Memo

TO:                 Stephen Burke, CEO NBCUniversal

FROM:           Merin Pasternak, Digital Strategist

RE:                 The Curse of the Mogul

DATE:             April 3, 2013

________________________________________________________________________

Part One: The Mogul

All media companies are involved in the production and distribution of information and entertainment in some form or another.  In The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies, Knee, Greenwald and Seave illustrate the current roles of media moguls and how their actions can drastically shape the vast media landscape.  There are three key attributes when identifying a mogul: absolute power, mythic characteristics (that have a grain of truth and aim at protecting their personal interests), and unwavering passion for expansion.  These characteristics can often lead to poor business decisions and sometimes their demise.

In the media realm there are few large players who dominate the market share. These stents are often short lived as a result of failure to establish sustaining advantages by ignoring broad industry pressures and refusing to share the terrain with others.  Another pitfall is the “businesses that attract the greatest mogul interest seem to have the fewest competitive advantages” (58).  There is often a need for increased fixed costs to ensure a regular production of content.  For example Ted Turner’s cable empire was the source of the value that turned him into a billionaire.  These cable channels were based on the business of packaging and marketing content.

Moguls often become moguls by being extremely focused and efficient in their operations.  Once they reach the top they have a tendency to use mass amounts of information as a tool to obscure their positions.  They frequently hold the notion of conglomerates in high esteem when in reality they do not create value.

Part Two: Media Landscape

Competitive advantage is key in any industry, but for media moguls an advantage can easily become a competitor’s advantage if they are not careful.  For moguls, a major dilemma is the “sex appeal” of efficiency.  When you compare efficiency to strategy is does not seem very “cool,” and as a result companies do not focus on efficient operations.  Efficiency enables companies to extract the largest profit generated from operations of a collection of assets.

This combines operations and the company’s relationship with customers and suppliers, so “sexy or not, efficiency matters” (140).  On the other hand strategy portrays activity designed to enhance long-term value, which exclusively establishes and reinforces barriers to entry.

NBC must use its unique advantages by reinforcing competitive advantages and ensuring a peaceful existence with those companies within their industry that NBC shares advantages.

The Curse of the Mogul demonstrates that there are only four true competitive advantages: scale, customer captivity, cost and government protection.  All advantages either fall within these categories or are sham sources of competitive advantage.  Some common examples are companies having deep pockets, being a first mover, having good talent or having brand awareness.

Part Three: Unpacking Media Myths

There are numerous media myths that help facilitate bad decision-making on the part of media moguls.  It is often viewed that all growth is attractive.  This is false.  There are always costs that come with growth and the major decisions need to be based on the generated ROI.  For example, the movie industry has seen major profits from innovation, as was the case when DVD’s, home video and pay cable were introduced into the market.  Frequently, moguls pour more money into failing projects instead of paying out dividends to share holders.  This applies when trying to enter new fields that could have barriers to entry, regardless of whether or not they have expertise in the field.  Moguls “do a fine job of trumpeting their successes but an even better job of sweeping their failures under the rug” (73).

Additionally, going global and convergence are both myths that have a certain appeal, but are not always the best way of going.  There are many downfalls to globalization; one in particular is the importance of localized content.  Convergence is an easy way for competitors to enter your business.

Another myth that is constantly perpetuated to the public is the idea that “content is king.”  As previously stated all media companies, including NBC, are involved in the production of information and entertainment in some form, but content is just content.  The core business of NBC must be its ability to gracefully package content.

The substance of media companies does not necessarily make up its greatest value.  When content is packaged together it renders greater profit than pure content.  In this manner database businesses that aggregate, integrate and analyze data to best serve consumers are greatly profitable.

 

 

Part Four: Emergence of Digital

The move towards the digital space has been a new experience for media moguls.  This unchartered territory has brought along many false preconceptions of how to operate within the new online dimension.  Some moguls approach the Internet with the following notion in mind: the Internet is growing and I have digital properties, therefore the Internet will increase my growth.  Time has proven that this is not true, in fact new teams and strategies have been created in order to tackle this new interactive space.

Similarly moguls were under the impression that their incumbent competitive advantage would be transferable to digital.  In actuality, the fixed costs to launch an online business are so low that it has proven extremely difficult to achieve economies of scale online.

Lastly, it was believed that the Internet would allow media companies to continue their business at higher profitability levels.  The newspaper industry is the perfect case proving this to be false.  The Internet wiped out classifieds and made content available for free online.  If newspapers had been less reactive and more aggressive in their online efforts they might have completely altered the newspaper industry.

It is particularly important to focus on the actions of other media moguls as they make mistakes and succeed.  Throughout The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies the key identifying characteristics of moguls are qualities to be avoided.  Always be true to the nature and ideals that got you to where you are and do not get trapped following cool trends that lead to poor business decisions, as they can lead to your demise.

 

 

Sources:

Knee, J., Greenwald, B., & Seave, A. (2009). The curse of the mogul: What’s wrong with the world’s leading media companies. New York, NY: Penguin Group.