Most comments on this have come from media insiders, who have an auitomatic bias for, and affection for, the operation of the business. They don’t see it through the gimlet eye of the accountant. For that reason, ignore what anyone in the media tells you about this. They want NBC to succeed. They want to work there. Real businessmen don’t care.
For generations GE has had a rule that guides its actions toward subsidiaries. You grow earnings by 15% per year, or you’re gone. There are two ways to do this. If you grow revenues, and keep operations lean, your earnings will grow. If you can’t grow revenues, you better cut expenses.
What GE is saying here is that media revenues can’t grow 15% per year, so it’s going to cut. The media business model is broken.
Note that I’m not just talking about TV here. NBC Universal is more than TV. I’m talking about all media — music, movies, the lot. General Electric has decided these are no longer growth businesses.
What might it do instead? A lot of things. Jack Walsh liked finance. Jeff Immelt calls his strategy "ecomagination," by which he means green energy and energy-saving technologies. I think the key word here is technology. Technology is still a fast-growing business. Media is not.
What will GE do with NBC Universal? My guess is he’s looking to sell
it. And not to one of the usual suspects. By running NBC like a
newspaper (that’s what the Tribune-LA Times
business is about) I’m guessing he’s looking to let it go private.
Private capital, as I’ve noted before, can take on no-growth and even
negative-growth businesses. They can ride them into the ground, sell
what’s left of the assets, and pocket a tidy profit. Public companies
can’t do that — investors in public companies demand growth.
(The guy on the left is Gordon Gecko, a Wall Street sharpie played by Michael Douglas in the movie Wall Street. While he played a sharpie, don’t believe a word he’d say about this deal. As a media creation himself, his emotions, too, would get in the way.)
The talk during the lay-off announcement is that NBC is going to invest in online.
On the whole, this is a head-fake. MSNBC.Com is successful (far more
than the news network it’s named for) and music companies desperately
need a way around Apple, so saying you’re going to put your money
online makes sense.
But to believe that "content" is where the growth is coming from online
is brain dead, and I think Jeff Immelt is smart enough to realize this.
Media companies will always use online as a defensive shield. They
don’t understand, and by their nature will never understand, that the
nature of the Internet (as a medium) is interaction, interactivity, the
audience creating the show itself. Unless media companies can steal
that creativity for themselves (and folks don’t give it away for long)
they’re never going to "get it." (Anyone heard from iVillage since NBC
bought it? I didn’t think so.)
So what happens now? If you work at NBC, don’t ask anymore.