Buying Media Companies for Audience... or Vice Versa

Plus... A Media Operator is going paid on Substack. Yup.

Before we jump into why you actually opened today’s newsletter, I want to talk a bit more about A Media Operator because I’ve received a ton of email from readers about this specific topic.

A couple weeks ago, I talked about how I was preparing to leave Substack. It is important to me to build A Media Operator with optionality and keep the brand secure.

Long story short, I was able to get things squared away here on Substack. My long-term goals appear to be in-line with what Substack is building.

I owe thanks to a few people for ultimately giving me the right counsel. Alex over at Morning Brew, who has in quick time become the person I bounce most ideas off; Nathan who talked strategy with me (obviously, have you seen his Substack?); and Austin at Morning Brew, who gave me the ultimate push in the right direction:

Pick the tech that is going to let you control your brand, but is not going to get in the way of you doing what you’re good at. You don’t want to manage the tech.

That’s what I have done. Substack works. My newsletter and website get sent/published simultaneously without me having to worry about a thing. I get to focus on writing and they get to figure out how to ensure everything is working. For someone who is doing this in his free time, that’s a real luxury.

The other thing they do well is let independent writers generate revenue from their readers. It’s with that note that I announce that A Media Operator is going paid. I’ve been thinking about this for a while and I think it’s time.

What does going paid mean?

Currently, I send two issues out a week. They are a blend of long-form essay and analysis on the news. Free subscribers are only going to get the news analysis, which I will start publishing on Tuesdays. Paid subscribers will get both issues each week.

Paid subscribers will also have the ability to leave comments on my posts, which is the start of forming a community here. Not only can you reply to me, but you can reply to each other. Expanding on community, Substack supports a feature called discussion threads. Essentially, I’ll start the discussion with a short topic and then where the conversation goes from there is up to the community.

Finally, I’m based in New York. A lot of subscribers are as well. From time to time, I’ll organize dinners where 10-15 of us can get together, meet each other and talk about what we’re working on. Each person would pay their own way, but I’d get the people there. Anytime I travel, if there’s enough subscriber interest, I’ll set up dinners in those places as well. I like to think of this as an add on because they’ll be ad hoc, but only paid subscribers will be invited.

My hope is that with these additional features, subscribers will see enough value to want to hang out.

Another thing: I plan on charging $200 a year for this. However, because you have been the first people to sign up for the newsletter, I am giving everyone who signs up 50% off for life—so long as you act by March 12th. That means that, in future years, when people are paying $200, you’ll still be paying $100. You ate friends of A Media Operator.

I look forward to seeing the community grow over the coming years. I anticipate I’ll take a couple weeks to get everyone comfortable with subscribing. In February, though, we’ll be going paid. So, sign up!

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Enough about me…

A couple weeks ago, Peter Kafka at Recode reported that Penn National Gaming was looking to acquire Barstool Sports. He wrote:

The deal would tie Barstool, a well-known company with a passionate audience, to a casino company you may have never heard of, which is part of the logic of the tie-up: Industry observers expect Penn National, which operates properties like the Hollywood Casino in Bangor, Maine, and the Greektown Casino-Hotel in Detroit, to adopt the Barstool brand for at least some of its operations.

The rationale for the acquisition is straight forward. Penn National, which no one knows about, expects to see additional competition for new customers as online gambling is legalized across the United States. Especially with gambling, customer acquisition costs are high, so finding an organic way to gain customers is a smart play.

Enter Barstool Sports. Say what you will about the founder, Dave Portnoy, but CEO Erika Nardini has done a strong job growing this business with some people suggesting it’s already pushing $100 million in revenue.

Kafka explains:

Barstool already has a Barstool Bets site, which publishes sports-betting stories and videos, and runs free sports-betting games; the company also has deals to direct its users to betting operations like MGM Resorts.

So, what we have is a product company (Penn National) now looking for a way to bring tens of millions of potential customers to those products and realizing that a media company (Barstool) already has those prospective customers. It’s a smart play.

There’s no denying that the rise in direct-to-consumer businesses has seen a serious jump in customer acquisition costs. Early DTC brands built their entire business on the back of Facebook’s incredible ad targeting. Today, you can’t even open Instagram without seeing a dozen different products being marketed.

Unfortunately, the ease in which these brands launch has resulted in a lot of competition to get customers. In this Modern Retail report:

The online retail adage of 2019 has certainly become “CAC is rising.” It’s more expensive now to run ads on Facebook, Instagram and Google than in recent memory. Meanwhile, a bunch of businesses rely on these channels for growth.

There are plenty of media brands that are stuck in this middle ground where they have a decent sized audience, but don’t have the scale they need to really push to the upper levels of media business. I’ve compared these to the middle of a barbell. They’re not niche enough, but they’re also not large enough.

But if they have a loyal audience, that might be enough. For larger DTC brands, could they start looking to acquire these media brands that might, in turn, help push customer acquisition costs down?

I think it’s possible. However, I believe that the publisher, for the first time ever, is in the driver seat. This time, publishers might be buyers.

How would that work?

As publishers start to spend more of their time learning about their audience, they’re going to start learning about what their needs are. For example, a parenting website probably has parents trying to figure out what baby food is best.

In the past, the parenting website would simply advertise various baby foods. It’s not in a publisher’s DNA to create food. However, by purchasing one of these DTC baby food companies, the publisher doesn’t have to worry about creating the product. Instead, they are able to focus on building the audience and have a separate company that is focused on building the product.

Ironically, we saw this happen in the gambling world. In May 2019, Bloomberg reported that Fox had purchased 4.99% of The Stars Group for $236 million. Bloomberg reported:

The companies will jointly launch Fox Bet later this year, offering two products designed to stake a claim in the growing world of online betting. One will be free to play, offering customers cash and prizes for predicting the outcome of sports games. The other will offer the chance to place real money wagers in states with regulated online betting.

Additionally, Fox Sports within the next 10 years will have the right to acquire up to 50% of Stars Group’s U.S. business. Domestic sports betting, online casinos and poker could become a $9 billion revenue market by 2025 when wagers, sponsorship and advertising are all tallied up, Fox Sports CEO Eric Shanks in an interview.

Fox has the audience. As opposed to Barstool, which might get purchased, Fox decided to buy the product that its audience wants.

Purchasing is obviously not a necessity, but I see a lot of publishers trying to emulate what Complex and Buzzfeed built with their commerce initiatives and fall flat on their face. It’s just not in their DNA.

It’s not as simple as buying a brand and selling goods. Acquisitions are hard and most of them, ultimately, fail. But if the primary thing these DTC brands want is a less expensive audience, how does that give DTC leverage over the publisher?

It should be a fun 2020 to watch all of this unfold.

The Right Customer Data Platform — Request for Info

In my last post about the end of cookies, I mentioned that people might want to invest in a customer data platform (CDP) so they could unify their first party user data.

There are so many CDPs out there (my inbox is actually full of people pitching their product), but I wanted to hear from the other operators here. What CDPs have you used that have actually helped?

Hit reply and let me know because I am definitely interested.


That about wraps it up! Thanks for reading today’s issue. If you find value in A Media Operator, consider becoming a paid subscriber so you don’t miss a single issue and get access to the community. In the future, comments will be turned on and you’ll be able to post questions right there. I’m looking forward to seeing what we can build here. See you on Friday!

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