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StrategyExecutionPlan-NationMediaGroup

Date:13thJuly,2016

PeterOyier

Background

NationMediaGrouporNMG,isthelargestindependentmediahouseinEastandCentralAfrica,andisquotedontheNairobiStockExchange.Intheyear2013themediaandentertainmentindustryinKenyarecordedstrongperformances,andespeciallysoinsectorsNMGprovidesitsservices.Digital/InternetrecordedrevenuesofUSD471Min2013,withaprojectedcompoundedannualgrowthrateof20%overthenext5years.NewspapersrecordedrevenuesofUSD175Min2013withaprojectedgrowthof3.9%overthenext5years.TheradioindustryrecordedrevenuesofUSD301Min2013withaprojectedgrowthrateof7.5%overthenext5years.TVrecordedrevenuesofUSD319Min2013,withaprojectedgrowthrateof14%overthenext5years(EntertainmentandMediaOutlook2015-2019–Exhibit2).

Thegroupisamulti-mediahouseprovidingservicesintheprintssection,electronicmediaanddigitalmedia.NMGcommandsanunparalleledreadershipandfollowingacrossallitsplatformsintheregionthoughitfacesgreatpressurefromcompetitorsespeciallyonitsonlineplatform.(Exhibit1–TheCompetitiveLifeCycle)

TheCompetitiveLandscape

Thecompetitivelandscapeinthemediaindustryhasbeencharacterizedbykeydisruptionsprimarilytechnologyledasfollows:

i) MigrationtothedigitalplatforminKenya–Electronicbroadcastisimpacted.Greateruseofmobiledevicestoaccessinformation.

ii) Demandbytheconsumersforreliableandunbiasedinformation.Thisisprimarilytargetedatindependentjournalism.

iii) Emergenceofsmallonlinemediaplayersprovidinginformationtothepublicandgrowthofonlinecompetitoractivitybybigmediafirms.

iv) Needtofulfilllegalrequirementof60%localcontentonair.

Intandemwiththeworldwideanalogueswitch-off,KenyapassedintolawtheshiftfromanaloguetothedigitalplatforminJune2015.Thishashadanimpactonthe‘bigthree’mediahouses:NationMediaGroup,StandardMediaGroupandRoyalMediaServices.Thebigthreehadinvestedheavilyininfrastructurethatsupportedanaloguetransmission,whichisnowirrelevant(DigitalKenya).

TraditionallyNMGhasbeenthe‘goto’mediahouseforinformation(especiallynews)butcompetitoractionhascontinuedtothreatenitsleadingposition.NMG

hasovertimerespondedbyinvestinginitsdigitalplatformandhasleverageditsstrongnews-makingmachineryandlong-standingprintpresencetobuildastrongonlinepresencefortheKenyandiasporaandlocalsaswell.

ThechangesinthemodeofdeliveryofnewsproductsfundamentallyimpactthemediaindustryandindeedtheinternationalizationstrategyofNMG.Itsstrongandwell-recognizednewsproductscannowbefoundacrossthebordersbeforetheyhavesetfootinthecountry.Thisdisruptionorshift,hasindeedcausedanewS-curvetoformandtheindustryiscurrentlyinanemergentphaseasbusinessmodelsarere-shaped.Somebusinessesmayconsidergreaterinvestmentinonlinepresencewhilereducingtraditionalformsofdelivery.AnemergingcompetitiveareahasbeeninthecreationoforiginallocalcontentbymediahousesinKenya.AlthoughCitizenTVhasmadeleapsinthisregard,nomediastation,orprivateproductionhouse,isanywherenearfulfillingwhatwillsoonbeamandatoryrequirementbylaw,toair60%localcontent.Thiswillalsoapplyforradiostations.Thislawisalreadyinplace,thoughtheenforcementofithastakenabackseatduetotherealizationbytheexecutive,thatthoughthelegislaturepassedthelaw,itsapplicationisnotasstraightforwardduetocapacityissueswithinthemediaandentertainmentindustry.

NationMediaGrouprecentlycarriedoutarestructuringwhichoversawtheshutdownofsectionsofitselectronicmediadivision.NationFMandQTVwerethebiggestbrandsthatwereshutdownduetoperformancerelatedchallenges.ThisperhapspresentsNMGwithanopportunitytoinvestincontentcreationandcontentcreationfacilities.

CompetitorAnalysis:

Financials Capabilities Values Strategy

NationmediaGroup

2013&2014RevenuesremainedunchangedatKes.13Billion.ROI24.48%

Strongexperienceandabilitiesingatheringofcontentfordisseminationonallplatforms:Radio,TV,printandonline.Keystrengthliesinprint-DailyNationandSundayNationnewspapershavepeakreadershipsofapproximately

Journalisticintegrity.Keenonbeingthereliablesourcefortruth.BelievesinstaffwelfareandfairnesstoallastheybecomethemediaofAfricaforAfrica.ItsoverallvalueapproachispartlybasedonthebeliefsofitsfounderH.HAgaKhan.

NMGlookstogaingreatercontroloftheinitshigh-performancebusinesslinessuchasPrintandTVandmaylooktoconsolidateitsradiobusinessandfocusonthegrowingKiswahilimarket.NMGwilllooktoleverageitsstrongprintcapabilitiesontotheonlineplatformwhichisafast-growingsegmentasindicatedbytheprojected20%compoundedgrowthoverthenext5years.

190,000and1Mrespectively(Exhibit7).Hastheabilitytocommissionand/orproducelocalshowsandTVseries.

StandardMediaGroup

2013revenuewereatKes.4.81BillionandKes.4.78Billionin2014.

Strongexperienceandabilitiesingathering&productionofcontentfordisseminationonallplatforms:Radio,TV,printandonline.KeystrengthliesintheirTVbrandKTNandgrowingradiobrandRadioMaisha.

Believeinbringtheworldtoitsaudienceinaboldanduncompromisingway.Theyupholdjournalisticintegrityevenintimesofintimidation.

TheGroupisdevelopingstrategiestoengageconsumersonnon-traditionalplatformssuchasdigitalmedia,assomeofthetraditionalplatformsforinstanceprint,areshowingsignsofstagnation.

RoyalMediaServices

Notapubliclylistedcompanyandfinancialsnotaccessible.

Strongexperienceandabilitiesingathering&productionofcontentfordisseminationonallplatforms:RadioandTV.Throughitsvernacularradiostations,RMScommandsasizeableamountofthemarketshare

Haveastrongbeliefincultureanditisreflectedintheirvernacularradiopropositionthatspansmostmajorculturesandtalkstothemintheirveryowndialects.Defactopioneersofthe‘new’localcontentparadigm.Believeinremuneratingstaffwell!

RoyalmediaserviceswillplantoholditsstrongaudiencepositionacrossbothradioandTVtoensuretheycancommandhighadvertisingrates.Theywilllooktocontinueleveragingtheirstronglocalcontentpropositionandtheirnationalreach.

andareleadersintheTVviewershipsegmentthroughtheitsCitizenTVbrand.(Exhibit3)

StrategyFormulation

BusinessModelCanvas

WiththefastchangingbusinessenvironmentinthemediaandentertainmentindustryinEastAfrica,duetobothtechnologicalandlegislativechanges,thebusinesscanvasmodelallowsustoidentifykeyvaluepropositionfortheservicebasedcompany,andcorrelateitwithrevenuestreams.Thisallowsteamswithinthebusinesstoremainfocusedandnotnecessarilyantagonizedbythetraditional50+pagedbusinessplan;itallowsforeasierandfasterchangestothemodelwherenecessary,especiallygiventhefastchangingenvironment;andoffersgreaterleveloftransparencythatallowstheteamgreaterandfasterunderstandingoftheonepagedocument.

StrategyAnalysis

FiveForcesAnalysis

Buyers:Thebargainingpowerofthebuyersinthemediaindustryisnotstrong.Thisisespeciallysoinmainstreammediawhichoffersonlythreekeyproviders.Mediaadvertisingratesarearguedtobehighermakingcostperreachunprecedentedformostconsumers.Thoughbecausechoiceofnationaladvertisingoptionsislimited,consumersendupspendingneverthelessmakingtheirbargainingpowerlow.Thiscreatesacaseforproducingmorelocalcontentwhichwillneverthelessbeconsumedbyviewerships.

Suppliers:Thethreebigplayersintheindustryhavecapabilitiesofcarryingouttheirownproductionofcontentincludingrunningtheirownnewsproductionhouseswithcorrespondentsacrossthecountry.Thismakestheneedforindependentproducersmuchlowerandreducingthebargainingpowerofsuppliersofcontent.Itisalsoimportanttonotethatthesupplyoptionsavailablearevastwithmanyindependentproducersinthecountry.

Substitutes:Thethreatofsubstituteproductsisrelativelylowastheconsumerisgreatlydependentandcomfortablewiththetraditionalmediumsofnews-TV,Radioandprint,andnowbreakingintoOnlinethatisnowgrowing.

PotentialEntrants:Entrybarriersarerelativelyhighifonewishestoplayintheprint,TVandRadiosectorsallatonce.Thisisduetothehighcostoffixedassetsrequired.TherealthreatofentrantsisinthedigitalTVspacethatnowrequiresnoback-endtransmissioncapabilities,suchasmastsandtransmittersforanentrant,reducingcosts.

Rivalry:Withthethreatofnewentrantsintothemainstreambroadcastmarketminimal,thecompetitionlevelsarenotintense.Theplayersarehappynottostartprice-warsandcontinuetoleveragecross-groupsalestowooadvertiserstopurchaseacrossalltheirplatforms.

TheHypothesis

IsNationMediaGroupiswellplacedtobackwardintegrateandbegincreatingandproducinglocalcontentfordisseminationonitsTV,Radioandprintplatformsandforsaletoothernetworks,andbecometheleadingproducerofmediacontentintheregion.

CoreAssumptions:

A. TheValueTest:1. Thereisneverenoughcontentforthemarket.Tastesandpreferences

aredynamic.2. Marketdoesnothaveenoughlocalcontent.3. Positioningitselfastheproducerofcontentthatespousesculturaland

nationalvalues.Thisisnottrulypresentinthemarket.B. TheExecutionTest:

1. NMGhasproductioncapabilities.Someofthesecapabilitieslieidlenowgiventherecentshutdownofsomeofitselectronicmediabrands.

2. Creativetalentcanassumeroleofcreating/scriptingcontentrequired.3. NMGalreadyhasthecriticaldistributionchannelrequiredtogetend

producttomarket.C. TheScaleTest:

1. Industrydoesnothavemajorcontentproducer/majorproductionhouse.

2. Smallerproductionhouseswillexpressinterestinworkingwith/andhiringproductioncapabilities/facilitiesofNMG.

3. Merchandisingofcreatedproducts.D. TheDefensibilityTest:

1. Newlawscreatetheneedformorecontentproducers.2. Competitiononlylikelyfromonemajormediahouse–RoyalMedia

Services.Qualityconcernswouldbethecompetitiveadvantage.

ThoughtExperiments&Data:

1. Whatdoweknow?a) GovernmentrequiresmorelocalcontenttobeairedonTVstations.

60%localcontentregulation.b) Morejobscouldbecreatedthrougheffectivelocalcontentproduction.

2. Whatwedonotknow,butcouldknow:a) Canmarketsupportproductionoflocalcontentthroughaggressive

consumptionofthesame?b) Dowehaveenoughqualifiedpersonelltocreateandproducecontent

wellandonbudget?3. Whatwedonotknow,andcannotknow:

a) Willcontentbeacceptabletolocalmarketfromtheonsetthusencouragingproducerstoinvestmoreearlyon?

b) Therecouldbenewoffshoreproducersthatcreatecontentpreferredbylocalconsumer?

Thoughdataonmediaconsumptionisavailablebutatacost,itlevelslimitationsinasfarastestingourassumptions.ThishoweverdoesnotholdbackassertionsthatthemarketinKenyaandEastAfricarequiremorelocallyproducedcontentforitspeopleandkeyindustryplayersneedtomakeboldstepstowardsthis.NMGneedstotakethenextstepsbycommissioningtwotothreeprivate

productionhousestoproduceTVshowsasatest,andthereafterusethatasabasistobeginproducinginternally.

StrategyImplementation

Alignment:

NationMediaGroupisabigorganizationwithmanystaffspanningacrossdifferentterritoriesinEastAfrica.Thisnaturallybringstotheforethecriticalissueofaligningitsvisionwithallstaff.Thevisionisacriticalcatalysttotheestablishmentofthecultureoftheorganization,whichinturnwilldeterminehowpeopledothingsandtheirmotivationsbehindthedoing.Fortheorganizationtobesuccessful,alignmentbetweentheleadershipanditsstaffiskeytoensuringitalsoalignswellexternally.

Ability:

NationMediaGroupalreadyhascreativeandproductiontalentin-house.Keyareastheywouldneedtolookintoisaligningtheirtalenttonowfocuscreatingwiththenewbusinessdirectioninmind–creatinglocalcontent.Salesandmarketingstaffwouldalsoneedsomelevelofrecalibrationtohelpthembuildnewskillsinsellingthecontent.

Architecture:

Thestructureofthebusinesswilldetermineitsabilitytosucceedunderthenewdirection.Thebusinesswillhavetoviewitselfmoreasacontentproducerinallshapesandforms,deliveredacrossallitsavailableplatforms.Thiswouldrequireachangetothestructureofthecompanythatisverymuchattunedtoproducingfornews.Theorganizationwouldnowneedpersonnelwhounderstandcreationandproductionofcontentinkeyleadershippositions,aswellaskeysalespersonnelwhounderstandcontentsales.

Agility:

Byitsverynature,NMGisabureaucraticorganization.Thisislargelysobecauseofitsownershipandoperationalstructure.Sincetheearly1900sithashadawayofoperatingpassedonovergenerations.Astrongbeliefinsettinguptheinfrastructuretobroadcastwasthefocusforthebusiness.Sincethentherehavebeennewentrantsintothemarketwiththesameofferingandchangesintechnology,whichshiftedthecompetitiveplayingfieldtocontentproducedannotinfrastructure-NMGadaptedwell.Furtherchangesinregulationhaveseentheneedforagreaterlevelagility,withcontentbecomingkingat60%ofallbroadcastmaterial.NMG’sagilityinstructurechanges,personnelandabilityto

swiftlyalignthesewithitscapabilitieswillmakethedifference,andwillcertainlybetestedfurtherasitadaptsandtriestoremainaheadofthepack.

Conclusions

NationMediaGrouphasbeenandremainsakeyplayerinthemediaandentertainmentsphereinEastAfrica.Withregulatoryrequirementsdrivingtheneedtostrategizeandchartthenewbusinessdirectionforindustryplayers,NMGcanleveragecertaincapabilitiesandbackwardintegrate.Throughabackwardintegrationstrategyitcouldsolveamarketgapofcreatingmorelocallyproducedcontent.Itisclearthatthereisagapinthemarketwhichisnowherenearbeingfilledandthisisevidencedbythegovernment’sslowdownonenforcementofthe60%localcontentlaw,whichisaclearindicationofthemarket’sinabilitytodeliverontherequired60%localcontent.Asarespectedmediahouse,NMGcanmakeanentryintoproductionbycommissioningprivateandindependentproductionhousesbeforejumpinginwithbothfeet.ThecompetitionpresentalsohaslimitationsespeciallyincapabilitiesandfinancialmusclewhichNMGcantakeadvantageof.NMGcanleverageitsstrongfinancialstructure,skilledpersonnelandstrongtraditionoftrustedcontenttoproducemorefornotonlyitsownedplatforms,butemergingonlineplatformsanditstraditionalcompetitors.

References&Exhibits:

Exhibit1–TheCompetitiveCycle

Exhibit2:

Exhibit3

NTV&QTV–NationMediaGroupTVBrands

http://www.rich.co.ke/media/docs/Nation%20Media%20Group%20Ltd.-%20Audited%20Group%20Results%20for%20the%20Period%20Ended%2031%20Dec%202015.pdf

DigitalKenya:http://digitalkenya.go.ke/welcome-to-digital-kenya

ChangesInTheMediaLandscape–KARFEstablishmentSurvey2015

CommunicationsAuthorityofKenya:http://www.ca.go.ke/images//downloads/BROADCASTING/MarketStructure/Broadcast%20Market%20Structure%20and%20Licence%20Fees.pdf

CompetitionStudy–thebroadcastingindustryinKenya:

http://www.ca.go.ke/images/downloads/RESEARCH/Competition%20Study%20on%20the%20Broadcasting%20Industry.pdf

Entertainmentandmediaoutlook:2015–2019SouthAfrica–Nigeria–Kenyahttps://www.pwc.co.za/en/assets/pdf/entertainment-and-media-outlook-2015-2019.pdf

DigitalKenya:http://digitalkenya.go.ke/welcome-to-digital-kenya

NationMediaGroup:http://markets.ft.com/research//Markets/Tearsheets/Financials?s=NMGK:NAI&subview=IncomeStatement&period=a