Analyze this case study below using both Emergent change and Emergence, and answer this question please “Which approach is most likely to be useful to managers in the t.v. industry who want to understand and deal with the threat of Netflix and other new entrants??”
**Change management ( Please provide full related answer )
â€˜Great implosionâ€™ leaves US cable groups reeling as Netflix gains ground
Plunging shares in Viacom and Disney reflect investor fears for TV sectorâ€™s viability. It is a golden age to watch US television â€“ and a nightmare week to invest in it. On Wednesday alone $37bn was wiped from the market value of
Sumner Redstoneâ€™s Viacom, Rupert Murdochâ€™s 21st Century Fox, Bob Igerâ€™s Walt Disney and five other big cable and broadcast groups – in what Bernstein analysts labelled â€˜the great media implosion of 2015.
Viacom, whose biggest star Jon Stewart left The Daily Show this week, was the worst hit stock â€“ shares fell 8 per cent on Wednesday and 14 per cent on Thursday. Yesterday the malaise had spread to Europe. ITV and ProSiebenSat. 1 â€“ the biggest commercial broadcasters in the United Kingdom and Germany respectively â€“ experienced share price declines of as much as 6 per cent. The trigger for the declines was lower-than-expected quarterly revenues at some of the big US cable and broadcasting groups. That sparked a deeper fear that Netflix, ‘YouTube’ and others may fundamentally disrupt the sector, where operating profit margins have exceeded 40 per cent. â€˜It comes down to one simple question,â€™ said Todd Juenger, an analyst at Bernstein. â€˜Do you believe pay-TV [subscribers] will slowly erode, or do you believe they will crumble into chaos?â€™ In the United States, the big television groups depend on two main sources of revenue: advertising and so-called affiliate fees from cable and satellite companies that carry their channels. Advertising revenues are in a cyclical recovery but face a structural threat because of the shift away from live TV and the rise of online players such as ‘YouTube’ and Facebook. Lower audiences translate directly into lost ad revenue, in Viacomâ€™s case a fall of 9 per cent year on year in the three months to June. That contrasts with
the United Kingdom, where
advertising is sold differently: as ITVâ€™s audiences have fallen in recent years, ensuring consumers see an ad has become harder and brands have ended up paying more for the privilege. Viacom is particularly affected by the shift away from live TV, because its viewers tend to be young.
It is far from clear that new audience metrics, which measure viewing on mobiles, â€˜will save the dayâ€™, said Brian Wieser, an analyst at Pivotal Research. Affiliate fees are a steadier source of income, so long as viewers keep paying for their cable or satellite subscription. But if viewers switch from a pay-TV bundle, costing perhaps $80 a month, to a Netflix subscription, costing $8.99 a month, those revenues automatically fall.
Disney, often seen as a case study of how to invest in content over the past decade, told investors on Tuesday that ESPN, its flagship sports channel, had seen a â€˜modestâ€™ decline in subscribers. Netflix, meanwhile, has grown to 41m subscribers in the United States and 63m worldwide. Charlie Ergen, chairman of satellite provider Dish Network, has called it â€˜the most powerful content aggregator in the world todayâ€™. John Malone, the biggest shareholder in Discovery Communications, has admitted his companies were caught cold by Netflix – and challenged them to respond to the threat. Even so, evidence of cord-cutting â€“ whereby households cancel their pay-TV subscriptions â€“ is limited. A survey by research group TDG found that 84 per cent of Netflix subscribers use pay-TV, compared with 87 per cent three years ago. In Europe, where most households do not pay for a cable or satellite subscription, cord-cutting is an even more distant prospect. A moderate scenario for the United States is a shift to so-called â€˜skinny bundlesâ€™, where consumers can select only certain premium channels. That would put affiliate fees for some channels under pressure, while other less desirable channels might miss out entirely. Disney has sought to emphasise that ESPN, the dominant outlet for US sports, is a â€˜must haveâ€™ part of any skinny bundle. Analysts at Bernstein, JPMorgan and Pivotal Research have also questioned the size of the recent market sell-off â€“ with the latter calling concerns about the long-term prospects of the US TV industry â€˜overstatedâ€™. Bernstein said: â€˜We may be huge pessimists on TV advertising, but we remain optimists on the bundle.â€™ Yet others see a comeuppance for US media companies, which have for years benefited from being part of a system that offered high prices and low choice. â€˜Most US consumers we talk to have hated their cable company for as long as we can remember,â€™ wrote Rich Greenfield, an analyst at BTIG, last month. Even as companies begin to respond to Netflixâ€™s threat, â€˜you would still be hard pressed to find consumers that love their current multichannel video providerâ€™.