February 28, 2020
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Creating IP With Your Top Talent

Why do people choose to subscribe to specific publications? Is it because of the hard hitting news that they produce or is it something else?

This topic has come up on panels and discussions over the past few weeks and I’ve been spending a lot of time thinking about it. Why, exactly, does a user decide to subscribe to a publication?

After publishing my last piece, a reader, who shall remain completely anonymous, reached out about why they subscribe to The Information:

Lessin really has created a “clubhouse” much like Axios—she’s elevated her reporters into domain experts and personalities. Even when they don’t break the news, I like their takes. I prefer getting my in-the-weeds tech news through their filters. 

It’s not that The Information reports on something. It’s that these particular experts are reporting on something that is interesting to this reader. To them, paying the $399 for The Information is worth these journalists’ analysis around a specific story.

I hadn’t really thought about it this way, but it makes sense. Last week, Sara Fischer discussed Axios’ strategy that other publishers are starting to figure out. She said:

What we did see is if we looked around the market, we saw that suddenly people and IP and teams were becoming really valuable. I think a big wakeup call was when Steve Balmer bought the Clippers for $2 billion.

In a world where we’re switching from analog to digital, choice is ample. And people are flocking to brands, to teams, to celebrities, to journalists with authority, to help them make decisions and thus those types of entities are going up in value.

She went on to say a couple of other really important tidbits that are worth calling out:

That’s why a lot of media companies are starting to realize when it comes to diversifying revenue, we’re sitting on something more valuable that’s becoming more and more valuable every day, which is true IP. In a sense, fandom. The reason The New York Times, The Washington Post are making so much money on subscriptions is not because people think they’re going to get some sort of white house coverage they can’t get anywhere else, they can, of course, but I think they’re doing it because they’re fans of that brand. They want to support that brand.

Looking at it through this lens, it makes perfect sense why specific media companies are starting to grow their businesses whereas others struggle. It’s also looking at this that we can start to see opportunities across all media.

What Axios figured out and others are following

When Axios launched, it did so with the idea that it could hire strong reporters and then give them a newsletter that came directly from them. That’s why founder Mike Allen still does his newsletter twice a day and Dan Primack, who had run Deal Sheet at Fortune, was a founding employee and launched the Pro Rata newsletter.

While Axios is the brand, the reason many of us subscribe to the newsletters is not because of Axios, but because of the individuals who are putting that product out. Fischer had this to say:

At Axios, we’re making money that way. We’re licensing our IP to Hollywood studios and we’re making money off it. We’re selling journalist’s newsletters that come out on behalf of the journalists and their name, we’re selling their brands. When they sell a media trends event, they’re not just selling the concept and idea. They’re selling the idea, hopefully, that I’m moderating it.

If we go back to an earlier graphic I created around how content strategy can inform your events, we can see the Axios model in action (though with a different niche):

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In the case of Axios, the news acts as the free content that then drives the user to sign up for the newsletter. Axios makes a ton of money here, with Mike Allen’s newsletter earning $150,000 a week in sponsorship revenue.

Finally, for those sponsors that want to, they can do a small event that includes distribution across social channels and good branding. The reason Axios can do this is because, as Fischer said at the event, “this concept of authority sells.”

This runs counter to how media worked for decades. Let’s use The Economist as an example. There are no bylines. When a reader subscribes to The Economist, they are very much subscribing to The Economist, not the actual journalist. Here’s The Economist’s justification in their own words:

But having started off as a way for one person to give the impression of being many, anonymity has since come to serve the opposite function at The Economist: it allows many writers to speak with a collective voice. Leaders are discussed and debated each week in meetings that are open to all members of the editorial staff. Journalists often co-operate on articles. And some articles are heavily edited. Accordingly, articles are often the work of The Economist‘s hive mind, rather than of a single author. The main reason for anonymity, however, is a belief that what is written is more important than who writes it.

For a publication like The Economist, that certainly makes sense. You know what you’re going to get when you pick up a copy of the magazine. However, when a new publication like Axios comes along, what can a reader expect? Building on the backs of the strongest brand that exists—the actual journalist—is a great way to pick up goodwill with the reader.

It also makes for a very interesting business model because of the ability to launch better products that people are willing to pay for because of the community. Having an event with one of these experts leading it is an easy way to get other people excited, which I’ll touch on below.

Before I jump, let’s think about these solo newsletter operators, which are increasingly becoming the future of certain types of media. Do people subscribe to Bill Bishop’s Sinocism because he does a good job reporting on China? I’m sure that is part of the reason. Yet, I would guess the majority subscribe because of Bill Bishop. He has a particular perspective on China that is incredibly helpful; so much so, there are major companies that will buy dozens of seats for people because the information is so useful.

Not only do people get Bishop’s perspective. They also get access. The community that he is building have a direct channel to him. When Fischer refers to fandom, this is what she is talking about. People are paying so they can be near the expert they hope to learn from.

Where Axios appears to struggle

Although Axios does appear to do a good job of building product on the back of its strongest IP, I can’t help but feel like it’s missing out on major monetizable opportunities.

If we go back to the above content funnel graphic… Part of the value of moving users down the funnel from free content to the newsletter and then, finally, to the events is that the bottom can be incrediblt lucrative.

In the case of Axios, I don’t really get the feeling that they’re leaning as far into this bottom-of-the-funnel opportunity as they could be. Right now, it appears that they only do an event when a partner wants to sponsor it. With the quality of the brands at Axios, they’re leaving money on the table.

Let’s use Dan Primack, the business editor at Axios. He’s build such a strong brand that if he were to announce that they are doing a 500-1,000 person event, I imagine they would have no problem selling a solid chunk of those tickets almost instantly. Why? People trust what he has to say and if he was organizing the content for the event, people would immediately rush to get those tickets.

Even if the content wasn’t the driving reason for registration, people would come simply because they believe that other high quality people would be coming to the event. Why? People want to be part of a community of experts and Primack could pull that audience together. There’s a magnetism and network effect that comes with authority-driven communities.

Let’s do some basic math around this for a single track event. In registration alone with 1,000 people, I see no reason why they could not bring in $2.5-3 million. For an event targeting the most senior people in the investment and financial world, a $2,500-$3,000 ticket is not that insane. Honestly, you could probably get away charging $4,000-$5,000 for a ticket. CBInsights does that and their events are often sold out.

On the sponsorship side, I wouldn’t be surprised if there’s a chance to generate a decent return. The products wouldn’t have to be terribly advanced. Because the right people are in the room, branding is a fine-enough opportunity that would generate incredibly high margins.

Suddenly, you’ve got an event that is generating $3,000,000 a year in revenue built on the back of Dan Primack’s brand. How many other brands (journalists) does Axios have that could turn into $3 million a year event businesses?

And yet, Axios doesn’t appear to want to go down this path. For some reason, they’re comfortable doing very small, sponsored events while avoiding larger revenue opportunities. Instead, they’d rather try to enter the very crowded software as a service business, which baffles me. When you know your audience as well as Axios should know theirs, this path is confusing.

Bringing it back to start

I have a lot of goals with A Media Operator. One of them is for every media company to understand that editorial is the product. Said another way, the intellectual property that a media company can monetize is the individual brands of the journalists.

Yet, too many media companies don’t understand how to do this. Even if they do, the upside for the actual IP is limited. This is why so many have started venturing out on their own. Take Dan Frommer. He used to be editor in chief of Recode. Now he runs his own newsletter, The New Consumer, which appears to be doing rather nicely. Although I haven’t spoken with him, if I asked why he decided to launch I imagine his answer would be, “I’ve got the strong brand, why should Recode get all the value?”

The IP at these media companies is the talented journalists and the companies that figure out how to enhance those people brands and build products on top of them—with clear upside and incentives for those brands—are companies that will most likely be successful. Monetizable opportunities present themselves because of this IP. Take it.

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