Empires and villages

I have seen an article today at The Atlantic, “The Moguls’ New Clothes”, (written by one of my professors at Columbia Business School, Bruce Greenwald), which reminded me of the time when I have just started my Masters in Media Studies program in New York. Mergers and acquisitions of media companies were all the rage back in the day. The Atlantic writes: “Media is the only economic sector that historically has achieved growth predominantly through mergers and acquisitions.” Fair enough.

So what’s the deal here? Well, media companies and advertising firms seem to have been pursuing a bad strategy: accelerate growth, diversify internationally, invest in content, and exploit digital convergence. In short, build an empire.

The Internet does not like empires. It’s a network of villages; a loosely coupled federation, if you will. The web stroke “at the very heart of the core competitive advantage historically enjoyed by traditional media companies — economies of scale and captive customers. First, it radically reduces the fixed-cost nut required to engage in all manner of activities. And it all but eliminates the actual or psychological cost that impedes a user from trying an alternative product or services.” The web, in short, is a pure barbarian invasion.

p.s. Occasionally, and unexpectedly, good things happen (not that this is going to save media, but nevertheless). An recent occurrence related to the very same magazine, The Atlantic, is an example of Jane Jacob’s quote above. Apparently, the prominent political blogger Andrew Sullivan, NYT article reports, used his forum on TheAtlantic.com And, apparently, to tell readers to subscribe to the print edition of the magazine. And apparently, within just two days after his post, the magazine received 75% of subscriptions that usually takes a month to gather.

Sometimes, it takes a village to build an empire. ;)

Originally published September 24, 2009