January 15, 2021
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Will Creator Burnout Lead to a Return to Media Companies?

When people ask me how I am able to handle a full-time job and writing my newsletter, I say two things. First, that the Covid lockup has given me a lot more time to write. Second, that I’m tired.

Getting to the end of the day and then sitting down to write an essay can be a daunting exercise. I’m fortunate that I have built up a muscle that allows me to write late at night; however, having to consistently deliver new copy week-after-week (and in my case, twice a week) can be really exhausting.

I was reading the Journalism, Media, and Technology Trends and Predictions 2021 report by the Reuters Institute and this prediction popped out that I found interesting.

At the same time, some writers will struggle with the pressure of having to come up with the goods day after day. We may see some high-profile defections back to mainstream media, where there is potentially more variety and more editing and legal support. Platforms like Substack may also struggle to show that they can showcase and reward new and diverse voices alongside proven writers on a narrow range of subjects.

Naturally, publishers are going to feel this way. Having to “deliver the goods” consistently can be difficult and media companies remove a lot of the annoying work that goes into running these publications. The question is whether it’s the high-profile defections that will return to mainstream media or the middle-class creators.

There are two possible outcomes here that are worth looking at. The first is that the above prediction is right. People get fed up trying to write their newsletter on a day-to-day basis and return to the comfort of the media company. The second outcome is that these individuals recognize the need for more and staff up.

Where that breaks down is the size of the businesses. I think the above quote is backward. High-profile defections—code for those that have a large audience and are likely making solid revenue from their business—are unlikely to be the ones that return to media companies.

Take Casey Newton, for example. According to Substack, he has “thousands of subscribers” paying $10/month. If I had to guess, that number is probably in the 2-3,000 range. Assume 50,000 free subs and a 5% conversion and voila, you get 2,500 paid subscriptions. That’s a $25,000/m business. In the first six months doing his newsletter, that’s not that bad.

What’s to stop Casey from hiring someone with operating experience to run the backend? Perhaps that includes an expansion into other content types—everyone loves podcasts these days—or post covid, looking at other revenue opportunities tied to events. If Casey were the moderator of these, I’m sure there would be interest.

The resources are there to do this on their own. I’ve long felt that today’s creators are tomorrow’s new media operators. Why not? Theoretically, they’re creating great content and, with the right people handling the operations, they could build really interesting, niche businesses.

But Casey is one of those high-profile exits from mainstream media.

Then there are the many others who might have left, saw an initial rush of interest from people, but are now starting to stagnate. Maybe they’re a bit below 1,000 fans, so not quite earning $100k, and are now responsible for doing everything in their business: editing, customer support, graphic design, audience development, administration, and the list goes on. They’re also hitting the first year where they have to do broader taxes with their accountant and are likely experiencing those wonderful quarterly payments. I remember the first time I owed the U.S. government money in my taxes and then had to send the IRS more money every quarter… that was not fun.

These individuals are in an interesting position. They’ve got a ton of work to do every single day, but they are not really making all that much money. Do they stick it out? See if they can earn even more? Maybe they do hit $100k or even $150k, which is likely more than they were making on their own. But after you factor in self-employment tax and health care costs, they’re right back to square one.

These are the people that I think are going to come in from the cold and seek to rejoin mainstream media. But the situation in which they do that will be different than when media companies hire an employee. Why? These creators returning to the fold have a cash flow generating asset that they likely don’t want to give up, and frankly, media companies shouldn’t want them to. In my mind, there’s an opportunity here for everyone to succeed.

Each situation is going to be unique and there is no right answer. But the process we should consider is one of M&A rather than just hiring an employee.

Before any sort of agreement can be reached, the media company is going to need to assess whether it is in any sort of a position to support a solo subscription. We’ve seen some examples of media companies trying this out, but by and large, it’s an “all or nothing” subscription. Therefore, introducing this sort of a product into the fold can be confusing.

If it can’t absorb it into the main, the product is going to have to be left outside, which might be the desired state anyway. What this means is that rather than bringing the newsletter into the large fold—NY Mag, for example, taking a solo newsletter under that brand—it’ll have to stay separate. This approach is fine because the publisher can still improve processes.

Irrespective of if it stays separate or not, the media company is going to need to also figure out how it intends on promoting the newly acquired newsletter. It could do nothing and just let it grow the same way it was before. Or, it can take a more active approach, trying to link that newsletter to similar topics on the site with house ads and the such.

Only now should you be actively working on a deal with the individual. Like I said above, this is not just hiring an employee. The publisher is actually doing an M&A deal whereby the newsletter is being either partially or wholly acquired by that publisher. If they’ve got a cash flow generating property, they’re not just going to give it up. So, you need to look at it the same way you would look at any acquisition.

My guess is most of these will be partial acquisitions to start. The individual wanted to be an entrepreneur and is likely going to struggle with the notion of giving up complete control of something they built. But something to consider is you also don’t want to take complete ownership right away. Incentives are everything and if they retain a chunk of the business, they are incentivized to continue growing it. Another approach could be the classic earnout. I’m not an M&A expert, so I’ll trust the corporate development folks to come up with the right incentives.

But it is important for the publisher to take a sizeable piece of the business. If incentives are everything, the publisher needs to feel that there is an upside for taking on the risk associated with hiring another employee and diverting resources away from other initiatives. The reason joint ventures struggle so often is that the incentives are not good enough for either party to direct attention. Why work on a JV when I can work on my 100% owned business?

Once you’ve agreed upon the terms of acquiring the asset, now it turns to the conversation about the individual. I believe it makes sense to offer this person an employment contract that is guaranteed for a set period of time. This isn’t completely necessary since you are also acquiring at least part of the business, but depending on the terms of that, you want to ensure they are going to stick around for a while. The last thing you want to do is build up the asset enough for them to then go out on their own again without some upside for the publisher.

Another thing to consider is the actual editorial. One reason people might leave media companies to go out on their own is because they want to cover a beat in a specific way. They’re not just going to want to give that up and, more importantly, you shouldn’t want them to. If that process is working, you’ll need to be comfortable with their content being different.

This may explain how to get the deal done, but what we haven’t discussed is the justification for doing it, to begin with. These sorts of things can be colossal distractions and, if not done intentionally and deliberately, they’ll fail. The justification for doing a deal like this, though, is two-fold. First, you have a cash-flowing asset that with the right support could grow much larger. Second, it helps diversify your business. If we know anything about building media companies, diversification is critical.

The truth is, most times, it won’t make sense. I go back to a piece I wrote in October 2019. A year prior, Skift had acquired Airline Weekly for an undisclosed sum of money. This is what I wrote:

One example is Skift. It purchased Airline Weekly a year ago. Airline Weekly is a subscription newsletter that costs $995 for a solo license. In the announcement post, the founders of Airline Weekly shared their thoughts on the acquisition:

“Having the backing of a much bigger media company means we can provide a product and level of service beyond anything imaginable just a few weeks ago. In short, being a part of Skift means we’ll be able to do a lot more. Dig deeper. Go further…”

In your niche, are there sub-niche products that you can bolt onto your brand? Skift’s approach of buying a subscription product made perfect sense and I imagine there are plenty of other opportunities out there similar to this.

This should be the very first question you ask yourself: does acquiring this creator newsletter open up the possibility of doing more with that product? Skift acquired a sticky subscription product, which was great. But it was also able to help the business do more. If the answer is yes, the deal might make sense. If, on the other hand, the answer is no, avoid it.

I very much believe creators are going to get burnt out this year. I’ve felt bouts of burnout myself and I only write twice a week. It takes a lot of work to write every single day and then run a business. The idea that writing is all you have to do is comical.

When that burnout occurs, many of these creators might decide it makes sense to return to a larger media company. Treat these opportunities like you would M&A, not hiring an employee. If you do, there might be great bolt-ons that can make your publication more competitive.

Thanks for reading. If you have thoughts, consider joining the Slack channel and sharing them with me. Thanks and have a great weekend.

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