4 Strategies for Value-Creation in Communication and Media Space - NWS, NEC, SXL

There has been a long prevalent debate over what should be a business’ priority for success. In today’s highly competitive and dynamic business environment, a company cannot rely upon one thing for achieving success. Thus, companies today focus on multiple areas, intending to create value for their customers. Value creation as a primary aim of any business entity comprises of the actions towards creating value for customers (by selling worthy goods and services), shareholders (in the form of higher returns) and business (by ensuring future availability of investment capital).

It is important to determine the factors within the industry, company and marketplace that drive value creation. Value creation is a task to be performed at multiple levels of the business as well as multiple areas of the business.

In the Australian communication and media space, we had recently witnessed few media companies developing a new joint platform with a view of enabling media agencies to buy advertising across commercial television in one place. The companies that came forward for the agreement to develop the platform were Nine Entertainment Co. Holdings Limited (ASX: NEC), Seven West Media Limited (ASX: SWM), Network Ten, Foxtel and SBS Media.

To learn more about the same, follow: Adding to Guide to Media and Advertising Stocks.

Here, we should discuss the strategies for value creation in the communication and media space in Australia.

1. Social Media Integration

The first identified area for value creation is the shift in preference of consumers towards social media for communication and media related activities. As a matter of fact, there has been a major development in the communication and media space in recent times with the shift towards social media for the purpose of value creation.

Some of the popular user-generated content domains are blogs and web forums, social bookmarking sites, photo and video sharing communities, as well as social networking platforms that together form what is called social media. These lay emphasis on the relationships among the users of the community.

Many international media companies are resorting to social media platforms like Instagram, Facebook and Twitter for engaging the users and viewers. According to the Australian Infrastructure Audit 2019 report, around 90% of Australians accessed the internet through their mobile phone in the year 2018.

With the penetration of the internet into semi-urban and even remote areas through mobile devices, media and communication companies have changed the way they connect with the users. Access to these services is just a click away.

2. 5G: A Must-Have Technology

In order to match with the fast pace of international growth, companies need to focus on getting edge over others by way of adopting new and innovative technologies like 5G. In Australia, the advent of 5G networks is on the horizon, with trials having begun already.

5G technology is likely to enable fast signal speeds (lower latency) that would underpin responsive technologies and applications, such as robotics, thereby positively influencing Australia’s economic productivity.

Installing 5G as part of service would not only provide a competitive edge to the companies in the Australian market but also provide a platform on the basis of which the companies can opt for expansion in the international market.

3. Strong Financials

What would you look for in a business to think of it as a sound business? Its financials, of course.

Strong balance sheet, high profits and increasing revenues all signify the strength of the business and efficiency in its operations. Since the media and communication sector is highly dependent on technological advancements and adaptive infrastructure, companies inevitably require funds for installing these wanted changes.

Maintaining strong financials and a fair statement of profit and revenues can keep the company in motion while responding to the changing technological and operational needs.

4. Regulations

A major concern that is taking priority in the eyes of the regulators is the privacy concern and protecting data of the users. The growing need for offering customised services in media and telecommunication to the users requires access to their personal information.

Regulators are of the strict view that the companies should take responsibility for the data collected by them. Also, Australia is believed to have a strong international standing on cybersecurity with its placement among the top ten countries for preparedness by the International Telecommunications Union in 2017.

With Australia’s data privacy regulation and enforcement rated as “heavy”, Australia ranks highly on cybersecurity and data governance with high community concern and constantly improving cybercriminal techniques.

Telecommunication and media companies in Australia are required to abide by the stated guidelines, as it would help them to develop an edge over domestic as well as international players.

News Corporation (ASX: NWS), Nine Entertainment Co. Holdings Limited (ASX: NEC) and Southern Cross Media Group Limited (ASX: SXL) are some of the players in the Australian media and communication space. Let us look at their stock performance, as on 6 January 2020 (AEDT 01:43 PM):

Bottomline

Today, telecommunication and media have become more central to human lives at home and work than ever before. There is an emerging demand for data-driven services and new uses for telecommunications, further requiring significant investments in the telecommunication sector.

Moreover, there are opportunities to improve telecom services for digitally disadvantaged, in addition to rural and remote communities and businesses in Australia, especially in the scenario where the needs of rural and remote users are often overlooked in upgrades to national telecommunications infrastructure