How CEOs Can Rebuild Media Companies

Gourmet 2Quickly: If you are a CEO in the media industry, you must move your company through three stages.

Content: I was shocked when I heard that Conde Nast was shuttering Gourmet Magazine after 68 years of operation. Gourmet had 900,000 subscribers, with total readership of approximately six million. Yes, advertising revenue was off 30%, but clearly Gourmet was a brand and franchise that was destined to morph into an Internet beehive of content, social sharing of travel and food tips, community, and close affinity. And they were on their way with 8,000 Facebook friends, 22,000 followers for editor Ruth Reichl on Twittter, and a YouTube channel. Gourmet could have and should have become the upscale Grand Dame sister of Epicurious.com, Conde Nast's successful recipe site. Why didn't the company get this?

Because much of Conde Nast is stuck in media meltdown. 

It's all in a recent report from Forrester -- How To Rebuild The Media Industries. I've extracted the most important lessons for CEOs:

CEO Lesson One:  Media companies must move through three stages. Stage One:  digitization -- when their music, newspapers, books, magazines, TV shows begin to leave their traditional form and enter low-cost digital forms. The majority of media has passed through this stage. Stage Two:  media meltdown -- when companies resist digital distribution, unsuccessfully try to reproduce their old analog business models in a digital world, and finally willy nilly liquidate their old assets in the hopes that their profit margins will rebound. That's the stage where Conde Nast finds itself. And then finally Stage Three:  rebuild -- when CEOs figure out the new pricing models, understand that consumer convenience is the new imperative, let the market (not imperious editors and producers) decide what it will pay for and value, and move their companies forward.

CEO Lesson Two: Get your company through media meltdown as fast as possible. Rupert Murdoch is clearly not there yet -- he spent the week threatening to sue the BBC and Google for "...stealing content." You might be able to replicate your old model for a time, but, as the Forrester reports states, "...you do so under a sun that is gradually sinking on the horizon." The more time you spend in the meltdown stage, the fewer resources you'll have to work with during your recovery -- cf. Gourmet.

CEO Lesson Three:  Use your leadership to prod, push, cajole your company into Stage Three. No, it won't be easy and you could very well lose your job in the process -- note that Reed Elsevier's Ian Smith left the company this week after spending nine months on the job. Your executives may only know the old way. Your board may only know the old way. You see lower operating margins ahead. You don't have a clear pricing model. But why wait around while Jeff Bezos, Steve Jobs, and the Google guys feast on your carcass? Get out there and start innovating and moving at their speed. You have no choice.

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Comments

re: How CEOs Can Rebuild Media Companies

I am at a complete loss for understanding this type of media problem. If I had a way of digitizing content, doing away with paper and ink and postal distribution, and making the content available anywhere the web was I would be jumping on it. Yes, it will likely be supported by both ads and online subscriptions, but that model has already been shown to be successful. If people were willing to pay for the content in printed form, then they should be willing to pay for electronic. Not everyone thinks everything on the web is or should be free.As far as "stealing content" that's what copyright law is for.

re: How CEOs Can Rebuild Media Companies

George, you are saying what's important and is also painfully obvious. Why isn't all this happening already? Why are media companies committing corporate suicide? Shed light and you move things up and forward. It's not just media companies that are melting down. So it's systemic failure. What's the root cause?

re: How CEOs Can Rebuild Media Companies

Mark:I think that media companies are moving slowly through their meltdown period for two simple reasons: human behaviour and habits. Executives at these companies have become wealthy and powerful understanding and working in the old model. They can't see (or perhaps they won't allow themselves to see) equivalent success in the unknown of digital. We all profess to love change in the abstract. But true change is emotionally difficult to accept.George

re: How CEOs Can Rebuild Media Companies

George. You are on the mark and the answers are out there. Take a look at gordonhastings.tumblr.com for today's post about just one new way to find answers.Best regards,Gordon

re: How CEOs Can Rebuild Media Companies

George, thanks. Great observations. A business problem comes never from the market but from management. And even many consultants they hire have not learned yet that the old days and the old ways are done for. The market has not changed as it is still a complex adaptive economy that the Internet exposes. What has changed is the level of control that businesses have over consumers.Content creation is virtually the same and even simpler. The CEO still has to find marketing channels, sales outlets and distributors. All those are out there and successful.You did not mention (and I have not yet had time to read the report) that the main problem is therefore advertizing revenue. Consumers can't be forced to watch ads on the internet. To do so pushes them away. We are still missing successful micropayment technologies but revenue sharing models on sales and outlets are working.Would you agree that the same problem exists at software companies who are media companies too? I even see the same symptoms with CIOs who still want to implement business software the old way and thus pull down their businesses with them. Existing boards, the C-level and consultants they hire seem to be unable to learn. A track record (read Nassim Taleb's 'Fooled by Randomness') means nothing. Creative innovation and guts means everything.Media businesses who rely on copyright laws will falter eventually. I predict here that those will become irrelevant for media and software. Microsoft grew the most in those years when it didn't control software use. Now they send out the lawyers and alienate so many customers not only with expensive, mediocre products. They are stuck in the old ways.General, media and software businesses will need to use technology inovation to bring customer focused products and services to the market. To me Apple is one of the few businesses who has taken existing products - MP3 player, the mobile phone, and PDA software - and revolutionized them through technology innnovation. Not through methodologies, best practices and rigid business plans that are unfit for the complex adaptive economy.That's where you really find your lessens ... in the complex adaptive economy at the consumer and customer. Just open your eyes and ears!

re: How CEOs Can Rebuild Media Companies

These CEO lessons could help many aspiring businessmen out there. Thanks for sharing.

re: How CEOs Can Rebuild Media Companies

One of the big unanswered questions in all of this is how media companies will price in Stage Three -- what the business model will look like. James McQuivey and his team at Forrester are burning up lots of cycles analyzing this question -- watch this space for an early look at their thinking...

re: How CEOs Can Rebuild Media Companies

George: I understand your thoughts about media meltdown, but I would attribute Gourmet's undoing to something much more simple. I had been a subscriber for over 10 years, despite also using Epicurious on a regular basis. About 4 years ago, I noticed that Gourmet was beginning to feature ever-more outlandish recipes with highly stylized photos of beautiful models sitting set-designed cafe's and wineries. Suddenly Gourmet was all about haute cuisine and impossibly beautiful settings. It turned me off and I eventually cancelled my subscription. So did my mother and my aunt, both decades-long subscribers.There are still magazines out there that are successful despite the encroachment of digital media. In this case, I think Gourmet lost track of their target market. So yes, I understand your points and I think they are valid. But Gourmet had much more old-fashioned market research shortcomings.Thanks! - Clare

re: How CEOs Can Rebuild Media Companies

ok thank you