My Corporate Nemesis -or- The Myth of Maximized Profits
I’m not sure how this never occurred to me, but I have a Corporate Nemesis. I’ve always known the facts involved in this…that one corporation oversaw the destruction and damn near death of two of my favorite things in this whole wide world, but I never really…you know…put one and one together and said “Wait a minute!!!!”…
In short, I hate CBS.
I realized this while discussing The Bronx is Burning with the Old Man the other night. He reminded me that during the early 70’s, the Reggie/Georgie/Billy insanity was actually far better than what it had been under the previous owners. That they were so bad that you wanted to scream…
“Friggin’ CBS” he said.
“No kidding…you know they did that to Fender, too”…
“Well, yeah. They bought them in the same year”
Hold up…what? How did I not know that?
CBS, the Columbia Broadcasting System, acquired and ran in to the ground not JUST the New York Yankees, but Fender Guitars, as well! Imagine two of your favorite things being roughed up, devalued, and shamed by one entity.
CBS acquired the Yankees in ’65 and just ran ’em in to the ground. In 7 short years they traded away everyone on the team worth a damn and became the only ownership group that failed to win a championship. They were 636-640. They were the only sub-500 owners and the only group to never win a trophy. Nice, huh? By the time CBS was done sucking the marrow, the Yankees were a floundering organization with little direction and less value. To wit;
When CBS bought the Yankees in 1964/5 they paid $11MM for 80% of the team.
When Georgie boy bought ’em in 1973 he paid $8.7MM. For the whole team.
What went wrong? Well, to start with, the CBS baseball philosophy; Maximize revenue. The results were a disaster. They didn’t invest in the team. They didn’t spend on youth and scouting. They let old superstars go and didn’t replace them with anything that cost too much. In short, they bled the team.
Imagine for a second that George Steinbrenner actually saved the Yankees from the worst ownership group in team history. Amazing.
But wait, they weren’t done.
CBS also acquired Fender in ’65 and basically did the same damn thing. Instead of trying to make great guitars, they tried to make money…they cut costs and increased production. They changed the design of the Strat to make it more cost effective, but never, not once, did they lower the cost. They kept the price right where it was and raised it every year for something that any musician knew was inferior. In the market today, if you’re buying a classic Fender, the term you hear over and over again is “pre-CBS”. Anything they didn’t make is worth more. MUCH more.
CBS basically made shit for 20 years until they decided that it was time to cut ties with Fender and they sold it. To whom, you ask?
The employees of the company itself who couldn’t stand churning out shit any longer. (IF this sounds familiar, give the Harley Davidson story a read) And of course, then Fender started kicking ass again.
Interestingly enough, the two groups that bought these companies took the complete opposite approach to relaunching these proud American corporations than CBS had used. That is to say that they poured money in to the products and charged far more. The results? Fender is now the most recognized name in American Music and the Yankees were just valued at $1 Beeeeelyon Dollarrrz.
How’s that for an ROI?
Now, look. I’m a biz guy. I love makin’ a buck. What I hate though…what I will always hate and what this illustrates in a rather long winded way, is the quick fix fuckers who ruin it for everyone. When you hear about something coming in way way WAY over projections? Something happened. And if it wasn’t something that you can point your finger to and say “THAT”, then something is definitely wrong. Behind the scenes there are lots of ways to make your numbers go up. (I’m looking at you, GM) But in the long run, things have a way of evening out. You cut cost, in shorter time than you think it’s going to show in your results. You bloat your spending on the wrong things (coughuppercoughcoughmanagementcough), you’re going to see your abililty to react shaved down.
This is not rocket science. Of course I’m simplifying here, but you see the broad strokes point; the fast buck more often than not costs you two down the road. This is true in business and this is true in life.
And no matter how strong the brand name is…it can’t survive on it’s own.
And what about CBS?
Two and a half Men.