Escolar Documentos
Profissional Documentos
Cultura Documentos
Industry Analysis
Prepared by Team 10:
Nicole Abercrombie
Rachel Austin
Jessica Elia
Jessica Reed
Jenni Torres
TABLE OF CONTENTS
Introduction------------------------------------------------------------------------------------------------------------- 4
Dominant Economic Indicator--------------------------------------------------------------------------------------- 6
1. Market Size:----------------------------------------------------------------------------------------------------- 6
2. Scope of Competitive Rivalry:------------------------------------------------------------------------------- 5
3. Market Growth Rate:------------------------------------------------------------------------------------------ 7
4. Numbers of Companies in the Industry:------------------------------------------------------------------- 7
5. Customers:------------------------------------------------------------------------------------------------------- 9
6. Degree of Vertical Integration:----------------------------------------------------------------------------- 10
7. Ease of entry/exit:--------------------------------------------------------------------------------------------- 10
8. Technology/Innovation:-------------------------------------------------------------------------------------- 10
9. Product Characteristics:------------------------------------------------------------------------------------- 11
10. Scale Economies:--------------------------------------------------------------------------------------------- 11
11. Experience Cure Effects------------------------------------------------------------------------------------ 12
12. Capacity Utilization------------------------------------------------------------------------------------------ 11
13. Industry Profitability:--------------------------------------------------------------------------------------- 13
Six Forces of Competition------------------------------------------------------------------------------------------- 13
1. Threat of New Entrants-------------------------------------------------------------------------------------- 13
2. Bargaining Power of Suppliers------------------------------------------------------------------------------ 14
3. Bargaining Power of Buyers--------------------------------------------------------------------------------- 14
4. Threat of Substitute Products/Services-------------------------------------------------------------------- 15
5. Intensity of Rivalry among Competitors-----------------------------------------------------------------15
6. Relative Power of Other Stakeholders---------------------------------------------------------------------16
Competitive Position of Major Entertainment Companies-----------------------------------------------------17
Competitor Analysis-------------------------------------------------------------------------------------------------- 19
News Corp. -------------------------------------------------------------------------------------------------------- 19
Time Warner------------------------------------------------------------------------------------------------------ 20
Viacom Inc.-------------------------------------------------------------------------------------------------------- 21
CBS------------------------------------------------------------------------------------------------------------------ 21
Key Success Factors-------------------------------------------------------------------------------------------------- 22
Industry Prospects and Overall Attractiveness------------------------------------------------------------------- 25
Factors Making the Industry Unattractive------------------------------------------------------------------------ 27
Profit Outlook----------------------------------------------------------------------------------------------------- 28
Conclusion------------------------------------------------------------------------------------------------------------- 30
References:------------------------------------------------------------------------------------------------------------- 31
PAGE 2 OF 30
INTRODUCTION
The following report is an analysis of the diversified entertainment industry. The
entertainment industry is a constantly evolving group of corporations with limited competitive
pressures. Revenue trends in certain core segments, including broadcast television, media
networks and radio, tend to vary with consumers' and advertisers' preferences towards new forms
of media (Value Line, 2010). As long as people have had discretionary time and money, the
entertainment industry has thrived, and as personal incomes grew, so did the industry. Although
the entertainment industry has proven to be quite resilient even in times of tough economic
conditions, the most recent economic downturn has had a noticeable negative impact. Even with
many large mergers and acquisitions throughout 2009 and 2010, including the Disneys
acquisition of Pixar and Marvel, and the planned merger of Comcast and NBC Universal, current
stocks are dropping across the industry at an average decrease of 1.18 % (i.e., Disneys stock
dropped 5.1%). According to Price Water House Coopers (PWC), this trend will not continue and
growth in projected to be positive over the next five years (approximately 5%). Below is a
forward looking chart listing both current values and encouraging projected values for the
Entertainment and Media industry.
Entertainment & Media Industry Overview
Amount
Total U.S. Communications & Media Spending
1.092
Total U.S. Communications & Media Spending (projection)
1.416
U.S. Advertising Revenues, including local outlets (preliminary)
166.4
Global Media Suppliers Advertising Revenue (preliminary)
389.8
Global Media Suppliers Advertising Revenue (forecast)
412.0
RADIO
Full Service FM Radio Stations, Including Educational, U.S.
9,844
Licensed AM Radio Stations, U.S. (Daytime/Unlimited)
4,812
PRINT MEDIA
U.S. Magazine Advertising Revenues, PIB Measured Magazines
19.5
Total Daily & Sunday Newspapers, U.S.
2,298
Total Daily & Sunday Newspaper Circulation, U.S.
46.2
Total Daily & Sunday Newspaper Circulation, U.S. (historical)
59.4
Annual Newspaper Advertising Expenditures, U.S. (Print &
27.6
Online)
Value of Books Sold by U.S. Publishers
23.9
E-books as a percent of Trade Book Sales, U.S.
8.70
Unit
Tril. US$
Tril. US$
Bil. US$
Bil. US$
Bil. US$
Date
2010
2014
2010
2010
2011
Source
VSS
VSS
Magna
Magna
Magna
Dec-10
Dec-10
FCC
FCC
Mil.
Mil.
2009
2009
2009
2000
PIB
E&P
E&P
E&P
Bil. US$
2009
NAA
Bil. US$
%
2009
Oct-10
AAP
AAP
Unit
Date
Source
Mil.
Dec-10
Sep-10
FCC
SNL
Bil. US$
PAGE 3 OF 30
44.4
43.8
42
Mil.
Mil.
Mil.
Sep-10
Sep-10
2012
SNL
SNL
In-Stat
MUSIC
Album Sales, U.S.
373.9
Mil. Units
2009
Nielsen
Digital Music as a Percent of U.S. Music Sales
40
%
2009
Nielsen
Global Digital Music Sales
4.2
Bil. US$
2009
IFPI
Digital Music as a Percent of Global Music Sales
27
%
2009
IFPI
Satellite Radio Subscribers, U.S.
19.9
Mil.
Sep-10
Sirius XM
Number of iPods Sold during the Fiscal Year ending Sep. 25
50.35
Mil.
2010
Apple
Number of iPhones Sold during the Fiscal Year ending Sep. 25
39.95
Mil.
2010
Apple
FILM
U.S. Box Office Revenues
9.87
Bil. US$
2009
Adams
Number of Movie Tickets Sold, U.S. & Canada
1.414
Bil.
2009
NATO
Number of Cinema Locations, U.S.
5,561
2009
NATO
Number of Movie Screens, U.S.
38,605
2009
NATO
ELECTRONIC GAMES
Video Game Software Sales in the U.S., U.K. and Japan
379.3
Mil. Units
2009
NPD
Video Game Industry Revenues, U.S. (Hardware & Software)
19.66
Bil. US$
2009
NPD
Source: http://www.plunkettresearch.com/entertainment%20media%20publishing%20market%20research/industry%20statistics
The economic downturn continues to take an increasing toll on the entertainment industry
resulting in a declining Gross Domestic Product (GDP) that has thus reduced the amount of
discretionary consumer spending, and company advertising compounding the variables in this
dynamic industry. This major state of transformation is the light at the end of the tunnel and is
seen as the result of economic distressed consumers looking for low-cost entertainment and
companies looking for new, innovative ways to fulfill those consumer needs. The desire for
increased value has caused the consumer to turn to digital media and the industry to focus on the
digital media value chain. As mentioned by PWC, The Entertainment Industry that entered this
recession will not be the same industry to come out of it (PWC, 2010).
This report includes discussion of the Dominant Economic Characteristics; Six Forces of
Competition; Competitive Position of Major Companies and Competitor Analysis; Key Success
Factors; Industry Prospects and Overall Attractiveness; and final conclusions and discussion of
the overall entertainment industry.
rapidly towards the ease of access of mobile and online entertainment platforms.
New technology improvements: For example, the electronic book readers such as
Amazons Kindle and Apple Incs iPad as well as 3D technology.
Cost of entertainment venues: The cost of concerts and movie tickets are a key
concern to consumers in the current economic condition where many are facing
reductions in incomes and discretionary spending. Lower prices compete as a larger
factor than quality or star appeal in this climate.
The figure below (United States movies & entertainment market value forecast),
illustrates the projected growth in the movie and entertainment market over five years from 2009
through 2014 and shows steady, yet moderate growth.
PAGE 6 OF 30
Number
of
Walt Disney
News Corp.
Time Warner
CBS
Viacom
CC Media Holdings
Live Nation Entertainment
Walt Disney is the number one ranked company in the industry with revenue growth of
10% in 2010. Recent mergers with Pixar and Marvel further excelled Disneys market position
and scope. Mergers and acquisitions such as this have led to the dominance of conglomerate
based companies this industry.
Below is a summary of the financial highlights of the top three companies in the industry:
Financial Highlights
Revenue (2010), (in billions $)
Quarterly Revenue Growth
Employees (2010)
Earnings Per Share ($)
Walt Disney
39.04B
10.00%
149,000
2.27
News Corp.
32.55B
-6.00%
51,000
1.12
Time Warner
27.25B
5.70%
31,000
2.22
Customers
PAGE 7 OF 30
PAGE 11 OF 30
PAGE 13 OF 30
Net Income
5
B
4
Disney
.4
5
B
3
B
.3
News Corp.
5
B
2
Time Warner Inc.
B
.2
5
4
5
7
8
3
6
B
B
5
5 Capital
5
5
5 Market
5
B
B
B
B
B
B
The chart below shows a comparison of each competitor in the areas of market cap, total
employees, projected quarterly revenue growth, total revenue, gross margin, earnings before
interest/tax/depreciation, operating margins, net income, earnings per share, price earnings ratio,
stock price earnings growth, and stock price/sales per share.
PAGE 16 OF 30
Market Cap:
$82.84B
Employees:
149,000
Quarterly Revenue Growth (yoy):
10.00%
Revenue (ttm):
$39.04B
Gross Margin (ttm):
18.58%
EBITDA (ttm):
$8.99B
Operating Margin (ttm):
18.58%
Net Income (ttm):
$4.42B
EPS (ttm):
2.27
P/E (ttm):
19.25
PEG (5 yr expected):
1.10
P/S (ttm):
2.10
Source: http://finance.yahoo.com/q/co?s=DIS+Competitors
NEWS CORP
TIME WARNER
INDUSTRY
$48.93B
51,000
-6.00%
$32.55B
36.49%
$6.19B
15.53%
$2.93B
1.12
16.63
N/A
1.48
$38.95B
31,000
5.70%
$27.25B
43.78%
$6.34B
19.82%
$2.49B
2.22
16.40
0.90
1.42
$209.64M
1.02K
9.40%
$295.10M
42.66%
$11.56M
7.96%
N/A
0.03
15.63
1.10
0.99
Competitor Analysis
News Corp.
News Corp. was founded in 1922 and is based in New York, New York. The mission of
the company is to create and distribute top-quality news, sports, and entertainment around the
world. Currently News Corp. is divided into many different entertainment segments including
cable network programming, filmed entertainment, television, direct broadcast satellite
television, and publishing. News Corp. currently operates in the U.S., Latin American, European,
and Asian markets.
News Corp. is widely known for its broadcasting of FOX and for coming out with box
office hits such as RIO, Black Swan, and Avatar. They have recently gained a lot of popularity
with their hit series Glee. One of News Corp.s biggest accomplishments for 2010 was tapping
into the 3D video market with its release of Avatar (its most successful movie). According to the
2010 annual report, this was a big risk but turned out to be well worth it.
News Corp. will continue on its path in 3D film making and plans to continue to release
3D films in the upcoming years. Rupert Murdoch (CEO) also plans on embracing innovation and
technology as a good way to move the company forward into the future.
PAGE 17 OF 30
Source: http://www.hoovers.com/company/News_Corporation/crxrji-1-1njea5.html
Fiscal Year-End
2010 Sales (mil.)
2010 Employees
Total Net Income
Total Revenue
December
$26,888.0
31,000
2,578.0
26,888.0
Source: http://www.hoovers.com/company/Time_Warner_Inc/rfthrxi-1-1njea5.html
PAGE 24 OF 30
Revenues
% change from
rank
65
83
95
174
180
391
444
millions
38,063.0
32,778.0
26,888.0
14,059.8
13,497.0
5,865.7
5,063.7
2009
5.3
7.7
-6.8
8.0
-0.9
5.7
19.7
millions
3,963.0
2,539.0
2,578.0
724.2
1,548.0
-479.1
-228.4
1
2
3
4
5
6
7
Walt Disney
News Corp.
Time Warner
CBS
Viacom
CC Media Holdings
Live Nation
Profits
% change from
2009
19.8
N.A.
4.5
219.7
-3.9
N.A.
N.A.
Entertainment
The second chart below from Fortune 500 shows the top seven entertainment leaders
ranked by earnings per share, total return to investors and number of employees instead of profits
and revenue.
2011: Industry:
Entertainment
Ran
k
1
2
3
4
5
6
7
Walt Disney
News Corp.
Time Warner
CBS
Viacom
CC Media Holdings
Live Nation
Employees
2000-2010 Annual
2000-2010
2010
Number
% change
growth (%)
13.5
N.A.
4.6
N.A.
N.A.
N.A.
N.A.
(%)
17.6
7.4
13.4
37.5
34.9
190.3
34.2
149,000
51,000
32,000
25,380
10,900
20,283
6,500
from 2009
3.5
-7.3
3.2
-0.8
-2.7
5.1
51.2
Entertainment
Issue date: May 23, 2011
PAGE 27 OF 30
CONCLUSIONS
In recent years, the entertainment industry has faced vast changes in technology and
consumer market demands with the increase in multi-format cellphones, internet and broadband
capabilities for programming, marketing, and movie viewing. Industry leaders must adapt and
stay flexible in these changing economic times. It is the consumer who is demanding more
control of their entertainment choices now and companies need to continue to respond quickly or
face the threat of substitution from competition. Analysts predict that the entertainment industry
will see improvements in profits and growth faster than some other industries despite the tighter
purse strings of many consumers.
PAGE 28 OF 30
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