Wanted: New Management

In the wake of the sale and break-up of media giant Knight Ridder, the recent auction and sales of Clear Channel Communications and Readers Digest to private equity groups, and a similar anticipated fate for the venerable Tribune Company, it is clear that investors are dissatisfied with the performance of many “old” media companies, and that they believe the valuable content assets of these companies can be managed better under new ownership. In a parallel universe, Brad Garlinghouse, Yahoo! Senior Vice President, expressed his frustrations with the management of the quintessential New Media company, for its lack of “a clear and focused vision” for the company.

The content business is starting to look like the airline business, where the largest players, in spite of having a highly valued product and well-established brands, have struggled to survive. In the case of the airlines, it took a small upstart (Southwest) to demonstrate that cost cutting and innovative management could change the game and create sustainable shareholder return. Like with the airlines, much of the immediate focus is on cutting costs. However, cost cutting alone is unlikely to be successful, unless these companies also figure out new ways to capture value from their most loyal users. Southwest did this in the airline industry by focusing on what was most important – like low prices, convenient schedules, and dependable performance – while jettisoning costly features that, in the end, customers did not consider so important.

Will the new owners and managers of content companies have the insight and understanding of their audiences that will enable them to make the right calls through the tough times ahead?