This year's Nobel Prize in Economics, awarded to a trio of academicians for their work in "mechanism design theory," has everything to do with the way media-related businesses must reinvent themselves and their financial models for the digital age. Those include the redefining and re-pricing of advertising; content and services from static to interactive digital platforms; and recalculating the value of advertiser connections to potential online consumers.
Getting the double whammy--from Wall Street and Main Street--is inflicting some notable pain on Comcast, the country's largest cable operator, at a time when the entire industry is under scrutiny. In many ways, the Comcast Must Die campaign and blog launched online earlier this month by Advertising Age columnist Bob Garfield gives exceptional prominence to the grassroots frustration with cable in general, and Comcast in particular.
Time Warner and Yahoo may represent different ends of media's diverse spectrum, but a similar faltering and folly has brought them to the same place--determining whether their assets and shareholders are better served by a breakup.
The Internet is a black hole of grassroots creativity and intellectual spark as well as insipid repetition and idiocy. Fertile bastions of out-of-the-box thinking can give way to the banal in a click. You can blow a fortune or blow your mind without ever leaving your keyboard or keypad.
Many Wall Street analysts are lowering earnings expectations for CBS Corp. as they anticipate the worst for the advertising-dependent, pure-play broadcaster being squeezed by shaky program ratings and a soft advertising market. But those warnings may not go far enough.
Even as the Bogeyman occasionally skulks about on Wall Street, defiant forces are spurring media and related Internet deals into 2008, defined by some new rules and expectations.
Local television stations are sitting on prime digital real estate at a time when consumers cherry-pick content, marketing and information according to their personal tastes and locale. Yet, broadcasters are struggling to shift their grassroots gold to the Internet. Their future depends on it.
Facebook's independent developers' forum--an unprecedented call for innovation transformed into a capitalistic free-for-all--will have wide-ranging universal impact. While Facebook and the more successful developers are the immediate beneficiaries, all companies and consumers are winners.
If the networks are serious about generating at least one dollar of new media revenue to replace every dollar of conventional advertising lost, they had best throw their money and energy behind measurement systems that certify reach on all platforms.
It is not clear that more value will accrue by breaking up traditional media conglomerates than there was in assembling their disparate assets in the name of synergy. For many traditional media companies, synergy and integration were better ideas on paper, with News Corp. a rare exception. While vertical rollup acquisitions will continue, the driving incentive is to simplify traditional media companies so they can concentrate on core competencies and support services. Call it limited-liability M&A.