Funding of Media Venture - Essay Example

? Funding of Media Venture Topic 3: ‘Good creative thinking and a winning product are only one component of developing a successful media firm, securing long term funding is just as important’. Discuss with examples of the key requirements for, and obstacles faced when, seeking funding for a media venture. Introduction Venturing in the media business requires huge capital for it to be able to meet the requirements of the government, sponsors, and customers and to achieve the obligations for which it is formed. However acquiring sufficient funds remains a huge challenge to many upcoming media firms. This is mainly the case considering that the firms experience a lot of obstacles in this pursuit. The paper seeks to explore the key requirements for media organizations seeking funding. It will also discuss the various obstacles that the media firms face when seeking funds from various sources. Solid Business Plan For a media firm to be able to secure funding, one of the requirements in many cases is a business plan which contains a solid business concept. This is because the funding agencies like the donors, banks or sponsors expect a return out of the funds they invest in the media venture. For this reason, they believe that a media firm with a good business concept would be able to compete effectively with other media firms and in the end make profit. However, the media firms that do not have sound business concepts will in most cases find it hard to acquire funds because they are perceived to be risky businesses that may not compete effectively in the media industry. A good business concept in this case will include details of the winning product and services in form of quality advertisement and creative thinking by the media personnel especially the journalists, the presenters and writers. Hewlett-Packard Company for example required that those media companies that seek funding must first ensure that they have a sound business plan1. Product Capable of Succeeding Product viability is another key requirement that venture capitalists tend to look at before providing funding to the media firms. They first look at the probability of success of the product that the media wants to offer in the market. If they realize that the products that the media wants to offer have high chances of success, the funds will be provided with relative ease since they assume that their investments are not going to be put in a business that is too risky with limited chances of survival. Picard noted on the contrary that venture capitalists are in most cases reluctant to provide funds to media firms if they establish that the products on offer have very low chances of success2. Capital Threshold Most companies that provide funding to media ventures require that the latter have a given amount as part of their financial base before they can be offered funds. This situation was witnessed when HP Company announced their funding program to internet startups in which they required interested media companies to have a financial base of $250000 in capital before they could be considered for funding3. This capital threshold is meant to indicate the seriousness of the media company. The capital base also ensures that the company can provide security to its customers and clients before the business can pick up. This means that those media companies that were seeking funding to venture into the internet services but lacked the stated amount could not get funds from Hewlett-Packard4. Compliance with Government Regulations Before the media venture can be provided with funding from outside sources, they are normally required to be in compliance with government regulations and policies5. This is to ensure that the business that is being financed is a legal entity and operates within the legal framework. The media ventures that comply with the government regulations show signs of seriousness in doing business as opposed to those that fail to comply. Those who provide funding to the media ventures shun sponsoring media firms that operate illegally considering that they risk facing litigations in spite of their good intentions. Market size The size of the market for product and services offered by the media company is a major factor that financiers of media ventures consider before offering funds6. If the market seems big enough and can be profitable to that firm, and beneficial to the audience and advertisers, then they will probably offer their financial services with ease. However, if the size of the market is small, then the financiers probably will withhold their funds. This kind of situation was observed by the Billboard when ZelnickMedia’s manager Karl Slatoff told those who attended a symposium that investors only commit their funds based on market size, and not on ideas. It is therefore important that a media venture seeking funding considers the size of its market before applying for funds from venture capitalists. Competitors Competitors offer a big threat to the success of any business. For this reason, the financiers of media ventures tend to consider the competitors of the venture so as to establish if the venture can be in a position to compete effectively and succeed in such an environment. If they establish that the products that the media venture wants to deal in can compete effectively and win a huge audience and customer base, then funds could be easily given. However, if the products and services are perceived to be low in quality and cannot effectively compete in the market, the financiers become reluctant to offer funds. It is therefore important for the media ventures to ensure that the products and services that they offer make the business have considerable competitive advantage over their competitors. Target Market To be able to get funding for a media venture, it is important that the venture identifies its target market and ensure that the it is approved of by the financiers7. The financiers usually consider the target market of the media’s products and services in establishing if the venture is viable and will compete effectively. If they establish that, the target market is not up to standards, they it will be difficult to get funding. This was evident when ZelnickMedia told a gathering that funding is based on good record and the targeted market. For this reason, it is very important that a media venture that seeks funding ensure that the target market for its product and services is approved of by the financiers. The Management Team, Skills, and Experience Venture capitalists require that media ventures seeking funding ensure that the management teams of the firms have enough expertise, skills and experience that can lead to successful management of the firms. Financiers believe that maintaining or observing professionalism leads to good management and thus higher profits. If the financiers note that the media venture has managers with little expertise and experience in management, they may opt not to provide funds fearing the possibility of business mismanagement. It is therefore important that the media venture ensure that they have a strong team of professionals with enough expertise and skills to attract funding of their media venture. This factor was evident when Amplify.net sought funding from Alpen ventures8. Contribution of the Media Venture to the Community and Media Industry The financiers also require that the media ventures ideas and business is focus at promoting the media industry and contributing to the development f the society9. This was seen when the management head of ZelnickMedia, informed the curious audience at the symposium that the financiers of media programs requires them to promote the business of music for them to be funded and that the financiers funding does not depend on technology. They were also expected to have a meaningful impact on the society through education, and entertainment. Control Rights Financiers of media ventures in some cases demand to be given control rights in the management of the business venture10. In this respect, they may demand that their representative(s) form part of the management team so that they can participate in the decision making process. They may even demand that their representatives be appointed as directors. The financiers may also tend demand a stake in the business as shareholders. This is to enable them have control over the business. Obstacles faced when seeking funding for a media venture Media firms are faced with many challenges when seeking funding to establish or expand. This has made it difficult for small upcoming media organizations collapse. The following sections of the paper present some of the challenges facing media ventures when seeking funds for establishment or expansion. Skepticism Most media ventures seeking for financing from outside investors are in most cases find their business concepts being met with a lot of skepticism from the financiers. The financiers in most cases demand an exchange of their financial assistance with being offered some degree of control of the venture. This is because the financiers require them to set aside some stake in the business for them. This has not been greeted well with the entrepreneurs in media venture. In most cases, they are turned away. This has made the media ventures proving their level of business plan difficult making it not easy to get funding because of failure to meet the business plan threshold set for funding. As such, a lot of convinsing is required to get funding as was acknowledged by Terry Howell, the manager of portal program. Wrong corporate Structure In cases where the media is planning to venture into the market for the very first time, they will find it easy getting funded due to the fact that they will not have developed the right corporate structure that the financiers are looking at. This is because financiers are so skeptical financing a venture that is not known to them as they consider such ventures risky. This is due to the fact the venture will not have acquired the right management expertise and experience that the financers are looking at before giving funding11 Lack of Clear Business Plan Since financiers seek to provide funding to those media ventures that have solid business plans, this has made media ventures find it difficult getting funding. This has been because meeting the business plan requirements for financiers has been very difficult. The financiers have a very high and complex business plans threshold that is not easy to meet. This major obstacle faced Bailey the managers of BSM Media as he says that getting finance for outside sources was had since the investors were not able to understand their business plan12 Lack of Track Record Financiers prefer looking at the tract record to see how the business has been performing in the past for them to be able to gage whether the business is viable financing or not. This record shows the type of products and services that the media venture have been dealing in or intend to deal in. In cases where the records of operations are not available, this leads to skepticism on the part of financiers to fund the venture. Lack of right Credentials Financiers are only comfortable providing financial assistances to those media ventures that have the right credential in terms of qualifications, experience, and expertise to manage the business. In some cases the venture may be having the idea to venture in to the business but lack the credential that in most cases see them being denied financial assistance from venture capitalists who tend to rely on credentials that the physical people they see in front of them13. Conclusion In conclusion, it has been seen that several requirements are needed to be met by media venture seeking funding from outside financiers. This has been because the venture must have a solid business plan, have products capable of succeeding, show their target market and the size of the market in question. The financiers also require the media venture first ensure that they comply with the government rules and regulations, show their competitors in the market. Good management team with enough expertise, skills, and experience is also another requirement from the financiers whom they can trust with their investments. It is also evident that some financiers demand to be given shares and control over the venture before they can provide any financial assistance. The media ventures are also facing many challenges in seeking for such findings. The obstacles ranges from skepticism form the financiers in providing funding, as they demand control of the venture. The other obstacles is due to the fact that the venture may be lacking the right corporate structure, lack of clear business plan, track records and credentials that the financiers tend to look at before giving out funds to the media ventures. Bibliography Arden Lynie & Enterprenuer. Start Your Own e-Business. Madison: Jere L. Calmes, 2009. Boogar Steve. Booogalist: Directory of Venture capital & Private Equity. Boogalist Press Cardis Joel. Venture capital: the definitive guide for entrepreneurs, investors, and practitioners New York: John Wiley & sons, 2001. P23-140. InfoWorld. Mach 27, vol. 22, Issue 13, 2000 Picard Robert. The economics and financing of media companies. Fortham University Press, 2002 p44-156. Strauss Steven. Get your business funded: Creative methods for getting the money you need. Hoboken, NJ: John Wiley & sons, 2011 p12-66. Topic 2 :‘Advertising revenue is the cornerstone of profitable media firms in the 21st century’. Discuss. In your answer give media firm related examples of differing advertising methodologies and strategies. Advertising refers to the attracting of attention of an interested audience by a person selling an idea or a product so that he/she could benefit mostly financially from the interested party. Advertisements act as very important strongholds to the development of a media firm14. These advertisement promoters provide money to the media so that their products will get consideration from the public and increase sales. The advertisers usually consider the media firms that they will use to promote their products. The main base is of consideration regards their popularity with the potential audience or customers. Producers will consider airing their advertisements with the media firms that offer free services. This is because free media is accessed by the highest population possible and increases the chance of selling their product. Millions and even billions in cash is spent by the producers on product advertisement because of the competition in the market. The fact that media firms get so much revenue from airing such advertisements means that they would not at all air anything that would affect that product negatively or they would lose that revenue. This means that although they are advertisers, they have a lot of influence on the activities undertaken by the media firms. An advertiser’s most important interest is the audience that buys the product15. The media acts as the ‘middleman’ or medium connecting the advertiser and the consumer/audience. So the audience becomes the ‘product’ of the media firms, this ‘product’ is what the advertisers look at when deciding on which media firm to invest in and only want the most efficient one to favour their sales. Noam Chomsky points out in his article What Makes Mainstream Media Mainstream that media firms do not benefit financially from the audience but instead benefit from the advertisers. Hence, to the advertisers, the product that the New York Times and such companies bring to them is the audience itself, and it is the advertiser’s that bring the money to the media companies and not the audience. Considering very prominent media firms like the CNN known for its great news coverage and being the most viewed news station in the world, it is seen to be involved in advertising a lot, and most of the advertisements include airline companies, that will surely be of great benefit to the TV station. In this generation and time, people are driven by what they view from the media that they trust. Once an advertisement from a media firm like CNN tells you that ‘Korean Airlines’ are the best in the field of travel, then by no doubt you will want to try that airline regardless of the rest. The development of media, T.V to be precise, has allowed easier access of advertisers to the intended audience. The media firms that use this digital system get to pay much lower prices just to go on air. The digital system can be mostly seen working in public places like hospitals, banks, hotels where there is an expectation that the audience will be readily available to view it and be convinced. Since the media firm in charge of airing this advertisement is paying little for its upkeep in the digital world, it is benefitting much more from the advertisers and this becomes its main income source. ‘The highest priority for today's branded video advertisement experiences is to make them as organic as possible to the content experience of the sites that they run on’ this is according to Dan Greenberg16.This means that an advertisement can in more than one way depending on the different media firms that it is using to publicise its brand. This is because it is well aware of the different audiences that each of the media firms gets to attract. Most of the younger viewers will tend to go for more colourful and newer products unlike the elderly who may consider more classic products, so this can dictate what either of this audience will end up viewing. Thus, the media firms have to figure out on how to advertise the products in order not to lose the customer [advertiser] and also keep its audience to keep itself running. On the same note of each media firm having its own audience, this may dictate to the firm on what to go on and advertise like for example, a newspaper for the elderly may advertise artificial teeth or even advanced wheelchairs since the elderly audience are most likely to be the most appropriate customers for such products. Similarly, the media firms that are involved and target the youth will also be seen advertising things relevant to the youth like fashion trends like ‘Fashion TV’ on DSTV cable television. This assures the advertisers that there will be a readily available market if they use it to advertise their product through it. The presence of big and major events like the annual ‘super bowl’ that is highly watched world-wide, though it’s an American affair, presents a good advertisement ground for advertisers and media firms alike. Though many advertisers may want to advertise during this period, only the best are eligible for viewing. This means that competition is usually very stiff for the top spot. They also compete on who will be the official sponsor of the game. Through this the super bowl acts as a form of media firm since it has its audience and it is used by advertisers to promote their products17.This means that though it is a once a year thing, it usually is of major benefit to the organisers of this event from these advertisements and that is why so many of its viewers can watch and pay so little. The number of public service advertisements that they air in a day dictates granting of licences to radio and television stations in the USA. They end up airing the public service advertisements early in the morning or late in the night when there is little viewers involved, and instead air the commercial advertisements during when there is major viewing, since they know that they will benefit greatly from them. Having aired the P.S.As the recommended number of times in a day, they are sure of getting their licences and still get to air commercial adverts that will help them financially. A media firm ‘News of the World’ did a survey in the period of January to May 2011, and gave record of the advertisers that spent a lot in their advertisements18. It came up with a top 50 list of most spending companies and ‘BskyB’ was the leading in the list having spent 2,100,000 pounds while ‘Npower’ came at the base of the list having spent 206,000 pounds on advertisements. This is to show the amount of money that a company is willing to squander to publicise its product. Advertisements being the cornerstone of most media firms means that they play a very major role in developing the media firms, the airing of advertisements is as old as the development of media itself19. Lack of advertisements means that the media will not have the ability to keep on improving the quality of its programming and thus everything that media provides to its audience like news and entertainment will not be good since the media firms will not manage to have what the necessary equipment to make it possible. The presence of media that is provided to the mass free of charge like most papers in America and the UK, means that everyone is expected to have access to the printed material which includes the advertisements and this assures the advertisers of a readily available market. Branding is usually what makes a media firm have its reputation. This is what drives the audience to make up their minds that, that is what they want to associate themselves with, the advertiser will go for the best brand in the market if they are only interested in making only the best of sales. Thus, each media firm will aim to have the best brand and this competition only makes sure that only the best make it through in the industry. More money is made if an advertisement is aired more times in a day. Thus, if an advertiser wants to promote their product and be more influential, they will have to purchase more airtime from the concerned media firm that they are using to advertise. This thus shows that the media depends so much on the revenue that the advertisements give them since that is what assists them get to develop and improve to the level that is really pleasing to the audience. Bibliography Shah. A, “Media and Advertising”. Global Issues. Created: Friday, January 22, 1999. http://www.globalissues.org/article/160/media-and-advertising (Accessed 8th Feb 2012) Demarrais. K, “Advertisers look for Super results”. North Jersey. January 31 2012 http://www.northjersey.com/news/138462204_Merchants_take_care_in_avoiding__Super_Bowl__ads.html (Accessed 8th Feb 2012) Greenberg. D, “Three Qualities Advertisers Look For in Brand Video Ad Placements”. Media Posts Blogs. Feb 24, 2011. http://www.mediapost.com/publications/article/145629/ (Accessed 8th Feb 2012) Escmedia, “ECS Media Marketing and Promotion”. Nd. http://ecsmedia.com.np/advertise.php (Accessed 8th Feb 2012) The Guardian, “Top 50 News of the World advertisers - and what they spend”. 2012, http://www.guardian.co.uk/news/datablog/2011/jul/06/news-of-the-world-top-50-advertisers-spend (Accessed 8th Feb 2012) Read More