Competitive Dynamics in the Online Video Streaming Industry
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STREAMING WARS: COMPETITIVE DYNAMICS IN THE ONLINE VIDEO STREAMING INDUSTRY Jyväskylä University School of Business and Economics Master’s thesis 2020 Authors: Korhonen Aleksi & Rajala Janne International Business & Entrepreneurship Supervisor: Lamberg Juha-Antti ABSTRACT Authors Korhonen, Aleksi & Rajala, Janne Title of thesis Streaming Wars: Competitive Dynamics in the Online Video Streaming Industry Discipline Type of work International Business & Entrepreneurship Master’s thesis Time (month/year) Number of pages 06/2020 118+3 Abstract Digitalization and advances in technologies have changed the world in the past few dec- ades. This has affected consumer behaviour and developed new, more dynamic, indus- tries as well. As a result, competition is fiercer than ever, and competitive advantages are only temporary. This thesis builds on the literature of strategic management and compet- itive dynamics by exploring the competitive interaction of companies in the Subscription Video-on-Demand industry. We seek answers to how competitive advantages are pur- sued within the industry and how the strategic decisions of the companies differ from more traditional industries. To answer this, the press releases of several publicly listed U.S. based SVoD companies were collected and analysed through qualitative content analysis. After that, the connec- tions between the competitive actions were linked through event structure analysis to un- derstand how rivalry affects the companies within the industry. The results show that in contrast to traditional industries, competition in the growing SVoD industry revolves around content, which is enforced through resource building, co- creation, and to some extent, market expansion. The nature of competition is a defensive race to outperform others in the long run as big established companies are also entering the market. Finally, our results help predict which actions are important for the companies to prepare for the accelerating competition and upcoming industry shake-out, and to ul- timately retain the interest and subscription of consumers. The results open further re- search on repeatable competitive patterns in the SVoD industry as new competitors have entered the market after the period of our analysis. Keywords Competitive Dynamics, Competitive Advantage, Strategy, Industry Evolution, Digitaliza- tion Location Jyväskylä University Library TIIVISTELMÄ Tekijät Korhonen, Aleksi & Rajala, Janne Työn nimi Streaming Wars: Competitive Dynamics in the Online Video Streaming Industry Oppiaine Työn taso International Business & Entrepreneurship Pro-gradu tutkielma Aika (kuukausi/vuosi) Sivumäärä 06/2020 118+3 Tiivistelmä Digitalisaation ja teknologinen kehitys on muuttanut maailmaa viime vuosikymmenien aikana. Muutokset ovat vaikuttaneet kuluttajakäyttäytymiseen sekä luonut uusia, dynaa- misempia markkinoita. Lopputuloksena kilpailu on kovempaa kuin koskaan ja kilpai- luetujen saavuttaminen on vain väliaikaista. Tämä tutkielma rakentaa strategisen johta- misen ja kilpailudynamiikan teoriaan tutkimalla jäsenmaksullisten videosuoratoistopal- veluiden toimialan välistä kilpailuvuorovaikutusta. Pyrimme vastaamaan siihen, miten toimialalla tavoitellaan kilpailuetuja ja miten yritysten strategiset päätökset eroavat pe- rinteisistä toimialoista. Vastaamme tähän keräämällä usean julkisesti noteeratun yhdysvaltalaisen videosuora- toistopalvelualalla toimivan yhtiön lehdistötiedotteita ja tutkimalla niitä kvalitatiivisen sisällönanalyysin avulla. Tämän jälkeen sidomme löydettyjen kilpailutoimenpiteiden yh- teydet toisiinsa tapahtumarakenneanalyysin avulla ymmärtääksemme, kuinka kilpailu vaikuttaa toimialan yrityksiin. Tuloksemme näyttävät, että verrattuna perinteisiin toimialoihin, kilpailu videosuoratois- topalveluiden kasvavalla toimialalla keskittyy sisältöön, mitä vahvistetaan resurssien ra- kentamisella, yhteisluonnilla, sekä joissain määrin markkinalaajentumisella. Kilpailun luonne alalla on rakentaa puolustusta ja suoriutua muita paremmin pitkällä aikavälillä samalla, kun suuret vakavaraiset kilpailijat astuvat markkinoille. Lopuksi tuloksemme auttavat ennustamaan mitkä kilpailutoimenpiteet ovat yrityksille tärkeitä valmistautuak- seen kiihtyvään kilpailuun ja tulevaan yritysten karsiutumiseen, sekä lopulta pitämään kuluttajat kiinnostuneina ja maksavina asiakkaina. Tulokset avaavat mahdollisuuden tut- kia kilpailutoiminnan toistettavia kuvioita videosuoratoistopalvelualan tulevaisuudessa, sillä tutkimusaikamme jälkeen uudet kilpailijat ovat astuneet markkinoille. Avainsanat Kilpailudynamiikka, Kilpailuetu, Strategia, Toimialaevoluutio, Digitalisaatio Paikka Jyväskylän Yliopiston Kirjasto 3 CONTENTS 1 INTRODUCTION ................................................................................................ 6 2 THEORETICAL FRAMEWORK ...................................................................... 13 2.1 Competitive Strategy, Advantage and Dynamic Environment ....... 13 2.2 Sustaining Competitive Advantages in Modern Markets ................ 16 2.3 Competitive Strategy Planning in Evolving Industries .................... 22 2.3.1 Evolution and Development of Industries ............................... 22 2.3.2 Benefiting from Evolutionary Theories in Strategic Planning 27 2.4 Seeking Competitive Advantages in Dynamic Markets ................... 29 2.4.1 Temporary Advantage in Dynamic Environments ................ 31 2.4.2 Utilizing the Competitive Dynamics Perspective in Gaining a Competitive Advantage .................................................................................... 36 2.4.3 Competitive Interaction and Outcomes from an Action- and Business-level Perspective ................................................................................ 40 3 DATA AND RESEARCH METHOD ............................................................... 49 3.1 Data ........................................................................................................... 49 3.2 Method ..................................................................................................... 55 4 RESEARCH FINDINGS .................................................................................... 60 4.1 Individual Company Findings .............................................................. 60 4.2 The Competitive Dynamics and Trends in the SVoD Industry ....... 75 5 DISCUSSION ...................................................................................................... 95 6 CONCLUSIONS ............................................................................................... 105 6.1 Managerial Implications and Future Research ................................. 107 6.2 Limitations ............................................................................................. 108 REFERENCES ............................................................................................................. 110 APPENDIX 1. SVOD SERVICES PRICE EVOLUTION ....................................... 119 4 LIST OF FIGURES AND TABLES Figure 1. Industry Life Cycle. (Peltoniemi, 2011; Porter, 2004). ............................ 23 Figure 2. Research Streams for Gaining a Temporary Competitive Advantage. (Chen & Miller, 2012). ................................................................................................. 31 Figure 3. A Set of Temporary Competitive Advantages. (D’aveni, 1994). .......... 33 Figure 4. Levels of Competition Within Industries. (D’Aveni, 1994). .................. 34 Figure 5. The Chosen Themes of Competitive Dynamics for our Research. ...... 41 Figure 6. Competitive Advantage Through Competitive Interaction. (Grimm et. al., 2006). ........................................................................................................................ 42 Figure 7. Detailed Competitive Interaction. (Chen et al., 1992; Chen & Miller, 2012; Ferrier, 2001; Grimm et al., 2006; Nokelainen, 2008; Porter, 2004; Schimmer, 2012; Shapiro, 1989). .............................................................................................................. 45 Figure 8. Competitive Attack and Influencing Forces. (Chen et al., 1992; Chen & Miller, 2012; Ferrier, 2001; Porter, 2004; Schimmer, 2012; Shapiro, 1989). .......... 47 Figure 9. Traditional Action Types Adjusted to the Data of our Thesis. ............. 51 Figure 10. The Process for Data Gathering and Research Methodology. ............ 56 Figure 11. Netflix Action Trend 2015-2019. ............................................................. 61 Figure 12. Netflix Content 2015-2019. ....................................................................... 62 Figure 13. Netflix Content Average Ratings (IMDb) 2015-2019. .......................... 63 Figure 14. Netflix Content Category Trend 2015-2019. .......................................... 63 Figure 15. HBO Action Trend 2015-2019. ................................................................. 65 Figure 16. HBO Content Category Trend 2015-2019. ............................................. 66 Figure 17. HBO Content 2015-2019. .......................................................................... 66 Figure 18. HBO Content Average Ratings (IMDb) 2015-2019. .............................. 67 Figure 19. Amazon Prime Video Action Trend 2015-2019. ................................... 68 Figure 20. Amazon Prime Video Content Category Trend 2015-2019. ................ 69 Figure 21. Amazon Prime Video Content 2015-2019. ............................................. 69 Figure 22. Amazon Prime Video