Modesty. What A Strategy!

I've worked in the entertainment business for nearly ten years, and it's always great to see an executive who understands there are two lines: A top line and a bottom line.  Yesterday's New York Times had a profile on Universal Studios Group president Ron Meyer. That he has held the same title for 17 years is a testament to his strategy of modesty.

"In a strategy that is starkly different from other top film studios, Mr. Meyer has determined that Universal should stay well behind the leaders, allowing the flashiest and most expensive projects — and typically the biggest payoffs — to go elsewhere.

'We gauge ourselves to be in the middle,' Mr. Meyer said. Universal currently ranks last among major studios at the domestic box office and hasn’t placed higher than third in the last seven years.

This approach appears to have put Universal on a permanent second tier, a strategy that could concede the future to a few 'superstudios' like, for instance, the higher volume distributor Warner Brothers. Warner has routinely invested much more than the amount that Universal spends — less than $1 billion — on production each year."

Meyer's people skills are said to be a reason for his long tenure, but his financial responsibility is the key. Rare is the entertainment exec who is content to make steady profits on mid-size sucesses.

On the other end of the spectrum, Janet Jackson just signed to Island Def Jam, a label run by free-spending Antonio 'L.A.' Reid. No details were given on the size of the contract. From a February 2004 article about Reid's ousting from Arista:

"Media reports suggested that he was forced out because, in spite of artistic and sales successes, spending was way out of line. The New York Times reported that Reid was known as a big spender, giving artists extremely generous contracts and spending lavishly on marketing and videos."

That's the story of the music business. People would rather be a bankrupt #1 than a profitable #2 or #3.

Comments

[Todd Gentry]

Great post. Love this blog--- plain-spoken strategic business information is so hard to find. This RSS feed sits right alongside NYT and WSJ. Keep up the good work.

[chano]

your modesty, what a strategy blog is VERY true. i think there are free spending executives in both industries. that said, looking at the present state of the music business that seems too be getting worse every day, the music industry should be MUCH more conservative and realistic about how they spend there money. the major labels and there executives have been out of touch for the past 10 years or so. and from the janet jackson (hyped) deal, they STILL don't get it. peace.