Corporate Idiocy
Declining Systems & Desperate Measures

The Washington Post reports that the TV ratings for this year’s World Series were at an all-time low, down 50 percent in the last 11 years.

Certainly some of this year’s performance can be attributed to the fact that it was a California series; the previous all-time low ratings were for the ‘subway series’ between the Yankees and the Mets in 2000.

“Baseball’s got to be concerned about its future,” Fox Sports Chairman David Hill told the Associated Press. “I would imagine they’ll read the writing on the wall at the very highest levels and get their house in order.” [… He] blamed the summer’s protracted labor negotiations between owners and players for part of the postseason apathy.

“Once again, baseball managed to turn off its loyal fans,” Hill said. “I hoped it would pick up when we got to the postseason. It certainly hasn’t been what I hoped it would be. Our ratings had been terrific all year. They went in the bucket when all the bristling and saber rattling started.”

But

Major League Baseball spokesman Rich Levin called the ratings drop part of a cycle that included an increase last season. “While there were a lot of unknown faces and that hurt in the short term, we put a lot of new faces on the national stage, and that bodes well for the future,” Levin said.

In other words, as far as Baseball is concerned, everything is fine. The team that won the World Series is up for sale because it’s a financial millstone around Disney’s neck, they’re talking about axing two teams entirely, one of the country’s largest cities (Washington) desperately wants a baseball team but can’t have one because of the greed and vanity of the owner of the Baltimore Orioles, and the All-Star game was called at 7-7 after 11 innings because… well, because that’s what the baseball honchos decided to do. But of course fan apathy is due to the fact that baseball is building for the future, and not because the sport is horribly mismanaged.

Baseball is clearly in a downward spiral, and the people currently in charge seem not only not to care, but determined not to notice.

Regular readers will notice that I don’t write about sports here much. I’m not actually writing about sports now, appearances to the contrary notwithstanding.

I am writing about the tendency of large organizations — Major League Baseball, the RIAA, the airline industry, certain governments, etc. — to look everywhere but to themselves for the causes of their problems.

Low music sales are the caused by on-line piracy, not by the music industry’s extreme risk-aversion and the resulting blandness of pop music.

The airlines are in the dumps because of terrorism fears and government security requirements, not the byzantine corporate structures, antiquated business plans, high costs, and anti-competitive practices of the airlines themselves.

And social and economic misery in certain parts of the world is caused by the policies of richer countries, not corruption of the local governments.

In each of these cases, we find an entity in a position where it has a virtual license to print money, and in each case we see that entity forget that it’s making money because it’s selling something (baseball, entertainment, transport, societal stability and growth) that is relatively difficult to provide and for which there’s strong demand. The people running these organizations begin to believe that they’re making money because — well, who knows? Because they’ve been chosen by God, I suppose, but not all of them actually phrase it that way.

But God helps those who help themselves, the thinking goes, and they get greedy:

People like to watch baseball games! Let’s raise the ticket prices, charge more for the rights to televise the games, get the city to build us a new stadium, pay the players more, etc., etc., etc.! We’ll make even more money, because people like baseball, and there’s certainly no upper limit on the price they’re willing to pay!

People like boy bands and whore-of-Babylon adolescent girl performers and thumping horrible “R&B” acts and “alternative” music in one of two or three styles! Let’s concentrate on our core competencies and release lots more of that! Think of the money we’ll make by eliminating the risk of acts that aren’t the product of a focus group!

People like to travel! And they’ll still like it if they have to pay more for worse service, get treated like dirt, wait in long lines, and always feel like they’re being ripped off as a result of one of the world’s most opaque markets! Let’s keep operating as we did before deregulation, because that’s certain to still work, and result in greater profits!

I’m living large as Presidente-for-life! But I could live even larger if I squeezed the population a little more and keep the security forces happy! No successful state on earth actually works or has ever worked that way for long, I‘ll definitely be able to make it work!

What do all of these people — the Baseball owners, the music-industry honchos, the airline kings, and el Presidente, have in common? They’re totally insulated from reality. Some business failures are due to incredibly subtle factors like stock shrinkage, slight fluctuations in the weather, employee morale, customer whims, and so forth.

That’s not the case in any of these examples. All of these people are trying, as every business does, to wring as much profit as possible out of their customers. But what they’ve all done is to go over to the Dark Side of the curve — where the diminishing returns lie.

These people aren’t all complete idiots; somebody at each of the major airlines, for instance, must have noticed by now that their costs are unnecessaily high, and that squeezing their customers, rather than making their operation more efficient, is not a good idea in anything but the extremely short term.

But whatever the smart individuals inside these organizations might think, bureaucratic inertia is killing those golden-egg geese. If you were running a lemonade stand, and you were charging $8 a glass — whether you had to because you’d bought sugar at $35 a pound, or just because you were greedy — you probably wouldn’t be surprised when you didn’t sell much lemonade. You especially wouldn’t be surprised to find yourself idle if you skimped on the sugar ($35 a pound, remember) in that lemonade, and were attempting to sell watered-down lemon juice to people at those prices.

I mean, this doesn’t take a business degree to understand: people just don’t want that product at that kind of price. If you were an individual, you’d understand this. If you were a large operation, you’d probably hire consultants to reassure you that it’s someone else’s fault.

Posted by tino at 17:08 29.10.02