News Corporation - Corporate Strategy


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News Corporation - Corporate Strategy

  1. 1. News Corporation Corporate Strategy Analysis – (1990 - 2011)
  2. 2. Table of ContentsSummary - Corporate StrategyExecutive StructureTimeline - AcquisitionsTraditional vs 2 Sided MarketBet on MySpace vs FacebookPerformance - Stock, IndustryRupert Murdoch – The Last TycoonFuture – Growth, Risks
  3. 3. Summary Corporate Strategy (1990 -2011) • Corporate Strategy – Sharing of Activities • Behavior Based Control - is used in an uncertain environment, where as outcome based control is used in certain environment and is easy to implement and cheap • Vertical Integration - Maintaining the content and distribution dynamics. Easy to manage the contracts. In case of information goods its vital because managing contracts are very difficult • Information Goods - 2 sided market for (digital/information) goods have infinite economies of scale, 2 sided or 1 sided market with physical goods have finite (diseconomies) of Scale • Ownership – Minority economic interest with voting control (Other Example - Google) • Internal SSP Remains Same - Entrepreneurial Structure & Rapid Decision Making, even though business have grown globally and in different segments, but same structure and decision making style is used • Dirty Digger Still Placing Bets - Direct TV, MySpace • Rupert Still In Control – No Succession plan Corporate Strategy - Spectrum Investment Corporate Sharing of Business Portfolio Transfer of Strategy Restructuring Strategy Activities Strategy Management Skills Berkshire Partners Textron Newell News CorpManage Uncertainties Exploit UncertaintiesLow Cost High CostLow Value High Value Source: Google Search, Creating Corporate Advantage , David J. Collis & Cynthia A. Montgomery
  4. 4. Corporate StrategyResource Continuum General Nature of Business Special Wide Narrow Scope of Business Same content is used in different formats Transferring Coordinated Mechanisms Sharing Outcome Type of Control Behavior Small Corporate Office Size Large Source: Creating Corporate Advantage , David J. Collis & Cynthia A. Montgomery
  5. 5. Executive StructureMar. 2011 Rupert Murdoch Chairman & CEO (79) James R Murdoch Chase Carey Arthur M Sikind Deputy COO, David F. DeVoe Joel Klein Deputy Chairman, Sr Advisor To Chairman & CFO Exec VP Office of President & COO Chairman Chief Executive (63) Chairmen (56) (71) Europe & Asia (37) Roderick I Edington Natalie Bancroft Non Exec Director Non Exec Director (60) (30)2004 Rupert Murdoch Chairman & CEO Chase Carey Arthur M Sikind Lachlan Murdoch David F. DeVoe Peter Chernin President & CO - Exec VP to Deputy COO CFO President & COO COO Chairman Change in Legend New Present in 2004 Responsibility Source: News Corporation, Data Monitor 2010, Annual Report , 2010
  6. 6. Timeline - Post 2003 2009 Acquisition (118), Others Restructured Fox Businesses Consolidating Film &TV Production Businesses in a single unit and TV 2011 2005 Networks Biz into a single unit Acquires Shine Group 2007 Acquires My Space Sale of Direct TV, International TV (Intermix Media) for Took 16% stake in Increased Stake in the German Pay- Production group for 0.77B in US. News Corp (11B) TV platform, Premiere, to 30.5% 0.67B 2003 Increased its stake in Sky (Owned by Elisabeth back from John 34%of Acquired IGN Entert., Deutschland (formerly Premiere) Murdoch – Succession Plan Malone (Liberty Direct TV Community-based from 30.5% to 39.96% in Play ??) Media) by trading (Satellite internet media & 41% stake of Direct Broadcast services co. for Video Restructured its Asian broadcast Becomes Carbon Neutral TVNetwork) is Games & other forms of businesses into three units, includingAcquired in digital entertainment for STAR India, STAR Greater China and Launched The Daily, Acquired Dow US 0.65B in cash Fox International Channels National US publication Jones (WSJ) for 5.6B built specifically for the iPad 2004 2006 2008 2010 Shifts Domicile to US Launched new general HarperCollins & WSJ formed 3- Signs to acquire 90% of Companys shares entertainment broadcast year publishing partnership to Wireless Generation, were listed on the network MyNetworkTV develop books written by the Privately-held Education New York Stock Journals expert editors and Technology Company for Exchange Announced $900 million reporters 0.36B in cash deal with Google in 2006) Voluntarily transferred its stock exchange listing in the US from NYSE To NASDAQ Global Select Market Source: Google Search
  7. 7. 2 Sided vs Traditional MarketOverview – Traditional Market• Value moves from Left to Right and Information flows from Righto Left• Growth beyond some point usually leads to diminishing returns. Maximum Profit Contribution when MC = MR, that is it suffers from diseconomies of scale Cost Revenue Suppliers Price Advertise Create or Move Distribute Service Customers (wholesale) (Retail) Promote Upstream Value Chain DownstreamNews (Paper Based) Traditional Market Create Price Content Content Distribution Customers (News) (News) Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
  8. 8. 2 Sided vs Traditional Market Overview – 2 Sided Market • Value moves in both direction from Left to Right and Right to Left • Marginal Revenue and Profit contribution is always increasing as user base grows, Network effect leads to infinite economies of scale (for information goods only) Revenue Revenue PLATFORMCost Cost Customers Customers Upstream Value Chain Downstream News (Paper Based) 2 Sided Market – Old Model • No economies of scale as this is not a digital good Advertisers Create Price (Ads, Content Content Distribution Customers Classifieds) (News) (News) Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
  9. 9. 2 Sided vs Traditional MarketNews (Digital/Online) 2 Sided Market - New Model• Economies of scale are infinite as this is a digital good, because Marginal Cost for distributing to an additional customer is nearly zero Advertisers Create Price (Ads, Content Content Distribution Customers Classifieds) (News) (News)Other Examples Company Industry Type Platform Type Google Web Search/Advertising Audience Builder Amazon (ebay, Trading Post) E-Retailer Matchmaker Monster (Seek) Recruitment Matchmaker iTunes Music Matchmaker Betfair Gambling (betting) Matchmaker AP Moller-Maersk Logistics Cost Sharing Source: STL Partners, Telco2.0 , Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
  10. 10. 2 Sided MarketsGoogle Model Free Product for Cheap Adverting for Low Cost Per End Users Brands Transaction (Subsidised) Google Platform• Massive investment in Google Platform• Google Indexes 34B+ pages Source: STL Partners, Telco2.0
  11. 11. 2 Sided MarketsNetwork Effect - Google vs Vodafone $18 $16 Google, $17b $14 $12 Billions $10 $8 $6 $4 $2 $- Vodafone, $3b 1 2 3 4 5 6 7 8 9Years After Inception :• Network Effect - Six Times larger in 9 years in comparison to largest mobile operator Source: STL Partners, Telco2.0
  12. 12. MySpace vs Facebook Myspace Failure – Old Media Model • Identified an opportunity with Myspace (Social Media), but couldn’t leverage it • Turned out to be a losing bet, in discussions to sell for $100M Reason • Applied Old Media Model in a 2 a Sided Market • Locked in Advertisers (via Google Search) on Upstream Side, and let the Customers Create Content (primarily blogs). Didn’t let/opened Upstream Side to other Customers • Networks effects on Downstream side are not leveraged on Upstream side – leading deterioration in asset and momentum shifting towards other platform (Facebook) Revenue Upstream Downstream Only 1 MYSPACE CustomersCost Customer Content Distribution (Advertisers) Platform (Subsidised) Source: The Australian, Google Search
  13. 13. MySpace vs Facebook Facebook Success – New Media Model Reason • Applied New Media Model in a 2 a Sided Market • Opened Platform for various Upstream Customers – Hosted Content from various players, Ads, 3rd Party Application Developers • Opened Platform for various Downstream Customers – Market Research Companies, Subscription (soon) • Networks effects on Downstream side are leveraged on Upstream side – built mass and momentums Revenue Revenue Upstream Downstream Various FACEBOOK CustomersCost Content Distribution Paid Data Customers Platform Research Revenue Source: The Australian, Google Search
  14. 14. Performance Stock Market - Trend Global Financial CrisisNear Bankruptcy Competitors – Disney, Warner Source: Google Finance
  15. 15. Performance FY 2010 Rev. By – Division, Region Book Other Publishing 5% 4% Newspapers Australasia and Filmed and Other Information Entertainment 16% Services 23% 18% United Integrated States and Television Europe Canada Marketing 13% 30% 54% Services Direct 4% Cable &Broadcast Network Satellite ProgrammingTelevision 21% 12% Source: News Corporation, Company Profile, Mar 2011, Data Monitor
  16. 16. Industry & Competitors Status & Trends Industry Walt Time Attributes News Corp. Viacom Disney Warner Revenue in Billion by 2010 781.7 32.778 38.063 26.888 9.34 (Size) Growth (CAGR% 2006 -2010) 1.7 5.9 2.2 (7.69) (-20)Expected Revenue Growth by 2015 913.3 Expected Growth 3.2 (CAGR% 2010 -2015)
  17. 17. Products & ServicesFY - 2010Filmed entertainment:• Production and distribution of motion picturesTelevision and cable:• Television programming• Cable and satellite network programming• Direct broadcast satellite televisionMagazines, inserts, books and newspapers• Interactive programming guides• Magazines• Newspaper publications• Book publishingOthers:• FM radio• Production and distribution of promotional products and services• Online programming Source: News Corporation, Company Profile, Mar 2011, Data Monitor
  18. 18. Rupert MurdochThe Last Tycoon• A lot of people claim they have ten-year plans or five year plans. But basically, the most successful businesses are the opportunistic and you take your opportunities when they come — Rupert Murdoch, 1985• Probably the most inventive, the bravest deal-maker the world has ever known – Andrew Neil, Sunday Times, 2002• For better or for worse, our company is a reflection of my thinking, my character, my value - Rupert Murdoch, 2004• The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow — Rupert Murdoch, 2008• I just want to live forever— Rupert Murdoch, 2007 Source: Times Magazine 2007, The Last Tycoon, Google, Forbes
  19. 19. FutureGrowth• Digital Economy - As more and more content of various formats are digitised, more opportunities will be available to grow at minimal cost• Sports League, Formula One Racing – buying a sports league will give necessary information and direct access to contents and its rightsRisksSuccession:• News Corp is managed centrally and predominantly by Rupert, to this date there is no succession plan being made publicIncreasing Competition:• Operates in a highly competitive business, Leads to Pricing Pressure, impacts Rev. & Market SharePiracy:• May adversely affect the companys revenues derived from films, television shows, books and DBS (Digital Direct Broadcast Satellite )programmingLegal Disputes:• The company is involved in various legal disputes – Shine (2011), Valassis Comm. (2006, resolved in 2010)• Lawsuits may adversely affect the market reputation of the company, which in turn will negatively impact its growth and investors confidence Source: Business Spectator News Corporation, Company Profile, Mar 2011, Data Monitor
  20. 20. Thank YouEnd of Document