Transcript The collapse of ITV Digital

The collapse of ITV Digital
Implications for broadcasting
Implications for sport
Lessons in International Marketing Strategy
The Market Entry Decision
Opportunities
• Technological :
– digital = multichannel-interactive- subscription
– need to be in ‘lead market’
• Economic:
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ITV ad revenues stable or falling
Digital offers new revenue streams
access to global markets via satellite or JVs
evident success of BSkyB
• Social
– fragmentation of consumer markets into niche
lifestyle and interests segments
– market for premium products -sports, movies,
documentaries, news?
– Gap in provision of basic terrestrial package
• Political
– government desire to create international
success of UK communications industry
– deregulation of ownership
– promise to switch off analogue (by 2010?)
Mode of entry
• Carlton and Granada form ON Digital
• joint venture, limited company
• share and limit risk
• originally BSkyB were also partners
• ruled uncompetitive by EC & ITC
‘ create internationally successful UK company or ensure
diversity and plurality in a democracy’ Hargreaves FT
‘it is now clear we cannot have both’ Bell, Guardian
Forces of Competition
BBC plans
£100 digital box
by spring 2002
BSkyB hold top
sports &
movie rights
BSkyB v
ONDigital
BSkyB free boxes
and installation
Conventional
terrestrial
(why change?)
The winner will be the one with the better value-delivery network
Kotler
Competitive Strengths
• Expertise
– no experience in pay TV
• Resources
– unable to secure top sports rights
– unable to sustain price-war
• Markets
– failed to create premium niche channels
– fall in ad revenue after 11.9.01
• Product quality
– paid too much for second-division football
– home-made channels low quality and downmarket
• Technology
– software prone to crashing
– easy to hack - est. 100-300,000 non-paying viewers
– poor reception and incomplete coverage of UK
• Distribution
– delays in supplying boxes
• Image
– expensive rebranding as ITV Digital
– now tarnishes parent brand image
‘Never try to out Sky BSkyB’ Guardian
Implications for broadcasting
Part of a wider crisis
• Kirsch Media, Germany, bankrupt after
paying too much for F1 and World Cup
rights, NewsCorp invited to the rescue
• ‘NTL is broke, BSkyB losing money’
‘digital terrestrial is a license to lose money..
Will cost taxpayers £10bn to achieve’ Elstein
• Is there a ‘killer application’ to drive sales?
• Is content really king? (AOL case)
• Should governments intervene?
Implications for sport
• Channel theory (Sims) distinguishes
– insiders (the elite that control the channel)
– strivers (who want to become part of the elite)
– transients (who exploit the channel but have no
long term commitment)
• Expansion strategies
– organic growth leading to export success
– growth through acquisition, alliances and
venture capital
The virtuous circles
Warner, Guardian 6/4/2
Sporting
success
Recruitment
& retention
of top players
Merchandise
Sponsorship
& rights
Investment
Shareholder
value
Has the bubble burst?
• Kirsch’s rights up for resale at bargain
prices
• ITV can’t find a sponsor for World Cup
• Worthington pull out of FL Cup
• BSkyB pull out of 6 Nations Rugby
• Chris Akers says sporting market will still
grow. F1 is a $2bn business with 54m
viewers (Guardian 12/4)
The future?
• Downward pressure on players’ wages and
values?
• A healthier game with realistic wages?
• Increased power of governing bodies
– salary cap and pooling on the US model?
• Increased gap between elite and the rest?
• FLD1 clubs 60% of revenue from ITVD
deal FLD3 8%. About 25 clubs in danger
A new model (Warner 6/4/2)
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Broadcast and sponsorship levels off
Conventional investors pull out of sport
Does the answer lie in ‘corporate vanity’?
Sporting franchises as marketing tools (US
model)
• Sponsor as impresario (Meenaghan) as well as
investor
• Manufacturers are taking over motorsport
(Holbrook 2002)
• Reebok or mm02 take over Middlesborough?