No Single Bell Rings True, Beware The Tides

Michael Hedges February 13, 2023 Follow on Twitter

The media world continues to shrink, if employment is significant measure. Profits matter, in many cases, as investors can easily slide their money into happier holes. Worldwide, consumers are making different choices - and changing their minds furiously. Longtime business scribe Forbes offers a “layoff tracker” to keep worry worts in the mood. The typical - reported - concern is “recession fears,” appropriately identified as a loss of faith.

At the end of January publisher HarperCollins announced a 5% reduction in North American staff due to “unprecedented supply chain and inflationary pressures.” A few days earlier the subsidiary of News Corporation, principally controlled by the Murdoch family, agreed to have a federal mediator find common ground with union members on strike since November. A tentative agreement was reached, reported AP (February 10), to raise salaries.

That news came came just as News Corporation released financial results for the final quarter of 2022, particularly weak for HarperCollins, off US$51 million year on year. News Corporation chief executive Robert Thompson blamed Amazon, among other woes, for losses at HarperCollins. “Under the prevailing circumstances, it is absolutely necessary to confront the cost base as we seek to bolster long-term profitability in the post-pandemic marketplace,” he said, quoted by Publishers Weekly (February 10). Then he went on to announce a 5% cut in the company’s global workforce, eventually to remove about 1,250 jobs. A month earlier News Corporation employees were ordered back to the office because “screens deny us the subtleties of body language,” noted Fortune (January 13).

About the same time certain activist investors, including family member James Murdoch, scuppered the plan to “re-merge” News Corporation with Fox Corporation, originally severed in 2013. The Elder Mr. Murdoch admitted the plan was not “optimal at this time,” in a statement. Not forthcoming was the full agreement of investors, reasonably separate. VC Irenic Capital Management, a News Corp shareholder, suggested putting the Dow Jones subsidiary on the block, which would include the Wall Street Journal. On the other side, Fox Corporation turned down, said Bloomberg (February 11), an unsolicited for its streaming service Tubi.

The Walt Disney Company is taking this upheaval a bit further. Chief executive Bob Iger, who recently returned after a two year hiatus, announced a widespread reorganization across all divisions in addition to job cuts. Mr. Iger, too, has issues with an activist investor, VC Trian Management. He also has issues with the right-wing culture warrior governor of Florida, but that’s separate. As usual, the announcement was made (February 8) immediately after quarterly financial results were released.

Disney will shrink its workforce by 7,000, about 3% of the total. “We will take a very hard look at the cost of everything we make across television and film,” he told investors, quoted by CNBC (February 9). Lopped off the spreadsheet will be US$5.5 billion, a bit more than half from content production. Not touched, despite cries from activist investors, will be sports network franchise ESPN. Several senior executives have already been replaced.

Warner Bros Discovery took most of its job cuts last year, almost entirely from the Warner Bros side. Netflix did the same. Both have moved from “restructuring” to “rebuilding,” meaning fewer film and series releases. Publishers no longer want to print anything. Bertelsmann just moved to eliminate 35% of the Hamburg workforce of publisher Gruner+Jahr.

If fears of recession, inflation, earthquakes and balloons have rattled the media world, the tech sector is terrified. They had the most fun hiring folks and putting bowling alleys in office spaces over the last decade. Now digital technology enterprises are shrinking fast. Not the 3% to 5% of workforce seen in the media world but 15% to 30% in tech. And that doesn’t include the 70% headcount shrinkage at Twitter.

Economies of scale - bigger is better - has long been the dominant market strategy. Competition can be invigorating but being number one with a bullet is always considered the answer. The iconic “Think Small” campaign for the Volkswagen Beetle first appeared in 1959. The black and white ads changed advertising and, memorably, sold a lot of cars. That was before Elon Musk was born.

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