“Barriers to entry” in the media industry: the launching of El Español and Netflix Francisco J. Pérez-Latre (perezlatre@unav.es) Alfonso Sánchez-Tabernero (astabernero@unav.es) Gustavo García-Mansilla (gmansilla@unav.es) Media Management Department University of Navarra (Spain)

RATIONALE: THE DEMISE OF ENTRY BARRIERS The demise of barriers to entry in media markets Legal barriers tend to disappear The effectiveness of economies of scale decrease spectacularly Finding good research questions and learn about “new entry barriers” by studying new entrants Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

METHODOLOGY AND RESEARCH QUESTIONS FOR A WORK IN PROGRESS We use a narrative theoretical approach to learn about innovation and “barriers to entry” in our industry Case-study research about the first months of new market entrants Our research question: once the environment of “restricted competition” has blurred what will be the next “barriers to entry”? An in depth-look to these new market entrants sheds some light, although news and entertainment markets appear to be different Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

BUILDING ON OUR WORK ON INNOVATION IN THE LAST 5 YEARS Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

EL ESPAÑOL AND NETFLIX ENTER THE MARKET October 2015: Netflix & El Español enter the market El Español after a quite impressive 3.6 million euro crowdfunding drive Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

EL ESPAÑOL AND NETFLIX ENTER THE MARKET October 2015: Netflix & El Español enter the market Netflix, a giant global player that aims to reinvent television. Already studied: (Evens, Urgellés & Herrero) Reed Hastings (2016): “Today you are witnessing the birth of a new global Internet TV network.” Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

An interesting contrast NETFLIX & EL ESPAÑOL An interesting contrast Spanish-owned new brand dedicated to opinion and news gathering Versus global strategy of an American entertainment brand that is well established in the US and other markets Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

NETFLIX & LEGACY TV “For us the arrival of Netflix is not a threat at all, in fact it’s a great opportunity for doing new businesses. Before they started their operations in Spain we had already sold them more than two million euros in local contents, mainly fiction and series, as they need to have local contents in local language to be appealing their new clients. We expect to continue doing business with them in this direction in the near future” Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

NETFLIX ENTERS THE MARKET: REACTIONS …while direct competitors showed respect: “Experts criticize the short list of contents that Netflix offers to the market when they come into a new market. But the truth is that even being short they have everything they must have, giving much more with less. Spain has not been an exception”

WHEN NETFLIX ENTERS SPAIN’S MARKET Proven WTP for quality contents from local clients (Spotify, iTunes, Amazon Kindle among others are well established)   Growing time spent consuming contents on digital platforms 60% of audience Full season (13 episodes) In only seven days Binge viewing puts into value the desire to consume contents as fast as possible, which allows suppliers to capture audiences’ attention in a short period of time, leaving other suppliers out of the game and gaining loyalty from customers. Source: Telefonica, Press Conference, November the 26th, 2015. Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

Innovative organizational culture NETFLIX ENTERS SPAIN Innovative organizational culture Open to share revenue with content suppliers Global vision Flexible: Beta phase Focus (no sports, no live events, no premieres: only series and movies). “We only do some things, but do them very well” Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

EL ESPAÑOL, BUT… SOME GOOD NEWS, SOME CHALLENGES. 5,2 MILLION Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

EL ESPAÑOL, SOME GOOD NEWS, SOME CHALLENGES Difficulties to increase the number of subscribers beyond the crowdfunding drive 80 per cent of visits coming from mobile browsers and tablets: no paper needed Display advertising is very limited, they say, because of their mobile intrusiveness "we don't do anything that pops up and covers the screen Hoping to find new avenues for monetization through Instant Articles Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

EL ESPAÑOL, GOOD NEWS, SOME CHALLENGES Focus on community building The market has been shaken, with El Pais.com making major strategy changes But page views and unique users could mask light engagement 15,000 after crowdfunding, around 2,000 after the launch Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

EL ESPAÑOL, GOOD NEWS, SOME CHALLENGES "I think it's not that easy to pursue both high traffic and subscriptions.“ Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

DISCUSSION: THE NEXT BARRIERS TO ENTRY? If “barriers” are completely gone, it will be difficult to sustain competitive advantages: market uncertainties will only grow Industrial, legal and financial barriers seem to have lost weight But hat about “intangible barriers”? brands, reputation, trust, creativity, team spirit, leadership, relationships, ability to innovate, community building Along those lines media brands could establish a new type of “barriers to entry”, the assets that will define the options of media companies for the future Conference of the European Media Management Association (EMMA) 2016 Faculty of Arts, Porto University, June 2-5 2016

THANK YOU! Francisco J. Pérez-Latre @perezlatre (perezlatre@unav.es) Alfonso Sánchez-Tabernero (astabernero@unav.es) Gustavo García-Mansilla @gggmansilla (gmansilla@unav.es)