Structure of Service Distributors

Question: How do companies in cable distribution tend to structure themselves? What functions represent the majority of their workforce?

Summary: Service distribution companies usually consist of one umbrella corporation, such as Comcast, Time Warner Cable, or Cablevision. These companies own a number of smaller subsidiaries, which provide different services. For example, Comcast is an umbrella corporation, which runs Xfinity (the company's internet/telephone/cable provider) and NBCUniversal (which provides cable programming). The umbrella corporation itself still handles many of the operations of the business, primarily the core functions the company was built on. Subsidiaries are usually purchased in mergers and acquisitions.
Most of these companies are multibillion-dollar corporate entities, traded as public corporations on the stock exchange. The majority of these companies are owned by investment institutions. All have traditional corporate structures, with a president, and a board of directors.

Employment for these companies usually consists of three divisions: management, office workers, and customer service (which often consists of over-the-phone assistance, and physical installation/repair work). The number of employees varies greatly with the size of the company; Comcast, the largest cable provider, employs 100,000 people; Time Warner Cable, next on the list, employs half that number at 47,500; Cablevision, one of the smaller companies, employs only 14,471.

Analysis: These companies have found a strong overall structure, which will greatly help them stay the large and powerful corporations that they are. However, their size does present a challenge to them, as they have to consistently find ways of cutting costs. Comcast, for example, is the largest company, but has a reputation for poor customer service and satisfaction. Additionally, the size of these corporations makes it less likely for truly innovative change to come from within - usually, it comes from entrepreneurial competitors, such as Netflix. While this does not mean that the structure of these companies, or their sizes, is necessarily a bad thing, it is not solely a positive either. It requires a great deal of work on the part of the company to make it work, otherwise, the company will slowly wither away under better competitors.

Sources: http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/twc2010.pdf
http://www.sec.gov/Archives/edgar/data/1166691/000119312511047243/d10k.htm#tx100440_1
http://www.theacsi.org/index.php?option=com_content&task=view&id=86&Itemid=90

Employment Trends

Question: What workforce trends is the industry experiencing?

Summary: Over the past years, the changes in regulation and technology have affected broadcast, cable, print and tellecommunications industries a lot. The control of media resources had an especially great impact on the diversity of employment and quality of jobs in these industries. If these trends continue, minorities and female workers might find themselves at risk of losing their jobs. Right now, "as policymakers consider legislative and regulatory changes in the communications and media industries, the Leadership Conference on Civil Rights Education Fund believes that issues of employment opportunity and economic security should be part of the debate." The Fund also calls attention to a new study by the Institute for Women’s Policy Research (IWPR), which examines the effect that regulatory, industry, and technological changes are having on both the quality and quantity of jobs for women and minorities in the communications and media industries."The study finds that despite the explosion in new information technologies, overall job growth in the communications and media sector has lagged behind job growth in the rest of the economy." It also finds that "while other newer industries, such as wireless telecom and cable, are providing jobs for women and minorities, compensation in these industries lags far behind that in the wired telecom industry."

Analysis: The problem the media industry has to face today is the diversity of employment, or the lack of it. It is a common knowledge that technological innovations replace human labor, thus the workers. But it does so in an unfair manner. In the media industry, the changes in regulation and technology lead to elimination of specific types of workers - minorities and female workers. It is surprising that such a problem even exists! After all, we do live in the 21 century. The executive director of the Leadership Conference on Civil Rights states - Wade Henderson - stated that “The communications and media industries, as leading sectors of the 21st century economy, should lead the way for minorities and women... In the media industries, where the voice of minorities and women is so critical, we find growing concentration blocks that voice. This underscores the critical importance of strong media ownership rules.” I agree with that statement, and would also like to add that if nothing would be done about this problem today and the trends will continue others industries beside media might face the same problem and we will go back to that era where women and minorities were treated unequally and did not have the same rights.

Source:http://www.civilrights.org/publications/employment-trends/

Current Events in Media

Question:

What are some current events in your industry? What is the impact of these events on the industry?

Summary:

Dish Network chairman Charlie Ergen has recently proposed that Dish look to offer online pay-TV services to relieve the cost of only providing broadcast television.  The new programming offer would not include sports channels because those are the most expensive to provide (50 percent of what customers pay goes toward delivering sports channels, while sports make up only about 20 percent of what they view).

Dish also reported that more customers have left the company, leaving about 13.9 million subscribers as of the end of September.  DirecTV brags a larger customer base, having experienced its best third quarter growth since 2004.  However, Dish's stock has gone up $0.71, and the company a 12 percent increase in revenue.

Analysis:

I find it interesting that Dish Network is looking into online TV options--especially because our group has been looking at companies that stream TV and movies online.  Dish's foray into this mode of TV providing is particularly fascinating because Dish owns Blockbuster, the company that declared bankruptcy after being beat out by Netflix, a company that has just recently begun to offer online TV/movie options.  Is Dish trying to curb the costs of providing sports channels to its customers...or is it trying to compete with Netflix, Hulu, Amazon Prime, and the other companies beginning to use the internet to deliver untraditional entertainment?  Are they providing services so similar that price will be the only factor in consumers' decisions?

Source:

http://online.wsj.com/article/SB10001424052970204190704577024023586817992.html

Influential Leaders

Netflix isn't Doomed

Question: Who have been some influential leaders (Founders, CEOs) in the industry over the past 20 years?

Summary: This article discusses the choices of Reed Hastings, the CEO and cofounder of Netflix, in the past and recent events. The sock price of Netflix has fallen by 70% since July, at least partly due to his poor decisions about the direction of the company - the price increases and an attempted split of the two services that the company offers. However, investors and analysts have long praised his strategic thinking - even if the recent results have not been the best.

Hastings has a reputation for "trying to mold his company to the future, not the past." However, the recent attempt has cost his company 800,000 subscribers. The article presents the idea that Netflix's biggest problem is that it's streaming service offers a wide selection of bad movies, but not many good ones. For a long time there was the impression that the wide variety of movies that are available by mail from Netflix, would soon become available for streaming. Lately, it has been made clear that this is not the case. The content is simply too expensive for Netflix to be able to provide at the prices that consumers are willing to pay.

The article makes the point that Netflix did well in the niche that it picked, but failed to explain to the consumers what would be the reasonable expectations to have of the services they would get.

Analysis: Good leadership is what makes or breaks a company. The media industry is therefore home to many great leaders, however, the most visible face of media is Reed Hastings, CEO and cofounder of Netflix. While the article above is a bit older than most that we have used on this blog (Oct 26, 2011), it provides a good summary of Hastings' strengths and weaknesses as a leader. His good judgment and the ability to foresee the next opportunity in media is legendary. As a long-time customer of Netflix, I would have been hard-pressed to find fault with his leadership a year ago.

It seems, however, that the opportunities in this niche of the media service providers has hit a plateau, and though he has tried to continue with the trend of strong innovation, there is little to be done in order to really improve the service. The consumers are unlikely to want to pay more than they are currently paying - even the relatively small increase recently has led to serious frustration. The content providers, on the other hand, expect to be paid a lot for their product and can get these prices from other sources. Netflix has found the middle ground between quantity and quality, however consumers expect Reed Hastings to continue improving the service, whether or not that expectation is reasonable.

Google's Feeling Lucky

Question:

What are some current events in your industry? What is the impact of these events on the industry?

Articles in this blog post:

“Google Ponders Pay-TV business”

Article Summary:

As television distributors face competition from internet streaming and other major corporations in the industry, they now have to face a new threat: Google. Amidst the development of dozens of online YouTube channels and Google TV, software for televisions which lets both the internet and television channels be searched easily, Google has begun considering making its own cable services.

While not officially announced or commented on by Google, the evidence is piling up. There have been exploratory discussions with Disney and other content providers about distributing content from their channels, along with the recent hiring of Jeremy Stern, an executive from cable television, which indicate a desire to move into the television market. While more details have yet to be seen, many analysts think that a large company like Google or Apple will eventually make the jump into providing online service.

Analysis:

Google definitely has the potential to become an immediate threat to the media industry. While Netflix, Amazon, and Hulu have all trailblazed the streaming industry, Google has significantly more assets and has grown vertically and horizontally at a tremendous rate. Given the introduction of Google TV and the concept of making channels for viewing YouTube, it seems like Google has already made the first steps into the media distributor industry. As the article states, there’s also an incredibly large market at stake – subscriptions and advertisements for television produce $150 billion in revenue, and with the growing strength of both Google and the Internet a transition into media distribution would be welcomed by consumers.

Google has to be careful of moving too quickly. Netflix has lost respect for changing the prices of their service, along with attempting to grow too quickly – it would be incredibly easy for Google to become overly-ambitious and lose potential. Still, as of present Google’s presence strikes a fear in the current distributors due to the immense size of their possible competitor.

Innovation in Media

Question: In what areas of the industry are there opportunities for innovation?

Summary: According to an article on Comcast's website, "[Apple] Apps have opened up an entirely new world of possibility in nearly every industry, and the app revolution is poised to be a game-changer in the evolution of television." This is one example of how media providers have adapted to the technological climate and invented new ways of selling their services and products to consumers. Comcast has developed an Xfinity App that is compatible with the iPad and iPhone which creates another source of revenue for Comcast and the beginning of something new: cable subscriptions on your mobile device.

Analysis: This innovation is just one example of how companies adapt their products/services to haul in new customers and further satisfy old ones. The complicated and interesting thing about the media industry is that technology is constantly changing and improving which means that providers and distributors specifically must be in tune to what is going on, what customers will want next, and prematurely fill those needs. This just one way that competitors in the media distribution industry can stay ahead of the game: innovation.

Source: http://blog.comcast.com/2010/11/xfinity-tv-news-comcast-demos-ipad-app-at-web-20.html

Burst Media Launches Online Channels

Question: What are some current events in your industry? What is the impact of these events on the industry?

Summary: Burst Media, an online media company, is launching a series of online video channels offering a variety of programming. This is an expansion into online TV, which Senior Vice President Jessica McGranenhan claims "has become a vital, integral part of online media consumption." These video channels will be incorporated onto other online publisher's website, such as fashiononerouge.com's use of the fashion channel on their website. These channels will consist of independent content, since this is what Burst is built around - indie media.

Analysis: Entrepreneurship consists of innovating, finding new markets, and offering new products. Online businesses have been the single biggest source of entrepreneurship over the last 15 years, with the exception of computer technologies. Facebook, twitter, amazon, and host of other websites have redefined our society. Online media has been quickly displacing more traditional media. Netflix has slowly but surely made itself into one of the most prominent movie distributors through its online service. The entire move towards online distribution of video is an important part of the recent media revolution. Hulu only recently began to crack open that opportunity, and increased levels of it, as well as new content, will strengthen the market as a whole.
Additonally, indie media is a very important part of entrepreneurship, and offering indie television over the internet is not only a way of expanding the online media market, but it can bring a whole new market to independent media, the same way social networking gave a whole new level of depth to independent bands.

http://www.marketwatch.com/story/burst-media-launches-video-channels-to-enhance-and-complement-publisher-content-2011-11-02