Growth Strategies of Media Companies: Efficiency Analysis

Estrategias de crecimiento de las empresas de medios: análisis de eficiencia Estratégias de crescimento das empresas de mídia: análise de eficiência This paper analyzes the media and entertainment companies’ main strategic options about what to do for growing—internationalization or diversification—and how to do it—organic and inorganic growth—in a context of ever growing competition. We identify correlations between those strategies and three basic pillars of managers’ decision-making process: growth, profitability, and indebtedness. We conclude that mergers and acquisitions can generate rapid growth, but they are expensive in terms of Return on Investment Capital (ROIC) and they usually increase the leverage of the company. Therefore, the inorganic path could not be the best option for companies with difficulties to get access to capital or for very cyclical businesses. In addition, we identify that vertical integration generates a lower ROIC than horizontal integration, and we show how internationalization strategies increase the profitability of audiovisual companies. We analyze the basic indicators of 50 listed companies in the sector that meet three criteria necessary for our study: data transparency, sufficient size of the company, and a certain trajectory that would allow us to study the consequences of the chosen strategies over long periods of time, at least 15 years. We study the firms’ evolution from 2010 to 2016 with metrics from the Thomson Reuters database. In that last year, they accounted for 88 percent of global television revenue. To reference this paper / para citar este artículo / para citar este artigo Medina, M., Sánchez-Tabernero, A., & Larrainzar, A. (2020). Growth strategies of media companies: Efficiency analysis. Palabra Clave, 23(1), e2317. DOI: https://doi.org/10.5294/pacla.2020.23.1.7 Recibido: 12/11/2018 Aceptado: 13/02/2019 Online: 13/12/2019 * Spanish Government fund: Reasons to consume fiction and entertainment audiovisual contents in the Spanish market CSO2015-64615-R (MINECO/FEDER)

Abstract licence: CC BY-NC-ND

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