Author: rick

Content is King; People will Pay Anything for Their Entertainment

I tell my classes in media topics that “people will pay anything for their entertainment.”  Today we get yet one more proof of that.  Apple, a company famous for mostly hardware and a good place to buy music, is going to invest $1 Billion in new content in 2018.  Wow! The entertainment business is big, but that is still a lot of money.  For example, ALL of Broadway grossed approximately $1.5 Billion last year.  this is a huge number and shows the continuing shift from “appointment media” such as networks toward “me media” or on-demand consumption.  Here a company that is good at making harware or selling songs is venturing into content much as other recent neophytes including the “bookseller” Amazon and the “video rental store,” Netflix.

Yet these non-traditional media venues are having terrific success creating media and getting the public to consume and rave about their shows; just check the number of Emmy nominations they are receiving.  Why?  Well from their side, the intellectual property is a gold mine with enduring value.  You can only sell a computer once, but you can play a show over and over again for many years.  What is not to like about that revenue model?  And on the quality side, media has always been a “gig economy” where people come together for a project then disband and go onto their next project.  So there are few institutional barriers to working on a gig for Apple, Amazon, or Netflix, and it is always another employment opportunity in a business famous for not having enough.  The tide has turned, the number of opportunities is rising, and there is no downside to working for a non-traditional media company.

 

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The Twitter Campaign

It seems like this campaign surprised everyone.  No, not the vote counts, which did indeed surprise everyone including the best forecasters, pollsters, and data crunchers.  No, I mean the Twitter campaign.

The Twitter campaign – which meant the use of Twitter by the candidates, and although one was particularly known for his tweets, they all used it as a means of directly addressing the public.  It is something that those of us in academe have been teaching for years and years – ever since the first Myspace and Friendster apps, we have been talking to our students that the “old media” would be replaced by the “new media” of the social media, and that social media is now most often called Twitter, Facebook, Instagram, etc.

We have been talking about it for 10 years.  And the new media have been growing and developing for the last ten years. So the tipping point was inevitable and now we have it.  New media can be even more effective than old media.   A media needs a certain network reach to be effective as a “mass media”.  Talking to one or two or thirty people is not enough; talking to millions makes a difference.

So what do the numbers show?  As of this day in January 2017, Twitter itself tells us that Hillary Clinton has 11.9 million followers, Bill Clinton has 6.6 Million, and Barack Obama has 80 million.  That is reach.  That is a lot of people. Those numbers, while world-wide numbers and not just the US, show a tremendous possible impact every time one of those Tweets leaves the gate.  And how about the winner of the presidential election? Donald Trump got to spend spent a fraction of the money that Hillary Clinton did on the election by using his Tweets to his 18.7 million followers. And a Twitter campaign can have many instances of contact, many tweets, on any day.  Since they are free, there is no danger of a campaign running out of money for ads.

How does that compare to the more established media? Nielsen tells us that in the last week in November, the NBC Nightly Newscast reached 7.8 million.  Donald Trump Tweets and it reaches over 18 million.  And CNN? Less than a million viewers.  MSNBC?  Same thing – less than a million viewers.  What about Fox News? A bit better at 2.4 million viewers.  Thus social media now has it all over traditional media.  And if you listen to the journalists, they are mad.  They have complained that they are not included as closely with the administration.  Why would a president waste time with people he does not need anymore?  The social media are more effective, are faster, and are more direct and unfiltered.

Some might argue that there is a need for “transparency” or “access.” Why?  Because some journalist thinks so?  Presidents have often wanted to go straight to the people. What benefit do the journalists add to a president’s life?  Once upon a time, they were the conduit to the people; now they add nothing.  Nothing added – and they ask annoying questions.  Journalists used to be the only way that politicians could communicate with the public in a “mass,” therefore the rise of the symbiotic relationship with the mass media.  Now the communication with the public is direct and a politician does not have to worry about the spin a journalist puts on the story, or even a difficult follow-up question.  Journalism is now going to have to re-invent itself.  In the age of new media, people who add little or no value to the communication are unnecessary.  We have been telling people that for the last 10 years. Technology disruption in media has happened many times – anyone still get a newspaper delivered to their front door anymore?

What happens to your internet security when your fingerprints are stolen?

There is recent news that the US government last 5.6 million fingerprints to unknown people in a cyber-attack. While it is worrisome, I don’t blame the government, it seems like it can happen to anyone.  For example, pretty much every store and business cannot keep our credit cards safe.  If we take it as a given that if something is stored on a network, eventually it will fall into the hands of people not authorized to have it, then it is OK to worry about the significant loss of data, and in this case, not credit card data, but rather fingerprint data.

We have been told that passwords are inherently unsafe because they can be hacked or stolen.  And because passwords are unsafe, we need a new “safe” method of authenticating to the network – and the “safest” way is through biometric data like fingerprints.  So this brings me to my question – at least a password can be changed at the sign of hacking.  Fingerprints cannot be changed.  What are we supposed to do when the “bad guys” get a copy of our fingerprints like has just happened for 5.6 million people?  It is something I am thinking about in the realm of public policy.  Please leave a comment if you have an idea.

The Most Interesting Thing About the Fall Elections – 2014

The buzz all around the media is of course how the Republicans won big in the Fall (2014) elections.  Political parties ebb and flow, political fortunes rise and fall.  So I don’t think that was the most interesting result of the Fall elections.  Perhaps some others might think it is the change in attitudes and laws regarding drugs?  Nope, not that either. Of course social morals change over time.  What then?  I think the most important and interesting thing that happened is that Americans learned how to control their employment contract.  They learned that it is possible to give themselves a raise.

The minimum wage used to be the sacrosanct possession of the federal government.  Sure a couple of high-cost states like New York might enact a bit of a larger minimum wage, but for the most part, the minimum wage was driven by the federal government, with the federal minimum wage hikes usually dragging up most states’ minimum wage.  But the federal government has been taking its time.  The last federal minimum wage hike was enacted in 2007 after being stagnant for ten years.  The last of the three increases enacted then went into effect in 2009, five years ago.  After much discussion about new concepts like a “living wage” in urban areas, fifteen of our fifty states approved minimum wage increases in 2014, either by ballot or by legislation, and a sixteenth had an advisory vote in favor of raising their minimum wage.  Sixteen of the fifty sates is 32% of the country taking action on the minimum wage in 2014.

So America has learned how to control its work contract.  Sure many people have put forth for a lot of years that increasing the minimum wage costs jobs, but the research and actual data has shown that modest increases in the minimum wage has no significant effect on employment.  So the “fear factor” around raising the minimum wage has been drained from the system.  And it appears as if Americans are tired of stagnant wages and are willing to take action.  It is easier to get a state to vote for a change than it is to get a national change, so economic activists are taking the state route.  And with the current gridlock in Washington, it appears to be the most effective route.

Could this movement grow? Why, of course.  Suppose a state decides to increase wages even more, is it OK? Yes.  Suppose they decide to make it more difficult to fire an employee, OK?  Yes, in many circumstances.  Suppose a state decides to limit pay to executives, is that OK too? A bit harder to do, but there might be ways to enact that too.  So the danger of stagnant wages is the vote.  Americans who think that wages have been too low for too long have acted through the political process.

I think that is the political lesson of 2014.  I don’t know whether I agree or disagree with the trend, I am just an observer; but since I think this was the most interesting political development of 2014, I look forward to seeing how this develops in the future.

 

 

7 Things a Start-up Business Can Learn from the Shark Tank Television Show

The ABC television show Shark Tank is a show about entrepreneurs – about budding business people looking for a hand up in developing their business.  The participants who are entrepreneurs of a start-up company, appear before a panel known as the “sharks,” composed of successful business people who have money to invest.  The sharks are well-known millionaires and at least one billionaire who receive a pitch from the participants for an investment in their business.  The hopeful participants/entrepreneurs ask for an amount of money that varies from around $30,000 to well into six figures for a “percentage of their company.” The typical ask would be for “$150,000 for 10 percent of my company,” that the participant would propose would help to move their company along by enabling them to buy a new machine for production, buy inventory, or other make another important business development.

The sharks ask questions, perhaps even grill the participants, to figure out the viability and prospects for the business.  There are five sharks, each with interesting and unique perspectives and during the pitch it is clear that the sharks also offer business advice.  The contestants hope for at least one shark to be interested and the producers seem to show perhaps more failing proposals than successful ones, but the successful proposals and the discussions between the contestants and the sharks yield a wealth business advice.

The show is now in its fifth season and I think I have watched almost all 77 episodes.  Each episode has a blend of good pitch ideas and bad ideas, of sure things and nutty participants.  After watching carefully for this long, I have taken away seven important business principals that apply in the circumstances that these start-ups are in:

You need to know your numbers cold.  If you do not know your cost-of-goods-sold, your cumulative revenue, your recent revenue trends, your profit margins on each sale, etc. you have no business being in business and the sharks will find a way of telling you that.

          If you have a physical product – intellectual property protection is key.  If you have a physical product, you are much more likely to receive an investment if there is some aspect that is protectable by a patent or copyright, etc.  Even a trade secret like a secret recipe will work.

      The sharks know a lot about manufacturing and distribution chains and they are very practical.  If your idea is not patentable or protectable, they will ask what you think will keep someone from producing the same thing cheaper.  If you cannot come up with a reason that others cannot copy your idea, you are much less likely to get an investment.

      Your markup needs to be enough to interest the investors.  If you are making something for $1 dollar, you need to be able to sell it for $3 dollars.  This is a rough generalization, but profit margins that are too small don’t interest investors.  From watching a lot of episodes, my guess is that a 3 times markup is good, but of course it does not necessarily apply in all cases.  But a lot of the products pitched retail in the under-$100 category and in that price range there needs to be wiggle room.

The markup is not all for the entrepreneur and the shark, but rather because many products also need a distributor and the distributor will need some profit too.  Note that in the real world, there are many products that don’t have 300% markups – automobiles, computers, etc. might have a markup of 25%, 40%, 60% etc.  But if you are pitching an investor, you need to know how everyone in the distribution chain can make some money.  This also means you need to be thinking about what the ultimate distribution chains might be.  It is one thing to sell a few items online where you can have small margins, but it is another to place a product in a national distribution chain where distributors will want a markup, the retailers will want a markup, and you will also want to make a profit.

      Be bold and decisive.  You have come to sell a part of your company.  Deal with the emotions of what that means and what you will be parting with before you see potential investors.  The sharks have their pens and paper pads and are making calculations.  Cold, hard calculations using the facts you give them.  They make offers based on those facts.  Whether you are getting a good deal is only a case of mathematics at this point.  Leave your emotions and attachment to your company behind, don’t vacillate or waffle.  Yes, sometimes they offer a bad deal, and sometimes the contestants negotiate for a better deal, but that is all based upon the math and the perceived value.  Whether in the shark tank or in real life, in the heat of the deal, the shark tank teaches us to rely on the facts and use the data to your advantage.

          You need to be personally “all in.”  If you are going to be taking someone else’s money, they want to know you are committed.  It often becomes apparent that an entrepreneur is doing this as a side business.  They have a day job and are not fully committed to the business.  It never takes the sharks too long to figure that out.  And those that are not fully committed are unlikely to get a deal.  Some will, especially if the shark can just buy an idea outright or figure out a way that the person pitching is no longer key to the deal, but overall, investors want to see commitment.  This is true in anything in life.  If you are going to do something, do it with excellence and true commitment.

          Sales are the most important thing you can have in business.  Investors might not care about whether you are profitable yet, but they do care about sales.  A business that seems to have a “good idea” but very few sales do not seem to get much attention from the sharks.  Even if the company is losing money overall, sales mean that people are interested in your product.  Sales are what the sharks are looking for.  That also means that it is unwise to look for much external money until you have a track record.  Sure there are some VC firms that want to invest in ideas alone and sure a person can always get their friends and relatives to invest in the early idea phase, but it becomes quite clear that it is easier to attract money if there is at lease some “smoke” whether or not there is yet some “fire.”

          Some businesses are good for an individual, but just won’t attract investors.  Certain businesses work for the individual entrepreneur but don’t really scale in a way that it makes sense for outside investors.  An entrepreneur should not be afraid of these businesses, but rather should just realize the limitations.  Businesses that relay on an individual (say personal training) or that are good but unprotectable ideas can work on a modest scale but are very difficult to roll out on a large-scale basis.

The Shark Tank can be full of lessons, and this is my reading of some things I have taken away from the show.  But of course they do a lot for drama and for the good of the show that might not be good universal business truths, but watching the show can result in some interesting perspectives.  This show is clearly more “drama” than “how-to,” but there are reports that the investments resulting from the show have exceeded $20 million, so somewhere real-life intersects with this drama.

Late Night – Again

If you look at the blog posts below, you will see that this blog started about the time that Jay Leno and Conan O’Brien were battling it out for the Tonight Show several years ago. Today we are on the doorstep of the next transition in the Tonight Show – Jimmy Fallon will take over as host shortly after the 2014 Sochi Olympics in a few weeks. I look back on the prior posts, and I was pretty much right on. Jay needed to move on, and that is proven once again in the decision by NBC to install Jimmy Fallon as host, and late night will change again. This time, though, there seems to be less animosity than the last time. And I think NBC is making a smart move with a new host who is loaded with talent.

Jay has not been doing bad since his return. In fact, the one point I was not correct on is that Jay did return to dominate late night. He won every week’s rating’s since he returned. But I was correct on all of the rest including the fractured audience, the heavy competition from other talented people, and I think my compliments of Fallon as a rising star. The competition now includes Arsenio Hall who was a trend-setting talent the last time he was in late night. And Fallon’s talent has been demonstrated by his outstanding work on Late Night. His range of talents, his active participation in songs, skits, and comedy bits makes him a force. He has had huge success with his friendships with Justin Timberlake, Stephen Colbert, and others who have come on his show multiple times and performed in duets, both vocal and comedic, with Fallon. Fallon himself has been no stranger to ratings success – winning many weeks of the ratings competition in his timeslot.

Fallon will move the Tonight Show from the west coast back to NYC. That should be a refreshing and interesting development. I don’t know how long that will last, after all our friend David Letterman has been controlling the television traffic on Broadway quite capably for years now. But it is an interesting development and a wonderful idea. The Tonight Show started in New York and returning to its roots will add some spice to the new show. I remember when I started working at NBC years ago one of the first places they took me to see was the “Tonight Show” mockup set that they would take the tours to see in 30 Rock; even though the show had moved to the west coast, the folks in NYC still had love for the program.

Jay and his consistent, funny, and relevant monologues have entertained me for decades (wow, has it been that long?), but I am ready for something new. Welcome Jimmy Fallon! #FallonTonightShow

More Attempts to Regulate Google

It has been a while since I posted last. And my last writing was some thoughts about whether there would be attempts to regulate Google in a way that is more traditional for media. I was struck today by a column today reporting that the EU was asked to regulate Google like other communication utilities. “Rivals: Google should be regulated like telcos and electricity companies”

This is a short distance from the rest of media regulation. “Electricity” regulation actually provided the public interest standard that was incorporated into communication law early in the last century. And after the Telecom Act of 1996, telcos have been acknowledged to have some first amendment rights, depending on their activities. What about Google? It is certainly a first amendment speaker. Regulating Google can stifle one of the greatest innovation engines in recent memory.