Fortune Should Be Charging More and So Should You

Also, don't over-complicate your subscription + podcasts as engagement

Happy Friday everyone and thanks for your comments earlier this week. Before we jump into the issue, consider sharing and subscribing!

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This topic is an important one for me because it’s something I am currently working on here at A Media Operator. I’ll announce in more detail in the future, but I am going to introduce a paid subscription to this newsletter.

When I think about that, there are two primary factors that have to be taken into consideration.

The first is what you are all going to get. How do I ensure that I am providing value to readers? I believe value will come with my writing, a community and other ideas that I am working with. My theory is that I am doing a good job here.

The second is what you are going to pay for that. How much should I charge for the value that I am providing? This is harder. When individuals are subscribing, it’s hard to know how each individual values what they’re consuming.

Enter this tweet by Sam Parr, CEO of The Hustle:

Sam’s been working on his company’s subscription product, Trends by The Hustle, for about half a year now. For $299, you get access to a community of entrepreneurs and can learn quite a bit about various businesses.

Sam took his own advice and locked the entire site down behind the paywall and used strong sales copy to get the potential subscriber to convert. In my opinion, he just didn’t charge enough—I’ve seen inferior products sell for more and have a lot of people convert.

But what Sam was referring to was the recent news that Fortune was introducing a paywall. In a Digiday article about this, it was described as the following:

The first tier, priced at $49.99 annually or $5 per month, will give readers full digital access. The second tier, for $11 per month, will also include the print magazine as well as quarterly investment guides and early previews of Fortune’s list franchises. And the highest tier, at $199 per year or $22 per month, adds in access to the premium section of a new video hub filled with exclusive interviews with executives, business insights and instructional content, as well as a weekly research newsletter and a series of monthly conference calls hosted by CEO Alan Murray or reporters with specific subject matter expertise.

I believe Fortune is making a variety of mistakes here that are worth talking about.

Types of Products & Price

By introducing three tiers, I believe it will ultimately over-complicate the process. If you’ve ever subscribed to a newsletter here on Substack or on Trends by Hustle, it’s an incredibly straight forward process. Here’s what you get and here’s how much it costs.

Fortune, on the other hand, wants to offer options to users. It then needs to try and explain the various components of the more expensive plans. This over-complicates the sale.

Fortune is a more complicated business, though, than a newsletter here on Substack. Because they have a magazine, there is a standard practice to charge more for the print version than the digital only version.

I can’t help but wonder if they could try it a different way. Instead of charging $5 for digital and then $11 for print + digital, they could just charge $11 for a subscription to Fortune and then give users the option not to receive the print version.

Admittedly, I haven’t worked in print media before, but if the only difference in value between print & digital is the medium on which it’s consumed, there could be an interesting experiment to try.

That top tier product is actually really interesting. With additional research, monthly conference calls with the CEO and journalists and the dedicated video hub, you’ve got a high-value product targeted to executives and entrepreneurs. I would double the price on this because of the exclusivity. Research warrants a much higher price and with a brand like Fortune, I imagine they could charge at least $399.

Paywall seems weak

My other problem is that Fortune is introducing a very porous paywall and then hoping people will sign up.

According to the Digiday article:

It won’t be a hard paywall though. While there isn’t going to be a distinct split between how much content is behind the paywall versus free, the company said that all features and long-form journalism will be paywalled, as it is more expensive to produce. Additionally, stories that are popular for the site, like conference coverage, will be paywalled, but the edit staff has the ability to pick and choose articles they feel would drive readers to the paywall.

This is the exact opposite way to think about what you charge for and is a very internal way of looking at things.

Fortune is effectively saying, “because this content cost us a lot of money to make, you should pay for it.” But that’s not how you determine user value. The conversation needs to be, “what content is going to help our audience succeed at their goals?” That could be any content type.

One option would be to look at what TechCrunch did with its Extra Crunch product. Danny Crichton, former executive editor of Extra Crunch, said this:

With all those constraints and rules in mind, what we ended up centering Extra Crunch on was solving the problems facing founders in building their startups. That included how to raise venture capital, recruit talent, grow, pay themselves, work with PR agencies, and much, much more. I was previously a VC, and so I essentially channeled all the questions my founders would ask me into articles that solved those problems. Since launch in February, we’ve published about 600 articles on these topics.

Perhaps Fortune should be thinking about its content through two lenses.

  1. Content that gets a lot of traffic, but is relatively low value from a subscriber perspective.

  2. Content that helps a specific subset of the audience achieve their goals.

That second part is worth paying for. I would rather see Fortune figure out what types of content it creates that serve that purpose and then hard gate that.

This is the classic copywriting discussion that it’s not product features, but benefits that sell. A feature is that you’ll get to read long-form journalism. A benefit is that you’ll make more informed business decisions that will help you grow.

I know what I am willing to pay for.

Podcasts as an engagement tool

Changing topic a little…

In my last issue, I said the following about podcasts:

Have you been thinking about rolling out a subscription, but you’re not sure if you’ve got something that is 10x better than everyone else?

Now you do. If you have a small, but loyal audience, this is where you can make your podcast part of the subscription.

This is especially true if you’re very niche. It’s unlikely you’ll reach the scale necessary to earn much from advertising, but maybe it’s that special something that will keep your audience subscribed.

It appears that The Athletic is finding success with this exact strategy.

The World Association of Newspapers and News Publishers did a Q&A with Paul Fichtenbaum, Chief Content Officer at The Athletic. In that discussion, a little tidbit jumped out:

The Athletic has launched 140 podcasts since April (a number that’s likely to keep growing), and found that people who engage with at least one podcast during the free seven-day trial period are significantly more likely to sign up for a year-long subscription.

This makes sense. I’m a Tottenham Hotspur fan and The Athletic has a podcast called “The View from The Lane.” I can imagine a new Spurs fan signing up for the service would be more inclined to stick around to listen to it because it’s engaging.

Although we don’t know what percentage sign up, this lends itself to the overall strategy of using your audio initiatives as a way to get people to sign up and stay engaged.


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Thanks for reading! If you have thoughts, be sure to hit reply. I would appreciate you sharing this with friends and colleagues that are working on building media businesses. And if you’re new here, be sure to subscribe. Thanks again and have a great weekend!

Everyone is Chasing the News Podcast Craze

Don't be surprised if your recently launched show doesn't generate big bucks...

Podcasts are so fetch.

Although I believe our industry is smart enough not to do a huge “pivot to audio,” it seems that everyone is launching their own news podcast.

But just how big is this industry getting?

According to a report by Reuters Institute for the Study of Journalism and Oxford University:

Across all genres, the number of new podcasts is growing at a rate of more than 200,000 a year, though this rate has started to slow a little (see the next chart). Many of these are produced by hobbyists and individuals, but this growth is also increasingly driven by higher-quality professional content with significant investment from broadcasters and digital-born publishers, as well as those with a background in print. There have been almost 12,000 new news podcasts so far this year [by October 28], representing an increase of around a third (32%) in the last year.

This chart shows it in clear detail:

On Monday, Ride Home Media announced it had raised $1 million from Tiny Capital to expand its daily news podcast network. Fast Company wrote about it:

McCullough [Founder] knows Ride Home doesn’t know everything about everything, so the company is putting out a call for potential creative partners to make podcasts for almost any news niche. The partnership model he’s proposing is a bit like a podcast franchise. Ride Home Media pays the producers and hosts a production fee, then has a revenue share on top of that, so the talent participates in all of the upside of any show.

Everyone and their mother is getting into podcasts.

I can understand why so many people are moving into audio. Compared to video, which comes with a serious cost, audio is a leaner operation. Couple that with the fact that journalists are increasingly becoming celebrities and you’ve got a great opportunity for audiences to feel connected to them.

Not to mention, there is a growing pile of money to be made. According to the report, in 2018, news/politics accounted for 18.4% of the $479.1 million in podcast revenue. But with news podcasts growing, the percentage should grow. Let’s assume it grows to 25% of revenue by 2021. PwC is estimating that podcast revenue will be $1.044 billion, so news podcasts would earn $261 million.

That’s real money.

Although not specifically news focused, Slate has done rather well with podcasts. According to a Digiday article published in May:

Slate was one of the first digital publishers to seize on podcasts as a source of audience and revenue — it began producing podcasts more than a dozen years ago. But in recent years, the format has grown from important to essential: This year, audio could represent “nearly half” of Slate’s revenues, up from 28% in late 2018, Slate president Charlie Kammerer said. Slate declined to comment on how much revenue it generated last year.

And let’s not get started with the fact that The Daily is earning eight figures a year for The New York Times. But it makes sense considering how large it is. According to the Digital News report:

The New York Times says that The Daily reaches 2m listeners per day up from 1.1m in June 2018. The Economist told us that The Intelligence, which is less than a year old, reaches 1.5m people each month, with around 6–7m individual downloads monthly. It says that the average listener downloads or listens to three to four episodes each week. These are substantial audiences, even if they are not yet on a par with the most popular radio news shows in the US.

Suffice it to say, there is real excitement around audio. But with 12,000 new news podcasts launched in 2019, you have to wonder, is there any more room for growth?

Ad revenue is not keeping up

Here’s the real problem…

While it’s true that ad revenue is growing—and it certainly is—it’s not growing fast enough to support all of the podcasts that are coming out.

If we hit $1 billion in total podcast revenue in 2021 and $261 million of that is dedicated to news podcasts, then how much would each podcast earn? If it were an even distribution, let’s say there are 50,000 news podcasts. The answer is approximately $5,000 per podcast.

Naturally, we know that’s not how it works. The Daily will obviously get tens of millions of dollars. So, just removing that one podcast and its revenue cuts the mean down under $5,000 per podcast.

Even if we were to 10x the news podcast revenue and we’re sitting at $2.61 billion, the amount per podcast is only $50,000. That’s not even enough to hire one good journalist let alone the sound technician to go along with it.

And let’s be real… There is not going to suddenly be a 10x explosion in advertising revenue for podcasts.

To hear it in clearer terms:

“The hardest thing to do is to make something that is big,” said Slate president Charlie Kammerer at the Digiday Publishing Summit. “There are 100-150 podcasts out that there that are big and then there are hundreds of thousands of podcasts that 8,000 people listen to.”

The other problem is that the highest CPMs are tied to host reads, where the advertisement is read by the individual doing the podcast. This is clearly hard to do with a news podcast since that means journalists are reading ads. Even if that somehow becomes copacetic, you’ve got the problem that host reads simply don’t scale.

How podcasts still fit

Let’s say that you ultimately get stuck with a podcast that is only getting 8,000 people to listen. Depending on the scale of your operation, that might actually be okay if you think outside the box.

What is the completion rate of your show? According to the Digital News Report, they found that some of the more successful news shows had people returning multiple times a week with completion rates between 60% and 90%.

If that sounds similar to your show, you may want to look at your podcast as a tool of engagement and secondary revenue rather than a primary revenue driver.

So long as you have an engaging product, there are a couple of ways to generate revenue even if there is not much in the ad revenue department.

Add it to a subscription

Have you been thinking about rolling out a subscription, but you’re not sure if you’ve got something that is 10x better than everyone else?

Now you do. If you have a small, but loyal audience, this is where you can make your podcast part of the subscription.

I wouldn’t immediately restrict access to your current podcast, though. Instead, try and be additive where you can. If you’re doing a weekly news podcast, can you expand it to twice a week and only let paid subscribers have the second show? If you have to be subtractive, you can by limiting some exposure, but I would still release some episodes to your free audience—if nothing else, it acts as marketing for your subscription.

Start doing events

I was having a conversation about this yesterday. If you haven’t found an event strategy that works for you just yet, why not make live recordings of the podcast the event strategy?

Use your office and then sell tickets for people to come watch it get recorded live. Once again, you’re talking about a super loyal audience. They are likely to be interested in watching, especially if the news podcast has a strong personality helming it.

Axios reported in July that this was a growing business as you can see in the chart below:

The key thing for those that have never done an event before is that you absolutely want to sell the tickets. Even if you’re only selling 100 tickets for $20 a pop, charge for it so people show up.

For free things, people are likely to flake out. But when the psychology kicks in of having paid for something, people are more likely to show up.

If you want, you can expand this and make it part of your subscription. Only people that are paying subscribers get invited, so it’s an additional community aspect to get people excited about your subscription.

There’s definitely a bubble…

It’s easy to call something a bubble. Just look at some financial commentators. They call bubble year after year, are right once and, despite being wrong for years after, they still can sell newsletters and get booked on CNBC.

But I do actually think there is a bubble in podcasting, the same as I think there is probably a bubble in newsletters.

There are simply too many of them. Just look at how many new impeachment podcasts got announced over the past month. Do we really need that many?

Yet, here we are. Some might survive. But many of them are going to fail simply because there is not enough audience to go around. In niche audiences, there’s room to play and if you couple it with some of the above tactics, there might be a viable play there.

So, before you dart into the news podcasts craze, really try to figure out if it’s the right approach for you. If there are only going to be a few hundred really large ones, are you going to be the one to break into that?

If nothing else, this is a lesson in discipline. The best operators don’t get distracted with shiny objects. Be cautious chasing the herd into a new product just because some are making money. We’re not The New York Times.


Thanks for reading today’s newsletter. Podcasting is fun and I am actually planning one for A Media Operator, coming sometime in Q1 2020. But it won’t be a news show. What is your media company working on with regard to audio? Hit reply and let me know your thoughts. As always, I appreciate you sharing this with your colleagues and if you are new here, hit subscribe now. Thanks!

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Should There Be an Indie.vc For Media?

Thank you everyone for your notes following my piece earlier this week about going deep in a topic and raising money in a disciplined way. I appreciated all your responses and believe I replied to everyone.

One response, in particular, jumped out to me that touched on something I’ve thought on quite a bit. I preface: if you’re not a numbers person, this issue is pretty dense with my attempts at valuations, math and ROI.

But first, some buttons…

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In his email, the reader, who I will refer to as NC, said:

It seems to me that there's an opportunity for a new kind of investor in media companies with a thesis around profitability, diverse revenue streams, and slower growth. This approach has been thriving elsewhere, but it feels particularly suited to media businesses, given that they’re often misaligned with the growth expectations that come with traditional VC.

This model is being explored by Indie.vc, which believes in a system where you raise money—either solo or with other investors—and then treat your business like an actual business. It is expected that you’ll start generating revenue immediately.

They sum it up pretty nicely on their website:

We believe deeply that there are hundreds, even thousands, of businesses that could be thriving, at scale, if they focused on revenue growth over raising another round of funding. On average, the companies we've backed have increased revenues over 100% in the first 12 months of the program and around 300% after 24 months post-investment.

We aim to be the last investment our founders NEED to take.

That last sentence is a key point that is worth harping on. So many founders raise more money not because they want to, per se, but because they have no choice. The way around that is growing revenues to the point where you are profitable. When that happens, you’re in control.

On the FAQ page, the funding model is presented in a pretty clear way. But it boils down to this:

  • Indie.vc invests in the company, paying a specific amount of money for a specific percentage of the business

  • There is a pre-determined conversion trigger based on follow-on financing or a sale.

  • Anywhere from 12-36 months after raising, the company uses a percentage (3-7%) of its revenue to buy back 90% of the shares that Indie.vc owns.

That last bullet is worth looking at in more detail.

Let’s say that Indie.vc invests $500,000 for 30% of the business. That business then immediately starts generating revenue and growing with its own cash flow. After 12 months, the business begins to pay back Indie.vc. Over the next few years, the business buys back 27% of the initial 30% of shares—90% of 30% is 27%—returning the initial $500,000 plus an additional $1 million in profit.

Indie.vc ultimately keeps 3% of the business in the event the business becomes a smashing success. If it one day sells for $100 million, that would be an additional $3 million to Indie.vc. For a $500,000 investment, Indie.vc walks away with $4 million in profit. That’s an 800% gain.

The one problem is that Indie.vc doesn’t do media. But I can’t help but wonder if that presents an opportunity.

MediaIndie.vc (MI.vc)

Hypothetically, let’s launch a fake investment company. Enter MediaIndie.vc, totally focused on investing in niche media companies that want to be real businesses. You know the kind. I write about them all the time.

In my last post, I shared some remarkable numbers around fundraising:

There’s a better way to do it. A lot of media companies that I respect have all raised money in a smart way:

  • Skift: $1.5 million

  • Morning Brew: $750,000

  • Front Office Sports: ~$500,000

  • Industry Dive: <$500,000

Let that last number sink in… Industry Dive raised less than $500,000 from angel investors. Seven years later, they sold at a supposed valuation of $70 million. It’s incredible.

What if, instead of going the traditional routes, they opted for MI.vc? What would that look like? Let’s use Morning Brew because I like those guys and I don’t think they’ll mind me playing imaginary numbers with their business. And apologies ahead of time if my math is wrong. I am pretty sure my math is good.

Morning Brew raises $750,000 from MI.vc in late 2017. In exchange, MI.vc gets 20% of the business, valuing Morning Brew at $3,750,000. MI.vc wants to start getting a return at the start of 2019 and agrees to a 5% revenue redemption.

In 2019, the business is on track to do $13 million in revenue. Over the year, MI.vc is paid $650,000. This is about 28.8% of the total amount that will be paid back to MI.vc. If my math is correct, the founders of Morning Brew get 5.2% of the equity back from MI.vc.

For simplicity’s sake, the same revenue happens in 2020 and 2021. MI.vc receives $650,000 in both of those years and the Morning Brew team gets 10.4% equity back. Finally, in 2022, with 2.4% of the equity outstanding, the Brew team makes one lump sum payment of $300,000 and buys the outstanding equity back minus the 10% that MI.vc retains for being the initial investor—in this case, 10% of 20% is 2%.

Fast forward some years, Morning Brew has done a great job diversifying its business and it gets bought for $100 million. MI.vc earns an additional $2 million for a total ROI of 500%. The Morning Brew team earns the other $98 million.

Let’s look at a traditional model…

Assume Morning Brew had sold the 20% of the business for $750,000 to a traditional VC and was subsequently bought for $100 million. That means the VC would get $20 million, which is a 2,566% ROI.

Is this a no-brainer? Not exactly and it’s something that I wrestle with.

While it’s great that the media company gets to reclaim 90% equity that was bought, giving up revenue always hurts. In the above example, Morning Brew has to give up $2,250,000 in revenue. What could they have done with that money if they had not given it up? Would it have helped them to grow their business faster? The whole point is to raise a round and then chase profitability. In this scenario, you’re giving up revenue, which could interfere in that goal.

Ultimately, I’m inclined to think that MediaIndie.vc is a better deal for the entrepreneur. As a media operator, I get the initial lump sum of cash that I need to grow my business and then I am only giving up a small percentage of the revenue back to MediaIndie.vc. The better part is that the majority of the equity comes back to me, so I own more of my business.

The other benefit of this is there would be a portfolio of startup media companies that are all focusing on sustainable growth. Could you lean on the network for advice or suggestions? They say running a business is lonely. Having a network of similar businesses could help remove that loneliness. Problems that you are dealing with are possibly ones that another entrepreneur is dealing with.

I would also be curious to know if there are economies of scale that could be found with this sort of fund. Could all MediaIndie.vc portfolio companies get their email service provider for less by going into it together? What about web hosting?

Could this actually work?

The tricky part launching MediaIndie.vc is finding limited partners that feel comfortable investing in a fund that is specifically not chasing unicorn valuations. The desire for billion dollar exits is strong. The way around this might be to say the following:

We are going to invest in niche media businesses that are immediately chasing profitability, increasing the likelihood that more of the businesses ultimately succeed, which means more of our investments succeed as well. We also expect to start earning out on our investment, using a percentage of the company’s revenue until we’ve received 3x what we put in. We’ll also own a percentage of a strong, sustainable media business in a time when most media businesses are failing.

Think about it… You launch MediaIndie.vc and raise $10 million from media-friendly limited partners. Over the next couple of years, you invest in 20 media companies, putting $500,000 in each of them for 25% of each company.

Not every company is going to succeed, but let’s say 50% of them do because these are real businesses that are focusing on revenue growth. 10 of the companies return $1.5 million each in revenue redemptions. This is $15 million total, which means the fund has received back all $10 million + $5 million in ROI. Additionally, MediaIndie.vc owns 2.5% of each of the remaining 10 media companies (10% of 25%). If each company sells for $15 million, that means MediaIndie.vc earns an additional $3.75 million. Total ROI is $8.75 million.

There are a couple of assumptions and one unknown in the previous paragraph.

  1. 50% hit rate. We should still be real and accept that media is hard. Maybe a 50% hit rate on niche media startups is still too high?

  2. How many of the surviving companies can be valued at $15 million when they finally get sold?

  3. How many years does it take to return the $8.75 million? If it’s 5 years, that’s a 13.2% annualized ROI. If it’s 10 years, it’s under 6.5%.

It’s interesting, but is it practical?

It boils down to this. There are quite a few media startups that I am sure can be great businesses, but are unable to find that initial seed round required to get going. With how many stories are published about the death of media, I imagine investors are sitting on the sidelines.

This model would fund many of these startups. I can see why a media operator would do this, but the question that investors need to ask is whether the returns are enough for the additional risk.

One way or the other, this is an interesting approach and it could be practical.

These niche media companies won’t ever be unicorns, but the vast majority of startups never get billion dollar valuations. However, because the media operator mentality is to achieve profitability, perhaps more of them can succeed, allowing for greater success all around.


Thanks for reading. If you have thoughts, hit reply. Consider sharing this with your colleagues and if you’re new here, subscribe. And if you want to launch MediaIndie.vc, let me know! Have a great weekend and I’ll see you next week.

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Thinking About Depth Over Blind Growth

We’re back after a short holiday break. For those that celebrated, I hope you took some time to recharge as we prepare for the last sprint into the new year. Be sure to share A Media Operator with any friends or colleagues that you think would benefit.

Now let’s jump in.

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With media so beaten down, it appears that some investors are starting to look at it as a contrarian play.

On Monday, Business Insider published a story on Union Square Venture’s Fred Wilson investing in political video app, The Recount. On investing in a media company, Wilson said:

It is absolutely not something we've done in the past, but as media has come out of favor in the venture business in the past couple of years, that has created a pretty big negativity around the sector, and I think it's a very contrarian thing to do. It's possible we'll get even more conviction and do more [media investing]. We're intrigued about what looks like a little bit of a vacuum now in media, so we're making a couple of bets, and if we feel good about those, it wouldn't surprise me if we continue to do that. I like to zig when other people zag. I like to get to things before people get into them or when other people have gotten out of them. Those are generally the good time to invest in companies.

I’ve shared my thoughts on why I see The Recount as a difficult sell; that’s not the point of this essay.

Instead, I want to talk about how VC interest in media had an outsized contribution to the mess we have today in digital media.

Over the last decade, investors threw a ton of money at media companies that were more than happy to take it, promising that media could scale into the billions. BuzzFeed, Vice, Group Nine and the list goes on all made a similar pitch about scale. While these names have, so far, remains independent, so many others didn’t…

What about Mic, which at one time was a great success, but then pivoted to video and sold for pennies? How about Mashable, which sold for $50 million despite being valued at $250 million in its last fundraise? Refinery29 is reported to have sold for less than its previous valuation—and in a stock-only deal, which is just kicking the can down the road.

All of these media companies took tens if not hundreds of millions of dollars from investors and then went up like a cloud of smoke.

Now, we’re all adults here… I’m not saying venture capitalists are solely to blame. These media executives were adults and were responsible for their decisions. They knew that they were growing top line numbers—revenue—and sacrificing profitability. The rationale was simple: so long as top line numbers grew, even in money-losing deals, they could always go back for another round of capital.

It was a beautiful, virtuous cycle. Venture capitalists wanted to see growth and the media executives were more than happy to provide the allusion of it so long as VCs kept providing that sweet, sweet funding.

When you’re addicted to the venture capital drug, you’ll do basically anything to get more of it.

And then! Then! When the going got tough, the conversation pivoted to “Facebook is destroying media.”

No. You destroyed your business. You took too much money. Your investors were pressuring you to achieve the unrealistic growth you told them you could achieve and then when you couldn’t, you had no choice but to “scale back in the pursuit of profitability.”

The whole thing was built on a house of cards.

Forget about getting larger; think about depth

The problem was with the blind pursuit of growth. If a media startup raised $10 million and was valued at $50 million, it needed to hit specific revenue targets to justify those numbers. It spent aggressively to hit those targets, ran out of money, and had to raise additional capital.

Because it spent all its money to make its revenue appear higher, it was able to raise at a higher valuation. The circle continued with round after round of capital.

No one stopped to ask whether the business was profitable, the key indicator of a media business’ health. The conversation was always “if we grow more, we will then be able to achieve profitability” with no understanding that there was a linear correlation between revenue growth and costs.

But why did this have to be the conversation? Why couldn’t there have been a better dialogue around building viable media businesses?

I believe it boils down to the fear of being too small; being irrelevant.

I was having a conversation with an investor I respect and he said that he doesn’t like to use the word “niche” because it implies small. When you’re dealing with large amounts of money, you need to make deals that move the needle. “Niche” deals don’t do that.

What I told him, though, is that I like to think about it a different way. Niche is not small. Niche is about going deeper than anyone else possibly can.

Let’s look at STAT, a biotech & pharma media company. On Monday, Digiday published a piece that talked about its subscription revenue:

Stat launched Stat Plus in December 2016, barely a year into the publication’s existence, with the goal of amassing 10,000 subscribers in three years. Stat hit that target in the first quarter of 2019, thanks to 81% growth in subscribers between 2018 and 2019. Since launching Stat Plus, Stat has also raised the price, moving annual subscriptions from $299 per year to $349 and monthly ones from $29 to $35.

In three years, they were able to build the publication to over $3 million in subscription revenue. Further in the article, Digiday reports that subscriptions account for 49% of revenue. In four years, you’ve got a media business that has revenue of close to $7 million.

According to SimilarWeb, it gets approximately 2 million monthly visits. It serves its target audience and doesn’t try to be something that it isn’t. It also only has 50 people who work on the product.

Let’s look at another…

Industry Dive is niche. It has over 100 employees and it has close to 20 verticals that it serves. Five million people visit its sites and I’m not sure there are many publications that go deeper on waste management than Waste Dive. The numbers are strong as I reported when they were acquired:

In 2018, it had EBITDA of $5.8 million on revenue of $22.4 million. If 2018 revenue was up 40% over 2017, let’s pretend that growth is slowing a little and 2019 revenue is only 30%s greater than 2018. That would mean the company generates $29 million in revenue this year. If margins stay current, EBITDA would be approximately $7.5 million. I would wager margins have improved since the brands are getting older and they’re streamlining operations across more brands.

Although it’s not been confirmed, the reported valuation for Industry Dive was $70 million. Not bad if you ask me…

Alright, one more company…

Informa. I know what some may be thinking. Informa can’t be a niche company. It has over 10,000 employees and does billions in GBP per year in revenue. How can that sort of a company be classified as niche?

If you look at what they do, it boils down to hosting a ton of niche events. You name it, they probably have an event about it. In any given day, there must be a few Informa events going on at the same time around the world. What Informa has figured out is how to take a lot of niches and create a business around it. It’s why they are constantly buying new companies.

Niche doesn’t have to be about small. It simply has to be about depth.

Too often, we lose track of what matters and get addicted to flashy numbers. As I continue to talk to people about niche and B2B publications, I say the same thing over and over:

I would rather 100,000 really loyal readers that I know are coming back time and time again than 10,000,000 monthly users I know nothing about. I can build a business with those 100,000.

As you think about your businesses, figure out how to serve your core audience. Go deep.

A smarter way to raise

Let’s circle back to Fred Wilson investing $5 million of the total $10 million invested in The Recount. Great, it now has that money.

What The Recount should be thinking about now is how it can get to profitability as soon as possible. $10 million—with 20+ in the newsroom and a senior staff that is likely very expensive—will run out in a couple years.

If it can use that money to launch, grow and achieve profitability, where it then reinvests its capital back into the business with a sustainable valuation, perhaps there’s a future there.

I’m not against raising money to launch a media company. On the contrary, a VC investing in a media company does not automatically mean that it’s going to fail.

Where things get dicey with these sorts of high-flying investment rounds is that the money runs out before they reach profitability. So, they raise again. And again. Then it all comes crumbling down.

There’s a better way to do it. A lot of media companies that I respect have all raised money in a smart way:

  • Skift: $1.5 million

  • Morning Brew: $750,000

  • Front Office Sports: ~$500,000

  • Industry Dive: <$500,000

Let that last number sink in… Industry Dive raised less than $500,000 from angel investors. Seven years later, they sold at a supposed valuation of $70 million. It’s incredible.

What all of these companies did was raise a round once or twice, invested it in the business and focused on generating profits. They didn’t go back to the well for more drugs, I mean, capital.

I imagine the early years were difficult. Growth was likely slow. But year after year, they continued to build on the previous year’s successes. Skift does over $10 million in revenue. Morning Brew did $13-14 million in revenue this year. Industry Dive did over $22 million. All profitable ventures.

Find smart investors that you trust, raise a single round and then get to work. Use that money to push you to breakeven. It’s when you start going back to the well for more money—not because you want to but because you need to—that things turn bad.

I hope The Recount doesn’t go down that path, but if it does, it’ll be like every other media business that raised a ton of capital.


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Offering Perks to Increase Subscriptions

Is there room for niche streaming opportunities + newsroom is the product

I hope everyone had a nice weekend. I imagine many of you are already preparing for the holiday, but before you go, here’s your latest issue of A Media Operator. If you have thoughts, hit reply. And be sure to share with your colleagues!

Okay, let’s jump in.

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The quest to get users to sign up for a subscription has pushed some publishers to start offering additional perks in addition to the content. Digiday wrote a piece about how TechCrunch is trying to entice additional sign ups.

On Thursday, TechCrunch announced that annual Extra Crunch members, who pay $150 per year, could get two free months of Aircall, a cloud-based phone system that TechCrunch uses for customer service. The Aircall partnership is the fourth member perk TechCrunch has announced in the past three months, joining $1,000 worth of Amazon Web Services credits, 100,000 Brex credit card reward points and six free months of customer support software Zendesk.

By offering these additional perks, it makes the actual cost of the subscription significantly lower.

If we recall, TechCrunch’s Extra Crunch is not targeted to just any subscriber. Instead, the specific focus is on those that are looking to build startups. Danny Crichton, former executive editor of Extra Crunch, said this:

With all those constraints and rules in mind, what we ended up centering Extra Crunch on was solving the problems facing founders in building their startups. That included how to raise venture capital, recruit talent, grow, pay themselves, work with PR agencies, and much, much more. I was previously a VC, and so I essentially channeled all the questions my founders would ask me into articles that solved those problems. Since launch in February, we’ve published about 600 articles on these topics.

If we look at what TechCrunch is offering, it’s clear that the product offerings perfectly align to who the prospective audience is. AWS credits to power their project; Brex credit card points to get free travel; and Zendesk to start offering customer support. All three of these are important for young startups.

Between the three product offerings, you’re looking at over $1,500 in savings. Couple that with the core information offering and it becomes a bit of a no-brainer.

According to Digiday, TechCrunch is looking at this as a retention product. If there is a slow rollout of new offers that current subscribers are eligible for, it could keep people subscribed.

However, TechCrunch should pay attention to how these particular subscribers are engaging with the content. If they’re never reading content, it’s likely this person signed up specifically for the free perks and it’s unlikely they’re going to renew the next year.

I do find this to be an interesting approach, though. Since TechCrunch is selling the subscription for $150 over a year, getting startup founders to sign up for the free perks gives the publisher a year to keep the user engaged.

The economics of this sort of a deal is also a no-brainer.

Though TechCrunch has existing advertising relationships with many of the companies offering these perks to its members, neither TechCrunch nor the companies are paying to secure the offers.

While TechCrunch opted not to charge their partners, I think these opportunities can be monetized. If Amazon Web Services is giving $1,000 away, how much do they view the new client to be worth in their lifetime? Clearly it’s more than that, so could you convince them to give you an affiliate deal?

This doesn’t work with every industry, of course, but if you have partners that sell products with long-term contracts, you may be able to offer these perks to your new subscribers and earn additional affiliate revenue from those that are already subscribing.

For those publishers that don’t have the ideal partner-type, this article got me thinking about some experimentation that Wired did with its paywall back in June that you may want to experiment with. According to a Digiday article:

On June 1, Wired site visitors will see a message informing them that the site’s paywall has been raised from four articles to five, with that extra article’s worth of access sponsored by WeTransfer. Wired is hoping that the campaign, which runs for 30 days, will kill two birds with one stone, bolstering ad revenue on one side and driving subscriber growth on the other; WeTransfer is hoping the access helps distinguish the file transfer service’s first-ever digital branding campaign.

WeTransfer effectively paid to unlock additional content for users. The advertiser gets a high-impact ad unit targeting the highest quality and the publisher gets a lump sum of cash alongside users subscribing. It’s the closest case of having your cake and eating it too.

There are two primary risks that are worth exploring. First, the ad’s impact becomes less effective because users see the ad more often. Second, going from four articles to five before triggering the paywall, how many fewer people will subscribe?

Ultimately, this all boils down to testing things out. If you have a partner that wants to “sponsor” the paywall, keep track on how many potential subscribers you lost. If you know the LTV of one of those subscribers, you’ll know if the deal worked out for you.

Niche streaming services

Yahoo Finance reported that First Look Media launched a streaming service, believing that by going super-niche, it could build a business. The article says:

On Thursday, First Look Media, parent company of The Intercept and Press Freedom Defense Fund, quietly launched a $5.99-per-month streaming service called Topic, throwing its hat into the now comically overcrowded ring of OTT offerings.

Topic is home to original shows and movies, mini-documentaries, and news shorts, plus a small number of licensed content, like both seasons of the British version of “The Office.” Topic’s home screen currently touts original programming like “Monogamish,” “Philharmonia,” “Honour,” “Invisible Heroes,” “Pagan Peak,” “Blind Donna,” and “Miriam’s Big American Adventure.”

The immediate response to this story is a collective sigh. Why do we need another streaming service? Isn’t Baby Yoda enough for the rest of time?

And if First Look were introducing a general consumer streaming service like a Netflix or a Disney+, I would agree. However, this is a niche play. Just like I’ve been writing about the barbell of digital media, there’s also a barbell in streaming services.

On one end, you’ve got the Netflix and Disney+. These are massive offerings and they’re aiming for tens of millions of subscribers. Compare this to The New York Times and The Wall Street Journal. Then, on the other side, you’ve got the niche offerings, such as what First Look is trying to do. It doesn’t need millions of subscribers to be profitable.

And Wilson tells Yahoo Finance that Topic only needs “less than a half a million subs” to be profitable. “We don’t need to be in 80 million households,” he says. “It’s a tiny amount of subs required to make this engine run profitably.”

In the middle, there are going to be a lot of consumer streaming companies that realize it is a lot harder to engage with audience. The content budgets aren’t great enough and the audience is equally not niche enough.

None of this is to say that First Look will succeed. While I believe niche works, convincing 500,000+ people to sign up still takes a lot of work. However, if they have been paying attention to what their readers are consuming as much as they say they have, they might know enough to deliver the right kind of programming.

Whether it’s streaming or more traditional digital media companies, ask yourself where your business rests. You can count on two hands the number of large-scale media brands. If you’re not serving a niche audience, you might be in the middle. Things are going to get harder for those companies, not easier. Start thinking about niche product offerings. Even if it only serves a small percentage of the audience, you’ll be building a product for a niche, which is the way to monetize with user revenue.

One note about product & editorial

Over the weekend, I saw this tweet that talks about the perils of local news.

As a paying subscriber, you get a couple of stories and then the rest of the content is advertisements. Why would anyone pay for this?

This is a reminder that as a news publication of any sort, your primary product is your newsroom. If you’re cutting back on journalists and then expecting people to continue paying for news, you’re in for a rude awakening.

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.

This means that newsrooms need to invest in more local news, not less. Unfortunately, more of our local papers are being gobbled up by investors that don’t understand this necessary investment.

Even for those that are not investing in local news, this is an important message to remember: your newsroom is your product. Invest in it.


Thanks for reading! We’ll be off on Friday because it is Thanksgiving here in the United States. However, I’ll be back in a week with another issue of A Media Operator. Be sure to share this with your colleagues and if you’re new here, consider subscribing. I send issues on Tuesdays and Fridays. Have a great holiday and see you next week!

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