On August 27th, The Wall Street Journal published an article entitled, “In house agencies on rise as advertisers seek services closer to home”. I found it interesting and mildly surprising. Three MR readers coincidentally e-mailed me the link and asked that I cover the topic. Hence this post.
Over the years, In house advertising agencies did not have the greatest reputations. Generally, they were formed as a means for the parent company (the advertiser) to save money. Agency people were often their worst enemy. Clients came to believe that agency staffers were arrogant and charged too much for their services. They also flaunted their high incomes. Many is the time that I arrived with a creative or management rep at a client meeting in one of their Mercedes or Jaquars. The client would sometimes say something to me afterwards. They felt that the agency team was rubbing their affluence in their faces. Agency people also often talked of their fabulous vacations to marketing people client side who were struggling financially. It did not play well and, years later, when I ran in to former clients, it has often been a topic of conversation. So, many felt that a move inside would save a boatload of money and the work would be almost as good.
On the negative side, there was a stigma for many regarding working at an in house shop. The conventional wisdom was that there was little turnover and a true ad pro would want the fast pace of traditional agency life and enjoy pursing new business plus working on a variety of type of businesses. Many of my peers said in house was great for collateral material or grinding out coupons or Free Standing Inserts but fresh thinking had to come from the sharpies at ad agencies. If you worked on only one piece of business or category, you would get stale.
Things appear to be changing and in more ways that the splendid Wall Street Journal piece discussed.
I hunted up some people who I knew casually who worked at in house shops. A few former colleagues put me on to some others. Here are some comments from people currently working in house:
—“We went in house several years ago. It was a good decision. We move quickly (no waiting for our big shop to get a work starter wending its way through the creative department), save money, and our people know the brand. Our company is the brand. Amazingly, some agencies do not get this.”
—“Friends made fun of me when I went to a large in house shop. Well, the staff is professional and the hours are great. Sure, I work late every now and then but I only went in on two weekends last year. No new business to pitch so we focus on our assignments and are really good at time management.”
—“I am a single Mom and the benefits at my huge company dwarf that of any agency that I worked at. The health care package and 401k is so much better than my agency experience. Also, twice I was let go when my shop lost a big account. I was told that I did nothing wrong but they had to cut expenses. I do not have to worry here about what you often refer to as ‘the leaky barrel’ of agency/client relationships. It is not totally secure but better than I have ever known.”
—“The stigma of working in house is lifting. I like the better hours and benefits plus the salary is comparable to ad agency levels. We are nimble here and there are far fewer levels of review. Also, we do not suffer under an egotistical creative chief who hates ideas that were not his.”
—“Ad agencies do not get it. As a total percentage of marketing spending, advertising continues to decline here. Also, we deal directly with Google, Facebook, and lately, Amazon for our on line advertising needs. The reps are young, smart, state of the art, and, AND THEY LISTEN! I see us using a free lancer or two in a few years for theme lines or a new set of eyes but we will not need an outside agency much longer.”
—“As we move to digital, we deal with the FANGs sans Netflix. What pros!”
Agencies are not going to disappear. Yet, in an era when accountability continues to become more prominent and measurement metrics improve, the trend of a movement toward in house shops seems likely to continue.
If you would like to contact Don Cole directly, you may write to him at doncolemedia@gmail.com or leave a message on the blog.
Saturday, September 22, 2018
Monday, September 17, 2018
The Allure of New TV
Last week, many of us in the media world were surprised but pleased by the launch of a unique venture—New TV. It is the brainchild of two powerful executives—Meg Whitman, the outgoing chair of Hewlett-Packard and Jeff Katzenberg, a founder of Dreamworks and the former head of Disney’s movie studios. They raised over a billion dollars for the launch and did it very quickly with an amazing array of businesses providing seed money including Disney, NBC Universal, Alibaba, Facebook, Viacom and in the financial world, JP Morgan Chase and Goldman Sachs.
Right now, Ms. Whitman and Mr. Katzenberg are projecting a Christmas, 2019 launch. The service will provide “on the go mobile viewing” with much newly created content being about 12 minutes per episode for New TV series. You may ask why would people want to watch on their phones. Well, currently, the average person spends four hours per day on their mobile device and approximately one hour per day is with video content.
In terms of technology, they are are projecting an improvement in quality and also will be ready when the move to 5G occurs in a couple of years. When I bounced this idea off a number of people in recent days, there was a very sharp demographic divide. My contemporaries seemed to be skeptical of people watching series video on their phones although two mentioned that the new Apple phones will have larger screens. Those whom I canvassed in their 20’s were much more enthusiastic and some liked the idea of briefer episodes.
So, once again, conventional media is threatened. These two executives have a wonderful track record and are unusually well connected in both creative and financial circles. I am VERY curious to learn what they plan to charge for the service. How much will people be willing to fork out for “New TV”? Remember, many of us doubted people who be willing to pay for music but that has been proven to be totally wrong.
What do you think? I would love to hear from you.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Right now, Ms. Whitman and Mr. Katzenberg are projecting a Christmas, 2019 launch. The service will provide “on the go mobile viewing” with much newly created content being about 12 minutes per episode for New TV series. You may ask why would people want to watch on their phones. Well, currently, the average person spends four hours per day on their mobile device and approximately one hour per day is with video content.
In terms of technology, they are are projecting an improvement in quality and also will be ready when the move to 5G occurs in a couple of years. When I bounced this idea off a number of people in recent days, there was a very sharp demographic divide. My contemporaries seemed to be skeptical of people watching series video on their phones although two mentioned that the new Apple phones will have larger screens. Those whom I canvassed in their 20’s were much more enthusiastic and some liked the idea of briefer episodes.
So, once again, conventional media is threatened. These two executives have a wonderful track record and are unusually well connected in both creative and financial circles. I am VERY curious to learn what they plan to charge for the service. How much will people be willing to fork out for “New TV”? Remember, many of us doubted people who be willing to pay for music but that has been proven to be totally wrong.
What do you think? I would love to hear from you.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Monday, September 3, 2018
The Silver Bullet For Start-Ups?
Over the years, I have always watched the trajectory of start-up businesses very closely. As you all realize, most new products and most new businesses fail with businesses generally closing up shop within about three years. So, I have done some digging and asked countless people what they thought was the reason that some businesses succeeded while most did not.
The answers centered almost exclusively around five variables:
1) The Leadership or Management Team
2) The Big Idea for the business
3) The Business Model
4) How well financed the business was
5) The Timing of the Launch
Consistently, I have found that most businesses fail due to inadequate financing. Most brands of large companies fail due to poor marketing or tough competition. Finding why businesses succeeded was a great deal harder to smoke out than dissecting failures. When it came to tech, my highly limited sample came in hard on the attribute of timing. For service companies, most said the team of principals and how careful their subsequent hires made all the difference. Surprisingly, few said the basic idea for the business was a major factor. Almost to a person, they said that often a company evolved and the original idea either went away or became transformed in to something else as the business rolled out. Re the Business Model, one observer said “When a company succeeds, the analysts tout the business model. That is certainly part of the mix but I see it as secondary to the team and timing.” Others made similar comments.
What about funding? We have all heard Fred Alger's famous comment that “there is no such thing as an over-funded company.” So true. A few mentioned funding as vital if you had a somewhat rocky start but none saw it as the touchstone for brand success.
So what was the winner? To my surprise, Timing was the clear winner. More than one mentioned the Great Recession of 2008-2009. Their attitude was that no matter how good your product or service was, we were in the worst downturn since 1933 and people were afraid to spend or try something new. Unemployment soared by 250% and if you could keep you head down and also your job, you felt good. Branching out in to something new was not on the agenda during that very troubled period.
I was skeptical and then thought about it a bit. Then, watching TED talks, I found that my contacts had a strong ally. Bill Gross, the start-up maven, not the bond king, gave a brief talk entitled, “The Single Biggest Reason Startups Make It” and he came down heavily on the side of Timing as a major indicator (the You Tube link is https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed).
Clearly, I do not agree with all that Gross says. In the six and one half minute video, he discusses the 200+ firms that he has helped launch and discusses which attributes worked. Also, he makes a leap of faith and discusses other that he did not have a hands on relationship with personally. He may be implying a mathematical precision that really is not there as how can you really smoke out the contribution of Idea vs. Team vs. Business Model vs. Funding vs. Timing. He does make some cogent arguments, however and it is well worth a brief view. The example of Air BnB struggling at first as people did not want strangers in their homes dissipated in the Great Recession as people needed money very badly was dead on.
If one relies too much on timing, then you are saying that luck may place an outsized role in the success of a venture. Yet between the comments that I received plus the Bill Gross video, I am rethinking this question. Any opinions?
Should you wish to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
The answers centered almost exclusively around five variables:
1) The Leadership or Management Team
2) The Big Idea for the business
3) The Business Model
4) How well financed the business was
5) The Timing of the Launch
Consistently, I have found that most businesses fail due to inadequate financing. Most brands of large companies fail due to poor marketing or tough competition. Finding why businesses succeeded was a great deal harder to smoke out than dissecting failures. When it came to tech, my highly limited sample came in hard on the attribute of timing. For service companies, most said the team of principals and how careful their subsequent hires made all the difference. Surprisingly, few said the basic idea for the business was a major factor. Almost to a person, they said that often a company evolved and the original idea either went away or became transformed in to something else as the business rolled out. Re the Business Model, one observer said “When a company succeeds, the analysts tout the business model. That is certainly part of the mix but I see it as secondary to the team and timing.” Others made similar comments.
What about funding? We have all heard Fred Alger's famous comment that “there is no such thing as an over-funded company.” So true. A few mentioned funding as vital if you had a somewhat rocky start but none saw it as the touchstone for brand success.
So what was the winner? To my surprise, Timing was the clear winner. More than one mentioned the Great Recession of 2008-2009. Their attitude was that no matter how good your product or service was, we were in the worst downturn since 1933 and people were afraid to spend or try something new. Unemployment soared by 250% and if you could keep you head down and also your job, you felt good. Branching out in to something new was not on the agenda during that very troubled period.
I was skeptical and then thought about it a bit. Then, watching TED talks, I found that my contacts had a strong ally. Bill Gross, the start-up maven, not the bond king, gave a brief talk entitled, “The Single Biggest Reason Startups Make It” and he came down heavily on the side of Timing as a major indicator (the You Tube link is https://www.ted.com/talks/bill_gross_the_single_biggest_reason_why_startups_succeed).
Clearly, I do not agree with all that Gross says. In the six and one half minute video, he discusses the 200+ firms that he has helped launch and discusses which attributes worked. Also, he makes a leap of faith and discusses other that he did not have a hands on relationship with personally. He may be implying a mathematical precision that really is not there as how can you really smoke out the contribution of Idea vs. Team vs. Business Model vs. Funding vs. Timing. He does make some cogent arguments, however and it is well worth a brief view. The example of Air BnB struggling at first as people did not want strangers in their homes dissipated in the Great Recession as people needed money very badly was dead on.
If one relies too much on timing, then you are saying that luck may place an outsized role in the success of a venture. Yet between the comments that I received plus the Bill Gross video, I am rethinking this question. Any opinions?
Should you wish to contact Don Cole directly, you may reach him at doncolemedia@gmail.com or leave a message on the blog.
Thursday, August 16, 2018
Do You Want Me to Fail?
If you have been in business a while or simply lived a long time ( I have done both), you realize that most things be they new products, new companies, new restaurants, new ideas do not succeed. If you study the habits of entrepreneurs you find that successful ones make it on the 3rd or 4th try. They appear to be wired differently than most people and do not see failures as conclusive but merely a learning experience and they move on to the next adventure.
One thing that I have observed and experienced, and often hear a lot from MR readers is that it appears that most people do not want you to succeed. It has always struck me as odd especially in certain circumstances. Over the years, I was involved in hundreds of new business presentations. People would always grill me afterwards and asked how I thought it went and whether or not the firm that I was associated with would get the business. I would always say how I thought the presentation went but, after I left my 20’s, I never said whether we would get the business or not. People would gloat if you were wrong and it was always hard to forecast. Once I was a lead player in a pitch and really nailed it. When I returned to the office, people asked me what I thought and, very uncharacteristically, said “we have it. I am sure.” The most eager person with the questions seemed deflated and said “Cole, you are awfully sure of yourself.” Forty eight hours later they called and assigned us the account. My colleague walked around morosely for a few days. I was confused. Why should he be jealous? He, too, was a partner in the firm and would benefit from the increased billing.
Months later, a third colleague really burned the midnight oils and, against stiff odds, landed a nice account. When I saw him, I thanked him and gave him a big hug. My colleague who was displeased with my win months earlier, chimed in, “Yeah, congratulations.” Later that day, he called me aside and asked “Why did you hug that bastard?” I responded that the firm would be better off with the new business and our associate had worked very hard to bring it in to the shop.
When I asked some panelists about this issue, I expected mild responses. Nope. Here are some verbatim (expletives deleted plus some modest editing) comments:
—“The only one who was ever happy with any success I have had is my spouse. Even people that I made a lot of money for did not seem grateful. I was no threat to them especially when young but they seemed ill at ease when I succeeded.”
—“I am a serial entrepreneur. My losses are far more frequent than my gains. People still dredge up my failures at dinner or cocktail parties and out on the golf course. I am rich now and they are really jealous. None of them ever took a real chance. I try to avoid them but I live in a small city and they pop up at any large gathering. “
—“I can’t stand the armchair dreamers who sit around and tell me what I did wrong. They were not still at the office at 9pm and you never saw them on weekends. When I was young, a few would come to me after a loss and want to do a post mortem telling me what I did wrong. They were high on criticism but never got off their asses and tried to broaden their horizons. You never strike out if you never get in the game!”
—"I have been a salesman for 35 years. When I landed an account that others had tried to crack for years, New York (headquarters) was happy. My boss and fellow foot soldiers rarely had any sincere praise. They were jealous, I suppose. One boss told me that the only reason I was able to get billing was that he had softened them up for years. Maybe so, but it was a rotten thing to say after my first big win.”
We live in an age of envy. If you win when others lose or merely sit on the sidelines, there will be inevitable resentment. May I suggest that you wrap yourself up in entrepreneurial mode and go out and change the world?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
One thing that I have observed and experienced, and often hear a lot from MR readers is that it appears that most people do not want you to succeed. It has always struck me as odd especially in certain circumstances. Over the years, I was involved in hundreds of new business presentations. People would always grill me afterwards and asked how I thought it went and whether or not the firm that I was associated with would get the business. I would always say how I thought the presentation went but, after I left my 20’s, I never said whether we would get the business or not. People would gloat if you were wrong and it was always hard to forecast. Once I was a lead player in a pitch and really nailed it. When I returned to the office, people asked me what I thought and, very uncharacteristically, said “we have it. I am sure.” The most eager person with the questions seemed deflated and said “Cole, you are awfully sure of yourself.” Forty eight hours later they called and assigned us the account. My colleague walked around morosely for a few days. I was confused. Why should he be jealous? He, too, was a partner in the firm and would benefit from the increased billing.
Months later, a third colleague really burned the midnight oils and, against stiff odds, landed a nice account. When I saw him, I thanked him and gave him a big hug. My colleague who was displeased with my win months earlier, chimed in, “Yeah, congratulations.” Later that day, he called me aside and asked “Why did you hug that bastard?” I responded that the firm would be better off with the new business and our associate had worked very hard to bring it in to the shop.
When I asked some panelists about this issue, I expected mild responses. Nope. Here are some verbatim (expletives deleted plus some modest editing) comments:
—“The only one who was ever happy with any success I have had is my spouse. Even people that I made a lot of money for did not seem grateful. I was no threat to them especially when young but they seemed ill at ease when I succeeded.”
—“I am a serial entrepreneur. My losses are far more frequent than my gains. People still dredge up my failures at dinner or cocktail parties and out on the golf course. I am rich now and they are really jealous. None of them ever took a real chance. I try to avoid them but I live in a small city and they pop up at any large gathering. “
—“I can’t stand the armchair dreamers who sit around and tell me what I did wrong. They were not still at the office at 9pm and you never saw them on weekends. When I was young, a few would come to me after a loss and want to do a post mortem telling me what I did wrong. They were high on criticism but never got off their asses and tried to broaden their horizons. You never strike out if you never get in the game!”
—"I have been a salesman for 35 years. When I landed an account that others had tried to crack for years, New York (headquarters) was happy. My boss and fellow foot soldiers rarely had any sincere praise. They were jealous, I suppose. One boss told me that the only reason I was able to get billing was that he had softened them up for years. Maybe so, but it was a rotten thing to say after my first big win.”
We live in an age of envy. If you win when others lose or merely sit on the sidelines, there will be inevitable resentment. May I suggest that you wrap yourself up in entrepreneurial mode and go out and change the world?
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Friday, August 10, 2018
Should You Fear The Robots?
It is hard to believe but Stanley Kubrick’s “2001: The Space Odyssey” was released in 1968, some 50 years ago. I was a freshman in college and was eager to see it as it was directed by Stanley Kubrick who a decade earlier had led “Paths of Glory”, my favorite film of all time (if you have not seen it, do so. It is remarkable and remains my favorite film). I did not quite understand the film but vividly remember people talking about HAL, the robot who at one point in the film tried to kill all the humans. Today, when I discuss either robots or Artificial Intelligence (AI) with people, HAL often comes up especially since “2001” has been re-released.
Here is my take on Artificial Intelligence(AI). The robot issue is a ruse—the real issue is the AI WITHIN the device. Ask anyone running a business of any size and ask what is most important and they will tell you that containing or cutting costs is issue #1. The great Warren Buffett was once quoted as saying: “There are two rules in business. #1 is cut costs. #2 is don’t forget rule #1.”
Over the years, I have read and heard many comments about using robots or logarithms or algorithms to do many things but most importantly THEY CUT COSTS!. Taking a mix of comments send to me over the years, business owners have told me that robots “never get sick, never require social security or health insurance or 401k contributions, never go on coffee breaks, and are absolutely never clubhouse lawyers.” So, when people tell me that the robot revolution will never happen, I just smile. If you are running a business today, it is not easy. Something that can save you a boatload of money and reduce headaches is an approach that one is going to embrace.
The U.S. Department of Commerce has projected that today some 3.8 million Americans drive taxis, Ubers, trucks, buses and other vehicles. Within 20 years, most of these jobs can be replaced by self drive vehicles. When you tell this to people, an amazing number (over 50%) shake their heads and say that it can never happen. Believe me, it will. I hear arguments including “I like to drive and be in control. I will never give that up.” Well, if your insurance rates drop and you get place to place safely, you will likely embrace it. And, businesses will as they see costs fall and productivity and safety rates rise. I have joked with family members that when I turn 90, I will take my self drive car to the Grand Canyon by myself and perhaps a bottle of scotch (I had a scotch once in 1973, hated it, and have not had one since but I may make an exception in 2040!).
Big mining firms such as Rio Tinto and BHP Billiton are experimenting with self drive trucks in underground mines. Even the struggling and comparatively small Hecla Mining of Idaho has found that self drive trucks are more reliable than staff drivers. Imagine if every traffic cop in the world were relieved of traffic control and freed up to fight crime? Things might get safer and municipalities could save money.
Been to a casual restaurant lately in a major city? Increasingly, ordering is automated from a touch screen eliminating the need for many on the wait staff. We grey-beards my not like it but millennials do. How about health car? Algorithms can spot patterns that your physician may not and diagnoses are getting sharper but there will be less need for specialists as the “robot” may do the screening.
So, here is the issue. I have averaged several studies from a wide variety of sources. Projections are that in the U.S. some 19 million jobs could be eliminated over the next 20-25 years due to all forms of AI. At the same time, the glass is half full crowd say that 21 million new jobs will be created. They talk of “cobots” that are collaborative robots that will work side by side with humans. Great! I just do not see how more jobs can be created out of this AI growth. If you are not well educated or motivated, you may a very uncertain future. To survive, many businesses will have to hop aboard the AI train as it is leaving the station or be noncompetitive moving forward.
Don’t get me wrong. As doors have closed on me due to changes, several more have always opened. I do not see this happening for people across the board in the future. We do not need to fear HAL literally killing us. But young people need to stay flexible and on top of things. The world will change faster than many realize.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Here is my take on Artificial Intelligence(AI). The robot issue is a ruse—the real issue is the AI WITHIN the device. Ask anyone running a business of any size and ask what is most important and they will tell you that containing or cutting costs is issue #1. The great Warren Buffett was once quoted as saying: “There are two rules in business. #1 is cut costs. #2 is don’t forget rule #1.”
Over the years, I have read and heard many comments about using robots or logarithms or algorithms to do many things but most importantly THEY CUT COSTS!. Taking a mix of comments send to me over the years, business owners have told me that robots “never get sick, never require social security or health insurance or 401k contributions, never go on coffee breaks, and are absolutely never clubhouse lawyers.” So, when people tell me that the robot revolution will never happen, I just smile. If you are running a business today, it is not easy. Something that can save you a boatload of money and reduce headaches is an approach that one is going to embrace.
The U.S. Department of Commerce has projected that today some 3.8 million Americans drive taxis, Ubers, trucks, buses and other vehicles. Within 20 years, most of these jobs can be replaced by self drive vehicles. When you tell this to people, an amazing number (over 50%) shake their heads and say that it can never happen. Believe me, it will. I hear arguments including “I like to drive and be in control. I will never give that up.” Well, if your insurance rates drop and you get place to place safely, you will likely embrace it. And, businesses will as they see costs fall and productivity and safety rates rise. I have joked with family members that when I turn 90, I will take my self drive car to the Grand Canyon by myself and perhaps a bottle of scotch (I had a scotch once in 1973, hated it, and have not had one since but I may make an exception in 2040!).
Big mining firms such as Rio Tinto and BHP Billiton are experimenting with self drive trucks in underground mines. Even the struggling and comparatively small Hecla Mining of Idaho has found that self drive trucks are more reliable than staff drivers. Imagine if every traffic cop in the world were relieved of traffic control and freed up to fight crime? Things might get safer and municipalities could save money.
Been to a casual restaurant lately in a major city? Increasingly, ordering is automated from a touch screen eliminating the need for many on the wait staff. We grey-beards my not like it but millennials do. How about health car? Algorithms can spot patterns that your physician may not and diagnoses are getting sharper but there will be less need for specialists as the “robot” may do the screening.
So, here is the issue. I have averaged several studies from a wide variety of sources. Projections are that in the U.S. some 19 million jobs could be eliminated over the next 20-25 years due to all forms of AI. At the same time, the glass is half full crowd say that 21 million new jobs will be created. They talk of “cobots” that are collaborative robots that will work side by side with humans. Great! I just do not see how more jobs can be created out of this AI growth. If you are not well educated or motivated, you may a very uncertain future. To survive, many businesses will have to hop aboard the AI train as it is leaving the station or be noncompetitive moving forward.
Don’t get me wrong. As doors have closed on me due to changes, several more have always opened. I do not see this happening for people across the board in the future. We do not need to fear HAL literally killing us. But young people need to stay flexible and on top of things. The world will change faster than many realize.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Saturday, August 4, 2018
The US Consumer Debt Bomb
Those of you who know me are aware that I am something of a data junkie. I love to crunch numbers and look for trends. For years, I have worried about growing debt levels. Currently, the US government debt stands at approximately $21 trillion dollars. Few want to discuss that and I realize it is not exactly comparable to personal consumer debt. After all, the US dollar is the world’s reserve currency so, at times, we can print money to cover expenses and get away with it for a surprisingly long period of time.
Recently, the Federal Reserve released updated figures on household debt in the United States. The headline was that total household debt in the United States was projected to be $13.15 trillion. That certainly got my attention!
As any media strategist should be, I am something of a part-time demographer. So, I wanted to see how the debt was arrayed against different age groups in America. Results were a bit surprising and as follows:
Demographic Average Household Debt
Under 35 $67,400
35-44 133,100
45-54. 134,600
55-64 108,300
65-74. 66,000
75+. 34,500
Source: Federal Reserve Bank of New York, 2018
A few issues popped out. The under 35 group was burdened by college loans. The average person owed $19,000 but often both husband and wife owe so the household college debt can be much higher. This debt is preventing many millennials from buying their first home nearly as early as their parents did. The 35-64 demos were about what I anticipated. People have mortgages and college bills plus notes on cars at that time of their lives. The surprise was 65-74 year olds and the 75+ demo. I assumed that it was for car loans. Nope. Many still had mortgage payments. Banks cheerfully write long term mortgages for people of any age if they qualify. Admittedly, some upscale 65-74 have mortgage debt on second homes.
Why bother to bring this up? Well, the Great Recession or financial crisis began to take hold in earnest a decade ago. Once we struggled through 2009, many people said something like this to me—“People have learned their lesson. Look ahead 10 years. Millions will have cleaned up their personal balance sheets and will never get themselves in such a bad situation again.” Looking at the above data, I see that my friends were wrong. Household debt continues to grow. A rebounding real estate market did get many out of upside down mortgages (mortgage balance higher than current value of residence) but the overall debt levels continue to churn ahead.
Credit card debt continues to be annoyingly high. Again, the surprises came among those 65+. Here is the average revolving credit card balance by age group:
Under 35 $5,808
34-44 8,235
45-54 9,096
55-64 8,158
65-69 6,876
70-74 6,468
75+ 5,638
I was quite taken by surprise that the average 75+ household with credit card debt owed $5,638!
So, despite our recent very solid growth of GDP of 4.1% for the last quarter, things are not so rosy for many people when you dig a bit. Are people borrowing more to purchase things and keep our 70+% consumer driven economy chugging along? It would appear so. An acquaintance dropped me an e-mail recently and said that he stole this line but uses it in meetings—“If you think the retail apocalypse is exaggerated, wait until the next recession comes along. People will not be able to meet their debt payments and storefronts will close all over America.”
So, what does this mean for the world of media? Even if my gloomy friend quoted is not entirely correct, it would appear that debt service will dig even deeper into discretionary income. So, people will likely watch more video as a result. You may cut the cord on cable but keep your Netflix subscription. Will you do without Amazon Prime? Probably not. So, Amazon Prime Video will take up more and more of your video viewing. HBO could grow stronger depending on what new owner AT&T does with it. And free You Tube will be cost effective for very inexpensive entertainment.
The world is not coming to an end. But when over 40 percent of Americans cannot handle a $400 car repair bill or trip to the emergency room, something has to give at some point.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Recently, the Federal Reserve released updated figures on household debt in the United States. The headline was that total household debt in the United States was projected to be $13.15 trillion. That certainly got my attention!
As any media strategist should be, I am something of a part-time demographer. So, I wanted to see how the debt was arrayed against different age groups in America. Results were a bit surprising and as follows:
Demographic Average Household Debt
Under 35 $67,400
35-44 133,100
45-54. 134,600
55-64 108,300
65-74. 66,000
75+. 34,500
Source: Federal Reserve Bank of New York, 2018
A few issues popped out. The under 35 group was burdened by college loans. The average person owed $19,000 but often both husband and wife owe so the household college debt can be much higher. This debt is preventing many millennials from buying their first home nearly as early as their parents did. The 35-64 demos were about what I anticipated. People have mortgages and college bills plus notes on cars at that time of their lives. The surprise was 65-74 year olds and the 75+ demo. I assumed that it was for car loans. Nope. Many still had mortgage payments. Banks cheerfully write long term mortgages for people of any age if they qualify. Admittedly, some upscale 65-74 have mortgage debt on second homes.
Why bother to bring this up? Well, the Great Recession or financial crisis began to take hold in earnest a decade ago. Once we struggled through 2009, many people said something like this to me—“People have learned their lesson. Look ahead 10 years. Millions will have cleaned up their personal balance sheets and will never get themselves in such a bad situation again.” Looking at the above data, I see that my friends were wrong. Household debt continues to grow. A rebounding real estate market did get many out of upside down mortgages (mortgage balance higher than current value of residence) but the overall debt levels continue to churn ahead.
Credit card debt continues to be annoyingly high. Again, the surprises came among those 65+. Here is the average revolving credit card balance by age group:
Under 35 $5,808
34-44 8,235
45-54 9,096
55-64 8,158
65-69 6,876
70-74 6,468
75+ 5,638
I was quite taken by surprise that the average 75+ household with credit card debt owed $5,638!
So, despite our recent very solid growth of GDP of 4.1% for the last quarter, things are not so rosy for many people when you dig a bit. Are people borrowing more to purchase things and keep our 70+% consumer driven economy chugging along? It would appear so. An acquaintance dropped me an e-mail recently and said that he stole this line but uses it in meetings—“If you think the retail apocalypse is exaggerated, wait until the next recession comes along. People will not be able to meet their debt payments and storefronts will close all over America.”
So, what does this mean for the world of media? Even if my gloomy friend quoted is not entirely correct, it would appear that debt service will dig even deeper into discretionary income. So, people will likely watch more video as a result. You may cut the cord on cable but keep your Netflix subscription. Will you do without Amazon Prime? Probably not. So, Amazon Prime Video will take up more and more of your video viewing. HBO could grow stronger depending on what new owner AT&T does with it. And free You Tube will be cost effective for very inexpensive entertainment.
The world is not coming to an end. But when over 40 percent of Americans cannot handle a $400 car repair bill or trip to the emergency room, something has to give at some point.
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Wednesday, July 25, 2018
The Coming Two Americas?
On July 12th, THE WASHINGTON POST published an article by Phillip Bump in their political section that, in many ways, was right in my wheelhouse. It discussed demographics 20 years from now. The point was that by 2040, eight states will have nearly half (49.5%) of the U.S. population. Add the next eight most populous states and that will be home to nearly 70% of Americans. So what, you may say. Well, clearly, young people want to go where the jobs are and where the action is. Living in rural areas has little appeal especially in those areas that are getting grayer and actually losing population. The author then talks about how this seismic shift, which strikes me as a demographic tidal wave, will put us in an odd situation. His thesis is that the U.S. House of Representatives will likely get far more progressive in nature as today’s millennials pile in to the 16 most populous states. Conversely, the U.S. Senate may get far more conservative as, even states that are losing members of the House and may join the handful now that only have one at-large House member will still have two U.S. Senators. His projection, and I have seen others that are similar, is that 30% of the population will control some 68% of the U.S. Senate seats. (A link to the article is https://www.washingtonpost.com/news/politics/wp/2018/07/12/in-about-20-years-half-the-population-will-live-in-eight-states/?utm_term=.c24c1ad51732).
Growing up in Rhode Island, I had a sense of this type of issue by studying Little Rhody’s history. When the Constitution was being drafted, people in smaller states felt that the larger ones (New York, Virginia and Massachusetts) would dominate things.So, the idea of an upper chamber, the U.S. Senate, was put forward. The two smallest states, Rhode Island and Delaware, might not have many members of the House but each would get two Senators just as the big states would. Delaware seemed to like the compromise and became the first state to ratify the Constitution. Stubborn Rhode Islanders held out but finally gave in and became state #13.
When I first read the article, I wondered if the author was going to call for an end to the electoral college. Many progressives are still smarting over George W. Bush losing the popular vote in 2000 by gaining the White House. There is an even larger discussion of the issue with Donald J Trump’s electoral college victory in 2016. Yet, no, the author does not go there. He does, say, however, with some merit, that the House and Senate may well represent two different Americas.
Right now, the divide between urban and rural in America, to me, is largely cultural. It seems if these population shifts come to fruition (they do seem likely), things will get even more polarized than they are now. By the way, this is not true only in America. On May 22, 2012, I put up an MR post entitled “Urbanization, Globalization and Media” that discussed how DAILY across the globe some 180,000 were leaving rural areas to move to a city. Soon we will be facing issues that aging nations in Europe deal with daily. Hospitals in some Scandinavian countries are being closed due to declining populations. Countries with a deeply entrenched provider state are trying to see how they can maintain services in areas will declining economic prospects and aging populations. We are seeing cracks now in places such as Northern Maine, Western Kansas and Nebraska. Local schools have become regional and rescue squads are manned by folks in their seventies.
I thought about these data and forecasts and ran them by my hero—a no-nonsense, feet on the ground type who shares with me a tendency to look ahead. She immediately grasped the details and said “One caveat. Climate change.” If things do heat up, people will move back to certain places. Minnesota and Wisconsin will grow and Buffalo, Syracuse and Rochester will have a comeback. These places have lakes and upscale people like to live near the water. If the winters moderate somewhat, some will relocate to formerly forbiddingly cold areas that have good medical care and universities. Far fetched? Maybe. Yet, I have learned to take her forecasts seriously.
So the Post raised some interesting political questions. Will the Senate be dominated in two decades by people, who, if a mirror image of their small state constituencies, be out of touch with the population as a whole? I hope to live to see the outcome!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
Growing up in Rhode Island, I had a sense of this type of issue by studying Little Rhody’s history. When the Constitution was being drafted, people in smaller states felt that the larger ones (New York, Virginia and Massachusetts) would dominate things.So, the idea of an upper chamber, the U.S. Senate, was put forward. The two smallest states, Rhode Island and Delaware, might not have many members of the House but each would get two Senators just as the big states would. Delaware seemed to like the compromise and became the first state to ratify the Constitution. Stubborn Rhode Islanders held out but finally gave in and became state #13.
When I first read the article, I wondered if the author was going to call for an end to the electoral college. Many progressives are still smarting over George W. Bush losing the popular vote in 2000 by gaining the White House. There is an even larger discussion of the issue with Donald J Trump’s electoral college victory in 2016. Yet, no, the author does not go there. He does, say, however, with some merit, that the House and Senate may well represent two different Americas.
Right now, the divide between urban and rural in America, to me, is largely cultural. It seems if these population shifts come to fruition (they do seem likely), things will get even more polarized than they are now. By the way, this is not true only in America. On May 22, 2012, I put up an MR post entitled “Urbanization, Globalization and Media” that discussed how DAILY across the globe some 180,000 were leaving rural areas to move to a city. Soon we will be facing issues that aging nations in Europe deal with daily. Hospitals in some Scandinavian countries are being closed due to declining populations. Countries with a deeply entrenched provider state are trying to see how they can maintain services in areas will declining economic prospects and aging populations. We are seeing cracks now in places such as Northern Maine, Western Kansas and Nebraska. Local schools have become regional and rescue squads are manned by folks in their seventies.
I thought about these data and forecasts and ran them by my hero—a no-nonsense, feet on the ground type who shares with me a tendency to look ahead. She immediately grasped the details and said “One caveat. Climate change.” If things do heat up, people will move back to certain places. Minnesota and Wisconsin will grow and Buffalo, Syracuse and Rochester will have a comeback. These places have lakes and upscale people like to live near the water. If the winters moderate somewhat, some will relocate to formerly forbiddingly cold areas that have good medical care and universities. Far fetched? Maybe. Yet, I have learned to take her forecasts seriously.
So the Post raised some interesting political questions. Will the Senate be dominated in two decades by people, who, if a mirror image of their small state constituencies, be out of touch with the population as a whole? I hope to live to see the outcome!
If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com
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