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Digital Convergence

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MBA Dissertation_ 2010
University of Leicester, UK

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Digital Convergence

  1. 1. DIGITAL AVATAR- The Strategies for Digital Convergence 099018609 University of Leicester 8/26/2010
  2. 2. DIGITAL AVATAR- The Strategies for Digital Convergence Digital Avatar- The Strategies for Digital Convergence Student Number: 099018609 August 2010Dissertation submitted to the University of Leicester in partial fulfilment of the requirements for the degree of Masters of Business Administration (MBA-Full Time) Sep 2009-2010MBA Dissertation by Student no. 099018609 Page 2
  3. 3. DIGITAL AVATAR- The Strategies for Digital Convergence DIGITAL AVATAR- THE STRATEGIES FOR DIGITAL CONVERGENCE TABLE OF CONTENTS:CONTENT PAGE NUMBERCover page……….……………………………………………….……………………1Title Page………………………………………………………….……………………2Table of Contents……………………………………………………………………..3Acknowledgements ………………………………………..............................8Executive Summary………………………………………………..………………11Chapter 11.1 Introduction for dissertation………………………………………………..141.1.1 Scene Setting: The making of Digital Avatar……………………….…14MBA Dissertation by Student no. 099018609 Page 3
  4. 4. DIGITAL AVATAR- The Strategies for Digital Convergence1.2 Changing Market Place………………………….................................151.3 Objective of the Research …………………………………………………..19Chapter 2……………………………………………………………………………202. Literature Review…………….……………………………………………………20 • 2.2.1 Literature Review on Digital Convergence…..…………………21 • 2.2.2 Literature Review on Strategy Perspective….…………………25 • 2.2.3 Literature Review on Strategic Alliances………..………………26 • 2.2.4Literature Review on Bundling…………………….………………34 • 2.2.5Literature Review on Integration Strategy………..……………43 • 2.2.6 Emerging Questions: Research Questions ………….…………49Chapter 3……………………………………………………………………………513. Research Methodology……….…………………….……………………………51Chapter 44. Data Analysis: Views on transformation of Digital Avatar………….....574.1 Data Analysis –Strategic Alliance……..……………………………………57 • 4.1.1 Strategic Alliances- Nature of strategic alliance..................59 • 4.1.2 Strategic Alliance & cross-media participation………………..71 • 4.1.3 Social Marketing due to Strategic Alliance……………………..78 • 4.1.4 Telcos seek a solution through Strategic Alliance…………….81MBA Dissertation by Student no. 099018609 Page 4
  5. 5. DIGITAL AVATAR- The Strategies for Digital Convergence • 4.1.5 Conclusion………………………………………………….………...884.2 Data Analysis -Bundling Strategy………………………………………….89 • 4.2.1 Attractiveness of Bundling…………………………………………90 • 4.2.2 Bundling strategy to retain customer base………….………..98 • 4.2.3 Bundling eases audience hyper-targeting……………….……104 • 4.2.4 Conclusion……………………………………………………….….1074.3 Data Analysis -DigitalIntegration…………………………………………………………………………109 • 4.3.1 Integrate to create synergies……………………………………110 • 4.3.2 Organisational challenges with Integration Strategy……….120 • 4.3.3 Marketing Communication currently is disintegrated………122 • 4.3.4 Conclusion………………………………………….……………….127Chapter 5…………………………………………………...........................1285.1 Discussion: Analysing the transformation of Digital Avatar…………128 • 5.2 Discussion over critical review of Digital Convergence…….…129 • 5.3 Discussion over Bundling Strategy……………………………….130 • 5.4 Discussion over Strategic Alliance………………………………..137 • 5.5 Discussion over Integration Strategy…………………………….140 • 5.6 Conclusion of Discussion……………………………………………..144MBA Dissertation by Student no. 099018609 Page 5
  6. 6. DIGITAL AVATAR- The Strategies for Digital ConvergenceChapter 6…………………………………………………………………………1476.1 Recommendations……………………………………………………………1476.2 Limitations of the research…………………………………………………1516.3 Conclusion of Dissertation: Digital Avatar transformed...………….153Chapter 7………………………………………………………………………….1567.1 Bibliography……………………………………………………..……………1567.2 Conferences attended………………………………………………………1827.3 References of Interviews.........................................................1837.4 List of Websites Accessed………………………………………………….185Chapter 88. Appendix………………………………………………………………………189Annexure 1: Contents of the DVD ………………………………………………….……189Annexure 2.1: Profile of 20 Senior Professionals interviewed………………1902.2 Complete set of questions………………………………………………………………2012.3 Sample of Consent Form…………………………………………………………………205MBA Dissertation by Student no. 099018609 Page 6
  7. 7. DIGITAL AVATAR- The Strategies for Digital Convergence2.4 Consent Form……………………………………………………………………………………2072.5 Supplementary Charts……………………………………………………………………..2102.5. a) Thematic Chart for Strategic Alliance ………………………………………2102.5. b) Navigation Chart of key strategies ……………………………………………211END………………………………………………………………………………….212MBA Dissertation by Student no. 099018609 Page 7
  8. 8. DIGITAL AVATAR- The Strategies for Digital Convergence ACKNOWLEDGEMENTSI am pleased to offer my sincere thanks and heartfelt gratitude to mysupervisor, Professor Steve Brown for his constant support, guidance andmotivation to successfully complete the dissertation. I can‘t stop myselffrom saying that it would not have been possible without ProfessorBrown‘s dedicated mentoring and encouragement. Professor Brown‘svision, immaculate thought process greatly helped me refine my ideasand organize the emanating views into the carefully drafted dissertation.My sincere thanks to the module leaders, faculty and staff members ofthe School of Management, University of Leicester for imparting theirvaluable knowledge and extending their continued support to make thisyear an enlightening experience for me.I have always had a passion for communications industry and thank theopportunity to serve this industry for 7 years of my life, as a newspresenter and finance news journalist. Towards my contribution to theacademic world, I am highly obliged to present this dissertation to theMBA Dissertation by Student no. 099018609 Page 8
  9. 9. DIGITAL AVATAR- The Strategies for Digital Convergenceprestigious University of Leicester and thank the University for giving methis opportunity to gain knowledge and conduct this research. As aresponsible professional, I take the opportunity to state that I will beobliged to offer my contributions to the University of Leicester even in thefuture.I am highly obliged to the 20 Senior Professionals who have given metheir precious time and valuable information, without which thisdissertation would not have been successful. I hereby offer my gratitudeto: Andrew McGrath, Executive Director (Commercial), Virgin Media ;John Denton, Managing Editor, TV Platforms, BBC London;GiulianoStiglitz, CEO, Orange Advertising (USA) & Global Sales Director(UK), Orange-FT; Tim Hussain, Head of Mobile & Video Advertising,BSkyB; Paul Cowan, VP, New Ventures, Syncapse Ltd.; Eric Elia, VP, TVSolutions, BrightcoveInc; Tom Weiss, CEO, TV Genius Ltd; Harry Strasser,Executive Partner - Digital Convergence and Innovation, Germany; PeterBrimacombe, Former Vice President- Strategy at Disney UK- now anindependent consultant, London; Penny Power, Director, Ecademy UK;Aaron Bogucki, Senior Digital Campaign Manager, Universal Music; AdamField, Head of Social Media, Media Contacts UK; Carolyn Morgan,Managing Consultant, Penmaen Media; Oli Shaw, Digital Director, Oli, UK;Triona Campbell, Company Director of CR Films Entertainment, Ireland;Paul Armstrong, Social Media Director, Kindred Agency Limited; CraigMBA Dissertation by Student no. 099018609 Page 9
  10. 10. DIGITAL AVATAR- The Strategies for Digital ConvergenceElder, Online Communications Editor, Conservatives; EndafKerfoot,Thinker-in-Chief, Brand New Adventures UK; Jack Willis, AccountsManager, Marketing Grin, UK and Edmund Chambers, Key AccountsManager, Affiliate Window, UK.I offer my special thanks to the world of academia and the scholars whohave contributed to the fundamental research about digital convergenceand allied strategies that this dissertation has made an attempt toresearch. I also offer special thanks to my parents and sister Vartika fortheir constant support, guidance and encouragement.MBA Dissertation by Student no. 099018609 Page 10
  11. 11. DIGITAL AVATAR- The Strategies for Digital Convergence EXECUTIVE SUMMARYThe 21st century is fast integrating the world‘s media, telecommunicationsand information technology and online industries under a single platform.Globally the communications industry is undergoing a transformationowing to technological advancement and massive investment flows in theaforementioned four industries, leading to revolutionary changes in thedigital eco-system. This dissertation researches the digital convergencephenomenon that has been brought about by coming together (and clash)of the eco-systems of four industries- media, telecommunications,internet and technology. Such converging (and diverging) businessobjectives are building interesting scenarios where vicious competitionand intense inter-dependence are co-existing. In order to capitalizethe separate yet converging business interests, the digital convergenceMBA Dissertation by Student no. 099018609 Page 11
  12. 12. DIGITAL AVATAR- The Strategies for Digital Convergenceindustry calls for a strong strategic orientation to mentor the change. Thebiggest strategic issue concerning the Digital Convergenceindustry is the challenge to capitalise on the newly-emergingdistribution mechanisms of information flow. This dissertationanalyses the strategies to encash the potential benefits ofdistributing content across the multiple-platforms that has beencreated by the digital confluence of the four industries. The keystrategies responsible for bringing around the Digital Convergencetransformation are Strategic Alliance, Bundling and Integration and havebeen explored in this dissertation. Based on a qualitative researchmethodology, views from a carefully selected sample of 20 highly-influential professionals (media & communications industry) have beencompiled over in-depth interviews and data has been analysed usingthematic analysis. The dissertation observes that a creative combinationof the three strategies has a tremendous potential to lead the digitalconvergence industry towards creating converged communicationapplications that can transform human lives. Though in the currentcircumstances, issues over digital rights, existence of a standard metricfor performance evaluation, skilled talent to meet the burgeoning demandand user-privacy concerns still remain unanswered. But, once thesebarriers are crossed, digital convergence can have a powerful impact onthe way the world communicates and interacts. To a consumer, digitalconvergence would mean an enhanced digital experience, easierMBA Dissertation by Student no. 099018609 Page 12
  13. 13. DIGITAL AVATAR- The Strategies for Digital Convergenceapplications and convenient multiple-access to information. Convergencetranscends the geographical and physical barriers of providing informationto innovate services and applications to a point where almosteverything - and everyone - is connected.Such is the impact ofdigital convergence that its omnipresence reaches the user attheir point of location.MBA Dissertation by Student no. 099018609 Page 13
  14. 14. DIGITAL AVATAR- The Strategies for Digital Convergence CHAPTER 1 INTRODUCTION 1.1 Scene Setting: The making of Digital AvatarComing together of media & entertainment, telecommunications andinformation technology (abbreviated as IT hereafter) and the online industriesare transforming the communications landscape by offering digitallyconverged solutions. Rapid technological advancement combined withmassive investments flows buoyed under deregulation and globalisationushered a revolution in the digital communications space. This strategictransformation called - Digital Convergence implies the blurring ofboundaries between the four industries. It offers easy-to-use, value-added digital solutions at cost-effective rates and faster pace, marking aparadigm shift towards a globallyintegrated digital omnipresence.MBA Dissertation by Student no. 099018609 Page 14
  15. 15. DIGITAL AVATAR- The Strategies for Digital ConvergenceThis strategic transformation is addressed in the title of the MBAdissertation as ‘Digital Avatar-The Strategies for DigitalConvergence’…..a transformation unfolding. ‘Avatar’ meaning‗metamorphose: transformation‘ (Collins English GemDictionary, 1966:325). Avatar implies ‗transformation of a single soul‘, isoriginally a word from Sanskrit language and hails its origin to Hindumythology. But now, the word ‘avatar’ has gained wide acceptance inEnglish language. Evidence of a global familiarity to the word ‘avatar’ iswell documented in a recent Hollywood movie (James Camerons science-fiction epic, 2010) by the name ‘Avatar’ (2010). The Title of thisdissertation hence implies ‘avatar’ as transformation of traditionalcommunication practices to its present form of converged digital version.Hence ‘Digital Avatar’ is the dissertation analysing the strategiesfor bringing about a successful and sustainable DigitalConvergence. 1.2 Changing Market PlaceThe stages that have led to the transformation of digital convergencehave left an impact with the passing of each era of the time-line. Thefirst phase (1970s-1990s) of the current millennium affected traditionalprint business with the substantial growth of online applications, withadvertising revenues diverting to the emerging online players. Even theMBA Dissertation by Student no. 099018609 Page 15
  16. 16. DIGITAL AVATAR- The Strategies for Digital Convergencewave of electronic commerce (e-commerce) applications hit the retail-sales inthe high-street stores. Traditional players like newspapers and magazinesstruggled to survive on subscription revenues amidst decreasingnewsprint demand. Among them, the only survivors were the specialistsegments- like financial news content, lifestyle magazines (example: finewine, fashion, travel et cetera). The second phase (mid-1990s) witnessed anexplosion of mobile communication. The online media continued to growin this time-period and did not much affect the television players.Currently, the third phase (year-2000 onwards) is transforming itselfboosted by high-speed net connected TV. It means a bright side forinternet and media content producers but pose a tough challenge to thecurrent distribution channels, namely telecom, satellite and cable carriersand the broadcasters.But interestingly, amidst this transformation, increased customer focusand value-addition remain the driving factors in the heart of digitalconvergence. Applications like smartphones, on-the-move communicationdevices have become digital life-lines (those which can be used without fixed-lines example: Apple iPad). Traditional newspapers and magazines continue tosee a dwindling growth unless they form strong strategic alliances withonline business models or are recognised as strong brands names likeForbes, Time etc. The transformation will mark some players emerging asmovers and shakers of the changing landscape, giving nervous times toMBA Dissertation by Student no. 099018609 Page 16
  17. 17. DIGITAL AVATAR- The Strategies for Digital Convergencethe traditionally dominant players. The new dawn will see niche players(like Google and Facebook) who would completely change the rule of thegame-posing a stiff competition to the existing business models. There isa shift in the level playing field. Digital Convergence is paving way tointeresting business solutions to converge, compete and change thedigital eco-system. This calls for a strategic perspective to manage andmonetise the convergence. Hence, this dissertation critically analyses thethree key strategies- namely- strategic alliance, bundling and integrationthat are closely responsible in bringing about this digital transformation. Digital convergence will come with a lot of pride, discontent, politics, human emotions and a clash. A clash of titans of the four competing industries- media, internet, telecommunications (mobile) and technology (IT)- will be like strong tectonic plates colliding. Highly competitive digital world will give way to smart business solutions, innovative integration amidst the power struggle of colliding business interests over content and revenues. During this evolutionary phase, there is a constant battling on the level playing field with new entrants threatening existence of traditional old players or at times, the old playing joining hands with new-age business to promote mutual gains.MBA Dissertation by Student no. 099018609 Page 17
  18. 18. DIGITAL AVATAR- The Strategies for Digital Convergence Digital Hot Spots of the World Source: 2009 World Factbook cited in World Digital Media Report (Deloitte and Touche, 2009) Description: This picture reflects the level of global participation over digital access. Countries like USA, UK, Canada and most parts of Europe are found to be most active participants. While, parts of Africa, Latin America, Vietnam et cetra are found to still catch up the connectivity to log on to the world of digital experience.MBA Dissertation by Student no. 099018609 Page 18
  19. 19. DIGITAL AVATAR- The Strategies for Digital Convergence 1.3 Objective of the ResearchThis dissertation will critically analyse the strategies to build creativecombinations of competing digital technologies. Success in masteringdigital convergence can be gained by balancing the right strategies,maintaining high-standards of quality and using an effective pricingstrategy. The channels of distribution like- internet, mobile and mobileapplications, television, cable distributors have become significant playersin this emerging eco-system. But the most challenging strategic issue inthe evolving business model is the question of monetization of profitsover newly emerging distribution mechanisms.The transforming digitaleco-system is caught between questions over form of effective businessmodel, nature of agreement within business models, pricing strategy andevaluates the techniques for seeking cross-functional participation. Thisdissertation conducts a detailed evaluation of the strategies that can beMBA Dissertation by Student no. 099018609 Page 19
  20. 20. DIGITAL AVATAR- The Strategies for Digital Convergenceused by digital convergence industry to unleash an unprecedentedconsumer experience and monetise emerging business opportunities. CHAPTER 2 2. LITERATURE REVIEWThis part of the dissertation explores and empirical evidence based onpast literature to evaluate the applicability of the three key strategies –Strategic Alliance, Bundling and Integration, considered in thisresearch.MBA Dissertation by Student no. 099018609 Page 20
  21. 21. DIGITAL AVATAR- The Strategies for Digital Convergence Organisation of Literature Review The literature review for this dissertation is discussed under the following categories: 2.2.1. Digital Convergence giving a Strategy Perspective and discussing Moore‘s Law 2.2.2. Strategic Alliance 2.2.3. Bundling Strategy 2.2.4. Integration Strategy 2.2.4 Literature Review on Bundling StrategyBundling can be defined as a typical pricing strategy to offer two or moreproducts (goods or services) that are available for purchase as one singleproduct (Guiltinan, 1987; Gaeth et al., 1990 and Semonin, 1995). Productbundling has attracted increasing interest from researchers mainly withinthe fields of economics and marketing. Bundling is seen as a devicefor leveraging market power from one good to another (Whinston,MBA Dissertation by Student no. 099018609 Page 21
  22. 22. DIGITAL AVATAR- The Strategies for Digital Convergence1990) cited in (Saligner, 1995:85). It helps in reducing competitionthrough differentiation (Carbajo et al., 1990; Chen, 1997).Cost-saving aspect under bundling makes it a profitable strategy wellapplicable to most telecommunications companies product/service offerscutting across voice, video or internet access. Product bundling strategyinvolves retailing several identical products in a single package at areduced unit price (Adams &Yellen, 1976). Bundling can also becategorized as pure or mixed, with pure bundling referring to bundleswhere the individual products cannot be purchased individually and mixedbundling referring to bundles where the individual products can bepurchased both as single products and also as part of the product bundle(Adams and Yellen, 1976).Adams and Yellen (1976) argue that mixed bundling at least weaklydominates pure bundling. (McAfee et al., 1989) suggest that while mixedbundling virtually always strictly dominates pure bundling, the optimalbundle price is sometimes greater than the sum of the prices of theindividual goods cited in (Saligner, 1995:86). Schmalensee (1984) wasone of the first authors who discussed bundling in a context thatfits the characteristics of e-commerce, described the phenomenonof heterogeneous buyers’ taste in a monopolistic market. Heassumes the marginal-utility for the second (reproduced) good to be zerofor all buyers. Study by Bakos&Brynjolfsson (1996, 1997, and 2000)MBA Dissertation by Student no. 099018609 Page 22
  23. 23. DIGITAL AVATAR- The Strategies for Digital Convergenceanalyzed why information goods can be sold with higher profits asbundles. Companies build customer-experience around the productby bundling-strategy as a means of selling potentially separablecomponents to customers, as integrated system or ‘bundle’,usually by collaborating with their B2B partners (Porter,1985:425). Core-product and services are sold as a bundle (example:Software-hardware maintenance package). This implies, marketers shouldcombine sales-leadership and deliver specialized-service. For example: Ericsson collaborated with Vodafone to create highly customized solutions for commercializing the new generation 3-G mobile system technologies offering convergence-benefits to consumers (Davis et al., 2007:186).Bundling as a profit Strategy: Paid content on the web advanced only from the year-2000 but compelled the academic thinking to analyze the effect of competition on bundling strategies of firms that sell information goods.Bundling entails cost savings, product complementariness, enlarged scopeof profitability, high costs and positive correlation of valuations (Salinger,1995) and creates entry-deterrence (Nalebuff, 1999).MBA Dissertation by Student no. 099018609 Page 23
  24. 24. DIGITAL AVATAR- The Strategies for Digital ConvergenceComplementors(example: Microsoft and Intel) increase the value of eachothers offerings and the size of the total market. However, discord candevelop in many areas, such as pricing, technology, standards, andcontrol of the market, both in terms of which company has the mostinfluence over customers and which one gets the biggest slice of the pie.The issue of pricing perfectly captures this tension in a bundledoffer. Ideally, the pricing will be pegged higher thancomplementor’s price. The first step in managing relationships withcomplementor‘s is ‗to develop a deep understanding of their economics,strategies and goals, their existing capabilities, their incentives forcooperation, and any potential areas of conflict, then, to gain an upper-hand‘ (Yoffie&Kwak, 2006:88-98). Now-a-days, unbundling strategies are moving towards quadruple play by incorporating mobile on top of home wire-line products. For example: NTL-Telewest in the UK bought Virgin to develop a new quadruple play company called Virgin Media. The advantage of ‘unbundled’ sales is the vendor’s ability to obtain the highest price for each component product from individual buyers, whereas bundling can increase sellers profit by extracting more consumer surplus by reducing the heterogeneity in buyers’ reservation prices (Adams and Yellen 1976; Schmalensee, 1984) cited in (Häubl, 2010:110-115).MBA Dissertation by Student no. 099018609 Page 24
  25. 25. DIGITAL AVATAR- The Strategies for Digital ConvergenceOn contrary, (Ware &Dippon, 2010:54-64) analyse that communicationsnetwork are subject to unbundling at different levels for different services.Assessing the cost-benefit of unbundling is complicated because ofconvergence and competition among the video, wireless and telephoneproviders. While, bundled products/services marketers aim for cost-effectiveness and strive for better control over their promotional toolset(Silva-Risso et al., 1999) cited in (Foubert et al., 2010:880),(Stremerschand Tellis, 2002; Hanson and Martin, 1990). Unbundling of networks canadd disincentive to investment in new infrastructures when it may becheaper to make use of regulated access to the existing national telecomsnetwork (European Union, Green Paper, 2007).Another stream of analyses has focused on how bundling affectscompetition. Economists such as Schmalensee (1984), McAfee et al.(1989), Saligner (1995) and Armstrong (1996) demonstrate that bundlingmay lead to effective price differentiation. Bundling can also act as amechanism of market foreclosure, creating concern of anti-competitivebehaviours cited in (Foubert et.al, 2010:880).Information goods are presumed to have very low marginal costs. Chae(1992) has analyzed a subscription TV market where bundle is used dueto economies of scope in distribution technology, pricing and productiondecisions of a supplier. Bakos and Brynjolfsson (1999) have discussed thepricing and profits when marginal costs are negligible and customers haveMBA Dissertation by Student no. 099018609 Page 25
  26. 26. DIGITAL AVATAR- The Strategies for Digital Convergenceidentically distributed valuations. They have shown that pure bundling oflarge numbers of goods is optimal. Chung and Sirbu (1999) establishedthat mixed bundling is the dominant strategy. Wu et al. (2008) solved thecustomized bundle pricing problem in which consumers are allowed tochoose up to N goods from a larger pool of J goods by considering thetrade-off between offering more choices and incurring greater menu cost.Fana et al. (2009) analyzed the bundling of a software product with adelivery and maintenance service cited in (Yang, 2010:473).Lack of Standard MetricAnother important yet unexplored area of pricing for digital content is thelack of standard metric to evaluate financial performance of digitalcontent. Distorted revenues, costs and share prices have been matchedby the unreliability of the financial metrics that companies have adopted.The executives of companies conducting business over the Internet have,conveniently, downplayed traditional measures of profitability andeconomic value.MBA Dissertation by Student no. 099018609 Page 26
  27. 27. DIGITAL AVATAR- The Strategies for Digital ConvergenceInstead, they [executives of internet companies] have emphasized expansivedefinitions of revenue, numbers of customers that might somedaycorrelate with revenue [such as numbers of unique users (reach), numbers of sitevisitors, or click-through rates]. Creative accounting approaches have alsomultiplied. Indeed, the internet has given rise to an array of newperformance metrics that have only a loose relationship to economicvalue, such as pro forma measures of income that remove ‗non-recurring‘costs like acquisitions (Porter, 2003:4).‘The dubious connection between reported metrics and actual profitabilityhas only served the confusing signals about what has been working in themarketplace. The fact that those metrics have been taken seriously by thestock market has muddied the waters even further. For all these reasons,the true financial performance of many internet-relatedbusinesses is even worse than has been stated’ (Porter, 2001:5).However, (Bennison, 2009) points out that Google Analytics is a softwaretool to measure the success of your digital marketing has been availablefor a few years since the advent of Google Analytics is free to set up.[Analytics software measures the website‘s performance]. But this maynot be successful in evaluating true-economic value of digital content(Bennison, 2009).Freemium ModelMBA Dissertation by Student no. 099018609 Page 27
  28. 28. DIGITAL AVATAR- The Strategies for Digital Convergence The internet customer is accustomed to free information. (Swatman et al., 2006:64)Some of the new-age thinkers researched the significance of Freemiumstrategy to target the paid user of content. In a ‗Freemium‘(free+premium) model, products/services are offered in free basic andpaid premium versions (Andersen, 2009b). The word freemium is created by combining the two aspects of the business model: free and premium (Heires, 2006:36). Freemium model works by offering basic web services like basic digital content in a downloadable format for free while charging a premium for advanced or special features.The business model has gained popularity with Web 2.0 companies and ispopular for making advertising revenues by targeting the potential paidcustomer (Heires, 2006:36). The freemium model is especially relevant inthe case of digital media (internet) companies, where the creation ofrevenue streams is often most perplexing because of customerexpectations that basic services should be free.Digital content measures include straight usage statistics, the ImpactFactor, the Eigen factor and newer metrics that begin to take into accountMBA Dissertation by Student no. 099018609 Page 28
  29. 29. DIGITAL AVATAR- The Strategies for Digital Convergencethe linkages and interdependencies that characterize modern,interdisciplinary research. Though in the 1980s, Ives et al., (1983), Davis(1989), Baroudi and Orlikowski (1988) and Doll &Torkzadeh (1988)developed a number of general-purpose measures of success ofinformation systems. However, these measures are too general purposefor benchmarking. In addition, ‗they all focus on benefits from the pointof view of individual users as stakeholders, not management‘ cited in(Shang, 2000:1).Bundling occurs often where there is a strong and large-scale changeagenda, through peer pressure scope for providing cheaper alternativeswith limited resources (Willcocks&Oshri, 2009). Bundling strategy being apricing strategy usually comes under the regulation scanner. The mostnotable contributions to the literature exploring the regulation of amonopolist that screens its consumers include Sherman &Visscher (1982)and Srinagesh (1986) who examine the effects of rate-of-returnregulation on two-part tariffs and Besanko et al. (1987, 1988), who studythe regulation of a quality- differentiated monopolist. However, Bakos andBrynjolfsson (2000) showed a non-monopolistic environment ofcompetition for information goods.MBA Dissertation by Student no. 099018609 Page 29
  30. 30. DIGITAL AVATAR- The Strategies for Digital Convergence 2.2.5 Literature Review on Integration StrategyVertical integration refers to a firm‘s ownership of vertically relatedactivities (Grant, 2008:350). The assumption behind theory of verticalintegration is reduction in transaction cost and attainment of marketshare by taking over the competitors (Ahn&Litman, 1997:13). It is usefulMBA Dissertation by Student no. 099018609 Page 30
  31. 31. DIGITAL AVATAR- The Strategies for Digital Convergenceto concentrate on the core-competencies to help the firm assemble itsnews production and broadcast capabilities to experience a better verticalintegration of its resources. This move will also create barriers to entry forthe firm (Prahalad& Hamel, 1990).Benefit of Integration:Empirical evidence on market dominance has been established byintegrating advantages and challengesof one player that are bredinto that of the other to create increasing market integration as studiedby (Veugelers et. al, 2001; Rondi et al.,2003; Rondi and Vannoni, 2005,DeVoldere et al., 2004) cited in (Belderbos et al.,2009). Past studiessuggest that vertical integration is a way of increasing a firms value-added margins for a particular chain of processing from ultra rawmaterials to ultimate consumers. Research by (Arrow, 1975; Coase,1937; Williamson (1969, 1971, & 1975) noted integration economiesgained from shared facilities, information, or other resources cited in(Harrigan, 1985). Adelman (1949), Bork (1954), and Kaserman (1978)recognized the market power conveyed by this strategy, but the analysesthey employed in studying it were static (Harrigan, 1985:398). The aim ofan integration strategy is to accomplish a commanding position withinall stages of the value-chain to secure the largest possible marketdomination for the players involved. Porter suggests the other way toachieve advantage is strategic positioning—doing things differently fromMBA Dissertation by Student no. 099018609 Page 31
  32. 32. DIGITAL AVATAR- The Strategies for Digital Convergencecompetitors, in a way that delivers a unique type of value to customers.This can mean offering a different set of features, a different array ofservices, or different logistical arrangements. It creates operationalefficiency advantages. Operational effectiveness can take myriad forms,including better technologies, superior inputs, better-trained people, or amore effective management structure (Porter, 2001:10).Every economic revolution redefines the roles and relationships on whichofferings are based. This was true during the industrial revolution whentechnological breakthroughs in the application of energy to useful workmade possible the factory system with its highly specialised division oflabour (Norman &Ramírez, 1993:2). As an outcome, integration resultsin creating more value per person (customer, supplier and employee) andin securing greater total profit from and for its financial and humanresources than all but a handful of other companies in any consumerindustry (Norman &Ramírez, 1993:4). The result is an integrated businesssystem that invents value by matching the various capabilities ofparticipants more efficiently than was ever the case in the past (Normanand Ramírez, 1993:4). The availability of digital information highways, incommerce will give consumers fast and increased access to a vastselection of goods and will also cause an evolution from retail channels toelectronic markets. The virtual products offered will be ordered on-screenMBA Dissertation by Student no. 099018609 Page 32
  33. 33. DIGITAL AVATAR- The Strategies for Digital Convergenceand delivered direct to the home (Magretta, 1998; Ghosh, 1998) cited in(Wirtzab, 1999:19).The change from an industrial to an information society connected therewith will above all else be affected by the dynamics of technologicaldevelopments (Wirtzab, 1999). This change has been bolstered by birth ofinternet. The internet came as a strong force. This disruptive force brokedown the concentration of power from the hands of a few, to the hands ofmany. Andersen (2009a:3) asserts, ‗there have never been a morecompetitive market than the Internet, and every day the marginal cost ofdigital information is drastically reducing‘. In most upstreamtelecommunications markets, incumbents are subject to a number ofobligations, including a requirement not to engage in ‗undue‘ price andnon-price discrimination. However, enforcement of non-pricediscrimination is inherently difficult. In light of this, considerable academicliterature has focused on the ability and incentives of a verticallyintegrated operator to engage in non-price discrimination. By puttingdownstream rivals at a disadvantage, a vertically integrated operator isable to capture a higher share of the downstream profits (Crocioni, 2007:464). Further, (Yoffie, 1997) predicts that consumer multi-media industrywill change from three vertical businesses to five horizontal segments andsuggests that content providers are in the strongest position to prosper,while hardware companies face limited prospects. New informationMBA Dissertation by Student no. 099018609 Page 33
  34. 34. DIGITAL AVATAR- The Strategies for Digital Convergencetechnologies are divisive in allowing such a flexible, adaptive model toactually work (Castell, 2000:177). Digital technology allowed thepackaging of all kinds of messages including sound, images & data- anetwork was formed that was able to communicate its nodes withoutusing control centres (Castell, 2000:45).Lack of vertical integration may lead to a reduction in quality(Economides, 1996:22). By 2011, the world will witness truly interactivetelevision that will interface consumers, communications, content andcommerce into a seamlessly flow to and from other devices (Friedman,2010). With vertical integration one can be an efficient producer. Butvirtual integration makes one efficient and responsive to change at thesame time (Dell, 1998) cited in (Magretta, 1998:7). More opportunitiesalso mean more uncertainty and greater risk. Forecasts based onprojections from the past become unreliable. Factors that have alwaysseemed peripheral turn out to be key drivers of change in a companyskey markets. Invaders from previously unrelated sectors change the rulesof the game overnight (Normann and Ramírez, 1993:65-8).Economides &Woroch (1992) find that vertical disintegration is notdesirable for the firm that offers end-to-end service. Once disintegrated,its constituent parts realize lower total profits (Economides, 1996:22).The lessons of networks can be applied to industries where verticalrelations play a crucial role; conversely, the economic and legal learningMBA Dissertation by Student no. 099018609 Page 34
  35. 35. DIGITAL AVATAR- The Strategies for Digital Convergencedeveloped in the analysis of vertically-related industries can be applied tonetwork industries (Economides, 1996:4). In so in a competitiveenvironment, strategy is no longer a matter of positioning a fixed set ofactivities along a value chain. Increasingly, successful companies do notjust add value, they reinvent it. Their focus of strategic analysis is not thecompany or even the industry but the value-creating system itself, withinwhich different economic actors - suppliers, business partners, allies,customers work together to co-produce value (Prahalad, 2008) cited in(Leavy, 2008). Their key strategic task is the reconfiguration of roles andrelationships among this constellation of actors in order to mobilize thecreation of value in new forms and by new players. And their underlyingstrategic goal is to create an ever-improving fit between competenciesand customers. To put it another way, successful companies conceive ofstrategy as systematic social innovation: the continuous redesign ofcomplex business systems (Prahalad, 2008).The literature review has identified some gaps. Despite theenthusiasm building around digital convergence, significant factors likeregulation, standards, nature of business model, changing customerrequirements and management of dynamism in the industry remainignored. Little attention has been paid to the true total costs forconvergence were looming indirect costs may threaten to overpower thebenefits of cost reductions attained under Moore‘s law. It calls for aMBA Dissertation by Student no. 099018609 Page 35
  36. 36. DIGITAL AVATAR- The Strategies for Digital Convergencestandard metric of evaluation of real-growth in the digital convergenceindustry. This real-growth parameter would remain unaffected by the un-real digital exuberance. This dissertation has made an attempt to analysethese issues in the Data Analysis section. Strategic Alliance Bundling Integration 2.2.6 Emerging QuestionsBased on the critical review of the empirical study of the phenomenon ofdigital convergence and strategies to compete in the converging market,a series of unanswered questions have sparked up. The greatest concernfor the digital convergence industry is the search for a strategicmentorship to suggest ways to monetise the benefits of the comingtogether of multiple-channels of distribution. It calls for a tremendouschange on the strategic canvas by companies seeking competentMBA Dissertation by Student no. 099018609 Page 36
  37. 37. DIGITAL AVATAR- The Strategies for Digital Convergencealliances, opting for a competitive pricing strategy to value real-growthand integration of the multiple platforms, currently working in silos.Hence, the major questions that structure the article and the theorymaking process are: Main questions for research Strategic Alliance: In the face of digitally changing ecosystem, does the strategic alliance help the companies to evolve more competent in the digital interface? Bundling: Does the pricing strategy of bundling emerge out successful to the players of the digital era? How do you see the relevance of unbundled content being priced? Integration: How can companies efficiently integrate heterogeneous applications with so many businesses so as to be mutually benefiting all business capacities? What are the strategic implications of such a business process for today‘s managers who are setting the scene for digital convergence to unleash its potential?MBA Dissertation by Student no. 099018609 Page 37
  38. 38. DIGITAL AVATAR- The Strategies for Digital Convergence CHAPTER 3 3.0 RESEARCH METHODOLOGYThis part of the dissertation emphasises on the research methodologyemployed for this dissertation. The dissertation is based on a qualitativeresearch methodology followed by a thematic analysis of the datacollected. Qualitative approaches are incredibly diverse, complex andnuanced (Holloway and Todres, 2003), (Argyris et al., 1985) cited inBryman and Bell (2007:428) and thematic analysis is seen as afoundational method for qualitative analysis (Braun et al., 2006:78).Thematic analysis is firmly compatible with both essentialist andconstructionist paradigms within psychology (Braun et al., 2006:78).Theinterviews conducted are an account of in-depth perspective on thequestions that emanate from the critical review of past studies evaluatedin the literature review. Thematic analysis is a method for identifying,analysing and reporting patterns (themes). Thematic analysis organizesand describes the data set in (rich) detail (Braun et al., 2006:79).MBA Dissertation by Student no. 099018609 Page 38
  39. 39. DIGITAL AVATAR- The Strategies for Digital ConvergenceThe focus of the dissertation is to analyze the real problems within thedigital convergence industry and weigh them against the strategies thatare reflective of the most recent changes in the digital landscape. It aimsat suggesting a practical solution that can prove beneficial to the digitallyconverging industry. The dissertation is based on strong theoreticalfoundations of strategic management and aims to arrive at findings thathave practical implications Bryman and Bell (2007:428). The objective ofthis dissertation is to seek effective digital strategies that can offer acompetitive edge to a company in this industry.Why qualitative research methodology?This dissertation research hasbeen conducted using the qualitative research methodology as theobjective of the research is to capture the emerging views from thecarefully selected group of interviewees. The author chose a qualitativeresearch method as it facilitates theoretical mapping of views and extractthe emerging thinking from the data into meaningful information.Qualitative research also potentially enhances managerial knowledge byproviding best-practice information as most participants have expressedtheir practical experience in the digital interface.Why Interviews? The ethnographic interview is a commonly usedinterviewing process employed by research-clinicians (Kuehl& Newfield,1991). It gives an opportunity to emerging ideas to be identified inobservable patterns. It is here that role of thematic analysis is broughtMBA Dissertation by Student no. 099018609 Page 39
  40. 40. DIGITAL AVATAR- The Strategies for Digital Convergenceinto view. Thematic analysis focuses on identifiable themes and patternsof living and/or behaviour. The interview can be a combination of closedended and open-ended questions (Bryman& Bell, 2007:213). Further, ithas been highly advantageous to conduct the interviews from thecarefully selected set of respondents as the interviewees are highly-placedsenior professionals from the media and communications industry. Theserespondents represent the decision-makers across the four industries thatreflect the theme of digital convergence across- Media,Telecommunications, Internet and Information Technology. Further, therespondents have been interviewed in-detail over a fairly well distributedtime frame over each of the questions asked by the author. It has been acommendable opportunity for the author to use the seven-years of richwork-experience as a broadcast media journalist into the art ofinterviewing & analysing and interpreting the emerging patterns.Face-to-face interview gives the freedom to the interviewer to encouragethe interviewee to respond and develop a comfort level with the questionsput up. Further, the author‘s personal experience in interviewing is theimportance of eye-contact in face-to-face interview. Hence, based on thevalidity of importance of capturing emerging thinking from the data-setad based on strong background of professional experience, thisdissertation has chosen Qualitative Research Methodology: Semi-structured interviews using a standardized interview protocol for eachMBA Dissertation by Student no. 099018609 Page 40
  41. 41. DIGITAL AVATAR- The Strategies for Digital Convergenceinterview would be conducted with focus groups. The semi-structuredinterviewees, in this dissertation analysis will be the senior/managers indigital media, communications, and telecommunication, entertainment &IT industries. The above mentioned industries are rapidly witnessing adigital transformation and hence are expected to be a part of close reviewof this study.The candidates were first emailed a copy of the dissertation synopses,complete set of questions and the consent form at least 2-4 weeks aheadof the interview. They were requested for a convenient time of 45-60minutes for conducting the in-depth interview. A total of 20 in-depthinterviews (face-to-face and a few over Skype call) were conducted. Theaverage duration of an interview was 30-50 min to 85-90 minutes. Only 2interviews are on specific questions and range for 10 minutes. Allinterviews have been recorded on a digital voice recorder (OlympusVN5500PC) and professionally transcribed for the total duration. (Alltranscripts are attached in Appendix).Research Setting:This dissertation is a reflection of the most dominantfactors for changes in digital landscape in advanced, emerging anddeveloping markets for digital content.MBA Dissertation by Student no. 099018609 Page 41
  42. 42. DIGITAL AVATAR- The Strategies for Digital Convergence The data is collected from well-established players that represent the largest companies in the 4-industry confluence. Most of the data is collected from companies based in London (UK). But there are highly valuable contributions of views from industry leaders from Cambridge (MA), Toronto, Germany and Dublin.Data Collection- The data had been collected from highly-crediblesources by conducting in-depth interviews of 20 of the responsibly placed,senior professionals (media & communications industry) between June2010 and July 2010. The objective of the interviews has been to capturethe views on research questions from the sample that reflects thediversity of experience in witnessing, managing and deciding the future ofdigital convergence. Apart from the interviews, a wide range of journals,publications, reports, trend have been referred. Apart from them, theauthor has attended 3 Conferences on digital media (between March-July2010) at London. This has been useful to gain meaningful insights intothe latest indications in order to throw a deeper analysis over thisdissertation. Selection of the topic of digital convergence also finds areflection into the minute observation of changing trends, gained over 7years of work-experience into the media industry. The areas covered inthe interviews include verbal-discussion on the firms perspectives ontechnology evolution in the digital convergence industry, major driversMBA Dissertation by Student no. 099018609 Page 42
  43. 43. DIGITAL AVATAR- The Strategies for Digital Convergenceand barriers to the adoption of digital technologies, impact of competitionand detailed focus on the 3 strategies explored in this dissertationData Analysis-The data has been analysed using thematic analysisprocess where key patterns have been categorised under– strategicalliance, bundling and integration. The data analysis involves a rich inter-weaving of emerging perspectives of the interviewees who maintaininfluential positions in their organisations and are at the helm of decision-making and retain powerful positions in their respective organisations.The emerging thinking is summarised by extracting details of informationthat run across the data and not within each participant.MBA Dissertation by Student no. 099018609 Page 43
  44. 44. DIGITAL AVATAR- The Strategies for Digital Convergence Data Analysis Data Collection 20 Qualitative In-depth interviews Data Immersion Identification of common Data Reduction themes, patters, emerging thinking from the interviews Data Processing Identification of Strategic Alliance, Bundling and Integration to be Analysis propelling forces to drive the Digital Ecosystem Systematic Data Collection Flowchart (Created by the author) CHAPTER 4MBA Dissertation by Student no. 099018609 Page 44
  45. 45. DIGITAL AVATAR- The Strategies for Digital Convergence 4.1 Expert’s Views on transformation of Digital AvatarMBA Dissertation by Student no. 099018609 Page 45
  46. 46. DIGITAL AVATAR- The Strategies for Digital ConvergenceDigital convergence is what has emerged from the pace of technologicalchanges in the era of technological dynamism. This convergence issustained by the fundamental co-existence of the three strategies- strategicalliance, bundling and integration (vertical and horizontal), interplaying to makedigital convergence a reality. This part of the dissertation captures theemerging picture that emanates from the data collected, defining theprominent trends attained from the set of interviews over the next-generation strategy canvas.This part of the dissertation conducts a thematic analysis to capture theemerging picture that emanates from the data collected from 14 (out oftotal of 20) senior media professionals who have been interviewed by theauthor during qualitative data-collection stage. The objective of this stageof the dissertation is to capture the common positions, points ofdifferences by cross-linking the thoughts of participants. Adoption ofstrategic alliance as a strategic management tool has been supported by14 participants. The seven major themes arising emphasise that strategicalliance helps in content sharing by developing smart partnership,achieves core-competence and cost-optimisation and balance of powerrelations under strategic alliance that lead into mutually beneficialrelationships. It leads to achieve cross-media integration, pursue socialMBA Dissertation by Student no. 099018609 Page 46
  47. 47. DIGITAL AVATAR- The Strategies for Digital Convergencemarketing and such alliances are proving to save the telecommunicationcompanies to adopt lucrative business models for revenue-growth. 4.1.5 Conclusion for Data Analysis on Strategic AlliancesFinal observations lay out that digital content users needs and demandsare fast rising up creating a pressure on companies to evolvepersonalised and customised products and services. So, this is putting apressure on specialization of the content. While at the same time, theindustry is experiencing massive convergence with the coming togetherof four industries- Media, Telecommunications, Web and Technology.Digitally converging eco-system is hence, fragmenting as quickly as itsconverging with the two forces playing against each other with equalconsistency. Therefore, it may be concluded that the emanating digitalecosystem will bring with it the fundamental complexities, however, astrategic perspective will give rise to benefits of competencies andcollaborations flow out both to consumers and industry players.MBA Dissertation by Student no. 099018609 Page 47
  48. 48. DIGITAL AVATAR- The Strategies for Digital Convergence 4.2 Data Analysis on Bundling Strategy 4.2.4 ConclusionThe road to content-distribution is witnessing more and more optionsavailable. It can be observed that bundling is one of the ways of gettingMBA Dissertation by Student no. 099018609 Page 48
  49. 49. DIGITAL AVATAR- The Strategies for Digital Convergencethe content to the user. But much of profitability from bundling dependson the nature of business models adopted. So, digital mediacompanies have the power to exercise a balance between theeconomic-trade off from bundling and unbundling. Companieshave the choice to select the route that best fits the regulatoryrequirements. Further, the companies need to adapt bundling as asensible-pricing strategy and not a mere price-strategy as today‘sempowered consumer is highly price-conscious. Further, there is nodearth of differentiated products in the digital market place andconsumers may change their choices over price-sensitive behaviourunless the brand value is the sole reason for their choice. So, effectivebundling of emerging new technology with apt strategy is expected tooffer a better consumer experience.MBA Dissertation by Student no. 099018609 Page 49
  50. 50. DIGITAL AVATAR- The Strategies for Digital Convergence 4.3 DATA ANALYSIS –Digital IntegrationMBA Dissertation by Student no. 099018609 Page 50
  51. 51. DIGITAL AVATAR- The Strategies for Digital Convergence 4. Integration StrategyDigital convergence is changing the world of the media industry withadvertising revenues streaming into print media and TV, radio and theinternet. Growth of internet has boosted digital convergence by creatingintegrated platforms. Integration strategy is particularly useful for thoseplayers who build up this competence either in-house, organically or bygaining competence through joint-ventures or acquiring companies.However, there remains a problem of managing the diversity ofapplications. With infrastructure capacities building up, integrationbetween telecom competence and IT competence is growing. Hence,companies are trying to use integration strategies by knowing theircustomers and understanding the allied business partners. This part ofthe dissertation presents the emerging thinking of 13 (out of total of 20),senior media professionals who have been interviewed by the authorduring qualitative data-collection stage. The three major themes identifiedin this section are employment of integration strategy to create inter-platform synergies, develop skill sets and achievement of integrated-marketing communications. These outcomes help in positioning in themind of the consumer and also harness better revenues for the company.MBA Dissertation by Student no. 099018609 Page 51
  52. 52. DIGITAL AVATAR- The Strategies for Digital Convergence 4.3.4 ConclusionIntegration strategy pays digital media companies to retaining clients, winnew business and add value to the business proposition. Recent trendsindicate involvement of social media in proving to be a successfulintegrating factor. Integration of dying traditional media with digitalapplications creating online versions has come about as a survival factoras well. Digital Integration compels synergies of separate media platformsto promote converged business interests positively impacting the revenuestreams. However, challenges remain with integrating different skill-setsto have in-house quality employees well versed with both technology andcreativity to serve well the three screens- mobile, television and internet.MBA Dissertation by Student no. 099018609 Page 52
  53. 53. DIGITAL AVATAR- The Strategies for Digital Convergence CHAPTER 5 5. DISCUSSION 5.1 Analysing the transformation of Digital AvatarThis part of the dissertation discusses the emerging thinking from thequalitative data collected in light of the empirical evidence in the LiteratureReview. The emanating views are discussed in the context of phenomenon ofDigital Convergence lead by the strategy perspective of the digitalrenaissance and Moore‘s Law. The discussion focuses on the three mainresearch parameters - strategic alliance, bundling and integration. It isobserved that due to the digital convergence, there is a massive changehappening in the global media, communications and entertainment industry.MBA Dissertation by Student no. 099018609 Page 53
  54. 54. DIGITAL AVATAR- The Strategies for Digital ConvergenceThis change is celebrated by advantages of cohesive existence of four keyindustries- web, TV, media and information technology. But at the sametime, the landscape of business faces critical conditions due to clash ofmultiple-objectives of the four industries. The discussion section is organised as per the following: 5.2 Discussion over critical review of Digital Convergence 5.3 Discussion over Bundling Strategy 5.4 Discussion over Strategic Alliance 5.5 Discussion over Integration Strategy 5.2 Discussion over critical review of Digital ConvergenceDigital Convergence is the potential field for effective interplay of thethree strategies explored in this dissertation. The phenomenon of DigitalConvergence is driven by Moores law that acts as a roadmap for thecompetitiveness of the industry. Moore‘s law provides the guideline to theindustry to create a faster stream of faster, better, and cheaper high-technology products. The literature review acknowledges the influence ofMoore‘s Law of the current state of the industry. Empirical studies supportMoore‘s Law that technological performance will double every two years.During data analysis, the views by participants evaluate their practicalMBA Dissertation by Student no. 099018609 Page 54
  55. 55. DIGITAL AVATAR- The Strategies for Digital Convergenceexperience in the industry to confirming the existence of the impact ofMoore‘s Law. Hence, as observed in the Data Analysis, views ofsome of the industry leaders reflect an agreement with theliterature on empirical evidence of Moore’s law. The empirical studysuggests that moore‘s law will define the pace of changes in the digitalinterface. So, this discussion considers that empirical study is in line withresearch observation. The theory stands true to the actual phenomenonof digital convergence witnessed in the real world. 5.3 Discussion over Bundling Strategy One of the biggest issues that have been observed in the data analysis is the co-existence of strict divergence and strong preference for bundling as a successful strategy in the world of digital convergence.While some of the participants admit that they have to resort to bundling-strategy under competitive pressures, some call it a necessary evil.However, it is observed that most businesses are following a bundlingstrategy both for bundled-pricing and bundled-content. But a resistantview by some participants has brought to sharp notice that with digitalconvergence space evolving and may lead to unbundling for somesections. Further, it has been identified that there is a need for a betterMBA Dissertation by Student no. 099018609 Page 55
  56. 56. DIGITAL AVATAR- The Strategies for Digital Convergencepricing mechanism to manage digital content still needs clearer strategyfrom price-implementation. Both Paul Cowan and John Denton haveemphasised on the need for a pricing model from a digital standpoint tomatch the need and growing scale of operations. This observation isanalysed against the literature review on bundling. The literature reviewemphasises that bundling strategy for price, tends to extract more moneyfrom consumers. Whereas, unbundling strategy is employed to obtain thehighest price for each component product from individual buyer. However,research scholars warn the businesses of the difficulty in evaluatingpricing of unbundled converged digital products. Sale of operations andinnovation can make bundling a responsive strategy. It can be inferred that as the empirical evidence offers a loose correlation between unbundling strategy and its success in most cases. However, some business-models that cater to the specialized segments (like iplayers, on- demand TV etc.) are likely to adopt an unbundled pricing strategy. But most business that cater to digital experience for mass-consumers may continue with bundling strategy due to pressure of competition. Moreover, the economics of bundling drives the companies to offer bundled solutions and this trend is likely to continue.MBA Dissertation by Student no. 099018609 Page 56
  57. 57. DIGITAL AVATAR- The Strategies for Digital ConvergenceHowever, this discussion would suggest that it may be advisable for thecompany to conduct cost-benefit analysis before adapting a bundled or anunbundled pricing strategy. This means, the company needs to wellunderstand the economics, goals, existing capacities and offer pricesbefore deciding the convergence partner. Though, bundling does promotecost-effectiveness. Literature suggests that bundling reduces serviceprovider‘s costs through simplified management and scale economies. So,with a combination of better pricing model with right bundling,organisations can achieve ambitious targets through risk-mitigation.Further literature suggests that as bundling where there is a strong andlarge-scale organisation. So, bundling will further create competitionthrough peer-pressure, resulting in cheaper alternatives with limitedresources. However, bundling is flanked by regulatory regulations asinferred from the views expressed Example: BBC‘s Kangroo bundled offerwas flanked by competition commission‘s regulatory guidelines.It can be summarised that for digital convergence, neither mandatorybundling nor mandatory unbundling would be successful, but rather thedecision would emerge from the factors like- price offer, costs, benefits,sustainability, business objectives. So, both bundling and unbundlingas a strategy can be interpreted to co-exist in the digitalconvergence space- giving space to mixed-bundling offers. Mixed-MBA Dissertation by Student no. 099018609 Page 57
  58. 58. DIGITAL AVATAR- The Strategies for Digital Convergencebundling allows the consumers to purchase individual products as well asbundled products. Secondly, a gap has been identified between the current performance evaluator and desirable metric to measure digital convergence. The need for and ideal performance measure arises from the observation that the metric should have high correlation real economic growth, Views expressed by many participants have expressed a consistency f concern that the digital convergence industry is facing the problem of lack of a statistical tool to measure content.Empirical study by (Porter, 2001) says that the current metric forevaluation of digital performance has a lower correlation to real-growth.Hence, in a significant observation, this dissertation recognises a strongdichotomy between the existing evaluation and the real-growth indicatorthat should be in practice. This presents a wide disparity of thoughtsbetween the literature and actual experience of industry leaders. Theviews of the candidates reflect a tone of complain over absence of astandard metric to evaluate financial performance of the digital content.(Porter, 2001:4) lambasts the current practices of internet-basedcompanies discouraging them from continuing with the performanceindicators that is loosely correlated to the economic-value. Thisobservation reminds of the exuberant show of the dot-com companies inMBA Dissertation by Student no. 099018609 Page 58
  59. 59. DIGITAL AVATAR- The Strategies for Digital Convergenceyear-2000, soon after which what came blatantly was the dot-com burst.This discussion observes that there may be a serious need to developmore reliable and economic-value indicating performance measures forthe digital value evaluation. So, the author observes an immediate need of having in place a real- indicator for digital content and evaluates the true-performance. This could go a long way in saving the digital convergence industry from any unfortunate denting due to improper evaluators. The growth in the in industry will be large. So the more realistic it remains, the better will be its repercussions the multiple-stakeholder- consumers, investors, companies, suppliers, vendors, software providers, hardware providers et cetra of the four competing industries- Media, Telecommunications, Internet and the Information Technology.It further can be interpreted that absence of a real-indicator is the reasonfor failure of cross-media targeting mainly from advertising point of view.As the advertisers are wary of value of digital content potential and sofear investing their capital and trust, over a cross-media platform. Thiscould be the reason why integrated marketing communication has yet totake off in the digitally converging eco-system. So, there is a need for astatistical measure in the first place so as to set the stage forMBA Dissertation by Student no. 099018609 Page 59
  60. 60. DIGITAL AVATAR- The Strategies for Digital Convergenceeffective hyper-targeting.It may be noted that better measurementtools to evaluate website‘s performance (number of visitors, trafficsources, pages visited etc.) may be important for companies to find theircustomers. It would also help to measure the marketing attempt torespond to cross-media advertising rather than traditional advertisingover television, press and radio advertising. Further, literature can beexplored considering the impact on non-measurable scale on marketingprofitability. Some of this observation has been carried on by the authorover the ‗Recommendations‘ section of this Dissertation on Page Number149. Thirdly, based on the diversity of views expressed in the data, it has been observed that some participants (Endaf, Harry Strasser, John Denton) suggest that bundling is in principle a smart strategy and amidst challenges, bundling works in favor of customer retention and can work well with a freemium offer.Empirical evidence suggests that a seller‘s profit perspective is sometimesignored in a bundled offer. Studies by (Adams and Yellen, McAfee,McMillan) have shown that, optimal bundle price is sometimes greaterthan the sum of the prices of the individual goods. So, profit of the selleris reserved in a bundled offer. Hence, it can be interpreted that bundlingkeeps in mind the profit perspective for the seller. So, it may be inferredMBA Dissertation by Student no. 099018609 Page 60
  61. 61. DIGITAL AVATAR- The Strategies for Digital Convergencethat the view of the participants interviewed is in line with the empiricalevidence on bundling. It gives a much clearer understanding reasons fordigital media companies to offer bundled packages of goods and services.Moreover, companies are giving out a free-offer (freemium offer) withtheir bundled packages. It is realised that an attractive pricing strategyimpacts marketing, financial and overall organizational strategy anddirectly impacts customer retention.The literature also reveals the existence of bundling strategy in a multi-product monopolist setting. But it is observed that digital convergence ischanging the face of the industry and so are the power-relations changingfrom a monopoly setting on to a competitive setting of many such playersoffering widely differentiated bundles. But, with the coming on internet, concentration of power has distributed into many hands. There is a call for a level playing field. So, further research can be carried out to capture the implications of bundling strategy in a non-monopoly setting. Hence, this dissertation indicates an area for future research that will give a better understanding about the limitations of practicing a bundling strategy in a digitally converging eco- system.MBA Dissertation by Student no. 099018609 Page 61
  62. 62. DIGITAL AVATAR- The Strategies for Digital Convergence 5.6 Conclusion of DiscussionWhat is emerging out of the discussion is that the digitally convergentcompany will have the benefits of core-competence through strategicalliance, have a better price-strategy in place, and imbibe on verticallyintegrated technology and skill-set on adequate application of the threestrategies discussed in this dissertation. It can be identified that bundlingmakes strategic and operational sense but a trade-off must be exercisedbetween offering a bundled or an unbundled package depending on thebusiness circumstances.Secondly, this dissertation reaches to a conclusion that in the timesahead, digitalized content will be available in two sets. The traditionalbundled or unbundled models will exist. But in order capture a largerconsumer base, they may align with a freemium offer. That is offering afree service for the targeted paid user. Digital content or product/servicewill exist in both differentiated and undifferentiated formats. Thedifferentiated content offered by premium products. People will beprepared to pay for thispremium content over whatever platform it mightbe. Secondly, undifferentiated or free content will exist to act as a tool togather advertising revenues.MBA Dissertation by Student no. 099018609 Page 62
  63. 63. DIGITAL AVATAR- The Strategies for Digital ConvergenceFor example, Rupert Murdoch‘s pay wall model charges the reader forthe premium content offered by The Times. Such content would be avalue-added one with focus on high quality offer. It will open scope andcompetition battle for premium content producers for whom attainingthe brand position would be a compelling factor. On contrary, Googlenews is an undifferentiated content and will be available for free. Thefree content model is accessible by innumerable users and will bepassed on to readers for free. Such a model will be heavily dependenton advertisement revenues and will not build up brand positions amongcontent distributors.Smart partnerships in forms of strategic alliances will exist butthey may maintain selective openness based on the businessobjective. Strategic alliance will further nurture the companies formaintaining core competence. However, careful balance of power betweenthe entities will run across carefully protecting the ownership rights andintellectual property issues.Finally, the issue of transiting to the changes in the integratingmarketplace are a bit of challenge for organisations to embed them as asuccessful change management. Convergence will call for changes in theorganisational context. It implies changes in the in the traditional patternof running company to integrating new solutions and that too at a fastMBA Dissertation by Student no. 099018609 Page 63
  64. 64. DIGITAL AVATAR- The Strategies for Digital Convergencepace, so as to gain from timing the market appropriately. A lot ofemphasis on participation and innovation will need to be invoked. Eachorganisation will have to promote and encourage their own employees tocontribute to innovation and offer solution ideas. Good amount of trainingwill have to be imparted to encourage right ways of innovation. Large sizecompanies will have an opportunity to grow bigger. But, digitalconvergence gives an opportunity to small or medium sized smartcompanies to build up a strong market share and that too in acomparatively short span of time. So, companies need to have goodcompetent management team and commit to smart investmentstrategies. CHAPTER 6 6.1 RECOMMENDATIONSMBA Dissertation by Student no. 099018609 Page 64
  65. 65. DIGITAL AVATAR- The Strategies for Digital ConvergenceBased on a critical observation, this dissertation suggests somerecommendations that may be observed by the digital convergenceindustry and the world of academics.This dissertation stresses on such a research to be considered so as toavoid unreal growth of irrational exuberance from misleading the limpingglobal markets. As predicted, the digital market will grow multi-fold.So, it is highly essential for the growth to be real and not an outcomeof irrational exuberance. Lessons from past reveal that unfortunateevents such as the dot-com bubble burst (1995-2000s), global financialmeltdown (2008-9) have emanated due to improper evaluations ofgrowth performance. Such incidents have left behind a trail of painfulspill-over effects on the world.MBA Dissertation by Student no. 099018609 Page 65
  66. 66. DIGITAL AVATAR- The Strategies for Digital Convergence The dot-com boom of the 1995-2000‘s reminds of the over-dependence on un-real and speculative-growth indicators that ultimately left distressing repercussions leading to crash of the building exuberance. Similarly, if the digital convergence growth is not measured on real-growth indicators, it may be feared to lead into un-real digital-growth exuberance. By this, the author implies that if digital convergence growth is not measured on growth indicators that reflect real-growth, it may not give the accurate growth position of the industry. If the fundamentals of this growth-achievement are not sustainable, it could be feared to lead to a digital-exuberance crash.This finding can be considered to be of an alarming nature asmanagement of this digital growth story calls for immediate attention.This observation gains support from empirical study by (Porter, 2001: 4)in his Harvard Business Research study which suggests that a the existingfinancial performance indicators currently practiced in the industry do notfully correlate to their economic value. Thus, financial performance ofdigital potential needs to be related to its true economic value. At thesame time, this gap could be further investigated by research scholarsemphasising the nature, need, digital profiling of the key indicators. Theauthor suggests this could be investigated from a quantitative dataMBA Dissertation by Student no. 099018609 Page 66
  67. 67. DIGITAL AVATAR- The Strategies for Digital Convergenceanalysis point of view as it could be more relevant to establish ahypothesis based research. The following are the two Hypothesis suggested by this dissertation: Hypothesis 1: Is the existing metric a reflection of economic value of the performance of digital content? Hypothesis 2: Is the new metric a reflection of true economic value of digital content? These are some suggested research questions that may be useful to future researchers: 1. From the digital profile data (based on number of clicks, user profile, time-spent etc.), can a good performance indicator stand true to reflect economic-value of digital content? 2. How trustworthy are the current performance indicators-like- Google analytics, straight usage statistics, the Impact Factor, the Eigen factor and newer metrics. 3. What are the latest findings of the researchers towards having a comprehensive measure of performance indication? 4. Can the new metric (that may be getting developed at the moment) separate performance exuberance from real economic value?MBA Dissertation by Student no. 099018609 Page 67
  68. 68. DIGITAL AVATAR- The Strategies for Digital Convergence 5. Does the finding differ from academic literature that dismisses the fact that existing evaluators are anywhere consistent to true value? 6. As digitally converging market is an emerging market, a study can be done specifically on monitoring performance indicators for emerging markets.So, the author observes an immediate need of having in place areal-indicator for digital content and evaluates the true-performance. This could go a long way in saving the digitalconvergence industry from any unfortunate denting due toimproper evaluators. The growth in the industry will be large. So themore realistic it remains, the better will be its repercussions the multiple-stakeholders- consumers, investors, companies, suppliers, vendors,software providers, hardware providers etc.- of the four competingindustries- Media, Telecommunications, Internet and the InformationTechnology.MBA Dissertation by Student no. 099018609 Page 68
  69. 69. DIGITAL AVATAR- The Strategies for Digital Convergence This realisation is like the tip of the iceberg to foreseeable but real problem for future. The author urges this observation to be treated with immediate effect so to have the real-growth picture, before the news stories on ‗digital convergence bubble burst‘ or ‗good-bye digital exuberance‘ make headlines on daily newspapers, through TV into our living rooms or click on the internet. This observation emerges out of a comparison of the empirical evidence in the literature review with emerging thinking of participants. Based on this understanding and analysis of outcomes of un-real growth, this dissertation realises that if powered by unreal growth, digital burst could be a reality if not handled well. 6.2 Limitations of the researchDigital Convergence is all pervasive. The applications are vast and mayhave industry-specific trends. This dissertation has captured some of themost remarkable trends that capture the convergence effect in 4 keyMBA Dissertation by Student no. 099018609 Page 69
  70. 70. DIGITAL AVATAR- The Strategies for Digital Convergenceindustries namely- Media, Telecom, Internet and Information Technology.However, there are specific industries like – online book publishing, smallscale business networks, online charity institutions, online educationindustry that may have a different approach towards the markets.Further, areas of national defence, satellite communication forsurveillance, weather monitoring, data monitoring of the governments,use of digital content on clinical and health industry may have moreprotected and conservative approach. The strategies explored in thisdissertation may not apply to such specific industries. It has been beyondthe scope of this dissertation to address the typical scenarios in typicalcases.It can be observed that importance of digital convergence and itsapplications is growing massively around the world. But it is realised thatthere still exists a digital divide based on the net- penetration, impact andgrowth of Digital convergence. For example, in UK, USA, China, Korea thedigital convergence is at its full boom, but countries like-Vietnam, parts ofNigeria may still be affected with lack of digital interface. This dissertationis however in line with advanced, emerging and developing markets fordigital content. Further, this dissertation is an academic paper and effectsof digital convergence on industries related to gambling, adult content,black-economy stand beyond the scope of this research document.MBA Dissertation by Student no. 099018609 Page 70
  71. 71. DIGITAL AVATAR- The Strategies for Digital Convergence 6.3 Conclusion of Dissertation: Digital Avatar transformed…There will be challenges opening up galore as the 4 titans of the industrythat compete to converge. This research has made an attempt to explorethe strategies involved in digital convergence. What may be essential tonote is that organisations will have to be receptive to the changes in thedigital landscape to take the opportunities and challenges thrown open.The top-management teams in the organisation may need to constantlyrevalue the strategic alliances, bundling strategy and integration effectsto maintain the pace of desired changes. Innovation may be encouragedto emanate from multi-levels in organisation. This means the companieswill have to motivate and encourage their employees to think aboutadding value to their tasks. At the same time, the employees will have tobe trained to render cross-media functioning. The next era will beearmarked with even more competition, further indulgence in price-cutsand product differentiation. So, to the digital media companies have to bewell prepared and equipped adapting a forward-thinking approach toposition themselves in the minds of the consumer. The age will be of easyMBA Dissertation by Student no. 099018609 Page 71
  72. 72. DIGITAL AVATAR- The Strategies for Digital Convergenceapplication solutions and greater consumer engagement.As the digitalconvergence industry witnesses a new boom, a right balance of thestrategies explored in this dissertation may prove beneficial to witnessmulti-platform interaction of the channels of distribution. This could createfurther clarification to the current challenge of monetization of profits forthe digital convergence companies. Further, the empirical evidence andthe analysis suggest that the integrated approach, well balanced withstrategic partnership could have a cost-optimizing effect on the industry.Consciousness in the industry to create a new metric for measuringperformance could provide an opportunity to weigh, balance and improvethe real growth in digital performance. The new digitized world couldwitness more of cloud computing, social media applications in businessalliance, growth of mobile application economy. On the applications side,further efficiency can look upon smart-home applications, security andimproved surveillance equipments, and advanced forms of navigation –for all forms of transport. Even digital devices would witness a high levelof improved application with touch screen television, high-definition TV,out of home digital applications; digital billboard advertising could be on arise with software being used as a service application.However, in this transforming landscape, inter-industry clash will growdenser with integration amidst fundamental changes brought by strategicchanges. The digital convergence space will promote open innovation asMBA Dissertation by Student no. 099018609 Page 72
  73. 73. DIGITAL AVATAR- The Strategies for Digital Convergencethere could be more integration happening between web (internet) andTV. Mobile and Internet at the moment are fighting a bitter battle asrevenue streams are diverting to internet companies. Internet connectedTV will pose fresh challenges to the existing players in the current decade.Internet companies like Google will get Android applications on the TV byforming strategic alliance with technology providers like Intel and Sony. As the digital story unfolds to a new dawn, it will engross the curious users with a captivating digitalized experience that will ensemble everyone to watch the new ‘Digital Avatar- The Strategies for Digital Convergence’.....a transformation realised.MBA Dissertation by Student no. 099018609 Page 73
  74. 74. DIGITAL AVATAR- The Strategies for Digital Convergence CHAPTER 7 7.1 BibliographyAbell, D. F. (1978) ‗Strategic Windows‘Journal of Marketing 42(3):21-26Ahn, H. &Litman, B. R. (1997) ‗Vertical Integration and Consumer Welfarein the Cable Industry‘ Journal of Broadcasting & ElectronicMedia41(4):453–477Aigrain, P., Chan, L., Guédon, J. and Willinsky, J. discussed by Benkler, Y.(2008) in a Symposium ‗The Wealth of Networks‘ Policy Futures inEducation 6(2): 151-175Albarran, A. B. (2002) Media Economics: Understanding Markets,Industries and Concepts 2nd Edition Ames IA: Iowa State University PressAnderson, C. (2004) The Long Tail Wired, 12(10) Available online athttp://www.wired.com/wired/archive/12.10/tail_pr.html (accessed02.08.10)MBA Dissertation by Student no. 099018609 Page 74
  75. 75. DIGITAL AVATAR- The Strategies for Digital ConvergenceAnderson, C. (2006) The Long Tail: Why the Future of Business Is SellingLess of More New York: HyperionAndersen, C. (2008) ‗Free! Why $0.00 Is the Future of Business‘ WiredMagazine 25thFebruary available athttp://www.wired.com/techbiz/it/magazine/16-03/ff_free (accessed28.07.10)Anderson, C. (2009a) Free: The Future of a Radical Price New York:HyperionAnderson, C. (2009b) Subscribing to FreemiumTheEconomist 11th April390(issue-8626)Arthur, W.B. (1989) ‗Competing Technologies, Increasing Returns, andLock-in by Historical Events‘ The Economic Journal 99:116-131Bane, P.W., Bradley, S.P., Collis, D.J. (1997) ‗Winners and losers-Industrystructure in the converging world of Telecommunications, Computing andEntertainment‘ in Yoffie, D.B. (eds.) Competing in the age of digitalconvergence Boston: Harvard Business School PressBattelle, J. (2005) The Search:How Google and Its Rivals Rewrote theRules of Business and Transformed Our Culture New York: PenguinMBA Dissertation by Student no. 099018609 Page 75

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