Doug Poretz
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Latest Comments20 Comments
The Real Problem? People Are Scared to Spend
1. Officially we are not even in a "Recession" yet -- we have not yet had two sequential quarters of negative growth, which is the defintion of a Recession, as you know. But if we aren't in a Recession, or a Depression, we are in a Something. I think that "Something" is new and should have a new name. For now, I call it "The XYZ Event." I think what we call this economic period is important -- if we use old terms to define and diagnose the event, we will use old remedies. I think this is different from either a "Recession" of the past or the Depression of the 1930s due to some vastly different fundamentals, among them a shft from a manufacturing to a knowledge economy, the emergence of a truly global and interlocked economy, and a radically different communications infrastructure.
2. I think there is a major consequence that you do not account for by virtue of the speed of information now as compared to the Depression and even previous Recessions -- we get information and put it to use much quicker, by an order of magnitude. We know much key fundamental economic data on a real-time basis, and that data we do not know as it happens, we do know very quickly, especially as compared to the 1930s. Improved IT networks and reporting systems allow manufacturers to control inventory much better, allow corporations to adapt budgets quicker, etc. This allows the rapid and almost total "shut down" of spending by both businesses and consumers, as we currently see, but that, in turn, should mitigate the ultimate damage.
3. Most significantly in my opinion, the current economic situation is not attributable to a single event or institution or enforcement or non-enforcement of any regulation, albeit all those contributed to what's happening. I think the innundation of "buy this" messages that have surrounded the American public since the post WW II boom, has led to a culture where "the American dream" is a consumer's dream: buy more, buy bigger, buy more expensive. All aspects of our society became ensnared in that culture -- those who created new debt instruments, those who encouraged their customers to stretch a little more for a bigger and more expensive house, and those who decided to buy a new flat screen TV even though they couldn't afford it because they didn't have to make any payments "until next year." Until we come to grips -- get out of denial -- about the cutlure that gave rise to this economic mess, we won't define the situation correctly -- and we won't be able to remedy the situation until it is correctly defined.
Despite my opinions, I am not optimistic about the economy for the near-term at least. I am, however, certain that the creative component of this destructive period will be very robust and ultimately the world will be better for it. For anyone interested, I express this type of thought and related issues about communicating messages at my blog, which is linked above.
The Current Economic Crisis: Hell, Meet Handbasket
Since World War II, people have been innundated with "buy this" messages. The benefits for increasing the efficiency and effectiveness of such messages were obvious, and so more effective communications tools and techniques were developed. I was struck recently by the news over a survey that showed that teenagers who are exposed to more sex on TV are more likely to have sex. That's shocking? Consider what hour after hour, day after day, decade after decade of "buy this" messages have had on our culture as a whole. Over the years, the impact of these messages translated into the culture that led to people over-stretching for their homes, realtors more than happy to craft that deal, mortgage companies willing to finance it, and a retailer out there willing to sell the new furniture on some really great terms ... Hey, let's get a new car for the new garage and go out for a great dinner, we'll put it on the credit card. Etc.
The death of the consumer economy that is upon us will drive many of those who push the "buy this" messages to cut their budgets and find more efficient distribution channels. This will accelerate the trend to rely more heavily on interactive and digital communications (or "new media"). At the same time, with a new political environment in Washington and a new White House promising to "hit the ground running" plus an energized and supportive electorate focused on "change" and a one-party Congress for all practical purposes, there is going to be a surge in "support this" messages from special interest groups of all ilks, sizes, persuasions and motivations. The proposed changes will be way too significant and fundamental for the special interest groups to sit on their hands.
If you look closely you can already see it happening: have you noticed the new TV campaigns for the AMA and for the chemistry industry, for example? When is the last time you saw them advertising? It's the tip of the iceberg.
As this happens -- that is, as the consumer becomes "the supporter," we should expect a major cultural change. If anyone is interested, I write about that sort of thing (from the perspective of a 4-decades long career in communications) at my blog, which is linked above.
Big Media: Future Growth Depends on Serious Change
The Economy's Worst Is Still Ahead of Us
Media: Is It Time to Panic Yet?
I think there is about to be a really fundamental change in media. I wrote about it recently at my blog, deathoftime.com under the title "The Message Is The Medium; Get Ready For A New Era Of Communications Campaigns." My basic premise is that the dynamic global political and economic environment will result in a mission-critical level need on the part of special interest groups of all sizes and ilks to defend their current positions and/or promote new changes that will benefit them. This will translate into a fight for who controls messages and thereby frames the debates that may start as soon as in a lame duck session of congress. This will create a surge in advertising of "support this"-type messages. At the same time, the "buy this" messages that have dominated and shaped our culture will be moved to much more efficient environments and aimed in a more targeted way than ever before.
Also at the same time, my side of the industry will be changed. That is, communications firms have been identified by virtue of the distribution channel. For example, "advertising"... and advertising agencies communicate messages by buying media; PR firms communicate by "earning" coverage in news media; sports marketing firms focus on communicating a message through an event; and so on. But in an era when you can get to your targets through numerous channels, it is crazy and counter-productive to structure the industry on the basis of the channel.
What will these trends result in? I believe we will see a more fundamental change to the communications industry with deeper impact at a faster speed than is currently predicted, even among those who think the situation is dire for communications companies. But out of this, new names and new models will emerge -- none of the existing leaders look to me as prospects for creating the new models.
100 Companies That Can Take Themselves Private
Big Media Coming Apart at the Seams
I think we are about to see a really major phenomenon. Imagine a pie chart with two slices, one represents messages that basically say "buy this" and the other represents messages that basically say "support this." Although "support this" messages have become more visible over recent years, the communications business, and, in particular the advertising business, has been dominated by those wanting to get consumers to buy something. There is about to be a major change in the way that pie looks for two reasons: 1) a surge in need on the part of special interest groups of all ilks and sizes to get out their messages, and 2) the redirection of "buy this" messages toward interactive.
As to the first reason, consider what is about to happen in this country. Whether Obama wins or McCain wins, the White House is going to be dramatically energized versus the inert Bush Administration. There will be a new cabinet and there be new priorities. At the same time, the Hill will change not only in terms of the Democrat's lead, but a very large voter turnout will fuel a momentum for change. That momentum will begin to be translated into actual proposals, both legislative and administrative. The mood will encourage more than just change around the edges -- what will be at risk will be game-changers. New rules and regulations, new impacts on the P&L, probably new accounting rules, new ways of doing business, importing, taxing, addressing the environment, and that says nothing about, well, name it.
And for each proposed change there will be numerous special interest groups, right or left, public or private, the whole gamut, who are going to want to defend their current position and/or promote a new one. That is very often the case, of course, when there is a change in the White House. This time it is different by an order of magnitude by virtue of degree. The special interests won't only want to communicate their messages .. they will absolutely need to, because the political environment and the escalating speed by which things are done during a crisis will combine to create really bold (and very often dumb) ideas. And those ideas will be so significant that the special interest groups (including many non-U.S.) will not be able to sit on the sidelines and let whatever will happen happen.
So, we're going to see a major fight over who controls the various public (and private) debates. And that means, we're going to see a major surge in "support this" communications campaigns.
At the same time, we're going into a deep economic slump -- call it "recesssion" or "bula-bula" -- it won't matter. Unemployment will be high. The consumer will no longer have the home equity and credit card piggy banks. And those with money in their wallets, well they've accumulated enough over the past bunch of years and they are going to keep their wallets closed. So what will those who need to push the "buy this" message do? They are goling to get as close to the consumer and the consumer's buy decision as possible. Like in front of your eyeballs right now where you can make an impulse decision by clicking a button. Ask me, as a guy who communicates messages, whether I'd prefer to get my message to someone when they are sitting at home and have to remember to go somewhere to buy my product, or whether I'd prefer to get my message to someone who can litterally lift a finger to buy my product rigtht now. Duh. But while I am answering the question, I'll volunteer some more preferences. I prefer to get my message to someone who is more than moderately interested in what I have to say. I prefer to get my message to someone who is experiencing a rainstorm if I am selling umbrellas. I prefer to get my message to someone I know will react positively to this particular image and this particular word.
My goal in this post was to provide another perspective -- the perspective of someone in that industry that very often pays the bills and provides a lot of the content in the media/communications industry. From at least this one person's perspective, the depth and speed (and cultural consequences) of a fundamental change in the communications business will all be greater than most imagine at this point. It won't take long to see it. There will be economic consequences of course, but there will also be very serious consequences to the business models in the entire industry. If you follow the big ad/pr/etc agencies, watch out. I think they are about to see that they have operated under an outdated time-based business model in a value-based world.
I write about ideas like this at my blog, deathoftime.com if you are interested.
General Discussion on CBON
NY Times Intrinsic Value Analysis Shows It's Still Overvalued
Allow me to offer the perspective of someone who has spent four decades in the communications business, prinarily in public relations, with a 20-year focus in investor relations, and more recently as co-founder and partner of a pretty successful full service communications firm (about 100 people, based in DC).
Advertisers (that is, those who generate the revenue for papers) are about to go through a major re-conceptualization of their communications campaigns. A drive to efficiency, exacerbated by the recession, will force advertisers to think much more robustly about how they get their messages to their audiences, in terms of impact of presentation, selection of the targets, cost efficiency, and the ability to create a sale immediately. That does not bode well for newspapers. From my perspective, I see this shift coming sooner than is generally predicted.
I have an article called "The Message Is The Medium: Prepare for a coming change in communications campaigns" in my blog deathoftime.com -- I also have some related views about what I think is going to happen to communications firms (ad and pr agencies, etc.) if you follow those stocks.
Fannie and Freddie Did Not Cause This Crisis
Four Reasons We Can't Call It a Recession - Yet
Homebuilder Bankruptcies: Who Might Be Next?
As to Dwight's large position in the company subsequent to the emergence from Chapter 11: I do not believe you are right -- i do not think he had a very large position at that time, at least compared to his enormous position prior to the debt-for-equity cram down. There was a reverse split after the debt-for-equity swap and that caused bondholders to become the major equity holders. But as the equity began to recover, the company started buying back its own stock (something it has done for years). The former bondholders, largely vulture investors who bought the bonds at dramatically depressed prices, were thrilled with the ability to sell back their equity to the company in big orderly blocks. And, in the process, it was an anti-dilutive event for all shareholders, including Dwight. Hope that helps. I haven't been involved with NVR for over 15 years or so, so these are memories that may be somewhat faded and inaccurate. But that is how i would answer your questions -- and I think these are fairly accurate.
Homebuilder Bankruptcies: Who Might Be Next?
Least likely to go Chaper 11/most likely to succeed: NVR. Virtually no land position (options only), great market positions, very smart management who went Chapter 11 in earluy 1990s, learned major lessons, not going there again.
(Fair disclosure: i was vp at NVR from 1986-1990)
Guess Who's Talking About Recession?
Bill Gross: The Housing/GSE Bill Is Best Way Out of Credit Crisis