Media industry network analysis – tools for better strategic decisions
Among the most powerful applications of network analysis is understanding industry structure and the implications for strategy. While this is still a relatively new field, we are beginning to uncover some very specific approaches and applications to industry network analysis. If you go to a large strategy consulting firm to provide strategy recommendations, you will get a thorough analysis of your industry. However this is almost always highly linear, looking at market shares, value chains, and industry trends. This hides the richness of highly interconnected industry structures. The next 5-10 years of strategy analysis will see a far greater use of network analysis to understand leverage points for
In the Future of Media Report 2007, we included some new analysis by Laurie Lock Lee. In the Future of Media Report 2006 we used Laurie’s analysis of shifts in media industry networks from 2001 to 2006, and earlier this year I featured some high-level analysis on the network structure of the Australian media industry. This new network analysis goes considerably deeper, analyzing the change in industry structure before and after a significant acquistion, by Macquarie Media Group of Southern Cross Broadcasting. An overview of the analysis is below. See the Future of Media Report 2007 for the full details.
There are a wide range of highly practical applications of industry network analysis. One, as illustrated in the example below, is analysis of industry structure before and after potential acquisitions or divestments by your company or your competitors. This can show the industry impact of major transactions, and provide further insights into their value. Another example in the media sector which we are currently exploring is examining the rich networks between advertisers, ad agencies, media buyers, and publishers. Viewing this from a network (rather than a simple market share) perspective enables very specific insights into how advertising spending can be shifted from one publisher to another. I’ll continue to post high-level views of some of this work and the kinds of benefits our clients are deriving from this.
MEDIA INDUSTRY NETWORK ANALYSIS: CASE STUDY
Network Analysis is a powerful tool for analyzing industry structure and developing effective strategies for ownership and positioning. It is particularly relevant in the highly complex and deeply connected media industry. In the following example, Network Analysis is applied examine the acquisition of Australia’s Southern Cross Broadcasting by Macquarie Media Group in early July 2007.
The network map above provides a representation of radio and TV license ownership in Australia. It shows that Macquarie Media and associated Macquarie companies have shared ownership of many regional radio stations.
The network shows the existence of ownership “syndicates”, where several ownership entities band together to jointly own multiple media licenses. Network theory identifies two advantageous positions to occupy within a network. Like in ancient times, being located in the center of a large city was advantageous in stable times. However, in times of growth, being located at the cross roads of major trading routes was highly beneficial. Networks are no different. Being centrally connected, in this case by part-owning many licenses, can be very beneficial. But in times of instability, being in a position to bridge or broker between disconnected elements of the network can be highly advantageous.
In the two maps above, the size of the companies reflects their “betweenness” i.e. the degree to which they bridge or broker connections between other companies. The pre- takeover map shows that the ownership network is quite fragmented. However Macquarie Media is part of the largest cluster, which contains three other significant ownership syndicates. Southern Cross Broadcasting is in the next largest cluster, which contains two significant ownership syndicates. The members of the largest ownership syndicates have similar bridging or brokerage power to Macquarie Media and Southern Cross Broadcasting.
The post takeover map shows that Macquarie Media has significantly increased its brokerage power over other companies by becoming the bridge between the two largest clusters, which were previously disconnected. Macquarie is now ideally placed to negotiate ownership deals with all the major existing ownership syndicates.
