Part I: The Curse of the Mogul

A must-read for followers of Big Media – or would it be High Media given the mogul personalities involved(?) – The Curse of the The Mogul delivers an academic treatment on how digital media is forcing the studio or communication mogul’s work to be more transparent and hence more competitive. It’s argued that in the past, the lure or image of Hollywood allowed more mogul leeway as running a studio, handing the creative industry, “managing a Jennifer Lopez,” etc. was harder to quantify. With digital both making the studio returns or numbers easier to read, public and shareable, creating transparency; and, lowering the cost of entry for new digital companies to immediately step into publishing, video and home entertainment, creating more competition, the mogul is more and more clearly “wearing the emperor’s clothes” in a quickly diminishing empire or moguldom.

As the higher-end moguls, or consolidating moguls, roll-up or over the  lesser moguls, the transparency and competitive nature of their day-to-day existences even becomes more hazardous.

Confused yet? I’m only in the first chapter, but this readerly plow is slow-going and obviously academic given the Columbia School pedigrees of the three co-writers. The New Medici goal – as this topic is spot-on for our focus – is to provide analysis and commentary as we turn the pages.

Some initial insight:

Value destruction is occuring more often than value creation for the traditional media moguls. Via Gordon Crovitz at the WSJ:

The media industry is a leading indicator of how digital technologies undermine old assumptions about how companies create value. Technology has redefined the sources of competitive advantage. The authors write, “In media, particularly since the advent of the Internet, misunderstanding the source of competitive advantage often leads managers to inadvertently build bridges for competitors when they think they are actually strengthening the moat” around their businesses.

In addition, as traditional media co’s try to buy into the digital game, these new media acquisitions do not readily integrate well within traditional studio businesses. Division heads see them as ancillary businesses with little revenues, and clearly as cannibalistic to their core, typically retail businesses.

The result is a lot of attention to shareholders and the business world via PR, but the oftentimes hasty acquisitions doesn’t fit organically into the culture of the studio company or deliver quarterly, aka immediate or quick, results to the bottom line.

The further result commonly becomes: the acquisition publicizes the company as opportunistic, but beneath the ill-fitting clothes (to continue the emperor’s nudity metaphor…), there’s not enough operational or resource sense to see how the buy really solves a problem.

Nevermind, of course, the political fallout and hard learning curve to actually integrate the newco and its anti-studio staff.

In an interview with co-author Jonathan Knee via SAI:

Many traditional media companies buy web companies, only to write them down a few years later when they see that they’re not worth what they thought. Do you think it’s in media companies’ best interest to wait until the dust settles on certain web businesses before they dive in?

People sometimes get confused. Just because somebody destroys an existing business model, for all of the emotional satisfaction that may give you, doesn’t imply it is itself, a good business model. The simple fact that you’ve torn down a barrier, leaves you just as naked as it has left them.

Unless you are able to construct something new in its place, which is no mean task, the chances are that you are going to be threatened in the same way they were by the next guy, who will not need to try as hard as you did because there is no wall there in the first place.

In a sense, the pay wall argument of late with newspapers fits against the traditional media incumbents and the new media pioneers – the only way to stop the financial pain for Murdoch/NewsCorp is to put up walls, which unfortunately will be continually ransacked by technology.

“The Internet may be somebody’s friend—most notably, the consumers of media—but it is not the friend of incumbent media companies,” they assert. “For the incumbent, any benefits from the Internet on either the cost or new revenue opportunity side are overwhelmed by the damage done by the lowering of barriers to entry” by technology. “Digital media systematically lowers the cost of entry into most markets—it’s far easier to start a local Web site than a newspaper.”

Those moguls who can accept integration, who own or co-own (joint venture) digital properties that bring value and force adapted business models – examples: NBC/Fox’s Hulu and Disney’s iTune immersion – will survive more intact or clothed than others who buy out of competitive fear, then find that competitiveness runs counter in many ways to their quarterly growth.

One could argue, and we have, that digital growth needs to be strategic longterm as it’s where all of filmed media is going to end up in terms of a digital future. Yet as all public media conglomerates live quarterly and annual reports, there has to be a hybrid way of looking at these traditional-digital integrations.

Over a discussion with a mogul-in-the-making recently, I argued that it has to be “50:50″ – move at the speed of “everything gets down in 50 minutes” (or based on quarterly reports to Wall Street), while also having the vision to look at “the 50 year strategy,” i.e., where does this place us in terms of a digital future.

It’s for the current media mogul to consider how they are framed in the present and in the future. A perfect Iger quote via the LAT:

“I think that all the old rules should be called into question because the rules in terms of consumption have changed so dramatically,” Iger said at the time, conceding, “I’m sure we’ll get a fair amount of push-back there from the industry.”

So where do we end up – again still in Chapter 1 – back to brand, ensuring that your brand makes that handshake between traditional and digital well. That the mogul’s product, businesses or library can play equally well in both old and new. More from the Crovitz at the WSJ:

Media companies [...] have options. They can become more efficient, find new revenue streams from their most engaged consumers, and add new services. Still, no one knows which brands will survive in a world where the traditional advantages are the new disadvantages and where so many new-media companies don’t survive the pace of change they helped accelerate. The challenge for all media—old and new—is the same, even if the difficulty level is higher than ever before: Focus on what makes each brand different and more valuable than the ever-increasing number of alternatives that technology makes inevitable.

Stay tuned for Chapter 2…