Recently much has been said about the demise of the newspaper. New media like Yahoo!, Google, etc. is triumphing old media in US and other Western markets. In contrast, the old media is thriving in BRIC countries. Newspaper circulation is up in both India and China and advertising revenues are booming. Just for fun, let’s say you are Warren Buffet (WB). So you own Buffalo News in New York and a lot of Washington Post (WP). What do you make of all these industry changes? What are you going to do?
Sitting tight doesn’t make sense. WB realizes that. Here is what he wrote in his annual letter to shareholders recently…
Almost all newspaper owners realize that they are constantly losing ground in the battle of eyeballs. If cable and satellite broadcasting, as well as the Internet, had come along first, newspapers as we know them probably would never have existed.
So, I guess, its safe to say that doubling down on the existing investment is certainly out. After all, this is not a matter of horizontal consolidation. The enemy is the new media.
What are the options then? I can think of four.
One option is transform WP to new media. Basically this involves becoming, as Rupert Murdoch says in his famous speech, a “digital immigrant”. This is possible but you need a terrific transformation leader like Lou Gerstner. These guys are hard to find.
The second option is to stay in old media but take a newspaper like WP global. Of course, this is not a simple matter of taking the brand global. You have to be multi-local in this business. This is not easy but can be done. Murdoch’s newspaper empire is testament to that. But then even his newspaper empire is basically in three countries (Australia, UK and US0 and publishes only in English.
The third option is abandon idea of transforming old media in US. Why not pick up old media that has a future. Why not buy Deccan Chronicle Holdings in India; it was up by 81% last year. Or HT Media, or even Jagran Prakashan. They are all doing well. There are similar options in China too.
The fourth option is to abandon old media altogether. Why not pick up new media stocks? What’s stopping WB from becoming the largest shareholder in Yahoo! like he is in WP? Intriguing proposition but its unlikely to happen. Why? Because Yahoo! market cap is near $40b while WP is only $8b. Hmm… maybe WB can buy StarTV or TV18 – these are examples of great “new media” picks in India.
What’s your guess that WB will do? I would imagine that options one and two are out. Both options three and four are bets on entrepreneurs – stuff that WB is comfortable with. But he is also prone to stick to the knitting. That gives option three an edge. That’s what I would vote for. So the conclusion could be that Warren Buffet is coming to town!
Now if only there was a way to find what he really thinks!
[Disclosure: I have no inside knowledge. This is purely speculative. Consume it at your own risk.]
All lawyers are taught at some point to not get tricked into picking one choice when confronted with a multiple choice question. So I pick option: None of the above. Warren Buffett’s record strongly suggests that he is unlikely to make or even suggest any changes in how Washington Post is run. This doesnt mean Washington Post may not change its strategy but Warren is not the catalyst. He probably bought Washington Post because its undervalued; in a business he understands; the fundamentals over the long term look good.
Remember, this man missed Microsoft, Oracle, Google, Yahoo!, eBay, Medimmune, BioGen… oh the list is long. He is a genius by choosing to focus on his core skill- patience and keen eye for underpriced solid companies in industries where winners are easy to predict.
Since one of our focus areas is print and publishing, I have been tracking this market for sometime. Pretty much the media industry has to tansform (which industry is not) and adapt to the changing world, usage patterns etc.. The issue can be split into content, delivery mechanism, and context/personalization.
Traditional media had one major problem: Content and “product” were indivisible & locked to physical enstantiation (They owned and “controlled” the entire chain) and were the gatekeepers to content.
In the 90’s everyone was obsessed with disintermediation &
the digital age brought in copies of physical products.
The current models emerging seem to have user generated content in one extreme and “editor” driven content on the other, and mix of the two. The new media caters predominatly to the youth whereas the traditional media to the Gen X’s. As Anshu mentioned no one knows what model works and therefore will hedge their bets across all formats/distribution models to increase inventory turns on their “core assets” and distribute them traditionally as well as new forms such as Podcasts, RSS feeds etc..
Bottom line is that those who transform to take advantage of technology and deliver to customers what they want (which will be different person to person based on culture, geography, age, technology exposure/availability etc.). While its a huge problem that traditional media are facing, it is time to look global and transform themselves to take on this as an opportunity.
I would say a really positive blog in favor of new media. Even though no body doubts the great feature and future of the new media in countries including India and china, to replace or even to give a commendable challenge to television and print companies need to invest in content creators and good editorial people. We are yet to see a smart editorial candidate like Ayaz Memon in sports or a talented Editor in chief to join a Yahoo, Indiatimes or a Google. We see very average talent in this area especially in India. Either the top management is myopic or they don’t have the right strategies in place. What one should be looking forward is for great talent in online and many breaking news happening in the new age medium. Unless until that is met you will not see any threat from the new media and the traditional media will thrive and our WB will burn his hands for the first time in India.
All the 4 options suggested by Sharad kind-of indicate that old media and new media are mutally exclusive something that I am not sure is really true, be it in the advanced countries (used merely to indicate countries where computer/internet penetration is very good) or in advancing countries (like India and China). It is true that even today most of us who get most of our news from the internet/television still subscribe to a news paper (old habbits die hard !!). This is also true amongst the population in the “underground” / the “tube” or the “metro”. I think there is enough scope for both old and new media with decent amount of investments required in both to stay at the top. There is a need to re-invent continuously for both.
Both old and new media cater to different segments (not necessarily different group of people, because the same individual will have interest in both print and digital media) and there is scope in both. The need is to actually innovate and be the first to come up with something new and cool and more importantly something that actually delivers (like google did with search engines).
Best option for WB or RM is not to put all eggs in a single basket.