Can Newspapers Learn Anything from Casinos?

Apparently more than just the lines in the sports book, …at least so says the CEO of MGM Mirage (see Casino CEO Encourages Newspapers to Change).

According to Terry Lanni, the CEO of MGM Mirage Casinos (MGM), newspapers stand to learn a fair amount about change from Las Vegas:

The chief executive of the world’s second-largest casino company told newspaper editors Monday that he wished them the best in embracing change in the journalism industry, and said Las Vegas casinos have required reinvention to remain profitable.

MGM Mirage Inc. chief executive Terry Lanni…offer[ed] insights on responding to change and connect[ed] journalism’s current challenges with the transformation of Las Vegas — from a gambling-only town to a resort destination with many other amenities.

That’s what happens when an innovation (in this case, the internet) poses a fundamental challenge to your entire business model. Your options are to stick to your knitting and risk going the way of the dodo, or to change, and maybe still meet the same fate.

The problem with change in the face of such a crisis is that it is extremely costly for management to undertake, and even if they do, there’s no guarantee of success. Changing to a new business model or diversifying into new businesses is not only costly, but often stretches the firm beyond its capabilities. It’s really a double-edged sword.

However, this dilemma is not unique to the casino industry or the newspaper industry. It is universal, part of a normal pattern of industry evolution. Every so often, industries experience upheaval. This is referred to as a punctuated equilibrium model of innovation (industry evolution) in the management literature. Industries experience long periods in which technologies do not change all that much, and competition is relatively stable. Then some radical innovation appears (either coming from within the industry itself, or from a complementary industry - such as the internet in this case) that upsets the apple cart.

Taken together, this is generally a good thing for economies. It is called progress. However, at the micro level, for individual firms, industry upheavals of this sort can cause a lot of pain.

Lanni expressed his recognition of that fact eloquently in his comments:

Suffering through the turmoil of change is never easy. However, as (then) U.S. Army chief of staff Gen. Eric Shinseki said, ‘If you don’t like change, you’re going to like irrelevance even less."

Now it might have been a bit of a stretch for Lanni to compare the type of change currently being experienced by the newspaper industry to that experienced by casinos in Vegas (in my opinion the latter experienced a much less radical challenge to its business model/value proposition). However, I have to admit, it was nice of Terry to let what happened in Vegas get out of Vegas for once.

Disclosure: No positions

Comments

[jay fredric...:]

I don't get it? What does the casino industry have to do with the newspaper business? has some new technology kept people from going into casinos? Has some new competitor jumped up and offered the same thrill with more ease and convenience? last I saw, the casino industry looked pretty healthy. There has been tremendous growth in the gambling business, can't say the same for the newspaper biz.

Jay

chicagocheap.com

2008 Sep 10 09:31 AM

[Richard Col...:]

jay, What Terri Lanni is saying is that irrelevance is destructive. Look at Hollywood. Hollywood was the Las Vegas 60-70 years ago and without change it died. He's saying the Newspaper business has to follow Las Vegas with change to attract new people and keep their clients coming back.
Daniel Kowkabany

2008 Sep 11 10:45 AM

[notsosmart:]

i dont see the comparison. he could have compared the newspaper industry to the buggywhip industry.no matterwhat they do i dont think the upcoming generation will need newspapers no matter what the paper mangement does.

2008 Sep 11 11:10 AM

[FullMetalPh...:]

I worked in the newspaper industry for about 15 years as photojournalist and webmaster. I have to laugh when I hear people blame the web for newspaper's problems. The facts do not support that conclusion. Newspapers are flourishing in other countries and circulation has been declining way before the web.
I have to agree with the Vegas analogy. The biggest issue for papers is not how to compete with the web but how to embrace the new media. There needs to be a serious rethinking advertisement revenue and circulation. Newspapers are following the same economic model for 50 years. There has been no change in the way do or think about doing business. I think will look back at this time as a Mass Extinction period in newspaper history because they failed to adapt. If you want an example of what not to do is look at Lee Enterprises (LEE). They are the poster child of poorly run Newspapers.

2008 Sep 12 02:21 PM

[jay fredric...:]

You are right, there are a lot of poorly run newspaper companies out there. Most companies have slashed their marketing departments, spend nothing promoting their products, including their online sites. Most newspaper companies could hire 4-5 times the number of new media reps they currently have, and it shouldn't be enough if they are maximizing their websites and spinning off other sites for travel, kids news, parenting news, real estae and automotive news, etc etc etc.
They still feel thet driving all their users through their main site maximiizes the revenue which is dead wrong. Too bad.

Jay

sydneycheap.com


On Sep 12 02:21 PM FullMetalPho tographer wrote:

> I worked in the newspaper industry for about 15 years as photojournalist
> and webmaster. I have to laugh when I hear people blame the web for
> newspaper's problems. The facts do not support that conclusion. Newspapers
> are flourishing in other countries and circulation has been declining
> way before the web.
> I have to agree with the Vegas analogy. The biggest issue for papers
> is not how to compete with the web but how to embrace the new media.
> There needs to be a serious rethinking advertisement revenue and
> circulation. Newspapers are following the same economic model for
> 50 years. There has been no change in the way do or think about doing
> business. I think will look back at this time as a Mass Extinction
> period in newspaper history because they failed to adapt. If you
> want an example of what not to do is look at Lee Enterprises (LEE).
> They are the poster child of poorly run Newspapers.

2008 Sep 14 08:18 AM