Sponsors

Moderator:
Gordon Crovitz, Columnist and Former Publisher, The Wall Street Journal

It was moderator Gordon Crovitz's considerable acumen in guiding the discussion that made several points clear: The contraction of print media is really the creation of new opportunities in this digital age; and newspapers are really media companies well positioned to lead the way with strong branding, talented writers, a deep sense of social responsibility and resources that far exceed what competing businesses offer.

If you wonder whether newspapers will be an integral part of America′s digital society, look at businessmen like Sam Zell, who has taken the helm at Tribune Company, and Brian Tierney, a local businessman who recently became publisher of The Philadelphia Inquirer. When executives like these enter the news business, it′s evidence that claims of the demise of the print medium are, indeed, greatly exaggerated.

But newspapers today face twin challenges: how to adapt to and monetize digital distribution and advertising revenue; and how to meet the Fourth Estate's obligation of "feeding them spinach with the ice cream" in the interests of a civil society.

"Newspapers are 'news media' companies," said Brian Greenspun, President of the Las Vegas Sun. "We're just witnessing how news will be delivered a little different from the past, and in an enterprise fashion." Some people will still receive their news in print with their coffee, he added, while others will expect to read it over the Internet. Publishers are working to align distribution with consumer preference, but print media, he maintained, will be around for a long time. "The future will also include integrated and stand-alone rich media, primary source materials, and community participation," Greenspun continued. "The Las Vegas Sun ceased print news years ago through a joint operating agreement with our former rival newspaper, which still prints and distributes a morning paper. This freed us to become the newspaper we wanted to be and put the capital 'J' back in journalism through investigative and in-depth reporting.

"The challenge is monetizing the Internet," he added. "It may take three to five years from now, but we'll figure it out."

Tierney's confidence is equally unflinching. "The number of newspapers in America has not changed appreciably in a century," he explained. At the Philadelphia Inquirer, we have 470 journalists serving the community. Where local radio or television put five people on a Phillies game with maybe one minute of evening news coverage, I have journalists who can cover the game from all angles and give the consumer instant access to statistics and Phillies-related information with a depth no radio or television station can provide. We have branding, and The Inquirer produces much of the Philly news available via the Internet." To get through the current period, he continued, the secret is to focus like a laser beam on cost. "We renegotiated a number of contracts, eliminated wasteful habits and realigned resources to grow online revenue, stabilize print news, improve quality, create niche products, incorporate local video, online radio and ask what else we can sell from our web presence."

Gone are the days of print's incredible profit margins, Tierney said. Ad revenue is way down. "It's extremely difficult to create print advertisement, compared to radio or television ads," he said. "It's not very glamorous either, so many advertising agencies ceased doing print ads. ... Our advertising staff now goes to ad agencies and businesses to show them what can be done with print ads and to do the technical layout for them. 'You want to buy a Phillies ticket for tomorrow based on today′s game? To the left of the story is a link to buy your Phillies tickets now.'"

Online reporting has its advantages. "In Las Vegas, the Sun's reporting on the Monte Carlo (casino fire) commenced before the Las Vegas Fire Department arrived on the scene, and in a multimedia approach with depth over several days," said Greenspun. "We had over 40 million web hits on this event alone. No one else generates that level of click volume in the Las Vegas market. Advertisers are smart and they'll go where they'll be successful in getting their ad seen."

Ted Olson is co-chairing an Aspen Institute study on the community information needs of a democracy. "The product is not in decline," he stated, "but the old form of delivery is. The consumer's appetite is there for news, and newspapers are well positioned to serve those needs once they figure out the revenue challenge associated with the new forms of distribution."

Perhaps it is no surprise that as a former solicitor general, Olson's views of newspapers are quite grounded. "In a democracy the most important thing we have is good information," he said. "Newspapers have traditionally served our democracy well in that capacity." Anyone can call himself a journalist and publish something on the web, said Olson, but newspapers possess the resources to provide a depth and breadth on issues that is difficult to replicate. This benefits democracy, he continued, and if the Internet facilitates distributing that information or contributing more depth, so much the better.

"But the web raises important First Amendment questions related to what constitutes a journalist from others who report on an event," he continued. There are shield laws in 49 states protecting journalists from revealing sources. Does that protection extend to anyone publishing any text on the Internet? Who decides? Who credentials? What is privacy? What do you do about serving the needs of small communities? It's branding that has traditionally distinguished a journalist from a note-taking gadfly.

While today's young people may read printed news less than a generation ago, it was noted that not many young people read newspapers 30 years ago either. Youngsters today may be more adept at multimedia and locating information online, but Greenspun notes that when they do come to the point where they want information, that Google search often leads them to a newspaper article. The challenge is to "feed them spinach with the ice cream" so what they read is not only attractive and satisfies their "light" tastes, but offers substantive thought that contributes to their education as citizens.

Moderator:
Dean Rotbart, Journalist, Consultant

"We have a lot of big mouths here!" announced journalist and consultant Dean Rotbart, the moderator of a lively panel about how bloggers are changing public perceptions of the news we get from the mainstream media.

After his surprising opening (which was fully intended as a compliment), Rotbart asked how many audience members read blogs at least once per week. The answer was an impressive 75 percent. Of those that did, 50 percent read blogs once per day, and 15 percent were bloggers themselves. And that percentage is anticipated to grow substantially while the popularity of print media continues to decrease.

"Bloggers are informed and opinionated," stated Paul Kedrosky, who writes the "Infectious Greed" blog. "I needed more awareness politically. It makes me feel like I am contributing to society by enlightening the public to what is really going on with the economy. Not whatever they see in print media ... I combine both old and new developments in economics, things I couldn't say in a classroom. It lets me vent, primarily. And there are, in fact, many institutional investors that read it, believe it or not."

Yves Smith, who writes the "Naked Capitalism" blog, had ample experience on Wall Street with Goldman Sachs. She felt that there was a "real disconnect between what was being reported in the press with common sense." She stated that there "was a lot of frothiness in the market ... and the way the dots were connected were incomplete — the mortgage crisis, for example, was very 'snarkly.' In blogger language, that means unclear."

Felix Salmon of Portfolio.com felt that media needs to make things more fun to read in order to captivate and sustain an audience's attention. "Stuff bugged me," he said. "It is my own therapy. My wife told me to 'put it somewhere else, and find someone who cares.' My readership grew organically and developed into a quarter of a million readers per month."

Mark Thoma, author of the "Economist's View" blog, agreed with Smith. He felt that there "was a tremendous amount of information not getting put into print, due to source conflicts, space constraints, etc., and blogs allow for the total picture. This makes a story much (easier) to be whole and complete."

Rotbart posed another interesting question to the panelists: "Who holds bloggers accountable for what they put up?"

Most all the panelists agreed that credibility was extremely important for them, as well as integrity in what they wrote. "I put up articles that link to factual info to support where my opinions are based from," commented Thoma. Smith added that bloggers earn their respect by what they write, noting that even The Wall Street Journal relies on statements by trusted sources. Smith felt that "a blogger should be able to strip the arguer from the argument, and both should be able to stand on their own." Kedrosky believed that some blogs are purely for entertainment, while other may be "factual, impressionistic, etc., and that's okay." He added that blogs are complements to print, not substitutes.

When the subject of blogging for money came up, the crowd became a little rowdy. Salmon announced, "Blogging should come from the heart and mouth, not out of a lust for money. Bloggonomics 101: Never do it for the money." Rotbart noted that traffic is the monetary sum of blogging through ads.

Whether it's for the money or not, the panelists all had a lot to say about what was not being said before.

Moderator:
Yoram (Jerry) Wind, Lauder Professor, The Wharton School, University of Pennsylvania; Founding Editor, Wharton School Publishing

Facebook's recent valuation of $15 billion, bolstered by Microsoft's multimillion-dollar investment, sent a powerful message to corporate boardrooms across America: Social networks aren't just for kids anymore. Leading corporations like Nike and Amazon have seen the light and are reaping actual benefits from business social networks; other smart companies are jumping on the bandwagon of using these networks to solve problems.

Although traditional strategies have focused on a "me, my, and I" approach, this session highlighted a "we" approach that has emerged as the foundation for creating significant, sustainable change in the United States and abroad. Moderator Jerry Wind of the University of Pennsylvania suggested that "a 'we' perspective is a must today because of changes in globalization, technology and movement toward empowered consumers. This causes companies to change traditional approaches and go from 'me' to 'we.'"

This is especially challenging for the business community, which is typically more competitive than collaborative, he said, but that environment often produces limited financial gain and a certain level of stagnation. There is widespread agreement, supported by research, that the current business model must be transformed if we are to make any global advances. Although there are many ways to achieve this, the panelists agreed that these changes should be generated both within and outside of these organizations.

Yossi Vardi of International Technologies Ventures noted that an efficient way in which large organizations have changed the traditional business model has been to create an environment of "bottom-up innovation." This has been accomplished by empowering passionate employees to "run free and develop tools to help customers, employees and the organization." Best Buy and Proctor & Gamble were cited as perfect examples of such a movement. Two Best Buy employees created a web site that provided a medium for all employees to communicate with each other, which subsequently generated new ideas for improving customer relations and the company as a whole. Dwayne Spradlin of InnoCentive Inc. mentioned that Proctor & Gamble's CEO stated that "within five years, 30 percent of the company's innovation would come from a source outside of their organization." Dwayne believes that companies should encourage open innovation, which involves "inviting the outside world into the process and creating opportunities to empower younger business people."

Lex Fenwick of Bloomberg LP said he believes it is important to create a community around something (i.e., geography, a subject etc.) and to help that community with whatever it is trying to do. By capitalizing on the power of "we," financial gain will be generated for all businesses involved. More specifically, "if you want to build a community around an issue or problem, others will join for fear of being left out," he said.

An audience member mentioned that collaborating with other businesses may result in an organization losing its brand. Wind countered that "the brand is not under your control. It's how it's perceived by the customer." As such, Barry Libert of Mzinga Inc. suggested that a business should allow the collaborative "we" community to build the brand. In essence, "the brand belongs to the network using the brand." He stated that "American Idol" only does 10 shows a year but needs the brand to be carried all year round. Once they let the community build and use the brand, another hit show, "So You Think You Can Dance?" developed.

In spite of some issues and barriers, the panelists and audience members alike agreed that the "we" brain is better than the "me" brain. "We" must not be restricted to the organization but must involve the larger space. This will involve examining global innovations, recruiting people smarter than you and being willing to share the benefits so that it's a win-win for everyone. For in the end, said Wind, "the summation of brains is bigger than the value of each brain."

Moderator:
Larry Carroll, News Anchor, KFWB News 980

The music industry has been roundly criticized for its failure to embrace the future and create a new business model for today's consumers, who increasingly choose to get their music online. Millions of dollars have been lost; some even believe the music industry presents an object lesson in how not to conduct business in the digital era.

"Nobody has a clue right now," said Quincy Jones, the legendary musician, producer and composer known for identifying hit artists ahead of the curve. "The volume of sales we had in the past will never come back. The genie is never going back in the bottle."

Justin Goldberg of Indie911 acknowledged that few firms are earning substantial revenues from online music sales yet but maintained that, with the exception of the recording segment, other areas of the music business — including tours and publishing — are doing quite well. There is also more use of music in film and television productions, he said. As for the recording side of the business, Goldberg added, "This industry was once driven by larger-than-life entrepreneurial personalities and format updates, but now things are more in the consumers' hands."

Andrew Lack of Sony BMG Music Entertainment agreed that now is a great time to be artist or a fan of music. It's easier than ever both to get more music and distribute one's music. He cited two new landmark agreements involving major record labels and Nokia and MySpace. "These two agreements and their associated business models show that we may be turning things around," he said. "The power of working with the largest social network and one of the largest mobile handset makers is undeniable."

Jones added that working in new technologies and getting "hooked into Silicon Valley" are key to success.

Established artists are already taking advantage of digital technologies. For example, Madonna signed a $120-million "360 degree" contract with concert promoter Live Nation, and Prince, Nine Inch Nails and Coldplay have experimented with digital album releases. "There are many schemes available to established stars now," remarked Lack. "But it has always been the role of the record label to find new talent, and that continues today." And as the field of players in that role becomes more crowded — with social networks and services like Goldberg′s Indie911 helping fans find new music — the labels have had to diversify their activities.

All three men noted one new "activity" in particular — the popular television show "American Idol," which has been a boon to the music industry, spinning out a variety of new stars.

In wrapping up the session and getting at the heart of the matter, moderator and radio host Larry Carroll asked the panelists if all of the "pipers of the music industry are ever going to get paid." That is, can this industry make money in the long term? And in the most telling response of the panel, almost in unison, all three shrugged their shoulders.

Moderator:
Barry Libert, Chairman, Mzinga Inc.

Corporations, entrepreneurs and even presidential candidates are finding innovative ways to use social networking to their advantage, and Barry Libert of Mzinga Inc. led a lively session aimed at informing and motivating attendees to create "communities" within their organizations.

"Businesses often confuse the means with the end," said Libert, noting that a loyal customer base has historically been the means to the end of selling products. Now, however, products are a means to establishing communities, which may consist of customers, employees or clients.

A common business misconception about social networking is that communities are only built online, but Libert explained that "community is not about technology — it's about social interaction." Companies should determine which medium is most appropriate for their target constituents. Relatively older employees, for example, may feel more comfortable with communities that revolve around face-to-face interaction. In designing their communities, companies should consider that people may have trouble transitioning from one medium of communication to another.

Communities in businesses cannot survive if they're not marketed, supported and moderated. After creating a forum for customers to make suggestions online, Starbucks assigned 48 employees to moderate the discussion board. While each company needs to determine its own level of regulation, companies should strive to create an environment that fosters candid feedback and suggestions. Every company has passionate customers, and companies can benefit by allowing their voices to be heard. Companies then need to act on customer feedback to maintain the credibility of the community.

Proctor & Gamble, InnoCentive and American Express are real-world examples of effectively implemented communities. P&G set a goal to have 50 percent of its new products originating from outside of the company by 2010. By 2006, 42 percent of P&G's new products originated externally. As a result of community input, about 80 percent of P&G's new products are successful, compared to an industry average of 30 percent.

InnoCentive has created a community of 140,000 "solvers," or technical experts, who try to solve problems commissioned by companies throughout the world. This community allows some of the largest companies in the world to tap into an extensive network of expertise to solve problems quickly. One company had been unsuccessful at removing solidified oil from the ocean floor until tapping into the InnoCentive network.

Lastly, American Express created the framework for its customers to suggest charitable causes that the company should support. More than 100,000 customers participated in The Members Project, and the winning idea resulted in a $2 million donation to a UNICEF program promoting clean drinking water for children. Each of these companies has found ways to create communities tailored to its individual needs.

Libert offered five steps for business leaders to start building communities in their organizations: (1) Identify a process that is not using social networking; (2) find a group of activists who care; (3) provide the right technology to house the community; (4) accept the wisdom of the community participants; and (5) measure your results and the results of the community.

In closing, he said, "I'm going to beg you to go home and be a community activist in your business."

Moderator:
Ernest Wilson III, Dean, Annenberg School for Communication, University of Southern California

Ernest Wilson III, Dean of the Annenberg School of Communication at USC and the moderator for the panel, opened the discussion reminding the audience of the "dinosaur age" when people had desktops, not yet laptops, and were essentially chained to their desks. The advent of laptops began the age of mobility, and the trend accelerated with the introduction of the modem and then wireless Internet. But today's generation of phones and mobile devices will usher us into yet another era.

The panel consisted of five gentlemen, each with a specific (and often adamant) view as to the superiority of certain products and approaches for taking the world mobile.

Rama Shukla of Intel helped to frame the discussion, referring to it as an "old debate" ("are we trying to shrink the PC into a phone or make the phone grow up into a PC?"). Most on the panel thought the mobile phone is growing up. Mike Yuen of Qualcomm pointed out that "the cell phone is the most ubiquitous electronic device in the world." Doug Britt of Helio added that when it came to entering the digital information age, "the starting point in Asia and Africa was the mobile device, not the PC."

Mark Collins of AT&T Mobility spoke of the "limitless" possibilities for handheld devices and said we are at the dawn of a new industry. However, Collins admitted "there are certain things you can't do on a device the size of a business card because of the size of human hands, battery life and screen size." But perhaps Americans are a little spoiled. David Steinberg of CAIVIS Acquisitions Corp. pointed out that "in America we grew with 15 inch monitors . . . in Asia, they didn't." While the handheld mobile device is a supplement to the personal computer for most Americans, the handheld is the primary device for many Asians. Because of this, the two markets are developing quite differently.

"Ubiquity" was the word of the day. Several panelists spoke of traveling to Asia and seeing people operate not just one but sometimes two or three mobile devices at the same time. Britt shared his personal experience of buying a $2 slushie from a vendor in Korea who was watching TV on one mobile phone and texting on another. Still, Shukla maintained that if given the option, a taxi driver in Asia would still prefer to pull over and use an Internet café, if one were available. But the rest of the panel disagreed — not surprising on a panel full of spirited debate.

Moderator:
Mike "Zappy" Zapolin, Co-Founder, Music.com

Today's global Internet brands are becoming even more important to consumers, who need trustworthy sources to access information and products. Advertisers are starting to move aggressively into the online space, where results are quantifiable and performance-based, and the panelists for this session discussed ways to create business models and employ viral marketing to increase brand awareness.

Building a truly global brand requires that companies adapt promotional activities to local needs. When Monster.com tried importing a U.S.-generated commercial to Europe, said founder Jeffrey Taylor, the company met with limited success but learned to solicit input from local employees and create advertising content for individual countries. "A big part of the process of global branding is not to have the hubris to say we know everything about building the brand around the world," he added, noting that it is also important for a company to defend its Internet brand by securing international domain names that are related to the brand.

Panelists debated whether branded or generic domain names are most valuable to building an Internet brand. Mike Zapolin of Music.com, who also moderated the panel, explained that generic brands, such as music.com, beer.com and music.com, are valuable because the domain names bring credibility and legitimacy to consumers. Andrew Miller of Internet Real Estate Group elaborated on the evolution of the creditcards.com brand: His company purchased the domain name for less than $100,000 and eventually sold the brand for several million dollars after partnering with credit-card providers to allow visitors to apply for credit cards on the site. The buying party further developed the site′s capabilities and brand, eventually selling the site for more than $100 million. The brand was successful because of the credibility inherent to its name. Taylor said he favors the use of unique or branded domain names, such as monster.com, eons.com and kayak.com, rather than generic domain names. "The brand is incredibly important," he said. "I'm a huge believer in branded domain names."

It is essential for Internet companies to have a sustainable, underlying business model and not simply focus on brand proliferation. Robert Diener of Hotels.com said, "You need to build a solid business" and focus on creating a strong foundation to maximize the value of an Internet brand. Hotels.com started as Hotel Reservations Network in 1991 and created a sustainable business as a booking agent before purchasing the hotels.com domain name and launching the brand in 2002. The company took a low-cost approach to promoting the hotels.com brand by producing its first series of commercials internally. The campaign resulted in an increase in brand awareness by more than 80 percent within nine months.

Viral marketing has an increasingly important role in building Internet brands. Steve Mitgang of Veoh Networks has grown veoh.com to attract more 18- to 24-year-old users than Facebook.com, largely through word-of-mouth advertising from users. Veoh.com is a viral, socially built brand, he said, and companies must become comfortable with viral content as user-generated content and word-of-mouth advertising become more common among Internet users. Mitgang now faces the challenge of finding ways to monetize the traffic the site receives from international visitors.

Zapolin thinks that the current environment for Internet branding is exciting. In 2007, he said, only 7 percent of advertising was spent online, while 21 percent of all media was consumed online. There will be great opportunities with Internet branding as the portion of advertising spent online converges with online media consumption.

Moderator:
David Meerman Scott, Viral Marketing Strategist

Enormous shifts are underway in the world of public relations, and they are shaking up an industry once seen as indispensable by even the most powerful of corporations.

David Meerman Scott, a viral marketing strategist, moderated this eclectic panel, which featured one of the most interesting and rowdy debates of the conference. The experts panel sometimes clashed as they analyzed where public relations is headed in the next 5 to 10 years, and how the Internet will continue to change the way information is filtered, presented and translated into a format that can move an audience of consumers.

It's a whole new ballgame these days, according to Steven Rubenstein of Rubenstein Communications. "Everything is instant. Everyone wants to cut through all the noise and all the extra info that bombards them each day. The media needs to be able to tell an engaging story and have great content. Stories tend to travel and bubble up," he advised. "Our business is 'nichier' and we need to know it better than those bloggers do, or they'll eat us up."

Calacanis arrived late, and burst into the room full of opinions. "Listen, I'm the one keeping it real," he insisted. "Journalists' relationships with public relations firms are unnecessary and way overpriced." This elicited a surprised reaction from the audience. "I'm saying what needs to be said," he continued. "It's about time we go direct. Who would you rather speak with, the president of a company or his/her PR person? It's not rocket science. And most CEOs want to talk to customers directly as well, not hear information filtered from an overpaid third party who acts like the most important person in the room."

He continued by pointing to Steve Jobs as an example. "He says, 'Look guys, this is my (stuff). This is what it does. What do you think? Like it?'" In this way, he is able to communicate directly with customers on a personal level, and make the necessary changes to improve his product or keep it the same. As a result of this direct communication, Apple is one of the most successful companies on earth.

Hope Boonshaft of Hill & Knowlton injected that honesty is always the best policy. "Tell the truth and get the message across with grace and dignity — in the best way possible," she stated. "All you can do is your best. Sometimes a mess does occur, but we can only do our best to mop it up and move on."

A video clip from YouTube about viral marketing was shown as an example of a new and creative way to market a product. "YouTube is fantastic!" exclaimed Boonshaft. "Look how it helped tell the story and get a message out."

Calacanis insisted that "company heads need to go to parties and do the meet and greet. They need to meet people directly, without any glorified assistants called public relations." But Rubenstein raised an excellent point: "What about when a crisis occurs, what then?" Calcanis conceded that public relations may be helpful in sticky situations.

The panel discussed the need for CEOs to learn to blog, use new social networking tools and learn how to facilitate public conversations. CEOs should be in the trenches, not hiding behind their desks. "You've got to get in the game!" Boonshaft urged.

Scott concluded the session by asking the panelists: "If you were sitting with the 'Governator' and he asked you for the most important keys to blogging, what would you tell him?" The answers included creating an organic dialogue, honesty, creating a platform for information exchange, transparency, respect ... and a little bit of pizzazz.

Moderator:
Michael Stroud, CEO and Co-Founder, iHollywood Forum Inc.

Technological change seems to happen almost overnight. But in reality, the process is not nearly as simple as it may seem from the outside. Major factors, including new attitudes about privacy and information sharing, help to pave the way for technological change.

How has the distribution of digital content changed in the 21st century? As moderator Michael Stroud of iHolywood Forum explained, digital content has enabled huge numbers of people to participate in Internet communities, and to use the web for entrepreneurial innovation. He noted that Moore's Law — developed by Intel co-founder Gordon Moore in 1965 to show that computer integrated circuit capacity doubles about every two years — can serve as a sign of the times for Internet growth as well. With that growth in capacity has come a surge in television, movie and music content available to the public. The panel agreed that the future is bright for digital innovation.

As the Internet is bombarded with the more sites like YouTube and Itunes, we can expect to see a changing trend that includes the seamless exchange between the cell phone and Internet, and "open networking," in which the restrictions on equipment types and modes of communications, content and platforms do not exist. This openness will facilitate the oneness between the device and medium, said Stroud, adding that we already have massive networks to handle this phenomenon. "Distribution of content will be frictionless and not bounded by any platform in the future," he predicted.

As more companies like his emerge, said Eric Feng of Hulu.com, "we are going to see the bridge between TV and the Internet." Hulu.com allows viewers to watch television clips and episodes for free online. Having content that is available on demand and flexible will make the distribution pipeline "low friction," he said. The upcoming battle will be to ensure that quantity doesn't supplant quality.

The biggest issue for content distribution will be to ensure it remains free, the panelists said, noting that newspapers and the music industry are facing financial trouble ahead unless their content is either offered free online or with reduced entry points, such as that offered by the iTunes music downloads library, where songs cos just 99 cents. They also warned that it will be a challenge to monetize any content unless it is of high quality.

In a world of techie teenagers who embrace Facebook and MySpace, we see both the changing mindset and the change in content that is posted readily available. Younger Internet users aren't bothered by the lack of privacy, said Andres Jordan ot Deutsche Telecom/Tmobile. "We are trading privacy for accountability," he added, "and we need balance." As times change, attitudes about online privacy will change, and its importance will change accordingly, he suggested.

The vision in 10 years for content distribution is going to be dramatically different, the panelists said, predicting that content will become free, and that convenient and social environments will dominate. The Internet will become a platform of common interests and shared hobbies, becoming the lifeline for content generation.

Moderator:
Jim Gray, Sportscaster, NBC (Olympics), Showtime and Westwood One Radio

It's not just about bragging rights and the love of the game anymore. The wide world of sports has become a $213 billion behemoth, comprising marketing, endorsements, media, merchandising, travel and more. We live in a world of constant change, said panel moderator and NBC sportscaster Jim Grey, "and the business of sports is changing on a daily basis."

Recession became a key topic for the panelists, who agreed that sports teams suffer when consumers spend money elsewhere. The business of sports is based substantially on advertising, and Timothy Leiweke of AEG added that when consumers stop spending, retailers cut their sports advertising. Sumner Redstone of Viacom Inc, argued that "the best will survive because those companies are good at what they do." When he owned the New York Knicks, the team succeeded, he said. When he sold it, "they tanked."

Even in times of recession, said Casey Wasserman of the Wasserman Media Group, sports rights will continue to grow because new channels are developed faster than for any other media types. Grey commented on a recent statistic from Disney Inc.: 50 percent of its market capitalization is represented by ESPN. Redstone agreed, adding that "at CBS, sports are very important — they make the money."

Ed Goren of Fox Sports responded that all his company's contracts with sports entities generate profit, regardless of the deal size, although the Super Bowl is the single most profitable event in any day for Fox, earning the company over $600 million in one day. In fact, said Wasserman, nine of the top 10 most watched shows of all-time, have been Super Bowl games. "That," he added, "is the power of sports!"

The sporting industry in the United States constitutes a $51 billion market, growing at a rate of 37.6 percent a year. With Los Angeles offering a substantial market base, Grey asked the panelists if they thought there would be an NFL team in L.A. by 2015. "It would take two to three years to design a stadium, one to two years to sift through politics, two years to build the stadium, and that's not even talking about the team," said Leiweke. "I don't see how it could happen."

Globalization has been a growing phenomenon in sports, and Grey wondered what sport is best positioned to go overseas. Wasserman said he believes the NBA has the lowest barriers of entry and the biggest stars in the world, concluding, "The NBA can transport globally better and more efficiently than any other sport." Leiweke agreed but argued that sports facilities around the world are the biggest hindrance to the NBA spreading globally. "Once new facilities come online and the infrastructure needed to succeed is developed," he said, "this will enable the league to be global." Goren countered that baseball is the best positioned as a global sport. For example, when Japan won the World Baseball Classic, that victory empowered other countries to believe they could compete as well. "It created opportunity for expansion as a global sport," he said. Even so, Wasserman pointed out that soccer is currently the most global sport by far, and he doesn't see that changing any time soon. A testament to Major League Soccer′s success is its ability to build the "right" infrastructure in other countries.

Transitioning from soccer to "branding" and athletes, Grey stated that the top three sports brands are the New York Yankees, Real Madrid and Tiger Woods. "Tiger has an enormous impact in the business of golf," said Redstone, and the panelists agreed they didn't foresee another powerful athlete in our lifetime.

The most controversial topic of the session was mixed martial arts, which has been called a brutal sport and for which no standardized fight rules exist. All panelists recognized the sport's growth but said it directly conflicts with social responsibility. For that reason, said Goren, Fox didn't offer the sport. Redstone agreed, saying, "There is a difference between the bottom line and social responsibility. I don't believe MMA is socially responsible, but it′s good for the bottom line. Still, I don't like it."

As for gambling, Wasserman said there is a taboo in the United States that restricts gambling as a growth sport. He recommended we define what gambling is specifically because fantasy sports, such as March Madness brackets, are drawing a fine line. Leiweke warned that there must be some separation between those who own and gamble, but he predicted there will be a team in Las Vegas soon.

Finally, Grey asked how sports companies could capitalize on digital content. Digital sports media constitute their own $3 billion industry already. Fox rents its product to Internet media to protect the content rights, said Goren, but many entities give up these rights and it hurts business. Redstone acknowledged that the Internet "is still a small pot of business." However, "as we move ahead, it will be the growth business." As an illustration of how times have changed, Leiweke said, "ESPN was a secondary consideration when Disney initially bought its parent company."

Moderator:
Dennis Kneale, Media and Technology Editor, CNBC

The world of mass entertainment is facing a transformation perhaps even more profound than the shift it faced in the early 1980s with the rise of the VCR and the personal computer. Industry leaders met to discuss how these changes are converging and how they will shape the future of entertainment in a provocative session moderated by CNBC editor Dennis Kneale. The panelists, all representing major media companies, discussed the barriers and benefits of the digital revolution.

Throughout the session, the panelists returned to the question of "What does a 21st-century company look like?" Terry Semel (of Windsor Media, formerly of Yahoo!) noted a historical pattern in which past media corporations dominated older technologies but did not own newer innovations (such as radio stations not owning television), opening the door for a changing of the guard. Peter Chernin of News Corporation added, "We are in the business of trying to create content," noting that companies are adjusting to the new patterns and transformation of consumer consumption. Mark Thompson of the BBC agreed, saying that it's wrong to look at digital as simply a new way to distribute old technology. In the end, innovations in distribution will happen, thanks to these new companies with differing business models.

The next item on the agenda was a shift towards the benefits of the digital revolution and how it will change the way people interact. The focus was on connectivity. Robert Kotick of Activision spoke about the way that video-game consoles are moving towards connecting TV to the Internet in ways that haven't been accomplished before. Adding on to the idea of connectivity, each of the panelists noted the importance of mobile phones. Although there are 1 billion television viewers and 1 billion users on the Internet, there are 2 billion cell phone users around the world.

A question arose about the lifespan of theaters. Thompson noted that movie theaters are universal, that digital film and the movie theater experience can and will co-exist. Other questions brought up included the role of U.S. broadband and its slow connection speed in relation to the rest of the world. For now, even though the industry is moving towards downloadable content such as movies and video games, the lack of infrastructure to support such measures is hindering its adoption.

The panel ended its discussion with advertising advice and lessons for company business models. Kotick brought up his company's wildly successful game Guitar Hero, which includes untold hours of untapped advertising potential. Semel built on this with the concept of opening up platforms, creating Web sites that allow people to access their personal information that is currently housing on a multitude of sites. The panel concluded by addressing piracy; other media sectors are hoping to avoid the struggles of the music industry by adapting to change instead of fighting against it.