This blog post contains part two of the business plan for LYP Productions. Focus in this post is assessment of Industry Analysis and Trends, Target Market, and existing Competition. This will be combined with the post from week one into a cumulative business plan in a follow-up post.
Industry Analysis and Trends:
LYP Productions is well positioned to take advantage of the ever-increasing demand and engagement with online video engagement by consumers. As Internet users continue to spend greater amounts of time on websites that contain video content, the door is open for new entrepreneurs to engage in the market of video creation, and LYP Productions seeks to identify a niche within this ever expanding market.
Numerous statistics are available for the video production market, and though varying slightly in their interpretations, all signs point to this sector of business having strong future potential, ongoing growth, and a leading shift in advertisement marketing between 2011 and 2016. With this growth, LYP Productions is poised to enter into a fertile landscape with exceptional opportunity.
There are numerous sets of data that all point to exponential growth within this market, especially in the sector of online video advertising. Kantar Media notes that 24% of brands are currently using videos (as of 2014) as part of their marketing efforts. Additionally, Mist Media notes that the average Internet user spends 88% more time on websites that contain video, and displays a trend towards greater conversion rate for marketing professionals than any other medium.
It is estimated that in 2017, 74% of all Internet traffic will be related to video content. As such, this is a critical time for marketing professionals and businesses to embrace all aspects of video production, keeping in line with the demands and interests of their target audiences. With the trend towards increased video consumption, it is estimated that 93% of marketers will engage in video as part of their online marketing and sales strategy.
Hoovers defines the competitive landscape as vibrant and evolving, and success within this sector of business will be defined by the technical and creative skills of businesses entering this market, as well as the ability to develop and maintain client relations. When reviewing the competitive landscape, it is important to consider that the US online ad spends for video advertising was $2.0 Billion in 2011, which increased to $5.7 Billion in 2014. It is important to also note that of the total videos available online, it is estimated that a total of 36% of videos are online video advertisements. This translates to a considerable market share of online video content. These numbers represent the ever expanding and ongoing growth potential within this niche sector of marketing and advertising.
Barriers to Entry:
As a smaller scale business entering into the arena of video production, it is important that LYP Productions identify niche markets within this ever-expanding market. By focusing on niche markets, along with competitive pricing, LYP Productions will be poised for success within this exponentially expanding market of online video content. For LYP Productions, focusing efforts on the production of corporate brand stories, online video training materials, as well as crowd funding video creation and business presentations, this business sets the stage for success within this industry.
The greatest leverage for LYP Productions within this market, is taking action that will transition LYP Productions from the 10,000’s of video production providers identified as “equipment owners”, to the smaller subset of production providers that are classified as either “Experienced Videographer or “Experienced Production Company”. Making this leap decreases the competition from the 10,000’s to the 1000’s within the United States. Further establishing LYP Productions, as an experienced production provider and further developing the business into a value-added production company will further improve the competitive edge with compassion only identified in the 100’s.
Within the first year of operation, LYP Productions will be focused on transitioning from Equipment Owner, to the level of Experienced Videographer. The greatest challenge to this will be the attaining the financing necessary to take this leap. In the event financing is not readily available, LYP Productions has the opportunity to continue operations between 1-3 years to raise the necessary capital as part of the internal business operations that will allow for expansion of the business.
The second true barrier in this industry is the ability of LYP productions to remain abreast of new technology, trends within the video sector, and ongoing education. This barrier is an absolute necessity for LYP Productions to overcome, and will likely require investment of business capital to assure that the business and services provided do not become outdated or obsolete.
Long Term Opportunities:
As LYP Productions defines itself within a smaller niche market within the video production industry, it has the opportunity to further expand (as defined in the Barriers to Entry section) into a value-added production company. As LYP Productions builds a client base, and increases the level of expertise within the market, it will have the opportunity to grow beyond a solopreneur business into a larger, collaborative business model that provides greater value to clients and shifting landscape.
Remaining on the cusp of new innovation and technology, LYP Productions has the opportunity to lead the market in interactive video content with appropriate planning, remaining open to the potential for expansion, as well as involving additional employee assets to the business. By expanding the talent pool available to LYP Productions, the service offerings of the company will continue to expand, and a greater foothold will be established within the industry.
The end goal of LYP Productions is to take any and all steps necessary to establish a business persona that is a minimum of one step beyond the entry level entrepreneur, to establishing itself as a viable competitor within this expanding market. The growth potential for LYP Productions is limitless in the foreseeable future.
Target Market Analysis
LYP Productions is a digital media production company based in Seattle, Washington. The focus of LYP Productions is the creation of video assets for web, client presentations, training, brand storytelling, and crowd funding campaigns. Through production of high quality media asses for use across multiple media channels, LYP Productions will help to serve the needs of it’s clients, as well as inspire, engage and connect them with their individual target audiences.
Keeping LYP Productions as a viable competitor within this industry will require the business to actively engage in collaborative efforts between LYP Productions and it’s clients that are creative, innovative, and created with a high level of integrity and professionalism.
Market Size and Trends:
With anticipated growth in online video ad spend increasing to more than $8.0 Billion in 2016, the industry shows an expected growth of 300% in video consumption, and a 40% overall increase in budgeted ad spend by businesses seeking to utilize video content as part of their marketing strategy in 2016. These numbers represent a unique time and opportunity for LYP Productions to introduce itself into the video production market.
Within the greater Seattle area, there are currently more than 100 companies defined as “Video Production Companies” and “Corporate/Institutional Production Companies”. While this may seem a large number of competitors within the video landscape, this market has numerous niche target audiences in which LYP Productions can establish a reputation within.
With the anticipated growth in this industry between today and 2018, there is ample room within the industry for new entrepreneurs to enter the landscape, and further establish itself as a dominant leader within the Pacific Northwest. Opening the opportunity for expansion of a client base beyond the greater Seattle region, will expand the opportunity to become a leader within this industry should LYP Productions choose to expand beyond the confines of a regional provider of online and commercial video content.
According to the Puget Sound Business Journal, the greater Seattle area was ranked at no. 13 in total business at more than 97,000. The United Sates Census Bureau notes that in 2007 there were a total of more than 27,000 businesses within the confines of Seattle. When considering the vast number of businesses within this region, and only 100’s of established production companies within Seattle, there is great opportunity for any entrepreneur to thrive in this region.
The intended target customer for LYP Productions will be small businesses within the local community, non-profit organizations, and ultimately setting sites on larger corporations within this region, as well as potential expansion into the national market. A consideration with small businesses is that in 2013, only 7,500 businesses in the local Seattle area are businesses that are employer establishment. Many of these businesses may utilize more established production companies to create the video assets they require. This however, leaves the additional 20,000 businesses in the local area that are solopreneur businesses who may seek out video content creation at a competitive price point in comparison to the larger firms.
As noted previously, the market for online video content is expanding at an exponential rate. When considering the increased production budgets of businesses in 2013, it is clear that more and more businesses are choosing to increase marketing budgets to include online video. In 2013, 46% of businesses nationally allowed for online video as part of their marketing budget. This is anticipated to continue in growth between now and 2018 and transition to be one of the dominant budget allocations for marketing professionals and businesses.
With the increased engagement by consumers in online video content, the advancements of mobile technology, and shifts in the way the consumer consumes media, there is a ongoing strategic opportunities within this market. LYP Productions seeks to position itself as a leader within a small niche of this global market, and cater to the needs of its local community.
Establishing itself as a leader with a niche market will provide LYP Productions with the experience necessary to expand its services and define value-added opportunities that it can provide to clients. The ultimate goal of LYP Productions will be to one day partner with other video content creators, and produce a collaborative opportunity to strengthen it’s market share hold.
Looking towards the time when LYP Productions establishes itself as an Experienced Videographer, or Experienced Production Company, the following are three prominent competitors within the local Seattle community. While this is a limited list, a great resource for keeping abreast of local production companies, resources for equipment rentals and other talent that may be required is found in the Northwest Production Index. Keeping abreast of news released on this site, as well as ongoing research into the local competition, will keep LYP Productions moving forward into greater opportunities over the course of it’s first three years in operation.
In review of the hundreds of video content providers in the local Seattle Community, it is evident that there is a diverse level of participation within this industry. The following details information on three competitors within the greater Seattle area. They consist of established firms with 9 or more members, to smaller organizations between 1 and 3 key players within the businesses.
Yes and Video:
Each of the three competitors listed above offer varying services that target a slightly different niche within the video production market.
The greatest competition of the above referenced businesses will likely be Yes and Video. As a company consisting of three individuals, they have a similar scale to what LYP Productions has to offer. The greatest advantage that LYP Productions has over this particular business is the interest in creating corporate presentations, and scaling into the sector of providing services to create crowd-funding clients. Additionally, LYP Productions has interest in entertaining the non-profit sector, which can have an added advantage. Where LYP Productions will excel against Yes and Video is working towards a varied portfolio of projects, and avoid the potential pitfall of limiting services to only a handful of clients.
The primary advantage of LYP Productions over Sparkworks is the intended client base. Spark works has placed primary focus as an established video content creator, on larger corporations like Microsoft, the Seattle Theater Group, and larger non-profits like the King County Bar Foundation. Having opportunity to work with smaller businesses at a more competitive rate, LYP Productions can operate effectively with smaller businesses in the area, at a fraction of the cost of the Sparkworks operating budget. Having need to only support the business operation of one individual, or fees tied to collaborative efforts, the overall operations will cost considerably less than Sparkworks which maintains a physical location, and 5 key members of the organization (and no doubt countless others).
Again, looking at Spin Creative, the greatest advantage of LYP Productions is in its focus on the small business and non-profit sector, limited whine the greater Seattle Area. As an established video production firm, Spin Creative has considerable overhead expenses to operate within three distinct markets of Seattle, San Francisco, and London. Additionally, the core team for Spin Creative consists of 10 team players, with additional resources to support each of these players. The size of client base required for LYP Productions will be considerably lower than that of Spin Creative in order to be successful.
In the end, the greatest advantages for LYP Production is the current size of employee base (owner fun), having no physical location to incur operational expenses, and the ability to work with smaller organizations to meet the financial needs of the business. As LYP Productions becomes established within the video content creation market, consideration will need to be given to the potential for increased expenses that coincide with growth. However, for today, LYP Productions is poised to effectively operate within a smaller budget, an ability to work with smaller businesses and non-profit organizations at competitive rates, and an ability to tap into many of the niche target audiences that larger production companies may not work with, or whom are cost prohibitive for smaller organizations.
Market Share Distribution:
In the local are area, Spin Creative seems to have the greatest market share of local community based clients, though as mentioned previously, there are potentially 100 plus businesses that operate in this sector. Sparkworks Media is the greatest competitor in the arena of training / explainer videos. This business will be important to follow as LYP Productions establishes itself, and attention given to making a mark within this niche area of interest. Though as previously stated, there are thousands of businesses within the greater Seattle area, nearly 8000 of which have employees and may require video training materials.
While there appears to be competition within this industry market, there are very few businesses that dominate this sector. The advancement and increase in consumer video consumption, and the increased demand by marketing professionals, leaves ample room to maneuver within this market, and the opportunity to focus within the greater Seattle area appears to be an open field for any entrepreneur to enter the playing field.
Barriers to Entry:
Entering into this market sector has minimal barriers. The greatest barrier is from a financial perspective. If LYP Productions chooses to begin business with 100% new equipment assets that are the sole ownership of the business, it is estimated that a total of $24,000 will be necessary for the first year of operations. This can be minimized, by using existing owner owned equipment, reducing this barber to only a few thousand dollars to initially begin business.
There will be ongoing challenge with interest of new participants within the video content creation sector. As the industry expands, so expands the interest of other amateurs to enter into the playing arena. Keeping abreast of new entrants into the industry will be a critical element to continually remain abreast of.
Additionally, there may be barriers created over time that are related to evolving technology, equipment, standardized formats for video, as well as shifting costs for storage and hosting of video content. It will be imperative that LYP Productions always continue ongoing education and research of new tools, technology and techniques that are of interest to its client base. Similar to the challenges of Flash developers, any technology that transitions from popular use, or no longer meets industry standards, will slowly disappear along with businesses that are unable to adapt. It is the intent and focus of LYP Productions to always adapt and evolve with shifts in the media landscape, and seeks out ways to enhance the services offered to clients. The end goal is assuring that LYP Productions reaches a point where it is a value driven business, which offers the greatest value to clients in the Seattle demographic.
LYP Productions is entering into the video content creation market at an incredible point in history. As a new and emerging business, LYP Productions has the opportunity to identify any underserved niche markets within the industry, and become the dominant leader within those niche markets. LYP Production has the opportunity to grow with the latest technology available, and is unhindered by existing debts that other similar businesses may already incur. With minimal investment, LYP Productions has the opportunity to have the latest equipment, which may outshine its competitors.
LYP Productions also has the strategic opportunity to partner in collaboration with other creative professionals in the local Seattle area. By engaging with organizations like the AIGA (the professional association for design), Interactive Advertising Bureau (AIB) and the Media Index Publishing Group, LYP Productions will remain abreast of new trends within the industry, have access to information related to competitors, and available resources for outsourcing or collaboration.