Be Really Glad Bezos Bought The Washington Post

Jeff Bezos, founder of Amazon worth $25.2B just paid $250 million to become sole owner of The Washington Post

Some think the recent rash of of billionaires buying newspapers is simply rich folks buying themselves trophies.  Probably true in some instances – and that benefits no one.  Just look at how Sam Zell ruined The Chicago Tribune and Los Angeles Times.  Or Rupert Murdoch's less than stellar performance owning The Wall Street Journal.  It's hard to be excited about a financially astute commodities manager, like John Henry, buying The Boston Globe – as it has all the earmarks of someone simply jumping in where angels fear to tread.

These companies lost their way long ago.  For decades they defined themselves as newspaper companies.  They linked everything about what they did to printing a daily paper.  The service they provided, which was a mix of hard news and entertainment reporting, was lost in the productization of that service into a print deliverable. 

So when people started to look for news and entertainment on-line, these companies chose to ignore the trend.  They continued to believe that readers would always want the product – the paper – rather than the service. And they allowed themselves to remain fixated on old processes and outdated business models long after the market shifted.

The leaders ignored the fact that advertisers could obtain much more directed placement at targets, at far lower cost, on-line than through the broad-based, general ads placed in newspapers.  And that consumers could get a much faster, and cheaper, sale via eBay, CraigsList or Vehix.com than via overpriced classified ads. 

Newspaper leadership kept trying to defend their "core" business of collecting news for daily publication in a paper format.  They kept trying to defend their local advertising base.  Even though every month more people abandoned them for an on-line format.  Not one major newspaper headmast made a strong commitment to go on-line.  None tried to be #1 in news dissemination via the web, or take a leadership role in associating ad placement with news and entertainment. 

They could have addressed the market shift, and changed their approach and delivery.  But they did not.

Money manager Mr. Henry has done a good job of turning the Boston Red Sox into a profitable institution.  But there is nothing in common between the Red Sox, for which you can grow the fan base, bring people to the ballpark and sell viewing rights, and The Boston Globe.  The former is unique.  The latter is obsolete.  Yes, the New York Times company paid $1.1B for the Globe in 1993, but that doesn't mean it's worth $70M today.  Given its revenue and cost structure, as a newspaper it is probably worth nothing.

But, we all still want news.  Nobody wants the information infrastructure collecting what we need to know to crumble.  Nobody wants journalism to die.  But it is unreasonable to expect business people to keep investing in newspapers just to fulfill a public good.  Even Mr. Zell abandoned that idea. 

Thus, we need the news, as a service, to be transformed into a new, profitable enterprise.  Somehow these organizations have to abandon the old ways of doing things, including print and paper distribution, and transform to meet modern needs.  The 6 year revenue slide at Washington Post has to stop, and instead of thinking about survival company leadership needs to focus on how to thrive with a new, profitable business model.

And that's why we all should be glad Jeff Bezos bought The Washington Post.  As head of Amazon.com  The Harvard Business Review ranked him the second best performing CEO of the last decadeCNNMoney.com named him Business Person of the Year 2012, and called him "the ultimate disruptor."

By not doing what everyone else did, breaking all the rules of traditional retail, Mr. Bezos built Amazon.com into a $61B general merchandise retailer in 20 years.  When publishers refused to create electronic books he led Amazon into competing with its suppliers by becoming a publisher.  When Microsoft wouldn't produce an e-reader, retailer and publisher Amazon.com jumped into the intensely competitive world of personal electroncs creating and launching Kindle.  And then upped the stakes against competitors by enhancing that into Kindle Fire.  And when traditional IT suppliers like HP and Dell were slow to help small (or any) business move toward cloud computing Amazon launched its own network services to help the market shift.

Mr. Bezos' language regarding his intentions post acquisition are quite telling, "change… is essential… with or without new ownership….need to invent…need to experiment." 

And that is exactly what the news industry needs today.  Today's leaders are HuffingtonPost.com, Marketwatch.com and other web sites with wildly different business models than traditional paper media.  WaPo success will require transforming a dying company, tied to an old success formula, into a trend-aligned organization that give people what they want, when they want it, at a profit.

And it's hard to think of someone better experienced, or skilled, than Jeff Bezos to provide that kind of leadership.  With just a little imagination we can imagine some rapid moves:

  • distribution of all content via Kindle style eReaders, rather than print.  Along with dramatically increasing the cost of paper subscriptions and daily paper delivery
  • Instead of a "one size fits all" general purpose daily paper, packaging news into more fitting targeted products.  Sports stories on sports sites.  Business stories on business sites.  Deeper, longer stories into ebooks available for $.99 purchase.  And repackaging of stories that cover longer time spans into electronic short-books for purchase.
  • Packaging content into Facebook locations for targeted readers.  Tying ads into these social media sites, and promoting ad sales for small, local businesses to the Facebook sites.
  • Or creating an ala carte approach to buying various news and entertainment in an iTunes or Netflix style environment (or on those sites)
  • Robustly attracting readers via connecting content with social media, including Twitter, to meet modern needs for immediacy, headline knowledge and links to deeper stories — with sales of ads onto social media
  • Tying electronic coupons, and buy-it-now capabilities to ads linked to appropriate content
  • Retargeting advertising sales from general purpose to targeted delivery at specific readers, with robust packages of on-line coupons, links to specials and fast, impulse purchase capability
  • Increased use of bloggers and ad hoc writers to supplement staff in order to offer opinions and insights quickly, but at lower cost.
  • Changes in compensation linked to page views and readership, just as revenue is linked to same.

We've watched a raft of newspapers and magazines disappear. This has not been a failure of journalism, but rather a failure of business leaders to address shifting markets and transform old organizations to meet modern needs.  It's not a quality problem, but rather a failure of strategy to adapt to shifting markets.  And that's a lesson every business leaders needs to note, because today, as I wrote in April, 2012, every company has to behave like a tech company!

Doing more of the same, cutting costs and rich egos won't fix a newspaper.  Only the willingness to experiment and find new solutions which transform these organizations into something very different, well beyond print, will work.  Let's hope Mr. Bezos brings the same zest for addressing these challenges and aligning with market needs he brought to Amazon.  To a large extent, the future of news and "freedom of the press" may well depend upon it.

 

Are You More Like Rupert Murdoch Than You Think?


Bernie Ebbers (of WorldCom) and Jeff Skilling (of Enron) went to prison.  Less well known is Conrad Black – the CEO of Sun Times Group – who also went to the pokey.  What do they have in common with Rupert Murdoch – besides CEO titles?  The famous claim, “I am not responsible” closely allied with “I’ve done nothing wrong.” While Murdoch hasn’t been charged with crimes, or come close to jail (yet,) there is no doubt people at News Corp have been charged, and some will go to jail.  And there is public outcry Murdoch be fired.

Investors should take note; three bankruptcies killed 2 of the organizations the ex-cons led and investors were wiped out at Sun Times which barely remains in business. What will happen at News Corp? Given the commonalities between the 4 leaders, I don’t think I’d want to be a News Corp. stockholder, employee or supplier right now.

How in the world could something like this happen?

Like the infamous trio, Rupert Murdoch was, and is, a leader who defined the success formula of his company.  As time passed, the growing organization became adroit at implementing the success formula, operating better, faster and cheaper.  Loyal managers, who identified with, and implemented intensely, the success formula were rewarded.  Those who asked questions were let go.  Acquisitions were forced to conform to the success formula (such as MySpace) even if such conformance created a gap between the business and market needs.  Business failure was not nearly as bad as operating outside the success formula. Failure could be forgiven – but better yet was finding a creative way to make things look successful.

Supporting the company’s success formula – its identity, cultural norms and operating methods – using all forms of ingenuity became the definition of success in these companies.  This ingenuity was unbridled, even rewarded! Even when it came to skirting the edge of – or even breaking – the law.  Cleverly using outsiders to do “dirty work” was an ingenious way to create plausible deniability. Financial machinations were not considered a problem if there was any way to explain changes.  Violating accounting conventions not really an issue if done in the pursuit of shoring up reported results.  Moving money wherever necessary to avoid taxes, or fines, and pay off executives or their friends, not really a big deal if it helped the company implement its success formula.  Any behavior that reinforced the success formula, as the leader expressed it, made employees and contractors successful. 

Do the ends justify the means?  Of course! As long as the results appear good, and the leader is taking home a whopping amount of cash, everything appears “A-OK.” 

Is this because these are crooks?  Far from it.  Rather, they are dedicated, hard working, industrious, smart, inventive managers who have been given a clear mission.  To make the success formula work.  Each small step down the ethical gangplank was a very small increment – and everyone believed they operated far from the end.  If they got away with something yesterday, then why not expect to get away with a little more today?  What are ethics anyway?  Relative, changeable, difficult to define.  Whereas fulfilling the success formula creates clear, measurable outcomes!

What is the News Corp’s Board of Directors position?  The New York Times headlined “Murdoch’s Board Stands By as Scandal Widens.”  Mr. Murdoch, like any good leader implementing a success formula,  made sure the Board, as well as the executives and managers, were as dedicated to the success formula as he.  Through that lens there are no difficult questions facing the Board. Everything was done to defend and extend the success formula.  Mr. Murdoch and his team have done nothing wrong – except perhaps a zealous pursuit of implementation.  What’s wrong with that?  Why should the Board object?

Could this happen to you, and your organization?  It may already be happening.

Answer this option, what’s more important to you and your company:

  1. Focusing on and identifying market trends, and adapting your strategy, tactics, products, services and processes to align with emerging future trends, or
  2. Focusing on execution.  Setting goals, holding people to metrics and making sure implementation remains true to the company’s history, strengths and core capabilities, customers and markets? Rewarding those who meet metrics, and firing those who don’t?

If it’s the latter, it’s an easy slide into Murdoch’s very uncomfortable public seat.  Very few will end up with an Enron Sized Disaster, as BNET.com headlined.  But failure is likely.  Any time execution is more important than questioning, implementation is more important than listening and conforming to historical norms is more important than actual business results you are chasing the select group of leaders exemplified today by Mr. Murdoch.

Here are 10 questions to ask if you want to know how at risk you just might be.  If even a couple of these ring “yes,” you could be confidently, but errantly,  thinking everything is OK :

  1. Is loyalty more important than business results?  Do you have people working for you that don’t do that good a job, but do exactly what you want so you keep them?
  2. Do you hold certain aspects of your business as being beyond challenge – such as technology base, meeting key metrics, supporting historical distributors (or customers) or operating according to specified “rules?”
  3. Do you ask employees to operate according to norms before asking if they have a better idea?
  4. Does HR tell employees how to do things rather than asking employees what they need to succeed?
  5. Do employee and manager reviews have a section for asking how well they “fit” into the organization?  Are people pushed out that don’t “fit?”
  6. Are “trusted lieutenants” moved into powerful positions over talented managers just because leaders aren’t comfortable with the newer people? 
  7. Are certain functions (finance, HR, IT) expected (perhaps enforcers?) to make sure everyone operates according to the historical status quo?
  8. Is management meeting time spent predominantly on internal, versus external, issues?  Talking about “how to do it” rather than “what should we do?”
  9. Is your advisory board, or Board of Directors, filled with your friends and co-workers that agree with your success formula and don’t seek change?
  10. Do your customers, employees, or suppliers learn that demonstrating dissatisfaction leads to a bad (or ended) relationship?

 

How Harry Potter predicts Success for AOL


Evolution doesn’t happen like we think.  It’s not slow and gradual (like line A, below.)  Things don’t go from one level of performance slowly to the next level in a nice continuous way.  Rather, evolutionary change happens brutally fast.  Usually the potential for change is building for a long time, but then there is some event – some environmental shift (visually depcted as B, below) – and the old is made obsolete while the new grows aggressively.  Economists call this “punctuated equilibrium.”  Everyone was on an old equilibrium, then they quickly shift to something new establishing a new equilibrium.

Punctuated EquilibriumMomentum has been building for change in publishing for several years.  Books are heavy, a pain to carry and often a pain to buy.  Now eReaders, tablets and web downloads have changed the environment.  And in June  J.K. Rowling, author of those famous Harry Potter books, opened her new web site as the location to exclusively sell Harry Potter e-books (see TheWeek.comHow Pottermore Will Revolutionized Publishing.”) 

Ms. Rowling has realized that the market has shifted, the old equilibrium is gone, and she can be part of the new one.  She’ll let the dinosaur-ish publisher handle physical books, especially since Amazon has already shown us that physical books are a smaller market than ebooks.  Going forward she doesn’t need the publisher, or the bookstore (not even Amazon) to capture the value of her series.  She’s jumping to the new equilibrium.

And that’s why I’m encouraged about AOL these days.  Since acquiring The Huffington Post company, things are changing at AOL.  According to Forbes writer Jeff Bercovici, in “AOL After the Honeymoon,” AOL’s big slide down in users has begun to reverse direction.  Many were surprised to learn, as the FinancialPost.com recently headlined, “Huffington Post Outstrips NYT Web Traffic in May.” Huffpo beats NYT views june 2011
Source: BusinessInsider.com

The old equilibrium in news publishing is obsolete.  Those trying to maintain it keep failing, as recently headlined on PaidContent.orgCiting Weak Economy, Gannett Turns to Job Cuts, Furloughs.” Nobody should own a traditional publisher, that business is not viable.

But Forbes reports that Ms. Huffington has been given real White Space at AOL.  She has permission to do what she needs to do to succeed, unbridled by past AOL business practices.  That has included hiring a stable of the best talent in editing, at high pay packages, during this time when everyone else is cutting jobs and pay for journalists.  This sort of behavior is anethema to the historically metric-driven “AOL Way,” which was very industrial management.  That sort of permission is rarely given to an acquisition, but key to making it an engine for turn-around. 

And HuffPo is being given the resources to implement a new model.  Where HuffPo was something like 70 journalists, AOL is now cranking out content from some 2,000 journalists and editors!  More than The Washington Post or The Wall Street Journal.  Ms. Huffington, as the new leader, is less about “managing for results” looking at history, and more about identifying market needs then filling them.  By giving people what they want Huffington Post is accumulating readers – which leads to display ad revenue.  Which, as my last blog reported, is the fastest growing area in on-line advertising

Where the people are, you can find advertsing.  As people are shift away from newspapers, toward the web, advertising dollars are following.  Internet now trails only television for ad dollars – and is likely to be #1 soon:

US Adv rev by market
Chart source: Business Insider

So now we can see a route for AOL to succeed.  As traditional AOL subscribers disappear – which is likely to accelerate – AOL is building out an on-line publishing environment which can generate ad revenue.  And that’s how AOL can survive the market shift.  To use an old marketing term, AOL can “jump the curve” from its declining business to a growing one.

This is by no means a given to succeed.  AOL has to move very quickly to create the new revenues.  Subscribers and traditional AOL ad revenues are falling precipitously.

AOL earnings

Source: Forbes.com

But, HuffPo is the engine that can take AOL from its dying business to a new one.  Just like we want Harry Potter digitally, and are happy to obtain it from Ms. Rowlings directly, we want information digitally – and free – and from someone who can get it to us.  HuffPo is now winning the battle for on-line readers against traditional media companies. And it is expanding, announced just this week on MediaPost.comHuffPo Debuts in the UK.”  Just as the News Corp UK tabloid, News of the World,  dies (The Guardian – “James Murdoch’s News of the World Closure is the Shrewdest of Surrenders.“)

News Corp. once had a shot at jumping the curve with its big investment in MySpace.  But leadership wouldn’t give MySpace permission and resources to do whatever it needed to do to grow.  Instead, by applying “professional management” it limited MySpace’s future and allowed Facebook to end-run it.  Too much energy was spent on maintaining old practices – which led to disaster.  And that’s the risk at AOL – will it really keep giving HuffPo permission to do what it needs to do, and the resources to make it happen?  Will it stick to letting Ms. Huffington build her empire, and focus on the product and its market fit rather than short-term revenues?  If so, this really could be a great story for investors. 

So far, it’s looking very good indeed. 

 

 

 

Journalism 2020 Revisited – Amazon, Apple, NewsCorp, Newspapers, Books


Things are tough for the printed word these days.  Not for writing, or demand for information.  That is doing great – with more volume than ever!  But the issue is “printed” material.  Clearly, the format is changing.  But are business leaders changing with it?

The Los Angeles Times reported “Amazon.com Says It’s Selling 80% More Downloaded Books Than Hardcovers.”  This is a big switch.  Clearly Kindles are making a big difference as people are buying a lot less paper, and reading a lot more bits.  Do you remember when your colleagues all said “I want a book, I don’t want to read looking at a screen?”  Do you remember when businesspeople actually printed their emails?  Clearly a sentiment gone by the wayside. 

Accuracy in Media reported “U.S. Newspaper Circulation Dropped 30% Since ’07.” And it’s a global phenomenon, with the U.K. down 25%, Greece 20%, Italy 18% and Canada 17%. Fully 2/3 of major countries are seeing newspaper demand decline.  No wonder Tribune Corporation, publisher of The Chicago Tribune, Los Angeles Times and Baltimore Sun, as well as others, is having such a hard time emerging from bankruptcy.  Every month this looks more like the buggy whip business.  Can you really expect the company to survive?

Amidst this backdrop, magazines have a dire future.  I can remember when browsing magazines was the norm, and trade magazines arrived in my inbox daily.  Often 60 or 100 page affairs.  No longer.  Magazines have disappeared like rain in the Sahara.  Their savior is supposedly to go digital, but according to TwistedImage.com magazine leaders are at a loss how to proceed.  In “The Media Disruption Within” Mitch Joel describes how a panel of magazine publishers are approaching the industry change mostly with despair that the internet is here – and no concerted effort to define a new model.  Lock-in was prevalent as they kept hoping for a return to the good old days for print publishers, which we know is never going to happen.

So today the New York Post reported “Mag Publishers, Apple in Subscription App Scrap.”  Most of us can acquire newspapers for an iPad issue by issue – but subscriptions aren’t possible.  The magazine fears it will be the big loser – and rightfully so.  If Apple controls the subscription and delivery, why couldn’t it repackage?  Where would Apple stop, and what value would the magazine actually deliver?  Since iTunes changed music buying, how many people buy albums?  It would require the editors and publishers be really sharp to know their market – something most gave up a long time ago when they turned to focusing on narrow content for their “core product” and trying to maintain their “core competency.”  Neither of which are very “core” any more. 

We all want news that’s exactly what we want, and we’ll simply go to Google to get it.  Who published it isn’t nearly as important to readers any more.  Nor is the packaging.  Pretty soon Amazon via Kindle, Apple via iPad, and we can expect a Google tablet to do the same, can start packaging up the chapters of various books for readers giving them just what they want.  And with that they can link off to source articles from newspapers and magazine archives – or to current events.  The role of publisher will get a lot less clear, as writers and editors can go directly to the electronic distributor with content.

Into this fray is an interesting new approach reported by CNBC.com, “Rupert Murdoch’s New Digital Game Changer?”  The claim is that News Corp. is preparing an all-new interactive product designed just for on-line and mobile users.  It wouldn’t be a re-treaded newspaper.  Text, photo and video designed just for the medium.  Now that would be the right way to go about preparing for 2020.  Unfortunately, the way News Corp. handled MySpace.com doesn’t give us a lot of comfort this will be a truly White Space project.  But if it is, it might just be the start of toward the product which will be journalism in 2020.

If you’re in publishing you have no choice but to get White Space going.  The intermediaries – from the tech companies to new-age publishers like HuffingtonPost.com – are moving forward.  The business as it used to be is gone.  But the demand for news – for content – is bigger than ever.  It will require a new business model.  A new Success Formula. And this is clearly a case of change or die.  The world will never again be as it previously was.

Even if you don’t think of yourself as a publisher – you probably are.  Do you put out customer literature – like user or repair manuals?  Do you put out sales literature? Do you communicate with investors or industry analysts?  If so, how do you “publish” your material?  Paper?  Packaged pdf?  In today’s world, an advantage can be created by moving quickly to what’s new. 

Today there are a plethora of luxury automobiles on the market.  These beautifully high tech luxury machines have manuals that can run 500+ pages!   It is impossible to figure out how anything works by trying the manual!  Why don’t manufacturers of $60,000+ cars have a Kindle (or iPad) built into the console?  Those cost less than a set of brake pads today, they can be updated automatically, and are interactive. 

Are you thinking about how you could use a $100 device to make life easier for your customers and supply chain partners?  Or are you printing?  If you’re printing, what’s your budget?  How much would you save if your salespeople, customers, etc. were given a Kindle?  Or iPad?  Can you afford not to be thinking differently about your future?

Biting off your nose – News Corp. and Rupert Murdoch

"Rupert Murdoch to remove News Corp's content from Google in months" is the London Telegraph headline.  Claiming that Google gets a "free ride" on the newspaper content, the News Corp. Chairman claims he can block Google from referring his content – and that the conclusion will be bad for Google because it will hurt the search engine's ability to add value.  He also expects that his newspaper and its website will do fine without Google, including doing fine without any Google-placed ads on the newspapers' web sites.

Really.

Ever heard the phrase "cutting off your nose to spite your face?"  It means that you get so mad at something, or someone, that you take a stupid action just trying to get even.  Given the gruffness of Mr. Murdoch, I mashed that phrase up into my own explanation of his threat – that he's trying to bite off his own nose.

There is no changing the shift to on-line news readership.  People will never again return to reading print-format newspapers.  Print demand will continue to decline.  Simultaneously, nobody will revert to searching for news on their own – such as by browsing around any particular web site.  Users now know they can find news with the aid of powerful search engines, like Google, that deliver them directly to the page that tells them what they want to know.  And advertisers now know that they must use services like Google to deliver ads to the pages that present their most likely targets.  Advertisers are not willing to accept "views" alone, now knowing that ads can be targeted to specific readers associated with specific page content.  Those shifts have happened, and are now trends moving forward.  No hoping for "the good old days" will change these shifts.

Google doesn't need the News Corp. newspaper output to succeed as a search engine nor News Corp's pages for its ad placement business.  There is so much access to news, from press releases (source news) to bloggers to other newspapers that any individual news source is relatively irrelevant.  And Google can place all of its advertisers' ads – whether News Corp. makes its pages available to Google or not.

Simply, News Corp. needs Google.  Without Google page referrals, visitors will drop.  Lower visitors means fewer ad views means lower revenue.  No news organization can stand lower revenues.  Simultaneously, News Corp. needs as many advertisers competing for its ad space as possible.  To turn down any ad placement service will only hurt revenues further.

Mr. Murdoch said in the article "I don’t believe the media industry can continue to exist in this way."  He's right.  Media companies are going through a major market shift.  But trying to walk away from the #1 search engine and #1 ad placement company is —– foolish.  And Mr. Murdoch knows this – because News Corp. owns MySpace and other internet properties.  Google may not need News Corp., but News Corp. definitely needs Google