CHAPTER 9 - Strategic Alliances • Radio’s popularity gave way to • TV Networks which held a national role • until cable began to offer a wider variety but then • video tapes became a staple until the public found • DBS which gave them even more flexibility but now • the internet and computers take up a person’s time
How much time do we spend surfing? • 66% of all Americans are on-line – 30% access at work – 55% access at home • 79% of all US Households have a computer • right now only 1/2 of them are on-line
Strategic Alliance • Association designed to provide benefits to its members • Convergence – Combination and integration of the broadcast, cable, telecommunications and computer industries to develop and market information and entertainment products.
Major Forces Driving Convergence • Technological – Digital Compression – Wireless Cable – Satellite – Interactive systems – HD – Mobile
Forces • Regulatory – Electronic Superhighway opened competition – Elimination of governmental restrictions – deregulation of industry – HDTV
Forces • Global Expansion • In USA – 99% of all households have Radio & TV – 95% have a telephone – 90% have a VCR/DVD – 70% have cable / DBS growing • In EUROPE & South America????
Forces • Social – American becoming more comfortable with computers – Internet - shopping, banking, etc – Information / entertainment
Planning (AGAIN) is the key • Strategic planning forms the basis of the alliance – objective evaluation – target market – competitive advantages and disadvantages – strategies to implement the alliance
Reasons for Strategic Alliance • company wants to gain access to new geographic markets • exercise control over existing markets • share risks in developing new products or technology • share expertise – Cable Networks and Phone Co’s • Programming expertise / distribution expertise
Radio Alliance • Ownership (restrictions) • Greater efficiency in management – consolidation of department – able to capture a larger market share
LMA’s • Both Ad sales and programming – time available to broker restriction- 15% of total time on-the-air – Prevents programming duplication beyond 25% of schedule
MERGERS & ACQUISITIONS • DISNEY - Cap Cities/ABC • WESTINGHOUSE - CBS • TIME-WARNER - Turner Broadcasting • SONY - Columbia Pictures & CBS Music Group • MATSUSHITA - MCA/Universal Pictures
Advantages??? • Growth in popularity of the media (PROFIT) • Barriers to entry (buy a winner-market share / cash flow potential) – (google bought Youtube) • relaxation of ownership limits • tax advantages for buyers.
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