In another lifetime, in the 80s in London, I was asked to demonstrate BBC Television’s groundbreaking teletext service CEEFAX to a visiting “American television executive.” His name was Ted Turner. Apparently, the guy had just inherited a little independent television station in Atlanta called WTBS-TV, after the untimely death of his father.
I showed Mr. Turner around the little newsroom of the world’s first-ever digital news service. He was not that much older than me. We had a ball. He seemed fascinated by one thing in particular – that news could be delivered 24×7, and not necessarily at a scheduled time. We call it “printed radio,” I told him.
As it happens, 25 years later I found myself sitting next to him at some fund-raising breakfast or another in Atlanta. I reminded him of when we first met, and the conversation turned to CNN. “Ted, you must be very proud of that accomplishment,” I said. “You know Winter,” he replied, “sometimes I think it was the worst thing I ever did. All that empty air is filled with nothing but bullshit. There’s just not enough news to fill it.”
CNN network’s post-Trump slump
Of all the media outlets now suffering from what I call “the Trump slump,” CNN is down the most. Trump himself predicted it. Of all his failed prophecies — that Mexico would pay for the wall, that the coronavirus would disappear on its own one day — with this one he was right on the money. “Newspapers, television, all forms of media will tank if I’m not there,” he predicted in 2017, “because without me, their ratings are going down the tubes.”
After five years of profiting from a Trump bump, and even surpassing rivals Fox News and MSNBC during the Capitol riot in January, CNN lost almost 50 percent of its prime-time audience in the first quarter. The network averaged only 1.6 million primetime viewers from January 21 through March 15. They’re not alone. MSNBC’s primetime audience dropped by more than 26 percent in the first quarter. Fox News is down 6% in the primetime slot.
The problem CNN faces is that nobody knows what it stands for – except that it’s the news brand of choice when a major event occurs. There’s no mistaking what FNC represents, though it too has identity problems and a big decision to make about how far right it needs to get to protect its flank, given the advent of the One America News Network and Newsmax, each of which has siphoned away elements of its far-right audience. MSNBC’s progressive brand position is clear and unambiguous. But CNN is stuck, claiming the neutral middle but leaning liberal. It’s time to dispense with the pretense of neutrality — that’s what it is — a pretense, and adopt a deliberate, consistent, political voice. If one thing is true in this turbulent media era, it’s that authenticity of voice is essential. You can’t claim the middle and then project a consistent liberal opinion.
You can’t please everybody. You cannot straddle, and why would you? There’s no need to try. Plain-vanilla reporting that did not risk offence was an important piece of the puzzle back before mass media died, when the operating principle of any consumer media property was to try to appeal to as broad an audience as possible and thus provide advertisers with the mass reach they thought they needed. Well, this is the age of vertical media, the age of running to the niches. The truer you are to your defined audience, the more that audience will reward you with consistent usage. The converse is true, too.
CNN needs to make up its mind.
I have made this point before. In Pravda, the U.S.A. edition I wrote:
We turn to news not to have our opinions formed but to have them reinforced. News does not create a point of view, news endorses a point of view. The news we like is the news we trust – the news we trust is the news we like. It’s the circular logic of the media audience and in today’s fractionated media universe, it’s what makes media work. Social media would be nothing without it.
How do you know if a news story is true? If you agree with it.
CNN has long been a financial and market under-achiever. As a division of Warner Media it is now owned by AT&T. Every now and then a telephone company does this. It tries to turn itself into a communications company. Wall Street likes the idea in theory, it sees more room for financial growth in content rather than mere distribution. Wait, I should say Wall Street likes it at first, until it doesn’t. A telephone company owning a media business is rather like a water utility thinking it can move up the stack by acquiring a bottled water company. I smell trouble. This will sound uppity coming from me, but can anybody tell me of a successful AT&T acquisition outside its core business? DirecTV is the latest example of an AT&T market misread. You buy a satellite video delivery vehicle just as streaming takes off? Okay. Now let’s see what you can do with CNN…
If it was up to me, I’d begin by finding my television voice. Then I’d focus on digital. I’d begin the process by turning cnn.com into a blended free + subscription business. But that’s just me.
National newspaper websites are down, too
The audience decline is not just happening in cable news. After four years of heady growth, national newspaper websites are also seeing declines. The New York Times began Trump’s term with 3 million digital subscribers and ended it with 7.5 million. The Washington Post tripled its subscriber base to more than 3 million during his administration.
But the Post saw the number of unique visitors fall 26 percent from January to February this year, and 7 percent from a year ago — and The New York Times lost 17 percent compared with January and 16 percent over last February. I’ll be watching to see when the fallback stabilizes — and when Wall Street figures out that there’s maybe too much air in that NYT EPS number. As I write this the company looks very expensive at over 50x GAAP earnings. The rich financial reward for projected subscriber growth may have been a little premature…
Deeper dive into The New York Times
Let’s step back a little. Let’s begin by noting that The New York Times was always an unusual outlier in the daily newspaper business. It ranked third in its home market, behind The New York Post and The New York Daily News. It long thought of itself — and sold itself — as a national paper, but national circulation did not reach 50% of total circulation until 2007. Its classified advertising was light, to say the least. Actually, it didn’t have any. More than half of its advertising revenue came from national advertisers — in a regular daily newspaper, even a big metro, that contribution was typically about 15%. It was also famously mismanaged. In an industry where margins of 25% and above were common, it regularly delivered margins of 5% or less.
But in 2011, the newspaper woke up. Desperation will do that, the parent company itself was as close to bankruptcy as you can get without actually falling off the cliff. It abandoned its reliance on advertising and made a commitment to become a subscription business. For the first several years, digital subscribers wandered along aimlessly below one million. But in 2016, subscriber growth began to take off. There are two reasons for that. First, the company had learned a lot about running a digital subscription business. Second, Trump got elected. 7.5 million subs by the end of Trump’s term is an impressive number — at peak, print subscribers topped out at roughly 1.6 million, in the early 2000s. Source: 2020 10-K
But there’s another thing. Although the business has rapidly added digital subscribers in the last five years, digital subscriptions are far less profitable than selling print ads used to be. The company’s revenue was essentially flat from 2011 to 2020.
Running a digital subscription business is very different than running a print-based advertising business. Print newspaper expenses scale closely with circulation. As print circulation grows, so does the cost of ink and paper, production and delivery. For a successful digital subscription business, it is exactly the opposite.
The growth in intrinsic value of a subscription business is mostly a function of two variables; the number of paying subscribers and the average revenue per subscriber (ARPU). In the case of the New York Times, if the subscriber base grows to where fixed content costs are covered — and remember, the company has 700 engineers and 1,800 journalists — then each additional subscription dollar will drop straight to the bottom line at almost no marginal cost. This is the magical outcome of any successful digital business, including a digital media business based on subscriptions.
But, here’s what those variables have looked like at the New York Times in the past three years, courtesy of Dan Shuart, who writes on SeekingAlpha:
As you can see, the trends are going in opposite directions. Digital subscribers grew rapidly while ARPU dropped. The fundamental question is obvious right? Can the company retain subscribers at a price above the discounted introductory offer and successfully hike the price over time without churn getting out of control? Can it lift the ARPU number? That leads to a more fundamental question: Just how sticky is this brand? It is sticky enough to sustain dynamic subscriber growth as the world settles down after four exhausting years of Trump?
A few years ago management set a goal of 10 million subscribers by 2025. They’ve been making stellar progress towards that target, but now, post-Trump, subscriber growth is slowing while digital ARPU continues to fall. Let’s see what the second quarter numbers look like…
Everyone’s looking for clicks
Talking about the New York Times, since we were last here Tom Cleveland of TJCX published a very interesting report on the use of A/B testing by newyorktimes.com to ratchet up the emotive pulling power of its headlines and drive-up engagement. Here’s an example, from the site’s coverage of Trump’s appearance at the CPAC conference in late February:
Trump starts off “addressing conservatives” and “claiming leadership of G.O.P.” but in the final headline Trump has “a hit list” and is firing “a warning shot.” Sure enough, the ratcheted rhetoric propelled this article onto the “most viewed” list that day. You an read more about this fascinating analysis at TJCX: New York Times Tracker
Look, I think this is great. The New York Times should be doing a lot more A/B testing than it is. Drama drives clicks. If the news report itself lives up the brand promise of serious news, then trial clicks by non-subscribers at the top of the funnel are more likely to drive a subscription decision as the user journey continues on its merry way.
Just let’s stop proclaiming that the New York Times, which forms the uncritical default world view of so many of my liberal friends, should somehow exist above such grubby things as warping headlines to drive up clicks and engagement.
Come with me now, to London
The report on NYT A/B testing interested me because around the time that it came out there was an outcry in journalistic circles when an internal document leaked from London’s The Telegraph newspaper that it intended to move to paying journalists based at least in part on how many digital subscriptions were driven and retained by their product. This stimulated the predictable handwringing about the superior nature of the profession, which apparently must stand above such mercantile considerations as audience and market. ‘It will lead to clickbait,” hollered one commentator. “The Telegraph is not and can never be ‘Buzzfeed.’”
Well, if capturing and retaining a subscriber is the aim, then understanding two age-old axioms of direct marketing is probably essential:
- what is the “the purchase journey” a non-subscriber goes through before pulling out the credit card? and
- since it costs three times as much to capture a new subscriber than it does to retain a current one, what are we doing to satisfy our customers?
You can’t have your cake and eat it, too. You can’t eschew advertising and claim you’re transitioning to subscriptions as your primary source of revenue without then learning the basic marketing tools of audience definition, capture and retention. It would seem that a Telegraph-like compensation scheme is an essential incentive to do just that — and the uproar says much about the problems most traditional news company websites are having in building audience.
It reminds me of a story I have told here before, the one about how Mark Willes, then chief executive officer of Times-Mirror, told L.A. Times journalists in a newsroom meeting that they should work backwards from the market rather than trying to imagine what the market might want. The newsroom was appalled at the idea. “Don’t come in here and call my newspaper a product,” yelled the editor. Very revealing, that.
The King of the Gods and The Washington Post
New Yorkers believe they live and work at the center of the universe. I know, I thought that too, in my many years there. So it’s easy to see why The New York Times looks at its national market from the top down.
The Washington Post looks at it from the bottom up. For several years it has been trying to stitch together a network of allied local news sites that, in the end, would provide aggregated local news on the scale of a national product. I just re-read that last sentence — forgive me. I sometimes despair of ever making the grade as a writer.
At one point The Post suggested to newspapers that they adopt both Post technology and look-and-feel for their own website, and then drop-in local news and features. But local publishers were worried about what they saw as the loss of brand, which I find odd. The only brand difference newspaper to newspaper is the masthead. Other than that, they all look identical. On the other side of the table some Post executives worried about “giving away” Post content, even though the paper has syndicated its news for decades.
Still, the Post’s Arc publishing system is the engine behind more than 1,500 websites, mostly newspapers and broadcasters. The target customer base is now expanding beyond news publishing, As I have written before here, Bucking the herd, again, retailers, even banks are becoming niche publishers. They need a Content Management System (CMS) to get that job done.
In a fascinating web interview recently with my colleague Bill Densmore of the ITEGA Privacy Beat and Randy Picht, executive director of the Reynolds Journalism Institute at the University of Missouri, Shailesh Prakash, EVP and CIO at the Post announced that the Post has built a multi-publisher, shared-subscription system in its tech labs — one of three components of its digital advertising suite of tools called Zeus — and is considering deploying a “Zeus Pass” to allow users to sign in once and get access to multiple publications in the Zeus network.
This is a big deal. It’s not a new idea, but perhaps it’s an idea whose time has come. Giving national advertisers access down deep into local markets was precisely what we had in mind in 1997 when we launched New Century Network (NCN), a consortium of nine of the biggest newspaper companies in the country. I was founding CEO. The founding companies brought the collective reach of 400 newspapers to the table. But parochialism and a myopic industry culture that could not see the impending digital disaster did NCN in. I have to confess that I experienced a brain-numbing flashback to NCN as I read ITEGA’s summary of the interview….
But, if you want to read more of what Prakesh had to say, here’s the link: https://itega.org/2021/03/16/sso-washington-post-eyes-shared-user-content-ad-network-for-zeus-sites/
Advertising set for a record-breaking rebound
Since the passing of McCann-Erickson’s Bob Coen, a giant figure in the media research business for decades, the most watched media analyst and researcher is Brian Weiser of GroupM. In his latest forecast, just out as I write this, Weiser predicts that advertising revenues will climb by almost 15% this year. This assumes of course that in-person activities, like sporting events, live entertainment and travel, will return faster-than-expected, driving marketing opportunities.
Axios/Chartbeat produced this chart to illustrate his forecast:
Many in the commentariat have suggested that advertising is dead. It’s not of course. What’s dead is mass advertising to unqualified audiences…
People who think they know it all are really annoying to those of us who do
The U.S. had another grandstanding hearing for tech CEOs, this one during the joint House Energy and Commerce Committee hearing on disinformation. The session again focused on content moderation and “Section 230,” a subject I covered the last time we were together here at BlastofWinter. A lot of nutty things are said about Section 230 — but Benedict Evans put it very simply is his newsletter — which incidentally, since you’re reading this, you should also subscribe to:
It means internet companies cannot be sued just because someone used their product to do something bad, but they’re allowed to look for bad behavior and remove it without voiding that immunity. Without something like this, you’d have to block everything (which is impossible), nothing, or shut down.
However, ‘allowed to look’ is increasingly looking too weak, and meanwhile both the UK and EU are proposing rules that create an active obligation to take ‘reasonable best efforts’, with some sort of proportionality to how big the company is. Facebook has been arguing for this for some time – the others made noises about change without specifics. Something will happen here – both US parties want change and other countries will do it anyway.
“Your business model itself has become the problem, and the time for self-regulation is over,” Rep. Frank Pallone (D-NJ), told Mark Zuckerberg, Sundar Pichai and Jack Dorsey. On this occasion he found bipartisan support from across the aisle. It’s true, he did. For all the wrong reasons.
I must say, I get an unpleasant stirring in the seat of my pants when I behold the sight of conservative politicians whining on the Fox News Channel about media’s suppression of their political point of view when the channel on which they are whining is consistently the most watched cable news outlet – and most of the highest-scoring political news posts on Facebook are from conservative sources:
Facts matter when it comes to the legislative process, surely? No? Really? It’s all just grandstanding?
The “sovereign writer”
As I mentioned in my last post, Small is Beautiful and Product is Everything the creator economy is booming. Patreon, the membership software company, is now valued at $1.2 billion, after raising $90 million last fall. And Substack, the newsletter platform is raising $65 million in new venture capital funding. That round would value the company at around $650 million.
The digital newsletter craze seemed to me at first like the same kind of consensual hallucination we have seen before from internet world. But there is clearly a market for independent writers. And by charging readers for their writing, they’re getting the clearest possible sense of what they’re worth.
Take the writer Andrew Sullivan for example. In the Trump era, he increasingly used his weekly column in New York magazine to dial up criticism of the American left and especially the insane wokeness that has penetrated newsrooms everywhere. When the magazine showed him the door last year, Sullivan left legacy media entirely and began charging his fans directly to read his column through Substack. He says his income has risen from $200,00 to around $500,000 as a result of the move.
This shows that writers who can command a paying audience have long been underpaid. The Internet makes it possible for writers to go directly to market. I think this is a real threat to publishers. They will be forced to pay more to keep star writers, which will wreck balance sheets or, having provided a platform for them to become known, they will end up competing with them, which will diminish the publisher’s hold on their own audience.
It does have to be said that the firebrand writer seems to have the easiest path to success in newsletters. The sector has the same performative aspect that Twitter has. That’s not surprising, polemics have always been useful in driving media audience. I see it as a reflection of current society, where we live in a hyperbole and everything must be bigger and louder to garner attention. For myself, I like the honest whisper in the back of the room. It’s getting harder and harder to hear it though, don’t you think?
Me? A newsletter? Are you nuts?
In recent emails, several of you have asked me when I will launch my own newsletter. Thank you, I’m flattered, of course. I’d like to think I have an original take at the three-way intersection of media strategy, leadership and culture. When I started BlastofWinter, I had lots of data showing that readers wanted concise writing that gave them a quick, practical return on their time investment. I ignored that entirely. I’ve always regarded this blog as a journal of my ongoing exploration of these subjects, my own attempt, really, to make sense of what is happening across the world of media. I haven’t really thought of it as a business. I’m trying to get not one but two books over the finish line, write freely over on Medium and keep my eye on tech start-ups — January saw the greatest total in venture investments in history, with $40 billion invested. So, no immediate plans, but thank you sincerely to those of you who inquired. I always appreciate your emails by the way, and try to respond to them within a day.
Until next time, happy spring, unless you’re in the southern hemisphere where many of my readers live. In that case, happy fall. Not that it ever gets too cold down there….