The Dilemma Vexing Big Media

All digital content under one umbrella? Corporations fumble for an answer

In an era when media companies are under the gun to distribute their movies, TV shows, and publications in new ways, MTV Networks (VIA ) saw itself making a bold statement last October when it appointed a 34-year-old executive to be its first-ever chief digital officer. The executive was to have a key role in helping brands such as Comedy Central, Nickelodeon, and VH1 tackle broadband and wireless efforts. The anointed one: Jason Hirschhorn, a smart, charismatic former entrepreneur who had been advising on online projects at the company for about five years.

Oops. Just seven months after Hirschhorn's promotion was hailed as groundbreaking by MTVN, his departure was quietly slipped into the trade press. In a prepared statement in late May, CEO Judy McGrath praised Hirschhorn for his work and called him a "visionary." MTVN officials declined to elaborate further.

What went wrong? Shortly after Hirschhorn took on his new role, it had become clear that the 25-year-old media giant, which always prided itself on being a pioneer, had a problem. Many of MTVN's businesses were already deep into their own digital plans, such as the online broadband channel MotherLoad from Comedy Central. In his earlier incarnation as a sort of internal consultant, Hirschhorn had been a helpful ideas person. But as the top guy, he was seen as a meddler, rankling executives on the front lines. "We are a very decentralized place where we are told our mission is to supersize our brands," says one executive. "Jason was a polarizing figure."

Faux pas like MTVN's are clearly front and center in the minds of executives these days. That's because the biggest challenge in many large companies over the next few years -- and not just in media -- will be who wins in the race for digital supremacy. The internal debates go something like this: Do we make a high-profile hire at corporate, and give the person a fancy digital title that will impress Wall Street? Or do we take a chance on closer-to-the-ground techies in our business units who may be less risk-averse and understand more of what our customers really want? How those high stakes decisions get handled will go a long way toward determining not only career paths but also whether billions are made or lost, particularly in media. "For [this] industry now," says Scott Anthony, a managing director at consultancy Innosight, "this is a decision that companies know they need to get right -- and right away."


It is still way too early in the game for anyone to declare a proven formula. But fearing duplication of efforts, many media companies are leaning toward centralizing, naming a high-ranking digital guru. That has created a cottage industry for executive recruiters and consultants who are reaping big fees for delivering hotshots to traditional media and other industries. Kelvin Thompson, chief marketing and strategy officer at executive recruiting firm Heidrick & Struggles, says he travels around the globe scouring for New Media hires. "Everyone wants to know how to interact with those new ecosystems out there," says Thompson.

That is why CEOs are looking for direct feedback from a digital consigliere. Betty Cohen, CEO of Lifetime Networks, says she recently hired Dan Suratt, who helped create the franchise for NBC Universal (GE ), as her top digital person because "we needed help in prioritizing the overabundance of opportunities." Yet last December, Cohen promoted ad sales executive Lynn Picard to the post of executive vice-president for interactive entertainment. Cohen says she doesn't foresee any conflict: "We will have a collaborative understanding." For Eric W. Schrier, the CEO of Reader's Digest Association Inc. (RDA ), who on June 19 hired Time Warner's Jodi Kahn to be president of digital media, his decision to go central was about "having someone here who was thinking 24/7" about these new platforms and who could forge new partnerships.


Early enthusiasm surrounds these newest hires, but a script more reminiscent of the MTVN experience is being played at other companies over, what else, turf. "The problem is that a person gets endowed with responsibility but no authority," says Mark Piesanen, a senior manager in the media and entertainment practice at Deloitte Consulting LLC. "You give somebody a big hat and no cattle." That lack of clarity appears to be plaguing NBC Universal. In December, Beth Comstock, an executive at parent General Electric Co. (GE ), was appointed to head digital media at the entertainment unit of GE, the third person in that role in two years. Meanwhile, David Zaslav, president of NBC Universal Cable, had assumed many digital responsibilities before Comstock's arrival and is still often seen as the face of NBCU's New Media efforts. Under him is Jean-Briac Perrette, a senior vice-president for new media and the chief financial officer. What's more, Jeff Gaspin serves as president of digital content and cross-network strategy for NBCU Cable Entertainment, a programming arm. While it may seem confusing, "it's not anarchy," insists Comstock. "You have to have a centralized digital operation to get the company to move fast. At the same time, you want every unit to have autonomy but with a level of accountability."

It all has a familiar ring, going back to the first Internet boom. A lot of executives have long memories of early, disastrous attempts to centralize Internet operations. Those embarrassments are a factor in the way some companies are proceeding today. Before its painful combination with AOL (TWX ), Time Warner Inc. (TWX ) created a unit called Time Warner Digital Media to handle all matters of the Internet. But its failure to create any tangible products in part motivated then-CEO Gerald Levin to embrace AOL.

Today, Time Warner has decided not to hire a top digital executive. President Jeffrey Bewkes, once a bitter critic of the AOL deal, oversees the media conglomerate's digital strategies. He meets regularly with division executives such as Ned Desmond, president of Time Inc. (TWX ) interactive and formerly head of the magazine Business 2.0. It was at these biweekly brainstorming sessions with Desmond and other managers that Time Warner decided to relaunch the financial Web site last January. Now it's No. 6 among business Web sites.

Other companies are treating their operations as petri dishes, watching closely to see what will grow. One is Walt Disney Co. (DIS ), also sans a digital guru. It learned its lessons the hard way. In 2001 it shut down its Internet business and took a $790 million charge to earnings. Robert A. Iger, who as Disney president announced's demise, says that upon being elevated to CEO last October, he decided he did not want a one-size-fits-all strategy. "We knew with things moving so fast, and it all being so new, there would be a lot of trial and error," says Iger. "We felt creating a corporate template, with its rigor, could be a mistake."

Instead, Iger wanted to get everybody at the company thinking about making technology work for Disney. Through speeches and internal meetings, the CEO emphasized that technology should do three things: make products better (football in high-definition TV); deliver programming in new ways (the hit show Lost on iTunes, one of his first moves as CEO); and understand customers better (one-on-one feedback from free streaming of prime time shows on Now every week Iger holds a catered lunch for his direct reports in the headquarters in Burbank, Calif. Over sandwiches and bottled water, the execs swap digital ideas that bubble up from staff. "This is still all an experiment," says Iger, "so why not explore what is possible?"

At MTVN, meanwhile, digital efforts have not slowed since Hirschhorn left. The MTV channel is creating "MTV Viewser Labs," in which its programmers and biz types meet with media buyers to tailor ads on all distribution platforms to have the look and feel of the programming they're next to. It was the brainchild of MTV President Christina Norman. CEO McGrath and her team are still trying to determine the best approach to digital at a corporate level, say executives, especially now that COO Michael Wolf is being tapped for much of the broader New Media thinking.

Sooner or later, however, the dilemma over whether to go local or top-down will stop being a headache, says James Citrin, the top media headhunter at search firm Spencer Stuart. "In the end, everything will be digital."

By Tom Lowry

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