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Multimedia Industry: Case Study of Electric Word PLC Paper

Electric Word specialized in information processing business covering areas as diverse as education and sports. Some of the products it deals with include magazines, websites, newsletters, events and other custom reports.

Financial results:

Let us look at some of the financial indicators for the year ended 30th November 2006. The adjusted profit before taxation rose from 451,000 pounds to 920,000 pounds. The operating margin saw a two percent increase. The year saw a profit of 33%. All these numbers point to a healthy balance sheet with sufficient cash flow. The company has been in an acquisition spree since December 2005, assimilating 5 companies already and looking for more opportunities.

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These are remarkable achievements given the fact that Electric Word was started only seven years ago. It then conceived a long-term goal of creating an organization that would deal with all branches of the publishing media with a special emphasis on niche markets. Now looking back at these seven years, investors and other stakeholders can conclude that the company had indeed lived up to its own expectations.

The Acquisition spree:

Giving fillip to the company’s progress is its recent acquisitions. Of the five companies acquired, SportBusiness Group and Incentive Plus are very significant in that they give a vital competitive advantage to Electric Word. These acquisitions were matched by organic growth as well.

Let us look into some other significant numbers. Turnover for the year ended December 2006 was 10.7 million pounds, which was a rise of 72 percent to the previous year’s turnover. Renewable subscriptions have been the central source of revenue generation for Electric Word, amounting to nearly 50% of its total sales. The company has been successful in its endeavour to diversify its business and increase its market share. Of late, the management is drawing plans to start operations in the internet, which had been unexplored so far. A similarity could be drawn between Electric Word and EMI Records in their sluggishness in venturing into the online market.

Broad range of Products & Services:

Electric Word’s revenue growth right from its inception has been extremely healthy. For example, the profit before tax increased 104% last year, while earnings per share rose by 21pence. In a way it is difficult to categorize Electric Word. Although it is loosely called a multimedia company, its range of activities makes it much more than that. For example, its public sector activities extend across education and health services. The company also published couple dozen different newsletters on subjects as diverse as compliance responsibility, finance and provisions for special education. In addition to this, Electric Word is into book publishing and other training products. So, when compared to Eicom, Electric Word has a broader portfolio in terms of products and services offered.
In spite of its steady growth, there are a few areas where the group is not performing to the optimal level. For example, the market for management information and professional development resources has been growing over the last ten years. But Electric Word’s clientele remains more or less stagnant. With little more focus on innovation, the company can garner a large chunk of these emerging market opportunities.

Some Weaknesses:

Similarly, while the business generated from the education sector rose by 2 million pounds in the last 12 months (largely as a result of the acquisition of Incentive Plus), there were other acquisition opportunities that were squandered due to indecision by the top management. So, a reassessment of the Board of Directors may be warranted during the annual general meeting, so that the growth potential of the company will not go to waste.

The acquisition of Teaching Expertise was another landmark event in the history of Electric Word. According to its Board of Directors, the deal has had a synergistic effect on the business as a whole. This is so because there was much overlap between the customer bases of Teaching Expertise and the newsletter subscribers of Electric Word. The subsequent move to offer these services online further improved the integration of these related but different services.

Future Prospects:

With prospects for the education business looking brighter than ever, the following rationale extracted from their recent annual report displays much foresight and understanding: “The foundation of strongly-renewing subscription products is now enhanced by a series of inter-connecting products in well-defined niches. The addition of Incentive Plus enables the business to monetize access to its customer base in a way that is more appropriate and more effective for this market than through advertising revenues alone, and the development of online channels will both complement and support that development”.(annual report for the year ended December 2006).

References:

Chiariglione, L., 1998, Impact of multimedia standards on multimedia industry, Proceedings of the IEEE, 1998.

Drew, M.S. & Li, Z.N., 2004, Fundamentals of Multimedia, School of Computer Science Publication, Canada, 2004

Electric Word Corporate Website, [online], available at:, accessed on 16th October, 2007

Multimedia Induatry, Annual reports from 2001–2006. [Online].
Available at:, accessed on 16th October 2007.

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