Broadcasters on the brink? Why skyrocketing media pay should be a red flag.
On my blog at HBR, I observed that the business model for broadcasting is showing some cracks and that a new one is likely to emerge. Interestingly, a recent New York Times article points out that the compensation for media CEO's is at sky-high levels, some $10 million more, give or take than the compensation of other executives. So let me make a provocative observation: We've seen this before in industries about to go through wrenching change. In the near term, the companies will have pulled out of less productive markets, narrowed their range of offers, gone upmarket, learned to exert power over suppliers and done a ton of other things that makes their immediate results (and cash flows) look good.
Let me tell you what they aren't doing: using those cash flows to invest in the experimentation, options and new ventures that could provide them a glide path to a new business model. In other words, things look their brightest right before the business model heads over a cliff.
What those big pay packages might mean, instead of celebrating success, is that funds that should be going into building a future for the organization are going into today's consumption instead. And that's a very bad early warning.
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