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IT’S NOT JUST BUSINESS TO US.
WE LIVE HERE TOO. © 2008 Michael Austin c/o theispot.com
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Anvil. The Right Fit. For you. For us. For the earth. www.anvilknitwear.com. Anvil is a registered trademark of Anvil Knitwear, Inc.© 2008 Anvil Knitwear, Inc.
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CONTENTS [Fall 2008. Volume 45. Issue 2]
Janet Robinson The CEO of the New York Times Company talks about confronting the digital age as the future of traditional media appears to be on the rocks. [Article by Amit Mukherjee]
68 Hugh Hefner
Chris Johns Escape for a day with the Editor-inChief and former photographer for National Geographic. [Article by BJ Sullivan]
The pop culture icon and founder of Playboy reminisces about his unlikely beginning in the industry and the growth of his brand. [Interview with BJ Sullivan]
Sir Richard Branson The entrepreneur extraordinaire reflects on his first businesses and offers advice to budding businesspeople. [Interview with Sudeep Doshi]
The Executive Vice President of the National Geographic Society talks about spreading the mission of science education around the globe. [Interview with Brittany Urick]
The celebrity designer and icon of bridal couture talks about clothes, style, and how she built a fashion empire after leaving Vogue. [Article by Caroline Clark and Brittany Urick]
Bridget Foley The Executive Editor at W chats about the ways the magazine tries to provoke through fashion. [Interview with Liz Kohansedgh]
One of Sports Illustratedâ€™s most acclaimed and prolific writers discusses sports journalism and the challenges he faces in crafting narratives that may lie far beneath the surface of sports. [Interview with Brittany Urick]
FALL 2008 BUSINESS TODAY 5
> create your career here
CONTENTS [Fall 2008. Volume 45. Issue 2]
A designer reflects on her development as an artist and, now, as an instructor. [Article by Allyson Taylor, Harvard University]
Cankles and Armbows A brief glance into the world of advertising through a summer internship. [Article by Nick Slavin, Princeton University]
Romance of Rankings Why we base our graduate schools choices on rankings and why that might just be to our detriment. [Article by Matt Turner, PhD, University of Texas]
Better Business Basics
How one university is using a class for freshman students to promote professional responsibility. [Article by Kaitlin Holcomb, University of Illinois, Urbana-Champaign]
NEWS + ANALYSIS
America has an obsession with oil, and the problems have just begun. [Article by Michael Keaton, Princeton University]
Revolutionary Road Travel through to the rapidly evolving world of news, from TV to computer — and back! [Article by Paul Slavin, Senior Vice President, ABC News]
Introducing A New Banker Meet your new banker: Your Mom. Discover a new way to hit up the folks for loans. [Article by Asheesh Advani, CEO, Virgin Money]
Oracles, Tomboys, & Dropouts Colorful personalities rule some of America’s most recognized companies. Explore a handful of the most unique. [Article by Nimi Katragadda, Harvard University]
Your Music Sucks
But that’s just the humble opinion of one music journalist who also thinks Coldplay is rubbish. [Article by Alan Baban, University College London]
The Pinstripe Playbook You may never break away for a touchdown run you can still discover a big break in sports finance. [Article by Sandra Thomas, Princeton University]
Packaging Pretty There’s more to selling make-up than a sexy brand, a pretty color, and a little glitter. [Article by Molly Gomolin, McGill University]
Couture for the Crowds Now that the economy’s in a slump, people have to learn to dress to the nine — with a budget! [Article by Nell Diamond, Princeton University]
FALL 2008 BUSINESS TODAY 7
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Business Today is America’s largest student-run publication, reaching 200,000 readers nationwide. Published at Princeton University, the magazine is distributed at over thirty of the top schools in the country and has extensive online readership at our website, www.businesstoday.org. Business Today is dedicated to presenting the opinions of students and business leaders. By examining controversial issues facing our world and exploring life after college, we hope to help readers prepare for their futures. The magazine has been published by Princeton University undergraduates since 1968. Business Today Princeton University 48 University Place Princeton, NJ 08540 609.258.1111 firstname.lastname@example.org JULIO ROJAS PRESIDENT SUDEEP DOSHI EDITOR-IN-CHIEF KATE HOLMAN PUBLISHER MERRITT HUMMER REGIONAL CONFERENCE DIRECTOR ALEX KENNEDY SEMINAR SERIES DIRECTOR AMIT MUKHERJEE INTERNATIONAL CONFERENCE DIRECTOR ANKUR PATEL EXECUTIVE RELATIONS DIRECTOR WILL PENG ONLINE JOURNAL DIRECTOR WILLIAM PLUNKETT DESIGN DIRECTOR CLAYTON SACHS CORPORATE CONTACTS DIRECTOR CONOR SUTHERLAND FINANCE DIRECTOR BEAU THOMAS BUSINESS DEVELOPMENT DIRECTOR The Foundation for Student Communication, Inc. is the parent company of Business Today. FSC, a 501(c)(3) non-profit foundation, is run entirely by students for students at Princeton University. In addition to the magazine, FSC sponsors International and Regional Conferences held across the country that bring together students and executives to discuss the future of business. For more information, visit our website, www.businesstoday.org.
SUDEEP DOSHI EDITOR-IN-CHIEF KATE HOLMAN PUBLISHER WILLIAM PLUNKETT DESIGN DIRECTOR Editorial WILL BEUTTENMULLER EXECUTIVE EDITOR MICHAEL KEATON ELIZABETH KOHANSEDGH MIHEER MHATRE CARMEN SANCHEZ BJ SULLIVAN BRITTANY URICK Design KATE HOLMAN SENIOR DESIGNER DAN LI SENIOR DESIGNER EILEEN CHEN KATE MACHTIGER AMIRA POLACK RAFAEL ROMERO HANNAH SACHS BJ SULLIVAN MILES WU Publishing LINDSEY LEAKE PHILIP THALHEIM IRENE ZHANG
FALL 2008 BUSINESS TODAY 9
If your actions inspire others to dream more, learn more, do more and become more, you are a leader. â€“ John Quincy Adams
EDITOR OUR ANNIVERSARY Business, today, is a world apart from what it once was. The last four decades have transformed how we conduct commerce, where we manufacture our products, who we borrow from, and why we care about ethical business. The recent financial meltdown notwithstanding, the attitude of students towards the business world has also taken a sharp U-turn since the rocky days of the late 1960s. Gone is the vilification of corporate America, the endemic disdain of business, and the frenzy that led to the burning of our first issue. As Business Today marks its 40th anniversary, we can look back with no small measure of pride on our survival and success. From Nixon, Humphrey, and Wallace in 1968 to Obama and McCain today, from the rise of Wall Street in the 1980s to its demise earlier this year, from the first personal computer and the first cellular phone to the online era and the triumph of e-commerce, Business Today has been a part of every momentous national conversation for four decades, a constant representative of student opinion. Every issue is a physical reminder of this longevity and a cause for celebration as we reach another milestone. This issue is a magazine’s magazine. This means that many of its articles are about journalism and the journalistic process. In choosing this theme, we could think of no better way to commemorate and celebrate 40 years of student journalism. The issue is also characterized by a conscious blend of the present and the past. For example, each section is introduced by a Business Today Archives piece: a snapshot of a past issue that encapsulates the theme of the section ahead. The sections, in turn, present a selection of provocative and pertinent articles about the world today as it applies to students and business. As our readers immerse themselves in another season of applications and interviews, they would do well to read our “On Campus” section, our focus on developments in student life across the
country. Especially interesting to students thinking about what they want to do next summer are the various student accounts of internships they have pursued, while those with a view to graduate school may be interested in our piece on the process behind business school rankings. Our “News and Analysis” section turns the spotlight on two worldrenowned publications. Readers of National Geographic or The New York Times will be interested in our interviews with Chris Johns and Terry Adamson, respectively the Editor-in-Chief and the Executive Vice-President of National Geographic, or in our conversation with Janet Robinson, the CEO of The New York Times Company. Johns, Adamson, and Robinson all provide fascinating insight into the dynamics of running an international publication, the successful balance between corporate strategy and content quality, and the uncertain future of print media in today’s electronic world. In our “Entrepreneurship” section, British billionaire Sir Richard Branson talks to Business Today about the student magazine that launched his career, his approach to successful business, and why he chooses to constantly put his life at risk in pursuit of the next great adventure. The section also includes an article by Asheesh Advani, the CEO of Virgin Money, which promises to be of interest to students looking for a loan. We move from one playboyentrepreneur to the next with an “Entertainment” section that features an interview with Hugh Hefner, the 82-yearold Editor-in-Chief of Playboy magazine. Hefner reflects on the success of his empire, about how he came to this career path despite his conservative upbringing, and how he sees the future of Playboy and of the magazine industry as a whole. This section also includes a conversation with Sports Illustrated writer Alexander Wolff, who has written for the publication for nearly three decades.
This issue is anchored by a “Fashion” section that features a wealth of articles, including a profile of the acclaimed designer Vera Wang, who talked to us over the summer, and an interview with Bridget Foley, executive editor of the women’s magazine W. Our anniversary issue is unusual in its diversity of sections and articles. Normally, one section predominates over the others but this time, we are brimming with exciting content across the board. In many senses, this is symbolically fitting. It encompasses the diversity of 40 years of publication and allows us to pay complete tribute to the legacy of our founders. Steve Forbes, Michael Mims, and Jonathan Perel took a risk when they started Business Today. Two generations and over 12 million copies down the line, that risk seems to have paid off. Their mission to connect students and executives is still relevant and continues to be realized through the programs we support and on the pages of our magazine.
SUDEEP DOSHI EDITOR-IN-CHIEF
FALL 2008 BUSINESS TODAY 11
Improving the future, one molecule at a time Energy Technologies
Food and Beverages
Consumer Products Cosmetics
Soane Labs is a nanotechnology incubator in Cambridge, Masschusetts specializing in selfassembly, polymer chemistry, and surface modification. We develop market-ready innovations for mature industries and seek talented scientists and businessmen interested in cutting edge research and development and entrepreneurship. For internship and employment opportunities, email your resume to email@example.com. Improving the future, one career at a time
www.soanelabs.com | 35 Spinelli Place Cambridge, Massachusetts 02138 | 617.871.2101
[NEW YORK CITY]
BUDDHA BAR NYC
FACTS A Few Essentials (and non-essentials)
New York: 25 Little West 12th Street, in the Meatpacking District. For reservations: Call 212.647.7314. Dress code: Casual and trendy. How much you’ll spend: Between $30 and $50, before drinks. Paris: If you can’t get to New York anytime soon (or if Paris is easier for you), there is a Buddha Bar located at 8 Rue Boissy d’Anglais. For reservations: Call +33.1.5305.9000
Buddha Bar New York, sister to Buddha Bar Paris, offers the ultimate dining experience. Located in the Meatpacking District of Lower Manhattan, Buddha Bar is a popular restaurant for celebrities and trend-setting socialites. The restaurant’s casual-elegant dress code provides a comfortable and accessible atmosphere to all. While enjoying Buddha Bar, diners are enveloped in an electric atmosphere of chic Asian-fusion décor, which prominently features an oversize golden Buddha overlooking the dining area. The restaurant’s interior design, combined with DJ Sam Popat’s electronica music and exotic beats, creates a hypnotizing sensation. Executive Chef Keith Matsuoka offers an intriguing menu, consisting of Asian flavors accentuated by French undertones. In addition, Matsuoka presents an extensive sushi menu, presented and served by a friendly and efficient wait-staff. Guests relax and enjoy a luxurious meal of four courses: appetizers, sushi, entrees, and desserts. Food is served “family style,” allowing every member of the dining party to try a unique blend of flavors. As the evening wanes, the music gets louder, and the dining room is rearranged, turning this popular restaurant into a trendy club. The restaurant’s late hours allow its guests to enjoy a scintillating atmosphere and amazing food until the early morning. ~M.L.
BUBBA’S [DALLAS, TEXAS]
I scream, you scream, we all scream for...
Located in the heart of the Park Cities, Bubba’s serves authentic southern food that has attracted SMU students and locals for the better part of a century. Once a 1927 Texaco gas station, Bubba’s is now a retro diner complete with chrome and red leather booths. It’s famous for its fried chicken and piping hot yeast rolls. Try these rolls with a dab of honey, and don’t worry for a waitress will be coming around soon with seconds and thirds. Also, if you’re more of an early bird, come out and try the southern-style, justlike-mom-used-to-make biscuits and gravy. Welcome to Texas. ~W.B.
Southern Comfort Come on guys, we meant the food...
CHOICES [PASADENA, CA]
If you’re looking for a great frozen yogurt place, look no further than 21 Choices. There are several delicious flavors of yogurt to choose from and an endless array of toppings that employees will cheerfully mix in with your yogurt to make whatever combination you’d like. All the yogurt and additional toppings are made with the freshest fruit, candy, and chocolate, and are served in eco-friendly cups. If you are lacking inspiration, 21 Choices also provides a menu of the day’s options. The menu is updated online daily, and you can even sign up to have it e-mailed to you. If you go on a Friday or Saturday night, be prepared to wait in a line that sometimes goes out the door. But trust us, it’s worth the wait. ~K.H.
Sample Daily Menu Hershey’s Take 5: Vanilla with Hershey’s Take 5 bars, peanuts, pretzels, peanut butter, caramel, and chocolate Pumpkin Cheesecake: Pumpkin, cream cheese, and graham crackers Butterfinger Chip: Made with Butterfingers and chocolate chips Boysenberry Bliss: Fresh boysenberries and guava juice Oreo Cookie Magic: Oreos, cookie dough, and rainbow sprinkles Purple Sunset: Made with raspberries, blueberries, and pineapples Mayan Chocolate: Semi-sweet chocolate with a hit of spice
FALL 2008 BUSINESS TODAY 13
[No, not the newest VH1 show]]
Can’t start the morning without that good old box of Wheaties? ies? Well, W over the last five years the cereal bar, Cereality, has brought a whole new meaning to the phrase, “breakfast of champions.” With a Chinese take-out approach to cereal, founder David Roth first envisioned that the business would become the “Starbucks of cereal,” and when I checked it out, I also couldn’t help noticing the similarities. As I approached the “cerealogist” at the counter, he informed me that I could have my cereal one of three ways: “my way,” “their way,” or even “a whole new way.” The options were phrases I had heard before, “Sir, would you like to make that double mocha frappucino tall, venti, or grande?” And despite Cereality’s best efforts to reproduce the ultra-success of Starbucks, the chain is flopping miserably. Since the 2007 acquisition by Kahala, owners of Coldstone Creamery, Cereality has closed both of its Pennsylvania locations, including one on Wharton’s campus, its Chicago store, and its franchise training center. Maybe with Starbucks closing 600 stores of its own, Roth should rethink his vision, too. ~W.B.
HEMCON MEDICAL TECHNOLOGIES
[Science and patriotism] Whether in the deep, chilly waters of the ocean or the searing heat of the Iraqi desert, HemCon scours disparate ends of the earth to capitalize on the natural properties of an unlikely compound. The small medical technology company based in Portland, Oregon, makes serious medical bandages and dressings from chitosan, an element that exhibits antibacterial properties and expedites clotting in serious wounds. This unlikely lifesaver reduces the amount of blood loss from major injuries, thereby buying time for patients in need of medical attention. Currently being used by the U.S. Military, chitosan offers a natural and cost-effective way to treat serious injuries. Attention adventure-seekers: working with HemCon means exploring unchartered territory both on land and in science. Sign us up. ~B.J.S.
CHITOSAN Commercial chitosan is produced from chitin, which forms the base structure for the exoskeletons of shrimp and other crustaceans.
14 BUSINESS TODAY FALL 2008
BILLSHRINK [Your new financial contract decoder]
While we may all want to be frugal consumers, sometimes it is just too difficult. Take services such as wireless plans or credit cards. Navigating through a maze of pricing plans and monthly fees can be time-consuming and frustrating, and can ultimately lead us to simply pick one on a whim. Fortunately, BillShrink, a new startup which launched just a few months ago, promises to do the dirty work for us. With the aim of helping users save money, the company uses a consumer’s existing plan and its accompanying details to determine if the consumer might actually be paying more than necessary considering all other available options. Currently, BillShrink offers services for cell phone carriers and credit cards only. But it intends to expand to insurance plans in the future. In order to see how the site works, users simply choose a service and either import their bill or manually estimate their usage. BillShrink looks for important metrics such as current monthly cost, minutes used, number of lines, frequency of text messaging, and user residence. After these details are provided, BillShrink comes back with a list of all plans and their annual savings. In an instance where the consumer has done his homework and is already on the cheapest plan, he can still see how much money he is saving in comparison. Much of BillShrink’s appeal comes from its user-friendly navigation and “Orbitz-style” layout. The ease with which users can tweak their preferences and account for minute details is a big plus. While a handful of other companies have claimed to help lower consumers’ payments, BillShrink aims to improve on their services through more complex algorithms and more rigorous analysis of comparable plans from companies offering similar services. Furthermore, BillShrink promises to track the market over time, providing alerts when certain plans become cheaper to help the consumer adjust on the fly. While helpful in reducing a consumer’s workload, BillShrink may run into trouble with cautious users, wary of trusting a third-party with their existing plan details. Consumers can bypass the option and manually provide information, but this option is not very appealing for those looking to save time. In an age where identity theft runs rampant, it may be hard for some consumers to take that step. BillShrink is by no means revolutionary, but it promises to do its job better than those who have tried before. With so many other costs to cut (gasoline, anyone?), you may not have much time to track your wireless or credit card plans. Think about letting BillShrink do it for you. ~M.M.
[Flea markets have gone digital]
INTUITIVE SURGICAL [Thank you very much, Mr. Roboto]
Since the 17th century, bartering goods has been an accepted form of trade. Although it has been a while since Pilgrims and Indians were exchanging goods, its novelty has not yet worn off. In fact, a growing Boston-based startup dubbed “Swaptree” is taking the concept to a whole new level. Swaptree has created a vibrant online community in which users can exchange CDs, books, movies, and videogames — essentially for free — in just a few simple steps. Users can list any items they would like to give away, perhaps old CDs catching dust or a movie that wasn’t quite as funny as its trailer made it seem. In mere seconds, Swaptree can calculate everything you can receive in return, combining its wide breadth of categories with its hundreds of users to provide an immense number of options. In order to finalize the exchange, simply print out the shipping labels (weight, cost, and address already calculated) and wait for your Christmas to come early. Eager to give Swaptree a go, I quickly made my own account “in 8 seconds,” as the site claims. In order to list something, users only need the UPC or ISBN code on the back of an item, and Swaptree fills in all of the other details. With only a textbook on hand, I submitted the item online, only to find that no users were interested in purchasing “The Tower and the Bridge.” Digging deeper, I produced “The Central Park Concert: Dave Matthews Band.” This time, I was given 114 possibilities, from Dan Brown’s Angels and Demons to Mandy Moore’s classic “So Real.” It is here that Swaptree truly succeeds; its algorithms produce results you (clearly) could have never anticipated, giving the website a unique, suspenseful feel. If Swaptree has any failing, it is that the UPC/ISBN code must be known to submit an item. While it ensures that users actually possess the item, it can make it difficult to trade away from home, for example, when students are at college. Although Swaptree is directed at a broad audience, college students comprise a large percentage of its online population and can be limited in their trading activity because of splitting time between home and school. Launched in July 2007, Swaptree shows no signs of slowing down, particularly after recently receiving an additional $3.35 million in funding. In catering to the mother whose daughter has outgrown “Dora the Explorer” or the dumped boyfriend whose Barry White CDs no longer help, Swaptree has ensured it has found a market that can last. ~M.M.
Photo by Edgar H.
Many people gripe that our lives are becoming too digitalized and that we are becoming ultra-dependent on technology. But there’s an upside — technology might be able to save our lives, literally. Intuitive Surgical, a maker of robotic surgical systems, is trying to make that a reality by cutting the invasiveness and increasing the precision of complex surgical procedures. Their trademark da Vinci Surgical System is comprised of two primary elements: a surgical interface where four robotic arms can emulate the hands of the surgeon — except with a much smaller incision and more precise maneuvers — and a console where the surgeon can view the operating site on a monitor. With ultra-high resolution, zoomed-in graphics, the surgeon can control the arms that are actually interfacing with the patient. The machine ultimately reduces the inherent human limitations on the surgical table. The company value proposition to the surgeon, according to its corporate brochure, reads “Superior visualization, enhanced dexterity, greater surgical precision, and ergonometric comfort.” It’s the epitome of 21st century healthcare, and statistics show that recovery time from procedures using this system are significantly better than traditional methods. But we’re far from a paradigm shift yet — the cost of the machine and its relative novelty mean that the technology is still far from commonplace. ~B.J.S.
FALL 2008 BUSINESS TODAY 15
Berkeley, California, is a college town with a funky twist. Home to the Cal Bears of UC Berkeley, the city caters to college students, with a wide selection of hole-in-thewall shops, offering tie-dye shirts and quaint restaurants where you can find a bargain on outstanding ethnic food. Telegraph Avenue is the classic Berkeley environment, where intellectual sophistication meets hippie culture. The aura of People’s Park is alive and well, and Berkeley remains one of the most famous radical liberal strongholds in the country. Even Berkeley police turn a blind eye to those stuck in the 60s, smoking pot and raving to reggae at this favorite hang-out spot. Smoke shops and tattoo parlors abound around campus, offering a stark contrast to the upscale restaurants of 4th Street, College Avenue, and North Berkeley, which are populated by the [BERKELEY, CALIFORNIA] intellectual elite, retired professors, and alums drawn to the charming, little town. The Berkeley Hills, decimated in 1991 by the Oakland Firestorm, have been rebuilt in the last decade with ultramodern homes that enjoy a spectacular view of the Bay. Berkeley is a true melting pot of old and young, students and retirees, right and left (with decidedly more of the latter), and upscale and super casual — united only by a liberal, laid-back perspective on life. ~M.K.
LEFT BT BORDERS
[THREE WATERING HOLES]
A cornerstone on Austin’s famed Sixth Street, Maggie Mae’s is popular with locals and tourists alike. It boasts four different drinking environments, ranging from a saloon-style shotgun bar to a rooftop cabana overlooking the street. It also helps Austin live up to its title as the live music capital of the world, hosting the musical festival South by Southwest for the last 17 years.
This trendy TexMex restaurant and tequila bar is the perfect place to start the night. With a rooftop patio rivaled only by Maggie Mae’s, Iron Cactus is best known for its signature cocktails, especially the Sangria and the Cactus Cosmo. If you’re planning on heading over, make sure to get out early because there’s bound to be a wait.
Scholz is a historic brewery founded in 1866 that still serves its famous German imports and rotates beers depending on the season. Renowned as the “oldest business in Texas,” it is now the place to go to watch all the away Texas football games. Come on over on a Saturday afternoon, grab a delicious Schneiderweisse, and make Scholz a tradition. ~ W.B
16 BUSINESS TODAY FALL 2008
Part of Petra’s allure is its remoteness, but that makes travel somewhat difficult. Many fly into Amman, Jordan’s capital, and take a three-hour drive to the ancient city. Hotels dot the small city of Petra, and cover every price bracket. Common visits last a night or two, but its location also can make a plethora of opportunities for rustic, physical fun and breath-taking panoramas.
WORLD WONDER So you might not be Indiana Jones. Tough luck. But you can still revel in the beauty of one of the ancient world’s best preserved legacies, an ancient city of rock. Nestled in the Jordanian desert, this archaeological gem served as a key trading outpost during Biblical times because of its strategic location in the middle of the major caravan route. And though its importance slowly waned, Petra has recently been deemed one of the New Seven Wonders of the Ancient World. What is left of Petra is essentially the ancient city’s giant necropolis. When you walk down the main path through the ruins, the mountains on either side are dotted with tomb after tomb. Some are simple caves carved into the rock. Others are as magnificent as the iconic façade of the Treasury, named not for a commercial function but because of a legend that claimed treasure had been hidden in the giant urn at the pinnacle of the sandstone masterpiece. The treasury actually served as a tomb for one of the most well regarded Nabataean kings. To get to the archaeological site, you have to walk for about half a mile down a sheer, narrow gorge that spits you out right in front of the Treasury — i.e. that universally recognized photo-op. And if you really want to emulate our favorite cinematic adventurer — or if you don’t want to get sand in your shoes or step in horse crap — you can bargain with some of the locals and arrange a donkey or camel ride through the gorge and around the site. But beware: donkey sweat will clog your pores and, more importantly, will make you reek for the next three days. That said, even the smelliest and sweatiest of tourists will appreciate the stunning architecture built right into the face of the mountain. When you step into this ancient world, it’s hard not to feel awed and energized by the ingenuity it took to construct the seemingly indestructible monuments in front of you. While you could spend days wandering through the ruins, there is more to do in Petra for the adventurous traveler. If you do not mind a 4 a.m. wake-up call, you can take an early morning horse ride up the mountains of the ancient city and watch the sun fill the canyon from your elevated perch. As the horses huff and puff and sweat their hearts out schlepping you up the mountain — you might just find the ride slightly unpleasant. But it’s worth it in the end: the sheer cliffs mean that you can literally look right down onto the city and its beautiful red sandstone features. If you’re lucky enough to have your visit coincide with an event called Petra at Night, you will be led to the site by a local Bedouin guide and thousands of candles — at which point you will enjoy a concert of traditional music and mint tea. With the moon overhead and the eerily illuminated Treasury to your left, it will surely be a night to remember. ~ B.J.S.
FALL 2008 BUSINESS TODAY 17
Amidst the ceaseless symphony of taxi horns that electrify New York City, you would never expect to find an enclave of serenity devoted entirely to the antiquated act of reading. In 1970 the Pulitzer Prize-winning journalist George F. Will wrote that there were eight miles of Manhattan truly worth saving — therein were the bookshelves of Strand. In a city where no two people are likely to hail from identical backgrounds, much less purchase the same clothing, it is striking to see so many locals, male and female, young and old, liberal and conservative, proudly sporting Strand
YOU MAY THINK
IDEA BT BOOKS
[THE NUMERATI] “What do you think they check for?” I ask my roommate, puzzled by the yellow slip left at our doorstep by campus public safety after each monthly room inspection. The slip reads that my room was evaluated and that the results of the search will be released at a later date. Somehow, I am left feeling uneasy. “Why?” my roommate inquires. “Well,” I respond, “it’s just that they must know a lot about us by now.” What goes through the minds of people who are paid to search our lives? In The Numerati, Stephen Baker discovers a new generation of public investigators who, though unconcerned with the coffee cups and candy wrappers that I leave on my floor, are eager to analyze what I leave on my desktop. In his book, Baker notes that human beings leave self-revealing messes wherever they go, even on the world-wide-web. With every word we type into Google, with every link we select, we send updates about our habits and likings. What at first appears to be “digital garbage” is in fact a “mosaic of human behavior” that — when correctly reassembled — becomes immensely valuable to marketers across the globe. Who are the well-paid garbage men of the digital world? Meet the mathematicians, scientists, and engineers who collect the
2,520 monthly clues left by the average Yahoo user and compile them into predictive statistical models that can be used not only to track but also to guide our web wanderings towards particular products and political platforms. In a fast-paced, in-depth trek into the realm of the business world’s most prized, digitally fluent employees, Baker discusses the implications of The Numerati endeavor primarily in relation to national elections, healthcare reform, and homeland security. He makes it evident, however, that the potential of these marketing models is far-reaching — a generator of new ideas not only among business leaders but also among those working for social development. We the human mess-makers have traditionally been urged to take responsibility for everything from breadcrumbs left on the kitchen table to greenhouse gases left in the atmosphere. It is refreshing to discover a well-trained 21st century clean-up force that is happy to let us leave as many digital crumbs as we wish and then even happier to feed us exactly what we want. However uneasy we may feel about The Numerati infiltration into our personal web-space, our lives are likely to improve as a result of the information we constantly, yet unknowingly, send them. ~ C.M.S.
OLDIE BUT GOODIE [BLINK: The Power of Thinking Without Thinking] Two seconds are the essence of Malcolm Gladwell’s Blink, an articulate, insightful work about our personal instincts. Gladwell delves into our first two seconds of seeing something — our “snap judgments” — through a variety of scenarios: speed dating, trauma emergencies, art appraisals, and military positioning. Although he slightly loses the reader with his dubious assertion that we can “listen with our eyes,” Blink remains an entertaining, masterful work combining countless personalities and professions. Don’t blink, or you’ll miss it. ~ M.M.
18 BUSINESS TODAY FALL 2008
WHERE BOOKS STILL MATTER [STRAND BOOKSTORE] tote bags. Founded in 1927 on Fourth Avenue and later moved to the corner of Broadway and 12th Street, Strand Bookstore is the lone survivor of 48 institutions that once constituted New York’s Book Row, a Europeaninspired hub of intellectualism. Although primarily renowned for its extensive collection of low-priced, used books, this hallmark store also boasts thousands of new releases at 50% off the cover price and an impressive warehouse filled with rare literature and artwork. Offering high-quality literature coupled with a low-key atmosphere, Strand has long been an American ode to the poets, writers, and lovers of Victor Hugo’s Paris. For today’s rebellious youths, wise professors, and cunning Wall Street brokers alike, it is to remain the go-to Bohemia of books. ~ C.M.S.
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Brightpoint is headquartered in Plainfield, Indiana, and has operations centers and/or sales offices worldwide in more than 25 countries. We are responsible, active citizens of the place we call home.
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THE FIRST YEAR AND THE CANDIDATES
or most students in 1968, working on Wall Street was about the worst thing they could possibly do. For them, Wall Street was the embodiment of corporate America, of an elitist social sphere that represented everything wrong with the country. After all, the country was in the throes of a social revolution — when pinstripes had given way to PCP, when social worth was defined by how actively you protested and not by how much money you made. Starting a student publication about business in this climate was risky to start with. Asking other students to pay $2 (that’s $12 in today’s prices) to read it was bordering on crazy. But Steve Forbes, Michael Mims and Jonathan Perel, three students at Princeton University, decided to do exactly this. In 1968 the first issues of Business Today were successfully distributed to over 200,000 students around the country. The reception was extreme. On some campuses, the first issue was burnt in protest as students continued their steadfast condemnation of the business world. At the other end of the spectrum, the magazine — and the core mission of the three founders to connect students and businesses — received rave reviews from every section of the media, including accolades from the Wall Street Journal. Whatever the reaction, the fall issue was undeniably impressive. Its cover story focused on the 1968 elections and featured articles written by the two presidential candidates — Richard Nixon and Hubert Humphrey. To understand the magnitude of this, think of how many professional publications could hope to run articles written by Barack Obama and John McCain in the same issue today. The candidates wrote earnestly about their respective commitments to reducing unemployment and achieving steady economic growth. Interestingly, the issue also featured a column by Ralph Nader, one of the most outspoken critics of the evils of corporate America today. His piece called for greater disclosure of corporate information as part of a move towards an efficient “consumer democracy”. Other articles included one written by the Dean of Columbia Business School in the wake of the infamous protests on that campus. In it, she explained how some students had become “so dissatisfied with contemporary society that they had committed themselves to revolutionary purposes” and what lessons could be learned from their actions. Forty years later, the landscape of American business looks very different, and the relationship between students and businesses could not be further from where it was in our founding year. Our Fall 1968 issue is both a reminder of this transition and the celebration of a milestone.
by Sudeep Doshi
FALL 2008 BUSINESS TODAY 21
“the candidates: getting down to business.” during its inaugural year in 1968, BUSINESS TODAY featured exclusive articles from presidential candidates hubert humphrey and richard nixon international conference keynote address by GERALD R. FORD: calls for responsibly balanced government regulation
GEORGE McGOVERN writes: the looming spectre of a permanent international conference keynote arms industry
address by HENRY KISSINGER: we finally appear to be emerging from our post-vietnam paranoia
PAUL A. VOLCKER: the president and ceo of the federal reserve bank of new york comments on the recent developments in and the prospects for the banking industry
one man’s view: interview with NOAM CHOMSKY
one man’s view: interview with ISAAC ASIMOV
BUSINESS TODAY holds first INTERNATIONAL CONFERENCE
international conference keynote address by DONALD RUMSFELD: the chairman of g.d. searle reflects on his experience in business and government
breakup and breakthrough: deregulation and new technology have created a transformation in the TELECOMMUNICATIONS industry
1978 hold the confetti: the party on WALL STREET is ending. what’s next?
peking at CHINA’s marketplace: the market system is permitting chinese consumers wider choices, but chinese marketing still lacks something in sophistication
can GORBACHEV pull it off? economic reform will not be easy
PETER JENNINGS ...off the air: an interview with one of the best in the broadcast business
JOHN SCULLEY, ceo of apple computer, writes, building the information age: technologies of the future aren’t something to be taken for granted
TED TURNER takes on the giants: avid entrepreneur, mr. turner is seeking to parley his networks into a cable t.v. empire by featuring all-news programming
40: The Proof hbo’s new rising star: steve levinson, an executive producer of ENTOURAGE, on what it takes to make a hit show
DELL COMPUTER CORP: younger and quicker, dell is beating the old heavyweights to the punch
the media king: an exclusive interview with RUPERT MURDOCH
NAPSTER threatens traditional music recording industry: new program makes trading and distributing mp3 music files faster and easier than ever
the virtual shopping bag: ONLINE SHOPPING takes off
BUSINESS TODAY founds SEMINAR SERIES coke’s college crisis: alleged labor abuses prompted several top colleges to terminate their COCA-COLA contracts
E-MAIL: what it is and how to send it
wireless dreams: james barksdale explores the future of the CELLULAR INDUSTRY
BLACKBERRY: an essential gizmo for the future executive
the EURO: momentous step or monumental blunder?
just what the doctor ordered: senator BILL FRIST prescribes a cure for the healthcare crisis in an exclusive interview
dorm room start-up: the story of FACEBOOK.COM
the return of the mac: the next APPLE revolution is everyone going WIRELESS? how it is impacting personal and business freedom
what now? the aftermath of the TERRORIST ATTACKS on america BUSINESS TODAY launches ONLINE JOURNAL
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BUSINESS TODAY releases fortieth anniversary issue, featuring exclusive interviews with vera wang, hugh hefner, and richard branson
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By Students for Students w Published at Princeton since 1968
WORRIES ON WALL STREET DUSTY DREAMS OF BEIJING MICROFINANCE LENDS A HAND
Businessman Peyton Manning is more than just a football player. Speaking exclusively with BT, the NFL’s top QB discusses leadership, teamwork, and giving back.
u EXEC PAY: HOW MUCH IS TOO MUCH? u B-SCHOOL TIPS STRAIGHT FROM WHARTON
Frist Aid Former Senate Majority Leader Bill Frist, M.D. takes the pulse of the nation in an exclusive interview with BT.
Fall 2006 Volume 43, Issue 2
WHY IT’S NEVER TOO EARLY TO INVEST
BU OBA RN L W & IN ARM ST U G IN D EN TS I G: W S EIG S U H IN E ]
[E XP ER TS
business manning: PEYTON MANNING shares his perspective on the complexities of his dual role as businessman and professional athlete
Spring 2008 Volume 45, Issue 1
FA L L 2 0 0 6 B U S I N E S S TO DAY
VERYBODY WORRIES ABOUT THE COST OF FUEL. FALCON OWNERS WORRY 20-60% LESS.
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8/16/07 6:34:03 PM
by allyson taylor | harvard university
give our members the technical knowhow and confidence to layout a magazine spread from start to finish. Bringing an article to fruition requires pulling together many technical and artistic elements of design. I’ve spent hours creating FAQ sheets, answering emails, and leaning over shoulders tweaking picture frames and text columns. But just as much effort is invested in finessing the aesthetic elements of design. It’s a tough job to help your fellow students understand how to lead the viewer’s eye across the page and how to convey different moods and ideas through colors and shapes. As someone who just started in the field herself a few years back, it’s been especially challenging to develop a way of teaching this, but the job is made easier by the passion of the students who choose to join HMV Design. Fuzzy feelings aside, the job can be hard at times. In addition to training new members and managing a creative team of ten people, I’m also charged with the task of proofing and sometimes even re-designing magazines for other student publications on campus. You’d be surprised at the number of magazines I receive that, were they to go to print in present form, would come out in the wrong colors, with chunks of text missing, or just completely unreadable. It requires quite a level of commitment and patience to help the design leads of these publications understand what they need to fix and then fix it within tight deadlines from the printer. After all, design is all about sharing. It’s a middleman between editorial’s ideas and the readers’ understanding, and HMV Design does its best to share our writers’ vision, using a clear and interesting visual medium. Learning the skills and putting in the time to be able to do this well — on top of the myriad of academic and social demands of college life — is a challenge, but it ends up being fun and rewarding. Moreover, taking on the job of passing on my knowledge to new recruits, however time consuming it may be, seems to me the best way to thank those who did the same for me freshman year. Our new members, as I did, come in knowing next to nothing about the subject, and thanks to the dedicated staff of HMV, will hopefully leave just as I did — with a new well of knowledge, an appreciation for good design, and the desire to share their BT newfound skills.
the m dd eman between ed tor a deas and reader understand ng a student des gner descr bes her path from amateur photoshop user to head of des gn for harvard med a ventures a harvard student organ zat on
ay back in high school, I was as close to a designer as I thought I could get. And by that, I mean I was able to crudely crop my headshot and Photoshop it onto the bodies of my favorite celebs. So when I walked into the info session for Harvard Media Ventures, the major design group on campus, I had little conception of what skills I really had to offer. But the group promised that, with a semester-long crash course in graphic design, they would teach me to master Photoshop and show me all of the other bells and whistles of digital design. I doubted that they would let me sign up. As it turned out, they were happy to talk to anyone with any interest in design, and I actually ended up learning a lot more than Photoshop that semester. To me, joining a student group should be about a desire to engage and develop an interest in a particular subject or cause, whether you consider yourself an expert in the subject or just found yourself curious after reading a flyer in your mailbox. Ideally, you should be able to walk into a meeting without any prior skills or knowledge and from the people you find there, learn something about a topic of interest to a point where you can apply your new knowledge in a practical and useful way. The process of going from novice to expert, from freshman note-taker to senior decision-maker, is just as valuable in itself as the actual expertise you gain. One of the things I like most about HMV, three years of learning and experience later, is that I was able to walk in the door having never thought about graphic design before and end up heading up the Design department for Venture, a full-color, semiannual student publication. And now helping other design team members make similar transitions is one of the best parts of the job. Graphic design is just like any other art. The tools are simple to master, but the creative skill, for most of us, comes only with years of practice. Much of the work I do now is endowing novices with those tools—teaching them to operate the Adobe Suite—and then guiding them in the process of tapping and honing their own creative reservoirs. But it takes a lot to break our new members in. Getting them up to speed requires two months of weekly meetings, discussions, assignments, and practice—all of which are tailored to
bu d ng
We’ve been hearing it for years – old media is going out of business under the onslaught of new media enterprises. But old media is not finding it easy to abandon its strongholds in print newspapers and magazines, television, and radio. As time progresses, big names in old media that once seemed infallible will be struggling to maintain their hold on the American market in the face of new forms of media, which are developing a unique appeal for modern consumers. New media tends to rely on the digital medium of the Internet, giving ordinary people the ability to create their own sources of information for other people to read. Most important, new media is hugely interactive, instantly accessible, and customizable down to the individual level. New media has many concrete advantages over the existing behemoth of old media. For example, online journalists are infinitely more speedy than their print counterparts, tending to be more flexible due to their lack of restriction by corporate agendas. Online writers are free to make mistakes without severe hits to their reputation, which means that they are open to carry on a dynamic dialogue with commenters who serve as virtual policemen. Since change has practically no repercussions, bloggers are free to experiment with the types of views they are trying to portray, giving them daily renewed opportunities to increase their audience base. In the face of the clear advantages and constant evolution of their webbased rivals, old media corporations are being forced to downsize their operations in order to stay afloat. The most successful newspapers in America - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have been seeing their subscription bases shrink over the past few years, with an average decrease of 5% in the past year. Some newspapers have stopped sending free copies to hotel rooms and airports, claiming that the advertising benefits that they gain from such practices do not make up for the lost costs of delivering the papers. In addition, broadcast media companies are laying off a large part of their work force, including such well-known corporations as NBC, Disney, and MTV. AOL-Time Warner made headlines when it cut 1 in 4 of its employees in order to increase its bottom line. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, ultimately causing the corporations to produce less. According a poll by The Economist, Americans are moving to online sources of news, with 44% responding that they read blogs regularly to obtain news. In fact, many people view the online media as more honest, more conversational and more open to reader feedback than traditional forms of news media. This flight from print to the Internet is reflected in changes in advertising revenue for both sides of this rivalry, with online ad spending increasing at a rate of over 10% a year, while printing advertising falls about 3% a year. Even the creative minds behind the corporate faces of old media outlets acknowledge the importance of the developing field of Internet media. The 2007-2008 Writers Guild of America Strike was precipitated by the indignation of TV writers who felt that they should be paid for having their content put online. But even television companies cannot help the rampant sharing of content online, as broadcasts are uploaded on YouTube by eager fans around the world. TV companies are trying to combat this loss-generating practice by making content officially available online, from which they can earn a portion of advertising revenues. We ’ v e been hearing it for years – old media is going out of business under the onslaught of new media enterprises. But old media is not finding it easy to abandon its strongholds in print newspapers and magazines, television, and radio. As time progresses, big names in old media that once seemed infallible will be struggling to maintain their hold on the American market in the face of new forms of media, which are developing a unique appeal for modern consumers. New media tends to rely on the digital medium of the Internet, giving ordinary people the ability to create their own sources of information for other people to read. Most important, new media is hugely interactive, instantly accessible, and customizable down to the individual level. New media has many concrete advantages over the existing behemoth of old media. For example, online journalists are infinitely more speedy than their print counterparts, tending to be more flexible due to their lack of restriction by corporate agendas. Online writers are free to make mistakes without severe hits to their reputation, which means that they are open to carry on a dynamic dialogue with commenters who serve as virtual policemen. Since change has practically no repercussions, bloggers are free to experiment with the types of views they are trying to portray, giving them daily renewed opportunities to increase their audience base. In the face of the clear advantages and constant evolution of their webbased rivals, old media corporations are being forced to downsize their operations in order to stay afloat. The most successful newspapers in America - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have been seeing their subscription bases shrink over the past few years, with an average decrease of 5% in the past year. Some newspapers have stopped sending free copies to hotel rooms and airports, claiming that the advertising benefits that they gain from such practices do not make up for the lost costs of delivering the papers. In addition, broadcast media companies are laying off a large part of their work force, including such well-known corporations as NBC, Disney, and MTV. AOL-Time Warner made headlines when it cut 1 in 4 of its employees in order to increase its bottom line. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, ultimately causing the corporations to produce less. According a poll by The Economist, Americans are moving to online sources of news, with 44% responding that they read blogs regularly to obtain news. In fact, many people view the online media as more honest, more conversational and more open to reader feedback than traditional forms of news media. This flight from print to the Internet is reflected in changes in advertising revenue for both sides of this rivalry, with online ad spending increasing at a rate of over 10% a year, while printing advertising falls about 3% a year. Even the creative minds behind the corporate faces of old media outlets acknowledge the importance of the developing field of Internet media. The 2007-2008 Writers Guild of America Strike was precipitated by the indignation of TV writers who felt that they should be paid for having their content put online. But even television companies cannot help the rampant sharing of content online, as broadcasts are uploaded on YouTube by eager fans around the world. TV companies are trying to combat this loss-generating practice by making content officially availy avail able online, from which they can earn a portion of advertising revenues. We ’ v e been hearing it for years – old media is going out of business under the onslaught of new media enterprises. But old media is not finding it easy to abandon strongbaaandon ndon its strong ndon gholds in print newspapers and magazines, television, and radio. As time progresses, Magazine Spring 2008 will be struggling to maintain big names in14old Venture media that once seemed infallible their hold on the American market in the face of new forms of media, which are developing a unique appeal for modern consumers. New media tends to rely on the
digital medium of the Internet, giving ordinary people the ability to create their own sources of information for other people to read. Most important, new media is hugely interactive, instantly accessible, and customizable down to the individual level. New media has many concrete advantages over the existing behemoth of old media. For example, online journalists are infinitely more speedy than their print counterparts, tending to be more flexible due to their lack of restriction by corporate agendas. Online writers are free to make mistakes without severe hits to their reputation, which means that they are open to carry on a dynamic dialogue with commenters who serve as virtual policemen. Since change has practically no repercussions, bloggers are free to experiment with the types of views they are trying to portray, giving them daily renewed opportunities to increase their audience base. In the face of the clear advantages and constant evolution of their webbased rivals, old media corporations are being forced to downsize their operations in order to stay afloat. The most successful newspapers in America - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have been seeing their subscription bases shrink over the past few years, with an average decrease of 5% in the past year. Some newspapers have stopped sending free copies to hotel rooms and airports, claiming that the advertising benefits that they gain from such practices do not make up for the lost costs of delivering the papers. In addition, broadcast media companies are laying off a large part of their work force, including such well-known corporations as NBC, Disney, and MTV. AOL-Time Warner made headlines when it cut 1 in 4 of its employees in order to increase its bottom line. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, ultimately causing the corporations to produce less. According a poll by The Economist, Americans are moving to online sources of news, with 44% responding that they read blogs regularly to obtain news. In fact, many people view the online media as more honest, more conversational and more open to reader feedback than traditional forms of news media. This flight from print to the Internet is reflected in changes in advertising revenue for both sides of this rivalry, with online ad spending increasing at a rate of over 10% a year, while printing advertising falls about 3% a year. Even the creative minds behind the corporate faces of old media outlets acknowledge the importance of the developing field of Internet media. The 2007-2008 Writers Guild of America Strike was precipitated by the indignation of TV writers who felt that they should be paid for having their content put online. But even television companies cannot help the rampant sharing of content online, nline, as broadcasts are uploaded on YouTube by eager fans around the world. TV companies co om ompanies are trying to combat this loss-generating practice by making content officially fici cia ially available online, from which they can earn a portion of advertising revenues. s. We ’ v e been hearing it for years – old media is going out of business under err the th t onslaught of new media enterprises. But old media is not finding it easy to abandon andon its strongan holds in print newspapers and magazines, television, and radio. Ass time progresses, t big names in old media that once seemed infallible will be struggling uggling to maintain ug their hold on the American market in the face of new forms ooff media, which are developing a unique appeal for modern consumers. New media dia tends to rely on the digital medium of the Internet, giving ordinary people the ability bility to create their own sources of information for other people to read. Most important, ortant, new media is hugely interactive, instantly accessible, and customizable down wn to the individual level. New media has many concrete advantages over the existing behemoth of old media. For example, online journalists are infinitely nitely more speedy than their print counterparts, tending to be more flexible due to their lack of restriction by corporate agendas. Online writers are free to makee mistakes without severe hits to their reputation, which means that they are open n to carry on a dynamic dialogue with commenters who serve as virtual policemen. en. Since change has practically no repercussions, bloggers are free to experiment with the types of views they are trying to portray, giving them daily renewed opportunities unities to increase their audience base. In the face of the clear advantages ges and constant evolution of their webbased rivals, old media corporations are being eing forced to downsize their operations in order to stay afloat. The most successful ful newspapers in America - with the sole exceptions of the two largest dailies, Thee Wall Street Journal and USA Today - have been seeing their subscription bases shrink hrink over the past few years, with an average decrease of 5% in the past year.. Some newspapers have stopped sending free copies to hotel rooms and airports, claiming that the advertising benefits that they gain from such practices do not make up for the lost costs of delivering the papers. In addition, broadcast ast media companies are laying off a large part of their work force, including such uch well-known corporations as NBC, Disney, and MTV. AOL-Time Warner made de headlines when it cut 1 in 4 of its employees in order to increase its bottom line. ne. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, vity, ultimately causing the corporations to produce less. According a poll by The Economist, Americans are moving to online sources of news, with 44% responding that they read blogs regularly to obtain news. In fact, many people view the online media as more honest, more conversational and more open to reader feedback than traditional forms of news media. This flight from print to the Internet is reflected in changes in advertising revenue forr both sides of this rivalry, with online ad spending increasing at a rate of over 10% a year, while printing advertising falls about 3% a year. Even en the creative minds behind the corporate faces of old media outlets acknowledge dge g the importance p of the developing p g field of Internet media. The 2007-2008 Writers Guild W it G ild off America Am A erica i Strike St ik was precipitated p ipit t d by by the th indignation i dig ti off TV writers who felt that they should be paid for having their content put online. But even television companies cannot help the rampant sharing of content online, as broadcasts sts are uploaded on YouTube by eager fans around the world. TV companies are trying ng to combat this loss-generating practice by making content officially available online, from which they can earn a portion of advertising revenues. We ’ v e beenn hearing it for years – old media is going out of business under the onslaught of new media enterprises. But old media is not finding it easy to abandon its strongholds olds in print newspapers and magazines, television, and radio. 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a production of
Harvard Media Ventures
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based rivals, old media corporations are being forced to downsize their operations in order to stay afloat. The most successful newspapers in America - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have been seeing their subscription bases shrink over the past few years, with an average decrease of 5% % in the past ye year. Some me newspapers have stopped sending free copies to hotel rooms ms and airports, airports claiming that the advertising benefits that they gain from such practices tices do not make ma up for the lost costs of delivering the papers. I addition, In addition dditionn,, broadcast b d t media di companies p i are llaying yi g off ff a llarg ge ppartt off their wo k force, including uding such well-known corporations orations as NBC, Dis Disney, and MTV. AOL-Time Warner er made he headlines when itt cut 1 in 4 of its it employeess in ord to der t inc i rease its it bottom b tt lin li line. e Unf e. U Unfortuna fortuna t ely ely, ly, th this iss practice ppracti practic ti e hurts h t worker k morale morall andd dampens risk-taking k creativity, vity, ulti ultimately causing ng the corporations to produce less. A cordi a poll According oll ll bby Th The Econom conomist, miist, mist, t A Americans i are moving i tto on online sources of new news, with 44% respond r ng that at they read blogs regularly to obtain news. In fact, many people ople view he online nline media as more honest, more conversa ional and m more open to reader feedback ack than traditional forms of news media This flight media. ght fro g from print p tto o the Internet is reflected refl in changes g in in adver advertising g revenue for both sides off this r valry, y with oonline ad spending p g increasi g att a ate ing t off over 10% a yyear, year, ar, while hil printing i ti g adver advertising d ti i g falls f ll about b t 3% a yyear year. Even n the creative creat minds beh nd thee corpor corporate faces of old media outlets acknowledge ge the importance impor of the developing oping fie field of Internet media. The 2007-2008 Writers ers Guild of America A Str ke was precipitated by the indignation indign of TV writers write riters wh who ho o felt that they they should sho ld be paid p for having ha having ing thei theirr content put p t online online. Butt even ttelevision B l i i companies i cannott help h l the th rampantt sharing h i off content t t online, li as broadcasts are uploaded on YouTube by eager fans around the world TV companies
from such practices do not make up for the lost costs of delivering the papers. In addition, broadcast media companies are laying off a large part of their work force, including such well-known corporations as NBC, Disney, and MTV. AOL-Time Warner made headlines when it cut 1 in 4 of its employees in order to increase its bottom lin line. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, ultimately causing the t corporations to produce less. According a poll by The Economiist, Americans are moving to online li sources off news, news, with ith 44% responding p di g thhat h t th they y read d blogs l g regularly g l ly tto obtain news. In fact, many people view the onlin ne media as more honest, more versational and more open to reader k than traditional forms of news ia. This ia Thi flight flight from f print p i t to the th Int I t reeflected fl t d iin changes h g iin advertis d ti ing revenue evenue for both sides of this rivalry, riva with onnline ad spending increasing at t off over 10% a year, while whi hille pri ti ddveertising ti i ffalls ll about b t 3% a year. Even the creative minds b e co orporate faces of old media outknowledge the iimportance of elopiing field of Internet media. The 008 Writers Guild uil of America was precipitated by the indignation of TV writers ers who felt tha that they y shoul p d for having g their their content pput online online. But ut even television comp ccompanies p cann the ram mpant p sharing g of content online, as broadcast bbroadcasts d t l d loade ouT T eager g fa fans aroundd th the world world. ld TV compa p nies are trying to combat ombat tthis lossing practtice by making content officially ava rom whi n a portio ues. 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Online writers are free to make mistakes without severe hits to their reputation, which means that they are open to carry on a dynamic dialogue with commenters who serve as virtual virtual ppolicemen policemen. Since change g has practi practtiically c no repercussions, bloggers are free to experiment with the types of views they are trying to portray, giving them daily renewed opportunities to increase theiir aaudience base. evoluttion of their webbased rivals, old media corporations are being forced to downsizee th heir operations y st successful newspapers in Americca - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have been seeing their subscription bases shrink over the past few yearrs, with an averve stoppped sending free copies to hotel rooms and airports, claiming that the advertising bennefits that they gain from such practices do not make up for the lost costs of deliv vering i the papers. In addition, broadcast media companies are laying offf ff a large part of their work force, including such well-known corporations as NB BC, C Disney, and of its employees m in order to increase its bottom line. Unfortunately, this practice hurts woorker k morale and dampens risk-taking creativity, ultimately causing the corporationss to produce less. According a poll by The Economist, Americans aree m moving to online sources of news, with 44% responding that they read blogs regularly e to obas mo ore honest, more conversational and more open to reader feedback than traditionaal fforms of news media. This flight from print to the Internet is reflected in chan nges e in advertising revenue for both sides of this rivalry, with online ad spen nding i increasing at a rate of over 10% a year, while printing advertising falls aboout 3% a year. faces of old o media outlets acknowledge the importance of the developing field of Inteernet n media. The 2007-2008 Writers Guild of America Strike was precipitated by th he indignation of TV writers who felt that they should be paid for having their conten nt put p online. But even television companies cannot help the rampant sharing of co onntent online, as p Tube by eager fans around the worlld. TV companies are trying to combat this loss-generating practice by making conten nt o nt officially available online, from which they can earn a portion of advertising reveenuues. We’ve been hearing it for years – old media is going out of business undder the onslaught of new media enterprises. But old media is not finding it easy to ab bandon n its strongio. Ass time i progresses, big names in old media that once seemed infallible will be strugggling i to maintain their hold on the American market in the face of new forms of meedia, which are developing a unique appeal for modern consumers. New media ten nds to rely on the digital medium of the Internet, giving ordinary people the ability to o create their own ant, new w media m is hugely interactive instantly accessible, and customizable down to the individual n level. New media has many concrete advantages over the ex xisting s behemoth of old media. For example, online journalists are infinitely more speeedy than their print counterparts, p p tending to be more flexible due to their lack of restriction by corporate p t agen g n nda das da as. s Online writers are free to make mistakes withoout u severe hits to their reputation n, w which means that they are open to carry on a dynamic n dialogue with commenteers who serve as virtual policemen. Since change has practically no repercussions, blo oggers are free to experiment with the types of view ws they are trying portray, givin ng them daily renewed opportunities to increase theeirr audience base. In the face of the clear advantages and constant evolu utio on o of their webbased rivals, old media corporations are being forced to downsizee their t operations order to stayy aafloat. The most successful newspapers in Americca - with the sole xceptions of thhe two largest dailies, The Wall Street Journal and USA Today - have been seeing th heir subscription p bases shrink over the past p few year yeaarrs, s with an average decrease of 5 5% in the past year. year Some newspapers have stopped stoppe stop ppe sending free copies to hotell ro ooms and airports, claiming that the advertising benefits that they gain from such h practices r do not make up for the lost costs of delivering the papers. In ad addition, d broadcast media companies are laying off a large part of their work force, including such well-known corporations as NBC, Disney, and MTV. AOL-Time Warner made headlines when it cut 1 in 4 of its employees in order to increase its bottom line. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, ultimately causing the corporations to produce less.
New w v. Ne holds in print newspapers and magazines television and radio As time progresses
sources of information for other people to read. Most important, new media is hugelyy interactive, interactive, instantly y accessible, ssible, and customizable down to the individual level. level New media has many concrete advantages over the existing behemoth of old media. For example, online journalists are infinitely more speedy than their to th corporate agendas. Online writers are free to make mistakes without severe hits to their reputation, which means that they are open to carry on y g with commenters who serve as virtual policemen. Since change has practically no repercussions, bloggers are free to experiment with the types of views they are trying o incr In the face of the clear advantages and constant evolution of their webbased rivals, old media corporations are being forced to downsize their operations in order to stay afloat. The most successful newspapers in America - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have e past age decrease of 5% in the past year. Some newspapers have stopped sending free copies to hotel rooms and airports, claiming that the advertising benefits that they gain from such practices do not make up for the lost costs of delivering the papers. In addition, broadcast media companies are laying off a large part of ration MTV. AOL-Time Warner made headlines when it cut 1 in 4 of its employees in or der to increase its bottom line. Unfortunately, this practice hurts worker morale and dampens risk-taking creativity, ultimately causing the corporations to produce less. According a poll by The Economist, Americans are moving to ony read blogs tain news. In fact, many people view the online media as more honest, more conversational and more open to reader feedback than traditional forms of news media. This flight from print to the Internet is reflected in changes in adver tising revenue for both sides of this rivalry, with online ad spending increasertising y Even the creative minds behind the corporate faces of old media out lets acknowledge the importance of the developing field of Internet media. The 2007-2008 Writers Guild of America Strike was precipitated by the indignation of TV writers who felt that they should be paid for having their content put online. ant sha broadcasts are uploaded on YouTube by eager fans around the world. TV companies are trying to combat this loss-generating practice by making content officially avail able online, from which they can earn a portion of advertising revenues. ’ been hearing it for years – old media is going out of business under the onslaught of new media enterprises. But old media is not finding it ea holds in print newspapers and magazines, television, and radio As time progresses big names in old media that once seemed infallible will be struggling to maintain their hold on the American market in the face of new forms of media, which are developing p g a unique q appeal pp for modern consumers. New media tends to rely y on the digit l medium digital di off th the IInternet t t, ggiving i i g ordinary di y ppeople pl th the ability bility tto create t th their i own sources of information for other people to read. Most important, new media is hugely interactive, instantly accessible, and customizable down to the individual level. New media has many concrete advantages over the existing behemot of old media. For example, online journalists are infinitely more spee print counterparts, tending to be more flexible due to their lack of corporate agendas. Online writers are free to make mistakes without severe h their reputation, which means that they are open to carry on a dynamic dial with commenters who serve as irtual policemen. Since change has practical repercussions, bloggers are free to experiment with the types of views they are trying to portray portray, giving them daily renewed enewed opportunities to increase their audience base base. In the face of the clear advantages and constant evolution of their webbased rivals, old media corporations are being forced to downsize their operations in order to stay afloat. afloat The mo most st successful newspapers in Am America erica - with the sole exceptions of the two largest dailies, The Wall Street Journal and USA Today - have been seeing their subscription bases shrink over the past few years, with an average decrease of 5% in the past year. Some newspapers have stopped sending free copies to hotel rooms and airports, claiming that the advertising benefits that they gain
FALL 2008 BUSINESS TODAY 25
cankles or nick slavin | princeton university
Cankles or armbows? That was the question, and by the look on the two employees’ faces, a damn important one. Arms crossed, legs bent, and eyes intently searching the office for anyone with even the slightest sign of one of these contentious traits, they debated the merits of each. While an armbow would provide added protection during a knife fight, the cankle would provide a necessary defense to getting table-topped. Plus, the “cankle” did have a better name. As the two meandered off mindlessly towards the kitchen, the conversation was forgotten, and they began rattling off countless glamorous celebs with either of the two fat overlays. Believe it or not, the ardent cankle versus armbow debate was not the only question I was to be pondering during my summer-long stint at Special Ops Media (SOM). The relatively small, seventy-person operation is located in downtown Manhattan, the heart of everything that is good and chic. SOM is an interactive marketing and design firm specializing in Internet-based advertising, and in 2002, SOM opened with the goal of leveraging creative talent and developing the market for digital advertising. Since its inception, it has provided clients with the opportunity to have all of their Internet advertising needs met within a single agency. Through the use of innovative social network marketing and online PR, SOM is now propelling itself to the forefront of the advertising sphere—at a time when print-based ad campaigns are becoming increasingly obsolete.
26 BUSINESS TODAY FALL 2008
I knew that I wanted to work in an ad agency this summer. I can’t quite say what I want to do after I graduate: architect, Ibanker, developer, or the guy that asks if you’d “like fries with that?”—who really knows? With all of those options in mind, I decided to try my luck in the advertising arena. After all, it does offer a unique intersection of business and creative savvy.
somewhat structured list of publicity, viral, and ad unit ideas for potential clients. I was personally tasked to hark back upon those morning meetings and to develop the ideas that were presented. I could add or delete whatever I deemed fit. The excitement came from knowing that whatever concoction of words I chose would play a pivotal role in determining whether or not SOM
to evolve. This perpetual growth will vault some agencies to unimaginable heights while it will leave others to nibble on the dirt that their more successful compatriots kicked from their shoes. As print media spirals downward, traditional advertising is becoming a less and less effective means of marketing products and services. Ad agencies can no longer be the one-trick ponies
armbows? a window into the world of advertising
At SOM, I was one of five interns—four girls and me. Homeless for the first week, I spent my days wandering aimlessly around the office, bumping into hot-coffee-bearing employees and enduring rainy days without the solace of a cubicle wall. Just as I became acclimated to my nomadic lifestyle, however, I was moved to the Business Development office…permanently. I finally felt like a “real boy now.” The office’s mean age is quite young, which makes the company culture much more upbeat than that of many of its competitors. Employees yell across the halls, indoor football is a mainstay, and quotes like this get put on a wall: “I kind of like hiding, it’s like being in the womb.” And yet, there is an incredible air of professionalism to everything that gets done. Both CEOs are in their early thirties, and the rest of the office is comprised of employees around the same age or younger. Much of SOM’s advertising work is catered towards those in their teens, twenties, and thirties, which is the beauty of the agency’s youthful makeup. The employees are generating content for themselves, in the sense that they are reaching out to people with similar tastes and sensibilities. I had relatively harmless work hours: 10 to 5, perfect for the sweltering subway rush on both ends. Mostly comprised of sending e-mails and feeding the office fish, the mornings were generally slow, but one pickme-up we did have from time to time was our morning brainstorm sessions. In these meetings, we had the opportunity to poll ideas from the staff and piece together a
was hired for the project. Was I the decisive factor? The dispeller of fear? The upholder of integrity? The creator of all things lucrative? Not really. Well, not at all. For the remainder of the summer, I had two major projects, with a few proposals thrown in from time to time. A huge budget had been allotted for promoting a
they used to be. To be successful, they must be dynamic in the way they work with their customers. To meet their customer’s marketing needs, they must be able to work through every possible channel. Fewer people are reading magazines and newspapers; television has not quite yet taken its last breath; and digital is in its golden age.
Homeless for the first week, I spent my days wandering aimlessly around the office, searching, bumping into hot coffee bearing employees, enduring rainy days without the solace of a cubicle wall.
vodka company, which, of course, will go unnamed, and for a musical theatre company. An astute observer might wonder how these two clients could coexist under one advertising roof. Well, they do. In fact, the reason that advertising can be so interesting is that every company is needy. Whether it be a film studio, a makeup powerhouse, a magazine, or a liquor club, every company and product needs to be marketed. With an ever-growing number of needy businesses, the face of advertising continues
As cliché as this may sound, the great thing about internships is that they allow you to glimpse what your future might hold. They help show what profession you may or may not go into. I can’t say that I would give an arm and a leg to work in digital advertising, but I might just contemplate working with advertising’s other forms. The lure of advertising in general lies in the idea that nothing is impossible; in fact, impossible is impossible. If rules BT didn’t exist, what would you create?
FALL 2008 BUSINESS TODAY 27
ON CAMPUS PUS
ROMANCE OF RANKINGS HOW MAGAZINES WIELD A SEDUCTIVE POWER OVER YOUR SELECTION OF A BUSINESS SCHOOL AND MORE IMPORTANTLY, A FEW REASONS WHY YOU MIGHT WANT TO IGNORE THE IRRESISTIBLE SONGS OF THESE SIRENS. BY MATT TURNER, PH.D. | McCombs School of Business, University of Texas at Austin 28 BUSINESS TODAY FALL 2008
mericans love ranking and competition. We rank sports teams, cars, restaurants, actors, musicians, how much money we make, how happy (or fat) we are, even our most likely causes of death. So it is no surprise that prospective business school students are in love with rankings, too. And there are so many to choose from. U.S. News and World Report’s annual ranking has been the dominant public report card of American higher education since 1983, but business schools are besieged by many additional media outlets. There are currently more than 30 external surveys of business schools, 15 of which attempt to rank order the schools. Six of these are well recognized in business circles: U.S. News, BusinessWeek, the Wall Street Journal, Forbes, and the British publications, Financial Times and the Economist. If the sheer number of options — each with its own niche (read: bias) — doesn’t give you pause, maybe a closer look at methodologies will. Rankings may seduce us into believing they measure value and merit, but, as with many competitive venues (think pre-season football polls), there’s often more charm than substance, chance than merit, data than meaningful information. Beauty of the Buck One of the most popular ranking criteria magazines use is the salary of graduates. Indeed, what could be sexier to a prospective applicant than anticipation of a sixdigit salary? This benchmark, appearing in many guises, from starting salary to salary several years after graduation, sometimes combined with placement success or return on investment data, currently accounts for about 35 percent of the ranking score for both U.S. News and the Economist, 55 percent for Financial Times, and 100 percent of Forbes’ ranking. Leaving aside for a moment the question of whether it is fair to judge a career, let alone the education that helped one obtain it, purely by salary, what’s wrong with this seemingly objective measure? The first quandary is that starting salaries are not equal across industries and functions. The highest paying jobs — well into six digits — are found in major management
consulting firms, with investment banking and trading coming in a close second. Large, brand name, national companies tend to remunerate employees better than smaller and more regional companies. Conversely, lower paying salaries are found in brand and product marketing and industries such as high-tech, entertainment, food and beverages, health care, manufacturing, retail, and transport. Entrepreneurial interests, including startups, are real wild cards, rarely pulling in high starting figures. Nonprofit jobs, increasingly appealing to MBA applicants of the millennial generation, tend to pay at the low end of the scale, typically from $40K to $90K. If the ranking doesn’t adjust for salary variation between industry sectors (and only Financial Times attempts this), then any school heavily invested in consulting, i-banking, and trading will have an advantage over schools more balanced across the board. In short, if your career goal is consulting or investments, the salary criterion is for you. If you are interested in any other sector, you’d better give this a second look. Geography’s Dark Little Secret Another stumbling block is more subtle: geography. According to Stacey Rudnick, Director of MBA Career Services at the McCombs School of Business, salary stats gathered at McCombs over the past several years show that the Northeast and West Coast provide grads with 3 to 14 percent more income than the same jobs in other regions. In the absence of a cost-of-living adjustment, schools located in bi-coastal regions, and which place the majority of their graduates there, are at an advantage. Unfortunately, only one of the major ranking media, Forbes, takes cost of living into account. While everyone knows that salaries (and rents!) in NYC, Boston, and San Francisco cannot be compared to those in Atlanta, Denver, and Minneapolis, the ranking surveys invite you to overlook this not-insignificant detail. This plays out even more dramatically on the global scene. The Financial Times ranking, which is global in scope and privileges international diversity in its methodology, places heavy weight on both the salary and percent salary increase attained by alumni three years post-MBA. In the
current world economy, the U.S. does not fare so well. Some of the highest global salaries are earned by those working in Africa, Russia, and the United Arab Emirates. And, as Ursula Milton, former Rankings Project Manager for the Times points out, “graduates of all schools earn most if they are based in places such as India, Russia or China” (FT, Jan. 28, 2008). It should come as no surprise then that 11 of the Times’ 2008 top-20 MBA programs are not in the U.S., and fully four of these are one-year MBAs that barely existed ten years ago. CEIBS, the China Europe International Business School established in only 1994, jumped 10 places to number 11 last year alone, which partly reflects the high salaries corporations and consultancies are willing to pay its bilingual graduates. The Indian School of Business, whose graduate program was launched in 2001 and which was not ranked last year,
RANKINGS MAY SEDUCE US INTO BELIEVING THEY MEASURE VALUE AND MERIT, BUT, THERE’S OFTEN MORE CHARM THAN SUBSTANCE, CHANCE THAN MERIT, DATA THAN MEANINGFUL INFORMATION. debuted this year at number 20 (out of 100 ranked programs worldwide). Allured by the buck, renminbi, or rupee, prospective MBA applicants may start to equate a school’s merit with the power of its local economy. And while business schools are more closely aligned to the economy than other schools and while MBA applicants place career progress at the top of their list of reasons for
FALL 2008 BUSINESS TODAY 29
the degree, the caliber and quality of the program does not equal the salaries of the local market, no matter how enticing that sounds. The skinny: Since starting salaries are tied to ever-changing economic conditions and since most ranking media ignore cost of living in their methodologies, take care when assessing schools on salaries. Self-Perpetuating Power The reputations of academic institutions — never mind the current state of
WHILE MAGAZINES MAKE AN ADMIRABLE ATTEMPT AT INCLUDING ALL CONTENDERS, THEIR RESULTS END UP BEING A POPULARITY CONTEST OF THE ALREADY POPULAR, A REFLECTION OF HISTORICAL REPUTATION MORE THAN CURRENT STATUS. their particular programs — are notoriously slow to change. This is due to a variety of factors such as the respect for tradition, the understanding of education as a long-term endeavor, and the partial insulation of universities from market vagaries. So when rankings attempt to measure reputation, as does U.S. News in their “peer assessment” score (worth 25 percent of the total score and which in 2008 most strongly correlated to the total), it is good to keep in mind what is being assessed. U.S. News asks deans and program direc-
30 BUSINESS TODAY FALL 2008
tors of business schools to rank on a oneto-five scale (from marginal to outstanding), not just their own program, or the programs in their region or state, or those where they have taught, but rather all of over 400 business programs across the nation. Just the list of these schools took 10 pages in the 2008 survey and can take multiple hours to complete. Ask yourself what you would do if you were dean. Given how valuable your time is, wouldn’t you probably rank the few major players as you’ve always known them, and mark the rest as “DK” (“Don’t know”)? Even the most conscientious of deans is unlikely to know the subtle programmatic differences between hundreds of these listings. Just to take one example at random, what dean outside the state of Wisconsin can accurately assess the graduate programs of the University of Wisconsin at Oshkosh, Parkside, River Falls, and Whitewater? If you take a look at U.S. News’ top 20 best graduate business programs, this seems to be what happens, for there is not a single program that will surprise you. The 2008 list (billed as the 2009 edition), starts off with the famous private schools, Harvard, Stanford, and U Penn (only one of the top ten is public, Berkeley), and runs through the so-called “state ivies”, such as UT Austin, UNC, and Indiana (six of those ranked 11-20 are public). You could more or less come up with this same list by polling college grads off the street about the most famous universities in the U.S. While the magazine is making an admirable attempt, the result ends up being a popularity contest of the already popular, a reflection of historical reputation more than current status. Bottom line: A dean is unlikely to take the same care and determination to assess the current status of the programs at the handful of schools you are considering. First Impressions The polling of employers for their perceptions of business schools is a major component of the best known graduate rankings. Questions such as how many recruiters come to a particular school, how they rate student quality, the company’s experience with that school, and the likelihood of recruiting there again, constitute 15 percent of the ranking for U.S. News,
45 percent for BusinessWeek, and 100 percent for the Wall Street Journal. On the surface, what could be more convincing of a program’s success than the market demand for its students? After all, business schools are in the business of grooming students to be future business leaders. The problem is that recruiters rarely take a holistic view of the school and student quality; their opinions will be formed almost entirely by the handful of students they interviewed, the particulars of the job on the table, and the success they had in matching the two. Recruiters visit the school to fill specific jobs. If they leave empty handed, or have a lower yield than usual, they are less likely to rate the school highly. But this may speak less to the school’s quality and more to a mismatch between recruiter expectations and student career goals. The student is trying to meet long-term career goals and aspirations. The recruiter is trying to hire for a position. The Wall Street Journal, which has halted its annual MBA survey this year for methodological revision, routinely based its rankings entirely on recruiter perception. Not surprisingly, volatility in its rankings was high. For instance, in the space of one year, from 2006 to 2007, Northwestern dropped six places in the national ranking while MIT rose six. In the regional rankings, even wider swings appeared: Michigan State dropped 13 and Thunderbird 10, while Notre Dame rose 14 and Indiana 10. How can a prospective student rely on rankings with swings as broad as this? Caveat: Recruiter perceptions are closer to impressions than reasoned judgments. Take care not to let their views overly charm you when making important decisions about your own life trajectory. Nonsense of Numbers Of course we could go on critiquing criteria forever. Surely, you might say, the nit-picking of this or that becomes statistically irrelevant when combining many elements and looking at aggregate scores. Perhaps. What goes unnoticed is the degree to which scores cluster. With the exception of U.S. News, none of the major business rankings publishes the actual scores, neither the totals nor the raw scores on specific items. Why? Possibly because
they don’t want you to see how tightly a group of schools cluster, lest you realize how pointless the individual ranks are. Imagine a bicycle race, like the Tour de France, in which the peloton travels together as an integrated unit. Now imagine the pack approaching the finish line. A hair’s breadth separates the winner from place two from place three. If the biker in sixth place sneezes as he approaches the finish, he suddenly finds himself in 12th or 15th place, even though he’s only inches away. The rankings often present a similar scenario. Large clumps appear, especially among the top 25, as well as chasm-like gaps, both of which are completely hidden from the reader. Perhaps, broadly speaking, we can rank the clusters, and talk about a top, middle, and lower echelon, but you can see how difficult it is to argue that no. 12 is significantly better than no. 18, or no. 22 than no. 27. The logic of the numbers lure you to believe this, but there’s more romance here than reason. The Take Home: While in sports we accept winning by millimeters or nanoseconds, do you really want to choose your graduate education and future career accordingly? In Perspective Our romance with rankings compels magazines onward, and to be completely fair to the ranking industry, there are some real benefits to be had from the affair. Rankings provide a basic roadmap to the hundreds of graduate business programs out there. They encourage schools to standardize their data and impose at least a modicum of accountability to their claims. They potentially help schools identify shortcomings for improvement, and the diversity of rankings, each with its own methodology, potentially highlights different strengths and attributes. In the absence of rankings, applicants would have to rely on hearsay and reputation, or programs would end up touting unique attributes that are as difficult to compare across schools as they are to verify. Academic institutions are in the business of educating you for a lifetime, and it is difficult to put simple metrics around the rich and nuanced environment that makes for a top program. It is practically impossible to quantify such things
BETTER BUSINESS BASICS NO REASON TO WAIT UNTIL AFTER GRADUATION: HOW ONE BUSINESS SCHOOL IS FOCUSING ON FRESHMEN AND FUNDAMENTALS BY KAITLIN HOLCOMB | University of Illinois,Urbana-Champaign
ow can responsible business professionals create a better world? Business students at the University of Illinois, Urbana-Champaign explore the answer to this question as soon as they step on campus. With a class called Business 101: Professional Responsibility, the university encourages all College of Business freshmen to develop a keen awareness of the role of integrity in the business world, as part of a wide-range of initiatives in the College that incorporates the foundations of professional responsibility. The course teaches students that professional integrity is a foundation of modern business practice. The course serves as an introduction to the business world, the College, and the students’ new roles as professionals, in addition to encouraging students to participate in an array of activities both inside and outside of class. Students engage in a self-exploration on how they interact with the world around them. This exploration of values expands into the business context. In small teams, they evaluate a set of five corporate codes of conduct and research related companies to discover how values shape and influence business. Near the conclusion of the course, students participate in a poverty simulation that places each freshman into a mock subsistence environment. Students are thrown into abject poverty, grappling with problems such as educating their children, paying their mortgages, and simply putting food on the table each night. After the students finish the poverty simulation, they are charged with the task of using these newfound perspectives to generate sustainable product ideas for a subsistence economy. They present viable “green” solutions to issues such as cost-effective public transportation and affordable housing. According to Courtney Venable, a student in the pilot course last fall, “It did get me thinking about what I want to do in life and how I can make an impact on the world based on products that I can create and the effect of the business world on people in different environments.” The course teaches students that responsible, profitable business strategies can be implemented while maintaining respect for the environment and cultural differences. With this unique approach to teaching professional responsibility, the University of Illinois compels its business students to give second thought to what it means to think and act “responsibly” in today’s rapidly changing world. They come away with a new vision of the obligation that business has to change the world and more importantly, an inkling of how their own passionate convictions can BT make the world a better place.
as intellectual vigor, creative thought, collaborative environment, ambition, leadership, stellar teaching, innovative curricula, networking prowess, interpersonal skills, success in the workplace, to say nothing of your unique “fit” with a program’s culture. Magazines have labored to overcome this by turning what is essentially an art
into a science, wooing us with the glamour of rank and casting the spell of statistical significance. The seduction works, and to some extent, there is merit in the infatuation. But, as with speed dating, first impressions won’t get you very far. After all, the rank can change tomorrow, but you’ll be a graduate of the program BT forever.
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THE VCR, 90210, AND THE SPICE GIRLS. THE 90s.
s most of us are children of the 90s, the decade seems to be but a distant memory — a time when we were just complacent little babies, trudging around the house in diapers. But in many ways we, as a society, are reliving many of the same dramas and confronting many of the same issues, albeit in reconstituted forms, that we did then. This issue, which focuses on entertainment in all its major forms, reflects many of the same themes that Business Today has covered in recent issues, especially those dealing with the internationalization and integration of business that have occurred with globalization. The 1992 issue centers on the famed success of media mogul Rupert Murdoch. In the narrative leading up to the interview, the author highlights the foresight that allowed Murdoch to transcend the local Australian newspaper business and build a bona fide international media empire. According to Murdoch, the one trait that allowed his career to skyrocket was his ability to think globally — not to impose American or Australian cultural biases on a very international audience. The message is one that shines through time and again in successful businesses. He took major risks and projected consumer demand in the future. His empire was built on ingenuity, media savvy, and straight-up luck. The rise of Murdoch’s empire came at an exciting juncture for the media industry: the transition from traditional print media news to television formats. This revolutionized the business — in the same way the Internet is delivering another blow to the print and television media industries right now. But it also forced industry titans to make serious gambles on their programming and features, as there was little research at the time on what consumers would watch or enjoy. After starting FOX News and watching it languish, Murdoch teamed up with the now-famous Barry Diller (CEO of InterActiveCorp) and together generated hits like Beverly Hills 90210 and The Simpsons. These successes set a foundation for the programming we have come to love and expect from the major networks. In another piece written by an executive from the MCA Television Group, the author predicts the downfall of the major networks with the dawn of what was then cuttingedge cable programming. Not only has that prediction been totally unrealized, but today’s most popular shows are also still on network television. However, the ways he describes last decade’s technological landscape makes our decade seem like the space age: “In a world of VCR’s, 100-channel cable systems, satellites, and pay-per-view…” The author also notes that technologically intensive industries have many bells and whistles that can distract attention from consumer trends and underlying financial viability. This certainly resonates today as technology improves at a faster rate than ever before, but smart management remains the hallmark indicator of a company’s longterm viability. Now, if the Spice Girls are any indication, the 90s are back! And as such, it’s interesting to see our own entertainment industry as an extension and product of trends started in what now seems like the Stone Age of popular media.
by BJ Sullivan
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CHRIS JOHNS As Editor-in-Chief of National Geographic since 2005, Chris Johns remains at the helm of one of the most recognized and important magazines in the world, but his career started far from the editorial board. After finishing graduate studies in photojournalism, he began working as a staff photographer at the Topeka CapitalJournal, a position where he won the National Press Photographerâ€™s Association award for Newspaper Photographer of the Year. Soon thereafter, he began shooting freelance stories for National Geographic, in addition to TIME and Life. In his nearly two decades as a photographer for National Geographic, he has shot over twenty stories on topics ranging from wildlife and the environment to cultural and social issues. He has also published several books that are equally expansive in scope: Hawaiiâ€™s Hidden Treasures and Wild Heart: Man and Beast in Southern Africa, to name a few. This year, Johns was named Editor of the Year by Advertising Age. by BJ Sullivan, Princeton University
NEWS + ANALYSIS
Thrusting through a rapidly-revolving door into the lobby of the National Geographic headquarters in downtown Washington, D.C., I secretly hoped that the Society’s signature Elmer Bernstein-scored fanfare (you know, the one that played in documentaries you watched in fifth grade) would fill my ears as much as I hoped to be dazzled by photographs of distant places and mesmerizing creatures. Instead, I was trapped between a chaotic school group and a bronze, life-sized replica of a gorilla. To top it off, I was fifteen minutes late for my appointment. I had to wait in line at reception as a nice lady, who also doubled as a museum guide, explained to an inquisitive teacher how to navigate the halls of the National Geographic Museum, which spun right off of the main lobby. Meanwhile I gazed at a small submarine and posters of ancient pottery — quintessential lobby décor — as I reminisced about years ago when I visited the museum to see the Ice Maiden, a frozen Incan mummy. As the group shuffled off to the exhibits, I remembered my hurry, charged the welcome desk, and blurted my name. In a matter of what seemed like seconds, I had my badge ready and was being whisked up in a wood-paneled elevator. As the doors opened on the executive floor, there was Johns — clearly more put
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together and prompt than I — anticipating my arrival with a hearty smile and a firm handshake. We walked into the office cluster for the magazine’s movers and shakers. The ambiance could not have been more in line with National Geographic’s image — elegant, refined, and worldly. Creamy carpets spilled into massive oriental rugs; ancient pottery perched on discreet wooden stands; awe-inspiring photos adorned the walls. A huge blowup of the current cover marked the entrance to the Editor’s suite. On the cover was a photograph of a plant shooting up from the earth, superimposed on a white background. The cover embodies the ultimate reductionist approach to representing the importance of soil to our existence and reflects the new editorial vision Johns has promoted since given the reins of the acclaimed magazine in 2005. Before becoming editor, Johns spent two decades traveling to some of the most exotic places on earth as a staff photographer for the magazine, shooting twenty features on topics ranging from cheetahs to Bushmen. You would instantaneously recognize some of his signature shots, as eight earned a spot on the prestigious cover. He stands out as a more intriguing, less fictional version of Indiana Jones: search him on YouTube and you’ll find footage of him speeding through
the Southern African bush in a forest green Land Rover in search of a cheetah. But in his new capacity, the challenge is far different: to revive a magazine whose content and appeal was beginning to lag with the dawn of a new era in print media. Magazines today are suffering because advertisers are fleeing from print formats and flocking to the web, as digital content becomes popularized. The heyday of the 80s when magazines could not print enough copies has come to a definitive close. In spite of these obstacles, however, National Geographic’s current issues have been among the most successful. Johns has refocused the magazine’s look and content to appeal to a broader demographic — beyond the relatively older, homogeneous readership that long formed the magazine’s base. This new plan combines National Geographic’s strengths — in-depth reporting, unparalleled access, and stunning photography and design — with real-world issues that appeal to anyone who cares about geopolitics, culture, and the environment. “It is my wish to make National Geographic a relevant publication, in print, on the web, in exhibitions, through lectures and special events, [a publication] that helps people understand and appreciate our incredible world,” said Johns. “Our civilization faces many challenges, and it is im-
Photo by Chris Johns ©2008 National Geographic
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portant for National Geographic to identify those challenges and provide information and facts in a provocative, nonpartisan, and enlightening format that will help all of us make good decisions. We have to continue to be a thought leader on issues concerning energy, the environment, ancient civilizations, science, wildlife, and culture.” One of the first issues published under his oversight assertively announced the new direction of the publication. On the cover, for one of the first times since the magazine’s inception in 1888, there was no picture. Instead, in big, bold letters there was a simple title “Africa” with a subhead that read “Whatever you thought, think again.” The stunning part was not what it was, but rather what it is was not. It was Africa stripped to its core – truths much more serious and austere than the Masai Mara and its migrating herds or the colorful personalities of the Soweto township. When many of us think about National Geographic, we think of pretty animals or exotic places. And that’s exactly the paradigm Johns is trying to change. For the long-term viability of the magazine, it needs to engage a broader crosssection of society. He recognizes that the image of the magazine must be redefined in order to do that. Since this landmark issue, you can see, from looking at the cover alone, this vision emanating. Instead of endearing, the covers are thought-provoking and glob-
team collectively feels are important but in a way that engages our readers and takes them on a journey that invites them to question their own views and predisposed notions,” Johns noted. To illustrate his point, Johns remarked on a cover story about the poaching of mountain gorillas in the Congo. “We, as people, are naturally drawn to these creatures because of their humanness, so this issue was obviously well received. But what’s interesting is that below the surface, this article wasn’t just about gorilla murders in the Virungas. The intertwined narratives that run through the story reveal a much more complex picture. The narratives document illegal coal production, poverty, and civil war. The gorillas are just a small part of the story in the end.” That’s the beauty of National Geographic: From a few thousand words comes a complex and compelling sociopolitical portrait of an entire country — all within a story about apes. And it is these revealing, multilayered, long-form narratives that separate the magazine from its competitors. And it’s not just Johns that thinks so. National Geographic stole the show at the National Magazine Awards in 2008, winning three of its most prestigious awards — more than ever before in the magazine’s long history. The magazine won top honors for photojournalism, for reporting, and, for the second year in a row, an award for
us because they want to be associated with the general excellence and quality of our publication. We don’t want our advertisers to have any influence over the content of our magazines; we want them to be totally disparate.” In order to ensure the trust of its readers, the magazine must always resist any influence advertisers may attempt to wield through product endorsement or testimonials. A perusal of the magazine reveals the struggle to protect editorial integrity as advertisers such as Rolex, Canon, Mercedes, and Dow Chemical, to name some of the regulars, try their best to espouse quality and wholesomeness as part of their value proposition to reader consumers. During a pause in our conversation, I gazed at a large map on the wall. It appeared to be a large antique replica, and I thought it to be a fitting adornment. At that moment, Johns got up and asked, “Want to see something cool?” Of course I did. I realized then that the map was mere decoration for two flaps that opened to reveal the magazine’s extensive editorial calendar. Displayed on four panels were the story topics not for the next month or two — but for the next two years! Yes, many of the issues to be printed in 2010 were already indexed by story, and, for most of them, the cover story had already been identified. Each article was color-coded according to its respective topic, (nature, archaeology, culture, etc.) and great
That is the beauty of National Geographic: a few thousand words can create a compelling sociopolitical portrait of an entire country.
ally relevant. Special issues on Katrina and China have been among the most popular. And while you will still see compelling stories on Philippine eagles or right whales, they have been generally demoted from the cover because, frankly, “Natural history covers don’t sell.” His vision for the magazine is to generate content that appeals to a well-educated and intellect-hungry audience, inviting readers to explore the world and investigate important issues facing it. “We’re not just in the business of selling magazines — we don’t just come up with stories to cater to our reader’s interest. We present topics that our editorial
general excellence. In addition, two of the most recent issues of the magazine sold over 200,000 copies at the newsstand, placing them among the best selling issues in decades. While the circulation of the magazine numbers are close to seven million worldwide, the newsstand sales are an excellent barometer of public reception to the cover story. Despite encouraging metrics of success, advertising still remains a tough equilibrium to stabilize. Like other magazines, National Geographic suffers from shrinking ad budgets. But the situation is a little more complex. As Johns explained, “We want our advertisers to promote themselves through
care had clearly been taken to ensure a balanced range of editorial initiatives. Stories ranged from esoteric to fundamental, from Amazon River Dolphins and Hatshepsut to food and war. When I asked how it was possible to plan so far in advance, without knowing what monumental events the future may hold, Johns replied that when you hold yourself to such high standards of quality — and are unwilling to publish anything that may come up short — you have to plan far ahead and give yourself the leeway should any problems arise. That said, he admits that when events happen, like Katrina, articles and plans can be reshuffled to ac-
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commodate requisite coverage. But only to a certain extent. The magazine is fully laidout and ready to go to press many months before it is delivered to your doorstep. When you look at the incredible variety of stories in each issue, you have to wonder: who comes up with all of the ideas? From what I gathered, it’s a very decentralized system in that the writers, photographers, and editorial staff members can all propose articles — which are all evaluated by an editorial board comprised of varying interests. But the most important part of the pitch is that it must show the distinct angle that would make National Geographic’s coverage unique. “People often propose ideas that are of interest to them, but that’s a good thing because they tend to be passionate about their work — and passion is just as important as the topic itself,” said Johns, who admitted to being especially excited about upcoming coverage of California redwoods, whose “many layers of intrigue,” he said, make these trees “unbelievable.” When I asked about popular interest in some of the more obscure topics, Johns responded that it really wasn’t important: Any good writer or photographer can find a facet or
a theme within their subject that resonates with readers. The mission of the magazine is to educate, so if the team deems an article important, then it becomes the team’s role to convey that importance to the reader. Going into the field on behalf of National Geographic is no easy feat. With article budgets often surpassing $100,000, no stone goes uncovered in the search for the truth. Recently, a writer was abducted and jailed in Darfur while documenting the civil war in the region. A few years ago, explorer Mike Fay walked the entire length of Africa’s core — through swamps and seemingly impenetrable forests — to document the ecological robustness of one of the most remote places on earth. And then there are the photographers that think nothing of diving into Antarctic waters to get the perfect shot of leopard seals or narwhals. It can certainly be a test of character to get your byline published, but those that embark on these monumental projects have plenty of support back at home base. Editors are always in touch with those in the field, monitoring their every move and making sure they are making progress on the assignments. Teams in the field often need to refine a topic or
The giraffe in the mist photo is an example of the importance of time. For weeks I’d gone through this lovely stand of fever trees, hoping to see a rhino in the mist, as South Africa’s Ndumo Game Reserves is known for its healthy rhino population. Early one morning I saw this giraffe in the trees and forgot about the rhinos, as I could see the possibilities for a wonderful giraffe photograph. I usually use my Land Rover as cover and can get quite close to game, but the area was swampy and muddy, so I set out on foot. I slowly stalked the giraffe for about an hour, until the sun burned off the mist. I shot many photographs, but just one frame worked, as the giraffe turned his head and looked toward me. ~ Chris Johns
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pick a new angle, yet another reason why the editorial calendar is nailed down so far ahead. Because these projects — which often last from months to years — can incur setbacks so easily, the editors and designers need the flexibility to shuffle and adapt stories should the need arise. Once the articles are completed and pruned by the editorial team, the story goes to the designers. “I’ve got the best designers in the world,” said Johns, “but you don’t find flashy, over-the-top graphics in the magazine because I think the only function of design is to accentuate and further the editorial. I think that many other magazines, especially those of lesser quality, use design as a way to distract attention away from the subpar quality of the editorial.” But the artists that do renderings of historical stories and the designers that generate explanatory graphics are among the all-stars of National Geographic editorial. Their work can add immeasurable substance to an article when executed well. Computer models that show the layers of King Tut’s tomb, to take a famous example, and his many sarcophagi serve as a stunning complement to the article. However, most of the photo portfolio stories require almost no design work as that would detract from its sole purpose: to highlight and draw attention to the photographs themselves. What defines the excellence of National Geographic’s designers is that they have the ability to adapt to different stories — to go all out when necessary and to cut back when their work is barely needed. They realize there is artistry in restraint. And as we were talking, two o’clock rolled around. A hard stop — an important editorial meeting. So I followed Johns through a door on the far side of his office into an adjoining conference room. From my perch in the corner, feigning invisibility, I looked around the room and admired the shelves surrounding the table — all bursting with books on a whole slew of topics, from exciting to esoteric. Striking images covered any and all available wall space, and back issues of the magazine were filed all over. Editors and designers began to pour in to discuss a special project. The monthly magazine that we’re all familiar with is the staple of National Geographic, but the editorial team also engages in other extensions of the magazine, most notably exclusive collector’s editions. These specials, sold independently from the
Photo by Chris Johns ©2008 National Geographic
NEWS + ANALYSIS
Photo by Chris Johns ©2008 National Geographic
NEWS + ANALYSIS
magazine, cover a broad array of topics in depth, from Treasures of Egypt to the 100 Best Unpublished Photographs. And next on the special agenda: the energy crisis. Given their thick paper stock and higher price point than the monthly, these issues are meant to be savored — and a particular effort is made to ensure that not a page, not even a sentence, is used frivolously. The team congregated to finalize the editorial plan for the issue, discussing everything from specific graphics to length of copy — all of which must be completed by the issue’s publication in April of 2009, a late start given the time-frame of the monthly! How to document and capture the multifaceted crisis in a way that is both complex and accessible was the problem at hand. Of import to the discussion was guaranteeing a mix of editorial formats: short-form and long-form narrative, as well as photographic portfolios. A typical editorial meeting. But what was particularly striking was the sustained collaboration between the editors and the designers in confronting America’s crumbling power grid and the resulting decline in the quality of electrical infrastructure. This phenomenon was of such magnitude and complexity that the staff worried whether it could be adequately treated and analyzed in a manner understandable to the general reader. The consensus was that the issue was far too nuanced to cover adequately in the issue, so a fitting surrogate, they concluded, would be an informative yet accessible graphic, to offer the reader just a glimpse of the problem’s immense importance. This team does not shy away from monumental challenges; instead, they come up with creative ways to leverage the magazine’s talent to overcome them. But not everything is serious, and every page does not have to be a sublime educational experience. Sometimes readers just want to go, “Wow, that’s cool,” as one of the editors commented in referencing the merits of a short spread on tankers and other big, bad machines used to transport oil. After an hour of lively, productive debate, the editorial plan was finalized. Next, everyone marched down the stairs to the layout room to finalize a special edition on space exploration, soon to be printed. This gathering was more in line with what I expected: a room with full-color proofs of the issue tacked up on all four walls. Column after column, row after row, blocks of text, daz-
This photograph is an example of the importance of the collaboration between a photographer and a picture editor. During the mid 1980s I was working in China, putting the final touches on a soybean story. For months my editor, Susan Welchman, and I had been struggling to make this commodity piece come to life with warm and engaging photos. So I was happy to hear from Susan that she’d discovered Geisha’s in training use a special soft tofu to practice their skills with chopsticks. We had been using an excellent fixer/guide in Japan during an earlier trip, so we contacted him and he found the Geishas in training. On my way back from China I stopped in Japan for a few days and shot the cover. By the way, the tofu she was eating was absolutely superb and I’m not usually terribly excited about tofu. Curiously, the cover brought intense responses from readers, some loving the photo and others finding it too provocative and sensual. ~ Chris Johns
zling photos: the magic of the magazine in 360°. In the few moments that I observed the discussion, I was amazed at the level of detail at which the editors work. One slight man, armed with intellectually-suggestive glasses and a pinstripe shirt, stood up to moderate the discussion which had suddenly energized the room. The question was the first word of the introductory paragraph. Some liked it. Others didn’t. Johns made his opinion known in his typical, understated way, but they did not take it as doctrine and they continued discussing — although they eventually conceded. To have fifteen people in a room discussing a single word of one of the special editions was mind-boggling. By extrapolating this dynamic and superimposing it upon a hundred-page magazine, one can only appreciate the number of hours and eyes expended on those pages to scrutinize every detail of what all members consider to be a communal masterpiece. And as the meeting adjourned, I took leave and considered my afternoon a success.
National Geographic might not be targeted for the whims of college students, but what is outstanding is the publication’s unwavering sense of purpose, fueled by talent that is nonpareil. These impassioned, explorative photographers, editors, and designers trace the most important cultural and environmental phenomena of our time. Consummately in tune with the evolving concerns of the global community, the magazine frames these crucial topics in ways that appeal to an ever-changing and incredibly-broad readership. Next time I go to the gym and observe vogue-conscious college girls spinning away on their stationary bikes, fueling their brains with the latest issue of National Geographic, I will imagine them being teleported not to Ibiza or Malibu but to some of the most exciting, important, and magical places on earth. National Geographic finds no need to employ any slight of hand to trick its readers, but rather transparently presents its pursuit of truths BT that readers find more fascinating than any
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NEWS + ANALYSIS
GLOBAL GEOGRAPHIC Terry Adamson, National Geographic’s Executive Vice President, talks about the intricacies of forging relations to expand an international distribution network and the importance of spreading the magazine’s mission to the entire global community. by Brittany Urick, Princeton University
Business Today: How does National Geographic decide what language editions of the magazine will be created and where they are distributed? Terry Adamson: A lot of it is more opportunistic than deliberate. First of all, it’s all relatively new — about a decade ago the magazine was only in English. There was a fairly deliberate determination by the then editors and executives at the Society because there were some concerns at that time that the magazine could achieve the same quality production and editorial. But
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[one of the overarching reasons we went forward with it is because] we have a mission of education in science and we didn’t feel that it should be limited just to those that speak English. Our first language edition was published in Japan, and that was launched in April of 1995. It turned out to be very successful, establishing records for a monthly magazine by subscription. It took us two more years before the next two were launched — Spanish in the fall of 1997, launched separately in Spain and Latin America. We now have 32 different language editions,
other than English. But there really hasn’t been a deliberate strategy like “let’s do this next” — it’s been far more opportunistic. It has been people who have approached us and people we met building on the success of the first language editions [that have facilitated the production of the language editions]. For some of them we had to deal with the government because you can’t publish without governmental approval. A prime example of that: It took us six years of pretty diligent work to get the Chinese edition published, [which was] launched in July 2007. It was the first magazine approved under the presidency of Hu Jin Tao. And publishing this edition in simplified [Chinese] has been a good addition to [our repertoire]. We cover almost every major language group — except one. We do not have an Arabic language edition of National Geographic yet, but that is currently a top priority. There’s no real precedent in the magazine industry of publishing a Westernbased magazine in the Arabic community. Part of that is because it is very difficult to have the kind of base to be successful, to be economically viable, when you’ve 21 countries with very different laws and customs and mores. But we’re going to try to solve that problem over the next year. The next edition we are actually going to launch, which will actually be our 33rd edition, will occur in mid-December with the January ‘09 issue in Ukraine — published in the Ukrainian language. It will be interesting, too, because almost any Western magazine published in Ukraine is in Russian. And in Ukraine, which has about 48 million people, about a third of the population speaks Russian as their primary language. It’s a bit forward and a bit risky on our part because most advertisers think about advertising in the Russian language. But we feel it’s very important to be in the native language, in part because it’s the future. Ukrainian language is what is taught in schools. Being primarily scientific and educational in nature, we believe that’s important. BT: Can you describe some of the biggest hurdles you’ve faced in launching some of the language editions? TA: One of the biggest hurdles was [negotiating with] the government in
NEWS + ANALYSIS
China, which I already described. We’ve all been pleasantly surprised at how National Geographic travels in other languages, which is in part a testimony to the editorial content that Chris Johns and his editorial team are able to produce — to produce stories that are not U.S.-centric, that really have international focus, applicability, and appeal. I think that has been a hurdle and a learning exercise for National Geographic over the last ten years because we were so very U.S.-centric, both in terms of reach and distribution. It was not as important for content to be internationally appealing, but it is today. I think the editorial team has risen to that challenge. But one of the things that has helped them do that is now that we have editorial staffs in each of the
we piggyback on structures that already exist. And that’s enabled us, over the last ten years, to build a large distribution in other languages. BT: How difficult is it to forge those relationships, and make sure that your partners publish with the same quality that we expect in the States? TA: It takes attention and time. We do a lot of due diligence in choosing a partner. We put a lot of time and effort into training our partners in the local markets and into developing a close relationship between these partners and the mothership in Washington. Every year we have a seminar in which the editor-in-chief of all of the local
built a large subscription base, in addition to single-copy sales. On average, I think about 55% of the international language distribution of the magazine is by subscription, and 45% is by single-copy sales. It has placed more importance on the cover itself, and the choice of the cover, to be sure that when the magazine is displayed on the newsstand, it motivates a person to pick up the magazine and purchase it. These newsstands have hundreds and hundreds and hundreds of magazines available so we have to somehow motivate the purchaser to buy National Geographic. That has been an interesting process and an evolving one, and I think one that the editors of English-language version are much more acutely aware of.
There’s no real precedent of a Western-based magazine in the Arabic community, it is very difficult to be economically viable.
areas that we publish another language edition, which becomes a great asset to the eyes and ears of the editorial team based in Washington. And they, too, are producing their own stories for local appeal, and that gives us added editorial strength as well. It’s led to the discovery and recruitment of more international photographers and writers participating in the language editions, including English. We’ve gained much greater editorial strength by the internationalization of the magazine. BT: How do you manage the immense infrastructure of such a globally integrated series of magazine teams coming out with an issue every month? TA: Our business model, except for one edition, is a license model, which means we partner with, in most instances, the most eminent, or one of the most eminent, publishing companies in the country or region we are launching the magazine. They provide the infrastructure — the means of distribution, the marketing, the promotion — and they counsel with us on the content to be featured in that particular market. That’s really the secret. We don’t have to transplant and build structures of our own;
language editions comes to Washington for several days of training and discussion on how to make the magazine better. Every other year, we provide the editors and the lead business people at the local magazines a seminar in Washington, and we talk about business practices: marketing, promotion, circulation. We have actually learned a lot from that process because some of them do things that we have learned from and done ourselves. The model is somewhat different from the English language edition because that edition is largely a subscription-based magazine: you subscribe, and you become a member of the National Geographic Society and a supporter of our mission. Probably 95% of the circulation in English is by subscription. But in many markets, there is really not a subscription market. As such, people are not accustomed to getting their magazines by mail. One of the things National Geographic has done in a number of countries, and this is particularly true in Eastern Europe, is we have built a subscription model where one has not existed before. In Hungary, the Czech Republic, Bulgaria, Romania, and Turkey, people weren’t accustomed to subscribing to magazines, but our partners there have
It has become increasingly important for sales of the English-language version — to get people to pick up the magazine at a private newsstand. We have about 225,000 copies of the English-language circulation through single-copy sales. Five years ago that didn’t really exist. And now it’s an important source for new members because people buy it and decide they should subscribe to it. That’s true in English and other languages as well. BT: In what capacity are you personally responsible for forging relationships abroad to facilitate distribution of the magazine? TA: That’s one of my responsibilities, as I head up the National Geographic Society and the magazine. We also do our other magazines internationally, as well. We have about 20 editions of our children’s magazine, what we call in the U.S. National Geographic Kids. And we also have about a dozen editions of our Traveler magazine in other languages around the world. This is a direct responsibility that I have and that people who work with me have. It takes a lot of time visiting new markets, understanding new markets, understanding who the potential partner could be,
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developing relationships with that partner, and developing the business deal itself in which we begin publishing National Geographic and the other magazines. We also use a lot of the same partners â€” and other partners â€” to publish books in other languages around the world, which is an important business and activity of the Society. Again, taking our content, which is rooted in our educational and scientific mission, to people in other markets.
been very satisfying. Our partner there is partially a financial services company and construction company that had a small media and publishing division that had several television channels but no magazines. Now National Geographic is the largest subscription monthly in Turkey. BT: Could you flesh out some of the implications of your recent victory in the trial concerning property rights with National Geographic photographs?
BT: Sounds like you have an exciting job. TA: It has been very rewarding and very exciting, and itâ€™s been very satisfying to see the success of the magazine in markets all over the world. Iâ€™m particularly proud that weâ€™re doing very, very well in two predominantly Islamic countries. We publish in Bahasa Indonesia and when we launched in Indonesian several years ago, the president showed up for the magazine launch. Turns out he was a longtime subscriber, and now heâ€™s a very active subscriber and supporter. Turkey has also
TA: It has been a long battle [that has lasted] over ten years. We have confirmed our view of the law. National Geographic is unusual in many respects because itâ€™s a collectible. Most people donâ€™t throw the magazine away every month like they do other magazines. They put it on their bookshelves, they put them on eBay â€” you type in National Geographic on the site and you might get fifty pages of results of people selling old issues of the magazine. Apparently, thereâ€™s quite a market for it. We find it very important, therefore, to have a
way to share our archive with people. There are a lot of people who would like to have access to it but canâ€™t get the old issues of the magazine â€” and who donâ€™t have access to microfilm. But having a digital CDROM, DVD, or hard drive available of the magazine that people can have the entire set of 1,200 issues, over time as a research tool or just for enjoyment of reading history. The confirmation that the law permits us to reproduce this archive electronically is extremely important not only to us but also to the publishing industry overall. Since we won the case, publications of The New Yorker and Mother Jones have come out with digital versions of their archive. In our case, we have such a collection about what the world was about at different points in time over the past 120 years. Itâ€™s an extremely valuable research and educational tool, and weâ€™re very excited the courts have agreed that the copyright law in the United States, which has a specific provision which has to do with publishers reproducing parts of collective works, applies in this way to BT publications.
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42 BUSINESS TODAY FALL 2008
When A GOOD NEIGHBOR meets A GREAT CAUSE I’M THERE
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NEWS + ANALYSIS NALYSIS
It makes us wince to the see the pump register a price of $5 for a gallon of unleaded. But that only breaks the surface of one of America’s perplexing calamities: our unquenchable thirst for oil. As oil serves as a pivot for our economy, environment, and homeland defense, we have no time to waste in attenuating our thirst. Don’t drink up!
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by Michael Keaton, Princeton University America has an addiction problem: oil. With few notable exceptions, oil has been cheap, accessible, and efficient since the turn of the century. As a result, petroleum became part of our everyday lives with the advent of the combustion engine and automobiles. The two other major fossil fuels, coal and natural gas, also became increasingly important as electricity became widespread. We take for granted that energy will always be abundant, as if it were a right for all Americans. Origins of Oil Dependency We never learned our lesson. While cheap energy had been the norm, the oil shocks of the 1970s proved that this would not always be the case. At the time, the inflation adjusted price of oil exceeded $100 per barrel. Rationing was imposed, and the country took significant steps to reduce consumption such as revamping
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public transportation and running major conservation campaigns. The problem for us was that the oil we needed most was located in politically unstable regions of the world, such as Saudi Arabia. The geographic inequity in resource allocation lent itself to the cartel model of the Organization of Petroleum Exporting Countries (OPEC), which, as an oligopoly, was effective in artificially elevating the price of oil for a short time. Economics came back to bite them, however, as cartels are difficult to enforce, and oil prices eventually collapsed to levels lower than they were before OPEC started cutting production. The inability of OPEC to control prices for the last twenty years was an important aspect of a golden age of economic growth, which was largely devoid of inflation. As a result, we were lulled into a false sense of security about the price stability and supply reliability of our oil.
The tripling of oil prices in the last five years has changed all of that and forced us to rethink American dependency on foreign oil. Energy is a crucially important topic from the perspective of public policy, as it marks the intersection of economics, environmental issues, and national security concerns. As the cornerstone of our economy, energy is an input for every good and service our country produces. Energy consumption through the combustion of fossil fuels accounts for the lion’s share of the human contribution to global warming. Energy is also a vital strategic asset as resource rich nations can use it as a weapon against those who rely on their exports. The end of cheap oil in the last few years demonstrates that supply and demand are out of sync, as relatively small supply shocks cause massive changes in price. Geopolitically speaking, this reality is
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dangerous for the US. Free markets have also failed to price petroleum at a level which reflects the environmental impact of its use. Thus, there now exists a threefold argument for alternative energy: first, we will eventually run out of oil and will need a viable substitute; second, it is a national security risk for a foreign country to be able to leverage energy as a weapon against us; third, we cannot afford to let global warming reach crisis levels. So what are we doing about it? A National Leadership Failure Unfortunately, national leadership has been least present when it is most needed. This August, when Congress was preparing to vote on a comprehensive energy bill,
many may acknowledge its benefits, people don’t want it anywhere near their homes, or even in their state. Centralized power was created to address exactly this situation: to make decisions in everyone’s national interest despite strong local opposition. France has been highly effective in using centralized power to push its energy production to 70% nuclear, though most French citizens do not support it. The proposed Yucca Mountain national nuclear waste depository in Nevada will probably never be opened, but it represents a fairly good option for addressing the problem of nuclear waste storage. Localities that are overridden by federal government decisions can and should be compensated to internalize the
alternative energies. From an efficiency standpoint, solar is actually one of the worst alternative energy sources. At less than 15% energy efficiency, solar technology is simply too lacking to make financial sense without incentives. Thus, strong solar incentives actually represent capital that could have been used more efficiently had it been allocated by a free market. These incentives also create market inefficiencies that are simply manipulated by savvy businessmen. For example, the solar incentives for residential installations are far lower than for commercial settings. SolarCity (www. solarcity.com), a startup in Foster City, California, uses this loophole as its business model. Instead of selling solar panels to
THE FAILURE OF GOVERNMENT TO PROVIDE A COHERENT PLAN ON ALTERNATIVE ENERGY CREATED INCENTIVES FOR THE PRIVATE SECTOR TO PURSUE LOOPHOLES. which would address crucial issues like alternative energy and offshore drilling, they took a five week vacation without passing any legislation. It is disappointing that at a time when the country needed them most, our leaders abandoned us. The federal government has failed to use centralized power to effect positive energy policy changes. The best example is nuclear power, a relatively clean, efficient, and virtually unlimited resource. It’s no longer a moral question of whether we should build nuclear plants that produce radioactive waste which will have to be stored and guarded for hundreds of thousands of years. By building any plants at all, we have answered that question. It is now a matter of scale. The marginal cost to produce a few more tons of nuclear waste per year pales in comparison to the benefits of reducing our oil dependency, carbon emissions, and the energy bill. Nuclear power produces a few tons of very nasty waste per year in comparison to the billions of tons of carbon dioxide in addition to other air pollutants that coal and oil do. With economics on its side, the primary barrier to nuclear power is political. It’s perceived as a not-in-my-backyard (NIMBY) technology, meaning that, while
externality of the NIMBY. Oil refineries in California are an excellent example of this concept. The Shell oil refinery in Martinez was strongly opposed by people in the city, but Shell agreed to contribute large sums of money to their faltering school system in exchange for permission to build the refinery, a win-win for both parties. Our nuclear power generation capacity could be drastically increased using similar policies, which would in turn reduce the need to burn dirty fossil fuels for power. Responses to Inefficient Policies The government has been rather haphazard in its approach to supporting clean energy because it does not understand how to shape the free market to accomplish its goals. For example, the government incentivizes clean energy by providing tax credits for certain industries, such as solar and wind. While these credits do have the effect of increasing demand for clean energy, they are not very efficient because lawmakers essentially decide which energy sources are “clean” and which should get incentives. Wind power incentives operate more effectively than solar, but geothermal — obtaining power from the heat in the earth — receives almost no subsidies, even though it is one of the most efficient
consumers, they lease them, allowing SolarCity to retain ownership of the panels and qualify for the higher commercial tax credit, then passing on some of the savings to the consumer. The response to this incentive was overwhelming enough that Morgan Stanley partnered with them to create a $100 million fund to buy the panels. The beauty is that with the lease arrangement, a customer can put zero down and begin saving on his energy bill immediately. SolarCity covers the installation and maintenance and guarantees the performance of the panels over the 15 year lease. Being cash flow positive on day one makes a huge difference when compared to the $30,000 one usually has to sink into a solar system they are unsure will pay off. Though in reality it represents a national policy failure, it makes a lot of sense for consumers: my family is putting solar panels on our roof this year through SolarCity. The failure of the government to provide a coherent plan on alternative energy has created incentives for the private sector to pursue loopholes, rather than focusing on improving the basic science and technology. Modified Free Markets to the Rescue One creative solution to the issue of
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Geothermal 11% Biomass 34% Solar 11%
Wind 11% Hydro 33% Renewable 7% Nuclear 8%
Natural Gas 22% choosing the best alternative energy, supported by the Director of the UC Berkeley Energy Institute, Severin Borenstein, would be to double the tax on “dirty” energy like coal, oil, and natural gas while removing all subsidies for alternative energy. At the same time, income taxes could be cut back so that there would be no net change in taxation. This would have the effect of pricing traditional energy sources at a level so high that alternative energy would make economic sense, and the market would select the most cost-effective technology instead of the government. Professor Borenstein also supports incentives which would help companies overcome the hurdle
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of transitioning from energy-intensive capital to labor-intensive capital, a major roadblock to decreasing our economy’s energy dependency. This approach aligns incentives in a manner which takes advantage of market’s effectiveness at finding the most efficient solution to a problem while disincentivizing dirty energy. A similar tactic could be applied to the carbon emissions problem. Instead of the government intervening in the operations of private businesses and dictating an acceptable level for carbon emissions, it should decide what is reasonable on a national level and then institute a cap and trade system of carbon credits. Essentially,
this system distributes carbon emission rights in the form of tradable, transferable permits. This would create a national market for carbon, and the equilibrium price would represent the marginal benefit of producing a certain amount of carbon. This system would cause the businesses with the least cost of clean up to do so, selling its permits at a profit to companies with higher pollution. Businesses that are harder to cleanup would simply purchase permits up to their marginal benefit of carbon emission. If the Environmental Protection Agency (EPA) were to decide that carbon emissions needed to be reduced further, the beauty of the system is that they would purchase the credits on the open market, essentially removing them from use at the most efficient price. While this strategy might produce odd effects, like polluting companies buying old, smogging vehicles to take them off the road and reduce pollution rather than altering their business model, the bottom line is that incentives will be aligned in a way that allows the free market to choose the most efficient solution. Entrepreneurs Step Up While potential solutions exist on a macro level, the country needs to invest more in basic science to develop the intellectual property necessary to advance alternative energy technologies. This type of research often yields more for society than subsidizing inefficient technologies. One advantage of the high price of oil is that it makes many of the alternatives more viable. I spent nine weeks this summer interning for a nanotech startup in Cambridge, Massachusetts, called Soane Energy (a recent spinoff from of the incubator Soane Labs, www.soanelabs.com). The basic premise was to apply nanotechnology to the industry to make unconventional oil — heavy petroleum, as opposed to the high grade light sweet crude of Saudi Arabia, which is abundant but harder to refine — accessible and less environmentally harmful to extract. I focused on the Canadian tar sands, which contains vast oil reserves rivaling that of Saudi Arabia’s. The problem is the oil is literally locked up in tar mixed with sand, making it very energy intensive to extract. These issues don’t even take into account the technical
Source: US Energy Information Administration
United States Energy Consupmtion
NEWS + ANALYSIS
NEWS + ANALYSIS
difficulties of extracting in the Canadian tundra and dealing with a petroleum product thousands of times more viscous than ordinary light sweet crude. It is only economical to extract when the price of oil is high. Current practice involves using high pressure steam and strong caustics to remove the sand, which is horrible for the environment and produces massive amounts of clay-filled wastewater as a byproduct. After the waste is pumped into nearby ponds, its life-depleting impact can last years as the dispersed clay slowly but never fully settles. The hope is that the nanoparticles at Soane Energy will revolutionize the extraction and transport processes, making them more efficient and thereby unlocking a reliable supply of oil. The potential in
While this plan holds a lot of merit in terms of reducing oil dependency and using domestic resources, it is somewhat short sighted in that it assumes natural gas will stay cheap relative to oil. It would also require a massive infrastructure change to replace all of the gasoline stations with natural gas fueling stations. Nevertheless, Pickens is right about wind, and the mere fact that influential individuals are working to address the problem means the situation wields significance for the coming years. Students Fill Leadership Vacuum Just as national level policy failures have created entrepreneurial opportunities, the leadership vacuum left in the government has spawned energy interest groups, particularly at the collegiate level. A high
aiming to establish chapters in China and at Princeton University. Energy Crossroads is a prime example of how individuals are responding to a global challenge in the face of poor national leadership. Where To Go From Here Clearly, the US has a structural energy problem. We are reliant on a foreign resource, and the private sector is unwilling to make the long term investment to change our capital stock to be less energy intensive because of volatility in energy prices. Traditional energy producers are unwilling to grow capacity because of speculation that the future will hold largely alternative energy sources. Thus, we have a short run energy supply crunch that is battering an economy already rocked by the credit
THE POTENTIAL IN UNCONVENTIONAL OIL IS ENORMOUS: IT COULD BE THE SOLUTION THAT BRIDGES THE SHORT TERM OIL SUPPLY BEFORE ALTERNATIVE ENERGY SOURCES BECOME VIABLE. unconventional oil is enormous: it could be the solution that bridges the short term oil supply shortage before alternative energy sources become viable. Before my internship, I was highly pessimistic about the future of our energy, but after an extraordinary work experience there, I am confident that the best and brightest minds are tackling these problems and will solve them. After all, the price of oil has raised the stakes in terms of the value of a solution to our energy needs. The Pickens Plan is an excellent example of how individuals are stepping up to the challenge of alternative energy. T. Boone Pickens, an oil man himself, has put billions of dollars of his own money on the line in a campaign to break American dependency on foreign oil. He suggests capturing the vast wind power resources in the Midwest — he has invested in a windfarm in Texas that will be in the largest in the world — to replace the natural gas component of our electricity generation. Then, instead of using gasoline refined from oil to power our cars, he suggests using the domestic natural gas resources that have now been freed up.
school classmate of mine, Sandy Yuan, has gotten involved in an energy interest organization at Stanford University called Energy Crossroads. Energy Crossroads is a student group dedicated to inspiring, educating, and involving people in energy to foster a clean, prosperous, and secure energy future. The goal of the organization is to develop a network of thinkers on the forefront of the intellectual developments associated with energy innovation. In 2009, Energy Crossroads is planning a Global Conference series where each chapter will host events with the region’s top energy experts. Their 2008 Conference featured Cathy Zoi, the CEO of Al Gore’s Alliance for Climate Protection, Michael Shellenberger, the founder of The Breakthrough Institute, and Libby Cheney, the Vice President of Shell Oil. These events, as well as more casual “energy socials,” have helped to propel the issues at stake onto the radar screens of other students. Energy Crossroads has chapters in Denmark and Singapore, where Sandy may travel to help plan next year’s conference. The organization is looking to expand internationally and domestically,
crisis, both of which are inhibiting our productivity potential. We need national leadership that will prioritize energy policy, give us a coherent plan, and be willing to make tough decisions that are in the long term interest of the country. We should grow our nuclear power capacity to reduce fossil fuel consumption, institute a cap and trade system to control carbon emissions and protect the environment, and align economic incentives in a way that utilizes free market efficiency. Obviously, change will not occur overnight. But with a holistic approach and sound policymaking, we can secure an independent energy future while minimizing current economic impact. Whether the answer will come from solar, wind, nuclear, geothermal, hybrid, or some combination thereof should not be up to the government. It should be an optimized solution that addresses the economic, environmental, and strategic issues at stake. Since the presidential candidates have so far not espoused very convincing plans, the brightest students and entrepreneurs appear to offer our best hope for the BT future.
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Revolutionary Road As the news industry attempts to reinvent itself, ABC News is willing to risk trying something new in hopes of pushing the edge of the revolution envelope even further. by Paul Slavin, Senior Vice President, ABC News Change is roiling the news media business, and it is tectonic. Newspaper circulation is down and advertising revenue is plummeting. Ditto with magazines. Broadcast television news continues to erode, and commercial radio is struggling. Cable is holding its own, but what happens to that audience when the political year has run its course is up for debate. Overall, could things get worse? You bet. But this could really be the most exciting time to be in the business. Before we panic, let us get a grasp on the landscape and put it into context. Overall ad spending on all media was staggering in 2007. New media (digital formats)
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accounted for only a tiny percentage of that (Q2 2007 online ad spending topped $5 billion.) The shift in revenue from traditional media to new media, however, is inexorable. In Q1 of 2007, online advertising revenue increased 26% over the same quarter from 2006 — and that was double what it was two years earlier. Analysts suggest the flow of ad dollars into new media will surpass newspaper ad spending by 2011 and eventually begin to make a serious run at the mother of all advertising mediums: TV. We are on the threshold of a revolution. Revolutions are, by nature, disruptive, difficult, and dangerous…but they’re also
hopeful, optimistic, and brimming with opportunities. Otherwise no one would attempt one. All revolutions are about power — specifically, shifting power from one group to another. Technology has shifted the power away from the content providers and broadcasters and put it in the hands of viewers. We no longer decide how and when people will watch our programming. They do, using the internet and other devices to get what they want when they want it. The impact of the digital revolution on the news business has been quite different than it has been on the entertainment industry, primarily because
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of the different ways industries capitalize on news content and creative works. It isn’t so much about curbing the illegal use of our content as it is about using the new platforms to stay relevant to an increasingly mobile and distracted audience. Viewers today — especially Millennials — carry wireless laptops, cell phones, sidekicks, Blackberries, digital cameras, and iPods.
using digital devices to watch television content. The ABC.com broadband player had over 150 million episode requests last season. ABCNews.com drove over 70 million video views in 2007, and ABC News NOW linear channel reaches nearly 44 million subscribers across cable, broadband, and mobile. And according to our internal measurements, all of those
virtuous cycle for our business — and the ABC News brand. The popularity of our broadcast programs can drive viewers to new platforms. And putting our content on new platforms can connect viewers to our high-quality news content. For us, the future is not a zero-sum game where one platform erodes another. It is infinite, and each new platform expands its potential.
TO FULLY LEVERAGE THE POTENTIAL, MEDIA MUST BECOME LESS FOCUSED ON BEING A “BROADCASTER” AND BECOME MORE OF A “NICHE-CASTER” SERVING DIFFERENT SEGMENTS ON A VARIETY OF DEVICES. e-mail, the Internet, and texting are integral parts of their day. They are used to the immediacy of downloaded music, phones in their pockets, and instant messaging. And they have little patience for those who cannot keep up. If you cannot give them what they need — like the news of the day on demand — they’ll go elsewhere to get it. There is tremendous opportunity here. To fully leverage the potential, media must become less focused on being a “broadcaster” and become more of a “niche-caster” as well, serving different segments of the audience on a variety of devices. To compete effectively we have to continue to find ways to add value to the news experience. Before we do that, however, we must understand who our consumers are and what they want. Media companies have extensive information about who utilizes their legacy platforms. But digital users are less defined. As technology becomes more widely adopted, we’re seeing the demographics and demands of the users change. For example, initially the average online viewer was much younger than the television audience. But as a growing number of older people are embracing the online experience, the average age is trending up….but it’s still a younger audience than for TV. The good news is that we’ve seen an explosion in video usage as broadband access becomes more widely available and affordable. More and more people are
numbers are growing at a geometric rate in 2008. And video content is something that advertisers are very familiar with, so they’re open to putting their messages in video content on multiple platforms. The jury is still out on exactly what the best ad format is on digital platforms, but we continue to look at what’s working and to experiment with new formats to enhance engagement with both the ABC News brand and our advertisers. News is a business, after all, and finding a healthy balance between the two factions is important for the longterm viability of online content. Some of the challenges in programming new platforms are similar to the ones we have on the air, such as how we differentiate our programming from everyone else out there offering news. We have to maintain a strong brand identity and give viewers a reason to look for that brand on every platform. Whether we’re streaming live news, offering on-demand segments, or podcasts for video-bloggers — we have to differentiate ourselves in the market so that viewers will continue to turn to us to get their news on whatever device. One of the most surprising things that we’ve learned so far — and something that many people in our business still don’t fully grasp — is that putting content on digital platforms can be additive to the legacy platforms. It can actually strengthen the television audience by increasing loyalty and value that goes beyond the traditional offering. Collectively, all platforms create a
The Digital Revolution is changing the entire media landscape. It changes how people consume media, so it has to change how we approach our own businesses. The old rules and conventional wisdom no longer apply in a world where innovation and flexibility are key to survival. Television is a business where the vast majority of product is expected to fail each season. So you would think that risk taking would be ingrained in the industry. But it’s not. We have to make it part of everything we do from here on out, investing in the chance of failure for the opportunity to change the game. The only people who ever fail are the ones taking the risks, trying something new, and pushing the envelope to change the industry. Sometimes the right answer only comes from trying the wrong one first. So we can’t afford to fear those critical failed attempts. We need to empower the people who work for us to be creative and reward their risk taking. To keep up with our consumers, we have to start asking our teams a fairly simple, yet powerful question: “If you could break all the rules, what would you build for our viewers?” The answers may not always thrill us, but discomfort leads to innovation. It’s an exciting time for the news business. Change is coming at a furious pace. Each new technology, each new idea creates more possibilities. Success will come to those businesses with a consumer-centric strategy that are prepared to adapt and innovate to serve viewers wherever they BT are and however they want.
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NEWS + ANALYSIS
Hot Off The Web Janet Robinson, the CEO of The New York Times Company, talks about the importance of catering to student readers, the tenuous future of print media, and why she feels the daily newspaper is here to stay.
by Amit Mukherjee, Princeton University “I don’t think I’ve ever picked up a copy of The New York Times,” said Meghana Dhar, an undergraduate student at UC Berkeley. Instead of picking up the paper each day, Meghana reads a variety of online news sources, including NYTimes. com and several blogs written by professors, professionals, and students. Meghana also contributes to the increasing range of online news sources by writing her own blog called The Uneducated Elite. Meghana’s reading habits are symptomatic of a wider phenomenon: the rise of online media at the expense of its print alternative. As newspaper companies across the country attempt to adapt to an Internet-dominated world, they have seen their profits, revenues, and customer bases decline. Even The New York Times, a bastion of American journalism, is not immune to this transformation. The Business of Newspapers Traditionally, newspapers’ profits have come from three sources: subscriptions, advertisements, and classified ads. Since the rise of mainstream online media, all three areas have suffered losses. As of July, The New York Times Company revenues were down 10% year-on-year, with most
of the losses coming from advertisements and classifieds. While falling subscription numbers are a deep concern, perhaps the biggest challenge newspapers like The New York Times are facing is intense competition with websites for advertising dollars. Beyond the obvious concern of declining circulation, advertisers have begun to question the value of print ads, whose impact remains difficult to quantify. After all, online ads offer companies multiple ways to measure the value of their advertising outlays. Companies can easily track how many people click on their ad, how much time each user then spends on their linked website, and how many of those users eventually end up purchasing something from the company’s website. These appealingly connected metrics simply don’t exist for newspaper ads. As a result, many newspapers, including The New York Times, have had to rapidly change their business models in order to survive. Many companies have struggled dramatically with the shift. The Tribune Company, the nation’s second largest newspaper publisher, has a $13 billion debt and made layoffs this summer at both The Los Angeles Times and The Chicago
Tribune. The New York Times, on the other hand, has done better. As Robinson put it, “The companies that are winning are the ones that embrace the challenge and embrace the change rather than running away from it.” Described by some as the most “websavvy” newspaper outfit in America, The Times became serious about its online operations five years ago, when it purchased about.com for $410 million. “That was a good signal to our folks both internally and externally that we are very willing to embrace change,” Robinson said. “We not only acquired a large, very profitable website, but we also acquired technological expertise in the field of search optimization.” Since then, the company has made many unique strides to improve its online business. It has focused on dramatically enhancing the advertiser and user experience, while quickly responding to changing Internet trends. When the company saw that a large number of viewers came to its website from search engines, it dropped the premium “TimesSelect” service, opening up the vast majority of the site for all users. In addition, the website has many technological features not found on other
THERE WILL ALWAYS BE A PLACE FOR NEWSPAPERS. THE WINNING STRATEGY SEEMS TO BE PROMOTING THE NEWSPAPER AND WEBSITE AS A SINGLE PRODUCT RATHER THAN AS ALTERNATIVE CHOICES. 50 BUSINESS TODAY FALL 2008
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© 2008 Showtime Networks Inc. All rights reserved. SHOWTIME and related marks are trademarks of Showtime Networks Inc., a CBS company.
NEWS + ANALYSIS
EVEN AFTER NEWSPAPERS ADAPT TO THE LATEST TECHNOLOGY, STUDENTS ARE USING FREE INTERNET SITES AS THEIR MAIN SOURCE OF INFORMATION INSTEAD OF PAYING FOR PRINT PUBLICATIONS. news websites, such as the ability to read a definition of any word by simply doubleclicking it, and a fluid integration of video into articles. The New York Times also quickly responded to the decline in the classified ads, creating strategic partnerships. Since most classified ads have migrated to the internet (craigslist.org, for example, has largely re-
placed the need for a classifieds section in most newspapers), The New York Times Company has partnered with Monster Worldwide, owner of the employment website monster.com to bring a interactive “Jobs” section to their website. Despite the many advancements of the Internet, many believe that there will always be a place for newspapers. According
Hey, Babe. The unprecedented expansion of the blogosphere in the 21st century may lead a typical market observer to note the impending, perhaps inevitable demise of the print media industry. If Babe Blog is the easy, hot new freshman commanding the attention of the global media campus, do the hard-to-foldhard-to-navigate newspapers that we associate with our tech-challenged parents stand a chance? Classical science tells us that a helpless prey faced with the prospect of degradation and destruction is primed to execute one of two natural responses: fight or flight. Janet Robinson believes in a different science — a science which dismisses the fright response as bogus and instead embraces the Darwinian conception of selection and synchronization as means of ensuring survival and attaining success. Her response to Babe Blog’s triumphant rise onto the 21st century media stage: “Hey, Babe. We are The New York Times, a 150-year old giant of the 21st century media industry. Let us be the first to welcome you.” In this issue, Robinson confronts the apocalyptic rhetoric that has come to target the newspaper industry and assures us that “print,” thanks in part to the arrival of blogs, “will be around for a very long time.” It is by embracing, not fleeing the media industry’s technological revolution that The New York Times will continue to do what it has always done best, namely to provide its readers with high-quality news and analysis each and every day. As it moves towards digital distribution, the “competitive advantage” of The New York Times, says Robinson, is the rich repository of archives that will make the new dot-com headquarters a place for traditional news reporting as well as a nurturing home for the company’s own specialized blogs — a haven where selection and synchronization, “depth and breadth,” are achieved in style, for 21st century readers to enjoy. So watch out, Babe Blog, because Mrs. Robinson has her eye on you.
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to Robinson, the winning strategy seems to be promoting the newspaper and website as a single product rather than as alternative choices. As a result, The New York Times offers companies a package of print and online ads. In contrast, many other publications, such as Forbes and Forbes.com, offer their ads separately, meaning that their online and print products often actually compete with one another. “I think one of the most successful things this company has done is to integrate print and online in the news area and also in the sales area”, Robinson said. “And we did that a number of years ago now, before many of our traditional competitors. [That] integration, which has gone very smoothly, has expanded our offering to our customer base.” The College Generation But even after newspapers adapt to include the latest-available technology, they are still concerned that so many students — so much of their core future customer base — are using free Internet sites as their main source of information instead of paying for print publications. In the face of this obstacle, The New York Times has recognized the serious need to market its brand to students and has created a serious education initiative. “We sponsor on-campus events and speaker programs, primarily to bring The Times to life on college campuses”, Robinson said. The Times also distributes 83,000 classroom copies to over 1,780 schools and colleges and distributes 60,000 homedelivered copies to students daily. This targeted initiative seems to have paid off. As Robinson noted, “In a recent survey of all US college students, [The New York Times was voted] the #1 newspaper, and according to the Student Monitor, The Times reaches the largest market share of US students.” Many are concerned with the college generation’s shift away from print newspa-
NEWS + ANALYSIS
Photo by Robert Scoble
pers. They believe that crucial information can be lost as students become comfortable with snippet articles and websites with poor quality content and inaccurate information. Like many of these critics, Robinson believes that reading the newspaper is still an important activity. “We are encouraging students to utilize both the website and the printed newspaper,” she said. “There is something to be said in regard to how the newspaper reading habit gives you a broader news analysis, which is extremely beneficial to students.” Robinson still has a “great deal of faith” in college students, who she describes as “the next generation of America’s leaders.” Instead of criticizing students, she believes that the burden falls on the media companies to provide solutions for students’ changing needs. “It is incumbent upon the media companies to provide [students] with the experience of the quality news and the quality journalism that we create each and every day,” Robinson said. Robinson believes that the quality The New York Times offers is the differentiating factor that online alternatives cannot seem to match, so while cost-cutting measures must be made, each step that decreases the quality of its writing is certainly a step in the wrong direction. The challenge for Robinson is to convince students of this preeminent quality. As long as she can do this, she believes The New York Times will be around “for a very long time” and that there will continue to be the need and the demand for the physical newspaper in hand. Meghana Dhar seems to agree. “It would certainly be a pity if I didn’t have the opportunity to ever pick up a print newspaper;” she said. “I hope that opportunity always exists.”
From Blueprint to Newsprint The New York Times Company now calls an iconic new 52-floor skyscraper in midtown Manhattan home. Robinson described the new headquarters, which has been occupied for only a year, as having a three-pronged goal: “to enhance the way we work,” “to make a meaningful contribution to the city,” and “to serve our long-term needs as an owner and user.” Before moving to this new space, the company was suffering from a suboptimal division of labor. NYTimes.com was housed in a separate building, for instance, creating an environment that lacked the necessary synergy for a company whose divisions are so intertwined. “The move to our new home allowed us to fully integrate the news room and fully integrate the sales operations. And a further level of cooperation with our colleagues in all of these departments has been greatly enhanced because of that move,” said Robinson. The new dynamic of The New York Times reflects the trend of the century, where different facets of business must work together cohesively — as opposed to existing as disconnected entities — to create a multifaceted, hyper-integrated media conglomerate. The Times wants to be the industry leader in all facets of media, so they must capitalize on all of their resources and espouse a totally collaborative environment — one that is profoundly affected by the physical plant. “The building really is a testimonial to our drive to be a media leader.”
Looking Forward While newspapers may be around for a long time, competing technologies only continue to improve. Apple’s iPhone and Amazon.com’s new digital reader, Kindle, are examples of new devices that have improved digital reading dramatically in the last year alone. Whatever the final outcome is, it is certain that the news media industry will have a very different face ten years from now, and the changes that must be made will be drastic and difficult. BT
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“Your success depends on you… Steer your own course… Do your own thinking… Make your own decisions... Write your own record.” -Forbes Founder B.C. Forbes
Business Today is helping young men and women write their own record by fostering dialogue and understanding with business leaders.
RAGS TO RICHES: IS THE AMERICAN DREAM ALIVE?
n 1977 British high school dropout Richard Branson was in his mid twenties, signing bands like the Sex Pistols to his four-year-old company, Virgin Records. Within the first week of the signing, the legendary punk rock band sold 100,000 copies of the single “God Save the Queen.” That same year in our spring issue “Rags to Riches: Is There Still Room for Entrepreneurs?” Business Today posed the question of whether or not entrepreneurs had become a dying breed, a distant memory from the times of Andrew Carnegie, John D. Rockefeller, and Henry Ford. Clearly, we at Business Today forgot to ask Richard Branson. Arguably the most prolific entrepreneur of all time, Branson and in 1992, he was even knighted for his contribution to entrepreneurship. Though entrepreneurship is as far from dead as ever, the question our 1977 issue presented is still significant. To find out more about the state of entrepreneurship in the latter half of the twentieth century, Business Today’s own Richard Devane surveyed a wide array of entrepreneurs on the topic. Most entrepreneurs’ responses focused on the debilitating effects of government regulation. Though large companies had the economies of scale to cope with the government bureaucracy, small businesses were unable to stomach severe regulations. Businessmen, however, did not solely focus on the negative aspects of government policies. Many entrepreneurs heaped praise on the Small Business Administration, citing the organization’s loans as crucial to their company’s success. Perhaps the most interesting aspect of the survey was small businessmen’s response to the prospect of their company being acquired by another corporation. Not only were most entrepreneurs adamantly against the notion of being “swallowed up,” many did not even feel the need to emphasize growth, a striking disparity from today’s innovators. The 1977 issue also inspected the effectiveness of nationalization on two industries, the post office and the railroads, and with today’s Secretary of the Treasury Henry Paulson injecting billions into the nation’s largest banks, this question could not be more timely. Back in 1971, the Post Office Department, predecessor to the semiprivate United States Postal Service (USPS), was mired in incompetence and inefficiency. Five years after the establishment of the USPS, however, the organization was operating a surplus to the tune of $75 million. At the time of the issue’s release, the jury was still out on the nationalization of railroads, but many free marketers voiced concerns. According to the chairman of the Chessie Railroad System, “What is disturbing is the steady increase taking place in government participation in our business and personal lives.” From entrepreneurship to nationalization, the “Rags to Riches” issue covered topics that are both interesting and relevant. Though the question posed by the issue about entrepreneurship is surely settled, with government regulation strangling financial innovation, we now must ask which industry will attract America’s most innovative minds. by Will Beuttenmuller
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RICHARD BRANSON If there were a prize for the “coolest 58-year-old in the world”, Richard Branson would be the odds-on favorite to win it. Not only is he the creator of one of the most successful and innovative companies around, but he also owns a private island, an airline, a comic-book company, and a spaceship, as well as substantial stakes in over 360 other companies. On the way, he has appeared in Casino Royale and Superman Returns, and has set world records flying across the Atlantic and Pacific oceans in a hot air balloon. In building the Virgin brand to the status it enjoys today, Branson has perfected the timeless maxim “work hard, play hard.” Or as he once said, “I don’t think of work as work and play as play. It’s all living.” This summer, as the billionaire prepared to break the world record for the fastest Atlantic crossing in a speedboat, Business Today had an exclusive opportunity to speak to him about his unique entrepreneurial style, the secret to his success, and his future ambitions. by Sudeep Doshi, Princeton University
Virgin Galactic is a company established by Virgin to undertake the challenge of making private space travel available to everyone by creating the world’s first commercial spaceline. Virgin will own and operate privately built spaceships based on the history-making SpaceShipOne. These environmentally benign spaceships will allow affordable private sub-orbital space travel for the first time in history and give customers the opportunity to be among the very first civilian astronauts. The company also has long-term ambitions to develop the WhiteKnightTwo and SpaceShipTwo systems for low Earth satellite deployment, payload, and other scientific applications. virgingalactic.com
Virgin America, launched in August 2007, is an airline based out of the San Francisco International Airport aimed at reinventing modern travel by offering attractive fares and a host of innovative features. The airline’s new Airbus A320-family aircraft offers interactive in-flight entertainment systems and power outlets for laptops. In July 2008, Virgin America was named “Best Domestic Airline” in Travel + Leisure World’s Best Awards. In Zagat’s 2007 Global Airlines Survey, the airline was ranked #1 among U.S. carriers for quality in First Class and #2 in Main Cabin. bin. The airline’s brand new w fleet is 30 percent more fuel efficient than the average domestic fleet. virginamerica.com
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Business Today: Teenagers are compelled to do many things, but starting magazines is rarely at the top of the list. Why did you feel compelled to start a student magazine as early as you did? Richard Branson: The magazine, called Student, was my first business, and I started it when I was 16. It was the 1960s, and I didn’t like what was happening in the world. There wasn’t a magazine run by students, for students, and I wanted a chance to edit a magazine. I didn’t start it because I wanted to make money or because I wanted to run a company. That’s one lesson I learned early on: if you want to succeed, you’ve got to be passionate about what you’re doing, not just about making money. A business has got to be involving, it’s got to be fun, and it’s got to tap into your creativity. It’s about creating something you can really be proud of. BT: The Virgin brand first became a household name as a record label. How did you take your entrepreneurial instinct from running a student publication to forming this record empire? What were some of the obstacles en route and how did overcoming them help you? RB: Obstacles…well, when I left high school, my headmaster’s parting words were, “Congratulations, Branson. I predict that you will either go to prison or become a millionaire.” In the early years, money was definitely an obstacle. My aunt gave me a second mortgage on a house which got Virgin going. She saw how passionate I was about Virgin and trusted that I would eventually pay her back. What she did for me many, many years ago actually got me excited about what Virgin Money US does, which is to facilitate borrowing and lending among friends and family towards things like student loans, which is more important than ever now that private loan sources have all but disappeared. Again, I didn’t start my businesses by focusing on making money but by following my passion. As long as you have that, the work will follow. As far as the record “empire,” it certainly was not that in 1966 when my friends and I were sitting around trying to come up with the right name for our little record company.
We chose the name Virgin instead of Slipped Disc Records because it was catchy and because we thought it could be used for other things in the future. Unfortunately not everyone felt the same way; the patent office rejected it for years because they thought the name was too “rude.” Luckily artists liked the name, and Virgin Records really took off. We began to develop the idea that we could take this name and apply it to lots of different businesses, with different partners, the only linkage between the companies being the name itself, the philosophy of how we do business, the culture, and the Virgin brand values of quality, value for money, innovation, competitive challenge, and fun. Over the years, Virgin has successfully lived those brand values through the hundreds of Virgin companies that exist around the world. In the US, the most recent obstacle had been the foreign ownership law that delayed the birth of Virgin America. That challenge has certainly made it even sweeter to enjoy milestones like Virgin America’s first birthday this past August, the many awards we’re getting for best domestic air travel and best first class service, and also launching service from JFK to Las Vegas with lots of style and champagne—and the lads from HBO’s Entourage! That was great fun. BT: Today, Virgin cannot be boxed into one industry (or even two or three). With so many businesses covering such an amazing array of industries, how are you able to stay abreast with everything going on at Virgin? At what point do you stop and let the people who work for you take over? In other words, what is your typical day at work like? RB: I’m very lucky to be in this position, and I try to use it towards helping the Virgin companies and also tackling humanitarian and environmental issues. Let’s see, a typical work day. Jimmy Kimmel asked me several months ago, and I had just spent the day in India launching a new mobile company that will serve the fastest growing youth market in the world, and then I threw a party to announce a new transcontinental airline that will serve Australia and the US. Earlier this summer, I spent an afternoon and evening at four different parties for Virgin companies in the UK and then went to Kenya to celebrate a peace accord that the Elders had worked on.
BT: You make the headlines as much for your ethical and responsible approach to business as you do for the profits your companies make. How important is corporate social responsibility to you? Do you think Virgin and the business community on the whole should do more to promote issues like the environment, fair trade, and corporate giving?
crossing with the Virgin Money Speedboat. I try to do things that will make a difference. You only live once so you may as well do things that are fulfilling and that test what you are capable of.
RB: Corporate social responsibility is a natural extension of our businesses because we approach it in a very entrepreneurial way. Virgin Unite (www.virginunite.com) tackles social problems by utilizing the business strengths of each of our companies. For example, Unite works with Virgin Mobile to help homeless teens by asking customers to make clothing donations by texting “KARMA” (or 68405). Thanks to Virgin Mobile and our dear friend Jewel, US Congress declared November National Youth Homeless Awareness Month. Virgin Mobile also hosts a fantastic summer music festival, Virgin Mobile Festival, which benefits the Unite charities. I try to go each summer – not just to enjoy the great headliners and the beer – but also to support the good things they’re doing.
RB: I think I answered that in the first question! I also think it’s very important to get the details right. If I’m on a Virgin plane, I’ll try to make an effort and meet the passengers and the staff. I’ll have a little notebook in my back pocket and listen to their ideas. A lot of these ideas are now what makes Virgin America a completely different flying experience. You can order food and charge your iPhone from your seat, and you can watch movies or listen to music or text your friends through the touch-screen inflight entertainment system. This is what’s possible when you ask customers what they want and then you let your teams do what they do best: innovate.
On a serious global note, it will take the private sector making serious clean tech investments to help us reduce our carbon footprint in every area of human endeavor [if ] mankind has a chance of surviving the next 100 years. Not just manufacturers of computers, power stations, ships, buildings, transport, and every other energy-using device but companies in every sector have to get involved in investing in carbon efficiency. Environmental issues cannot be seen as a sort of charitable adjunct to normal day-to-day business. If we can achieve this, humanity will dramatically increase its chance of survival long enough for us to actually go out and explore the stars. BT: You have set hot air ballooning world records and capsized in the middle of the Atlantic. Is your passion for life (and risk) one secret to your incredible success? RB: I’d much rather be participating in an adventure than be in front of a TV watching someone else do it! Right now I’m watching the weather reports as we’ll soon attempt to break the world record in transatlantic
BT: What’s the best piece of advice you think a student entrepreneur can receive starting out?
Virgin Money USA is a financial services company committed to offering consumers alternatives to traditional forms of credit. The company provides an easy way for people to make loans between relatives and friends – helping people to arrange affordable loans without hurting their relationships, to enjoy the benefits of flexible loans that fit their needs and to keep money where it belongs – in the family. With interest rates typically lower than what a bank charges, coupled with flexible repayment schedules, Virgin Money helps consumers take major steps toward achieving their personal dreams, with help from friends and family. virginmoneyus.com
BT: Your interests and business savvy have led you down a constantly evolving trajectory of ventures. What are your plans in the future? Do you have any ambitions left to achieve? RB: There is so much left to do. One of the most untapped yet vital resources is space. I believe that without space — and the work of organizations such as NASA — we would not even know or understand the realities of climate change. Without space, we could not feed the current population of the world. Space could also provide the answer to [the] necessity of future air travel without atmospheric impact. Space launch technology is still in the dirty, polluting, and carbonintensive Cold War era. We aim to change that with Virgin Galactic as we are making a considerable investment in the world’s first environmentally benign space launch system that will eventually carry not only people but also low earth orbit satellites, payload, and even science experiments into space. Private investment in space launch systems will help reap some of the huge benefits that access to space can offer future generations. We can also give thousands of people a unique and life changing perspective BT of our planet.
Virgin Mobile has attracted more than 10 million customers worldwide. Virgin Mobile USA offers more than five million customers control, flexibility, and choice through Virgin Mobile’s Plans Without Annual Contracts. As the #1 mobile youth network, Virgin Mobile Canada’s mission is to connect, entertain, and reward like nobody else. J.D. Power and Associates ranked Virgin Mobile highest in customer satisfaction with prepaid wireless service for three years in a row. Virgin Mobile USA’s full slate of smart, stylish and affordable handsets are available at 40,000 top retailers nationwide. virginmobileusa.com
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INTRODUCING A NEW KIND OF BANKER:
Your Mom A New Social Lending Contender Enters Education Finance Landscape.
by Asheesh Advani, Founder and CEO, Virgin Money USA
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Virgin Money US Gets its Start In 1971, Sir Richard Branson borrowed ₤7,500 (about $18,000 at the time) from his Aunt Joyce to buy a recording studio. He paid that loan back soon after, with interest. But little did he know that, 36 years later, he would be inspired by that family loan experience to build a business around helping others do the same. My efforts to build an innovative financial services company that keeps money in the
family got a boost last year when Branson’s Virgin Group acquired a majority stake in CircleLending, the company I had founded in 2001. Together, we re-launched the company as Virgin Money — a social lending company that helps people access affordable and flexible credit, offering unique financial services and a customer experience that most banks cannot match. Our future is in bringing this kind of social lending together with the banking industry
in a way that is unique to Virgin — and a good deal for the consumer. The Student Loan Crunch It is obvious that the credit crunch has directly affected the ability of families to borrow at decent rates for education. Just this year, more than 60 lenders have exited the federal student loan market and, in the private market, most lenders have significantly tightened their standards or left the business altogether. The student loan crunch is related to last year’s subprime mortgage crisis, which severely hindered the debt source that student lenders were tapping: auction-rate securities. Auction-rate bonds were short term paper which allowed student lenders to borrow billions of dollars at low interest rates for the past few years. By February, the auction market had failed and demand for the bonds dropped off. All of this left student lenders without the cash to write this school year’s loans. In addition, the long-term nature of student loan repayment cycles — lenders typically wait for students to graduate before getting repaid — has made student financing a costly and risky product for banks to offer in an uncertain economic climate. Interest rates on loans given to students (as opposed to their parents) have increased considerably and a higher proportion of students are being rejected for loans. These disturbing developments, coupled with a continued rise in tuition costs, have left families scrambling to figure out how to make the dream of a college education a financial reality. Many parents today are faced with a difficult choice: tap into their retirement funds to pay for college or take on additional loans at higher rates. Students often want to help with a portion of the tuition burden, but have far fewer choices than their parents. Due to their lack of credit history, students are not likely to secure favorable interest rates or terms, particularly in light of today’s stringent credit environment. New Options for Students So how does Virgin Money fit in? In June, we launched Student Payback, which allows parents or other relatives to borrow from their most affordable sources of capital — home equity, a federal
PLUS Loan, or personal savings — then formalize an agreement in which students pay them back for all or a portion of that debt. Student Payback lays out a clear repayment schedule, facilitates electronic payments, provides formal documentation and offers optional credit reporting to help build a student’s credit. It is a simple but effective service to ensure that the family saves money. It enables parents and relatives to select how and when they get repaid, giving them the confidence to tap into their personal savings or additional loans from low-interest sources such as federal loan programs or home equity. And it also enables students to save thousands of dollars in interest payments and keep money where it belongs — in the family. Interest rates and terms are agreed upon at the outset of the loan, allowing students to access far lower rates than they would with traditional private loans. At the same time, their family members benefit by lending a helping hand while earning a return on their investment. Here’s a typical example of how it works: Sam’s parents realized there was a gap between the amount of federal funding he qualified for and his college tuition. Rather than finance the entire difference, they wanted him to put some skin in the game. The trouble was, like most 17 year-olds, Sam had a limited credit history. So he reached out to aunts, uncles, and grandparents. Uncle Joe agreed to lend a helping hand and Virgin Money documented the loan — $6,000 at 4% to be repaid monthly, beginning six months after Sam graduates. “I was happy to do it once I heard that someone else would keep Sam on track with his payments,” Uncle Joe said. And Sam likes that his interest rate is much lower than alternatives. Due to the current credit environment for student loans, turning to family and friends is an increasingly popular option for students struggling to conquer the college financing challenge. The credit crunch has also provided a silver lining. Many families have been forced to look at alternative options to pay for school. We feel some of these options — including social lending — may very well represent a more affordable, financially sound method of paying for college, even in the best of BT credit environments.
THE LONG-TERM NATURE OF STUDENT LOAN REPAYMENT CYCLES HAS MADE STUDENT FINANCING A COSTLY AND RISKY PRODUCT FOR BANKS TO OFFER IN AN UNCERTAIN ECONOMIC CLIMATE.
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ORACLES,TOMBOYS, & COLLEGE DROP-OUTS
BUFFETT IS A MAN OF FRUGAL HABITS AND SIMPLE TASTES: HE STILL LIVES IN THE SAME HOUSE HE BOUGHT FOR $31,000 AT THE AGE OF 28 AND HAS A SOFT SPOT FOR CHERRY COKE, HAMBURGERS, AND HOMEMADE CANDY BARS.
by Nimi Katragadda, Harvard University
Strong leadership is the cornerstone of nearly all successful businesses. However, as business dynamics become increasingly complex in the face of rapid globalization and technological change, successful leaders must adopt a more expansive understanding of the position of their business within the integrated global economy. The cultivation of leadership talent in this changing landscape is of paramount importance to many companies: How can they identify future leaders, nurture them, train them, and most importantly retain them, especially when it is uncertain what might be expected of them ten or twenty years down the line? What constitutes a successful leader depends on his environment and the people he works with; there are few unifying characteristics. As Harvard Business School Professor Das Narayandas aptly points out, “Leadership by definition is a multifaceted term. Are you managing yourself, are you managing upwards, below, or laterally, or the firm, industry, or society? That complexity is only going up. It’s just not a question of leading a small team. It’s about leadership in ideas and actions.” Today, it is arguable that the subject of leadership has never been of greater interest for both the managers attempting to practice it and those attempting to write about it: What makes a great leader? What are the qualities of successful C-level leadership? Can leadership be taught or emulated? In attempting to answer these questions, we can evaluate the leadership styles of some of America’s corporate darlings from a healthy crosssection of industries. Warren Buffett, Berkshire Hathaway Thousands have studied the leadership
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style of Warren Buffet, considered to be the greatest investor of our time. With a net worth of $62 billion, Buffett has soared to the top of Forbes magazine’s annual ranking of the world’s richest people, ending his friend Bill Gates’ 13year reign. However, Buffett, known for his frugal ways, does not bask in the glory of his coveted title. As Robert Miles, author of The Warren Buffett CEO, states, “I don’t think for a moment it’s about being number one for him. He’s not going to sleep any better or eat any better. It’s inconsequential to him.” Innovation is clearly the highlight of Buffett’s leadership at the helm of Berkshire, as demonstrated by his recent transformation of the company. In the past three years, Berkshire has aggressively acquired seven new companies in industries ranging from aviation to fast food — spending $27.3 billion in total. As a result of this shift in Berkshire’s corporate profile, its assets have quadrupled, and its number of employees has doubled to approximately 48,000. In May, approximately 30,000 of Berkshire’s legendarily devoted shareholders flock to Omaha to learn from the master investor during Berkshire’s three-day annual shareholder meeting, often referred to as “Woodstock for Capitalists.” In keeping with his humble persona, Buffet has displayed an incredible willingness to learn from his mistakes and to constantly adapt his investment strategy and corporate management style. Yes, the Oracle of Omaha is, believe it or not, fallible. Buffett has experienced his fair share of investing blunders but is open about his missteps and often outlines them in his annual letter to Berkshire shareholders. Buffett says, “A key to investing well is a willingness to look
Photo by Mark Hirschey
WHAT DO WARREN BUFFET, INDRA NOOYI, AND MARK ZUCKERBERG HAVE IN COMMON? TURNS OUT NOT MUCH EXCEPT STRONG CONTEXTUAL INTELLIGENCE.
Photo by Remy Steinegger
stupid.” Buffett is patient and waits for the right opportunity, rather than chasing every tantalizing lead. He is noted for his commitment to value investing by sinking money into undervalued companies with a sustainable competitive advantage, especially those that tie into his own everyday experiences like Coca-Cola or Gillette. Another unique component of Buffet’s management style is that he includes the CEOs of his portfolio companies in discussion of the long-term vision at Berkshire. He ensures that their input is valued and appreciated. In that sense, he tries to diffuse the decision-making power to many within the company and its portfolio, thereby empowering employees and collecting insights from a range of different perspectives. In addition to acknowledging his mistakes, Buffett is also deeply humble about his successes. Aside from his obsession with luxury air travel, he is a man of frugal habits and simple tastes: he still lives in the same house he bought for $31,000 at the age of 28 and has a soft spot for Cherry Coke, hamburgers, and homemade candy bars. Lastly, in 2006, Buffett’s unprecedented generosity led him to donate 70% of his amassed fortune to the Bill and Melinda Gates Foundation to help address global healthcare issues. As an investor, businessman, and philanthropist, Buffett’s leadership is truly visionary. Indra Nooyi, Pepsi Co. Indra Nooyi is a newcomer to the corporate limelight, having just recently taken the reigns of Pepsi Co. in October 2006. With sales of $33 billion, Pepsi Co. is the largest company by market capitalization to be led by a female CEO. Nooyi’s perceptive business sense has long been apparent at Pepsi Co. She emphasizes a “performance with purpose” ideology and has initiated influential changes towards making Pepsi Co. a leader in healthier products. She has persistently pursued Pepsi’s withdrawal from the fast food industry with the dropping of Taco Bell, Pizza Hut, and KFC, and was instrumental in the successful merger with Quaker Oats and the acquisitions of Tropicana and chic brands like Naked Juice. The numbers certainly seem to be
on her side: since she assumed the role of CFO in 2000, Pepsi’s annual revenues have risen 72%, and its net profit has doubled. Nooyi’s leadership style stands in stark contrast to that of her successor, Steven Reinemund, and those who know both executives say that she “exudes an informality that Reinemund, an exmarine, would not attempt.” During a presentation at an investor conference, Nooyi spoke from her chair, unlike other executives who preached from the podium, and conducted a lively fireside chat. During meetings, she freely interjects during discussions and shares her point of view. She is so comfortable with her leadership presence that she even strolls barefoot through the office, singing in the hallways. And, reminiscent of her days as a teenage girl in a rock band in Chennai, India, she hired a “Jameoke” band to spice up a senior executive management meeting earlier this year. It is this uniquely irreverent leadership style that has propelled Nooyi to the highest echelon of her company. Former Pepsi CEO Roger Enrico stated, “Indra can drive as deep and hard as anyone I’ve ever met, but she can do it with a sense of heart and fun.” Indra Nooyi is transcending traditional stereotypes of business leaders, as both a female and an Indian. She came to the US with the hopes of seizing opportunity and was attracted to Pepsi Co. because she saw it as a struggling company in which she could make a tangible difference. As a leader in a male-dominated business environment, she is willing to adapt her style to perform effectively. She meets regularly with her team of top advisors, nearly all of whom are men. As the top executive and face of a Western company, her personal and corporate values are deeply shaped by her family and childhood in India. Although she is an American businesswoman, she partially owes her success to the studies she completed at the Indian Institute of Management in Calcutta prior to attending Yale, and the entrepreneurial gene she cultivated in her childhood. Raised in a middle class family in southern India, Nooyi spent her childhood days, unlike most young girls in India, jamming out in an all-girls rock band and playing tough on a cricket team.
NOOYI’S PARENTS LET HER IMMIGRATE TO THE US DESPITE THE FACT THAT “IT WOULD MAKE HER AN ABSOLUTELY UNMARRIAGEABLE COMMODITY.”
FALL 2008 BUSINESS TODAY 63
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After completing her MBA in India, she saw a magazine advertisement for the Yale School of Management and applied impulsively. Much to her surprise, she was accepted. According to Nooyi, her parents let her immigrate to the US despite the fact that “it would make her an absolutely unmarriageable commodity.” Nooyi’s childhood experiences have shaped her leadership at Pepsi, particularly in the corporate social responsibility arena. One issue especially close to her is water. She recalls waking up at dawn with her family to fill buckets of water and learning to live off just two buckets a day. Nooyi has proposed a Pepsi initiative to generate more water through improving water harvesting activities in Indian villages. To this day, she still feels guilty filling a bathtub with water. These experiences have all contributed to her unique and novel leadership style. Mark Zuckerberg, Facebook At the grand old age of 23, when most of us will be simply trying to eke out a living at the bottom of the totem pole somewhere, Mark Zuckerberg has proved himself to be one of the most innovative leaders of the 21st century, leading Facebook through a period of explosive growth and amassing a personal fortune of over $1 billion in the process. As founder and CEO of Facebook, he set up the social networking website from his college dormitory at Harvard in 2004. Dropping out of school later that year, he ventured to Silicon Valley to fulfill his dorm room vision. Starting out as a campus-wide website to help students connect with each other, Facebook gradually expanded to other universities, high schools, and the general public. The site’s popularity skyrocketed, and it now boasts over 70 million active users generating more than a billion page views per day, with more than one million new users per week. It is the sixth most trafficked website in the US with 1% of all Internet time spent on Facebook. But for all of these successes, there were several obstacles along the way. Most notably, in 2006, Facebook membership was leveling off, while its competitor MySpace continued to surge, and suitors began bidding for the company. When Yahoo called Zuckerberg with an offer of
$1 billion, many began saying Facebook had peaked. Reflecting his strong conviction and intuition, Zuckerberg refused the deal saying Yahoo was not a good match, and became instantly known as the cocky 23-year old who refused $1 billion. Zuckerberg soon came under great external pressure from executives and investors and was criticized for his foolhardiness, but just two years later, venture capitalists say that if Facebook were to go public today it would be valued at over $5 billion. Suffice to say that Zuckerberg has proved himself many times over. Zuckerberg’s notion of a “social graph” — the web of connections that make up a person’s real social network — catalyzed his initial development of Facebook and reflects his long-term vision. Zuckerberg saw that by mapping out this social graph online, he could revolutionize the model of modern communication. What if instead of having a few mass media outlets at the center directing the spread of information, it could flow to people through their most trusted network of friends and family? What if you could read news perfectly tailored to your social graph, not mass produced? Zuckerberg’s commitment to this revolutionary vision based on a community of users, in the face of challenges and criticisms, is an inspiring act of leadership that many in Silicon Valley are now scrambling to replicate. It’s All Relative While it can be argued that these three individuals are quite diverse — leading in different industries, under different circumstances, from different generations — they all share the quality of “contextual intelligence.” Based on a study by the Harvard Business School Leadership Initiative, “contextual intelligence is the ability to understand the macro-level factors that are at play during a given period of time.” Successful business leaders gain their competitive advantage from being able to understand their contextual framework, take advantage of factors coalescing at one time, and adapt to changes in their environment. Going forward in our increasingly globalized world, the ability to harness this contextual intelligence may define BT successful leadership.
REFLECTING HIS STRONG CONVICTION AND INTUITION, ZUCKERBERG REFUSED THE DEAL, SAYING YAHOO WAS NOT A GOOD MATCH AND INSTANTLY BECAME KNOWN AS THE COCKY 23-YEAR-OLD WHO REFUSED $1 BILLION.
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Turner Television: The 24-Hour News Channel
ollowing the political election on CNN? Watching old Seinfeld reruns on TBS? In the early 21st century, much has been made of predicting the transformation of the media industry, with the dramatic rise of online streaming and pundits calling for the demise of newspapers. While we must sift through these new issues, cable television remains at the heart of the entertainment industry. Back in 1981, Business Today was there at the beginning with television magnate Ted Turner. Although his legacy today surpasses simply giving us CNN and TBS, none of his success was certain nearly thirty years ago. The 1981 article discusses Turner’s foresight as he predicted the enormous potential of cable television before everyone else. In 1976, he first launched WTBS, which he called his “Superstation,” and his biggest move came in 1980. In one of the most unconventional decisions in the business, Turner created the Cable News Network (CNN), the first all-news television station. Looking back, it may have been at this point that television truly surpassed radio as the primary form of media. When the article was written, CNN was losing $750,000 every month, and Turner was being panned for his gamble. In a moment of prescience, however, Turner maintained that “the Turner Broadcasting Group is going to be the greatest business success story of all time.” While Ted Turner’s legacy clearly remains relevant to the greater world today, his story pertains even to this fall’s edition of Business Today, as the magazine comes full circle. In addition to being a pioneer for cable television, Turner also made forays in the sports world. He bought the Atlanta Braves franchise, turning it into a perennial success, as well as a share of the Atlanta Hawks basketball team (not quite so successful). In this issue, we discuss some of today’s most pertinent sports issues, such as the growing importance of sports agents. With athletes making more money than ever before, our piece on contract financing brings these issues into the conversation. Turner’s success was also built on taking risks: seeing things that nobody else saw and making decisions that nobody else would. We will surely need that sort of foresight when discussing the current state of entertainment. In a feature interview in this issue, Hugh Hefner, known far better for the girls always on his arm than for his thoughts on digital media, offers an insightful twist to one of the world’s most recognized print publications.
by Miheer Mhatre
FALL 2008 BUSINESS TODAY 67
HUGH HEFNER A media mogul and pop culture icon, Hugh Hefner is known around the world for his unique lifestyle and irreverent personality. But what few people know about “Hef” is the somewhat unlikely path that brought him to the Playboy Mansion. Born and raised in Chicago, Hefner studied psychology at the University of Illinois and continued his academic career with graduate work at Northwestern. After working for a few years at Esquire, he pushed his career onto the fast track in 1952 by launching Playboy, a men’s interest magazine that broke ground in this previously nonexistent genre. Hefner then rode the Playboy wave for decades, managing to keep the company afloat despite the vicissitudes of popular culture by extending the brand to casinos, clubs, and other entities. And he is currently one of the stars of the hit TV series The Girls Next Door, which traces the lives of Hefner’s three girlfriends living at the Mansion. Between two marriages, Hefner has four children, the eldest of whom, Christie, is now Chairman of Playboy Enterprises. Hefner currently serves as both the Editor-in-Chief of Playboy magazine and Chief Creative Officer of Playboy Enterprises. In this interview, Hefner reveals some of the foundational elements that have given rise to Playboy’s long-term success and globally iconic status. by BJ Sullivan, Princeton University
Business Today: What did your parents think of the first issue of Playboy? Hugh Hefner: Well, my folks were both Puritan and prohibitionists — they were farm people from Nebraska with very strong Methodist values. I went to my father before I launched the magazine because I was running out of money, and I asked him if he might want to invest in the company I had just formed or whether he would loan me some money. He was an accountant and a conservative guy, and he just felt it was not a good business investment. And as I was about to leave, my mother took me aside and said that she had some money saved up on her own because she had worked during the war. She gave me a check for a thousand dollars — the largest investment I’ve had to date. They didn’t really believe in the magazine, but they believed in their son. And my father, soon after the magazine was launched, started doing our books as an accountant. And then in time, he came to work for me at the company, and
to my friends. I started a penny newspaper when I was nine years old. Our family had a typewriter that I commandeered for my paper. And I founded a number of other publications when I was in high school and then in college. I reinvented myself at the beginning of my senior year after the rejection of a girlfriend. I started referring to myself as ‘Hef ’. Quite literally I reinvented myself, just as I did later on when I published the magazine. I reinvented myself in high school and started to become what I considered to be a cool cat. I started printing a comic autobiography of my life and passing it around to friends. When I left school, I joined the army, and when I got homesick, I continued the comic strip. And over time, that evolved into the scrapbook I keep today that covers my entire life of editorial work that now numbers almost two thousand volumes. And while I had never worked professionally on magazine editorial when I founded Playboy, in some sense
had the cartoons and the pinups because in 1945, the US Post Office had taken the position that they were the censors of American culture. Esquire almost lost second class mailing permits. I felt there was room for a magazine for the young urban guy after WWII, as all the most popular men’s magazines were outdoor adventure books. BT: How did you take Playboy from your living room onto the path to becoming a global brand? Did you incur any major obstacles in this global expansion, such as culture clashes abroad? HH: Well, the reality is, to begin with it wasn’t global. Playboy shouldn’t have been successful — I just didn’t have enough money, and so many businesses fail simply because of a lack of capitalization. I literally started the magazine on my kitchen table with just $8,000, and then a distributor came in and I printed 70,000 copies of the first issue, with Marilyn Monroe in it, and sold about 80 percent of them. The second issue sold better
AND WHILE I HAD NEVER WORKED PROFESSIONALLY ON MAGAZINE EDITORIAL WHEN I FOUNDED PLAYBOY, IN SOME SENSE I HAD REALLY BEEN IN A REHEARSAL FOR IT MY WHOLE LIFE. eventually became the treasurer. So they never read the magazine, but they were supportive. And when my father passed away, I learned he left a third of his estate to the Playboy Foundation. BT: What life experiences brought you to found the magazine? HH: I created comic books , wrote stories and bound them, and passed them along
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I really had been in rehearsal for it my whole life. I had studied and knew a great deal about magazines, and was involved in magazine promotion both for Esquire and for other magazines. Esquire, a magazine not allowed in my home, in the 1930s had sexy cartoons and pinups, which were very popular during World War II — and were an inspiration for what became Playmate of the Month. All that changed, and Esquire no longer
than the first, without Marilyn in it, because there was a concept that caught your attention immediately, particularly on college campuses. The magazine circulation throughout the 50s exploded, and by our by our fifth anniversary we were selling over a million copies a month — surpassing Esquire. And then in the 1960s, the real explosion took place and the circulation continued to grow. And the growth accelerated so fast during the
60s that by the early 70s, we were selling over seven million copies a month. We used that popularity as momentum for opening the first Playboy club in February of 1960 — and then the expansion of other Playboy clubs, and even a Playboy club and casino in London six years ago. It had become something of a global phenomenon. We got requests from foreign publishers and people were interested in publishing foreign editions of the magazine. I realized I had more than a magazine. And it’s why the magazine expanded not into other magazines, but into other kinds of Playboy products — like the Playboy club. The club was, in its time, more popular than I could possibly describe. In the first two cities, in Chicago and New York, they were immediately the most popular clubs in the city. When we opened the club and casino in London, it was by far and away the most productive casino, in terms of revenue, in the entire city. And this all just naturally lent itself to foreign language editions of the magazine, and there are now 25 of them around the world. When the Iron Curtain collapsed and Russia let its satellite countries go, the first foreign magazine published in almost every one of those satellite countries, including Russia itself, was Playboy. The magazine was all about the personal, political, and economic freedom that had great appeal to the people who were once shrouded by that Iron Curtain. We have had some censorship problems recently in some Muslim countries, but, by and large, our major censorship problems are here in America. The magazine continues to be the most popular men’s magazine in the country and in the world, but we do not play on a level playing field. We are not distributed today in half of the newsstands and convenience stores and drug stores around the country — and that was not the case in the 50s, 60s, and 70s. It became much worse from the 1980s on, when the religious right became very active in censorship areas and in politics. BT: You recently launched the PlayboyU initiative. What is your target audience — is it still a men’s magazine or are you branching out to younger audiences
now? HH: The target audience has remained essentially the same: It is the young male in his postgraduate years. It’s a young male audience, but we’ve always had a strong female following. About twenty percent of our readers are female. And of course I think that the television show The Girls Next Door has increased the reader interest. We didn’t anticipate it to begin with, but the television show skews dramatically female, and young female. About seventy percent of the viewers of the show are female. And that turn has had a major influence on our Playboy product lines. The majority of our licensing deals are a very popular part of the company and a major source of income for Playboy Inc. — and it skews female also. BT: How have you and your daughter [Christie Hefner, CEO, Playboy Inc., interviewed in the Spring 1992 issue of BT] come up with these new ideas for expanding the brand and diversifying into these new ventures, keeping Playboy innovative not only in terms of magazine content but also as a global media and entertainment enterprise? HH: The editorial and the promotional part of the company has always been my end. When my daughter came in, after graduating summa cum laude from Brandeis, she got involved in the business and ended up taking over the corporate side of Playboy. She looks after business; I control creative. BT: So who decides when and where to open Playboy resorts and Playboy stores and all of the spinoffs of the brand? HH: We have a licensing division that is in charge of the expansion of the brand. Interestingly, we’ve had boutiques and stores selling Playboy products on the mainland of China, over three hundred of them, for several years now even though the magazine is still prohibited. The brand is hugely popular on the mainland. We will also be opening up a major hotel and casino in Macau in the next year. BT: As Editor-in-Chief of the magazine, could you reflect briefly on the digital
revolution and the ways web content have changed the business. Do you still see a market for the print version, the tactile experience? HH: I think the reality is, and it’s a painful admission for a person who grew up on print, that the future will be electronic. I think that it’s defined inherently by the costs of the production — the expense of paper, postage. It’s expensive to print a magazine. Playboy is really in a period of transition, and increasingly will be a combination of print and web. We will be expanding the internet content for the magazine and the company in the very immediate future. BT: When you eventually do have to step down from Playboy, how is it going to survive without its spokesperson and charismatic leader? And do you see anyone else who could become the next Hugh Hefner? HH: Well, I have a couple of teenage sons… One of them just reached 18, and there’s a profile of him in a recent issue of GQ. He’s going to be going off to college, and he’s not necessarily interested in stepping into his father’s slippers entirely, but he’s definitely interested in getting involved in the business end of the company. I have another son a year and a half younger named Cooper, and whether he joins the company or not is unsure. But he certainly has the talent for it. He created his own rock band when he was sixteen years old, and they’ve played on the Sunset Strip. He’s very entrepreneurial, so we will see…we’ve got another generation coming up! BT: Last question — I’m just dying to know: Do you really walk around in pajamas all day? HH: All day long! I’m sitting in my pajamas right now. BT: It’s a great life. HH: I think that on occasion when I’m not wearing my pajamas, the people BT meeting me are disappointed.
FALL 2008 BUSINESS TODAY 71
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your music sucks. but your friends are okay There’s this rationale in writing – a subject I speak on, admittedly, with less authority than I think – that people should open big pieces with a hook. People, we’re told, like hooks. They enjoy them. Hooks are people-friendly. An example of one such hook would be if I were to say, now, with absolutely no qualification whatsoever that you, and all your friends, suck. Which you don’t (I hope). The point is it’s a nothing statement. You and (I guess) your friends – we, whatever – all belong to that round thing we call the wider world, where ‘subjectivity’ is a dirty word and the concept of indecision and indecisive truth is, as it happens, the rubric by which we value ourselves as very concerned, very work-friendly people. A hook effectively disregards all of this. We are not all (apparently) people, anymore: we are what the words say we are. We’re subjugated to text; we become pure readers. Here, we’re told, is the opening sentence. Please don’t take it too seriously: your friends probably don’t suck. by Alan Baban, University College London 74 BUSINESS TODAY FALL 2008
Still, a singer can’t only be as good as his pitch. A writer, too, sometimes loses interest in dry mechanism and approaches, slantwise, that thing we call basic human expression. I therefore feel free to tell you at this point that I have nothing much to say about music journalism. It’s a subject I’ve spent a long time thinking about – more time in the past month, maybe, than actually listening to
educated, consistent base for discussion. Blurbs are for the weak; VIP passes for hype-breathers; we’re willing, where we can, to burn bridges for the fate of your fifteen dollars, seven pounds, whatever. We are not, in short, just acting as your evaluative filter for one thousand words. These are people who, for better or worse, actually want to express interesting stuff. Like, they know,
There’s no other way of putting it: the music industry is Big Business. Is there no real irony in the fact that a lot of the best music journos out there are failed musicians? I’m not trying to communicate my skepticism. At the heart of all this, is the circuitous and none too pleasant realization that I’m bucking this issue, not being clear over where I stand, exactly. I ask myself
I CAN SAY (WHICH I WILL, NOW) THAT COLDPLAY IS RUBBISH. records – and other than outright dismissing the form, I’ve decided, pretty much, that it serves little purpose other than to aggravate and gall those rare people who hear songs and form bands and, for the most part, actually really listen to music. A lot of this, I’m warning you, is going to sound fairly sappy and melodramatic. I don’t do firstpersons by-halves. Music, to me, is one big confession: a few more notes, really, about my continued happy irrelevance in the wider scheme of things. I’m not sure where I should have begun. Three years ago I sent off my application to Cokemachineglow – a Canadian zine and, by my now fully-disclosed watch, the best written, most hilariously formulated and straight up funny music website out there right now. Seriously! I am in awe of my fellow staffers. I mean, we all know spontaneous eloquence is a gas but to these guys (and girls) that gas is the throttling, indulgent, vitriol-pushing diction through which the tropes of an oversaturated critical medium are flipped, fumbled and exploited, finally, as something new and fun. Cokemachineglow’s big goal is to realign the industry standard: to widen the accessibility of all kinds of new music by providing an
the seven words
g dy ula lan r es
whiteboy-soul glacial al d in sem ioheapy rad rap sc
you absolutely can’t say in a music review
for instance, the seven words you absolutely can’t say in a music review (quickly; angular; glacial; seminal; whiteboy-soul; Radiohead; scrappy; Dylanesque) or that the top ten songs on Illmatic are, well, the only ten songs you’ll find on Illmatic. Illmatic is a pretty amazing record. Their sort of humour and bravado is, I feel, what a lot of the stuff people regularly call ‘music journalism’ is missing out on. The problem being subjectivity – that bad word again – holds way too much to sway over what people think they want to express, and the nature of that expression itself. There’s too many ways to reroute a simple sentence; too few ways, ultimately, to say something simply, and to say it well. Language, it should be said, is immediately accessible to the naïve. To wit, I can say (which I will, now) that Coldplay is rubbish. Coldplay is rubbish. Highly civilized people may as well be debating, with some degree of civility, what a lot of this stuff actually means. It all breaks down to the rub that everyone apparently is a ‘critic’. Also: everybody seems to be making noise these days. Perhaps the outstanding musical achievement of the past ten years is the increasing realization that almost anyone can make some kind of ‘outstanding musical achievement’ with the appropriate financial backing, and the right software. The terms ‘outstanding’, ‘achievement’ and even ‘musical’ are being re-defined in the Network Era. Everyone, now, supposedly knows everyone. The Big Time is a universal punch-bag; everyone gets a shot. Real, unbiased, cold criticism is hard to come by – this is why I say that one of the things people usually don’t realize about music journalism is that music journalists, as a whole, pretty much don’t exist anymore.
the same question everyday: what is there to say about music, other than the fact that we can talk about it, entirely and uncommonly, freely. All popular art is, simply put, ‘different’; distinct, at least, from other things in that its aesthetic currency is precisely in and of itself. It expands, by association, to include everything. It is what it is what it is. The draw of the pop song, then, is natural, all encompassing, consequential and somewhat infinite. In dropping short of calling it Everything, we get at the more accurate, less refined concept that music, itself, is merely un-defined. So, what are the special considerations in pushing a writing-form that, true to nothing, now has zero special consideration? If only we could all crawl back to that sweet, vaguely innocent era when there was only one Cruel Intentions sequel out, and when we weren’t a culture so much defined by the hundred and one ways we hold everything to mass critical light. Coldplay is rubbish –by which I mean some of my favourite records have, in hindsight, proven to be pretty bad. Coldplay! Big, hunkering, slobbersome, not-quite-there Coldplay! This band, if you didn’t know, released one album of modest (as in: unquestionable) quality and then started to get bad, fast. Just like, in preparing to write these words, I’ve found myself noting the long, protracted process by which my rote enjoyment of music became my rotten interest in sound. Of course, I’ve just been talking about myself (aren’t you?) and let’s face it, anyway: this is empty cynicism as over-the-counter culture. We like to think that we like to think. Perhaps good music journalism, as a rule, should just keep it to the music. There’s always, in any event, the awkward business of a first paragraph. BT
FALL 2008 BUSINESS TODAY 75
The Pinstriped Playbook If you build it, they will come. Sal Galatioto, President of Galatioto Sports Partners coaches how to take risks, make big plays, and build your own field of (financial) dreams. Suit up! by Sandra Thomas, Princeton University “I have the greatest job in the world,” he says, “I tell people that all the time.” Sal Galatioto is a superstar in the sports finance and advisory industry, a niche that barely existed a decade ago. His past and present deals comprise a veritable “Who’s Who” list of big-name franchises that include the New York Yankees, Phoenix Suns, and the Anaheim Angels, just to name a few. This is quite an achievement, especially considering an unexpected confession from the mogul: “I ended up in sports completely by accident.” Nevertheless, he has become one of the preeminent trailblazers in the field. In the early 90s, while working at SG Cowen, a subsidiary of Société Générale, and researching new directions to increase returns on equity, Galatioto and his colleagues stumbled upon the sports business. At the time, there was little competition in the industry and entering it seemed like an exciting possibility. After some cautious first steps, the group slowly
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gained momentum, so much so that in 1997, Galatioto was placed at the helm of Société Générale’s newly formed Sports Advisory Group. Incidentally, the first major deal the team undertook turned out to be one for the books: they advised and financed Dan Snyder’s historic acquisition of the Washington Redskins for the monumental sum of $800 million, the highest price ever paid for a franchise in American sports. That deal marked only the beginning of a career that would soon continue breaking records and making milestones. Within a few years of working for the Sports Advisory Group, Galatioto, along with some of his best performing team members, moved on to join Lehman Brothers. There, he was named Managing Director and head of Lehman’s new Sports Advisory and Finance Group. With Galatioto’s leadership, this group soon became the foremost of its kind on Wall Street. In 2005, after having gained experience in the field, Galatioto took a risk
and spun off his own finance company from Lehman, Galatioto Sports Partners (GSP), taking all the members of Lehman’s Sports Group with him. While still maintaining a strategic alliance with Lehman, Galatioto slowly began to foster new relationships in the four major U.S. sports leagues: basketball, football, baseball, and hockey. In the past few years, GSP has grown to become one of the busiest firms in the field. The group operated in many facets of sports finance, ranging from mergers and acquisition work, in which the firm might represent franchise buyers or sellers, to stadium and arena advisory. GSP also boasts a unique valuation system that goes beyond traditional formulae, in addition to lending capital to sports franchises through debt financing. Goldman Sachs and Morgan Stanley may be heavy hitters on Wall Street, but they have been outcompeted by GSP, as Galatioto’s company currently boast the greatest market share in the industry. How
did a nine-person company manage to defeat such goliaths of opponents? “To be honest, I have no idea,” answers Galatioto, “I think that our competitive advantage is our ability to forgo profit to do the
this country is that a person can come here with nothing and build something tremendous.” The son of Sicilian immigrants from Brooklyn, Galatioto has experienced the
really something to strive for.” Galatioto serves to inspire not only future business leaders but also those already working alongside him. Summing up his philosophy, Galatioto states, “I have one
Sources: Thompson Financial, DealScan, LPC Gold Sheets (Reuters) and GSP
WHY GIVE A KID A ROLE MODEL THAT IS AN ATHLETE WHEN YOU CAN GIVE THAT SAME KID THE ROLE MODEL OF THE OWNER? right thing.” He pauses a moment before knowingly summarizing his business’ objective: “Long term friends, not short term profits.” And that motto extends beyond GSP boundaries: Although he may have broken away from Lehman Brothers (a decision which, in today’s economy, now seems serendipitous), Galatioto was committed to maintaining a strong alliance with his former employer. Today, any sports-related deals that the global investment bank comes across are referred to GSP, a system to which Galatioto knowingly credits as part of his firm’s success. “[Lehman Brothers] can do a lot of business we are not equipped to do,” he adds, “It’s very symbiotic. I have a lot of respect for that firm. They treated me well, and it was a hard decision to choose to leave. However,” he declares without any hesitation, “It felt right. If you’re afraid to fail, then you’ll never get anything. You have to take risks.” And Galatioto is a shining example of the massive payoffs risk-taking can deliver to the lucky. Many of the deals Galatioto has brokered have landmark significance beyond their price tags. For example, Galatioto facilitated the 2002 acquisition of the Charlotte Bobcats and the 2003 purchase of the Anaheim Angels, which marked the first African American owner of a major league franchise and the first Hispanic owner of a Major League Baseball team, respectively. Regarding both his own accomplishments and those of these minority franchise owners, Galatioto comments, “This country is a melting pot. One of the greatest things about
# of Deals
1. Galatioto Sports Partners
2. Goldman Sachs
3. Allen & Co.
4. Morgan Stanley
5. Bank of America
M&A League Table Rankings: 1999-2007
American dream firsthand. “When I was a kid, I didn’t have a conception of what people did in offices,” Galatioto recollects, quickly adding with a smile, “Some people say I still don’t.” Far exceeding his own early expectations, given both the limited education of his parents and his limited circumstances growing up, Galatioto completed his higher education, graduating magna cum laude from Hunter College with a degree in History. Afterwards, he went on to earn a Master’s degree from the Fletcher School of Law and Diplomacy, once again finishing with honors. Although Galatioto eventually completed an MBA at the American Graduate School of International Management, business was never his plan or his passion. “I thought I was going to be a teacher,” he claims, “I loved history.” That passion is still evident in his office where, in addition to the requisite sports memorabilia, the walls are covered with newspaper spreads from milestone moments in athletic history. Fittingly for someone who dreamed of teaching, Galatioto still aims to enthuse younger generations. “Why give a kid a role model that is an athlete when you can give that same kid the role model of the owner?” he says, “I mean, at the end of the day, one of them is the employee and the other is writing the checks. I think that’s
goal: I never expect more of someone who works for me than I expect of myself. That’s the way business should work.” Galatioto’s able management skills are also buttressed by his relationships with his colleagues and employees. “Part of it is that most of my people have worked for me their entire careers,” he agrees, “Some of these guys have known me for fifteen years.” He describes a work setting that is interactive, flexible, and creative. Rather than focusing on titles, Galatioto emphasizes performance, adding, “If the most junior guy in the firm were to come to my office and say that they think they have a better idea, I’ll listen to them, and if it is better, we’ll run with it.” When asked to offer some guidance for those wishing to enter the field of sports finance, he laughs and says, “The sports business is a pretty simple business. I’m not building any rockets over here. NASA is not coming by any time soon. It comes down to common sense, the ability to talk to the clients, and a broad understanding of the world.” What about advice for undergraduates in general? Galatioto thinks a moment before answering. “Find something you really like and do it,” he says, “That’s what you’ll be doing the rest of your life. If every Sunday night, you’re looking forward to going to work—that’s a win. That’s what I do. I look forward to going to work every day.” Today, that work includes serving as an associate professor at the Columbia School of Business, through which Galatioto’s childhood dream of becoming a teacher has materialized. Now, however, he doesn’t just get to teach BT history. He makes it.
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Get Your Head in the Game…
… And Don’t Forget a Pen! From Belfast to Beijing, Princeton alumnus Alexander Wolff has run the gamut of sport writing in its many forms for one of the world’s most respected sports magazines, Sports Illustrated. by Brittany Urick, Princeton University Business Today: How did you first get involved in sports journalism and what initially pulled you to that specific genre? Alexander Wolff : I was a high school athlete, but upon getting to campus I realized there wasn’t really a place for me in Division I athletics. I had an interest in writing and journalism, and so I tried out for the Press Club my freshman year. It
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very quickly became apparent that there were ways to get involved in sportswriting through the Press Club, whether I was covering campus events or writing articles for the sports information office. I did everything from writing features about athletes to doing deadline game stories for the Associated Press. But sportswriting was probably no more than twenty percent of the writing I did on campus. Gen-
eral news stories constituted the majority of my writing while at Princeton. But general journalism — having to meet a deadline and pick up the thread of a story and get comfortable with the craft of it – is probably the most valuable thing I can identify of my Princeton experience. […] I try not to think of myself as a sportswriter because of its reputation. Sportswriting tends to be riddled with clichés, and an-
other Princetonian, Frank Deford, once said that “It’s like being called the world’s tallest midget when somebody tells you you’re a really good sportswriter because people’s expectations are so modest.” BT: That’s funny. What else would you say, besides this clichéd stereotype and reputation, distinguishes sportswriting from other forms of journalism? AW: I think there is maybe a little less enterprise in it. [Sportswriters] go to events and then react to the events. But I think that’s one of the reasons I continue to enjoy [this profession] because if you are enterprising, you can find great stories in the cracks. One thing that sportswriting has going for it is that it has built-in drama — you have winners and losers;
our opportunity lies. BT: How did you get your start with Sports Illustrated, and why have you chosen to stay there for so long? AW: I started [at SI] in the fall of 1980, right out of college, as a fact-checker. I had a pile of clips, as a result of having been in the Press Club, and lots and lots of journalism that I had already done, which put editors there somewhat at ease. And once I got my foot in the door, a few weeks later, I was [given] the chance to become a writer. The kind of writing I have been able to do has been very gratifying. I tell people often that the magazine offers the time and the resources and the platform that any sportswriter could ever want. You can take stories that are really engag-
Belfast; writing a piece about the former world junior champions Yugoslav basketball team; writing about how Croats and Serbs wouldn’t talk to each other in the NBA because their countries had gone to war — even though these guys were teammates; writing about women in Iran and how they’ve become Olympians despite having to wear headscarves [during competition]. All the stories that have allowed me to visit exotic countries and people have been the cornerstones of my career. BT: You mentioned this briefly earlier, but how has the rise of online journalism affected SI and journalism in general? AW: Specifically it has affected Sports Illustrated by forcing us to create a website — SI.com — and turning a lot of us
I TRY NOT TO THINK OF MYSELF AS A SPORTSWRITER BECAUSE OF ITS REPUTATION. SPORTSWRITING TENDS TO BE RIDDLED WITH CLICHÉS. you have people getting hurt and coming back from injuries; you have upsets. You have stories like that of Greg Norman, the golfer who could never win the big golf tournament. There are dramas and melodramas that come packaged with these games that we cover, so you don’t have to manufacture [them] in many cases. Magazine people decry the effect of the Internet in disseminating information instantaneously and letting people gather exactly what they want to know when they want to know it. But I think it’s actually giving us a great opportunity because with so many people instantly knowing the result, the next question is, “Well,what’s the back-story and the analytical take on what really happened?” There are that many people who are likely to be curious because they know the result or they saw the event, but they’ll want a peek behind the curtains. That’s where
ing, and [SI allows] you to go out and do the reporting. Once you’ve finished it and it’s packaged with great photography, 17 million readers have the opportunity to enjoy it. My career has been rewarding on so many levels, and it has been almost 30 years now that I’ve been a writer there. BT: What has been your favorite writing assignment for Sports Illustrated?
into content providers for that website. I think in a way it has been a blessing because we collect so much information for our weekly stories that might not make it into the magazine, so we have this great outlet for it. The other specific thing to the magazine, particularly the front of the magazine, is that it has become shorter and punchier and more reflective of the way people read today.
AW: Well, there have been a number, and they come in different categories. There are the junket assignments, where you get to go to a very exciting place to cover the French Open, Wimbledon, or the Australian Open. But I think the stories that stick with me the most are those attuned to where sports intersect with politics and culture; for instance, writing about a World Cup qualifying match between Northern Ireland and the Republic of Ireland right after the bombings in
But again, I’m very grateful that the magazine hasn’t completely gone in that direction, and there’s still a place for a longer, more analytic piece. I’m not pretending that we won’t ever become something of a dinosaur, but we’ve been pretty shrewd in developing our website, making it a go-to place, and figuring out ways to take the SI voice through our writers, our contacts, and most recently, our archives, and making those available online. We just launched a new feature [a few months
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age] called SI Vault, which has essentially digitized every article that has appeared in the magazine and made it available online, which is great and will drive enormous amounts of traffic. As more people become aware of it, there will be a lot more people going to SI.com. BT: I’m assuming your favorite sport is still basketball but is that your favorite sport to cover? What do you like playing most, and what do you like covering most? AW: Basketball is the sport in which I’ve been most involved, and I still love to play it to keep in shape. When I watch it, in a way I’m more agnostic about who wins or loses — I’m just looking for beauty and
BT: What sport do you think gets the least credit in sports coverage? AW: I think lately, track and field. Because of the running events, it’s the most essential athletic endeavor when you strip it all down. It goes all the way back to Ancient Greece, and every four years there is the curiosity of the Olympics. [Aside] from the doping scandals and so forth, I think the average athlete [in track] is a pretty clean competitor who has put it all down into training [even though] they’re not making all that much in winnings or in endorsements as athletes in some other sports do.
no love [from the writer], which I think is just as dangerous. If you have a journalist who has it in for the team that he or she is covering, then that’s not a good situation either. On the other hand, sportswriting calls for a certain amount of subjectivity — people like to read comments and opinions. Sports fans are involved in arguments, whether it’s on sports talk radio or if it’s in a bar, barstool to barstool, because people love a good, friendly argument. I was pretty into that — I grew up with several teams as a kid, but now I’m pretty agnostic. I usually find myself rooting for the best story because it makes my job that much easier.
BT: How do you approach the personal relationships that you have with athletes
BT: That’s very interesting. Returning to the idea of the players’ and coaches’
DO YOU GRAB THE READER BY THE LAPELS AND SAY, ‘YOU HAVEN’T HEARD THIS, BUT YOU’RE GOING TO LIKE IT. READ THIS STORY’? truth. (Laughs) I have found that I’m very much drawn to tennis. I love the rock star entourages you get in tennis and the utter exposure of the player — all his foibles, all his strengths — and the ability of the writer to write, if you go to a big Grand Slam event, about this carnival — really, it’s not just about the game because there are so many things going on around it. Socioeconomically, it’s such a grotesque world — people have so much money, and it has got all of these starchy traditions. But it’s a very nice counterpart to basketball. In fact, if you look in Sports Illustrated, a lot of the writers who cover tennis also cover basketball because the seasons dovetail so nicely. The French Open starts right about when the NBA playoffs are winding down, and the US Open finishes up the Grand Slam season and then you’re going to training camp to cover basketball. I have really enjoyed sinking my teeth into the tennis world.
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and the alliances you have to your home teams? Do you have trouble writing an objective article on your home team or a player you’re close with? AW: For me, it’s not much of an issue. Like everybody, I grew up as a fan and had teams I was pulling for, but I think it’s the time and exposure to sporting events that professionalize you in a way. It might surprise fans and readers to know that most sportswriters are not all that invested in the outcome. Roger Kahn wrote a great book called The Boys of Summer and devoted a chapter to the phenomenon where you could be a beat writer for a team and find yourself kind of crossing over the bridge into the clubhouse and rooting for them, but I don’t think that universally happens. I think lately the behavior of so many athletes, coaches, and managers toward the press has been so hostile that there’s just
attitudes, what do you see for the future of sports, especially concerning how so many athletes today seem to be driven by the need to make money rather than the love of the game? AW: I think where to go with it is to steer toward stories that are more pure that will touch people’s being. Do you write about the high-profile teams and players and coaches, because everybody knows about them, from a different angle? Or do you grab the reader by the lapels and say, ‘You haven’t heard this, but you’re going to like it. Read this story’? I’m more in the second camp because I like to think that I can identify something that’s a little ahead of the curve. I don’t think it’s an accident that the stories that people respond to most enthusiastically in our magazine are about average people who have done extraordinary things — stories that, if it weren’t for our magazine, no one would BT know about.
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THAT’S SO 2006: KEEPING UP WITH FASHION TRENDS
hile Einstein designed a model to demonstrate the relativity of time, a flowering fashion industry discovered that trends transcend the times. This phenomenon was as apparent in our 2006 issue as it was to Guccio Gucci in 1921, when he established the Italian fashion house that would become a worldwide hallmark of luxury. As this issue investigates the fashion business of today, recurring themes from past issues emerge to reflect the uniqueness of an industry whose leaders are not only capable executives but also artists anticipating and observing our most personal purchases. To the typical historian, the year 2006 qualifies as ‘recent.’ But to the typical fashion executive, 2006 was six collections ago, a history in and of itself. Fashion chronology parallels styles, and styles change fast — as Jessica Dennis, worldwide director of advertising and marketing at Gucci, explained. In describing the structure of a typical fashion house, she stressed that despite divisions among design, production, merchandising, and communication departments, the house is energized by dynamic individuals who are, by profession, flexible in their talent to both create and sell within a system generally governed by rigid economic rules. “Fashion,” she said, “is not as corporate as it is creative.” Like Olympic runners in a pre-sprint position, those in the fashion industry analyze curves in the road ahead while waiting for the market’s “go.” To lead in this business, these executives must consistently be a step ahead of the times. In a sense, therefore, 2006 was a different race, a different era for fashion, when the realm of e-commerce was yet unconquered by individual designers. Although major retailers such as Neiman Marcus were relatively quick to embrace the technology of the 21st century, fashion houses long hesitated to project the characteristic aura of a luxury store onto the Internet. Led by Dennis, the Gucci brand was then in the process of jumping on the electronic bandwagon. Now in the year 2008, Gucci’s online store is not only functional but also as mesmerizing in its design as its $1500 “website exclusive” handbag. In two years, the fashion industry has introduced to modern society a pearltrimmed ocean of surf-friendly web-space. The Gucci store page includes links to “Gucci news” that informs consumers of items arriving soon at store locations around the world. For a touch of animation, the website also offers customers promotional videos that ignite their shopping sensations. Only a doubleclick away lies an especially stimulating promotion for Gucci’s “pour homme” collection in which James Franco, clad in classic couture as the hero of the new vogue generation, appears out of the shadows of the past to assure today’s audience that “though your world is changing, I’ll be the same.” Historically speaking, today’s recipe for success within the fashion industry is the same as it was when loincloths were the vogue for primitive man: “Come in humble, and prove yourself,” Dennis advised. It is through this age-old evolutionary tactic that couture creators and door knob designers alike continue to ascend from the doorstep of their enterprise to the lofty runway of their dreams.
by Carmen Sanchez
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VERA WANG One of the most famous names in fashion, Vera Wang has achieved something of celebrity status in both pop culture and the country’s elite fashion circles. Best known for her elaborate, elegant wedding gowns, her masterpieces have graced the nuptials of scores of Hollywood darlings and stylish sophisticates around the world. But Wang has also delved into many other facets of fashion — from lingerie to fragrances — and has boutiques in most of the country’s fashion hubs, including Beverly Hills and Waikiki. Growing up in New York, Wang sporadically attended fashion shows both there and in Paris, though her personal goal was actually to become a professional figure skater. While her life derailed slightly when she failed to make the U.S. Olympic skating team, many would probably call it fate as it was then that she decided to refocus her professional energies on fashion. After working as a senior fashion editor at Vogue for sixteen years, and then at Ralph Lauren for another two, she finally opened her own boutique at Madison Avenue’s Carlyle Hotel in 1990 where she began to solidify her reputation for exquisite wedding apparel. The rest is history. by Caroline Clark and Brittany Urick, Princeton University
The dress, her canvas, must have begun as a stretch of soft ivory silk. Series of black and charcoal crosshatches were then laid upon the cream backdrop in a manner that appears random but somehow deliberate. The careful combination of onyx and slate, of warm and cool grays, allows the illusion of muted grape to shine through, a hue that appears more regal on a woman than Tyrian purple on the royalty of antiquity. Vera Wang must have then shaped the fabric into a strapless silhouette, knotting swatches of silk at the bust for femininity and adding pockets for functionality. The dress, part of Vera Wang Lavender Label (see below), just as easily belongs in the Museum of Modern Art as on a rack in Bloomingdale’s. As her creations continue to impress on the runway and the red carpet, Vera Wang’s status as an innovator in the fashion industry continues to skyrocket. Raised in an affluent Chinese immigrant family on Manhattan’s opulent Upper East Side, Wang attended the
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Chapin School and matriculated to Sarah Lawrence College. Before graduating in 1971, she spent time abroad at the Sorbonne in Paris. Although her earliest fashion inspiration was her mother, “a woman with impeccable style,” it was in this fashion Mecca, the same that inspired other pioneers in women’s clothing like Coco Chanel and Yves Saint Laurent, that Wang discovered her own love for the industry. Her fashion career began at age 22 when she was offered a job at Vogue after networking with then fashion director Frances Patiky Stein. Within a year Wang was promoted to senior fashion editor, becoming the youngest senior editor in the history of the magazine. Over the next 16 years, Wang gained a wealth of knowledge about the fashion industry that would later prove invaluable to her career as a designer. “I had an incredible education in fashion at Vogue,” Wang says. “I ended up being exposed to more clothing than most people see in a lifetime and working with some of the most extraordinary photographers in the history of photography. And when you’re young and your eye is educated with that level of talent, it’s something you take with you, no matter what you do for the rest of your life.” As a editor at Vogue, Wang held the reigns of the fashion world, as magazine editors typically determine the latest trends each season. Though she possessed an enormous
amount of creative power in her role at Vogue, Wang eventually understood her true desire was not to simply work with clothes but rather to create them. Despite having limited experience in design, Wang landed at job with Ralph Lauren in 1987 as his accessories design director. The truly pivotal moment of her career happened two years later in an unlikely situation. As Wang was planning her wedding to then Bear Stearns stockbroker Arthur Becker, she struggled to find a dress to suit her tastes. A three-month search of every department store and boutique in Manhattan proved unsuccessful, and eventually Wang hired a dressmaker to create a ten thousand dollar custom gown. The experience of failing to find a dress that appealed to the modern bride instilled in her a desire to fill this niche, and, according to the Vera Wang website, “inspired…a new vision where fashion and bridal meet.” Though she only had a few years of design experience under her belt, nearly two decades of work in the fashion industry gave Wang the confidence to leave her position at Ralph Lauren and open her first line in 1990 at the Carlyle Hotel on Madison Avenue. “I’ve always been interested in fashion as a medium of expression, and running my own business had been a dream for me since I lived in Paris,” Wang recalls. “By the time I started my own business, I had been in the industry for so long that I understood
things differently than a young graduate out of a design school. I brought a certain amount of education that was unusual.” The line was hugely successful, and her creations dramatically redefined this once overlooked sector of the fashion industry. Seamlessly combining modernity with tradition and sensuality with elegance in each design, Wang’s name has now become synonymous with bridal. Countless celebrities, including Jennifer Lopez, Jessica Simpson, and Uma Thurman, have chosen to walk down the aisle in her designs. Even Barbie was married in a cream-trimmedin-black-velvet Vera Wang gown. The primary key to Wang’s success lies not in the innovation she brings to design or the brilliance with which she approaches material but rather the way in which she envisions a woman with every creation. Her intention is to create pieces that will enhance, not confine, a woman’s body. She credits her background in figure skating and ballet as the source for this visualization of the female body. “Skating was, for me, the first chance I got to be able to express myself in a creative way. It was the blend of all worlds — music, dance, athletics, choreography, and, of course, costumes. From an early age I really fell in love with what a body could look like, what it could do, what you could express, and how you could look,” Wang tells. “I also studied ballet and worked in front of a mirror, so I became obsessed with proportions. All those years
of skating and dancing have carried over. I can’t design anything without thinking of how a woman’s body will look and move when she’s wearing it.” While her background in skating and dance might provide the primary inspiration for her silhouettes and designs, Wang allows all types of art and media to influence her creations. “I am also an avid watcher of television,” Wang says. “I like shows that are sophisticated and edgy. I also am inspired by television as well as film and art. My design process can really begin anywhere. It can be an attitude, a girl on a street, a period in history, a film. Television shows like HBO’s Deadwood and films such as The Talented Mr. Ripley and In the Mood for Love have influenced past collections.” All of these sources of inspiration have given Wang a creativity that is truly boundless. Her ability to translate what she sees in the world into arrangements of materials, textures, and colors has led to beautiful customized creations that shine on the red carpet. “Charlize Theron at the 2000 Oscars is one of my all-time favorites,” she remembers. “I wanted to create something for her that represented the glamour of Old Hollywood. It was a simple, sleek tangerine silk-chiffon halter dress. The amazing thing is that the orange is achieved by overlays of 6 different colors ranging from pink to pale green, all forming this brilliant opaque orange. She wore her hair in a close-cropped 20’s-style
which was just perfect.” An entrepreneur at heart, Wang has since created a fashion empire that has expanded to include high couture fashion, ready-to-wear designs, fragrance, jewelry, eyewear, shoes, and a home collection. Her latest endeavor is her partnership with Kohl’s to create the line “Simply Vera” that has allowed her to design a stylish, sophisticated brand that is more affordable to shoppers who are searching for the feel of luxe but must operate on a lower budget. “One of the real challenges of being a designer today,” Wang notes, “is discovering new areas in which you can learn and grow and bring what you have to say to a different audience. I’ve been greatly influenced by designers such as Ralph Lauren and Giorgio Armani, who find an audience at many price points and with every retailer. I’ve carefully managed my brand to cultivate growth, and that is what makes it possible to operate at a variety of price points. It’s important to delineate between the lines, and to never compromise. If you do everything with integrity at every price point, then you don’t compromise your name.” As Wang continues to venture into untapped sectors of the fashion and retail industries while maintaining her uniquely innovative spirit and fresh approach to design, she certainly won’t run the risk of compromising her name or any part of the BT empire she has created.
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Packaging Pretty As cosmetic consumption diversifies in today’s global market, make-up companies are being forced to specialize production to satisfy specific consumer niche in order to target and attract customers. | by Molly Gomolin, McGill University Over the past century, the cosmetics industry has flourished with the introduction of hundreds of companies revolutionizing how people express both their inner and outer beauty. Capitalizing on the demands of consumers for products that either accentuate or hide certain features, make-up companies have responded with innovative items for every kind of man and woman and their respective lifestyles. With such a widespread market, though, one company cannot satisfy them all. To compete in this multi-billion dollar industry, cosmetic companies must focus in on their target consumers to better accommodate specific niches within the larger, diversified market. Once companies hone in on these niches, they call in a small army of marketers to take it from there. To create a well-rounded strategy, companies must keep in mind the 4 P’s of marketing: product, placement, price, and promotion. Initially, a company must decide on its products, choosing what to sell and clarifying why they are selling it. What, exactly, is the value proposition to the consumer? After the product has been
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selected, the importance of place comes into play as a market is determined. What locations give maximal exposure to the target consumer base? Otherwise, if aimed at the wrong market, a potentially great product might fail to sell. Once placed, the product’s price influences what type of consumers will be buying it. If a product is placed in a high-end store at a rather low price, for instance, consumers otherwise accustomed to pricey goods may doubt its quality or consider the product as possessing less status than those surrounding it. Therefore, the overlap of place and price becomes a crucial consideration. When all other pieces are in order, a product is ready to undergo promotion, which involves creating publicity and exposure for the product. Clearly, the marketing of products has become as important to their success as the quality of the products themselves. Paula Dorf Cosmetics, a master of the marketing process, features a collection of high-end tools and make-up with natural-looking colors. Because its products feature more modest tones, the company chooses to aim its cosmetics at a demure
crowd. Debbie Miller, Director of Marketing at Paula Dorf, specifies its direct target audience as “women 25+ who are professional, educated, fashion savvy and extremely loyal.” As a result, Paula Dorf places its products in boutique stores in affluent urban areas across the country, thereby catering to its niche of customers. For example, the chic Manhattan retailer Henri Bendel serves as Paula Dorf ’s largest vendor. The company positions itself as a luxury brand through the high price and quality of its products, relying on reputation and word-of-mouth rather than print spreads or television spots as its means of brand promotion. In addition to counting on long-time users for their loyalty and endorsements, Paula Dorf, regularly cited as a celebrity-favorite in both style magazines and tabloids, depends on high-profile customers to inspire new customers to use her brand. An iconic brand in the make-up industry, M.A.C. Cosmetics carries a more versatile line of make-up, with a wide array of colors ranging from fluorescent greens to neon pinks. As a result, it has developed a
reputation of being somewhat of a maverick by revolutionizing cosmetics for women with colors and looks that challenge the norm. Because of the brand’s audacity and glamour, M.A.C markets itself to a wider niche of women whose ages range from teenage girls to older women but who all share an edgier attitude and seek out the unexpected. Given that M.A.C. is aimed at this broad audience, its products are priced lower than labels such as Paula Dorf in order to target a more socioeconomically diverse consumer base. And rather than having counters within other department stores and boutiques, M.A.C. has created a more imposing street presence, running its own branded stores. Although, like Paula Dorf, M.A.C does not advertise directly, it has gained a great deal of exposure through the “Viva Glam” charity campaign centered on its brand. These prints feature celebrities decked out in burlesque outfits and donning daring make-up, further perpetuating the brand’s vivacious image and attracting customers who buy into this edgy look. Like M.A.C, the household cosmetics name Maybelline also targets a broad audience, but their value proposition to the customer is decidedly different. Instead of creating an identity based on youthfulness and fashion savvy, Maybelline draws in customers who prioritize cost value and convenience. The cosmetics line appeals to swaths of people because of its simple availability, boasting both multi-cultural products — well suited for women of any race or ethnicity — and low prices that make its goods affordable to the masses. As a result of its wide-spread appeal, Maybelline does not invest serious energies in product placement; it’s ubiquitous. In addition to being available in over 90 countries, Maybelline products are carried in practically every major drugstore, discount store, supermarket, and cosmetic specialty store across the United States. Since it attracts somewhat of a larger niche than most, Maybelline uses television and magazine advertisements extensively to promote and publicize its brand to the largest audience most directly. For the environmentally-conscious, make-up company Lavera offers an organic alternative to traditional cosmetics. Manufactured overseas in Germany and designed specifically for sensitive skin, all
Lavera products are free from parabens (skin irritants) and synthetic preservatives — and none were tested on animals. All of the line’s make-up is created with pure, organic plant oils and extracts. Lavera offers over 250 products that include anti-aging skin care, baby and hair care, sun protections, color cosmetics, and face and body products, with most of its overall make-up containing UV-ray combatants to prevent premature skin aging. To create a buzz about its products, Lavera taps celebrities who have become spokespeople and outspoken proponents of environmental consciousness. For example, the “Jessica Set” honors actress Jessica Alba, who is known to use natural botanical mineral make-up, and the “Kate Set” features style icon Kate Hudson, who has recently launched her own line of organic shampoos. In one fell swoop, you get both star allure and the guttural good feeling of knowing you are aligning yourself with products concocted with the earth in mind. Packaging has also become an important part of Lavera’s green image. For example, skin care items are set in tubes as opposed to jars to ensure natural preservation so that artificial preservatives do not have to be incorporated into its products. As is common for many items promoting the green cause, Lavera items carry relatively high price tags because of the level of quality and care involved in their production. As a result, these items are segmented towards a narrower, more selective market of wealthier consumers who are more concerned with quality and ingredients than saving money. Lavera products are consequently positioned in stores in the United States and Canada with similar ideologies, such as Whole Foods Market, Wegmans, and Pharmaca, to increase exposure to this target niche of women. The cosmetic industry is no longer concentrated solely on females, though. As
cosmetics become defined as something wholly more vast and multifaceted than make-up and eye liner — because of things with true medicinal value like anti-wrinkle and antioxidant creams—more men have been getting onboard with the cosmetics surge. Some call it rising metrosexuality. Others just think men are finally taking initiative to control their appearance. But regardless, men are becoming an increasingly important customer base in an industry that, until very recently, marketed almost entirely to women. 4V00’s Distinct Man, for one, is a Canadian skincare and cosmetic line that specifically targets this niche market. The line takes care to retain a masculine image, reminding customers that “grooming and appearance are vital to [a man’s] professional and personal success,” as reads the company website, and focusing on the indulgent side of using cosmetics. The line is carried internationally at upscale urban department stores, thereby catering to wealthy men attracted to luxury items. Although this demographic is largely homosexual, 4V00 publicizes sex symbols such as Brad Pitt and Tyrese as Distinct Man users in order to cast their brand as something appealing to men in general, regardless of race or sexuality. Baby steps are constantly being taken in that direction, but men still only represent a small fraction of the consumers in the cosmetics industry. With such a wide array of consumers with differing tastes, needs, and budgets in today’s cosmetics market, companies must target appropriately segmented markets in order to avoid spreading themselves too thin. By forging strong, distinct brand images, and promoting them accordingly, cosmetics companies can own their target market and create strong distribution channels for pumping their products out to their consumer base. The era of the generalist is over — and cosmetics companies must align themselves with distinct demographics in order to survive. BT
Clearly, marketing of products has become as important to success as quality.
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Media should provoke. Media should get people thinking. Our magazine is of a genre that it is our job to unsettle people’s thought processes and get people thinking, either love it or hate it. We want people to be engaged. We don’t want it to be a passive flip-through magazine for you to put down and forget. We want to provoke, and I don’t mean only in outrage. I mean ‘provoke’ in that we want people to think about what we’re presenting. And we want to be questioned as well. We’re happy when people question.
90 BUSINESS TODAY FALL 2008
MAGAZINE’S EXECUTIVE EDITOR
Bridget Foley is a head honcho and resident fashionista at one of the country’s most innovative and provocative fashion publications. With its dramatic oversize format and dazzling features, W has become famous for its forwardness in presenting the intersection of culture, fashion, and sexuality. We were lucky to connect with Foley while hard at work at fashion week in Milan. | by Liz Kohansedgh, Princeton University Business Today: For background, how did you come to be interested in fashion journalism? Bridget Foley: Well, I’m not a terribly organized thinker. I was always interested in journalism, and I was always interested in fashion. I’ve loved fashion since the time I was a very little girl. But they came together to me somewhat accidentally, when I was out of school looking for a job and heard of one at a small trade paper called The Apparel News Group. Today, media is so fascinated with covering itself that so many people are aware of various careers in journalism, but I hadn’t gone off to school thinking, “I’m going to be a fashion journalist.” It just came together that way.
BF: They are still sister publications, but, as opposed to when I started, the staffs are almost completely separate. W Magazine used to be a broadsheet, so it was basically launched out of WWD without hiring — as far as I know, since this was before my
BT: How did you find W? BF: I’d been at what used to be Fairchild Publications for a very long time. I worked at another paper for a year, and then I heard about an opening at Women’s Wear Daily. I applied and got the job covering one of the markets. WWD is the sister publication to W, and at the time, there was still a considerable level of cross over. When I started, it was a much more integrated staff. I started out as a market editor for WWD, but people would sort of cross over in a very fluid way. Someone would ask you to do something, or you would pitch a story. So there was never an official, “Okay, now you’re spending X amount of your time on W.” It was more, “Okay, go help out on this shoot, or perhaps just write this little story.” It was a very organic process. BT: What’s the interaction between W Magazine and WWD today?
to do shoots, but it was always the same staff. Now, it’s different. Now the fashion is completely separate, but the connection is that some of us still work for both publications — the fashion writers, myself, and a couple of the eye people — that’s our party and social coverage, so there’s this crossover. The parties that are covered for WWD are recapped and reworked for W and at the same time, people who are out in that social world before WWD may find stories that are more appropriate for W and will pitch those. At the same time, fashion wise, I’m here [in Milan] covering the collections for both publications, really. You can’t make a clear divide that when I’m writing a review, it’s for tomorrow’s paper. One is getting ideas for W as well. I’m not primarily on either side; I’m on both of them. I’m one of the very few. It’s a quirk of the way of W’s evolution. I oversee the fashion staff, but the fashion stylists and market editors- that’s a very separate thing. People often ask me, “How much do time you spend on this or that?” It’s a very hard breakdown. During the collections, my day-to-day, in the present is for WWD because I’m also a fashion critic and I’m writing for the paper, but I’m also observing and getting ideas for W coverage as well.
The worst thing you want to be, from a practical standpoint, is mundane.
time—any new staff. The idea was that WWD was this trade paper, but so much of what we covered would be of interest to a general fashionloving reader and consumer, like society and the arts. Mr. Fairchild thought that he could spin this off into its own publication, and he did. It came out twice a week, every other week, at the time, and it was a four color broadsheet. So the difference initially was that, when we started back in those days, WWD was all black and white, but these staff photographers would start bringing color film when they did a shoot. Then people started traveling
BT: How do you and the other editors determine fashion trends for upcoming
FALL 2008 BUSINESS TODAY 91
seasons? How do you define what’s up and coming? BF: You’re sitting there and watching it! When you’ve been doing it for a long time, you sort of have a sense for it. Sometimes trends just hit you over the head because, for some reason, everyone’s doing the same thing. Like in the spring collections, many people were doing nude fabrics. Or sometimes there’ll be a real scaling back and everything will be austere. Last season, there was a certain austerity, whereas this season, there’s been a little bit more outburst young in the season. You’re sitting there and you can’t help but see that this is a trend and that is a trend. We write stories about emerging designers; we do all of that. We’ll do a trend, but it’s delivered more subtly. We don’t necessarily say “Okay, here are new takes on little black dresses,” but that’s what it is. That’s part of a fashion editor’s job — to be able to define what’s out there. Sometimes what’s interesting is that as an editor, you love things that are very different from what the retailers are supporting.
ics, the more clinical fashion information they want, that they already know this, that they’re already excited about it, so they don’t look to us for that. They look to us to put a more cultural spin on it. So how do
There’s always someone to say “How could you?” or “This is bad.”
BT: How would you label or describe W’s creative direction? BF: W is a very upscale, fashion lifestyle publication. What is unique about W is that we approach fashion from a less merchy and more artistic point of view than virtually any other mainstream magazine. Our rendering of the trends is subtle. We tell the fashion story through the greater story that the photographer and stylists choose to tell. BT: Of course, W is known for having a talented crew of photographers, writers, and designers. How do these teams cooperate and work together to create the magazine? BF: Fashion is very important to us. We assume our readers are getting the specif-
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the various teams interact? Really, they don’t. We have a very talented creative director, Dennis Friedman, and very talented fashion director, Alex White. We discuss and make sure that stories are not overlapping between the two of them. In terms of various photographers, though, they’re their own entities. It’s really up to the creative team on staff led by Dennis to make sure that any given issue is well-balanced. We don’t have a complication of photographers to say, “Okay, what are you doing? And what are you doing?” They really are artists in their own right. They are the absolute tops in the field, and they’re not interested in what the other guy is doing. They’re interested in their own projects. And that’s what we want them to do. BT: Over the past few years, W has published some covers and spreads that have been received as rather controversial. Would you say this image is intentional?
BF: Our editorial director, Patrick McCarthy, is a brilliant editor and brilliant judge of what’s appropriate for when. While we don’t seek to be deliberately controversial, we take the stance that of course we should be provocative. Media should provoke.
Media should get people thinking. Our magazine is of a genre that it is our job to unsettle people’s thought processes and get people thinking, either love it or hate it. We want people to be engaged. We don’t want it to be a passive flip-through magazine for you to put down and forget about it. We want to provoke, and I don’t mean only in outrage. I mean ‘provoke’ in that we want people to think about what we’re presenting. And we want to be questioned as well. We’re happy when people question us. There is, of course, always a struggle. When you’re involved in this, you always think whether you’ve gone too far or not far enough. And sometimes we’ve gone both ways. Most often I think we’ve been successful in what we consider our mission. But certainly, the worst thing you want to be, from a practical standpoint, is mundane. Complication is good. We only present things that we find interesting or intriguing or curious ourselves. That’s how we judge whether it’s appropriate to put in the magazine. Sometimes pictures will come back, and I can’t tell you there’s never a lot of discussion about a particular picture. Of course there is. And we sometimes we make the wrong call, but more often than not, I think, we make the right call, and that’s what people want from W. That’s why it is so distinctive. BT: So how have those calls and the controversy resonated with readers? Has it enhanced or hurt readership? BF: Obviously, we think we know our reader very well. Sometimes we run something and someone has been outraged and cancelled a subscription. But I think we have many more cases of people who are really engaged and happy to go. Sometimes people love being outraged. There’s always someone who will say, “How could you?” or “This is bad,” whether it’s about skinny models and or a depiction of nudity or anything in between. There will always be people who will not like something. You can’t publish a magazine hoping to only run things that will never offend anyone or anger anyone ever. It wouldn’t be what we do. Fashion is our very essence, before we even get to the other things we cover: society and culture, high culture, low culture… That’s one of the amazing elements of W, that it has always covered high culture, low
culture, and everything in between. Sometimes its seamless interweaving, and sometimes it’s in your face that this is the world we live in, and it is a world of extremes. Once upon a time, those extremes didn’t mingle, but now they do. That’s what we try to capture. You have to always be aware of what’s going on, how things are changing, and be willing to chronicle the change. And that’s a challenge for us, too. We’re not just challenging our readers. We’re challenging ourselves. BT: You mention change. How do you think that W and WWD are dealing with the transition from print to the Internet? BF: (Sighs) This is a big issue. The Internet has been around for a long time, not relative to the history of print or the history of communication, but basically, the Internet’s been around for practical purposes, though it’s only been within the past couple of years that all magazines seem obsessed with their websites. About a year and a half ago, we launched W’s website, and it’s growing, and it’s expanding. It was a lovely but modest launch, and we’re really focusing on having it grow. We’ve only recently re-launched WWD’s website. That’s a very different animal: That’s a news site, and we’re into a 24/7 news cycle for it now. I am no expert, and certainly no seer, but my feeling is that while print will continue to be important in the foreseeable future, websites will probably overtake print in the newspaper arena, because newspapers are looked at as primarily vehicles of disseminating information. Yes, they’re visual. WWD, of course, as a fashion publication, is very visual. But increasingly, now, we don’t have to wait until tomorrow’s paper to get a scoop out, and that’s very exciting. As people become more accustomed to not just reading the paper in the morning, but paying attention to their email, that’s going to make the WWD website more important and more of a tool for people. I think that for magazines, especially for W, websites will definitely continue to grow. It effectively puts everyone in the daily game, because you can’t just put a website up there and have go-to content for a month. And that’s something we’re all struggling with, because you don’t suddenly staff up for daily contributions. Print newspapers are far more vulnerable
in my opinion than magazines. With W, for example, I think that the website will always be an adjunct and there will always be things that we didn’t have room for. Or if something happens today, whether there’s a party worth covering or a celebrity sighting, by the time it gets to print two months from now, it is old. So it’s very exciting to have that ability to express a W thought even if it doesn’t happen within a W print schedule. But I think that there are some things that can still be done better in print. Obviously, a print magazine can’t do video, and we have video up on our website. But some of our lavish photo spreads would read very differently on the computer. There are certain presentations that are far more impressive on paper. And that’s where I think that it will be a symbiotic relationship going forward. And it will continue to change, and obviously the websites will continue to gain an importance as everyone figures out how to best leverage them. Many of these pho-
that pops into your mind? If I say Ancient Greece, or the Napoleonic Years, or the 1920s: probably the first thing that came to your mind for each one of those is a visual image of how someone looked. A toga, a drop waist dress, an empire line: it says a lot about social history. When we think about ages and eras, we might think about architecture, but we tend to think about people first, and people wear clothes. The way clothes change over the years is the way we get social history. Also, more simply put, I love clothes. I really love clothes! I always have, from the time I was a child, and now that I’ve been doing this for so long and have gotten to know the designers, I have a tremendous respect for what they do. With the exception of writing for television, [fashion design] is about the only creative commercial discipline in which one has to produce creativity on demand. It doesn’t happen in film or music or dance. The stress and the strain on designers is tremendous, and they have to do it so many times a year- five times a year just for women’s, and most of them have menswear and many of them have secondary lines. I just have such respect for these people, and I find them very interesting. I find designers to be very smart, very aware. Their cultural IQs have to be high. You have to be aware of what’s going on. You have to have a sense of the here and now. And one could get lost after many years in an ivory tower, but you can’t afford to do that. There are all these pressures and business pressures- with the economy we’re in now, everyone’s just walking on eggshells- and to see that they can manage to turn this out on demand on a schedule is phenomenal. I think I started by saying I love clothes. I love designers, and I love clothes. And when you take these beautiful things, it’s very interesting to look at clothes apart from your own personal preferences and really appreciate them for what they are and in the context of the market in which BT they’re directed.
We are not just challenging our readers. We are challenging ourselves.
tographers are doing videos and doing web projects, so that’s not to say you can’t do visual presentation online. You absolutely can. But it’s different. BT: So here’s the classic closing question: What is it that you personally enjoy most about being an editor at W? BF: On a grand scale, fashion is a way of looking at social history. If you think of any period of history, what’s the first thing
FALL 2008 BUSINESS TODAY 93
Couture for the Crowds
Smaller price points and eager designers have fueled a craving for fashion that has taken couture from catwalk to sidewalk. | by Nell Diamond, Princeton University Couture catwalk shows have traditionally represented an outlet for creative freedom by allowing designers to unleash their wildest imaginations beyond the reach of an ultra-competitive consumer market. In the 1990s, platform heels presented by Vivienne Westwood were so high that even Naomi Campbell tripped in them. That same decade, Dior showed gowns reminiscent of those worn by the French aristocracy at the turn-of-the-century, complete with full, wired skirts. None of these extravagances, however, were actually sold in Dior stores. In more recent years, the line between couture and ready-to-wear has been blurred as these possessions of mannequin-figured elites find their way into the hands of ‘regular’ (read: not famous) customers. Does this change speak to an increase in spending power amongst the wealthy upper classes? Or has taste progressed from understated glamour to in-your-face showiness? Certainly, in these trying eco-
94 BUSINESS TODAY FALL 2008
nomic times, it seems not only unethical but impossible for so many people to shell out $700 for a single pair of shoes. So how can designers such as Christian Louboutin, whose platform heels are famous for their vibrant red soles, be greeted with such success while the pillars of Wall Street tumble and fall? Perhaps fashion, or indeed, public displays of wealth, have replaced essentials such as on-time mortgage payments
Cow can designers such as Christian Louboutin be greeted with such success while the pillars of Wall Street tumble and fall?
and sustained commitment to education, all as part of an effort by consumers to fit into an increasingly label-conscious world. This transition from laid-back austerity to a craving for couture is a social and economic phenomenon which designers have not hesitated to exploit. Walking down New York’s Fifth Avenue, one could easily forget the economic woes that have recently befallen our nation. Glass-fronted Louis Vuitton, across the street from vault-like Tiffany & Co., is so crowded with ‘label-watchers’ that it functions not just as a store, but as a sightseeing destination for wide-eyed visitors. Customers, however, are not merely browsing. In an effort to prevent a stampede toward the register, buyers are asked to wait in a cordoned-off area for their names to be called, as if anticipating a special prize in return for spending $1,000 on a leather bag. In fact, $1,000 is a low price tag at this flagship store. On prominent display, along with $3,250 snakeskin and velvet bags from the Autumn/Winter 2008, is a $135,000 diamond-encrusted watch. Two blocks down from Louis Vuitton, a smaller but no less popular Chanel store showcases a black and gray dress worn with over-theknee, silver-toed suede boots that would set its owner back $17,355. Even more outrageous items can be found in the Fendi store, where mink coats — already a luxury in and of themselves — are laced with 24 karat gold at the price of $64,300. One might expect such luxurious gold furs in Gstaad or even Dubai, where a largely Arab and European clientele has money to burn, but not in New York. The very presence of these items speaks to the spending power of the Manhattan-based consumers they attract. Ten years ago, it is unlikely that these items would have been produced for any show other than couture catwalks. It would have been even less likely to find these items in U.S. stores, where designers don’t usually stock their more flashy pieces. Naturally, these remarkably overpriced items are not being purchased by a majority of Americans, but the willingness of designers to stock them in U.S. locations speaks to the nature of the luxury industry, newly-characterized by an insatiable craving for high fashion and its accompanying high prices. But how does this demand trickle down to more down-market retailers? And does
the popularity of low-priced fashion inspired by couture collections indicate a concern for style overspending? Swedish company H&M and British brand Topshop both seem to have the right idea, targeting fashion-savvy, mid-market buyers by using A-list designer names to promote lowprice lines. Through its successful strategy, H&M has not only profited from the image of designers such as Stella McCartney and Karl Lagerfeld, but has also employed musicians such as Kylie Minogue, Madonna, and Rihanna to help expand collections across branches worldwide. Topshop, known for its relatively inexpensive and fashion-forward designs, capitalized on a society-wide, cult-like infatuation with supermodel Kate Moss’ signature style. In launching her newest line, Moss designed a collection consisting of skinny jeans, waistcoats, floral dresses, and an endless supply of cut-off denim shorts. These items ranged in price from 10 GBP (approximately $20) for a top to 150 GBP (approximately $300) for a leather jacket. Moss’s designs flew off the shelves throughout continental Europe after a dramatic opening at London’s Oxford Street that featured Moss posing as a mannequin in flagship store windows. This marketing spectacle not only brought media attention to the British company but also allowed the brand to expand into the U.S. by selling select items—though at marked-up prices—at the upscale Manhattan department store Barney’s. Topshop recently announced plans to open a store of its own in New York, an endeavor that, if successful, will be a first for a British retail chain store of its nature. H&M, too, saw celebrity collaborations increase its brand power, drawing in customers with a keen eye for the latest in celebrity styles. Thanks to establishments like Topshop and H&M, mid-market shoppers are no longer forced to forgo style as a result of their economic status. American companies are also honing in on the demand for a low-price, highfashion market. Though arguably less successful than its European competitors, the less-than-glamorous mega-store Target has signed on designers including Isaac Mizrahi, Cynthia Rowley, and Luella Bartley in an attempt to secure this vogue-conscious, mid-market consumer bracket. The nationwide chain recently sought to gain ground in the midst of New York’s Fashion Week,
The recent economic slump and increasing draws to high fashion have made for a transformation in today’s fashion industry. opening up “bodegas” across the city that featured Target’s more upscale collections instead of the basic furniture and home care accessories one might usually expect to find. These “bodegas” demonstrate just how the fashion world is changing, as a down-market chain store uses the glitter of couture fashion shows to attract customers. Bag Borrow or Steal, a website made popular by its cameo appearance in the recent film version of Sex and the City, also markets the philosophy that labels and couture fashion are no longer reserved for hyperwealthy clients. By paying a monthly fee ranging from $20 to $200, subscribers can rent handbags, jewelry, and accessories for a limited time. When ready for a change, the customer simply sends the item back in exchange for another temporary luxury. This model operates based on the assumption that mid-market shoppers see labels and fashion as increasingly important and will sacrifice not just money but ownership in order to get what they want. Judging by the success of Bag Borrow or Steal, as there are wait-lists for many
of its items, this assumption seems not only plausible but accurate . The recent economic slump coupled with a consumer populace increasingly drawn to high fashion has made for a transformation in today’s fashion industry. No longer do we see couture and ready-to-wear as two separate entities. While prices may be soaring in designer boutiques, low-end franchises are capitalizing on the media attention high fashion brings and offering their own versions of couture to the wider community. This season, as Louis Vuitton replaces skinny jeans with wide-legged, high waisted trousers, so too do Seven for All Mankind and Zara move away from the skin-tight trend. This fall, consumers will be given the ability to choose between Minnetonka’s fringed moccasin boot and Gucci’s more elaborate, high-heeled version. Suddenly, middle-market buyers are a consumer category at which even the most prestigious of designers are aiming their collection. With this transition, it is now the average buyer’s need for style that drives the fashion industry and no longer just the BT tastes of caviar-consuming elites.
FALL 2008 BUSINESS TODAY 95
FINAL WORD “Iron Man, he’s an innovator and is obsessed with improving upon his own inventions. He learns from his mistakes, never gives up, and is willing to sacrifice himself for his cause. Plus, he can fly around in a virtually indestructible suit and runs his own business. Who wouldn’t want Iron Man on their side?” NAVEEN JAIN PRESIDENT AND CEO, INTELIUS
“I’d hire Aquaman to resolve a Supreme Court case between the U.S. Navy and environmentalists over the Navy’s use of loud mid-frequency sonar. The case is so complex that it led Justice Steven Breyer to exclaim, ‘You are asking us -- who know nothing about whales and less about the military -- to start reading all these documents to try to figure out who’s right.’ Aquaman can communicate with both humans and undersea creatures, and would be able to tell the Court how the whales are feeling.”
“I run an investment bank. Every person I hire believes him or herself to be a superhero already.” MICHAEL LACOVARA CEO, RODMAN AND RENSHAW CAPITAL GROUP, INC.
“How about Green Lantern because I like people with obscure backgrounds but capable of illuminating insights.”
“I would have to say Wonder Woman. I really, really, really want to ride in that invisible jet! She’s a hard worker, then add in the bracelets and the crown, and she’s a real fashionista. I love that she gets everyone to tell the truth with that lariat — no more missed deadlines!”
BROOKE JOHNSON PRESIDENT, THE FOOD NETWORK
AMY FITZGERALD DIRECTOR OF MARKETING, NAKED JUICE
“Definitely Mr. Crabs from SpongeBob. Anyone who ‘can think of 10 good reasons never to let go of a dime’ would be perfect for my finance organization.” JOHNATHAN HALKYARD CFO AND TREASURER, HARRAH’S ENTERTAINMENT, INC.
Please don’t be that guy.
GREG CULLISON PRESIDENT AND CEO, PROVERITY
IF YOU COULD HIRE ANY SUPERHERO WHO WOULD IT BE AND WHY? 96 BUSINESS TODAY FALL 2008
want every opportunity to succeed.
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Visit us at unionbank.com/careers to learn more.
Union Bank is committed to leveraging the diverse backgrounds, perspectives, and experiences of our workforce to create opportunities for our people and our business. EOE. M/F/D/V. unionbank.com
©2008 Union Bank of California, N.A. Member FDIC
10/8/08 12:22:23 PM
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K12 Kepner-Tregoe Loews Corporation Luminex Corporation Major League Baseball NuStar Energy Owens & Minor Pitney Bowes The Plaza Group POM Wonderful PPG Industries Foundation
Printpack Rockefeller Group International Sears Showtime Networks, Inc. Soane Labs Spencer Stuart Texas Petrochemical
Facilities Solution Group Financial Solutions Partners First Republic Bank Godiva Chocolatier Harley Westfall Hays Companies Healthvision Henniges Automotive Heritage Foundation The Hersh Foundation Holman Enterprises Insight Communications InterDigital Communications John Rogers - Ariel Investments John D. Clark - Welsh, Carson, Anderson & Stowe
The Linc Group Louis Dreyfus Property Group Mark Biderman - National Financial Partners Maxine Clark - Build-a-Bear Microsoft Mitsubishi International MMC Inc. Nationwide Acceptance Navistar International New Mountain Capital NOVEC P.L Thomas Parsons Brinckerhoff Peter Georgescu PharMerica PITT OHIO Express
PLX Technology ProVerity Rodman & Renshaw Rosenthal & Rosenthal Rothschild North America Royal Cup SIGA Technologies Smithfield Trust Spansion Inc. Sutter Hill Ventures Universal Weather & Aviation Victory Packaging Wendell Family Foundation 1-800-Flowers
This list reflects our supporters as of October 23, 2008
CONTRIBUTORS A.J. Agarwal - Blackstone Allergan Foundation Alliance Imaging Alon USA Alpheus Communications American Greetings A.O. Smith The Ardrey Consulting Group Belfor USA Group Berkshire Hathaway Brinker Public Relations Brown-Forman Eric Williams - Merrill Lynch Coherent Inc. CSM Capital Management Dave Martin - Dimensional Fund Advisors
FALL 2008 BUSINESS TODAY 99
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Published on Nov 22, 2008
Celebrating 40 years as the largest student-run publication in the country, featuring Richard Branson, Hugh Hefner, and Vera Wang, along wit...