Monday, May 11, 2009

Media biz: dead or alive??

The media business is ' on the roof '......yes or no ?

We have a running story in our family, derived from a joke about a man named Al, cat-sitting for his best friend at the friend's mother's house.  The cat accidentally falls off the roof of the house and dies while his friend is away, the friend is very upset, especially over the abrupt way Al broke the news to him on the phone, etc etc, and the very long joke ends with the punchline about Al telling his friend that the mother is 'on the roof' as a kinder, gentler way to let his best friend know that mom, sadly, is no longer of this world.

Every time I return to NY after a long trip away, I always call my parents to let them know I am home safe and, inevitably, one or both let me know that no one was 'on the roof' while I was gone.  Ha ha.

OK, so now I am trying to make a living day to day in an industry that all the experts claim is 'on the roof' and, on many a bad day reading media trade press, I feel as though I'd rather be having root canal than spending one more hour as a media management consultant.

And yet.  And yet......the news of our demise may be premature.....

The same folks who brought us the Catastrophe in the financial sector have run the media business into the ground through inappropriate use of debt.  Sam Zell put 4% down to buy the Chicago Tribune company and borrowed $8 billion.  Lo and behold, when the ad market went south, his diamond turned back into a lump of coal.   This sequence has been repeated endlessly throughout the media business, and not just with newspapers.

Yes, yes, the prevailing media business models out there are creaky, some are cracked, and others are shattered beyond repair.  Yet, interestingly, when you look at some of the underlying operating margins of these properties, they're not all bad.  The financial costs of ownership often strangle otherwise sound and profitable brands.  

A great time to buy media properties for those with strong stomachs, patience, and ingenuity.  Know anyone like that?

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