Information adapted from “The Rise of Lifestyle Media” from PriceWaterHouseCoopers’ Technology Center
Color coded to provide context for BMG
Information adapted from “The Rise of Lifestyle Media” from PriceWaterHouseCoopers’ Technology Center
MBA_Business Tools Project
COLORADO STATE UNIVERSITYBUS621: Tools for Decision Making Kinner Group 2 Shawn Inman
COMPANY INTRODUCTIONReason Selected• Scripps Networks Interactive has an opportunity to capitalize on the convergence of media (services, content, and devices) which is rapidly transforming the marketplace. The company’s position as the dominant leader in lifestyle media and branding provides an advantage over competitors in forging the media convergence frontier.Primary Industry• Scripps Networks Interactive is a leading lifestyle content and interactive services company with high-profile television and interactive brands.Major Products and Services• Lifestyle media- National television networks (HGTV, Food Network, Travel Channel, DIY, GAC), related internet businesses, and other electronic content services. Revenues are generated through advertising, affiliate/ancillary fees, licensing of content, and licensing of brands for consumer products.• Interactive Services- Internet-based online shopping comparison service Shopzilla, and related online comparison shopping brands Bizrate and Beso. Revenues are generated mostly from referral fees paid by participating online retailers.
EXECUTIVE SUMMARYFive Main Points:1. Digital convergence is rapidly evolving the external environment for content providers… failure to adapt business strategies and objectives will likely lead to failure.2. The leading edge of value in digital convergence is defined by the customer.3. Customer intimacy (Scripps Networks’ center of gravity) provides competitive advantage for Scripps Networks in seizing new opportunities presented by digital convergence.4. Refocusing on customer intimacy value as defined by digital convergence will lead to synergies in business activities and create opportunity for growth.5. Strategies designed for flexibility and responsiveness to consumer needs in the age of digital convergence will not only sustain Scripps’ lifestyle content leadership, but possibly create new frontiers for growth.
SPECIFIC PROBLEM TO ADDRESSProblem statement Scripps Networks’ position as a leading lifestyle and interactive services company is threatened by the convergence of digital media (services, content, and devices).Reason for selecting this problem• Although threatened by this problem, the company is uniquely positioned to capitalize on the convergence of media (opportunity).• The absence of action will equal failure - “Doing nothing” is not an option• This problem is the essence of strategy. By applying various “tools for decision making”, we can determine areas where the company needs to seize the advantage, defend established positions, and cease disadvantageous activities.
TOOLS TO UNDERSTAND THE PROBLEMApproach Selected and Applicability• The Value Discipline model determines the company’s targeted value objective in the convergence era, and provides context for further analysis.• Position, Fit, and Trade-off tools (Activity Map) are used to understand how the company’s activities are related.• TOWS matrix provides the primary approach for strategic direction: 1. Assess strengths, weaknesses, opportunities, and threats (SWOT analysis) . 2. Develop Internal (IFAS) and External (EFAS) Factor Analysis summaries to populate the TOWS matrix. 3. Determine viable strategic approaches based on the result. 4. Use EFAS/IFAS analysis to inform other areas of analysis• Porter’s 5 (6) Forces is used to determine focus area for sustaining competitive advantage• The BMG Canvas provides perspective on how the business model will likely evolve around the new strategy.Other Analysis• Researched current issues in media/digital convergence.
A CHANGING ENVIRONMENTDigital Media is Converging:• Convergence: the ability of different network platforms (broadcast, satellite, cable, telecommunications) to carry similar kinds of services; and the merging of consumer devices such as PCs, telephones, and televisions• Convergence is collapsing previously distinct media distribution channels into a single delivery chain through internet protocols (network driven as opposed to device-independent)… video is now digital data.• Content owners are both facilitators and beneficiaries providing consumer’s new media needsConsumers are Evolving:• The percentage of video consumers who are multi-mode, multi-device, and multi- tasking is growing• Although seeking free content, they are willing to “pay” for online experiences by providing information• Opportunities for access will no longer be limited. In a time-constrained world, consumers will seek on demand content through multiple channels.• Social networks are a powerful component of the evolving consumer
DIGITAL CONVERGENCECharacteristics of the converged environment:• Untethered –Access to content in a time, place and method of their choosing• Participatory – Social networks, community-based content• Dynamic – Packaged according to consumer needs• Hyper-linked – Will allow for easy transition for consumers to follow their interests, video browsing• New tools (platforms) – Managed access to content and creation• More friction between Content Owners, Content Distributors, and Device Makers • Accurate and appropriate royalty revenue? • Transactions adequately captured? • Responsibility for unauthorized use of intellectual property? • Control of content… platform compatibility? (Apples refusal to enable Adobe’s flash)• Consolidation and migration between various business models• Complex business models and necessary inefficiencies during evolutionary periodAdvertising in the converged environment:• Information databases are improving advertising by understanding the target consumer… making it more personalized and accountable, less annoying
IMPLICATIONSLifestyle Media is Emerging:• Lifestyle media, as defined in a PriceWaterHouseCooper study, is a personalized media experience within a social context bridging the world of unlimited content to the world of limited consumer time and attention• The components of the business model most affected by this transition are consumer control of content (interactive and on demand), as well as gathering information about consumer activities and trends.
PROPSECTS FOR GROWTHApproach Description Growth Prospect ExamplesMass Media Content with broad Saturated, unlikely Hit TV Shows, big appeal moviesSegmented or niche Content for special Limited growth Discovery Channelmedia interest groups or opportunity due to SCRIPPS NETWORKS audience segments serving smaller niches (long tail)Lifestyle media* Customized, Considerable, Early indicators: interactive content serves new YouTube, MySpace, with a greater consumption model etc* Different context than used byScripps in defining their business social contextsegment. This is term defined inPWHC in “Rise of LifestyleMedia”… seeks to capitalize onconvergence opportunity
LOGIC TREE AND DATA HYPOTHESIS Development and implementation of strategies that synergize impact of digital convergence will solidify Scripps Networks’ customer intimacy niche as a provider of lifestyle content and present new opportunities for growth. Sub-Hypothesis 1 Sub-Hypothesis 2 Sub-Hypothesis 3 Sub-Hypothesis 4 Digital convergence Static “position and fit” of Strategies leveraging Flexibility to meet requires business business activity in the strength for opportunity customer needs will fosterobjectives to be established digital convergence era (SO) are best for navigating a “living” business modelaround new dimensions of will lead to failure. the digital convergence that evolves naturally incustomer intimacy in order landscape. the digital convergence to sustain competitive environment. advantage. Value Analysis Position, Fit, Trade-offs TOWS Matrix BMG Canvas IFAS EFAS Porter’s 5 (6) Forces Customer Empathy Map PWC Study System Activity Map PWC Study Financials PWC Study
SUB-HYPOTHESIS 1: ASSESSMENT Sub-Hypothesis 1 Digital convergence requires business objectives to be established around new dimensions of customer intimacy in order to sustain competitive advantage.Scripps’ center of gravity is Customer Intimacy • Scripps has a devoted niche of consumers desiring their lifestyle content • Because of related demographics for viewership (for example, Food Network: female, average age 40-45, shoppers), these targeted consumer segments are very valuable to advertisersDigital convergence is redefining what it means to be “Customer Intimate” • According to a study by PriceWaterhouseCooper, Costumer Intimacy is the key to ongoing success in a digitally converging world. • Convergence is opening new frontiers for social networking and interactive content… Being costumer intimate will require fulfilling those needs • In order to retain advertisers, Scripps will need to stay on the value frontier for lifestyle content.
VALUE FOCUS IN DIGITAL CONVERGENCE • SNI’s success is built on customer intimacy for Product advertisers and consumers Leadership • Lifestyle content mass media, but niche segments • Large target audience due to mass penetration • Retaining customer intimacy leadership requires a “convergence” mindset to defend against rising Mass Media Competitors competition Deliver the same “Best Solution” in new and innovative ways Arising internet-OperationalExcellence based competitors“Best Cost” Convergence forces multi- dimensional perspective… customer-based, socially networked, advertising friendly content for on demand, flexible distribution
Internal Factors Analysis Summary (IFAS) Table Internal Factors Weight Rating Wtd Comments 1 2 3 4 5 Strengths *Leader in lifestyle content 0.10 5 0.50 Category killer * Consolidated niche in lifestyle content 0.10 5 0.50 Acquisition of Travel Channel Brand recognition 0.05 3 0.15 Among the best Brand exploitation 0.05 2 0.10 Limited use for some reason * Negotiating position with partners 0.10 5 0.50 Excellent… demonstrated Experienced management 0.10 5 0.50 Ken Lowe has been there from radio to internet Strong financials 0.10 4 0.40 Cash position is ok, debt is 1 year of oper profit * Customer and trends data (Interactive) 0.05 3 0.15 Leveraged for targeted advertising * Access to distribution channels 0.05 4 0.20 Pursuing all available Weaknesses Revenue sensitivity to economy 0.10 2 0.20 Huge swings in advertising trends/revenue Slow global expansion 0.05 2 0.10 India expansion plans abruptly ended * Unprepared for unbundling regulation 0.05 1 0.05 No alternative plan * Reliance on search engine agreements 0.10 1 0.10 Convergence challenge * Inability to protect intellectual property 0.05 2 0.10 Convergence challenge Totals 1.05 3.55 * [Note: Convergence issue]
SUB-HYPOTHESIS 1: TRUE Sub-Hypothesis 1 Digital convergence requires business objectives to be established around new dimensions of customer intimacy in order to sustain competitive advantage.Conclusion: • According to a study by PriceWaterhouseCooper, Customer intimacy is the core value discipline for winning in the digital convergence era • Independent analysis including value disciplines tool and IFAS show that customer intimacy should be the core focus • Customer intimacy requires active assessment and flexibility to the needs of the consumer… the only way to sustain competitive advantage TRUE: Digital convergence requires business objectives to be established around new dimensions of customer intimacy in order to sustain competitive advantage.
SUB-HYPOTHESIS 2: ASSESSMENT Sub-Hypothesis 2 Static “position and fit” of business activity in the digital convergence era will lead to failure.Digital convergence forces action… status quo is untenable • Threats will eventually be realized in a static scenario (EFAS): • Internet competition leading to reduced affiliate and advertising fees • Friction with partners over antiquated fee structures and content format • Advertisers seek the power of social networking • “Unbundling” will crush business model and revenue generation • Internet giants will seek other content partners and give rise to new entrants to challenge lifestyle leadershipPosition, Fit, Tradeoff assessment • Position – Needs-based positioning, unique lifestyle content with companion websites, delivering mostly through traditional channels, essentially no competition in traditional distribution channels • Fit – Lifestyle content and delivery to consumers and advertisers simple and reinforcing fit. Interactive services are very segmented and generally unrelated. • Trade-offs – Avoids competition for saturated mass audience and focuses on viewers most attractive to advertisers
External Factors Analysis Summary (EFAS) Table External Factors Weight Rating Wtd Comments 1 2 3 4 5 Opportunities and Threats Friction with partners and potential competitors Challenge of fee structures, friction with partners and potential * Multiple network/device distribution 0.10 3 0.30 competitors * Distribution format 0.10 1 0.10 Challenge of fee structures * Social networks 0.10 3 0.30 Smaller startup could leverage social network * Web-based content 0.10 3 0.30 Competition is still fierce in this arena Opportunities International expansion 0.02 3 0.06 Best avenue for near term growth Use of customer information 0.05 2 0.10 Targeted advertising is very profitable Brand exploitation 0.02 2 0.04 Licensing of brands to quality products Horizontal expansion 0.02 5 0.10 Travel Channel… strategic homerun Partnerships for vertical integration 0.05 1 0.05 Cooperative Threats Change in public and consumer attitudes 0.10 3 0.30 No plans for trend change in place Government intervention (Domestic) 0.05 2 0.10 Unbundling, other regulation Government intervention (Foreign) 0.02 2 0.04 Prevents growth Financial market turmoil 0.05 3 0.15 $254 million cash, $884 million debt Online security failure 0.05 3 0.15 Damage to brand name Unforeseen technologies, game changers 0.05 3 0.15 Difficult to imitate content would provide time Cable provider consolidation 0.05 1 0.05 Distributors can negotiate smaller fees Interactive media is driven by arrangements with search Internet search engine dominance in advertising 0.05 1 0.05 providers Theft of intellectual property 0.02 3 0.06 Digital format challenge Totals 1.00 2.40 * [Note: Convergence issue]
Activity-System Map Cable Satellite Delivery Delivery Consumer Feedback Comparison Targeted Information Shopping Customer collection Services International Segments markets Delivering Content Interactive Interaction Services Platforms Licensing HD Content of Brands Lifestyle- Marketing Oriented and Video On Content Optimization Demand Online Services Communities (Converged)LEGEND: New Primary activity Distribution Technologies Selling Interactive Secondary activity targeted companion advertising websites In development Red is convergence activity
SUB-HYPOTHESIS 2: TRUE Sub-Hypothesis 2 Static “position and fit” of business activity in the digital convergence era will lead to failure.CONCLUSION:Business model activities must evolve to deliver optimum value • Current - • Lifestyle content development is the centerpiece activity • Other activities orient themselves in support • Future - • The red circles and lines of the system activity map show frontier activity • Convergence activities (early development or non-existent) such as platform-based interaction, social networking, distribution technologies, HD, more profitable use of interactive services, etc. will migrate and realign as new dominant , higher order, strategic themes TRUE: Static “position and fit” of business activity in the digital convergence era will lead to failure.
SUB-HYPOTHESIS 3: ASSESSMENT Sub-Hypothesis 3 Strategies leveraging strength for opportunity (SO) are best for navigating the digital convergence landscape.TOWS Matrix • When combining IFAS and EFAS factors, convergence issues dominate the matrix (highlighted in red) • Convergence issues are simultaneously a threat and an opportunity • More passive “avoiding”(ST/WT) or “weakness” (WO) based strategies might mitigate convergence threats or buy time, but not prevent threat/risk realization • Convergence issues dominate the SO strategy category • SO is a strategy that uses Strengths to take advantage of Opportunities • Nearly all opportunities are directly related to convergence • Strengths are not specifically related to convergence, but provide means to seize opportunitiesPorter’s 5 (6) Forces • Most concerning issue is threat of new entrants provided by scalability of content on the internet for distribution. • Bargaining power with customers (advertisers and affiliates) is currently high • Advertising revenues very sensitive to economic conditions… decreases power • Affiliate distributors of content have bowed to pricing pressure in the past year, but could change as consolidation continues
TOWS Matrix Strengths Weaknesses • Lifestyle content leader (no • Revenue sensitive to economy (W) IFAS • traditional “network” competitor) (S) Brand recognition (S) • • Slowing global expansion (W) Unprepared for unbundling (W) • Strong negotiation position with • Reliance on Google for internet EFAS • distributors (S) Rich customer data (S) operations (W) • Experienced management (S)Convergence-related in redOpportunities SO Strategies WO Strategies• Convergence issues EFAS (O&T) • Wedge into convergence arena using • Convergence strategies may provide• Vertical Integrated Partnerships (O) alternate revenue sources lifestyle content leadership and brand• Horizontal acquisition (O) • Sustain intl operations, build goodwill, recognition• International Expansion (O) be alert for opportunity, do not over • Use negotiating strength to forge• Brand exploitation (O) pay partnerships for vertical integration• Customer database utilization (O) • Convergence mindset may solve • Use management’s experience to potential “unbundling” issue consult/convince partners of way • Expand horizontally only if ROI is forward… achieve shared vision substantial and <3 years • Share data with google in exchange for servicesThreats ST Strategies WT Strategies• Convergence issues EFAS (O&T) • Use negotiating power to ensure • Sustain/encourage cash flow• Consumer retrenchment, thrift (T) property rights are respected positive ops (cash cow)• Government regulation (T) • Use management and strong • Avoid confrontation with internet-• Consolidating distributors (T) negotiating position to illuminate risk dominating companies• Powerful internet players (T) of negative action by increasingly • Develop back up plan for forced• Online security risk (T) strong distributors “unbundling” of content• Intellectual Property theft (T) • Lobby government (grrr) • Do not choose sides in distributor consolidation
Porter’s 5 (6) Forces Other Stakeholders• Some Union employees orperformers Threat of Potential• Government regulation, Entrantspotential “unbundling”• Comcast, EW Scripps, • Low barriers to entry from internetfinancial relationships Industry Bargaining power Competitors of Buyers Bargaining power • Continuing consolidation of of Suppliers cable/satellite providers as well other non-traditional • Key performers deciding Virtually non- content delivery companies to demand more existent… (ATT U-verse) reduces convergence is bargaining power • Recent bargaining has changing this been successful • 2008-2009 proved advertisers will essentially stop advertising Threat of Note: Convergence Substitutes • Substitute products/service concerns are in red could come from online community that people identify with
SUB-HYPOTHESIS 3: TRUE Sub-Hypothesis 3 Strategies leveraging strength for opportunity (SO) are best for navigating the digital convergence landscape.CONCLUSION:Opportunity is best pursued from a position of strength • Passive/avoidant strategies are insufficient for dealing with a changing societal and task environment • Strength/Opportunity approaches are best when the environment provides no option for delivering value otherwise, and will sustain bargaining power over buyers • Failure to seize digital convergence opportunities would cede ground to competitors (new entrants, substitute products, and erode customer intimacy value leadership TRUE: Strategies leveraging strength for opportunity (SO) are best for navigating the digital convergence landscape.
SUB-HYPOTHESIS 4: ASSESSMENT Sub-Hypothesis 4 Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence environment.Growth on the digital frontier requires flexibility to meet customer needs • Traditional segmented or niche business models may be inadequate • “Lifestyle” media orientation requires application of new innovations in customer intimacy to unleash new sources of revenueCustomer needs must be constantly assessed • Understanding and empathizing with the customer is an important part of staying on the frontier of digital convergence • Customers define the way forward... You must listenScripps Networks’ business model has several elements (BMG) • Multi-sided Lifestyle segment – Content distributors, consumers , advertisers • Content is essentially the platform (traditional business) • Multi-sided Interactive segment (Free, multi-sided) – Consumers/advertisers • Comparison services and consumer information come together • Future business model components will take advantage of convergence
PROPSECTS FOR GROWTHApproach Description Growth Prospect ExamplesMass Media Content with broad Saturated, unlikely Hit TV Shows, big appeal moviesSegmented or niche Content for special Limited growth Discovery Channelmedia interest groups or opportunity due to audience segments serving smaller Scripps Networks –Expansion required to niches (long tail) meet consumer needsLifestyle media* Customized, Considerable, Early indicators: interactive content serves new YouTube, MySpace, with a greater consumption model etc* Different context than used byScripps in defining their business social contextsegment. This is term defined inPWHC in “Rise of LifestyleMedia”… seeks to capitalize onconvergence opportunity
SCRIPPS NETWORK’S BMG CANVAS KEY KEY VALUE RELATIONSHIPS CLIENTS PARTNER ACTIVITIES PROPOSITIONS SELF SERVICE PRODUCTION OF GOOGLE LIFESTYLE CONTENT CUSTOMIZATION CO-CREATION PLATFORM COMMUNITIES ONLINE RETAIL ADVERTISERS (LIFESTYLE CENTRIC, MERCHANTS ONLINE COMMUNITY) (NICHE) NEWNESS AUTOMATED CONTENT PLATFORM SERVICES CONVENIENCE/ LIFESTYLE CREATION (INTERACTIVE SERVICES) USABILITY CONTENT PARTNERS CONSUMER SEGMENT CONTENT KEY AD SPACE, DISTRIBUTORS RESOURCES CONTENT TRAFFIC, TARGETED CHANNELS DISTRIBUTORS COOPETITION SEGMENT CABLE WITH VERTICAL ONLINE PARTNERS COMPARISON CUSTOMIZATION SATELLITE INTELLECTUAL COMPARISON SHOPPERS PROPERTY AND SERVICES AND BRANDS PHONE DATA PRODUCT REVIEWS NETWORK HUMAN ONLINE ONLINE• COST CENTRES • REVENUE STREAMS ADVERTISING SUBSCRIPTION (AFFILIATE FEES) VALUE DRIVEN! LICENSING ONLINE REFERRAL FEES FIXED COSTS ONLINE ADVERTISING FREE
SUB-HYPOTHESIS 4: TRUE Sub-Hypothesis 4 Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence environment.CONCLUSION:The digital convergence world is and will be defined by the customer • Understanding and listening to the customer will sustain competitive advantageThe digital frontier is still evolving • Predicting future business models is a losing proposition. Even if you are right, you can be wrong by being early. • Understanding the characteristic of the societal and task environment will provide context clues for how to evolve the business model • Interactive elements (red and blue on BMG) will create more potential value requiring even more focus on synergy of activity Bottom line: Business models must learn and adapt to changing consumer needs and environment… a “living” business model TRUE: Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence environment.
SUMMARY OF SUB-HYPOTHESES FINDINGS • Sub- Hypothesis 1: Digital convergence requires business objectives to be established around new dimensions of customer intimacy in order to sustain competitive advantage. TRUE • Sub- Hypothesis 2: Static “position and fit” of business activity in the digital convergence era will lead to failure. TRUE • Sub- Hypothesis 3: Strategies leveraging strength for opportunity (SO) are best for navigating the digital convergence landscape. TRUE • Sub- Hypothesis 4: Flexibility to meet customer needs will foster a “living” business model that evolves naturally in the digital convergence environment. TRUEMAIN HYPOTHESIS IS TRUE: Development and implementation of strategies thatsynergize impact of digital convergence will solidify Scripps Networks’ customerintimacy niche as a provider of lifestyle content and present new opportunities forgrowth.
CONCLUSIONS• Customer needs are being redefined by digital convergence.• Scripps Networks’ current focus on customer intimacy and leading position in lifestyle content provides only temporary advantage.• In order to stay ahead of future competition, Scripps Networks must focus on new and innovative way to deliver a superior customer intimacy value proposition as demonstrated by the Value Discipline tool.
CONCLUSIONS• Digital convergence is a threat and an opportunity. “Doing nothing” will ensure the threat is realized.• In order to successfully navigate the frontier of digital convergence, Scripps Networks must constantly assess position, fit, and tradeoffs as identified in the system activity map in the context of a digitally converging external environment (EFAS).• Supporting activities providing 2nd and 3rd order effects may become more central (1st order) to the activity system, such as online communities and new distribution technologies.
CONCLUSIONS• Scripps is uniquely positioned to use its strengths to take advantage of opportunity through appropriate SO strategies as shown in the TOWS matrix.• Other strategies (WO,WT, ST) are not appropriate because they are more passive and avoidant. They may become applicable if asymmetric approaches are employed by potential entrants or substitutes (Porter’s 5 (6) Forces) that Scripps is unable to immediately defend against.• For now, leveraging strengths to take advantage of convergence opportunities is the best approach as shown.
CONCLUSIONS• The BMG Canvas shows Scripps Network’s traditional business model is sustained by advertising and affiliate fees (Black) through cable and satellite.• The current Interactive business segment (Free, multi-sided) is also shown (Blue)… capitalizing on consumer data and targeted advertising.• Future interactions of the various BMG building blocks will likely be more interwoven and synergistic as shown (Red).• The exact nature of the digital convergence BMG canvas is not known… only that Scripps will need to rapidly adapt by listening to consumers (customer empathy map) to understand their needs and provide for them through a “living” business model
RECOMMENDATION #1• Establish/eliminate/refine Pros & Cons customer intimacy objectives to Potential exist for disruption of current maintain consistent focus on business activities digital convergence customer intimacy Major Risks Seemingly inconsequential business activity may have unintended consequences Barriers to Implementation Possible resistance from current corporate culture Next Action Steps to Make It Happen Establish an action team to develop and institutionalize customer intimacy activities
RECOMMENDATION #2• Utilize/develop feedback tools Pros & Cons for understanding customer Feedback interaction can be annoying to needs in the digital convergence customers… use minimally intrusive environment... Advertisers, methods Consumers, and even partners. Major Risks Proactive business interaction with the consumer is risky… be sensitive to boundaries of tolerance Barriers to Implementation Privacy concerns Next Action Steps to Make It Happen Establish an action team to develop and institutionalize customer intimacy activities
RECOMMENDATION #3• Establish relationships with vertically Pros integrated partners, even affiliate Reduces risk and affords potential economies of clients, to forge relationships for future scale. unknown partnership opportunities in Cons digital convergence Some potential partners are also buyers… there – Timewarner could be conflicts of interest – Comcast Major Risks – Direct TV Partnerships may preclude action or realignment of – DISH business activity if conditions change – Internet search companies Barriers to Implementation – Mega online retailers Partners may not desire to engage. – Etc. Next Action Steps to Make it Happen As part of a broader strategic initiative, determine where the most value added potential exists for partnership
RECOMMENDATION #4 Pros• Develop an online “lifestyle” Online communities are considered central to social centric platform that provides networking synergies and part of a growing for an online community, customer need. This may well seed the future rapid access to archived critical business activity of Scripps information, video content, Cons and even user-created Platform development is very expensive. Affiliates who pay for content may not be excited about free content. distribution of older content Major Risks Failure of the platform service would result in sunk costs Barriers to Implementation Expense and “know how” Next Action Steps to Make It Happen Seek strategic consulting advice from digital convergence experts
RECOMMENDATION #5 Pros• Train corporate executives Rapid adaptation and seizing of opportunity and top managers to Cons understand the concept of a Self-critical behavior may be rejected, viewed as “living” business model and weak. implement it. Major Risks Missteps can be costly, may silently convince managers “living” business model is failure Barriers to Implementation Corporate culture, limited conceptual understanding Next Action Steps to Make It Happen Just say yes, CEO!!!
DECISIONS REQUESTEDRequest for decision to: • Establish action team to assess current operational alignment with customer intimacy goals • Begin development of conceptual “lifestyle” centric web- based, interactive platform for eventual establishment of loyal online community and social network • Train corporate executives and managers in strategic tools for decision making and start a process of continual collaboration for realizing a true “living” business model.
SUMMARYFive Main Points:1. Digital convergence is rapidly evolving the external environment for content providers… failure to adapt business strategies and objectives will likely lead to failure.2. The leading edge of value in digital convergence is defined by the customer.3. Customer intimacy (Scripps Networks’ center of gravity) provides competitive advantage for Scripps Networks in seizing new opportunities presented by digital convergence.4. Refocusing on customer intimacy value as defined by digital convergence will lead to synergies in business activities and create opportunity for growth.5. Strategies designed for flexibility and responsiveness to consumer needs in the age of digital convergence will not only sustain Scripps’ lifestyle content leadership, but possibly create new frontiers for growth.
REFERENCES• Business Model Generation, Osterwalder, Alexander• Customer Intimacy and Other Value Disciplines, HBR, Treacey, Michael• Essentials of Strategic Management, Hunger and Wheelen• The Rise of Lifestyle Media, PriceWaterhouseCooper Study• What is Strategy, HBR, Michael E. Porter• Scripps Networks Interactive 2009 Financial Report• Zacks Investment Research, SNI Stock Anlysis
Issues Priority Matrix High Impact Medium Impact Low Impact •Convergence of media: •Customer Information utilization Services Devices DistributionProbability •Change in consumer attitudes •Interactive trendsHigh • Regulation and unbundling •International expansion • Cable/SAT consolidation •Internet search engine dominance, high fees • Financial market instabilityProbabilityMedium •Online security failures •Theft of intellectual property •Game changing technologyProbabilityLow
COMPANY HISTORYScripps Networks Interactive (SNI) • 1878- Edward W. Scripps borrowed $10,000 from his and started “The Penny Press” in Cleveland, OH, and expanded to other cities. • 1907- Scripps successfully challenged the Associated Press by starting United Press International (UPI) and improved the company’s ability to expand. • 1935 to1980- Scripps solidified its position as a top newspaper publisher, and began to build its reputation as a leading operator of local television stations. • 1981 to 1980- Scripps began buying and building cable television systems. • 1988- The Scripps family sold shares to the public at $8/share. • 1990s- Scripps began to evolve its business model toward information and content by founding Home and Garden Television, and divesting cable TV systems to Comcast (sold in 1996). • 2001- Scripps continued to develop “lifestyle media” businesses through new launches and acquisitions. • 2005- Scripps acquired Shopzilla to enter the online interactive business segment. • 2008- In order to focus on growth segments, Scripps split off Scripps Networks Interactive (SNI). • 2009- Scripps acquired a 65% controlling stake in The Travel Channel.
FINANCIALS AND TRENDSRevenue• In 2009, Lifestyle Media revenues increased 4.2% to $1.4 billion corresponding to a 1% increase in segment profit.• For the same period, the Interactive Services segment revenue decreased to $174 million from $238 million the year prior, a 27% decrease.• Lifestyle media segment accounted for 89% of revenue in 2009 as compared to 85% and 84% in the prior years (increasing %).• Interactive services segment accounted for 11% of revenue in 2009 as compared to 15% and 16% in the prior years (decreasing %).Other Trends• SNI has generally pursued horizontal growth strategies through acquisition which include Shopzilla (2005) and The Travel Channel (2009).• The company’s business model centers around engaging audiences that are highly desirable to advertisers by producing content for television, the internet, and other platforms.• The company seeks to aggregate large audiences through the organization of searchable and highly useful consumer information.• The company is actively seeking new sources of revenue with a strategy for diversification.
RESEARCH DATAScripps Networks is the leader in lifestyle content: HGTV – • 99 million households, 96 countries and territories • Website is a leading home and garden destination - 3 million visitors/month Food Network – • 99 million households, 150 countries and territories • Website is a leading food and cooking destination - 13 million visitors/month • Record growth in 2009 Travel Channel – • Recent acquisition rounds out “lifestyle” category • 2009 was a record year for primetime and total-day ratings Other networks – • DIY – Do it Yourself Network, 53 million homes, website top 15, 2 million visitors/mon • FLN – Fine Living Network rebranded as the cooking channel • GAC – Great American Country, 58 million homes, music-based • Scripps’ only network with direct competition! Other websites – • HGTVPro.com – 1 million visitors/mon • RecipeZaar.com – 400,000 recipes (Online community!), 4 million visitors/mon • FrontDoor.com – Online real estate listing service • Double digit growth in advertising and affiliate fee revenue • Advertising revenue extremely strong at 33.7%, but reflective of sensitivity to economic volatility
RESEARCH DATAScripps Networks has leverage with industry partners:• Dispute with AT&T U-verse was ended quickly after AT&T customers threatened service termination as demonstrated by backlash on U-Verse’s Facebook page• Dispute with Chicago’s Cablevision ended after sustained ratings of Food Networks episodes were aired through special arrangement with Tribune owned affiiates• 2009 affiliate renewals were up substantially and more inline with industry peers • 2009 - $322 million revenue • 2010 - $430-$440 million projected revenue • Travel Channel expected to add $100 million• Viewership is at all-time highs, and remained high during the great recessionInteractive Services struggles, but improving:• Shopzilla – Online comparison shopping service • Includes bizrate (consumer feedback) and beso (specialty) websites• Comprehensiveness of search results and double-digit growth in merchant leads show improvement• In the third quarter of 2010, Shopzilla and other interactive shopping sites generated year over year profits for the 1st time in history.• An additional benefit of ownership is consumer information data
CUSTOMER EMPATHY MAP What does she Think and Feel? • Consumer: Life is stressful…I need an escape through lifestyle entertainment, convenient, stress free, when I need it. • Advertisers – I need good return on my expenses What does she What does she Hear? See? • Consumer: Clunky websites… long searches for desired content.• Everyone is joining social networks • Advertisers: Stalled recovery… am I• Digital is here… buy an iPhone getting good bang for my buck?• Office friends are going on a trip • A family member just posted a recipe• The company is throwing a potluck dinner on facebook tomorrow and I have nothing to bring What does she Say and do? • Consumer: Research, then purchase … looks for assistance locally at store • Goes for cheap and easy • "free“ is my best offer PAIN GAIN • Clunky slow websites/interface • "Easy" stress free options • Search difficulty • Personalized options • Poor review content • What I want, when I want it, and how I • Digital download problems want it... sometimes that means free • Long surveys • Social interaction, local and internet • Shared information leading to engagement telemarketers, etc • I’m a valued customer