Bad and Incompetent Management? It's Everywhere!

You've got to wonder how people, who are so clueless to even their own industry, get into management positions. 

Bored

But, come to think of it, actually, you and I don't have to wonder; someone wondered about it long ago and wrote a book on it in the 1970s. It was all explained in the seminal book, The Peter Principle. That book explained the phenomenon of how, in a hierarchy, everyone rises to their top level of incompetence. Then because they are incompetent, they remain in that position, unable to advance or, because of politics, be demoted.

Wikipedia says:

The Peter Principle is a belief that, in an organization where promotion is based on achievement, success, and merit, that organization's members will eventually be promoted beyond their level of ability. The principle is commonly phrased, "Employees tend to rise to their level of incompetence." In more formal parlance, the effect could be stated as: employees tend to be given more authority until they cannot continue to work competently.

Yep. That's it. 

Regular readers of this blog will know that I have railed on incompetent management at broadcasting stations for years. Just to prove that even a broken clock is right twice a day, almost 4 years ago, I wrote (on July 24, 2010) in One More Phase in the Shattering of Mainstream Media:

I rode the Tokyo subway today and saw a sign inside the car that notified the passengers that as of July 24, 2011, terrestrial television stations will no longer broadcast analogue signals in Japan and will finally make the switch to digital.   

This signals the final nail in the coffin of many of the FM radio stations in this country and the collapse of TV Tokyo and TBS.    

I predict that *****FM will either be bankrupt or sold to a new owner by 2014 and TV Tokyo will be in the same situation: insolvent or absorbed by another company by 2016. 

I picked the first one correctly (polite applause here). The FM station was sold to another company in the summer of 2012. My prediction came true two years ahead of schedule. 

I've got a few more years left on my TV Tokyo prediction and I'm feeling very good about that. Especially since TV Tokyo is unable to payback a $5 billion dollar loan from Mizuho bank they made in Feb. of 2010 and keeps rolling that loan over every year... I wonder how long the rollover will be allowed by Mizuho bank especially since the new Japanese government has publicly stated a policy of 2% inflation which will lead to much higher interest rates.

(TV Tokyo share price was around ¥4,400 at that time. Today, TV Tokyo Holdings shares run at ¥1768 - a rise of over ¥800 from the 2011 lows - due to Abenomics?)

I haven't been writing about these stations recently, but a while ago I had a meeting with management at a broadcasting station that just made my head spin. The boss of the station said to me in an incredulous manner,

"Mike! We have to do something to get people back to listening to the car radio... Did you know that Toyota stopped putting radios in cars? Did you know that??"

Simply astounding! Doesn't this manager read business publications at all? 

It was in 2007 that Toyota had publicly announced that they were phasing out analogue radio in the automobiles within three years and that they would no longer be standard equipment in 2011 (that was two years ago!) Taking that obvious clue, I even blogged three years ago that the future of radio lay in the hands of, not the stations, but Toyota. How could a station manager, almost seven years later, just be finding this out? 

Please refer once again to July 24, 2010: One More Phase in the Shattering of Mainstream Media

The future of FM radio doesn't lay in what they broadcast or how they up the ante of quality of content (but, of course, it will always be a competition between stations for dwindling audience and sponsorship dollars)...

The future of FM radio depends on what Toyota does.

That's right. Toyota is the one who decides what is going to happen. In my opinion, it is obvious that FM  is is serious trouble and that we are now witnessing the end of an era; and it's happening, in slow motion, right in front of our eyes.

But, don't take my word for it, decide for yourself. Let me explain further...

Think about this: Where do most people listen to FM radio? In cars, right?

The Japanese government and all the big manufacturers in this country, Sony, Panasonic, etc. (who, by the way, all have an incestuous relationship with each other and Toyota in stock holdings) are pushing for the digital conversion big time. These manufacturers need their flagging fortunes to get an injection of sales and profits that new broadcasting and new equipment will generate. Digital equipment costs anywhere from $500 - $2,000 (USD) a set. The Japanese manufacturers want and need for the Japanese public to go whole-hog into digital broadcasting. They need the public to dispose of their analogue equipment and buy the new digital equipment... (By the way, a cursory check of analogue equipment at Bic Camera the other day - what little I could find - showed that all the analogue products were all manufactured outside of Japan).

If digital broadcasting is a failure in this country, then it's going to hurt Japanese manufacturing for a very long time... The analogue equipment I saw was all manufactured in Malaysia, Indonesia, and I found some from Taiwan (which was surprising).

Now, how does Toyota fit into this equation?

Imagine your car dashboard. It has a GPS, CD player, and television/radio set all built together. Most people have an analogue device (with terrible TV reception!) From July 2011 there will be no cars that come with that device. They will all be digital.

After July 2011, on your dashboard, you will have a digital GPS, Internet, digital TV and digital radio. Want to do Social Media, YouTube, Twitter, U-Stream, blog? Got you covered. Need to Google or Yahoo search? Sure. When you need traffic conditions, just a click on your GPS will give you up to the minute details on traffic and road conditions. All the TV channels? No problem. Throw on top of that 6 digital radio channels and, of course, a CD player and probably an iPod connection, and you have the next generation of car entertainment system. 

Now where does that leave radio in the equation? Especially when you consider the fact that radio, unlike TV and the Internet, cannot give data on exactly how many users it has and cannot give ratings... 

Why does it matter that radio cannot give ratings? Well, because any advertising campaign expenditures from sponsors must be justified at accounting at the sponsor company. How can one justify a radio campaign in Japan when clients cannot be told how many people listen and who is listening? They can, though, get data on viewers for TV and Internet and numbers for print media.

That upper management at a station can be serious and tell me in an incredulous tone, a full seven years after Toyota's announcement, that they just found out that the world's largest car maker stopped making radios for their cars shows just how completely out of touch with reality some people are with what's going on with people's lives and the world and society they live in.

But, gee, far be it from me to tell people what to do, but I think it is the duty of management to keep apace with the market and conditions. Anything less is gross negligence. The shareholders should be, and will be, furious. It's a simple matter of time.

You be the judge! Do you think people like that, who are so unaware of the market - and even their own business merits and demerits - who seem to not read business publications on market trends - can run a successful business? They should be fired! There are employees working under them who have families to support; management has a responsibility! 

Of course, if the guilty parties ever read this, they would probably be angry at me for stating the obvious... I don't know why. I am doing them a favor.... 

But, as you know, when the tyrant king doesn't like the message, they will not consider where they went wrong, they will just kill the messenger boy... 

What was I saying about the Peter Principle?

Japanese Government Preparing for Broadcasting Companies' Bankruptcy

Last year, in 2010, for the first time in the history of this country, two major broadcasting stations were allowed to go bankrupt. Those stations were Radio-I in Nagoya and Love FM in Fukuoka. Those two events shook the Japanese broadcasting industry to its bones as the old school broadcasters have always thought that no matter what happened, the government would bail out the stations.

SELECTER - ON MY RADIO

"It's just the same old show... On my radio..."

There have been times in the past when stations got themselves into serious financial troubles, but, when push came to shove, either the Japanese government bailed the stations out or they guaranteed loans for the stations or arranged a group of companies to cooperate to buyout or support the station.

With the current poor economic situation and the Japanese government in debt over 200% of GDP, the well has run dry. There are no more funds to bail out these businesses.


This is actually the way things should be. The government should not be bailing out insolvent businesses as that just causes distortions in the market and causes management to continue with their incompetent practices.


A bankruptcy allows for the bad management to be washed out and replaced with new management. Bailing out a business (in this case a broadcasting station) or arranging loans, etc. allows bad management to continue in their positions and creates a false security for them. This creates a situation whereby the stations continue in their old and tired ways of failure.


I can give you a shocking example of this. In 2006, when a major Tokyo TV station took over a FM station, I was at a meeting where the guy who had been Program Director at that FM radio station for over ten years (ten years and lost $140 million USD) actually said to the TV station president - who had no become the president of the radio station;


"We don't have to get good ratings or make money as, even if we lose money, some other company will come in - with government support - and bail out the station and we'll all get to keep our jobs as we can't be fired under the labor laws (of Japan). So there's no reason to make any money." 


He said this like an excited boy who wanted his new friend in on his "secret." Both the new president of the radio station and I were surprised. No, surprised isn't the word I'm looking for here. I think my jaw dropped and bounced on the table top. It was a shocking admission.

If the kids want to hear new, cool music in Japan, 

it's not on the radio. They have to read magazines! 

The new president was also dumbfounded to hear this sort of thinking direct from the horse's mouth from a person in management. I had worked with this guy and that station for years and knew that they were incompetent and not interested in making money or getting good ratings. But I was completely surprised that he was so foolish that he'd so readily volunteer such information - so innocently - as if it were common sense - and as if it were useful knowledge. Did this Program Director actually think that the new president had bought this radio station for his fun and not to make money?


Of course, it goes without saying, that this Program Director was removed from his position quite soon after that.    


It had always struck me as amazing how someone like that could keep their job in the decade or so that I knew this gentleman. He was a nice guy, for sure. But a completely and totally clueless and incompetent businessman. 


As an aside, for those of you who live in Japan and have always wondered why, say, Japanese FM radio is so bad, then there's your answer: The management of these stations all think like the Program Director above; there's no reason to worry about your station brand, ratings, sales or making good programs. The station management only have to worry about protecting their own personal positions. This is how the situation is on the ground in these broadcasting stations. This is the reality for these people.


That's why, in a nutshell, Japanese TV and radio are so bad. It is also just one more symptom of why several of these stations will not survive the digital conversion. I've written about that here, here and here.

Now, if you read between the lines of the latest headlines, you can see that the Japanese Government is setting up the system for a collapse of radio stations.


The Associated Press reports: 


The Ministry of Internal Affairs and Communications said Friday it plans to allow one company to own up to four radio stations by relaxing its ordinance on the principle of banning multiple ownership of mass media.


The amendment is designed to permit a company to hold an entire equity stake in each of four radio stations, whether they are AM or FM stations.

The current ministry ordinance bans a company, which has a 10 percent or larger stake in a radio station, from holding more than 10 percent of shares in another station in the same service area.

On a nationwide basis, a company is allowed to hold a stake of more than 20 percent in no more than two stations.

The ministry decided to relax the principle in order to help radio stations as the widespread use of the Internet has caused many of them financial difficulties by eating into their advertising revenues.

The drafted amendment, which would also allow radio stations to merge with each other, is expected to be put into effect in late June after being examined by an advisory panel to the communications minister.


The Japanese government recognizes the writing on the wall. Most of these stations under the current system are insolvent and cannot survive much longer. The economy is so bad - and the Internet has changed the game so much - that industries outside of broadcasting (the ones that the government traditionally went to for money) are no longer able to afford it, nor are they interested in broadcasting anymore.


Traditional broadcasting is a dinosaur. All the FM radio stations in Japan are seriously bleeding money even now - even J-Wave in Tokyo. When digital broadcasting starts and they lose all their sponsors, they are dead. I explained that in detail here.

RAMONES - ROCK & ROLL RADIO

Well, actually, no. No one in Japan remembers any rock & roll

radio because Japan has never had any.

FM stations in Tokyo cannot survive past 2015 in their current configuration. The government can change the rules all they want to try to keep them breathing but the fact remains the same: Traditional broadcasting days are numbered. FM radio in Japan is already at death's door. 


TV stations like TV Tokyo, TBS and TV Asahi are not far behind.