“The future equilibrium for news media seems obvious: 1. A handful of super-bundles (NYT, WaPo, WSJ) that can spread costs over a massive subscriber base. 2. A long tail of superstar individuals who monetize their audiences via Substack/Patreon/etc. The middle market is toast.”
These words greeted me this morning from a vocal tech policy specialist (whom I won’t care to name, that’s not the point of this column). It’s an increasingly common refrain – a couple of huge players are going to eat all subscriptions, super-stars will launch their own thing and everyone else is doomed.
Nor is this the first gloomy future to be predicted. In fact, it’s just the latest in a series. A big hit in the Winter/Spring season of 2019/20 was “The New York Times would devour everyone” (later softened to winner-takes-most, including WSJ and a few others).
Before that we had “(almost) all privately owned media will fail, no one wants to pay, only non-profits and state-subsidized will survive” (especially for local news).
Yes, 2020 has been a huge pain for a lot of publishers. But a lot of media also had a great year – even local publishers. Newsletters are booming, and while the attention is on the stars, a lot of smaller writers are also doing fairly. Podcasts are taking off.
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Every industry suffers from bad takes or temporary manias. Yet media seems to be uniquely rich in predictions that predict the future with great confidence and then turn out to be wrong. I think there are basically four reasons why we constantly, and incorrectly, predict the end of history.
Arguably the most serious mistake with media analysis is a constant technological environment. Yes, subscriptions are booming now, largely because of easy payment processing, well-designed subscriber product solutions, and people generally getting comfortable buying digital goods.
That is actually a relatively big shift from just a few years ago (in most countries), and a huge one from a decade back. On the flip side, the consistent decline in ad revenue going to publishers has been determined by how social media have eaten up this space (which in turn was made possible by a dotcom boom that led to massive fiber-optic capacity being built).
Why would we assume that the current situation would be an end-state? Changes in technology and the resulting social trends and movements have consistently driven innovation in media. Sure, the behemoths may have more resources to take on the next challenge, but it seems like hubris to assume “this is it.”
Consider how important vertical video became after TikTok pushed everyone to launch their version of stories. Or how Substack got the right mix of usability and monetization for newsletters. Now think about the potential impact of regulatory-driven break-ups of the tech giants.
Second, and almost as important, is the assumed passivity of market players. Forecasts and predictions typically claim that revenue model X will take off – and they can very well be correct. Next, they claim (again, reasonably), a few players will benefit the most. But this fails to consider is the behaviour and adaptive techniques deployed by the rest of the market.
Often, the opposite happens. While plenty of media end up being passive witnesses to their own destruction, a handful of second-tier players (those who made some, but not most of the money from model X), is driven to find new solutions.
A lot of innovation comes from necessity, as they say, or from trying to work around market constraints.
News media are a fairly complex business. Typically, we’re talking at least 3 or 4 sizable but very different revenue models, sometimes more. They often run on different cycles, as we saw with the case of advertising and subscriptions during the pandemic.
But new developments often get hyped up and spiral out of control. Subscriptions are a unique case in point. Both tech giants like Netflix and heavyweight media like NYT or WaPo saw subscription revenue boom over the past year.
As a result, reader revenue has become a shiny new object, the crux of every hot take. But many legacy media only earn 20-30% from digital subscriptions. That’s just not enough to base a model on.
This one probably favours the big media players, but it’s still an important gap. The rise of reader-revenue has pushed some publishers to be profitable, and even seriously profitable. By that, I mean beyond regular expected economic profits.
Typically, a portion of that is re-invested into innovation. In the media sector it’s been so long since we saw companies able to invest in R&D, that we’ve basically forgotten it’s an option. But this is actually the norm in most industries.
That’s a new variable in the ecosystem, and potentially super exciting. Some new money will probably go into AI and Machine Learning, but there may be even more exciting innovations in terms of business models. There is no reason to think that the current version of subscriptions is where the game will stay for long – and for the first time in years media will have something to say about what comes next.
Yes, there is probably a lot of consolidation to come, and definitely a “winner-takes-most” aspect. But the industry is right now in the process of going from super-fragmented to just fragmented. It’s still a while before we see a Coke-Pepsi duopoly.
Moreover, the past few years have shown that the media industry can be both volatile and vibrant. The future looks brighter than it has in a long time – and we should probably reflect a bit of that opportunity in our forecasts, not just the doom and gloom.