Open MIC: Setting New Standards for Media in the Digital Age
Shock jock Don Imus recently captured headlines and focused national attention on the question of media responsibility. He did so with a racist, misogynist jibe at a women’s basketball team that drew widespread censure from civil rights activists, media watchdogs and, most importantly, advertisers like GM and Proctor & Gamble.
Suddenly the airwaves were crackling with debate over the significance of Imus’ offense, the public’s response, and how his corporate employer, CBS, should deal with the situation. At Trillium we’ve been thinking a lot about how responsible investors should answer questions like these. What is the social responsibility of media after all? Is there a civic responsibility distinctive to media companies? And does a media company’s civic performance have any systematic impact on its bottom line?
Trillium has created a special research and advocacy vehicle to explore these questions. It’s called the Open Media and Information Companies Initiative (Open MIC). Working closely with a range of media experts, we incubated Open MIC internally for two years and have spun out the effort as a freestanding project of the nonprofit Tides Center Foundation.
We modeled Open MIC on TAMC’s earlier efforts to explore issues of corporate environmental responsibility through the vehicle now known as Ceres. Indeed, the best description of Open MIC is that it modulates the Ceres approach to environmental responsibility into the key of media.
The Ceres Model
It’s hard to imagine today what it was like in the ’80s when Ceres got started. Today hundreds of companies report their environmental performance according to standards that grew out of Ceres. “Climate risk,” a concept first articulated by Ceres, is now a bottom- line concern of CEOs around the world. And corporate environmental performance is analyzed by Wall Street as a key determinant of shareholder return.
Before all this could happen Ceres had to convene and encourage a conversation among investors, corporations and environmentalists on the ways that environmental performance might affect the bottom line. This probably seemed quixotic at the time. But the genius of Ceres was to engage the profit motives of corporations in a process of environmental improvement.
Open MIC intends to convene and encourage a similar conversation among investors, media executives and other stakeholders in the media sector. The focus of this conversation will be the impact that media companies have on our information environment and the ways that impact affects their bottom line.
What Is Media Responsibility?
The Imus affair highlights a certain kind of “pollution” that media companies will now think twice about, both as a social issue and as a bottom-line concern. But these sorts of content questions, while important, don’t get at the crux of the media responsibility question or the widespread anxiety felt about it today.
As every student of Civics 101 knows, the most fundamental responsibility of media in a democracy is to inform the electorate. This is why freedom of the press is enshrined in the Bill of Rights. This is why – from the founding of the U.S. Postal Service to the granting of free rights to broadcast spectrum – the Federal Government has actively promoted the growth of an independent, diverse media sector.
The element of diversity is essential to media’s democratic function. Traditionally media diversity has been taken to mean diverse ownership of media. The assumption has been that to get a diversity of perspectives expressed in the media you need diversity in the ownership of the media. As A.J. Liebling famously said, freedom of the press is guaranteed to anyone who owns one.
Having a diversity of perspectives expressed in the media insures against any one perspective – and the interests it serves – dominating the flow of information. Diversity of perspectives thus promotes the critical exchange required to get at something resembling the truth.
A Monoculture in Media
Today there are real questions about the diversity of perspectives at work in our media environment. Six corporations – Viacom, CBS, Time Warner, GE, Disney and News Corp – control 80 percent of prime time TV as well as vast swaths of the print, radio and cable landscape.
Just as a lack of biodiversity increases the risk of catastrophic failure in an ecosystem, so a monoculture in media is prone to disaster. Consider the fact that two years after 9/11 a full 70 percent of the U.S. population still believed Saddam Hussein was behind the attacks (Washington Post, 9/6/03). This dramatic failure on the part of U.S. media underpinned popular support for the disastrous invasion of Iraq.
We’d note here that media diversity isn’t a proprietary interest of the political left. Conservative pundit William Safire has written forcefully on the issue in the New York Times. And Ted Turner, no anti-corporate crusader, penned one of the best articles ever on the subject, “My Beef with Big Media” (The Washington Monthly, 9/04). So there’s a large and bipartisan community of media reformers actively engaged in the issue. One of the best is Free Press, a nonprofit group led by media guru Bob McChesney. Check them out (and consider giving them money) at www.freepress.org.
The media reform community is focused largely on legislative, regulatory and non-commercial solutions to the problem of media diversity. While there’s a tremendous amount of work to be done on these fronts, the fact remains that our media is largely mediated by commercial entities, most of them publicly held. Like Ceres, Open MIC starts from the premise that the best way to improve corporate performance, whether environmental or civic, is to demonstrate its relation to the bottom line.
Is Media Consolidation Bad for Business?
The media reform community has criticized Time Warner as a salient example of concentrated media ownership. As investors we’ve also noticed the company’s stock has been a dog for five years. Corporate raider Carl Icahn has made headlines badgering Time Warner’s Board over this fact. His proposed solution? Break up the company. Consolidation hasn’t worked for Time Warner investors.
The stock of radio giant Clear Channel Communications, another posterchild for media consolidation, likewise went nowhere for five years until private equity investors recently bid for the company. Their plan? Break it up.
Carl Icahn and the investors bidding for Clear Channel aren’t reformers concerned with promoting diversity in media. They’re investors trying to make a buck. As socially responsible investors we wonder if there’s a connection.
To be fair, the stocks of some other big media companies like Disney and News Corp. have done well. But one thing no investor has missed is the dramatic disparity between the valuation of traditional media companies and that of some new players shouldering their way into the space. Disney stock trades at 17 times its past year’s earnings. Google’s trades at 43 times.
If you asked Eric Schmidt, Google’s CEO, why his stock wins such a high multiple from investors he might say because the company recently posted a 69 percent jump in quarterly earnings. But the more strategic answer he might give is that Google is in the business of promoting diversity in media.
How? First, by putting every byte of digitized content available on the internet at every user’s fingertips – this is their search tool business. Second, by giving every person with a computer and an internet connection a voice that can be heard by anyone anywhere anytime they connect to the internet. This is their communication tools business.
Google isn’t doing this because they think diversity in media is a civic good. They’re doing it for the best of business reasons: because this is what people want most from a “media” company to day. And wherever people go to find the media they want, advertisers follow.
Successful Media in the Digital Age
And so we find ourselves at an interesting inflection point in the history of media. Just as the ownership of traditional media be comes most concentrated – and so most threatening to the diversity of perspectives necessary in a democracy – along comes the internet with its radically democratizing capabilities.
As Yochai Benkler masterfully recounts in The Wealth of Networks, the internet has fundamentally changed the economics of media and in doing so shifted the balance of power in the mass media equation.
Before the internet, reaching a mass audience required a vast investment in physical capital – printing presses, broadcast towers, recording studios. Only corporations or the wealthiest individuals could afford such an investment. Today being heard around the world takes a $500 computer and a $40-a-month internet connection. Freedom of the press still belongs only to those who own one. The difference is: today most people do.
People are no longer content to be treated as passive consumers of a finished media product. They no longer want to be just an “audience.” This is why Google stock is flying while TimeWarner’s is flat-lining. This is why MySpace membership has exploded as sales of newspapers and CDs plummet. The path to competitive advantage in media has changed.
In the old industrial model of media the simplest way to gain market share was to buy another media company and the passive audience that came with it. This is the competitive logic that led to Time Warner and Clear Channel and an inexorable loss of diversity in media. Today media companies built on this model remain powerful and politically daunting. But they are struggling as businesses.
The thriving companies are those that enable people to be active participants in the media environment, to be users who create, alter, share, search for and store various sorts of media when and how they choose. From a civic perspective this change could hardly be more fundamental: Media companies today gain market share by increasing rather than reducing the diversity of voices audible in society.
Competitive Advantage and Civic Value
Contrary to the more ecstatic views of the digital vanguard, this doesn’t mean that traditional media companies will be swept away in a sea of unfettered exchange. Nor would we want them to be. As Google’s Schmidt himself has said, the new online firms depend in no small part on content produced by traditional media companies. So a new equilibrium must be found that balances the democratizing capabilities of the internet with the legitimate, indeed necessary property rights of commercial entities. Finding this new equilibrium is a challenge democratic society will grapple with for years to come. But what’s clear is that the relationship between media companies’ civic and financial performance has changed.
Before the internet one could argue that what was good for the business of media was bad for democracy: consolidation of ownership and a corollary loss of diversity in media. Going forward, what’s good for the business of media appears to be just what democracy requires: the expansion and amplification of individuals’ ability to create and share information – our ability, in a word, to communicate.
So the consolidation strategy that drove media in the 20th century has come to a dead end, both commercially and democratically. The pathway out will take a different route, one that finds competitive advantage by enabling greater participation in media. Companies that recognize and reflect this change in their business models will be rewarded, as will their investors.
Open MIC’s mission is to:
1) foster an appreciation of this new reality among investors and corporations;
2) promote business strategies that capitalize on the commercial and democratic opportunities it affords; and
3) identify and discourage anti-competitive practices that thwart the democratic potential of media in the digital age.