Media (Short Old Business Models, Long New Models?)

Media Continues to Struggle

A few weeks ago, we cautioned readers not to sleep on digital media distress. Since then things have only gotten uglier. 

This past week Bay Area News Group, the Digital First Media chain that subsumes Mercury News and various other community newspapers let two dozen journalists and support staff go in what called a "push to maintain profits with little regard for the product, the people who make it or the customers who consume it." Why the vitriol? Well, Digital First Media is owned by private equity fund, Alden Global Capital. Choice quote, "Union officials say Digital First cutbacks have far exceeded those at other news organizations and have less to do with the industry’s revenue trends than Alden’s brutal investment tactics." The hatred for PE is so fierce that Apollo got dragged into this even though they have absolutely nothing to do with it. 

But the problems extend far beyond just digital media. The media model, generally, is broken. And because of that, local media properties all across the country are failing. Like the Pulitzer Price winning The Charleston Gazette-Mail in West Virginia - now in bankruptcy - and the East Bay Times (Oakland), which announced senior staff buyouts recently

All of this has, naturally, sparked the need for blame. Advertising seems like a good place to start. Per Farhad Manjoo in the New York Times

  • "Ads are the lifeblood of the internet, the source of funding for just about everything you read, watch and hear online. The digital ad business is in many ways a miracle machine — it corrals and transforms latent attention into real money that pays for many truly useful inventions, from search to instant translation to video hosting to global mapping. But the online ad machine is also a vast, opaque and dizzyingly complex contraption with underappreciated capacity for misuse — one that collects and constantly profiles data about our behavior, creates incentives to monetize our most private desires and frequently unleashes loopholes that the shadiest of people are only too happy to exploit. And for all its power, the digital ad business has long been under-regulated and under-policed, both by the companies that run it and by the world’s governments. In the United States, the industry has been almost untouched by oversight, even though it forms the primary revenue stream of two of the planet’s most valuable companies, Google and Facebook."  

Which is precisely why there is a growing movement away from the ad-based model and towards the subscription model. Even better if you can leverage both revenue streams...

This week The New York Times Co. ($NYT) announced profit and revenue beats as digital subscriptions multiplied (#MAGA!!) and the company's stock jumped meaningfully higher. Digital-only product revenue increased 51.2%, with 157k new subscribers in Q4 '17. Meanwhile, print advertising revenue fell 8.4%, somewhat offsetting a 8.5% rise in digital advertising revenue. 

Still, local media sources like those in West Virginia and Oakland don't have the size or scale of The New York Times. There is no way they can compete for ad dollars. So, what should local news - or niche news organizations for that matter - do? Back to Farhod Manjoo"Shun advertising. Instead, ask readers to pay for it with real money — $5 or $10 a month, or perhaps even more. It will take time, but if you build it right, you just might create the next great metropolitan news organization." 

PETITION NOTE WITH BLATANT FORESHADOWING: We wonder whether paid subscriptions would work for a niche newsletter on disruption/restructuring?