Two and a half years ago, I wrote a post using the shrinkage of TV Guide (a slow fall from 17 to 3 million circulation, from more than 100 editions to one or two) as a cautionary tale. Beware the cash cow in the coal mine, I said — the money machine that blinds you to the strategic imperative for change.
Well, that cow’s come home. As Paid Content summarizes a Wall Street Journal calculation, News Corp. lost about $7 billion on the quaint old relic, now being sold to Macrovision. Most of that was lost at the hands of John Malone (not uncommon in dealing with him). The Journal concludes:
But in gross terms, Mr. Murdoch looks to have paid $1.6 billion — after selling the magazines in 1991 and receiving cash from Mr. Malone in 2000 — for the first half of his Gemstar stake. He paid $6 billion in News Corp. stock for the other half. That is nearly $8 billion for an investment valued at $1 billion today.
Now, of course, that doesn’t calculate all the profits — the cash — that News Corp. and its partners were able to milk from ol’ Bessie before sending her to the dog-food factory. But then, that’s also the point: it was that cash that was blinding.
I repeat: There is a lesson here for every media company. Oh, yes, the cash may still be coming in. But what’s happening to the true value of your asset? What are you doing to make the bridge to the future? How much of that cash are you investing in innovation? Should you get rid of it now? Is it better to hold onto the old asset and its cash or cash out and invest in something new?
(Disclosure: I was TV critic at TV Guide in the ’90s.)