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, April 30, 2010

Michael Moore's "Capitalism: A Love Story"

I have never written a movie review before in Media Realism. But, having seen Michael Moore’s latest documentary “Capitalism: A Love Story”, I feel compelled to comment on it.

Michael Moore is a 56 year old film maker from Flint, Michigan. He burst on to the scene with “Roger & Me” back in 1989 which took direct aim at General Motors. Over the years, he added many documentaries including “Bowling for Columbine” in 2002 which covered America’s love affair with guns and tendencies toward violence, “Fahrenheit 9/11”, a 2004 hatchet job on George W. Bush, “Sicko” from 2007 which discussed our lack of comprehensive health care compared to other Western nations, and most recently, his 2009 entry, “Capitalism: A Love Story.”

I must confess that I do not particularly like Michael Moore. Some people have told me not to watch his films; a few others not to write this blog entry. But, I have always held that if you do not see or read something, you cannot ethically complain about it. So, I screened the film twice (thank you, Netflix).

“Capitalism: A Love Story” covers the events surrounding and the aftermath of the financial crisis of late 2008 and early 2009. We still feel it today and will be paying for it for decades. Moore’s thesis is that capitalism or the free market is inherently unfair, even evil. Capitalists in the film are portrayed as greedy and unfeeling. This week his message probably strikes a responsive chord with many who witnessed the arrogance of the Goldman Sachs senior team testifying in front of Carl Levin’s senate committee. Repeatedly, they dismissed questions from the unusually well prepared Senators with comments such as “Senator, do you really understand what it is to be a market maker in a security?” I watched a good bit of it on C-Span and was very annoyed (Yes, I lead an exciting life!).

Moore goes to great lengths to say that those on top are in an endless search for profits. Reviews of the film in some quarters say that the investment bankers (or is it banksters) are really the true life embodiment of of Milton Friedman’s famous quotation—“There is one and only one social responsibly of business: to use its resources and engage in activities designed to increase its profits.”

Well. They never really read Friedman. I started at 19 and have since devoured virtually everything he ever published. The quote is a fragment from a now famous New York Times Magazine article in 1970. Here is the actual sentence that is rarely quoted in its entirety—“There is one and only one social responsibility of business: to use its resources and engage in activities designed to increase its profits SO LONG AS IT STAYS WITHIN THE RULES OF THE GAME, WHICH IS TO SAY, ENGAGES IN OPEN AND FREE COMPETITION WITHOUT DECEPTION OR FRAUD”. (Emphasis mine)

Friedman is actually calling for regulation and ethics! Moore throws all of us free market, free traders into the same cesspool as investment bankers who may have willfully packaged up crap mortgages and sold them to unsuspecting investors while they sold them short simultaneously. The truth is that there are millions of us who engage in honest exchange, pay our taxes, and stand behind everything that we sell. It is not the system that is evil; it is merely some of the players.

Moore is a film maker and at times, a good one. There is a lengthy scene in the film about a family in Illinois losing their farm as they could not handle increasing mortgage payments. Unless you are completely hard of heart you have to be moved by it. The segment reminded me of an updated version of Steinbeck’s “Grapes of Wrath” without John Ford’s brilliant direction and cinematography and Henry Fonda’s stunning acting.

He also has some humor. At the end of the film, he arrives at Goldman headquarters perhaps at 6 am and blocks the entrance to the building with police tape emblazoned with “Crime Scene.” It reduced me to uncontrollable laughter.

These touches give Moore’s superficial analyses some traction with many people. Compare this to the marvelous and important documentary on America’s budget crises entitled “I.O.U.S.A.” Meticulously researched and featuring deficit hawk David W. Walker, billionaire Warren Buffett, and libertarian congressman Ron Paul, it lays out our difficult future clearly. But then it becomes repetitive and very boring. Moore, on the other hand, knows that he has to make you laugh and cry and often hits the mark.

The low point of the film to me is when he interviews some priests as to whether capitalism is a moral system. Instantly, I thought okay, he will have an economics professor from Georgetown, Boston College, or Notre Dame on to discuss it. Nope. He had the parish priest who officiated at his wedding in Flint, Michigan, another who was the church’s witness at his sister’s wedding, and finally a Detroit bishop. The trio all said capitalism was not moral. They all seem like splendid fellows but what expertise do they have in the economic arena?

Those of us who are Catholics know that priests and bartenders often serve as the poor man’s psychiatrist. So, if you were ministering to the faithful in Flint or in Detroit the last 30 years you would get an earful from struggling people as the domestic auto industry went south. But does the arrogance of GM ignoring consumer behavior trends make the system immoral? I think not.

I have always counted myself lucky. Roughly 4% of us were born in the United States. That gave me and most of you a tremendous leg up in life. But imagine if capitalism never evolved into being. Our ancestors would never have escaped to our rocky shores and unlimited opportunities. Even on my worst day, I realize this. Capitalism helps people. Certainly, you have freedom to succeed and also to fail and some do. But most of us are far better off with a free market. Had we not had economic freedom, my ancestors would never have come here. I would not exist, period. But somewhere in Monaghan County, Ireland there would be a fellow with some of my genetic history scrambling for a living working a potato patch for an absentee British aristocrat.
The market system is not perfect but it is the best system known to man. Moore’s blanket condemnation of capitalism is superficial and unfair. With proper regulation and Friedman’s concept of “open and free competition without deception or fraud” we can right the ship and move forward.

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

Friday, April 23, 2010

The Case of the Vanishing SKU's

The other day I was in a supermarket line. A lady in front of me had a very large order and sent her 10-11 year old daughter back to the aisles to pick up a can of pumpkin as she took her many other items out of the shopping cart. The child returned moments later and the mother shouted at her saying “We don’t buy Libby’s. They are a Nestle company. Nestle is despicable”.

Relax. This post will not be a diatribe against Nestle, the world’s largest food processor. I felt bad for the little girl who was clearly embarrassed by her mother’s outburst. But then I began to laugh softly to myself as the mother hoisted a case of Poland Spring water onto the conveyor belt. Guess who owns Poland Spring? Why, Nestle, of course, which also owns Arrowhead, Deer Park, and Ice Mountain among others in the U.S. bottled water space. Even passionate activists and insensitive parents have a hard time keeping track of who owns what these days.

Over the last 30 years, there has been quite a consolidation in foodstuffs and household and personal products and I have observed a certain pattern with it. First, the company, a large one, goes on a shopping spree and buys up a few competing companies or brands. Then, heavy with debt, they shut down a plant or two (often in the U.S.), cut overall production, lay off staff, and then begin to eliminate products. It is not uncommon for 15-20% of Stock Keeping Units (SKU), the code for every item in a store, to vanish for a company within a given year. Sometimes, they pay a heavy premium for a company and several of the brands are gone very quickly. Over time, this leads to fewer niches in the marketplace except at the high end where smaller players often still abound.

Competition still exists although there are categories such as toothpaste where the two major players control 80% of the handle. Few know it because the brands are generally identified under their old corporate names on the packaging. Part of this is natural in a rapidly changing world where the concept of Creative Destruction as articulated by Joseph Schumpeter comes into play (for more on Creative Destruction, see Media Realism 1/30/09).

But, over time, our choices are getting a bit more limited and they congregate to the big companies which have a whole family of offerings in a category. Barry Lynn, an astute retail observer and author of the recent book Cornered put it this way—“Do you think it is hard to get your child into Harvard? Try getting a new product onto the shelf of a big chain of stores in the U.S.”

Each year some new ones break through and some old ones survive as independents. But they face slotting allowances for shelf space, lack of marketing dollars, lower name recognition, and tough retail demands on packaging, pricing and content if they want to play at Wal-Mart or Target. It is no wonder that some sell out. Imagine that you built a modest brand up from scratch. You are sixty years old and Coca-Cola, Nestle, Kraft, or Kellogg comes to you with a buyout offer. They offer you a tax deferred swap of your equity for 1 million shares of Coke, Kellogg, 1.3 million of Nestle, or two million of Kraft. Each company tends to raise the dividend each year so you know that your children and grandchildren will have ever increasing payouts as far as the eye can see. They give you a management contract as a consultant for a few years and then sever the ties with you. You lose your baby of a brand but the dividend checks come every 90 days. As Hemingway once said, “Money does not buy happiness but it soothes the nerves.” It has to be pretty tempting.

Invariably, we will see more of this. A small investor who e-mails me frequently buys companies that he feels will be gobbled up. His latest gambit is Heinz (HNZ). He wrote to me that sooner or later Nestle has to buy it and meanwhile you collect a nice little income while you wait. My opinion is that Nestle does not have to do anything and will make their own decision. At the same time, some people will likely make money buying large but second tier players that will at some point be gobbled up by the behemoths.

How does this relate to the communications field? Plenty, I believe. Over the years, I worked on several food brands and many financial institutions. The food brands are either extinct or owned by a conglomerate and the banks are all gone; every single one. For years, they were a mainstay for small and mid-sized ad agencies. They were immensely profitable pieces of business, let you do fairly good work, and gave you a million or two extra media dollars in your local community. Since 1980, the U.S. has lost a bank almost every working day due to buyouts or mergers. And, in the last 18 months, the Federal Deposit Insurance Corporation (FDIC) is closing 5-7 banks per week. If a larger player takes over the assets, local agencies lose nice accounts.

In foods, the same thing works. Many agencies that I know well or have worked at had package goods accounts in the $8-12 million dollar range. You get to do some nice creative, the account and media teams learn some package goods disciplines and you buy some national media. Everyone involved at the shop should become a better marketer as a result of having a food account on the roster. As these companies get gobbled up, the media immediately leaves for the conglomerate’s buying arm, and the creative almost always follows.

Broadcasters and local cable players also get hurt as the new owners either go 100% national with the brand as part of a multi-product buy, morph the entity (bank) into their national/regional name, or maybe shut down some of the product lines.

This is one more challenge that small and mid-sized agencies and local media will have to face in the years ahead. It has been there for a long time but as the economy recovers, M&A activity is likely to accelerate later this year and many will feel the pinch through no fault of their own.

Finally, allow me one more personal story. Not long ago, I was at an all day meeting at a company. We had lunch in the conference room followed by a break so people could get to their blackberries and e-mails for a bit. I used it to grab my toothbrush and Colgate from my bag and head for the men’s room. As I was applying the dental crème to the brush, a pleasant young fellow from the meeting pulled up to the sink beside me and began to do the same thing. “Why do use Colgate?”, he asked. I told him that I liked the taste as a kid, have pretty much stuck with it, and have not had a cavity in 45 years. He smiled and shook his head and said, “I avoid buying from big companies. That is why I brush with Tom’s of Maine”. I did not have the heart to tell him that in 2006 Tom’s sold out to Colgate-Palmolive.

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

Saturday, April 17, 2010

My Man in The Arena

Almost exactly 100 years ago on April 23, 2010, former president Theodore Roosevelt gave a speech at the Sorbonne in Paris, France. The youngest man ever to serve as president (Kennedy was the youngest elected), Roosevelt was then a very vigorous 51 who had just returned from a safari to Kenya. Over two months he made a whirlwind tour of Europe meeting with heads of state, ambassadors and social leaders.

The speech at the Sorbonne was vintage Teddy. He advocated living a strenuous life and hoped for peace and harmony among all civilized peoples. One passage from it is quoted frequently even today. It is practically one long rambling clause with punctuation from T.R., not I. The quote is:

“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”

I knew a man who fit that description perfectly. Roughly 30 years ago, a salesman for a magazine asked for an appointment. When he arrived a week later, I was startled at how young he was and how incredibly well prepared he was for the sales presentation. He knew more about my client’s business than the account supervisor at the agency. We talked for quite a while and I recall telling my wife that night that I had met a kid who would blast through our industry like a rocket.

It did not happen. Over the years he called on me from a variety of publications, cable entities, sales promotion firms, and finally internet startups. We would lose touch for a year or two and then he would always surface someplace new. When e-mail came on board it was rare for a month to pass without an excited message from him about some aspect of our changing industry. I used him as a sounding board for ideas and he was generous with his time.

I have never met anyone who struck me as being so alive. His energy and enthusiasm for our business stunned me and I am known as someone who loves it a great deal. One night we had dinner in Dallas followed by four hours of debate, discussion, laughter and several after dinner coffees. As I was driving home, I was humming something and cracked up when I realized it was “Lovin’ of the Game” that Judy Collins popularized so long ago.

Some key lyrics to refresh your memory are:

All my life I’ve searched around
Traveling hard from town to town
But I never found anything to tie me down
Still I would not trade my time
For a solid diamond claim
No, I would not trade my fortune
For the lovin’ of the game


My friend was not perfect. He had no patience, never learned how to stoop to conquer, and did not learn how to work around superiors who were inferior intellectually, morally, or in terms of work ethic. The rest of us usually did and survived and prospered. Money had little appeal—he loved the work and gave every day every ounce of energy that he had.

A couple of years ago I was sitting in my office on a Sunday afternoon putting together a presentation deck. The phone rang, and I knew instantly who it was by the big laughter filled greeting. He was driving through Atlanta on route to the Carolinas. Could I come downstairs and have coffee at Starbucks? Five hours later I put my caffeine laden buddy in his car and on the way to Raleigh. We had discussed the future of communications at a level of intensity and honesty that I never thought possible. I never saw him again.

When I began this blog, he was wildly enthusiastic. Some days he was full of praise; other times he had tart and brilliant criticisms. In January, the messages stopped and I got worried. When I sent him a few e-mails, they bounced back. Several weeks ago, another old media fossil wrote to me that our mutual friend was dead. He was felled by a massive coronary and he died very quickly while on the road. He left behind a much loved son whom he often told me about and, to my surprise, three ex-wives.

Since his passing I have received several messages from those who knew him. Most say gently that he was a hard worker who never made it. Others said he was an undisciplined dreamer who could have done well if he had swallowed his pride a bit and stuck it out with a few employers.

To me, he will always be Theodore Roosevelt’s “Man in the Arena.” He was not as Roosevelt noted “one of those cold and timid souls who neither knew victory nor defeat.” He knew defeat but it never seemed to get him down for an instant. His sense of life and love of our business made us all look like timid souls. He never had a “big” job and his life was not long in years. But he never settled for mediocrity and never dropped his integrity for an instant or tried to rationalize his way out of things. I really miss him.

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

Friday, April 9, 2010

A Modest YouTube Proposal

YouTube has been around for a little over five years. It is a popular site for many of us. The amateur nature of it appeals to us and it is a great way to find performances from decades ago, the latest in home made films, political and economic views of uncommon opinion, and work that friends and acquaintances have produced.

In 2006, Google purchased YouTube. At the time, I remember writing to clients and colleagues and mentioning in presentations, that Google would soon monetize YouTube and probably create a whole new product that I dubbed GoogleTube. Well, several years have passed and I am still wiping the egg off my face on that forecast.

Today, I risk more embarrassment and humbly make a suggestion to the uber-smart boys and girls at YouTube.

Virtually overnight, Google could launch a new television network. Maybe they would call it GoogleTube (I don’t give up all that easily!). Google has been a financial phenomenon largely because the company rarely missteps. For nearly four years, however, they have failed to monetize YouTube much and they continue to lose hundreds of millions of dollars annually with it. Yes, Google's pockets are very deep indeed. But, those kinds of losses have to annoy someone. I am certain that some substantial shareholders are not thrilled even with the solid stock market performance of late.

Why a network and how? Well, they have the platform basically set up with YouTube. There are no affiliate relations problems, no brick and mortar to build, no owned and operated stations. Google could fund a number of TV series of varying lengths and content with rounding errors on their cash flow.

How should they do it? A simple solution to me would be to steal shamelessly from the Hulu.com model. Make the network advertiser supported from the day one. People could watch GoogleTube programming where and when they wanted it. Commercial load would be light as is true with Hulu.com

Some advantages:

1) Hulu.com is restricted to the U.S. While the new census is still going on and results will not be out for a while, it is a safe assumption that Hulu.com is ignoring somewhere between 95-96% of the world’s population.
2) From day one, think of the appeal of GoogleTube to brands with a large global presence. The big soaps, Bud, colas, Apple, Nike, Nestle, Kellogg, General Mills, Toyota, BMW and a host of other major brands would love to send out a worldwide message to young English speaking people (and those learning it) quickly and easily.
3) YouTube or GoogleTube would have instant credibility. It would be easy to navigate and hundreds of millions use it now anyway. Over the Easter break, I had coffee with two young Media Realism readers who also are easily my most severe critics. They said YouTube had no credibility as it was an amateur site with home made material. I countered that maybe that would strengthen a change to a name like GoogleTube for the network product. I disagree with them about credibility and feel that 95% of the people would not care. With good programming, the YouTube stigma, if it really is there, would fade quickly.
4) Imagine you are a producer, writer, or actor or actress. Would you like to work with a US network or cable channel or instead have your program fanned out WORLDWIDE from day one? That has to have some appeal.
5) Google is, to put it mildly, well financed. They can give it time to develop and can afford to add new programming quickly. They could even pay amateurs for some content they thought was good or split some ad revenue with them in a meaningful way.

Somewhere at Google they have to be wrestling with the monetization of YouTube. My modest idea of GoogleTube could have surprisingly strong legs.

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