Media companies are struggling in the age of the Internet, and it’s exposing the myth of the “Mogul,” says Jonathan Knee, co-author of “The Curse of The Mogul: What’s Wrong With the World’s Leading Media Companies.”
From 1995 to 2005, the stocks of Disney (DIS), Viacom (VIA), Time Warner (TWX), and News Corp. (NWS) were up 2.5%, while the S&P rose by 9%.
The value of over 100 digital deals made since 2000 by Sony, Time Warner, NBC, Disney, Viacom and the News Corp., is down to nothing now. In total, big media companies have written down over $200 billion in value in the past nine years.
Knee tells David Carr of the Times media moguls have the wrong business model for growth. Says Knee, “The four pillars of media conventional wisdom have not changed: First, growth at all costs; second, content is king; third, the answer to all problems is to expand globally; and finally, that by embracing convergence and the Internet, they will be able to solve all their problems.”
Moguls like Rupert Murdoch, Jeff Bewkes, or Peter Chernin get frustrated with the limitations of their own business. They go looking for hot acquisitions to boost their margins and inflate their egos, but often have no idea what they’re doing. From AOL’s merger with Time Warner to News Corp.’s purchase of MySpace, media companies have been trying and failing to integrate new digital properties for over a decade now.
The good news for shareholders: While many of the media CEOs are still flailing around trying to figure out how to deal with the Internet, they’re learning from their mistakes. The fact that Jeff Bewkes is breaking up the AOL-Time Warner business, spinning out AOL, and possibly selling off the magazines is a positive sign.
Read David Carr’s piece >