Multimedia Industry: Case Study of Eicom PLC Essay
Eicom Plc is into the management and optimizing usage of digital airwaves for television broadcasting. Performance Channel and SciTech TV are the two channels that the company presently operates.
Past performance and Future plans:
Eicom management has announced plans to expand their business outside the UK in the near future, which is their primary market as such. This would entail adopting newer technologies like broadband and Internet Protocol Television in the future. In the eighteen month period spanning from January-2005 to June-2006, the multimedia group had announced a turnover of 1,016,000 pounds. During the same period the group registered an EBITDA loss of 1,572,000 pounds leading to a net loss of 1,885,000. These numbers may not make the shareholders happy. But given the plans for expansion, most revenue from the new channels will translate into profits as fixed costs for the expansion had already been covered. So, Eicom had established a strong technological asset base, with which it can add new channels for relatively very low costs. The turnover for the period January-2004 to December-2004 was 365,000 pounds. The cost of sales during January-2005 and June-2006 is 1,153 pounds and for the period spanning January-2004 to December-2004, it was 304,000 pounds. Gross loss during the eighteen months between January-2005 and June-2006 was 488,000 pounds. The gross loss between January-2004 and December-2004 was 15,000 pounds. Between these two periods, the retained loss has had a dramatic decrease of 1,371,000 pounds. So overall the company’s finances are charting an upward curve.
The impact of a growing workforce:
The total number of employees working for the group is 9,000 according to its latest annual report. So, both in terms of market capitalization and workforce numbers, Eicom Plc is a large business entity. This makes its plans of expansion elsewhere that much easier. In fact, nearly 15% of its turnover for the last year had arisen from markets outside the UK.
The primary reason why the group is not showing profits yet is the nature of the market. The digital entertainment industry is at a nascent stage. A lot of areas like technological compatibility and software installation need to be standardized and regulated, before the market base expands and prices for the consumer declines.
Its leading brand: “Performance MainStreet”:
One of its channels – “Performance MainStreet” offers programs based on 20th century culture in the form of various music genres. Yet, its market share in the music industry is less than 2%. However, the channel’s performance improved during the last 6 months of 2005 and the first three months of 2006. This is a positive trend and is set to continue in this direction. The temporary dip in the revenues during the second half of 2006 is due to a general industry downturn – so the figures have to be evaluated in this light.
Another reason why the future looks bright is the recent legislations. Some of the recently passed regulations to protect niche services such as MainStreet will have a damaging effect on its competitors in the mainstream television industry.
The Eicom group has also initiated large-scale marketing efforts this year, which is already having a positive effect on revenues. As part of the company’s strategy to delve into the IPTV market, it has come to an arrangement with the Nature magazine. Eicom group supplies multimedia material like videos for the magazine’s website on a regular basis. With an ever growing goodwill, such opportunities will soon multiply.
Problems Confronting Eicom:
One area where Eicom had struggled in the past is its inability to find a suitable revenue model for its Job Channel. As a result it has now become unviable to continue this service. Now that the directors have decided to remove the service, the time is opportune to choose the right revenue model this time around.
Another deficiency with the business was its failure to utilize its overheads at their most efficient. This could be achieved by bringing various services under one UK based television channel. It remains to be seen if the Eicom group is able to acquire smaller businesses to make optimum use of its investments in technological infrastructure. If it will succeed, then its revenues will shoot up.
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