As more entertainment and news have moved online, it seems like more and more things can be had for free.  I can watch a clip from a cable television show on Hulu even though I don’t subscribe to cable.  I can read a New York Times article even though I dropped my print subscription.  As Tangyslice write in a post last month, there are lots of things you can get for free — software and international phone calls included.

So you can imagine my surprise when I read that Disney is starting a web portal that will require a $75 annual fee.  Subscribers will get access to Disney news, entertainment and merchandise.  In addition, they will receive a quarterly magazine.  While I understand that Disney wants to generate revenue, I wonder if consumers are willing to pay for the features offered.  The online Wall Street Journal has been effective at generating revenue with a subscription model but they offer financial reporting and insight.  Is Disney news and entertainment as desirable?  In addition, will consumers be able to find most of the information provided other places (e.g., youtube, other fan sites, etc)?  If so, the value of the portal will be diminished.

In this tough economy, what can a CEO do?  The more I think about it, the more I am convinced that a CEO’s options are limited.  The CEO can try to increase revenue through participating in and supporting sales efforts; however, he cannot be everywhere and he does not control customer spending.  In addition, there is the problem of information asymmetry.  He must rely on sales and operations to provide feedback on revenue generation.  The CEO has more control over costs and companies large and small have announced layoffs, wage freezes and reduced benefits.

However, the CEO also has the power to bring the company together to survive and possibly achieve competitive advantages in this tough environment.  I have been thinking about an HBR article I read in my business school strategy class, “Leading Change: Why Transformation Efforts Fail” by John P. Kotter.  It describes eight steps for transforming an organization and it is extremely relevant in today’s turbulent environment.  It all starts with the CEO.  She can form a guiding coalition that assesses the company’s problems and opportunities.  In addition, her vision for how the organization can effectively react to the challenging economy will ground all of the company’s efforts.  The guiding coalition may develop a list of plans, projects and initiatives but the CEO’s vision will determine the priority of the projects and keep everyone on the same track.  Further, her vision will reassure employees as they will know where the company is heading.  The CEO will need to reiterate her vision across multiple channels in order to empower others to act upon it.  Change is hard and will almost certainly involve sacrifices.  However, employees will pull together to help the company survive if they understand the CEO’s vision and are inspired by it. 

This is a crisis too good to waste.  CEOs can do more than just survive until the economy recovers by using this opportunity to transform their organizations.

“I think that playing the same music over and over again is irresponsible, uninteresting, and somewhat immoral.”  This morning I caught an interview with Gil Rose, the Artistic Director of BMOP, on WGBH.  I could not resist quoting him.  The interview mentioned that BMOP has started an independent record label, BMOP Sound, for their recordings.  It seems slightly quaint to be starting a record label when consumers are buying downloads rather than compact discs.   However, vertical integration, in this case expanding into the business of recording and distributing music, makes sense.  They want to create awareness both of the music they champion and their brand.  Most record labels are unlikely to be interested in their music or be willing to invest in it or them.  In addition, vertical integration enables them to reap more of the benefits from each compact disc.  They can also leverage their concerts and subscriber base to promote or sell compact discs.  It is yet another innovative way that BMOP is addressing the challenges of the music industry.  An earlier post dealt with an inventive approach BMOP has adopted to market itself.

I have been thinking about a conversation I had recently.  I was talking to someone from a prestigious Boston cultural organization about her subscriber base and the catch 22 they are facing.  The subscriber base is aging so the organization needs to bring in new, younger subscribers.  However, younger subscribers do not like the repertoire favored by the existing subscriber base.  She described a challenge that companies face all the time.  How do you acquire new customers while retaining loyal customers?

In this difficult economic environment, it is hard not to focus on protecting and defending your most loyal customers. They represent the life blood of your company. However, they will not be there forever. You need to balance acquisition and retention efforts.

In the case of the cultural organization, I think she has at least three options:

1. Focus on the loyal customers for now. Once the economic climate improves and budgets ease, begin courting high potential prospects. For example, a local opera company performed Carmen on the Boston Common and used the opportunity to collect lead information from attendees. In this case, they collected information on cards distributed before the performance and then sent a targeted follow up mailing about their upcoming season. 
2. Create a new sub-brand. The organization could develop a sub-brand that would leverage their considerable name recognition and reputation. For example, Boston Modern Orchestra Project (BMOP) has concerts at the Jordan Hall in Boston as well as concerts some Tuesday nights at Club Café. They may play Elliot Carter at both types of venue but the club concerts are in a more intimate and less intimidating space. I imagine that they attract a different crowd as a result - probably younger and less well-versed in classical music. I haven’t yet made it to a club concert but the next one is February 3! By providing an alternate venue and experience, BMOP caters to their current subscribers and reaches out to new customers who will become future subscribers.
3. Try to please to both segments. It can be hard to meet the needs of both new and loyal customers. James Levine caused a stir in Boston by including new and contemporary compositions with traditional stalwarts of the repertoire at the Boston Symphony Orchestra (BSO). However, the BSO did not give up. A new program provides $20 tickets for those under 40; it is another innovative way to bring a younger demographic to the symphony.

These are my thoughts. Is there anything you would suggest?