September 3, 2014

Gannett Spin-Off Makes the Score Wall Street, 4 – Public Service, 0

On Tuesday, August 5, Gannett announced it was spinning off its publishing business, consisting of USA Today, 81 daily newspapers and the British news company Newsquest. The new spinoff newspaper company will keep the Gannett name.

The company that will own Gannett’s television stations and digital assets doesn’t have a name yet, but will consist of 46 stations, including the Belo stations, which Gannett purchased last year for $1.5 billion. The new broadcasting company will be the largest group of TV stations in the top 25 markets.

Gannett’s response seemed like a knee-jerk reaction to the Tribune Company and E.W. Scripps Company doing the same thing – spinning off its newspapers and keeping its TV stations in a separate company.

And several weeks before these two spinoffs, Time Warner spun off its huge magazine businesses, including Time, People, Fortune and Sports Illustrated, into a stand-alone print business and kept its content-creation and distribution businesses, Warner Bros., HBO and Turner Cable channels.

All of these spinoffs were justified based on maximizing shareholder value. TV stations and cable channels rake in gobs of money and are highly profitable. Newspapers and magazines are slowly bleeding to death as readers move from paper to mobile screens and as advertisers inevitably follow this audience diaspora (and pay less for the corresponding mobile ads).

But when the notion of “maximizing shareholder value” is bandied about, we have to ask who are the shareholders that are demanding more “value,” which really means a higher stock price. Today’s shareholders are not individuals, but are huge institutional investors, such as pension funds, mutual funds and hedge funds that all demand outsized returns. They have a Wall-Street-Gordon-Gekko-greed-is-good mentality.

In the good old days (ahh, nostalgia) most newspaper and many magazine owners thought of their publications as delivering useful, important news and information to serve the public good, convenience and necessity, and were typically guided by the tenants of responsible journalism as well as, and often before, profits.

What seems to have happened in the four recent spinoffs is that the media companies involved have spun off anything that smacks of public service.  Separate the profits from the journalism – keep the state, throw away the church.

Wall Street, 4 – Public Service, 0.

But wait. There is hope. One counter trend to the Wall-Street-greed-is-good approach is reflected in Jeff Bezos buying the Washington Post, and there are indications that the WAPO is scurrying to catch up digitally and continue to serve a more mobile public. And BuzzFeed and The Huffington Post have hired responsible investigative journalists and are publishing responsible, in-depth journalistic reports to intersperse with their click-bait content.

Another counter trend is the rise of B corporations, as reported by James Surowiecki in the August 4, issue of The New Yorker. The B in B corporations stands for benefits, and the firms are for-profit companies that “pledge to achieve social goals as well as business ones.” (I’d link to the The New Yorker article, but you can’t get in unless you subscribe, so I don’t bother.)

Warby Parker, Patagonia, Etsy, and Seventh Generation are examples of B corporations, of which there are currently over 1,000, and are allowed by law in 27 states.

Surowiecki writes:

The rise of B corporations is a reminder that the idea that corporations should be only lean, mean, profit-maximizing machines isn’t dictated by the inherent nature of capitalism, let alone human nature. As individuals, we try to make our work not just profitable but also meaningful. It may be time for more companies to do the same.

I would add one word to the last sentence: “It may be time for more media companies to do the same.”

But what are the odds that the old-line media moguls such as Murdock, Redstone, Moonves, Roberts, Bewkes, or Iger will get a sudden public service urge or that the Wall Street owners of their companies’ stock will allow them to achieve social goals as well as business ones.

Don’t hold your breath.

USA World Cup Team Survives, Aereo Doesn’t

On Thursday, June 26, the USA men’s football team moved on to the knock-out round of 16 in the World Cup, but the day before, startup Aereo lost its battle for survival in the Supreme Court.

What does USA FIFA football team advancing have to do with Aereo losing? ESPN and sports on television.

The Supreme Court case was titled American Broadcasting, Co. (ABC) vs. Aereo. ABC and ESPN are owned by the Walt Disney Co., which was joined in the case by CBS, NBC Universal (owned by cable TV giant Comcast), FOX and all the large cable TV companies and cable networks. The broadcast networks and their owned TV stations all claimed that it wasn’t fair for Aereo to retransmit their programming without paying them.

The details of copyright law are too complicated for me to fathom, so I can’t comment on that aspect of the case. Many bloggers and other news sources commented intelligently by focusing on the legal issues in the case, as Jerry Markon, Robert Barnes and Cecilia Kang did in the Washington Post. Some, like Farhad Manjoo in the NY Times Bits blog, commented on the technology issues involved, especially the implications that the Court’s decision might have on cloud storage companies.

But I think it’s interesting to see how the Supreme Court members divided in the 6-3 split. The Court’s three most conservative members (Alito, Scalia and Thomas) were on the dissenting team. Did they not understand the technology involved or interpret the copyright laws differently than the majority (Breyer, Ginsburg, Kagan, Kennedy, Roberts and Sotomayor)?

Could it be the conservatives were voting in favor of a free-market solution and the majority was voting for a more liberal-oriented regulatory solution? Or could it be that the conservatives were sick and tired of their cable TV bills ballooning and wanted to cut the cord, or maybe they just weren’t interested in World Cup football? Free, over-the-air NFL, yes; cable-and-ESPN-delivered FIFA, no.

Or could it be that the conservative trio were looking ahead to 2018, when Fox and Telemundo will be carrying the World Cup, for which they paid $1.2 billion for the two-year package, outbidding ESPN and Univision, which paid $425 for the current FIFA package. Maybe they thought it was a fair, free-market solution for Aereo or other retransmission delivery systems not to pay anything to sports rights holders such as ESPN and FOX.

If you were a Supreme Court justice and liked the World Cup, loved ESPN and other cable network programming (MTV, CNN, MSNBC, FOX News, CNBC, Bloomberg News, etc.) and couldn’t bear the thought of cutting the cord, you would vote in favor of the broadcasters and cable networks and believe it was not fair for Aereo to pay nothing to broadcast networks for programming, especially not to pay for expensive sports programming.

The majority might have seen the chaos that would have ensued if they voted for Aereo. FOX and Telemundo would more than likely demand that FIFA re-negotiate the $1.2 billion deal. FOX, CBS, NBC and ESPN would more than likely demand that the NFL re-negotiate the multi-billion rights deals.  FOX and ESPN would want to re-do their deals with Major League Baseball. All too much to contemplate — too much money involved.

Thus, the decision against Aereo was the easiest way out – give the money to the broadcast and cable networks, the TV stations and the sports leagues, not to upstart Aereo and its backer, Barry Diller. The decision also put off the eventual demise of broadcast and cable TV a little longer, just like the USA World Cup football team’s advancement put off its eventual defeat a little longer.

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Charles Warner on Forbes.com.

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http://www.forbes.com/sites/charleswarner/

If Aereo Wins, Here Come the Seven Dirty Words

Please go to Forbes.com to read the full post.

Media Curmudgeon Moves to Forbes.com

My Media Curmudgeon blog will be published initially on Forbes.com.  So I would love it if all of my loyal followers would go to Forbes.com and follow my blog posts there.

I was honored to be asked to blog on Forbes.com, which ranks fourth among Web business sites, with 34.5 million unique visitors a month, ahead of the Wall Street Journal with 32 million uniques.

Please follow the new media curmudgeon on Forbes.com.

Turkish Delight – A Confection, Not a Strategy

My wife and I returned to New York in July from a three-week trip to Jordan and Turkey.

So much about the trip was memorable: Petra, Istanbul, the boat traffic on the Bosphorus, a sunrise balloon ride in Cappadocia, dondurma (Turkish ice cream), and, of course, Turkish Delight – a chewy confection.

But because I’m a media salesaholic (and it is an addiction), I paid particular attention to the way people tried to sell me stuff, especially in Istanbul.

Turkey has between 30 and 32 million tourists a year, most of whom wind up in Istanbul and most of whom are buyers of stuff – rugs, trinkets, clothes, or meals. With 32 million potential buyers wandering around, you’d expect a lot of sellers.

And a lot of sellers there are, and their focus is entirely on meeting their own needs – parting you from your money. It’s me-first selling. The concept of delighting customers by anticipating their every want and need hasn’t yet migrated to Turkey or the Middle East. In America, we even have apps, such as Google Now, that delight customers by anticipating their wants and needs.

Apple for a while became the most valuable company in the world by delighting customers with gorgeous design and gee-whiz functionality. Amazon became the biggest online retailer in the world by delighting customers with relevant recommendations and ease of use.

The strategy of many leading-edge corporations has shifted from maximizing shareholder value, which management icon Jack Welsh called the “dumbest idea in the world,” (See Steve Denning’s column on Forbes.com) to delighting customers first, then worrying about profits.

Selling, too, has been transformed in this era in which the knowledgeable customer is in charge. Such books as Daniel Pink’s To Sell Is Human: The Surprising Truth About Moving Others and Lisa Earle McLeod’s Selling With Noble Purpose: Drive Revenue and Do Work That Makes You Proud emphasize that selling is serving others, helping others get what they want.

Turkish Delight may be a delicious confection, but it isn’t a sales strategy in Turkey or in too many U.S. media sales organizations, especially TV networks when they sell in the upfront market. Gouging buyers and allocating inventory based on increasing share of budgets is a greedy, me-first, street-hawker strategy that’s guaranteed not only not to delight customers but also to drive them to programmatic buying, which will eliminate me-first salespeople.

Media sales organizations had better start thinking about delighting customers not as a nice add on – a confection – but as a strategy.

Beancounters, Not Creatives, Now Run Don Draper’s Ad Business

Don Draper must be spinning in his grave, or he would be if he had read Business Insider’s May 13 post by Jim Edwards titled “The 37 Richest People in Advertising, Ranked By Income.”

Of the 37 people on the list, only one was on the creative side of the advertising agency business. The rest were white male finance, legal, and management types – suits – with one exception: Mercedes Erra, board member of Havas and founder of BETC Euro RSCG, was the only woman on the list. She was #17 at $2.2 million.

The list was dominated by CEOs (11 of the 37) and CFOs, treasurers, chief accounting officers, and controllers – beancounters (ten of the 37) – and the list had only one Don-Draper-type chief creative officer, Jacques Séguéla, of Havas. He was #28 at $1.2 million.

If there were any agency conglomerate sDon Draper would want to work for, it wouldn’t be, WPP, Publicis, or Omnicom, because the big three in terms of total billing were tied for sixth in terms of the number of executives on the list of the 37 richest people in advertising. Draper would have wanted to be employed by little old conglomerate Havas; it had 11 of the 37 (27%).

In Don Draper’s Sterling Cooper Draper Pryce (SCDP) the creative people are the stars, as they were in real-life Madison Avenue of 1970: Bill Bernbach, David Ogilvy, Rosser Reeves, Leo Burnett, and George Lois were all creative superstars who founded (or co-founded), ran, and skyrocketed their agencies to fame, glory, and riches.

However, in the 1980s and 90s, the agency business founders got a little greedy and their agencies started to go public in order for them to get big paydays. Then, large agency holding companies, mostly from Britain and Europe, started gobbling up the stock or just outright bought most of the creative-driven agencies. Finance types like Martin Sorrell and the Saatchi brothers took over and started making decisions based on making money, not on making great advertising.

The beancounters began controlling the ad agency business and started price wars — cutting commissions to earn business – and this trend plus cost-conscious advertisers led by procurement-officer mentalities have driven profits steadily downhill ever since. Instead of delighting customers with great ads, agencies began to delight top executives and board members with big bonuses. The agency business began taking on the greed, ethics, and inequitable compensation of Wall Street and left behind the creativity focus of Draper’s Madison Avenue.

So, instead of paying creative people to make great ads, WPP pays its CEO, Martin Sorrell, $27 million a year, its Finance Director, Paul Richardson, $12.4 million, and its CEO of WPP Digital, Mark Read, $3.4 million – the only three WPP execs on the list of 37. WPP pays Sorrell so much it’s no wonder it can’t afford to pay creative people a lot, and that really would set Draper off on another rage-filled binge.

The Ten Most Hated Jobs – Why?

Of the blogs I read regularly, Steve Denning on Forbes.com consistently writes the most thoughtful ones about management. Recently he posted about the ten happiest and the ten most hated jobs in America. I think there are some lessons in the lists for managing media organizations and media salespeople.

Ten Happiest Jobs

  1. Clergy: The least worldly are reported to be the happiest of all.
  2. Firefighters: Eighty percent of firefighters are “very satisfied” with their jobs, which involve helping people.
  3. Physical therapists: Social interaction and helping people apparently make this job one of the happiest.
  4. Authors: For most authors, the pay is ridiculously low or non-existent, but the autonomy of writing down the contents of your own mind apparently leads to happiness.
  5. Special education teachers: If you don’t care about money, a job as special education teacher might be a happy profession. The annual salary averages just under $50,000.
  6. Teachers:Teachers in general report being happy with their jobs, despite the current issues with education funding and classroom conditions. The profession continues to attract young idealists, although fifty percent of new teachers are gone within five years.
  7. Artists: Sculptors and painters report high job satisfaction, despite the great difficulty in making a living from it.
  8. Psychologists: Psychologists may or may not be able to solve other people’s problems, but it seems that they have managed to solve their own.
  9. Financial services sales agents:Sixty-five percent of financial services sales agents are reported to be happy with their jobs. That could be because some of them are clearing more than $90,000 dollars a year on average for a 40-hour work week in a comfortable office environment.
  10. Operating engineers: Playing with giant toys like bulldozers, front-end loaders, backhoes, scrapers, motor graders, shovels, derricks, large pumps, and air compressors can be fun. With more jobs for operating engineers than qualified applicants, operating engineers report being happy.

No big surprises here. People who help other people, find intrinsic motivation in their work, and have autonomy seem to be happy. There is much more focus on the meaning of their work and of their lives rather than on money.

The Ten Most Hated Jobs

  1. Director of Information Technology: Information technology directors hold almost as much sway over the fate of some companies as a chief executive, but they reported the highest level of dissatisfaction with their jobs. Why? “Nepotism, cronyism, disrespect for workers.”
  2. Director of Sales and Marketing: A director of sales and marketing plans reported the second-highest level of job dissatisfaction, “a lack of direction from upper management and an absence of room for growth.”
  3. Product Manager: Product managers complained of restricted career growth, and boring clerical work even at this level.
  4. Senior Web Developer: Senior web developers reported a high degree of unhappiness in their jobs, because employers are unable to communicate coherently, and lack an understanding of the technology.
  5. Technical Specialist: A technical specialist reported that for all their expertise, they were treated with a palpable disrespect. Their input was not taken seriously by senior management.
  6. Electronics Technician: Electronics technicians complain of having too little control, work schedule, lack of accomplishment, no real opportunity for growth, no motivation to work hard, no say in how things are done, and mutual hostility among peers.
  7. Law Clerk: Clerkships are among the most highly sought-after positions in the legal profession and the job beefs up a resume. Yet law clerks still report high levels of dissatisfaction. The hours are long and grueling, and the clerk is subject to the whims of sometimes mercurial personalities.
  8. Technical Support Analyst: Technical support analysts help people with their computer issues. This typically amounts to calmly communicating technical advice to panicked individuals, often over the phone, and then going on site only to find the client simply hadn’t turned the printer on. They may be required to travel at a moment’s notice, sometimes on holidays or weekends.
  9. CNC Machinist: CNC machinists operate computer numerical control machines. For the uninitiated, this is a machine that operates a lathe or a mill. Now that the CNC operator has had most of the physical hazards of manufacturing replaced by a machine, there’s not a lot to do but push buttons and maintenance. Since it’s a specialized skill, the job offers no room for advancement.
  10. Marketing Manager: Marketing managers often cited a lack of direction as the primary reason for job dissatisfaction.

Some surprises here. If people don’t feel like they are helping others, don’t have room for growth, or have a job focused on extrinsic rewards (money and profits), it appears that they hate their jobs.

But why do sales and marketing directors and product managers say there is no room for growth, when the odds are the CEOs of a majority of companies come out of these jobs. There must be something else going on. I think that in many of the hated jobs there is focus on money and profits and not on meaning, not on helping others.

So what can media companies and media sales management do to make the people who work in their organizations happier (assuming they care about their people being happy)?

One adjustment media managers can make is to emphasize meaning instead of money, emphasize helping and serving others instead of maximizing revenue, increasing shareholder value, or garnering ratings. If salespeople were told their number-one goal is to delight their customers by getting results for them (results as their customers define them) and their number-two goal is to educate customers and give them insights on how they can grow and be more successful, then salespeople more than likely would be happier; they might say to themselves, “I helped someone today.”

And instead of compensating media salespeople wholly or partially on commission, why not pay them based on delighting customers by giving them superb service as measured by customer satisfaction surveys?

Emphasizing the purpose and meaning of media sales jobs, providing an intrinsically motivating work environment, and encouraging salespeople to delight customers might well make salespeople happier than paying them more money, and, by the way, it might well increase profits by increasing revenues and reducing expenses. It might be worth a try, especially in attracting younger people who are often looking for work that gives them a sense of meaning.

Innovative Move by Marissa Mayer

The blogsphere, newspapers, and magazines have been full of opinions about Yahoo CEO Marissa Mayer’s decision last month to have everyone who telecommutes at Yahoo come into the office. Most of the opinions I read were complimentary of Mayer’s decision for a variety of reasons.

Michael Schrage wrote on the HBR Blog Network that “Marissa Mayer Is No Fool” and Greg Satell’s headline in a Forbes blog was “One More Reason to Applaud Marissa Mayer.” Max Nison wrote in the typically curmudgeonly Business Insider that “Marissa Mayer Got It Right – You Can’t Fix a Broken Culture When People Aren’t In the Office,” and in the more august Atlantic, Ann-Marie Slaughter (a professor at Princeton) opines that “Marissa Mayer’s Job Is to Be CEO—Not to Make Life Easier for Working Moms.”

Admittedly, it might well be confirmation bias that I read items that were positive about Mayer’s decision, but there are two reasons (among many) that I thought were particularly important about her decision to bring telecommuters in out of the cold, so to speak.

One reason, mentioned in several blog posts and articles, was that Mayer’s decision was not based on the notion that “this is the way it’s always been done” or gut feel, which is typical thinking in most legacy media companies, but was based on hard data.

Apparently, Mayer looked at data that indicated telecommuters were not logging into the Yahoo VPN and recognized that a large number of the WFH (Work From Home) people were not fully engaged or not productive.

Another reason I believe Mayer’s decision was right is not one that was indicated (certainly not stressed) in the blog posts and articles I read, and that reason is Yahoo’s desperate need for innovation. And, as pointed out in many books, articles, and research studies, innovation occurs when people mix with other people.

Steven Johnson, in his brilliant book, Where Good Ideas Come From, writes about the vital importance of “the adjacent possible” and liquid networks for innovation to occur, and gives the example of MIT’s famous Building 20:

…the temporary structure build during World War II somehow managed to last fifty-five years, in part because it had an extraordinary track record for cultivating both breakthrough ideas and organizations like Noam Chomsky’s linguistics department, Bose Acoustics, and the Digital Equipment Corporation.

Breakthrough ideas usually don’t come from people working alone at home. Innovation comes from people bumping into each other, from water-cooler discussions, from open-space areas between cubicles, and from buildings like Pixar’s that in his book Steve Jobs Walter Isaacson writes Jobs designed with typical obsessiveness so that people couldn’t avoid random encounters – sort of like Google’s offices, where Marissa Mayer famously worked before she became CEO of Yahoo.

Google and Steve Jobs’s Apple are companies where sustaining and disruptive innovations come by the truckloads. Yahoo has been stuck in the past and hasn’t innovated much, so Mayer had to change the company’s culture and kick-start its innovation engine. She had to kick people out of the isolation in their homes and bring them back to company offices where they could collaborate and innovate.

I have not been in Yahoo’s offices, but I have been in the New York offices of Google and Facebook. The walls in the halls of most of Google’s NY offices are floor-to-wall whiteboards full of ideas and formulas (no pictures allowed), and Facebook’s NY offices are open spaces with rows of tables with people sitting side by side working on their computers.

Google’s and Facebook’s offices are nothing like those of Viacom, CBS, Hearst, or Time-Warner, whose fancy offices more often reflect the overblown sense of self-importance of their executives rather than reflecting the importance of openness and collaboration for innovation.

As legacy media executives struggle to deal with the disruptive innovation of the Internet, and as they lose their distribution advantage to the Web, they should take a page from Marissa Mayer’s playbook, get out of their plush offices, and make a move for innovation.