SWOT Analysis Fox Entertainment Group

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Fox Entertainment Group SWOT

Introduction

William Fox and a group of partners founded the Fox Entertainment Network in 1904.
After amassing ownership of 25 theaters, the young firm then went through phases of operating as a film exchange, and film rental company and eventually making movies under the name Fox Films in 1915.

The company merged with Twentieth Century Pictures in 1935. The company's name was changed to Twentieth Century Fox. Then the company changed its name to Twentieth Century Fox.

More recent changes include the News Corporation purchase of Twentieth Century Fox in 1985, the formation of the Fox News Channel in 1996 and The Fox Entertainment Group in 1998.

Strengths

Strategically integrated business practices

Fox Entertainment is an integrated entertainment company engaged in the development, production and worldwide distribution of feature films and television programs. The company also broadcasts television and cable network programming. The company is firmly entrenched in all aspects of the entertainment business. Vertical integration helps the company to generate better profit margins. Examples of this successful strategy include the purchase of Hughes and Direct TV. Fox employees a large number of subsidiaries to help facilitate this strategy.

Substantial film inventory

Fox Entertainment produced an average of 26 films per year during the period of 2004 through 2006. Through its subsidiaries such as Twentieth Century Fox, Fox 2000, Fox Searchlight Pictures, and Twentieth Century Fox Animation the company is able to compose a film inventory including League of Extraordinary Gentlemen, Dodgeball: A True Underdog Story, The Devil Wears Prada, and the X Men. Beneficial production partnerships with other businesses such as Universal Studios and Miramax Film have aided this development pace.

Substantial market size and strength

The Fox Entertainment company has four business segments and all are major players in their respective business. The company is one of the world's largest producers and distributors of motion pictures. Fox also owns and operates television stations in nine of the top 10 US markets, including New York, Los Angeles and Chicago. In the sports segment, Fox Sports Net is one of the largest Regional Sports Network (RSN) programmers in the US with stakes in more than 18 networks. Fox Entertainment is itself a subsidiary of the News Corporation. These assets allow Fox to exercise tremendous influence and leverage this power when launching new shows and programs.

Weaknesses

Over-reliance on reality TV shows

Fox Entertainment’s are down 6% year-on-year in total viewers and 8% year-on-year in the key adults category 18-49 year olds. The company’s ratings trouble result from too few successful scripted shows and an over-reliance on reality programming. A prime example is its dependence on American Idol to drive higher ratings. The performance of the network's other reality programs has been very disappointing. This reliance on the reality format is a major weakness which must be addressed or the company risks losing viewers to other networks in search of scripted shows.

Internal unrest among company leadership

In 2005 Lachlan Murdoch, Rupert Murdoch's eldest son, resigned as Deputy Chief Operating Officer following a rift over control of the family empire. Major decisions such as the relocation of the company base from Australia to America have been the source of internal disputes. There were also tensions over the status of Rupert Murdoch's daughters who were due to take control of the family trust, (which owns 29.5% of News Corporation), following Mr. Murdoch's death. Continued strife and disputes within the family regarding structure of control and leadership has the potential to destabilize the company's operations and affect its performance.

Opportunities

Stability via long-term contracts

In February 2006, Fox Sports Network entered into a 10-year deal with the Los Angeles Angels baseball team said to be valued at $500 million. The contract entailed the broadcast of 150 games a season. Angels has been a successful team that had won the 2002 World Series and the 2004 and 2005 American League West championships. Fox’s current licenses with the NFL, MLB, and NASCAR extend until the 2011 NFL season, the 2013 MLB season and the 2014 NASCAR season. These deals have translated into long term stability. In addition, Fox Sports also has had the right to broadcast the National Collegiate Athletic Association’s Bowl Championship Series from 2007 through 2010. The deals with professional sports leagues or organizations spell consistent increases in viewer base and revenues.

Recent trends in advertising expenditures

In June of 2010 Fox Broadcasting has launched this year's television advertising sales season -- another sign that companies are stepping up their purchase of television time to pitch their products after two years of cautious spending as a result of the economic downturn. Fox has fewer hours to fill because it programs 15 hours in prime time each week compared with 22 hours by ABC, CBS and NBC. In addition, the network has a stable schedule and big attractions including popular shows like "Glee," "House" as well as NFL football and next year's Super Bowl. The company can benefit significantly as prime time advertising rates usually contribute better to the revenues. Fox is expected to pull in about $1.9 billion from advertisers.

Government mandated broadcasting format

The FCC and Congress recently mandated that television stations to broadcast exclusively in digital form by 2009. In 2005 Fox Broadcasting Company launched a new digital broadcast system co-designed with IBM, that would help transform high definition (HD) broadcast production. The company is well positioned to capitalize on the shift to digital television. The change presents a significant opportunity for the company to increase viewership and advertising revenues.

Threats

Formidable competition

Several factors related to competition threaten the success of Fox Entertainment. Fox is faced with a large number of formidable competitors such as ABC, CBS and NBC. In addition there is The Walt Disney Company, Viacom Inc, Time Warner and UPN Networks. The impact of competition is exacerbated by the fact that some television competitors have a higher number of affiliates with VHF signals than Fox. Competition could affect the company's advertising revenues, as advertisers prefer networks with a higher number of affiliates. Furthermore, the company will also have to compete for the acquisition of the broadcasting rights to major events, reducing profit margins for Fox.

The growing incidence of content piracy

The proliferation of unauthorized copies and piracy of products has an adverse effect on the firm’s businesses and profitability since the sale of such products reduce the revenue that the company could potentially receive from the legitimate transactions. The creation, transmission and sharing of unauthorized content has had a negative impact on the entertainment industry.

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