World Class – Koos Bekker: Media shapeshifter

2014-06-22 15:00

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What happens when your business is threatened with oblivion? A vivid comparison was just laid bare. One was the leak of a confidential memo assembled for the leadership of The New York Times that revealed, in gruesome detail, the plight of the company.

The other was an earnings report that caused South African media company Naspers’ stock to nudge towards a historic high and attain a market value of about $44?billion (R468?billion), or almost 100 times what it was worth in 1994.

By contrast, shares of The New York Times trade for about the same nominal value as in the mid-1980s, while the company’s market value is about $2?billion.

In 1997, the management teams of Naspers and The New York Times were each confronting the dawn of the internet and the insidious challenge it posed to the mere idea of a “paper of record”, expensive printing plants and truck fleets, and the conceit that all important news and information could be

contained in one place. In 1997, audiences were beginning to enjoy more choices than ever – there was a quickening news cycle, distribution that was instantaneous and bloggers who held intergalactic megaphones.

This was before Google, Facebook, Twitter, Netflix, iTunes, Pandora and WhatsApp; before videos had been streamed on YouTube; and before the first smartphones had put the power of yesterday’s supercomputers in everyone’s pockets.

It was also before it was obvious that people could buy a song rather than a full album, catapult themselves directly to a product page on Amazon, watch a TV show when they wanted, scan news aggregation sites for the latest headlines, dip into speciality sites for detailed coverage and, most importantly, it was way before most sponsors had woken to the fact that there were now ways to accurately measure how advertisements performed.

The Naspers management decided to ride, rather than fight, the technology tide while the The New York Times management chose otherwise.

Today, coincidentally, both companies have fairly new CEOs, and while the head of The New York Times has to deal with the consequences of 20 years of ruinous decisions, his counterpart at Naspers has been dealt a royal flush.

The CEO of The New York Times inherited a company that missed not just one but two media revolutions – TV (mastered in a spectacular manner by Rupert Murdoch) and online (mastered by Koos Bekker, CEO of Naspers).

Between the early 1990s and mid-2000s, The New York Times spent about $2?billion on assets that later melted down.

In 2000 – admittedly the height of the dotcom zaniness – the New York Times had revenues of $3.6?billion and an operating profit of $635?million. Last year, its revenues were $1.6?billion and its operating profit was $158?million. Its balance sheet is creaking.

Meanwhile, Bekker, one of the most accomplished but least known online executives of the past quarter century, took a different tack.

When he became Naspers’ CEO in 1997, he took the helm of a company that, like The New York Times, had started in the newspaper business – in this case in 1915 in Cape Town with a single title, Die Burger. This later grew into a company that also published magazines and books.

In the early 1980s, Bekker, having just graduated from Columbia Business School, mimicked Time Inc (the original progenitor of HBO) and, under the auspices of Naspers, started M-Net, a subscription-TV service that eventually added the nectar of the genre – sports coverage – to help his company migrate away from dependence on the printed word.

Naspers became one of the early internet service providers in South Africa, but Bekker’s defining move – and the one that sets him apart – was his decision to put online first by starting, investing in or buying companies that were born on the web. The best known, and by far the most profitable, was Naspers’ $32?million purchase of about half of Tencent, which at that point operated China’s most popular internet messaging service.

Prior to retiring as CEO, Bekker outran and outwitted the world’s old-style media companies as they floundered with the online challenge, and also outflanked dozens of aggressive private investors as he turned part of Naspers into a fast-moving finance house – epitomised by his decision to take all his compensation in the form of Naspers stock.

That has paid off – for both him and shareholders – as Naspers has gone about accumulating an enviable array of interests in internet companies, usually in faster growing economies, that are off the radar of most of its global competitors.

The result: Naspers is now the largest internet company outside the US and China, and holds stakes in online auction businesses, instant messaging services, mobile advertising networks, price comparison sites and e-commerce firms in countries such as

Russia, Poland, Brazil, Nigeria and the United Arab Emirates. Naspers has also taken its share of defeats (OpenTV).

Naspers’ astonishing progress is in stark relief to the plight of The New York Times, laid out in turgid, repetitive detail in the leaked 97-page memo, apparently six months in the making, that concludes with the breakthrough idea that the organisation should “consider a task force to explore what it will take to become a digital-first newsroom”.

Apart from the revelation of a declining web and mobile audience, there are several other aspects of the report worth noting.

The first is the constant allusion to perpetual catfights between the two sides of the organisation – the journalists and the businesspeople – as if neither recognised they are engaged in a war of mutually assured destruction or that their real enemies lurk outside their building.

The second is the company’s struggle with the fact that three-quarters of its revenue comes from subscribers nearing their graves. The third is the difference between a company whose leaders were born on the web and those led by people struggling to come to grips with it.

The overwhelming sense from the report is that, except for the desire to refashion its rich trove of archived material, The New York Times’ hierarchy is still too busy paying homage to the past.

Here are some telling examples: the printed newspaper still carries the slogan “All the news that’s fit to print”, a slogan that is now so patently false that it sounds like a spoof borrowed from The Onion.

Of the 32 people on The New York Times’ masthead (the list of its senior people), four are dead and none of the titles include the words ‘software’, ‘engineering’, ‘design’ or ‘technology’. To further the indignity, right in the middle of the banner for the home page is the phrase, laden with misguided symbolism, “Today’s Paper”.

But most revealing of all is the choice of language in the 97-page report. The word ‘software’ does not make a single appearance in the body of the report and it is not until page 63 that the word ‘code’ makes its debut. It’s also clear the authors could not summon up the courage to stop referring to their audience as “readers” and begin to call them “users” – probably because some pedant was worried they’d be confused with dope addicts.

Understandably, The New York Times’ task force was busy trying to come up with ways to arrest the online audience ­decline. But that’s less – far less – than half the battle.

The Times’ report did not address how an internet property, dedicated to broad-based news and information, can ever generate a lot of money. Without solving that riddle, there is no path to pros­perity. In the meantime, The New York Times has to contend with the humiliation of being outed by the online service BuzzFeed – a property born on the web.

Moritz of Sequoia Capital first published this article on LinkedIn.

Bekker is currently chair of Naspers. City Press is a Media24 publication, which is owned by Naspers

» This series is supported by Play Your Part, which is a nationwide campaign to inspire and celebrate active citizenship. Each South African is encouraged to offer their time, money, skills or goods to make a collective difference to the lives of those in their communities. Start following @PlayYourPart

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