Posts Tagged ‘business’
“If the world’s 223 international undersea cable systems were to suddenly disappear, only a minuscule amount of this traffic would be backed up by satellite, and the Internet would effectively be split between continents”*…
Your correspondent is hitting the road, so (Roughly) Daily will be a good bit more roughly than daily for a bit. Regular service should resume on or around May 6. Meantime, a fascinating– and meaty– piece to hold you…
Josh Dzieza goes deep on an undersung technology and the folks who keep it functioning…
The world’s emails, TikToks, classified memos, bank transfers, satellite surveillance, and FaceTime calls travel on cables that are about as thin as a garden hose. There are about 800,000 miles of these skinny tubes crisscrossing the Earth’s oceans, representing nearly 600 different systems, according to the industry tracking organization TeleGeography. The cables are buried near shore, but for the vast majority of their length, they just sit amid the gray ooze and alien creatures of the ocean floor, the hair-thin strands of glass at their center glowing with lasers encoding the world’s data.
If, hypothetically, all these cables were to simultaneously break, modern civilization would cease to function. The financial system would immediately freeze. Currency trading would stop; stock exchanges would close. Banks and governments would be unable to move funds between countries because the Swift and US interbank systems both rely on submarine cables to settle over $10 trillion in transactions each day. In large swaths of the world, people would discover their credit cards no longer worked and ATMs would dispense no cash. As US Federal Reserve staff director Steve Malphrus said at a 2009 cable security conference, “When communications networks go down, the financial services sector does not grind to a halt. It snaps to a halt.”
Corporations would lose the ability to coordinate overseas manufacturing and logistics. Seemingly local institutions would be paralyzed as outsourced accounting, personnel, and customer service departments went dark. Governments, which rely on the same cables as everyone else for the vast majority of their communications, would be largely cut off from their overseas outposts and each other. Satellites would not be able to pick up even half a percent of the traffic. Contemplating the prospect of a mass cable cut to the UK, then-MP Rishi Sunak concluded, “Short of nuclear or biological warfare, it is difficult to think of a threat that could be more justifiably described as existential.”
Fortunately, there is enough redundancy in the world’s cables to make it nearly impossible for a well-connected country to be cut off, but cable breaks do happen. On average, they happen every other day, about 200 times a year. The reason websites continue to load, bank transfers go through, and civilization persists is because of the thousand or so people living aboard 20-some ships stationed around the world, who race to fix each cable as soon as it breaks…
The internet cables that knit the world together and the people that keep them working: “The Cloud Under the Sea,” from @joshdzieza in @verge. Eminently worth reading in full.
* Nicole Starosielski, The Undersea Network
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As we dive deep, we might send effectively-transmitted birthday greetings to a pioneer of telecommunications, Granville Woods; he was born on this date in 1856. An inventor, he held more than 50 patents, for innovations that ranged from a locomotive steam boiler to an egg incubator. But he is probably best remembered for his Synchronous Multiplex Railway Telegraph, a variation of the induction telegraph that relied on ambient static electricity from existing telegraph lines, allowing railroads to send messages between train stations and moving trains.
He is often referred to as the first African American mechanical and electrical engineer after the Civil War and as “the Black Edison” (sic).
“Hollywood will rot on the windmills of Eternity”*…
… or possibly, Daniel Bessner argues, sooner…
… Thanks to decades of deregulation and a gush of speculative cash that first hit the industry in the late Aughts, while prestige TV was climbing the rungs of the culture, massive entertainment and media corporations had been swallowing what few smaller companies remained, and financial firms had been infiltrating the business, moving to reduce risk and maximize efficiency at all costs, exhausting writers in evermore unstable conditions.
“The industry is in a deep and existential crisis,” the head of a midsize studio told me in early August. We were in the lounge of the Soho House in West Hollywood. “It is probably the deepest and most existential crisis it’s ever been in. The writers are losing out. The middle layer of craftsmen are losing out. The top end of the talent are making more money than they ever have, but the nuts-and-bolts people who make the industry go round are losing out dramatically.”
Hollywood had become a winner-takes-all economy. As of 2021, CEOs at the majority of the largest companies and conglomerates in the industry drew salaries between two hundred and three thousand times greater than those of median employees. And while writer-producer royalty such as Shonda Rhimes and Ryan Murphy had in recent years signed deals reportedly worth hundreds of millions of dollars, and a slightly larger group of A-list writers, such as Smith, had carved out comfortable or middle-class lives, many more were working in bare-bones, short-term writers’ rooms, often between stints in the service industry, without much hope for more steady work. As of early 2023, among those lucky enough to be employed, the median TV writer-producer was making 23 percent less a week, in real dollars, than their peers a decade before. Total earnings for feature-film writers had dropped nearly 20 percent between 2019 and 2021.
Writers had been squeezed by the studios many times in the past, but never this far. And when the WGA went on strike last spring, they were historically unified: more guild members than ever before turned out for the vote to authorize, and 97.9 percent voted in favor. After five months, the writers were said to have won: they gained a new residuals model for streaming, new minimum lengths of employment for TV, and more guaranteed paid work on feature-film screenplays, among other protections.
But the business of Hollywood had undergone a foundational change. The new effective bosses of the industry—colossal conglomerates, asset-management companies, and private-equity firms—had not been simply pushing workers too hard and grabbing more than their fair share of the profits. They had been stripping value from the production system like copper pipes from a house—threatening the sustainability of the studios themselves. Today’s business side does not have a necessary vested interest in “the business”—in the health of what we think of as Hollywood, a place and system in which creativity is exchanged for capital. The union wins did not begin to address this fundamental problem.
Currently, the machine is sputtering, running on fumes. According to research by Bloomberg, in 2013 the largest companies in film and television were more than $20 billion in the black; by 2022, that number had fallen by roughly half. From 2021 to 2022, revenue growth for the industry dropped by almost 50 percent. At U.S. box offices, by the end of last year, revenue was down 22 percent from 2019. Experts estimate that cable-television revenue has fallen 40 percent since 2015. Streaming has rarely been profitable at all. Until very recently, Netflix was the sole platform to make money; among the other companies with streaming services, only Warner Bros. Discovery’s platforms may have eked out a profit last year. And now the streaming gold rush—the era that made Dickinson—is over. In the spring of 2022, the Federal Reserve began raising interest rates after years of nearly free credit, and at roughly the same time, Wall Street began calling in the streamers’ bets. The stock prices of nearly all the major companies with streaming platforms took precipitous falls, and none have rebounded to their prior valuation.
The industry as a whole is now facing a broad contraction. Between August 2022 and the end of last year, employment fell by 26 percent—more than one job gone in every four. Layoffs hit Warner Bros. Discovery, Netflix, Paramount Global, Roku, and others in 2022. In 2023, firings swept through the representation giants United Talent Agency and Creative Artists Agency; Netflix, Paramount Global, and Roku again; plus Hulu, NBCUniversal, and Lionsgate. In early 2024, it was announced that Amazon was cutting hundreds of jobs from its Prime Video and Amazon MGM Studios divisions. In February, Paramount Global laid off roughly eight hundred people. It’s unclear which streamers will survive. As James Dolan, the interim executive chair of AMC Networks, told employees in late 2022 as he delivered news of massive layoffs—roughly 1,700 people (20 percent of U.S. staff) would lose their jobs—“the mechanisms for the monetization of content are in disarray.”
Profit will of course find a way; there will always be shit to watch. But without radical intervention, whether by the government or the workers, the industry will become unrecognizable. And the writing trade—the kind where one actually earns a living—will be obliterated…
Film and television writers face an existential threat; viewers, a drab future: “The Life and Death of Hollywood,” from @dbessner in @Harpers. A bracing piece, eminently worth reading in full.
* Allen Ginsberg
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As we study streaming, we might recall that it was on this date in 1964 that AT&T connected the first Picturephone call (between Disneyland in California and the World’s Fair in New York). The device consisted of a telephone handset and a small, matching TV, which allowed telephone users to see each other in fuzzy video images as they carried on a conversation. It was commercially-released shortly thereafter (prices ranged from $16 to $27 for a three-minute call between special booths AT&T set up in New York, Washington, and Chicago), but didn’t catch on… though, of course, it augured the “future” in which now we live.
“The metric system did not really catch on in the States, unless you count the increasing popularity of the nine-millimeter bullet”*…
Nearly everywhere in the world, folks use the metric system to measure things; here in the U.S. we use the Imperial system. (Note that Britain should really be a dark shade of green– i.e. a little yellow, mixed with a lot of blue. Brits may regularly use inches, ounces, miles, and pounds in everyday life, but have officially been Metric since 1965.)
Mike Sowden (amusingly and informatively) recounts the history of the metric system, then muses on why Imperial measures– the mile, the inch, the cubit, the ell– have staying power…
… Yes, all of these lack precision, so they’re useless for modern science, and would be incredibly dangerous if used for engineering purposes. But they also tell a story of people’s relationship with the space they moved through.
A lexis of movement – perhaps in a similar fashion to the language of landscape that writer Robert MacFarlane has done so much to retrieve.
This is why I’m on the fence about Imperial now. There’s no question that Metric is necessary as a standardised, exact form used to make cars that don’t shake themselves to bits, planes that don’t fall out the sky and spacecraft that can launch themselves to interplanetary targets with mind-blowing accuracy.
But the versions of Imperial still being used by people in everyday life deserve their place in the world too.
Anyone brought up thinking and feeling temperature in Fahrenheit can tell us Celsius-reared folk something different about how we can experience the world. Anyone cooking in pounds will be thinking about food a little differently (“well, it’s just 2 cups, isn’t it?”). All these things are tiny windows into new ways of seeing what we think we already know…
In defense of an old way of measuring: “Why Go Imperial in a World Gone Metric?” from @Mikeachim.
See also: “The real reasons the US refuses to go metric,” and explainer from Verge Science on the last big attempt to turn the US towards Metric, why it failed, and the ways scientists and manufacturers have snuck it in anyway.
* Dave Barry
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As we muse on measurement, we might pause, on Pi Day, for a piece of pi(e)…
… in celebration of Albert Einstein’s birthday; he was born on this date in 1879.
“Everything should be made as simple as possible, but not simpler.”
“Look on every exit as being an entrance somewhere else”*…
It’s all too clear that the fourth estate in the U.S. is in trouble. Indeed, the wrenching contraction of the field has become one of journalism’s most covered stories. Here, for example, Alex Weprin on the sorry state of things…
It wasn’t all that long ago that a billionaire buying a storied news publication was a sign of hope and optimism. After all, they had money to lose, and they earned their fortunes by creating something new. Maybe they could figure out how to make media work?
And what about private equity? It’s an industry premised on turnarounds: acquiring underperforming companies, reimagining them and making them succeed.
Or the classic family-owned publication: Keeping a business in the family with no goal of excessive profits, just a certain amount of stability to keep the legacy alive.
Unfortunately, it seems, no category of owner appears able to salvage a media business in decline, with business models still stuck in the past (programmatic, anyone?) and editorial models built for a world before Facebook, TikTok and artificial intelligence.
The media sector is facing a crisis unlike anything seen since the 2008 financial mess, with layoffs and cost-cutting at every turn. The cuts have all occurred in the backdrop of declining web readership at many major publishers over the past year, as tech giants like Meta (Instagram, Facebook) and Google try to keep consumers on their own platforms while old standby referrers like Twitter/X no longer deliver as many readers and the social media landscape fractures.
The Washington Post, Los Angeles Times, Time, Condé Nast, Sports Illustrated, Business Insider, New York Daily News, National Geographic and The Baltimore Sun have all been in the news just this month for layoffs, cost-cutting, labor walkouts or bleak prognosticating…
“The Media Is Melting Down, and Neither Billionaires Nor Journalists Can Seem to Stop It” Hollywood Reporter
There are other– so many other– examples of this kind of grim survey I might have cited, e.g. here or here…
But as Monika Bauerlein, CEO of Mother Jones + Reveal, explains, news– like democracy– can be saved. After recounting several of the same examples, she stipulates to the issue, and then offers a way forward:
… What is—to use a word smart men love to toss out—the gamechanger for the news business?
There isn’t one. Period. End of story.
That’s not a doom prediction. It’s just a reality check. Because the news “business” is over. Dead. No smart guy or better mousetrap is going to get us to a world where quality journalism makes enough money to survive as a for-profit business.
And the truth is, it never did. There was a period when publishers and broadcasters raked in the dough because they were the only ones who could get ads in front of eyeballs. But even then, what made the money was not the shoeleather accountability work. It was the sports section, the real estate supplement, the bar ads.
That model did start creaking in the late 20th century. And then, sometime later, it stopped creaking. Because it was dead.
Sure, there are zombies walking around: hedge fund–owned newspapers, digital startups trying to party like it’s 2009, magazines run by Anna Wintour. But they are getting shakier with each year, sometimes each week. The Messenger, which launched last year with a promise to assemble a giant audience with viral stories and softball Donald Trump interviews, was still publishing when I started writing this column. By the time I found a closing sentence eight hours later it was gone, having set on fire $50 million in startup capital—enough to run Mother Jones well into 2026.
Some news companies have managed to avoid zombification, most notably the New York Times. But that’s because the Times found a business model as a lifestyle brand for the literate, cosmopolitan, and somewhat liberal. How many news-based lifestyle brands can there be?
No doubt there will be a handful of other commercial news organizations that thrive as for-profit companies. But a handful is nowhere near enough. We need thousands of robust newsrooms to serve the many different audiences that make up our democracy. And to get there, we need to stop pretending journalism can make anyone rich, and instead try like hell to serve the public interest… while breaking even.
That’s it. No fancy mousetrap, no shiny object for investors or funders. No billionaire owners who might push out the editor-in-chief because they’re upset with coverage of their friend’s dog. No faux centrist news from conservative heavyweights. Just a hard slog of putting together the money, one dollar at a time, to give people the information they need to change the world, one heart and mind at a time.
That’s what Mother Jones has been trying to do for the past (nearly) half-century. It’s the toughest model to make work. Except for all the others.
Here’s a proposition to all those funders, donors, and investors looking for the Next Big Thing. It’s not quite “one weird trick,” as the internet used to say, but there is a pretty simple formula for survival in the news business. The Next Big Thing, it turns out, might be the Big Thing That Was There All Along:
- Create solid journalism that earns the trust of a community—geographic, identity-based, or interest-based (for example, Mother Jones’ community is one of people who want to see the world change for the better).
- Give folks a chance to support that journalism with their money, attention, and input
- To that foundation of trust and support, add an honest, smart business operation that brings in whatever other forms of revenue are available so long as they don’t undermine #1.
That’s it! No white papers, no pitch decks, no BS…
“It’s Not Just the End for Journalism. It’s a Beginning.” from @MonikaBauerlein and @MotherJones. Eminently worth reading in full (and supporting MJ‘s important work).
* Tom Stoppard, Rosencrantz and Guildenstern Are Dead
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As we contribute to clear-sighted civil discourse, we might recall that it was on this date in 1981 that Walter Cronkite, who had anchored the CBS Evening News for 19 years, signed off for the final time. A journalist since 1935, Cronkite had joined CBS in 1950 (though he’d been offered, but refused a chance to join the “Murrow Boys” team of war correspondents in 1943). He did reportage, anchored political convention coverage, hosted You Are There and CBS’s Morning Show (its answer to NBC’s Today), and was the lead broadcaster of the network’s coverage of the 1960 Winter Olympics, the first-ever time such an event was televised in the United States (replacing Jim McKay, who had suffered a mental breakdown).
Then, on April 16, 1962, Cronkite succeeded Douglas Edwards as anchorman of the CBS’s nightly feature newscast; in September of 1963, that 15 minute show was expanded to a half hour. Cronkite also hosted the network’s special coverage– perhaps most notably, of the Kennedy assassination and of NASA missions. He became “the most trusted man in America” and received numerous honors including two Peabody Awards, a George Polk Award, an Emmy Award, and in 1981 was awarded the Presidential Medal of Freedom by President Jimmy Carter.
Except on nights when he closed with opinion (as, famously, his observations on the Vietnam War), he ended every newscast with the words “… and that’s the way it is,” followed by the date of the broadcast.
“There are only two ways to establish competitive advantage: do things better than others or do them differently”*…
… so why is it that there’s so much emulation, so much sameness in the marketplace? Byrne Hobart explains Hotelling’s Law…
The economist Harold Hotelling has already inspired one Diff piece, on the optimal extraction rate for finite resources ($), but Hotelling has another rule that explains political non-polarization, fast-followers in tech, and the ubiquity of fried chicken sandwiches. Companies, parties, subcultures tend to converge over time, and a simple model can illustrate how.
Consider a stretch of beach 100 feet long, running east to west. Beachgoers are positioned randomly on the beach. There are two hot dog vendors who are both selling to beachgoers. Where should they position their hot dog stands?
One option is for one vendor to be a quarter of the way from one side, and the other to be a quarter of the way from the other side. This means that everyone is, at most, 25 feet away from a snack. That’s socially optimal. But let’s suppose the vendor on the eastern side moves a bit to the west. Everyone east of them will still patronize them, because they’re still closer, if not the closest. But some customers in the middle will switch! So the other hot dog seller responds by moving east, and the same result ensues. Eventually, you end up with two vendors in the middle of the beach, and now the median distance customers travel, 25 feet, is the former maximum distance anyone used to travel.
You can substitute any other cost or one-dimensional positioning feature for this. If there are two snack food manufacturers, the socially-optimal setup might be for one of them to sell something sweet and the other to offer something salty, but the same convergent force will eventually lead both of them to sell a salty-sweet combo; customers with specific preferences will be worse-off, but they’ll still have a favorite, while any convergence captures some of the customers who were close to indifferent before.
Making the model more reflective of the real world illustrates some of the assumptions it depends on. For example, we were always assuming exactly two competitors, but now let’s add in new entrants and departures. The model gets simpler if one of the initial two hot dog vendors quits—ironically, in this case the monopolist’s profit-maximizing position is also the social welfare-maximizing position (though they’ll probably respond to their new monopoly power with higher prices). In snack foods, if the formerly diverse market is now just a choice between salty-sweet and sweet-and-salty, a new entrant might introduce some product for the flavor purists and capture the market that way.
The model does describe cases where there are limits to new entrants. For example:
- In a voting system that tends to disproportionately reward winners, you’ll expect some convergence between parties. They want enough differentiation for voters to feel like they’re making a choice, but beyond that it makes sense for both sides to compete on similarity rather than difference.1
- Businesses that are dependent on continuously delivering products with low value density will tend to have a few national brands and lots of regional ones, as with Coke and Pepsi. Both beverages are pretty similar, and retain just enough differentiation for customers to feel like they’re making a choice. The amount is small, but nonzero: in the 1980s, when Coke was losing to the sweeter Pepsi in blind taste tests, they introduced a new, sweeter formula, a decision they reversed after a consumer backlash.
- Software products with high switching costs tend to get more complex over time, as standalone products get subsumed as features of a larger suite. As long as the pace of increased complexity is controlled, this doesn’t hurt user experience too much. It does eventually lead to a sprawling mess, but by then a new kind of switching cost kicks in—the sunk cost of learning to use the system is so high that it feels wasteful to switch.
- This model also describes regulated industries that lack extraordinary returns on capital. It’s hard for a bank to become a monopoly because it takes so much capital to grow, and while even the largest banks have some regional skew to their branch networks, they tend to settle on a similar model. They also diversify in similar ways: issuing credit cards, getting into investment banking, having a capital markets business of some sort, etc…
Hotelling’s simplified model describes an iron law: under the right set of assumptions, sellers end up homogenizing their products, and niche interests end up under-served. In the real world, there are countervailing forces, and in practice the dimensions on which companies compete are messy enough that “adjacent” doesn’t really work. But Hotelling’s Law also illustrates why there’s relentless pressure for homogeneity: if some people like product A and some people prefer product B, something halfway between the two will capture part of that audience. And the producer of A or B is probably in a better position to make this new compromise product C…
One can observe that this dynamic often leads, beyond sameness, to steadily declining value/quality as well. So, one might wonder why, if all it takes is an innovative new entrant to stir up a market, that’s not going on all the time. The answer is, of course, complicated (and varies from sector to sector). But if there is a root cause, your correspondent would suggest, it’s the concentration of power and control in a market that yields oligopolies that can effectively preempt new competitors. (See, e.g., here, here, and here.)
The economics of every burger chain launching a chicken sandwich: “Hotelling’s Law,” from @ByrneHobart.
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As we noodle on normalization, we might spare a thought for a man who innovated, then (for a time) enjoyed the benefits of an oligopolist, Thomas Crapper; he died on this date in 1910. Crapper popularized the one-piece pedestal flushing toilet that still bears his name in many parts of the English-speaking world.
The flushing toilet was invented by John Harrington in 1596; Joseph Bramah patented the first practical water closet in England in 1778; then in 1852, George Jennings received a patent for the flush-out toilet. Crapper’s contribution was promotional (though he did develop some important related inventions, such as the ballcock): in a time when bathroom fixtures were barely mentionable, Crapper, who was trained as a plumber, set himself up as a “sanitary engineer”; he heavily promoted “sanitary” plumbing and pioneered the concept of the bathroom fittings showroom. His efforts were hugely successful; he scored a series of Royal Warrants (providing lavatories for Prince, then King Edward, and for George V) and enjoyed huge commercial success. To this day, manhole covers with Crapper’s company’s name on them in Westminster Abbey are among London’s minor tourist attractions.
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