October 20, 2016

THE SLOW, PAINFUL DEATH of the media’s cash cow.

At its most basic, this sort of existential crisis presents companies with a very unpalatable choice. In the long run, your revenue will, to a virtual certainty, fall to $0. But in the meantime, you have a cash cow that will still throw off income for quite a while. Do you milk your cows until the last of the herd falls over dead? Or do you take some of your revenue and invest it in a flock of goats, allowing you to pursue exciting new opportunities in the field of goat-cheese manufacturing?

There are always good arguments on both sides. On the one hand, you’re probably not very good with goats. You have a large staff of highly competent dairymen and milkmaids, who probably aren’t much interested in goats, don’t have many goat-related skills, and, in part due to the aforementioned lack of interest, may never develop the world-class talents needed to beat out competitors in the cutthroat goat-cheese business.

If you were a brand-new entrepreneur looking to get into goat-related enterprises, you probably would not decide to buy a dairy farm and retool the whole thing for goats; you’d probably get some nice hilly land somewhere and populate it with workers who were, so to speak, goat-native. Dairy operations, many economists might argue, should look at the problem as if they were considering entering the marketplace for the first time — or, in econo-jargon: Ignore sunk costs. In plain English, this means: Don’t try to turn yourself into something you’re not. Milk the cows until they die, then walk away with whatever profits you have stashed in the shed.

These critics will be inevitably be vindicated. Most of the dairy farms that attempt the conversion will founder and fail, beaten by newer and, er, nimbler operations that aren’t weighed down with all their legacy costs.

On the other hand: $0. A 100 percent chance of $0 in revenue doesn’t necessarily look better than a 5 percent chance of a profitable goat business. Especially if you can turn some of your pasturage over to goats while still getting some milk out of the old cows.

I’m afraid the metaphor for today’s media has less to do with livestock than with certain livestock byproducts.

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