The empires have been built. The mad land grabs in media and entertainment orchestrated by larger-than-life founders have run their course. A business that was once all about box office, TV ratings, and advertising is a new world in which technologies are untethering media from time and place. The people with the power in this amorphous universe aren't the old guys in the corner office but demanding consumers who rule as never before.
In this twilight of the moguls, a new, younger generation of executives is waiting in the wings to inherit an industry in upheaval. They're baby boomers with MBAs and law degrees. They are women. They have had media gigs in all parts of the business and the globe. They grew up embracing technology but know all too well that pirates are around every corner.
Sure, steely Viacom Inc. (VIA) Chairman Sumner M. Redstone, 81, is still going strong. So is 73-year-old News Corp. (NWS) founder Rupert Murdoch. But they are the last of a breed, the builders who helped define the modern media conglomerate by making their companies extensions of their own personalities.
By now everyone has heard about the likely inheritors, News Corp. President Peter Chernin, Time Warner Entertainment & Networks Chairman Jeff Bewkes, and Viacom Co-Chief Operating Officers Tom Freston and Les Moonves. But dozens of others along the corporate ladder are also helping to redesign media for the digital age.
There are executives such as Michael Lynton, 45, the understated, boyish-looking chairman of Sony Pictures Entertainment (SNE). A Harvard MBA fluent in four languages, he worked in mergers and acquisitions on three continents for Credit Suisse First Boston (CSR), served as a studio exec at Walt Disney (DIS), ran Penguin Group, and later headed America Online's (AOL) international business. There's Susan L. Decker, 42, who is bringing to her chief financial officer post at Yahoo! Inc. (YHOO) the studied approach of a stock analyst (she was head of equity research at Donaldson, Lufkin & Jenrette Inc.) to help CEO Terry Semel win over Wall Street and Madison Avenue. And there's former AT&T (T) veteran Dan Schulman, 46, CEO of wireless reseller Virgin Mobile USA, who marries content and hardware by putting hip ads and MTV clips on cell phones to lure media's ever-elusive audience, teens and the college crowd.
By all accounts they and others in their cohort are pragmatic and careful not to be too mogul-like, as apt to grab a sandwich on the run as take time for a power lunch at the Ivy or Michael's. In many cases they have focus groups for divining what is cutting-edge right at home -- their own multi-tasking, media-mad children. "We are seeing a whole new group stepping out of the shadows of the tycoon figures," says headhunter James M. Citrin of executive search firm Spencer Stuart, who is a matchmaker for this generation. "Today media executives need to have it all -- that right balance," he says.
This changing of the guard comes as media are flourishing but also under enormous pressure, scrambling to stay ahead of every new gadget or innovation on the Net. "We're right at the precipice," says Tom Wolzien, an analyst at Sanford C. Bernstein & Co. (AC) and a former NBC executive whose musings on the latest media trends are widely read by many of the new managers. "The convergence to digital is here, and it's threatening the gatekeepers of old." The next step in media's evolution will most certainly shuffle the deck for the market leaders. Some may ultimately fail. Who emerges on top may be surprising as media's boundaries grow to include tech, phone, and wireless outfits. Just three years ago, who would have imagined that ring tones would become a $3 billion-a-year music business.
THINKING IN MANY DIMENSIONS
The challenges these inheritors face will surely test their skills. Now that media are no longer hard-wired and regulated, and digital technology is delivering content anywhere anytime, capturing a piece of the highly fragmented audience is tougher than ever. In the late 1950s, Gunsmoke on CBS captured a 65% share of the TV audience nearly every Saturday night. Only one event, the Super Bowl, has a chance to do that now.
Today's executives have to manage in three dimensions -- constantly imagining their books, magazines, movies, shows, and games in an array of digital forms. More and more you hear executives referring to cell phones as their third screen. "We are seeing a separation of content and distribution," says Wolzien. "Over time there may be 20 ways to get to the consumer." Consider this: Five years from now there will be 83 million homes with broadband connections -- nearly as many as the 88 million that now have cable and satellite hookups, according to Bernstein projections. The number of wireless subscriptions in the U.S. will grow 20%, to 243 million, in the same period. Little of what works today is a given for long.
Even as media are available on a scale once unheard of, the industry is also increasingly vulnerable to piracy, the bête noire of today's media honchos. It used to be that the first impulse of any strong leader was to club pirates with lawsuits. Now it's not that simple. Execs have to strike ticklish accords with all sorts of adversaries that may well be partners tomorrow, weighing the need to protect their content against the rush to the latest cool devices.
They also have to contend with wary investors, traumatized by AOL's disastrous acquisition of Time Warner and Comcast's (CMSCA) failed bid last spring to buy Walt Disney (DIS). Where sweeping acquisitions once prevailed and EBIDTA (earnings before interest, depreciation, taxes, and amortization) measures sufficed, younger execs are charged with articulating a new story of growth to Wall Street, built on disciplined financials, innovative business models, and sales of the most sluggish parts of the old empires. They're managing differently, too, breaking down all the silos the founders assembled so ideas and savings can flow freely. And while there are strong arguments for amassing distribution might, content will always be king. Execs will still struggle to nurture magazines, programs, movies, and music that can stand out in the proliferating clutter.
So how is this New Media crop coping? Faced with having to push Old Media into fresh forms, Sara Levinson, 54, a top exec at publisher Rodale, hit on a most unlikely combination. She wed the staid, booklet-sized health-and-nutrition magazine Prevention, a mainstay from the 1950s, with Microsoft Corp.'s (MSFT) red-hot video-game player Xbox -- and she'll soon make a second match with Sony Corp.'s PlayStation. Come again? It's a clever, if far-fetched, play: Prevention is offering an interactive fitness video using an animated personal trainer, designed to be played on the big-selling game consoles. So when the kids are at school, moms can get in on some of the fun in those briefly dormant players.
Levinson learned a thing or two about consumers during her time at MTV, where, in the late '80s, she helped turn the cable channel into a culture phenomenon with books, videos, franchise shows such as Unplugged, and global outlets. She then moved to the National Football League, creating its first marketing-and-research unit and persuading her male colleagues that reaching the more casual female fan was a great opportunity. "There are all kinds of consumers," says Levinson, "and you should never look at business with that singular mentality."
Robert A. Bowman, 49, had a similar challenge -- taking a well-worn product into new territory. Back in the fall of 2000, when Major League Baseball came calling, he was faced with adapting the 120-year-old game for today's fans. Although in the 1990s he was a suit, serving as president of conglomerate ITT, the Wisconsin native grew up dreaming of playing for his hometown Milwaukee Brewers. As CEO of Major League Baseball Advanced Media LP, the Wharton MBA decided early on to deliver online and digital services directly to fans, without an intermediary such as Yahoo.
The bet paid off. MLB.com, with revenues of about $125 million last year, sells 30 services, from live video and audio of full games to fantasy baseball video-games, all available on the Net and on cell phones. Taking a page from Apple Computer Inc.'s (AAPL) iTunes, Bowman last season rolled out a 99 cents-per-download video-clip service. "We don't worry about cannibalizing ourselves because even if we lose 10% from one service, we know our customers are still tuned in to baseball and not off downloading a movie or music," he says. That's as good as a save in the bottom of the ninth.
Bowman doesn't have to worry as much as some execs about the threat of piracy in these new frontiers because most of his offerings are live events. But no media company is immune to the lesson learned by the loss of 30% of music sales in recent years through illegal file-sharing and CD burning. As software and consumer-electronics makers plow ahead in home entertainment, a big push back is inevitable from nervous businesses that still don't feel adequately protected from intellectual-property theft. But four years after the great music massacre, these new execs are also smart enough to realize that to compete with free, you have to offer cool.
So Michele Anthony, 48, COO of Sony Music Label Group U.S., stumps on college campuses, hoping to steer students away from stealing music. She grew up in the business: Her dad, Dee Anthony, was a legendary band manager whose acts included Peter Frampton and Joe Cocker. After getting her law degree at the University of Southern California, she represented musicians, too, including Guns N' Roses and Ozzy Osbourne. So Anthony has her own share of street cred when she likens uploading 200 songs illegally to walking out of Tower Records with 15 CDs. She's also pushing a music service backed by the major labels that is offered over campus computer networks. Anthony has signed up 24 colleges for Campus Action Network, but she keeps traveling. "We will always compete against free," she says, "but you can begin to make a difference."
The trick for execs is finding that sweet spot between fighting new technologies and pushing into digital delivery. R. Brandon Burgess, 37, wrestles with that every day. The onetime Goldman Sachs & Co. (GS) banker and mergers-and-acquisitions specialist at PepsiCo Inc. (PEP) may have thought his hardest job so far was helping NBC Universal Chairman Robert Wright win the bidding war in 2003 for Vivendi Universal's (V) TV and movie businesses. But as executive vice-president for business development and digital media at NBC Universal, Burgess is the front-line guy for new revenue streams at a company that Wright now declares "platform neutral." Burgess helped in the rollout last year of NBC Mobile, which offers cell-phone users two-minute-long video news broadcasts. Burgess is also spearheading an internal think tank on new technologies at NBC Universal that will look at offense and defense. "The priority is digital, not just piracy," says Burgess.
SELL IT TO WALL STREET
Running companies that are out of favor with Wall Street makes the job that much harder. Investor skittishness dates back at least to the AOL Time Warner deal. It closed in January, 2001, and since then, the Bloomberg Media index, comprising 36 companies, has fallen 29%, vs. a 5% decline for the Standard & Poor's 500-stock index. To win back investors, execs will need to be financially vigilant and project a more temperate image.
If anybody can sell a fresh story, it's Alfred C. Liggins III. He's in broadcast radio, a sector some see as mature, with slowing ad growth and thinning margins. But Liggins, 40, CEO of Radio One (ROIAK), an African American radio company based in Washington with 69 stations in 22 cities, has a smooth delivery and a big vision for the company his mother, Catherine L. Hughes, founded in 1980.
As a teenager he sold Adidas shoes in Georgetown at a time when Nikes were what people wanted. Today he's hoping to convince the markets that his $300 million-a-year operation is not a dinosaur but a platform for creating "a Univision for black folks." He is moving to position Radio One as a multimedia company with a presence in programming, syndication, the Net, and even rival satellite radio. Last year it launched its own TV channel, TV One, in partnership with Comcast, now seen in more than 18 million cable homes and aimed at African American households. Still, Radio One's share price is off about 25% in the past year. So Liggins the salesman will need to turn up the volume on his pitch to the Street.
Meantime, this new digital world can seem like a Tower of Babel to investors or advertisers used to established rules of trade. Joanne K. Bradford, the 41-year-old chief media revenue officer for Microsoft, is making it her mission to reassure marketers that they're getting their money's worth when they spend online. Coming from a print background (including ad sales at BusinessWeek), she adapted some of that industry's auditing traditions to the software maker. Since her arrival in 2001, Bradford has been trying to establish new, standardized measurements for online viewership, a prerequisite if the Net is to become part of major advertisers' standard buys. Besides using the MSN portal as a testing ground, with its 20 million unique visitors a day, Bradford is also sponsoring industrywide studies to help hammer out standards. Her efforts have been likened to what Ted Turner did in the early 1980s to attract advertisers to then-nascent cable TV. "She is just as much an evangelist for online as he was for cable," says Sarah Fay, president of online marketing firm Isobar U.S.
THE CULTURE CZARS
Inertia in many of the sprawling media empires can make it even tougher to turn a new idea into a revenue stream. Patricia Fili-Krushel faced that problem when Time Warner recruited her, in the wake of the AOL deal, to manage the various workforces and cultures in a company known for its feuding fiefdoms. Walls needed to be crashed, especially at a company of 80,000 employees -- roughly the population of Canton, Ohio. "The first thing I learned is, you have to manage in teams in this new world," says Fili-Krushel, 51. The former ABC executive now organizes regular bimonthly meetings with CEO Richard D. Parsons and the company's nine division CEOs and six executive vice-presidents.
It's a similar picture at cable giant Comcast, with 68,000 employees. When Chief Operating Officer Stephen B. Burke, 46, took the job with what was then a midsize cable operator in 1998, industry pundits were shocked -- Burke had been a golden boy at Disney. In a dozen years he had overseen the retail stores, Euro Disney, and ABC's TV and radio stations. At Comcast he's No. 2 to 45-year-old CEO Brian L. Roberts, helping to build the company into the nation's largest cable outfit, with 21 million subscribers and new power in the media world. Among Burke's latest feats: integrating ahead of schedule the AT&T Broadband cable systems Comcast acquired in 2002.
With Roberts, he's also the architect of Comcast's maze of relationships involving collaboration among fierce rivals, arrangements that typify this new age. Consider Comcast's ties to two of the biggest media companies. With Time Warner, Comcast negotiates prices for programming. The two are also partners in a new New York Mets sports channel. Both are bidding to buy and split up Adelphia Communication's cable assets. Then again, it was Comcast's 11th-hour agreement to partner with Sony last fall that helped seal the Sony/MGM merger, all but ending Time Warner's chances as a bidder. News Corp., meanwhile, is a big supplier of programming even as its satellite service, DirecTV Group Inc. (DTV), is a direct rival in distribution. "Listen, with all this, you realize life is long," says Burke, "and you get along well because of that."
THE TALENT SEEKERS
Will having more professional managers running things snuff out the creative sparks that power these hit-driven enterprises? After all, as entertainment choices proliferate, offering entertainment that actually entertains is more critical than ever. Even at a time when TV shows and movies are branded like soft drinks to generate new revenues, finding and backing a hit is still about instinct -- and luck. "It's not like selling cereal into Indonesia," says Time Warner's Bewkes, who won high marks for his support of creative types when he ran HBO. "It's more like drilling six holes for oil."
The bets are getting even bigger. At Sirius Satellite Radio Inc., (SIRI) execs have ponied up more than $850 million for programming deals over the past year in a still-unproven business. Making these big-money calls is President for Entertainment & Sports Scott Greenstein, 45, a former chief of movie studio USA Films, known for the Oscar-winning movie Traffic. To differentiate Sirius' 100-plus channels, Greenstein's strategy is to supplement his dozens of commercial-free music channels with headline-grabbing talent on other channels that will draw big advertisers. Oprah Winfrey and former President Bill Clinton are on his wish list. Newly signed shock jock Howard Stern is sure to lure new subscribers starting in 2006, but Greenstein, who also worked for Miramax Film Corp. (DIS), wants to avoid turning Sirius into the Howard Stern network.
As president and CEO of Martha Stewart Living Omnimedia Inc. (MSO), Susan Lyne knows full well the perils of relying on one personality to make your brand. The 54-year-old ex-ABC exec also has an eye for talent, having championed the network's current hits Lost and Desperate Housewives before leaving under pressure last April. She's hoping to stir up new interest in Stewart's iconic celebrity and play off the publicity from the domestic diva's release from prison. But Lyne is also trying to speed up development of secondary brands, such as Everyday Food, which now has monthly publication as well as a weekly TV series on PBS.
By its nature there's really no escaping the new world of media. Comcast's Burke is bombarded every night when he walks through the door of his suburban Philadelphia home. There, his five kids, ages 8 to 16, are instant messaging, cell- phoning, listening to MP3 players, playing video games, and watching video-on-demand -- often all at once. "Our kids have become our canaries in the coal mine," he says. Nor is the pace of media about to let up anytime soon. And while nobody would be surprised if the still-spry Rupert and Sumner were running their empires as centenarians, the demands of the new age are quickly moving the media biz into new hands.
By Tom Lowry
With Ronald Grover in Los Angeles, Catherine Yang in Washington, and Diane Brady and Stephen Baker in New York