There have been very successful endeavors in our industry over the past 10 years including National CineMedia, Captivate, Focus Media, the Wal-Mart Smart Network and networks that have been installed for years such as Target, Verizon Wireless and Best Buy.
Most good news is shared only by those responsible. Bad news is shared by everyone. Speculation is easy, and bad news is always the biggest target. Walmart is the perfect example. When they do something good, they talk about it. When they do something bad, everyone else talks about it.
Three of the larger business setbacks in our industry revolve around Technicolor/PRN, CBS/SignStorey, and Wireless Ronin and its IPO. The trouble is that these are three of the largest business deals concerning our industry, and they are three of the biggest business disappointments. For reasons both public and private, these did not work, and millions of dollars in value was tossed to the curb.
Instead of writing about what went wrong, I want to focus on what we can learn from this, specifically CBS and Technicolor.
Last Tuesday night, I watched Charlie Rose, and I learned.
Charlie interviewed Jonathan Nelson, the CEO and Founder of Providence Equity Partners, a $22 billion firm that invests in media companies around the world, including heavyweights like Hulu.com, Kabel Deutschland (Germany’s largest broadband service provider), and the Yankees Entertainment and Sports Network – George Steinbrenner’s media outlet.
Jonathan Nelson. Smart man. Very smart man.
Mr. Nelson is well known for avoiding the limelight and publicity in all its forms. In light of CBS’s troubles with Outernet and Technicolor’s management of PRN, Mr. Nelson’s appearance was ideal.
Mr. Nelson described some of his philosophies with the media business. They stem from his history of working in China. His firm recently invested in Baidu, the ‘Google’ of China. Baidu is huge over there, really huge, owning around 75% of the market. Charlie mentioned that Google had recently backed out of China and asked Mr. Nelson what he knew that Google didn’t. Without hesitation, Mr. Nelson said, “Patience,” explaining that one of the big lessons he learned while working in China was the virtue of Patience. This theme of patience runs through the interview, providing the foundation for his business practices. What is amazingly ironic is that he invests in companies that move and grow (and sometimes explode) at the speed of light. Yet he continues to build incredible wealth with smart investments and partnerships.
When Mr. Nelson began to talk about his investment in Hulu.com as an aggregator of content for multiple content providers, Charlie asked him why these content providers don’t simply create their own portals for their own content. Mr. Nelson believes that Hulu.com can provide a higher probability of success because of what he had observed in traditional media companies:
“What we have observed is that when traditional media companies try to do what Hulu is doing, in other words breaking the old model, when they try to do it in-house, generally it doesn’t work. It doesn’t work for a number of reasons. It doesn’t work because they usually promote someone on the traditional media side to run it. The silos that are embedded in those organizations. . .generally. . .it is viewed as not something they want to help. In fact it hurts them. Its success comes out of their old model. And you don’t get the best talent because, what entrepreneur is going to join General Electric? Great company, but not really the place to spawn new companies.”
Mr. Nelson continues:
[Talking about Jason Kilar, the CEO of Hulu.com] “He didn’t come from media. He came from online, from amazon.com. He understood online rather than media. It’s less important, in fact it may even be an advantage, not to come from the world of television but to come from online retail, and understand what does it mean to deliver an acceptable customer experience.”
He is saying that new media models clash with the old media conglomerates, and that the cultural clash leads to the death of entrepreneurship when these conglomerates try to do it themselves, either by taking it on as a new silo, or hiring outside people to do it. Ultimately, that results in the demise of the new media company itself.
Looking at the Technicolor (nee Thompson)/PRN and CBS/SignStorey models, you see two old and rich companies (Thompson was founded in 1893, CBS 1941) taking on new ventures for entry into a new market. Within a few years, you see their acquisitions floundering.
So what can we learn from this? I believe we can learn a couple of things that are crucial for our industry:
First, we can learn that entrepreneurship is still alive and kicking, and must continue for the industry as a whole to grow. Companies will be bought and sold, and some will make or lose millions. But the entrepreneurial spirit of competitive greatness will continue to drive the growth. The digital out-of-home industry, in all sectors, feels a bit like the wild west. I don’t have a big problem with that. It’s what’s keeping all of us on our toes.
Second, and perhaps most importantly, is that large conglomerates are in this industry now, and will continue to build market share. What we can hope from them is that when they do acquire new media companies, that they foster the growth that made that particular company so attractive in the first place, or that if they hire away these passionate leaders, that they will loosen the reins on the old business models and enable these leaders to continue to drive not only the growth of the big companies, but the growth of the industry as well. Google made big news last week with their introduction of Google TV. Their history of fostering creativity and entrepreneurship can be directly related to their growth. Take this article on Yahoo! Finance from the 18th, in which we learn that the most compelling competency that CEO’s look for in their people is creativity. You can easily note that creativity is a key component of entrepreneurship.
Toward the end of the interview, Mr. Nelson explains part of his firm’s criteria for investing in media companies:
“Our track record. . .it’s good because we back the right people. I don’t know much, but the people we back do.”
Notice he didn’t say “companies.”
How’s that for 22 billion dollars in growth?
You can find Mr. Nelson’s interview on charlierose.com. I highly recommend you watch it.
