E-letter: Deflated expectations
The Wall Street Journal last month warned of an upcoming collapse in the big-media markets based on the lopsided cost and value of sports news. I share the WSJ’s view of the future of big media, sort of. For one thing, it may be eclipsed by bigger media as monopolistic interests smother legacy media and even the “smart-ups.” But I think another, more important force is moving. I call it the Trump Effect.
[caption id="attachment_6049" align="alignleft" width="180"] Kerry Knudsen[/caption]
The article, “Why the clock is running out on big media companies,” cites Netflix, Hulu and other streaming companies as evidence of consumers cutting the cord with cable, and it credits live sports as largely supporting the $70 billion TV ad industry, for now. That could change, they say, as new platforms eye the subscription potential and new contracts come up.
The Trump Effect is bigger, but it’s not really Trump, and it goes back a long way.
For example, the famous Chinese General Sun Tsu, writing in The Art of War about 2,500 years ago, noted that people will kill for good information, and they will kill for bad information. In fact, in his section on spies and spying, he even proposed that you can get rid of irksome associates by giving them known bad information and then sending them into the enemy camp. When the dupe conveys the bad information to the enemy, the enemy knows it’s a lie and kills him. Today, we can call this the George Popadopoulos Conundrum.
Back to the point, the news industry has been losing credibility for decades as reporting has moved from independent, dedicated owners and reporters to amalgamated megaliths run by advertiser and committees. That is simply a fact.
However, when Trump decided to run for the presidency, he seems to have intuitively avoided the standard modes of media relations, choosing to use Twitter, much to the media’s chagrin, and to simply call news conferences instead of buying ads.
To the media, this is potentially devastating. Next to sports news, the media benefits big-league (Or should I say “bigly” as the media insists?) from the cyclical election ad buys and they do everything in their power to extend and expand it. We have talked about this before. In 2016, the aggregate cost of all presidential and congressional campaigns was $6.5 billion. Clinton spent $768 million, while Trump spent $398 million. From the boardroom perspective, if winning candidates can cut their spending by half and still win, that is no good.
It is my opinion that you can see the panic in the actions of the media both during and after the election. Take a look and decide for yourself.
One thing that happened, for whatever reason, is that a bunch of alpha males, to include Elon Musk, Mitt Romney, Jeb Bush, John McCain, Jeff Zucker, Mark Zuckerberg, Jeff Bezos, etc., turned on Trump, with the main reason stated being that he is not “cool.” Predictably, the employees of the barons turned on him, too, and the record is pretty clear on that point.
Either before that, after that, during that or because of that, Trump then retaliated with the appellation “fake news” for anybody and anything he saw as being partisan while pretending fairness, lying or stupid.
Much to the chagrin of his targets, he started being proven right, particularly by a relatively small-but-loyal contingent of media, political and business followers. Significantly, he also won the presidency, indicating a substantial, and winning, contingent among the general population.
I am not here to praise the efforts or effects of Trump. However, if you accept that the general population has become disaffected with the mainstream media, that they are leaving cable and network broadcasting for more focused, friendly providers, that the hugely profitable sports viewership is ready to man the lifeboats and that Trump, wittingly or not, has disengaged the press from its stranglehold on campaign financing, it appears that such media megaliths as WarnerMedia, NBCUniversal, etc. may be a good divestment strategy if you have stocks in those places.