Featured Post

Jennifer Aniston is 40!

Those of you who know me or have become frequent readers of Media Realism might be more than a little surprised by my People Magazine style ...

Friday, July 21, 2017

The Graying of the West


This is a topic that I have touched on in posts a few years ago. It needs a revisit as the demographic urgency has increased yet virtually no country affected by it has taken any meaningful steps to reverse the situation.

Aging has been increasingly evident in many Western nations for some time. Also, it is a long standing even drastic situation in Japan, and a big problem in Russia and China as well. It all starts with ZPG.

ZPG stands for Zero Population Growth. You need fertility rates of approximately 2.1 children per woman to replace each existing generation. As a young person, I never was much concerned with it but now, incredibly, some 60% of the world’s population lives in nations with fertility rates below ZPG.

So what, you may exclaim. This is good. Fewer mouths to feed and fewer people to pollute Mother Earth. One cannot argue with that although it shows a lack of faith in technological advancement. The problem is that since World War II ended in 1945 virtually all Western nations have created some form of social safety net. In the U.S. we have Social Security, Medicare and Medicaid. In Europe, it is often referred to as retirement schemes and universal health care. All good in many people’s eyes but can the West continue to pay for it?

The European Commission published a paper a few years ago, that made even an experienced demographer such as I reel. By 2060, the German population will drop by a fifth and people of working age will plummet from approximately 52 million now to 36 million! Some dismiss problems with a smaller workforce saying that increased productivity will bail us all out. It will certainly help but caring for the massive increase in the elderly will put tremendous new pressure on the finances of even the most solvent governments (yes, there are a few left)!

To be blunt, what is going is a generational Ponzi Scheme of epic proportions. It is not brain surgery--it is simply demographics and plain arithmetic. As life expectancy increases and fertility declines, those younger people who are still working will have to pay a great deal more to take of the elderly in many, many nations.  Many will have to depend on immigrants assist the elderly. Looking ahead a decade or two, these entitlements for the elderly will likely suffocate even the most robust economies.

Keep an eye on Spain and Italy. Both countries have had economic challenges for some time but as the societies continue to get older, the strain on their “provider state” will get intense. In the US, we have SOME breathing room. Social Security will stay solvent until 2034. Medicare/Medicaid is anyone’s guess as both Republicans and Democrats argue over health care. What both sides fail to address is the rising cost of healthcare. How will an aging population pay for it?

China is really facing a ticking bomb. Candid Chinese analyst’s refer to their “4:2:1” problem. Mao’s limit of one child per family in many provinces decades ago has created a situation where and adult child is asked to care for both parents and sometimes four grandparents. The World Health Organization projects that China will likely have more patients suffering from some form of dementia than the rest of the world combined by the year 2040. Think about it. It is frightening.

The nations of the world need to shift gears. Here at home we need to means test Social Security and raise the age for distributions or the system could collapse. Also, some health care proposal has to be crafted that whittles down the Medicaid burden and does not try to place it on the backs of the poor who simply cannot pay for it. Will we react in time?

Separately, a few words about senior marketing. Looking around the world, many countries seem to be doing a better job hitting the 60+ demographic than we do. In Canada, I have seen commercials aimed at the mature touting private label goods in supermarkets. Seniors are often financially challenged and are more careful shoppers, than younger adults. Also, they have more time. In Singapore, a flagship company, Singapore Telecom, known as Singtel, ran a highly imaginative campaign called Project Silverline a few years ago. The telecom behemoth asked for contributions of old iPhones and then retrofitted them by adding apps designed with senior users in mind. Very attractive plans were set up for seniors who might be on a tight budget. I would be interested in a similar plan at some point and will likely love a phone with larger keys as I get increasingly far sighted with each passing year.

In the U.S, many products aimed at seniors are almost comical. A few years ago, I was looking for CNBC and hit the wrong digits on my remote. Up popped The Andy Griffith Show. I watched for a few moments and realized it was my favorite episode ever, “Barney runs for sheriff.” For 20 minutes I was back to 55 years ago and laughed heartily at Don Knotts and Griffith. The commercial breaks were another story. Clearly, the DRTV advertisers realized that the viewership was old. A two minute spot appeared for the questionable reverse mortgages with a spokesperson actor whom I had not seen in years. Hemorrhoid remedies and denture adhesives followed finished by a spot for an alert bracelet for the elderly living alone. So, we seem to have a need for more nuanced marketing to the growing legions of the elderly in America. Some upscale players for financial institutions and luxury vacations do a nice job but few others are adequate.

So, the West has some challenges ahead and, while few will dispute the facts that I have laid out, even fewer feel moved to do something about it. Someone told me not to concern myself with it as “you will be dead before this really kicks in and, meanwhile, you get all the benefits.” Maybe so, but what kind of answer is that? If you have children or grandchildren, you have to care about the demographic cliff.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, July 14, 2017

The Stealth Disruption


A few months ago a young adult approached me who said that he was working on a research paper for a graduate course. He asked what my opinion was on the most disruptive forces affecting businesses around the world. I assumed, and I was right, that he expected me to talk about advances in technology in the years to come. Instead, I threw him a curve ball that, as an American, he did not expect.

The big disruption that I mentioned to him was the shifting center of economic growth. The significant changes are going to be in emerging markets and, more subtly, to new cities within those countries with likely explosive growth.

Where did this concept come to me? Over 15 years ago, I woke up ready to go to work. A snowstorm was in progress. Not severe as the ones that plagued my native New England but one which paralyzed the southern city that I was working in at that time. So, I poured another cup of coffee and decided to wait a couple of hours before trying to  head to the office. As I relaxed, I picked up a neglected copy of FORTUNE magazine that had hanging around for several months. It was their annual issue highlighting the Fortune Global 500 and, with time on my hands, I studied the membership roster carefully. The list showed that well over 90% of the world’s largest companies were domiciled in developed countries dominated by the U.S., Japan, and Western Europe. Since then, I have tracked the list each year with a bit more caution. Dozens of newcomers have joined the international 500 as is typical of the creative destruction present in our 21st century world. Last year, I read a report from the McKinsey Global Institute that projected by 2025 China will have more billion dollar revenue companies that either the United States or Europe and that more than half of the 2025 large players will call an emerging market home. So, economic power is going to shift and perhaps faster than we can imagine to selected countries in Asia, Latin America and the Middle East.

There is a real sleeper in all of this and I tried very hard to articulate to the earnest young graduate student. It is not just that countries are seeing explosive growth relative to the developed nations of the West. A key issue is that entire new cities are emerging in these fast growing markets. On 5/22/12 I put up an MR post entitled URBANIZATION, GLOBALIZATION, AND MEDIA. A key take away from that post was that, amazingly, EVERY DAY, some 180,000 PEOPLE around the world moved from a rural area to a city. McKinsey has estimated that some 65 million people get urbanized annually. To put it in to perspective for American marketers, that is the equivalent of seven new Chicago DMA’s being formed annually. Marketers and reasonably informed citizens have all heard of Hong Kong, Shanghai, Dubai and probably Mumbai. Yet, the real dynamic growth will come from cities that most of us have never heard of ever. Again, quoting McKinsey, they are forecasting that 46 of the top 200 cities in the world will be in China by 2024. Can you name 46 Chinese cities? How about 10? I know that I could not prior to attacking this issue.  Soon Tianjin, Shenyang, Harbin, Chengdu, Taiyuan and a host of others will hit the radar screens of astute marketers.

Think of the possibilities of this growth. The UN has projected that between 1990 and 2025, some three billion people have or will become members of what has been dubbed “the consuming class,” meaning that they will have $10 of disposable income per day. A large proportion of these new consumers will be living in the cities of emerging economies. By 2030, they will account for half of the world’s spending!

All this will impact media as well. How will you reach all these new consumers? Within large countries, everyone will not be speaking the same language. An acquaintance told me to forget about it--advertise on You Tube and other global properties as everyone speaks English. He is clearly not a seasoned traveler as people everywhere, especially this new breed of consumers who are newly arrived urbanites, likely speak only their native tongue. Mobile advertising has to be a huge beneficiary of this rapidly growing trend.

So, quietly and steadily, these new cities will emerge and join the million population club. Perhaps, more importantly, they will have many newly minted members of the consumer class.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Friday, July 7, 2017

Small Town Blues


As many of you know, the Nielsen company divides the U.S. television universe into 210 separate entities know as Designated Market Areas (DMA’s). New York is clearly the largest and tiny Glendive, Montana is the smallest and ranked at #210.

A few months ago, I received an e-mail from a small market operator asking why I did not devote an MR post to markets with a low Nielsen ranking. A bit later I heard from an old associate who still toiled in a tiny market asking basically the same thing.

Hence this post. I contacted several people across the country who were either general managers or sales managers in markets ranked #110 (Ft. Wayne) to #180 (Marquette). For those of you who are amateur detectives, I did not speak to anyone in either Ft. Wayne or Marquette!

Small market TV was once a great business and then it morphed, like all over the air TV, into a good business. Now, according to my wildly unscientific sample of seven small town broadcasters and sales executives, it has a new set of struggles.

Here are some comments (some edited) from all of the participants:

--“When I talk to my competition or players in broadcasting in neighboring markets, they seem to be in a time warp. At a golf outing recently, I told a competitor that he was sleepwalking to disaster. He did not like that but he still seems to think that it is 1977 instead of 2017. The game is not over but big cracks are evident in our facade.”

-- “Last year, a local cable interconnect nabbed my most experienced salesman. I could not afford to keep him despite pleas to our owners to up his compensation. He now is stealing many of our long standing local retailers with zoned buys that deliver far less waste than we can because we cover the entire DMA. Also, he can tap into canned promotions from ESPN and others that we cannot match.”

--“I can tell you what is killing us in one word--Amazon! We lost four retailers on Main Street this year. When I drive to work each day I see the boarded up stores and it kills me. One was a clothing retailer that allegedly had been with the station at some point in every quarter for the past 62 years! Now, with more buying online and the trend toward casual clothes, he had to liquidate. Retail is in real trouble. Our local mall’s days have to be numbered.”

--“Headquarters keeps telling us to improve our news product. I was always proud of our local community involvement but the newscast was always poor. People over 70 watch it and many probably don’t have cable. A U.S. Senator stopped in to town the other day and I told our anchor to ask some pointed questions about the upcoming GOP health care bill (we are in a non-competitive market but this was real news). He did not want to do it. I almost choked when he said he might get a better response if he asked the Senator about the college football season this fall. Furious, I made him ride to the deli that was providing the food for the staff party that we were hosting for the Senator’s visit. I read him the riot act in the car but when we went in to pick up the platters, everyone surrounded him as if he were a movie star. It drives me crazy. We have a crap news product but the locals, who still watch over the air TV, love it.”


--“Technology has helped us a lot. We do not do local weather. A weather man from another one of our corporate markets does it via remote and it seems to work. Also, we can send a reporter out with one other person or sometimes alone to do a story so that cuts down on costs. We are so small that we still do Video News Releases on slow news days. Hell, every day is a slow news day here.”

--“We have never recovered from the Great Recession. I see no hope for turning our town around. Not to get political, but our local hospital may have to close depending on what health care bill the Senate cooks up soon. Why would anyone want to retire here or raise children or give birth to children if the nearest hospital is 150 miles away?”

--“I have had a great run. When I started, I did two years in a top 10 market and that was enough for me. We did a good job for decades for our small clients. Now, I know that TV does not work nearly as well as it once did. I feel guilty sometimes with clients as the returns are sad compared to years ago.”

-- "Automotive has always been our bread and butter. Local dealers make or break us. A dealer who is a close friend is alarmed. Customers have been getting seven year loans for a number of years. The problem is that they return five years later still under water on their pickup truck but need a new one. They have no cash for a down payment but they need a vehicle for commuting to work. He finances nothing but the local bank will as does his manufacturer. He sees a big problem coming. If we lose a chunk of automotive advertising, we will never hit sales goals.”

Are these comments truly representative of all small market DMA’s? Well, three players were from rust belt markets in the Midwest so perhaps the comments are a bit gloomy. One thing is certain, however. The media landscape continues to change and you cannot hide out in rural America on the assumption that Amazon cannot touch you.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com






Friday, June 30, 2017

The Staying Put Trap


A long time ago I was on a panel at a conference. We had all presented different aspects of the media landscape and the moderator said he was going to hit us with some big questions. Most were pretty vanilla but, at the end, he asked each of us to discuss briefly a strength of the America economy. We all had to think fast and the early answers were obvious things such as our relatively free market, American entrepreneurship, and rule of law. The guy next to me seemed flustered but blurted out that America had a relatively abundant water supply. People laughed but it was a pretty thoughtful response. I came last and pulled a gem out of my derriere--America, I said, had a secret strength in its economy--mobility. A few people rolled their eyes but afterward some attendees stopped me and said that they had never thought of it before.

If you look at the last 50 years, American unemployment rates have often been far below our friends in Europe as we Americans tended to be willing to move where the jobs were. I vividly remember talking to a clergyman about a small city in Italy where many families had lived in apartments in the same building for up to six generations. He said, “How wonderful” while I, the crass capitalist, said there had to be some talented people who never reached their potential by staying put for 150 years. The European Union has changed some of this but there still appears a reluctance to cross borders even if it is to another province.

Looking clearly at the data, it appears that American mobility is stalled somewhat. To me, there appears to be a few reasons. The biggest is two-career couples. If one is offered a job, a tough decision often has to be made. Can the other member of the couple find a similar job in their new city? Sometimes yes, sometimes no. What about child care? In your hometown, in-laws and grandparents often cheerfully provide it for free. That strong safety net disappears.

Some columnists on both the left and right have often questioned why more blue collar people in depressed areas don’t simply pack up and leave and go to boom towns. I read several such rants during the shale oil boom in North Dakota a few years back. Well, if you are struggling, is it easy to rent a truck, and conjure up money for a security deposit plus rent if you have no job? Week to week rentals are very expensive and you likely know no one in the boomtown. So many simply stay put.

A final issue that I observed that hinders mobility may not be obvious superficially. It is simply the American dream of home ownership. This is a deeply embedded part of the American culture. Yet, there is a problem. Owning a home often makes it damn hard to move. Back in October, 2010, Media Realism published a four part series entitled “Mid-Sized Malaise.” In part two, a talented young creative told me that he was underwater on his mortgage and felt as if he were an indentured servant at his shop where raises were nowhere in sight and there was literally no other place to work in town. I hunted him up and found that he is still there. He said, “I am not underwater on the mortgage after seven more years of payments. The problem is that my market (a mid-western city that will remain anonymous) has never really bounced back from the great recession. So, it could take me a year to sell our place. I cannot afford to go to a new market and pay rent and also continue to pay the mortgage on my home here. Also, my wife might have a hard time getting a similar job in a new market. I do a bit of freelance for people 1000 miles away but I may be stuck here forever.”

Separately, an agency chief whom I have known for decades tells me that he wanted to hire a very promising writer currently toiling in a depressed market in a flyover state. The guy was not too demanding on salary but asked that my friend buy his house as part of his employment package. My friend said that he was not in the real estate business and the deal fell through.

Some agencies hire the footloose millennials who can attach their possessions to a U-haul and arrive quickly. If things do not work out, they can leave their apartment and move on. Not so with homeowners.

So a surprising number of people are caught in a difficult situation. The downscale may not have the resources to move or a support team when they arrive at a new venue. Even potential agency stars are hamstrung by being caught in homes that are difficult to sell.

Were I on a similar panel today, I would certainly think twice about naming mobility as a secret strength of the American economy.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

Wednesday, June 21, 2017

Gresham's Law in Media?


In economics, there is a long standing monetary principle called Gresham’s Law. Succinctly, it states that bad money drives out good. In other words, historically if there were two forms of a commodity in circulation that a government gives similar face value, the more valuable commodity would disappear.

There have been many examples throughout history. I even witnessed one as a youngster. American dimes, quarters, and half dollars were largely silver through 1964. The next year dimes and quarters were a mixture of nickel and copper and half dollars had only 40% silver until 1970 when silver disappeared from US coinage. What happened? Gresham’s Law kicked in with a vengeance. I vividly remember seeing people get a roll of quarters from the bank, opening it, taking out the pre-1964 (silver) coins and hoarding them. One gentlemen at the time shook his head and told me the nation was finished as we had replaced silver in our money with cupro-nickel slugs.

Relax, I am not going to call for an immediate return to gold and silver as our sole form of money. I tell the story as, to me, it seems, a version of Gresham’s law seems to be in play in the media business.

With the growth of dozens of new platforms, advertising clutter is at an all time high and, despite protests from practitioners, advertising effectiveness is at an all time low. There is so much low quality or debased advertising currency on thousands of sites, that the most valuable outlets are getting weaker. Couple that with huge increases in advertising avoidance and you can see why launching a brand is often more difficult than ever.

What do I think will happen as this trend continues? Call me crazy but I think we will revert to a 1950’s model of sponsorships. One of my earliest memories is seeing The Men From Texaco opening The Milton Berle Show and Dinah Shore singing “See the USA in Your Chevrolet.” Maybe soap operas will make a comeback in the sense that large personal care or household product companies will sponsor programs again but they will not be daytime dramas. There will be far fewer commercial messages but the sponsor will be clearly identified. Think of the intros to Masterpiece on PBS. Programming will likely be interrupted minimally but the sponsor will be well known to the viewers.

This also sets up well for established brands and large, deep pocketed companies. They can afford to keep reminding the consumer of who they are but still reach advertising shy millennials.

The other option would be to go toward a heavy pay TV model which is really what Netflix and Hulu Plus and others are providing right now.

What do you think? Is there a modified Gresham’s Law moving in to the media world?

If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com

Tuesday, June 13, 2017

Will Millennials Become Wage Serfs?


In recent weeks, I have read several articles discussing how Millennials (those born from 1977-1995. Different demographers use varying time spans so I stuck with the Nielsen Media Research dates) may often become wage serfs. Amazingly, two people e-mailed me in the past few weeks and described the fate of some Millennials as Medieval serfs.

If you remember from grade school or a course in western civilization a Medieval serf led a pretty sorry existence. They were essentially peasant farmers who worked part time on their master’s land and, in exchange for their labors, they would get to use part of their master's land to grow their own food. It was a life with virtually no ability to rise. In your entire life, you may never stray more than a few miles from your master’s holdings.

Why are both pundits and my correspondents making such a harsh judgement? To me, it stems from an idea that most of us Americans have believed for a few hundred years. The idea is that each succeeding generation is better off than the one that preceded it. The “better off” is not just financial. It can mean education, sophistication, a healthier lifestyle or leading a life that matters.

The Great Recession of 2008-2009 had a profound effect on many Millennials. A number of observers have commented that it did long term economic and social damage to that youthful demographic. Some have said that this generation is rootless--many do not want to own homes or have allegiance to their employer. I do not see it that way. The issue to me appears to be economic hardship and fewer opportunities.

Here are a few Millennial factoids that I hope make my point:

--Seven out of ten students have borrowed for college. On balance, many people say that borrowing gives many an opportunity for a good education that they may not otherwise have. True, but student debt by definition has to slow economic growth. Many have a six figure millstone around their neck when they graduate and, unless they get in to a high paid field such as medicine or finance, they may be paying off the debt for 20 years. Go to graduate school and the meter really runs wild. Interestingly, many would be better off to attend a state school, work part time and finish in six years rather than four but few seem to want to go this route.

--Some 82% of Millennials say that they want to be home owners. Why are they not buying homes in great numbers in their late 20’s? They cannot afford it! Many are saddled with high levels of student debt and others live in wildly expensive cities. Right now, 22-35 year olds are paying as much as 45% of their salaries for apartments in cities including Los Angeles, San Francisco, New York or Miami. Others in the heartland are much lower. I remember that decades ago when I made my way in the world, rental agents would not write a lease if the monthly tab was more than 28% of your salary. So, how can Millennials save up for a downpayment when they are literally struggling to meet their monthly rent?

--The U.S. Census Bureau reports that people in the Millennial age bracket earn $2,000 less in REAL TERMS than they did in 1980.

--The Federal Reserve Bank of NY finds that for recent college graduates wages have only risen 1.6% in the last 25 years when adjusted for inflation. Put student debt and rising rents or housing costs and these youngsters face an uphill battle for achieving financial freedom.

--The Huffington Post reported that in 1990, those who took college loans only borrowed 28.6% of first year income. By 2015, the average loan is the equivalent of 78.3% of first year earnings and some owe much, much more with students loans now totally a staggering $1.3 trillion.

--The financial return on education is dropping. This may simply be the result of college tuitions wildly outstripping inflation.

So, while describing these fine young people as wage serfs offends me, I can see how many people who lack my optimism would come to that conclusion. Also, why did Bernie Sanders appeal to so many Millennials in the 2016 primaries? It is pretty simple to me. He promised free college education and universal medical care. Were I 22 years old, I can see why that might be appealing!

Are Millennials doomed to be 21st century serfs? I hope not. Yet, as logarithms gobble up more and more jobs and technology marches forward, young Americans are really going to need to differentiate themselves in the labor pool to keep the American dream of upward mobility with each generation alive.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.



Saturday, May 27, 2017

Weapons of Math Destruction

Today, like it or not, all of us live in the age of the algorithm. Some fairly big decisions in our life--be it a choice of university, getting a home mortgage, a reasonable car loan and the cost of our health insurance are now made by mathematical models, not human beings.

Banking titan J.P. Morgan testifying before congress over 110 years ago stated that credit was something that a person brought with them when they applied for a loan. It was as much about character as it was about financial creditworthiness. Not so any longer!

A model, often grouped under the term “Big Data,” determines whether a loan is approved and what terms you will pay. Early on, many of us thought that this would be a wonderful situation as bias, cronyism, and discrimination would be eliminated.

In a recent book entitled WEAPONS OF MATH DESTRUCTION (Crown, 2016), Cathy O’Neill says that the reverse is happening. The subtitle to the book is “How big data increases inequality and threatens democracy.”

Now, be aware that this book was NOT written by some bomb tossing emotional left winger. Ms. O’Neil has a Harvard PHD in Mathematics and has served as a quant at the prominent hedge fund D.E. Shaw. Disillusioned with the world of finance, she has shown involvement and sympathy for the Occupy Wall Street Movement. What she does, for sure, is expose the dark side of Big Data.

Her principal thesis and it is a very well reasoned argument is that many people are stuck where they are in America today because Big Data has, to a certain degree, locked them in a life of mediocrity. Smart kids from certain zip codes will not get approved for student loans, or may pay significantly higher rates for car insurance and auto loans.

Hourly workers are sometimes victims of modeling according to Ms. O’Neil. Take someone working at a fast food restaurant or even a casual dining establishment. Employees sometimes get their hours the day before the next day’s schedule is announced. This becomes a child care nightmare for many. Others close a store and then open it the next morning but do not know that until midday. The firm, often a franchise, has a sophisticated algorithm that determines the optimum use of employees. Great for them but it messes with the lives of many staffers. When Starbucks was alerted to this issue, they began publishing workers hours a week ahead of time which was a great help to many.

On the plus side, Big Data is a marvelous thing to those of us who are affluent. We can get great deals on airfares, sales on high ticket items, or reviews of hot new and reasonably priced restaurants that many Americans would never be able to afford. Amazon knows our every move in purchasing but we do not mind much as their logarithms place us in certain demographic and lifestyle “buckets” and we are offered prohibitively great deals on many items. The WALL STREET JOURNAL reported recently that even Neiman Marcus loyalists are now abandoning their favorite store and buying the same luxury goods online at a significant discount to the set price of the high end Dallas retailer.

Do I buy Ms. O’Neil’s thesis? Yes and no. As a marketer, Big Data gives you an edge that is incomparable to any tool that you could work with in the past. It is far easier to forecast who will buy certain items if you have a plethora of data points about a prospect and his or her lifestyle. If you are loaning money, it only stands to reason that you charge more to someone who has a lower probability of paying you back.

To me, Ms. O’Neil’s most powerful point is that there is no human element involved anymore in so many financial agreements. Some people have errors in their credit history and no machine double checks the veracity of them or tries to clear them up. Also, some people regardless of the health of their personal balance sheet are highly trustworthy.

Ms. O’Neil writes with great clarity. I highly recommend it and encourage you to reach your own conclusions. If you work in any aspect of marketing or finance, Big Data is here to stay and needs to be evaluated carefully.

If you would like to contact Don Cole, you may reach him at doncolemedia@gmail.com
or leave a message on the blog.