Discuss about the Mediea Marketing Strategies.
The paper explores two media and communication companies and the marketing strategies used for the past ten years, the challenges, and success. The focus is Netflix and Time Warner companies. According to Slack (2015), market, the strategy of any organization comprises broad plans of selling product and to the consumers in the market. Marketing strategies are based on marketing mixes such as the price, promotion, place, and the product. Considering these aspects, the main aim of the management is to produce goods and services with unique characters to help sell and deliver benefit to the consumers Dodge (2015) argues that companies have target market segment in a particular geography, and proper pricing strategy is formulated in a bid to minimize loss and maximize the profit. Besides, varieties of channels are utilized to help sell the product while preserving the brand image of the corporation. In essence, Netflix and TimeWarner market strategies have similarities and differences.
Marc Randolph and Reed Hastings founded the media and Communication Company 20 years ago in California, USA. The enterprise started as an idea of selling and renting DVDs through the internet. One of the core founder Hastings began the idea when he was late to return a rented tape, which led to $40 fine. The initial strategy focused on integrating the emerging technologies that included the internet and DVD. The individual would borrow the tape online, and the company would use U.S. Postal Service to deliver the requested movie the following day. After two years in the market, the firm introduced a monthly subscription system where customers would rent many DVDs at a go. In 2000, the company had not successfully managed to capture the market well because they only had a thousand subscribers and therefore not profit was realized (Liu 2014).
The failures and success in the market prompted another market move when one of the core founder Hastings launched an alliance with the video-rental enterprise Blockbuster. The offer included offloading 49% of Netflix shares, but Blockbuster rejected the idea in totality. However, Hastings pushed on, and the company first realized a profit in 2002. The subscribers base began to expand as DVD titles kept growing until in 2007 when the management grabbed another opportunity rising (Dobbs 2014). Online streaming service was added to the company portfolio; it provided a chance to watch the content through an online platform. However, one of the problems affecting the company and the entire film industry was digital piracy, but the problem was solved through licensing (Liu 2014).
From the year 2007 to 2009, the consumer subscription grew significantly to estimated 45 million members. Its strategies have helped the company deal with emerging threats, and from this decade, the company has become one of the leaders in its category globally. It has since diversified business to become the first internet TV-network. The consumer base has grown exponentially to estimated fifty million subscribers across the globe (Dobbs 2014)
Time Warner Inc. is a world leader in the provision of media and entertainment content, and its venture is in filmed entertainment, television networks, and publishing. The merger of Time Inc. and Warner Communications 1990 founded the media company. Warner was first incorporated in Los Angeles in 1923 in as Warner Brothers Pictures, Inc. Brothers Harry; a Polish immigrant cofounded the company together with Jack Warner, Albert, and Sam. The partners initially started the organization in Nickelodeon in Newcastle back in 1903 (Merali 2014).
On the other hand, Time magazine was also formed the same time as it first appeared on March 3, 1923, and began selling copies of publications. Time founders include Henry R. Luce and Briton Hadden, and their target market was college educated residing in the United States during the. Time Warner currently has three divisions namely Warner Bros. Pictures Inc., Home Box Office Inc. (HBO), and Turner Broadcasting System Inc. The products specialization comprises the motion pictures, cable television, and broadcast media. There were also other divisions namely comic books, recorded music, magazines, hardcover books and online services were sold off to investors. Last year (2016) AT&T showed interest in the acquisition of Time Warner Inc. and confirmed its offer of $85 billion that is yet to be completed (Merali 2014).
The paper analyses porter’s five forces in the industry in which Time Warner company and Netflix competes. The strongest of all in the model is the competitive rivalry faced by Time Warner Inc. the main competitors includes the Viacom Inc., The Walt Disney Company, News Corporation and NBCU Universal. Overall, these market shares controlled by these companies are 81.2% (Albarran & Gormly 2004). In the coming decades, the company is likely to face threatening competition in the industry. However, to deal with competition challenges, the company has negotiated with big tech firms namely Apple and Samsung to help package its products. An example is its app in products like Samsung’s Smart TV. Such deals are one of its successes, as it will enable consumers to streamline the company content at a lower price and thus reduce competition (Fitzgerald 2011). This is an added advantage because Time Warner Inc. could use the first in the industry to make such strategic move that could lessen the intensity of market rivalry in the market.
The threat of new entrants is another force the company faces. In the recent decades, the number of media streaming sites has increased, and this is a threat to business revenue margin. However, there have been strategies, which have registered success in reducing the production revenue (Dobbs 2014). The firm has entered into licensing agreements with companies like Amazon and Netflix. The approach has allowed the cutting of high cost of production and further gain income to subsidize that cost. Price cutting further supported its ability to acquire new technology required to reduce the cost of production (Fitzgerald 2011).
Teece (2010) explains that When Netflix entered the market in 1997; the management realized that brick-and-mortar strategies dominated the market. Its first method at the time included internet retailing, but father changed when online selling gained popularity to seize all the opportunity. The company designed the website in 1998 that made it possible to provide the goods and service to many consumers. Besides, Netflix has tested various pricing models to boost the sales volume. Jenner (2016) argues that Netflix had designed a number of strategies to counter the new entrants and other changes in the market to remain competitive. For example, use of video platform to provide services to its consumers. There has been success and failure of the market strategies. The company has liased with technology companies such as XBOX 360, Wii, PS3 which are available on Ipad and Iphone. Such market moves make the company ahead of the competition because the rivals are yet to make such a move.
Both Time Warner and Netflix have challenges when penetrating and sustaining the market. These problems are occasioned by the competitive environment and intense competition due to new market entrants and shift in technology. Time Warner faces intense and formidable competition in all its business segments generating revenues. The AOL Division in the company faces substantial challenges against tech giants firms such as Google and Microsoft (Cabral & Natividad 2016). In addition, other companies challenging its market base includes social media companies such as MySpace, Fox Interactive Media, and Facebook because they compete for internet-based revenues. Further traditional media companies such as ValueClick and Broadband access providers have introduced the challenges of offering web services (Appleyard 2015).
Evens & Donders (2016) enunciates that Intense competition also threatens time Warner’s business categories like the film entertainment due to technological shift and entrance of websites with capabilities such as user-generated content, internet streaming, and interactive games. Besides, alternatives like satellite and cable providers have taken the competition higher. In the recent years, emerging competitors are launching products like websites and magazines targeting celebrity and women segments that encroach on timer warner business. An example includes InStyle, Warners’s People, Fortune magazines, and Real Simple. The level of competition most likely affects the pricing, the profit margin, and market share (Sawhney & Sawhney 2017).
According to Appleyard (2015), piracy of television is on the increase, and Time Warner Inc. is one of the principal victims as it content is including DVD, motion pictures programming, and video games. Piracy is enabled by sophisticated technology that allows pirates to create and transmit high-quality illegal content from the media. The effects include revenue reduction. There is also a large dependence on some services on Google such as AOL network and products. Review of Google pricing strategy is likely to have a significant adverse effect on its operations and revenues.
According to Teece (2010), Netflix also faces challenges in sustaining and penetrating to new markets across the globe. The company is experiencing declining margins and growing losses. The company revenue is facing pressure due to the massive decline of DVD memberships that generate more revenues than others do. Besides, the firm is struggling with the costs of expanding to other markets. This has seen the deterioration of its profit margins attributed to international expansion. According to Lamberton & Stephen (2015), another issue is unsustainable content costs that are growing at an alarming rate because the firm’s content obligations are increasing significantly. Competition is also intense, and the cost of licensing is becoming bigger.
Netflix heavily relies on other media firms for content. These companies also seem to be its market rivals competing for viewers. An example is a Time Warner that producers content and sell it to Netflix for streaming service. These companies sometimes extend the time between the run of the original show and the time it is distributed to Netflix. Besides, the content may become more expensive which can force the company to increase its market rate leading to loss of consumers and revenue (Teece 2010). Kovacs & Jansen (2015) adds that penetrating the international market is becoming difficult for the enterprise. While it may be gaining market in Latin America, other regions like Europe are becoming competitive due to the entrance of regional competitors. Conquering international market means handling price challenges emanating from content coming with global rights because the Netflix is used to local license that was a bit less costly.
Both companies’ strategies have some similar attributes that can be compared and contrasted. Both strategies aim at making the companies market leaders, and therefore effort is concentrated in inventing the product, incorporating, and identifying unique characters, which meet the customer needs. Such a market move by an organization is aimed at adding value to the product and then making them look distinct to attract consumers who will at the end purchase it with a good price. For example, this is evident when Netflix market strategy when it began renting videos online and while Time Warner concentrated on subscription of cable television to capture the consumers. Besides, both have adopted digital marketing strategies that rely on internet marketing technology. Working with other companies like Samsung and Apple also shows the convergent of strategies used to become competitive in the market. However, there is a variation in how the company set their market prices to recover the cost of production. While Netflix has lowered the prices, TimeWarner is dropping its prices to capture many consumers. When both seek to expand internationally, the differences is how they reach the target markets. Netflix adopts digital strategy while TimeWarner uses a mixture such as door-to-door, cable, radio, and television advertising.
References
Albarran, A.B. and Gormly, R.K., 2004. Strategic Responses or Strategic Blunder? Examining the Mergers of AOL Time Warner and Vivendi Universal. Picard, RG: Strategic Responses to Media Market Changes, Jönköping, pp.35-45.
Appleyard, M., 2015. Corporate responses to online music piracy: Strategic lessons for the challenge of additive manufacturing. Business Horizons, 58(1), pp.69-76.
Cabral, L. and Natividad, G., 2016. Cross?selling in the US home video industry. The RAND Journal of Economics, 47(1), pp.29-47.
Dodge, H.R., 2015. Innovations and Industrial Marketing Strategy. In Marketing Horizons: A 1980’s Perspective (pp. 81-84). Springer International Publishing.
Direction, S., 2011. The TV game: how will Apple, Netflix, Hulu and Time Warner play?; Behind the scenes at the most complex show on earth. Strategic Direction, 27(8), pp.5-7.
Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of industry analysis templates.Competitiveness Review,24(1), pp.32-45.
Evens, T. and Donders, K., 2016. Mergers and acquisitions in TV broadcasting and distribution: Challenges for competition, industrial and media policy. Telematics and Informatics, 33(2), pp.674-682.
Fitzgerald, S.W., 2011. Corporations and cultural industries: Time warner, bertelsmann, and news corporation. Lexington Books.
Jenner, M., 2016. Is this TVIV? On Netflix, TVIII and binge-watching. New media & society, 18(2), pp.257-273.
Kovacs, G. and Jansen, J., 2015. An Analysis of Strategies by Netflix in the Television Market.
Lamberton, C.P. and Stephen, A.T., 2015. Taking stock of the digital revolution: A critical analysis and agenda for digital, social media, and mobile marketing research.
Liu, A., 2014. JavaScript and the Netflix user interface. Communications of the ACM, 57(11), pp.53-59.
Merali, Z., 2014. Q&A: Space-time visionary. Nature, 515(7526), pp.196-197.
Sawhney, M. and Sawhney, M., 2017. Blockbuster Entertainment Corp.: Growth Strategies for 1995. Kellogg School of Management Cases, pp.1-7.
Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.
Teece, D.J., 2010. Business models, business strategy and innovation. Long range planning, 43(2), pp.172-194.
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