On the one hand, Fox News’s takeover has many advantages, which are supported by the quantitative values of this platform in the form of the number of subscribers, growth over the past year, and profit. The audiences of CNN and Fox News are significantly different, which promises a 95% post-acquisition subscription influx (Baye et al., 2022). Therefore, we can conclude that this direction of the company’s services is diversified with certain positive aspects, which will be presented below. However, this purchase is associated with several risks due to the high price of the brand, the implementation of new content in the emerging markets of Europe and Asia in terms of external legislative and technological factors, which requires additional study of all financial aspects of the transaction to assess its relevance.
Regarding economic profit, it is evident that with the continued mechanism of subscriptions to these networks, the company will sooner or later make a profit, depending on the transaction price. The more important aspect is that Time Warner will get a significant portion of new subscribers under its wing, and with specific actions, it can count on the sustainable development of a new branch of the business. First, by creating an integrative subscription that allows more products to be bundled for less—like both CNN and Fox News—the company will be able to integrate and expose nearly disparate audiences to content diversification. Secondly, a push in the direction of AOL Europe, which just managed to turn the fall in this region and consolidate the overall success of the holding on this continent, will come in very handy. Thirdly, competition in this market segment, unlike film production or, for example, book sales, is relatively low, but it has its specifics. Most cable TV providers in the regions are monopolists, leading to a natural technical limitation and lack of growth incentives (Crawford et al., 2019). The takeover will encourage this trend but, at the same time, will create many opportunities for the industry to develop content through increased profits.
Therefore, the centralization of the financial activity of subscribers can, among other things, be aimed at improving the technological issues of the company’s development. Given the high level of competition among diversified holdings like Time Warner and their competitors, technological development is a determinant of an organization’s competitiveness in the marketplace (Costa et al., 2022). As a result, this transaction is likely to bring cost-effectiveness in the long term, while the high price of the arrangement may provoke financial deterioration in the short time.
Accordingly, there are several risks that the company may face in this transaction. First, the target audience may not get the necessary information about new features within the same hardware without a proper approach to integrating Fox News into the Time Warner system. At the same time, to avoid this minus, significant marketing costs are required, which will increase the transaction cost, delaying the break-even moment. Second, the Fox News audience may overlap to varying degrees with other Time Warner products and divisions, which could reduce subscriber numbers in the short term in the absence of an integrated subscription. Finally, significant risks may be posed by the authorities of the regions where the deployment of a new unit is planned: Europe and Asia. Additional taxes, and assistance to local companies, to a greater extent, can negatively affect subscription sales. In addition, there may be difficulties with the technical equipment necessary to implement networks for a broad audience in Asia. Consequently, it is essential to consider potential losses and expenses that can delay the project’s payback for an indefinite period, especially in the absence of proper management behavior.
References
Baye, M. R., Prince, J., & Squalli, J. (2022). Managerial economics and business strategy (Vol. 10). New York: McGraw-Hill.
Costa, I., Riccotta, R., Montini, P., Stefani, E., de Souza Goes, R., Gaspar, M. A. & Larieira, C. L. C. (2022). The Degree of Contribution of Digital Transformation Technology on Company Sustainability Areas. Sustainability, 14(1), 462. Web.
Crawford, G. S., Shcherbakov, O., & Shum, M. (2019). Quality overprovision in cable television markets. American Economic Review, 109(3), 956-95. Web.