Business Model Canvas (BMC)- A new venture concept
Digital Convergence
1. DIGITAL AVATAR- The Strategies for Digital Convergence
099018609
University of Leicester
8/26/2010
2. DIGITAL AVATAR- The Strategies for Digital Convergence
Digital Avatar- The Strategies for Digital Convergence
Student Number: 099018609
August 2010
Dissertation submitted to the University of Leicester in partial fulfilment of
the requirements for the degree of Masters of Business Administration
(MBA-Full Time) Sep 2009-2010
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3. DIGITAL AVATAR- The Strategies for Digital Convergence
DIGITAL AVATAR- THE STRATEGIES FOR DIGITAL
CONVERGENCE
TABLE OF CONTENTS:
CONTENT PAGE NUMBER
Cover page……….……………………………………………….……………………1
Title Page………………………………………………………….……………………2
Table of Contents……………………………………………………………………..3
Acknowledgements ………………………………………..............................8
Executive Summary………………………………………………..………………11
Chapter 1
1.1 Introduction for dissertation………………………………………………..14
1.1.1 Scene Setting: The making of Digital Avatar……………………….…14
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1.2 Changing Market Place………………………….................................15
1.3 Objective of the Research …………………………………………………..19
Chapter 2……………………………………………………………………………20
2. Literature Review…………….……………………………………………………20
• 2.2.1 Literature Review on Digital Convergence…..…………………21
• 2.2.2 Literature Review on Strategy Perspective….…………………25
• 2.2.3 Literature Review on Strategic Alliances………..………………26
• 2.2.4Literature Review on Bundling…………………….………………34
• 2.2.5Literature Review on Integration Strategy………..……………43
• 2.2.6 Emerging Questions: Research Questions ………….…………49
Chapter 3……………………………………………………………………………51
3. Research Methodology……….…………………….……………………………51
Chapter 4
4. Data Analysis: Views on transformation of Digital Avatar………….....57
4.1 Data Analysis –Strategic Alliance……..……………………………………57
• 4.1.1 Strategic Alliances- Nature of strategic alliance..................59
• 4.1.2 Strategic Alliance & cross-media participation………………..71
• 4.1.3 Social Marketing due to Strategic Alliance……………………..78
• 4.1.4 Telcos seek a solution through Strategic Alliance…………….81
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• 4.1.5 Conclusion………………………………………………….………...88
4.2 Data Analysis -Bundling Strategy………………………………………….89
• 4.2.1 Attractiveness of Bundling…………………………………………90
• 4.2.2 Bundling strategy to retain customer base………….………..98
• 4.2.3 Bundling eases audience hyper-targeting……………….……104
• 4.2.4 Conclusion……………………………………………………….….107
4.3 Data Analysis -Digital
Integration…………………………………………………………………………109
• 4.3.1 Integrate to create synergies……………………………………110
• 4.3.2 Organisational challenges with Integration Strategy……….120
• 4.3.3 Marketing Communication currently is disintegrated………122
• 4.3.4 Conclusion………………………………………….……………….127
Chapter 5…………………………………………………...........................128
5.1 Discussion: Analysing the transformation of Digital Avatar…………128
• 5.2 Discussion over critical review of Digital Convergence…….…129
• 5.3 Discussion over Bundling Strategy……………………………….130
• 5.4 Discussion over Strategic Alliance………………………………..137
• 5.5 Discussion over Integration Strategy…………………………….140
• 5.6 Conclusion of Discussion……………………………………………..144
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Chapter 6…………………………………………………………………………147
6.1 Recommendations……………………………………………………………147
6.2 Limitations of the research…………………………………………………151
6.3 Conclusion of Dissertation: Digital Avatar transformed...………….153
Chapter 7………………………………………………………………………….156
7.1 Bibliography……………………………………………………..……………156
7.2 Conferences attended………………………………………………………182
7.3 References of Interviews.........................................................183
7.4 List of Websites Accessed………………………………………………….185
Chapter 8
8. Appendix………………………………………………………………………189
Annexure 1: Contents of the DVD ………………………………………………….……189
Annexure 2.1: Profile of 20 Senior Professionals interviewed………………190
2.2 Complete set of questions………………………………………………………………201
2.3 Sample of Consent Form…………………………………………………………………205
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2.4 Consent Form……………………………………………………………………………………207
2.5 Supplementary Charts……………………………………………………………………..210
2.5. a) Thematic Chart for Strategic Alliance ………………………………………210
2.5. b) Navigation Chart of key strategies ……………………………………………211
END………………………………………………………………………………….212
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ACKNOWLEDGEMENTS
I am pleased to offer my sincere thanks and heartfelt gratitude to my
supervisor, Professor Steve Brown for his constant support, guidance and
motivation to successfully complete the dissertation. I can‘t stop myself
from saying that it would not have been possible without Professor
Brown‘s dedicated mentoring and encouragement. Professor Brown‘s
vision, immaculate thought process greatly helped me refine my ideas
and organize the emanating views into the carefully drafted dissertation.
My sincere thanks to the module leaders, faculty and staff members of
the School of Management, University of Leicester for imparting their
valuable knowledge and extending their continued support to make this
year an enlightening experience for me.
I have always had a passion for communications industry and thank the
opportunity to serve this industry for 7 years of my life, as a news
presenter and finance news journalist. Towards my contribution to the
academic world, I am highly obliged to present this dissertation to the
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prestigious University of Leicester and thank the University for giving me
this opportunity to gain knowledge and conduct this research. As a
responsible professional, I take the opportunity to state that I will be
obliged to offer my contributions to the University of Leicester even in the
future.
I am highly obliged to the 20 Senior Professionals who have given me
their precious time and valuable information, without which this
dissertation would not have been successful. I hereby offer my gratitude
to: Andrew McGrath, Executive Director (Commercial), Virgin Media ;
John Denton, Managing Editor, TV Platforms, BBC London;
GiulianoStiglitz, CEO, Orange Advertising (USA) & Global Sales Director
(UK), Orange-FT; Tim Hussain, Head of Mobile & Video Advertising,
BSkyB; Paul Cowan, VP, New Ventures, Syncapse Ltd.; Eric Elia, VP, TV
Solutions, BrightcoveInc; Tom Weiss, CEO, TV Genius Ltd; Harry Strasser,
Executive Partner - Digital Convergence and Innovation, Germany; Peter
Brimacombe, Former Vice President- Strategy at Disney UK- now an
independent consultant, London; Penny Power, Director, Ecademy UK;
Aaron Bogucki, Senior Digital Campaign Manager, Universal Music; Adam
Field, Head of Social Media, Media Contacts UK; Carolyn Morgan,
Managing Consultant, Penmaen Media; Oli Shaw, Digital Director, Oli, UK;
Triona Campbell, Company Director of CR Films Entertainment, Ireland;
Paul Armstrong, Social Media Director, Kindred Agency Limited; Craig
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Elder, Online Communications Editor, Conservatives; EndafKerfoot,
Thinker-in-Chief, Brand New Adventures UK; Jack Willis, Accounts
Manager, Marketing Grin, UK and Edmund Chambers, Key Accounts
Manager, Affiliate Window, UK.
I offer my special thanks to the world of academia and the scholars who
have contributed to the fundamental research about digital convergence
and allied strategies that this dissertation has made an attempt to
research. I also offer special thanks to my parents and sister Vartika for
their constant support, guidance and encouragement.
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EXECUTIVE SUMMARY
The 21st century is fast integrating the world‘s media, telecommunications
and information technology and online industries under a single platform.
Globally the communications industry is undergoing a transformation
owing to technological advancement and massive investment flows in the
aforementioned four industries, leading to revolutionary changes in the
digital eco-system. This dissertation researches the digital convergence
phenomenon that has been brought about by coming together (and clash)
of the eco-systems of four industries- media, telecommunications,
internet and technology. Such converging (and diverging) business
objectives are building interesting scenarios where vicious competition
and intense inter-dependence are co-existing. In order to capitalize
the separate yet converging business interests, the digital convergence
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industry calls for a strong strategic orientation to mentor the change. The
biggest strategic issue concerning the Digital Convergence
industry is the challenge to capitalise on the newly-emerging
distribution mechanisms of information flow. This dissertation
analyses the strategies to encash the potential benefits of
distributing content across the multiple-platforms that has been
created by the digital confluence of the four industries. The key
strategies responsible for bringing around the Digital Convergence
transformation are Strategic Alliance, Bundling and Integration and have
been explored in this dissertation. Based on a qualitative research
methodology, views from a carefully selected sample of 20 highly-
influential professionals (media & communications industry) have been
compiled over in-depth interviews and data has been analysed using
thematic analysis. The dissertation observes that a creative combination
of the three strategies has a tremendous potential to lead the digital
convergence industry towards creating converged communication
applications that can transform human lives. Though in the current
circumstances, issues over digital rights, existence of a standard metric
for performance evaluation, skilled talent to meet the burgeoning demand
and user-privacy concerns still remain unanswered. But, once these
barriers are crossed, digital convergence can have a powerful impact on
the way the world communicates and interacts. To a consumer, digital
convergence would mean an enhanced digital experience, easier
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applications and convenient multiple-access to information. Convergence
transcends the geographical and physical barriers of providing information
to innovate services and applications to a point where almost
everything - and everyone - is connected.Such is the impact of
digital convergence that its omnipresence reaches the user at
their point of location.
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CHAPTER 1
INTRODUCTION
1.1 Scene Setting: The making of Digital Avatar
Coming together of media & entertainment, telecommunications and
information technology (abbreviated as IT hereafter) and the online industries
are transforming the communications landscape by offering digitally
converged solutions. Rapid technological advancement combined with
massive investments flows buoyed under deregulation and globalisation
ushered a revolution in the digital communications space. This strategic
transformation called - Digital Convergence implies the blurring of
boundaries between the four industries. It offers easy-to-use, value-
added digital solutions at cost-effective rates and faster pace, marking a
paradigm shift towards a globallyintegrated digital omnipresence.
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This strategic transformation is addressed in the title of the MBA
dissertation as ‘Digital Avatar-The Strategies for Digital
Convergence’…..a transformation unfolding. ‘Avatar’ meaning
‗metamorphose: transformation‘ (Collins English Gem
Dictionary, 1966:325). 'Avatar' implies ‗transformation of a single soul‘, is
originally a word from Sanskrit language and hails its origin to Hindu
mythology. But now, the word ‘avatar’ has gained wide acceptance in
English language. Evidence of a global familiarity to the word ‘avatar’ is
well documented in a recent Hollywood movie (James Cameron's science-
fiction epic, 2010) by the name ‘Avatar’ (2010). The Title of this
dissertation hence implies ‘avatar’ as transformation of traditional
communication practices to its present form of converged digital version.
Hence ‘Digital Avatar’ is the dissertation analysing the strategies
for bringing about a successful and sustainable Digital
Convergence.
1.2 Changing Market Place
The stages that have led to the transformation of digital convergence
have left an impact with the passing of each era of the time-line. The
first phase (1970s-1990s) of the current millennium affected traditional
print business with the substantial growth of online applications, with
advertising revenues diverting to the emerging online players. Even the
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wave of electronic commerce (e-commerce) applications hit the retail-sales in
the high-street stores. Traditional players like newspapers and magazines
struggled to survive on subscription revenues amidst decreasing
newsprint demand. Among them, the only survivors were the specialist
segments- like financial news content, lifestyle magazines (example: fine
wine, fashion, travel et cetera). The second phase (mid-1990s) witnessed an
explosion of mobile communication. The online media continued to grow
in this time-period and did not much affect the television players.
Currently, the third phase (year-2000 onwards) is transforming itself
boosted by high-speed net connected TV. It means a bright side for
internet and media content producers but pose a tough challenge to the
current distribution channels, namely telecom, satellite and cable carriers
and the broadcasters.
But interestingly, amidst this transformation, increased customer focus
and value-addition remain the driving factors in the heart of digital
convergence. Applications like smartphones, on-the-move communication
devices have become digital life-lines (those which can be used without fixed-
lines example: Apple iPad). Traditional newspapers and magazines continue to
see a dwindling growth unless they form strong strategic alliances with
online business models or are recognised as strong brands names like
Forbes, Time etc. The transformation will mark some players emerging as
movers and shakers of the changing landscape, giving nervous times to
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the traditionally dominant players. The new dawn will see niche players
(like Google and Facebook) who would completely change the rule of the
game-posing a stiff competition to the existing business models. There is
a shift in the level playing field. Digital Convergence is paving way to
interesting business solutions to converge, compete and change the
digital eco-system. This calls for a strategic perspective to manage and
monetise the convergence. Hence, this dissertation critically analyses the
three key strategies- namely- strategic alliance, bundling and integration
that are closely responsible in bringing about this digital transformation.
Digital convergence will come with a lot of
pride, discontent, politics, human emotions and a clash. A clash of
titans of the four competing industries-
media, internet, telecommunications (mobile) and technology (IT)-
will be like strong tectonic plates colliding. Highly competitive digital
world will give way to smart business solutions, innovative
integration amidst the power struggle of colliding business interests
over content and revenues. During this evolutionary phase, there is a
constant battling on the level playing field with new entrants threatening
existence of traditional old players or at times, the old playing joining hands
with new-age business to promote mutual gains.
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Digital Hot Spots of the World
Source: 2009 World Factbook cited in World Digital Media Report (Deloitte and Touche, 2009)
Description: This picture reflects the level of global participation over digital
access. Countries like USA, UK, Canada and most parts of Europe are found to
be most active participants. While, parts of Africa, Latin America, Vietnam et
cetra are found to still catch up the connectivity to log on to the world of
digital experience.
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1.3 Objective of the Research
This dissertation will critically analyse the strategies to build creative
combinations of competing digital technologies. Success in mastering
digital convergence can be gained by balancing the right strategies,
maintaining high-standards of quality and using an effective pricing
strategy. The channels of distribution like- internet, mobile and mobile
applications, television, cable distributors have become significant players
in this emerging eco-system. But the most challenging strategic issue in
the evolving business model is the question of monetization of profits
over newly emerging distribution mechanisms.The transforming digital
eco-system is caught between questions over form of effective business
model, nature of agreement within business models, pricing strategy and
evaluates the techniques for seeking cross-functional participation. This
dissertation conducts a detailed evaluation of the strategies that can be
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used by digital convergence industry to unleash an unprecedented
consumer experience and monetise emerging business opportunities.
CHAPTER 2
2. LITERATURE REVIEW
This part of the dissertation explores and empirical evidence based on
past literature to evaluate the applicability of the three key strategies –
Strategic Alliance, Bundling and Integration, considered in this
research.
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Organisation of Literature Review
The literature review for this dissertation is discussed under the following categories:
2.2.1. Digital Convergence giving a Strategy Perspective and discussing Moore‘s Law
2.2.2. Strategic Alliance
2.2.3. Bundling Strategy
2.2.4. Integration Strategy
2.2.4 Literature Review on Bundling Strategy
Bundling can be defined as a typical pricing strategy to offer two or more
products (goods or services) that are available for purchase as one single
product (Guiltinan, 1987; Gaeth et al., 1990 and Semonin, 1995). Product
bundling has attracted increasing interest from researchers mainly within
the fields of economics and marketing. Bundling is seen as a device
for leveraging market power from one good to another (Whinston,
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1990) cited in (Saligner, 1995:85). It helps in reducing competition
through differentiation (Carbajo et al., 1990; Chen, 1997).
Cost-saving aspect under bundling makes it a profitable strategy well
applicable to most telecommunications companies product/service offers
cutting across voice, video or internet access. Product bundling strategy
involves retailing several identical products in a single package at a
reduced unit price (Adams &Yellen, 1976). Bundling can also be
categorized as pure or mixed, with pure bundling referring to bundles
where the individual products cannot be purchased individually and mixed
bundling referring to bundles where the individual products can be
purchased both as single products and also as part of the product bundle
(Adams and Yellen, 1976).
Adams and Yellen (1976) argue that mixed bundling at least weakly
dominates pure bundling. (McAfee et al., 1989) suggest that while mixed
bundling virtually always strictly dominates pure bundling, the optimal
bundle price is sometimes greater than the sum of the prices of the
individual goods cited in (Saligner, 1995:86). Schmalensee (1984) was
one of the first authors who discussed bundling in a context that
fits the characteristics of e-commerce, described the phenomenon
of heterogeneous buyers’ taste in a monopolistic market. He
assumes the marginal-utility for the second (reproduced) good to be zero
for all buyers. Study by Bakos&Brynjolfsson (1996, 1997, and 2000)
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analyzed why information goods can be sold with higher profits as
bundles. Companies build customer-experience around the product
by bundling-strategy as a means of selling potentially separable
components to customers, as integrated system or ‘bundle’,
usually by collaborating with their B2B partners (Porter,
1985:425). Core-product and services are sold as a bundle (example:
Software-hardware maintenance package). This implies, marketers should
combine sales-leadership and deliver specialized-service.
For example: Ericsson collaborated with Vodafone to create highly
customized solutions for commercializing the new generation 3-G mobile
system technologies offering convergence-benefits to consumers (Davis
et al., 2007:186).
Bundling as a profit Strategy:
Paid content on the web advanced only from the
year-2000 but compelled the academic thinking to
analyze the effect of competition on bundling
strategies of firms that sell information goods.
Bundling entails cost savings, product complementariness, enlarged scope
of profitability, high costs and positive correlation of valuations (Salinger,
1995) and creates entry-deterrence (Nalebuff, 1999).
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Complementors(example: Microsoft and Intel) increase the value of each
other's offerings and the size of the total market. However, discord can
develop in many areas, such as pricing, technology, standards, and
control of the market, both in terms of which company has the most
influence over customers and which one gets the biggest slice of the pie.
The issue of pricing perfectly captures this tension in a bundled
offer. Ideally, the pricing will be pegged higher than
complementor’s price. The first step in managing relationships with
complementor‘s is ‗to develop a deep understanding of their economics,
strategies and goals, their existing capabilities, their incentives for
cooperation, and any potential areas of conflict, then, to gain an upper-
hand‘ (Yoffie&Kwak, 2006:88-98).
Now-a-days, unbundling strategies are moving towards quadruple
play by incorporating mobile on top of home wire-line products. For
example: NTL-Telewest in the UK bought Virgin to develop a new
quadruple play company called Virgin Media. The advantage of
‘unbundled’ sales is the vendor’s ability to obtain the highest
price for each component product from individual
buyers, whereas bundling can increase seller's profit by
extracting more consumer surplus by reducing the heterogeneity
in buyers’ reservation prices (Adams and Yellen 1976;
Schmalensee, 1984) cited in (Häubl, 2010:110-115).
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On contrary, (Ware &Dippon, 2010:54-64) analyse that communications
network are subject to unbundling at different levels for different services.
Assessing the cost-benefit of unbundling is complicated because of
convergence and competition among the video, wireless and telephone
providers. While, bundled products/services marketers aim for cost-
effectiveness and strive for better control over their promotional toolset
(Silva-Risso et al., 1999) cited in (Foubert et al., 2010:880),(Stremersch
and Tellis, 2002; Hanson and Martin, 1990). Unbundling of networks can
add disincentive to investment in new infrastructures when it may be
cheaper to make use of regulated access to the existing national telecoms
network (European Union, Green Paper, 2007).
Another stream of analyses has focused on how bundling affects
competition. Economists such as Schmalensee (1984), McAfee et al.
(1989), Saligner (1995) and Armstrong (1996) demonstrate that bundling
may lead to effective price differentiation. Bundling can also act as a
mechanism of market foreclosure, creating concern of anti-competitive
behaviours cited in (Foubert et.al, 2010:880).
Information goods are presumed to have very low marginal costs. Chae
(1992) has analyzed a subscription TV market where bundle is used due
to economies of scope in distribution technology, pricing and production
decisions of a supplier. Bakos and Brynjolfsson (1999) have discussed the
pricing and profits when marginal costs are negligible and customers have
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identically distributed valuations. They have shown that pure bundling of
large numbers of goods is optimal. Chung and Sirbu (1999) established
that mixed bundling is the dominant strategy. Wu et al. (2008) solved the
customized bundle pricing problem in which consumers are allowed to
choose up to N goods from a larger pool of J goods by considering the
trade-off between offering more choices and incurring greater menu cost.
Fana et al. (2009) analyzed the bundling of a software product with a
delivery and maintenance service cited in (Yang, 2010:473).
Lack of Standard Metric
Another important yet unexplored area of pricing for digital content is the
lack of standard metric to evaluate financial performance of digital
content. Distorted revenues, costs and share prices have been matched
by the unreliability of the financial metrics that companies have adopted.
The executives of companies conducting business over the Internet have,
conveniently, downplayed traditional measures of profitability and
economic value.
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Instead, they [executives of internet companies] have emphasized expansive
definitions of revenue, numbers of customers that might someday
correlate with revenue [such as numbers of unique users (reach), numbers of site
visitors, or click-through rates]. Creative accounting approaches have also
multiplied. Indeed, the internet has given rise to an array of new
performance metrics that have only a loose relationship to economic
value, such as pro forma measures of income that remove ‗non-recurring‘
costs like acquisitions (Porter, 2003:4).
‘The dubious connection between reported metrics and actual profitability
has only served the confusing signals about what has been working in the
marketplace. The fact that those metrics have been taken seriously by the
stock market has muddied the waters even further. For all these reasons,
the true financial performance of many internet-related
businesses is even worse than has been stated’ (Porter, 2001:5).
However, (Bennison, 2009) points out that Google Analytics is a software
tool to measure the success of your digital marketing has been available
for a few years since the advent of Google Analytics is free to set up.
[Analytics software measures the website‘s performance]. But this may
not be successful in evaluating true-economic value of digital content
(Bennison, 2009).
Freemium Model
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The internet customer is accustomed to free information.
(Swatman et al., 2006:64)
Some of the new-age thinkers researched the significance of Freemium
strategy to target the paid user of content. In a ‗Freemium‘
(free+premium) model, products/services are offered in free basic and
paid premium versions (Andersen, 2009b).
The word freemium is created by combining the two aspects of the
business model: free and premium (Heires, 2006:36). Freemium model
works by offering basic web services like basic digital content in a
downloadable format for free while charging a premium for advanced or
special features.
The business model has gained popularity with Web 2.0 companies and is
popular for making advertising revenues by targeting the potential paid
customer (Heires, 2006:36). The freemium model is especially relevant in
the case of digital media (internet) companies, where the creation of
revenue streams is often most perplexing because of customer
expectations that basic services should be free.
Digital content measures include straight usage statistics, the Impact
Factor, the Eigen factor and newer metrics that begin to take into account
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the linkages and interdependencies that characterize modern,
interdisciplinary research. Though in the 1980s, Ives et al., (1983), Davis
(1989), Baroudi and Orlikowski (1988) and Doll &Torkzadeh (1988)
developed a number of general-purpose measures of success of
information systems. However, these measures are too general purpose
for benchmarking. In addition, ‗they all focus on benefits from the point
of view of individual users as stakeholders, not management‘ cited in
(Shang, 2000:1).
Bundling occurs often where there is a strong and large-scale change
agenda, through peer pressure scope for providing cheaper alternatives
with limited resources (Willcocks&Oshri, 2009). Bundling strategy being a
pricing strategy usually comes under the regulation scanner. The most
notable contributions to the literature exploring the regulation of a
monopolist that screens its consumers include Sherman &Visscher (1982)
and Srinagesh (1986) who examine the effects of rate-of-return
regulation on two-part tariffs and Besanko et al. (1987, 1988), who study
the regulation of a quality- differentiated monopolist. However, Bakos and
Brynjolfsson (2000) showed a non-monopolistic environment of
competition for information goods.
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2.2.5 Literature Review on Integration Strategy
Vertical integration refers to a firm‘s ownership of vertically related
activities (Grant, 2008:350). The assumption behind theory of vertical
integration is reduction in transaction cost and attainment of market
share by taking over the competitors (Ahn&Litman, 1997:13). It is useful
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to concentrate on the core-competencies to help the firm assemble its
news production and broadcast capabilities to experience a better vertical
integration of its resources. This move will also create barriers to entry for
the firm (Prahalad& Hamel, 1990).
Benefit of Integration:
Empirical evidence on market dominance has been established by
integrating advantages and challengesof one player that are bred
into that of the other to create increasing market integration as studied
by (Veugelers et. al, 2001; Rondi et al.,2003; Rondi and Vannoni, 2005,
DeVoldere et al., 2004) cited in (Belderbos et al.,2009). Past studies
suggest that vertical integration is a way of increasing a firm's value-
added margins for a particular chain of processing from ultra raw
materials to ultimate consumers. Research by (Arrow, 1975; Coase,
1937; Williamson (1969, 1971, & 1975) noted integration economies
gained from shared facilities, information, or other resources cited in
(Harrigan, 1985). Adelman (1949), Bork (1954), and Kaserman (1978)
recognized the market power conveyed by this strategy, but the analyses
they employed in studying it were static (Harrigan, 1985:398). The aim of
an integration strategy is to accomplish a commanding position within
all stages of the value-chain to secure the largest possible market
domination for the players involved. Porter suggests the other way to
achieve advantage is strategic positioning—doing things differently from
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32. DIGITAL AVATAR- The Strategies for Digital Convergence
competitors, in a way that delivers a unique type of value to customers.
This can mean offering a different set of features, a different array of
services, or different logistical arrangements. It creates operational
efficiency advantages. Operational effectiveness can take myriad forms,
including better technologies, superior inputs, better-trained people, or a
more effective management structure (Porter, 2001:10).
Every economic revolution redefines the roles and relationships on which
offerings are based. This was true during the industrial revolution when
technological breakthroughs in the application of energy to useful work
made possible the factory system with its highly specialised division of
labour (Norman &Ramírez, 1993:2). As an outcome, integration results
in creating more value per person (customer, supplier and employee) and
in securing greater total profit from and for its financial and human
resources than all but a handful of other companies in any consumer
industry (Norman &Ramírez, 1993:4). The result is an integrated business
system that invents value by matching the various capabilities of
participants more efficiently than was ever the case in the past (Norman
and Ramírez, 1993:4). The availability of digital information highways, in
commerce will give consumers fast and increased access to a vast
selection of goods and will also cause an evolution from retail channels to
electronic markets. The virtual products offered will be ordered on-screen
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and delivered direct to the home (Magretta, 1998; Ghosh, 1998) cited in
(Wirtzab, 1999:19).
The change from an industrial to an information society connected there
with will above all else be affected by the dynamics of technological
developments (Wirtzab, 1999). This change has been bolstered by birth of
internet. The internet came as a strong force. This disruptive force broke
down the concentration of power from the hands of a few, to the hands of
many. Andersen (2009a:3) asserts, ‗there have never been a more
competitive market than the Internet, and every day the marginal cost of
digital information is drastically reducing‘. In most upstream
telecommunications markets, incumbents are subject to a number of
obligations, including a requirement not to engage in ‗undue‘ price and
non-price discrimination. However, enforcement of non-price
discrimination is inherently difficult. In light of this, considerable academic
literature has focused on the ability and incentives of a vertically
integrated operator to engage in non-price discrimination. By putting
downstream rivals at a disadvantage, a vertically integrated operator is
able to capture a higher share of the downstream profits (Crocioni, 2007:
464). Further, (Yoffie, 1997) predicts that consumer multi-media industry
will change from three vertical businesses to five horizontal segments and
suggests that content providers are in the strongest position to prosper,
while hardware companies face limited prospects. New information
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technologies are divisive in allowing such a flexible, adaptive model to
actually work (Castell, 2000:177). Digital technology allowed the
packaging of all kinds of messages including sound, images & data- a
network was formed that was able to communicate its nodes without
using control centres (Castell, 2000:45).
Lack of vertical integration may lead to a reduction in quality
(Economides, 1996:22). By 2011, the world will witness truly interactive
television that will interface consumers, communications, content and
commerce into a seamlessly flow to and from other devices (Friedman,
2010). With vertical integration one can be an efficient producer. But
virtual integration makes one efficient and responsive to change at the
same time (Dell, 1998) cited in (Magretta, 1998:7). More opportunities
also mean more uncertainty and greater risk. Forecasts based on
projections from the past become unreliable. Factors that have always
seemed peripheral turn out to be key drivers of change in a company's
key markets. Invaders from previously unrelated sectors change the rules
of the game overnight (Normann and Ramírez, 1993:65-8).
Economides &Woroch (1992) find that vertical disintegration is not
desirable for the firm that offers end-to-end service. Once disintegrated,
its constituent parts realize lower total profits (Economides, 1996:22).
The lessons of networks can be applied to industries where vertical
relations play a crucial role; conversely, the economic and legal learning
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35. DIGITAL AVATAR- The Strategies for Digital Convergence
developed in the analysis of vertically-related industries can be applied to
network industries (Economides, 1996:4). In so in a competitive
environment, strategy is no longer a matter of positioning a fixed set of
activities along a value chain. Increasingly, successful companies do not
just add value, they reinvent it. Their focus of strategic analysis is not the
company or even the industry but the value-creating system itself, within
which different economic actors - suppliers, business partners, allies,
customers work together to co-produce value (Prahalad, 2008) cited in
(Leavy, 2008). Their key strategic task is the reconfiguration of roles and
relationships among this constellation of actors in order to mobilize the
creation of value in new forms and by new players. And their underlying
strategic goal is to create an ever-improving fit between competencies
and customers. To put it another way, successful companies conceive of
strategy as systematic social innovation: the continuous redesign of
complex business systems (Prahalad, 2008).
The literature review has identified some gaps. Despite the
enthusiasm building around digital convergence, significant factors like
regulation, standards, nature of business model, changing customer
requirements and management of dynamism in the industry remain
ignored. Little attention has been paid to the true total costs for
convergence were looming indirect costs may threaten to overpower the
benefits of cost reductions attained under Moore‘s law. It calls for a
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36. DIGITAL AVATAR- The Strategies for Digital Convergence
standard metric of evaluation of real-growth in the digital convergence
industry. This real-growth parameter would remain unaffected by the un-
real digital exuberance. This dissertation has made an attempt to analyse
these issues in the Data Analysis section.
Strategic
Alliance
Bundling
Integration
2.2.6 Emerging Questions
Based on the critical review of the empirical study of the phenomenon of
digital convergence and strategies to compete in the converging market,
a series of unanswered questions have sparked up. The greatest concern
for the digital convergence industry is the search for a strategic
mentorship to suggest ways to monetise the benefits of the coming
together of multiple-channels of distribution. It calls for a tremendous
change on the strategic canvas by companies seeking competent
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alliances, opting for a competitive pricing strategy to value real-growth
and integration of the multiple platforms, currently working in silos.
Hence, the major questions that structure the article and the theory
making process are:
Main questions for research
Strategic Alliance: In the face of digitally changing ecosystem, does the
strategic alliance help the companies to evolve more competent in the
digital interface?
Bundling: Does the pricing strategy of bundling emerge out successful to
the players of the digital era? How do you see the relevance of unbundled
content being priced?
Integration: How can companies efficiently integrate heterogeneous
applications with so many businesses so as to be mutually benefiting all
business capacities? What are the strategic implications of such a business
process for today‘s managers who are setting the scene for digital
convergence to unleash its potential?
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CHAPTER 3
3.0 RESEARCH METHODOLOGY
This part of the dissertation emphasises on the research methodology
employed for this dissertation. The dissertation is based on a qualitative
research methodology followed by a thematic analysis of the data
collected. Qualitative approaches are incredibly diverse, complex and
nuanced (Holloway and Todres, 2003), (Argyris et al., 1985) cited in
Bryman and Bell (2007:428) and thematic analysis is seen as a
foundational method for qualitative analysis (Braun et al., 2006:78).
Thematic analysis is firmly compatible with both essentialist and
constructionist paradigms within psychology (Braun et al., 2006:78).The
interviews conducted are an account of in-depth perspective on the
questions that emanate from the critical review of past studies evaluated
in the literature review. Thematic analysis is a method for identifying,
analysing and reporting patterns (themes). Thematic analysis organizes
and describes the data set in (rich) detail (Braun et al., 2006:79).
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The focus of the dissertation is to analyze the real problems within the
digital convergence industry and weigh them against the strategies that
are reflective of the most recent changes in the digital landscape. It aims
at suggesting a practical solution that can prove beneficial to the digitally
converging industry. The dissertation is based on strong theoretical
foundations of strategic management and aims to arrive at findings that
have practical implications Bryman and Bell (2007:428). The objective of
this dissertation is to seek effective digital strategies that can offer a
competitive edge to a company in this industry.
Why qualitative research methodology?This dissertation research has
been conducted using the qualitative research methodology as the
objective of the research is to capture the emerging views from the
carefully selected group of interviewees. The author chose a qualitative
research method as it facilitates theoretical mapping of views and extract
the emerging thinking from the data into meaningful information.
Qualitative research also potentially enhances managerial knowledge by
providing best-practice information as most participants have expressed
their practical experience in the digital interface.
Why Interviews? The ethnographic interview is a commonly used
interviewing process employed by research-clinicians (Kuehl& Newfield,
1991). It gives an opportunity to emerging ideas to be identified in
observable patterns. It is here that role of thematic analysis is brought
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40. DIGITAL AVATAR- The Strategies for Digital Convergence
into view. Thematic analysis focuses on identifiable themes and patterns
of living and/or behaviour. The interview can be a combination of closed
ended and open-ended questions (Bryman& Bell, 2007:213). Further, it
has been highly advantageous to conduct the interviews from the
carefully selected set of respondents as the interviewees are highly-placed
senior professionals from the media and communications industry. These
respondents represent the decision-makers across the four industries that
reflect the theme of digital convergence across- Media,
Telecommunications, Internet and Information Technology. Further, the
respondents have been interviewed in-detail over a fairly well distributed
time frame over each of the questions asked by the author. It has been a
commendable opportunity for the author to use the seven-years of rich
work-experience as a broadcast media journalist into the art of
interviewing & analysing and interpreting the emerging patterns.
Face-to-face interview gives the freedom to the interviewer to encourage
the interviewee to respond and develop a comfort level with the questions
put up. Further, the author‘s personal experience in interviewing is the
importance of eye-contact in face-to-face interview. Hence, based on the
validity of importance of capturing emerging thinking from the data-set
ad based on strong background of professional experience, this
dissertation has chosen Qualitative Research Methodology: Semi-
structured interviews using a standardized interview protocol for each
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41. DIGITAL AVATAR- The Strategies for Digital Convergence
interview would be conducted with focus groups. The semi-structured
interviewees, in this dissertation analysis will be the senior/managers in
digital media, communications, and telecommunication, entertainment &
IT industries. The above mentioned industries are rapidly witnessing a
digital transformation and hence are expected to be a part of close review
of this study.
The candidates were first emailed a copy of the dissertation synopses,
complete set of questions and the consent form at least 2-4 weeks ahead
of the interview. They were requested for a convenient time of 45-60
minutes for conducting the in-depth interview. A total of 20 in-depth
interviews (face-to-face and a few over Skype call) were conducted. The
average duration of an interview was 30-50 min to 85-90 minutes. Only 2
interviews are on specific questions and range for 10 minutes. All
interviews have been recorded on a digital voice recorder (Olympus
VN5500PC) and professionally transcribed for the total duration. (All
transcripts are attached in Appendix).
Research Setting:This dissertation is a reflection of the most dominant
factors for changes in digital landscape in advanced, emerging and
developing markets for digital content.
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The data is collected from well-established players that represent the
largest companies in the 4-industry confluence. Most of the data is
collected from companies based in London (UK). But there are highly
valuable contributions of views from industry leaders from Cambridge
(MA), Toronto, Germany and Dublin.
Data Collection- The data had been collected from highly-credible
sources by conducting in-depth interviews of 20 of the responsibly placed,
senior professionals (media & communications industry) between June
2010 and July 2010. The objective of the interviews has been to capture
the views on research questions from the sample that reflects the
diversity of experience in witnessing, managing and deciding the future of
digital convergence. Apart from the interviews, a wide range of journals,
publications, reports, trend have been referred. Apart from them, the
author has attended 3 Conferences on digital media (between March-July
2010) at London. This has been useful to gain meaningful insights into
the latest indications in order to throw a deeper analysis over this
dissertation. Selection of the topic of digital convergence also finds a
reflection into the minute observation of changing trends, gained over 7
years of work-experience into the media industry. The areas covered in
the interviews include verbal-discussion on the firm's perspectives on
technology evolution in the digital convergence industry, major drivers
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and barriers to the adoption of digital technologies, impact of competition
and detailed focus on the 3 strategies explored in this dissertation
Data Analysis-The data has been analysed using thematic analysis
process where key patterns have been categorised under– strategic
alliance, bundling and integration. The data analysis involves a rich inter-
weaving of emerging perspectives of the interviewees who maintain
influential positions in their organisations and are at the helm of decision-
making and retain powerful positions in their respective organisations.
The emerging thinking is summarised by extracting details of information
that run across the data and not within each participant.
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44. DIGITAL AVATAR- The Strategies for Digital Convergence
Data Analysis
Data Collection 20 Qualitative In-depth interviews
Data Immersion
Identification of common
Data Reduction themes, patters, emerging thinking from
the interviews
Data Processing
Identification of Strategic
Alliance, Bundling and Integration to be
Analysis
propelling forces to drive the Digital
Ecosystem
Systematic Data Collection Flowchart
(Created by the author)
CHAPTER 4
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4.1 Expert’s Views on transformation of Digital Avatar
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46. DIGITAL AVATAR- The Strategies for Digital Convergence
Digital convergence is what has emerged from the pace of technological
changes in the era of technological dynamism. This convergence is
sustained by the fundamental co-existence of the three strategies- strategic
alliance, bundling and integration (vertical and horizontal), interplaying to make
digital convergence a reality. This part of the dissertation captures the
emerging picture that emanates from the data collected, defining the
prominent trends attained from the set of interviews over the next-
generation strategy canvas.
This part of the dissertation conducts a thematic analysis to capture the
emerging picture that emanates from the data collected from 14 (out of
total of 20) senior media professionals who have been interviewed by the
author during qualitative data-collection stage. The objective of this stage
of the dissertation is to capture the common positions, points of
differences by cross-linking the thoughts of participants. Adoption of
strategic alliance as a strategic management tool has been supported by
14 participants. The seven major themes arising emphasise that strategic
alliance helps in content sharing by developing smart partnership,
achieves core-competence and cost-optimisation and balance of power
relations under strategic alliance that lead into mutually beneficial
relationships. It leads to achieve cross-media integration, pursue social
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marketing and such alliances are proving to save the telecommunication
companies to adopt lucrative business models for revenue-growth.
4.1.5 Conclusion for Data Analysis on Strategic Alliances
Final observations lay out that digital content users needs and demands
are fast rising up creating a pressure on companies to evolve
personalised and customised products and services. So, this is putting a
pressure on specialization of the content. While at the same time, the
industry is experiencing massive convergence with the coming together
of four industries- Media, Telecommunications, Web and Technology.
Digitally converging eco-system is hence, fragmenting as quickly as it's
converging with the two forces playing against each other with equal
consistency. Therefore, it may be concluded that the emanating digital
ecosystem will bring with it the fundamental complexities, however, a
strategic perspective will give rise to benefits of competencies and
collaborations flow out both to consumers and industry players.
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4.2 Data Analysis on Bundling Strategy
4.2.4 Conclusion
The road to content-distribution is witnessing more and more options
available. It can be observed that bundling is one of the ways of getting
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the content to the user. But much of profitability from bundling depends
on the nature of business models adopted. So, digital media
companies have the power to exercise a balance between the
economic-trade off from bundling and unbundling. Companies
have the choice to select the route that best fits the regulatory
requirements. Further, the companies need to adapt bundling as a
sensible-pricing strategy and not a mere price-strategy as today‘s
empowered consumer is highly price-conscious. Further, there is no
dearth of differentiated products in the digital market place and
consumers may change their choices over price-sensitive behaviour
unless the brand value is the sole reason for their choice. So, effective
bundling of emerging new technology with apt strategy is expected to
offer a better consumer experience.
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4.3 DATA ANALYSIS –Digital Integration
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4. Integration Strategy
Digital convergence is changing the world of the media industry with
advertising revenues streaming into print media and TV, radio and the
internet. Growth of internet has boosted digital convergence by creating
integrated platforms. Integration strategy is particularly useful for those
players who build up this competence either in-house, organically or by
gaining competence through joint-ventures or acquiring companies.
However, there remains a problem of managing the diversity of
applications. With infrastructure capacities building up, integration
between telecom competence and IT competence is growing. Hence,
companies are trying to use integration strategies by knowing their
customers and understanding the allied business partners. This part of
the dissertation presents the emerging thinking of 13 (out of total of 20),
senior media professionals who have been interviewed by the author
during qualitative data-collection stage. The three major themes identified
in this section are employment of integration strategy to create inter-
platform synergies, develop skill sets and achievement of integrated-
marketing communications. These outcomes help in positioning in the
mind of the consumer and also harness better revenues for the company.
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52. DIGITAL AVATAR- The Strategies for Digital Convergence
4.3.4 Conclusion
Integration strategy pays digital media companies to retaining clients, win
new business and add value to the business proposition. Recent trends
indicate involvement of social media in proving to be a successful
integrating factor. Integration of dying traditional media with digital
applications creating online versions has come about as a survival factor
as well. Digital Integration compels synergies of separate media platforms
to promote converged business interests positively impacting the revenue
streams. However, challenges remain with integrating different skill-sets
to have in-house quality employees well versed with both technology and
creativity to serve well the three screens- mobile, television and internet.
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53. DIGITAL AVATAR- The Strategies for Digital Convergence
CHAPTER 5
5. DISCUSSION
5.1 Analysing the transformation of Digital Avatar
This part of the dissertation discusses the emerging thinking from the
qualitative data collected in light of the empirical evidence in the Literature
Review. The emanating views are discussed in the context of phenomenon of
Digital Convergence lead by the strategy perspective of the digital
renaissance and Moore‘s Law. The discussion focuses on the three main
research parameters - strategic alliance, bundling and integration. It is
observed that due to the digital convergence, there is a massive change
happening in the global media, communications and entertainment industry.
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54. DIGITAL AVATAR- The Strategies for Digital Convergence
This change is celebrated by advantages of cohesive existence of four key
industries- web, TV, media and information technology. But at the same
time, the landscape of business faces critical conditions due to clash of
multiple-objectives of the four industries.
The discussion section is organised as per the following:
5.2 Discussion over critical review of Digital Convergence
5.3 Discussion over Bundling Strategy
5.4 Discussion over Strategic Alliance
5.5 Discussion over Integration Strategy
5.2 Discussion over critical review of Digital Convergence
Digital Convergence is the potential field for effective interplay of the
three strategies explored in this dissertation. The phenomenon of Digital
Convergence is driven by Moore's law that acts as a roadmap for the
competitiveness of the industry. Moore‘s law provides the guideline to the
industry to create a faster stream of faster, better, and cheaper high-
technology products. The literature review acknowledges the influence of
Moore‘s Law of the current state of the industry. Empirical studies support
Moore‘s Law that technological performance will double every two years.
During data analysis, the views by participants evaluate their practical
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55. DIGITAL AVATAR- The Strategies for Digital Convergence
experience in the industry to confirming the existence of the impact of
Moore‘s Law. Hence, as observed in the Data Analysis, views of
some of the industry leaders reflect an agreement with the
literature on empirical evidence of Moore’s law. The empirical study
suggests that moore‘s law will define the pace of changes in the digital
interface. So, this discussion considers that empirical study is in line with
research observation. The theory stands true to the actual phenomenon
of digital convergence witnessed in the real world.
5.3 Discussion over Bundling Strategy
One of the biggest issues that have been observed in the data
analysis is the co-existence of strict divergence and strong
preference for bundling as a successful strategy in the world of
digital convergence.
While some of the participants admit that they have to resort to bundling-
strategy under competitive pressures, some call it a necessary evil.
However, it is observed that most businesses are following a bundling
strategy both for bundled-pricing and bundled-content. But a resistant
view by some participants has brought to sharp notice that with digital
convergence space evolving and may lead to unbundling for some
sections. Further, it has been identified that there is a need for a better
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56. DIGITAL AVATAR- The Strategies for Digital Convergence
pricing mechanism to manage digital content still needs clearer strategy
from price-implementation. Both Paul Cowan and John Denton have
emphasised on the need for a pricing model from a digital standpoint to
match the need and growing scale of operations. This observation is
analysed against the literature review on bundling. The literature review
emphasises that bundling strategy for price, tends to extract more money
from consumers. Whereas, unbundling strategy is employed to obtain the
highest price for each component product from individual buyer. However,
research scholars warn the businesses of the difficulty in evaluating
pricing of unbundled converged digital products. Sale of operations and
innovation can make bundling a responsive strategy.
It can be inferred that as the empirical evidence offers a loose correlation
between unbundling strategy and its success in most cases. However, some
business-models that cater to the specialized segments (like iplayers, on-
demand TV etc.) are likely to adopt an unbundled pricing strategy. But most
business that cater to digital experience for mass-consumers may continue
with bundling strategy due to pressure of competition. Moreover, the
economics of bundling drives the companies to offer bundled solutions and
this trend is likely to continue.
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57. DIGITAL AVATAR- The Strategies for Digital Convergence
However, this discussion would suggest that it may be advisable for the
company to conduct cost-benefit analysis before adapting a bundled or an
unbundled pricing strategy. This means, the company needs to well
understand the economics, goals, existing capacities and offer prices
before deciding the convergence partner. Though, bundling does promote
cost-effectiveness. Literature suggests that bundling reduces service
provider‘s costs through simplified management and scale economies. So,
with a combination of better pricing model with right bundling,
organisations can achieve ambitious targets through risk-mitigation.
Further literature suggests that as bundling where there is a strong and
large-scale organisation. So, bundling will further create competition
through peer-pressure, resulting in cheaper alternatives with limited
resources. However, bundling is flanked by regulatory regulations as
inferred from the views expressed Example: BBC‘s Kangroo bundled offer
was flanked by competition commission‘s regulatory guidelines.
It can be summarised that for digital convergence, neither mandatory
bundling nor mandatory unbundling would be successful, but rather the
decision would emerge from the factors like- price offer, costs, benefits,
sustainability, business objectives. So, both bundling and unbundling
as a strategy can be interpreted to co-exist in the digital
convergence space- giving space to mixed-bundling offers. Mixed-
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58. DIGITAL AVATAR- The Strategies for Digital Convergence
bundling allows the consumers to purchase individual products as well as
bundled products.
Secondly, a gap has been identified between the current
performance evaluator and desirable metric to measure digital
convergence. The need for and ideal performance measure arises from
the observation that the metric should have high correlation real economic
growth, Views expressed by many participants have expressed a
consistency f concern that the digital convergence industry is facing the
problem of lack of a statistical tool to measure content.
Empirical study by (Porter, 2001) says that the current metric for
evaluation of digital performance has a lower correlation to real-growth.
Hence, in a significant observation, this dissertation recognises a strong
dichotomy between the existing evaluation and the real-growth indicator
that should be in practice. This presents a wide disparity of thoughts
between the literature and actual experience of industry leaders. The
views of the candidates reflect a tone of complain over absence of a
standard metric to evaluate financial performance of the digital content.
(Porter, 2001:4) lambasts the current practices of internet-based
companies discouraging them from continuing with the performance
indicators that is loosely correlated to the economic-value. This
observation reminds of the exuberant show of the dot-com companies in
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year-2000, soon after which what came blatantly was the dot-com burst.
This discussion observes that there may be a serious need to develop
more reliable and economic-value indicating performance measures for
the digital value evaluation.
So, the author observes an immediate need of having in place a real-
indicator for digital content and evaluates the true-performance. This
could go a long way in saving the digital convergence industry from any
unfortunate denting due to improper evaluators. The growth in the in
industry will be large. So the more realistic it remains, the better will be
its repercussions the multiple-stakeholder-
consumers, investors, companies, suppliers, vendors, software
providers, hardware providers et cetra of the four competing industries-
Media, Telecommunications, Internet and the Information Technology.
It further can be interpreted that absence of a real-indicator is the reason
for failure of cross-media targeting mainly from advertising point of view.
As the advertisers are wary of value of digital content potential and so
fear investing their capital and trust, over a cross-media platform. This
could be the reason why integrated marketing communication has yet to
take off in the digitally converging eco-system. So, there is a need for a
statistical measure in the first place so as to set the stage for
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effective hyper-targeting.It may be noted that better measurement
tools to evaluate website‘s performance (number of visitors, traffic
sources, pages visited etc.) may be important for companies to find their
customers. It would also help to measure the marketing attempt to
respond to cross-media advertising rather than traditional advertising
over television, press and radio advertising. Further, literature can be
explored considering the impact on non-measurable scale on marketing
profitability. Some of this observation has been carried on by the author
over the ‗Recommendations‘ section of this Dissertation on Page Number
149.
Thirdly, based on the diversity of views expressed in the data, it has
been observed that some participants (Endaf, Harry Strasser, John
Denton) suggest that bundling is in principle a smart strategy and
amidst challenges, bundling works in favor of customer retention
and can work well with a freemium offer.
Empirical evidence suggests that a seller‘s profit perspective is sometimes
ignored in a bundled offer. Studies by (Adams and Yellen, McAfee,
McMillan) have shown that, optimal bundle price is sometimes greater
than the sum of the prices of the individual goods. So, profit of the seller
is reserved in a bundled offer. Hence, it can be interpreted that bundling
keeps in mind the profit perspective for the seller. So, it may be inferred
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61. DIGITAL AVATAR- The Strategies for Digital Convergence
that the view of the participants interviewed is in line with the empirical
evidence on bundling. It gives a much clearer understanding reasons for
digital media companies to offer bundled packages of goods and services.
Moreover, companies are giving out a free-offer (freemium offer) with
their bundled packages. It is realised that an attractive pricing strategy
impacts marketing, financial and overall organizational strategy and
directly impacts customer retention.
The literature also reveals the existence of bundling strategy in a multi-
product monopolist setting. But it is observed that digital convergence is
changing the face of the industry and so are the power-relations changing
from a monopoly setting on to a competitive setting of many such players
offering widely differentiated bundles.
But, with the coming on internet, concentration of power has distributed
into many hands. There is a call for a level playing field. So, further
research can be carried out to capture the implications of bundling
strategy in a non-monopoly setting. Hence, this dissertation indicates an
area for future research that will give a better understanding about the
limitations of practicing a bundling strategy in a digitally converging eco-
system.
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5.6 Conclusion of Discussion
What is emerging out of the discussion is that the digitally convergent
company will have the benefits of core-competence through strategic
alliance, have a better price-strategy in place, and imbibe on vertically
integrated technology and skill-set on adequate application of the three
strategies discussed in this dissertation. It can be identified that bundling
makes strategic and operational sense but a trade-off must be exercised
between offering a bundled or an unbundled package depending on the
business circumstances.
Secondly, this dissertation reaches to a conclusion that in the times
ahead, digitalized content will be available in two sets. The traditional
bundled or unbundled models will exist. But in order capture a larger
consumer base, they may align with a freemium offer. That is offering a
free service for the targeted paid user. Digital content or product/service
will exist in both differentiated and undifferentiated formats. The
differentiated content offered by premium products. People will be
prepared to pay for thispremium content over whatever platform it might
be. Secondly, undifferentiated or free content will exist to act as a tool to
gather advertising revenues.
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For example, Rupert Murdoch‘s pay wall model charges the reader for
the premium content offered by The Times. Such content would be a
value-added one with focus on high quality offer. It will open scope and
competition battle for premium content producers for whom attaining
the brand position would be a compelling factor. On contrary, Google
news is an undifferentiated content and will be available for free. The
free content model is accessible by innumerable users and will be
passed on to readers for free. Such a model will be heavily dependent
on advertisement revenues and will not build up brand positions among
content distributors.
Smart partnerships in forms of strategic alliances will exist but
they may maintain selective openness based on the business
objective. Strategic alliance will further nurture the companies for
maintaining core competence. However, careful balance of power between
the entities will run across carefully protecting the ownership rights and
intellectual property issues.
Finally, the issue of transiting to the changes in the integrating
marketplace are a bit of challenge for organisations to embed them as a
successful change management. Convergence will call for changes in the
organisational context. It implies changes in the in the traditional pattern
of running company to integrating new solutions and that too at a fast
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pace, so as to gain from timing the market appropriately. A lot of
emphasis on participation and innovation will need to be invoked. Each
organisation will have to promote and encourage their own employees to
contribute to innovation and offer solution ideas. Good amount of training
will have to be imparted to encourage right ways of innovation. Large size
companies will have an opportunity to grow bigger. But, digital
convergence gives an opportunity to small or medium sized smart
companies to build up a strong market share and that too in a
comparatively short span of time. So, companies need to have good
competent management team and commit to smart investment
strategies.
CHAPTER 6
6.1 RECOMMENDATIONS
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Based on a critical observation, this dissertation suggests some
recommendations that may be observed by the digital convergence
industry and the world of academics.
This dissertation stresses on such a research to be considered so as to
avoid unreal growth of irrational exuberance from misleading the limping
global markets. As predicted, the digital market will grow multi-fold.
So, it is highly essential for the growth to be real and not an outcome
of irrational exuberance. Lessons from past reveal that unfortunate
events such as the dot-com bubble burst (1995-2000s), global financial
meltdown (2008-9) have emanated due to improper evaluations of
growth performance. Such incidents have left behind a trail of painful
spill-over effects on the world.
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The dot-com boom of the 1995-2000‘s reminds of the over-dependence on
un-real and speculative-growth indicators that ultimately left distressing
repercussions leading to crash of the building exuberance. Similarly, if
the digital convergence growth is not measured on real-growth
indicators, it may be feared to lead into un-real digital-growth
exuberance. By this, the author implies that if digital convergence
growth is not measured on growth indicators that reflect real-growth, it
may not give the accurate growth position of the industry. If the
fundamentals of this growth-achievement are not sustainable, it
could be feared to lead to a digital-exuberance crash.
This finding can be considered to be of an alarming nature as
management of this digital growth story calls for immediate attention.
This observation gains support from empirical study by (Porter, 2001: 4)
in his Harvard Business Research study which suggests that a the existing
financial performance indicators currently practiced in the industry do not
fully correlate to their economic value. Thus, financial performance of
digital potential needs to be related to its true economic value. At the
same time, this gap could be further investigated by research scholars
emphasising the nature, need, digital profiling of the key indicators. The
author suggests this could be investigated from a quantitative data
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analysis point of view as it could be more relevant to establish a
hypothesis based research.
The following are the two Hypothesis suggested by this dissertation:
Hypothesis 1: Is the existing metric a reflection of economic value of
the performance of digital content?
Hypothesis 2: Is the new metric a reflection of true economic value of
digital content?
These are some suggested research questions that may be useful
to future researchers:
1. From the digital profile data (based on number of clicks, user
profile, time-spent etc.), can a good performance indicator stand true to
reflect economic-value of digital content?
2. How trustworthy are the current performance indicators-like- Google
analytics, straight usage statistics, the Impact Factor, the Eigen factor
and newer metrics.
3. What are the latest findings of the researchers towards having a
comprehensive measure of performance indication?
4. Can the new metric (that may be getting developed at the moment)
separate performance exuberance from real economic value?
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5. Does the finding differ from academic literature that dismisses the
fact that existing evaluators are anywhere consistent to true value?
6. As digitally converging market is an emerging market, a study can be
done specifically on monitoring performance indicators for emerging
markets.
So, the author observes an immediate need of having in place a
real-indicator for digital content and evaluates the true-
performance. This could go a long way in saving the digital
convergence industry from any unfortunate denting due to
improper evaluators. The growth in the industry will be large. So the
more realistic it remains, the better will be its repercussions the multiple-
stakeholders- consumers, investors, companies, suppliers, vendors,
software providers, hardware providers etc.- of the four competing
industries- Media, Telecommunications, Internet and the Information
Technology.
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This realisation is like the tip of the iceberg to foreseeable but real problem
for future. The author urges this observation to be treated with immediate
effect so to have the real-growth picture, before the news stories on ‗digital
convergence bubble burst‘ or ‗good-bye digital exuberance‘ make headlines
on daily newspapers, through TV into our living rooms or click on the
internet. This observation emerges out of a comparison of the empirical
evidence in the literature review with emerging thinking of participants.
Based on this understanding and analysis of outcomes of un-real growth, this
dissertation realises that if powered by unreal growth, digital burst could be a
reality if not handled well.
6.2 Limitations of the research
Digital Convergence is all pervasive. The applications are vast and may
have industry-specific trends. This dissertation has captured some of the
most remarkable trends that capture the convergence effect in 4 key
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industries namely- Media, Telecom, Internet and Information Technology.
However, there are specific industries like – online book publishing, small
scale business networks, online charity institutions, online education
industry that may have a different approach towards the markets.
Further, areas of national defence, satellite communication for
surveillance, weather monitoring, data monitoring of the governments,
use of digital content on clinical and health industry may have more
protected and conservative approach. The strategies explored in this
dissertation may not apply to such specific industries. It has been beyond
the scope of this dissertation to address the typical scenarios in typical
cases.
It can be observed that importance of digital convergence and its
applications is growing massively around the world. But it is realised that
there still exists a digital divide based on the net- penetration, impact and
growth of Digital convergence. For example, in UK, USA, China, Korea the
digital convergence is at its full boom, but countries like-Vietnam, parts of
Nigeria may still be affected with lack of digital interface. This dissertation
is however in line with advanced, emerging and developing markets for
digital content. Further, this dissertation is an academic paper and effects
of digital convergence on industries related to gambling, adult content,
black-economy stand beyond the scope of this research document.
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6.3 Conclusion of Dissertation: Digital Avatar transformed…
There will be challenges opening up galore as the 4 titans of the industry
that compete to converge. This research has made an attempt to explore
the strategies involved in digital convergence. What may be essential to
note is that organisations will have to be receptive to the changes in the
digital landscape to take the opportunities and challenges thrown open.
The top-management teams in the organisation may need to constantly
revalue the strategic alliances, bundling strategy and integration effects
to maintain the pace of desired changes. Innovation may be encouraged
to emanate from multi-levels in organisation. This means the companies
will have to motivate and encourage their employees to think about
adding value to their tasks. At the same time, the employees will have to
be trained to render cross-media functioning. The next era will be
earmarked with even more competition, further indulgence in price-cuts
and product differentiation. So, to the digital media companies have to be
well prepared and equipped adapting a forward-thinking approach to
position themselves in the minds of the consumer. The age will be of easy
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application solutions and greater consumer engagement.As the digital
convergence industry witnesses a new boom, a right balance of the
strategies explored in this dissertation may prove beneficial to witness
multi-platform interaction of the channels of distribution. This could create
further clarification to the current challenge of monetization of profits for
the digital convergence companies. Further, the empirical evidence and
the analysis suggest that the integrated approach, well balanced with
strategic partnership could have a cost-optimizing effect on the industry.
Consciousness in the industry to create a new metric for measuring
performance could provide an opportunity to weigh, balance and improve
the real growth in digital performance. The new digitized world could
witness more of cloud computing, social media applications in business
alliance, growth of mobile application economy. On the applications side,
further efficiency can look upon smart-home applications, security and
improved surveillance equipments, and advanced forms of navigation –
for all forms of transport. Even digital devices would witness a high level
of improved application with touch screen television, high-definition TV,
out of home digital applications; digital billboard advertising could be on a
rise with software being used as a service application.
However, in this transforming landscape, inter-industry clash will grow
denser with integration amidst fundamental changes brought by strategic
changes. The digital convergence space will promote open innovation as
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there could be more integration happening between web (internet) and
TV. Mobile and Internet at the moment are fighting a bitter battle as
revenue streams are diverting to internet companies. Internet connected
TV will pose fresh challenges to the existing players in the current decade.
Internet companies like Google will get Android applications on the TV by
forming strategic alliance with technology providers like Intel and Sony.
As the digital story unfolds to a new dawn, it will engross the curious
users with a captivating digitalized experience that will ensemble
everyone to watch the new ‘Digital Avatar- The Strategies for
Digital Convergence’.....a transformation realised.
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CHAPTER 7
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