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Time Warner SWOT & PESTLE Analysis

ID : 52227953 | Jun 2017

OVERVIEW

Name of the Company: Time Warner Inc.

Business Sector: Mass Media

Operating Geography: United States, North America, Global

About the Company: Time Warner Inc., renamed in 1990, is an American multinational mass media conglomerate headquartered in New York. The organization operates in almost every field of mass media – movie production, cable television, publishing, music, theme parks etc. The company has three major divisions – Turner, Home Box Office (HBO) and Warner Bros. As of March 2017, AT&T has acquired the company pending approval from regulatory authorities. The company has 25,000 employees.

Revenue: $ 29.318 Billion for fiscal year 2016

SWOT & PESTLE Analysis

The SWOT analysis for Time Warner is presented below:
Strengths
Weaknesses
1. Growing Profit Margins and EPS
2. Diversified Revenue Sources
3. Powerful Brand Portfolio
4. Loyal Consumer Base
1. Higher reliance on an unreliable revenue source
2. Cross brand cannibalism
3. Dependence on a dying industry (DVD/Blu Ray)
Opportunities
Threats
1. Increasing demand for OTT services
2. Acquisition AT&T to reach new audiences
3. Increasing popularity of American content on a global scale
1. Competition from low-cost substitutes
2. Piracy of content
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Strengths

1. Growing Profit Margins and EPS: TIME Warner Inc. has been riding on increasing operating profit margins, reflected in an upward trend in the stock prices over the last one year. The EPS has been steadily increasing YoY (EPS is 1.8 for first quarter of 2017 compared to 1.51 for first quarter of 2016)

2. Diversified Revenue Sources: The company has a diversified revenue stream with Warner Bros. contributing 42% of total companywide revenues, HBO contributing 20% and Turner contributing 38% of companywide revenues of $29.318 billion for the financial year of 2016. Each business operates in a different segment of mass media and very well dilutes risks faced by the company. The conglomerate is third in terms of revenue size behind only The Walt Disney Company and Comcast.

3. Powerful Brand Portfolio: It has an arsenal of powerful names and brands like Turner, Warner Bros. and HBO. Under each division there are brands with a global presence and recognition across generations of consumers.

4. Loyal Consumer Base: TIME Warner has a loyal consumer base which follows the brands under its umbrella – HBO has more than 100 million subscribers worldwide.

Weaknesses

1. Higher reliance on an unreliable revenue source: The conglomerate relies upon its Warner Bros. division to a greater extent for its annual revenue. This division focuses on big banner projects distributed exclusively through cinemas. As more and more movie goers continue to find alternatives to watching films in theatres, the division will suffer.

2. Cross brand cannibalism: The results of the last year releases in the DC Entertainment section – ‘Batman Vs Superman’ and ‘Suicide Squad’ were mixed as they could not deliver the unanimous impact as delivered by the superhero franchise of Marvel Comics. However, the next films in the series hope to redeem their value and make sure those theatres stay full.

3. Dependence on a dying industry (DVD/Blu Ray): The Warner Bros. division is still dependent upon DVD/ Blu-ray discs for distribution of media to audiences at home, which is a dying business due to the advent of OTT services such as Netflix, Comcast etc.

Time Warner SWOT analysis has been conducted by Abhinay Pednekar and reviewed by senior analysts from Barakaat Consulting.
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The PESTLE analysis for Time Warner is presented below:
Political
Economical
1. Debate over net neutrality
2. Different regulatory policies across markets
1. High investment Industry
2. State of demand for services in emerging markets
3. Deterioration of certain revenue streams
Social
Technological
1. Nature of content across markets
2. Cultural inclinations of target audiences to be kept in mind
3. Impact of western culture on emerging markets
1. Staying in sync with innovations
2. Letting go of older trends
Legal
Environmental
1. Merger with AT&T is still pending approval1. Impact of filming at open air locations
2. Environmental activism by media companies
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Political

1. Debate over net neutrality: The recent debate over repealing the Net Neutrality order passed under the previous Democratic government has a brought all media and telecom giants in the spotlight with split opinions. AT&T is one of the companies who are publicly against the Net Neutrality order, citing reasons of discouraging investment and innovation. This debate will definitely affect the way telecom and mass media companies modify their revenue models.

2. Different regulatory policies across markets: Across the world, media regulation is done in different ways with different levels of control. TIME Warner has to maintain and distribute content in accordance with the regulations of each country it operates in, to avoid any legal action (fines for media related infarctions represent huge sums). Regional entertainment in different global markets is supported by their respective governments. For example, in India, there is a mandate for at least one Indian movie be screened at every show time across theatres. This leaves foreign entrants with limited options to screen their movies. However, collaboration with regional production houses is a viable option for foreign companies to enter domestic markets.

Economic

1. High investment Industry: The size of the global mass media and entertainment industry is nearly $1.6 trillion with the US market accounting for 29.2 per cent of this volume. However, the industry is an expensive one to be in. The high costs of investment with high risk on return continue to be deterrents for new players, thus leaving only a few giants at the top of the economic pile.

2. State of demand for services in emerging markets: The emerging markets are now a hotbed for major entertainment industry events, as these markets have access to more variety than ever. The impact of western media on emerging markets continues to pull more and more audiences towards western content.

3. Deterioration of certain revenue streams: With the introduction of DVRs and OTT services, consumers enjoy entertainment with little or no ads, which is strangling major revenue streams from advertisements for media companies in mature markets.

Environmental

1. Impact of filming at open air locations: The entertainment industry is affected by environmental norms in case of shoot locations and procedures. However, with the use of CGI for major film projects, the impact on shoot locations has been reduced.

2. Environmental activism by media companies: The industry however is looked upon as stalwarts for promoting environmental activism via its content and talent, which is easily managed by these major corporations. TIME Warner has been actively involved in maintaining its green business standards. More details can be found on their website.

Time Warner PESTLE analysis has been conducted by Abhinay Pednekar and reviewed by senior analysts from Barakaat Consulting.

References

1. TWX Corporate Annual Report 2016: http://ir.timewarner.com

2. Stock Research data: http://in.reuters.com/finance/stocks/financialHighlights?symbol=TWX.N

3. AT&T Time Warner Acquisition a rare deal that makes economic sense: https://www.forbes.com/sites/greatspeculations/2016/11/15/att-time-warner-acquisition-a-rare-deal-that-makes-economic-sense/3/#23f3f4ed7e12

4. CSR policies: http://www.timewarner.com/company/corporate-responsibility

5. FCC to take vote rollback of Obama-era Net neutrality rules: http://fortune.com/2017/05/18/fcc-vote-rollback-obama-net-neutrality-rules

6. Here’s Elizabeth Warren’s Big Gripe With the AT&T-Time Warner Deal: http://fortune.com/2016/10/31/time-warner-lawyer-christine-varney

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