#182. What Do News, Sports, and this Pod All Have in Common?
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This short bonus episode skips the usual banter entirely and dives straight into a single-topic media-business conversation, kicked off by Sonny after reading Ben Smith's book Traffic and writing his own Bulwark piece on the subject: he argues that the industry-wide chase for pageviews and ad impressions has been "deleterious" to both media and society, and that subscription models (like the Sub-Beacon's own Patreon setup) are the only sustainable future. Mike, drawing on his time running digital at both small subscription outlets and a giant legacy media company, agrees that advertising only still works for a shrinking handful of entrenched institutions, since the internet's infinite ad inventory has destroyed the scarcity that used to make ads valuable. JVL, who fought this exact battle with Mike at The Weekly Standard starting around 2014-2015, traces the "pivot to video" and SEO-clickbait eras as symptoms of the same disease, and predicts sustainable niche outlets will top out around five to twenty million dollars in annual revenue rather than chasing USA Today-style scale; all three predict the newly launched traffic-chasing outlet The Messenger is doomed to fail. The group singles out the New York Times as the model success story for having gone full subscription and reinvented itself as a lifestyle brand (Wordle, cooking) while noting no other outlet has the scale to pull off the same trick, and contrasts CNN and Fox's cratering carriage-fee revenue with the relative health of NFL broadcast rights versus the more exposed, fracturing local-rights markets for the NBA and especially MLB, plus the ongoing collapse of regional sports networks. JVL closes by tying it all back to the cable-bundle version of the same inefficiency argument: advertising and bundling both mask true costs from consumers, and a transparent, pay-for-what-you-consume market is coming whether legacy media companies like it or not.
From the show notes
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Full transcript
Mike00:00:00Welcome to the Sub-Beacon bonus episode. We decided we'd talk a little bit about the business of media, the business of news. What's advertisement? Yeah.
Sonny00:00:20What, uh, well, I, I, well, I, it's funny because we were, we were discussing this before the show started and I was like, we should do this as a bonus episode, but I, I just wanted to pick your guy's brain about the future of media because I, uh, you know, I wrote a piece for the Bulwark, uh, and also had, have just read this book traffic by Ben Smith. And, uh, the thing I liked most about this book is that it, uh, confirmed all of my biases because that's why I read books. I don't read books to be challenged. I read books to tell me that I'm right. Uh, and this book told me that I'm right in the sense that a thing I have believed for the longest time is that the search, the race for traffic is been deleterious, not only to the media. Yeah. Industrial complex, but society as a whole. I think it's a really bad thing where, where news businesses are focused entirely on generating, uh, page views and unique visitors and that sort of thing for pennies that they get by selling ad impressions, terrible business. I think we got it. We, we gotta get away from it. Um, and that the future, the future is basically the sub beacon, right? It's you, you, you, you sell subscriptions, you sell memberships, uh, and you have to, you reach a point of sustainability. For a thing. Uh, and if people don't like the things, if don't, if people don't pay for the things that they like, those things go away. That is, that is my fundamental baseline understanding of media writ large. And I feel like I feel, I feel very vindicated over the last five years or so, uh, in watching lots of different things collapse. And one of the reasons this came up is because there's this new, uh, there's this new venture starting with the guy who owned or ran the hill or whatever. Um, uh, Uh, what's the, the messenger, the messenger, the messenger, which is going to be like the hill on steroids. It's going to be like just nothing but click bait. People are going to, you know, they're, people are going to be doing 27 stories a day and maybe one of those stories winds up on drudge and that pays for their, their day's salary. And I just think that this is, I think that's, it's such a bad model that it will almost certainly succeed beyond my wildest dreams and make the guy like $10 billion. Does that, they like, I, I just, I don't know. I'm, I'm curious to get your guys take on.
Mike00:02:27Well, my, my thought on this was I've had a similar thought to you, Sonny, and having worked both at small subscription based publications and also, you know, a gigantic, uh, on scale level, uh, media company. Um, I can see where advertisement works for those very few and growing fewer, um, large scale news companies. Right. And, and w which where advertising is just. It's an important part. Uh, it is not even the entire business model, but it is an important part of the business model. Um, but anybody else, and, and this is what like Ben Smith's point is right. It's like anybody else who is not essentially an established institution. Um, it, it, it will, it will, it will fail because of the way that the, the way that the scarcity problem, which ads were designed to sort of feed off of, um, it disappears with the right. Like there is no scarcity, right.
Sonny00:03:28In a world, in a world where you have two local newspapers, uh, and you have, you know, uh, a couple of television stations, there's a finite amount of advertising. And in the world of traffic, there is an infinite amount of advertising space. You, you put ads anywhere and, and once you, once you have an infinite supply of a thing, that thing becomes less valuable. I have a, I have a thing it's called supply and demand. There's too much supply. There's not enough demand. And. Uh, we, it doesn't, doesn't, doesn't work. Just doesn't work.
JVL00:04:02Yeah, no JVL.
Sonny00:04:03Yeah.
JVL00:04:04I mean, this is Mike and I have been fighting this battle since Mike 2014.
Mike00:04:12Yeah. 20, 2015. Yeah.
JVL00:04:13Is that when you took over digital?
Mike00:04:15I technically took over in 2016, but I was sort of already getting some of this in 2015. Yeah.
JVL00:04:21Yeah. When we took over digital for the weekly standard and, uh, it was clear then that this stuff was a race to the bottom and, but everybody did it. And this is why everybody in media is always looking for the next pivot, right? This is why, you know, half the media world went out of business because of the pivot to video, right? Because they, they were just, we're chasing Facebook clicks. Facebook is going to prize video. So we have to prize video. Let's video we're now a video content company in just be ridiculous. Uh, it's the, the thing which people don't have their head wrapped around is that what this means is that the scale that everybody is used to is no longer a scale that is sustainable. And you can have niche media companies that are able to survive doing three to $20 million of revenue a year, five to $20 million revenue a year. Uh, and they're going to reach a certain size of audience. But the idea that you could be a traffic monster like USA today, or the hill or something like that, and that's not true anymore, you can't sustain yourself at that size and your audience is going to be much smaller, but it's going to be real, like you're getting real people actually reading you, not people drive by click because you happened to master the SEO tech so that your rewrite of the actual AP news report is the one that comes up first on Google. Yeah.
Sonny00:05:50Well, I mean, you, if you, if you, I mean, you will still have those big organizations, but there will be like four of them, there'll be, and you know, New York times, there'll be the wall street journal, the Washington post, and like the LA times, maybe something else, CNN.
Mike00:06:03I mean, CNN has the largest red.
Sonny00:06:06Uh, web English language news website, but CNN doesn't make its money by the website. CNN makes its money by, I mean, they, they make their money by affiliate fees. That's that's how CNN makes their money. And CNN, look, I like CNN. The CNN is CNN is fucked. CNN is in a, in a really bad, in a really bad place because, uh, they, they are there. They generate their revenue. They generate their revenue by, uh, um, uh, carriage fees. Those are going with, those are falling by like 10%, a quarter at this point. It's it's, it's the, the hemorrhage is real and it's only gonna get worse. Um, their advertising is not like their, their ratings are in, are in not a good place, not a good place. And like, if they wanted to really monetize cnn.com, they could, I guess, but like, it's, it's still not gonna be enough to generate, uh, the money that's needed to, to keep the show going. So I like, I, I, I, CNN is CNN is just as fucked as anyone else. Fox news also fucked Fox news is Fox because, because they are going to have the same problem with carriage fees, um, that, that everybody else is having. I, I, I, I like, I am the thing I am most curious about is how cable news evolves into the streaming world. Because once you, once you get to a place where you have not, once you get to a place where you don't just have TVs on all the time with like background noise, uh, or where you, you have a, you have a news channel on all the time cause you want to see what's going on and you move to, uh, the world of streaming where it's like, all right, I want to sit down and I want to watch five episodes of friends. I want to sit down. I want to watch the new succession, whatever it is. That's not how news watching works really correct.
JVL00:07:52So I don't know, but maybe we'll go back, right? Maybe we'll go back to the saturation of news. Won't be profitable anymore and we'll have fewer people broadcasting because the ad rates aren't there. I, you know, the most interesting in all of this to me is the New York times, which has the New York times is institutional moves over the last five years and fascinating. First of all, they switched to a full subscription model and now, you know, more than two thirds, more than two thirds of their revenue comes from subscriptions. Their advertising business has subsequently gotten better because they're capturing so much data. People read them, but then they've done stuff like buying wordle and picking up, you know, like cooking stuff. So the New York times is no longer really the New York times. The New York times is.
Mike00:08:37A lifestyle brand.
JVL00:08:38Is it is a lifestyle brand with stuff that if you, if you have no interest in reading Nate cone and political stuff, whatever, but you are super into cooking, the New York times has a product for you. Yes. And they have been super smart about the thing is I don't think you could have more than one of those. Yeah. I, I think, you know, maybe you could have. Coke and Pepsi, but you can't have Coke, Pepsi and RC and Boylan's and, and all that stuff in this, like knee high, the scale that you've gotta be operating at in order to succeed as a lifestyle brand in the media space is enormous. So.
Mike00:09:13Yep. Yep. Every everybody else is gonna be Faygo and cheer one and every other region.
Sonny00:09:17And look, there are, there are other ways to make, there are other business models that can work, right? You have the Mike Allen model where you have, uh, you have a huge newsletter that goes out to a. A lot of people and a lot of like important people in a very specific place. So like Northrop Grumman is like, we're gonna spend a hundred thousand dollars buying out your ad inventory for a month, right? Or the live event space, right?
Mike00:09:38But you know, Axios was purchased by a, by a local, by Cox, by a local or sub regional media company. Yeah. So I mean, no, the, the, the, the, the, the scale keeps happening, the decline, the decline
Sonny00:09:50of cable news and the decline of local cable is going to be a bigger and bigger story as the years go along. I mean, I look. At the regional sports nets that are collapsing right now.
JVL00:09:58I mean, those are all happen fast enough.
Sonny00:10:01Those are far as I'm concerned, those are all gonna go out of business in the next five years here with the exception of like, yes, in New York, uh, and, and the Los Angeles one that broadcasts the Lakers games. And like, I don't, I don't, I, I, what is gonna happen to baseball rights? What's gonna happen to NBA rights? I like all of these local sports shows. All these local sports airings are gonna have to move to the internet.
JVL00:10:23Is it Phoenix that just went over the top? Yeah. Yeah. Yeah. Yeah. Right. This is, I think this is the future. Right. And the, you know, major league baseball is very well positioned. I mean, in a way, all of this is the same story, right? Yes. Yes. MLB.com is the same story as CNN is the same story as Fox is the same story as New York times. It's, it's all about changing media landscapes and that stuff.
Sonny00:10:45But the difference, the difference though, is that, that sports leagues have a specific thing that people are, that is, again, they have a specific thing, right? Anybody can get the news anywhere I can go. I can go to any website. I want and read the news, right? I don't need to go to cnn.com a, like I, I can go to ap.com or whatever. I can go to the Washington post like whatever there there there's, but, but the sports franchises are particularly well positioned. I think because they have like, all right, we are the baseball team. You have cheered for us for years, but they're worse off than the NFL. They're worse off than the NFL.
JVL00:11:21The problem though is about rev sharing. Right. Yes. Yes. One of the ways that sports leagues have worked is, uh, everybody pulls their, their resources. And then this way you could have small market teams and big market teams and the, and you could wind up in a place where, uh, you know, if you're the minute Minnesota Timberwolves is, do they still exist? Is that a team that exists in the NBA? Right. Uh, like, well, I don't know. How do you survive in a world where you've gotta be killing what you eat with over the top subscriptions?
Sonny00:11:55Well, but, but, but, but, but. All right. So, but. Yes. I mean, that's, that's, that's definitely an issue. Uh, the, and this is why I say the NFL is in a better place because the NFL has national deals for everyone. There, there is no local cable affiliate. You're not, I'm not watching. Correct. I'm not watching the Dallas Cowboys games on Fox five here or whatever the local Fox channel is. Uh, I'm, I'm watching NFL on CBS. I'm watching NFL on Fox.
JVL00:12:22And that's because their supply is so low they can do that because the supply of games
Sonny00:12:25is small. So, uh, I think the NBA is probably okay because the NBA still has very good like national deals, um, for their, for their stuff, especially during the playoffs. But I think baseball baseball is kind of screwed in, in the sense that you, you are discussing unless, unless something like Apple TV says we're gonna pay a billion dollars a year for all the local rights. And then like the, the Yankees throw a fit and the Red Sox throw a fit because they're like, well, what about our, but like, I don't know, maybe there are carve outs there. I, I don't know, again, how that, how that would work, but unless, unless some, unless some streaming company, and I think it would be a smart thing to do because that's a large consumer base that watches a lot of games throws an, an, an obscene amount of money at major league baseball, that, that it's gonna be too fractured to, to kind of work as a business model for the league as a whole, as opposed to again, individual teams.
?00:13:20All right.
JVL00:13:21Well, it's funny that we started out by talking about, uh, Ben Smith's book about traffic and end up here. Yeah. It's all the same problem. It's all the same problem.
Sonny00:13:29It's all the same problem. The problem is advertising. Advertising is a bad model. Advertising cannot sustain, uh, anything anymore.
JVL00:13:36You know why? Because here just to very quickly, cuz we all have to go, uh, fundamentally, the problem is about the transparency of cost and advertising masks the cost, right? If you, you know, by, by putting in advertising, then the cost for you, your, you, the consumer is in your attention and it's hard to value that. And, but if you get to like pay for the content you consume, then everything's transparent and the market is more efficient.
Sonny00:14:04Yes. Well, the cable bundle is the same thing. The cable bundle. Same thing. Yes. The cable bundle masks the fact that you're that somebody who never watches ESPN is spending $22 a month on ESPN and spending, you know, $12 a month on massin.
JVL00:14:17If they. And that's where you get all these inefficiencies from. And you know what? Another word for inefficiency is it's getting rich, right? And these, all these, these other industries have gotten very, very wealthy. Yeah. Because there was an inefficiency working in their favor in the market.
Sonny00:14:30But now we're all just going to spend the same amount of money on less stuff. It'll be great. It'll be great.
JVL00:14:35Well, hopefully, but you know what? If it means that a bunch of these fucking companies dive and so I, that's, I think that
Sonny00:14:40is the backwards. Take that Chris lick, but we'll, we'll have to, we'll come back to that, I guess.
Mike00:14:44Yeah. I'm glad we've, I'm glad we figured it all out in this 15 minute conversation today. I'm sure it's fun.
?00:14:56you
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