MBA dissertation

DIGITAL AVATAR- The Strategies for Digital Convergence

099018609

University of Leicester

8/26/2010


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

MBA Dissertation by Student no. 099018609 Page 2


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



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



• 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



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



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



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


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; Giuliano

Stiglitz, 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,

Brightcove Inc; 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



Elder, Online Communications Editor, Conservatives; Endaf Kerfoot,

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.



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



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


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.

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.



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



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



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.



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.



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



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.



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

2.2.1 Literature Review on Digital Convergence

The convergence phenomenon is unification or coming together of

previously distinct products that employ digital technologies (Yoffie,

1997:2). Digital Convergence is essentially a fusion of technologies such

as voice (and telephony features), data (and applications) video and

online that now share resources and interact with each other to create

new efficiencies. It is a process by which separate media become

digitalized to be delivered via the global networks (European Commission,

Green Paper, 1997). Popularly known as the ‗media convergence man‘,

Henry Jenkins describes the present moment of digital convergence, as a

Renaissance culture- one being transformed - for both better and

worse - as the social, cultural, political, and legal institutions respond to

the media change (Jenkins, 2007). The process of digital convergence

involves flow of content across multiple media platforms, mainly due to



cooperation between multiple media industries targeting the media

audiences searching for varied entertainment experiences (Jenkins,

2007:3). The information-age means blurring and redefinition of industry

boundaries of the ‗new competitive landscape‘ (Bettis & Hitt, 1995;

Porter, 2001; Sampler, 1998). Industry convergence ‗the converging of

two or several hitherto separate industries‘ has tended to focus on

developments within the information technology, communications &

media industries with further intensification of competition. Revolutionary

changes are taking shape and industry convergence owing to ‗digital‘

convergence (Grant, 2008:209), (Yoffie, 1997; Lei, 2000; Stieglitz, 2003)

cited in (Weaver, 2007:3). A strong driver for convergence is an

‗electronic super-highway‘ that is beginning to bind together the globe as

voice, video and data converge, defining a new basket of digital,

multimedia and interactive communication technologies (Negroponte,

1995). The root causes for convergence are ‗innovation and competition‘

brought about by digitization (Bernabo et al., 2009:3).

Digitization compresses the information of bits and bytes (0s and 1s)

that the computer can understand. Digital material can be reproduced at

any resolution to offer unlimited bandwidth and storage.

Digitization changes the distribution of intelligence and the transposition

of one medium to another so that information can be consumed



differently by different people at different times thus, empowering users

(Negroponte, 1995:231-2). Digitization will increase dramatically with

each generation becoming more advanced [digitally] than the preceding

one. Being digital is not about the future: "We are not waiting for any

invention. It is here. It is now" summarises (Negroponte, 1995:231).

Information and digital content being self-multiplicative avoid

redistribution losses (Rowley, 2008). Operation within the existing

capacity can give rise to economies of scale in production in advertising

and distribution of information (James & Trautman, 1990:13).

Digital Convergence is an outcome of a technological revolution, but its

impact is both economical and social. The economics of Digital

Convergence is justified by the empirical observation under

Moore’s Law. Moore's Law says that component density and

performance of integrated circuits doubles every year. Under Moore's

Law, prices of technology-based products fall by 30% every year and

about 50% in every two years (Moore, 1965).

"Reduced cost is one of the big attractions of integrated

electronics and the cost advantage continues to increase as

the technology evolves toward the production of larger and

larger circuit functions on a single semiconductor substance"

(Moore, 1965:115).

Depiction:Gordon Moore at Intel's headquarters at Santa Clara, California

Image Source: Associated Press (AP)



This implies smart optimization, timely introduction of new processing

techniques, device structures and materials. Cost-benefits and quality

improvements make digital convergence a strategically viable

phenomenon (Sorensen et al., 2010:1). Moore‘s law has continued

unabated for 40 years (Thompson & Parthasarathy, 2006:21;

Lundstrome, 2003). It is predicted that by year-2053, Moore’s Law will

reach stunning new levels awakened by the progress on the

Digital Convergence (Futuretimeline.net, 2010). However, Moore

(2000) has pointed out that the rapid decrease in semiconductor and

computer prices may reflect a decreasing marginal utility as technology

reaches redundancy very soon as higher versions of technological

products soon replace the previous counterparts.



2.2.2 Literature Review on Strategy Perspective

Strategy is the art of creating value. Successful company‘s strategic

analysis is a value-creating system within which different economic

actors-suppliers, business partners, allies, and customers-work together

to co-produce value (Norman and Ramirez, 1993:65). Analysing the

changing digital space, Porter says, ‗Internet should be viewed as a

complement to, not a cannibal of, traditional ways of competing‘ (Porter

2001,2). (Fransman, 2000), (Nyström & Hacklin, 2005) suggest that

convergence will create new opportunities for both incumbents and new

entrants in the firm of new technical possibilities and new market

opportunities. As indicated by (Grant, 2008) that ‗the greater the change

in external environment, the more likely it is for the firm will depend on

its internal resources and capabilities to create a secure foundation for

long term strategy‘. The unexplored potential in the complementary

firms has been identified by (Brandenberger and Nalebuff, 1996:117),



defining the room for profitable cooperation. It is not the size of the

firm‘s resource base but much depends on the firm‘s ability to leverage

its resources effectively by the means of converging, balancing and co-

opting (Prahalad & Hammel, 1990). Hence, in strategic decision-making,

cohesive and integrated role of the firm make it better enabled to

compete (Kay, 1999).

2.2.3 Literature Review on Strategic Alliances

A strategic alliance is a business relationship in which two or more

companies, work to achieve a collective advantage, attempt to integrate

operational functions, share risks, and align their corporate cultures



(Chan-Olmsted & Kang, 1998:34-5). Alliance may be in form of a simple

licensing agreement to a joint-marketing effort or joint-ventures.

Companies are found to be interested in alliances to capitalize on different

expertise, speed up a venture with combined resources and develop

economies of scope (Chan-Olmsted, 1998:35). Benefits of strategic

alliances include conserving resources, sharing risk, reducing costs and

improving technological capabilities. Hence the rate of strategic alliance

formation has increased radically (Dyer et al., 2001) cited in (Lee and

Ding, 2010:707).

Networks formed by inter-firm alliances have received considerable

attention from strategy and organization scholars. To better understand

alliances, they are made to work in partnerships (Bleeke and Ernst,

1992). Research on alliance outcomes has shown that preferred positions

in inter-organizational networks confer on firms such advantages as

higher innovation rates (Powell et al., 2005), lower financing costs (Uzzi &

Gillespie, 2002), and higher performance (Baum et al.,2000; Burt, 1992).

The relationship between network structure and advantage has prompted

a large body of research on the patterns of alliance partner selection that

propel network emergence (Gulati, 1995; Gulati & Garguilo, 1999) cited

in (Baum et al., 2005). Much is now known about partner selection



criteria and collaboration build-up (Larson, 1992; Li & Rowley, 2002;

Oxley, 1997; Simonin, 1997).

Strategic Alliances for Partnerships

For digital convergence to work effectively it has to transcend a wide

range of networks, devices, applications and content to offer high-speed

connectivity whenever and wherever (Miner, Google: 2008) cited in

(Deloitte Report, 2008:133). Albarran and Dimmick (1996) identified the

recent trends of conglomeration and consolidation in the media industries

as seen in multinational media conglomerates like News Corporation,

Time Warner and Viacom expanding horizontally, vertically and globally to

maximize their growth potentials. Rise of communication empires reflect

high level of interest for strategic alliance (Picard, 1996). Such

organisations form strategic alliance under strong leadership, visionary

mentorship and high visibility under high uncertainty. Alliance results in

greater stability and risk-reduction. This phenomenon has been witnessed

in growth of the broadcaster CNN (Chan-Olmsted, 1998:35). Presenting a

skill-based view of the firm, Prahalad and Hamel, (1990) assert that it is

possible to conceive of a firm as a portfolio of core competencies.



For instance, Finnish handset leader Nokia employs strategic actions to

build [collaborate on] a sustainable competitive advantage in an emerging

market by taking advantage of the opportunities arising from the

convergence of digital home technologies cited in (Bunduchi &

Berar, 2007:102).

One important way of navigating the value-chain is

throughpartnerships. Companies specializing in one phase of the value

chain partner with companies who are able to manage other parts of the

value-chain. The operators create value in the convergence process by

seeking the most profitable partners for developing products and services

(Nyström and Hacklin, 2005). Porter (1980, 1985) describes the needs for

corporations to identify and exploit inter-relationships among related

businesses to reduce costs or enhance differentiation. Pitofsky (1992,

1996) stressed the importance of alliances in the new global technological

innovation market. The development of ownership integration across

media industry boundaries is well documented in recent years (Chan-

Olmsted, 1998:35).

Strategic Alliance for Core-competence:

Global competition highlights asymmetries in the skill endowments of

firms. Collaboration may provide an opportunity for one partner to



internalize the skills of the other and thus improve its position both within

and without the alliance (Hamel, 1991:83). Hamel, points out that core

competencies and value-creating disciplines are not distributed equally

among firms. Core-competencies are built through a process of

continuous improvement and enhancement. A company that failed to

invest in core competence building will find it very difficult to enter in

emerging markets (Prahalad and Hamel, 1990:15), (Prahalad, 2006).

Competition is not only contributing to digital convergence but is also

paving way for formation of strategic alliances. Such affiliations enable

firms to exploit core competencies while taking advantage of

synergies with other companies (Bernabo et al., 2009). Companies are

under the pressure of responding to increasingly technical demands,

network relationship management, that are virtually impossible to

accomplish as a single entity. Hence, engaging in an alliance, they give a

chance for another party to help shoulder the burden (financially and/or

technologically) and allow a company to remain competitive (Bernabo et

al., 2009). (Mello, 2003:3) says if the biggest pitfall to growth is

the failure to define a core business, the next biggest is the

premature abandonment of a core business. Hamel supports the

emphasis on core competencies and suggests that inter-firm

competition, as opposed to inter-product competition, is essentially

concerned with the acquisition of skills (Hamel, 1991:84). However,



alliances must be carefully struck as there is uncertainty over future

knowledge requirements and where new products offer early-mover

advantages (Grant & Baden-Fuller, 2004:65). A change in strategic

priorities may suddenly make a partnership much more or much less vital

for one of the partners (Franko, 1971), (Harrigan, 1985).

Strategic Alliance for cost-optimization:

Alliances can avoid many of the costs associated with knowledge

transactions across markets. However, it is observed that alliances limit

opportunism by converting single period into multi-period games and

fostering investments in trust (Gulati, 1995; Ring and Van de Ven, 1992;

Simonin, 1997; Teece, 1992) cited in (Grant & Baden-Fuller, 2004:65).

Effective strategic alliances overcome the problems of under-utilized

knowledge arising from incongruent product and knowledge domains.

Strategic Alliances and ownership concern

Strategic alliances are more efficient than internalization within a single firm

in integrating and utilizing knowledge. The advantages of alliances are

especially apparent under conditions of uncertainty and early mover

advantages cited in (Grant and Baden-Fuller, 2004:65).



After Telecommunications Act (1996), many media and

telecommunications companies have formed strategic partners in

preparation for the showdown in an integrated global information

marketplace (Chan-Olmsted, 1998:34). Globalization has been widely

credited for provoking a shift to collaborative strategies (Ghemawat,

Porter and Rawlinson, 1986; Hergert and Morris, 1988; Ohmae, 1989;

Perlmutter and Heenan, 1986). Bargaining power at any point in time

within an alliance is, ceteris paribus, a function of who needs whom the

most. This, in turn, is a function of the perceived strategic importance of

the alliance to each partner and the attractiveness to each partner of

alternatives to collaboration (Hamel, 1991:86).

Although alliance break-ups and member withdrawal are also common,

running as high as 50 percent in some industries (Broschak, 2004:608;

Burt, 2000; Podolny & Page, 1998) but an understanding of them is basic

to the development of realistic and informative models of alliance

behaviour and network dynamics (Kogut, 1989) cited in (Greve et.al,

2010:302-5). An ‘embeddedness’ perspective (Granovetter, 1985), in

which alliances are viewed as economic transactions that occur in a social

context, is also common. Previous studies have suggested that partner

selection favours formation of alliances with firms that are relationally

‗embedded‘ through prior direct ties and structurally ‗embedded‘ though

network connections to common third partners (Gulati & Gargiulo, 1999;



Podolny, 1994) cited in (Greve et al., 2010). This is not surprising, given

the role of social interaction among partner firms in alliances in the

development of the trust and cohesion are necessary for mutually

beneficial inter-firm relationships (Larson, 1992; Li & Rowley, 1999;

Mohr & Spekman, 1994; Ring & Van de Ven, 1992; Seabright, et al.,

1992) cited in (Greve et al., 2010:302-5). Strategic alliance is better than

merger and acquisitions as the industry prefers to have flexible and agile

alliances (Kasama, NIFTY Corp., 2008) cited in (Deloitte Report,

2008:106) & (Alaxender, 2001:482).

But, it's hard to escape the conclusion that the companies that are

making most money are those that maintain a close guard. Cueing from

examples from Apple Inc. and its applications, it is probably a good

strategy to choose selective openness. As, Economist (May, 2010)

looks at Microsoft, Apple and Google about the future of cloud computing

where the three companies compete and collaborate when it suits their

business objectives. The companies that will strive and in the future those

that are most open to collaboration, and collaborative innovation

(Tapscott, 2010). Openness through innovation across corporate

boundaries is a result yielding strategy (Friedman, 2007), (Tapscott,

2007).



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,

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)

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). 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).

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

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.

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

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

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.



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 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

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

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

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

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

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

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?



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).

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

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

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.

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

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.

Data Analysis

Data Collection 20 Qualitative In-depth interviews

Data Immersion
Identification of common themes,
Data Reduction 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



4.1 Expert’s Views on transformation of Digital Avatar

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



marketing and such alliances are proving to save the telecommunication

companies to adopt lucrative business models for revenue-growth.

4.1.1 Understanding the nature of strategic alliance:

Why Strategic Alliance? Strategic alliance has been successful in

improving revenue models of cash-starved traditional media &

telecommunications companies and results in funding cross-media

advertising. Companies can focus on core-competence of their specific

areas and merge the specialities together under strategic alliance, to

provide an enhanced consumer experience. Under the current scenario,

the traditional media companies have been losing advertisement revenues

to the digital space and telecommunication companies are hit by revenues

diverting to new-age internet companies. Music industry is dented by free

online music and cross-media advertising has not been well understood

by new-age advertisers.



For example, Endaf Kerfoot, Thinker-in-Chief, Brand New Adventures

UK says, ―Companies like BBC or CNN don‘t have to go back and re-engineer

all content. They find it convenient to apply a protocol to all of that content

which basically automatically optimizes that content on a device like say

iPad. That is again in Apple‘s interest as well because the more content

people can access via the iPad, the more successful the iPad will be‖.
Source: Personal Interview conducted on June 29,2010 (Time:2-3pm) at Earl‘s Court office, London

Apple‘s iPad is a revolutionary device combining the benefits of web,

email, photos and videos that sold about 3 million sets in 80-90 days

since its launch in April 2010. Further media barons CNN or BBC are

increasingly generating content for mobile phones to harness the

convenience of cost-reduction. So, it gives rise to a set of content

producers aligning with high-tech device providers to lead way to a digital

experience for the users. As Endaf Kerfoot points out, strategic

alliance involves ease of sharing content. This implies a commercial

relationship that works on mutual benefits for each of the competing

industries. Co-existing in atmosphere of strategic alliance also helps the

company‘s focus on their core competence areas. For instance, the

content owners (like CNN) can partner with distribution networks (like

Virgin Media) to make the content available to the consumer. Andrew

McGrath, Executive Director (Commercial), Virgin Media supports



the view that with strategic alliances, the companies can focus on their

area of core competence.

Andrew McGrath says, ―What we want to be is really good at what

we‘re good at and because we‘re the best at what we do. We want to

work with really good systems integrators, combine ourselves and we do

that just through commercial arrangement and mutual interest for each

organization‖. Source: Personal Interview conducted on June 22,2010 (Time:4-5pm) at

Virgin Media‘s office, Covent Garden, London

It can be inferred that companies supporting strategic alliances, resist

being system integrators. They find solutions workable with mutually

beneficial commercial agreements rather than complex strategic

agreements and avoid complicated equity-partnerships. Under Strategic

Alliance, the unique selling propositions of both assigned entities are

clearly maintained by pursuing a clear understanding of what the

customers requirement are to identify partners and also the alliance one

wants to work with. This materialises in providing converged solution from

the two or more companies that work for the customer. It is worth

observing the rising votes to strategic alliance due to the inherent critical

element called core-competence. [Sofia’s Diary is an ‗interactive media soap in

which teenagers can make decisions about Sofia‘s life (Cinekid, 2006)].



Director of this popular soap- Sophia‘s Diary, Triona

Campbell, Director, CR Films (London and Dublin) agrees with

Andrew McGrath that strategic alliance strengthens the ability of the

company to focus on core-competence. Triona says, ―we are being more

independent on our core-content by working in partnership with others‖.
Source: (Face to face) Skype Video Call interview from Dublin studio conducted on July 5, 2010

(Time: 1-2 PM)

Focus on core-competence promotes bottom-up efficiency for firms

entering into strategic alliances. It is worth noting the fact that since

2010, cable giant Virgin Media UK is working on offering high-bandwidth

product of 400 Mbps that has been made possible by striking a strategic

alliance by piling in more capabilities around the information technology

partners rather than just the telecommunications allies. Combined

capabilities of two organisations are addressed through working

in commercial relationships with other organizations and

concentrating on core-competence.

An observation of underlying importance is that, while some participants

have expressed strong views on focus on core-competence as a crucial

factor for strategic alliance to exist, there are some thinkers in the

industry who differ in their opinions. Influenced by the dynamic changes

in the digital eco-system, these participants insist that strategic alliance is



an outcome of smart-partnership ties between two companies or

industries.

Harry Strasser, Executive Partner, Digital Convergence and

Innovation, Germany says, ―I strongly believe in smart partnership to

be the right way. It can be in form of strategic alliances. It can be seen

in this era where internet is a strong driver, internet solutions

applications have come about as a stronger driver to fix

telecommunication‖.
Source:Face-to-face Skype Video Call interview from Germany on July 20, 2010 (Time:12-1 pm)

This implies that as the digital convergence is changing the digital eco-

system, there are new forms of alliances teaming up where the

converging industry offers smart solutions to the customer. It is worth

noting that strategic alliances have been existing in the industrial eco-

system, but in the dynamic world, partnership implies smart-customised

and personalised solutions that are far more customer oriented compared

to the contemporary offer a decade ago. It is interesting to observe some

of the participants differ in their positions on smart partnership ties. It

can be inferred from a different position taken up by one of the

participants. Oli Shaw, Director, Oli UK resists the smart partnership

debate by highlighting the imposed form of strategic alliance.



Oli Shaw insists that, at times ―strategic alliances are mere collaborations

to serve a legal mandate amongst viciously competitive companies. So, it is

only in such situations that the competing industries enter into a strategic

collaboration due to serve a legal mandate. For instance, BSkyB legally had

to give up some of its channels to be broadcasted on Virgin

platform…otherwise they would have to make a large amount of fines‖.
Source: Personal Interview conducted on July 2,2010 (Time:2:30-4pm) Old Street Station, London

So, alliance may as well be a form of imposed relationship rather than a

mutual agreement.

Tim Hussain, Head of Mobile & Video Advertising, BSkyB

(London) differs from Oli shaw by saying that a legal mandate is only

a regulatory requirement and can‘t be called a strategically allied

solution. Tim asserts, ―I would not call this a strategic alliance, it is a

mere arrangement to fulfil regulatory implications imposed by industry

regulator, Ofcom‖. [Ofcom is the independent regulator and competition

authority for communications industries in the UK].

Source:Personal Interview conducted on July 28, 2010 (Time:2-3 pm) at Sky‘s Office, Old

Street, London

Interestingly, the following opinion from BBC brings the observation back

to square-one. It has to be noted that strong waves of dynamism have



made BBC change from the earlier concept of partnership to that of

strategic alliances.

John Denton, Managing Editor (TV Platforms), BBC London

believes, ―BBC has been very big in the last two years talking about

partnerships. But there is a reason we‘ve got why the word partnerships

isn‘t used quite a lot, because there is a lot of change, digital is affecting

old business models, no one is entirely sure what is going to come out

later. And with lots of hopes, and lots of plans and projections, but no one

is entirely sure. So in that kind of a framework, where uncertainty

ranges, I think people start to look to share the burden, share the

pain. That's why I feel strategic alliances are really important at the

moment. People can‘t do it all on their own, people are nervous about

investing huge sums of money and going down a path that then maybe

the wrong one. So, I guess strategic alliances does a couple of things, it

helps you get together as a team to do a bigger project, but it also

means if you can convince someone to join that team, then hopefully it‘s a

good idea!‖.

Source: Personal Interview conducted on July 14,2010(Time: 10-11am) at BBC White City,London

Such alliances foster emphasis on research and development, create and

distribute clever interactive applicationsfor the 3-screen approach - TV,

mobile and the internet, (referred to as multi-casting). So, information



becomes quickly available to the mass audience. Strategic alliance is

encouraging the content king, BBC to seek commercial partners who

would invest in software and hardware and share the content. BBC

Canvas is the latest example in this respect. Further, JohnDenton

believes, strategic alliance supports Moore's law which says that

processing power doubles every 18 months over constant costs.

John says, ―we all come to get new partnerships because no one entirely

sure, but there is a lot of hope that we are right‖.
Source:Personal Interview conducted on July 14,2010 (Time:10-11 am) at BBC White City, London

John predicts another round of strategic alliance- would be with the

Government of United Kingdom to partner in investment for BBC. For

pursuing UK government‘s ambitious-project of establishing ‗Digital

Britain‘ by 2012, the public service broadcaster, BBC seeks strategic

alliance with the government for project-funding.

John Denton says, ―if you [UK government] want Digital Britain by

2012, you got to help us [financially]. So that, BBC will roll up public

service money to try and help other companies understand the difficulties

and try and come up with some solutions and so we have to work

together to solve it‖.
Source: Personal Interview conducted on July 14, 2010 (Time: 10-11 am) at BBC White City office, London



An emerging thinking over the forms of strategic alliance emanating in

the digitally converging landscape point to a significant observation that

draws attention towards the balance of power positions maintained by

the (converging and competing) industries. Such a balance of power

position decides the level-playing field for the four converging yet

competing digital convergence industries namely- TV, Web,

mobile and technology.

As Peter Brimacombe, Former VP, Disney World, says, ―It‘s whether

you get those kind of the balance of power in the value chain and you

find the one bigger player can extract value from others that people

start thinking that they will need to integrate in order to protect their

market position‖.
Source: (Face to face) Skype Video Call interview conducted on July 23, 2010 (Time: 10:30-11:30 am) from

Peter‘s office, London

This observation indicates the stiff-competition that can be expected

within the industry players. Supporting Peter‘s notion of balance of power,

Tim Hussain, Head of Mobile and Video Advertising, Sky (London)

expresses alliances coming in way with strong internet companies, like

Google. But expressing fear of losing ownership, Tim asserts that

strategic alliances may have to be carefully plotted.



Tim says, ―..at the same time they[Google] are trying to be a competitor

but they also need our content. But we have to be careful else, we‘ll start

to lose that ownership of relationship. Further... we may not have the

ability to pull back as quick from that relationship. So we have to be very

careful..‖.
Source: Personal Interview conducted on July 28, 2010 (Time: 2-3 pm) at Sky‘s Office, Old Street, London

This view makes a strong suggestion that strategic alliances will have to

be an outcome of well-balanced analysis of relationship outcomes.

Monetary gains must spread equally to both alliances in the long run

otherwise; alliances start to feel the displeasure of relationship. A deeper

thought into the stiff-competition scenario expressed by Peter

Brimacombe, reflects the divergences building up over the converging

and competing scenario. This means the industry players compete to

build up their market shares using innovation and adaptation of dynamic

technologies. There is a room for strategic alliances for traditional print

media players (newspapers and magazines), that are already suffering a

downfall in their market shares due to strong displacement caused by

online media (free news and views available over the internet) . The plight of

traditional media players may continue as the life-cycle of this industry is

under attack by the new-internet stars.



Carolyn Morgan, Director, Penmaen Media predicts the slow death of

traditional companies who fail to catch the verve of the smart, dynamic

and young players (like Apple‘s iPad- launched on April 03, 2010 crossed over

10,000 subscriptions in mere 4 months). Carolyn says, ―I think it‘s still in the

smaller groups that provide more (niche) specialized content that will

survive. …But there is going to be quite a lot of blood in the floor, and

they will have to make their businesses smaller. They [traditional media

players] will have to reduce the number of journalists, reduce their

overheads‖.

Source: Personal Interview conducted on June 21, 2010 (Time: 11am-1pm) at Stamford, England

So, unless the traditional players do not sign strategic alliance

with digital players, they may find survival getting harder. But it is

observed that while companies are trying new alternatives- print media

aligning with online media, these strategies for Digital Convergence are

still not fully marketed to yield revenues.

Eric Elia, Vice-President (TV Solutions), Brightcove Inc

(Cambridge) believes, ―traditional print media companies trying a lot of

different things by creating online versions of the content and using

applications devices to to reach where the consumer is located‖.
Source: Face-to-face Skype Video Call interview from Brightcove Office, Berkley, CA on July 12, 2010 (Time:

9-10 pm GMT)



Views indicate that when it difficult to innovate start-ups, companies

prefers to ally with existing small-scale specialised firms. As the start-up

business models are nimble and agile and can be easily moulded

according to business objectives. Hence, in most cases the purpose of

formation of strategic alliance- that is competence benefits are observed

to accrue to both parties involved.

So, this part of Data Analysis summarises that traditional media

companies can have better revenues and a longer survival if they form

strategic alliances with emerging channels of distribution like the online

players.



4.1.2 Strategic Alliance and cross-media participation

Digital Convergence still lacks the maturity on thinking about cross-media

advertising. Cross-media advertising means advertising the same product

or service in several different types of channels offered by a single-

company so as to target the same audience accessing content from TV

and mobile, or on web and mobile than on TV alone. So, if an advertiser

spend similar amount of money on TV, on mobile and web on the same

audience‘s digital profile, they will be able to monetise better revenues.

Triona Campbell, Director, CR Films (London and Dublin) says, ―with

strategic alliance, you can have advertising that goes in all the platforms-

media, mobile, internet and technology and not in just in two or three

platforms….‖.
Source: (Face-to-face) Skype Video Call interview from Dublin studio conducted on July 5,2010

(Time:1-2 PM)



This process not only adds value to the communication chain but also

transforms a uni-dimensional communication to multi-media

communication. It ultimately cuts down the costs and disseminates

information with a greater impact. The advertising world is still caught in

the traditional one-media thinking rather than cross-media thinking over-

Web, TV and Mobile. So, digital media companies currently are struggling

to convince the advertisers.

Giuliano Stiglitz, CEO Orange Advertising (USA) & Global Sales

Director Orange UK notes that, ―advertisers don‘t see different

technologies as just part of one big information flow that they just see

different technologies in different platforms. So... they employ different

media strategies to target TV watchers from mobile users‖.
Source: Personal Interview conducted on July 1,2010 (Time:12-1 pm) at Orange FT office, Tottenham Court

Road, London

This implies online advertising poses a challenge and needs deep thought

over seeking cross-participation solution. Advertising media bases tend to

be very conservative.



Triona Campbell, Director, CR Films (London & Dublin) says,

―They[advertisers] buy by the number of eye-balls and the number of

page impressions. They don‘t understand how it quantifies the digital

content impact it to the people they‘re answering to‖. Cross-channel

advertising has still a long way to go as Triona adds, ―the current system

lacks a mechanism to quantify the product placement or judicial

integration of content would benefit in terms of the number of

consumers...We need something like Nelson‘s rating system for integration

and product placement‖.
Source: (Face-to-face) Skype Video Call interview from Dublin studio conducted on July 5,2010

(Time:1-2 PM)

This means, quantifying the metric to an advertiser would make sense.

Many other participants have converging views with Triona, expressing

concern over absence of a standard metric to measure Digital

Convergence impact by tracking digital footprints.

Further, Digital convergence is creating platforms for music industry‘s

applications. Application devices are partnering with the music content

developers. For instance, Apple motivates applications developers for the

iPhone by yielding 70 percent of the revenues for them by partnering with

music content provider like Universal Music.


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