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StrategyExecutionPlan-NationMediaGroup
Date:13thJuly,2016
PeterOyier
Background
NationMediaGrouporNMG,isthelargestindependentmediahouseinEastandCentralAfrica,andisquotedontheNairobiStockExchange.Intheyear2013themediaandentertainmentindustryinKenyarecordedstrongperformances,andespeciallysoinsectorsNMGprovidesitsservices.Digital/InternetrecordedrevenuesofUSD471Min2013,withaprojectedcompoundedannualgrowthrateof20%overthenext5years.NewspapersrecordedrevenuesofUSD175Min2013withaprojectedgrowthof3.9%overthenext5years.TheradioindustryrecordedrevenuesofUSD301Min2013withaprojectedgrowthrateof7.5%overthenext5years.TVrecordedrevenuesofUSD319Min2013,withaprojectedgrowthrateof14%overthenext5years(EntertainmentandMediaOutlook2015-2019–Exhibit2).
Thegroupisamulti-mediahouseprovidingservicesintheprintssection,electronicmediaanddigitalmedia.NMGcommandsanunparalleledreadershipandfollowingacrossallitsplatformsintheregionthoughitfacesgreatpressurefromcompetitorsespeciallyonitsonlineplatform.(Exhibit1–TheCompetitiveLifeCycle)
TheCompetitiveLandscape
Thecompetitivelandscapeinthemediaindustryhasbeencharacterizedbykeydisruptionsprimarilytechnologyledasfollows:
i) MigrationtothedigitalplatforminKenya–Electronicbroadcastisimpacted.Greateruseofmobiledevicestoaccessinformation.
ii) Demandbytheconsumersforreliableandunbiasedinformation.Thisisprimarilytargetedatindependentjournalism.
iii) Emergenceofsmallonlinemediaplayersprovidinginformationtothepublicandgrowthofonlinecompetitoractivitybybigmediafirms.
iv) Needtofulfilllegalrequirementof60%localcontentonair.
Intandemwiththeworldwideanalogueswitch-off,KenyapassedintolawtheshiftfromanaloguetothedigitalplatforminJune2015.Thishashadanimpactonthe‘bigthree’mediahouses:NationMediaGroup,StandardMediaGroupandRoyalMediaServices.Thebigthreehadinvestedheavilyininfrastructurethatsupportedanaloguetransmission,whichisnowirrelevant(DigitalKenya).
TraditionallyNMGhasbeenthe‘goto’mediahouseforinformation(especiallynews)butcompetitoractionhascontinuedtothreatenitsleadingposition.NMG
hasovertimerespondedbyinvestinginitsdigitalplatformandhasleverageditsstrongnews-makingmachineryandlong-standingprintpresencetobuildastrongonlinepresencefortheKenyandiasporaandlocalsaswell.
ThechangesinthemodeofdeliveryofnewsproductsfundamentallyimpactthemediaindustryandindeedtheinternationalizationstrategyofNMG.Itsstrongandwell-recognizednewsproductscannowbefoundacrossthebordersbeforetheyhavesetfootinthecountry.Thisdisruptionorshift,hasindeedcausedanewS-curvetoformandtheindustryiscurrentlyinanemergentphaseasbusinessmodelsarere-shaped.Somebusinessesmayconsidergreaterinvestmentinonlinepresencewhilereducingtraditionalformsofdelivery.AnemergingcompetitiveareahasbeeninthecreationoforiginallocalcontentbymediahousesinKenya.AlthoughCitizenTVhasmadeleapsinthisregard,nomediastation,orprivateproductionhouse,isanywherenearfulfillingwhatwillsoonbeamandatoryrequirementbylaw,toair60%localcontent.Thiswillalsoapplyforradiostations.Thislawisalreadyinplace,thoughtheenforcementofithastakenabackseatduetotherealizationbytheexecutive,thatthoughthelegislaturepassedthelaw,itsapplicationisnotasstraightforwardduetocapacityissueswithinthemediaandentertainmentindustry.
NationMediaGrouprecentlycarriedoutarestructuringwhichoversawtheshutdownofsectionsofitselectronicmediadivision.NationFMandQTVwerethebiggestbrandsthatwereshutdownduetoperformancerelatedchallenges.ThisperhapspresentsNMGwithanopportunitytoinvestincontentcreationandcontentcreationfacilities.
CompetitorAnalysis:
Financials Capabilities Values Strategy
NationmediaGroup
2013&2014RevenuesremainedunchangedatKes.13Billion.ROI24.48%
Strongexperienceandabilitiesingatheringofcontentfordisseminationonallplatforms:Radio,TV,printandonline.Keystrengthliesinprint-DailyNationandSundayNationnewspapershavepeakreadershipsofapproximately
Journalisticintegrity.Keenonbeingthereliablesourcefortruth.BelievesinstaffwelfareandfairnesstoallastheybecomethemediaofAfricaforAfrica.ItsoverallvalueapproachispartlybasedonthebeliefsofitsfounderH.HAgaKhan.
NMGlookstogaingreatercontroloftheinitshigh-performancebusinesslinessuchasPrintandTVandmaylooktoconsolidateitsradiobusinessandfocusonthegrowingKiswahilimarket.NMGwilllooktoleverageitsstrongprintcapabilitiesontotheonlineplatformwhichisafast-growingsegmentasindicatedbytheprojected20%compoundedgrowthoverthenext5years.
190,000and1Mrespectively(Exhibit7).Hastheabilitytocommissionand/orproducelocalshowsandTVseries.
StandardMediaGroup
2013revenuewereatKes.4.81BillionandKes.4.78Billionin2014.
Strongexperienceandabilitiesingathering&productionofcontentfordisseminationonallplatforms:Radio,TV,printandonline.KeystrengthliesintheirTVbrandKTNandgrowingradiobrandRadioMaisha.
Believeinbringtheworldtoitsaudienceinaboldanduncompromisingway.Theyupholdjournalisticintegrityevenintimesofintimidation.
TheGroupisdevelopingstrategiestoengageconsumersonnon-traditionalplatformssuchasdigitalmedia,assomeofthetraditionalplatformsforinstanceprint,areshowingsignsofstagnation.
RoyalMediaServices
Notapubliclylistedcompanyandfinancialsnotaccessible.
Strongexperienceandabilitiesingathering&productionofcontentfordisseminationonallplatforms:RadioandTV.Throughitsvernacularradiostations,RMScommandsasizeableamountofthemarketshare
Haveastrongbeliefincultureanditisreflectedintheirvernacularradiopropositionthatspansmostmajorculturesandtalkstothemintheirveryowndialects.Defactopioneersofthe‘new’localcontentparadigm.Believeinremuneratingstaffwell!
RoyalmediaserviceswillplantoholditsstrongaudiencepositionacrossbothradioandTVtoensuretheycancommandhighadvertisingrates.Theywilllooktocontinueleveragingtheirstronglocalcontentpropositionandtheirnationalreach.
andareleadersintheTVviewershipsegmentthroughtheitsCitizenTVbrand.(Exhibit3)
StrategyFormulation
BusinessModelCanvas
WiththefastchangingbusinessenvironmentinthemediaandentertainmentindustryinEastAfrica,duetobothtechnologicalandlegislativechanges,thebusinesscanvasmodelallowsustoidentifykeyvaluepropositionfortheservicebasedcompany,andcorrelateitwithrevenuestreams.Thisallowsteamswithinthebusinesstoremainfocusedandnotnecessarilyantagonizedbythetraditional50+pagedbusinessplan;itallowsforeasierandfasterchangestothemodelwherenecessary,especiallygiventhefastchangingenvironment;andoffersgreaterleveloftransparencythatallowstheteamgreaterandfasterunderstandingoftheonepagedocument.
StrategyAnalysis
FiveForcesAnalysis
Buyers:Thebargainingpowerofthebuyersinthemediaindustryisnotstrong.Thisisespeciallysoinmainstreammediawhichoffersonlythreekeyproviders.Mediaadvertisingratesarearguedtobehighermakingcostperreachunprecedentedformostconsumers.Thoughbecausechoiceofnationaladvertisingoptionsislimited,consumersendupspendingneverthelessmakingtheirbargainingpowerlow.Thiscreatesacaseforproducingmorelocalcontentwhichwillneverthelessbeconsumedbyviewerships.
Suppliers:Thethreebigplayersintheindustryhavecapabilitiesofcarryingouttheirownproductionofcontentincludingrunningtheirownnewsproductionhouseswithcorrespondentsacrossthecountry.Thismakestheneedforindependentproducersmuchlowerandreducingthebargainingpowerofsuppliersofcontent.Itisalsoimportanttonotethatthesupplyoptionsavailablearevastwithmanyindependentproducersinthecountry.
Substitutes:Thethreatofsubstituteproductsisrelativelylowastheconsumerisgreatlydependentandcomfortablewiththetraditionalmediumsofnews-TV,Radioandprint,andnowbreakingintoOnlinethatisnowgrowing.
PotentialEntrants:Entrybarriersarerelativelyhighifonewishestoplayintheprint,TVandRadiosectorsallatonce.Thisisduetothehighcostoffixedassetsrequired.TherealthreatofentrantsisinthedigitalTVspacethatnowrequiresnoback-endtransmissioncapabilities,suchasmastsandtransmittersforanentrant,reducingcosts.
Rivalry:Withthethreatofnewentrantsintothemainstreambroadcastmarketminimal,thecompetitionlevelsarenotintense.Theplayersarehappynottostartprice-warsandcontinuetoleveragecross-groupsalestowooadvertiserstopurchaseacrossalltheirplatforms.
TheHypothesis
IsNationMediaGroupiswellplacedtobackwardintegrateandbegincreatingandproducinglocalcontentfordisseminationonitsTV,Radioandprintplatformsandforsaletoothernetworks,andbecometheleadingproducerofmediacontentintheregion.
CoreAssumptions:
A. TheValueTest:1. Thereisneverenoughcontentforthemarket.Tastesandpreferences
aredynamic.2. Marketdoesnothaveenoughlocalcontent.3. Positioningitselfastheproducerofcontentthatespousesculturaland
nationalvalues.Thisisnottrulypresentinthemarket.B. TheExecutionTest:
1. NMGhasproductioncapabilities.Someofthesecapabilitieslieidlenowgiventherecentshutdownofsomeofitselectronicmediabrands.
2. Creativetalentcanassumeroleofcreating/scriptingcontentrequired.3. NMGalreadyhasthecriticaldistributionchannelrequiredtogetend
producttomarket.C. TheScaleTest:
1. Industrydoesnothavemajorcontentproducer/majorproductionhouse.
2. Smallerproductionhouseswillexpressinterestinworkingwith/andhiringproductioncapabilities/facilitiesofNMG.
3. Merchandisingofcreatedproducts.D. TheDefensibilityTest:
1. Newlawscreatetheneedformorecontentproducers.2. Competitiononlylikelyfromonemajormediahouse–RoyalMedia
Services.Qualityconcernswouldbethecompetitiveadvantage.
ThoughtExperiments&Data:
1. Whatdoweknow?a) GovernmentrequiresmorelocalcontenttobeairedonTVstations.
60%localcontentregulation.b) Morejobscouldbecreatedthrougheffectivelocalcontentproduction.
2. Whatwedonotknow,butcouldknow:a) Canmarketsupportproductionoflocalcontentthroughaggressive
consumptionofthesame?b) Dowehaveenoughqualifiedpersonelltocreateandproducecontent
wellandonbudget?3. Whatwedonotknow,andcannotknow:
a) Willcontentbeacceptabletolocalmarketfromtheonsetthusencouragingproducerstoinvestmoreearlyon?
b) Therecouldbenewoffshoreproducersthatcreatecontentpreferredbylocalconsumer?
Thoughdataonmediaconsumptionisavailablebutatacost,itlevelslimitationsinasfarastestingourassumptions.ThishoweverdoesnotholdbackassertionsthatthemarketinKenyaandEastAfricarequiremorelocallyproducedcontentforitspeopleandkeyindustryplayersneedtomakeboldstepstowardsthis.NMGneedstotakethenextstepsbycommissioningtwotothreeprivate
productionhousestoproduceTVshowsasatest,andthereafterusethatasabasistobeginproducinginternally.
StrategyImplementation
Alignment:
NationMediaGroupisabigorganizationwithmanystaffspanningacrossdifferentterritoriesinEastAfrica.Thisnaturallybringstotheforethecriticalissueofaligningitsvisionwithallstaff.Thevisionisacriticalcatalysttotheestablishmentofthecultureoftheorganization,whichinturnwilldeterminehowpeopledothingsandtheirmotivationsbehindthedoing.Fortheorganizationtobesuccessful,alignmentbetweentheleadershipanditsstaffiskeytoensuringitalsoalignswellexternally.
Ability:
NationMediaGroupalreadyhascreativeandproductiontalentin-house.Keyareastheywouldneedtolookintoisaligningtheirtalenttonowfocuscreatingwiththenewbusinessdirectioninmind–creatinglocalcontent.Salesandmarketingstaffwouldalsoneedsomelevelofrecalibrationtohelpthembuildnewskillsinsellingthecontent.
Architecture:
Thestructureofthebusinesswilldetermineitsabilitytosucceedunderthenewdirection.Thebusinesswillhavetoviewitselfmoreasacontentproducerinallshapesandforms,deliveredacrossallitsavailableplatforms.Thiswouldrequireachangetothestructureofthecompanythatisverymuchattunedtoproducingfornews.Theorganizationwouldnowneedpersonnelwhounderstandcreationandproductionofcontentinkeyleadershippositions,aswellaskeysalespersonnelwhounderstandcontentsales.
Agility:
Byitsverynature,NMGisabureaucraticorganization.Thisislargelysobecauseofitsownershipandoperationalstructure.Sincetheearly1900sithashadawayofoperatingpassedonovergenerations.Astrongbeliefinsettinguptheinfrastructuretobroadcastwasthefocusforthebusiness.Sincethentherehavebeennewentrantsintothemarketwiththesameofferingandchangesintechnology,whichshiftedthecompetitiveplayingfieldtocontentproducedannotinfrastructure-NMGadaptedwell.Furtherchangesinregulationhaveseentheneedforagreaterlevelagility,withcontentbecomingkingat60%ofallbroadcastmaterial.NMG’sagilityinstructurechanges,personnelandabilityto
swiftlyalignthesewithitscapabilitieswillmakethedifference,andwillcertainlybetestedfurtherasitadaptsandtriestoremainaheadofthepack.
Conclusions
NationMediaGrouphasbeenandremainsakeyplayerinthemediaandentertainmentsphereinEastAfrica.Withregulatoryrequirementsdrivingtheneedtostrategizeandchartthenewbusinessdirectionforindustryplayers,NMGcanleveragecertaincapabilitiesandbackwardintegrate.Throughabackwardintegrationstrategyitcouldsolveamarketgapofcreatingmorelocallyproducedcontent.Itisclearthatthereisagapinthemarketwhichisnowherenearbeingfilledandthisisevidencedbythegovernment’sslowdownonenforcementofthe60%localcontentlaw,whichisaclearindicationofthemarket’sinabilitytodeliverontherequired60%localcontent.Asarespectedmediahouse,NMGcanmakeanentryintoproductionbycommissioningprivateandindependentproductionhousesbeforejumpinginwithbothfeet.ThecompetitionpresentalsohaslimitationsespeciallyincapabilitiesandfinancialmusclewhichNMGcantakeadvantageof.NMGcanleverageitsstrongfinancialstructure,skilledpersonnelandstrongtraditionoftrustedcontenttoproducemorefornotonlyitsownedplatforms,butemergingonlineplatformsanditstraditionalcompetitors.
References&Exhibits:
Exhibit1–TheCompetitiveCycle
Exhibit2:
Exhibit3
NTV&QTV–NationMediaGroupTVBrands
http://www.rich.co.ke/media/docs/Nation%20Media%20Group%20Ltd.-%20Audited%20Group%20Results%20for%20the%20Period%20Ended%2031%20Dec%202015.pdf
DigitalKenya:http://digitalkenya.go.ke/welcome-to-digital-kenya
ChangesInTheMediaLandscape–KARFEstablishmentSurvey2015
CommunicationsAuthorityofKenya:http://www.ca.go.ke/images//downloads/BROADCASTING/MarketStructure/Broadcast%20Market%20Structure%20and%20Licence%20Fees.pdf
CompetitionStudy–thebroadcastingindustryinKenya:
http://www.ca.go.ke/images/downloads/RESEARCH/Competition%20Study%20on%20the%20Broadcasting%20Industry.pdf
Entertainmentandmediaoutlook:2015–2019SouthAfrica–Nigeria–Kenyahttps://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf
DigitalKenya:http://digitalkenya.go.ke/welcome-to-digital-kenya
NationMediaGroup:http://markets.ft.com/research//Markets/Tearsheets/Financials?s=NMGK:NAI&subview=IncomeStatement&period=a