STAND-ALONE VALUE OF HBO Harvard Case Solution & Analysis

INTRODUCTION

HBO is a premium cable and satellite television network worldwide as they provide their services to the users around the globe. HBO is owned by Home Box Office Inc. an operating subsidiary of team Warner and it primarily consists of original television series along with movies, made for cable movies and documentaries etc. Apart from this it is also the largest and old operating pay television service in USA. They provided their operations since November 8, 1972. HBO generated $1.8 billion in operating profit last year and it is the one-quarter of the total profit of Time Warner.

BUSINESS MODEL

HBO will finally start offering stand-alone, online-only plans next year. But while the über-popular premium channel is copying their direct-to-consumer distribution method created by Netflix, it will not be campaigning for the fairer internet including its rival. Jeff Bewkes, the CEO of HBO’s parent or guardian, the media conglomerate Time Warner, was asked at the big meeting with investors on Wednesday, “Where would you stand on online neutrality? As stated by Netflix, that all online data should be taken care of equally.

The charges of HBO are high as compared to other TV cable firms; therefore, TV cable firms impose additional charges to their customers. The reason why HBO did this was to make their content available specifically for the TV cable businesses.

Nowadays, HBO has become impatient with its TV cable partners; it has never done any work regarding marketing and advertising for the better quality of the channel. Plepler stated hundreds regarding a lot of dollars could be achieved by improving their marketing and advertising which would attract new customers.

PORTER’S FIVE FORCES MODEL

BUYER POWER

The first force that is buyer force is rated high in this industry because consumers have a lot of choices regarding the prospective of television and deciding which source to adopt for entertainment. The competition is high and it also creates opportunities for the industry to make such efficient strategic planning steps for the consumers to attain their services for entertainment.

SUPPLIER POWER

On the other hand, the supplier power in the television industry is low; as already it has been discussed that viewers have choices among channels and different shows, HBO needs to maintain their competitive advantage in order to afloat in this business. The only competitive advantage that can be identified appeals to those viewers who do not give such value to other competitive forces.

 THE THREAT OF NEW ENTRANT

According to porter’s five models the threats of substitute services are moderately high in this industry. Few barriers are associated with this industry. One Entry Barrier is the need of legal rights of supplying such as copyrights to potential customer. Another barrier is the change of technology as there is a use of online streaming involved in this business.

THE THREAT OF SUBSTITUTES PRODUCT

The particular bargaining power of suppliers in such an industry is really low overall. The suppliers for this industry are usually celebrities, sports agents, some well known Art institutes, IP licensing, performers and resourceful artists. While the overall major players in these supply areas maintain some control when it comes to those suppliers, however, Time Warner along with other companies within the industry are able to maintain level of control that leads to other suppliers in a position where survival becomes difficult for them.

THE RIVALRY AMONG THE EXISTING FIRMS IN THE INDUSTRY

Significant complex aspects associated with TV and Film Entertainment industry are because of the growing number of firms associated with media. The majority of the competitors and fresh entrants are substitutes because of the economies of scope; they maybe creating a new varied mix associated with delivery channels. Aside from the increased use of internet to deliver TV and film to the consumers as discussed in the last two paragraphs, other entertainment substitutes have started to take the appropriate steps to become much more competitive. One of the substitutes which is an increasing threat in entertainment is theatre.

ASSUMPTIONS

Several variable assumptions were taken in the project for the evaluation of HBO. Revenue assumptions are considered as the market trend and Time Warner’s previous performance regarding generating the revenue and Operating Income is also assumed as the upcoming media trends....................

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