@ EconSM: Managing Deals With Social Nets

The final EconSM panel dealt with managing the deals with social nets. Trading views were Esther Dyson, principal, EDventure; Jason Hirschhorn, president, entertainment group, Sling Media; Mike Lang, EVP, Business Development and Strategy, Fox; and Quincy Smith, President, CBS Interactive. The panel was moderated by Rafat Ali, publisher and editor of paidContent, and Staci Kramer, paidContent’s executive editor.

Angel Funding vs. Big Media Investment: It seems that many integrations end once the press release is issued, Smith said. Hirschhorn added, “When you’re dealing with established media companies, they’re used to control. I think the angel community is a little more forgiving. All too often, I’ve heard the pitch from bigger companies that, you just have to change a number of things, until it becomes a question as to why they want to buy you in the first place.” Lang said that such cautionary tales offer a clue as to why so many deals don’t work. “Successful media companies don’t try to crush the innovation of companies they’re interest in. Part of the challenges large media companies have when embarking on such deals, Dyson said, is that when a company feels its spent millions acquiring a smaller entity, they won’t invest in in because they don’t want it to affect their P&L.

Mistakes Often Made: One problem Lang has found is the lack of realism on the part of some entrepreneurs. “When doing an acquisition, you want management to say here’s the risks. The worst thing I often hear entrepreneurs say is ‘We have no competition.’ or ‘No one’s done this yet.’ The number two mistake is that too many companies are influenced by venture capitalists, who are driven by something else other than what the business can actually achieve.” Smith added, “Big acquiring companies tend not to be good at managing growth. You need to give them five year plans about growth. We on the acquiring side will make mistakes too. Every acquisition is different and presents its own set of challenges and opportunities. There has got to come a point when the song and dance has to stop and both sides seriously examine whether there’s a fit or not.”

Areas Of Concentration: CBS is aiming for achieving greater reach and new content. “We don’t compete with Fox, we compete with Lonelygirl.” Smith said. You have a lot more competition from various platforms in the new media world and we have to address that. The second space I care about is developing new content. You can’t regurgitate TV shows and put them on the net. One of the most popular videos is a guy skateboarding over a cat. But new content isn’t professional versus user-based. It’s going to take a combination of both.” Taking up the same question, Lang brought up the NBC/News Corp. JV video deal as offering a clue to its priorities. “We are bullish on the future of video. It’s about all different kinds of applications, ones we haven’t even thought of yet. We’re also focusing on international. It is clear that there are new audiences we can reach. Mobile is much stronger internationally and that’s going to be a major area for us.”