CASE ANALYSIS OF NBC

Running head: CASE ANALYSIS OF NBC

Case Analysis of NBC John Cahill, Michael Cole, Erica Tanner, Brian Ward Southwestern College

CASE ANALYSIS OF NBC

Table of Contents
Table of Contents....................................................................................................... 2 Introduction................................................................................................................ 3

History .........................................................................................................................................4 Growth.........................................................................................................................................5 Strategic Analysis........................................................................................................................6 Porters Five Forces Model......................................................................................................7 SWOT Analysis of NBC..........................................................................................................8 NBCs Structures and Controls..................................................................................................10 Corporate-level Strategy ...........................................................................................................12 Companys Business-level Strategy..........................................................................................13 Recommendations......................................................................................................................14
Conclusion................................................................................................................ 16

CASE ANALYSIS OF NBC

Introduction
The business of broadcast television is a volatile one, wrought with rapidly changing viewer tastes, continuing technological advances and fierce competition among the top tier competitors. NBC has been on both sides of the proverbial industry coin, from being a market leader to languishing behind its competitors. Our group analysis, which follows, will examine the principles and concepts of strategic management as applied to NBC's operations and decisions. We will articulate our analysis across eight distinct areas: 1. The history, development, and growth of NBC over time 2. Identification of NBC's internal strengths and weaknesses; 3. The nature of the external environment surrounding the company; 4. A SWOT analysis; 5. NBC's corporate-level strategy; 6. NBC's business-level strategy; 7. NBC's structure and control systems, along with how those match its strategy, and; 8. Recommendations. We will begin our group analysis by first examining the history, development and growth of NBC over time.

CASE ANALYSIS OF NBC

History
In 1926 the Radio Corporation of America (RCA) launched the National Broadcasting Company (NBC) for radio broadcasting (Hill & Jones, 2008). During the late 1920s NBC began research and development of television programming, utilizing profits recognized from the multiple radio programming formats. In 1931 the first experimental broadcasts were launched from New York City. In 1939, NBC began regular broadcasting, which combined with its radio broadcasting helped NBC position itself as one of the dominant players in the budding industry. In 1952, the television Industry was seeing significant growth, NBC launched their morning news program and in 1953 they began broadcasting in color. In 1964, NBC was the first television broadcaster to produce a made for television movie. In 1981, Grant Tinker was appointed Chairman and CEO and began the process of revitalizing NBC programming. In 1986, RCA sells NBC to GE & Capital Communications; Robert C. Wright named CEO. From 1987-88, Wright decides to turn the focus of NBC squarely on television, and sells off the consumer electronics, radio, and music divisions and this put the focus on being a television broadcasting company. Throughout the 1990s NBC had some of the top rated programming and the term Must see TV was born with a strong showing in the Thursday night programming with the likes of the Cosby Show, Cheers, and Friends. Struggling to find its identity in mid2000s NBC decided to purchase the rights to National Football League (NFL) programming. Airing games on Sunday night with no direct competition. NBC continues to complete its turn around and get back to its once prominent position within the industry with new programming and the continuing success of the NFL.

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Growth
NBC has seen continual growth since its inception in 1926. With the launch of color broadcasting and morning news during the 1960s NBC had firm grasp on the television broadcasting industry. During the 1980s the company was sold to GE for 6.3 Billion dollars and new CEO, Robert C. Wright wanted to focus the NBC name on television broadcasting, thus selling NBC radio to Westwood One, the consumer electronics division to Thomson, and the music division to Bertelsmann AG. The sales were controversial and cost many employees their jobs. In an effort to expand the NBC name into the cable television market, In 1989, Wright and NBC launched the cable television station CNBC, which was dedicated to financial and business news. In 1991, Wright turned his focus to the number competitor of CNBC, the Financial News Network (FNN) and acquired the company in 1991. This merger not only helped reduce the amount of competition, it garnered more market share for NBC. In 1995, NBC.com was launched, the first internet site for a television network. This helped NBC broaden its appeal and take advantage of the burgeoning internet. In 1996, in an effort to expand NBC into the global networks, NBC began a partnership with Microsoft to form the a 24-hour news channel called MSNBC. With Microsofts assistance the MSNBC.com website was also introduced. The growth continued when NBC purchased a 32% stake in Paxson Communication Corporation in 1999. At the time Paxson had a significant presence, with interests in 72 television stations and partnerships in 52 affiliate stations across the U.S.

CASE ANALYSIS OF NBC

In 2001, new GE chairman and CEO Jeffry Immelt used his knowledge of the media business and purchased Telemundo, a Hispanic broadcasting network and this gave NBC the ability to aim broadcasting at the growing Hispanic-speaking population in America. October of 2003 brought about the largest venture for NBC. With the merger of Vivendi Universal Entertainment, NBC added Universal Pictures, Universals Parks, and Universal Television to it growing portfolio; the new company is called NBC Universal This gave NBC access to the ample content of the television and film divisions of Universal. Finally in 2006, as NBCs television ratings were slipping, NBC secure a six-year contract with the NFL to broadcast football, in prime-time on Sunday evenings. In addition, NBC also gained the rights to the 2009 and 2012 NFL Super bowls, thus boosting revenues. NBC has grown significantly since the late 1980s with its expansion into the internet and cable television. In addition, the merger with Vinvendi, to form NBC Universal gave NBC a significant boost to their portfolio. The merger provided additional television content in addition to a rich catalog of film content. NBCs portfolio today includes 19 television networks, 5 international channels, television production and distribution, film, and parks and resorts.

Strategic Analysis
The television broadcasting industry is one of the most competitive industries; the industry is facing serious competition from the internet and other forms of media outlets. With these new outlets, audiences are becoming more fragmented, thus reducing the size of the audience which directly affects the advertising dollars generated by programming. As Individuals spend more time on the internet, the television audience becomes more fragmented, with the internet enabling the potential circumvention of the traditional television value chain

CASE ANALYSIS OF NBC

(http://www.dbrs.com/research/238926, pg. 7). Although the risk of coming into the industry could be classified as high, the possibility of audiences finding substitutes is also high, and the internet is one example of this.

Porters Five Forces Model

Using Porters Five Forces Model we looked at the natural environment surrounding NBC and determined the following: Risk of Entry MED/HIGH FCC Regulations, finding a distribution channel, and creating a unique format make it difficult for new entrants. However, monetarily new entrants can get in for lower costs than their competitors. Bargaining Power of Suppliers HIGH With the increasing production costs, dependence on specific content and undifferentiated services all contribute to the risk of prices rising. Bargaining power of the buyer HIGH Viewers tastes change and loyalty is a thing of the past in todays television market. In addition, the demand for new formats (e.g. High Definition & 3D) lends more weight to the customer. Threats of Substitutes HIGH The internet plays a significant role as a substitute; customers can watch streaming video from their phones and computers. Additionally, the invention of the DVR and TiVo have made watching television more convenient with the ability to cut through commercials, so live viewership will continue to fall for some programming.

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Rivalry Amongst Established Firms HIGH Rivalry is fierce within the television broadcasting industry. With the top five broadcasting networks (CBS, NBC, ABC, FOX and CW) vying for advertising dollars and fresh content.

SWOT Analysis of NBC

NBC is the original broadcasting company, with its roots going back to 1926. NBC is considered a giant in the television industry, but has struggled recently to recoup the dominance they once had. Because of the dynamic business environment, our group conducted a SWOT analysis to determine the challenges and opportunities facing NBC. A SWOT analysis of NBC demonstrates NBCs unique position within the broadcasting industry. Internally, they have a diversified portfolio with interests in the internet, Network television production and distribution, cable television, film production and distribution, publishing, amusement parks and resorts. Couple these with the strong national and local identity; this makes NBC a strong company. However, their inability to leverage their name and lagging revenue growth has had negative effects on NBCs ability to return to the top of ratings. Externally, with the global market and the possibility of acquiring other networks, creates many opportunities for NBC. In addition, NBC faces fierce competition from national and cable programming as well as the growing internet content, all which can affect NBCs ability to find new revenue in the future. The goal of a SWOT analysis is to create, affirm, or fine-tine a company-specific business model that will best align, fit, or match a companys resources and capabilities to the demands of the environment in which it operates (Hill & Jones, 2008, p. 18). By analyzing relevant internal and external information on the organization and the industry, management can

CASE ANALYSIS OF NBC

make the strategic decisions based on relevant information to help a company gain a competitive advantage over its competitors. A SWOT analysis of NBC reveals the following: Strengths Diversified portfolio With interests in Film, the internet, cable television and publishing, NBC is creating many opportunity to gain market share and increase revenue. Strong Brand Name NBC is a household name and they can use that to their advantage when launching new networks, forming partnerships, or purchasing existing networks. Strong media content With interests in both the film (Universal Films) and television industry, NBC has the potential to resell and secure residual income consistently. Weaknesses Single market dependency Although NBC is diversified, they still maintain a dependency on the U.S. market. Slow revenue growth - Ad sales are going down due to the number of networks vying for advertisers. In addition, poor programming content have slowed the economic growth. Inability to leverage the brand name- NBC is not utilizing its name effectively, which leads to many missed opportunities Opportunities Global openings - Global networks are growing and taking advantage, such as they did with Telemundo, can open up new opportunities to reach new audiences.

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Acquisitions of other networks Opportunities to purchase other network, which erodes the competition, which creates additional market share, are opportunities NBC will need to seize.

Partnerships - Partnerships with online companies such as Google to launch new initiatives will help NBC expand its reach.

Threats Growth internet content - With addition of video streaming onto many different devices, real-time television watching may become a thing of the past. Piracy As with all industries, piracy is a real concern. Having the resources to support an anti-piracy effort is vital. Fierce Competition There are five major national networks and hundreds of cable and satellite stations in competition for viewership and ad sales, which creates intense competition.

NBCs Structures and Controls

The history of broadcast television is a volatile one. This is, in most part, due to continual innovations in the methods programs are recorded with and the means with which they are delivered to customers. Beginning as radio broadcasts signals were converted to network television programs, then t o cable and eventually satellite signal deliveries. As the quality of equipment and delivery methods have improved, companies which compete for viewership have had to remain responsive to this ever-changing environment.

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NBC is no exception to this competitive requirement. As competition for viewers and market share has intensified over the years, NBC has found itself both, at the bottom of the broadcast ladder, and on top of it. Up until the early-1980s, NBC was an also-ran, yielding to CBS as the leader of the pack. This all began to change with the appointment of Grant Tinker as Chairman and CEO in 1981. Tinker teamed with NBC's chief programmer Brandon Tartikoff and together, the two immediately set out to change NBC's fortunes (Hill & Jones, 2008). Up until this time, the company had numerous, short-lived structures in place in response to the evolving business market, and Tinker found himself to be operating his network under the RCA Companys umbrella. Tinker and Tartikoff turned things around for NBC, culminating with what was referred to as "must see TV" which signaled to mid-1980s audiences that the network was back on top (Hill & Jones, 2008). Things were about to change again, and in 1986, General Electric purchased RCA, which gave them control of NBC as its subsidiary (Hill & Jones, 2008). Soon after GE's purchase, Tinker resigned and Robert Wright took the reigns as the network's CEO (Hill & Jones, 2008). Wright was singularly focused on building upon Tinker's success in the television industry went straight to work changing the structure of the company. He sold the network's radio operations, the affiliated music network, and the consumer electronics operations and, after evaluating the company's employee construct, which end in the displacement of 150 employees (Hill & Jones, 2008). Any gains realized from Wright's significant structural shakeups were short-lived as, by 1993 NBC had lost one-third of its viewers (Hill & Jones, 2008). This led to the next significant change in the company's structure when Don Ohlemeyer was appointed as the President of NBC West Coast (Hill & Jones, 2008). Together, the two shook up the network's programming lineup and by the early-1990s, NBC was again the top television network (Hill & Jones, 2008).

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There would be several attempts at improving market share, through joint ventures such as its alliance with Microsoft to form MSNBC, its purchase of Paxson Communications Corporation, and launching NBC Internet, in an attempt to ride the emerging internet craze (Hill & Jones, 2008). The structure would soon change again when NBC Internet began bleeding money due to an ambiguous strategy, lack of differentiation and being late to the market (Hill & Jones, 2008). This failure would lead to the appointment of Jeffrey Immelt as the new CEO (Hill & Jones, 2008). Immelt brought with him a new focus, based more on emerging media such as the internet. The landscape under Immelt again changed through the acquisition of Telemundo, Bravo, and the formation of NBC Universal deriving from the purchase of Vivendi Universal Entertainment (Hill & Jones, 2008). The resulting structure of NBC Universal was a related diversification company, with its activities spread across four markets; television network, production and distribution, film and parks and resorts, with its television network comprised of 18 subsidiaries (Hill & Jones, 2008). Going forward, it is uncertain whether the related diversification construct of NBC Universal will help them turn around their again-sagging viewership, or if another innovation which would reshape NBC's operating landscape might be looming on the horizon.

Corporate-level Strategy
NBCs mission is to provide outstanding entertainment while becoming the network leader. The goals of the company would include being the network with the most viewers. NBC operates networks in many different markets that help them to gain shares. NBC now has several subsidiaries that they have purchased as the years have gone by. Some of them include Universal, Paxson, and Telemundo. With the purchase of Telemundo, they were the first major network to have a subsidiary that was Spanish speaking only.

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While NBC is known for the television network, they also operate in different industries. Outside of the television network they are also in production and distribution, film, and parks and resorts. When NBC purchased Universal they entered into the new industries. The industries that they operate in are somewhat intertwined. The company can use some resources from other areas. If Universal has a new movie coming out they have the ability to advertise on multiple networks to save money. Additionally, NBC may have the first run possibility of a movie made by Universal. Operating in the industries NBC is in the diversification is related because the industries are so close together. The company has made efforts to work on their brand in the different industries. NBC has made the shift recently to focus on the international market. This philosophy will help a weakness that is based off the SWOT analysis. By focusing internationally, they limit the single market dependency. NBC did try to get into the world of the Internet with the launch of NBCi, but they were remarkably unsuccessful. As for global expansion, NBC will need to work on diversification of its portfolio. With the world becoming a global market more and more every day, it is vital for NBC to be forward thinking and take an aggressive position.

Companys Business-level Strategy

NBC has made the attempt to try to differentiate themselves from other networks in order to help them gain viewers. They continue to try and change the networks landscape so they can find programming that creates excitement and viewers. If NBC is successful they will be able to increase the advertising revenue that had been dropping. The network has attempted to take on additional programming that is not offered by other networks, such as the Olympics and Sunday

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Night Football. The strategy of NBC is to offer a wide variety of programming so they can reach out to viewers and inform them of programming on NBC. The main strategy of NBC is to be number one in the time slot. NBCs main claim was on Thursday nights because they had a history with being the number one network for that day. The main competitors of NBC (CBS, ABC, and FOX) have tried to take away the market shares and they had been unsuccessful for years. CBS made a critical decision to introduce a new reality show, Survivor, against the staple of NBC on Thursday night. The key behind the revenue of NBC is programming. Money comes from advertisements that are made during programming. The more viewers, the more the company can charge for the advertising slots. A primetime location is when they normally charge the most for the advertisements because they are reaching the most viewers. The programming for NBC has been exceptionally poor lately which has created an issue with generating revenue. NBC went from being number one in 1995 with the 18-49 age group to note even being in the top four (p. C317). This change also includes losing the number one slot 8-10:30 pm on Thursdays. In addition, during the 2005-06 seasons, NBC only had one top fifteen shown. By trying to differentiate themselves from others in the industry they did not stay with the trends that were successful.

Recommendations
To ensure success, NBC needs to commit to a progressive plan and needs to be committed to making changes. Although NBCs portfolio is diversified, it has failed to maintain relevancy in all industries. NBC has struggled to maintain in its strongest industry, Television

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Entertainment and is quickly losing credibility in the industry. The following diagram outlines the recommendations for NBC.

As mentioned previously, NBC has failed to maintain leverage in the Television Industry which has cost them in brand vitality. NBC has not invested much time and revenue in analyzing its market. It has also failed to stay in tune with programming trends and has lost opportunities to showcase relevant programming. Partnerships in the digital age are also imperative and NBC must continue to developed partnerships to sustain in this market. Although, NBS has acquired diversity thorough purchasing Universal and Telmundo it has failed to reach its potential and develop relevancy in other industries. The following recommendations will assist NBC in growing and becoming a top runner in the Entertainment market. Invest in Market Research

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Contract with vendors experienced in television programming research. Conduct market analysis and strategic group analysis regularly for the NBC television and cable network. Ensure that each industry in the portfolio is properly researched and maintained.

Evaluate and Redevelop Current Portfolio Ensure current investment such as Universal Studios, Cable networks and NBC television are performing above current competitor standards. Market and create new programming, entertainment options and new attractions at theme parks. Create new strategies to develop new customers.

Establish new Partnerships Develop cutting edge partnerships in the technology and satellite industry. Build affiliations with performing arts and broadcasting schools to bring new creative ideas to NBC. Create partnerships abroad and partner with cable and television networks in other countries.

Successfully acquire unrelated and related investments Invest in video, mobile and music streaming companies such as Hulu, Netflix, ITunes and Pandora. Merge with companies outside of television and movie industry. Secure global networks and create additional audiences.

Conclusion
As you can see, doing business in the broadcast television industry requires a company to remain committed to innovation and responsive to new technology. Integral to the successful formulation of business- and corporate-level strategies is a thorough SWOT analysis. Finally, we have evaluated NBC's strategy, decisions, and other information to formulate our

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recommendations for a successful future path for NBC. We feel that by applying the concepts of strategic management and utilizing the appropriate management tools, leaders at NBC can ensure they are formulating strategies and making decisions which are complimentary and responsive to the threats and weaknesses of its internal and external environments, while leveraging its opportunities and strengths to maximize and sustain its competitive edge.

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References Hill, C.W.L., & Jones, G.R. (2008). Strategic Management an integrated approach. Boston, MA: Houghton Mifflin Company. Methodology: Rating the television broadcasting industry. (2011). Retrieved September 10, 2011, from http://www.dbrs.com/research/238926 .