Nieman Foundation at Harvard
Ah, the pre-Thanksgiving bounty. Those of us who try to chronicle the business end of the news business have seen our plates overflowing lately. Not since the Bezos blitz of August have we seen so many announcements, shuffles, offers to sell, and big-name moves in a single month. These shuffles tell us lots about the evolution of both value and values going into 2014. Lots of media to pick apart: Wishbones, drumsticks, and carcasses to be cleaned, gravy to be separated. Let’s carve:
As Forbes Media put itself on the block last week, it did so as a digital media company, not a magazine brand. Why aim at something like a 5x multiple of earnings — if you can even find a “magazine” buyer — when you might be able to get twice that amount selling on your digital cred. Lots of good digital numbers tossed around: 25 percent digital ad growth, 55 percent digital revenues overall. Not highlighted: The familiar print struggles, as ad revenue is down 7.5 percent to $165.7 million through September, with ad pages down a percent.
Forbes, forsaking its traditional business roots, has been a poster child for how to digitize a legacy company. Take a look at its home page, and you see how it has floated far away from its Fortune and Bloomberg Businessweek competitors, populizing, optimizing, nativizing, and rightsizing its content creation. Inevitably, in such transitions, something’s gained — a doubling of unique visitors in three years — and something’s lost, in this case the upmarket nature of its old magazine audience. Despite its great digital growth, it’s still sub-scale compared to many of the companies it now competes more directly with — not to mention the truly big guns like Google, Facebook, Yahoo, AOL, Microsoft, and Twitter.
So maybe the end of 2013 — with the Dow over 16,000 and the shine not yet wiped off of Forbes’ remake under CEO Mike Perlis — offers a great time to sell. Sell the story (digital audience and revenue growth, a leader in “Brand Voice” content marketing) and let the next guys deal with the next era. Elevation Partners, which bought in seven years ago and now controls a large minority stake of Forbes, probably won’t get its investment back out, but its calculation may be a good one for Thanksgiving movie viewing: As Good As It Gets.
Similarly, I’d have to agree with Michael Wolff that Henry Blodget — the banned-for-life Wall Street trader turned publisher who recently told the FT’s tripe-eating Andrew Edgecliffe-Johnson, “I mean, first of all, I feel like an absolute moron for missing the top [of the market]” back in the dot-com days — may sense the same thing. Whether or not he is yet shopping Business Insider for $100 million, as Wolff surmises, he’s built a Forbes Media-like digital company, adept at creating and replicating newsy content. BI recently got a new infusion of needed cash from investors, and Blodget immediately pooh-poohed Wolff’s advice to sell. Yet the construction of such efficient content sites has its limits, and Henry’s got to be driven by his previous market experience.
These are businesses that have built value quickly on the explosive growth of pageviews. Though both Forbes and BI have branched out from display ads into events and other businesses, their fortunes lie greatly with ad monetization. As we’ll see below from Yahoo’s own ad math, that’s problematic for 2014-2015 growth.
The problem for both companies: The companies who may be the only potential buyers — the Yahoos, AOLs, or Voxes — can calculate fairly exactly what the digital audiences of page-spinners like Forbes or BI are really worth with their own state-of-the-art ad stacks applied. Those calculations would likely lead to significantly less than the desired $400-500 million price tag of Forbes or a possible $100 million for BI.
Will Alden be next? As Digital First Media improves its own balance sheet — putting up paywalls to goose circulation revenue, outsourcing printing, and centralizing national content creation — when will Alden Global Capital, the company’s prime driver, decide its time to cash out its investments? Like Elevation Partners, it won’t walk away a big winner — but walking sooner than later may be its best move.
Let’s remember when Katie went viral — it was with her dance partner Sarah Palin, drawing millions of pageviews as a mesmerized electorate marveled at the candidate’s view of Russia. Couric will do an interview program for Yahoo, and it will be those interviews — separately judged and shared — that I think will bring the greatest value to Marissa Mayer’s new-look Yahoo. After all, appointment viewing is more about Walking Dead and Breaking Bad these days than the network news, or even Katie’s own disappointing talk show. As announced by Yahoo, Couric has been described as a new “global anchor.”
For Yahoo, being number one in online news “viewership” just hasn’t (yet, at least) paid off sufficiently. Yahoo’s like the most popular kid in a high school class who nonetheless struggles to pull together all the right application elements to get into a really good college. We’ll have to wait and see how Mayer further defines the new company. The shorthand of being a “content origination” company doesn’t do much; besides, why would that description be useful given the eternal business struggles of all the companies that do originate content?
Yahoo was down seven percent in display ad revenues in the last quarter, though the number of ads sold dropped only one percentage point. That’s the basic math that defines the mighty struggle of most companies other than Google and Facebook to grow digital revenue: Downward pricing pressures are overwhelming.
Though a big name in the old world, Couric is just one more puzzle piece in the Rubik’s Cube — inevitably, there are many more dead-ends than successes — of re-imagining digital news programs. At Yahoo, it’s Megan Liberman, ex- of the Times, assembling the parts, part Bai, part Pogue, part Couric — just as her former employer goes to the Times Minute, with its new thrice-daily one-minute video news update and names a new managing editor for video, Bruce Headlam. Place Yahoo’s “re-imagining” of digital video news among many others, from The Wall Street Journal’s early video news moves to Newsy’s pioneering multi-source programming to Oslo-based VGTV’s audacious move beyond print to the boundary-breaking (news/social/talk show) HuffPost Live (“The newsonomics of leapfrog news video”).
The experimentation will only grow, and be bolstered by more big names, in 2014. The reasons are clear: 45 percent of U.S. adults report watching digital news video, and video advertising continues to sell out — the only category of digital advertising that has more demand than supply. Yahoo doesn’t break out its video revenue, but we know that overall U.S. video advertising grew 24 percent in the first half of the year, to $1.3 billion. These video-forward moves are driven by demand-side economics.
Stelter has been the best bridge between the old business of TV and the new emerging business of video, with all its fuzzy-patterns transition. As the phenom, hired at age 21 by The New York Times, moves to CNN, he brings his unusually intelligent, perceptive, and deeply reported work with him. We have to wonder about the fit, though. He moved the Times measurably forward in the media/tech world in which it both excels and lags. Though it’s the announced plan, it’s hard to see him stepping into the dated media container of Howie Kurtz’s Reliable Sources show, old media doing old media, even though he’ll undoubtedly bring new edge to it. I like the idea of him doing a Morgan Spurlock-like show, one with attitude, authentic reporting, and a modern graphical sense — almost weblike on TV — of how to tell a story.
The problem is that there are so many CNNs. For every stretch of defining intelligence from the Fareed Zakarias, there’s another of numbing, talk-down-to-me bleating out of The Situation Room, leading to such gaffes as Wolf Blitzer announcing the segment on the Kennedy Assassination: “I’m Wolf Blitzer, reporting from Washington. The assassination of President Kennedy begins right now.”
As many of the non-TV-based giants, Yahoo and the Times among them, go deeper into video, the next remaking of CNN itself continues apace under Jeff Zucker. Everything from storytelling modes to business models are up in the air, as the reality of smartphone- and tablet-delivered video sinks in across the news industry.
Kushner’s Freedom Corp. wired its $27.2 million to A.H. Belo Corp. Thursday. It wasn’t that the acquisition of the Riverside Press-Enterprise took that long to close, only six weeks after the agreement was announced. What was unusual was the public commentary on the delays, as Belo put out releases both giving Freedom more time to complete the deal and to announce very clearly its alternatives and ability to extract a non-refundable million dollars if the deal went south.
That’s just the public tip of discussion. Behind the scenes, people in the news industry — some rooting for the contrarian publisher who has smartly promoted a $10-12 million investment (“The newsonomics of Aaron Kushner’s virtuous circles”) in the Orange County Register’s staff and product; others deep doubters — are linking the delay in the Riverside buy to Kushner’s ability to stay the course in Orange County. Kushner has been quite clear in saying that his investment will take a good three to five years to pay off, rebuilding the readership and advertising base of a paper that had been drained by cutting and then bankruptcy.
So the question: Does he really have the financial wherewithal, or access to it, to advance his strategy? Completing the cash deal seemed to be the holdup. “We have no inability to stay the course,” he told me, three days after the deal closed. “We’re on the offensive.”
How well is that offensive going? Kushner says that the investment in the Register products and the rationalizing of reader pricing has led to a 16 percent increase in circulation revenue year over year. That number doesn’t significantly count the impact of a unique paywall put up in April.
While those dollars may be good, an improvement on what was a substandard base, the Register is still, like its peers, down in advertising. Figure mid-single digits of down in print, and down in digital ads. One issue with latter: The Register’s hard paywall has caused a 40 percent loss in pageviews, traffic that Kushner says is beginning to come back.
Those numbers tell you one thing: Even if successful, the Register’s approach will take years. That again raises the question of wherewithal. As the new year rolls in, we’ll see how much of the Register investment philosophy is — and can be — applied to the Press-Enterprise.
While the Register sees the L.A. Times — and its pointed reporting on the Register’s Belo delay, and three lawsuits in which it is involved — as the sour grapes of a big competitor, the hint of question about the future of the Register will hang in the air for awhile.
Southern California — which has the twin distinctions of being both the region having the most dailies with paywalls and with the most to have emerged from bankruptcy — remains ripe for a rollup, a cost-saving consolidation.
When other SoCal properties — Digital First Media’s numerous MediaNews dailies and/or the Times itself, as it’s spun out or directly sold off by the Tribune Company — are put on the market, the acquisitive capacity of the new Freedom will arise, fairly or otherwise, as a question mark.
It’s a good problem to have: What do you do with a possible fund of $250 million to build a new news company in 2014? That number, offered up by Pierre Omidyar as the reservoir of financial capacity for his new Glenn Greenwald+ news company, deservedly won headlines. While the site may not need to show profit any time soon, it needs to prove itself a credible news source — and that money can’t buy. So Jay Rosen’s decision to get aboard the new enterprise, actively advising it on navigating the editorial waters, is great news. I’ve known Jay for 20 years now, and you couldn’t ask for a clearer thinker on what journalism needs to do in the digital age. The business issues of establishing credibility for personal-branded journalism site are still profound, but Rosen offers a fundamental belief in the power of honest, fact-based journalism to do good. His joining of Omidyar parallels former academic Clark Gilbert’s move from Harvard to Salt Lake City, as he’s driven one new model after another, many based on his teachings over the years, at Deseret News. Everyone into the swim.
Photo by Chris Hsia used under a Creative Commons license.
