21ST CENTURY FOX

21st Century Fox

A Strategic Analysis

By Ishita Dwivedi (15P024)

18-Mar-16

Word Count:

TABLE OF CONTENTS
1. EXECUTIVE SUMMARY....3
2. INTRODUCTION..4
3. PART A: EXTERNAL AUDIT
1. PEST ANALYSIS......6
2. PORTERS 5 FORCES MODEL...8
4. PART B: INTERNAL AUDIT
1. BCG MATRIX..10
2. SWOT ANALYSIS..12
5. PART C: RECCOMMENDATIONS AND CONCLUSION
1. ANSOFF MATRIX..14
6. REFERENCES16

1. EXECUTIVE SUMMARY

2. INTRODUCTION

Twenty-First Century Fox, Inc. (21st Century Fox), formerly News Corporation, is a media and
entertainment company. The company creates and licenses news, sports, motion picture programming and
general entertainment for conveyance through digital TV frameworks, telecom companies, direct telecast
satellite administrators and online video wholesalers. The company operates broadcast television stations,
and broadcasts network programming in the US.
The company also undertakes the production and acquisition of animated motion pictures and live-action,
and production and licensing of television programming over the world. It likewise offers direct broadcast
services to subscribers through its subsidiaries in Italy, Germany and Austria. 21st Century Fox is
headquartered in New York, the US and operates in the UK, Australia, Continental Europe, Asia, and
Latin America.
The companys mission is the creation and distribution of top-quality news, sports and entertainment
around the world.
21st Century Fox is motivated by the brilliant legacy of its parent organization, 20th Century Fox and
was created to signify the advent of the current trends with the changing generations and reflect
about the new century. It reflects upon the advancement and innovativeness of a standout amongst the
most dynamic entertainment names in the mass media industry.
It was one of two organizations shaped from the 2013 split of the publishing assets of News Corporation,
as established by Rupert Murdoch in 1979; 21st Century Fox is the legitimate successor to News
Corporation, and fundamentally bargains in the film and Television enterprises. The other organization,
the "new" News Corporation, holds Murdoch's print interests.(wiki)
20th Century Fox had an exceptionally humble starting as a modest minimal inconsequential theater on
Lower East Side, New York. After its merger with rising star Twentieth Century Pictures, it gradually
developed into the current gigantic entertainment company. Since its origination, the fundamental
yearning of Fox has been to enthrall the masses and make life-changing movies.
21st Century Fox's operations can be broadly categorized into four major reporting segments- Cable
Network Programming, Television, Filmed Entertainment, and Direct Broadcast Satellite Television.
(Source: https://en.wikipedia.org/wiki/21st_Century_Fox; http://successstory.com/companies/21st-century-fox )

It gets business from four fundamental working fragments:

Cable Network Programming, which comprises for the most part of the generation and
authorizing of content through cable, broadcast satellite, and telecommunications providers
o Fox Network
o Big Ten Network
o Fox Business Network
o Fox News Channel
o Fox Sports Network
o National Geographic Channel
Television, which works the organization's 28 full-control show stations
o Fox News Sunday
o SPEED
o Fox College Sports
o Top-rated TV shows

Filmed Entertainment, the administrator of the organization's different film and Television
production studios
o Twentieth Century Fox Television
o Fox Animation/Blue Sky Studios
o Fox Searchlight Pictures
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o Fox Television Studios

o Shine Group
Direct Broadcast Satellite Television, which gives programming to worldwide markets like Italy,
Germany, and Austria

The organization holds equity interest in many media ventures, including an approximate 39% stake in
BSkyB, the British entertainment and communications provider. The company also holds around 40%
stake in SKY, 50% stake in Shine-Endemol-Core Media and 30% stake in Tata Sky. Through its different
operations, the organization depends fundamentally on affiliate broadcast charges, memberships,
promoting expenses, and substance authorizing and retransmission incomes to bolster the top line.
(Source: http://www.valueline.com/Stocks/Highlights/SWOT_Analysis__21st_Century_Fox.aspx#.Vuhdnfl97IW)

Its competitors include

Comcast NBC Universal
Walt Disney
ESPN
CBS
Marvel Studios
ABC
Discovery Communications, Inc
DISH Network Corporation

Its first production The Robe (1953) became very popular among people all over the world and
paved the way for innovative movie creation. It gave the world Sound of Music, an all-time
classic, when the movie musical was potentially proclaimed over. Fox gifted us the wonderful
Star Wars franchise and forever embossed in our hearts and minds the epic line- May the force
be with you.
In later years, films like Die Hard series thrilled the Hollywood audience. Comedy hits like
Home Alone and Mrs. Doubtfire brought peals of laughter to the viewers.
The most famous epic romantic tragedy based on a true story Titanic was produced by Fox. It
depicted real life conditions in The French Connection and Slumdog Millionaire. It wavered
and awoke our creative and fiction as well as action-hero senses through our favourite Hugh
Jackman hits in the form of X-Men Series. Most recently, it brought literary works to the screen
with its interpretation of Life of Pi and the deplorable yet ardent The fault in our stars. With the
creation of Avatar- the most noteworthy earning motion picture ever, Fox embraced digital
revolution.

3. PART A: EXTERNAL AUDIT

1. PEST ANALYSIS

Factors Impacting The Entertainment Industry

Political

Government
o Government provided funds go a long way in success stories of various firms in different
industries. In the entertainment industry especially government support is a major help
for the ever-innovative media industry to grow globally and regionally.
Through government funding of approx. $1392 millions in R&D, technology and
global co-productions have helped endorse the Korean Media entertainment
industry and popularized the South Korean culture, doubled the productions
total revenue and made it a success.

Government Initiative
o U.S. government look to ensure U.S. intellectual property by ensuring the elimination of
all piracy sites and pressurizing countries, into taking trade agreements, who do not take
lawful action against illegitimate software. Organizations situated at U.S. will pick up
copyright insurances particularly media production organizations like Walt Disney and
Time Warner Inc. However, it is difficult to completely eradicate the piracy crime
throughout the world.
(Source: Sigal &MacKinnon 2011)

Restrictions upon import

o In short-term, the impact of levies and trade barriers prove to be advantageous to the
producers. But, entertainment organizations may lose their leverage in the long run
because of diminished utilization of products and services with higher cost.

Economic

Gross Domestic Product (GDP)

o GDP is the profit and investment opportunity indicator of a country and firms in this
business like to play safe and invest in countries with a positive growing GDP. For
instance, the long-term GDP growth of China was the incentive of Disneys investment
of more than $4 billion to open a theme park in Shanghai.

Exchange Prices
o This is something that has never been fixed neither will it remain fixed. There is constant
fluctuation in exchange rates that can affect the business of this industry. The most direct
implication can be seen from the fact that if travelling overseas becomes costlier then
there will be fewer visitors to the afore-mentioned theme park in Shanghai.

Inflation
o The rise in inflation decreases purchasing power of the people who would rather spend
their money more judiciously on necessities than on entertainment services and products.
This directly impacts revenue streams of the companies in this business which will result
in decreased revenues and profitability.

Business Cycle
o The ups and downs of business cycle directly impact unemployment which can lead to
production companies cutting their work force.

Social

Demographics
o Average age of the area residents impacts this industrys business too. In fact it could turn
around its profits too based on this research as the broadcasted channel and movie genres,
types etc go a long way in deciding an audience for a production company.

Consumer Buying Behavior

o Consumer behavior differs a lot as far as entertainment industry is concerned and in the
current internet era online shopping has influenced it all the more. Hence production
companies like 21st Century Fox need to make their presence felt online through digital
marketing of merchandise or advertisements etc.

Technological

Technical Advances
o Advances in technology have taken leaps and bounds and entertainment industry can
leverage this to their advantage in a million ways to attract audience. A step taken by21st
Century Fox in this regard is a preliminary agreement to acquire a minority stake in
Osterhout Design Group (ODG), a virtual reality and smartglasses designer and
manufacturer. The technology can go a long way in shaping the companys profit.

3D, 4D, 5D, 7D

o The modern audience looks for variety, change, something exciting, something fun. With
advent of 3D, 4D, 5D, 7D etc entertainment industries can invest in these technologies to
gather audience and even increase profits manifold that these movies actually provide.

2. PORTERS 5 FORCES MODEL

Bargaining Power of Suppliers

LOW

Bargaining Power of Buyers

HIGH

Threat of New Entrants

LOW

Substitutes

HIGH

Rivalry

HIGH

Bargaining Power of Suppliers

o Bargaining power of suppliers is low
There are no specific suppliers in this industry to begin with. Suppliers for studio
products are writers, directors, actors and screenwriters. The bargaining power
for certain popular and capable suppliers are high due to their more noteworthy
work.
Also there are a large number of equipment suppliers which gives Fox the
leverage to choose its suppliers freely.
On top of all this, the company has also done a lot of backward integration.

Bargaining Power of Buyers

o Bargaining power of buyers is high
Audience is also one form of buyer in the industry and a bad review by a critic
can actually affect a channels or films rating at the box office leading the movie
to be a commercial failure and cost it a lot of cash.
Buyers hold a sort of leverage in this industry because they incur no cost upon
switching between firms.
In addition to all of the above, there is less risk of background integration.

Threat of New Entrants

o Threat of new entrants is low
There is a lot of competition in this field among the existing firms itself like 21 st
Century Fox, Walt Disney, CBS etc which actually makes it extremely hard for
new firms to enter the competition let alone top it off.
Furthermore new entrants would find it very difficult to survive in the industry
owing to the fact that there is very low accessibility to suppliers. Even an
audience attraction plan needs to be put into place and executed which is in itself
a very hard job.
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The old companies in question like Fox have been in the play a long time and
strengthened their roots and reached the success heights at which they are now.
Any new company needs to set up its base even before entering the competition
and it proves to be a very tricky task as the initial investment itself is very high
and would cost the company a lot.
Firms in the industry enjoy large scale of economies, hence new entrant threats
becomes a backward thought.

Substitutes
o Threat of substitutes is high
There are a lot of substitutes for studio entertainment like books, video games,
music, TV etc. Although these substitutes can rarely offer the same experience
yet they are cheaper than movie hall tickets.
There is also a high rise in the piracy and copyright infringements which is also a
threat to Fox to decrease its revenues.
Furthermore firms like Walt Disney have alternative revenue streams coming in
through its diversified entertainment assets like theme parks, Disney merchandise
which Fox has not leveraged on that big a level as Disney.

Rivalry
o Threat of rivalry is high
21st Century Fox Inc. competes with the following major competitors in the film
industry including Walt Disneys Buena Vista, Warner Bros, NBC Universal
Media, Comcast, and Viacoms Paramount etc. Apart from all these it also faces
a lot of competition from local and regional firms.
Nearly 80% of the market share is comprised of the box office revenues of these
studios. Thus it can be clearly seen that the rivalry in the filmed entertainment
market is clearly centralized within a few major studios.
Apart from this these firms also compete on the basis of their various segments
and diversified businesses. For example Fox has its Fox News Channel, Fox
Sports Network, National Geographic Channel etc, in the same way Walt Disney
also owns cable networks that comprise of ESPN, ABC Television Group and
Disney Channels Worldwide.
NBC Sports in Olympics broadcasting and Comcasts regional sport networks
strong presence made Disneys ESPN revenues decline in the third quarter in
2012.
As stated before also Foxs competitors compete on basis of merchandise and
theme parks also like Walt Disney, Universal, and Comcast etc.
Fox thus have a high and strong rivalry chain to top and succeed among its
competitor firms.

4. PART B: INTERNAL AUDIT

1. BCG MATRIX

(Source: https://prezi.com/8yg7-drnxwvh/21st-century-fox)

The BCG portfolio matrix is a strategic alliance tool used for finding development fields in a companys
product offerings. Products are mapped in terms of market growth and relative market share and are
classified as "dogs", "cash cows", "stars" or "question marks". The BCG matrix is based on two ideas: the
"product lifecycle curve" and the "learning curve". The product lifecycle curve captures the idea that
products go through different stages from launch to decline. The learning curve expresses the relationship
between experience and efficiency, i.e., the more often a task is performed, the lower the cost of doing it.
Thus two of 21st century foxs segments are shining stars in the matrix which means that they have high
growth rate as well as market share. Direct Broadcast Satellite TV though high on growth still has to
figure out ways in which to increase its memberships and subscriptions and hence the market share which
is mainly being pulled down from competitors.
And here Television Broadcasting is the main cause of worry for the company who is looking to expand
its boundaries both ways. 21st Century Fox's (FOXA) television business keeps on being emphatically
affected by development in the retransmission assent expense. The organization trusts this pattern will
proceed. As indicated by James Rupert Murdoch, 21st Century Fox's co-head working officer, " We think
that the retrans income that we take, that we earn is going to continue to grow as you have new deals
come up and new MVPD renewals." Murdoch said this at J.P.Morgan's Global Technology, Media and
Telecom Conference on May 18, 2015.
(Source: http://marketrealist.com/2015/05/foxs-retransmission-consent-revenue-continue-expand/)

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As seen from the graph given above, 21st Century Foxs revenue from its Television segment declined by
22% from $1.6 billion to reach $1.2 billion in 3FQ15.In the event that we do take out the income the
organization created from Super Bowl XLVIII in 3Q14, the adjustment in the section's year-over-year
income was level. Super Bowl XLVIII contributed $350 million to Television income in 3Q14. FOX did
not telecast Super Bowl XLIX in 2015. But even after not including the Super Bowl XLVIII income, the
fragment's promoting income fell about 7% year-over-year in 3Q15. Nevertheless, a development in the
income from the retransmission assent charge made up during the current year-over-year decrease in the
portion's promoting income amid the quarter. The year-over-year diminishes in the Television section's
advertising incomes was because of a plummet in the FOX systems' entertainment ratings. The four
biggest US broadcasters battle for viewer ratings, which specifically affects their promoting incomes. The
four biggest US broadcast networks are (CBS), NBC (CMCSA), ABC (DIS), and FOX.

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2. SWOT ANALYSIS

Strengths

Originality
o 21st Century Fox makes its presence felt in almost every type and genre of the big screen
entertainment through its foundation stone Fox Entertainment Group.
As far as film production is concerned, it owns the privileges to Avatar, XMen, The Devil Wears Prada and many more of the kind.
On television, it produces original shows like American Idol, American
Horror Story, and Its Always Sunny in Philadelphia.
Furthermore, the different units regularly share harmonious connections. Case in
point, the organization's FX Networks won the rights to syndicate Fox
Broadcasting's "The Simpsons" without precedent for the show's quarter century
of broadcast appointment.
Partnerships with other production businesses like Universal Studios and
Miramax Film have benefitted the company exceptionally.

Diversity
o The company has diversified its holdings in practically every aspect of the entertainment
network. From substance creation, to disseminating, to airing, syndicating, and requesting
to retail, Fox is presented to various distinctive income streams.
Fox Broadcasting, Fox Television, and different film and Television producers
are among the numerous media resources the organization works over the media
range.
Vertical integration is the companies secret to gaining higher profits. Only a
couple of contenders can actually coordinate the organization's broadness of
speculations and media offerings. 21st Century Fox is thought of as more than fit
for creating and promoting new substance, yet its capacity to either distribute it
on the inside or discharge it through partner or TV agreements will spell out its
achievement.
Contracts with different worldwide media organizations, like IMAX, will
guarantee a boost in its viewers and spectators.
Agreements with the NFL and MLB permit the organization to keep up a solid
footing in the cable sports promotional market, a standout amongst the most
lucrative spaces on TV. This additionally serves to bolster the organization's
early cable channel, Fox Sports One, which will give a solid competition to
ESPN and Comcast's (CMSCA) youngster NBC Sports.

High market share and growth share

o As discussed from the BCG Matrix above the company has most of its segments at high
growth stages with a big fat market share percentage which keeps getting better and
better because of the companys strategic business pursuing techniques.
The Cable Network Programming and Filmed Entertainment segments are
on the better side of the Product Life Cycle Stages.
The other two segments of Direct Broadcast Satellite TV and Television
Broadcasting are looking to expand which gives the company oodles of new
development to look forward to.
Successful overseas business
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Weakness

Dependability on Advertising
o Regardless of its portfolio diversification, 21st Century Fox depends powerfully on
publicizing, affiliate, and membership charges, which contributed to around 70% of
aggregate business in 2014.
While it has given outstanding performance in boosting these fragments by
trendy productions and developing its television systems into lucrative markets,
its long haul achievement will depend on its capacity to market content on new
stages.
Its fizzled play at Time Warner recommends Foxs need to set up a strong
foothold in the space.

Dependence on Reality Shows

o 21st Century Fox has shown an unnecessarily high reliability on Reality TV Shows like
American Idol the likes of which sees a constant declining audience.

Opportunity

Potential Global Markets

o Fox is already a global player with its deals and business with India (owning Star India
broadcasting 49 channels in 7 languages) and Latin America.
The companys deal with IMAX ensures an international recognition of its film
releases which it has displayed in the success of Penguins of Madagascar,
Exodus: God and Kings, Night at the Museum: Secret of the Tomb, and
Taken 3 released in Europe, Asia, Latin America and Middle East.
Maximizing its own global reach and increasing demand for its products is a
special asset of IMAX which Fox is strategically leveraging to increase its
opportunities.

Acquisitions
o Acquisitions never go against the interests of a company unless its a strategically
thought out and well-worked out decision.
21st Century Fox has reached a preliminary agreement to acquire a minority
stake in Osterhout Design Group (ODG), a virtual reality and smartglasses
designer and manufacturer.
In addition, the two companies plan to enter into a strategic partnership that
brings together ODGs revolutionary technologies with 21st Century Foxs
industry leading content and storytelling.
ODG is further cementing its leadership in the Smartglasses arena as it moves
into immersive experiences for entertainment with the introduction of its highdefinition, cinema-wide field of view technology which it is demonstrating at
CES 2016.
(Source: http://www.businesswire.com/news/home/20160105006762/en/21st-Century-Fox-Acquire-Minority-Stake-Leading)

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Threats

Highly Competitive Industry

o The organization is always occupied with rivalry with worldwide, national, and local
broadcasters, production studios, cable networks. Through its auxiliaries, 21st Century
Fox competes always for business sector space against smaller, more regionally focused
broadcasters, and box-office supremacy versus major studios like those possessed by
CBS Corp. (CBS) and Viacom (VIA/B). Fox is always attempting to build its viewers.
While it keeps on acknowledging accomplishment on the top line, the expense of keeping
it together at this level is a struggle. The organization dedicated almost $3 billion to
publicize 2014 film slate, up from $2.2 billion in 2013.

Content Piracy
o The expansion of unapproved duplicates and robbery of items adversely affects the
company's business and productivity since the offer of such items decrease the income
that the organization could conceivably get from the genuine exchanges. The creation,
diffusion and sharing of unapproved content has negatively affected the entertainment
business.

5. PART C: RECOMMENDATIONS AND CONCLUSION

1. ANSOFF MATRIX

Market Development
Media Networks
Global Market
Movie Industry Revival
Innovative solutions
Market Penetration

Studio entertainment
Advertising
Consumer Products

Diversification

Forward integration

Product Development

Merchandise
Consumer Products

As seen from Ansoff matrix, 21st century fox should introduce its existing cable networks into
different geographical markets.
The company also needs to secure dominance in existing markets with a combination of heavy
advertising and sales promotion.
Maximizing its own global reach and increasing demand for its products is a special asset of
IMAX which Fox is strategically leveraging to increase its opportunities through its deal with
IMAX.
Movie Industry revival will prove to be the lifeline of the company which the firm is following
currently but needs to strengthen its efforts on the same.
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The latest Oscar buzz revealed the following news about the firms success:
21st Century Fox led the Oscar pack Thursday morning, as "The Revenant" racked up 12
nominations, and "The Martian" picked up seven nods for an Academy Award. Both were
distributed by the media conglomerate's studio arm, 20th Century Fox.
"The Revenant," backed by New Regency Pictures, received nominations in a dozen categories,
including best picture and best director. The film's star, Leonardo DiCaprio, was nominated for
best actor in a leading role. "The Martian" is also up for best picture, as well as best adapted
screenplay, among other categories. Matt Damon got a nomination for his leading performance
in the space drama.
"Brooklyn," from Fox-owned Fox Searchlight Pictures, was nominated for best picture and best
adapted screenplay, meaning that Fox domestically distributed three of the eight best picture
nominees.
(Source: http://web.a.ebscohost.com/ehost/)

The firm needs to keep up with its mission of commitment towards unlocking the potential of the
audiences by focusing on creativity & the arts, knowledge & exploration, and sports & wellbeing, as well as through a commitment to diversity and sustainable business practice.
(Source: https://impact.21cf.com/strategy.html)

Studio Entertainment, creative advertising and quality consumer products would give the
internationally well-known company the face it needs to enter a potential market.
Fox could work on developing its own line of discrete copywrited merchandise which would
provide another means of revenue streams and a means of advertising too for the firm.
As for diversification, Fox could profess forward integration of all its resources with the aid of
technical expertise.

In summary, the future of 21st Century Fox Inc. is in a good position powered by the decent margin
improvement of its four segments. The company is strategically planning mergers and acquisitions too in
the process like ODG minority stake acquisition as stated above and leverage their smartglasses
technology into drawing more audience towards its creative and innovative arenas.

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6. REFERENCES

1. https://en.wikipedia.org/wiki/21st_Century_Fox
2. http://successstory.com/companies/21st-century-fox
3. http://www.valueline.com/Stocks/Highlights/SWOT_Analysis__21st_Century_Fox.aspx#.Vuhdn
fl97IW
4. Sigal &MacKinnon 2011
5. https://prezi.com/8yg7-drnxwvh/21st-century-fox
6. http://marketrealist.com/2015/05/foxs-retransmission-consent-revenue-continue-expand/
7. http://www.businesswire.com/news/home/20160105006762/en/21st-Century-Fox-AcquireMinority-Stake-Leading
8. http://web.a.ebscohost.com/ehost/
9. https://impact.21cf.com/strategy.html

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