I have long been a bit skeptical about people who get promoted every year or so. Almost anyone can find ways to look good for a year: cut costs; suspend investments; or market only to high-margin sources.
Over time, these tactics can undermine a department or even a business. Departmental damage surfaces two or three jobs down the line, when someone new has a real mess to clean up.
With that in mind, David Carr’s review of 2012 media stock performance, which appeared in the New York Times earlier this month, made me sigh just a little bit.
Carr reports how the stock prices of companies that included Viacom (+16%), Time Warner and Disney (both up 32%), CBS (+40%), News Corp (+43%) and Comcast (+58%) all beat the Standard & Poor’s average for the year (+13%). He goes on to note:
“Writing for Deadline Hollywood, David Lieberman pointed out that cranky old media far outperformed a sexy technology group composed of Amazon, Netflix, Apple, Yahoo, Google and Microsoft. Take that, digital overlords!”
What made the media stocks attractive? Carr interviewed a variety of analysts, who repeatedly talked about “stronger balance sheets” and “returning capital to investors”. They also talked about locking up distribution deals for years to come.
They didn’t talk about growth.
In fact, companies that are growing are the ones least likely to return capital to shareholders. They need it to fund their growth. When businesses start to distribute more of their cash to shareholders, they acknowledge “We can’t find any investments that trump just handing this money over to you.”
Well, sometimes they are saying “We’re buying back stock because a higher share price means we all get better bonuses”, but the point is the same. They aren’t investing in the future.
Ask people working in these companies if they are excited for what the future will bring. You’ll find a few, but you’ll also hear stories of layoffs, postponed investments and retrenching to what has proven successful in the past.
Carr is mostly responsible for reporting on the present. The people who run these media giants should have longer time horizons than that. That is, they should if they are not in the liquidation business.