< The Curse of the Mogul


Friday, October 16, 2009

BOB GARFIELD: You probably don't know the name of the chairman of Intel Corporation or of IBM Corporation, but I'll bet you know the name of the chairman of News Corporation because that chairman is Rupert Murdoch, a mogul, a celebrity basking in the reflected glamour of the real celebrities on his payroll. But how celebrated should Rupert Murdoch and his fellow moguls be? In a new book titled The Curse of the Media Mogul, authors Jonathan Knee, Bruce Greenwald and Ava Seave reveal that the moguls have no clothes, or at least profit margins, to speak of. Ava Seave joins us now, and before she does, let me just say that I have known [LAUGHS] this woman since I was 5 years old. Hey Ava, welcome to the show.


BOB GARFIELD: In terms of profitability -- Hollywood, good business or bad business?

AVA SEAVE: Terrible business. It’s always been a terrible business.

BOB GARFIELD: [LAUGHS] Video game publishing business -- good business or bad business?

AVA SEAVE: Well, it’s good in some places and bad in some places. There are places to make money. However, the people who manufacture the boxes, they do not make any money on the boxes. Those are essentially loss leaders, in order to do the publishing of the video games.

BOB GARFIELD: TV networks -- good business, bad business?

AVA SEAVE: It’s been a really, really [LAUGHS] good business for a really long time. NBC, notwithstanding, they cooperate legally, they don't poach on each other’s stars and they keep their costs relatively low.

BOB GARFIELD: We have this notion of Disney and Viacom and Time Warner, and most especially News Corp, Rupert Murdoch’s company, as being these Leviathan corporations that have their way with every business that they enter. [LAUGHING] It turns out that they barely outperform for their shareholders’ U.S. Savings Bonds, in many cases. How could this be?

AVA SEAVE: Well, I think a lot of the companies that you mentioned were started by entrepreneurs who actually were good at business, and a particular kind of business, and they did make money in their histories. But what happened over the years is that these moguls did not get the memo that conglomerates don't really work. And because they are addicted to growth and they think that any kind of purchasing or growth is good, they proceeded to buy companies that sound like they possibly have something to do with the original company but, in fact, they have completely different cost structures, completely different management structures. And so, the management is completely distracted, and in the end they actually don't make money in [LAUGHS] most of the businesses that they own.

BOB GARFIELD: Now, to read the book, you get inside not only the balance sheets but the heads of people like Sumner Redstone and Rupert Murdoch, and I guess it’s tempting to imagine them as just so vain and self-regarding that they care little about their shareholders and only about their own egos. But, in fairness, Wall Street, as an institution, does love growth, and if you’re not growing on the top line on revenues, Wall Street tends to devalue your stock. Isn't part of the fault the system itself?

AVA SEAVE: Well, I mean, first of all, most of the guys you just named own all the voting rights on their shares. Even though they have a smaller economic interest in the firms, they actually control the firms in a lot of ways. Growth, it has to be profitable growth. Part of the problem is that a lot of people who cover the media are just in love with the glamour of it, and they follow these guys as if they are gods, what they eat for breakfast. I mean, we shouldn't care about where they get reservations. We shouldn't care about the stars they hang out with. And when stars and agents and people like that say how terrific the moguls are or the executives are, the public is looking at this glamour, instead of looking at these businesses as real businesses. Media businesses are like everything else, and they should be treated as such.

BOB GARFIELD: You were talking about the image of these tycoons, the moguls, an image that is perpetuated in the very media that they own. [LAUGHS] Sumner Redstone and Rupert Murdoch are portrayed as, you know, kind of geniuses, even when their biggest deals turn out to be not so ingenious after all. Are we causing harm in portraying them as these great omniscient visionaries?

AVA SEAVE: I think that the people who write about these media moguls are doing a disservice. The return on investment doesn't get judged but just how they appear in the media and talk about their businesses, rather than making money for the shareholders.

BOB GARFIELD: You [LAUGHS] and your co-authors repeatedly point out in The Curse of the Mogul you have to maintain and actually reinforce barriers of entry that make it harder and harder for little guys to come in and poach on your market share. But in a digital world, the barriers of entry in many of these businesses have been reduced to near zero. Do the moguls have any future, whatsoever?

AVA SEAVE: In media industries which are being affected by the digital revolution, like music, it’s going to be really hard for what were called the majors to continue to make money, because there are so many people who can actually create music and distribute music and really don't need the big companies. So yes, you’re right, the moguls are in trouble. However, there are ways that you can run [LAUGHS] businesses efficiently, and maybe you don't have a competitive advantage, which is what we talk about, but that you can actually still give an okay return to your shareholders. It’s just not going to be as pretty as it was in the past. There are going to be many fewer people who make a really good living, and there’s going to be a lot of people who are in it because they like the idea of creating music or making movies or that kind of thing.

BOB GARFIELD: All right, Ava. Thank you very much.

AVA SEAVE: Thank you.

BOB GARFIELD: Ava Seave is co-author, along with Jonathan Knee and Bruce Greenwald, of The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies.


BROOKE GLADSTONE: Coming up: how in the Depression the only way forward was to face the music and dance.

BOB GARFIELD: This is On the Media from NPR.