September 25, 2017

Obama Was Wrong About Romney’s Salesmanship

In a speech in the last week of the campaign, President Obama said about Mitt Romney: “He’s a very talented salesman, and in this campaign he’s tried as hard as he can to repackage the same old ideas and pretend they’re new.”

Obama used the Mark Anthony strategy and damned Romney with faint praise, but Mitt proved that even the faint praise was exaggerated. He was a terrible salesperson; he could only sell himself to people who looked like him and were about his age. And worse, he proved he was a sore loser and refused to take responsibility for running a lousy campaign and having a terrible sales pitch.

In a post-election conference call with supporters and donors, according to the NY Times, Romney said:

…his team still felt “troubled” by his loss to President Obama … [and] attributed defeat in part to what he called big policy “gifts” that the president had bestowed on loyal Democratic constituencies, including young voters, African-Americans and Hispanics.

…Mr. Romney said Wednesday afternoon that the president had followed the “old playbook” of using targeted initiatives to woo specific interest groups — “especially the African-American community, the Hispanic community and young people.”

In other words, Romney was whining, “It wasn’t my fault!” Oh, yeah? How about breaking one of the most basic rules of selling, “Don’t knock the competition.”

How dumb was it to start the campaign knocking a personally popular president? Making robot-like speeches claiming that Obama “just wasn’t up to the job” of course alienated people who didn’t look like Mitt Romney but did like the president and his policies. It reminds me of the way magazine reps used to sell magazines by starting their pitches to buyers with, “Don’t buy my competitor, their circulation is down,” and not being sensitive enough to know that the buyer was buying the magazine the salesperson was knocking, thus insulting the buyer’s judgment.

When I used consult for radio and TV stations and networks, I would often conduct a Sales Audit, which I would begin by meeting with a sales staff, asking them a series of questions, and then listening carefully to the answers. When I would ask something like, “How are sales going?” (or something sort of vague related to revenue), and I got excuses such as “Well, ratings are down,” or “The station doesn’t promote enough,” or the ever-present “Our competitors all lower their rates, what can we do;” I knew they were losers because, like Romney, they didn’t take responsibility, they wouldn’t be personally accountable for results.

And I would remember Jim Freeman, the general sales manager of a radio station in Los Angeles, and the best at his job I ever saw. In one unforgettable sales meeting, Jim, with enormous pride, showed the sales staff a chart that looked like a big X. The line that started at the top left and went down to the bottom right represented the station’s ratings. The line that started on the bottom left and went up to the top right represented the station’s billing (revenue).

Jim said, “Look, we’ve had 21 down rating books, and every month we’ve had revenue growth. We’ve just had another down book. Another character builder. Another opportunity to show management how good we are!” And he meant it, and the billing went up.

Jim and his sales staff took responsibility for getting results. Each sales manager and salesperson was personally accountable for creating value for their station and increasing revenue. They didn’t knock the competition. How could they; the competitors had higher ratings, were more popular. All the sales staff could do was sell the benefits of their programming, their target audience, and their ability to service accounts. They were winners.

Being a good salesperson doesn’t mean lying to get an order, doesn’t mean knocking the competition, or doesn’t mean blaming the competition for being unfair; it means taking responsibility and being accountable for results regardless of the competition.

Does Real-Time Bidding Threaten Salespeople?

eMarketer estimated this week that buying display ads through real-time bidding (RTB) platforms will account for 13 percent of online display spending in 2012, rising to 25 percent in 2015.

Does the increased use of RTB mean that more and more salespeople will be disintermediated by ad exchanges and trading desks and put out of work?

No.

Silicon Alley Insider’s November 15th Chart of the Day showed that “Google Rakes In More Ad Dollars Than U.S. Print Media” – yes, more than all magazines and newspapers combined. But over the last several years Google has added scads of salespeople as it has grown, even though the final sale of keywords is handled by AdWords, Google’s online RTB platform.

What has happened, though, as the result of automated ad-buying platforms and exchanges is that the role of digital salespeople has changed dramatically. Their role has morphed from “closer” to “educator.” Traditional advertisers and agencies are often lost when they try to buy new mediums such as search and social media. They don’t need closing; they need educating. They need help in buying these dramatically different and radically new mediums.

Advertisers also need insights into how search, social media, and mobile advertising can save them money, increase their advertising ROI, and help them sell a lot more stuff, as brilliantly described in the bellwether book, The Challenger Sale. Exchanges and RTB platforms can’t educate clients, can’t give insights, and can’t build trusting relationships. You can’t get a hug from a computer … yet.

In David Mamet’s play and movie, “Glengarry Glen Ross,” the chilling speech by Blake (brilliantly played by Alex Baldwin in the movie) in which he nastily exhorts the real estate salespeople (all men) to “ABC — Always Be Closing” is a classic view of the old-fashioned perception of salespeople in a bygone era before Google, Facebook, and Twitter. Salesmen were closers then. Salespeople are educators today, or they’d better be unless they want to be replaced by RTB platforms.

RTB platforms drive prices down; they’re only concerned about price, not value. Good sales educators drive value up by gaining client trust and giving insights and strategies on how to invest in digital advertising and marketing.

So, as digital advertising investment for the world’s largest media companies (38 percent) approaches television ad investment (42 percent), according to Silicon Alley Insider’s October 2nd Chart of the Day, it won’t but a few more years until online becomes the world’s number-one ad medium. And this top rank will not be because of RTB platforms, which will do an increased percentage of the grunt work of buying, but will be because of flesh-and-blood salespeople building trust and educating clients how to invest in digital advertising and, by the way, how to use the RTB platforms.

What The President Thinks of Salesmen

Let me begin with a disclaimer. I voted for Barack Obama in 2008 and supported him for re-election this year. I like his character, I like what he’s done in foreign policy, and I like what he did in bailing out General Motors and Chrysler. But I don’t like his attitude toward “salesmen.”

In a speech in the last week of the campaign, here’s what Obama said about Romney:

He’s a very talented salesman, and in this campaign he’s tried as hard as he can to repackage the same old ideas and pretend they’re new. In fact, he’s offering them up as change, says he’s the candidate of change. Now, let me just say this: We know what change looks like, and what he’s selling ain’t it.

Obama, or rather his speechwriters, instead of calling Romney a liar, called him a “salesman,” which really pisses me off for two reasons: 1) He’s using an outmoded, pejorative image of a “salesman” as a liar and a persuader who tries to sell something defective. It’s a 1950s image of a used-car salesman with a wide, insincere smile, in a gaudy checkered sport coat, and with a loud, loosened, Windsor-knotted tie trying desperately to sell a lemon of a car to a clueless customer. 2) He’s using an old-fashioned gender-specific word for salespeople that inherently presumes everyone in sales is a man (and a liar).

Obama’s speechwriters (and we can assume, Barack, too) haven’t read The Challenger Sale, the bellwether book based on extensive research by the Corporate Executive Board that, if its principles are followed, advances the craft of selling to a new level of professionalism.

The Challenger Sale indicates that the most successful salespeople, not “salesmen,” are those who give insights to customers on how to make the customers’ businesses more successful and who teach customers how to buy and use the products or services they are selling. The most successful salespeople are educators, are evangelists, are experts in their products, and help their customers get what the customers want – more sales and profits. Successful salespeople are not liars.

In the media, the two best performing sales organizations, according to surveys of sales staffs, including those of Jack Myers, are Google and ESPN. Google salespeople don’t sell search to clients, they educate clients on how to use search. They are educators.

ESPN salespeople don’t sell spots or banners or pages to clients, they educate clients on creative executions and relevant sponsorships. They are evangelists.

And all of Google or ESPN’s salespeople are not salesmen. In fact, the last time I checked, ESPN’s top salesperson is a woman.

So, come on, let’s get real here and stop demeaning a noble craft and remember the old adage that “nothing happens until someone sells something,” and that something isn’t sold by lying or persuading, but by educating customers; and that something isn’t sold just by men.

“The Newsroom” Is a Sirloin Steak Dress

I blogged last week about HBO’s “The Newsroom” and how the show debuted at an opportune time soon after the Gallup Poll showed American’s confidence in TV News at a all-time low. There is now no place for the credibility of TV journalism to go but up, and if it does rise in future polls, you can bet in the prediction market that “The Newsroom” creator and writer Aaron Sorkin’s price will go up.

Sorkin’s credibility may go up among those in the political center and left of center, but the credibility of TV News is not likely to budge for several reasons:

  1. The primary viewers of TV News (65+) are dying off, and just about the only advertisers in a non-election year that want to reach these aging viewers are pharmaceutical marketers.
  2. In spite of the massive infusion of money during this election year, the broadcast and cable news providers and especially local TV stations will almost certainly not invest in improving their news product, but will take the money to boost their bottom lines during these recession years and in the face of stockholder demands.
  3. In their desperation to turn around the overall news ratings decline trend (a virtually impossible task), news providers will become more partisan on the right and left to attract a diminishing core of extremists at both ends of the political spectrum.
  4. This drift to extreme positions will turn off younger viewers, whom Jack Myers labels as Internet Pioneers in his excellent book Hooked Up, furthering the decline of news ratings as more and more Internet Pioneers and those under 55 abandon TV News for instant updates on Google News, CNN online, Twitter, and Facebook.

Therefore, I think Aaron Sorkin is trying to keep afloat a journalism Titanic. His ego and idealism will carry him through at least two seasons of “The Newsroom” (HBO has renewed for a second season), but it will not survive based on its high-minded journalistic idealism, which Charles Pierce in an online Esquire blog, indicated was a world that never was, a world that exists only in “what Sorkin imagines it once was.”

“The Newsroom’s” ultimate success will be determined by essentially the same speculations that make “Jersey Shore” a hit. Who will wind up sleeping with whom?

Lady Gaga wrapped a cute body in a sirloin steak dress to get attention. Aaron Sorkin is wrapping non-ratings-driven journalistic integrity in a dress of sexual tensions to get attention, and he’s getting it. But “The Newsroom” will not change TV journalism. Like Lady Gaga’s sirloin steak dress, integrity-driven TV journalsim will be cooked.

Confidence In TV News Hits All-Time Low As “Newsroom” Debuts

On July 10, the Gallup organization announced the results of its latest poll on America’s confidence in various institutions with the headline “Americans’ Confidence in Television News Drops to New Low:”

Americans’ confidence in television news is at a new low by one percentage point, with 21% of adults expressing a great deal or quite a lot of confidence in it. This marks a decline from 27% last year and from 46% when Gallup started tracking confidence in television news in 1993.

The findings are from Gallup’s annual update on confidence in U.S. institutions, conducted June 7-10 this year. As such, the findings preceded the erroneous initial reports by cable-news networks CNN and Fox News regarding the U.S. Supreme Court’s June 28 decision about the constitutionality of the U.S. healthcare law.

Producer/writer Aaron Sorkin could not have chosen better time for the debut of his HBO program “Newsroom” starring Jeff Daniels as the self-absorbed but journalistically righteous anchor Will McAvoy and Emily Mortimer as pro-integrity and anti-ratings executive producer MacKenzie McHale.

Sorkin obviously knew of Americans’ disgust with TV news as he was developing “Newsroom” and clearly is attempting to show the conflict between the type of ratings-driven pandering done by Fox News, MSNBC (now NBC News), CNN, and especially local TV stations to journalistically sound reporting done only by NPR Radio in the broadcast and cable realm.

“Newsroom” is entertaining in focusing on the problem, but Sorkin hasn’t yet, as of episode four, indicated who’s to blame for the ratings-and-profit-driven news pandering, although in episode three there is a hint that the CEO of McAvoy’s ACN (played briefly but chillingly by Jane Fonda) might be to blame. We’ll see.

Also, the Gallup poll indicated:

Among 16 U.S. institutions tested, television news ranks 11th, following newspapers in 10th place. The 25% of adults who express a great deal or quite a lot of confidence in newspapers is down slightly from 28% last year. Confidence in newspapers is now half of what it was at its peak of 51% in 1979.

So, the credibility of two once admired legacy mediums, television news and newspapers, are at all time lows. Who’s to blame? Is it bloviating, self-absorbed talent like Rush Limbaugh, Bill O’Reilly, or Keith Olbermann in television, or the inaccurate, self-absorbed reporters in newspapers like Jason Blair, Judith Miller (ex NY Times, now Fox News, of course), or Alessandra Stanley (NY Times TV critic and reporter)?

Even though the bloviators and reporters (I don’t know of an equivalent adjective similar to “bloviator” for newspaper journalists) mentioned above are consistently inaccurate and lack basic journalistic truth telling, they are just doing what management allows them to get away with. Therefore, who’s to blame – management. Top management.
So we shouldn’t blame Rush Limbaugh, Bill O’Reilly, Keith Olbermann, Jason Blair, Judith Miller, or Alessandra Stanley, the blame must be placed on the greedy Rupert Murdoch, Jeff Bewkes, Arthur Sulzberger, and other corporate executives whose decisions about news and journalism are based primarily on their grossly bloated bonuses, not on public service, public trust, or on credibility.

What these short-term-oriented, greedy CEOs don’t realize is that advertising and subscription revenue will eventually parallel the downward slope of credibility. They need to take a page out Steve Jobs’s management book and focus on products that delight consumers and not on profits. Profits will come, like they did at Apple if the products are superb – and credible with consumers.

Media Sales Executives: Hurry, Buy This Book

When I became VP of Sales Strategy and Development at AOL’s Interactive Marketing division in 1998, I was asked to become active in a membership that the division had in the Sales Executive Council (SEC), part of the Corporate Executive Board.

I remember attending my first meeting of the SEC with top-ranked marketing and sales executives of GE, DuPont, Time Inc., and several large banks, and I was blown away with what the SEC had to offer based on extensive research it conducted in sales organizations of major global corporations.

One of the reasons I appreciated the SEC research is because I had come to AOL from having an endowed chair at the University of Missouri School of Journalism, which I had been hired, in part, because I had an MS in Journalism and was a.b.d. for my Ph.D, which also meant that I had taken several advanced research courses and had some understanding of what good research and methodology looked like.

The SEC provided such insightful information that I used much of what I learned in subsequent sales training at AOL, other organizations I have done training for, and in the fourth edition of my textbook, Media Selling: Television, Print, Internet, Radio..

Well, the SEC and the Corporate Executive Board have done it again. Matthew Dixon and Brent Adamson have written a sales management blockbuster titled The Challenger Sale: Taking Control of the Customer Conversation, and it’s an absolute must read for media sales and marketing executives, especially for those in digital (internet and mobile).

The reason I’m not recommending The Challenger Sale to media salespeople is because, even though they might benefit from it enormously, they will be extremely frustrated and discouraged because there are so few media companies that will be willing to embrace the changes necessary to implement such a successful approach that The Challenger Sale recommends.

Alas, because most media companies sell to advertising agencies, who could care less about solutions to advertiser problems, the approach recommended in The Challenger Sale must be adopted and customized, which most media companies are unwilling to take the time to do. But the major points made that sales reps must “Teach for Differentiation, Tailor [the solution] for Resonance, and Take Control of the Sale” all work in media selling.

The only media companies I know of that come close to the Challenger Sale are Apple (not a pure media company), Google, and ESPN (Disney), but they are not run by bean-counting financial types or narcissistic, greedy cliff-dwellers who think old-style relationship selling is good enough.

If you’re a sales executive who works for the latter type of media company, buy the book, have it shipped to your home, don’t tell anyone you’re reading it, and surreptitiously put into practice all that you can of the Challenger Sale with your flexible, growth-oriented sales reps.

Good luck.

Nielsen’s Digital Video GRPs: Who Gains?

Last fall Nielsen announced it would provide gross rating points (GRPs) for online ads to mixed reviews.  Most of the criticism focused on  the problem of comparing a 30-second TV commercial to a static online banner ad.  Not an apples-to-apples comparison.  It didn’t seem like Nielsen had really found the Holy Grail of media comparability, at least for media buying and planning purposes.

Then a couple of weeks ago, Nielsen announced a partnership with TubeMogul to provide GRPs for online video ads.  Were digital video GRPs now the Holy Grail?  Were there any winners or losers?

Because the Nielson/TubeMogul announcement comes about a month before the TV upfront market breaks, we can assume that the timing of the announcement was not random, but a strategic maneuver to influence the upfront and attempt to give media planners and buyers a defensible reason to move budgets from TV, continuing to suffer from declining audiences, to online video, which is growing like Jack’s beanstalk, and is now measurable in GRPs.

Who gains the most by the introduction of digital video GRPs?  Obviously, the biggest winner is Nielsen, which now has more data to sell.  The second biggest winner (and purchasers of the data) will be internet sites and apps that serve video, which can now try to get GRP-obsessed media planners at the large media agencies to switch money from TV to online.

The losers will be TV and print.  Poor print; digital video GRPs are just another nail in print’s coffin, as though it needed any more nails.  Radio won’t suffer much, because its terrestrial revenue seems to be rising – slowly, but on an upswing – and radio’s biggest upside is in digital, which is on the verge of substantial growth.

And, if media agencies and planners put too much emphasis on GRPs, another group of losers will marketers, because a GRP (or a CPM) never went into a store or online and bought anything.  What marketers care most about is selling the most stuff for the least amount of money – ROI.  Return on investment is the Holy Grail for marketers, and you can’t get reliable and valid ROI metrics from multiple-source and panel data such as Nielsen supplies.  Solid ROI metrics can only come from single-source data.

There is one media agency that is trying to take advantage of marketers’ focus on ROI.   This week ZenithOptimedia Group announced that it:<blockquote>… is refreshing its marketplace branding with the new addition of a “Live ROI” tagline to underscore the shop’s real-time ROI accounting capabilities. The Publicis Groupe-owned media agency network is also sprucing up its logo and redesigning the logos of its specialty units to present a uniform corporate look.

The agency network, comprised of media shops Zenith and Optimedia along with several specialty operations, has been positioned as “The ROI Agency” for the last decade. That overarching descriptor will remain in place.</blockquote>

Is the notion of “Live ROI,” “refreshing” its branding that has been in place for 10 years, and “sprucing up its logo” a new approach for ZenithOptimedia or is it merely a PR push for an old idea that has been dusted off to take advantage of the questions that marketers are bound to ask about what benefit digital video GRPs will have for them?

So, it will be interesting to watch the upcoming TV and internet upfront markets to see if money <i>is</i> shifted from TV to the internet, and where ZenithOptimedia places the majority of its media investments, in GRP-measured TV or in more ROI-accountable online and mobile  — not that they would necessarily tell anyone, but it will be fun to guess in order to speculate if the ZenithOptimedia rebranding is a stunt or a strategy.

And it will be fascinating to watch and see who gains and who loses with the introduction of video GRPs.

Mediabrands’ Desperate Move

IPG Mediabrands announced that, according to Media Post’s Media Daily News on Monday, January 16, it “will move to a pay-for-performance model that links the agency’s performance and compensation to the clients’ business outcome, according to global CEO Matt Seiler. Other ways create a ‘horrible disservice’ to clients, he said. ‘It’s simple, if our clients don’t achieve their business plan, we don’t get paid.’”

The Media Daily News story went on to indicate that:

Last year, IPG Mediabrands hired McKinsey & Company to start shifting the business mode. “Frankly, we are happy to move the whole industry in that direction, too,” Seiler said.

The move means tying IPG Mediabrands’ pay-for-performance business contracts directly to the emerging technology focus spearheaded by IPG Media Lab, which continues to rise in applications, about 600 in its database total. The physical IGP Media Lab in New York highlights 50 applications, helping brand execs better understand emerging technologies by touching and feeling the apps.

Nine days later, on January 24, this headline appeared in Media Daily News: “Carat To Steer $3B GM Media, Digital: Global Savvy Was Key To Win.”

General Motors has awarded its estimated $3.5 billion global media planning and buying account to Aegis Group’s Carat, after a formal review that began in August, the carmaker confirmed Tuesday.
Other contenders included the U.S. incumbent Starcom, Omnicom Media Group and Interpublic’s [Mediabrands.] Commenting on the award, GM’s Global CMO Joel Ewanick said: “We wanted a media agency partner with the sophistication to leverage global marketing opportunities.” He called Carat’s approach “innovative” and able to “drive significant marketing value” that would align with the company’s global and regional brands.

And further in the Media Daily News Story:

Reps for IPG’s Mediabrands and Omnicom Media Group did not immediately respond to queries for comment.

So, let me make sure I get this straight: IPG’s Mediabrands’ CEO Matt Seiler makes a wild claim that Mediabrands’ new pay-for-performance compensation model is going to be a game changer because of some gobbledogook about technology, and then a little over a week later GM, one of the world’s largest advertisers, pulls a portion of its media buying business from Mediabrands and gives it to Carat. Could the two be linked? You make the call.

At the time, Seiler’s announcement seemed like he was waving a white flag in order to scrape up any crumbs of business he could find by essentially agreeing to work on spec, a move that has been tried many times over the years by desperate agencies that are on a precipitous decline. The GM announcement that Carat had won its business meant that Mediabrands had lost its piece of the GM business, which put a spotlight on the hypocrisy of Seiler’s previous week’s announcement.

If pay-for-performance were the most effective and efficient agency compensation model, the Big Three conglomerates, WPP, Omnicom, and Publicis, would be using it and it would have become the preferred way to compensate agencies. These conglomerates are as profit minded and as confident of the efficacy of their work as Seiler’s Mediabrands is, but they and their clients have not adopted the pay-for-performance model. Why? Because “performance” is too hard to measure, as it involves creative execution, competitive activity, pricing, weather, luck, and distribution channel effectiveness, among hundreds of factors.

Therefore, when pay-me-if-it-works is touted as the best new system and all other systems are called a “horrible disservice” by a media agency that has just lost one of the world’s biggest spending advertisers, presumably because GM didn’t think Mediabrands did a good job, Matt Seiler makes about as much sense as a Republican candidates’ debate does.

And, similar to the debates, the perception that is created is not one of effectiveness, but one of desperation – not a good way to win new clients.

Failure at the Top of Yahoo and Time, Inc.

Two new media company CEOs started this month. Scott Thompson moved from president of eBay’s PayPal unit to CEO of Yahoo, and Laura Lang moved from CEO of Digitas, the world’s largest digital advertising agency, to CEO of Time, Inc.

What do these two have in common? Both come to their new companies after a long search, both are replacing fired CEOs, and both come from outside their new companies and have limited, if any, direct experience in the medium they are going to lead.

This being the beginning of a new year and a time when predictions are traditionally in order, I’ll hazard a guess about how long Thompson and Lang will last in their new jobs: Both will be out at the end of two years because it will take that long for their respective boards of directors to deflect blame from themselves to the two they have hired.

Yahoo’s board is led by co-founder Jerry Yang and board chairman Roy Bostock, both of whom have reputations in Silicon Valley and Silicon Alley of being major bozos who have fumbled by having four CEOs in five years (Terry Semel, Jerry Yang, Carol Bartz, and, now, Thompson). Thompson like Bartz and Semel, came from outside Yahoo.

The Yahoo board, led by Bostock, backed Jerry Yang, the only insider of the four CEOs, when he made the bonehead decision to turn down Microsoft’s desperate and excessive $45 billion offer to buy Yahoo in 2008. Soon after this embarrassment, the board hired Carol Bartz, and then fired her two years later.

Time, Inc. is owned by Time Warner, which is headed by CEO Jeff Bewkes, who does pretty much what he wants because he has strong support from his board. Time, Inc. was headed by Ann Moore, a 30-year Time, Inc. veteran, who was CEO for eight years, but couldn’t lead the web-backward magazine group into the digital age. So Bewkes hired web-savvy Jack Griffin, head of the magazine division of Meredith Corp.

The Ivy League, cliff-dwelling, web-ignorant editors at Time, Inc. couldn’t stand the outsider Griffin trying to drag them into the digital age, and they undermined him, just like they trashed the Warner Communications people in 1990, when Time, Inc. bought Warner Communications for cash and, especially in 2001 when they trashed the AOL people after the AOL purchase of Time Warner was approved.

When Griffin was fired, The New York Times quoted a confidential source who was close to the situation at Time, Inc. as saying:

“Jack’s exit had nothing to do with management style and everything to do with the question of whether Time is manageable so long as entrenched interests fiercely resist the change necessary to position the organization for the future,” this person said. “Fortunately, the team Jack leaves behind is first rate and he wishes them all the best of success.”

So what does Bewkes think will be different when the digital marketing expert, Laura Lang, tries to herd the Time, Inc. cats? I give her two years before the cliff-dwelling editors get her.

And I’ll give Thompson two years at Yahoo, not because anyone below him will torpedo him like they will Lang, but because those above him on the board are clueless. The board will blame him for failure to turn around a dinosaur business, which Lou Gerstner couldn’t save from shrinking. Huge, lumbering, mass-appeal portals are dead; they’ve been painfully nibbled down by smaller, more nimble, speedier, niche-appeal websites and, especially, apps.

What hiring from outside their organizations says about the boards of Time Warner (and Bewkes) and Yahoo is that they are not doing their jobs well. They are not doing effective leadership training and they are not doing adequate succession planning. It’s their fault there is no one in their organizations who is qualified to step up. And if or when Scott Thompson and Laura Lang fail, it will not be their failure, it will be the failure of leadership at the very top of Yahoo and Time, Inc. once again.

Management Lessons From Disney and ESPN

Media companies would do well to follow the lead of the Walt Disney Company and its top revenue-producing subsidiary, ESPN, and institute rational top management succession planning.

This past week Disney and ESPN announced that ESPN president George Bodenheimer would move up to Executive Chairman, and executive vice president for content, John Skipper, would become president of ESPN and co-chair of Disney Media Networks effective January 1, 2012. These moves are significant for several reasons.

One reason is that Bodenheimer, an ESPN 31-year lifer who came up through affiliate marketing, is a salesman. His primary expertise is understanding the needs of and negotiating with ESPN’s primary customers, the MSOs. Skipper is a content guy. More and more we are seeing the shift in forward-thinking media company top executives from sales, legal, and finance people to content people. But why?

I think it’s because sales, legal, and, especially, finance people tend to focus on profit instead of product. In his best-selling biography of Steve Jobs, according to Silicon Alley Insider, Walter Isaacson writes that Jobs told him:

“My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It’s a subtle difference, but it ends up meaning everything.”

Skipper, a product person who launched ESPN The Magazine, and who has ad-sales experience, will lead ESPN forward. In launching ESPN The Magazine, Skipper worked closely with “the soul of ESPN,” John Walsh, the often gruff but brilliant content and journalistic integrity cop, as chronicled in the fun read Those Guys Have All the Fun: Inside the World of ESPN by James Andrew Miller and Tom Shales. You can be assured that content and content integrity will continue to be a focus of ESPN.

In making the announcement, Bodenheimer wrote:

At ESPN we take great pride in the development of future leaders of the company, people who understand our Mission and Values and who make other people better. We have many such individuals at ESPN and I am confident that the list grows longer every day.

Secure in that belief and with the support of Bob Iger, today I am announcing that as of January 1, 2012, I will take on the new position of Executive Chairman of ESPN, a position I will hold for at least the next 12 months. In that capacity I will remain Chairman of the ESPN Board but will hand off responsibility for the day-to-day duties as President of ESPN and co-chair of Disney Media Networks. Succession planning has been a focus of Disney’s for some time, and consistent with that approach, this is a process that I began last spring. We are in very good shape both domestically and internationally on many fronts, including, distribution, ad sales, ratings and digital distribution and I simply decided that after 13 years as president and nearly 31 years at the company, it was a good time for me to step aside and allow others to lead our continuing efforts.

Can you imagine Michael Eisner, Barry Diller, Rupert Murdoch, Sumner Redstone, Les Moonves, Mel Karmazin, or Jeff Bewkes writing the above? Those guys are all “I” people, whereas Bodenheimer and Iger are mostly “we” people. Notice the use of “we’ and “our’ in the above quote. Bodenheimer sees himself as a team player, not an individual star, as opposed to the typical narcissistic media mogul with an “I” complex. He’s eager to pass the baton when he is 53 to someone younger, while Redstone (nearing 90) and Murdoch (81 this coming March) defiantly refuse to even contemplate any type of succession planning. What does that say about the future of Viacom, CBS, and News Corp.? What might it say about the future of Disney and ESPN?

Place your bets, ladies and gentlemen. And you can be sure that Wall Street will be placing its bets in the coming months based on the Level 5 Leadership (Jim Collins’s Good to Great and Great By Choice ) of ESPN and Disney, not on the aged moguls who have destroyed over $200 million in stockholder value of their companies, according to The Curse of the Mogul: What’s Wrong With the World’s Leading Media Companies.

Focusing on profits instead of product, destroying stockholder value, and holding desperately on to power is a tradition in old-fashioned media conglomerates. It will be interesting to see if any of them will learn any management lessons from Disney and ESPN, an organization that does things differently. Wanna place any bets?

Will Others Follow Google’s Sales Lead?

In a recent video by Jack Myers, Google ad sales won top honors in a Jack Myers annual survey of the highest performing media sales groups for quality of sales organization and sales support.

Top media sales organization. Way to go Google! But wait a minute, does Google really have a sales organization?

The function of traditional media sales organizations has been to maximize revenue, close deals, and process orders. However, Google salespeople do none of these functions, which are all executed in an online auction by a sophisticated algorithm. Google salespeople are educators; they are evangelists who sell the concept and benefits of display, video, and, mostly, search advertising.

I believe it is because the Google salespeople are educators and evangelists and not deal closers that they have the top reputation among agencies and advertisers. The Google salespeople are trusted partners who help buyers understand and effectively use search and other Google products. They are not commissioned, make- budget-or-die hustlers.

The Google salespeople are not paid on a commission basis, as many media salespeople are, and are not managed by traditional command-and-control sales management hierarchies. Google salespeople work in pods – autonomous, self-managed units that are assigned from one to as many as 30 or 40 accounts, and are paid based on making goals, some of which are quantitative, some of which are qualitative (non-numeric), and some of which have to do with overall Google goals. For example, CEO Larry Page recently set a sales goal that is tied to the overall increase in Google’s social media usage.

Traditional, old-line media management is probably saying, “What does increased social media usage have to do with getting an order? And how does sales management know if the salespeople in the pods are making enough calls? It’s crazy!”

Yes, crazy according to old-fashioned thinking. But Google’s stock closed over $600 a share on Thursday, October 27. It’s market cap is just over $194 billion, almost three times the market cap of the largest traditional media company, the Walt Disney Co.; Google’s profit margin is 26.7%, more than twice as high as any other large media company; Google’s revenue growth for the third quarter of this year was 33% over the previous year, over twice as high as any large media company but Comcast, which bought NBC Universal and thus upped revenues by 50%; and Google’s gross profit was $18.9 billion last year, more than three times that of the largest media company, Walt Disney Co.

On October 13, Google CEO Larry Page announced third quarter results — revenues of almost $10 billion, up 33%, at which rate by the end of year it should surpass Disney as the largest media company in revenue. Old-fashioned, cliff-dwelling media companies should be so crazy. But, will they follow Google’s lead and adopt the new type of selling, compensating, and managing that have made Google the top sales organization according to the Jack Myers survey?

Not by the hair on your chinny-chin-chin. The old media companies think their salespeople are revenue maximizers and closers, not educators and evangelists, and they are not going to change.

Bye, Bye Fairness Doctrine — Good Riddance.

The FCC announced last week that it is throwing out the Fairness Doctrine along with 80 other rules it considers “outdated and obsolete.”

The Fairness Doctrine was originally put into effect in 1949 by the FCC to ensure that radio stations and, at the time, the few newly licensed TV stations presented opposing views of controversial issues of public importance in an honest, equitable, and balanced way. The Fairness Doctrine was probably a good idea in 1949 to make sure that those who were granted scarce licenses to operated VHF TV stations didn’t use their TV stations for partisan political purposes.

In 1987, under direction from President Ronald Regan’s administration, the FCC abolished the Fairness Doctrine. Because of the growth of cable television and the proliferation of both VHF and UHF TV stations, scarcity was no longer an issue in 1987. Also, led by a Regan-endorsed and encouraged push for deregulation, lawmakers felt the Fairness Doctrine violated free speech rights, especially the rights of a small but growing number of conservative radio talk show hosts, including Rush Limbaugh. Limbaugh began airing political commentary in 1984 in Sacramento, and in 1988 his syndicated program made its first appearance in New York, after the Fairness Doctrine was abolished.

The FCC decision not to enforce the Fairness Doctrine in 1987 (it remained on the books until last week), led directly to the huge growth spurt of conservative talk radio and reinforced the conservative view that government regulation – any regulation – was bad.

Furthermore, the conservative movement had been promulgating the myth that the mainstream media had a liberal bias. The liberal media myth was a right-wing Machiavellian strategy implemented so that conservative talk radio and the conservative media could play the victim and have something to rant against. Conservative bloviators began their unchecked trashing of liberals, Democrats, gay rights, abortion rights, the underprivileged, the uninsured, taxes, big government, and, behind a very thin veil, immigrants and blacks.

After the conservative bloviators (by the way, they are mostly uninformed entertainers) got so numerous, Liberals and Democrats began whining about this trash talk and started calling for the reinstatement of the Fairness Doctrine. However, their leader, newly elected President Barack Obama, who was the prime target of the conservative, racist bloviators, clearly stated early in his presidency that he was against reinstating the Fairness Doctrine because he inherently knew as a lawyer and teacher of Constitutional law that it was bad policy and that government could not legislate fairness or decency.

Therefore, Obama’s FCC finally buried the Fairness Doctrine because scarcity was no longer an issue in an age of abundant content, opinion, and information outlets. Burying the Fairness Doctrine was the right decision even though it leaves unchecked racist, conservative trash talking of a beleaguered president.

But, considering the recent revelations of the corruption of the Rupert Murdoch empire and the fallout that is casting doubt (finally) on the credibility of the Murdoch-owned, conservative propaganda machine, including the New York Post, the Wall Street Journal, and, especially Fox News, perhaps burying the Fairness Doctrine was as much a strategic maneuver by the Obama administration as a free-speech, legal, regulatory move.

By allowing the conservative propaganda machine to continue to run wild and unbalanced by the Fairness Doctrine, the American public and voters have the opportunity to learn how ridiculous, out-of-touch, simplistic, nasty, theocratic, and racist the conservative positions are, thus making an indecisive and too-conciliatory president look good by comparison.

Whatever, the reason, though, the Fairness Doctrine is gone for good, and good riddance.

Murdoch and the Environment: Missing in Action

Guest Blogger Chris Warner writes:

It is all well and good to focus an argument on a specific issue. Rupert is a current Darth Vader type.

However, nowhere do either of you mention the big problem of human nature as a subset within the natural environment. In a hot, flat and crowded world of the energy climate era, with one sky and one sea, the natural environment has changed, mostly by human contribution to the problem. Adam Smith and Milton Freidman are old school. Their contributions do not apply to our current dilemma. The rules have changed. Was Adam Smith correct when he said “the more you know, the less you want?” Was Milton Freidman’s edict the Government is required to protect those down stream in the “neighborhood effect” observed in policy creation?

Aldo Leopold clearly states that “a thing is right if it tends to preserve the integrity, stability and beauty of the biotic community. It is wrong if it tends otherwise.” One world is enough for all of us. All economic policy, including, and hopefully in a leading role, the media, must evolve to a position of thinking and acting responsibly, based on an ethic that supports biodiversity. There is no sustainable alternative.

Sustainable business has a triple E bottom line, Ethics, Environment and Economy. A little greed is good for competition. How about a race to see who can sequester the most carbon. All that requires is fundamentally reversing old business models. No big deal, except everybody born in the 20th century will likely have to die first. We just can’t seem to stop taking, warring and burning. Media has an opportunity to play a pivotal and heroic role in fostering such a large movement.

John Lennon, one of the most influential and successful people in the history of media and entertainment, on whose back many have profited, wrote “Imagine.” The message is boring, yet timeless. Is there a profitable place in media for honesty? Can a positive message sell? Or is that the role of government which the Koch brothers want to remove from public service too? Does private have to mean take? Can the private sector act responsibly? What is enough? The future of our species, and most life on Earth as we knew it is in the balance. Where is the love, the urgency, the rage? I don’t hear any loud rallying cries from the media. Survival must not be profitable.

Rupert does not care about my view, since I don’t pay for his opinion.

Behind the Mask of Meredith’s Guaranteed Sales is a Discount

On July 25, a headline in Media Post read, “Meredith Teams With Nielsen To Guarantee Sales To Magazine Advertisers.” Joe Mandese wrote in the accompanying article:

In a surprise development that signals how pressed print media is to compete with the ROI of digital media, one of the biggest publishers of consumer magazines, Meredith Corp., this morning announced an unprecedented plan to begin guaranteeing that their magazine buys will yield an increase in sales of their products or services.

On July 26, a headline in Advertising Age read “Why More Media Companies and Agencies Should Guarantee Ad Results: It’s About Creativity, Not Just Pleasing Budget-Minded Procurement Officers.” The accompanying article by advertising executive, Jacki Kelly, global CEO of Universal McCann, praised Meredith for its promise of results:

Ladies’ Home Journal publisher Meredith this week said it will promise some of its biggest advertisers that major ad campaigns in its magazines will achieve certain sales results. It’s time to see more of this — and not only to please the procurement officers squeezing major marketers’ budgets.

It’s true, of course, that clients want to see the real results of their ad spending. And emphasizing analytics can seem like just another way for agencies to push media partners’ prices lower…

…If we want to experience a creative renaissance and give our client partners the confidence to experiment, agencies and media owners must be willing to measure more and be willing to be compensated based on performance.

Kelly goes on to recommend four ways marketers and agencies can partner for more creativity. They were good ideas.

But media guaranteeing results to advertisers is not a good idea; it’s a mask.

If you read the above article excerpts closely, you’ll see the principles playing musical chairs about results from advertising. The last one standing without someone to blame loses.

The CEO of an advertiser can blame the Chief Marketing Officer, the CMO can blame the strategy consultant, the strategy consultant can blame the advertising agency creative team, and the agency can blame the media (especially if a medium guarantees results). Because success (sales) has many parents and failure is an orphan, blame, like manure, gets passed down from the top of the pile.

At least 50 years ago, when agencies still got paid based on a 15 percent commission on placed media, some agencies that were losing clients offered to get remunerated based on the performance of their advertising – essentially based on increased sales. A couple of clients took a few agencies up on performance-based deals, but the concept was not widely adopted. Also, the 15 percent commission system was scraped in the ‘70s and ‘80s, and a more rational system of time-based fees were widely adopted because time-based fees were perceived to be more equitable to both advertisers and agencies.

Why weren’t pay-for-performance systems adapted over the years? Because they didn’t work for either advertisers or agencies. Pay-for-performance or pay-only-for-results systems didn’t work because advertisers and weak CMOs didn’t take responsibility for results; they pushed the accountability and blame to agencies, thus abdicating their own responsibility.

Think of the logic of placing the responsibility for results on an advertising agency. What a marketer, in essence, is admitting in this case is that the two most important elements in the sale of a product or service are the placement and creation of advertising. They are not giving any weight to the quality of the product, the packaging, pricing, the distribution channel, consumer or trade promotions, publicity, social networking strategy, the weather, the economy, or the cumulative effect of advertising messages, to name just a few factors that impact sales.

Also, think of the logic of an agency taking responsibility for results. What an agency, in essence, is agreeing to is the same concept as stated above. But since agencies cannot control the multitude of variables that affect the final sales of a product, they are hoping and guessing that their media placement strategy and their creative are good enough to overcome the possible screw up of advertisers in all or even a few of the hundreds of variables that impact product sales.

Furthermore, clients always have the final say on media plans and creative execution, so they can turn down an agency’s well-thought-out media plan or an engaging creative campaign. Often agencies execute client-dictated second- or third-rate campaigns because of unimaginative, cautious, penny-wise-and-pound-foolish, CFO-dominated clients. Therefore, agencies are foolish to guarantee results for work they don’t totally control.

So, if an agency offers a pay-for-performance deal when it knows it can’t control the majority of the variables that lead to increased sales, it seems like a Hail-Mary pass: “We’ve lowered our fees as low as we can, so let’s try this.”

Same for the media, which has less control over the variables than agencies do. An advertising medium, such as a magazine, doesn’t control any of the variables mentioned above (as agencies don’t), and it also doesn’t control the creative, so the only element a medium can control is ad placement (back cover, first editorial position, e.g.) and frequency of insertions (it can give bonus insertions to increase frequency).

In the Meredith offer, the magazines set a high level of frequency over a year, so they demand a large schedule that they know from experience will work, all the other variables remaining constant. What Meredith is doing, in essence, by guaranteeing sales results, as monitored by Nielsen Homescan, is getting a very large schedule of ads and discounting their rates by the amount that the Nielsen research costs.

What we don’t know about the Meredith offer is what the downside is. The upside for Meredith is a very large ad schedule at a time when magazine advertising spending is in serious decline. But if we assume that the downside for Meredith is that if sales decline, say 5 percent, after a schedule runs, then Meredith has to rebate 5 percent of the cost of the schedule to the advertiser.

Thus, the value of the deal is based on how Meredith prices and discounts its ads according to its published rate card. If Meredith charges rate card rates (doesn’t discount) for the sales-guarantee ad schedules, it can well afford to pay for the research and any rebates for underperformance.

In today’s depressed market for print advertising, newspapers and magazines are under pressure to discount off their rate cards by 25 to 50 percent. Therefore, the Meredith sales guarantee offer is a mask for an opening offer in a price negotiation for very large advertising schedules.

Meredith is smart enough to know that sales of national advertisers’ products in the beauty, household goods, over-the-counter drugs, and food categories, even in a slow-growing economy, are going to increase by some amount, and probably aren’t going to drop. So, Meredith is taking virtually no risk by guaranteeing a sales increase.

If I’m an agency executive, I like Meredith’s offer because it gets my creative off the hook.
If I’m an advertiser, how much I like the offer depends entirely on the comparative and competitive CPMs of the ad schedule. If I can get the high-quality, highly targeted Meredith content at competitive CPMs, the Nielsen research doesn’t mean a thing to me.

But it does mean something to Meredith because it can run ads that claim that its magazines have proof that advertising in those magazines increases sales, which is nice for Meredith. And as advertisers we like Meredith because they gave us a nice, very competitive CPM on the magazine schedule we bought.

Also, if I’m an advertiser, I don’t want to turn over responsibility and accountability for increasing sales of my product or service to an advertising agency or to the media; it’s my responsibility to increase sales. I want to take responsibility because I control most of the variables that affect sales. I’d like advice from my agency and from the media to help with scheduling and solutions, but I’m not going to pay them for getting results because there are too many variables involved, and media and creative are just two of a horde of these variables.

If I’m a medium, then instead of calling a discount off rate card a discount, it makes sense to put on a mask of guaranteed sales increases. But the mask isn’t fooling smart advertisers, because behind it is a just an old-fashioned discount.

Liberal Vs. Conservative On the Profit Motive

It all started with my Media Curmudgeon blog post titled “Murdoch: Liar, Liar, Pants on Fire!” in which I accused Rupert Murdoch of caring more about profits than that “a free and open press should be a positive force in society,” as he claimed in a cynical ad that ran in British newspapers. Here’s the blog post.

According to Advertising Age

Rupert Murdoch is keeping the throttle wide open on crisis-control efforts in an attempt to limit the damage from the News of the World’s hacking scandal…
Now he is apologizing to Britain via a newspaper ad headlined “We are sorry” — perhaps foreshadowing what he will say when he testifies before Parliament next week.
The ad read:

We Are Sorry

The News of the World was in the business of holding others to account.

It failed when it came to itself.

We are sorry for the wrongdoing that occurred.

We are deeply sorry for the hurt suffered by the individuals affected.

We regret not acting faster to sort things out.

I realise that simply apologizing is not enough.

Our business was founded on the idea that a free and open press should be a positive force in society. We need to live up to this.

In the coming days, as we take concrete steps to resolve these issues and make amends for the damage they have caused, you will hear more from us.

Sincerely,
Rupert Murdoch

Do you honestly believe one word of this ad? Do you believe that Murdoch’s News Corp., which includes Fox News, the Fox Business Network, and the NY Post, believes it is “in the business of holding others accountable?” News Corp. is in the entertainment business for the sole purpose of making a profit.

Do you honestly believe that Murdoch or News Corp. “are sorry for the wrongdoing that occurred,” or “are deeply sorry for the hurt suffered by the individuals affected?” Can you imagine that Bill O’Reilly or Sean Hannity or Don Imus are deeply sorry for the nasty insults and mud they sling? That’s why Murdoch hired them.

Can you imagine in your wildest dreams that Murdoch regrets “not acting sooner to sort things out.”
Is it conceivable to you in your most generous moments that Murdoch actually believes that “a free and open press should be a positive force in society?” Do you believe that he really is committed in his soul to “live up to this” concept? Will Murdoch force Roger Ailes to make Fox News “a positive force in society” and make “fair and balanced” a reality rather than a cynical marketing slogan?

Looking at this newspaper ad and Murdoch’s interview in the Wall Street Journal July 14, in which he is quoted as saying News Corp. has handled the crisis “extremely well in every way possible,” making just “minor mistakes,” you wonder what the 80-year-old Murdoch has been smoking or how senile he is.

The corporate suits and scores of MBAs at News Corp. who understand Excel spreadsheets and bottom lines but not journalism are probably advising and prepping Murdoch in this ultimate form of cynical spin, but it’s not working.

The dirty chickens are coming home to roost. Everyone knows Murdoch is lying … bigger than ever. What hair he has left is aflame and his pants are on fire.

A dear friend of mine from St. Albans and Dartmouth, Jim Rill, is an avowed conservative, a graduate of the Harvard Law School, a very successful lawyer, and a former Assistant Attorney General for the Anti-Trust Division of the Justice Department in the George H. W. Bush administration. In other words, he’s smart, articulate, and informed.

Jim responded via email to my Murdoch post, to which, I responded, then he responded … and so on. Below is the email exchange, which I believe you will enjoy:

Charlie,
Most interesting article. I continue to ponder your denigration of the "profit motive,” however, apparent in this article as well as others. I have always thought that profits were earned by firms' serving public demand, subject of course to prohibitions against deception and illegal restraint on competition. One may, of course, have a personal disagreement with what the public demands (my view of the attraction of Lady Gaga, for example), but the market should decide the outcome, not some elite observer or government agency. To paraphrase Adam Smith, the invisible hand will most often produce the best result for consumer welfare through market participants' fairly competing to enhance their own advantage. Thus, your criticism of e.g., Hannity, with which I agree to some extent, should, I respectfully submit, be founded on your disagreement with his substance, not with Fox's profit motive. Presumably Fox airs some of the commentators with whom you disagree because there's a viewer demand for the content. The market is a better arbiter of the profit motive than you or I, in the long run. I haven't seen Glen Beck on Fox News lately.
Best as always.
Jim.

Jim,
You are an expert on history, especially the history of wars. The wonderful thing about history is that the facts don’t change, so you can hold on to them, feel secure in them. But the Chicago, Milton Freedman theory of the efficiency of the free markets, which is based primarily on the theory of man as a rational economic actor, is old theory that has been proven wrong and hopelessly naïve not only by Nobel-Prize-winning economists such as Joseph Stiglitz and Paul Krugman and economists such as Robert Schiller, but also by Nobel-Prize-winning behavioral economists such as Kahneman and Tversky and behavioral economists such as Daniel Airely. All agree that neither man nor markets are rational and that free markets don’t work efficiently.

The current recession and economic disaster was brought on by the excess in greed that is the result of free market thinking – let the markets regulate themselves, keep government out of it. And look what happened. Books such as 13 Bankers, The Big Short, To Big to Fail, and Reckless Endangerment all lay out in great detail the utter failure of free markets to contain the unbridled and unregulated greed of Wall Street and big banks.

As far as the free market system working in the media, it is brought us not only Lady Gaga, but the top-rated reality show, “Jersey Shore,” and cable’s top-rated non-football program WWE Wrestling. If you look at media history, the government underwrote, subsidized, newspapers at the birth of our nation by giving publications free postage. The Founding Fathers wanted a free press and information to be disseminated freely in support of democracy – serve society first, make a profit in order to survive second.

Adam Smith’s invisible hand is an anachronistic concept that works only in the sense that the hand of the market goes into the pockets of the greedy – those only interested in short-term profit and not in serving the needs of the community. What the free market has become is the tragedy of the commons – everyone out for their own self-interest and the common good be dammed.

The less government, less regulation model has not worked. The world is too complicated, economies too complex for there to be no rules – laissez faire. Just like there are rules, laws, and regulations involving how we should treat each other – no rape or murder – there need to be rules, laws, and regulations about how we treat each other financially – we can’t rape, steal, and pillage.
Charlie

Charlie,
Well said. Do not classify me as unbridled laissez faire, however. The issue is not regulation vs. no regulation, but the extent and nature of regulation. I could not have served my time managing the antitrust laws of the US if I didn't believe in laws and enforcement that prohibited the inefficient acquisition and abuse of market power. Clearly, securities regulation was sadly deficient in the run up to the bubble burst.

That flaw can be remedied without turning the economy over to the government. The failure of socialism throughout time and space cries out against that policy. I know Joe Stiglitz and can assure you that he abjures excessive regulation, at the same time he's skeptical of the Chicago School.

Please concede that entrepreneurs often seek to make a profit by inventing, manufacturing, and distributing a better product or service.
Jim.

Jim,
We got into this discussion because you were pondering my “denigration of the profit motive” and your assertion that “profits were earned by firm’s serving public demand.” Just as you indicated that based on your experience “I could not have served my time managing the antitrust laws of the US if I didn't believe in laws and enforcement that prohibited the inefficient acquisition and abuse of market power,” so I could not have spent 20 years as a salesman generating revenue, being a sales manager maximizing revenue, and a general manager controlling expenses to subtract from revenue, which creates profits, if I did not believe in profits to some degree. I was totally into profits, because, as I said in the previous email, profits are necessary to remain in business, to grow.

Therefore, to imply, however tangentially, that I am suggesting turning the economy over to the government or am against entrepreneurs is a stretch and not germane to our argument. First, it’s not accurate, and, second, I was an entrepreneur in 2006. I started a business on the web called Daily Comedy. It failed because it wasn’t funny. But I tried.

The point is that I understand and believe in profits. But, as Peter Drucker said, the only purpose of a business is to create a customer. It is not primarily to make a profit; it is to create a customer, which, as you indicate, means meeting customer needs, wants, and demand. I think we are conceptually in line so far. However, today’s businesses have many stakeholders, have many purposes, and, therefore, profit for the benefit of shareholders is not the only purpose. Stakeholders include customers, employees, suppliers, the government, the public, and shareholders.

More and more American companies are intent on creating shared value, as stated in the Michael Porter Harvard Business Review article, “Creating Shared Value,” and of doing good while doing well. Serving the public interest and making a profit are not mutually exclusive. Many firms have realized that if they put customers and society first (avoid the tragedy of the commons) before profits, they are often more successful than if they are driven solely by profit. Google is an example of this service-first business concept. Google is now the most profitable media company in the world, but the founders, Page and Brin, did not start out thinking about profits above all else.

The moguls in charge of large media companies that have put profit first (Time Warner, Viacom, News Corp.) have destroyed over $200 billion in shareholder value over the last decade, as exceptionally well documented in the book The Curse of the Moguls by Knee, Greenwald, and Seave (Columbia Business School Professors).

Which brings us to my point that News Corp., led by the greedy Murdoch, has consistently put profits first and has not considered the media as a public trust, merely as a profit generating machine, and has never considered serving the public interest, convenience, and necessity if it did not directly lead to profits. The public demand for crap, trash, celebrity news, reality TV shows, and outrageous, uninformed opinion pandering to the uneducated and extremists has increased. And greedy entertainment profiteers – media carpetbaggers – will take advantage of the situation, but that doesn’t mean that we can’t expect and demand better.

If the media is not greedy to maximize profits as a sole rationale for its existence and attempts to be profitable while simultaneously serving the public interest (avoiding the tragedy of the commons), it can have its cake and eat it too. And we, as responsible media consumers, should demand both from the media – profits and responsibility.

Murdoch is a greedy media profiteer, pirate, and power broker. He lies when he talks about social responsibility and being a positive force in society. He has a track record to show that all he cares about is profit. It’s time he got his comeuppance. It’s time all media consumers, especially those who have the advantage of a good education, demand that the media serve the public interest as well as make a profit.

Let’s hope this News Corp. hacking scandal will wind up making the media more responsible and less sensational and celebrity oriented – less profit fixated and more considerate of the public and the public interest.
Charlie.

Charlie,
Well written, again. I suppose if there's any gap between us it's that you believe profits are a necessary, and possibly somewhat regrettable, factor in permitting firms to engage in socially beneficial enterprise, but should not be a primary motivating factor. I believe that the profit motivation is a primary driving engine for output and innovation that serves the public, principally consumer, welfare. Obviously, neither of us endorses the result of the profit motive in all cases; eg, Lady Gaga, Glenn Beck. On the other hand, can you doubt that, for example, Thos Edison, Henry Ford, and, yes, Bill Gates were out to make a profit as at least one end in itself? That does not make them, or me, apostles of Ayn Rand or Jacob Marley, ante mortem.

In time, the market can address some of the output you find objectionable; e.g., Beck, is no longer on Fox News. It doesn't always work, but that may merely reflect consumer choice. The government certainly has a role to ensure that choice is not influenced by deception, collusion, or monopolization.

But what to do about hysterical rants and simply bad taste offerings? I gather we agree that the government has no business regulating that conduct. I submit the fairness doctrine is an excrescence on the Constitution.

At the least, we can not contribute to the demand stimulus. In addition, we can speak out and offer our opinion on the state of the business. You are taking this course and I sincerely admire you for doing so.
Jim.

Jim,
I think the gap between us is not primarily about the necessity of profits or their being a primary motivating factor. I think our basic gap is in our view of human nature and an individual’s place in society.

I think you take a conservative, individualistic view of human nature – that individual rights are primary, above the rights of society, or as Ayn Rand would claim, above the right of the collective. I take a liberal, collaborative view of human nature – that the collective, societal (even tribal) rights are primary, above the rights of the individual.

In the classic economic dilemma, The Tragedy of the Commons, those who put individual rights as primary, tend to believe that it is OK for individuals to look out for their individual self-interest and over-graze the common with more cows than others have because that is the nature of competition. Those who put the collective rights as primary believe that the collective (all of the farmers acting as a group) have the right to regulate grazing so that no one individual is able to benefit unduly at the expense of the collective.

I believe this gap in views of human nature is at the heart of the current debate between Republicans and Democrats over the debt ceiling, the deficit, and income taxes. Conservatives and Republicans tend to favor what is in the interest of individuals (especially rich or well-off individuals) and liberals and Democrats tend to favor what is in the interest of society as whole, including the poor and elderly.

I don’t see this gap being bridged soon.

As far as the profit motive being the primary driving force behind Thomas Edison, Henry Ford, and Bill Gates, I’m afraid history, the facts, and management literature do no support this view. I’ll skip Edison and Ford, but if you’re interested, I can send you specific references that they had other motives that primarily profit for their efforts. It has been well documented in management literature that Bill Gates was primarily motivated by creating great software, not by profit. In fact, in classic management books such as Built to Last by Collins and Porrass, How the Mighty Fall by Jim Collins, Good to Great by Jim Collins, In Search of Excellence by Peters and Waterman, Drive by Daniel Pink, In the Plex (about Google) by Steve Levy, The Facebook Effect by David Kirkpatrick, and What Really Works: The 4+2 Formula for Sustained Business Success by William Joyce, Nitin Nohria, and Bruce Robertson, all point out that the most successful companies that have been started in the last 50 years, including Microsoft, were started by entrepreneurs who wanted to build great companies, build great products, write great software, organize the world’s information, and serve customers better than anyone else – and on and on about benefits for society, not primarily about their individual greed for profit.

In Julia Angwin’s book, Stealing My Space, she shows that the founders of MySpace were individualists who were interested primarily in two things, getting rich and getting laid. They made a lot of money by selling MySpace to Rupert Murdoch. However, MySpace failed to grow and to innovate and was destroyed by Facebook, whose founder Mark Zuckrberg was not interested in profit, but in organizing friendships. Sergy Brin and Larry Page, the founders of Google, the most profitable media business in the world, founded Google because they wanted a great search engine, and had no idea how to make a profit.

Newspapers that have survived are those who have a passion for public service that is in their DNA – The New York Times (the Ochs and Sulzbergers), the Washington Post (the Myers and Grahams). The newspaper that was interested only in profit, News of the World, has been folded.

Also, I think, that the gap in our world view is widened by the psychological phenomenon called projection. Thieves think everyone is trying to steal from them. Greedy people think everyone is greedy because they are. Individualists think everyone acts in their own self-interest first and foremost. Do-gooders think everyone is interested in the collective good.

We have different world views, different views of human nature, different basic personality traits and characteristics and, thus, we project differently.

We also have intellectual curiosity that compels us to listen to and try to understand each other’s point of view, which is much more than I can say about the stupid venal politicians of both parties that are making America the laughing stock of the world. It’s a shame that they can’t enjoy each other’s company and listen, as we do.