How did media companies miss the opportunities of the tech wreck?
ABC Radio National’s Background Briefing has a terrific story on the struggles of the Fairfax newspaper empire during the early days of the Internet.
One of the major themes that jumps out is how Fairfax, like many media and retail organisations, squandered the opportunity presented by the tech wreck.
The tech wreck was an opportunity for incumbents to claim their spaces in the online world, instead they saw the failure of many of the dot com boom’s over-hyped online businesses as vindication of their view the Internet was all hype.
As former Sydney Morning Herald editor Peter Fray said “In florid moments you could even think this internet webby thing would go away”.
For Fairfax the profits from the traditional print based business were compelling. According to Greg Hywood the current CEO, for every dollar earned by the company, 70c were profits – a profit margin of 233%.
The Internet threatened those “rivers of gold” and media companies, understandably, did nothing to jeopardise those returns.
Another problem for Fairfax was the massive investment in digital printing presses in the 1990s. These behemoths revolutionised the way newspapers were printed as pages could be laid out on computer screens and sent directly from the newsroom to the press itself which printed out pages in glorious colour rather than with smudgy black and white images.
Moreover these machines were fantastic for printing glossy coloured supplements and the advertising revenue from those high end inserts kept the dollars rolling in.
When the tech wreck happened, the massive investments in printing presses were vindicated as the rivers of gold continued to flow while the smart Internet kids went broke.
Fairfax’s management weren’t alone in this hubris – most media companies around the world made the same missteps while retail companies continued to build stores catering for the last echos of the 20th Century consumer boom.
In 2008, the hubris caught up with the retailers and newspapers. As the great credit boom came to an end, the wheels fell off the established business models and the cost of not experimenting with online models is costing them dearly.
Value still lies in those mastheads though as more people are reading Fairfax’s publications than ever before.
Readers still want to read these publications, one loyal reader is quoted in the story that Sydney Morning Herald should aspire to “being a serious international paper.”
That isn’t going to happen while management is focused on cutting costs to their core business instead of focusing on new revenue streams.
Somebody will find that model, had the incumbent retail and media organisations explored and invested in online businesses a decade ago they may well have found that secret sauce.
Now many of them won’t survive with their horse and buggy ways of doing business.
One of the tough things about long haul, overnight flights is getting a decent night’s sleep. I find this can only be done in a windows seat where you can snuggle against the fuselage and get reasonably comfortable. So it’s a priority to get those windows seats for a big flight.
With the return flight to Sydney from San Francisco it turned out there were no window seats in the basic economy section so a $150 upgrade to United’s Economy Plus section was needed to grab one of those essential windows seats.
Check-in
The United online check in, while clunky, still worked and the upgrade to Economy Plus was a simple online credit card transaction with a straightforward seat allocation, the selection was painless and effective.
At San Francisco airport the check in, albeit three hours early, was friendly and quick with no quirks and thankfully the seat allocation had been kept.
One thing to keep in mind with United’s seat allocations is they reserve the right to change them and even kick you out of Economy Plus, albeit with a refund of the supplement, if the flight is full and the Sydney flights are usually packed.
So it’s a good idea to get the airport and check in early to reduce the chances of losing your seat which is highly likely if there’s been disruptions elsewhere in the United network meaning connecting passengers have missed earlier flights.
Getting through security is the usually fraught hassle however the TSA staff deal with flummoxed tourists and language barriers with a brisk efficiency. Keep your sense of humour and accept that travellers’ dignity was one of the early causalities of the War On Terrorism and the process shouldn’t be traumatic.
Airside
San Francisco’s International Airport is a delight compared to the snarling, customer unfriendly Sydney Airport. While food outlets aren’t cheap, San Francisco’s are decent and there’s plenty of accessible power sockets, working desks and free wi-fi that works.
The gates themselves can be some distance from the facilities so be prepared not to stray too far. The gate lounges themselves are fairly spartan and there’s no reason to wait there until a few minutes before the aircraft starts boarding.
The seats
Sadly I didn’t get the aircraft registration numbers for this flight or the previous inbound trip but it appeared that this plane was newer – say mid-1990s – than the flight into San Francisco which could well have been one of the first 747-400s ever built in the late 1980s.
United Airline’s Economy Plus is far more comfortable than standard economy
The Economy Plus seats’ additional 3″ of legroom are definitely worth it. The moment you get in the seat, you know the extra room makes a much more comfortable trip than the cramped 31″ of standard economy class.
One thing to keep in mind is that while Economy Plus adds nothing more in service, being at the front of the economy cabin does mean you get first choice of food, beverages and easy access to the middle toilets which is a slight advantage over those crammed at the back. It’s also a little quieter as the seats are over the wing rather than behind the engines.
Another benefit with the additional pitch is that you don’t get a faceful of headrest when the seat in front of you reclines so it is possible to work on a laptop, read or eat in comfort even when the person ahead of you is still sleeping.
Inflight entertainment
While the system was still the shockingly decrepit 1990s cabin screens, there were for some reason additional choices on the audio channels including a classical music selection which made it far easier to relax than cheesy 1980s love songs or gangsta rap.
Naturally there was no inflight power in the cheap seats so take advantage of the plentiful power sockets at SFO to make sure you’re fully charged before boarding.
Shortly after take off the cabin crew come around with meals. Overall the cabin crew seem tired and beaten, while they aren’t rude or unpleasant one wonders if they have all received too many stern memos from management about being friendly to customers.
Food
An interesting thing about cheap airline food is how they cook and serve it in ways that make it difficult, if not downright dangerous to eat with plastic cutlery.
Careful trying to cut that chicken
In this respect UA 863 didn’t disappoint. The tough, mystery chicken lying under a red sludge masquerading as barbecue sauce was difficult to cut and risked sending one’s drink flying into your neigbour if you weren’t careful. This isn’t helped by the weird ridges United insist on putting underneath their trays.
The bread had a strange chemical taste while the Love and Quiches Double Chocolate Crunch Bar was the highlight of the meal. The red wine was nice as well.
After as good a night’s sleep as one can get in an economy class seat, breakfast was served around two hours before landing in Sydney. Again it was tough to eat.
You’ll need lots of syrup to soften that tough toast
Like the chicken earlier in the flight, the French toast was tough to cut and hard to eat. Fortunately a good soaking in maple syrup makes it almost edible.
The fruit salad was spartan but fine while the cold croissant tasted strange like the roll served the night before. It’s a shame United can’t find one of San Francisco’s excellent bakeries to supply their bread.
Arrival
The plane arrived on-time and without problems with immigration straightforward after dodging the embarrassing and garish duty free ripoff shops.
Customs is the standard mass brawl that’s normal for early morning international arrivals at Sydney when a dozen or so wide bodied jets arrive at the same time from Europe, Asia and the US.
If you have the choice, it may be worthwhile choosing a flight that arrives in Sydney after 8am so you can avoid both the customs hall and traffic peak hours.
Once past customs it’s welcome to the snarling, belligerent and anti-traveller horror that is Sydney Airport. Get out of there as quick as you can by train, taxi, bus or car.
Note if someone is meeting you, the pick up area is on the far side of carparks A and B. It’s not marked for either passengers in the terminals or for those driving into the complex. None of this is an accident and it’s best for both parties to have mobile phones so they can co-ordinate movements.
In many ways the customer hostile attitude of the Sydney Airports Corporation is good news for United Airlines as it makes their tired inflight service feel warm and inviting.
Overall the United Economy Plus option is worth the extra $150 charge to at least get earlier service and more legroom if you have to fly UA. It’s difficult though to recommend United while they fly such awfully old equipment and you should only consider it if the connections or the fare make them the best option.
Playing for love is different to working for free.
From the Internets;
Craigslist Ad:
We are a small & casual restaurant in downtown Vancouver and we are looking for solo musicians to play in our restaurant to promote their work and sell their CD. This is not a daily job, but only for special events which will eventually turn into a nightly event if we get positive response. More Jazz, Rock, & smooth type music, around the world and mixed cultural music. Are you interested to promote your work? Please reply back ASAP.
A Musician’s Reply:
Happy new year! I am a musician with a big house looking for a restauranteur to come to my house to promote his/her restaurant by making dinner for me and my friends. This is not a daily job, but only for special events which will eventually turn into a nightly event if we get a positive response. More fine dining & exotic meals and mixed Ethnic Fusion cuisine. Are you interested to promote your restaurant? Please reply back ASAP.
The discussion about Amanda Palmer offering unpaid gigs for local musos on her US tour has been heated and the perspectives are interesting.
What’s missed is the difference between artist and workers – the local violin player or trombonist getting up on stage with Amanda Palmer in Poughkeepsie isn’t going onstage to make a buck, it’s because he or she loves playing and is honoured to get an opportunity to perform with a big act.
On the other hand, one of the sites that’s been critical of Palmer advertised for a “insightful, knowledgeable and talented writers to contribute to the ongoing and ever-intriguing discourse on music and film.”
For submitting three 200 word blog posts a day, the lucky writer will receive a grand payment of six dollars. That’s one cent a word. Plus a cut of advertising revenue.
Should anyone be tempted to think that revenue could amount to much, they should keep in mind the web is awash with crap content that’s worth one cent a word; there’s no reason why any half decent writer couldn’t set up their own blog and stick adwords on it for a better return.
A few decades ago when printing was expensive and distribution networks difficult to set up, indy magazines offering little but an outlet to their writers served a purpose.
Today you can setup an outlet in five minutes on Blogger or WordPress and let the web do the distribution for you.
Any business that relies on free or cheap content is doomed – we’re in a world awash with cheap, crappy content and the public don’t see much reason to pay for it.
That there is no market for crap is something our once esteemed newspapers, magazines and TV stations should keep in mind as they sack subeditors, retrench journalists and increasingly source material that was available on Twitter a day earlier.
How shallow beliefs don’t substitute for economic analysis or business sense
Ever since the days of Napoleon business people have lusted over the idea of selling into the Chinese market – the idea of a billion people clambering to buy just one widget each brings a gleam to the eyes of even jaded entrepreneurs.
When Deng Xaioping opened the Chinese economy in the mid 1980s Australian brewers, Swiss watchmakers and German motor manufacturers rushed into the country believing that a billion liberated peasants would rush to buy expensive beer and watches.
As it turned out, the real opportunities for foreigners were in the other direction. When China joined the World Trade Organisation in 2001 the boom that had already started in the Special Economic Zones along the southern Chinese coast spread across the Eastern provinces as manufacturing from Hong Kong, Japan and Taiwan to find cheaper labour.
300km South-West of Shanghai the city of Datang became “sock town” where local companies manufactured a third of the world’s sock supply.
Excess capacity is a problem in many industries, particularly motor manufacturing where governments around the world have supported their local producers resulting in a glut of cars and trucks. Socks are no exception to the laws of supply and demand.
The travails of China’s sock industry are a cautionary tale for those who project straight lines for Chinese growth.
Facile assumptions that every man, woman and child on the planet needs to buy two pairs of socks a year, or that China will build millions of steel hungry apartments each year, is not economic analysis and any business built on such shaky beliefs is leaving itself vulnerable when things don’t work out.
The same is true for nations. Hollow assumptions can put an entire economy on shaky ground. Just thinking that every Chinese family needs six pairs of socks doesn’t guarantee economic success.
Throughout the industrial revolution progress and innovation was about creating products that improved people’s lives – whether it was Josiah Wedgwood making affordable crockery, Thomas Edison commercialising the light bulb or Henry Ford making cheap motor cars available to the masses – these innovations changed the way we lived or did business.
In the late Twentieth Century business focused more on creating gadgets and our lives became a race to accumulate more useless tat to store in our big McMansions to store the junk in.
We wore out our credit cards and home equity in “buying stuff we don’t need to impress people we don’t like” throughout the 1990s and early 2000s.
Jeff Bezos is onto this, instead of Amazon offering me-too products that don’t add value, “people don’t want gadgets anymore. They want services that improve over time.”
The word ‘service’ is notable — one of the things Amazon have achieved is changing how customers use books and DVDs from outright purchases that they can trade and sell to licensed products where Amazon and publishers control distribution.
Amazon are consolidating their position as one of the big four Internet empires. How Google, Apple and PayPal respond to Amazon’s suite of services will define much of the online economy.
One of the conceits of the late Twentieth Century was that we can engineer risk out of our lives.
Derivatives like Collateral Debt Obligations were thought to overcome financial risks, think contracts would eliminate business risks and wise central banks would massage the economic cycle to banish the risks of economic crises.
In schoolyards, the kids are banned from doing cartwheels and playing ball games – in response to a recent edict prohibiting physical activity at a local school an education department spokesman said the ban was to prevent, and not in response to, playground injuries.
So nothing’s happened to provoke a ban, just someone decided there was risk and the first reaction is to eliminate it rather than manage it.
In a litigious society where a culture of blame has developed this reaction is understandable. If a kid gets hurt in the playground then the parents might blame the teacher and one should be under no illusion that in the NSW state education system, the industrial concerns of teachers will always trump the welfare of students.
So the cartwheels must stop.
The strange thing with our culture of blame is that when something goes seriously wrong, such as the implosion of the banking system due to greed and misunderstanding of risk, no-one is held responsible.
For lawyers, this culture is understandable. After all, their job is to warn clients of legal risks and it’s true that every time we walk down the street or jump in our car we might make a mistake that could see us in court.
But we learn to manage that risk and we accept the odds every time we choose to drive down to the supermarket.
The danger in believing we can eliminate risk is that removing one element of risk often results in unexpected consequences – they are even more unexpected when you don’t understand the risks in the first place. CDOs and the shadow banking system are a good example of this.
Government seek to pass laws eliminating risks and in doing so create new risks, particularly when the Acts they pass are poorly written and badly thought out.
There is always the question of what risk we are addressing – in the modern corporatist political system, the PR risk to a government always takes priority over a real risk to citizens. Passing a law to protect the minister’s backside might make life more risky for others.
As helicopter parents, always hovering over our children and blaming teachers, schools, neighbours and other parents when something goes wrong, we’re creating a whole set of risks we don’t understand.
For politicians, managers and leaders their main responsibility is to manage risk, not pretend it’s been eliminated by the latest memo, law or silly schoolyard ban.
While there’s an argument that the cafe worker earning $25 an hour is overpaid – although we don’t hear the same criticism of multimillion dollar packages paid to executives with at best mediocre track records – the argument is far more complex.
In the McKinsey report linked to above, the mis-investment is put down to the recent resource boom, but is this really true?
To really understand why Australia hasn’t performed well, we need to look at why the country is so reluctant to invest in assets that will increase our productivity.
The role of property
Underlying the recent Australian “economic miracle” is the property industry. The country’s domestic building sector is one of the most efficient job generators in the world. Stimulate the Aussie property market and job growth ripples quickly through the economy.
This was one the lessons learned in the 1990s recession – successive governments and bureaucrats have learned the mantra “go early, go hard and go residential” when it comes to cutting interest rates and introducing home building incentives like the first home owners grants.
It was no coincidence that when the Rudd Government was faced by the Global Financial Crisis they launched a wave of initiatives to boost the property industry and shore household wealth. Just as the Howard and Costello governments did in response to the Long Term Capital Bank collapse, Asian economic crisis or the 2001 US recession.
While those stimulus measures have kept Australia out of recession for two decades, the failure to unwind the measures after the economic shock has passed leaves the nation’s property market remains “hyper stimulated” and over valued. That over investment in property has sucked funds away from other areas which affects the competitiveness of Aussie industry.
The great property squeeze
One of the great tragedies of the 1990s was Sydney’s East Circular Quay precinct which could have been one or two of the world’s greatest hotel sites, literally on the steps of the Sydney Opera House.
Instead, high priced apartments were built on the site and Sydney’s tourism and convention industries are crippled by a shortage of top end hotel rooms.
Tourism isn’t the only industry affected by the Australia’s obsession with residential property – across the country service stations, sports clubs and convention centres are being demolished to make way for high rise apartment developments. No economic activity seems to trump property speculation when it comes to attracting Australian investors.
Ideological beliefs
Adding fuel to the property obsession are the ideologies of the 1980s which are still closely held by the nation’s business and political leaders.
Capital gains tax concessions introduced by the Howard government in the late 1990s made property and share speculation far more attractive that invention, innovation or entrepreneurship.
To make matters worse, Australia’s social security policies and taxation laws favour capital gains – any Australian over thirty who has tried to build a business has plenty of mates who did far better out of negatively geared property than those who foolish enough to create new enterprises.
For those older entrepreneurs facing retirement, they are in for a nasty shock if their businesses don’t sell for what they hope. They would have been far better staying in a safe corporate job and buy a few negatively geared investment properties.
Again, this ideological belief that capital gains trumps wage or business income means investment is steered away from productive assets and into residential property that can be held for a capital gain.
The Ticket Clipping Culture
Australia’s failure to invest in productive assets is not just a feature of the household investor, the corporate sector has a lot to answer for as well.
While good in theory, the superannuation system has been a failure in providing a capital pool for new and innovative businesses and productive investments.
The superannuation trustees have largely focused on hugging the index, the ticket clipping funds management culture means that any real investment for productive assets is restricted to funding toll roads where fat management fees and guaranteed commissions mean an easy life for those fund managers.
In a perverse way, the short term appearance of the ticket clipping might mean increased productivity as costs are cut to improve profits. In the medium and long term, the lack of investment in these assets means in the long term these assets too cease to add productive capacity to the economy.
Of course there’s more to infrastructure investment than toll roads and airports with crippling parking charges, but the ticket clipping classes of Australia’s investment community don’t see a quick buck in that.
Increasingly the boards of Australia’s major companies are appointed by those running the superannuation funds and these people have the generational bias away from productive investment. Instead they see slashing IT, training or asset investment as costs to be cut in the quest of boosting bonus delivering profits.
More fundamentally, three decades of consolidation in most of Australia’s industries has seen a generation of Australian executives whose main expertise is that of maximising their market power at the expense of their competitors. Investing in productive capacity is not a major concern for those corporations.
Fixing the problem
Getting Australians – whether mom and dad property speculators or high paid fund managers parking money in the ASX 200 or plonking money in the latest toll road boondoggle – to change attitudes and invest in productive capacity is going to take a generational change.
As long as the attitude persists that property is a safe investment that doubles in real value every ten years then Australians are going to continue to ply cash into apartments and houses.
It is possible that a period of Australian Austerity that suppresses property prices may force that change in investment attitudes. An weak property market is one of the unspoken effects of the spending cuts advocated by many right wing commentators,
The question is whether those commentators, or the political classes who derive their much of their policies from right wing ideologues, view have the stomach for disruption that will come when weaning Australians from the teats of corporate ticket clipping and property speculation.
