December 6, 2022

Building General Interest Media Companies is Very Hard

Building a media company is challenging and a lot of work. No one can say otherwise. It takes a lot of time to build an audience, especially if you’re trying to do things sustainably. While not a complicated process, it’s still one of the more demanding businesses to succeed at.

Building a general interest media company is a lot harder. Unlike, say, a b2b media company with a clear focus, a general interest media company is trying to serve everyone. It’s why we see quotes like when Ben Smith of Semafor said, “there are 200 million people,” or when John Battelle of The Recount said, “there are over 150 million people who actively seek out news.”

Both are codes for “we don’t have a clearly defined audience.”

We’re starting the risks of that model playing out. Sara Fischer at Axios had two stories last week about some companies showing signs of weakness or outright failure. First up, The Recount. According to Axios:

The Recount, a video news startup founded in 2018, told employees it plans to suspend operations next Friday, sources told Axios.

Why it matters: The company, which raised over $34 million since 2020, struggled to find a profitable business model. Like most media companies, its prospects grew worse amid the economic downturn.

I would argue that its prospects never got off the ground. According to Fischer, “a source told Axios last month that The Recount lost $10 million in 2021 on $1 million in revenue.” 2021 was a great year for advertising. If it couldn’t figure it out in 2021, it was unlikely ever to figure it out.

But there had to be more than “its prospects grew worse.” So I returned to two pieces of content that were published around the time of the launch. First was Union Square Venture’s blog post, where Fred Wilson wrote about investing in The Recount. In the piece, he wrote:

Eighteen months ago, I had breakfast with John Heilemann and he told me that his world, political media, was challenged in the shift from linear television (ie cable news) to real-time mobile (ie Twitter). He saw an opportunity to address that by filling the void in between them with news content that was made for real-time mobile consumption but had the journalistic integrity and production values of linear television.

The second was a Vanity Fair article where co-founder John Heilemann said:

There wasn’t really an answer to the question of, on your phone, where do you go to see what’s happening in politics right now? People do a good job summarizing in text what’s [currently] happening in politics, but there’s not really an answer to that question [with video]. At some point in the not-too-distant future, someone was going to build the thing that was to this age, for politics, what ESPN was to sports in the age of cable.

On the surface, this makes a lot of sense. How people consume content has changed, but much of the content out there is subpar. And so creating great content for new mediums made a lot of sense. However, there are two problems here, one which The Recount could have anticipated and one it couldn’t.

The one it couldn’t anticipate was Donald Trump. There was so much interest in news media around this time because Trump made everyone addicted to it. And so, creating more content to serve that insatiable hunger made sense. We’re now seeing that hangover play out post his election loss. Many didn’t anticipate just how hard interest would drop.

The problem it should have anticipated was competition and lack of brand. Instead, it had to do that while carrying the unbelievably high costs of creating video content. It can be done inexpensively, but if you’re trying to have production value the same as television, it will cost a pretty penny.

Not to mention, there were already so many media companies pushing video onto platforms, particularly the same linear-first companies realizing that they would need to pivot more aggressively. Bloomberg had done it in 2017 with the launch of TicToc, which is rebranded to QuickTake in 2020.

And so, it’s not surprising this is the outcome. As I wrote in 2019:

Based on all of the information presented to me today, I think the investors have taken $10 million and lit it on fire like so many other investors in consumer media have in the past.

Following this, Axios reported that the Grid News CEO and co-founder had stepped down. In the piece:

The co-founder and president/CEO of Grid, a D.C.-based digital news startup, has stepped down amid confusion at the company over its business, sources told Axios.

In a Nov. 7 note to staff announcing his departure, Mark Bauman said he would be transitioning to an advisory role while the company looks for a new CEO that’s more focused on monetization.

Nearly a year ago, I wrote:

Yet, here we are, looking at the perfect example of media companies that are smack in the middle of the barbell with no discernable niche and, instead, are running with the theory that there is this big, underserved market of people who need journalism.

Fischer reports that “the company has 190,000 free email subscribers” and “the company averaged over 2 million monthly visitors in September.” This goes back to my original point above: growing a media company takes a long time. Two million monthly visitors aren’t bad if you’re a niche publication, but it’s rough for a general interest publication. Specifically, it doesn’t provide the scale needed for advertisers.

It’s never a good sign when the co-founder and CEO steps down so soon after launching. But, if I had to guess, it’ll be looking to sell itself within the next six months.

Neither of these situations is an indictment on the quality of the reporting either company did. On the contrary, I am sure the teams are rather talented. But getting one of these general interest companies to work takes a lot of work. Many of the largest general interest news media companies have spent decades building their infrastructure and gaining an audience. They have spent hundreds of millions on content. They have a legacy.

Trying to come in so late to compete requires an impossibly large sum of cash. Like I said a year ago, though, it can be done:

To be clear, it’s not impossible. Look at Axios. The world did not need another generalist publication with a heavy slant on politics. And yet, it found a way to do it by bringing in big-name people full time. Dan Primack is one of the most well-known reporters in the deal-making space; Axios getting him was a big coup and it immediately brought audience to the table. So, it can certainly be done. It’s just really hard.

But for every Axios, there will be multiple examples like The Recount. I admire teams that try, but it is a massive hill these operators are trying to climb. And for many, it’s insurmountable.

CNBC to raise prices

Increasing pricing is complicated for operators. There’s a fear that if we do it, we might see people churn, resulting in a more significant drop in revenue than what we’d gain from increasing prices.

But I think this is the wrong way to think about it. According to a Digiday story, CNBC plans to increase its subscription prices next year.

CNBC will likely begin its subscription price testing in the first quarter of 2023, after the first renewal period for the Investing Club, said Margaret de Luna, gm and svp of CNBC’s direct-to-consumer business. Existing subscribers will be grandfathered in at their current prices, but new subscribers to CNBC Pro could see a yet-to-be-determined price hike.

The new rate will be determined with varying site offers. A price increase on Investing Club would be based on those results, de Luna said.

This makes sense, though I think that CNBC is still being very conservative. I would experiment with subscription price increases not with new subscribers but with a subset of current subscribers.

For example, CNBC could take 10% of its current paying subscribers and tell them that their subscription will increase to the new rate. It can then track to see what percentage of these people churn. If, after a set period, the revenue is greater for that 10% than before, CNBC could extend this increase to additional cohorts.

It could even take it a step further. When CNBC increases the price, it can create a lower price for customers that look to unsubscribe. If someone is paying $300 and threatens to cancel, give them a discount down to $200 or $250. While it’s less revenue, the marginal costs for serving this subscriber are nonexistent. Therefore, the revenue passes straight to the bottom line.

Operators are often concerned with price increases; however, if you experiment with different tactics and only focus on a subset of the audience to start, you will find revenue increasing. And with costs going up, this only makes sense.

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