Many replied to last Friday’s email about media entitlement. The feedback was, overall, quite positive. Everyone who replied wants to see media succeed and agreed that as an industry, we need to evolve our way of thinking.
One comment in particular jumped out from a woman with initials DC that summed up my thoughts perfectly:
There was inability to realize that Facebook and Google had built a better product to reach audiences! And that one of the main reasons revenue was declining wasn’t that digital channels were “taking” audience, but that their media was not adapted to the needs of today’s audience.
DC is 100% right here. She went on to say that media “becomes this echo chamber of complaint rather than ideation to better meet the needs of the audiences they serve.”
I honestly couldn’t agree more. All we hear is that media is failing. Articles include pictures of Mark Zuckerberg or the Google logo to hit home how media is failing. Naturally, we focus our anger on the platforms, blame them for our failings, and feel entitled about the audience and revenue we once had. We start to believe that all media companies are failing.
But there are so many that aren’t. Last night, I met with the CEO of a niche B2B media company and they’re wonderfully profitable. He pays his journalists above market rate, they’re happy, and he owns a business that is profitable covering a niche that bores me to tears. Why was he able to do this during media Armageddon? Because he built something that his audiences really needed.
One thing I said was:
Making a profitable niche publication isn’t complicated. The script is very straight forward. It’s hard as hell and a lot of work, but the steps that you take are predictable.
I thought about that for most of the night. Was launching a profitable niche publication really not that complicated? As operators, we make it complicated. We think up expensive, exciting ideas that we want to see done—pivot to video anyone?—and then staff up to support those ideas.
But if we step back and really think about it, the script is not that hard. I’m working on a piece about what the script looks like, but I want to focus in on the most important part that so many media companies forget about.
When media companies get bought or they hit financial difficulty, the finance departments look at balance sheets, see the large expense in staff next to editorial, and start paring things back. I can see the conversation going like this:
Editor: We have 5 journalists.
Finance : That’s too much. Can we cut back? Maybe only have 4?
Editor: We’ll see a reduction in the types and number of stories we can do then.
CEO: Oh no, we can’t have any reductions in content. But we need to save money. Let’s make the 4 journalists write more to make up for it.
**Six Months Later**
Finance: Revenue is down. It appears audience numbers of lagging, our retention is weakening, this is bad.
Editor: Correct. The team is getting burnt out because they’re being forced to write more stories and I’m worried about quality.
CEO: This is not good. If revenue is down, we need to cut costs. Let’s go from 4 to 3 journalists.
It’s a vicious cycle. It’s also a boneheaded, downright stupid cycle. Your newsroom is not a liability. It is the biggest asset of your business; the fuel of the entire operation No other department matters as much as the newsroom.
Think about it this way…
If you’re trying to save money, do you stop buying gas for the car you need to get to your job? Of course not. You would then lose your job and have even less money.
And yet in media, so many operators look at the newsroom and go, “yeah… I don’t need this fuel…”
Naturally, it’s easy to say this from my comfortable office seat versus having the balance sheet in front of me and negative cash flow. I understand that. But not all fixed costs are created equal. The removal of one can actually exacerbate the problem rather than make it better, and sometimes it’s not so clear.
Let’s use a hypothetical local media company as an example that does advertising and subscription revenue. The CEO sees that revenue is down a bit and they need to keep a certain level of margin, so he let’s go of one of the journalists like in the example above.
Rather than telling the editor to write more stories, all the CEO mandates is that the amount of traffic doesn’t drop. To ensure traffic stays up, the editor assigns one of the journalists to write national news. Those types of stories get more traffic, and since there’s going to be fewer stories published, they need to write stories the audience wants.
Over the next six months, subscriber churn begins to increase. Rather than five journalists covering the local beat, there are now only three, with one covering national news that everyone else is also covering. Before you know it, revenue it down and the CEO is back trying to figure out what other cuts can be made—with a focus on the newsroom.
The data points to this. According to the Shorenstein Center and Lenfest Institute’s whitepaper “Digital Pay-Meter Playbook,” people will pay for local news:
According to publishers surveyed, users who view local news appear to be 2-5 times more likely to subscribe than those who view national and wire-sourced stories. Of news organizations studied, publishers that produce more local (and non-wire-sourced) stories tended to generate greater subscription sales.
The type of content that an audience will read is not always the same type of content that an audience will pay for.
With that in mind, let’s circle back to the script of making a profitable niche publication. What’s not included in that script is a bloated business department. It’s true, we need sales, marketing, ops, and various other departments.
No one seeks out our properties because of the great work that these departments do. Instead, they seek us out because of the great work the journalists do. People want to read what they’re reporting on and everything we operators do is in the background, hidden, and not relevant to the audience.
I like to think about it this way… Sales and marketing ensures there’s money to afford paint and canvas; the product and technology team stretch the canvas into the proper size and shape; and then the journalists paint on that canvas. If you want a painting, you don’t get rid of the painter before finding every other way to save money.
Sadly, it seems that most media companies don’t understand this. Rather than investing in their businesses, they look to grow through austerity. It doesn’t work.
Despite this reality in media, more and more students graduate from journalism school and go on to work for these failing media brands that don’t invest in their core asset. Why? There’s a better option.
I mentioned above a very profitable media company that pays it journalists above market rate and yet he still struggles to find journalists. Yes, his industry is boring. But it’s consistent, growing, and secure.
There are fixes to this problem from top to bottom. Media CEOs can start looking at their newsrooms as assets rather than liabilities. We can focus on creating content that people want to pay for. And journalism schools can teach business reporting.
One idea that came out of my meeting last night was for every journalism school to have an “Intro to B2B Media” class. Introduce this opportunity to prospective journalists. And explain how these media companies are growing, albeit in a slow and steady way. Explain that boring can be interesting. The deeper you go, the more you find out about that industry, and that is interesting.
There is opportunity in media. The ones that realize that their newsroom is an asset rather than a liability are the ones most likely to succeed.
So here’s the first part of the script:
Hire great reporters, give them the resources they need to succeed, and then have them report the hell out of that industry.
That’s it. That’s step one in building a profitable niche media business. If that industry is large, there are likely enough people working in it to make it a profitable media business. We’re in the audience business, but the product isn’t our website, business teams or any of that. Our product is our journalism. We have to grow that for everything to rise.
Thanks for reading this issue of A Media Operator. Over the past five days, I’ve met three different subscribers of this newsletter for drinks and coffee. It’s been amazing getting to know everyone, so if you’re ever in New York, let me know.
The general feedback that I’ve gotten is that I’m touching on things people want to read. The opens in the newsletter prove that to me as well. And most importantly, so do the many email replies I get, which I appreciate immensely.
One of the people I met asked me what my end goal is for A Media Operator. And I’ll be honest, I’m still trying to figure that out. I’m built on Substack, which built a paid newsletter product. I had one person question why I encouraged other media companies to make money on their content, but then not do it myself. So maybe I will.
But if I’m going to, I want to add even more value. If there are questions you have or thoughts on how to make this a better community, let me know. I’ve got ideas on some other things we could do, so I’ll continue working through that. Hit reply, let me know what you’re thinking, and as always, thanks for reading. See you on Friday!