Warner Bros. Entertainment Inc.: Case Study (Essay Sample)

Warner Bros. Entertainment Inc.: Case Study
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Warner Bros. Entertainment Inc.: Case Study
Warner Brothers: Company Overview
Warner Brothers, popularly known as Warner Bros (WB), is an American entertainment company based in Burbank, California that produces films, music and television entertainment. The company is one of the biggest movie production studios in the world that has stood the test of time and perennial industry challenges. The company operations are in the motion picture industry, which in the United States started in the 1920s. As a subsidiary of the Time Warner, Warner Bros came to the limelight in the midst of a Supreme Court ruling in 1948 that required production and distribution to be independent of operation and management of theatres (p. 1). The company was able to thrive under such conditions since it had the required (substantial) capital and international networks required to dominate the production and distribution segment (p. 2). Just as is the case today, in 2004, the company had a structured hierarchical structure with Alan Horn as the president, a position currently held by Kevin Tsujihara. This corporate structure is necessary given the nature of decisions that had to be made (with the president having the last say on such a decision) in the company just like is the case in the industry. For instance, Jeff Robinov, the then president of production (and later president of Warner Bros) relied on 4 meetings every week with 10 production executives at the company to examine scripts for production. The company is faced with several challenges, some of which are beyond the business’ control. For instance, the daily operations of the company involved gross uncertainty since there is no recipe for a blockbuster. The company relies on a strategy in which out of the 20-25 films produced annually, 3–5 were big-budget event movies. A preliminary SWOT analysis reveals that Warner Bros faces a major threat in the disguise of another studio employing a similar strategy. The business operations of the company are chronological stages entailing activities such as selection and "greenlighting" of movies, pre-production, filming, post-production and release.
Strategic Challenges Facing the Industry
The Motion Picture Industry faces a host of challenges, most of which are inherent in the abstract and the subjective nature of moviegoers. More aptly, the greatest challenge in the industry is developing a discernible strategy of producing a blockbuster since there is no criterion for such an endeavor. Today, the motion picture industry is faced with similar problems of budget constraints, estimating expected proceeds vis-à-vis expenditure and producing unique films. Moreover, other than the problems associated with production and distribution, the industry faces a new set of " big challenges today, especially from the ease with which content can be stolen, replicated, transmitted, and distributed online" (Joanna, 2015, n.p). Additionally, the current digitization programs have presented new challenges to the industry as implementing some of the recommendations of such programs require installation of new equipment and acquisition of licenses. Moreover, the digitization in the motion picture industry leads to "saturation releases" (Department of Culture, 2014, p. 12). According to Karray et al. (2015), the success of movies depends on the available information to form expectations on movies, a process that is usually informed by genre and MPAA rating (p. 706). In this statement lies the contemporary challenge to the industry, the production of a movie is a challenging situation that calls for a delicate balance between producing a self-discerned quality or aligning films to the subjective scrutiny by the MPAA which has influence on the movie reception. Along with these new challenges, the persistent problem of reinventing the wheel still exists. This is much clearer when Horn observes, "film-making is one of the few industries where we need to reinvent the wheel each time we start a new film" (p. 10).
Strategic Growth Opportunities for Warner Bros. Entertainment Inc.
Much as Warner Bros, just like most studios in the motion picture industry, is faced with several primal and contemporary challenges, there are new opportunities in the industry as well. The growth strategies for the company will be anchored on the opportunities presented as well as the core competencies of the business, especially the distribution network, assets and human resource endowment. The vertically integrated corporate structure of Warner Bros will also be critical to this endeavor, especially given that the stages of filmmaking require the employment of the best practices in decision-making. The following strategies present immense promise for the prospects of Warner Bros.
1.0 Market Segmentation
Market segmentation essentially implies that Warner Bros should categorize their potential audience based on geographical regions, age, gender and genre. This strategy will be particularly useful in reducing the uncertainties associated with revenues since different regions show different preferences of movies. This is much clearer when Sue Kroll, Warner Bros’ president of international marketing points out, ".. we know that audiences in various countries are drawn to particular actors and certain types of genres (p. 5)." This strategy, in its implementation, will entail writing certain scripts and developing themes complete with stars and cultural appeal in 2-3 out of the 20-25 films produced annually by Warner Bros to specific regions. This strategy is advantageous in the following ways.
* It reduces uncertainty over film proceeds
* Makes the decision-making process easy
* Leads to market dominance
* Leads to specialization and division and thus dexterity
* Simplifies the distribution channels and enhances efficiency
However, market segmentation, especially in the context of Warner Bros, will have limitations as espoused below.
* It limits the produced films to certain specific regions
* Restructuring operations to specialize in production of certain movies may be economically prohibitive
2.0 Mergers, Acquisition and Franchise
This strategy essentially implies that for Warner Bros to grow its business prospects there is a need to use its resources and established business reputation acquire other strategic studios and create subsidiaries, especially in the distribution channel abroad. The possibilities of this strategy are immense given the marketing and financial information available. For instance, a movie that grossed $40 million in the U.S. generated $40 million from abroad, better still, a blockbuster grossing $100 million in the U.S would generate $200 million from abroad (p. 5). These figures show the potential of the overseas markets that can be harnessed through strategic mergers, acquisition and franchises to enable robust marketing and distribution. This strategy has the following merits.
* It increases the law of averages and therefore sales
* Reduces overhead and production costs
* Increases operational efficiency
* Can lead to the benefits of market domination such as high ticket prices and reduced competition
* Can lead to economies of scale
The strategy has certain disadvantages such as
* It can lead to managerial problems associated with rapid business growth
* Can lead to market imperfections inherent in market domination by few business entities
* It can subject the business to conflicts of interest and further complicate the decision-making mechanics thus hindering operations
3.0 Business Risks Reduction Strategy (BRRS)
This strategy is hinged on the key challenge that there is no "recipe for a blockbuster" in the motion picture industry. In the context of Warner Bros, this reality is overly manifest. At one instance, Robinov confesses, "For every 10 ideas we buy, we end up making one film" (p. 8). Basic arithmetic reveals that in such occasions, in a single activity, Warner Bros undertake a 90% risk. It is important to note at this point that every business activity involves risks, but for a business to grow, it must develop a strategy to reduce the daily risks and ultimately, the produ...