CASE 3. TV Guide. TV Guide, by William J. McDonald, reprinted from Cases in Strategic Marketing Management, 1998, Prentice-Hall, Inc.

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1 CASE 3 TV Guide When TV Guide magazine first appeared in 1955, many people thought a publication based on something available for free from newspapers as television program listings was a dumb idea. Yet, 40 years later, TV Guide has a circulation of 14.5 million, making it the largest magazine in the United States. This weekly bible of television posted double-digit increases in both ad pages and revenue in each of 1993 and 1994, while facing increased competition from Sunday-newspaper television supplements and onscreen television program listings. However, circulation dipped slightly over the same period. TV Guide took in $391 million in advertising revenue in 1994, and, even after a 10 cent cover-price hike, it was selling 5 million newsstand copies each week, at 99 cents each. In 1994, TV Guide became the first magazine to gross more than $1 billion (Fig. 3 1 and 3 2). Each week, TV Guide s staff produces 119 editions that will be read by about 21 million television viewers. Developing each edition requires 100 steps from preparation to print. To improve the management of this array of details, TV Guide retired its outdated cut-and-paste process in favor of speedy electronic publishing tools. Technology is also allowing publishers such as TV Guide to target editions of their magazine at specific audiences. For a magazine like Radnor, Pennsylvania-based TV Guide, targeted editions are more than a marketing tactic, they are essential to the publication s existence. With its multimillion circulation, TV Guide must use sophisticated database technologies to set up a customized, database-driven workflow system to produce the magazine s editions. TV Guide editions generally share a common four-color cover and features, but the black-and-white features and listing sections are specific to each individual market. The program listings include scheduling information (show name, time, channel), explanatory listings (what episode), and features, such as the kids section, close-ups, and the crossword. Because much of this information is unique to each version, this section is in a constant state of flux. TV Guide, by William J. McDonald, reprinted from Cases in Strategic Marketing Management, 1998, Prentice-Hall, Inc.

2 Millions Year FIGURE 3 1 TV Guide Revenue Source. Estimated from various sources Millions Year FIGURE 3-2 TV Guide Net Income Source: Estimated from various sources

3 With its powerful publishing technology, TV Guide can create final, digitally imposed pages ready for output. The process begins in the editorial department, where powerful databases and personal computers (PCs) capture the two major types of editorial content: scheduling information and listing information. Advertisements, which also change from region to region, are managed separately by an advertising production system. TV Guide s strength has always been in its easily accessible listings. However, it plans to also continue to take the editorial high ground, which is another source of consumer interest in the magazine. Advertisers are interested in TV Guide readers because of their demographics. However, some wonder if TV Guide magazine can continue to grow in a magazine format, which is a dated, digest-sized one at that. iguide In 1996, TV Guide launched an interactive online version of the weekly television listings magazine. This offering is called iguide. Ultimately, the service will offer from a rotating headline home page with some 17 editorial categories, including books, computing, games, Internet, kids, government, science, movies, music, news, politics, shopping, sports, travel, TV, work/money, and the world. Most of the content will be original, although owner News Corp. s Fox Broadcasting and movie properties will be represented. The service will have forums organized around soaps, sports, movies, kid shows, and other programming categories that allows users to communicate with one another, and even interact with stars. The architecture will be similar to that of TV Guide magazine, and that includes advertising. However, television listings will be less prominent in iguide than in the magazine, avoiding potential conflicts with TV Guide magazine and TV Guide s new onscreen offering, which is accessible as part of a cable system. The completed version of iguide will allow users to create personalized TV grids for organizing the television viewing hours that their World Wide Web use is displacing. In the Movies section, a search feature called CineBooks will allow users to access detailed information on about 30,000 films. Political Pulse will compete with every other media outlet in North America to offer the definitive online coverage of the 1996 elections. Your Work, Your Money will help users analyze personal financial data and recommend investment strategies. iguide will also integrate with the wider Web by offering reviews of and links to other Web sites. TV Guide, just as most established magazines, has a problem with bringing in new younger readers who are perhaps just the sort of people who might find the online version while browsing the Internet. Thus, iguide provides a new way of attracting this hard to reach audience. It is easy to forget that the World Wide Web went from a relatively small audience to mass-market acceptance in a brief period. Estimates of Internet usage in the United States vary from fewer than 10 million to about 25 million. But with consumer product companies, local television stations, and college students boasting their own Web pages, it is clear that the Internet is here to stay. And, despite public protestations, that fact is understood in the executive suites of the major commercial online services. Prodigy has begun relocating to the Web; the Microsoft Network (MSN) is

4 making a total shift to the Web; AOL debuted a separate Internet access service; and CompuServe began offering its customers an Internet-only service, called Sprynet. The commercial on-line networks are, in part, victims of their own success. By stimulating the consumer appetite for easy access to information and other computer users, services like AOL, Prodigy, and CompuServe helped seed the market for the Web s growth. But increasingly, consumers refuse to limit themselves to a single, closed network when they can have access to the vastly greater riches of the Internet, including such free services as iguide. THE ALTERNATIVE OF ON-SCREEN GUIDES The television program listings field is going to get even more crowded as improved onscreen listings appear, including TV Guide s own joint venture with Tele-Communications Inc., which will potentially cut into TV Guide magazine s customer base. One major potential threat to TV Guide is Prevue Networks, whose onscreen listings reach more than 40 million subscribers in the U.S. and Canada. Television viewers will generally use the channel listing service offered free with their cable service. However, viewers need to go to that channel and wait for the program listing they are interested in to scroll by to view it. This listing lacks program content description, except for brief movie summaries. Prevue Networks is positioned as an alternate source that coexists with other listing sources in the marketplace. StarSight Telecast Inc. was the first company to offer television viewers an interactive electronic program guide alternative to using TV Guide, or other publications, to locate television programs. At the touch of a few buttons, this guide leads a viewer directly to a desired program. Users of the service pay an additional $4 a month for an extra data feed that goes into their set-top electronic box. That box or in some coming versions, the television includes StarSight-designed circuitry that translates the signal info data about all of the shows accessible on the cable system or on broadcast television. When a user turns on the television set, a notice appears indicating the name of the show tuned into, what it is all about, and the time remaining. If the viewer wants to see what else is on, he or she can use a remote to flip to a grid guide, similar in appearance to a newspaper television listing. Or, if the viewer knows what type of show he or she wants, the remote can be used to pull up a theme menu with categories to choose from. To record a show, the viewer just presses record. As interactive devices go, it is pretty passive; it makes it easier to sit on a couch and do nothing. Each converter box or television with a StarSight chip has a serial number. StarSight is able to activate or deactivate the service over the air by matching the serial number with a code that is transmitted in the data stream. StarSight is promoting the system not just to cable operators but to television, VCR, and satellite dish manufacturers. Zenith Electronics, Goldstar, and Mitsubishi have already agreed to include the StarSight chip in some of their television sets. (In Zenith s case, it will add $50 to the price of the set.) Not long after StarSight Telecast appeared, other television industry players decided to create similar services. News Corp. and Tele-Communications, Inc. share ownership of TV Guide On Screen. Not only does the product have significant

5 name-brand recognition, but thanks to the popular magazine, it also has the backing of an industry giant which reaches 40 percent of all cable viewers. BALANCING NEW AND OLD OUTLETS Media coverage of the content of other media, from TV Guide to Entertainment Tonight, has become a huge information category of its own. It will explode on the World Wide Web, which not only allows individuals to be publishers themselves, but also provides a venue where text, sound, and images are hyperlinked to other Web sites. This convergence may create a new audience of occasional or one-time readers willing to pay for content that fits a particular need or interest. The interactive nature of the Web has attracted millions of consumers and these people are potential visitors to the iguide site. However, some wonder if a chance to read about what is going on in television and entertainment from many sources plus the wide availability of television listing might not discourage people from buying TV Guide magazine. With so much free information available, will people be willing to pay for the magazine for access to iguide Web content? Even with all of the success TV Guide magazine has enjoyed over the years, it cannot become complacent. Now, it is being squeezed by other sources of television listing and by the many sources of news about entertainment. And there is the threat that technology will move beyond what TV Guide is able to do with a combination of its TV Guide magazine and its iguide while still making a profit. Then there is the problem of attracting younger readers and how TV Guide should handle that issue. This needs to be done while holding onto the magazine s existing large customer base. What marketing strategy would you advise TV Guide to pursue? What specific distribution, promotion, product, and pricing elements would you propose and why? How would you balance the new iguide offering with the existing TV Guide magazine? How would you deal with the growth competition from other sources of information about television? Sources Adams, Mark, Growing TV Guide. Mediaweek, 5, 27 (July 10, 1995): 5. Asbrand, Deborah. TV Guide Stays on Schedule With Workflow App. InfoWorld, 17, 37 (September 11, 1995): 56. Asbury, Eve. Give Your Readers What They Want. Folio: The Magazine for Magazine Management, 24, 21 (December 15, 1995): The Battle of On-Screen Guides, Dealerscope Merchandising, 37, 6 (June 1995): 1, 21+. Berniker, Mark. TV Guide Going Online, Broadcasting & Cable, 124, 24 (June 13, 1994): 49. Brady, James. The Little Magazine That Could... Advertising Age, 64, 14 (April 5, 1993): 26 Endicott, R. Craig. Ad Age 300: Ad Age Ranks the Nation s Largest Magazines. Advertising Age, 63, 24 (June 15, 1992): S1 S14

6 Hutheesing, Nikhil. Interactivity for the Passive. Forbes, 152, 13 (December 6, 1993): Krantz, Michael. Murdoch Eyes Another Empire. Mediaweek, 5, 27 (July 10, 1995): 4. Krantz, Michael. News Corp. Lays Off 189. Mediaweek, 6, 7, (February 12, 1996): Lynch, David J. End of the Line for On-line Services? Upside, 8,5 (May 1996): Manly, Lorne. TV Guide Tunes in to Online Service. Folio: The Magazine for Magazine Management, 23, 11 (June 15, 1994): 62. Montague, Claudia. How Viewers Feel About TV. American Demographics, 15, 3 (March 1993): News Corporation 1995 Annual Report.

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