Playback speed

Share post at current time

Share from 0:00

0:00

Lessons from the Disruption of Media

Video of my webinar with Lucy Kueng, Part 1

Mar 05, 2024

I’m delighted to share this video of my interview with Lucy Kueng on leadership lessons for every industry from the media. (Click video above ☝️ to start watching)

Our conversation was so packed with insights from Lucy that I’m splitting it into two videos.

Today’s edition, “Part 1”, covers:

The job of leaders facing digital disruption
Strategic timing, and the “valley of death”
How media companies became media-tech companies
The pendulum swing between organizational models for digital
Why “digital” has disappeared from job titles in media
Competitive advantage and the end of mass media
Why brand is so critical to media
The future of streaming TV: Disney, Paramount, WBD, and the rest

(You can find PART 2 of our conversation here: “Generative AI in the Media”)

ENJOY!

(Video above ☝️. Transcript below 👇)

Follow Lucy Kueng on LinkedIn to find out more about her work: here.

And don’t miss… Part 2 of my conversation with Lucy!

Generative AI in the Media [VIDEO]

David Rogers

Mar 12

In part 2 of my conversation with Lucy Kueng, we dig into Generative AI in the media industry — why it’s on the cutting edge, and what every other sector can learn from it.

Read full story

Transcript

David Rogers (00:00):

Hi, I'm David Rogers. Welcome to a special video edition of “David Rogers on Digital.” I'm delighted to be speaking today with Lucy Kueng. In this conversation, we will be taking a deep dive into the lessons that every leader can learn from the transformation of the media industry with case studies from behind the front lines and lessons for leaders in every sector. Thank you so much for joining us, Lucy. And I want to first go ahead and let you introduce yourself. Let folks know who are you and what do you do?

Lucy Kueng (00:35):

Okay. I'm a hybrid, so essentially I wear three hats. One hat is I'm a strategic advisor. I work with media companies navigating this transition mainly at the kind of C-level, helping set strategy and actually getting it out of the drawer, off the top template, into the companies, into life. I serve on the boards of media companies as a kind of non-executive director. And also I research and write through the Reuters Institute, which is part of the University of Oxford. So I think imagine you're probably wearing three hats too, a little bit as well.

David Rogers (01:10):

I am. I was going to say, I think maybe… I wouldn't say you stole that from me, but funny enough, I often introduce myself as wearing three hats. Sort of a teaching; and a writing; and an advising—as sort of the three that I toggle between. And Lucy and I had the pleasure to… I actually got a chance to meet Lucy several years ago. We were both speaking at the same global conference for the International News Media Association. And so that was for me, a really a great opportunity. I was invited to speak to… this was news leaders, journalism, publishing, from all over the world, from India to Latin America to the US and Europe and so forth. And for me, sort of bringing in sort of an outsider's perspective, I guess I would say, because that's just one of many different sort of industries that I kind of move between. But I got a wonderful opportunity to meet some amazing people, most notably Lucy, who was speaking I think right before me and really gave this incredibly incisive view of what was the real challenge for leaders today in the news industry based on her deep experience across all the sort of media sectors. Which to me were really lessons that spoke to every leader really, not even just in the media sector in terms of: What does it mean to lead change?

David Rogers (02:29):

How do you drive change in an established organization that is facing being buffeted by wind of new technologies, new entrants, new competitive dynamics, shifting eroding business models, but at the same time new value propositions emerging that could be captured? There's been so much to learn from this sector that applies really to every business who I meet with. So anyway, I was really excited to sort of when I thought about who I wanted to have on for one of our first conversations in this series, to reach out to Lucy and delighted that she was able to say yes. So let me just start with kind of a big picture question based on exactly what I was just saying. Print media, in particular, I would say journalism, but really all print media was perhaps the hardest hit, and certainly I would say the earliest hit, by disruption from digital media, the internet, the World Wide Web. So what do you see as the biggest lessons that the survivors, if you will, I mean not everyone has made it through the last 20 plus years, but The New York Times, Schibsted, those like the Washington Post who are maybe not doing everything but they're still there, they're doing a lot of innovation, they're pushing forward. What do you think those businesses can offer as lessons learned for folks in other industries that are maybe just now really beginning to be deeply challenged by digital change from one direction or another?

Lucy Kueng (04:07):

Yeah, I mean I think you nailed it very well in your introduction. So the media industry has been in full on disruption for a quarter of a century. So there are people in these organizations who've only known this is their experience. They've been on a kind of permanent transformation journey. In fact, it started with Napster, the music sector was the first in then books with amazon.com when it just shipped books and then news. And now we're seeing it play out really painfully in broadcast TV with the collapse of the cable bundle growth of streaming. So in fact, I probably wouldn't use the term survivors, I would split it into leaders and laggards.

Lucy Kueng (04:47):

So what we have really clearly is a group of leading players in all geographies who are pulling ahead really fast. And what was very interesting there is they had the mechanism in place pre the pandemic, when the pandemic hit and we had this massive shift to digital consumption. They just blew through everything. The others are still there in the main, at least in Europe, there aren't really many who've exited, if any. But what they've done is they've kind of all collectively slipped down the food chain. And that's what you see if you don't do the kind of transformation that you and I look at so hard. You're still in business, but you are a smaller organization in a lesser place. And that's also classic “boiling frog.” You don't really notice how much you're slipping down the food chain. It's imperceptible, but permanent.

David Rogers (05:40):

If you sort of take that… “Let's delay the change as long as we can.” The change is going to be difficult for people. It's going to be difficult financially. “We're going to be making short term worsening our financial position in the short term for long-term benefit. Maybe we'll just push that off, see how many more years we can keep the cable bundle going, how many more years we can keep whatever our legacy business model going is.” And I really also saw that as kind of a splitting point at Covid was the companies who, as I put it, who had not only been thinking about new digital business models and delivery models and customer experiences, but had started. It doesn't mean they had everything perfect, but they had actually started to put things into place. They were building things, they were testing, they were trying. Then, when Covid hit, it was a matter of, “Oh my gosh, this is no longer our side project or long-term bet. We're going to funnel our people and resources and accelerate that.” They were able to (not easy, but) adapt in a way that the companies who had been drawing their plans, sitting on the sidelines, thinking about, having consultants in, drawing blueprints, “what's our digital strategy for the future going to be,” but hadn't really gotten into the arena so to speak. Those companies just really struggled in terms of how do we respond to that sudden push forward from Covid.

Lucy Kueng (07:04):

And if you think about the media, they had this on steroids. So what happened during lockdown, people were nervous, worried it was new territory, they wanted the news, they wanted to read more. The other thing, they were bored, they were stuck…

David Rogers (7:19):

Demand for media.

Lucy Kueng (07:21):

So the problem for the media has actually been, there was this amazing subscription model takeoff, and now it's kind of flatlining. So that they're having to find growth in different ways. This has really been the problem. But to loop back to your original question, which is “What did the leaders do, right?” It's always a system, as you point out in your books, it is a set of things you do, but most important is timing. You make the big moves at the right time and the really important concept for the media industry is Burgelman's “valley of death.” You have to make the big expensive complex changes while the revenues in the old business is still holding up. Because the minute they start to decline, it's really hard to do that level of transformation. Plus, you get this kind of rigidity and panic coming into the business.

Lucy Kueng (08:16):

So timing, reading the runes, right? Working out which bets to make and when. So it's kind of like, sequencing the moves is very important. Essentially what's happened to the leaders is they've become media-tech organizations. I mean the New York Times, you mentioned it, New York Times is as much a tech organization as a media organization right now. And that is common to all of these players. I mean, what they've done is they've built expertise in tech, product, and data. But they have, those are really integrated into the core business, if not actually the kind of core organs of the business, and the content creation activities are kind of plugged into those. And what's really critical, the really fundamental shift is: the organization has to stop seeing those departments as service departments. “I've done my great work, can you go and do your stuff with it?” It is like…

David Rogers (09:13):

Right. It's like there's an IT department that you sort of give some specs to and say, “Hey, can you go build this?” But really moving towards the more multifunctional model where you have teams that are solving whatever the business problem is, but it's bringing together (in this case) the people who know the content, the creatives or the journalists or whatever it may be, and the technology people working in small teams to actually build things.

Lucy Kueng (09:39):

But what you do see is huge structural change, but very subtle structural change. So what we see in successful media organizations is a shift to much more fluid structures. So a lot of these new tech adjacent areas are moving in and out of the core, and that is actually determined by how much the culture accepts what they're trying to do. So if the culture completely gets what product and data are doing, then they're really disseminated into the organization. If there's a bit of cultural friction, then they tend to want to be in a central unit so they can be with their own people when they feel unloved. And what you find is this moves. It moves, a lot to do with the leader of a unit, the leader of the organization, how those people are accepted. But what you do also see in the media is, as they move through this transformation, the kind of cultural shift follows imperceptibly. Because the advantage you have in the media, which I suspect you have a lot of the sectors you work with, is people are very bright. So they get it. The challenge is actually framing it in a way they understand. “I need to do this so I can do what I need to do.”

David Rogers (10:56):

So let me just circle back to that distinction you made of two organizational models or sort of approaches. One is you've got new capabilities as I would put it, whether it's data analytics, whether it's machine learning, whether it's building consumer app experiences. And these new folks who don't match the old culture of the organization, because organizational structure and culture tend to follow each other. You can either say, well, we're going to integrate everybody, and everyone's working together. Or you say, well, we have these new folks, we'll call them the data scientists for example. They don't feel like… they don't fit, they're not at home in the newsroom. Or in the automotive design if you're a car company or something. So we're going to give them their own lab or team or sort of center of excellence, as it's commonly called. So they've got peers to work with, they can sort of lean on each other, and so forth. Do you see those as both equally viable models? That they can work? Is one sort of a stepping stone to the other? What have you seen in terms of how it's played out in the media industry?

Lucy Kueng (12:15):

What I see everywhere, even with Schibsted or the Washington Post, New York Times, The Economist… it's a pendulum. So essentially the outcome you need is that this new expertise is infused into the core processes. And basically you find the solution that works at that moment in time. So quite often there'll be integrated in the teams. It works in three teams, two teams is a catastrophe. So, you revisit it and you say, “okay, for the time being, we're going to move these people into a central unit.” They will continue interacting, but they don't have to live in these units. And then it might be that it changes. But I think that's actually been… The other big shift in terms of structure is: The really big reorganizations have really, are being adopted less and less, in favor of building these kind of fluid “missions.” I think Spotify calls them missions or squads. These kind of big multidisciplinary teams organized around a big strategic goal. So the New York Times did this to hit 10 million subscribers. They had a mission around, I dunno, 10 million subscribers, whatever. And we are seeing that more and more. So there's this kind of acceptance that any given structure isn't permanent. it's what works at the moment, for the culture at the moment.

David Rogers (13:43):

So greater fluidity, being willing to say these structures are transitory, they're meeting the needs. It's funny, a couple books back in “The Network Is Your Customer,” actually, I wrote about the idea of a center of excellence, when that was still sort of a new term. And I argued that if you were thinking about that and sort of creating a unit to bring in new digital expertise and capabilities, that it should always be sort of a temporary function. With the idea [being], you sort of identify a gap you've got, you bring in people who have it, you build up that capability in service of different business units or functions, but then over time it should be pushing that out to the different business units and becoming embedded. And eventually the original center of excellence either goes away or it morphs. As I actually have seen in companies like United Technologies (later becoming Raytheon). The mandate of it, it's like, “Well I guess we've all figured out data science. But now what we need is machine learning!” And so it becomes a machine learning center of excellence, and then that eventually gets pushed out. But this kind of fluidity and this change over time is, I think, essential to how we think about organizational structures in the digital era.

Lucy Kueng (14:59):

I think that's right. Where you see that really clearly is in any [job] title with “digital,” they have increasingly disappeared in the media now, because everyone is digital. And so that it's…

David Rogers (15:11):

Not a department. It's not like a separate silo.

Lucy Kueng (15:15):

[not] a separate department. So in the beginning, they were a startup unit. Then they got incorporated in the core. Then they became the core. And then suddenly we started to get this kind of overlay of these flexible teams on top.

David Rogers (15:29):

So, I want to shift to gears a little bit to another related topic, which is I think a lot of lessons again from the media industry… which is about competitive advantage. And really about the relationship between established incumbent players and these enormous, we'll call them ‘the tech giants.’ As well as the sort of continual flow of new entrants into every category, who may be smaller, but coming in and trying to capture the new emerging opportunities in your particular sector. So, of course we've seen this dynamic in the media sector. I would observe that today the legacy companies, the legacy media companies that are still around… they're important, but their role has shifted. They are no longer the gatekeepers. That's very clear in the terms of the whole “diffusion” of publishing, if you will. Everyone is a publisher today. But they're not even arguably the purveyors of mass media that they once were, right?

David Rogers (16:34):

If you look at HBO or Disney or the New York Times or any of these kind of legacy media brands that are still around and are great brands and producing great product. But they don't have that sort of—except for occasional rare moments like the Super Bowl—they don't have that role of congregating huge percentages of whole societies all kind of really listening, watching the same thing at the same time. But they do have a role. It's not like, “Well, your time has gone. You've been consigned to the dustbin of history.” They do have what is a unique role. I think I wouldn't enjoy looking at Amazon, I wouldn't be going to Amazon Prime video for something to watch last night, if it weren't for all the content they have that was produced by these (and is often still being licensed by these) legacy media players. So, it's not like they're irrelevant and the tech giants give us everything we need. How have you seen this shift? And what do you think legacy businesses in general should be thinking about as they reassess “what is our competitive advantage?” as tech companies become more and more pervasive and powerful new entrants come into your industry, et cetera?

Lucy Kueng (17:53):

I mean, this is probably one of the hardest issues the media industry has had to deal with, actually. The relationship with the platforms and with the tech media majors has been profound. I mean this is where the real disruption has happened, actually, for the media. I mean the fact is that actually audiences have gone elsewhere. So I was looking up some data before we spoke. I think the average person spends two and a half hours on social media every day. We haven't got an extra two and a half hours of free time every day that from other things. And a lot of it's been stolen from classic media products. So basically attention is elsewhere and it is been really hard for the media industry to get their heads around this. So essentially you nailed it. Mass has been redefined. They've had this adjective, the mass media forever…

David Rogers (18:48):

For decades.

Lucy Kueng (18:49):

In their origins where they did have mass audiences, they had products and…

David Rogers (18:55):

I'm old enough to remember growing up as a kid and there were three channels on the television, and when “Mash” had its final episode, half of America was watching it.

Lucy Kueng (19:07):

That's right. And now the mass media are the social platforms, and this has been a really profound mindset shift. On the one hand, they're actually small, medium-sized enterprises most of the time, but they have a kind of disproportionate… they punch above their weight, because they have a lot of influence still amongst elite audiences. People that shape policy…

David Rogers (19:28):

Right. If you look at run the revenue numbers for a New York Times or an Economist or some of these companies… they're not giant businesses financially. But, right, they punch above their weight, so to speak.

Lucy Kueng (19:40):

Yeah. If you talk to the Economist offhand, they'll say, “What's your segment?” “It's the boss class.” And they do it tongue in cheek, but very influential people read The Economist. So small organization, but a lot of punch. But this shift that we are no longer the mass is really difficult, because that then means this generalist model they had where we just fire out something for everyone, because it's going to work somewhere… it doesn't work anymore. So they're having to set priorities. So this has been really difficult. The other issue is, as they've got smaller, their competition has become huge. I mean the media industry is now competing for audiences, viewers, customers with the largest organizations on the planet. And these are tiny, relatively underfunded organizations.

David Rogers (20:26):

I would also point out that the early shift was they're competing with much more of each other. I mean you certainly saw this in things like print news. It used to be if you were the Chicago Tribune, you are competing with maybe another paper in Chicago. Now you're competing with every English language news publication from the Guardian to the Economist to everything, because it's all flat. So you've got more peers you're competing with, and then you've got these giant companies that's dwarf you.

Lucy Kueng (20:57):

Absolutely. And consistently in our research at Oxford, at the Reuters Institute for all age groups, in all geographies, about 80% of access to news, digital news comes through a side door. It's found on a social platform, it's found through a newsletter. They don't go to the app, they don't go to the website. So you're in a position of having to suck audiences from somewhere else. They don't come to you anymore. So this is really, really tricky for the media industry. And I would suggest any organization that has digital competitors who are attached to the platforms, it's a really, really profound shift. Because what we see in the media industry is, their biggest competitors now are not really media companies. They are media tech players. So whereas, reflexively, they tend to look at their competitive set as “news publishers in my geographic region,” which as you pointed out is a bit narrow minded, but actually the really big competitors are these whales outside. They're little minnows in the ocean, or maybe plankton. And then, if you take that perspective, a kind of “time use” (where the audiences are), there are a number of things that jump out. Firstly, how strategically outgunned they are. Right? They have very few strategic assets. The strategic assets they have, they have to play so cleverly. So they have to be really sharp: “Where do we have differentiation?” And, really the two things they have are, firstly the brands.

Lucy Kueng (22:30):

These brands are kind of luxury goods. They're like Hermes or Cartier. The New York Times, the Washington Post, whatever. These are… You can't build that kind of brand, those kind of brand values, that kind of emotional resonance fast. And they don't promote their brand. So that's one issue. And the other is actually the caliber of the people that work in there. I mean they are very smart people who are working actually for now very low salaries. So even intrinsically motivated. But it is this kind of asymmetric competition. I mean you are right to mention Amazon Prime. Amazon Prime outspent, everyone on fictional content last year on TV content.

David Rogers (23:10):

Really? They outspent Netflix too?

Lucy Kueng (23:13):

Yeah. If you put together everything, they were the biggest spender in the world. Wow. They spent I think three times the BBC’s entire revenues. And it's a loss leader! It's just a way to keep people on Prime. So this is really asymmetric competition. They're in there, very active, but to hit other goals. And I think the other problem in terms of product perspective, is they are setting really high standards, requirements, expectations concerning how well digital products work. It is one app. One icon works perfectly all over the world, on any type of screen. And this is so hard for media companies to compete against.

David Rogers (23:56):

And I guess that brings up another question I've been thinking about, which is: There are always these tough decisions. And it's not a single decision, you come at it different ways. But one kind of decision I see legacy companies that are facing this kind of dynamic disruption having to make over and over again is, “Okay, what are we going to do ourselves?” What are we going to build in house? Versus, where should we partner with others? Where do we become part of the ecosystem? Looking at media. Looking at the latest kind of thinking through of this, where it's still in the most kind of foment and confusion, I would say would be, streaming television and film. You've got maybe on the one end, somebody like Disney—who I would argue for a couple reasons, is best positioned to try to say, “Look, we're going to create our own app.”

David Rogers (24:49):

“We're going to be like a Netflix.” And that would be… one, they've really built a unique… A, they've got a brand, but they've got a unique sort of stable of content. And not just sort of old content, but also characters and intellectual property you can use to spin out new things. And they've shown that. But even with that, it's a challenge. On the other hand, you've got companies at the other side who are the Paramount Plus and whatever the heck Warner Brothers is trying to do now as they just kind of add more and more… not that interesting, certainly no throughline, no brand connecting it… content, into this giant ever-expanding bundle. Thinking, eventually it's going to become, I dunno, the equivalent of Tencent or a Chinese super app for media. And I kind of wonder about many of them, the Paramount Pluses and so forth—“Shouldn't you just be licensing this content and selling the film content?” Not unlimited license, but sale-per-rental per viewing of the films from the last five years or something… But shouldn't you be maximizing your value capture through sailing this through the Amazons, the Apple Pluses, the Netflixes of the world? Why do you think you’re going to be able to create this kind of singular, unified digital product as you say? Which is so challenging. The bar is so high. That it's going to really stand alongside Netflix's and Apples and Amazons or Google's?

Lucy Kueng (26:34):

It is complex, it's really complex. I think there's one issue that if you want any kind of survival in the world of digital media, you need to have a destination. You need… because otherwise…

David Rogers (26:47):

That’s been the theory for the last couple of decades! And I guess I'm sort of wondering if that's been a mistake?

Lucy Kueng (26:54):

There's too many destinations. The cost involved in becoming a destination are too high. So there has to be consolidation. So if you look at what the New York Times is doing, it's becoming a platform. So all of the New York Times’ growth, all of the acquisitions are actually soft. They're no longer on news. All the growth is coming from actually non-news activities. So what they're trying to, you know “We are a platform”… and then you can have a bundling strategy where, you might have had enough of news, but your son is using [NYT] Cooking. Or your daughter's using Wordle. So there's a family, building a force field.

David Rogers (27:31):

Is the distinction, maybe, the brand? Because the New York Times unquestionably has a brand. Whereas Warner Brothers Discovery (whatever is getting added on next) or Paramount Plus, that doesn't mean anything.

Lucy Kueng (27:43):

There's no logic actually. I mean that's really one of the problems with Warner Brothers Discovery. There's no logic behind it. And actually discovery against HBO really hurts.

David Rogers (27:55):

…as a brand! As separate brands, they each have an appeal, a message, a value proposition, and kind of a customer base. But mashing them together weakens both, I think.

Lucy Kueng (28:06):

If we take the Economist, it's a kind of perfect execution of a particular strategy, which is a small organization with the kind of disproportionately large footprint. So arguably an HBO could have done that kind of strategy as well. If you're kind mediocre product not wildly differentiated, then probably you're right to just go into production supply. These are super hard decisions actually at the moment. And I think what we're seeing now is a shakeout in the streaming space. Also because the costs are going up so incredibly. So, I think there's going to be maybe three or four that make it through, and the rest will consolidate.