A New Window of Opportunity for Viacom - Case Study Example

Strategy Case Study of Viacom of Table of Contents Introduction 3 Strategic actions of Viacom Inc 3 Multinational Operations of Viacom 6 Recommendation and Conclusion 7 References 9 Introduction The TV broadcast and cable networks industry is primarily focused in offering media content via television. Its product range covers news, family shows, sports, movies, documentaries, etc. There is a growing trend among customers to spend more to enjoy their favorite media content. The popularity of HD content has also increased over the years; consumers are more conscious of the picture and sound quality of the shows. This as a result has opened a new window of opportunity for the broadcasting companies to cater to a newly developed need among the customers. In the USA, the cable networks industry makes revenue of around $ 56 billion with a 1.7 % growth over the past five years (Ibisworld, 2014). This paper is based on the cable networks and broadcast industry with particular focus on the marketing strategies of Viacom. It includes the strategies of the company to operate in the international market and to strengthen its core competencies. Strategic actions of Viacom Inc Viacom is a TV broadcast and cable networks company, headquartered in New York. It owns some of the best known television brands like MTV, Nickelodeon, VH1, Comedy Central, etc. Viacom also owns Paramount, which is one of the world’s largest media entertainment brands (Viacom, 2014a). The strategic planning of the company focuses on becoming the industry leading broadcasting company, which focuses on catering to its customers by developing new brands and enhancing the existing ones on a multiplatform strategy (Viacom, 2014b). Over the years Viacom has expanded itself by taking several tactical strategies so as to meet its long term goals to expand itself in the media entertainment industry. In 1983, Viacom made its first major strategic move by establishing a joint venture with Warner Communication. In the next few years the company eventually acquired the MTV networks. Acquisition of the MTV brand gave Viacom a major financial boost. It also made Viacom an attractive business partner for other bigger companies; as a result in 1987 almost 87 % of Viacom was acquired by National Amusements with a financial consideration of $ 3.4 billion. Keeping in mind the high popularity of MTV, the company decided to introduce MTV in Europe. In 1994, Viacom made another major acquisition by taking over Paramount Communications with $ 9.9 billion. As a result the company diversified in to the movie production industry. The huge success of the movie “Titanic” has made Paramount a notable brand in the industry (Vector, 2010). After the acquisition of Paramount, Viacom also acquired Blockbuster which is a major retailer of videotapes in USA. The takeover of Paramount and Blockbuster had caused a substantial amount of debt. In order to clear off the liabilities, the company eventually divested some of its assets including the radio stations, cable systems, etc and was able to salvage around $ 7 billion. Viacom’s recovery was further boosted by the success of Blockbuster in 1998. In 1999 in order to strengthen its foot holds in the media entertainment industry, Viacom decided to form a merger with its previous parent company CBS. This merger led to a symbiotic advantage for both the companies. CBS gained access to new customer base and at the same time Viacom could leverage the brand image of CBS (Luening, 1999). In order to penetrate to a new customer base, Viacom acquired Black Entertainment Television in 2001 to focus on the African American youth. Even though the Viacom-CBS merger showed a lot of promise, but somehow due to internal disputes, the merger did not last long. After the failure of the merger, Viacom underwent a lot of acquisitions by taking over companies like Xfire, Dreamworks, etc (Vector, 2010). The growing popularity of online video sharing over the internet became a challenging situation for Viacom. In 2007, the company filed a lawsuit against YouTube for copyright infringement. The $ 1 billion lawsuit stated that users of Google owned YouTube uploaded some of the copyrighted content for public viewing. The dispute originated as a YouTube user illegally uploaded some of the content of Viacom like South Park, Daily Show, some of the movies produced by Paramount (Stempel, 2014). The law suit was ruled in by the district judge in favor of Google. After two years the case was further turned down by the US court, thus making Google the winner of the lawsuit. Viacom also claimed that YouTube had posted copyrighted material to their website to attract viewers. After a long lasting legal fight the case shifted towards Google’s favor. The court underlined that it is not illegal if YouTube has the facility which allows the owner to remove their copyrighted content (Kafka, 2014). As recent as in May 2014, Viacom acquired Channel five. This acquisition gave Viacom access to wide range of consumers. Channel 5 is the most popular television network in the UK which offers a range of shows like reality, sports, and entertainment and preschool programs for children. It allowed Viacom to gain a strong foot hold in the European market and simultaneously it improved its brand preference among the European consumers (Viacom, 2014c). Viacom believes that in the near future the huge potential of Channel 5 will realize a higher revenue generation and brand recognition for Viacom (Curtis, 2014). Currently Viacom is one of the leading entertainment media broadcasting company. It operates in cable distribution and motion picture production industry as well as in radio broadcasting and DVD production (Vector, 2010). The company generates its revenue mainly from the ad supported television channels and its movie production studio Paramount. Revenues from Paramount come from three major sources, a) the global release of movies in theatres, b) sale of DVDs and third party content distribution, c) and fees collected for third party licenses. The media broadcasting is supported by sale of advertisement time slots and collecting fees from third party cable operators and DTH services (Vector, 2010). Multinational Operations of Viacom The international TV broadcast and media industry is dominated by bigger players like General Electric, Walt Disney, Time Warner, etc. Viacom has expanded its presence worldwide, in order to stay ahead of the competition in the international market, (Morningstar, 2014). The company has achieved a strong platform to operate in the European market by acquiring Channel 5 (Curtis, 2014). The company already owns a number of popular brands by performing a series of acquisition, which has allowed Viacom to distribute its media content to over 200 countries in 37 different languages. The company has established a separate subsidiary called Viacom International Media Networks, which is responsible for global broadcasting of a number of most popular media entertainment brands like MTV, VH1, Colors, Comedy Central, Nickelodeon, etc. Around 700 million viewers worldwide consume media content of Viacom International (Viacom, 2014d). The overseas operation of Viacom has increased its revenue by around 6 % over the past few years. Due to a wide range of media portfolio, the poor performance of one subsidiary is compensated by the others. As a result even amidst the industry downturn in 2014, the company only faced a revenue dip of 0.4 % (Adweek, 2014). In order to expand globally, the company had appointed Macky Drese in the position of vice president of international sales. In order to make global brand awareness, the company went into business collaboration with Volkswagen as its media and brand partner. This as a result allowed the company to gain huge momentum and success in Germany (Clancy, 2011). The company eventually started to redirect all of its business strategies to a global perspective. The appointment of Macky Drese eventually proved to be fruitful for Viacom owing to his expertise in selling brand solutions and events on a large scale. The company realized that the best way to attract the global population is to start attracting the young population. Keeping this in mind, the company started to broadcast youth centric channels like MTV, Comedy Central, BET, VH1, VIVA, The Music Factory, etc on a global scale (Clancy, 2011). Viacom identified the growing popularity of the reality based shows across the globe and decided to launch the spike network in the UK. The company believes that UK can be its second home for media distribution.. As Channel 5 originated in the UK, the company realized that it would be wiser if The Spike is operated by Channel 5. This allowed the company to use the demographic expertise of Channel 5 in the UK. After the popularity of The Spike in the UK, Viacom has decided that it will distribute the channel globally in the near future (Ritman and Szalai, 2014). The overseas expansion of the company has also received a lot of criticism from the rival brands, like Channel 4. Channel 4 stated that acquisition by an American brand can damage the creativity of the UK. In response Viacom stated that it is ready to step up to the global competition at any cost. Moreover, the company also stated that it is not afraid of its rivals and focuses only on creating customer value and increase viewership (Ritman and Szalai, 2014). Recommendation and Conclusion Due to increase in piracy of media content, Viacom currently faces a strong challenge of increasing its viewership. It is further boosted by the wide spread of high speed internet and popularity of illegal torrent downloads. In order to face this challenge, Viacom must diversify its media distribution business to the online platform, where it can provide features like pay per view, or movie rentals via online streaming. The company can consider shifting its online distribution from third party companies like Hulu and Netflix to its own website. This as a result will allow the company to increase its web traffic and generate revenue via online rentals. The company can start to launch new movie channels based on genres, which as a result will give the users the ease of access to their favorite movies. The views will not have to browse through several channels to find his favorite movie genre. As a result it will drastically increase the viewership of Viacom’s channels. Furthermore the company can launch an ad supported website that streams free media content to the viewers in order to challenge the viewership of YouTube. Viacom can further diversify its business in music production. Owing to its popular brand image and high financial strength, the company has the required potential to enter into music industry. This will not only help the company to expand but it will also allow it to launch its own music channel. Thus it can be stated that Viacom has successfully taken the right strategic steps which has led to its international expansion, and it also holds huge opportunities for future growth and sustainability. References Adweek. (2014). US TV Networks Seek to Grow by Expanding Internationally Reach is integral to their bottom lines. Retrieved from http://www.adweek.com/news/television/us-tv-networks-seek-grow-expanding-internationally-160717 Clancy, M. (2011). MTV-owner Viacom eyes international expansion. Retrieved from http://www.rapidtvnews.com/2011081814395/mtv-owner-viacom-eyes-international-expansion.html#axzz3N5qwFG8i Curtis, C. (2014). Analysis: Viacoms C5 strategy under the microscope. Retrieved from http://www.broadcastnow.co.uk/analysis-viacoms-c5-strategy-under-the-microscope/5071230.article Ibisworld, (2014). Cable Networks in the US: Market Research Report. Retrieved from http://www.ibisworld.com/industry/default.aspx?indid=1263 Kafka, P. (2014). It’s Over! Viacom and Google Settle YouTube Lawsuit. Retrieved from http://recode.net/2014/03/18/its-over-viacom-and-google-settle-youtube-lawsuit/ Luening, E. (1999). CBS, Viacom in blockbuster merger. Retrieved from http://news.cnet.com/CBS,-Viacom-in-blockbuster-merger/2100-1023_3-230674.html Morningstar, (2014). Viacom Inc Class A. Retrieved from http://financials.morningstar.com/competitors/industry-peer.action?t=VIA®ion=usa&culture=en-US Ritman, A., & Szalai, G. (2014) Viacom to Roll Out Spike in International Markets, Starting With U.K. Retrieved from http://www.hollywoodreporter.com/news/viacom-roll-spike-international-markets-739133 Stempel, J. (2014) Google, Viacom settle landmark YouTube lawsuit. Retrieved from http://www.reuters.com/article/2014/03/18/us-google-viacom-lawsuit-idUSBREA2H11220140318 Vector, (2010). Strategic Report for Viacom, Inc. Retrieved from http://economics-files.pomona.edu/jlikens/seniorseminars/vector2010/pdf/via.pdf Viacom, (2014). About Viacom. Retrieved from http://www.viacom.com/about/pages/default.aspx Viacom, (2014a) Viacom Brands. Retrieved from http://www.viacom.com/brands/pages/default.aspx Viacom, (2014b) Inspiration. Retrieved from http://www.viacom.com/inspiration/pages/default.aspx Viacom, (2014c) Viacom Closes Acquisition of Channel 5. Retrieved from http://ir.viacom.com/releasedetail.cfm?releaseid=870079 Viacom, (2014d) The leader in global entertainment. 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