Memo

TO:                 Stephen Burke, CEO NBCUniversal

FROM:           Merin Pasternak, Digital Strategist

RE:                 NBCUniversal Strategic Plan 2014 – 2016

DATE:             May 2, 2013

________________________________________________________________________

 

Table of Contents

A. Executive Summary

B. Company Overview

C. NBCUniversal Competition

• Television
• Film
• Online

D. Emerging Industry Trends

• Multi-Screen & Mobile Devices
• Cord Cutting & A La Carte Programming
• Consumer Generated Content

E. NBCUniversal Re-Imagined

• Growth Initiatives: 2014 – 2016
• Digital Growth Tower
• Digital Monetization Drivers
• Organizing for Success
• Key Factors & Resources for Success

F. Appendix

G. Sources

 

A. Executive Summary

This report provides an analysis and evaluation of the current and prospective of the media industry as they pertain to NBCUniversal, as NBCUniversal is a leader in development, production, and marketing of entertainment, news, and content for a global audience.  The methods of analysis include trend, horizontal and vertical analyses.  The research draws particular attention identifying and predicting three emerging industry trends:

• Multi-Screen & Mobile Devices
• Cord Cutting & A La Carte Programming
• Consumer Generated Content

There is a massive upswing in the usage of multi-screen and mobile platforms. This trend continues to increase via content creators, distributors and consumer demand.  Further investigations reveal that the emergence of cord-cutting has reached about 5% of US consumers this year, with predictions to continue increasing.  Moreover, consumer generated content is a particularly important  trend for the younger generations as they are mainly focused on interconnectivity and interactivity across all of their media devices.

This report evaluates the range of trends and predicts where they are moving over the course of the next three years.  It discusses where NBCUniversal should be in order to be an ideal candidate to meet the challenges presented by the current and future market.  Our findings conclude that NBCUniversal can satisfy the new consumer demands if they position themselves accordingly.

It is recommended that NBCUniversal take the following approach:

1. Growth Initiatives: 2014 – 2016
   1. Advertised Category Development
   2. Content/Integration Opportunities
   3. Cross Platform Programs
   4. Media Sales Partnerships
2. Digital Growth Tower
   1. Media product & content evolution
   2. Online & mobile traffic development
   3. Advertising inventory creation
   4. Advertising sales execution & monetization
3. Digital Monetization Drivers
   1. Drive Traffic Growth For Salable NBCUniversal Sites
   2. Resources & Capabilities
   3. New Platform Development
   4. Paywall Access to New Premium Inventory
   5. Audience Development
4. Organizing for Success
   1. Internal & External Capabilities
5. Key Factors & Resources for Success

We define the NBCUniversal’s success over the next three years as a combination of these initiatives, which are all necessary to reach NBCUniversal’s goals by 2016.

 

B. Company Overview

The Comcast Corporation is an international media company serving with two business models: Comcast Cable and NBCUniversal.  As the nation’s largest residential video, Internet and telecommunications provider, Comcast Cable dominates the market.  NBCUniversal operates under the Comcast Corporation with 30 cable networks, NBC and Telemundo broadcast networks, TV production operations, TV station groups, Universal Pictures and Universal Parks & Resorts.  Comcast has a number of core competences that can be compared to against the industry standards to effectively  identify key success factors (KSFs).

Comcast Core Competences:	Alignment to Industry Key Success Factors:
Offer services and products that are more technologically advanced than competition	Technological advances make content more compelling. Comcast is more product-led than market-led, so there is the danger that technological innovation will outstrip consumer demand.
Offer a one stop shop to more subscribers than competitors	Comcast provides service bundles similarly priced to its competitors. Its size and geographical distribution of services allows greater access to more subscribers.
Offer subscribers wider range of services (due to its size), ability to secure exclusive distribution deals, and own regional sports network	Comcast is well aligned to KSFs in terms of quantity of content, but more could be done to differentiate the content offered and to capitalized on convergent technology.

(See Appendix A for Comcast SWOT Analysis)

NBCUniversal is a leader in development, production, and marketing of entertainment, news, and content for a global audience.  The NBC Television Network has a unified national persona that is evident through its unique programming, made possible by over 200 of its affiliate stations across the United States.  NBCUniversal has a dedicated commitment to expanding and enhancing its digital properties.   NBCUniversal’s aggressive digital outlook emphasizes multi-platform programming and marketing initiatives that capitalize on collaboration between content, consumer outreach and digital media interfaces.  NBCUniversal’s current digital properties include DailyCandy, Fandango, Hulu, iVillage, NBC.com, CNBC Digital, social media, mobile, applications, connected devices, multi-platform programming, product development, digital media business development and digital marketing.  “Digital media is an essential component of NBC’s programming, marketing and monetization strategies,” says Len Fogge, President, NBC Entertainment Marketing & Digital, as he emphasizes NBCUniversal’s new approach to digital.

 

C. NBCUniversal Competition

Competitive advantage is key for NBCUniversal, as an advantage can easily become a competitor’s advantage if they are not careful.  NBCUniversal must concentrate on both efficiency and strategy, as often times companies do not focus on efficient operations.  Efficiency will enable NBCUniversal to extract the largest profit generated from operations of a collection of assets.  This combines operations and the company’s relationship with customers and suppliers, so “sexy or not, efficiency matters” (Curse of the Mogul, 140).  On the other hand strategy portrays activity designed to enhance long-term value, which exclusively establishes and reinforces barriers to entry.  NBCUniversal must use its unique advantages by reinforcing competitive advantages and ensuring a peaceful existence with those companies within their industry that NBCUniversal shares advantages.

Television

Main competitors in the television industry include CBS (CBS), News Corporation (NWS), and ABC (owned by the Walt Disney Company (DIS)).

Film

Universal Studios (NBC) competes with Columbia Pictures (Sony (SNE)), Warner Brothers (Time Warner (TWX)), 20th Century Fox (News Corporation (NWS)), and Buena Vista (Walt Disney Company (DIS)).

Online

On the Internet NBC leads in overall website traffic. Fox’s American Idol website is the most popular for an individual program. iVillage is NBC’s main source of Internet traffic that it purchased for $600 million. Its main target audience is women and iVillage has remained at the top.

 

D. Emerging Industry Trends

1.  Multi-Screen & Mobile Devices

Tablet usage is on the rise by more than 50% as we see smartphone usage plateauing with a slight rise of a 4% increase.  Surprisingly, televisions have increased 138% over the past six months as Smart TV’s seem to be gaining in popularity with consumers and while there is more and more worthy content for the living room space.

While TV’s are a small player in Internet usage, as illustrated by “other devices” on the chart above, TV browsing is complementary to computer and mobile usage, not supplementary.

Taking a close look at the teenage demographic it is clear that they have been the most active online users.  This has translated in recent months to increased Internet accessibility via mobile devices.  The number of 12-17 year old kids who owned smartphones over the past year has risen from 23% up to 37%, as stated in a Pew Research Center study, Teens and Technology 2013.  A quarter of all teens use their smartphones as their primary portal to access the Internet.

 

This new fragmented media landscape is challenging to navigate in terms of how media buyers allocate budgets in a multi-screen environment.  Currently, 120 million people in the U.S. have smartphones and 57 million own tablets.  This opens up a huge viewing potential outside of traditional TV audiences.  A rapid expansion in mobile video audiences has grown 282% across both smartphones and tablets throughout 2012 compared to 8% on computers.

Lynn Bolger, executive vice president advertising solutions at comScore, states “people are overwhelmingly (91%) using tablets at home, typically in the living room and bedroom” This is evidence of multi-screen viewing habits.  Of those surveyed by comScore, over 50% claimed to be using tablets while watching TV, and more than half of that group was engaging in something related to the content they were consuming on TV.

Tablets are the preferred device for mobile browsing and app use, as opposed to a smartphone.  People are spending two times the amount of time on the Internet when using iPads as compared to iPhones, and up to seven times the amount of time when using apps.

We see that many companies are seeing extreme audience jumps in mobile usage.  For example Vimeo, Hulu, Sony Online, Disney Online and Discovery saw the greatest gains from video channels.  Disney, Discovery, Dow Jones and The Weather Channel had the greatest market share when comparing purely on traffic.  Sports TV content is somewhat unique as comScore found that “audiences on alternative screens are adding to the video audience rather than duplicating the TV audience,” which is an enormous advantage for those utilizing mobile platforms.

The next step for multi-screen and mobile usage is the ease by which consumers can access their content on a device of their choosing.  With the rapid advancement of mobile devices the next big push will be “wearable technology.”

 

 

 

 

 

Many companies have started testing wearable devices that will only reinforce the mobility trend that we have simply scratched the surface of today.

2.  Cord Cutting & A La Carte Programming

The current cable TV industry can easily be compared to the beginning stages of the transition that occurred in the telecommunications industry, when individuals replaced their landlines with cellphones.  This change did not happen quickly, but slowly became a rising trend.

In 2013, the vast majority of American households, about 90%, pay for television service, according to Nielsen.  There are estimates of up to 4.7 million households that will cut the cord, which comes to around 4.7% of all subscribers.  This number is up from 2012, from 3.74 million as reported by the Convergence Consulting Group.  Thus, there is a slowing growth for pay television subscriptions with the increasing number of cord cutters and the lack of younger media consumers signing up for the service.

In a survey done by Belkin and Harris Interactive up to 30% of people noted that they were at least thinking about cord-cutting.  People are learning to replace their traditional TV viewing habits with digital platforms, each of which have their own models of distribution and revenue.  We see that Netflix and Redbox have monthly subscription plans, while Hulu has a hybrid fee-based and ad-supported model. Amazon uses a membership plan that is connected to its Prime system, while consumers are also able to tap into à la carte programming options offered by Apple and Wal-Mart.

eMarketer predicts that there will be 145.3 million digital TV viewers in the US by 2017, which is 39.1 million more than in 2012.  It is also estimated that by 2014 the digital TV audience will surpass 50% of the US Internet user population, reaching a crucial tipping point within the industry.  However, many media executives are not worried about the notion of cord cutting, as they feel there are numerous offerings that consumers will not have access to if they cut the cord.  These services range from their extensive libraries, series and live sporting events.

A major issue that stems from the issue of cord-cutting is Net Neutrality.  The Federal Communications Commission’s (FCC’s) net neutrality rules require Internet providers to treat traffic to all websites equally.  This is particularly important for a Comcast, as they are in the distribution and content creation business.  As Comcast is broadband distributor they want to do away with the current laws on net neutrality, as they restrict their ability to profit.  This has become even more clear with Comcast’s purchase of NBCUniversal.  Given the opportunity Comcast could allow for NBCUniversal content much faster access within their pipeline of delivery than competitors content, allowing for a clear-cut advantage.

3.  Consumer Generated Content

User-generated content (UGC) covers a vast array of media content available on a multitude of digital platforms.  The birth of mainstream UGC was established via news outlets in 2005.  For example the BBC came out with UGC of the London bombings and Buncefield oil depot fire.  Later in 2006, CNN launched CNN “iReport” to facilitate UGC news to CNN.  This spurred Fox News to launch “uReport,” a UGC of their own.  Additional UGC was inspiration for the creation of websites such as Wikipedia, Blogger, Tumblr, WordPress and Yahoo! Answers.  UGC received so much attention that Time’s “Person of the Year” was “YOU,” as it described all individuals who collaborated and produced user generated media.

Mega social media sites were born out of these UGC sites.  Some examples are StumbleUpon, YouTube, Facebook and Twitter.  These sites and apps have created the new category of “social media” that occupies an enormous amount of people’s time.  During the month of July 2012 alone the US spent 121 billion minutes using social media, according to Nielsen’s annual Social Media Report.  To break that down, that is 6 and a half hours per person in the US; if we look at the numbers all together that is 230,060 years spent on these sharing platforms.

The use of “social” can be a powerful tool for the benefit of network and cable television or has the potential to lead to their demise.  With the abundance of free UGC available to digital consumers via popular platforms such as YouTube and Vimeo there is some cause for concern.  The power of social media can just as easily be wielding by a corporation to put out their message and capture greater market share.  Currently, companies are trying to figure out the best model for releasing free content, paid content or a hybrid of the two.

Jack Myers’, Hooked Up, describes the generation of Internet Pioneers as constantly in motion, actively engaged and tapped into their surroundings.  He claims most do not spend any of their waking hours doing ‘nothing.’  This assumption is defined as mobile and social synergies, which as social networking applications make up 39% of mobile usage.  Myers asserts “communication is as much a part of their routines as brushing their teeth” (Hooked Up, 16).  This demographic is particularly important to focus on, as they will be driving the future use of interactive content.

Interactive and social media have many perks for media companies as it can allow a more fluid two way conversation between content creators and audiences.  Myers implies that receiving recommendations from friends is the most effective way for Internet Pioneers to interact with content, which is often via accessing social media feeds.  These social media outlets also allow for more precise targeting of media consumers as social media sites have made it easier than ever before to hone in on audiences.  Media consumers will only continue to foster relationships that have the potential to transform into communities.  These consumers can comment, discuss and spread their views on the content they are consuming.

 

E. NBCUniversal Re-Imagined

1. Growth Initiatives: 2014 – 2016
   1. Advertised Category Development
   2. Content/Integration Opportunities
   3. Cross Platform Programs
   4. Media Sales Partnerships
2. Digital Growth Tower 

• We define the NBCUniversal “Digital Growth Tower” as the combination of:

1. Media product and content evolution
2. Online & mobile traffic development
3. Advertising inventory creation
4. Advertising sales execution and monetization

• All necessary to reach NBCUniversal’s goals by 2016

Revenue Drivers:

Revenue Sources:

• Core Internet Advertising:
  • Display – Direct
  • E-mail – Dedicated
  • Video
  • High Impact Units
  • Social Media
• Sources:
  • NBC Websites
  • Google – New Product Innovations (Ex. Google Glass)
  • YouTube Channel
  • Private Exchanges
  • Audience Extension
  • Major Themed Cross Platform Programs

Web Drivers:

Internet Floors:

• Traffic
• Unique Visitors
• Return Visits
• Premium Content (New Series, Movie Releases, etc.)
• Time Spent (Engagement)
• Site Registrations  => Dedicated Consumer Base
• Social Component (User Generated Comments)
• Analytics + Data Integration
• Campaign Management + Optimization

3.  Digital Monetization Drivers

• Drive Traffic Growth For Salable NBCUniversal Sites:
  • Expand existing inventory
  • Improve sell-through rates
• Resources and Capabilities:
  • Expanded dedicated digital
  • Digital category development
  • Integrated packaging
  • Editorial integration – improve process for rapid response to search and social trends
  • Enhanced research and market intelligence – perform keyword research to identify new opportunities to improve rankings and collaborate with editorial to implement
• New Platform Development:
  • Mobile & tablet (websites & applications)
  • Demonstrate how NBCUniversal can use everything in its media arsenal – from cable giants USA, Bravo and E! to digital platforms like Fandango and DailyCandy
  • Go to market with entire broadcast, cable and digital ad sales teams under one umbrella
• Paywall Access to New Premium Inventory:
  • Across all digital platforms (websites, mobile sites, applications)
• Audience Development:
  • Enhance search results for content (programming & news)
  • Conduct analysis and research on search trends to provide actionable insights for editorial and technology teams on how to improve content
  • Collaborate with editorial teams to ensure best practices for search engine optimization (SEO) are practiced and will work with technology teams to ensure page structure adheres to SEO best practices and keeps up with changing SEO landscape

4.  Organizing for Success

• Internal Capabilities
  • Creating/Packaging Most Valuable Traffic
  • Strengthening Digital Acumen/DNA
  • Strongest Possible Research Capabilities
  • Strongest Possible Lateral Ties (partnership opportunities)
  • Agility & Speed To Market With New Products & New Ad Offerings
  • Exceptional Internal Communications/Linkages
• External Capabilities
  • Selling Most Valuable Inventory
  • Growing Market Strength & Reputation As Digital Sales Force
  • Exceptional Market Intelligence For Sales & Product Development
  • Fully Integrated, Innovative & Growing Media Offering For Both Users & Advertisers
  • Market Share Gains
  • Exceptional External Communications/Performance

5.  Key Factors & Resources for Success

• Near Term Action Plan
  • Refined Revenue Structure for Digital (Mobile & Tablet)
  • Focused Category Targeting
  • Enhanced Research Capabilities
  • Active Sales Development
• Intermediate Term Action Plan
  • Content Planning & Interactive Integration
  • Advanced Accessibility to Mobile Products
  • Cross Platform Programs – across all digital platforms
  • New Sales Partnerships
  • Enhanced Industry Exposure

 

F. Appendix

A. Comcast SWOT Analysis:

B. NBCUniversal SWOT Analysis:

Strengths diversified portfolio – film, internet, cable tv, publishing – opportunity to gain market share and increase revenue strong brand name – use as advantage when launching new networks, forming partnerships purchasing existing networks strong media content – resell and secure residual income consistently (TV and film)	Weaknesses single market dependency – US market slow rev growth – decrease in ad sales due to increased number of networks. poor programming content has slowed economic growth inability to leverage brand name – not utilizing name effectively
Opportunities global openings – ex. Telemundo – reaching new audiences acquisitions of other networks – purchase networks, which erodes competition and creates additional market share partnerships – mainly with online companies such as google – in hopes to launch new initiatives will help NBC expand its reach	Threats growth internet content – increased video streaming on multiple devices hurts real-time tv watching piracy – resources to support anti-piracy effort is vital fierce competition – major networks and hundreds of cable and satellite stations compete for viewership and ad sales

C. Comcast Capital Allocation   (Comcast 4Q 2012 Earnings Presentation)

 

G. Sources

Knee, J., Greenwald, B., & Seave, A. (2009). The curse of the mogul: What’s wrong with the world’s leading media companies. New York, NY: Penguin Group. Myers, J. (2012).

Hooked up: A new generation’s surprising take on sex, politics and saving the world. Stamford, CT: York House Press. “Alternate Screens Expand TV, Video Audience.”

MediaPost Publications 04/08/2013. N.p., n.d. Web. 26 Apr. 2013. http://www.mediapost.com/publications/article/197442/alternate-screens-expand-tv-video-audience.html#ixzz2RQbHuX80

Bajaj, Vikas. “EDITORIAL | NOTEBOOK; Ready to Cut the Cord.” The New York Times. The New York Times, 07 Apr. 2013. Web. 26 Apr. 2013. http://www.nytimes.com/2013/04/07/opinion/sunday/ready-to-cut-the-cord.html?_r=0

“Comcast.” Company Overview. N.p., n.d. Web. 26 Apr. 2013. http://corporate.comcast.com/news-information/company-overview

“A La Carte TV Will Never Be.” Variety. N.p., n.d. Web. 26 Apr. 2013. http://variety.com/2013/biz/news/a-la-carte-tv-will-never-be-1200410243

“One in Four Teens Use a Cellphone to Get Online.” AdWeek. N.p., n.d. Web. 26 Apr. 2013. http://www.adweek.com/news/advertising-branding/one-four-teens-use-cellphones-get-online-148577

Pasternak, Merin. “Communication Frontiers.” Communication Frontiers. N.p., n.d. Web. 26 Apr. 2013. https://lpelin.expressions.syr.edu/trf483/2013/03/18/memo-to-stephen-burke-hooked-up/

“Pew Research Center’s Internet & American Life Project.” Teens and Technology 2013. N.p., n.d. Web. 26 Apr. 2013. http://www.pewinternet.org/Reports/2013/Teens-and-Tech.aspx

“Sustainability Party.” Sustainability Party. N.p., n.d. Web. 29 Apr. 2013. http://www.sustainabilityparty.org/ 

“Televisions in Living Rooms Now the Fastest-growing Internet Platform • The Register.” Televisions in Living Rooms Now the Fastest-growing Internet Platform • The Register. N.p., n.d. Web. 26 Apr. 2013. http://www.theregister.co.uk/2013/03/27/internet_tv/

“User-generated Content.” Wikipedia. Wikimedia Foundation, 19 Apr. 2013. Web. 26 Apr. 2013. http://en.wikipedia.org/wiki/User-generated_content

“We Spent 230,060 Years on Social Media in One Month.” CNBC.com. N.p., n.d. Web. 26 Apr. 2013. http://www.cnbc.com/id/100275798