Message From Michael 
May 4, 2010
NIETZSCHE’S MEDIA ADVICE
MESSAGE SENT; MESSAGE RECEIVED
THE
HALF A LOAF
THE YANKS ARE COMING
FAVORITE QUOTES
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NIETZSCHE’S MEDIA ADVICE: The major media corporations appear to have taken to heart the German philosopher’s admonition, “what does not kill you, makes you stronger.” At least that seems to be the message in reviewing their annual reports – an exercise I undertake every year about this time. Actually, message number one is probably – 2009 stunk. Advertising revenue was down around 20% and virtually all of the groups cut expenses an equal, or almost equal, amount. As part of that, the companies all talk about ‘new efficiencies’ and ‘financial flexibility.’ But after that, it’s the philosophy of Frederich Nietzsche. Whether it’s Sumner Redstone of Viacom/ CBS – “in 2009, Viacom was tested by difficult circumstances and an uncertain future – and we passed with flying colors.” Or Rupert Murdoch of News Corp/ Fox – “we are a company whose greater strength has always been getting ahead of change instead of waiting until it is forced upon us.” Or Jeff Bewkes of Time Warner/CNN – “Time Warner began 2009 with an ambitious agenda, and we achieved what we set out to do.” Robert Iger of Disney/ ABC – “we have many challenges ahead, but I like how we are positioned, who we are and what we stand for.” Jeff Immelt of GE/ NBC – “we learned a lot coming through this crisis. We think it’s a better company and we’re excited about the future.”
Several, if not all, of the CEO’s talk about how the business model, especially for media, has changed irrevocably, and how they have changed to accept that. But it’s Immelt’s comments that strike me as most ironic when he talks about GE becoming “a simpler company… with a simple focus on infrastructure and financial services.” Keep in mind that this is a company that has $25 Billion on hand in cash (so they have “the ability to play offense and defense”) and – think about this -- talks about its “company-to-country strategies.”
MESSAGE SENT; MESSAGE RECEIVED: There are several recurring themes in all of these reports and letters to shareholders: the transformative effect of the switch to digital, the need for financial flexibility mentioned earlier, the emphasis on innovation and adaptation. But the one message that the consumer has sent that the corporations have received is the theme of any time, any where, any how media. Craig Dubow of Gannett gets it -- “it’s about choice and engagement: choice in how, where and when consumers get information and how they engage with that information and other people who share their interests or lifestyles.” Very similarly, Robert Iger of Disney says companies have to have “the necessary agility” to respond to technological change and “to meet the expectations of consumers who increasingly enjoy entertainment how, when and where they want it.” J. Stewart Bryan and Marshall N. Morton of Media General get it when they talk about consumers “multiple choices… and… greatly expanded number of ways content can be accessed.” However, Bryan and Morton also note in their report that even in this digital world, they believe there is a “strong and stable customer base” for traditional printed newspapers and broadcast television programs. Gannett’s Dubow talks about their “ContentOne” initiative. And Frank A. Bennack Jr., of Hearst Corporation gets it, not only when he talks about the multi-platform approach of the company but by actually providing a URL in their annual report that allows you to ‘experience’ the report interactively with your mobile device. And, of course, Rupert Murdoch gets it when he writes that, because of the proliferation of sources – print, mobile, e-reader, internet – that we may have moved beyond the idea of there being a ‘typical’ reader or consumer of media. Murdoch, who is always eminently quotable, says the teenager in L.A. and the banker in Shanghai have one thing in common: They want news and entertainment that reflects their personal interests and “they want it when they want it” on the platform most convenient to them and “they are willing to pay, but they are only willing to pay for what they value.”
A side note to all my sales friends: Another recurring theme, in several of the reports, was that sales people have to be multi-media consultants for their clients, providing advice on how best to spend their advertising dollars across different platforms.
THE MOBILE MESSAGE BEING SENT: As an addendum to the any time, any where, any how theme, it should be noted that 12 major broadcast groups have joined forces to create a “national mobile content service” to provide content ranging from live and on-demand video, local and national news from print and electronic sources as well as sports and entertainment programming to mobile devices. The group will use part of their existing broadcast spectrum to provide the service nation-wide, reaching (according to the news release) nearly 150 Million U.S. residents. The news release says the effort is supposed to complement the Federal Communication Commission’s national Broadband initiative. The 12 groups are Fox, NBC/ Telemundo, ION, Belo, Cox, E.W. Scripps, Gannett, Hearst, Media General, Meredith, Post Newsweek and Raycom Media. The local broadcast companies have formed a company called Pearl Mobile DTV, and if anybody can tell me where the name came from, I would appreciate it.
THE YANKS ARE COMING: Vaudevillian song-writer George M. Cohan’s World War era song has a new ring to it a hundred years after it was first written. Now, the ‘yanks’ are the American media corporations which see their greatest potential for growth being the developing countries and economies. Leading the charge is GE, and CEO Immelt provides the factoid that explains it all. The Chinese government is going to spend $300 Billion over the next five years to modernize its healthcare business. $300 Billion. Now, that speaks to many of GE’s other enterprises, rather than media, but it is indicative of the growth. Murdoch talks about the “hundreds of millions of people entering the middle class and becoming consumers of news and entertainment” in
HALF A LOAF: You’ve heard the old phrase – half a loaf is better than no loaf. Or, maybe you haven’t. Anyway, that saying explains the NBCU/Comcast deal, as you read Immelt’s presentation to shareholders. Right now, GE owns 80% of NBC Universal. After the sale/ merger with Comcast, GE will own 49% of the new company. But that’s half of a much larger, $14 Billion company, as well as GE getting $8 Billion in after taxes and after deal fees. Another factoid from the GE report. According to Immelt, GE is
FAVORITE QUOTES: These are the lines or statements that stand out in my mind after reading through the various reports. My favorite comes from… who else… Rupert Murdoch: Quality journalism is not cheap. I’ll just leave it at that. Okay, I can’t do that. In fairness I have to note that, in addition to Fox, Murdoch does own The Australian, which is a top-notch newspaper, The Times, which is one of London’s premier newspapers and, of course, The Wall Street Journal. Actually the quote he makes that I like is “We believe there are no forms of media too old to thrive or too young to take off.” Showing the upbeat optimism that all the CEO letters tried to display, Time Warner CEO Bewkes proclaims, “whether in film, television or publishing, this is an exciting time for the media industry.” In very similar language, Gannett CEO Dubow notes the ‘extraordinary changes’ in consumer behavior and attitudes and says, “this is really an exciting time to be in a consumer-facing industry.” Consumer-facing industry? Anyway, in the Hearst annual report (which probably was the coolest of them all) CEO Bennack focuses on innovation and describes it as a function of intellect, character and imagination. And, he adds, “in good times they are the keys to our growth; in bad times, they are at the core of our renewal; in worst times, they are the guarantee of our success.”
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