Harvard Case - USA Networks in 2001
"USA Networks in 2001" Harvard business case study is written by Robert A. Burgelman, Philip Meza. It deals with the challenges in the field of Strategy. The case study is 14 page(s) long and it was first published on : Nov 1, 2001
At Fern Fort University, we recommend USA Networks pursue a strategic diversification strategy focused on digital transformation and vertical integration within the entertainment industry. This strategy will leverage USA Networks' existing strengths in cable television and content production to capitalize on the burgeoning internet and digital media landscape.
2. Background
The case study focuses on USA Networks in 2001, a company with a strong presence in cable television through channels like USA Network, Sci Fi Channel, and the newly acquired 'The Independent Film Channel.' USA Networks also owned a significant content production arm, producing original programming and acquiring distribution rights for movies and television shows. The company faced challenges from the rise of the internet, the increasing popularity of digital media, and the emergence of new competitors like Netflix.
The main protagonist of the case is Barry Diller, CEO of USA Networks, who is tasked with navigating the company through this period of disruption and defining a new strategic direction for growth.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces: The entertainment industry in 2001 was characterized by high rivalry due to the presence of established players like Disney, Time Warner, and Viacom. The threat of new entrants was moderate as barriers to entry were high due to the need for significant capital investment and content creation expertise. The bargaining power of buyers was moderate as consumers had numerous options for entertainment, while the bargaining power of suppliers (content creators) was high due to their ability to command premium prices. The threat of substitutes was high due to the emergence of the internet and digital media platforms.
SWOT Analysis:
Strengths:
- Strong brand recognition and established cable channels.
- Expertise in content production and distribution.
- Strong financial position.
- Access to a large audience through cable television.
Weaknesses:
- Limited presence in the digital media space.
- Dependence on traditional cable television distribution.
- Vulnerability to technological disruption.
Opportunities:
- Growing internet and digital media market.
- Increasing demand for on-demand content.
- Potential for new revenue streams through digital distribution and advertising.
Threats:
- Competition from new digital media players like Netflix.
- Technological disruption and changing consumer preferences.
- Potential decline in cable television subscriptions.
Strategic Framework:
- Value Chain Analysis: USA Networks' value chain included content acquisition, production, and distribution through cable television. The company needed to adapt its value chain to include digital distribution and content creation for online platforms.
- Business Model Innovation: USA Networks needed to explore new business models beyond traditional cable television advertising. This could include subscription-based services, digital advertising, and partnerships with internet platforms.
- Resource-Based View: USA Networks possessed valuable resources like its brand, content library, and production expertise. These resources could be leveraged to create a competitive advantage in the digital media space.
- Dynamic Capabilities: USA Networks needed to develop dynamic capabilities to adapt to the rapidly changing entertainment landscape. This included the ability to innovate, learn, and respond quickly to new market opportunities.
4. Recommendations
1. Digital Transformation:
- Launch a digital streaming platform: This platform would offer on-demand access to USA Networks' content library, including movies, television shows, and original programming.
- Develop original content specifically for digital platforms: This would attract new audiences and create a unique value proposition for the streaming platform.
- Invest in technology and analytics: This would enable USA Networks to understand consumer preferences, optimize content delivery, and personalize the user experience.
- Partner with internet platforms: This would expand reach and access to new audiences.
2. Vertical Integration:
- Acquire or invest in digital media companies: This would strengthen USA Networks' presence in the digital media landscape and provide access to new technologies and expertise.
- Develop in-house capabilities for digital content creation: This would give USA Networks more control over its content and allow for greater flexibility in adapting to changing consumer preferences.
3. Strategic Alliances:
- Partner with internet service providers: This would provide access to a wider audience and potentially bundle streaming services with internet packages.
- Collaborate with other content creators: This would allow for cross-promotion and the creation of joint ventures for digital content production.
5. Basis of Recommendations
Core Competencies and Consistency with Mission: The recommendations align with USA Networks' core competencies in content production and distribution while expanding into the digital media space, consistent with the company's mission to provide high-quality entertainment to a broad audience.
External Customers and Internal Clients: The recommendations address the needs of both external customers (consumers seeking diverse entertainment options) and internal clients (content creators seeking new distribution channels).
Competitors: The recommendations aim to position USA Networks as a leading player in the evolving entertainment landscape, competing with established players like Disney and Time Warner, as well as new entrants like Netflix.
Attractiveness: The recommendations are attractive from a financial perspective, with the potential for new revenue streams through digital subscriptions, advertising, and content licensing.
Assumptions:
- The internet and digital media market will continue to grow.
- Consumers will increasingly demand on-demand content.
- USA Networks can successfully adapt its content and business models to the digital environment.
6. Conclusion
By embracing digital transformation, vertical integration, and strategic alliances, USA Networks can position itself as a leader in the evolving entertainment industry. This strategy will leverage the company's existing strengths, capitalize on new opportunities, and mitigate potential threats.
7. Discussion
Alternatives:
- Focus solely on cable television: This would be a risky strategy as it would leave USA Networks vulnerable to the decline of cable television and the rise of digital media.
- Merger or acquisition: This could provide access to new markets and resources but would require significant financial investment and potentially lead to integration challenges.
Risks:
- The digital media market may not grow as rapidly as expected.
- Consumers may not embrace streaming services as quickly as anticipated.
- USA Networks may face challenges in adapting its content and business models to the digital environment.
Key Assumptions:
- The internet and digital media market will continue to grow.
- Consumers will increasingly demand on-demand content.
- USA Networks can successfully adapt its content and business models to the digital environment.
8. Next Steps
- Develop a detailed strategic plan: This plan should outline specific goals, timelines, and resource requirements for implementing the recommended strategy.
- Invest in technology and infrastructure: This includes building a robust streaming platform, developing content management systems, and acquiring necessary technical expertise.
- Create a dedicated team for digital media: This team would be responsible for developing and executing the digital transformation strategy.
- Monitor progress and adapt as needed: The entertainment landscape is constantly evolving, so it is important to monitor progress and adjust the strategy as needed.
By taking these steps, USA Networks can successfully navigate the challenges and opportunities of the digital age and secure its position as a leading entertainment company for the long term.
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Case Description
Describes USA Networks following its failed bid to buy the Internet portal Lycos in 1999. By 2001, USA Networks was an agglomeration of assets in two distinct areas: electronic commerce (something USA Networks refers to as "interactivity") and entertainment. In each of these two areas, USA Networks faced much larger competitors operating discretely. Explores USA Networks' attempts to compete simultaneously in the spheres of online retailing and television and filmed entertainment.
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