Given what I wrote recently about the problems of media, and the differences between H-P and GE, I reckoned it would be prudent to comment on the NBC lay-offs. NBC is owned by GE.
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.
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