The digital revolution is playing out the same way Mike went bankrupt in Hemingway’s The Sun Also Rises: “Gradually and then suddenly.” For all of the revolution’s world-changing effects so far, it’s only now transforming some of the biggest players in some of the biggest industries, as this week’s news illustrates.
Telecom. AT&T, which we used to think of as telephone company, announced last fall that it would buy Time Warner, creator of Warner Brothers movies, HBO programming, and Turner television from Conan O’Brien’s show to CNN. This is the phone business? Well, it is now. Attention has turned to AT&T’s major competitor, Verizon, and how it will respond; speculation is that it might buy a big cable TV company, either Charter Communications or, less probably, Comcast, owner of NBC Universal.
Most noteworthy is the size of the companies involved. As of yesterday, AT&T was the 12th-most-valuable public company in the world; Verizon was 19th, and Comcast was 25th. These are mastodons of business, now transforming themselves to the point of unrecognizability.
Retail. The nature of retail is that nobody lasts forever, but the news of recent days shows something deeper: The biggest players, almost in unison, are staggering under the onslaught of digital disruption. Target is the latest, yesterday reporting a lousy holiday season—just like Macy’s, J.C. Penney, and Kohl’s—and lowering its profit forecast for the year. Let’s not even talk about Sears. The key reality is that all the leaders of all these companies thought they were on top of the industry’s digital transformation. They saw it coming, kept an eye on Amazon, launched their own online operations, and for years thought they had the situation under control. Then comes 2016, and in an overall strong holiday season, they get clobbered. Gradually and then suddenly.
Publishing. This was the most predictable transformation of all, yet major players are crumbling anyway. Pearson yesterday slashed its profit forecast and gave up even trying to predict its dividend. The stock dropped 30%—the worst day in its history. The problem, described 22 years ago by Nicholas Negroponte in his book Being Digital, is that books make far more sense as bits than they do as atoms; but they’re much less expensive and less profitable in that form.
Last week Time Inc.’s board reportedly decided to begin discussions with interested buyers. The company is America’s biggest magazine publisher (and Fortune’s parent), and it launched its digital transformation over 20 years ago. Yet revenue has been falling steadily for years, and the company is worth only $1.9 billion, even after rising on takeover rumors.
Gradually and then suddenly. For many of the world’s biggest and most famous companies, the “suddenly” part of the digital revolution has finally arrived.
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