Business / Market &Amp; Swot Analysis Emap
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Autor: anton 31 December 2010
Words: 5030 | Pages: 21
Operating in the field of publishing EMAP PLC are a company who have grown over the last 50 years to become the second largest publisher in UK and international markets.
Founded in 1947 with several local newspapers the company soon expanded away from news making and by the 1950â€™s was creating business publications for the automotive industry. In 1974 the group expanded further into what is now its largest market of Consumer Media with its publication Smash Hits! The launch of this consumer magazine marked EMAP as a company involved in the very fabric of creating new markets and with the addition of new brands to the product portfolio over the next 20 years EMAP has continued the trend been both instrumental in the creation of movie mags with its publication Empire as well as infamous lad mags with brand FHM. Alongside these successes EMAP continued to expand its business publication portfolio and cease opportunities in emerging new media markets such as commercial radio and digital music television.
EMAPS business success was and is still hinged on creating or acquiring into vertical markets. Once in the business EMAP specialise in creating strong brands and brand awareness through marketing and cement their products, as â€œmust have mediaâ€. The exploitation of vertical markets and marketing competencies has meant EMAP have increased circulation of their brands and consequently advertising revenues and profits.
EMAPS current product portfolio stands as:
q Over 150 consumer magazines in the UK, France and around the world
q Over 200 business-to-business (b2b) events, magazines and conferences
q 18 UK local analogue radio stations, seven digital music TV channels and the biggest digital radio network in the UK
Its multiple interests as well as moves into international markets has lead EMAP to maintain a business structure which it believes can best manage its large product portfolio. In 2000 EMAP had eight divisions managing its interests:
EMAP Performance - Managing Radio and Television interests
q EMAP Elan - Managing Consumer Magazine interests
q EMAP Automotive/Active - Managing automotive Business Magazines
q EMAP Communications - Managing other business magazines and its exhibitions arm
q EMAP France - Managing its interests in France where its purchase of Edition Mondiale and Hersant in 1994 has seen the company emerge as the largest publisher in the French Market
q EMAP USA - Managing its 1998 Ðˆ1 billion acquisition of Petersen Publishing in the US
q EMAP International - Managing other international interests in Australia and 14 other countries
q EMAP Digital - Managing new media such as digital radio and Internet interests
At cross management breakpoint in 2000 EMAP simplified its structure to drop its American interests (at a loss), integrate its automotive magazines into its other business publication operations and integrate its digital and international product management inherent to the relevant brands affected.
Currently the following models represent EMAP PLCâ€™s structure:
DIAGRAM SOURCE: EMAP. (2004) About Us: Homepage
< http://www.emap.com/nav?page=emap.aboutus.homepage> (22/04/04)
EMAP operations cross two industry sectors, publishing and TV/Radio. A brief analysis of these industries with the assistance of Porters Five Forces Industry Model is carried out below.
In this industry EMAP has interests in multiple market sectors in both its B2B publishing operation EMAP Communications and EMAP Consumer Media. Consumer Media is a mature industry with Mintel data showing 2-5% market growth each year on average across the sectors which effect EMAPS top selling magazines. A list of these sectors is shown to the right.
As such market share is the most important feature of profitable business and EMAP claim 2nd position with a 16% share of the market place next to AOL/Time Warner. (See Right)
The fight for market share makes product differentiation the key to competitive success and EMAP maintain their strong position with brand identification (45 of their brands are in the top 250 circulated magazines). It is near impossible for EMAP to launch a new product without a substitute product been offered by a rival publisher as was the case recently when EMAP launched Zoo and IPC followed shortly after with publication Nuts, both magazines targeting the Menâ€™s market sector.
25% of EMAPS Retail Sales Value comes from â€˜newâ€™ magazines like Zoo, which have been launched within the last ten years suggesting that although the industry is mature it has traits of Schlumpterâ€™s dynamism view with new growth been found through innovation.
In terms of pricing the industry is relatively disciplined with most similar products retailing at a comparable price. Similar discipline is found in supply where EMAP, HayMarket Publishing LTD and BBC Worldwide own the main distributor of magazines in the UK, Frontline LTD. This asset was acquired in an example of vertical forward integration undertaken by EMAP in 1989. This distribution arrangement keeps the industry stable and provides publishers involved with considerable power over retail buyers such as WH Smiths as well as building barriers to entry. Overall competitive rivalry in this industry can be characterised as moderate.
Media and Entertainment
Although television and radio are technological formats that have existed for some time it is the adoption arrival of digital DAB radio and of digital television technologies that have been creating a new industry dimension welcoming competition and choice for the consumer.
EMAP were quick to acquire digital television (DTV) assets when the market emerged in 1999 and now have seven digital music television stations, which are distributed via subscription suppliers such as BSKYB and Telewest. This reduces their power to control distribution but by opening up all their channels onto the new free view digital system they have countered the threat of cheaper substitutes entering their markets and reaching larger audiences.
As the channels themselves are free-to-view, revenue in this industry is generated by advertising income gained when channels have large audience share. Across all digital music channels EMAP has a 45% audience share and it is unlikely that new competitors will be joining the music television market in the future. As with consumer media DTV product success is attributed to product differentiation. As technological barriers to entry become lower for customers in this market with the introduction of cheaper digital boxes Mintel data suggests that a 17.9 million (3 Ñ˜ of UK Households) potential audience will exist by 2008. From target markets identified the same report shows that approx. 53% of these viewers could be classed as typical music television viewers.
As digital radio is available through digital box technology a similar situation and industry potential is found in providing DAB services. Again portable digital radios have reduced in price leading to an increase in listening figures for all industry playersâ€™ radio stations. However, whereas in a traditional radio formats transmission area could be used as a technological barrier to entry preventing rivals taking market share digital radio coverage spreads further meaning closer inside rivalry and an acuter sense of product differentiation will be required in the near future. From current RaJar (Radio Joint Audience Research Limited) data EMAP have a 14% share of all commercial hours for traditional radio transmissions second in the industry to Capital Radio with 15%. (See Right)
In brief traditional radio is a mature industry with falling audience figures digital radio and television is an emerging industry with strong growth prospects.
Assessing opportunities and threats presented by the industry environment using a PEST model
The media industry is largely driven by market share and innovation of new products. Many large players pursue mergers and acquisitions to â€œbuy inâ€ innovation and increase their market share.
In the current climate for both the publishing and radio aspects of EMAPs and its contemporaries businesses competition regulation has never been enforced but bid ambitions have had to be scaled back. Such examples include EMAPs and Incisive pull out of a B2B magazine acquisition worth 145m when it was floated on the stock exchange.
Many industry analysts believes that the industries frustration with regulation will continue this year where a prime merger opportunity exists in the radio industry where market competitors and share seem to point for the need for an industry shakedown.
Applying the BCG three â€“ four rule it can be seen that there are more than three significant competitors in this market (see diagram page 6) as well as the largest holding almost four times the market share of the smallest competitor. Commentators have already suggested that neither EMAP nor Capital could bid for the target company Chrysalis, on account of competition regulation, and as such GWR Local is expected to be a successful bidder. Such blocks mean EMAP will have to look too less competitive vertical markets for expansion in the future or place existing products in new markets.
The latter of these aims could also prove difficult due to political considerations. Ripe markets for existing products are usually found abroad where different advertising regulations apply. For instance in its oldest foreign market France EMAP have never been able to advertise on television due to French laws against Press, Retail and Cinema ad campaigns. An opportunity to improve market share may occur later this year with the European Commission currently reviewing the French ad policy.
Further opportunity will also be presented by regulation in the UK for all radio competitors when the UK Licenses, each of which carry points, will allow an increase in point share for any one radio group from 15% to 55% with EMAP currently at the 15% max. This however, is a nominal opportunity given that digital radio and ownership of equivalent â€œmultiplex licensesâ€ will become the central issue for broadcasters in the next four years.
Two elements of the economic environment effect EMAP and rival publishers circulation figures for consumer media as well as B2B Magazines and as such the earnings potential of advertising revenues. These factors are consumer spending and business spending. Of these it is business spending affect the industry most when advertising and business publication sales reducing.
B2B magazines are a cyclic business. If advertisers arenâ€™t doing well advertising revenues will drop. In the final quarter of 2003 the economic downturn and world events caused ad revenue to drop 30% its worst fall in 3 years. In early 2004 the signs seem to point to economic recovery and as such advertising expenditure in this sector is expected to rise for companies such as EMAP as they attract back financial and recruitment advertisers. As the B2B publishing industry contains many Small to Medium publishers the downturn represented a chance for venture capitalists to acquire into the business in hope of recovery. As such EMAP will have to compete against larger publication rivals in this sector in the future.
In a similar vein a strong economy breeds consumer spending, which has helped circulation recover in all publishing sectors where the last high was in 2002. As the economy recovers and business confidence grows new products should arrive from businesses and as such effect advertising revenue in all consumer magazine titles.
From all environment considerations it is social factors, which effects EMAPS consumer magazine business the most as for all the markets that magazines operate in circulation figures hence market penetration success is a direct result of consumer tastes. Furthermore it is the interpretation and company savvy to these changing tastes, which spawn innovation and market creation opportunities.
EMAP has a good history of interpreting these tastes in its consumer media department with the successful creation of a market sector for middle youth women in 1994 with its publication Red and expanded the market for menâ€™s magazines with the launch of Zoo this year. Furthermore it has correctly predicted trends toward celebrity interests and owns leading gossip brand â€œHeatâ€.
In a less positive light in expanding into foreign markets EMAP has had less success than its competitors in interpreting foreign tastes when placing existing products.
In Hungarian and South African markets there have been instances of ad bans on EMAP products usually for been too raunchy an apposite reaction to the marketing mix it has successfully ventured in Britain over 10 years. Further more its failure to advance in the USA with EMAP USA was partly attributed to its ability to understand core brand magazines like Guns â€˜nâ€™ Ammo. American run companies such as Time Warner and Primedia have had far more success in the American markets.
In the digital sector its license acquisitions for digital television and radio in 1994 are now paying dividends as the market grows again a correct interpretation of social trends. As more media delivery devices become available to the consumer (mobile phones, internet, interactive television) all media companies have spotted that opportunity for delivering content and advertising across multiple medias exist. The AOL/Time Warner merger was made to harness this opportunity (a publisher with a media delivery company) and all company medium term opportunities are likely to come from this social trend for life-integrated media.
From those opportunities in the current environmental set for the industry it is technological factors, which provide the most growth opportunities. Strategy for all companies in media in recent years has to acquire and integrate emerging technologies into their product portfolios to achieve cross-promotional brand building and exploit new media business models. It is the latter of these aims, which has caused the most losses for companies as they have struggled to create viable business models a trend infamously known as dot com bust. Recovering from this industry low media companies have cautiously continued to buy into .com sites, which provide advertising revenue. By viewing the Internet as an accompanying media to existing business activities profits have started to be returned from the technology.
If EMAP can attract a user of its magazines, digital television channels or radio stations to the accompanying website then it is likely data can be gathered on who that customer is. Furthermore services tended from that website enable media companies to stay in touch with the individual perhaps text them when the latest issue of their favourite magazine is released helping build further brand differentiation and identity. As websites for strong brand attract more â€œimpressionsâ€ advertising revenues are sure to increase and EMAP are already displaying growing impression ability.
Page Impressions UniqueUsers SessionTime Subscribers Email Cost NewsletterDelivery
Automotive - - - - -
maxpower.co.uk 5,300,000 444,926 11.56 mins 95,216 n/a Friday
motorcyclenews.com 4,800,000 305,000 10 mins 52,536 n/a Tuesday
Total Automotive 10,100,000 749,926 - 147,752 - --
Entertainment - - - - -
aloud.com 709,171 57,757 13 mins 34,500 Ðˆ1,500 Tuesday
internet-magazine.com 455,000 24,000 11.53 mins 1,300 n/a Friday
Total Entertainment 1,164,171 81,757 - 35,800 - --
Men - - - - -
fhm.com 35,000,000 850,000 17 mins 256,839 n/a Friday
internet-magazine.com 455,000 24,000 11.53 mins 1,300 n/a Friday
maxpower.co.uk 5,300,000 444,926 11.56 mins 95,216 n/a Friday
Total Men 40,755,000 1,318,926 - 353,355 - --
Women - - - - -
newwoman.co.uk 1,500,000 96,500 8 mins 48,901 n/a Any
Total Women 1,500,000 96,500 - 48,901 - --
Emap Advertising - Digital delivers over 52.7m page impressions with 2.4m unique users.
Source: Webtrends, May 2003, Subscribers from site databases.
Although many new business models have been rejected by the media industry one technology widely adopted by all radio broadcasters is Internet broadcasting with four in 10 people adopting the new medium in 2004. Currently EMAP is behind in market share of this sector with 97,056 hours Time spent listening compared to AOL/Time Warnerâ€™s 6,124,864 across its channels. The difference can be attributed to sheer number of channels created by AOL/TW in comparison to EMAPS small product offering.
Although not currently a widely available product video media streaming of concerts and live events is set to become another vibrant Internet sector with the continued advancement of technology. Similar to radio casting this provides opportunities for EMAPS Performance business to provide link ups to its live events and perhaps sell advertising space in between. As with radio casting it is likely that AOL/Time Warner will take the lead into this field due to its unique market position having access to publishing and Internet customers.
Rank of key factors in the current environmental set:
1. Economic dependence on advertising expenditure in most of its core industries
2. Reaction to changes in social trends to create new markets and products
(Ansoffs Product Diversification â€“ See Diagram)
3. New media and technology â€“ new ways of delivering old products
(Ansoffs Market Development â€“ See Diagram)
4. Bolt on acquisitions ops needed to increase market share
5. Size of competition increasing due to political blocks of mergers
6. New business models needed where competition is less intense but still vertical markets
7. Placement of products in global markets [Ansoffs Market Development â€“ See diagram]
EMAPS current market strategies diagram:
Strengths and weaknesses â€“ the companies ability to react to opportunities and threats
Across all three industries that EMAP operates radio, TV and publications continued growth is based on building strong brands and product differentiation. This requires an extensive marketing effort for all products, which pays dividends of customer brand loyalty and perception of product confidence for potential advertisers. Some of its major brands such as Smash! Hits have presence in multiple industry markets and as such it is possible for fans to â€œread about their favourite stars in Smash! Hits magazine, listen to them on Smash! Hits Radio and see them live at the Smash! Hits poll winners partyâ€. EMAP currently invests approx. Ðˆ18 Million per year in developing its product portfolio. Around Ðˆ13 Million of this will go into extending the product life cycle of existing brands. For instance, 15-year-old publication Bliss was re-launched in 2003 with the use of other brands in the product portfolio to promote it in print as well as via SMS text messaging, e-mail and live events. These techniques also worked for flagging brand Yours in 2002 which achieved a circulation increase of nearly 95,000 over the year as a result.
Early investments in new media technologies have poised EMAP well for continued market penetration success with push marketing in new technology fields such as SMS and E-Mail marketing. It has databases from across twelve of its websites brands containing information on 700,000 customers with response rates of 15%. The data it continues to gather from new technologies will no doubt become the main marketing set for future branding decisions pulling the companies marketing resources away from traditional data sources about audience such as National Readership Surveys. Overall this should encourage further market penetration and growth.
To further leverage its brand building and marketing competencies EMAP created EMAP Advertising in 2000, which handles large creative advertising accounts for companies who wish to promote their product across all of EMAPS mediums. This product offering means that marketing is now another vertical market for the company and not just a competency of the business.
Particularly in the radio aspects of its business where there is a close interaction of local community and broadcaster EMAP furthers it marketing and brand images through the sponsorship of charity events.
Financial management of EMAP follows two strategic principles. The first is that there should be enough money available for borrowing that acquisitions can be continued to be made, the second is that the diversity of the product range means one sector can support another when profits drop.
This year has seen the second of these systems tested as EMAP Communications lost Ðˆ2milion in its B2B Magazine sector, a comparable position to its competition. However, a 6% increase of revenues from its trade arm countered the effect. Many offerings in its product revenue streams (right) still rely heavily on advertising to make their return which means EMAP will always be vulnerable across all products to a major economic downturn.
Aware of this the company has to predict recovery to cease opportunities in markets while acquisitions are easier to make. For this purpose EMAP believe they have a fund of Ðˆ739 Million although would not spend more than 100 Million on any one acquisition. This cautious outlook comes as a direct result of failure in the American market where a $1.2 billion purchase was made in 2001 and sold a Ðˆ393 Million in 2003. This deal increased the operating profit of the company 6% in 2002 and would have made a significant long-term addition to company turnover if it had been successful. The deal also dislodged shareholder confidence as stock was sold quickly and cheaply to raise the cash with the promise of a good return.
EMAP donâ€™t include intangible assets in their results and with strong brands this means it has considerable value in its intellectual property. Some years shareholder will almost certainly get a bonus from the sale of a flagging asset however, it is unlikely EMAP would give up one of its more valuable assets unless it was in financial need itself.
Overall EMAP make strong profits from its core businesses and with the attraction of larger clients through EMAP Advertising and Digital growth these should be set to increase in the future. Keeping a tighter lock on strategy will avoid a repeat of the EMAP USA disaster although EMAP needs to look to continue to expand vertical businesses not as reliant on advertising similar to that of its trade arm and e-ticketing site.
2003Total Ðˆm 2002Total Ðˆm Growth
Business Performance - 'normalised'
Turnover - continuing operations 967 938 +3%
Total turnover including US discontinued 967 1,029 (6%)
Operating profit - continuing operations 191 167 +14%
Profit before tax 175 151 +16%
Earnings per share 49.0p 41.0p +20%
Summary Profit and Loss for the year ended 31 March 2003
Human Resource Management
Next to its marketing resources EMAPS human resources represent its second most important strength. Although marketing data and systems can point to new markets and social trends EMAP requires the creativity of its staff to harness the opportunities the data presents in the form of live events and copy. This creative bias explains the large split in staff age with 67% under 35 and 3% over 55.
Staff turnover is a reasonable at 26% and 40% of staff own stock in the company and the entire board were promoted internally both of which must be contributing factors to strong staff motivation. In a 2004 poll for the guardian 73% of staff said they loved working for EMAP and 69% thought their manager cared about their job satisfaction.
Although EMAP seem to have good HRM before restructuring the company in 2000 management of internal communication was pointed for the loss of profits in that year. From the structure diagram even now an apparent weakness of the company would be its complex structure leading to communication breakdowns cross operations as well as down operations with the EMAP Management Office operating in different geographic location to all of its operations. This threat to the strength of the company has been countered by the introduction of an internal intranet system which was creatively designed for the under 35 audience. The introduction of this technology seems to have paid dividends with 72% of staff saying that their boss shares important information with them.
The strength of the companiesâ€™ human resources should continue to grow however, the effect of a number of management retirements since the beginning of 2004 are yet to be seen. A key leaver was Tim Schoonmaker who pioneered the cross media strategy of the company.
EMAPâ€™s competencies are in the marketing/sales and service areas of the value chain. In the radio industry it also has control over operations but with a move to digital that landscape is soon to change.
In terms of value chain efficiency it is only in its print operation where EMAP can have any meaningful control and as such they backward integrated into distribution in 1989 along with competitors creating Frontline. Since then the operation of frontline was not changed or brought under threat by other members of the industry until WHSmiths â€“ who were experimenting with backward integration themselves announced proposals for a new national distribution scheme in 2000 which they believed would take local inefficiencies out of the system. EMAP/Frontline vetoed the idea and threatened to withdraw their products from the retailer if they insisted in making the distribution changes, WHSmiths back downed in a demonstration of supplier power. The move however did not go un-noticed and quietly over the previous three years Frontline has introduced modern MicroStrategy computer systems to ensure value chain efficiency in the future. These systems provide two-way data between distributor and supplier and collect to analyse data on retail market dynamics so Frontline can match its strategy to buyers, promotional performance of each outlet, circulation management to cut unnecessary production costs and also category management which monitors the performance of large individual retailers such as Tesco, which sell its products. Investment in these systems creates efficiency in the value chain for the buyer but gives Frontline further competitive advantage through closer relationships with its large buyers. Companies such have dell have demonstrated that these computer systems are essential to modern business and the large data warehouse set should make direct profit returns in the coming future for its publishing business.
Early 2001 EMAP sold half of its web assets for 2.8million that included businesses such as cheap travel company a2btravel.com and bargainholdidays.com.
In fact it now operates just one true e-business model aloud.com its online ticketing division, which creates its markets through its performance division. Last year this business accounted for just 1% of the revenue stream and as with all .com businesses is dependent on marketing for further market penetration, tough against competitor AOL/Time Warner who owns ticketmaster.com and markets directly to web audiences through AOL.
AOL/Time Warner however do not have products in digital television and digital radio and EMAP have made the right move by adding websites, SMS phone services, e-mail marketing and internet broadcasting to compliment all of its radio businesses, TV-channels and top 40 magazines. Internet broadcasting has been a quickly adopted media with four in 10 now using the technology but lack of product diversification has left EMAP ranked 10 in the business. EMAP donâ€™t have a great deal of intention to diversify their product in this market.
It is unlikely that EMAP will take the lead into digital video broadcasting over the internet given that AOL/Time Warner both develop the technologies to make it possible but from past record EMAP is likely to buy in at the first opportunity to compliment its live events and TV channels. This could lead to further technological strength in the future.
Like many other media companies EMAP has a 3G Wireless division, which is yet to spawn significant revenue, and is unlikely to do so until more transmitters are installed and coverage increased. It is speculated that this will not happen before 4G and other technologies take hold meaning EMAP will have to continue to invest without return in this area.
Across the six departments deemed as the most important to EMAP there are a few but significant weaknesses in its strategy and portfolio.
Firstly, new brand success is an absolute requirement for the companiesâ€™ success in the UK and this means the need to interpret social trends and practice good HRM. There is no reason to believe that EMAP wonâ€™t continue to keep these standards but the complex structure of the company and internal communication problems could become apparent again as it begins to expand despite the introduction of Information Systems. Furthermore, developing new markets is a significant economic risk for a company and although they have the measure of the task in the UK foreign markets have presented a problem for the company forcing them to take â€œorganic integrationâ€ as their option or more bluntly a no effort strategy. EMAP cannot rest on its laurels and regrets in this field else they will be reliant entirely on market penetration in the future and end up in a static market because of lack of market development now. Foreign trading can also hold economic benefits such as in its relations with EMAP France last year provided 25% of capital in competitive interest and exchange rates.
In a similar circumstance a potential weakness of the company as audiences get wider through the introduction of new media systems is that its product range doesnâ€™t contain many star products that cater for the over 35â€™s markets and in many cases targets twenty-some things. Competitorâ€™s portfolios from a perspective of â€˜diversity is goodâ€™ are far more attractive with AOL/Time Warner touting crooner brands VH1 and Time Magazine.
Environmental Stance and Corporate Social Responsibility
As a compliment to its HRM success internal corporate social responsibility of the company is good offering strong pension schemes and rated 91 in The Times list of the top 100 companies to work for. As positive brand image is key to the companies success external social responsibility schemes are run in the form of charity events, fund raising and offering free advertising to non-profit business. It is however always susceptible to traded image advertising backlash when one of its publications runs an ad that is controversial or its leading brand FHM is criticised as sexist.
The companiesâ€™ main environmental impact is in regard to the usage of paper (163 metric tons per annum) but the use of buyer power over its raw materials supplierâ€™s means that it can and does enforce the use of well-managed forests.
It is the issue of the environment that prevents the company considering further backward integration in the value chain into a print operation where industrial waste is an issue. Again EMAP utilises its buyer power to try and assert good practice in the industry. EMAP is in the low impact category of the FTSE4Good Index an excellent image accreditation.
EMAP is in an excellent position the Consumer magazine industry and continued acquisitions in B2B publications should see it meet it goals of been the fastest growing media company in the UK. It has both the staff and the creative input to continue on its track record of managing successful brands. Quiet efficiency improvements in the value chain secure its position into the foreseeable future as a distributor as well.
As the media industry changes from print to electronic formats EMAP has found itself following the competition rather than leading it. With no patents on technologies or ownership of media technologies EMAP will have to wait for market opportunities in this sector, which could be to its short-term competitive loss, with a low industry understanding EMAP is susceptible to short-term investment misfires such as 3G.
Technology has opened up new opportunities and growth in its performance sector and judging from its success as a radio manager the company should be comfortable with maximising profit from DAB and DTV industry movements. It remains to be seen whether EMAP can make its conferences and websites anything more than add-ons to its business but reluctance to take risks in diversifying its product ranges in a area it is not confident in suggest that returns from this business could be slow.
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