Shredding the Dow

Now that GE gobbled up Honeywell, the 30 industrials making up the Dow are about to be reshuffled. At least one new company has to be added to this major stock market indicator, and there are plenty of companies with a $50 billion market cap that qualify. Times are changing. Only a year ago, new ground was broken when old-line companies were bumped to make room for Intel and Microsoft. Word is the keepers of the Dow Jones Industrial Average (DJIA) are looking at some telecommunications and new media candidates, which makes the selection a front-line PR issue.

In the past decade, media has changed even more rapidly and extensively than the industrial base of the Western World. Top-down, centralized media is giving way to distributed media, unlimited publication of print and broadcast materials in discrete packets tailored to the consumer. The Internet has emerged as a primary source for breaking news, shredding existing structures of news-gathering broadcast and print news organizations as they merge to make coverage of events available to consumers on a demand basis.

These developments — paralleled in the changing composition of the Dow — affect the way we allocate resources in advertising and direct marketing, and affect PR strategies and publicity tactics.

The payoff for publicity in the emerging media is faster and often more effective than in the traditional print and broadcast media, both of which are rapidly morphing into online versions of themselves. (Have you read The New York Times online lately?) But, like the architects of the Dow, much of our activity is driven by metrics.

Cisco Systems, for example, with a $400 billion stock market evaluation, is the front-running candidate for inclusion in the DJIA. And if the keepers of the Dow were going to go strictly by the numbers, that choice would be a no-brainer. But there are more subtle influences at work here.

To get a reading on those influences and what the changing Dow suggests about the shape of evolving media, I headed down to the local bistro to hoist a tankard with Heywood (“Woody”) Beautus, a partner in the Beatus & Buzzhead PR agency.

“The way I look at it,” he said, blowing some errant foam off his brew, “the Dow boys are barking up the wrong tree. Instead of looking for high-tech and communications companies, they should be more realistic. My first choice would be one of the oil companies — say, Exxon Mobil. These guys blamed OPEC for high crude prices when gasoline was selling for $2 per gallon at the pump, and just this week, they turn around and report quarterly profits of $4.3 billion! That’s the highest number cranked out by any U.S. corporation ever. Standing on top of a pile of money like that, we could repair space satellites without blasting off.”

“But, Woody,” I remonstrated, “Exxon Mobil is already in the index.”

“See,” he said triumphantly. “What did I tell you? And another group they should consider is Time Warner. Although those guys might be out of the running since they’re in AOL’s checkout cart. Let’s have another round.”

After a reflective moment allowing the barkeep to refresh our beverages, Woody brightened.

“I’ve got it!” he said. “We need to add a real growth industry to Dow, something that’s going to carry on into the next century. And PR is right in the middle of it. What’s the hardest thing about your job?”

“The client? Getting through to an editor? Writing a release at three in the morning to catch the market opening?”

He looked at me balefully. “Don’t be a putz. Haven’t you noticed how media are disappearing, newspapers consolidate, magazines — with the features or roundup stories we helped reporters and editors put together – are missing from the racks?”

Woody was definitely right on that one. As reported by The New York Times reporter Alex Kuczynski (October 23), power has moved into the hands of the wholesalers and that means a small handful of companies led by Joel R. Anderson’s Alabama-based Anderson News. “Of every 10 magazines on a retail rack in the United States, “writes Kuczynski, “Anderson delivers 4. If you want your publication at retail stores, you pretty much have to go to Anderson or three other companies.”

To keep pace with the economics of print publishing, Anderson has had to divide its line of 4,700 titles into two groups — the top 1,700 that account for 97 percent of sales… and the rest. Handling this massive amount of paper is costly. “Publishers are printing 1.2 billion copies a year that go straight to shredders because retailers, with limited rack space, won’t let them in the door,” says Kuczynski.

Anderson literally shreds thousands of tons of magazines every day, rain forests of magazines containing stories, photos, ads, and publicity we helped put together at 3 a.m.

“So you think the wholesalers like Anderson should be in the DJIA?” I asked Woody.

“Nah,” he said, “they’re privately owned. We need something public and rock solid, like the guys who make the shredders. In media, too. Keep your eye on the shredders.”

We paid the tab.