The Future of News Media: Newsletters, Podcasts, and Content that Pulls

Almost no one knows how to make money in news media. Newspapers don't. ESPN doesn't. Mashable doesn't. BuzzFeed doesn't. Vice doesn't. The old school players don't know how to make money in news media and the new tech-savvy companies don't know how to make money in news media. Perhaps, as one person has suggested, the end is already here and everyone should jump ship already. However, despite the dire outlook, a few organizations are figuring out how to become successful (and profitable!) in this new media landscape, which suggests that there is a roadmap for those who are able and willing to figure it out. So what is that roadmap? And if it's out there, why are so many news media companies still struggling?

Let's start with what got the news media industry here in the first place. The proximate causes are pretty well understood. They are that 1) advertising revenue has dried up as more and more advertising dollars have gone to the big aggregators, especially Facebook and Google and 2) subscriptions have failed to make up the difference as they have either declined or failed to materialize. These are very important trends, and they need to be understood and dealt with. However, they are themselves products of deeper issues. If Facebook and Google were magically removed from the face of the earth tomorrow, most news companies would not immediately return to growth and profitability. More likely, replacements to Facebook and Google would pop up that would more or less copy their business models and fill the same spaces in the market. This suggests that the current problems facing the news media are structural, and cannot be fixed with a few simple policy changes at Facebook and Google.

The Business Model Problem: Distribution is King    

News is an old business. It dates back to at least the Agora in ancient Athens. And in all that time, the vast majority of power and profit has always been captured by those with the power of distribution. By comparison, reporting has always taken a back seat. In the 19th and early 20th centuries, the power of distribution was held by a collection of publishers, chief among them Hearst Communications. In the mid-to-late 20th century publishers were joined by cable providers. (If you need evidence of the relative power differentials, compare the market cap of Disney ($169 BB) - one of the most innovative and beloved content providers of all time, which owns successful brands such as Marvel, Pixar, ABC, and ESPN - to that of Comcast ($191 BB), a cable company that no one likes.) Now there are two new content distributors who reign supreme: Facebook and Google.

While the power balance has always favored distributors, Facebook and Google (together frequently known as "The Duopoly") have a level of control never before seen. On the content side, there is almost perfect competition (Facebook and Google can replace one content provider with another at virtually no cost) while on the distribution side there is a near-monopoly, with an insignificant amount of competition in social networking and search. Their advantage is only furthered by the amount of data they generate and collect, which is orders of magnitude larger than what any media company can generate. This makes their advertisements more targeted and much more valuable. The result of this new arrangement has been the collapse of ad revenue for content providers as a larger share of finite ad spend has flowed to Facebook and Google.

At the same time, subscription revenue has started to collapse. Remember, newspapers succeeded in the past because they held a distribution advantage. You typically subscribed to a newspaper because it was the only way to get a certain type of news in your area. Now, news media organizations hold no power of distribution. If you see an interesting news item because it's trending on Facebook, you will probably click on the first link you see. If for some reason you don't like the source, in all likelihood you'll just Google what happened and pick another source at random. A subscription is out of the question when you can cobble together the same information from any other source or collection of sources for free. The value of reporting was always near zero, and with no value to add in terms of distribution, newspapers are put in an impossible situation. (The situation is similar, although slightly less acute, for television news and weekly publications, which are also seeing declines in ad revenue and subscribers.) This is compounded by the fact that the internet has democratized entertainment. News organizations no longer solely compete with other news organizations, but instead with Netflix, Angry Birds, pornography, cat videos, Instagram, memes, Tinder, etc. On the internet, everything competes with everything.

[Side note: Why do the powers of distribution fall to digital distributors and not the physical Internet Service Providers? Well first of all, ISPs do capture quite a bit of value. Secondly, there is more competition amongst ISPs. Thirdly, and most importantly, Net Neutrality prevents them from extracting value from content providers.]

Seizing the Means of Distribution

So if those with the power of distribution have always held the advantage, and Google and Facebook have (near) complete control of distribution, does that mean that there is no way to wrest control (and revenue) from them? No. Though many people seem to be operating from that assumption, there are many other means of distribution, and there are likely to be more in the future. The two most important non-Facebook and non-Google means of distribution right now are email newsletters and podcasts.

In indisputable proof that everything that is old will become new again, email newsletters are back. (No word yet whether this also means the return of obviously false chain-emails from your grandparents but for the record I am in favor.) Newsletters have taken ahold again because they are mobile-friendly, short, digestible, and fun, but also because they are personal. They represent a break from the asylum-like nature of Facebook. They're an opportunity to read and connect with content providers without feeling like you're participating in a manipulation contest. Additionally, they're great for business. Because they so fully capture audience attention, they create valuable advertising real estate. They also cut out the cost and attention competition that comes with getting clicks through Google and Facebook.

Podcasts have many of the same perks as email newsletters. Almost all of the most successful media enterprises have a podcast presence. This may annoy some who became print journalists because they prefer writing, dammit, but in this day and age it's important to be able to function across media including writing, audio, and video. Podcasts pulled in at least $220 million in revenue last year, which is a great start. Considering that radio did $18 billion over the same time period I think it's safe to assume that there is still a ton of growth left in the podcast industry.

The key point isn't that email newsletters and podcasts are the end-all be-all of digital media strategy, but rather that right now they are two of the best ways to escape the duopoly, connect directly with your audience, and establish a healthy business model. Even so, these methods are incomplete, because they only work if you have the right content strategy behind them.

Content that Pulls

In the new media environment, content providers will only be successful if they are good enough that people want to seek out their content. If people seek out your content, then they'll also be open to your advertising (think what you see from Tim Ferriss and Oprah or social media influencers like Kim Kardashian). That is the best way to generate enough interest to compete with the hyper-targeted advertisements offered by Facebook and Google. Content that is pushed to its audience (e.g. most of the random stuff you come across on Facebook) is good for nothing other than as fodder for the Facebook/Google machine. Content that pulls allows you to be your own distributor. It creates loyalty and by so doing creates value. The number one rule by which you can evaluate whether a piece of content is "push content" or "pull content" is by asking "Do I care what this person has to say in the future?" For push content the answer is no; for pull content the answer is yes. By observing content providers who have effectively created content that pulls, we can observe a few rules and principles:

1) Perspective should be personal. If your voice is purely demographic or ideological, it's relatively easy to replicate. If your only voice is "conservative" or "liberal" or "millennial" then there is always another conservative or liberal or millennial out there who could passably offer the same perspective. The successful players are personal, and you can never really replicate someone's personal voice. If your voice and analytical perspective are personal, people will form a connection and be more likely to come back to it regularly.

2) Be funny. One of the primary ways that news + analysis can be delivered is through comedy. News as comedy is not a new idea. It's the central concept of shows The Daily Show and the Colbert Report. It's what made early ESPN anchors like Dan Patrick and Keith Olbermann great. Humor is evidence that you truly understand your audience and your subject (in addition to being inherently entertaining). Something like The Daily Show takes the news and creates comedy by contrasting reality with a certain worldview. This requires deep understanding of the news, and serves as a type of analysis. You don't have to be a comedian to be funny. Think of theSkimm (their weird spelling, not mine). Comedy doesn't have to be your main shtick, but in most cases, there should at least be some element of it.

3) Be more vertical on audience than subject. I'm not saying you should have no concentration when it comes to subject, just that you should focus more on who your audience is. For me the poster-child for this rule is The Ringer. Yes, they focus mainly on sports and pop culture, but they often venture into stories about culture, society, and technology. That's because they are vertical (or focused) on audience. Their audience is a certain type of younger, educated, slightly progressive person who is interested in mainstream culture. Again, subject concentration is relatively easy to replicate. But going vertical on your audience creates a relationship. It creates a tribe-like experience that people are reluctant to leave.

4. Know your stuff. This might seem obvious, but it's no longer possible to hide ignorance and shoddy work. Your analysis has to be meaningful and insightful. 

5. News is out, analysis is in. Original reporting is expensive and becomes nearly value-less the second anyone can read it and re-report it. Focus more on analysis and perspective. Think of yourself as an "intellectual influencer." Reporting creates very little value. Influence creates immense value, and influence comes from telling people how to think.

If you're looking for examples of how to execute on some of these rules, here are the news media companies and individuals that I think are doing it right and I would try to replicate:

  1. Stratechery
  2. The Ringer
  3. theSkimm
  4. Axios

Figuring out how to create content that pulls your audience in is a never-ending study. But if you figure it out, you're well on your way to creating value in news media.