Distribution disruption

Media economics are downstream of distribution

Thanks to all who signed up for The Rebooting’s upcoming dinner series. We have a few planned already beginning in September and will continue to add others. Sign up here to get more information. We have limited space, so the dinners will be by invitation. Also, let me know if you want to sponsor an upcoming dinner. We are holding them around specific themes in the effort to build a sustainable, equitable and resilient media ecosystem. We plan ones in fall that will focus on publisher commerce operations and another on subscriptions.

This week, I wrote about the topic of a new episode of People vs Algorithms: How distribution shifts are wreaking havoc on media business models because in the media business, economics are downstream of distribution. First up, a message from The Rebooting supporter Omeda.

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Distribution disruption

Listen to People vs Algorithms on Apple, Spotify or elsewhere. Send me a note with your thoughts and feedback.

Every business deals with disruption and  challenges, but the media business is somewhat unique in having such profound upheavals to its distribution paradigms. Music faced it first. Publishing went next. And now we’re seeing entertainment, whether TV or film, face the same turbulence as distribution shifts to streaming and the economics change profoundly.

In the media business, economics are downstream of distribution. Every business deals with disruption and  challenges, but the media business is somewhat unique in having such profound upheavals to its distribution paradigms. As Troy Young reminded us again on this week’s episode of People vs Algorithms, digital publishing has never had much control over their distribution, leaving it at the mercy of the aggregators and platforms.

Now we’re seeing the entertainment industry, aka Hollywood, face the same turbulence as distribution shifts to streaming and the economics change profoundly. Jerry Seinfeld bought an entire Upper West Side building for vintage cars because syndication residuals are amazing economics for actors. (Buying a building in Manhattan for $1 million in 2000 is enough to make current New Yorkers feel ill.)

Streaming is akin to what Troy elegantly calls the digital meat grinder, which sucks in content of all kinds into an algorithmic maw to be distributed based on some black box algorithm, with complicated math for payments that ultimately results in nearly everyone making less money. Disney is cutting $3 billion in content costs. The pie is getting smaller for most media companies, which will make fights over the size of the slices more intense.

The focus on executive pay is a sideshow in this battle. Cut Bob Iger’s pay by 75% and you do not fill the $1.8 billion hole in the Disney balance sheet from just the past two quarters of Disney+ streaming losses or do much to alleviate its bloated debt. The rock-bottom pricing strategy, which Iger put in place along with piling on debt, won’t work, but there’s only so much Disney can hike rates in a crowded market, even with what Iger confidently calls “pricing leverage.” Netflix is back on a growth trajectory mostly by embracing ads and cracking down on password outlaws.

The optics of Iger talking tough about unions getting greedy fresh off a private jet flight to Sun Valley were, well, suboptimal from a PR perspective. It was, as Puck’s Matt Belloni put it, a rare unforced error. Barry Diller is also warning of “absolute collapse of the entire industry.” This catastrophism certainly puts paid to the idea that it’s just the creative side that’s overly dramatic. Posturing is a feature of all negotiations.

Meanwhile, the biggest immediate impact of AI on the publishing business will be how it changes distribution, not creation. Google’s generative search experience because seeing it makes clear just how profound of a change AI will have on distribution. Bustle Digital Group’s Bryan Goldberg, who, to use Puck style, is the preeminent SEO media macher of his generation, is saying search is already less reliable than it was. Instead, he’s more focused on email and experiential events like Art Basel parties.

Next week, I plan to write more about this pivot to events, something afoot at places like BDG and long a staple of B2B media. New publications like Semafor, Puck and Punchbowl all have events as a core part of their models from the start.

Established business media brands like Forbes and Bloomberg have big events businesses. Bloomberg Media CEO Scott Havens told me in a podcast coming out on Tuesday that events are about a quarter of Bloomberg’s business. Getting groups of like-minded people together in person is now more of a flex than bragging about your ComScore uniques.

Also on this episode, we discuss what’s cool (Bloomberg apparently), why corporate values aren’t much of a moat, how Airbnb puts design at the heart of everything it does and a review of Homewood Suites in Horsham, PA.

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AI talent wars: AI has become a buzzword to be thrown around to conjure both positive (powerful) and negative (threatening) feelings. We live in an age of feelings. It is emerging as an emotive tool in the rolling capital vs labor skirmishes. G/O Media’s use of AI perfectly fits in the worker view of Jim Spanfeller as a rapacious doofus. Efforts at CNET are being met with similar hackles. And to be fair, media bosses have a track record that isn’t great. Even Charlie Brown must have eventually wised up when Lucy suggested some kicking practice. The Hollywood strikes are both, in different ways, raising the threat of AI. Expect more as workers don’t buy management’s soothing words that these tools are to help them not replace them. (Peter Kafka)

Nailing jello to a wall: Medium is a curious beast. Like Quora, this is a company that seems like it had the right idea, only the execution and timing didn’t work. After all, Medium began five years before Substack. Maybe it just needed to hook up an ESP. Medium continues to try to find a way to incentivize quality. Nearly all the economic incentives in ad models favor quantity over quality. It’s why G/O Media and CNET are so hot to trot on AI. But it’s hard to both monetize quality and incentivize it. Look at the struggles Insider had with its admittedly goofy “impact points.” Medium is attempting to implement a new payment system for writers that takes a variety of engagement signals into account that go beyond the basic attention proxies favored in ad models. (Medium)

Jane Pratt’s MIA new brand: The media business of covering the media business has long been clubby. There are certain people and brands that exert more influence and therefore get coverage that is used to create optics of success, even if not deserved. What launches get covered is a prime example. In March, Vanity Fair hyped a vague new Airmail-like publication from Sassy and xoJane founder Jane Pratt, only for the company to never actually materialize. Kudos to Dirt’s Erin Somers for following up. (Dirt)

It was all a SaaS dream: Time to give up on the idea of publishers as tech companies. Vox is mothballing Chorus in favor of Wordpress. Yes, like all companies, publishers need to apply tech to their businesses. That makes sense. What doesn’t is the idea that a custom content-management system is a competitive advantage or, worse, a software business. That narrative was always conveniently advantageous for valuation purposes. (Axios)

Self-promotion alert: Thanks to Journalism.co.uk for rating The Rebooting Show as the No. 3 top podcasts for journalism. Subscribe to get new episodes, including next week’s with Bloomberg Media CEO Scott Havens. (Journalism.co.uk)

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