Pick the Right Battle – NBC Universal/Comcast’s future


Summary:

  • There is dramatic change in the television/media industry
  • NBC Universal/Comcast is changing ownership, and leaders
  • The company’s future success will have more to do with which battles the new President invests in than the history, or style of the past and future company President’s
  • Trying to “fix” the old business will waste resources and harm future prospects
  • Success will require developing a management approach that gives permission and resources to find a path to the future – a future that will be nothing like the past

NBC Universal is changing owners, from General Electric to Comcast.  The former NBC President, Jeff Zucker, is being replaced by Steve Burke.  Stylistically, it’s hard to imagine two fellas less alike.  Mr. Burke, portraited in the New York TimesA Little Less Drama at NBC,” is a mild-mannered, quiet, self-effacing executive who almost attended divinity school.  He avoids the limelight as much as he avoids being abrasive with colleagues.  The outgoing Mr. Zucker is by all accounts brash,abrasive and quick to make decisions, as he was portraited in PaidContent.orgWas Jeff Zucker Really So Bad For NBC Universal?

But it isn’t executive style that will determine whether Mr. Burke succeeds.  Although NBCU just returned its highest profits since 2004, the television and media industries are in dramatic transition.  Things aren’t like they used to be, and they will never be that way again.  Growing revenues, and profits, at the combined NBCU/Comcast will require Mr. Burke quickly move both companies into a different kind of competitor focused on the changed market of 2015 – when media customers and suppliers will both be very different, with quite different demands.

Although Mr. Zucker is blasted for allowing NBC’s ratings to fall to last among the Big 3 networks (including CBS and ABC), it’s not at all clear why that wasn’t a smart move.  What has grown NBC’s profits has been far removed from network programming.  It was the acquisition of cable channels USA and Sci Fi (now Syfy) via Universal, and later Bravo, Oxygen and The Weather Channel that contributed greatly to NBC’s revenue and profit growth.  These were also enhanced by building, from scratch, the #1 business-content television channel at CNBC, and the profitable, somewhat populist counter-channel to powerhouse conservative Fox News with MSNBC. Despite what the critics (who are largely interested in programs rather than profits) have said, it may have been an act of brilliance to avoid investing in the declining business that is prime time network programming.

What anyone thinks about the brouhaha over Jay Leno’s attempt at prime time, and Conan O’Brien’s stint leading The Today Show, is immaterial to revenue growth and profits.  I’m a late boomer, so I remember when there were only 3 stations, and Johny Carson dominated the post-news late evening.  But now I have college age sons that don’t even own televisions, have almost no idea who Jay Leno is (other than know of him as a car and motorcycle collector) and find all interview programs boring.  “Network” TV is something they don’t quite understand – since their tolerance for watching entertainment on someone else’s pre-determined schedule is non-existent, and their patience for sitting through commercials of real-time programming is even lower.  In other words, what happens in the “prime time” race, or with network celebrities, really doesn’t matter any more.  And if NBCU can’t grow viewers it can’t grow ad revenues – so why should it invest in the prime time business?  Just because it used to?  Or started that way?

While lots of media “experts” are screaming for Mr. Burke to “fix” NBC, that business is already well into the hospice.  Network share of entertainment interest is falling rapidly as boomers die, dozens of new offerings are micro-targeting across the channel spectrum, and we all turn to the internet for downloads, ignoring the TV for news or entertainment several additional hours each year.  Meanwhile, people under the age of 30 aren’t even watching much television any more.  They just pretend to watch while sitting with their parents as they text, check Facebook or watch a downloaded program on their iPhone.

“Network” programming is a business which is not going to grow again. Given how costs are increasing for traditional shows, and the over-explosion of inexpensive “reality” or “news” shows, and fragmentation and decline of advertising why would anyone ever expect this to be a profitable business?  Being last in that 3 horse race is about as interesting as tracking share of market for printed phone directories.  Probably the first to quit ist he big winner. So why should Mr. Burke spend much time, or money, fighting the last war?  “Fixing” that outdated business model is fraught with high risk, and low return.  Now that tthe artificial limits on news and entertainment programming have been removed (thanks to the internet) isn’t it time to let go of that historial artifact and focus on the future?

We know the future will be a mix of traditional TV (at least for a while, but don’t make any bets on it being too long), as well as targeted channels we now refer to as “cable” (even though that moniker is clearly losing meaning in a WiFi world.)  Some of these will be free access, and some will be paid content.  But all of that now must compete with downloads from Netfilx, Hulu (in which NBCU is a part owner) and YouTube (partially owned by Google.)  People can create and post their own programs, and even do their own marketing.  Instant availability, reviews and promotion will be couresy of Twitter and Facebook. This is a lot more complex than just ordering a new crime drama series, or situation comedy, and foisting it on a market with only a handful of channel options.

Viewership will range from 50″ panels, to 2″ hand-held screens – with a plethora of optional sizes in between.  Program length will be infinitely variable from hours of non-stop viewing to constantly interrupted sound bites, no longer proscribed by 30 minute increments.  Traditional programming, like local or national “news” will have little meaning, or value, in 2020 (or maybe 2015) when we will be receiving instant updates several times each day on our mobile device. 

Mr. Zucker did a yeoman’s job of steering NBCU toward the future.  He was smart enough to understand that only historians, locked-in media critics and old farts in Lay-Z-Boys care about what’s happening on The Tonight Show or the NBC News.  His primary investments were oriented toward understanding the future, and getting NBCU’s toes into that rapidly churning water where future growth lies.  But he’s leaving just as the stream is turning into a torrent.  Even what he did could well be out of date within a few years – or months!

Now it is Mr. Burke’s turn.  The very pleasant fellow has a daunting challenge.  If he isn’t supposed to “double down” his bets in network TV, and traditional “cable,” what is he supposed to do?  In a dramatically changing advertising world, where Google, Facebook and mobile device ads are now becoming the hot markets, what is the role for NBCU/Comcast?  If we no longer need the physucal cable (say in 2020), won’t Comcast lose subscribers for cable access just like we’re seeing declines in subscribers for newspapers, DVD subscriptions, land-line telephones and land-line long distance?  What is the role of a “programmer” like NBCU if viewers all have unlimited access to everything, anytime, anywhere, in any format?  And what is the value of a content provider if self-published content streams onto the web by the terabyte daily?  And is sorted by engines like Google and YouTube?

What Mr. Burke must do, regardless of style, is develop some scenarios about the future, and understand the much more complex playing field that is today’s media business.  He has to find the holes in competition, and learn how to leverage what the “fringe” competitors are doing that drives all that usage, and viewership.  And, most importantly, he has to keep experimenting – just as Mr. Zucker did.  He has to create opportunities to test the newly developing markets, figure out who will buy, and what they will buy.   He has to set up white space teams who have permission to be experimental, even if they attack the old businesses like “network” TV – even cannibalizing the historical viewr base as they transition toward future media markets.  If he can create these teams, give them the right permission and resources, NBCU/Comcast could be the next great media company. 

We’ll have to wait and see.  Will the sirens of the past, looking backward, pull the company into gladiator battles with old foes trying to hold share in narrowing, declining markets?  That path looks like a sure disaster.  Despite being an early leader with satellite TV and MySpace that approach has not helped NewsCorp.  But betting on the future is more a bet on the journey, and finding the right path, than betting on any particular destination.  The future-based approach takes a lot of faith in company leadership, and the company management team.  It will be interesting to see which way Mr. Burke goes.

Journalism in 2020 – YouTube, Google

Will YouTube be the USAToday or Wall Street Journal or New York Times of 2015 or 2020?  According to Mediapost.com "YouTubes Secret Citizen Journalism Plot Exposed."  Referring to a SFWeekly article by Eve Batey "YouTube Explains Top Secret 'News Experiment' to Local Media, But Doesn't Really" the reporting is that YouTube plans to hire groups of citizens in major cities, starting in San Francisco, to report news events via YouTube.  Could this replace the local newspaper?  Or maybe even the local evening news?

Americans are so used to freedom of speech that it's easy to forget what the concept launched in the USA.  200 years ago anybody who could access a printing press, of any size, could produce a newspaper.  That as revolutionary.  "Citizen journalism" was the norm, and there were literally thousands of newspapers.  That situation remained very true well into the 1900s.  Eventually acquisitions led to consolidation and a dramatic reduction in the number of newspapers. 

The decline in the number of newspapers was aided by consumer journalism preferences shifting, in part, to radio and television.  As radio and television journalism was born the limitation was "bandwidth" and therefore access.  Thus, from the beginning there was government control over the number of stations. That scenario very different from the founding of newspapers, as there were limited channels from the beginning.  But that didn't mean that the desire for video journalism was lower.

What will journalism be in 2020?  We know that most major city newspapers are on the brink of failure, with bankruptcies (such as Tribune Corporation, owner of The Chicago Tribune and The Los Angeles Tkimes as well as others) not uncommon.  As newspaper pages have shrunk, the internet has allowed the return of "citizen journalism" as bloggers and reporters have emerged able to tell a story, and with very low cost access to potential readers.  Having internet access is possibly cheaper, and certainly easier, than operating a printing press in the era of Benjamin Franklin, or even a local newspaper of 1900.  By numbers there is no doubt many more "citizen journalists" than "professional journalists" working at American newspapers today.

So why couldn't YouTube take advantage of a preference for video, and link together the armies of independent "journalists?"

I can't help but recall the television program Max Headroom from 20 years ago – where it was perceived that real-time information on practically all topics would be reported on millions of televisions everywhere – televisions which could not be turned off by law.  Wasn't Max simply an avatar, running around what we could now consider the web, popping up on computer – rather than television – screens?  Today I can create my own Max Headroom avatar to search the web for real-time content – mostly text.  Why couldn't YouTube give me a tool to do the same thing with video?

Many people are bemoaning the decline of traditional journalism.  But is this a bad thing?  Given all the screaming about today's "media bias" it would seem that citizen journalism could become a great equalizer.  If YouTube and Google can help give me the tools to search for what's interesting to me that would seem to be a very good thing.  And if in the process they sell some ads so that the content can grow, that doesn't seem like a bad thing either.

In the movie Network, made some 30 years ago, the thesis was put forward that news would become entertainment – and less "news".  With the growth of Fox News, MSNBC News and the number of broadcast minutes given to television news magazines like Nightline, one could reasonably claim that the movie was surprisingly foretelling.  Today, getting up to the minute news is even hard on a channel like CNN.  It's not at all unclear that providing a platform for citizen journalists, via YouTube and Google searches of the web, is a bad thing at all. 

Are you prepared?  Are you learning how to use these new tools?  Are you prepared to change your learning behavior?  Your advertising programs? Could you be a citizen journalist?   It certainly looks clearer every year that journalism in 2020 will look substantially different than it does in 2010.

Cry about the change, or do something – MSNBC and EveryBlock

For almost 3 years this blog has discussed how newspapers, and most traditional media, have ignored the changes being created by shifting markets for news readers and advertisers.  Unfortunately, not a lot has changed in how newspapers, magazines and traditional media companies operate.  They still don't put enough energy into using the web, for distribution or revenue generation.  They keep trying to Defend & Extend their old models – and these companies keep going bankrupt.  So much the worse for investors, employees and suppliers.

Today the Chicago Sun Times reported "Everyblock acquired by MSNBC.com."  The sort of short article you could easily miss.  Because the Sun Times, and most traditional media, still don't like to talk about the web.  But this is a pretty big deal.

Everyblock was started 2 years ago by a 28 year old in Naperville, Il.  He acquired $1M on a Knight Foundation grant to see if he could build a reporting engine that would supply information at the local level to web sites.  An ambitious undertaking.  Something you would think every major newspaper would try to do.  But they didn't.  They were so Locked-in to their old business model that they kept crying about the decline in subscriptions and print ads – but didn't do anything beyond cost cutting.  That's what Lock-in will do to you – leave you crying about the past but taking no affirmative action to deal with shifting markets.  They left the market for on-line local reporting available for someone more ambitious.  Someone age 28 who really wanted to see if he could make it work.

After Everyblock hired some folks and figured out this would work you'd think Tribune Corporation would be all over how to apply this in order to build its on-line businessGuess again.  Mr. Zell is so Locked-in to his big debt deal that he's too busy trying to sell the Cubs and otherwise raise money.  He doesn't have a dime to invest in building the future.  Same at the Sun-Times where leadership is still realing from the old owner's plundering of traditional assets with no game plan for how to succeed long-term.  Both companies are well into the Whirlpool.  So close to failure they've lost track of any plan to grow.  So they ignored the local talent, cutting costs to prolong the ride instead of investing smartly.

Now MSNBC.com is going where the newspapers wouldn't go.  It's acquiring the Everyblock business, one that's desperate for cash to grow, in order to expand its footprint.  MSNBC.com is ready to develop a new model for local news coverage.  Good for them.  We all know the day will come when we can get local news from the web, and it's good to see MSNBC set up the White Space to explore how to make it happen.  MSNBC.com is in the Rapids of growth, building on growth of its cable TV partner.  It's good news for GE shareholders, who could benefit from the next big thing since Google or Twitter.  All for the mere investment of a few million dollars.  Less than Mr. Zell spends on personal jets every year.

The world keeps changing.  Too many businesses are simply trying to do the same thing, only cheaper or faster or somehow better.  They aren't reacting to shifts by actually Disrupting their approach and setting up White Space to learn.  At the media companies the impact is sevee as fewer and fewer magazines get printed, and newspapers get thinner, and more companies file for bankruptcy.  But the smart ones do something – like MSNBC.  And MSNBC could just end up being the one taking it to the bank!