About four years ago, our company hired an internet marketing guru who was supposed to “bring us into the 21st century” or something. I nicknamed her “The Orient Express.” This wasn’t because she was Asian — she wasn’t — but because she’d managed, within a single week, to alienate every single branch of our 50-person company: editorial, sales, circulation, production, and accounting. Even the office manager hated her. In fact, the only thing that prevented me from throwing a stapler at her head was the fact that my computer monitor was blocking my path.
I started to get called into strategy meetings around this time, because I seemed to know something about the internet and some of my marketing suggestions were bearing fruit, despite the fact that I occasionally walked around the office dressed as if I’d just broken out of prison.
During one of the Orient Express’ presentations on how she was going to reshape our company, she busted out a breakdown of the money were spending on web-hosting, e-mail management, and other online services. She repeatedly hammered the point of how much money we were spending this way, when we could cut those costs by moving things in house (and maybe hiring people she knew, including her son, to handle things). I kept waiting for her to say what we would do after making these changes, but this appeared to be the extent of her “online strategy.”
After her umpteenth explanation of how much money we were wasting by using outside providers, I spoke up. I said to the group (including the owner of the company), “Y’know, the premise of my magazine is that, if you don’t do something really well, then you’re probably better off paying someone else to do it. Especially if you’re a small company. As far as I know,” looking over at the owner, “we’re not exactly hemorrhaging cash, so I’m not sure we need to make a priority of cost-cutting. I mean, it’s cool to want to save us money, but it seems to me that it’s one thing to shrink costs, and another to build new sources of sales.”
She announced that if we just listened to her, we would become a cutting-edge online content provider! I realized then that I should’ve brought a Bullshit Bingo card into the meeting. She had no plans for creating new online products for us to sell. All she saw was our online expense and how it could be smaller.
I was reminded of the Orient Express and her fixation on cost-cutting for its own sake when I read this BusinessWeek article on Edgar Bronfman’s Warner Music Group last week. Warner’s album sales have grown under Mr. Bronfman’s tenure. The numbers are pretty anemic, but they’re positive when the competition is in decline.
The point the article makes is that Mr. Bronfman did cut costs at the company, but savings weren’t treated as their own goal:
How did Bronfman do it? He cut Warner’s artist roster nearly 30%, ditching more than 50 acts that were no longer selling well. He refused to pay big bucks to keep the likes of Madonna and Nickelback out of rivals’ hands. And he found some $300 million in annual cost savings. Result: Warner had more time and money to focus on new potential hitmakers.
Other music companies have slashed budgets for artists and repertory (A&R), the department that finds and nurtures talent. Not Bronfman, whose hundreds of scouts spend their nights in clubs, from Manchester to Seoul, and their days on MySpace, finding new chart toppers such as James Blunt, Gnarls Barkley, and Panic At The Disco. The strategy is paying off: Warner’s share of U.S. sales of new releases is up 7% since 2004, vs. a decline of 2% for the rest of the industry, according to Nielsen SoundScan, which tracks music sales
It’s one thing to say, “There’s no way Madonna can earn back the advances on her albums; we can save $100 million by letting her walk,” but it’s another to actually put some of that money into developing new acts.
What happened to the Orient Express? At our Christmas party that year, I warned her explicitly about alienating the company that was handling our web-hosting and site updates. That company was also an ad agency that had long relationships with several of our magazines. Maybe I was too friendly in my warning. Days later, she sent the company a fax stating that we no longer needed their services. Two days after that, she was shitcanned. She hadn’t lasted 100 days.