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.

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.

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?

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.

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.

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.

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.

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.

]]> http://mediacurmudgeon.com/liberal-vs-conservative-on-the-profit-motive/feed/ 0 http://mediacurmudgeon.com/a-fox-in-the-henhouse/ http://mediacurmudgeon.com/a-fox-in-the-henhouse/#comments Tue, 02 Aug 2011 13:23:06 +0000 Charles Warner http://mediacurmudgeon.com/?p=917 Guest blogger Bruce Braun wants Rupert Murdoch, News Corp., and the Fox TV stations to be held accountable:

In light of the phone-hacking scandal with News Corp, I suggest we need to re-examine the rules and regulations regarding corporate ownership of media properties. As with the de-regulation of the savings and loan business, the repeal of Glass-Steagall and the removal of ownership caps on broadcast stations, the Foxes, (no pun intended) were let into the media henhouse. The broadcast license was at its onset, never created with people like Murdoch in mind.

As early as 1815, legislative critics realized that even Congress, “clothed with every power that ought to be desired, with abundant means for a wise and provident government,” could “fall into the mistakes of short sighted man.” Congress errs when it produces shortsighted legislation or contravenes the Constitution. Unfortunately, Congress fell into both pitfalls in relaxing the limitations on broadcast ownership via the Telecommunication Act of 1996.

Going back to 1934, the FCC restricted the number of broadcast stations one person or company may own., for good public policy interest reasons. Those restrictions were rooted in the concept that broadcast licenses are local and were granted on the basis of the “public interest, convenience and necessity” and not for the enrichment of the license holders. Today, that criterion seems only a quaint notion.
I’ve borrowed a chronology list from PBS’s Bill Moyers that traces the history of ownership rules between 1981 and 2002. I think you will see how the path has led us to the explosion of events in recent days with Murdoch and Fox.

1981-Deregulatory moves, some made by Congress, others by the FCC included extending television licenses to five years from three.

• 1981. The number of television stations any single entity could own grew from seven in 1981 to 12 in 1985.
• 1985-FCC guidelines for minimal amounts of non-entertainment programming are abolished. FCC guidelines on how much advertising can be carried per hour are eliminated.
• 1987-”Fairness Doctrine” eliminated. At its founding the FCC viewed the stations to which it granted licenses as “public trustees” and required that they made every reasonable attempt to cover contrasting points of views.
• 1996-President Clinton signs the Telecommunications Act of 1996. It is generally regarded as the most important legislation regulating media ownership in over a decade. The broadcast industry experiences unprecedented consolidation after the station ownership cap is lifted. For example, Clear Channel Communications expanded to 1200 radio stations and 40 TV stations, in all 50 states.

Did any of these actions benefit the public? Hardly. The exact opposite happened. Group broadcasters, in order to service their massive loans upped the number of commercial minutes an hour to 14-16 minutes and an endless parade of Infomercials. Payrolls were slashed and what were local businesses, employing scores of people, simply disappeared. All of the operational aspects of a local station were transferred to a headquarters operation. Your local station was not really local anymore.

Please note this new example of local broadcasting: In 2002, a train carrying hazardous materials derails at 1:30 a.m. in Minot, North Dakota, spilling 210,000 gallons of anhydrous ammonia in an incident federal regulators call “catastrophic”. Clear Channel Communications then owned six out the seven commercial stations in Minot. Minot authorities said when they called with the warning about the toxic cloud; there was no one on the air who could’ve made the announcement. Clear Channel says someone was there who could have activated an emergency broadcast, but Minot police say nobody answered the phones.

In industry parlance, a group owner like Clear Channel assembles what are called market “Clusters.” Instead of each station having its own operating staff, there is one skeleton staff for all the stations. Music formats, playlists, news, selling of advertising are all done out of one station in a market or at a company HQ. If Clear Channel has 100 Country & Western formatted stations, one C&W department at the HQ does all of the programming for those 100 stations. This is done to achieve what bean counters love to refer to as “economies of scale.”

The elimination of ownership caps destroyed local broadcasting, as we knew it. Wall Street could not loan money fast enough to fuel the growth and acquisition of local stations and national networks. Rather than 20-50 local station owners in a medium or larger market, the numbers dwindled down to between two and four national media companies. Local owners were forced to confront the inevitable: sell their stations or be put out of business by the big media conglomerates. The sold and the result is what we now have today.

No matter, because of course, Congress caved into the campaign contributions and demands of big broadcast group owners, the National Association of Broadcasters and their lobbyists.

Rupert Murdoch, Sumner Redstone, The Mays family, Comcast, Time-Warner, and Disney have all been given a free hand to build media empires, unchecked and essentially unaccountable.

Like the all-powerful Roman emperors, corruption was and is inevitable within the media culture our Congress enabled with the Telecommunications Act of 1996. Murdoch is just the first to be caught and there are sure to be more in this era of “Gotcha” journalism with the “If it bleeds, it leads” mentality of headlines and “exclusives.”

Is there an end to this insanity? Murdoch will never really take the fall because he like his counterparts he pays a lot of people to be fall-guys, even if they don’t realize it.

There is however a way to hold Mr. Murdoch and his media conglomerate brethren accountable thru their pocket books.

Between the 1960’s and 1980’s group broadcasters lived in fear of the FCC, due to the possibility that the misdeeds at one station could jeopardize the licenses of all their stations. The days of infractions of FCC regulations and rules or of Federal laws were a sure way to loose one or all of your broadcast station licenses.
For CBS, NBC and ABC, the local TV stations they owned were the core of their TV networks and were to be protected at all costs. Today, Fox owns 27 local TV stations, worth billions of dollars in asset and advertising values.

In August 1987, the FCC found group broadcaster, RKO unfit to be a broadcast licensee due to a long history of deceptive practices. RKO was ordered to sell or surrender the licenses for its four television stations and twelve radio stations. Among other things, the FCC found that RKO misled advertisers about its ratings, engaged in fraudulent billing, lied repeatedly to the FCC about a destroyed audit report, and filed numerous false financial statements and stated that RKO’s conduct was the worst case of dishonesty in FCC history. Even after RKO declared that all of the employees responsible for the misconduct had been fired, the FCC let it be known that it would almost certainly reject any appeals and strip the licenses. It urged RKO to sell the stations before that became necessary, which they ultimately did. In essence, the FCC concluded that RKO was being run as a corrupt enterprise and to pass responsibility to certain individuals, ignored a systemic corruption.

Those 27 Fox local TV station licenses should certainly be at risk at this time. A few high-level resignations while claiming “our lawyers said we had corrected the problems”, is so-self-serving as to be absurd and insulting.

If News Corp thru the actions of its employees is found to be guilty of felonious misdeeds, would that not suggest News Corp is an unfit broadcast licensee, as the FCC concluded with RKO? I would think so. The question will rest with the FCC’s eventual willingness to take such strong action with News Corp or will the political “fix” be in.

Sadly, you can bet there are no members of the Congress or the Administration willing to take on these media monsters, their Wall Street banks and law firms, in such a way as to amend the ownership caps or reduce their control in any way. And why should they? The media conglomerates and their executives pour millions into campaign coffers; provide regular on-air appearances and national exposure 24/7/365. Notwithstanding the possibility of post-political career employment as commentators, consultants, lobbyists and other types of lucrative full-time opportunities such as book publishing deals.

]]> http://mediacurmudgeon.com/a-fox-in-the-henhouse/feed/ 0 http://mediacurmudgeon.com/murdoch-brings-out-all-seven-emotions/ http://mediacurmudgeon.com/murdoch-brings-out-all-seven-emotions/#comments Fri, 29 Jul 2011 00:58:44 +0000 Charles Warner http://mediacurmudgeon.com/?p=912 Last year, the Business Insider ran a feature titled “100 Things You Should Know About People” that included an article titled “Only Seven Emotions Are Universal.”
Those universal emotions are:

• Joy
• Sadness
• Anger
• Contempt
• Surprise
• Disgust
• Fear

The recent phone hacking scandal involving News Corp., Rupert Murdoch, and his son James have elicited all seven of these emotions in the reading public, in journalists, in competitors, and in government.

There has been sustained and masked joy in Murdoch competitors over the hacking scandal that is threatening to reduce the power, influence, and credibility of News Corp. What politician will compete for Murdoch’s endorsement now? And government agencies are almost certain to look at the regulatory favors they have granted News Corp., which will give competitors and those interested in a free press some joy.

There is certainly sadness among executives, managers, employees, and talent of News Corp. subsidiaries because of the loss of credibility of Murdoch and such News Corp. properties as the NY Post, Fox News, and even the Wall Street Journal, Murdoch’s crown jewel. Furthermore, the drop in the company’s stock price since the hacking scandal was uncovered and Rupert and James had to appear contritely before Parliament must deepen the sadness substantially because for a company whose only passion is profit when the profit is threatened, there is nothing else that can bring happiness or satisfaction.

There is massive anger among the victims of the hacking. There is also anger among regulators and police authorities who genuflected to Murdoch and whose groveling is now exposed – they look as greedy as the old man himself.

There is universal contempt among legitimate journalists (some of whom work for Murdoch at such news outlets as the Wall Street Journal) for the debasement of journalistic standards practiced by the News Corp. properties that did the hacking. What self-respecting reporter would want to be associated with News Corp. now? Bill O’Reilly, Sean Hannity, and Don Imus are not journalists or reporters; they are entertainers who will continue to be comfortable in the hacking scandal environment – what do journalistic ethics have to do with what they do?

There is certainly surprise on the part of long-time Murdoch watchers like me that the wily, old, evil Emperor got caught. Murdoch has slithered through close examination by regulators for so long, that it seemed he had bullied and bought his way into a Star-Wars-type protective energy shield. But as in all good stories and myths, eventually good triumphs over evil. The hero in this story is not Luke Skywalker but Alan Rusbridger, the editor of The Guardian, the British newspaper that courageously uncovered and followed the hacking scandal until Murdoch finally had to defend himself.

There is no need to detail the disgust all fair-minded people on both sides of the Atlantic have for Murdoch, his son James, the executives of the now-defunct News of the World, and cooperating Scotland Yard officials who abetted Murdoch’s papers illegal hacking and spying. And make no mistake, it was Murdoch’s profitable newspaper. He talked to its editor daily, as he testified in the Parliamentary hearing, so how could he not know about how they got their celebrity scandal scoops? He assuredly tacitly agreed to the plausibly deniable scheme of hiring outside investigators.

And finally, there is fear. Murdoch ruled by fear, his power was based on fear – the fear of politicians of not getting a Murdoch newspaper endorsement. Fear of regulators of being attacked by the many outlets in his media conglomerate. Fear of not receiving his favors. News Corp. executives and management lived in fear of falling out of favor of the evil Emperor and of profits and, thus, stock prices falling.

I can think of no event or person since, perhaps, William Randolph Hearst, who has elicited so many emotions as Rupert Murdoch. But as Orson Wells’s classic film, “Citizen Kane,” implicitly asked, “is he happy?”

The answer for Murdoch today is, decidedly, “no,” which is like the way a tragic story should end. “King Lear” or “Citizen Kane” anyone?

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