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The coming decade in media will see continued consolidation, expanded choices for consumers, and more opportunities for African-American entrepreneurs, industry executives told an audience at the 30th Annual H. Naylor Fitzhugh Conference sponsored by the African-American Student Union held February 23 at Harvard Business School.
Goldman Sachs recently committed $1 billion to the consolidation of lower-to mid-level publishing companies, said Nelson B. Boyce, national advertising director at Vanguarde Media Inc. He added that the recent federal appeals court ruling that allows cable companies to buy local channels in the same market reinforces a political climate that seems to favor consolidation.
"Things will progress at an incredibly fast pace over the next two years," he said.
Music a commodity?
Being at the world's largest media conglomerate doesn't provide insulation from these changes. L. Camille Hackney (HBS MBA '94), vice president of Multimedia, Marketing, and Business Development at Elektra Entertainment Group, a division of AOL/Time Warner, ran down a laundry list of concerns that keep music executives awake at night. In 2001, 23 percent of consumers bought less music than in the previous year because they downloaded songs from the Internet or burned their own CDs, Hackney said.
| I predict that one company will control urban entertainment in ten years. |
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— Scott R. Royster, Radio One |
"The perceived value of music is low, so people don't feel bad about stealing it," she continued, noting that stores like Kmart and Best Buy sell CDs at a deep discount.
Meanwhile, marketing costs are increasing and publicity outlets such as MTV are playing fewer videos and creating more "reality TV" programming. It also doesn't help that the music industry is often perceived as the "evil empire," robbing young artists of royalties. "There's a brighter future on the horizon, but it's going to take a long time to get there," said Hackney.
"We're the cockroach of the industry," said Scott R. Royster (HBS MBA '92), executive vice president and CFO of Radio One. "You can't kill radio—it has the local advantage." In the media industry overall, he continued, scale matters more than ever. "Consolidation in a free market is inevitable. I predict that one company will control urban entertainment in ten years."
Size is key, agreed Alvin L. Bowles, Jr. (HBS MBA '01), director of Business Development at Sony Music Entertainment, but corporate infrastructure is equally important. "You really have to look at how you pull out costs without hindering the creative process," he said.
But if the trend is toward more mergers such as the AOL/Time Warner marriage, and continued growth of conglomerates such as Viacom and Vivendi Universal, how will consumer choice be affected, asked the moderator, Boston television reporter Naamua Delaney. What does this fast-paced evolution mean for small-to mid-size "infotainment" companies and the conglomerates themselves?
More or less choice for consumers?
Technology will continue to increase consumer access to music and other media while creating an increasingly fragmented, global audience, predicted David Boatright, a principal consultant at PriceWaterhouseCoopers.
| It's never a bad time to start a new media company if you have the right partners involved and a clear, defined plan for growth. |
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— Nelson B. Boyce, Vanguarde Media |
From the corporate perspective, one benefit of consolidation is reduced marketing costs, said Hackney, noting that the "war chest" of media outlets available at AOL/Time Warner offers opportunities for cross-promotion. "I'm trying to create multiple impressions to get you to go out and buy a particular record," she said. "Even if we're controlling more of the experience, the choice still belongs to the consumer."
Royster agreed, saying his focus as a CFO is on owning different kinds of media and creating shareholder value. "However, I don't necessarily share the opinion that this is a good thing for consumers."
"The current climate is very Darwinistic," said Bowles. "Should we leave the power of media in the hands of a few? From a business perspective, convergence is great, but how far does it go before it becomes detrimental?"
Technology evens the balance, countered Hackney. "The advent of the Internet has put the power of choice back in consumer hands."
Consolidation and African-American business
What does consolidation mean for the future of African-American business, asked one audience member, referring to Robert L. Johnson's 2000 sale of Black Entertainment Television (BET) to Viacom? Will it limit the media outlets available to African-Americans?
"Radio One is a growth business focused on becoming a multimedia company targeted at African-Americans," said Royster. "Our goal is to remain black-owned," he continued. "There has to be a balance between shareholder value and African-American interests."
There's still room for new players in the market, added Boyce. "It's never a bad time to start a new media company if you have the right partners involved and a clear, defined plan for growth."
It's also an excellent time for African-Americans to enter the industry, said Boatright. "We're moving from in front of the camera to controlling where the camera goes. Take your vision and create something with it."