The Commercial Experience 21.10: What my media company would look like if I started one today.

A bitof indulgence this week, in response from a question posed last week. "If you were to start a media company right now, what would it look like?"

Last week someone asked me in passing what sort of media company I would start if I had the chance to start one. At the time I wasn’t sure but the question has stayed with me since.

I need to point out I don’t plan on starting a media company. I have neither the capital nor the opportunity. But I do enjoy playing around with ideas for new businesses and the sort of freedom that comes with exploring them in the hypothetical realm in which one could create a business they both loved working in, and one they felt could generate new value and wealth for the audience, the staff, and investors.

So this weeks edition is a brief outline of what I would look to explore, if someone gave me a bunch of capital and asked for it to return 4x in 3-4 years. Something I think could be interesting for talent and help move talent from hired help to equity owners. And provide access to a discerning, unique audience for advertisers.

It’s also worth pointing out, given this is a hypothetical, is that a level of my own indulgence is key here. This isn’t all about investor return, it would need to be an area I would personally find interesting as a consumer. Content I’d want to read and listen to. Talent I’d want to help develop. An equity model I believe is fair and equitable and rewards the contribution and intellectual property of all of the people involved, not just one or a handful of people. There’s a bunch of people I know who are amazing talent who would, in my view, thrive in this sort of business.

And a final warning - this is a super indulgent exploration into what I might do if I head the means, the time and the licence to build anything I wanted. It’s absolutely a hypothetical and some of you may find it incredibly uninteresting.

What would this media newco look like?

Right now podcasts and newsletters are the big areas of opportunity in my mind.

Consumer appetite for them is increasing. They aren’t mainstream by any means. No company has really figured out how to operationalise them in a way that really makes money. They’re not big enough for the large technology companies to want to take them over, yet. Most current exponents of them both are side product bolt ons to media companies with a core focus area elsewhere.

In addition, the way these products operate is stuck at both ends of the operational spectrum. You have small, single person owned and operated businesses with maybe 1 or 2 staff trying to juggle product, monetisation, audiences etc. This creates scale challenges and makes the product less of a business and more of an entertainer (like a band or comedian). On the other hand you have large media companies treating these creators like staff and not businesses - paying them a salary, or a revenue share, but removing them from any wealth creation like providing them equity. Its the model where the talent makes the media company rich.

In a way it feels like an opportune moment to build a new form of creator led audio and content business. It’s a market increasing in size. One that is talent dependant but where the talent is treated more as labour than owner. An area that could benefit significantly from centralised operations but independent audience facing. And a market that is unlikely to be reimagined within the large media incumbents due to their primary business model.

So in a nutshell, here’s what I’d do:

• Firstly I’d seek to raise $7-10m dollars.

• Part of this money would be used to purchase stand alone podcasts and newsletters operating in the 8 focus areas. Key elements would be focus area, current audience, market presence, open rate, tone, opportunity for growth.

• Part of the purchase price would be cash, and part of it would be equity in this new company. For creators this would make them owners in a larger media company.

• I would actively recruit journalists and content creators working for media organisations in the focus areas as salaried staff, and offer them equity and salary to bring their talent and audiences to this newco. The pitch would be the world has moved and they have become the brands propping up the umbrella brand, not vice versa.

• A centralised, lean operational team would be assembled, all of whom would have an element of equity. This team would provide consolidated non audience facing operational excellence.

• The business would align on some common pillars - audience growth, audience retention, customer delight (both b2c and b2b), content independence and operational efficiency.

• The goal would be an exit - build a valuable operation with a strong organisation wise focus and sell it to a business incapable of doing this, but who sees value in it.

• Avoid areas of content and interest where there is an abundance of content. Avoid news. Avoid sport. Avoid fashion.

• Move away from ‘youth/millenial’ etc and into a more meaningful cohort. 25-44, curious, high media consumption, discerning and interested and interesting. Build an environment that is hard to duplicate via either platforms or mass media.

• Build on topical areas of significant importance over the next 5 years. Primarily health/wellbeing, environment/sustainability and reconciliation and indigenous affairs.

• Build a commercial model around a narrow suite of advertising products across newsletters and podcasts, a studio/lab business to provide content solutions, plus a focus on building paid content (events, audio, words)

• Operationally focus on a 4 year exit path where a business can be built that generates $12m EBITDA, 40%-45% operating margin, and provides the entire team with a financial event that provides them with a meaningful financial return. (between you and I, I spent a few hours putting together a hypothetical P&L for this business, complete with cap table!)

• Create an equity model that attracts and retains the best people, by providing them with ownership. Not a company stock plan where the employees have to “buy” shares. Not a dividend only bonus. Not options. Equity which demonstrates their value.

Why these content focus area?

Content areas are key as you want areas that 1/ have a material amount of audience interest 2/ have a manageable level of competition 3/ are interesting to advertisers 4/ make sense collectively 5/ avoid becoming commoditised 6/ are areas of interest that are legitimately important to the audiences (i.e. they feel they help them, entertain them, keep them company) 7/ make sense within the realm of 1 to 1 communication (emails, podcast)

Intentionally I would avoid the areas most people associated with anyone under 40 - fashion, technology, pop culture, sport, beauty - not because they’re not interesting, but because there’s plenty of options already for advertisers and audiences and my view is there are areas of passion that are more interesting to this audience that the same 4-5 that have been positioned as such for the past 3-4 decades.

Super simple commercial products

Media and advertising is already too complex, so it’s time to create commercial products which are anything but. This hypothetical newco would sell 4 things. Audio ads - 15/30/integration. Words (native/display inclusion). Studio/Lab (custom content, branded content). And Paid Content (paid for by the audience - events, subscription)

Simply, this is a focus on ends not means. The end being the audience. A really clear focus on the value of the audience, and not getting lost in the means of advertising distribution. Plenty of media companies are now selling their technology rather than their audiences. We don’t need another one.

A narrow but important audience

It is easy to reach anyone over 45 in media. And there are loads of options to reach people under 25. My view is there’s a real lack of focus on media saavy, interesting and interested 25-44 and most of the advertising dollars that go towards them are going to platforms. They’re hard to reach in traditional media, and digitally they’re fragmented. Often this demographic are placed into the ‘youth’ media basket, which is dominated by pop culture. I use the term ‘interesting and interested’ as it’s better than influential. This audience is interesting to other people - colleagues, friends - but they’re also ‘interested’ in the world around them. They might read 8-10 newsletters a week, and spend 5-6 hours listening to podcasts. They’re curious.

The pillars of a media newco

My view is this new media company needs to really nail 5 areas of operations and product to both succeed and also find its own space.

A simple commercial product model: basically this means that you don’t want to have hundreds of products. You want to have 3-5 core products that can be applied across a bunch of audience facing content. This keeps the commercial operation simple and seeks to reduce operational complexity.

Founder mentality: This is a mindset coined by Bain & Company that outlines 3 elements. An insurgency approach, meaning bold and limitless thinking. A frontline obsession with understanding customers and adapting to their needs without letting bureaucracy or complexity slow it down. And an Owner Mindset which is both cogniscent of cash as well as action. My view is great talent don’t just want this sort of environment, they demand it. And if you want to develop a founders mentality culture, then you need to provide your talent with founder benefits and equity upside.

Direct to Audience: My view is talent and content with direct connections and lines to their audience is the most highly valued. The two best examples of this right now are podcasts and newsletters. These are content and brands that have established, loyal audiences, with a direct path to them, and high engagement. They are not reliant on SEO, SEM, social distribution, virality or paid distribution. Yes - they rely on external platforms for receipt (podcast app, email app).

Centralised B2B, independent B2C: Put simply, this means you centralised all the non audience facing elements (ad sales, commercial, operations, logistics, technology, legal etc) to provide both economies of scale on operational elements, and an easy path to monetise through a one touch advertising sales model. But the element which touch the audience remain independent. You keep all the nuance, tone, brand that each element has and don’t seek to turn it into a homegenised umbrella brand. My view is in most cases, audiences don’t care about the media brand they care about the content.

25-44 focus: 25-44 is the area I have the most interest in, but the main takeout here is find a meaningful audience you can really service and add value to. There’s a lot of big media offerings that service everyone, and there’s a stack of small ones that service a narrow niche.

This approach mitigates some of the big risks facing media organisations over the next 5 years

This is by no means an exhaustive list, but these are areas I feel are critical operational risks for media companies of all sizes right now.

Loss of Commercial Control: Controlling your route to market is critical, and it’s an area that is becoming more and more intermediated. The hypothetical is that these aggregated market routes open up new revenue, but the reality is they probably just dilute yield. Any business wants to minimise the steps/stages/ticket clip between them and the revenue source.

Loss of talent: There’s a line in “The New New Thing” by Michael Lewis that a great technology engineer is worth 10x a good one. It’s the same with good talent. View good talent like NBA free agents, they can go anywhere. Keeping them will require more than salaries and free food. A remuneration model for key staff needs to go beyond salaries.

Fighting a tech war you can’t win: The 10x engineer metaphor is apt here. The best technical talent want to work at a handful of companies. It’s unlikely that you will attract the best if you exist outside of this narrow subset. So it will make it impossible to build better tech than what they can. Yes its defeatist but it’s real. Instead of desperately trying to convince the market you can match them, focus on the areas they can’t do that you do well. Let tech be an enabler but not the focus.

Loss of audience relationship: Platforms are powerful and can enable audience, but is your audience coming for you … or because they were sent your way. If its the latter it’s troubling. End relationships with your audience are more important than ever. Build a culture around close audience relationships.

Commoditisation: Every business thinks they’re unique, but in the eyes of most buyers the majority are pretty interchangable. A clear focus on podcasts plus newsletters provides an easier identity and a focus area. Yes, there’s risk the business could be considered too narrow … but at least it’s not going to be confused with 5 other businesses doing the same thing.

So, for the person who asked me this question … there’s my answer. It’s sort of my version of when people think about what their dream home might look like, or what they’d do if they won the lottery. Absolute fiction, but the fun is in the dreaming. The dreaming is free as you don’t have to worry about the realities of raising money, supply and demand, operations and the real world. And sometimes we all need to dream.

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