What Matters Most
CEOs cite tech savvy as top business skill
By Ken Kerschbaumer -- Broadcasting & Cable, 12/12/2004 7:00:00 PM
Future [business] leaders need to be personal consumers and users of technology, buying content and movies online,” says the CEO of a major media company, “rather than having their assistants print out their e-mails.” That's the advice a top executive surveyed by Ernst & Young gives to his corporate heirs. “In order to be a leader, you need to walk the walk, operate a TiVo and know how an iPod works.”
That sentiment is echoed by other CEOs who participated in the study “Fast Forward: Technology Propels Media and Entertainment CEOs into the Future.” Twenty-five corporate giants granted interviews to John Nendick, who heads Ernst & Young's media and entertainment division.
Among the participants: Time Warner's Dick Parsons, Disney's Michael Eisner, Sony's Howard Stringer, Clear Channel's Lowry Mays, Viacom's Sumner Redstone and Liberty Media's John Malone. The one-hour interviews promised anonymity, a move that led to honest answers from power brokers who typically speak on behalf of billion-dollar corporations, not themselves.
More than financial acumen or programming savvy, CEOs cite technological sophistication as outranking other skills for top management. “This group of CEOs has not really been on the cutting edge of technology,” says Nendick. “But these discussions were an acknowledgment they have to be aware of technology.”
In the past three months, tech announcements—high-definition DVDs, video over cellphones, and power companies' offering broadband services—are shaping future business opportunities and competition. And not only are these technologies penetrating the market quickly—it took only six years for DVD players to enter 50% of U.S. homes—but they're being introduced with greater frequency. (It was 25 years between the introduction of radio and television. But the time between the launch of DVD and DVRs, two devices transforming TV, was less than three.)
That pace of change, coupled with the multimillion-dollar mistakes of the dotcom boom by companies like Time Warner (the AOL debacle) and Disney (the Go Internet portal fiasco), have pushed tech understanding front and center. “While there was some feedback that the functional skills of leadership aren't changing much from those required 50 years ago, being technologically savvy was the top skill set required,” says Nendick.
Topping the list of technologies to understand: the digital video recorder. “We'll see a higher penetration of DVRs that will make TV consumption a tailored event, not a broadcast event,” said one CEO. “This is not a good trend for mass media.”
That concern, says Nendick, had CEOs contemplating how DVRs will change their business. It's estimated that $4 billion worth of advertising will be skipped by 2007. That has corporate chiefs looking at new ad models: everything from product placement or shows within a show to cable channels that are more tightly focused on a demographic, more subscriber-based models and greater emphasis on live news and sports.
“Sports and news are the two types of programming that still need to be seen now,” explains Nendick. “Pure CPM and ad rates for that type of programming have increased significantly, even as absolute viewership has declined.”
Another threat is the Internet. Broadband access is projected to hit 50% of online U.S. households by next year, and online advertising is recovering. It's expected to hit $7.4 billion in 2005. Unlike other media, the Internet impacts everyone. “Internet players are direct competitors to everyone,” says one CEO. “They'll take a large share of advertising and audience.”
Adding to that impact is TV transmitted over the Internet. We don't know if it will replace TV as we know it today, notes another CEO. Other trends they are watching are digital cable and satellite, online content distribution, DVDs and the growth of videogames. The latter two pose a different sort of challenge, since most adults have a limited number of evening hours to spend on entertainment. DVDs and videogames reduce the time spent watching TV. “Who would have guessed that electronic-game revenue would exceed movie-ticket sales?” muses one CEO.
In order to keep up with emerging technologies, a CEO needs to have technically sophisticated people feeding the decision process. That doesn't mean focusing on the most forward-looking technology but being aware of the state of technology today and likely changes in the future.
One of the tricks is to hire top people to provide sound feedback. The dotcom crash taught business that it's vital to hire decision-makers whose job security isn't tied to the success of the new initiative. If it is, they'll call for more cash and resources, even if the project isn't in the company's best interest. That realization underscores the need for financial discipline.
“The CFO now has a seat at the table when discussing investments,” says Nendick. “New ideas need to pass financial muster as well as being good technological opportunities.”
Or as one CEO puts it: “You can't let the accountants run the place, because we sell creative products. But you can't let the creative guys run it without adult supervision, or else you'd have the inmates taking over the asylum.”
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