Digital media has always been a turbulent business, but last week’s layoffs suggest a reason for panic.
The cause of each company’s troubles may be distinct, but collectively the blood bath points to the same underlying market pathology: the inability of the digital advertising business to make much meaningful room for anyone but monopolistic tech giants.
.. In the troubles at Verizon, we see a behemoth that tried to take on Google and Facebook. Under a former executive, Tim Armstrong, the phone company bought up Yahoo and other media brands as useful pawns in a strategic war against internet giants. For similar reasons, Comcast has also plowed money into media start-ups.
But Verizon quickly learned that Facebook and Google are insurmountable. When new management took over last year, it began dumping the news in favor of readier ways to make money.
.. It’s the cuts at BuzzFeed that sting most. You may regard the site as a purveyor of silly listicles and inane quizzes. I think of it as a relentlessly experimental innovator: It’s the site that gave us The Dress and published The Dossier, a company that pushed the rest of the industry to regard the digital world with seriousness and rigor.
More than anyone else in media, BuzzFeed’s founder, Jonah Peretti, bet on symbioses with the tech platforms. He understood that the tech giants would keep getting bigger, but to him that was a feature, not a bug. By creating content that hooked into their algorithms, he imagined BuzzFeed getting bigger — and making money — along with them.
At the least, the layoffs suggest the tragic folly of Mr. Peretti’s thinking. Google and Facebook have no economic incentive for symbiosis; everything BuzzFeed can do for them can also be done by the online hordes who’ll make content without pay.
So where does that leave media? Bereft.
It is the rare publication that can survive on subscriptions, and the rarer one that will be saved by billionaires. Digital media needs a way to profitably serve the masses. If even BuzzFeed couldn’t hack that, we are well and truly hosed.
The Breakdown of the Capital-Labor Accord and Okun’s Law
we talk a lot about the “post-war capital-labor accord” and the golden age of the 1940s-1970s. In these years, inequality went down, unions flourished, civil rights laws were passed along with LBJ’s Great Society programs like Medicare, etc. Corporations saw themselves as not just profit-seeking nexuses-of-contracts but also as institutions with duties to their stakeholders – employees, local community organizations, etc.
.. Then everything went to hell in the 1970s. Oil shocks, poor economic performance, large increases in foreign competition, an overheated economy created by the meeting of increased social spending and increased military spending, all combined to create massive inflation and other sorts of economic upheaval.
.. union contracts were blamed for causing inflation and big business began to push for
regulatory changes (to fight the hated EPA and OSHA, along with unions) and increased layoffs.
Institutional investors, growing rapidly in size in part *because* of the prosperity of the “golden age” (e.g. the massive pension funds like CALPERS and TIAA-CREF), began to demand discipline from corporations unused to having to listen to anyone
.. Changes in financial regulations and institutions made possible the junk bond market and, in turn, a more active market for corporate control – suddenly, large firms that were used to making acquisitions became targets.
.. by the mid-1980s, the golden age had ended along with the capital-labor accord and something new had begun – perhaps we can call it the “neoliberal era
.. This era’s hallmarks include the dramatic decline in unions, massive increases in the share of wealth going to the top 1% and .1% (cf. Piketty and Saez), massive increases in the share of profits going to finance (cf. Krippner 2005), and an overall change in the way that corporations perceived themselves.
.. No longer institutions with obligations beyond profit-seeking, corporations became (thought of as) legal fictions that served the sole purpose of maximizing shareholder value
.. The old dominant strategy of firms was to “retain and reinvest”, the new mantra was to “downsize and distribute”
.. The old model of the firm was GM – a massive, vertically integrated institution that dominated a market and did everything in-house. The new model was the “Original Equipment Manufacturer” (OEM), a firm like Nike that designs a product and markets it but outsources and off-shores as much of the actual producing, distributing, etc. The firm is now a brand, an identity demarcating a certain set of contracts, whose value is more about intangibles than men and machines.
.. Okun’s Law is an economic relationship between the magnitude of an economic downturn (in terms of real GDP) and increases in unemployment
.. if GDP (production and incomes, that is) rises or falls two percent due to the business cycle, the unemployment rate will rise or fall by one percent. The magnitude of swings in unemployment will always be half or nearly half the magnitude of swings in GDP.
.. The last downturns – 1991ish, 2001ish and the current moment – have all been characterized by “jobless recoveries” or, more broadly, much larger decreases and much smaller increases in unemployment than would be predicted by Okun’s law.
.. “businesses will tend to “hoard labor” in recessions, keeping useful workers around and on the payroll even when there is temporarily nothing for them to do”.
.. Manufacturing firms used to think that their most important asset was skilled workers. Hence they hung onto them, “hoarding labor” in recessions. And they especially did not want to let go of their prime productive asset when the recovery began. Skilled workers were the franchise. Now, by contrast, it looks as though firms think that their workers are much more disposable—that it’s their brands or their machines or their procedures and organizations that are key assets.
.. The 1980s saw a reordering of the world – a transition from a period governed by one set of rules that privileged the relationship between businesses and their employees to one that privileged (relatively speaking, in ideology anyway) shareholders.
.. What variables should we care about, if GDP seems to be connected less to welfare than it used to be?
.. the neoliberal period is marked by dramatic, mind-boggling increases in executive compensation without, as far as I know, any signs of better performance or increased shareholder value.
Ask HN: What was it like when dot-com bubble collapsed during 2000-2002?
By 2000 everyone knew there was going to be a big correction. Few accurately imagined how big. It was like going to the doctors because you knew something was ‘a little off’ and finding out that you were going to die in three months. Then talking to all your friends and realizing that everyone you knew had the same disease.
Initially many thought it would be similar to the early 90s recession. I.E. A few layoffs with everyone getting hired back again two years later. It wasn’t until 2002 that people realized that springtime wasnt coming back.
It wasnt just places like pets.com that crashed. You had every single non-tech company simultaneously scaling back IT initiatives. At the time there was still a large cohort of management types who considered the Internet more of a fad than a new paradigm. These types took full advantage of the shifting winds to cut deeply into anything tech related. This broad overcorrection did a massive amount of damage to the industry.
You can still see the impact crater. Remember the big talent shortages during 2008-2012? Thats because you no longer had a cohort of mid career professionals to draw from. Only the thin number of people who survived the collapse and a bunch of novices who were just getting started. Everyone was missing that valuable group of mid career 8-12 years of experience etc… Basically a generation of careers strangled. Which is why you’ll often see no sympathy for the ‘talent shortage’ complaint. Five years after cutting everything and leaving people to starve you have the same cohort of managers demanding to know “where are all the people with five years of recent experience”
The Wall Street Journal’s Global Retrenchment
The newspaper is cutting staff and shuttering bureaus, even as populism, trade, and international relations are in the headlines.
Restive news staffers have gone on background to reporters to complain about what they see as editor-in-chief Gerry Baker’s overly sympathetic leanings toward Trump; on the opinion side, an op-ed editor was recently forced out of the paper after conflict over the page’s Trump stance.
.. It’s “pretty grim and pretty depressing,” said that reporter, who like others spoke on condition of anonymity. Several cited agreements they had signed when their employment was terminated.
.. The reporter also mentioned the concerns over Trump coverage, saying Baker’s ordering editors to not refer to Trump’s controversial travel ban as barring those from “majority Muslim” countries as something that was “obviously not taken very well by reporters [overseas].”
.. Additionally, there was scant information shared internally in the company about the layoffs.
“Absolutely nothing,” the former reporter from the Eastern European bureau said. “All whispering between people who’d been laid off and other people.”