Sober outlook in Sun Valley
Security is tight at investment bank Allen & Co.'s annual conference.
Held at the tony Sun Valley Resort nestled in the northern Rocky Mountains, the fairly secretive gathering of media kingpins, technology geniuses, billionaire investors, politicians and even the occasional star athlete also is filled with moonlighting detectives and retired police officers watching everyone and everything like a hawk.
One question: What exactly are they guarding? The businesses of most in attendance here have already walked out the door and no one seems to have a clue where they went. With the world’s economy mired in the recession, their advertising-dependent companies pummeled by consumers who have gone into hiding, and the Internet undermining the model that made many of them wealthy, the moguls who met under the glorious Idaho skies were a decidedly downbeat lot.
“I’m shocked at the business mood, which is talking about either that we’re at the bottom or going lower,” News Corp. Chairman and Chief Executive Rupert Murdoch said in an interview he gave during the conference to his Fox Business Network. He had just emerged from spending a morning with the most powerful people from Wall Street, Silicon Valley and Hollywood. What was the word from inside?
“It’s going to take years and years, like five years at least before we see any real growth coming out of this,” Murdoch said.
“We don’t see things improving,” added Martin Sorrell, chief executive of WPP Group, one of the world’s largest conglomerates of advertising agencies and someone pretty close to knowing the willingness of companies to spend money.
Every summer for the last 27 years, Allen & Co.'s conference in Sun Valley has served as sort of a Davos forum for the media, entertainment and, increasingly, technology elite. The corporate chieftains, whose private jets crowd the tarmac at Friedman Memorial Airport like a dealership’s fleet of unsold Chryslers, are not accustomed to defeat or negativity. Many of them are as much celebrities as the ones created, packaged and marketed by their media empires.
Normally the resort lodge’s Duchin Lounge is rocking past midnight during the week of the conference, with chief executives joking and hanging out with journalists. But with few moguls in the mood to party this year, it was a ghost town by 11:30 p.m., the bar deserted and the few forlorn journos who showed up wondering where the big shots had gone.
Google Inc. Chief Executive Eric Schmidt offered a sobering dose of reality, calling today’s economic environment “the new normal” and advising everyone to “figure out how to be happy and get our lives together in this new configuration.” And this comes from an executive whose company saw its revenues increase 6% in the first quarter.
Sports is usually the safe haven from a bad economy, but no more. Roger Goodell, commissioner of the National Football League, which trimmed its staff by more than 10% last year, echoed Schmidt’s line about the “new normal” and added that his league would remain “slimmed down.”
Every year at the conference there are one or two star attractions. At previous conferences it was the Google boys, Sergey Brin and Larry Page, or YouTube’s Chad Hurley. This year’s “it” executive was Evan Williams, co-founder of Twitter, the wildly popular social networking site where users send “tweets” -- text-based posts of up to 140 characters in length.
But rather than sing praises to the fast-growing company, several moguls dismissed Twitter’s prospects as a cash machine. Barry Diller, chief executive of IAC/InteractiveCorp, and John Malone, chairman of cable giant Liberty Media Corp., said in a closed-door session that they didn’t see how Twitter could make money, according to people in attendance at the panel.
When Sony Corp. Chief Executive Howard Stringer was asked about Twitter and other social networking sites, he quipped, “a lot of people are doing very well at making very little money. It’s not a club I’m looking to join.”
Unfortunately, he’s already a club member. Battered by slumping electronic sales, Sony profit fell 43% for the 2008 fiscal year and the company has projected another loss for 2009. Other old media companies are also struggling. Profit at Murdoch’s News Corp.'s was off by 70% in the three-month period ended March 31. During roughly that same period, Walt Disney Co.'s profit sank 46%, Viacom Inc.'s dropped 34% and Time Warner Inc.'s fell 14%.
Many here agree that the key to a turnaround, beyond a better economy, is getting people to pay for the content they freely watch online.
“People will get addicted and be willing to pay for it,” said Malone, who once ran the country’s largest cable TV company and therefore should know a thing or two about what people are willing pay for.
But Malone declined to say how or when that would come about. It was the same with Murdoch, who told his Fox Business Network that he has “a lot of plans I’m not ready to disclose yet” about how to get people to pay to read newspapers online.
One wonders what sort of impression the old-time moguls, with all their doom and gloom, made on first-time conference attendees. One such guest was basketball star LeBron James, who is trying to build his own media empire. When asked what it was like to be at such a high-powered gathering, the 6-foot-8 Cleveland Cavaliers forward said, “I’m the small guy.”
Not today, LeBron.