The unbundling of publishing (1/x)

Substack and unionization are a sign of what's to come

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This is a bit of a different edition in that it is mostly a single column. I want to continue to experiment with different formats. This week is part 1 of a series -- I don't know how many installments there will be -- piecing together what I’m starting to see as the unbundling of publishing. To be transparent, this is part of my own thinking as I figure out what path to take with my own career. As a side note, after a couple experiments with Clubhouse, I am going to retreat to podcasting with a show that goes deep on the topics covered in this newsletter: How to build sustainable media businesses. If you know of a good producer to take care of editing and making the sound right, please send them my way. Also, if you’re not yet a subscriber, please do sign up to get this newsletter every Wednesday.

The unbundling of publishing

Last month, I wrote about how the pandemic has accelerated an unbundling of the events industry, as the inefficiencies of combining many different functions become exposed. There is a similar, even messier, unbundling taking place in the media business.

First, there’s a need to understand a few simple things that are often overlooked.

Publishers are not all alike. Different products require different distribution and business models. Ignore anyone who treats anything as an all-or-nothing proposition. They’re either trying to sell you something, lunatics or amiable dunces.

The publishing function is more than content. I always found it odd that layoffs stories focused almost entirely on the newsroom when, at many publishers, more people serve roles outside producing the actual content. You need product and tech, audience development, ad sales, ad ops, marketing, now commerce, admin and finance, etc. Journalists always focus on journalists. That will never change.

Media tends to be a children’s soccer game. I spoke to Ben Smith ahead of his NYT column calling peak to the subs craze, and thought for sure he’d use my children’s soccer game analogy. Alas, I ended up not making the cut. The children’s soccer game is where a big clump of players chase the ball from one side of the field to the other. SEO, social, video, newsletters, subs -- you’ll find a crowd.

What I believe is happening now is the singular publishing entity is under stress. We see institutions of all kinds being put under pressure as people revolt against the way things have always been. Within newsrooms, this is a fraught time. There are flares of revolt from both ends of the newsroom.

  • “Stars” are leaving for Substack or independent, micro-media ventures. Many already have their own distribution mechanisms, taking away a key function of the publisher. What’s more, the reality of publishing is often that experienced high performers subsidize others whose work is not economically viable. 

  • Workers are unionizing. I got pilloried by Union Twitter for pointing out that the beefs laid out by Insider’s newly formed union are a problem of business models. The model needs cheaper labor, and people early in their careers tend to be paid less. If these activist young people think a union will solve that structural problem, they’re being hopelessly naive. The pie simply isn’t big enough; that’s the problem. 

  • New forms of media products are being born, some by companies and some by experts -- and some as a hedge against high customer acquisition costs. These “media products” aren’t exactly journalism per se, but they do serve a role in the future information ecosystem, whether the Blue Checks like it or not.

Benedict Evans has a great Jeff Bezos ethos that resonated: Look for the root cause of a problem instead of pointing fingers and getting angry. In the FT, Simon Kuper echoed this with his broader diagnosis of  a societal “obsession with “wokeism” and culture wars at a moment of economic transformation.” The root causes of the discontent in newsrooms lies in economics, not in identity politics. 

To create new value, publishing needs to unbundle and then rebundle in much more rational ways. The destruction of the cable bundle was a necessary and messy step. We’ve seen the start of the unbundling of publishing with Substack. The defection of many well-known writers heralds the needed collapse of the op-ed pages. But the people who dismiss Substack and newsletters as just hot takes sound a lot to me like the people in the early 2000s who dismissed bloggers as dudes in their parents’ basement with pizza stains on their t-shirts and a desperate need for vitamin D. How things start are not how they end.

The more interesting developments is in writer collectives, whether that’s Every.co, Defector Media and the Sidechannel Discord collective. These models are all different, but they share in common a rethinking of what publishing is -- and a radically different cost structure. The reason people gravitated to scale is because the costs of running a publishing business are in all the in-between functions a publisher has. At Digiday, I believe 70% of our people were not involved in the creation of content. Some places are closer to 50%. That’s a lot of cost, even if like Digiday you mostly outsource tech. The only way to rebalance the economics is to use platforms and business models that eliminate the need for many functions to be in-house. 

Here are some characteristics of unbundled publisher -- with the caveats listed above in mind because there are many different types of publishing business:

Built around individuals and communities. Perhaps it’s age, but I find personal branding desperate to the point of pathological. That said, I do believe in developing a reputation and using personality to differentiate. The promise of what people are calling Web 3 is to marry the best of Web 1 (anyone can publish) with the best of Web 2 (networks for distribution). The promise of 1,000 True Fans is actually closer to a reality today than it was when Kevin Kelly wrote about it in 2008. There will be an explosion of niche media communities in the years to come.

New platforms to cut overhead. Publishers do many things. The core of the business is making the product (aka the editorial), audience distribution (marketing and audience development) and selling the audience (mostly ads, increasingly subscriptions.) Substack is interesting in that it takes care of a couple functions. The distribution tech, which has never been a core at most publishers, and the monetization. New platforms and networks will emerge that allow what today are one-person operations to grow to look a lot more like regular publishers. It is critical for publishing to cut down on the infrastructure costs -- and, as we have learned, people are infrastructure. That will do more to improve the economics for the content creators, presuming they are creating real value as determined by the market, not their feelings. There will be many publishers of the future, but I’m pretty sure most will be a lot leaner.

Clearer measures of value and new ownership structures. Speaking of Insider, it got pilloried for its Impact Points. I’m sympathetic to the goal of measuring output in a way that isn’t just pageviews. I’m an inch deep in my crypto research, but I see ideas and tech emerging that could end up giving a better grasp of who created what value. The reality in most ad-driven publishing companies is the people creating the content are treated like commodities but those harvesting monetary value (selling ads, etc) gain more. The Information, Bloomberg and The New York Times can spend more on journalists because they have better business models. I’m not pro-union for most publishers. I know this puts me at risk of cancelation and needing to move to a bitcoin commune in Puerto Rico. I see unions as having a marginal impact since they don’t grow the pie and might end up shrinking it. What Defector is trying to pull off is far more interesting. The true promise of the creator economy is aligning the value created with the value extracted. This is idealistic, as the shift from analog to digital media has pretty much swapped out one set of gatekeepers and intermediaries for another set. 

More expertise. My advice to a young journalist is to find an area that’s growing and complicated, go do it for a few years, then start to cover it. There is a reason the most successful people on Substack are often practitioners even though coverage of Substack tends to be through an ideological lens -- this white guy I disagree with is sending an email newsletter with views I disagree with, and he’s making money, so unfair. The original plan at Digiday was to hire people who worked in various industries and train them on the writing and reporting part. That proved harder than I thought. But the floodgates are open to people with expertise, including companies. Tech reporters turn up their nose at A16z and its media plans, but it has some of the best podcasts for understanding issues like crypto. This isn’t all that different. If you want to write about fashion or do a recap of Ted Lasso, your market value will be lower than if you know the ins and outs of programmatic advertising, clean tech, virology and so on.

Several ways of making money. Perhaps it’s age, but I find so much currently viewed as a zero-sum game -- and the world doesn’t work that way. The answer is rarely either-or; it’s often and. As Ben wrote last week, ads are still a good business model for much of media. Take Insider. They have a bifurcated model of subs for professional business content (expensable!) and ads (often programmatic) for lifestyle content. (This is one reason I disagree with unions since one of the demands is measuring everyone the same. This makes me wonder if these people understand the business.) Despite Substack’s weird ideological stance, you already see newsletters making ads several ways. The role of advertising will change in many ways -- it will underwrite free access to enable a top of the funnel -- but not go away.

Next week, in part 2, I’m going to dig into those putting these ideas into action, why to be optimistic about this next phase and winners and losers from this shift. As always, I’m interested in hearing your thoughts. Email me.


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The megatrends shaping marketing

There is a lot of noise in the media business that often obscures big shifts happening. For all the chatter about Clubhouse and NFTs, there are a few massive trends that will change advertising in the years to come, as fads rise and fall.

  • Closed ecosystems: The rise of platforms, along with linear TV, means there are a handful of environments where people consume the majority of their content. Marketers need to find ways to work across them. 

  • Converged TV: The explosion of streaming services has changed our conception of TV in a profound way. For marketers, the challenge is to have the capability to stitch together and manage audience segments across disparate screens.

  • Data privacy: The days of leaving the privacy panel to the last day of the industry conference are over. Privacy rules, set by regulations and tech companies, are reshaping the use of data to find the right customers at the right time with the right message.

  • RIP third-party cookie: The third-party cookie had a good run. This deprecation will change a key plank in digital advertising’s infrastructure as new solutions pop up to ensure advertising is relevant. Marketers need to be nimble in deploying their own data assets -- and ensuring their interoperability.

  • Ad tech tax cut: Digital advertising has long been ruled by middlemen. Now we’re seeing increased transparency in the media supply chain, enabling marketers -- fingers crossed -- to ensure their media dollars are efficiently reaching those creating the results for their ad campaigns.

The macro challenge for advertisers remains the same: Keep up with these changes to consumer behavior. Learn more about how to meet the omnichannel imperative in this Mediaocean guide.

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Other things to check out

  • Silicon Valley types love “orthogonal” strategies. It’s MBA-speak for going against the grain. Forkast News is a decentralized finance site based out of Asia that is building a new publishing brand in a great area. (I’m advising the team behind it.) It has a new daily video product at a time when many threw in the towel on video. With only a small team, this is a good product.

  • Jay Penske is one of the more underrated media operators. He doesn’t do the speaking and podcast circuit much, but PMC is building a great portfolio of brands that straddle B2B and B2C. His latest addition (at a great value, I’m sure): a 50% stake in SXSW. Events are coming back; this is a great fit with PMC brands like Hollywood Reporter, Billboard, Variety, Rolling Stone and more.

  • Bob Lefsetz makes a great point about aligning your business model with your mission. I don’t agree that subscriptions have to mean a loss of influence. But there is a cost to everything. The best businesses align their mission with their monetization.

  • Congrats to the team at The Infatuation for the relaunch of Zagat, a brand that was a bible to those of us new to New York City before the explosion of food media. In a sign of the times, Zagat is launching in Miami, not New York. 

  • If you’re checking out the Collision Conference, I recorded a Q&A with Kinzen’s Aine Karr, The 19th’s Emily Ramshaw and Capital B’s Lauren Williams. It airs on Thursday at 10:50ET. Prior to that, I’m hosting a roundtable on “the present and future of Substack journalism.” Should be kinetic. 

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