Board of Directors (Continued)
One of the biggest challenges these days to building an engaged Board of Directors is everyone’s tendency to multitask.
I like Matt Blumberg’s advice on this and I think it should apply to all Board meetings.
Posts from VC & Technology
A $32bn Dividend
Microsoft announced this evening that they were paying a $32bn dividend and also were initiating a $30bn stock buyback program.
I own shares in Mister Softee, as Jim Cramer calls the House That Gates Built.
But I sold about 1/3 of my position last week as I began to realize that the company was never going to generate the kinds of returns I want off the capital base they’d accumulated.
Am I sorry? Yes. I should have held on for the $3/share payout that all shareholders of record are going to get. But I still have 2/3 of my position so I am not terribly upset.
As we were headed back home from the airport tonight, the news came across my Blackberry.
My partner Brad and I talked about it. What does it mean?
For one, it means that Gates and Ballmer have realized that there is no way they can effectively invest the $60bn they have in the bank. They are going to give half of it back to the shareholders and invest the rest in buying back the stock over the next four years.
We decided its like Juian Robertson or George Soros recognizing that they can’t generate the returns they want to with the huge capital bases they’ve accumulated and so they give it back to their investors. Gates and Ballmer are not any different.
Can they invest $10bn in their business over the next four years at the rates of return they want. Probably.
Can they invest $60bn? No way. So they are giving it back.
I think its a good move.
I am not sure how Wall Street will react but I think it should help the stock get moving again.
Since I still own 2/3 of my position, I sure hope it will.
Board of Directors (Continued)
On the plane back from Denver today, I made a note to do a more thoughtful piece on Boards. I fired off my post on the subject fairly quickly last night after reading Brad’s post.
I’ve got some really strong feelings on this subject.
But Jerry beat me to it.
This is one of the most misunderstood issues in startups and possibly in all of business. There’s a lot more to say on this subject, but Brad and Jerry have done a good job of getting the conversation started.
The Bored of Directors
Brad Feld has a great post that is a reprint of an essay he did several years ago called Boards That Aren’t Bored. It’s a great rundown of the key issues in building and using a board.
It reminds me of the real problems of creating a great board. I’ve sat on over 30 boards in my years in the venture business and I can count on somewhere between one and two hands the number of boards that have been truly effective. Brad calls them working boards. That’s a good name. But I’ll call them engaged boards. Because boards that are truly exceptional are interactive, candid, engaged, involved, and passionate about the businesses they support.
I believe you can have a good company without an engaged board. You can even have a good company with a bored board, but its not that common.
But to have a great business, you must have an engaged board.
It takes a lot of work, but the payoff is always worth it.
Advertising
There was a great breakfast panel today talking about the future of advertising.
We’ve got the CEOs of WPP, Aegis Media, and DDB, the guy who runs marketing for Coke’s brand, the CEO of William Morris, a couple of great Internet entrepreneurs, and a even a dog sitting around a big round table talking about advertising and its future.
It’s clear that “image” ads are struggling to compete with “call to action” adds and its going to get even harder as digital media develops better tools to target these action oriented ads to the right audience at the right time.
It’s also clear that marketers (like Coke) are becoming media and media (like Fortune) are becoming marketers.
The most interesting part of the panel though was the heated debate that developed between the big agency guys and the Internet entrepreneurs. The entrepreneurs were arguing that we are experiencing a major transition in the world away from big brands and big media. They argued that individuals no longer trust the establishment and that credibility, authority, and connections among individuals is what matters most.
It was fun to watch the fireworks.
Charlie Rose and Ted Turner
The highlight of Brainstorm so far was Charlie Rose’s interview of Ted Turner last night after dinner.
Charlie did his part perfectly and Ted was in rare form. In my opinion, Ted Turner is one of the greatest entrepreneurs around. He took big risks and got big rewards. He kept envisioning things and then making them happen.
There were enough one liners from Ted last night to fill a couple pages, but my favorite was “The US invasion of Iraq was as big a screwup as Time Warner’s sale to AOL”.
Last night we saw a humbler man. His fortune is 1/10th of what it was at its height, blown up by the decline in Time Warner stock. He admited that he “sold at the bottom because he was scared”. He was candid, funny, and full of the energy and enthusiam for life that has always characterized this man.
The interview was taped and will probably broadcast on TV at some point. I don’t see it on the schedule right now though.
The Oil Endgame
I just attended a presentation by Amory Lovins, the CEO of the Rocky Mountain Institute, on a plan to reduce the world’s dependence on oil and other carbon-based fuels within 15-20 years.
The good news is it can be done with an investment of around $10bn per year over the next 15-20 years. And the payoff will be reduced oil costs of $135bn.
The panel was well attended by VCs and politicians which means to me that there’s money in this and there’s votes in it too. If that’s the case, then let’s get on with it.
Carly Fiorina on The Future of Tech
Carly Fiorina, the CEO of HP, opened the Brainstorm conference today with some interesting comments.
She said that we are not anywhere near the end of the run in IT. She feels that the “dot.com bust” marked the “end of the beginning” not the “beginning of the end”. She feels that we are entering a golden age of information technology that will change business, society, and the lives of everyday people in fundamental ways.
It was an uplifting speech. And I agree with her completely as I’ve said in previous posts.
Brainstorm
I am at the Brainstorm conference in Aspen the next three days. A great group of people here and the agenda looks great. I’ll blog as much of it as i can. HP gave out digital cameras so I’ll try to post some photos too!
Radio in 2010
I was asked to participate in a panel discussion today at Infinity Radio. The topic of the panel was Radio in 2010. The idea was to attempt to figure out what a radio station will be like at the end of the decade.
I have some strong feelings on this subject. I think the radio industry continues to believe that its spectrum (the AM and FM bands and specifically the channels on those bands) is its most important asset. Unfortunately for the radio industry, in the digital world bandwidth is bandwidth and how it gets delivered (over the air, over a wire, satellite, etc) is not a long term proprietary advantage.
The best way of illustrating this is to look at Internet radio. Today, it’s just as easy to listen to WFUV on my laptop as it is on my car radio. The sound quality is the same if I have a broadband connection to my laptop. If I live in NYC, then I can get that broadband connection almost anywhere by borrowing someone’s WiFi connection. With the right software, a WiFi enabled PDA can be as good or better than a car radio in most parts of NYC today.
This doesn’t mean that the radio industry doesn’t have a better product today and will for a long time to come. Every car comes with a radio that is simple to use. WiFi isn’t ubiquitous and free outside of the most dense major metropolitan areas. And it isn’t clear that WiFi or any other form of bandwidth will ever really be free and ubiquitous the way the radio spectrum is.
But the trendline is going in a clear direction. High bandwidth IP is going to be everywhere someday pretty soon. In that world, the radio industry’s spectrum is not the proprietary advantage that it is today.
So what are the radio industry’s key long term advantages?
First, the radio industry understands how to program audio better than anyone else. They understand the formats, the economics, the demographics, and they continue to experiment with new kinds of programming.
Second, the radio industry understands how to sell advertising to monetize free audio programming. They’ve been doing it for years and they have the clients, the relationships, and the skills to continue dominating that aspect of the business.
Third, the radio industry understands how to promote new music and they get paid a lot of money by the music industry to do that. They own this business today and they can own it in the future if they play their cards right.
Fourth, radio is where the most interactive forms of political (and other) discussions happen in major media (obviously this doesn’t include blogs). Regardless if you like or hate Rush Limbaugh or Al Franken, you have to admit the talk radio format and the interactive nature of the call-in listener is a powerful forum for political dialog. It’s true in sports too, just listen to Mike and the Mad Dog on WFAN. It’s true in stocks as well, listen to Jim Cramer.
And last, and the most important advantage, radio has a branded relationship with its listeners that is strong, familiar, and meaningful. My daughters won’t let me drive them around without putting on Z100. They like Z100, they know its personalities, its ads, its music, its concerts, and its location on the dial. I suspect that most people who drive to work every day have a relationship like that with a radio station.
What are radio’s near term issues other than the commoditization of its spectrum assets? Well for one, radio has become formulaic and boring to many listeners. In the NYC market, outside of the big formats like Urban, Top 40, and Classic Rock, there isn’t much to listen to on the FM band.
Another big issue is the loss of listeners, particularly in the car, to satellite radio. Satellite charges a monthly fee and does not need advertising to support it. I think the rise of satellite radio is mostly because it offers a broader array of music formats than the FM band and consumers really do want choice.
So like the classic karate move, radio needs to use the strength of its enemies and use it to its advantage. Those strengths are more bandwidth in more forms of delivery on more devices. So if I owned a radio station today, I’d invest heavily in digital delivery. To me that means Internet radio and HD Radio.
Internet radio lets a station put its audio programming out there in competition with other Internet radio competitors. I’d promote the Internet radio stream heavily on the traditional radio station and encourage listeners to log on and bookmark the station. I’d make deals with iTunes, Rhapsody, and the other digital music platforms to have the Internet radio station featured prominently. I’d make deals with Microsoft Media Server and the other home entertainment platforms to get the Internet radio station featured prominently on those devices too.
HD Radio allows for multiple audio streams on a single channel. I’d deploy HD Radio and quickly develop new formats that offer more diversity for the listeners. If I was Z100 and had a classic Top 40 listener, then I’d develop new supplemental channels that skewed older and younger in the way that Viacom did with MTV, VH1, and Nickelodeon. I’d promote those channels aggressively on Internet radio to build out the listener bases for the new formats.
The new emerging consumer devices, (iPod, Treo, cellphone, Gameboy, etc) are going to have radios in them. I’d create a consumer electronics group to go make deals with all these manufacturers to insure that there are stored preset buttons on all of these devices and I’d make sure that they come preconfigured with my stations on them when they are sold in my local markets.
There’s a lot more that I’d do, but I think you all get the point. I’d reinvent the radio business as an audio programming delivery company and organize it to be relevant on as many digital devices and over as many forms of audio delivery as one can imagine. It’s not as simple a business, but it could be a lot more valuable over time than a radio station is today.
The good news is that – based on my morning at Infinity – at least some radio companies have woken up. They are moving in this direction, probably a lot faster than we all might think.