Last year’s annual McGraw-Hill Media Summit New York was largely about the brash challenge to “show us the money,” as new media continued to explode and cautious optimism was in the air. This year, in the midst of gloom, doom and uncertainty, the unstated appeal that permeated the conference, again co-sponsored by BusinessWeek and Standard & Poor’s and produced by Digital Hollywood, was “Show us some answers.”

The questions suggested across all keynotes and the many panels were on the order of “Where’s the end to all this?” and “What do we do in the meantime?” The end, it seems, isn’t around the corner. In the meantime, well…let’s keep looking around that corner.

The Summit, which focuses on media, entertainment and technology, offered no pat answers. Trends like video-on-demand, movie downloads to own, and new content sites were part of the conversation, but with everything in flux and with few dollars to be made so far, conclusions—like the revenues in question—were in short supply.

Held at McGraw-Hill’s midtown headquarters March 18-19, Media Summit wasn’t the best place to be for breaking news, although a few tidbits could be gleaned. But there were splashes of reassurance as chief executives like NBC Universal president and CEO Jeff Zucker, Viacom president and CEO Philippe Dauman and Microsoft CEO Steve Ballmer trumpeted the healthy sectors of their businesses and made clear that they too are feeling some pain like the rest of us.

Much of the uncertainty, beyond the financial doldrums, emanates from the conundrum of how to do things differently (meaning profitably) as technology changes everything and monetize all the changes that have to be made. As Zucker put it, “These are scary times…in terms of trying to change models.” Ballmer put it this way: “Nobody’s proven they can get it right yet.”

Not that these execs, each the subject of one-on-one keynote interviews with BusinessWeek editorial staff, shared thoughts about their companies’ depressed stock prices. Yes, references to the economic downturn were ubiquitous and no one was in pain denial. But Media Summit New York is traditionally a place for execs to give their stock prices a boost with upbeat talk about their companies. So all three CEOs, when not referencing the economy, waxed enthusiastic about their businesses, especially those areas that continue to be robust.

Like so many other Media Summit participants, Zucker spoke a lot about “change.” For media people, the seismic change is all about the increased availability of content and the inability of providers, whether it’s TV, film, print or music, to get sustainable revenues from this explosion. A bonanza for consumers, this media and entertainment cornucopia is, for copyright owners, hugely undervalued by advertisers.

“Technology is changing everything,” said Zucker, citing NBC’s move to put Jay Leno on the NBC broadcast network in prime time. (TV that is watched as it is aired and TiVo’d is now known as “linear television.”) NBC is just one “legacy business” wracked by change. On the bright side, NBC’s cable channels are flourishing. The hugely popular USA Network, he noted, is right up there in popularity with the big broadcast nets.

Even measuring audiences has “radically changed,” so that there needs to be a rethinking of prime-time audiences. Like many others, NBC is “questioning the model for today,” Zucker confided. (A Summit panelist went so far as to say that the Holy Grail in metrics is to measure both the TV and online viewers for a particular show.)

NBC Universal’s “best competencies” are running cable networks and delivering news and information. But Zucker didn’t neglect hyping Universal’s summer movies. He hailed the return of Julia Roberts (starring in the current Duplicity), Bruno (Sacha Baron Cohen’s Borat follow-up, which got great buzz from the SXSW Festival), and the Johnny Depp/Christian Bale starrer Public Enemies, due in July.

Like other Summit speakers, Zucker noted that the younger generation—and especially pre-teens—consumes content “so differently.” Referring to Hulu.com, the online TV program site of which NBC is a part, Zucker said that “we believe in ubiquitous distribution” but conceded that NBC is still experimenting with this effort. Again, the model isn’t quite right because the ads supporting the programming are not delivering the necessary revenue.



Zucker summed up the dilemma for many of the media companies by noting that “what we lost on the analog side is not now being made up on the digital side.” Put another way and heard repeatedly at Media Summit is that “analog dollars have become digital pennies.”

Viacom’s Dauman, too, feels that “models are evolving” and all the current trends, including subscription TV and the growing practice of downloading movies to own, are “in flux.” Still, he embraced an optimistic view that the company, now “pure content” after the CBS split, is blessed with great cable brands like Nickelodeon and MTV.

Dauman dubbed movies “the highest form of content, which also resonates around the world.” He talked about the new Premium cable movie service that Viacom, MGM and Lionsgate are launching in October. The online components will be available in May. The three libraries are packed with about 35,000 titles, he said, and all will be offered in HD. The films will also have value-added DVD-like “extras” from the studios.

There are questions about Comcast carriage and changes that partners MGM and Lionsgate may be facing. But Dauman expects distribution of the new movie service to cable operators to be “robust.”

As for Viacom’s Paramount, Dauman acknowledged that “getting money for Hollywood movies is tough now.” He went through the litany of previous but now-extinct financing sources like German government money, hedge funds, etc. that were a boon to Hollywood. But “financing has never been an issue for us,” he allowed, noting that Paramount also makes money by way of distribution fees from outfits like DreamWorks and Marvel.

Referring to the Star Trek, Transformer and Indiana Jones films, Dauman added, “Our overall strategy is to focus on our franchises.” This approach is “the right strategy in this environment. And these franchise pictures do better in the challenged DVD market.”

Dauman excused Sumner Redstone’s rupture with Tom Cruise by explaining that his Viacom boss was “fighting the cost dynamics of movies,” meaning the onerous star salaries that celebrities like Cruise can command. “The nature of deals has been evolving and will accelerate because of the recession. Talent needs to invest with us.”



Yet Dauman said that Mission: Impossible V will be with Cruise and he’s sure it will happen one day. As for Paramount’s relationship with Steven Spielberg, who went independent of the studio and is now powered by an alliance with Indian giant Reliance, Dauman characterized it as “terrific.” He added, “We’re both in a better place with the new arrangement,” which gives the filmmaker “the autonomy he seeks.” But Paramount is still moving forward with Spielberg’s DreamWorks on Dinner with Schmucks,” the comedy remake of French-born writer-director Francis Veber’s art-house hit The Dinner Game. Paramount and DreamWorks had tangled over the property as the two studios divorced last year but have come to terms.

Still, the nasty economic climate is having its impact. Dauman shared that Paramount will be making fewer pictures and will be “much more selective regarding greenlighting,” all the while factoring in potential DVD revenues. The strategy as described by Dauman is to “ride through” the times and take opportunities to grow.

In fact, “opportunity,” like “Get me that model!” or “Get me that product or service” or “Show me those ad dollars we deserve” was another theme of Media Summit.

For Microsoft’s Ballmer, one of the company’s opportunities lies in kumo.com, the upcoming live search site. Yes, Google has 58% of that market, but, Ballmer notes, not a lot has changed in search in the past five to ten years, so “most of the innovation is still to come.”

Opportunity also knocks with an alliance in search with Yahoo!, which is established in that sector. Still open to talks with the site, Ballmer explains, “Yahoo! will give us greater scale, which helps all aspects.” Such a partnership is “fairly compelling.”

Ballmer suggested he’s also fairly optimistic about Microsoft’s big rivalry with Apple. Paying the $500 more for an Apple computer that is the same as a PC running Microsoft’s Windows doesn’t make sense in this environment.

Ballmer also sees opportunities for Microsoft in smart phones, noting that the iPhone has no keyboard and costs close to $500 to manufacture. Unlike the iPhone, the smart phone Microsoft is working on will give a range of modalities for interactions, for applications and for prices. And some versions will cost a lot less to manufacture.

Upside opportunities also exist for Microsoft with its coming Windows 7, Office software, and in the growing area of cloud computing, which allows delivery to the three screens (personal computer, mobile phone and TV through the XBox). And there are the opportunities for Microsoft in China.

As for the global economic slump, Ballmer didn’t want to be the messenger of pessimism or optimism but guessed that “maybe in four years we’ll be back to a normal growth pattern.” The “basic issue,” he said, is that there is too much debt. But optimism was in order for those who could recall that Microsoft was once an obscure start-up.

Media Summit had about a dozen exhibitors on its floor, including one company—Internet Video Archive—that will be making its first visit to the upcoming ShoWest. According to president and CEO Jed Horovitz, who spoke on the conference’s “Bridging TV and Broadband” panel, the company is a “back-end, nuts-and-bolts” operation that works inside the cloud that is cloud computing.

IVA is the bridge that brings the cloud data to business clients. In the case of theatre owners, IVA hopes to convince them that their service and ever-growing library of 31,000 movie previews and up-to-date release schedules will help exhibitors run better consumer sites for moviegoers.

On the many Media Summit panels, participants, like attendees, were hearing the deafening roar of technology and change whizzing at them from every direction. Like laddies on the loose in downtown Manhattan’s hotspots, panelists were looking for models—in their case, those business models that might turn the explosive popularity of the Web or that nifty service or even that tired old media staple into company profits.

A panel considering “Hollywood and the Digital Consumer” agreed that original content for the Web hasn’t really taken off and advertiser resistance to consumer-created content (also known as user-generated content) isn’t making things easier. And, yes, social-networking sites like MySpace and Facebook are wildly popular but, as YouTube head of marketing and programming Chris Di Cesare reminded, there’s no killer-app yet for these sites.



Cable giant Comcast’s strategy for the new media and entertainment world, said Karin Gifford, senior VP of Fancast and Online Entertainment for Comcast Interactive Media, is to find ways to achieve tighter integration between laptops and televisions. The Holy Grail, of course, is to get the three major consumer devices—computers, TV and mobile—all integrated. This may be just a few years away, panelists guessed.

What isn’t showing promise is interactive TV, which has been around since the early ’90s when Time Warner launched its much-ballyhooed Florida experiment. Some of the resistance has to do with the remotes that make navigation awkward.

Asked about what they have learned from consumers, panelists said the message is to make things easier, especially in terms of locating desired content. Netflix, they noted, does this and has shown that the subscription model can work, even though consumers are more and more getting used to receiving content for free.

But YouTube’s Di Cesare pointed out that ads can work for consumers if the ads are “appropriate.” Ad-supported sites “are better than a wall [subscription] experience.”

Another trend, addressed on the “Global Media and Advertising” panel, is permission-based advertising, in which online consumers gain value if they are willing to share information about themselves with advertisers. And they are, according to a just-published IBM survey. The challenge for advertisers lies in how to better target and reach consumers with a more fragmented approach and how to use technology to do it.

Several panelists throughout Media Summit noted that younger people these days are simultaneously watching TV and using their laptops—an observation prompting the unanswered question of whether such multi-tasking is due to the much-touted Attention Deficit Disorder problem or a sign that it’s more a myth.

On the panel that considered “The Changing Face of Media and News,” Associated Press senior managing editor Michael Oreskes acknowledged the “crisis” we’re in but added, “We’re not having an audience crisis. What is haywire are the business models.” It’s those elusive models again.

But some panelists did see an audience crisis and pointed to the fact that news is more interesting to people over 40 than to younger generations. So the question becomes how to fashion news for the new markets. Vanity Fair columnist and media guru Michael Wolff reassured that “younger generations do want news, but the question becomes how to serve them.” Suggesting that news as a kind of video automat might work, Kevin Yen, YouTube director of strategic partnerships, said that “news is popular” on YouTube.

Panelists also saw a value in tapping into niches and local communities, citing NPR’s popular radio show “Car Talk.” But the talk was also about “how to make a decent buck off very targeted communities,” since advertising is down everywhere but local communities and special-interest groups are growing in importance.

Panelists generally shared the stress they were under, with the glut of content a big contributing factor. Looking ahead to the coming of the Great Aggregator, Wolff suggested that while the price of content will continue to go down, “the premium will go to those who can best organize this content.”

The idea of news is not disappearing, panelists agreed, but again, as in other media and entertainment sectors, that replacement model has not emerged. The world we’re in, said Wolff, demands “we produce news for a dime,” but journalists need to get paid. In order to avoid withering away as print media seems to be doing, panelists suggested that journalists become entrepreneurial like Huffington Post founder Arianna Huffington and others.

Bringing some much-needed nostalgia and hope to the discussion, panelists recalled that radio of the 1930s is still alive and well and available, thanks to NPR. And TV still rules when it comes to big-brand ads. These buys remain the most efficient and cost-effective way to get the message across nationwide.



The Web was the center of attention on a panel that named Internet on TV or IPTV as the next big thing, but not due for a few years. As for which personal screen—TV, PC or mobile—is the most important, ESPN senior VP of research Artie Bulgrin, whose company also maintains a big Web presence, embraces the Best Nearest Screen philosophy that viewers will go for the screen nearest to them. ESPN, he said, is now a multimedia company that can pull in fans from multiple touch-points.

Standard & Poor’s researcher Scott Kessler suggested that mobile will grow once it is easier to use. The ideal would be for these devices to afford “appliance-like ease.”

The “Bridging TV and Broadband” panel considered the upcoming marriage of TV and the Net. The two are already dating seriously, as Philips’ engineer Martin Kienzle made clear. Philips is using broadband to bring content to TV, and in a few weeks high-end TVs will be available that have Wi-Fi connections to enable certain Web services. The high-end chips that make this possible also allow for the absolute security that the Hollywood studios demand.

New media’s profit problems were largely laid at the foot of ad agencies that, deemed too entrenched in their old ways and slow to change, aren’t paying the rates that such strong Web traffic demands. Evidence of this stasis is the fact that media buys and CPMs just don’t reflect explosive online use.

There are exceptions, other Media Summit participants noted, like MySpace and Comcast’s Fancast, whose ads are making their sites profitable. Yet consider the plight of social-network darling Facebook, which, spurning ads, is looking for a model to profitability. As ESPN’s Bulgrin observed, “We need to prove to advertisers that the PC and mobile screens can be as effective for them as TV screens.”

Advertising may be causing some of the problems, but it has its own problems to deal with in this crisis. As J. Walter Thompson worldwide chairman and CEO Bob Jeffrey put it, “Crises produce opportunities.” In the advertising downturn, his companies are going more viral and using more public-relations muscle to “drive client messages.” They are also milking their creative assets as they come up with the big ideas that drive a product.

Advertisers are also now well aware that “disruptive advertising” like pop-ups is waning and this “interruption model” is on the decline. Consumers, now known as “info shoppers,” are resisting information pushed at them, preferring to go online to do their own research before they make purchase decisions.

The challenge for advertisers in this new environment is to “listen better” and “engage consumers,” especially those who create their own content in blogs or on message boards, said Carl Fremont, executive VP and global media director, DIGITAS. The strategy is to be proactive and add value.

The “Media, Entertainment, Technology and Money” session reminded how tight money has become. Where once content was king, cash now is because of the liquidity problem today.

A conundrum for the money people is how to price things at a time when it’s so tough to do transactions. “People are searching for a way to assess and do things and this hasn’t been done,” said Velocity Investment Group co-founder Jonathan Miller.

Imran Khan, managing director at J.P. Morgan, described the media space as being “in the middle of a perfect storm and I don’t know when this will end.” But it’s clear, he added, that more and more people are moving online and this trend will last. Concurrent with this migration is audience fragmentation that is happening faster and faster.

The one oasis for Khan is movie box office, which has been up as much as 17% in the past few months. For Thomas H. Lee Partners, L.P. managing director Richard Bressler, the box-office stats give credence to the continuing value of real content that consumers want.

As for the advertising dilemma, Miller suggested that marketers first communicate with core consumers online to learn their needs and wants, then go for that more expensive mass reach with TV and radio.

Bressler, another radio cheerleader, called the beloved medium “the most misunderstood of mediums out there. Lots of people are still listening to terrestrial radio.”

The panel saw opportunities for investors like themselves in this crisis. One is to focus on adding value to companies already owned; another is to bottom-feed for good companies in distress.

Miller summed up the nervous funding situation by noting that “when you don’t see the exits, no one’s going to enter.”

Bressler injected a much-needed jolt of optimism into Media Summit by observing that “the eyeballs are up and advertisers still need to advertise.” But he didn’t spare us his prediction that “the downturn will continue for some time.”

As NBC Universal’s Zucker put it, “We’re in an era when everyone wants to question everything.” Until further notice, let’s keep those questions coming.