Mel Reveals the “Magic”

Mel Karmazin. Mention that name to a broadcaster or business pundit and you’ll trigger a vast array of words, phrases, and emotions, many I won’t say here (mostly to avoid triggering of any parental controls on your browser). Brilliant, bastard, visionary, cheapskate, anger, respect, love, hate…are just a few of the words that might be associated with Mel. I myself arrived at CBS Radio just after Mel left and the “burn the furniture” era (supposedly) ended. The phrase that is probably the most consistent across the board would probably be “outspoken”.

In this December 30, 2009 interview with Charlie Rose, the former CEO of CBS and current CEO of XM Sirius Satellite Radio, as well as the man responsible for making Howard Stern (second only to Howard himself) insanely wealthy, commented on many issues that face the media business today. But, in his outspoken style, he also reveals the “magic” ingredient of the business model for what is now known as “traditional” media and why it no longer works.

You can see the full interview by clicking here and entering the word “Karmazin” in the search box. Sorry, but Charlie hasn’t made this video shareable as of this writing.) You can also get a copy of the transcript.

During the interview Rose references a Mel quote from a meeting he had with Sergey Brin, Larry Page and Eric Schmidt of Google. Rose states, “And you said that their advertising model was…”f-ing with the magic.” The “magic” Mel speaks of not how well broadcast advertising worked for clients and but how well it worked for broadcasting. He explains, “I was the CEO of CBS, and I had a model where you buy a
commercial, here in advertising you buy a commercial in the Super Bowl.* And at the time you paid $2.5 million for a spot. And you had no idea if it worked. You had no idea if you sold product, if it did any good. I loved that model.”

I’m not going to argue the details of how well it worked for advertisers, because it did work…product and services were sold…it’s who was getting the message and how well did it work? In the days when there were no other advertising models, no models that allowed the consumer to make an impact, it was the only way to play.

Tongue in cheek Mel goes on, “And why, if I can get away with that model, if I’m in the business where I can sell advertising that way…You know how everybody looks for return on investment?  We had a business model that didn’t worry about return on investment. And then here comes Google. They screwed it up. They went to all these advertisers and say we’ll let you know exactly what it is. Everything follows after that.”

And, as Mel points out, that is the is the root of why the advertising model for media has changed. Not whether it’s good for the providers of the medium, but whether it’s good for the users of that medium…both advertisers and consumers. The ability to see, almost instantly, the response to an ad, offer, or reference in the interactive world and the ability for a consumer to consciously or unconsciously decide if the message is important right away is what is changing the way advertising is monetized. So, it’s the power of the people and it’s the being able to see them use that power. The magic has changed, the curtain has been pulled back.

That’s pretty powerful stuff…I don’t care who you are.

Karmazin makes some other very interesting points on the overall advertising landscape that are also of interest in the latter part of the discussion including:

“I think that there is too much inventory. I think that the Internet has changed obviously — I don’t know how many people have been on this show and said that — but has changed the world. And what’s happened is that there is far more supply than there is demand.”

“– if you were to ask me, who do I worry about competing with the most…I would have said Rupert and News Corp.  I would have said they have a global platform.  I thought Rupert was willing to invest.
He had a longer time horizon, he was willing to spend a lot of money on content. He was global in a big way. I would say today in my opinion, it’s Google. I think that Google is the company that I’d watch the most.”

Mel also makes some interesting points about content and distribution that are interesting in this new model for media…”The television business would be a great business if you only looked at the audience and you didn’t look at the business model. The business model for network television is a difficult business model. You don’t own the content.  I mean everyone who talks about content is king — the NFL owns the content. The NCAA owns the content. The Olympics own the content. It’s not like NBC owns the Olympics.”

He goes on to say, “Dealing with trying to monetize your content on the Internet, very few media companies have been able to do that, you know. Google has done a phenomenal job.  Amazon has done a great job.  EBay has done a good job. But it’s very hard to find a site that has done a great job of monetizing its content on the Internet, all right.” And, “the question is whether or not somebody is going to pay you for the content…”

*Perhaps now is the time some advertisers rethink the ginormous ad spend on the Super Bowl. Maybe that money could go to..oh, I don’t know…funding the economy of an impoverished third world country.

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