Makers and takers

The future is made, not financially engineered

I’m still stunned by the news that Catholicism is now cool. The vibe shift is more fickle than I’d realized. I’m tempted to follow up the paperboy chronicles and the dishwasher chronicles with the alter boy chronicles. In the meantime, I’ve been thinking about financialization and efficiency-driven austerity being weird ways to figure out the future. Send me a note with your thoughts: Also, please subscribe if you haven’t to receive The Rebooting every Tuesday and Thursday.

I would always bucket people based on what program they opened first for work. The reporters and editors are Google Docs. The sales people are grinding emails. The designers have InDesign. The strategists are doing Keynote. But the real action, inevitably, is with the CFOs and CEOs in Excel.

Spreadsheets are handy tools. They take chaos and boil it down to uniformity. They’re handy ways to cut through the vagaries inherent in media to provide some semblance of truth. But the spreadsheet is a blunt instrument. It boils everything and everyone down to a numerical value. Spreadsheets have a role, but it’s not the lead.

Publishing, along with most American business, has become captive to spreadsheets as financialization has taken root in how businesses are run and led to a dysfunctional economy not set up to thrive in the future. I’ve been reading a great book written a few years back by Financial Times columnist Rana Foroohar called “Makers and Takers.” Her thesis is that businesses have become myopically focused on massaging numbers to create the illusion of growth to please Wall Street. The entire point of businesses often ceases to be making great product or services, but looking good on spreadsheets – in the near term. The reasons for this are many, including the short-term incentives most corporate leaders have to prop up share prices through buybacks, cost cutting, loading on debt and other shenanigans. This kind of financialization ends up gutting creativity, however, and in the long run results in weaker companies with boring, over-optimized products, indifferent customers and unhappy, uninspired workforces.

Last week’s drama of Warner Bros. Discovery is a case in point. I’ve never been one for the personality dramas of corporate chieftains. They have long felt like from a bygone era, and it’s hard for me to take seriously the image of David Zaslav as some swashbuckling tycoon in the mold of Ted Turner. He seems instead like a corporate lawyer whose greatest gift has been engineering massive paydays while running an accumulation of second-tier assets. The takeover of WarnerMedia was meant to be his crowning move into the big leagues.

The playbook he’s using is a familiar one. Cut costs (people, pizza, whatever), dump poor Batgirl and Scoob for a tax writeoffs, shitcan risky ventures like CNN+, raise prices, and generally please shareholders with an austerity agenda geared to squeezing short-term profits instead of chasing big Netflix numbers. Efficiency is the name of the game. There’s talk of “wartime CEOs” with a rocky market and specter of a downturn lurking and most companies’ stocks in the toilet. Hardly inspiring stuff.

As Dylan Byers points out in Puck, an alternative path would be creating hits people have to watch. That’s a messier affair with few guarantees of success. The safer route – particularly if you’re focused on a huge payout for getting the stock price up – is austerity, financial engineering and probably yet another merger to have a new chapter of the efficiency story to tell Wall Street. The obsession with EBITDA over the next several quarters threatens to obscure the signals from consumers about what they want, as Martin Peers points out.

By raising prices and reducing the amount of truly exclusive content on his streaming services, Zaslav is only giving viewers a reason to switch. He needs to accept the reality that the old days are gone. Television will never again be a monumentally profitable business. Streaming needs to be profitable enough to draw investment, for sure. But times have changed. There’s no going back.

Like many incoming administrations, Zaslav is reflexively dumping on anything instituted by the previous regime, led by Jason Kilar. The knock on Kilar’s moves, such as a full embrace of streaming and de-emphasis on the theatrical window, are dismissed as rash. The wall Netflix has hit, as its stock has plummeted 60% in the past year, helps an austerity agenda fitting nicely in the streaming vibe shift, only Disney seems to be doing just fine with streaming as it took the top streamer crown from Netflix. You know Zaslav’s play when he approvingly references his mentorship by Jack Welch, whose damage to the state of U.S. business is only beginning to be unpacked. After all, it’s not a great sign when this is your strategy slide.

The spreadsheet culture of the media business hasn’t made it more resilient. The industry has long liked to point fingers at tech platforms for its difficulties, but it might be better served to turn inward. After all, the decisions made by the spreadsheet jockeys did more to create this mess. It wasn’t Google or Meta that forced the accumulation of $50 billion in debt, which looked great on the spreadsheet in a ZIRP era but less so as the Fed continues to crank up rates.

Operational excellence isn’t the same as financial engineering that fetishizes efficiency. Jessica Lessin has it right that this laser focus on efficiency by big tech company leaders is hardly inspiring for their future.

I am old enough to remember when CEOs like Pichai and Mark Zuckerberg waxed on about something else: their missions. There was Google’s quest to organize the world’s information, Facebook’s ambition to make the world more open and connected, and so on. I used to roll my eyes at their adherence to these talking points. Now I kinda long for those days again, because efficiency isn’t an end; it is a means.

This is a story that’s played out across American business. Foroohar spends much time on the plight of U.S. automakers, as the “car guys” lost out to bean counters. The bosses focused squarely on cost cutting and optimizations to please investors rather than designing and building excellent products of the future. It nearly doomed the industry.

This is one reason why I believe we’ll have different types of companies created by makers rather than takers. There are many ways to succeed in business and life overall, but having a deep understanding of the product – and a mission beyond EBITDA – would seem to me a good way to create sustainable businesses because it’s the way to create great brands and products. I don’t think it’s an accident that Jim VandeHei has had such success, first in building Politico and then at Axios. I always admired that Jim continued to write and report from time to time. He knows intimately how to make a good journalism product in a way that even a seasoned “operator” would not. You can look at numbers on a spreadsheet all day long, but you won’t have the feel for the product that comes from making it.

Media needs to take more risks, not fewer. An austerity agenda might be a path to a short term stock bump. It’s not the way to make a better future.


Ben Thompson has a long interview with New York TImes CEO Meredith Levien. One of the things that stood out for me is how Meredith boiled down the Times North Star mission in its turnaround as: make journalism worth paying for. She notes how it’s harder to run organizations with indirect business models, where what you’re making is different than how you make money. I’ve experienced this. Finally, another simple but hard mantra: “To be essential means to be of value every single day.”

The idea of combining content is commerce is hardly new. Anyone remember Lucky? I can remember covering dot-com companies like Bolt and Alloy who were preaching this gospel. Publishers more recently became enamored with affiliate commerce as a diversification from display advertising and content marketing. Like many trends, BuzzFeed led the way, but it’s commerce business is now in retreat, shrinking 22% in the second quarter even as its other business lines showed growth. For most publishers, commerce (it’s usually just SEO arbitrage with some affiliate links in the mix) will remain incremental.

The cascading impact of Apple’s “privacy” changes that just so happen to coincide with the massive growth of its app install business continue to be felt. The direct-to-consumer companies continue to get whacked since, at their heart, these businesses were built in an era of cheap customer acquisition. It’s likely the business models were dependent on that. DTC might have sounded cool for a while to most Harvard Business School students who suddenly discovered a personal issue they needed to solve between their first and second years, but retail has always been a cut-throat and shitty business with appalling margins.

The uncertain economy appears to be leading to delayed decisions. The easiest thing for businesses to do when they “lack visibility” is to freeze in place. Judging by the chatter on SellerCrowd, a platform for ad sellers, more clients are pushing out – or “pausing,” if we must – campaigns

Digital publishers have drawn vastly different multiples in exits over the years. The Business Insider deal at 10x revenue will remain on every digital publisher’s valuation slide in eternity. The recent big deals for Axios, Industry Dive and Politico both came in around 5x revenue, an impressive valuation for Axios and Industry Dive in particular given how most of their businesses are advertising vs a big recurring revenue segment. .

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