Milking the old cash cow

I’ve been thinking about TV Guide and why its drastic overhaul didn’t/couldn’t happen when it should have, 10 years ago — and why similar drastic strategic changes are not happening at other publishing companies today.

It’s because they are cash cows.

TV Guide brought in a helluva lot of cash; it was No. 1 in ad pages, and each page was golden. When I was there, I developed a new magazine, the Parents’ Guide to Children’s Entertainment, because I believed the company had to expand its guide franchise and diversify and because I thought it was a helluva good idea and was needed (it was). We sold 400,000 copies in only two weeks on the newsstand with no promotion but the project was killed. Why? It wasn’t worth the time of TV Guide ad reps to sell $8k pages when they could be selling $80k pages in the main mag. Now the answer to that, of course, would have been to invest in the new products with new staff. But when you work on a cash cow, executives don’t want to spend time raising calves; things need to be big to compete for attention and pay for the big infrastructure. And new = risk. So new things don’t start.

And the answer to the creeping shrinking of the main mag would have been to make radical changes in the product: gutsy changes like the ones TV Guide just made to not only update the product but also cut costs. Some argued in favor of making those changes when I was there, me among them. But inertia and fear and politics and cash won. Strategy didn’t.

Having a cash cow distracts companies from the future. It makes them complacent: ‘Look at all the money (still) rolling in.’ It makes them think that if they just tweak this and that — if they can still get away with raising their rates even as their audience and value are shrinking — they will continue to keep milking cash from that old cow. It makes them overly cautious: ‘Nobody hurt Bessie!’

And politically, the guys in charge of the cow don’t want anybody inside the company competing with them: no new products, no new power centers, no one else to set strategy, no one else to use resources. They win because, of course, they’re the ones bringing in the cash. Nevermind that they’re the ones stopping the company from building for the future. They’ll tell you that’s not their job. They’re there to protect the cow.

Jay Rosen argued in his post about laying newspapers down to die that it is also about draining the value of a company as it declines. In some cases, that’s true. But in some, there isn’t such a sinister or cynical motive; it’s more about blindness, wilfull blindness.

As in the case of TV Guide, change will finally come, but only when it is inevitable, and perhaps when it is too late.

: And that, ladies and gentlemen, is a picture of what life is like in many other big media companies today. That is what is happening on shrinking newspapers, and in shrinking broadcast and even cable networks, and in many a shrinking magazines.

The cash cowherds run the farm, change is resisted, strategic bravery is rarely seen. Why? They still make a lot of money. Yes, but they aren’t growing, not in real terms.

And, worse, the world has changed in this decade in profound ways. There is an entirely new medium competing for attention and dollars. This new medium has devalued what you thought was your core asset — your stranglehold on distribution, your size — and made them into burdens rather than advantages. Your customers, once just a mass, can now talk back and complain. And, most important, in a world where small is the new big, a million small competitors are now enabled to chomp away at your audience, your franchise, your brand, your business, your cash.

Other media companies should look at TV Guide’s saga as instructive and predictive: What happened to the magazine that once sold more copies every year than any other magazine can happen to you.

TV Guide is the cow in the coal mine.

  • I forgot how much Annenberg got for the Guide way back when it was first sold. Would be interesting to compare inflation – adjusted figures from that sale price to what it would be expected to fetch today. My guess is that the disparity in numbers would be revealing.

  • Cash cow. This strikes me funny because I know that media folks probably have a hard time seeing themselves as a cash cow.

    In other industries, like the chemical industry, folks know they work in cash cows and they adjust. They used to try to differentiate products, but now they realize that they are selling a commodity. So they compete on pricing and some aspects of service (like speed of delivery).

    Chemical companies have consolidated and are now shrinking in terms of staff. That's how they remain cash cows. (Sound familiar?)

    There's nothing glamorous about being in a cash cow business. You're producing and selling a commodity.

    What's funny is that the news/media people I know always believed their product was special, and thus not subject to the rules of business. Their work was so essential to customers that there was no need to change or consider alternatives. They were above the market, beyond technology, enagaged in work that existed in a higher realm of good.

    That's why this is hard. Because they are cash cows and may have always, and they're losing their grip on their monopoly of distribution, which means they won't be cash cows forever. But it will be very, very hard for the folks who run these companies to change their vision of their business, and their product, and their goals, and the alternatives.

    Do you think that the TV Guide shift will help newspapers? And here's another question, why doesn't Comcast (or whatever company) publish listings online? Why not TV Guide?

  • Maureen

    Good points all, Jeff. Did you catch the other day where Newsweek is cutting out an issue a year because of declining profits (guess those fake Koran in the toilet stories just didn't pump up circulation the way they thought).

    Years ago, I took a MassComm class in college where the professor had an interesting theory. US mass media, for the most part, is based on advertising revenue–subscriptions pay some, but not all, costs. However, he was advocating–even then–that media needed to be looking at alternative methods of revenue. Take magazines (or newspapers). If you cut out all the ad pages of a typical magazine, you're left with a surprisingly few number of pages. Switch to a non-ad-based magazine, with fewer pages (but the same content)–which means lower mailing costs, no salaries for all the people involved in selling, & perhaps slightly higher subscription costs. Think it can't work? Mad Magazine thrived on exactly that format. A lot of people would be willing to pay extra for magazines without ads. If not, then maybe you're just not putting out a publication that's worth reading (so why should advertisers be wasting their money on it anyway?).

    In the case of TV Guide, get creative. Let's face it–it exists primarily as an advertising tool for the tv networks, which is just fine. I have used their listings for years now, but I do enjoy reading the articles. So why not cut out the ads (thus reducing the mailing costs), & then ask the various networks to pay for the coverage they're getting. Or in the case of the parental magazine you were trying to create, have various non-profits interested in that area provide funding. That way, they could keep the subscription costs the same price for all of us. And spare me the "they won't be neutral" crap. No media are neutral anyway, & we're talking about TV Guide here. It's purely intended as a marketing tool anyway–so let the networks pay for the marketing they're getting. Or call it "underwriting."

    There are plenty of creative alternatives out there. Once again, we're seeing the inability of MSM in being able to adjust to change.

  • "The cow in the coal mine"???

    Yellow card for absurdly mixed metaphors. One more violation, and we'll revoke your poetic license. :)

    I will concede that the image of a cow squeezed into a birdcage is amusing.

  • TV Guide also struggled with a couple of other institutional problems. In recent years, News Corp. had retained a large stake in the company, and had blocked some attempts to change the focus of the magazine.

    And it seems to me that editors had never figured out a way to leverage their still-substantial subscriber base into getting exclusive content from the networks for use in the mag and online.

    Then there are the smaller things, such as why they still bother to run movie listings, rather than content more suited to their tv fan audience.

  • Great post, Jeff =)

    I wrote about something similar today to do with DRM:

    "It's very simple. When a corporate schmoe reaches a certain age and position within society, the thought of calling teenagers or single mothers "criminals" is far less daunting to him than the prospect of having have to change his tired ol' business model.

    When you spend twenty-plus years getting to the top of the pyramid, the last, last, last thing you want to hear is that nobody wants your pyramid anymore. Especially if that's the only pyramid you've got. So you lash out."

    URL here:

    When I worked at a large ad agency in my younger days, the "milk the cash cow till it dies, then cash out rich" strategy was very much the key management strategy. But everybody who didn't have equity in the company had to pretend that wasn't the case, that they somehow still had a future. At least, they did if they wanted to get paid that month.

    Looking back, I'm less able to blame those "evil management scumbags". Somehow, all the guys who were downsized/laid off years later were equally complicit in the same lie.

  • Evan

    All this may be true, but it is unpersuasive that TV Guide should have done anything other than milk their cash cow. The same for all the other 'big media'.

    Why? Because it is very unclear they have any specific competitive advantage in the new 'small' media world. It's very unclear that an investment in the internet and blogs by a large media company is any more effective or efficient than independent money put into such ventures. In fact, big companies often waste far more money pursuing such ventures than can be done by 'building from scratch'. So why not just allow the independent money to pursue such 'opportunities'?

    I reject the idea that businesses should be forever ongoing and always looking for ways to extend their lives, even if they are inefficient at doing so. Be the best TV Guide you can, return the most money to your shareholders as possible, die a proper death, and allow your wealthy shareholders to decide what to invest in that's 'next'.

  • Rick

    Not just media companies, big guy!

  • What Rick said. In particular, this topic could be a chapter in a revised "Innovator's Dilemma", amid the previous studies of disk drive and excavator manufacturers.

  • Evan makes a very good and wholly legitimate point, but I have a question?

    Shouldn't companies milking their cash cow (like TV Guide) be run with the leanest possible management and minimum incentives. I mean how much highly paid talent does it really take to harvest a cash cow?

    And shouldn't they announce their "cashing-in" strategy to potential investors so that no one buys their stock on any blue sky?

    Maybe the reason people expect companies to "forever ongoing" is because executives and stock promoters tell us that's what we should expect.

  • There's a magazine? Huh! I thought TV Guide was that thing on my digital cable…

    Seriously, if TV Guide put all their effort into being an outsourced content provider for digital and interactive television guides, they might have a future.

  • Lonnie G. Kohn







    Apple (almost)

    Dell (soon to be)

    Toddle House

    KMart (pretty soon)

    I'm sure each of you could easiy add ten more nearly forgotten names to this list.

  • Bob

    The TV Guide has become irrelevant for a number of different reasons. The first is that all of the cable/satellite providers have their own on-screen program schedule applications. Last minute changes are reflected almost immediately – They aren’t in my copy of TV Guide sitting on my coffee table.

    The second is that most of the people I know don’t watch the major networks anymore, what with the cable/satellite offerings, and they sure don’t watch network news! Folks have gotten a bad taste in their mouths from the MSM, and as I have done, cancelled all of my newspaper & magazine subscriptions as I view them as part of the problem. TV Guide has become as the buggy whip manufacturers around the turn of the 19th/20th century when the automobile was coming into its own – irrelevant.

  • Excellent post! This does not only apply to media companies but to all sectors where you have cash cows. Look at the online world. Already classifieds sites like Monster are cash cows and too afraid to innovate and disrupt their business. eBay risks ending up in the same place.

    Another example, telecommunications. Look what Skype is doing to an established industry.

    I used to work for eBay and cannot stand the cash cow mentality. I prefer being innovative (see my blog) and it is just hard at a big company, even if they try and want to be innovative.


  • Jeff,

    I run the online arm of a B2B media company, and I find that it’s often easier to work with magazines in a challenged market than it is to work with a cash cow franchise. A colleague of mine, Jeff Reinhardt, was featured in a recent FOLIO article, disecting how DIRECT magazine’s business was transformed by responding to changes in the marketplace before it was too late. At the end of the article is a table outlining how ad pages declined by 29% from 2000 to 2004, but revenue was the same (due to online initiatives). In the B2B space, I think most publishers would take 2000’s numbers over 2004, but DIRECT would take 2004’s because it is in better shape now than it was in 2000 and is positioned far better for future growth.

    Part of the problem is measurement. Magazine publishers don’t have the tools to see where the holes in the boat are. They can’t tell how much their “market size” (as defined by advertising in competing books) is loosing dollars to Google and other online competitors and substitutes to traditional magazine publishing. The industy has grown so accustomed to measuring performance in “ad pages” that no one recognizes the problem until it’s already grown to be a significant one. I strongly encourage publishers to begin doing more custom research on the buying habbits of their clients. If the industry has no means of measuring where dollars are flowing, your company better.


    P.S. As a former’er, I wish you all the success at About and hope that you enjoy working with Guides as much as I did.

  • Diddo on the innovation…..It is the visionary and the trailblazer who need not conform to the iron structures that a cash cow makes one adhere to. These business and people should be the cash cows and not the ones afraid to change!

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