What is the curse of the media mogul?
The curse is that there is a huge amount of accepted conventional wisdom articulated by moguls who preside over information and entertainment companies. They have a flashy insight about something and then help generate opinions that have nothing to do with reality. The result is that whenever these moguls have implemented their insights without the constraint or discipline of other people closely questioning them, their performance has actually been pretty bad. Some are very talented people who do some things intelligently. But when they do things unintelligently, nobody stops them.
You say that doomsayers predicting the death of media go too far. But you also question why anyone thought that the Internet was ever going to be the friend of media companies. Why is that?
The Internet is a friend of the consumer. It enabled lots of people to get to individual consumers. It makes it easy for competitors to get in the markets. And more competitors are much better for consumers and much worse for producers and suppliers.
The moguls — and a lot of other people — didn’t understand the dynamics of competition and they extrapolated from immediate experience. They just thought they were going to save a lot of money and reach a lot more customers. They didn’t consider that everybody else was going to be able to do the same thing. And it’s the “everybody else that can do that, too” that will kill you every time.
Why do you say that the media mogul gospel — and the conventional wisdom — that growth and globalization are always good needs debunking?
Local communities have local cultures and they have local information needs that must be fulfilled. As the Internet has enabled people to do more customized stuff they have provided for it locally. If you don’t understand that and you start to pursue global platforms you’re just asking for trouble.
What distinguishes a great media asset from a lousy media asset?
A great asset is a monopoly media asset. The more central you are to people’s needs the better you do. It’s like the old newspapers. Nobody was going to get in to compete against them and everybody needed them. And, still, nobody is going to compete against newspapers qua newspapers, but nobody needs them anymore.
Content production is never a great asset unless you are the only one doing it — and that’s just not going to happen. There are no barriers to entry, so there will never be monopoly control of content.
In the past, networks and music companies created and distributed programs and music. TV and cable networks have done well and some continue to do well. But now that everything is distributed on the Internet there will be less and less ability to keep people out of the business of aggregating content and distributing it. So there’s not going to be much money in that.
The good businesses that are left are telephone and cable companies because in the end everything has to go over their pipes. Content providers are not going to be collecting the money. Aggregators are not going to be collecting the money. And the value of the pipes is going up and up.
How can media companies balance the need to be efficient with the need to nurture the creative talent that it depends on?
They can’t. The creative talent is going to have to nurture itself.
Media companies are going hire freelancers. A good talent is going to make money for a good talent. It’s going to be like law school and medical school. You’re going to have to provide for yourself and hope that you be someone who can differentiate yourself in the market.
It plays out the same every place. Thomas Friedman does great. Movie stars do great. If people still read books, authors would be doing phenomenally. It’s not good for no-name people.
It implies what you have increasingly in sports, which is a star system. It used to be you had thousands of minor leagues playing all sorts of cities all over the country. They didn’t do really well, but players had a living wage. It was a good job. Now you have these stars who make a ton of money and everybody else starves. And that’s what happens when talent gets immediate access over TV or the Internet.
What kinds of media organizations will be profitable in the future? What characteristics do they share?
The efficient ones and the ones who own the pipes and, to some extent, the ones who dominant particular niches. Nancy McKinstry ’84, the CEO of Wolters Kluwer, has talked about how they started off by offering broad generic information. Suddenly everyone else was offering that so the company couldn’t make money anymore. It had to offer more specific information, for example, bond information that is very local; there is only enough demand to support one provider.
The thing that is really going to be lost in this is communities. There used to be journalistic communities that you could join, and within the communities the big stars were nice to the little guys and there was a place for everybody. And if you can pick and choose your content producers you can’t have that kind of community because the public won’t listen to it as a whole.
I think the community-based professions and the professional ethos and the morale and the comforts of being part of a profession and community is mostly going to disappear. I think that’s not something anybody expected from the Internet. We expected it would create communities, not disaggregate them.
Bruce Greenwald is the Robert Heilbrunn Professor of Finance and Asset Management in the Finance and Economics Division and director of the Heilbrunn Center for Graham & Dodd Investing at Columbia Business School.
Jonathan Knee is adjunct professor in the Finance and Economics Division and director of the Media Program at Columbia Business School.
Ava Seave is adjunct associate professor in the Finance and Economics Division at Columbia Business School.