There’s a fierce battle raging in the business centers of the world; from Silicon Valley, to London and New York startups are facing off against legacy businesses and there have been casualties.
Age-old corporations like big banks, car manufacturers, and newspapers are suddenly being forced to modernize and adapt their business models to compete with technologically agile, and forward-thinking startup players, or risk being made obsolete.
The media industry has been hit especially hard by the period of change. Print media is slowly but surely dying in the western world, and legacy publications have struggled to engage readers, and monetize in the new digital landscape. While leading publications have floundered, a number of new media startups have emerged which are tech savvy, and know how to reach Millennial audiences on the right channels, in a language they understand. In a scene which conjures images of David vs. Goliath, companies with only a few years of experience are going head to head with hundred-year-old, billion-dollar multi-nationals.
However, just because the door has been opened doesn’t mean legacy publications are going to roll over easily. Legacy publications have the name, the brand, the consumer confidence and millions of loyal readers/viewers on their side. The underdog startups have agility and technology to their advantage but they need to make a name for themselves in an extremely competitive landscape.
So startups and leading publications are left with two options: waste time and energy battling to the death, or partner and come out stronger on the other side.
Sleeping giants awake
The traditional media has been in a steep downturn for the last decade. Even the world’s biggest publications have struggled to find a business model that fits, and allows them to monetize in the modern age of smartphones and social media.
Newsroom employment in the U.S dropped 10.4% between 2013 and 2014, with a loss of nearly 4000 jobs in just one year, according to the American Society of News Editors. The trends continued in 2015 with cuts at many of the world’s leading print papers such as UK Guardian, USA Today and Chicago Sun.
And while the media old guard struggled to find revenue streams which are relevant for the digital age and tech-savvy Millennial readers, a new generation of media startups began emerging in the mid to late 2000s, who know exactly what content Millennials want and on which channels –partly because many of the founders were Millennials themselves– and are not held back by old ‘this is how we do it here’ mindsets.
Quartz, Vox Media and Refinery29 have entered the market with a bang. These digital-focused media startups were able to learn from experienced legacy publications and pick and choose the aspects to keep or chuck. Most importantly publications like Buzzfeed have created business models which are solely focused on reaching the newest generation of readers, capitalizing on where they spend their time, with the type of content that suits their shorter attention spans and “on the move” lifestyles, and making advertising money while doing so.
For a few years, these startups were allowed to grow relatively unchallenged by legacy publications. There was an abundance of funding being thrown in their direction — with at least $683 million invested by VCs into digital media companies worldwide in 2015 alone– and publications like Buzzfeed were able to grow huge readerships –-200M unique views per month by June 2016.
However, in 2016 we have finally witnessed the end of the honeymoon period as media startup growth begins to flatten out. In a year which Mashable writer Jason Abbruzzese describes as “brutal for digital media companies and their employees,” VC funding has begun to dry up, falling for the third consecutive quarter to $91.7 million, the lowest amount registered since 2013. Even digital golden boys Buzzfeed and Huffington Post had to make cuts this year, and Yahoo reportedly shed seven of its verticals. One of the main reasons for this VC funding drying up, is that investors recognize the growing strength of legacy players in the digital space.
For a few years, the biggest publications paused on the start line trying to assess the damage, size up their opponents and make a battle plan for the future. But it seems that finally leading publications are coming out of hibernation and jumping into the digital world with two feet.
While it took The New York Times a while to warm up, the publication reported a sharp rise in digital subscriptions and advertising revenue and higher circulation, even though print sales continue to fall, and the publication suffered a $14M loss overall.
The Times rolled out two new podcasts, acquired online publications The WireCutter and The SweetHome and recorded a 21% growth in advertising revenue after focusing on mobile, virtual reality, video, branded content, and programmatic advertising as principal drivers. Similar growth has been seen at The Washington Post which announced a 145% hike in subscriptions, and The Guardian which gathered more than 50,000 paying subscribers even though the paper is still struggling to make ends meet through digital advertising.
While they might still be on the back foot, it seems that the legacy giants are awakening.
Sizing up the opposition
The new media battleground resembles the Power Rangers going head to head with Genghis Khan’s hordes.
The legacy media (Genghis Khan) outnumber their opponents with huge audiences which have been with them for decades, bulging budgets, and a place in the history books which provides brand reputation and credibility. The new challengers have fancy outfits, a fantastic understanding of new technology, and resonate well with Millennials.
While legacy publications are struggling to reach the right audience, they have a lot of money behind them, and can absorb losses. The Guardian, for example, reported losses of £173M for the last financial year, but is still keeping its head above the water.
And startup media might not have the cash, but they know the market inside out. It’s a perfect partnership just waiting to happen.
Drawing up a prenup
Making a long lasting partnership requires negotiation, and a key part of negotiation is allowing room for compromise.
To date, both sides have been targeting different audiences. Legacy newspapers want to stay true to their existing readers, who range from Millennials to Baby Boomers and beyond, whereas media startups have focused almost entirely on tech-savvy generations X and Y.
Rather than focusing on specific groups, one of the most important benefits of the marriage of old and new would be the ability to tailor content for different audiences on different platforms. By joining up legacy publications could provide the quality of content and brand confidence which appeals to older readers, and media startups could provide the technology and knowledge of efficient use of new mediums and content types to appeal to the younger demographics.
However, to appeal to these different demographics would require moving from their pristine positions and finding a middle ground in terms of style and content. Legacy publications pride themselves on journalistic values and long-form editorial style, while new age startups have leaned towards bitesize content which is easily consumable on mobile devices, and content which verges on click-bait and relies on sensation.
Legacy publications will have to loosen up a bit. They can keep their values, but to appeal to younger demographics they need to be more casual on format and language. Substance needs to stay traditional but has to change format or become outdated. The New York Times has realized this, and is trying to change format and style to reach younger demographics and acquiring new publications which focus on content such as tech and gadgets. Likewise, media startups will need to cut clear boundaries between snappy content which attracts eyeballs and clickbait which adds no real value to the reader.
Media startups are learning that high volume without engagement holds little value. People might click off social media onto your “10 kittens getting drunk memes” content, but they are unlikely to spend more than a couple of seconds on the article, or be motivated to visit your site and browse on it.
Real engagement comes from high quality content, and brings brand affinity. Real revenue will follow.
Legacy publications will also need to become more accepting of new income models. To date The Guardian has avoided placing a paywall on its content, primarily because doing so would clash horns with the “open journalism” which the paper places as its core value. However, to make it in the new digital landscape, it must take advantage of all of the revenue tools which are available.
While media startups may be hitting their first speed bump, they are still moving in the right direction. VC funding might be drying up, but this could end up pushing them into the welcoming arms of legacy media companies.
If we look at current examples of media companies who have coupled up with the old guard, the future seems bright.
Vice is one of the few media startups who didn’t suffer losses in 2016. The company’s success has mostly been linked to Vice launching a cable TV channel earlier this year in partnership with A+E, which is jointly owned by Walt Disney Co. and Hearst Corp. Disney and Hearst have reportedly invested $400M into ViceMedia in total. CEO Shane Smith told Mashable that the decision to start a dedicated Vice cable channel was “logical” because that’s where 75% of all advertising revenue remains.
The only other investment on this scale comes from NBC who announced its second large investment of $200M into Buzzfeed in October of this year, after also investing heavily in Vox Media, the owner of the site.
Since its partnership, Buzzfeed has shifted to a ‘distributed’ media strategy, which seeks to reach different audiences through more traditional journalistic content, after realizing that despite attracting tens of millions of viewers via social media, this was not bringing in advertising money. As part of the new strategy, BuzzFeed divided its editorial teams into an entertainment group and a news group, and stated its intentions to put more of a focus on building out its video content.
If Vice wasn’t evidence enough that video is still profitable and attractive, NowThis, a NY based startup which has only been around for 4 years, has grown steadily since its partnership with NBC back in 2014. NowThis creates short video news clips which are designed for the mobile screen, and naturally shareable.
“Rather than just get more eyeballs to our television program or our website, we want to be wherever the users are whether it is Instagram or Twitter,” Patricia Fili-Krushel, chairwoman of the NBC Universal News Group, told The New York Times. “We can’t be as precious about having it all within our house and our platform.”
MIC.com is a news site which was valued at $100M in 2015. It has mastered a style and flow of content which really speak to Millennials –with 73% of its 20 million monthly readers younger than 35— while sticking to journalistic values. MIC.com accepted extensive funding from global media group Axel Springer back in 2015, who have also invested in NowThis Media and Business Insider over the last few years.
MIC.com offers snappy headlines, well written but informal articles which follow a conversational style without verging too far in the direction of clickbait, and a strong catalogue of video content. The front page features a range of serious topics from politics to the economy, but also has enough smatters of food and entertainment to keep younger readers engaged. The company has focused a lot of its efforts on video in the last year, launching an online product called “Flip the Script” Plank, which generated about 34 million views across the web, on Facebook, YouTube and MIC.com.
Startups which can highlight a profitable and attractive vertical — whether it be video or cable TV — but maintain a strong focus on providing high quality content, can push ahead when backed by the bulging bank balances, reputation and global reach of legacy media companies. While The New York Times is unlikely to partner with Buzzfeed any time soon, the reality is that it wouldn’t be the worst match ever. Media startups and legacy companies alike need to recognize their strong and weak points, and then partner with someone who can complement them with the missing ingredients.