a superhero? ♪ kinda. [ male announcer ] and we think that's the best prize of all. ♪ george kliavkoff helped to bring your favorite shows to the intersnne internet. and stanford's ge wang marching to the beat of his own app. with the reporters, this week on "press: here." good morning. i'm scott mcgrew. big companies are bad at innovation as a rule, particularly as they bring traditional business to the internet for the first time. though i can think of two exceptions. >> 2-1 pitch.

a high drive to right. this baby is way back out of here. >> those exceptions are major league baseball and my parent company, nbc. baseball brought us mlb.com and the mlb app allowing you incredible access to any game, any time. nbc and its partners created hulu, the popular on-line television service. perhaps the only time a big media company didn't completely screw up its internet offerings. those two efforts, baseball and hulu, have one thing or one person in common. george kliavkoff. on the team at mlb and the first ceo of hulu. with two major wins behind him,

kliavkoff's next effort is mani manila, helping consumers pay bills, any bill, online, instead of through the mail. george kliavkoff is a recovering attorney who has been working in digital media for years now. joined by john fort of cnbc. so why do large organizations get it so wrong on the internet so often? >> i don't know why they get it wrong. >> that's because you got it right. that's why you don't know why you don't know why they get it wrong. >> if you start with great content i think it should be difficult to get it wrong. >> what about you? >> i think they do so sometimes. if you have great content and you hire the great people and they're focused on doing what's right for the consumer first and really focused on the consumer and not on saving the existing business models or worrying about the legacy businesses, you're off to a really good start. >> and in the mom and pop we know we put the consumer first. that's how you sell first. >> you know whether they show up

again the next day. >> the consumers have the money. they'll give us the money. putting the consumer first for hollywood recording, people who jealously guard their content, baseball, that's much more difficult to get them to convince. >> but let's think about the context, right? i think historically media companies and sports leagues have not been in the business of selling things directly to consumers when you talk about media. certainly they sell tickets and they is sell merchandise to consumers but they were not selling direct subscriptions to consumers or could watch directly from the media company. it was about going through distributors. so both at hulu and at mlb.com with game day audio and with tv, those were products that were first time that we were going directly to consumers with the video content. >> the other problem i have often seen with this is putting the wrong people in charge and then getting somebody who's got technology in their title somebody where, but who does have the relevant skills and

then hiring the wrong people after that. how did you avoid that? >> well, we were diligent at hiring the wrong people at hulu. >> how did the organization -- >> because we're part of the same organization. >> that's a great question. i think let's take a step back and let's talk about how large organizations really can innovate and digital and sort of the key components that you have to have in place to do that. i think it's threefold. i think the first thing you need to have is from the very, very top, you need to have a mandate to do it. the ceo, or in the case of baseball, the commissioner. really has to buy in and has to drive the mandate. has to force the other folks who has a stake in the game to participate and to support the new venture. so really top-level mandate is number one. number two is you have to have the ability to create a creative structure. you have to partner with your enemies as nbc and newscorp did. >> you did --

>> absolutely. you have to create that structure and the structure to being able to create a structure where you can come pen said folks properly and encourage folks that would be otherwise at a digital start-up to work for a large media company. sometimes that means creating the kind of equity incentives you don't generally have. and it means making sure the new company is in a separate physical location. you don't want to col-locate th folks at 30 rock. it wouldn't work. the third piece, besides for having that sort of mandate from the top, and the creative structure, you have to have patient capital. right, if you're really talking about things that have to be immediately accretive they won't work. they take investment and time. and at baseball, when the company was originally set up and at hulu when we were set it up, we set expectations about the fact it will take investment and it's a multiyear investment. you have to be ready to lose

some money. really tough to do in a public company. easier to do in a private company or in a sports league kind of a structure where the teams can agree to fund it for a period of time. >> you know, george, one company that john and i were talking about earlier was barnes and noble. it had tried, you know, very hard to translate or really transition to the digital world. for one reason or another hasn't. it's considering spinning off the nook business into something highly separate. from what your perspective, what has it done wrong? what does it need to do? >> i don't want to comment on what others have done wrong. >> barnes and nobles want your comments. >> it wouldn't be appropriate for me to comment. but generally the idea of a spinoff is good and bad. when you have a spinoff, sometimes you get some benefits from having it completely separate, but you lose the synergies is -- which we relied on. we used the infrastructure in place to help launch both

companies. >> i think what you said is don't put the -- don't put it in the same location. get it out. treat it like a start-up. even apple when they created macintosh became this little subgroup, a tiger team. it was physically separate. i think that's a huge part of success. >> i agree. i would never do a start-up that was physically located within the large media company. it wouldn't work. >> you have a start-up, it's from a large media company. manila. are there any similarities between that and hulu and baseball? >> well, i think there's lots of similarities. it goes back to the three things we talked about before. manila is an on-line bill management and solution, where we allow people to aggregate in one place all their accounts, see a view of their accounts, including their travel reward points and financial rewards and pay the bill and a reminder to pay the bill.

we started that within hearst, a large media organization that includes television and newspapers and magazines. >> give us an example so that the viewer knows. hearst as in -- >> hearst owns the "san francisco chronicle." dozens of other newspapers around the country. second largest magazine publisher, cosmo, marie claire. we have stakes in cable companies. we own a portion of a&e, lifetime, history, espn. and, you know, at hearst we started this company and we really wanted it to have sort of the same benefits that hulu had and that baseball had. and we really treated it like a second company. the employees are not employees of hearst, but of manila. we based it in san francisco. even though the headquarters for hearst corporation is in new york city. because we want to attract the best talent we could. we really hired and insented people and we gave them a

portion of the profits, but we said it would take a couple of years to get there. >> why did you start this company within hearst? if you were to tell me to pick a digital problem that hearst should solve, this wouldn't be the one. given your track record. i mean, billing is important. >> it's actually a huge problem in the united states. there's about $48 billion spent every year sending paper mail for transactional mail, bills and statements, every single large service provider has on their books this monthly bill to send their customers paper. those customers have really migrated to paying their bills online and to managing their accounts online. but less than 15% have opted for paperless. and we thought that was a big opportunity. what hearst gives us is a couple of things. but the first is good relationships with cable providers and cell phone providers and other folks who have become the first customers for this.

>> hearst bills people for things. >> they do and they have relationships because of the ownerships of cable networks with other service providers like cable companies. the second thing is, our target demographic for this product is really the chief household officer. the person in the household who's managing the accounts and y 70% to 75% of women, you remember the list of magazines, redbook, marie claire, those are directed at the targeted market and we get at-cost opportunities to talk to the customers rather than having to pay market rates and it's a great launching pad tarketted to those -- targeted to those customers. we're paid on a per sub, per month basis for giving them a marketing platform to talk to the customers. >> it's in their best interest to go paperless and they give you -- >> they get all the savings and

they pay us a small portion each month. we love annuity business models. the other thing about the service which i think is really unique is that, you know, hearst is a trusted brand and we're asking folks to give us the financial institution information so we can help aggregate their information on the manila dashboard. having hearst as a backer closes the business dealers. >> time for one quick question from -- >> an another media technology question, apple and others trying to crack the tv. >> yes. >> will they ever be able to ipodify the tv? there are reasons that broadcasters don't want that to happen. how would you do it? >> you know, our company owns a stake in cable companies and it would be grossly inappropriate for me to talk about how apple can disseminate the cable

providers. apple always gets right the consumer and they look and i think there's improvements in epgs and other things that touch the customers. and other things that touch customers and come out of multisystem aggregatoaggregator. if apple can do that well, i think they have a real chance. another player to bid on the rights for any of the other properties, we are always welcome. >> george, as we head to break, i want to thank you for hulu and mlb.com, two of the better properties on the internet. thank you very much. six million people play an instrument you probably never heard of. stanford music entrepreneur ge wang and his arena coming up.

welcome back to "press: here." i'm scott mcgrew. i don't play a single instrument, not the guitar or the piano or the little plastic

recorder they make you try in third grade. but i can make music. there's a difference. who says? ge wang says, and he's a music professor. his ideas and inventions allow just about anyone to make music without a traditional instrument. here he is conducting a laptop orchestra. wang has taken his unusual ideas and turned them into a series of whimsical iphone apps. this is the musicians blowing into the microphone. this is an ipad app called mad pad. making music out of an old honda. and magic piano turning well known songs into games. ♪

so ge wang develops these with a company he founded called smule. he's at the head of the computer research and music and we have never had someone run in slow motion on this show before. you are the absolute first. >> i'm honored. >> my father-in-law who was a photographer, he would develop his film in the garage and in a dark room once told me you can't be a photographer with a digital camera because all the settings are taken care of for you. and you're not developing your own film, he's my father-in-law, i didn't argue with him. i now say he's wrong. are you a musician if you're using the iphone to play a flute? >> i think it depends on what you do with whatever you've got to make the music. you can actually hand someone an absolutely gorgeous instrument

like the violin. if they don't do anything with it, then they're not a musician, not really an instrument until someone chooses to be expressive with it. >> is that the criteria, to be expressive? can you make music with a honda if you press your ipad? >> absolutely. i think being expressive is the criteria. maybe it's a difference of whether someone is making music or not. you can make music if you choose with tin cans and some sticks. things you find on the street. if you choose to be expressive, you know what, you're making music. you can do that with a violin, a piano or with your mobile phone. >> what -- i mean, you can make music for instance. what's the most inventive way that someone has come up using your app in creating a new musical styling? >> well, we have had people play with their nose. we have had people kind of have a stream of consciousness, type of rapping that they do about kind of the night they have had.

you know, last night, out with themselves. people have made music with their cars, fridges, cats, roommates. you name it. we have seen cats play the magic piano on the ipad. >> i have seen that on youtube. >> yeah, it's all over the place. and we are surprised as anyone to see such a diverse array of ways that people -- people and cats make music. >> are you at all worried you're making it easier to make bad music? >> oh, no, there's always the potential to make bad music on any instrument. but it's harder for people who are bad at music to find instruments. >> did you have particular one in mind or -- >> the cat, for instance? >> well, not only people, but cats. >> knock it off. >> it's -- i think we should take music and make music pretty much like, you know, as much as we can -- as we can get it.

>> do you get this resistance, have you heard this resistance before? i think when the electric guitar was first invented, no, it's not a guitar. you're at the intersection of technology and music in the way that many people are not. >> the digital instruments that we're making from laptops, to mobile phones, are they going to for example replace traditional instruments or are they really instrument at all? >> right. >> i think -- i don't think there's like a quota in the world for how much music can be made. there isn't like a point where we say, hey, we're now officially making way too much music, we need to tone it down a bit. there's no quota on what is -- what constitutes the musical instrument and so i think -- it's kind of this thing. you keep on adding to the equation of things that we can use to make expressive sound. and what is music, but perhaps organized and expressive sound. >> one thing on that, it's not a

sound, but for trimming budget, cutting down on the music education. do you see what you're doing enabling students to perhaps discover music again and bring it back into the classroom? >> hopefully. hopefully, you know, one of the goals that we have is to bring the joy of making music to as many people as we possibly can. and that includes musicians, but also perhaps even more so people who don't think of themselves as musicians. certainly this goes for students. but i think also for the general public. >> let me jump in and ask how much money is smule making? it's got to be pounds and pounds of money. you are wildly successful. >> we're doing all right. >> doing all right? >> we're doing all right, but we could always do better. i think if you think about just how universal music is to people, you know, i don't -- people say i hate music, but, you know, there's always some sound or piece of music i think that engages each one of us.

maybe a different thing, but each one of us loves music in our own way. i think that's -- that speaks to this market that, you know, well, we can actually build and find and really explore. >> we'll give john ford the last question one last time. >> the recorders are cheap instruments, that's the reason we're introduced to them in school. is there a potential for this technology to make music more accessible to kids? >> absolutely. >> how will that happen i guess is the question, to piggyback -- >> sure. so one of the -- you can't ask someone to be creative on the spot. i can't say, be creative, one, two, three, go. but with mobile devices, that's something that people already have in their hands, in their pockets. they're taking them and it becomes a natural extension of ourselves for better or worse. in there seems to lie the potential thing to, you know,

already have an instrument and have a set of things right and realize that people have been carrying around a recorder like a magic piano or whatever in their pockets that they can pull out and making music shouldn't be -- shouldn't feel any harder than picking up the phone and calling your best phone. >> we'll leave it there. ge wang is the founder of smule. thank you for being with us this morning. >> thank you for having me. we'll be back in a minute.

welcome back to "press: here." tomorrow, yahoos are going to wake up to a new boss that's not the same as the old boss. what do you think of the appointment of thompson? >> there are three ceos into the turn around and it's hard to find any company besides apple that has managed three ceos to turn things around. their business is search and

display. he doesn't really know either by experience. so if he takes yahoo into the direction of being more of a tech company again and maybe bringing some more of his payments transactional retailback in, it could be interesting. >> scott thompson has been on the program, i liked him, i thought he's competent. my concern is when a reporter at a press conference asked him what's similar between paypal and yahoo, what are you bringing from paypal to yahoo, he said, well, paypal has buyers and sellers -- i'm paraphrasing and yahoo has advertisers. and there's not a lot there. >> you talk about balancing the needs of merchants and customers. it seemed like he was tenuous. kind of like saying meg whitman has enterprise experience because she's headed up -- >> right, she's used enterprise software. >> right. not saying that's not

irrelevant. >> just say that there is really -- here's a really smart person who's coming in and going to do great things. >> all right, j.p., go ahead. >> is its -- you mentioned is it a battle? because i think, you know, the things that people mention time and time again, i think yahoo needs to refine itself. it's a matter of pulling the weeds. so many things it had like -- to have the life span, it has the tv, for instance, but we have no idea how they're doing well. >> they have large numbers of viewers who come in. what they don't have is active members of a platform. and i worry sometimes that they confuse the two because they're so big trafficwise. they think this is an audience they can easily monetize. >> right. not only that, but an audience that will move on to other things. i don't think i -- yahoo is my home page at home and i read the news and i like it great deal.

but something better comes along, i'm gone. there's no allegiance to those sorts of people anymore i don't think. >> yeah. >> yahoo always says -- always quick to point out that it's a very iconic brand. i don't know how much that reputation -- >> on the internet it doesn't matter. >> how well is that doing? >> it has to start going deep. i use yahoo finance a lot. it used to be that you could do bill pay with yahoo. they were early to that but at this point there aren't many relevant tools you can use say in finance or in other areas that are really comparable to other things that people are doing like manila, for instance. you know, yahoo could have done that. maybe they need to do more of that. >> you say more, but the temptation to do less. to go in there and say, listen, we have got to figure out what it is that we are and just do that thing or is more better? >> i think they need to go deeper. when i say more, i say go deeper in some area. they can't go deeper in every area because that's really

expensive. look at facebook, a social network, they do really well at that. they do it on mobile and on desktop. and that took a really long time to do it on ipad because they didn't want to get too spread out. >> right. talent is also an issue. let's be frank, when you have your facebooks and the googles of the world, who wants to work at yahoo? so attracting talent and incentivizing them to stay and innovate. >> that's a challenge come tomorrow morning, monday morning, when he gets in front of the people. i assume he will, and says, here's why you should stay through one more ceo. >> just the fact that somebody from paypal has the guts to come to yahoo and do that though kind of speaks well for the situation. >> yeah. >> you always got to root for somebody who's taking a risk like that, especially in a time like this. >> with reiterate with 30 seconds left, i like the guy. i wish him the best of luck. it's going to be quite a challenge. but for scott thompson we wish you the best.

we'll be right back.

that's our how is for this week. my thanks to george kliavkoff and ge wang. these episodes are free on itunes. thank you for making us part of your sunday morning.