Good afternoon!
The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
[Author’s Note: There will be no long-form essay today. The simple explanation is a tight schedule yesterday and today. The broader explanation is this is a weird moment to be analyzing the media business, much less delivering an analysis in essay form. So, writing about this moment requires a bit more thought and research than my scheduled has permitted.
I will make it up to subscribers next week (more on that at the end of this mailing).]
Why is this a “weird” moment to be analyzing the media business?
First, we are currently witnessing “the great subscription reversal.” Axios recently reported: “News companies are reversing course on hard subscriptions — once seen as a safer alternative to the volatile ad market — in favor of flexible paywalls, membership programs and more ads.” Netflix and other streamers are continuing a strategic pivoti away from subscription-only models.
Second, advertising spend is growing overall but less with traditional and digital media—The Information reported today that both Vox Media and Bustle Media saw revenues decline by 15% in 2023. As Reuters reported, “an uncertain economy has led to advertisers reducing their marketing budgets and sticking with safe havens such as Meta.”
Analyst Brian Wieser—Principal of Madison and Wall and former Global President of Business Intelligence for GroupM—has been highlighting how advertiser demand is shifting away from a narrower supply of more expensive traditional inventory from legacy media companies (newspaper ads, TV sports) towards a broader supply of digital inventory (connected TV, social). Because that supply far exceeds that demand—and therefore is cheaper—advertising spending will inevitably go down overall.
This market dynamic reminds me of an essay I wrote last January—”Media Confronts New Gatekeepers to Scarcity”—which argued:
The technological, operational and financial structures required to be a gatekeeper to scarcity no longer seem to have an obvious business logic to them. It's no longer clear what the role of a gatekeeper is in media outside of Amazon's and YouTube's business models.
That essay was partially built off of a lake metaphor used by Warner Bros. Discovery CEO David Zaslav. In “Tinderbox”—James Andrew Miller’s oral history of HBO—he recalls his February 2021 discussions with AT&T CEO John Stankey about Discovery’s strategic need to make it across a lake to catch up with Netflix and Disney. Zaslav said Netflix had been “so successful, they’ve already gotten to the other side of the lake and built a cabin.” Each of Discovery and HBO Max were then only halfway across on their own, and only “together” they could make it across.
There was a confidence in Zaslav’s perspective—perhaps more salesman than visionary—that Netflix and Disney had solved for streaming. Three years later, Netflix is pivoting aggressively into both an ad-supported model and gaming, while Disney is expected to fall tens of millions of streaming subscribers short of its projected totals for 2025. It is now battling activist investors who do not buy into its streaming strategy. In other words, whatever Zaslav and others believed lay across the metaphorical lake for media’s retail-first, consumer-first future does not exist. It may not exist anymore or it may never have existed.
That reflects something Skift CEO/Founder Rafat Ali tweeted recently: The mass push of news and media organizations into digital subscriptions “were flawed to begin with”. The reason, as Rameez Tas—Co-Founder and President of research firm Antenna—tweeted (in a separate, unrelated thread) is that all media CEOs pursuing a subscription model failed to ask the question "Is my content commodity or scarcity?" And when they did, they answered it “naively / dishonestly”.
In short, we are witnessing the wholesale marketplace experience a humbling-but-also-long-overdue-learning-curve about what it means to survive in the increasingly consumer-first, retail–first marketplace. As I previously wrote in “The Daisy or The Flywheel”, “if in the wholesale model the consumer wanted TV, in the retail model the consumer's needs are far more multivariable and complicated than launching a streaming service.” Replace “TV” with “newspaper” or “magazine” and “streaming service” with “website”, and “the great subscription reversal” is easier to understand.
In other words, the “gatekeepers” in traditional media could never be “gatekeepers” in digital media because in retail-first, consumer-first models, some elements of their traditional media bundle will always be greater than the sum of all parts. As NYT executive David Perpich—Publisher of The Athletic and Wirecutter—recently told The Wall Street Journal, newspapers can be considered as “a bundle of information.”
Next Steps
Over the weekend, I will pull together a short "handbook" that answers the rhetorical question “What’s on the other side of the lake?” What did executives get wrong? Who is getting it right? And, what which sexy new ideas—like the sports joint venture or Xumo—are directionally right?
A handbook offers subscribers a curated variety of tools to help filter the important signals from the noise. An essay, alone, cannot accomplish that.
Subscribers should expect it no later than Thursday. There will be no Monday mailing unless there is a newsworthy story worth analyzing.