Is Media Best as a Family Business?

We live in an era where people’s attention spans is shorter than ever. We see this across all areas of our lives, whether it’s the content we consume or companies we invest in. According to eToro, the average hold time of a stock in the U.S. was 5 years in the mid-1970s. Now? It’s 10 months. This is despite the fact the best way to grow wealth is to simply hold.

The same is true in media. Operators want to see their publications grow faster than ever before even though we know it takes time to build a brand. I spoke to a friend the other day who said, “anytime I see a media company experiencing insane annual growth, I question just how sustainable it can be.” The reality is, great media companies take time to build. And in many respects, the best way to build a lasting media brand is to treat it like a family business.

A great example is Hearst. Despite dying 72 years ago, William Randolph Hearst is still indirectly controlling the company. When he died, his will stipulated that none of his five sons would ever run Hearst Corporation; however, he set up the Hearst Family Trust, which had a total of 13 seats—five for family, eight for current and former senior executives at Hearst. In turn, the 13 from the Trust sit on the board of Hearst Corporation, which includes an additional with seven members that are either Hearst executives or family members.

W. R. Hearst wanted to ensure that the business stayed in the family for as long as possible. W. R. Hearst stipulated that the trust would exist until every grandchild born before he died inevitably passes away. This was an ingenious way to ensure the company remained tied to the family for the long-term.

The Washington Post was family owned for generations. The New York Times remains under the control of the Sulzberger family. It could even be argued that News Corp is a family business, since the Murdochs exert so much control over the company.

There’s an argument to be made that the best way to build a long-term, sustainable business is for it to be run like a family business. Instead of operating quarter-to-quarter, families are making decisions for the long-term—years, and in the case of Hearst, decades.

A classic example is the 2014 Innovation Report from The New York Times. As Joshua Benton at Nieman Lab said when the report was leaked:

While it was a group effort — full list on page 3 here — the leader of this committee was Arthur Gregg Sulzberger, the publisher’s son and a potential heir to the throne, either when his father retires in a few years or sometime thereafter. His involvement in this report shows that he understands the issues facing the institution. That speaks well for the Times’ future.

He’s now the publisher. He’s the sixth publisher of the Ochs-Sulzberger family to serve as publisher of The Times. When he authored that report, The Times only had 800,000 digital subscribers. Since then, it has grown more than 10-fold. But he obviously had a long-term incentive to ensure that the business remained successful. He’s only 42; he’d like it to be around for a long time.

Then there’s Jessica Lessin and The Information. She started the company a decade ago.

If she wanted to sell the company today, I guarantee it would command an incredibly high price. Instead, she continues to launch new products. Just the other day, The Information rolled out “The Information Pro,” which is $999 a year and includes a lot more in-depth research. Could she have launched this sooner? Certainly. But it’s obvious that she is not in a rush and is much more interested in The Information sustaining itself.

With decades ahead of her, Lessin has the time to build a brand that could one day be valued at $1 billion. She’ll be in a position to incrementally expand into new coverage areas. She has already stepped out of tech coverage with more investment in the finance vertical. I remain convinced that if the last decade was about tech, this next decade is about biotechnology, and she should expand into that area. But because she’s trying to build this business over time, she can do it when its best for the business.

Compare that to a private equity investor buying a media company. What is their incentive? It’s to maximize their return. The faster that they can maximize that return, the better it is for investors. Doubling your money in two years is always better than doubling it in four years.

And so, the decisions that private equity investors make is not always with the long-term in mind. Embarking on a six-month investigation into your business like Sulzberger did might not be the right approach considering that’s eating into time for a turn around.

Look at Adweek. In December 2009, Nielsen sold it to a JV of Pluribus Capital Management and Guggenheim Partners. In 2015, it was spun out to Eldridge Industries. In 2016, Beringer Capital acquired it. In 2020, Shamrock Capital acquired it. Four transactions in 14 years. That’s an average of 3.5 years (though the Eldridge hold weighs that down). And so, I would anticipate that Shamrock will be looking to sell as well.

The problem when you’re looking to sell so few years after buying is that you have a very tight frame to execute on a strategy. And, typically, that strategy is not creating a lasting media brand; instead, it’s about maximizing return. We’ve seen this with Adweek, which multiple people have told me continues to slowly shrink as a business.

I don’t blame private equity for this. They have a responsibility to their investors and that means they need to generate a sufficient return as quickly as possible. Unfortunately, media is not a quick business if you’re trying to build something big.

Many of the VC-backed media companies operated the same way. BuzzFeed is still run by the founder; however, the game he was playing wasn’t to build a sustainable business. Instead, the game was to grow as fast as possible so the company could raise another round of venture capital. This led the company to make decisions in the short-term to make it look good enough to future investors.

Brian Morrissey wrote about changing lanes this week and this paragraph perfectly describes what has happened with BuzzFeed:

One of the lessons from the scale era is too many publishing businesses, flush with borrowed money, tried to switch too many lanes. Or worse, they were one of those drivers who bounce from lane to lane even without passing anyone. They’re gaining no advantage and just causing problems for themselves and everyone else. 

Running a media business is a muscle. It gets stronger with time. But if you’re constantly changing what you do—pivot to lists, pivot to video, pivot to affiliate, pivot to social, pivot, pivot, pivot—you’re never going to build the muscle of excellence required to have a lasting brand. Gimmicks are easy; longevity is not.

Ultimately, it’s about time horizon. If you can take time to execute, you’ll likely build a lasting brand. My suspicion is that, as media companies stop trying to achieve massive scale and, instead, focus on tighter niches, we’ll see more of these scenarios play out.

Does this mean you can never sell the business? Of course not. Barstool Sports’ Dave Portnoy built the company for 13 years before he raised any money. In 2020, he sold 36% of the business. Last week, Penn finally bought the rest of the business for approximately $551 million. But because he was so myopically focused on making Barstool successful, he was able to achieve legitimate success that so many in media hope for, but so few have the patience to achieve.

This brings us back to Hearst. Who knows what will happen to Hearst when the Trust shuts down? But what will remain impressive is that the structure W. R. Hearst left when he died ensured that the business could have decades to continue growing. Time really does help media.

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