Insights from network analysis of the Australian media industry landscape

Network analysis provides powerful insights into how social groups, organizations, industries, and economies are structure. More pointedly, it also can help identify the leverage points that will enhance strategic positioning and improve outcomes. Over the last few years of my work in the network space, I have focused primarily on social networks and organizational network analysis, however I have also spent time on applying network analysis to industries, and in particular strategic positioning within industry landscapes.

I first came across Laurie Lock Lee in the mid 1990s when he was working at BHP, and one of the first people worldwide to apply social network analysis to enhancing organizational performance. We’ve shared much thinking over the years, and on occasion worked together. Laurie has fairly recently left his role at CSC, and set up a consultancy, Optimice, together with some talented colleagues. Check out the interesting resources on Optimice’s web. Last year Laurie did the fascinating media industry network analysis that we included in our Future of Media Report 2006. Laurie has followed up on that work by writing a great paper, New Ways to Explore Australian Media Ownership Opportunities and Threats. In it Laurie explores how network analysis can be applied to understanding the media ownership landscape in Australia.

Laurie uses the data on media ownership maintained by the Australian Communications and Media Authority, and without any special industry knowledge, begins to pull out some very interesting insights. The first chart below shows the network of media ownership, from which it is clear that there are two quite distinct networks. The central tightly-connected cluster is comprised of a few television stations, related radio stations, and a diverse array of owners. Outside this central group there are a string of highly centralized clusters, such as the Macquarie group on the top left, that are connected by one or two common properties or owners. Two owners – Southern Cross Broadcasting and Tri-com Radio’s stake in Consolidating Broadcasting (WA) are responsible for linking the upper and lower parts of the industry network.

Australian TV and Radio Media Ownership Networks

Source: Laurie Lock Lee, Optimice

Later in the paper, Laurie examines the network of media owners from a “betweenness” perspective – essentially showing the degree to which media owners intermediate others in the industry network. The prominent feature of this diagram is the enormous centrality of Southern Cross Broadcasting, represented by the red circle in the center, which holds stakes in many media operations together with a wide variety of other companies. This gives it a strong position to potentially play a role in M&A activity in the sector, or simply in leveraging its relationships as a broker.

Australian Media Owner Affiniity – Betweenness

Source: Laurie Lock Lee, Optimice

There is considerably more detail in the paper, however it is very much providing simply a first pass view on how network analysis can be used in understanding media industry structure. In particular when there is a high degree of merger and acquisition activity, network analysis can be very powerful in identifying potential targets, acquirers, allies, and valuable relationships. These need to be leveraged in very specific ways in order to take advantage of existing positioning in the industry network. This kind of analysis is still almost always absent from the very linear “value chain” approaches used by most strategy consulting firms. Thus there is a real opportunity to gain strategic advantage through understanding industry networks better than competitors. I hope to work with Laurie to extend this application of network analysis to industry structure, both to include in the forthcoming Future of Media Report 2007, and also in working with clients on identifying effective strategic positioning and activities in a highly complex and volatile industry landscape. Check back here for more details later.