Comcast, NBC, Universal McCann Embrace New Business Models, say Leaders

05/25/2011 12:35 pm ET
  • Jack Myers Chairman & Media Ecologist, MyersBizNet

Traditional media and advertising business models are "doomed;" social media have little economic future; Google will become less relevant as vertical highly targeted and branded search tools become more available; and "media platforms" are now "king," replacing content and distribution. These were just some of the controversial topics introduced by Media Metrics CEO and founder Laura Martin at a panel moderated by Jack Myers at last week's PricewaterhouseCoopers Outlook 2012 event in New York.

Sharing the stage with Martin were Nick Brien, Worldwide CEO of Universal McCann; John Eck, President of NBC TV Network and Media Works; Julie Richardson, Managing Director of Providence Equity Partners, and Robert S. Victor, SVP of Strategic and Financial Planning for Comcast Corporation.

Victor, who joined Comcast six months ago from Boston Consulting Group, acknowledged Comcast is not moving quickly enough to adopt new business models and address changing marketplace realities. "More people are going online for entertainment and watching more video online," Victor said in a separate interview with JackMyers Media Business Report. "We need to make the online experience integral and additive to the experience on TV as opposed to a substitute. The multi-channel video industry needs to think through with programmers the best models for enhancing the consumer experience and sharing in the revenues."

"One of the things the new landscape demands is you must have a customer relationship," insists Martin. "It is no longer enough to have a passive relationship with audiences. Digital media know who their customers and audiences are. But," she warned, "one of the most disruptive implications of the digital space is the pricing toward free model." Using Craig's List as an example, Martin explained "digital media are giving away for free services that used to generate billions. This is destroying economics in the old media world. It's no longer enough to just offer audiences. You have to know who they are and have a relationship with them."

Julie Richardson reported that Providence has shifted its investment focus from domestic U.S. media companies to international markets "where there is more growth ahead," and to "unique situations where growth is being fueled by underserved demographics," such as Univision. Providence also invested $100 million for a ten percent stake in Hulu, the online video service launched by NBC and News Corp. "Our concerns are obvious," shared Richardson: "fragmentation of the media market and very tough sector trends." She points out newspapers have serious top line degradation and other media categories have top line multiples that don't make sense.

Brien, who in addition to his responsibilities at Universal McCann, is leading media development for parent company Interpublic Group (IPG), agrees "we have to challenge our own beliefs and experiences, which are encumbrances to introducing new models." In an interview with JackMyers Media Business Report, Brien commented "It is not subject to debate that the economics of the media industry are more complex. Our traditional models are broken. There is an appetite for change although there is concern about how we move to new models. [The debate is about] how we make money and what we make money on. What is the business model?"

Martin warned of the Innovators Dilemma: "Cash flow prevents companies from doing the right thing. There is margin compression for 18 to 24 months after companies find out they have to restructure. They strategically disadvantage themselves because their price umbrella allows competitors to enter their markets."

Brien agreed "there will be new opportunities for those who introduce new models and if we don't do it, new players will. Let's land the plane," he urges. "We need to look for new opportunities, institutionalize new models and make serious investments."

"No one has an opportunity to sit still," NBC's Eck commented. In an interview with JackMyers Media Business Report, Eck acknowledged NBC "needs to program differently and sell differently. We have to work together with the cable and satellite companies to change the interface to consumers so we can capitalize as change happens. We're in a period of transition right now and we can't always see how digital pennies scale, but they will." Commenting on NBC's Infront outreach to advertisers, Eck suggested NBC views itself as both a content and as a marketing services company. "We need to help our clients achieve their objectives. We have great opportunities for partnerships to help companies and [this effort] will become more explicit."

Two primary themes of PwC's new Outlook 2012 report are innovation and collaboration, and both Eck and Victor agreed cable operators and programmers will work more collaboratively to identify and develop business models that enable them to enhance their interface with audiences, offer more detailed consumer insights, and provide enhanced opportunities for marketers. Victor mentioned the recently launched Canoe Ventures as an example.

But Brien warned that companies cannot depend solely on advanced technologies. "The brands we are representing rely on our brilliant strategies to drive creative breakthrough. Our real challenge is whether there is enough innovation at the top of the industry. I meet a lot of leaders – many of whom are very good managers of the status quo. All elements of the value chain – from beginning to end -- are focused on accountability and all have to be reevaluated. Today, business models are based on efficiencies and business processes. [Enhanced technologies] attack the legacy business models but don't build new ones. For new clients we need to establish new models of compensation and for existing clients, we need to demonstrate the value of our services and extend our business to take ownerships of ideas we generate. Intellectual property is a source of revenue generation."

IPG has taken equity stakes in Facebook and SpotRunner and has launched an Emerging Media Lab. "We need to be far smarter about the investments we make and be more entrepreneurial," says Brien. "Every [advertising agency] holding company needs to make smart strategic acquisitions." He adds that innovation in emerging areas like mobile and social networking is originating in India, Korea, Japan, China and other countries, and suggests it is important "to be more open minded and receptive that breakthroughs won't necessarily be from the U.S."

PwC's Outlook 2012 forecasts only 3.9 percent annual growth in domestic U.S. ad spending compared to 6.6 percent globally.

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