Media and Entertainment

A corporate strategy article by Thunderbird students.

In 1887, Mr. Asa Candler was faced with a distribution dilemma. [1] The Atlanta druggist had spent $2,500 on a formula for a sweet-tasting drink and was looking for a way to promote the sale of this little-known beverage named Coca-Cola. [2] His solution: handwritten tickets offering customers a free sample. To Mr. Candler’s surprise, the offer was a huge success. So was born the coupon. By 1913, an estimated 11% or roughly 8.5 million Americans had received a free coke. [1] One could argue that Mr. Candler’s invention of the coupon is the reason Coca-Cola started on its path to becoming one of the most iconic global brands - ever.

Fast forward to 2008, when an internet start up based in Chicago, IL created one of the largest shake ups in the marketing world since Mr. Candler’s first hand written ticket; that company - Groupon. The novelty of Groupon was this: through the power of the internet, select “daily deal” coupons could be offered and if a big enough “group” agreed to purchase the deal, then the deal would become valid. [3] The program was used by participating companies as a way to reduce the risk of losses, increase customer traffic, and drive promotions. Now four years since its launch, the Groupon business model has come under attack and faces many strategic obstacles, including competition from lookalike websites.

by R. Dharni, A. Ibanez, T. Phan, J. Mendenhall, and P. Zamorano

Grupo Televisa SAB’s recent acquisition of a 50% stake in near-bankrupt Mexican wireless company Iusacell has been touted by company management as core in its strategy to become an “integrated media-telecom Company.”  While the deal has been widely panneddue to the high, $1.6 billion valuation for a company in an industry most analysts see as having few synergies with any of the company’s existing businesses, the bigger risk may lie in how the deal impacts Televisa’s successful foray into global markets.

As the dominant entertainment media company in Mexico, commanding 70% of the television broadcasting market¹, Televisa has progressively built a robust global footprint through content licensing agreements, minority ownership stakes in foreign media entities, and content creation and distribution partnerships.  The company has parlayed this global strategy into a market capitalization of over $11 billion² where it stands alone as the world’s largest Spanish-speaking media company. However, if recent statements in the press are any indication, it appears Televisa does not see its domestic and global success in media as the right trajectory for the company’s future.  Instead, the company is betting heavily on its telecom strategy to drive future growth.

A few years ago, BusinessWeek was valued at more than $1 billion and in October 2010 it was sold for a mere $5 million. When buying Newsweek in August 2010, the buyer Sydney Harman confessed, “Break-even is a serious accomplishment, especially in this world, the world of journalism. I’m not here to make money, I’m here to make joy." Print media is considered a dying business now but even in this environment The Economist, one of the oldest magazines in political, economic and academic news, is growing steadily. While most of the industry players have lost readership, The Economist has increased circulation 95% over the past ten years. Its circulation has risen another 3.3% from 2008 to 2009 while the largest news magazines lost more than 25% of their circulation, with Business Week losing 2% circulation and Forbes remaining steady with a 0.1% gain.