Newscorp & directv
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Case Study -
News Corp. and DirecTV

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  • Financial Resources• The firm’s borrowing capacity• The firm’s ability to generate internal fundsOrganizational Resources • The firm’s formal reporting structure and its formal planning, controlling, and coordinating systemsPhysical Resources• Sophistication and location of a firm’s plant and equipment• Access to raw materialsTechnological Resources• Stock of technology, such as patents, trademarks, copyrights, and trade secrets
  • Human Resources• Knowledge • Trust• Managerial capabilities• Organizational routinesInnovation Resources• Ideas• Scientific capabilities• Capacity to innovateReputational Resources• Reputation with customers• Brand name• Perceptions of product quality, durability, and reliability• Reputation with suppliers• For efficient, effective, supportive, and mutually beneficial interactions and relationships
  • Distribution Effective use of logistics management techniquesHuman resources Motivating, empowering, and retaining employeesManagement Effective and efficient control of inventories throughinformation systems point-of-purchase data collection methodsMarketing Effective promotion of brand-name products Effective customer service Innovative merchandisingManagement Ability to envision the future of clothing Effective organizational structureManufacturing Design and production skills yielding reliable products Product and design quality Miniaturization of components and productsResearch & Innovative technologydevelopment Development of sophisticated elevator control solutions Rapid transformation of technology into new products and processes Digital technology
  • Financial Resources• The firm’s borrowing capacity• The firm’s ability to generate internal fundsOrganizational Resources • The firm’s formal reporting structure and its formal planning, controlling, and coordinating systemsPhysical Resources• Sophistication and location of a firm’s plant and equipment• Access to raw materialsTechnological Resources• Stock of technology, such as patents, trademarks, copyrights, and trade secrets
  • Satellite base made digital technology possible. read that part. Read about alternating camera angles to stay focused,switching off sound etc. Human Resources• Knowledge • Trust• Managerial capabilities• Organizational routinesInnovation Resources• Ideas• Scientific capabilities• Capacity to innovateReputational Resources• Reputation with customers• Brand name• Perceptions of product quality, durability, and reliability• Reputation with suppliers• For efficient, effective, supportive, and mutually beneficial interactions and relationships
  • Distribution Effective use of logistics management techniquesHuman resources Motivating, empowering, and retaining employeesManagement Effective and efficient control of inventories throughinformation systems point-of-purchase data collection methodsMarketing Effective promotion of brand-name products Effective customer service Innovative merchandisingManagement Ability to envision the future of clothing Effective organizational structureManufacturing Design and production skills yielding reliable products Product and design quality Miniaturization of components and productsResearch & Innovative technologydevelopment Development of sophisticated elevator control solutions Rapid transformation of technology into new products and processes Digital technology

Newscorp & directv Presentation Transcript

  • 1. Consolidating The Direct TV Acquisition PRESENTED BY- GROUP 8
  • 2. TIMELINE FORDIRECT TV ANDNEWS CORP
  • 3. CASE FACTS FOR DIRECTV  BEFORE 1990’S• 1932- Huges aircraft by Howard Huges• 1963- 1st communication satellite by Howard Huges Medical Institute• 1985- institute sold Huges Aircraft to GM- GMHE 1990- 1995 • 1995- GMHE became Huges electronics and launched DIRECT TV
  • 4. CASE FACTS FOR DIRECTV 1996- 2000• 1996- Huges brought major stake in satellite communication PanAmSat• 1998- boosted stake in PanAmSat to 81%• 1998- drop in profits• 1999- huges bought United States Satellite Broadcasting and folded into Direct TV  2000-2005• 2000- Huges sold its Satellite Manufacturing business• 2000- 9.5 million subscribers(largest satellite based television content provider)• 2001- Huges bought Telocity- $177 million• 2001- negotiations with Rupert Murdoch’s newscorp• 2004 HE changed name to Direct TV
  • 5. CASE FACTS FOR NEWSCORP  BEFORE 1990• Mid 1980s- Sky television (Sky) £ 10 million 1990-1995 • 1990- BSB, a television channel, merged with Sky• 1992-losses due to combined entity but better programs and soccer matches increased revenue to £385 million• 1993- BSkyB reached financial stability
  • 6. CASE FACTS FOR NEWSCORP  1995-2000• 1997- 25% british homes were subscribers  2000- 2005• 2001- 5 million subscribers• 2002 revenues 20% increase in revenue with 6.1 million subscribers• 2003- 34% stake in HE
  • 7. PORTER’S 5 FORCES
  • 8. MICHAEL PORTER’S 5 FORCE MODELThreat of Competitors Buyers Suppliers Substitutesnew • Time Warner • TV Channels • Content • Cableentrants • Comcast like Fox Providers like • EchoStar News, NFL Football National games, Geographic, soccer Speed matches Channel • TV viewers
  • 9. COMPETITOR COMCAST  No.1 cable system in US  Acquired AT&T Broadband(owned regional sports rights, telephony and 2 way internet interactivity over cable lines)  Deal with Viacom’s MTV & Nickelodeon  Sold movies on cable even before video stores could get them  Partnered with Radio One to launch a channel that targeted African Americans Struck a deal with Chicago’s major sports teams- Chicago Bulls, Cubs, White Sox, Blackhawks to create a new sports channel• Acquired TechTV to cater to video gamers
  • 10. ECHOSTAR Constant bids to acquire DirecTV EchoStar & DirecTV together controlled 92% of the U.S. satellite pay- TV market
  • 11. BUYERS’ BARGAINING POWER Fixed fees from pricey cable channels Prices of DVR reduced Free DirecTV set top box DirecTV spent $670 (2002), $758(2003), $894(2004) to acquire and keep a new subscriber
  • 12. SUPPLIERS’ BARGAINING POWER Hollywood was made to supply movies first to Comcast for broadcasting and then to video stores News Corp finalized a $3.5 billion with NFL Football games for broadcasting rights for 5 years.
  • 13. SUBSTITUTES Cable offered high speed, two way internet access including phone capability Cable needed a very heavy investment for upgradation to digital technology Upgradation needed for Digital video recorder, high- definition TV Weather conditions cannot affect the quality as in case of satellite signals
  • 14. EVALUATIONParameters Evaluation AttractivenessThreat of new entrants Low HighIndustry Competitors High LowBuyer’s Bargaining Medium MediumPowerSuppliers’ Bargaining High LowPowerSubstitutes High Low
  • 15. ANALYSIS OF NEWSCORP
  • 16. NEWS CORP TANGIBLE RESOURCES Financial Physical Technological resources resources resources • Subscription & • Geographic spread: • Worldwide network advertising revenues 4 continents & 26 of satellite million subscribers distribution (BSkyB, Star TV, FoxTel, • High number of SkyTel, Stream) distributors
  • 17. INTANGIBLE RESOURCES Human Innovation Reputational Resources Resources Resources •Experience & •Innovative •Brand Image Planning of Murdoch programming and attractive sports •Content: high quality, content new/ fresh, innovative •Attractive sports, aggressive mktg
  • 18. CAPABILITIESDistribution Effective use of Content and satellite distribution. Worldwide network of satellite distributionHuman resources Murdoch’s negotiation skillsMarketing Aggressive marketing tactics Free installationsManagement Ability to envision the future of Television viewing experienceManufacturing High content qualityResearch & Quest of Innovative technologydevelopment Could cater to DVRs, HD-Tvs control of fox
  • 19. VALUE CHAIN TECHNOLOGY PRODUCT MANUFACTURING MARKETING DISTRIBUTION SERVICE
  • 20. CORE COMPETENCE Innovative Content and Worldworld satellite distribution network are news corp’s core competences
  • 21. ANALYSIS OF DIRECTV
  • 22. DIRECT TV TANGIBLE RESOURCES Financial Physical Technological resources resources resources • Revenue: $7.7 • Geographic spread • Digital technology: billion (19% (72% of US) Broadcasting, increase) Broadband/ Internet Profit: $970 million (59%) • High number of •25 satellites capable •12.2 million distributors of covering 98% customers (revenue world populations per customer = $63.9)
  • 23. INTANGIBLE RESOURCES Human Innovation Reputational Resources Resources Resources •Efficient & • Ideas like NFL • Perception of experienced Sunday Ticket delivering good leadership of Hughes Package Content •Efficient distribution •Ranked no. 1 in system • Scientific innovation customer satisfaction like Spaceway •Brand Image
  • 24. CAPABILITIES Distribution Effective use of satellites & digital techniques Marketing Effective promotion of brand-name products Effective customer service Innovative offers Management Ability to envision the future of satellite technologyR &D Innovative technology Rapid transformation of technology Digital technology
  • 25. VALUE CHAIN TECHNOLOGY| PRODUCT MANUFACTURING MARKETING DISTRIBUTION SERVICE
  • 26. CORE COMPETENCE Content Distribution in the U.S. using the Satellite technology
  • 27. DIVERSIFICATION Level of Diversification: Dominant Business Reason for Diversification:a) Economies of scaleb) Market power
  • 28. DIVERSIFICATION STRATEGY Acquisition REASON BEHIND MURDOCH’S DECISION TO ACQUIRE DIRECTV
  • 29. COMPETITORS OF NEWSCORP
  • 30. Competition Faced: Satellite distribution, Cable distribution, via Product Level bluetooth, infra red or Physical Diskettes and HDD Internet(1 way or 2 way) Broadband connection, Form Level Sound(Frequency) - telephony, Light - Morse code Distribution through any means Generic Level or No distribution at all Comcast: Cable TV, Times Warner Cable: Cable TVEnterprise Level ECHO star: Satellite TV
  • 31. WHAT WAS THE COMPETITION BETWEEN NEWS CORP AND HOW DID NEWSCORP FEND OFF RIVALS?
  • 32. 2001 DEAL Acquisition of the DirecTV from Hughes –  Echo Star – unsolicited bid: $30.4 bil & $1.9 bil in dent  Murdoch’s - $ 177 Mil (confident) The deal was abruptly called off  Hughes and Echo Star consisted 92 percent of the US Satellite pay –TV market The Justice Dept. was involved to stop the merger as Murdoch was under confidence since 2001
  • 33. 2003 News Corp. acquired GM’s 19.9 percent stake + 14.1 percent from public share and GM’s pension and funds  Major stake holder, R. Murdoch NOW had a wide entry into USA satellite pay-TV market  Rupert Murdoch – Chairman of Hughes
  • 34.  Cost leadership by NewsCorp:  Low rates of set top boxes: Attract subscribers  Low priced Content distribution: Sports and entertainment  Acquired content and distributed it cheaply Focus Differentiation by NewsCorp:  Strong distribution Channels – Comcast had trouble with it’s reach  Digital Video Recorder technology – DVR  High Definition TV
  • 35. FACTORS THAT INHIBIT NEWS CORP FROM DELIVERING ITS FULL POTENTIAL
  • 36. In 2004 and 2005 DirecTV made the highest NSA beating its immediate competitor Echostar
  • 37. A low churn rate means high customer retention, which in turn allows forsavings in advertising costs.Churn rates below 2.5%, are better than average DBS providers. DirecTV Echostar 2004 1.59% 1.70% 2005 1.70% 1.85%
  • 38. TECHNOLOGICAL LIMITATIONS High switching cost from cable to a direct broadcast satellite. Cable companies like Comcast have the ability to bundle cable and Internet over their networks. DirecTV did not have the ability to bundle cable, Internet, and phone services, putting them at a pronounced disadvantage. To overcome this problem DirecTV entered into agreements with Verizon and BellSouth phone companies in 2005 which solved the problem in the short run.
  • 39. Cost to acquire and retain a new customer 1000 900 800 700 Cost (US $) 600 500 400 300 200 100 0 2002 2003 2004 Cost (US$) 670 758 894virtually everyone who is going to buy cable or DBS has already doneso, DirecTV has to spend heavily on persuading customers to switch and toretain them
  • 40. DirecTV had very little interest and tax costIncurred massive sales and administrative cost by adopting aggressiveadvertising campaign to attract new customers, or steal existing cablecustomers.
  • 41. LIMITATIONS WITHIN MARKET DirecTV had to spend millions in upgrading users TiVo digital video recorders (DVRs) as technology improves. DirecTV spends a much greater amount on SGBA compared to its competitors. Echostar had almost no sales and administrative costs in 2005, but still was able to gain almost 1 million new customers. DirecTV incurred sales and marketing costs for US market, limiting its focus on expanding its Latin American operations as the market is not saturated and it was much cheaper to acquire new customers DirecTV had a subscriber base of 15 million households as in 15% of homes in USA, in contrast there were 167 million homes in Latin America of which DirecTV was serving only 1% (1.5 million homes)
  • 42. THANK YOU