HOME BOX OFFICE INC. Case Solution
The market participants mainly design their business models on deficit financing , potential profitable end of the TV series or shows and lastly they operate on the uncertainties in the beginning of any program like they face low revenues or some cases they face losses in the beginning but the overall project or program return turned their losses in the profits. There is a competition on getting sports deal like rights to broadcast popular leagues and movies to get huge benefits in terms of advertising because numerous viewers around the world watch popular programs and in turn, they charge companies for successful advertising. Pay TV industry with in HBO operates is competitive industry whereas other satellite stations rely on the major studios and producers to develop programs for each segment of population. In pay TV, business popularity of channel is everything producers and studios sell their contents to popular TV channels. Every satellite channel wants to be popular, which increases rivalry in return.
PORTER FIVE FORCES
The bargaining power of buyers is high in the television and media industry because switching cost of customers is very low and whenever customers have option to switch to another company or in this case station for the same content or show the bargaining power of buyer or customers are also high. The viewers have many other options they can watch same content or any other content as a substitute without no or low cost. The increase online programming also provides customers many other options such as they can watch same content online for free or with little subscription fee. Increased globalization also further increased the bargaining power of buyers.
As far as the bargaining power of suppliers are concerned, it is moderate in this industry and majorly depends on the type of channel we are discussing here. Supplier power is now low, especially after when stations outsourced their suppliers because network providers like HBO can also get same content and programmers from other suppliers. In this case, studios and producer companies also buy TV shows and right on predetermined payment, this also further lowers the bargaining power of suppliers.
The threat of a new entrant is directly linked with barriers to entry in the industry. Currently the companies in the television industry follow organic growth for expansion, which is now impossible for new companies to follow. New companies will suffer huge losses because large companies and conglomerates are ruling the industry. Every big contract is in the pocket of big corporations who run satellite stations, broadcasting channels, and distribute popular content. These giants cover almost every aspect of the industry and there is a very little scope for any new company to start its business in this television industry. This is not enough, the industry is very capital intensive and it is very hard to understand the complex supply chain and how things work around in this industry for any new player, it can be said that that the threat of new entrants in the industry is low except through acquisition. The current position of any television company can be distorted.
The threat of substitute product is very high in media industry and different viewers and subscribers want to see different things. The effect of substitute product on the companies can be massive. As there are different programs and contents available on the same genre. In the television industry, viewers can subscribe to any program which best suits them and their need, relying on customers for the subscription is only valid when the company have major deals with the programmers and producers. This can show the reliable forecasting of revenues, otherwise there are number of shows and contents, which can fulfill each other needs…………………
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