Written in collaboration with Jarrod Dicker of The Washington Post.
After the election, it’s common to see a post-mortem take place in an attempt to understand where we, as an industry, have gone wrong over the past few years. And over the past couple weeks, that’s been transpiring. There has been an increase in discussion about how the business model of media is running in contradiction to the civic responsibility of the Fourth Estate.
At the core of this is a debate on whether The New York Times, The Washington Post and others are failing the American people by pushing more content behind the paywall. Obviously there’s a bias since one of us works at The Washington Post, so let’s get that disclosure out of the way. But let’s think about this in more detail because the other author of this piece works at an advertising-driven media company that, to this day, does not have a paid subscription.
Is the business model of media to blame for where we are today? No. Surprised? Don’t be. In no other industry in the world do we debate the merits of business models than in media. Even Uber, which has literally perpetuated the myth that drivers “want to be contract workers” has had less written about its model than the media business.
Information is quite accessible on the internet. This isn’t an economic or availability problem. Instead, it’s about convenience and trust. Information is accessible and available for those who choose to read it. There are deeper problems at play so the business model is the last thing we need to worry about.
The ironic thing is that our industry is really simple. Media is not complicated. It’s hard work, but it’s not actually complicated. This topic has appeared on A Media Operator since it started, but at the core, there are three steps to running a media company.
You create content: Hopefully, that content is exceptional. But, unfortunately, most isn’t that great.
You build an audience: With that content, you then start building an audience through various channels. The goal is to capture people’s attention (we’ll come back to this).
You sell that audience: Whether it’s subscriptions, advertising, commerce, events or some other interesting business model, you monetize the audience with it.
Envision those three as a circle because with the money you generate from selling the audience, you can then reinvest back into the business and create more content. This is the flywheel that many successful and sustainable media companies have used to grow larger over decades.
When spelled out in those three steps, it’s clear that it’s not complicated. Honestly, we should be running infomercials about “the business of media” because in three uncomplicated steps, you’re on your way to running a great business! You’ll notice we don’t use the word easy. Because while the three steps of running a media company are not complicated, they’re hard. And nonstop.
Why do we bring this up?
Because at the core of it, every single media company follows the same flywheel. Even those zombie media companies that will never return value to investors still follow that flywheel. Content leads to audience leads to revenue and then we start all over again. And it doesn’t actually matter how you generate the revenue component of the flywheel because it’s all based on the exact same thing: attention.
All business models are attention based
Pundits (not us because we’re not pundits) would love nothing more than to divorce the business model from the content. The argument is that these models go against the integrity of the content because they are all based on attention.
This is the core of the “subscription only” media argument. “Media is dead because it has stopped delivering high-quality content and, instead, focuses all of its energy on creating content that captures attention—clickbait be damned.”
Here’s the thing… Everything is based on attention.
There has never been more content on the internet than there is today. Tomorrow there will be even more. Content on the internet is like a cancer; left untouched, it will continue to grow. That means, every day you’re running a media company, you’re competing with more content, not less.
That also means that people’s attention is being pulled in more directions than ever before. In what world, when we’re all trying to get people’s eyeballs, do people actually think that attention is irrelevant? Do you know one of the biggest contributors to subscription churn? People not actually reading the publication they pay for; aka, not having their attention.
Every business model in media depends on attention. If you’re running ads, you need enough people to see them. If you’re selling kitchen gear, you need people that like cooking to come to your site. And if your model is dependent on subscriptions, you need people to see the content enough to form a habit that encourages them to sign up.
It’s true, how attention is valued is nuanced from model to model, but the reality is still the same… without capturing consumer attention, the publication cannot monetize and, therefore, has no business. But so long as we assume that there is a business model that works for media, we have to accept and, more importantly, embrace the reality that attention is paramount to running a successful media company.
Business models are just reinventing themselves
There are two ways to think about product at an organization. An idea is either revolutionary or evolutionary. A revolutionary idea completely changes the narrative. The pivot from a monarchy to democracy here in the United States was legitimately revolutionary. An evolutionary idea, on the other hand, iterates and changes over time. The giraffe did not develop a long neck overnight; that was tens of thousands of years of slight change that resulted in those with the longest neck surviving.
It’s the same in media business models. There has never been anything revolutionary about media business models. And the reality is that there likely never will be because there are only two main ways to generate revenue in media.
You sell exposure to your audience.
You sell things to your audience.
That’s it. There is nothing else. While we hate the phrase “if you’re not paying for the product, you are the product,” it’s also kind of true. You’re either paying with your dollars or you’re indirectly paying with your time and attention.
Ironically, it’s because of media’s unwillingness to evolve that we are in many of the awful situations we are in now. Publishers like to blame Google for stealing their business, but let’s call a spade a spade… We were lazy, ignorant or both. The Boston Globe launched its website in 1995. The New York Times went online in 1996. So did The Wall Street Journal. Google didn’t go live until 1998.
Our business was advertising and a new company came along and beat us. Why? We didn’t evolve with the times and that meant we were left with pretty horrible ad products. They didn’t help our partners succeed. And so, when a new, revolutionary opportunity presented itself, customers flocked to it.
That doesn’t mean that business models can’t get better, though. They’re simply evolutionary. Banner ads used to be the only game in town for revenue. Then we started seeing the rise of native advertising. It fit more naturally into the experience. Fast forward, we’re now seeing this trend where the ad carries a semblance of brand validation.
Consider a podcast live read… the reason companies are forking over hundreds of thousands of dollars for them—even though the analytics are downright abysmal—is because the individual appears to be vouching for the product. Do we really think the person supports every single product that they talk about? No, of course not. But because they are talking about it in a way they’d talk about anything, the advertisement does better.
That’s the evolution of advertising, which started as a static thing that you would see on a piece of paper and has turned into a much tighter integration with the publication.
Advertising evolves even more than that when you realize commerce is just the next evolutionary state of advertising.
BuzzFeed was not the first to create its own brand of goods. Grocery stores have had generic brands of everything for years. Go to the pharmacy and you can get a generic headache medicine for like $1 compared to the brand name.
Nevertheless, evolution has taken place. We started by selling advertising for partners. Then we realized there was a greater upside if we took more risk and only earned money when we drove an audience that converted. Then we realized, “why sell their goods when we can sell our own and make a better margin?” There’s nothing revolutionary about that thought process; it’s simply an evolution on how we think about media and commerce.
With subscriptions, it’s no different. Ironically, the media used to be experts in the subscription business, each publication having an entire department called circulation that was solely focused on getting as many people to pay for the physical product as possible. But there has been an evolution in the thought process.
Originally, circulation’s responsibility was to get as many people to subscribe to subsidize the cost of the physical product so that profits could be generated from advertising. Now we think about the subscription as the means of generating actual bottom-line profit. Circulation is not just to provide an audience for ad revenue; it’s to generate actual profit itself.
Something to consider is that we are only as good as our willingness to evolve. When we pay attention to the business and constantly push the needle, the business does well. Looking at newsletter companies, it’s not that running ads is unique, but rather, that the ads feel part of the experience. This, in turn, helps our partners. The same can be said for podcasts.
We must always think about how we can improve our models while also recognizing they are all based on the same two things: a consumer’s dollars or a consumer’s attention.
Business models are not consumer benefits
The reason we have a business model is to generate revenue and support the creation of said content. No other industry on the planet worries about whether consumers care that they have to pay for said content or not. They care that the content is good enough to warrant being paid for.
Let’s say that again… it’s not a question of whether consumers should pay for content. It’s a question of if we’ve done enough to deserve being paid for.
One of the reasons we struggle with this so much as an industry is that we’re in this business for more than just profit. We believe that the reporting make a difference to the world. We believe that good, strong reporting is fundamental to a healthy democracy. Therefore, we extend the belief that because our reporting is a consumer benefit, then the business model must be as well.
That’s just not the case. Our product (the content) is for the consumer’s benefit. We create it for them. The business model is a tool to help pay for said content and generate profit. It’s not about benefiting the consumer when it comes time to pay for things; it’s about making sure we can continue to create.
The thing about running a media company is that many of us recognize it is paramount to be diversified, which allows us to monetize our business while also upholding our responsibility to the consumer.
Let’s consider the elephant in the room: The New York Times.
It has created a remarkable subscription business and the pivot that it made should not be undervalued. However, you don’t have to subscribe to read all of the content on The New York Times. Prior to inputting your credit card, The Times asks you to simply register to read a few articles. The number changes because they’re always testing, but we’ve seen upwards of “5 free articles” for registered users per month.
Here’s why they did that… they still have an advertising business. It might not be the main revenue driver, but it’s still going to be a healthy component of the business. By requiring users to register, they are able to collect more 1st-party data that they can for ad targeting. This shouldn’t surprise anyone. They’re going to attempt to monetize across the various levels of the funnel.
To expand on that, if they can get users registered and reading multiple articles per month, The Times believes that a habit will form and people are more likely to then become a paid subscriber. Habit is important to a healthy subscription business. Without it, people are more likely to churn.
They also introduced this free registration because of civic responsibility. We get into the news business because we believe it matters. Therefore, leaving some content open for people to read is important. And let’s be clear… when disaster hits, like the Covid-19 pandemic, both The New York Times and The Washington Post left reporting about that in front of the paywall.
But looking at this, it’s important to understand that while the content is very much a consumer benefit and we strive to make it as good as possible, the business model is not a consumer benefit. We are not trying to make people’s lives better when we decide to charge for content through dollars or attention. We are trying to decide if our content is good enough to charge readers to begin with.
The real problem involves both demographics and operations
This brings us to where we believe a problem exists and why things have turned so sour. None of this should be surprising, but when there are information voids in a particular area, someone will find a way to fill it. As we said above, content on the internet never stops expanding.
In an upcoming episode of A Media Operator podcast, Mike Orren, the Chief Product Officer at the Dallas Morning News, talked a bit about the ideal target audience for a healthy local news subscription business. He effectively said that people who own homes, have kids, go to church, vote and pay taxes are the perfect subscriber.
Why is that? No one cares about what’s going in local government until they’re paying property taxes and want to know it’s being spent. Then, suddenly, people very much care. Once a group of people are part of the community, they then want to stay up to speed on what’s happening.
However, local newspapers really missed the boat on the digital transformation. They left an entire generation of hybrid print/digital readers without a good product. Remember what we said above: we have to continue evolving. Nothing will ever be revolutionary, but it has to be evolutionary.
For too many, the pivot to digital came far too late.
For so long, every newspaper across the country was on the same level of The New York Times. When something major happened, every local paper had a reporter there. There were news bureaus all over the world for all sorts of local papers. Why? Because they had geographic monopolies, so they had to be international, national and local.
With the internet, that’s no longer needed. Someone living in Seattle can read national and international news on The New York Times. They don’t need that in the Seattle Times. What they need in the Seattle Times is information about Seattle. Local newspapers have seriously struggled with this fact.
Local newspapers need to be smaller, leaner and more focused on their particular geographic area. The New York Times can’t compete simultaneously with every single local newspaper. It may try, but that’ll require a huge investment and is likely years of work to accomplish.
But the evolution is not just on the content strategy side of things. It’s also the business model. There has been no shift here other than to lazily slap ads up on the website.
If you visit a local news website these days, they’re digital landmines. The fans on your computer speed up, you’ve got popups everywhere and then, when you do finally get to the content, a decent amount of it is about national news. Why is that? It has to do with how these newspapers think about themselves.
Because the newspapers have not made the necessary shift to a digital age, their businesses have died. An entire generation of “perfect readers” have not been served by these local newspapers, so they went elsewhere. When there are voids in information, someone will find a way to fill it and it might not always be to the same standards that traditional newspapers hold themselves.
But it’s also not all our fault either. Some of it is just user choice. When newspapers were the only game in town, they had a monopoly on information transfer. With the internet, people can find any pocket of information they want. And if there’s one thing people want more than anything, it’s to feel validated. If you hold a particular opinion, you’ll find a place online that tells you that opinion is right.
Business models can’t fix that. Operational laziness can’t fix that. The right demographics can’t fix that. At the end of the day, people are being force fed exactly what they want without a strong side of leafy greens. That has left so many of us as aggressive, opinionated, often very wrong morons. And I say “us” because this happens with all opinions irrespective of political slant.
Stop blaming the business model
To bring this all back to the beginning, when we continue to analyze why things are the way they are in this country, it’s going to be easy to point to the business model of media and say that it’s the problem. They’ll say that we need to revolutionize how the media makes money. “The business model must be rebuilt from the ground up.”
That’s not true. The business model of media is fine. We either monetize our audience by selling exposure to them (advertising) or by selling things to them (subscriptions and goods). Both are perfectly viable models and have made it possible for us to continue reporting on things that are important.
But there is a lot of work ahead of us on the operational side. We need to continuously deliver an amazing product to consumers worth paying for. No one balks at paying for a cell phone, gym membership, Netflix, BabyYoda+, Peloton and every other subscription. Why should they balk at paying for news if the product is actually important to them?
The business model is fine. It’s whether we matter that needs to be discussed. We believe we do, but we need to prove it to our audience.
Thanks for reading today’s piece. If you have thoughts, let us know on Twitter (@jaycodon and @jarroddicker). Consider sharing it and, as always, please become a premium member of A Media Operator for even more. Thanks and have a great weekend!
