Tuesday, March 22, 2011

Media Monguls and Respectability Do Not Go Together.

Media companies represent a large chunk of the global economy and a big piece of the world's stock market capitalization.  Unless you consider Apple a media company, the only one to make the list of the top 100 most respected companies by professional investors was Walt Disney, which went from #20 to #12.

Read the story in Barron's:

Most Respected Companies 2/12/2011 3:03:01 AM

Barron's presents its annual ranking of the most respected companies in the video below. Apple comes in first for the second year in a row. Johnson & Johnson fell from last year's ranking.

What explains this lack of respect in one of the business world's largest sectors?

The Curse of the Media Mogul

The media hold a peculiar place in the business world, for they are the natural habitat of that most peculiar species, the media mogul.  We do not speak of car moguls or utility moguls, yet the media sector is dominated by huge international companies run by over sized personalities.  A media mogul even provides a James Bond flick with its villain.  In "Tomorrow Never Dies," Elliot Carver is a caricature of News Corporation's Rupert Murdoch.

Three Columbia Business School professors, Jonathan Knee, Bruce Greenwald and Ava Seave, also see media moguls as villains but in their case they see the shareholders as the victims.  Jeremy Philips summarizes their argument in his Wall Street Journal review of The Curse of the Mogul (New York: Portfolio, 2009)  "that media conglomerates as a whole have underperformed since the advent of the Internet. The Web has eroded the barriers protecting traditional businesses without improving the competitive position of even one incumbent. For a new competitor, of course, lower barriers mean opportunity, but they will mean opportunity for still newer competitors, too, making it difficult to establish a sustainable advantage. Citing Warren Buffett, the authors say that companies should be 'continuously digging the moat around their business.' But media companies have often done just the opposite, 'inadvertently construct[ing] bridges for competitors when they think they are strengthening the moat.'"

Glitz, Ego, or Value?

Do you agree with the Columbia dons that media moguls are obsessed with growth and overlook true competitive advantage?

And Then There Is Italy

Italy is the only country to entrust its government to a media mogul (Silvio Belursconi) and now finds the office of the presidency embroiled in a sex scandal. For movie stars, scandal sells. That same principle may not hold for Italian politics.

The Financial Times reports: "On Tuesday a Milan examining judge accepted a request from prosecutors, who said they had sufficient evidence concerning a “significant” number of prostitutes, to proceed to an immediate trial of the 74-year-old prime minister without holding a preliminary hearing. The case will begin on April 6.

“Ruby,” a Moroccan nightclub dancer named Karima El Mahroug is "alleged to have joined erotic 'bunga bunga' parties last year..." She, then "aged 17, denies having had sex with the prime minister. Mr Berlusconi says he has never paid for sex and also denies pressing a Milan police chief to free the teenager from detention last May." His excuse is diplomatic: he wished to avoid an incident. He thought her to be "the niece of Hosni Mubarak." The people went to the streets of Mubarak's Egypt to oust him. The Italians have mostly headed to the espresso bars. Then again, they have the ballot box to deal with their media mogul.


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Anonymous said...

Flies, trembling at the head uplift in ire ignorant of such transgression. O young men and women! if you grow up short, I had not passed a night so agreeably all the while I had