Strategies for Surviving the Retailpocalypse

Online and traditional retail have been locked in a battle to the death since Amazon began stealing market share from Borders and Barnes and Nobles in the late ‘90s.  In that war it appears traditional retail is losing. Online has so much to offer.  It is easy and convenient. Web stores can carry more variety because they don’t have to worry about shelf space. Online often has less overhead, so prices are frequently lower than traditional retail.  What can traditional retail offer that will get people off their browsers and into a brick and mortar store?

League of Legends Esports: Financial Failure or the Future?

In my last post, I discussed whether or not esports is facing an economic bubble.  In it I called out a few bad actors in the industry, but also argued that it wasn’t fair to lump every competitive title together and that, as a result, there was more resiliency in the system than many seem to believe.  I only briefly touched on the elephant in the room with esports, League of Legends, because there was so much to say on the subject it deserved its own post.

Evaluating the “Esports Bubble”

About a month ago, Kotaku published an article entitled “Shady Numbers And Bad Business: Inside The Esports Bubble.” The article makes a lot of bold claims about the esports industry, which I don’t intend to discuss line by line, however it did get me thinking about the title’s premise. Is esports a bubble? Are we only a few years away from a collapse that will take many popular leagues and teams down with it? Or was Mavericks owner Mark Cuban right when he said recently, on the Freakonomics podcast, that if he had to invest his money in sports entertainment today he would bet long on competitive video gaming?

The answer is a complicated one. The facts around team, league, and publisher expenditures are fuzzy, at best. There are persistent rumors of participants in the market acting irresponsibly, some of which are probably true. However, it is also possible that the supposed industry-wide bubble is confined to a relatively small number of teams and tournaments. Esports is not a monolith and each publisher handles their competitive title differently, each broadcast and/or event team takes a different approach to monetizing their product, and each sports’ top players have different expectations about compensation. Dota 2 is not the same as Overwatch is not the same as Super Smash Bros Melee (SSBM). There are some people in the space who are going like gangbusters and spending themselves into oblivion. There are some that have been much more conservative with their growth and are able to live within their means.

Disney’s Unique Business Model

Disney is, far and away, the most successful film studio in the United States today.  They have dominated the box office this year, making up half the highest grossing films of 2018 so far.  And this is not an anomalous year for them. They are also responsible for half the highest grossing movies of all time.  Of the 35 films to ever exceed $1 billion in worldwide gross, Disney made 17. With the pending acquisition of Fox’s movie studio by Disney, films released under Disney or one of its subsidiary studios will account for a projected 40% of the domestic box office in America.  This is all the more amazing when you realize that movies aren’t Disney’s primary business. They aren’t even Disney’s secondary business. After combining their consumer products and parks and resorts divisions to form the consolidated “Parks, Experiences, and Consumer Products” division, according to adjusted quarterly earnings numbers, the film studios are actually the worst performing division at Disney.  Here’s an even crazier idea: I propose that, as long as their films were beloved, Disney could lose money on every picture and it would not have a serious impact on their business model.  This is possible because Disney doesn’t function like most people expect, as a movie studio. In reality, they operate in an entirely different way.  That’s the secret of Disney. What most people think is their product is their R&D and what most people think is their secondary income stream is actually their product.

YouTube and Netflix: A Business Strategy Comparison

Ten years ago there were two companies poised to be the de facto powers in online video. Netflix was the lone provider of piracy-free movies and television, cornering the market on mainstream entertainment online. YouTube had just rolled out its partner program for revenue sharing to lock in its biggest content creators, making it the most important and lucrative platform for independent creators and amateur video producers.

With the cost of storing and serving video content as high as they were (and still are) it seemed that both of these companies were destined to be natural monopolies. Now only one of those companies has locked in that position: YouTube. So why did YouTube succeed at becoming indispensable for independent creators while Netflix was unable to do the same for mainstream content? Ultimately, their divergent paths have to do with the relative strengths and weaknesses each had in their market segments and the strategies they employed to adapt to them.

Predicting the Future

Niels Bohr, famed physicist and Nobel laureate, once said that “Prediction is very difficult, especially if it’s about the future.”  This puts strategists in an awkward position.  Whether you are a communication, brand, design, or business strategist, your job isn’t just to understand society as it is now, but also to make educated guesses as to where it is going. Martin Weigel, Head of Planning at Wieden+Kennedy Amsterdam, wrote in his blog canalside view that one of the categories of books a planner should read are those which let “us peer into the near-future…because our task is creating new futures for our clients’ businesses.”

I have had some modest successes with such predictions.  In one blog post, I foresaw a number of ways in which crowdfunding would evolve and cause disruptions in the market including the rise of Kickstarter consultants who would specialize in launching successful funding campaigns and Hollywood’s usage of the platform for mid-budget projects.  In a follow-on post, I predicted the business climate that would lead to a success story like Oculus Rift’s funding, launch, and sale to Facebook.  Looking into the future was also present in some of my work in ad school.  While developing work for a mock Nikon pitch, my team and I believed that DSLRs should defend their turf by contrasting the art a high end camera was capable of making with the ephemeral and forgettable snap-capturing of a cellphone camera.  A few years later, Apple picked up the same insight, but from the opposite side, and launched the “Shot on a iPhone” campaign to highlight the creative possibilities of their cellphone’s optics.

Apple’s Strategy is Off-Track

Apple has been riding a high for several years now. It is consistently ranked one of the most valuable brands in the world, beating long time competitor Microsoft by a wide margin. It might seem odd, then, to deep dive into their shortcomings. Healthy brands like Apple are rarely thought of as needing a course correction. But is Apple as healthy as it appears? In the same way that I discovered Harley Davidson was actually better off than people gave it credit for in their brand audit (it was a category problem, not a corporate one), I believe the inverse is true with Apple: they are an ailing brand masquerading as a healthy one. Case in point, Apple just posted its worst quarter in a decade.

Is this the beginning of a major downturn for Apple? And if so, why are consumers shifting away from the popular brand? Some don’t believe there is a problem at all. Forbes contributor Mark Rogowsky posits that, despite the minor downtick in sales, Apple is still “an incredibly successful company.” On the other hand, Apple stocks dropped off a cliff in late April, though it is worth mentioning that the stock market does not have the best track record in tech company valuation. In contrast to Rogowsky, Dan Nathan of Risk Reversal, an influential market analysis site, was quoted in The Guardian as having said: “The jig is up for Apple. The big money’s known that for a while. But people love their iPhones so much, and the tech press are all fanboys, so people haven’t talked about it.” This suggests that many investors feel the same way I do: Apple’s health is somewhat of a façade. So what has us so spooked about Apple?

Cultural Influence in Art and Advertising

There is an age old expression often tossed around the creative community: “Life imitates art.”  This is sometimes used in a joking fashion to describe when the events of a fictional story become paralleled in the real world later.  For example, when David Duchovny plays a sex addict in Californication, only to learn later that he, himself, suffers from sex addiction.  But it also refers to the philosophical belief that people are so profoundly affected by the art they consume that society itself is reshaped.  Oscar Wilde is quoted as saying that “Life imitates art far more than art imitates Life.”  Academically, this idea forms the framework for many types of media criticism, like cultivation theory which posits that the more time people spend ‘living’ in the television world, the more likely they are to believe social reality is like it’s portrayed on television.  There is certainly some truth to this view.  Although it is widely considered one of the finest films ever made, Clockwork Orange inspired a number of real life copycats, including a gang of wanna-be droogs who beat a homeless man to death, mirroring an early scene in the movie.  Kubrick voluntarily withdrew the film from UK distribution as a result.  It remained “banned” in England until the end of his life.

Blue Shield of California Brand Audit

Blue Shield of California is in trouble, though it might not look it from the outside. They have strong revenue. They are a recognizable name. They are a member of one of the nation’s largest health insurance associations, and are one of the three largest health insurance providers in California. But despite all that, they are positioned disastrously in the market, in a way that makes them seem primed for failure.

Solving Business Problems with Advertising Solutions

Recently, I began researching The North Face for something I was considering writing. As an outdoorsman myself, The North Face is part of a category I know well. I was eager to see how my own perceptions about the brand and its target consumers would stack up against what came out during my research. I made sure to talk to a variety outdoorsy people, from casual campers to serious adventure seekers, from REI yuppies to hardcore gear-heads, and went online to check what people were saying on review sites, opinion sites, and outdoor specialty sites. In the end, I came to some simple observations.

Basically, The North Face is in a healthy place right now as far as brand communications are concerned. The North Face’s brand is the clothing equivalent of Clif Bar’s brand. They are both lifestyle brands whose core identity is built around the serious adventurer. This attracts plenty of people who, despite not being truly serious adventurers themselves, want to be part of that lifestyle, and that’s both natural and great for the brand. When it comes to their ads, The North Face does a great job of capturing the mythos of the serious outdoorsman, even in their springtime ads that focus more on training than summiting snowy peaks. The work that Mekanism has been doing is, in my opinion, top shelf. They won two CLIOs for it. Their “This Land is Your Land” spot was so good Jeep basically ripped them off for their Super Bowl spot (and got caught for it). There was one point of weakness that I found, though. While they still communicate the idea of gear for the serious outdoorsman, they are beginning to lose the serious outdoorsman market, which could be a disaster for the brand.