■Abstract
Competition Strategy in the Pay TV industry
- The case of BSkyB on the basis of the Cluster theory -
Minzheong Song
The aim of this paper is to examine the competition strategy in the pay TV industry. On the basis of Michael Porter’s Cluster theory, case of BSkyB is proposed as a successful model, which is driving more differentiated content strategy than that of other pay TV service providers in the era of convergence. At first, the convergence of telecommunications, information technology and entertainment is observed as the practice, and new environmental changes are described. Then, based on the Cluster theory, each cluster’s functions in the value chain of media industry structure which emerges as a result of convergence, are described in details. Finally, the competition strategy of BSkyB which is successfully forming the clusters of the media value chain.
In the “Cluster theory” which is introduced by Michael Porter at the university of Harvard, the cluster is ‘geographic concentration’ of related companies in specific area. It includes industries which are influencing the competition, i.e., provider of specific products, machine and service, and also infrastructure provider. In terms of “economy of scale”, each cluster means the concentration of core competences.
The source creating added value which results in making ‘critical mass’ in specific area, is a new function referred to as ‘service provision’ and ‘content packaging’. The service provision function provides the consumer interface, allowing the user to access services and interact. It would include all customer management and billing functions. It is different from the packaging function, which is more concerned with providing the content in a form attractive to potential users. Vertical integration has emerged as a main competition-strategic characteristics of pay TV operators. They package the channels, control the consumer interface and recently have moved upstream and purchased many movies and sports rights and also produced their own original programs. BSkyB is the case.
For BSkyB, content is now long term winner. In addition to the transmission of the distributed channels, this group has its own sky channels including basic channel such as Sky One, and premium channels(Sky Sports 1, 2, 3; Sky Premier; Sky Moviemax; Sky Cinema). Investment in Sky channels programming is an important factor in generating DTH and cable subscriptions. The key themes of Sky Digital’s content strategy are the rebranding of the Sky channels, the expansion into British film(with the creation of Sky Pictures - a division of Sky productions) and TV production, the securing of new content to add value to the programming schedules for digital. Due to this strategy, digital sales of 1.21 million have been achieved by end of July.
Especially, investment in original production is one of the main theme for Sky One. Sky One is boosting its original programming aiming to achieve 50% of peak-time broadcast hours and to become a mainstream, general purpose channel with wide audience and advertiser appeal. With the continued addition of local content programming, enhanced technological offerings in the new media field, and interactive services such as Open, Sky Digital offers an unmatchable proposition.
BSkyB case shows that content sourcing is the most important killer application. In the past, the group had aggressively pursued increasing the number of subscribers, but in the digital environment, it is now aggressively investing in programming.
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