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The collapse of ITV Digital

The collapse of ITV Digital. Implications for broadcasting Implications for sport Lessons in International Marketing Strategy. The Market Entry Decision. Opportunities Technological : digital = multichannel-interactive- subscription need to be in ‘lead market’ Economic:

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The collapse of ITV Digital

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  1. The collapse of ITV Digital Implications for broadcasting Implications for sport Lessons in International Marketing Strategy

  2. The Market Entry Decision Opportunities • Technological : • digital = multichannel-interactive- subscription • need to be in ‘lead market’ • Economic: • ITV ad revenues stable or falling • Digital offers new revenue streams • access to global markets via satellite or JVs • evident success of BSkyB

  3. Social • fragmentation of consumer markets into niche lifestyle and interests segments • market for premium products -sports, movies, documentaries, news? • Gap in provision of basic terrestrial package • Political • government desire to create international success of UK communications industry • deregulation of ownership • promise to switch off analogue (by 2010?)

  4. Mode of entry • Carlton and Granada form ON Digital • joint venture, limited company • share and limit risk • originally BSkyB were also partners • ruled uncompetitive by EC & ITC ‘ create internationally successful UK company or ensure diversity and plurality in a democracy’ Hargreaves FT ‘it is now clear we cannot have both’ Bell, Guardian

  5. Forces of Competition BBC plans £100 digital box by spring 2002 BSkyB hold top sports & movie rights BSkyB v ONDigital BSkyB free boxes and installation Conventional terrestrial (why change?) The winner will be the one with the better value-delivery network Kotler

  6. Competitive Strengths • Expertise • no experience in pay TV • Resources • unable to secure top sports rights • unable to sustain price-war • Markets • failed to create premium niche channels • fall in ad revenue after 11.9.01 • Product quality • paid too much for second-division football • home-made channels low quality and downmarket

  7. Technology • software prone to crashing • easy to hack - est. 100-300,000 non-paying viewers • poor reception and incomplete coverage of UK • Distribution • delays in supplying boxes • Image • expensive rebranding as ITV Digital • now tarnishes parent brand image ‘Never try to out Sky BSkyB’ Guardian

  8. Implications for broadcasting Part of a wider crisis • Kirsch Media, Germany, bankrupt after paying too much for F1 and World Cup rights, NewsCorp invited to the rescue • ‘NTL is broke, BSkyB losing money’ ‘digital terrestrial is a license to lose money.. Will cost taxpayers £10bn to achieve’ Elstein • Is there a ‘killer application’ to drive sales? • Is content really king? (AOL case) • Should governments intervene?

  9. Implications for sport • Channel theory (Sims) distinguishes • insiders (the elite that control the channel) • strivers (who want to become part of the elite) • transients (who exploit the channel but have no long term commitment) • Expansion strategies • organic growth leading to export success • growth through acquisition, alliances and venture capital

  10. The virtuous circlesWarner, Guardian 6/4/2 Sporting success Merchandise Sponsorship & rights Recruitment & retention of top players Shareholder value Investment

  11. Has the bubble burst? • Kirsch’s rights up for resale at bargain prices • ITV can’t find a sponsor for World Cup • Worthington pull out of FL Cup • BSkyB pull out of 6 Nations Rugby • Chris Akers says sporting market will still grow. F1 is a $2bn business with 54m viewers (Guardian 12/4)

  12. The future? • Downward pressure on players’ wages and values? • A healthier game with realistic wages? • Increased power of governing bodies • salary cap and pooling on the US model? • Increased gap between elite and the rest? • FLD1 clubs 60% of revenue from ITVD deal FLD3 8%. About 25 clubs in danger

  13. A new model (Warner 6/4/2) • Broadcast and sponsorship levels off • Conventional investors pull out of sport • Does the answer lie in ‘corporate vanity’? • Sporting franchises as marketing tools (US model) • Sponsor as impresario (Meenaghan) as well as investor • Manufacturers are taking over motorsport (Holbrook 2002) • Reebok or mm02 take over Middlesborough?

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