Monday, September 14, 2009

Do Media Moguls Understand the Economics of their Business?

If we take Netscape’s public offering in 1995 as the birth of the Internet era, on average over the next 10 years the biggest media conglomerates achieved less than a third of the returns available from the S&P as a whole.
...Understanding the fundamental flaws of these four tenets of conventional media wisdom—growth, globalization, content, and convergence—is essential to saving media shareholders of the future from the anemic returns of their predecessors. Each myth reflects its own confusion about the sources of competitive advantage.

That's Bruce Greenwald, Jonathan Knee and Ava Seave writing in the Atlantic

The Media industry is not immune to basic economics, like the fact that when the Internet lowers barriers to entry it also hurts profits. The latest downturn in media valuations is not simply a reflection of the recession, but reflects a much larger, long-term trend.

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