Could the frenzy of private equity-fueled media deals be over for now? That's what some analysts and participants seem to feel.
With capital cheap and money chasing deals, "private equity was consistently beating companies that had synergies" in purchasing media and entertainment companies that were for sale, according to Steven Price of private equity investment firm Centerbridge Partners, Monday's Convergence 2.0 conference from The Deal.
But with the credit crunch well in swing, buyouts are getting harder. "Sellers are unlikely to put their assets on the blocks, even if there are synergies. They want private equity to drive up the price," he continued. If the seller does put together a deal, the financing for private equity that's available is at a pretty unattractive price, he said.
He also said the market was more "bifurcated" than he's seen in the 20 years since he started doing this kind of work. Corporate America thinks things are going fine, but banks are in trouble, and credit is very tight. "It's not clear if the liquidity problems are going to turn into operating problems." Maybe it's just a matter of time.
NYT, While Quality, Isn't Exclusive or Niche
Here's the NY Times' explanation for getting rid of the TimesSelect wall (with my thoughts, in a sec.), emailed to print subscribers:
"Since we launched TimesSelect, the Web has evolved into an increasingly open environment. Readers find more news in a greater number of places and interact with it in more meaningful ways. This decision enhances the free flow of New York Times reporting and analysis around the world. It will enable everyone, everywhere to read our news and opinion - as well as to share it, link to it and comment on it."
This means, obviously, that ad dollars seem a better revenue stream over time than subscription. TimesSelect was, after all, a commercial, not editorial initiative. Publisher Arthur Sulzberger confirmed to me about a year ago that the opinion pieces had gone behind the wall because they couldn't attract enough quality advertising on their own -- unlike, say, the business or tech sections. (What top marketer wants its ad next to commentary that could alienate a good part of its consumer base?)
It probably also means the Times is buying into the idea of distributed content, that the best way to get exponential growth in audience is to let content out. Subscription growth is very limited. Not so ad growth in digital media. And one of the best ways to get that growth today is through not only inbound links from blogs, but also outbound content posting through widgets and Flash video and so on.. Don't be surprised if we eventually start to see some ad-supported Times widgets and the like, letting its journalism appear, branded, in other venues.
The Times' choice to get rid of subscription for its archives seems to show they believe the economics of the long tail. No individual piece gets tons of traffic, but over time, in aggregate, it's a business, even if ad-supported. "Our projections for growth on that paid subscriber base were low, compared to the growth of online advertising,” Vivian L. Schiller, senior vice president and general manager of NYTimes.com, told the newspaper. Maybe the Times will move to the model others suggested earlier this week at Convergence 2.0 of providing everything anyone would want to know about whatever topic the Times has covered. Of course, no matter how much that is, Google will have more available just a click away.
The move also means folks who've paid a pretty penny for Times archives, such as Factiva and Lexis-Nexis, are increasingly having to move their model to added value for commodified news products. Can they sell their subscribers on the idea that there's more search, more relational databases, more tools and tricks and so on? That's the sell, essentially, of the financial information firm Edgar, its chief told me, because the info is by and large available for free from the SEC.
It also, of course, comes in the context of The Wall Street Journal's impending decision of whether to go completely free online – something new owner to-be Rupert Murdoch is hinting will happen. (It may mean a short-term loss, but over time a bigger gain if, as expected, the ad market continues ballooning.) It's also intriguing that Rupe said he'd use the WSJ on his new Fox business channel primarily for mainstream, not business, news like international and political. While the Journal's unique users, according recent rating service figures, are much lower than the Times, that may not matter because 1. It's achieved those numbers with much of its site walled off and 2. advertisers and others believe the Journal's audience is higher income than the Times', whose forte is regular old news – albeit of some of the highest journalistic quality anywhere -- not the burgeoning and high-revenue niche of business news.
Future of Business Media Conference
A little bit of a promotional post, here, to say that I've added speaker names to the schedule for the Future of Business Media conference, which I'm helping program. Big-wigs like Gordon Crovitz, publisher of The Wall Street Journal and Keith Fox, president of BusinessWeek will be on hand to talk about whither business media -- an especially pithy subject with Rupert Murdoch's purchase of WSJ parent Dow Jones about to go through, and Rupe about to launch the Fox Business Channel in head-to-head competition with CNBC. The conf's Oct. 30 in NY at the Waldorf.
A Switch on the Long Tail
This, obviously, is a picture of Chris Anderson's book, The Long Tail (sitting atop the box for my new business card scanner). What's less obvious is that this book was custom-printed for me, very long-tail fashion, at the public library near me. I stopped by to see the massive machine chugging out custom-printed books for people, and the nice woman running the gizmo -- about the size of five large copy machines, and taller than a short basketball player -- told me Chris had awarded them the right to print 100 copies of his book, because the idea of printing books on demand fits his long-tail concept. (Most of the books were classics that are no longer under copyright.)
I've been thinking about the Long Tail today because of a breakfast I went to hosted by Jack Myers, for whom I do some work, called "Monetizing the Video Long Tail." I came away convinced that it will be possible to make money off of user-generated content and all the other niche-y stuff that's going online in video today. I wrote a more in-depth explanation for Jack in a column that goes up tomorrow on JackMyers.com.
The Power of "Yes"
"If you go to sleep a Yankee fan, chances are you wake up one." That was the way keynote speaker Leo Hindery today helped explain why the Yes network is more profitable than any regional sports network every constructed. Except for four nights this baseball season, Yes was the highest rated network in 8 million homes with a 3.5-4 rating night after night, he said. ("And we were playing some crap teams!")
Speaking at the Convergence 2.0 conference put on by The Deal, Hindery, managing partner at InterMedia Partners, talked about the power of enthusiast media, how hunters and fisherman pore over their magazines and all other media, how they defined "engagement" – a "dedicated, committed audience." That kind of audience, he said, is key when looking for media investments. Look for a dedicated audience – Yankee fans, Christians, Hispanics (noting that all Hispanics are not alike), outdoorsmen – some group that will avidly consume what you give them, if you give it to them in their sweet spot.
The other thing you need, he said, to really have a lasting investment over time is barriers to competition, lamenting the way cable TV had screwed up its customer service, for example niggling people over $20 worth of charges when their lifetime value was, perhaps, $2,000. "There was no reason for the satellite industry to get going except for our ineptitude in cable," he said.
Speaking at the Convergence 2.0 conference put on by The Deal, Hindery, managing partner at InterMedia Partners, talked about the power of enthusiast media, how hunters and fisherman pore over their magazines and all other media, how they defined "engagement" – a "dedicated, committed audience." That kind of audience, he said, is key when looking for media investments. Look for a dedicated audience – Yankee fans, Christians, Hispanics (noting that all Hispanics are not alike), outdoorsmen – some group that will avidly consume what you give them, if you give it to them in their sweet spot.
The other thing you need, he said, to really have a lasting investment over time is barriers to competition, lamenting the way cable TV had screwed up its customer service, for example niggling people over $20 worth of charges when their lifetime value was, perhaps, $2,000. "There was no reason for the satellite industry to get going except for our ineptitude in cable," he said.
Thoughts on an 'Octopus' Strategy for Newspapers
It's not news that "if you take out classified ad profits from newspapers, you take out the profit." Those were the words today of Michael Price, Senior Managing Director at private equity firm Evercore Partners, at the Convergence 2.0 conference in New York put on by deal-watching publication The Deal. But he didn't leave it there, and instead talked about what to do – at least for one anomalous newspaper with an audience most publishers would kill for.
Price went on to talk about what his firm would do if they'd bought the Wall Street Journal: "go deep on the Internet" for their passionate, C-level (meaning top executive) audience, giving everything they could want about any of various subjects they're interested in, be it credit markets, insurance, or whatever. He called it an "octopus" strategy. Unfortunately, Price said, newspapers haven't figured out how to "monetize" their good content. Leo Hindery of InterMedia Partners in a keynote Q&A said the New York Times should follow a similar strategy, out-Googling Google by, for example, giving someone searching for news on Alan Greenspan everything they could possibly imagine. Instead, he said, they're putting their newspaper content online, but in a much more fragile ad banner market.
Jeffrey Sine of UBS Securities said that while the Journal is held up as a huge success for subscriptions on the Internet, it "really is not that successful in the larger sense," which I take to mean $70 million (1 million people paying $70 per year) isn't tons of money in this realm. He added on Price's remarks saying the Journal needed to "upsell" folks on their "tiered" interest levels by selling them more on the value chain. Sine said his firm had sold Marketwatch to Dow Jones a few years back (for nearly $500 million, if you remember), which I guess gave him Street cred.
Later, Price said that that Dow Jones and Reuters have been "crushed" by Bloomberg. Another panelist – Dennis Miller of Spark Capital -- pointed out how CNN ended its 27-year relationship with Reuters, probably because Reuters was directly competing by running its material directly, with its own ads. Hindery said the folks at Bloomberg "are not unapprehensive" about the lack of a print partner.
Price went on to talk about what his firm would do if they'd bought the Wall Street Journal: "go deep on the Internet" for their passionate, C-level (meaning top executive) audience, giving everything they could want about any of various subjects they're interested in, be it credit markets, insurance, or whatever. He called it an "octopus" strategy. Unfortunately, Price said, newspapers haven't figured out how to "monetize" their good content. Leo Hindery of InterMedia Partners in a keynote Q&A said the New York Times should follow a similar strategy, out-Googling Google by, for example, giving someone searching for news on Alan Greenspan everything they could possibly imagine. Instead, he said, they're putting their newspaper content online, but in a much more fragile ad banner market.
Jeffrey Sine of UBS Securities said that while the Journal is held up as a huge success for subscriptions on the Internet, it "really is not that successful in the larger sense," which I take to mean $70 million (1 million people paying $70 per year) isn't tons of money in this realm. He added on Price's remarks saying the Journal needed to "upsell" folks on their "tiered" interest levels by selling them more on the value chain. Sine said his firm had sold Marketwatch to Dow Jones a few years back (for nearly $500 million, if you remember), which I guess gave him Street cred.
Later, Price said that that Dow Jones and Reuters have been "crushed" by Bloomberg. Another panelist – Dennis Miller of Spark Capital -- pointed out how CNN ended its 27-year relationship with Reuters, probably because Reuters was directly competing by running its material directly, with its own ads. Hindery said the folks at Bloomberg "are not unapprehensive" about the lack of a print partner.
Even for Money Guys, It's About the Operations
It can be easy to the think of the money guys as doing deals and paying attention to the income, but not the operations. At today's Convergence 2.0 conference, run by The Deal, Josh Steiner, managing principal of private equity firm Quadrangle, disabused the audience of that notion when talking about how they handled Maxim after buying Dennis Publishing. Quadrangle brought in Kent Brownridge, a former top honcho at Wenner media who helped run Rolling Stone, and Dan Rosensweig, who had been COO of Yahoo! for the digital side to help bring "new skills and perspective" for an audience that moves freely between print and online, Steiner said. Brownridge helped renegotiate printing contracts. Anyone in the biz knows that those contracts can mean the difference between operating profit or loss.
"With all due respect to former management, they had a great run of it, and they were no longer doing the basic things with respect to blocking and tackling perspective," Steiner said, referring – for those of you who may not know American football – to the basics of playing the game.
"With all due respect to former management, they had a great run of it, and they were no longer doing the basic things with respect to blocking and tackling perspective," Steiner said, referring – for those of you who may not know American football – to the basics of playing the game.
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