Media Product Portfolios

Issues in Management of Multiple Products and Services

Robert G. Picard

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781135250331
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Media product portfolios are rapidly becoming the predominant shared characteristic of media companies worldwide. The phenomenon involves firms from all kinds of media--newspapers, magazines, television, radio, cinema--and is found in enterprises ranging from small, local firms to large, globalized companies. This volume is the result of a coordinated effort of scholars in the United States and Europe to explore the characteristics, processes, challenges, and implications of media product portfolios.This book breaks new ground by introducing the concepts of product portfolio management and applying them to media companies in a comprehensive manner. It draws from knowledge and methods of analyzing product portfolio management in other industries, applies that knowledge to media industries, and analyzes current practices in media firms. The process and issues of portfolio strategy, development, and management are complex and wide ranging. The book explores the development of media product portfolios from an interdisciplinary perspective, providing insight from business, economic, organizational, and communication approaches. The book explores why and how firms develop portfolios, how company strategy and organizational development relate to portfolios, the role of leaders in developing portfolio activities, economic and economic geography issues in portfolios, production issues, challenges in managing multiple products and operations, issues of marketing and branding issues in portfolios, personnel implications, and the unique challenges in the internationalization of media portfolio operations.

1

The Nature of Media Product Portfolios

Robert G. Picard

Jönköping International Business School

Product portfolios are created when companies begin producing and offering more than one product into the market. Effective management of companies with multiple products requires changes in the ways they were managed when they offered single products. As the size of the product portfolio grows, significant change is sometimes required in company strategy, organization, and administration, as well as in product development activities, marketing, and customer service.

An electrical appliance firm, for example, may manufacture a range of products including handsaws, toaster ovens, and portable radios. A plastics manufacturer may produce kitchenware, automobile components, and toys. Media firms, however, have historically focused on one product. Newspaper companies, for example, typically produced one newspaper, and radio broadcasters typically offered one channel of broadcasting. When they increased their products it was usually through replication of the initial product. The newspaper would launch or acquire a newspaper in another city and the radio firm would offer a second radio channel.

In recent years, that situation has changed. Media companies are increasingly developing broad product portfolios in response to market changes and convergence, as an effect of industry consolidation, and as a means of seeking economies of scale and scope. Media product portfolios are appearing in every media industry. Larger magazine firms publish hundreds of titles, broadcasting firms operate multiple channels, and newspaper firms produce multiple titles and different types of papers.

Cross-media portfolios are increasingly common in media companies. Some newspaper companies moved into the broadcasting sector, broadcasting companies have broadened their activities into program and motion picture production, and domestic portfolios are being expanded into international portfolios. Depending upon the organizational structures of these firms, they can be thought of as owning and managing media product portfolios and portfolios of media companies. A recent study of the six largest media firms, for example, shows that all are broad content-creation and development enterprises that provide content through different platforms and media (Albarran & Moellinger, 2002).

These changes are creating significant new managerial challenges. Managers with knowledge, skills, and experience in one media field are being given responsibilities for media with different economic, financial, and operational characteristics, and managers with skills operating one product line are suddenly asked to manage multiple products.

These changes are problematic because managers in media have typically been raised through the organizations without significant business education and with limited understanding of strategy and management and the issues associated with portfolio management. Even the literature of media management, including key texts, provides little recognition that product portfolios exist and tends to focus on managing media firms based on a single type and unit of media.

Understanding and managing portfolios of products are key challenges of media management in the 21st century and require an understanding of the rationales for, influences upon, and structures and operations of portfolios. Managing portfolios requires diligence and care. It is described as “a dynamic decision process...[in which] new projects are evaluated, selected, and prioritized; existing projects may be accelerated, killed, or deprioritized; and resources are allocated and reallocated to active projects” (Cooper, Edgett & Keinschmidt, 1998, p. 3). The goals of the process are to maximize the value of the portfolio, achieve and optimal balance among parts of the portfolio, and to ensure that the products reflect strategic priorities.

Rationale for Product Portfolios

A number of rationales exist for operating product portfolios, including risk reduction, managing life cycles, market exploitation, increasing the breadth of service, and efficiency.

Risk Reduction

Development of product portfolios is often undertaken as a means of lowering risks associated with operating firms. Creating a portfolio of products helps reduce risks of product failure, diminished demand, business cycles, market disruptions, or events that interfere with production and distribution. Such risks are amplified when firms are dependent on single products or operate in single geographic areas.

Print and broadcasting companies traditionally were active in only one media field but in the past three decades many firms have increasingly diversified their product range—primarily to other media products—as a means of reducing risks. As early as 1986, it was shown that media company portfolio development and diversification reduced resource dependence and their associated risks (Dimmick & Wallschlaeger, 1986). Audio recording, motion picture, and television programming production firms have long used portfolios to overcome risks due to the difficulties of forecasting creative product quality, consumer demand, and financial success.

Another rationale has been to stabilize company finances during contractions in the business cycle. Traditional print media companies, in particular, have diversified into broadcast and other media because print media revenues are far more affected by downturns than those of broadcast media (Picard, 2001a) and evidence exists that that diversification of media products reduces effects of recessions on company finances (Picard & Rimmer, 1999).

Managing Product Life Cycles

Fear of current and potential market changes and their effects on the primary product also leads to the development of portfolios. Given that products have individual life cycles, operating a portfolio of products at different states in life cycles is a means for maintaining company stability and achieving sustainability (Barksdale, 1982).

For example, since the mid-1990s, the majority of newspapers in Europe and North America have begun providing Internet products as a response to market and technological factors that appear to be leading their companies into the decline phase of the 300-year long newspaper life cycle. How that strategy has been operationalized has generally been dependent on the degree of risk perceived. Saksena and Hollified (2002), for example, have shown that in papers at which the Internet was viewed as seriously disruptive technology, managers developed Internet newspapers with more systematic thought and processes and created more comprehensive online products than those at papers where the Internet was viewed as less threatening to their survival.

Currently, major audio recording firms are entering joint ventures to provide online sales and distribution of songs in response to the disruption created to their existing business and potential end of the life cycle for physical recordings that was created by digitalization of audio products and distribution possibilities enabled by the Internet for both e-commerce in recordings, as well as unauthorized downloading.

Market Exploitation and Company Growth

Some portfolios develop because managers see market opportunities and seek for their companies to benefit through the provision of additional products. Acquiring benefits by exploiting such visible market opportunities and pursuing strategies for company growth are clear rationales for the development of many product portfolios.

In the 1970s and 1980s, for example, newspapers in North America and Europe began offering several types of free nondaily newspapers and advertising sheets to reach some categories of the print advertising market that did not use traditional dailies and to provide broader household distribution for advertising of large retailers (Thorn, 1987; Willis, 1988). These strategies created new revenue streams and supplemental uses for editorial material already produced by the daily. For many publishers, the movement into these total circulation newspapers and nonduplicating coverage newspapers represented their initial transition from a single product producer into a producer of a portfolio of products.

In recent years, a growing number of traditional paid daily newspaper publishers have increased their portfolios by moving into the free daily newspaper sector—not merely to defend the market position—but because they see it as a means of reaching a segment of readers not served by the paid product and for providing service to advertisers who do not use their paid daily product (Price, 2003; World Association of Newspapers, 2000).

Today, a number of European broadcasters are exploiting opportunities to create a portfolio channels in different European markets. Examples of these portfolios are seen in the operations of Modern Times Group’s Viasat—which now has television operations in nine countries—and NRJ radio, which has radio stations and networks in nine countries.

Seeking new opportunities in the market is a relatively new phenomenon for most media firms and they typically lack formal processes and structures for managing new product development initiatives. The processes have been shown to contribute significantly to success of new products (Cooper & Kleinschmidt, 1995; Griffin, 1997). If media companies continue to adapt more entrepreneurial attitudes and seek to explore and launch a variety of new product and service activities, they may begin formalizing product development processes and research and development activities that have been previously absent.

Breadth of Market Service

Increasing contacts with customers and providing additional services is a focus of the development of some portfolios. The ability to provide multiple means of serving customers is seen as a critical means of developing loyalty.

The international cable television broadcaster Cable News Network (CNN), for example, operates a portfolio that began with a single cable network that was expanded into related headline and airport television channels, and then expanded into complementary Internet and mobile telephony services through which additional information and news updates are delivered.

In some countries, newspaper firms are operating Internet and mobile services, and have begun joint ventures with news operations of radio and television stations as a means of increasingly the frequency of their market contact with customers. This occurs because newspapers typically come into contact with their readers only 20 to 30 minutes a day and newspaper companies wish to increase the contacts and solidify their position as the primary news provider in the community.

The breadth of the portfolio and service provided can be analyzed by using a diversification index. Use of the index shows difference between degrees of diversification based on the contributions of different aspects of the portfolio to the company (Dimmick & Porco, 1990).

Efficiency

Operation of product portfolios is also a means of pursuing efficiency and advantages. This can occur through more efficient use of facilities and networks to achieve economies of scale and scope and by developing organizational structures that reduce transaction costs.

Creating a portfolio of similar media outlets—such as a portfolio of magazines—is a form of horizontal integration that may achieve efficiencies that reduce costs by exploiting benefits of economies of scale. Economies of scale are often product specific and related to cost efficiencies and capacity utilization of resources in a specific production facility (Teece, 1980, 1982), but they can also be achieved in multiple locations when some activities are combined to reduce average production price (Sherer & Ross, 1990). Doyle (2000) showed that various efficiencies in media do produce significant economies of scale and cost savings when portfolios of the same type of media products are constructed.

Strategic assets that allow resource sharing and competence transfers among products are also factor sin successful diversification (Markides & Williamson, 1996) because they make use of elements that create economies of scope. The publisher of a monthly magazine that has a distribution department that only operates at full capacity one week a month, for example, can achieve economies of scope in distribution by launching other titles to use the excess capacity in the remaining three weeks of each month.

Efficiencies can also be created by reducing costs throughout the value chain of media industries. The pursuit of these efficiencies has led to vertical integration in entertainment industries because they reduce transaction costs by creating a portfolio of value chain elements in which return is maximized across all functions (Gaustaud, 2002).

In the past decade, the practice of clustering media properties, a form of horizontal integration of operations in close proximity to each other, has emerged in attempts to gain efficiencies in operations of newspapers, broadcasting, and cable television operations (Ekelund et al., 2000; Lacy & Simon, 1987; Martin, 2003; Parsons, 2003). In such clusters, a broadcasting firm might seek to operate more than one radio station from a unified facility in which many production and support activities are consolidated, personnel can be shared, and cost savings achieved. Additional advantages may come from economies of scale (Doyle, 2000; Lacy & Simon, 1993; Sherer & Ross, 1990), economies scope (Teece, 1980), spatial economies (Dickens & Lloyd, 1990), or market advantages—such as lower costs of capital.

Influences on Media Portfolios

A variety of factors influence the type of product portfolios that can be or are established by media firms. These include both internal and exogenous influences that can be grouped into eight major categories (illustrated in Fig. 1.1): (1) company strategy; (2) company leadership and vision; (3) co...

Table of contents

• Cover
• Title Page
• Copyright Page
• Table of Contents
• Preface
• 1. The Nature of Media Product Portfolios
• 2. Product Portfolios, Diversification, and Sustainability of Media Firms
• 3. Media Portfolio Development: Strategic and Organizational Challenges
• 4. Strategic Leadership and Media Portfolio Development: Leaders and Impression Management
• 5. Clustering Media Operations: Rationales and Mangerial Challenges
• 6. Product Platforms for the Media Industry
• 7. Cross-Promotion and Branding of Media Product Portfolios
• 8. Strategic Direction and Control of Portfolios: Can Standard Models Create Cross-Media Benefits?
• 9. Issues and Strategies in Managing Product Portfolios Across Borders and Cultures
• 10. Portfolio Internationalization: The Case of a Successful Concept
• Author and Subject Index
• Contributors