Page 3 - SCS May 2018 - Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

Preliminary conclusion

The benefits of the proposal to buy MM would appear to outweigh the risks. An offer to buy MM
should therefore be considered, but care should be taken to ensure that Couchweb does not offer
too high a price.

Impact on structure

Couchweb currently has a functional structure in place, with responsibility for each of the main
functions assigned to a Board Director and vertical reporting lines. This would seem appropriate
for a business such as ours; whilst Couchweb is a large organisation, it is not significantly
diversified in terms of its operations. The emphasis of the business is on streaming content.

Acquiring a production company would diversify the nature of its business and, for this to work
effectively, the structure of Couchweb would need to adapt. The most appropriate way to do this
would be to treat MM as a separate division; in effect, Couchweb would now have a holding
company and a subsidiary. The existing Couchweb business would continue as before, but MM
would be treated as a stand-alone organisation, reporting into the Board of the holding company.

For this to work, the current Board of MM would need to be given considerable autonomy in how
MM goes about its business. By definition, creating content is an artistic trade; imposing lots of
restrictions on how this is done is likely to result in demotivation and a fall in quality of output.

In practical terms, I would suggest that the current CEO of MM be asked to also take up a place on
the main Board of Couchweb, so that the concerns and interests of that company can be carefully
considered. This would also improve the day to day dialogue between the 2 companies, and align
their strategic interests.

Whilst autonomy should be granted to MM, a carefully chosen package of targets (or KPIs) should
be put in place for that company to ensure that what is does is in tune with Couchweb’s
expectations. For example, targets concerning producing content on time; the viewer ratings to
assess quality; producing content within budget; the number of new subscribers attracted to
Couchweb on release of new content; etc.

Such targets should be linked with the remuneration packages on offer at MM to act as an
incentive to perform.

This is not an exhaustive list of matters for consideration, but should act as a starting point for a
more detailed discussion on how to integrate MM effectively.

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