Content is no longer King. Distribution isn't King either. Creativity, Community, Relationships, Search, Technology Platforms… all contenders but they have all been dethroned by financial, investment and procurement decision-makers who are undermining the economic foundation of our business. Money is King and in an increasingly troubled economy this Emperor has no clothes.
Decisions impacting the long-term health and vitality of the media and advertising business are being impacted by executives who have little at stake beyond short-term financial goals. At the most critical juncture in the history of the advertising business, decisions are being dictated by financially-motivated Emperors who care little about their subjects. They care little about the long-term health of media or the marketers who depend on media for their success. They do not share the passion for this business that has been the hallmark of generations of industry leaders.
Jeff Jarvis argues, "in this new age, you don't want to own the content or the pipe that delivers it." He adds, "It just doesn't pay to own the [media] assets anymore. Oh, yes, you can still milk cash from them. But can you get growth?"
The answer is Yes, We Can if we develop and support new business models that sustain the value of content and the power of the pipeline and if we reject the notion that the primary value of content and distribution ownership is milking short-term cash flow.
I've argued in past commentaries that Relationships are King, and even wrote a book about and own the trademark for "The Relationship Age."®. It's distressing that even as technology is empowering and powering relationships, it is synchronously destroying their meaning and value. Brand trust is a disappearing myth built on eroding pillars and aging attributes. In our current economy, corporate equity is only as good as next quarter's financial performance. The recent stock performance of GE proves the point.
And look-alike generics dominate retailers' shelves. Product brand equity has marginal value in a technology-driven market economy that consistently upgrades product quality while progressively driving down prices. Brand equity is dependent almost exclusively on marketing. And if we can all agree on one reality, it is that marketing is in deep, deep trouble.
Creating and sustaining differentiated and relevant long-term brand equity value through effective marketing is our industry's most important priority. It is the key to retaining the value of media content and media assets.
The average chief marketing officer for Fortune 500 companies is in his/her position for an average of only 22 months. During that short tenure, it is virtually impossible to accomplish much more than retain the status quo. "Change agents" within corporations have an even shorter life span and rarely gain the support of their colleagues. Those few companies that are touted for "turning the battleship," and that win advertising industry awards and front page trade magazine articles, often do little more than engage in costly experimentation and headline generating spin. Except at a handful of companies, fundamental business models impacting marketing, advertising and media remain relatively unchallenged and unchanged.
Marketing executives are increasingly confused by the eroding foundations of the traditional media industry, the myriad fragmenting options that present themselves as opportunities, and the confrontational competition for marketing dollars among media companies and categories. "Call on the clients" is the industry mantra but the proliferation of well-meant ideas is translating into just one more commodity, with each new opportunity and idea, no matter how powerful, subjected eventually to a low-cost-provider decision overseen by a procurement officer. This trend shifts the focus from content to networked content; from brand relevance to generic brands; from media value to media commoditization.
Nick Brien, Worldwide CEO of Interpublic Group's Universal-McCann agency, notes the irony. "The conundrum the industry faces is clients are saying there is no greater way than media innovation to demonstrate value [in a new business pitch], but then their procurement people stage a reverse auction media buy for the finalists to determine a winner." In an interview with JackMyers Media Business Report, Brien added, "Today, business models are based on efficiencies and business processes. All elements of the value chain - from beginning to end -- have to be reevaluated."
Technology advances efficiency measures and processes, but it does not axiomatically deliver greater effectiveness or long-term value.
Brien also points out "smart people get it conceptually. The practical elements of success are the real challenge." I'm continually impressed by those few executives who not only get it conceptually, but who inspire corporate creativity and the introduction of new business models. Apple's Steve Jobs stands out; Jack Griffin has created a new business culture at Meredith Publishing; Disney's Bob Iger fundamentally altered television network DNA when he agreed to distribute primetime content via the iPod; and there are others. Passionate, inspired and inspirational leaders need to retake control of the advertising, media and entertainment industry and impose a new philosophy built around a long-term view of their business, realistic measurable growth, and renewable relationships that shift the focus away from traditional media-as-commodity markets and focus instead on long-term brand equity building.
Just as commitments to the environment require long-term focus on renewable energy and fundamental changes in behavior, the media and marketing world require a longer-term perspective and new business models. Growth in a stagnant economy will require commitments to deep, meaningful and renewable relationships. Innovative marketing strategies built around media content and distributed via platforms that are relevant to their audiences can reverse the notion that a marketer's brand value is being diminished by search engines. Inspired management with the runway to introduce new business models can demonstrate that reduced media company revenues do not necessarily mean reduced profits. (I recently read that railroad company stocks are outperforming the S&P 500.) Traditional media should not be dismissed simply because technology is empowering new cheaper connections to consumers.
Shareholders, equity-owners, and VCs should embrace an ROI model that values long-term commitments, brand equity, and innovation. There is an inherent danger when investors base success exclusively on 1) quarterly returns; 2) cost cutting tactics and a quick re-sale; or 3) a risk management model that demands a 10 to 20 time multiple on investments within a three-to-five year window.
As the economy continues its downward slide, pressures for short-term financial returns will intensify. Investors will demand cost-cutting. VCs will seek exits from underperforming assets. There is a danger that investors will suck media companies dry and then release them as if they are corporate pollutants for others to clean up. As competition and pressures mount for advertising and media-dependent companies, there are only two solutions - to further commoditize and be the low-cost provider or shift to a longer-term perspective that builds brand equity and relationships designed to generate profits when the economy and business rebound in 2011 and beyond.
To communicate with or to be contacted by the executives and/or companies mentioned in this column, link to the JackMyers Connection Hotline.