The equity value and potential revenues being left on the table by media companies is in the billions. It is long overdue for these companies to focus on how they can wean themselves off their addiction to advertising revenues and begin capturing the other 70% to 75% of corporate marketing budgets they rarely touch. Media companies need to convince investors they have the management team in place that can develop and implement a coherent and intelligent vision for the future – a future in which they will be forced to be less dependent on advertising revenues. Just as America must wean itself off foreign oil by developing new energy sources, media companies must develop and implement a new vision if they are to survive. It's clear, based on their continuing emphasis on traditional business models… their reaction to the softening economy… and the unyielding downward pressure on media company stocks… that the current management teams at all but a few companies are failing to make the transformation to the new economy.
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In just the past few weeks, the media industry has gone from a wake-up call to a migraine headache. Across all media companies and agencies staffs are being cut in anticipation of an accelerating economic downturn precipitated by expected reductions in corporate ad spending.
While there are tidbits of good news here and there, overall it's impossible to view the short-term industry future with anything but nervous caution, at best. A depressed holiday shopping season will exacerbate an already negative industry mood. Unfortunately, many media companies are cutting in all the wrong places, trimming where there is no fat, and eliminating overhead without any cohesive strategic vision for how to rebuild and reconstruct the businesses they are now deconstructing.
For years, the signs have been on the wall. Traditional media companies have had plenty of opportunities to invest in business models that would have prepared them for these tough times. I'm not referring to digital investments, which of course are an important part of future growth opportunities. Ambitious digital plans have been rolled out, but traditional ad-dependent business models have been anchor-bolted onto them. The focus should have been and could have been on identifying core assets that have viable brand extension and growth potential and on shedding those assets that remain dependent on commoditized supply and demand market fluctuations.
Every network television series should have been reviewed for its long term brand vitality – not based on ratings but based on non-traditional revenue potential. Every section of every newspaper… every personality on every radio station and every format within a radio company… every editorial category within a magazine and every publication within a magazine company… all need to be analyzed as independent brands. Just as Procter & Gamble assessed the brand vitality of each product and category the company marketed, and shed several while investing heavily in others, so should media companies have viewed their businesses as collections of independent brands. Each media brand needs to be assessed for its potential to generate revenues from events, sales promotion, database marketing, cause related initiatives, long-tail sales, and other below-the-line marketing communications budgets.
Some companies have flailed at efforts to conduct strategic business reviews. A few, like Meredith, Disney, Google and IDG, have succeeded to varying degrees. Brand reviews need to be conducted by non-traditional experts who are knowledgeable of a company's assets but unaffiliated with the core editorial and business traditions of the company. Anna Wintour at Vogue has no true perception of the value of her brand as a long-tail marketing enterprise any more than David E. Kelley understands the event, database marketing and digital marketing opportunities represented by Boston Legal. And the traditional consulting companies like Booz, McKinsey and Bain & Company are mostly locked into outdated Harvard Business School case studies and antiquated perceptions of media industry realities. They are incapable of bringing forward thinking non-traditional vision to the companies they advise.
There is less time than they realize for major media companies to reinvent their business models. The writing was on the wall in 1993 when I wrote in my first book Adbashing,
"Media have traditionally not been viewed as marketing partners by advertisers or their agencies. Rather, they have been perceived as commodities designed to deliver a message as inexpensively as possible to a particular audience. Media sales representatives are not typically challenged to develop new and creative means of addressing a client's specific marketing needs."
If media companies want to survive for the next 15 years they must act quickly to alter this paradigm and present a coherent future-looking vision that will appeal to both marketers and investors. They must cure themselves of their advertising addiction.
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This post originally appeared at JackMyers.com.
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