Strategy Digest Volume 1 (Dec)

Top newspapers gearing up to make readers pay for online content

Some of the world’s top newspapers including “The New York Times” and “The Times of London” have showcased a serious intent to charge readers for online content. In recent times, the US and UK newspaper industries have been continuously plagued by steeply declining advertisement revenues. The decision to charge for online content comes with its share of serious difficulties that include the possibility of a heavy decrease in online readership which might make advertising through this medium less attractive for marketers. The publishing houses are still sometime away from actual implementation but it is interesting to see the starkly different strategies that they plan to implement.
The Times of London – The Times of London plans to establish an opaque pay wall which will allow readers to access the content for a price of £1.00 for a day or £2.00 for a week. A similar strategy which seemed to work for the business counterpart, “The Financial Times”, in the earlier stages failed to deliver results for The Times which witnessed a grave downfall in readership by almost 90 percent during test runs.
The New York Times – NYT’s plan of going for a “metered” tariff is very different. It plans to charge readers after they have accessed a limited number of free articles on the website. FT has been using this model for the last few years and at present the digital revenue at FT represents about 20 percent of the total revenue.
The publishing houses strongly believe that paid subscriptions allow them to gather valued data which in turn helps fine tune advertising programmes for the target audience. This offers better value to the marketers and increases the efficiency of advertising revenue for the newspapers.

“The Great India Nautanki Company” in China

Kingdom of Dreams, which is India’s first of its kind live entertainment complex, is ready to be established in China. The Great India Nautanki Company (GINC) which controls the Kingdom of Dreams has entered into a JV with China’s leading stage equipment manufacturer Dafeng to setup 10 live entertainment destinations in China at an investment of roughly $100mn each. It is common to hear about Bollywood popularity in the USA and Europe, but GINC’s strategic move into China with its theatrical firepower presents an interesting strategy that has been adopted by the company. GINC is banking on China’s local tourism where more than 30 million people travel each year.
The idea behind Kingdom of Dreams is to deliver an assortment of complete Indian entertainment which would include Indian handicraft, architecture, exotic Indian cuisine and India’s most expensive theatrical extravaganza – “Zangoora”. Wireless interpretation machines and dubbed dialogues will pave the way for our Chini brothers to understand and enjoy Indian art. The move sounds fresh and aims at more than 24 percent ROI.

Dell enters the smart phone market in India

A month after unveiling the Dell Streak tablet, Dell has launched two Android based smart phones, XCD 35 and XCD 28 attractively priced at Rs. 16,990 and Rs. 10,990 respectively. After establishing a strong foothold in the laptop market in India, it is interesting to see Dell exploring the hyper-competitive smart phone market in India.
The smart phone segment in India has seen a dramatic turnaround from being the corporates’ delight to becoming an affordable gadget for the tech lovers. The competition is intense and has proved to be tough to deal with, even for supremely experienced players like Nokia. The segment is growing at an attractive 30 percent. With Apple, Nokia, Samsung and HTC fighting it our hard in this segment Dell is obviously a late entrant and will have to perform exceptionally to make a name.
Dell’s strategy is banked upon a) The upcoming rollout of 3G services in India which will further boost demand for smart phones, b) Dell’s established clientele in the laptop segment and it’s highly rated after sales support network and c) The growing acceptance of Google’s Android mobile platform in India.
Dell wishes to couple this launch with an extension of its retail network in India to enhance sales. The customer is at the winning end with tonnes of choices in the smart phone segment and Dell’s entrance will be another headache for Nokia which has been struggling lately.

NSE to form Global Alliances

The recent deal between NSE and LSE to work out a joint venture and allow CNX Nifty and FTSE 100 to be traded on each other’s exchange is of great strategic significance. With such a deal in place, CNX Nifty, will become a globally traded contract and NSE will be able to offer a basket of top traded global indices. This move is expected to benefit both the exchanges and the investor community and seems to emerge out of a strong economic logic. The landscape in which stock markets have operated globally are fast changing. With advancement in IT services and almost negligible marginal costs involved in executing trades, the traditional parameters for judging a stock exchange’s competency are fast losing ground.

Typically, stock exchanges earn revenues from member subscriptions, fees from listing, trading, clearing and settlement services and charges for providing company news, quote and trading data. But with negligible marginal costs involved with each of these activities, the associated margins have dwindled significantly. Therefore, the economic viability of any exchange to a large extent is determined by the volumes of trade being transacted through it. The traded volumes in turn are dependent on the reach and liquidity offered by the stock exchange. In stock markets, liquidity breeds liquidity. Because of higher liquidity, the bid-ask spreads (the difference between the best buy and best sell prices of any scrip) become lower, which brings down the transaction costs for brokers. Because of lower transaction costs more brokers trade on the exchange, increasing the liquidity again.

Given the changing nature of the market forces, a strong case is set out for alliances among the stock exchanges. Alliances among stock exchanges will provide them with a positive network externality as a wider network would result in greater liquidity. With a wider network in place, more traders are expected to trade on that network as an order being sent out by them is more likely to get executed if there are others sending out their orders on the same network. Therefore, a network with a large order flow will attract more orders.

Apart from the strategic interests of the exchanges, such a tie-up will also benefit the investors. Traditionally, the high trading costs have limited Indian investors from taking positions in foreign stocks. The tie-ups between Indian and foreign stock exchanges are likely to make it easier for Indian investors to invest in foreign stocks.

The success of this deal is expected to set the path for future global tie-ups of Indian exchanges and provide synergies from other tie-ups of foreign exchanges. These tie-ups will add to the reach of the Indian stock exchanges and enable them to provide a wide range of trading options.