Via Digitalis*

Discussed: whats is a “media mogul, competitive advantages and/or barriers to entry, business models, fallacies

“Scale, customer captivity, cost and government protection.” According to Knee and his co-authors, those are the four fundamental ingredients necessary to maintain a competitive advantage in any industry. That includes the media. The “curse” they refer to in the title of their book “The Curse of the Mogul” is the top-guns’ media people’ blindness to this basic economic axiom. For the authors, the moguls are  guilty of having mistakenly believed that the growth of the net for instance would automatically mean additional revenues and compensate for the losses of revenues incurred on the traditional side of their business. Quite obviously, you might be forgiven, as a print-press mogul, to have initially believed that the Internet offers vast opportunities in the form of expanding markets and above all in declining distribution costs. But it has often proved to be a mirage, and a very costly one at that. The “curse”. If the press and the media are in such dire financial straits today,  the authors convincingly argue, it is because their  shortsightedness was made even more severe by their arrogance and their irrational and risky behavior. Think of the billions invested in phony ventures and inoperable “synergies”. Think, as an example familiar in Europe of Jean-Marie Messier who, besides his megalomania, could honestly pretend and convince his investors that it was the business of a utility company to expand into media!

The picture is not pretty and the authors find no extenuating circumstances for the “bad moguls” they portray in their book. They also talk about some brilliant ones, Michael Bloomberg for one, who before being elected Mayor of New York built an empire in the financial information sector by being a savvy businessman, i.e a by understanding  how competitive advantages are built. This is what Warren Buffet calls “constantly digging a moat around your business”.

So, yes the picture is bleak, we have ample evidence to prove it. Yet the author do not conclude that “old-media” is doomed. Incidentally,  they correctly argue that the distinction between “old” and “new” should be forever forgotten and be replaced by the question of knowing if , as a business,  you are capable of digging the moat. The challenge is tall in the digital ecosystem as the net primary impact on businesses has been to dramatically lowering barriers to entry and where “customer captivity” might actually be more important than ” deep pockets ” But on the other end , never ever have we consumed more media than today. May the best moat digger win!