My 2 Cents

Finding growth in a mature business — such as broadcast television — is like Finding Nemo. In the Walt Disney movie, at the end, the lead character finds its little fish, but not without a dangerous struggle. Similarly, in the television broadcast sector, the leaders will ultimately find some growth. The difference in this case, however, is that, even once growth has been found, it comes at a great cost, since:

  • It will accelerate the demise of the current business model by creating more fragmentation.
  • It will sacrifice profitability.
  • It will reduce effectiveness through downsizing.

For this reason, the current mind-set is that growth is impossible in a mature market.

According to Veronis Suhler Stevenson’s “2005-2009 Industry Forecast,” of all the TV outlets (broadcast, cable, satellite, DSL, home video, mobile), the least amount of growth is expected from broadcast television — with a compounded annual growth of only 4.3 percent.

Such a gloomy prediction is hard to digest, especially for broadcasting executives who are constantly arguing with financial analysts on this subject. The former predict growth at every corner, and the latter see how much the industry must lose in order to gain a little.

Up until recently, growth was achieved by acquiring or cutting: two things that are no longer possible, despite the fact that on the open market there are trillions and trillions of dollars — funds coming from private equity, hedge funds and venture capital — waiting to be invested, with nowhere to go. Recently, because of this shortage of opportunities, some VCs started to give back to their investors some of the money in their funds. Some conglomerates are trying to spur growth by splitting and spinning divisions, but final results are still up in the air.

Naturally, some experts have described growth as a false god. The Oakland, CA-based non-profit organization, Redefining Progress, has even proposed tossing out growth as the first economic yardstick and substituting a “Genuine Progress Indicator.”

Thomas Naylor, a professor of economics at Duke University, has written “If economic growth were no-longer the goal, there would be less anxiety.”

Logically, this kind of talk brings us to the political side of such a mundane thing as “financial growth.” Indeed, for some pundits, liberalization in a nation works better where there is growth, while growth works where there is liberalization.

Benjamin Friedman, a professor of economics at Harvard University, writing in “The Moral Consequences of Economic Growth” (570 pp. Alfred A. Knopf), took this concept up an extra notch by arguing that economic growth is essential to... democracy. And, for good measure, he added a psychological twist by noting that growth causes people to be optimistic about the future, which improves human happiness.

In conclusion, I’d only point out that, reasonably, a company needs growth and profitability: profitability allows investments, which create growth. But, my argument would be about the “rate” of growth.

Who says profitability, happiness and libertarian values, couldn’t be achieved in a harmonious way? Why would a 4.3 percent annual growth with a decent level of profitability, little debt and more stability be less desiderable than an 18 percent growth with an enormous debt load and daring financial moves?

Is it better for a company to play the stock growth game in order to borrow more money to spur growth, or to reward investors with dividends?

Isn’t it time for economists to rethink the whole corporate philosophy of growth from the point of view of market equilibrium rather than from the current market unbalances and uncertainties?

Dom Serafini