Tag Archives: increasing shareholder value

Thinning the Herd

Thinning the HerdGordon Borrell recently hosted a webinar that hit on the highlights of his #LOAC2019 (Local Advertising Conference) held in New York City. The shocker, for me and many others came when Gordon said the future for media expenditures would be a process of “thinning the herd.”

Media Overpopulation

To put things in perspective, Gordon shared how an over-populated media landscape is impacting local advertisers.

  • 1,300 daily newspapers, 6,500 weeklies
  • 4,700 printed directory books
  • 4,665 AM radio stations, 6,757 commercial FM radio stations
  • 1,760 Class A TV stations
  • More than 1,000 cable systems with local sales staffs
  • 660,000 podcasts were actively produced in 2018
  • 495 NEW TV shows were introduced last year in addition to what’s already on
  • PLUS, local ad sales are taking place on Facebook, Google and Amazon

Another way of looking at this media explosion, is that a TV market now has an average of 126 local media entities. To view a recording of the webinar, contact Corey Elliott HERE

Action – Reaction

So, how are the people who buy advertising responding to this media abundance?

Gordon identified three trends:

  • They are increasing buying for types of media, from 5.5 to 8 different ones
  • They are decreasing the number of companies from which they buy advertising, from 5 to 3.5 companies
  • 90% of their media buys are being made with companies who can bundle traditional and digital advertising

Facebook – Google – Amazon

When a new Ollie’s store opened in Winchester, Virginia, my Facebook newsfeed was peppered with announcements. During the fall elections, politicians also used lots of Facebook ads to try and get elected.

I can’t go on Google or Amazon looking for something without being followed around the internet with ads for that very thing.

eMarketer says that in 2018, Google and Facebook took 60% of the total digital ad spend. Amazon was third with 6.8% but is predicted to grow it’s share by more than 50% in 2019.

Think about that, these three companies will rake in over 68% of the digital advertising dollars spent this year.

eMarketer also says that by 2023, they expect digital advertising to account for 66% of total media spend.

Post-Capitalist Society

About ten years ago, my good friend John Parikhal recommended I read Peter Drucker’s book “Post -Capitalist Society.” Wikipedia summarizes Drucker’s thesis this way:

“The book states that the “First World Nations” and in particular the United States have entered a Post-capitalism system of production where the capital is no longer present because it doesn’t belong to one person or family but to a series of organizations such as insurance companies, banks, etc. Because of this, normal citizens become virtually owners of the great American enterprises, being owners of the capital, therefore, not destroying but overcoming the capitalism. The book foresees that the post-capitalist society will become a society of organizations where every organization will be highly specialized in its particular field.”

Sound like what we are witnessing in today’s world?

Accountable Capitalism Act

Recently, Senator Elizabeth Warren introduced a bill in Congress called the “Accountable Capitalism Act.” It targets what Warren says is the root of the country’s “fundamental economic problems.” You can read the Boston Globe story on the bill HERE

In essence, we have moved from a time when corporations cared about where they lived to one where only increasing shareholder value matter.

I remember a time when the insurance companies of Hartford, Connecticut were once heavily invested in the good of Hartford. I grew up in a GE city. General Electric made a positive impact on things and participated in growth and prosperity of the area.

In the 1980s, things changed. Corporations shifted from caring about both employees and investors, to only investors. The record profits went all to investors, and the people who worked hard to produce those profits didn’t get a share of them.

Increasing Shareholder Value

I first wrote about how the concept of “increasing shareholder value” was a dumb idea three years ago. You can read that article HERE

Real American capitalism was when both company and worker did well together.

Senator Warren has also raised many eyebrows with another plan that proposes to break up some of the largest US tech companies, like Amazon, Google and Facebook. Based on the trends in digital advertising, those of us in broadcasting would probably agree with Warren.

In essence, Warren says that high tech has created an unfair playing field. They control the platform, have full access to all the data, and then can either unfairly compete with companies, buy them out entirely or run them out of business. It reminds me of the type of things people said as Walmart covered America with their form of brick & mortar retailing.

Get Bigger or Get Out

Cox Media has recently begun liquidating its radio, television, newspaper and other media properties. The company’s leadership has determined that scale will be a determining factor in the future, and they either need to get bigger or get out. Cox has chosen the latter.

Current Trends

It would appear that in reading the tea leaves for ad supported media, that everything is currently headed in the direction of fewer entities owning all the media outlets, and advertisers buying their media on those platforms that can bundle it all together.

“Monopolies are a corruption of the marketplace. Breaking them up — allow[s] entrepreneurs to enter the market, giving consumers more choices, and giv[es] workers more jobs…”

-Adam Green, cofounder, Progressive Change Campaign Committee

I know there are many radio folks who saw the Telcom Act of 1996 as the beginning of the end of commercial radio as we knew it. That act is what caused Wall Street to enter the broadcasting business and apply their dumb idea of “increasing shareholder value” to another industry. It was the beginning of the consolidation of radio and we all know how that’s turned out.

 

3 Comments

Filed under Education, Mentor, Radio, Sales

Don’t Let Radio End Up Like Yahoo!

49I just finished listening to Jason Jennings’ podcast about how Yahoo went from being a company worth $120 Billion to its sale to Verizon for $4.8 Billion. I think the wisdom that Jason shared is very applicable to the radio industry’s journey through consolidation since the Telcom Act of 1996.

Jason says the selling of Yahoo is like a train wreck; you don’t want to look, but you just can’t help yourself. I know many who’ve said similar things as Wall Street invaded radio with its goal of “increasing shareholder value.”

So how can radio learn from Yahoo’s mistakes? What are the lessons Jason shared that apply to radio? Let me share with you the Top 5 Lessons of Yahoo:

#1) Know What You’re All About

Yahoo never really defined itself and the revolving door of CEOs contributed to this with each one bringing a different vision – or no vision – to Yahoo. Or as Jason puts it, the company didn’t have a purpose; they never knew what they were all about.

As radio was deregulated and its original mission of serving the public interest, convenience and necessity was abandoned, nothing replaced radio’s reason for existing except for “increasing shareholder value.” Not surprising as radio people were replaced by Wall Street investors.

#2) Have a Set of Guiding Principles

Radio’s guiding principles were first established by the FRC (Federal Radio Commission) and then by the FCC (Federal Communications Commission). Under President Ronald Reagan – and his government is best that governs least approach – radio’s deregulation began. President Bill Clinton would open the flood gates of consolidation with his signing of the Telcom Act of 1996.

With no guiding principles, investors were free to move in all directions; and they did, buying up not just radio stations but many of its manufacturers and service providers for radio.

It’s like the old saying, if you don’t know where you want to go, any road will take you there.

#3) Using a Business like a Personal Piggy Bank

Radio investors and many top radio executives began using radio as a personal piggy bank, only taking care of themselves and focusing on the immediate quarter with no long term vision, strategy or investment. Too many just lined their pockets and left.

#4) Trying to Be All Things to All People

Jason says “great companies stick to their knitting. You can’t be all things to all people.”

Radio was originally about serving their community of license via over-the-air broadcasting. It delivered local news, local sports, local community events, local bands and more by local radio personalities who lived in the communities they served. It was focused like a laser beam on local, local, local.

#5) Don’t Copy the Competition

Radio today is trying to copy Pandora, Spotify, Apple Music and others. Radio today is trying to also copy YouTube, Facebook, Pinterest, Twitter and SnapChat. Radio is trying to copy just about every other business advertising model and without any guiding principles has been economically treading water.

Yahoo’s SVP Brad Garlinghouse wrote his infamous “Peanut Butter Memo” in October of 2006 that pleaded with the company to narrow its focus and clarify its vision.

Brad felt that Yahoo was spreading its resources too thinly. Business Insider recently wrote “This internal memo from 10-years ago shows Yahoo still hasn’t solved its biggest problem.”

If Yahoo had a culture problem, radio by way of mass consolidation had an even bigger one. First, as Wall Street money flowed in and radio stations were bought up, each of those stations represented its own culture that would need to merge into a larger culture. Then these new larger radio groups would try to change the culture from a local scope to a national scope. National radio personalities like Ryan Seacrest, Rush Limbaugh and many others would replace local personalities. National radio contests would replace local ones. Live and local for the most part would soon only appear in the history books on radio.

Culture is created at the top. Over the last twenty-years, radio’s consolidation has seen a revolving door of top leadership. The culture of radio has been a moving target for both industry professionals and listeners alike. Culture is built over time. There is no “quick fix” for building culture.

Absent a company culture, what fills the vacuum is one of everyone for themselves.

Now twenty-years later, there are signs of new growth as people who believe in live and local, and operating in the public interest, convenience and necessity are entering the business.

In many small markets, this way of operating never got sucked into the vortex of consolidation.

Even some of our country’s biggest radio companies are focused on getting back to the core principles radio was built upon.

Radio, the first broadcast transmission system to reach a mass audience, almost 100-years later is still the leading way to reach a mass audience.

35 Comments

Filed under Education, Mentor, Radio, Sales, Uncategorized