Media M&A - [Business Breakdowns, EP.230]

This episode is brought to you by Portrait. Portrait was built by former buy-side investors, and they understand great investing isn't just about having more information from low-quality sources, it's about having the right information organized the right way. And if you listen to the show, you appreciate diligence consists of many things: diving into the history of a business, framing the nuanced competitive dynamics, tracking key signposts around your thesis. And historically, that would take up material time that you do not have. But Portrait is basically like adding an army of analysts to your team. It's powered by an AI system specifically designed for investment research workflows, so you get nuanced idea generation. Portrait assesses the same types of qualitative attributes that we discuss on this show, and that can help identify businesses which fit your frameworks. Portrait also customizes research report generation. And third, there's intelligent thesis monitoring, and that's where Portrait assesses thousands of data points across value chains each day, extracting the insights, driving the business. Again, all this work would typically take hours and hours and hours. It's at your fingertips now. Visit portraitresearch.com to start your free trial today.

This is Business Breakdowns. Business Breakdowns is a series of conversations with investors and operators diving deep into a single business. For each business, we explore its history, its business model, its competitive advantages, and what makes it tick. We believe every business has lessons and secrets that investors and operators can learn from, and we are here to bring them to you. To find more episodes of Breakdowns, check out joincolossus.com. All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts, podcast guests, their employers, or affiliates may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

This is Matt Russell, and today we are exploring the world of media deals. My guest is Blake Saunders. Blake has been in media investment banking for about 2 decades.

When I first met him, he was a banker, so I wasn't expecting to lean into this relationship. But I often introduce Blake to others as the banker that is really great, that I really love. He's been one of the best resources for me over the past 3 years because he's simultaneously involved with those making 8- or 9-figure deals, those who pay his paychecks, as he is with the new media upstarts and everything that's happening in the podcasting universe, the Substack universe, and the YouTube universe.

So I took what would otherwise be a private conversation and did it for the podcast. We get into the deal landscape that exists today and some of the realities of the media market, how companies are dealing with this new era, and who's best positioned for the next chapter.

I benefited from Blake, who had previously been known to some as the Anonymous Banker, who wrote some amazing things over the past year because he came out of hiding and was willing to come onto the podcast with us. So please enjoy my conversation with Blake Saunders.

All right, Blake, I am excited to finally have you on the show, and I can have you on without having to refer to you as the Anonymous Banker, as you've come out of hiding here. You have a deep history in media. You've been an incredible resource to me as a media banker over the past few years.

I wanted to start this out very high-level. We're going to get into a lot of the weeds, but as I was trying to come up with topics, it's incredibly difficult for me to define media. I thought the best place to start was to have you share your view on what media means to you.

Media at a high level is effectively content that's monetized via subscriptions or advertising. It takes on so many different forms and continues to evolve. It started at the beginning with books and manuscripts, and that evolved to newspapers, then radio, and then television.

I think each successive iteration of media, to where we're at today, gets more addicting and more engaging. At the end of the day, either the media company is making money because someone's paying them directly, or they're helping an advertiser, brand, or agency get someone to make a purchase decision and make that purchase.

You hit on a good point at the end there in terms of who the actual customer is, whether it's the advertiser or the audience itself. But going into your history as a banker, you've been in this media market, in the M&A markets, for decades now. Not to get into age dynamics—I'm right there with you—but what would you sketch out as the major thematic changes in terms of what has changed from the early days in your career to where we are today?

I would use an M&A lens if you can, but whatever you would say to capture the thematic changes.

1. The Internet Changed Media Deals

I think the biggest change that happened in media, just in general, is the internet. Even though it made distribution free, people's perception of what they were building and how to create value in the last 25-plus years has been to build it quickly and then sell it.

I think before that, newspapers and things like that were owned by families for multiple generations, and they were really stable and great businesses. TV—there are a lot of media companies today that still have family ownership, like Condé Nast and Hearst. So that's a big change.

The reason why it's changed, and it's not the best, is the lens has shifted from businesses that maybe don't take that much money to start and are very cash-flow-generative and stable. Newspapers had basically a monopoly, and the federal government actually regulated what you could own. This was a rule that went away, but you couldn't own TV, radio, and newspapers in the same market because they were worried about a monopoly.

The problem is Google and Facebook now came into these markets and effectively took a lot of the advertisers because they were just able to get customers more easily. Starting 20-plus years ago, you saw people raising money to build media businesses that may not ever be profitable, with the pure goal of getting them big enough to then sell them to another media company.

Where we find ourselves today is we're in a spot where it's really tough. Every company is struggling. I think people that have subscriptions and direct contact with their consumers are doing okay. But anyone that's relying on organic search traffic to drive advertising revenue is having a really tough time because the degradation you're seeing in consumer engagement is really high.

This is also on the TV side, too. In the US, a fully distributed cable network used to have around 110 million households. This was 7 or 8 years ago, so it's not that long ago. Today, it's 55 million.

The reason why that matters for TV and cable is that each of those households that are subscribing is paying a fee to Comcast or one of the other distributors, and part of that fee is then making its way to ESPN or whatever cable network. If you have that, you've effectively halved your revenue. They have other places to get revenue from, like advertising, but these businesses are changing rapidly, and most of the value is accruing in the hands of a few people: Google, Facebook, and Amazon.

It's incredible, the breadth out there, where there's literally no barriers to entry now for anyone in the media space. I did want to put the lens back on you in terms of going through your career and working for institutions. You've made this change recently, which I want to get into. Can you talk about why you left your firm recently and whether any of these developments had anything to do with you taking a different strategy personally?

2. Banking Goes Custom

I was at a small firm called Methuselah Advisors for 15 and a half years—I think 14 and a half years—and then I spun out a couple of weeks ago and started my own platform.

Being at a small firm, you're always your go-to-market when you talk to clients. Yes, it's about your partners, but it's also that they're hiring you. When you're at a larger bulge bracket, you have a multitude of services to sell into a client across the board: debt capital markets, equity capital markets. So you're able to provide more services.

I started at Citigroup for a year and then joined the smaller platform. Effectively, for 15 years, I was just selling air—literally, ideas. I just see the world changing a lot in terms of how firms will be structured, what clients want, and the services we can deliver.

I wrote this unique LinkedIn post, and I titled it “Conscious Uncoupling.” When you're in a partnership for 15 years, it's a conversation. It's not like I'm sending an email or a PDF with a signature on it. It was a conversation, and I think it just made a lot of sense.

I want to build something that can sustain these changes that are happening across the landscape. There are going to be fewer deals in media. The way to take businesses to market is changing dramatically.

Typically, the best sell-side process, when a banker sells a business, is getting an asset that you can market. You can basically have someone young on your team send it out to 30 people and get 5, 10, or 15 bids back. Then you decide, take whoever you want to a second stage, and pick the ultimate winner of an auction process.

But that's changed. In order to sell media companies or media-adjacent businesses, it's much more hands-on and much more custom. So that's what we're building. It's different.

I think there's a lot of strategic insight from the media that you know very well, and not to blow smoke, but you're incredibly well plugged in in terms of the new developments. But I also think there's a parallel to what's happened in media and seeing individuals go out on their own versus working under institutions, for a variety of different reasons.

So it's interesting when these things come together. One of the things I wanted to get your insights on is that I get a lot of exposure to the theoretical sellers—those who are building media businesses from the ground up—and these tend to be smaller in size, but even some of the medium-size businesses. I don't have nearly as much insight into the buyers.

How do you frame buyers in the media market? We could take this in so many different ways, but do you have a framework for thinking about who the natural buyers are in this market? You can elaborate on that however you like.

3. Buyers Chase New Audiences

It's super dynamic. With some of my clients or people I'm trying to pitch, I make this basic statement, which is, “If you're thinking about hiring a banker,” because a lot of times, most of what you do in banking is just copy and paste what you did 6 months ago, because you're doing a bunch of busywork.

Don't give away the secrets.

Yeah. If you're thinking about hiring someone who's copying and pasting a presentation from even 2 or 3 months ago, it's probably changed. The demands and desires of larger media companies, and where they want to invest, are changing rapidly.

A perfect example is Substack. I think you'll start to see more and more M&A around Substack. You saw Bloomberg a couple of days ago announce that they're going to turn on Substacks. CNN said they're going to lean more into newsletters a couple of months ago. There's a reason why this happens.

A lot of large media companies have been trained to be slow movers. When the platforms started to get bigger, they would offer unique things. Facebook turned on Facebook Video, and they did all these partnerships with larger media companies. They were like, “Build video teams, create video for Facebook, and we'll help you with the monetization.”

The monetization never happened, and Facebook shut that down after a year. Then they let everyone else suffer and clean up the mess: “Okay, what do we do with this team of 5 or 10 that we just hired?” A lot of media companies have been slow movers in adapting to change, but as soon as their competitors start to make moves, there's a fast follow. That's what I expect to see. It seems like more of them are getting wise to some of these new mediums.

The biggest one that I'm sensing now is YouTube. Think about the late-night shows, not in the context of them all getting canceled. Prior to that, they used YouTube as a place for shoulder or adjacent content. Say Jimmy Kimmel did a fun lip-sync or something like that; he would clip it up and put it on YouTube. They always thought of YouTube as a second-run place to continue to cultivate their audience and get them back to TV.

What you're starting to see with the larger traditional media companies, and it's just happening now, is that they're realizing, “Oh, wow, we should think of YouTube as a first-run spot, so let's actually make content for that.” The reason is that brands and agencies are finally willing to buy direct on YouTube and buy it like they do TV. I think Hot Ones, the show, sold at a pretty good multiple because they sell it like TV.

TV sells adjacency. Yes, they sell reach, but they also sell adjacency. When large brands want to buy advertising, they want to make sure that the content aligns with the person they're going after. Everybody has done a lot of studies around this.

Even premium content that has the wrong negative connotations—even if it's a premium show that everyone loves—could actually harm a brand by having the interstitial of a commercial in it. Brands care about adjacency, and a show like Hot Ones can effectively go buy its inventory from YouTube and resell it to brands.

They go to Procter & Gamble or Coca-Cola, and they say, “Hey, we're going to have these 2 actors on this week. Will you come in and buy this week? This is your reach, and this is who you're going to be next to.” That's been really profitable for that business. Larger media companies are starting to spin up digital ad sellers and think about the YouTube ecosystem in a much different way.

This is the backdrop to say digital media done right will continue to be more valuable. Yes, it's going to be hard to sell a creator-led YouTube channel. I totally get that. But I think Hot Ones is a good example of a business that, yes, has a host on it, but I think what people forget is that there have been hosts on most TV shows.

There are actors who are specific to those shows. Seinfeld has a lot of value, and we sometimes forget this key-man risk that exists in most content. Even with Hot Ones, there was a little bit of salacious gossip around the host, and people forgot about that in 2 seconds.

People reference Hot Ones. They don't reference Sean or Sean's show. It's a good framework. That particular anecdote about them buying back the inventory from YouTube and then selling it was interesting and a kind of missing piece to me in terms of the sale, so that's interesting in the weeds.

Applying the same thought process to something like Substack, which feels a little less obvious to me: YouTube has this natural analog to television. When you see more movement into Substack, to me, that's a net positive for Substack as a platform. You've seen plenty of brands now lean into that.

What is that telling you in terms of whether this is a signal that Substack is now considered a place where you can get eyeballs for newsletters? What are the dynamics that are driving that in your mind?

For media companies, their whole goal is to reach an audience. Substack is purely a platform. It's easy to reference Substack; I think you could just say the category of newsletters. I think a media company would buy any newsletter. Some of the fastest-growing newsletters happen to be on Substack.

I think if a media company buys a Substack, they're stupid to take it off. I think they're starting to see it more as a platform instead of a competitor. There are some people on beehiiv, but where the best talent has gone seems to be Substack.

I make this comment that I think we'll look back and say that there's never been a cheaper time to buy YouTube channels. That gets a retort: “Well, what about this one? What about this one?” That's not a specific comment around a specific person, and the same thing applies to Substack. I'm not making a claim that every single Substack can be bought.

YouTube—every channel is different. Same thing with Substack. People group all of these together. The Substacks that will get transacted on are ones that are basically harmonized with the content of whoever's buying them.

This is a random example, but if someone has a really good cosmetic tutorial or something like that, you could see a cosmetics brand buying that. Or, like, a news one where it's just links—you could see a news company wanting to buy that because it fits within maybe a premium product. There's such a diverse group of YouTube channels and Substacks that you can't say, “Every single Substack is going to be valued at X, and they should all sell for Y.” It's not going to happen. It's more about very specific types of content.

The buyers—do you see them as legacy media companies like Bloomberg or The New York Times, or is this filtering into the territory of cosmetics brands and corporations, where every entity is now a media entity? When you think about strategic buyers, or who's dominating the buyer side of the equation, where does that tend to lie?

I think it's anyone that has to pay a toll to Google and Facebook to acquire a consumer. There's a really cool B2B newsletter and website all around this gig economy. It's the number-one site to help Uber drivers and Lyft drivers sign up, and then they communicate all the new rules and things like that.

It's a completely private site. Would Uber buy that? Maybe, because they pay so much to get every single driver to sign up and complete the application on their platform to then be a driver, and they have a high churn. So when you go through cycles and valuations are starting to go up, you see people enter the fray who want to pretend they can operate a media company. It usually never works.

Cosmetic companies got into YouTube channels 10 years ago. I think Estée Lauder had a whole push into a beauty YouTube channel. I don't think it worked out that well because most people that are not media companies- Can operate a media asset.

I think it will be a mix, and that's again why I think, on some assignments, we can basically be better positioned than other large platforms: There aren't 20 buyers for these businesses. There's like 3 to 5, and you really have to communicate in a direct way what the value is.

And just to hammer on that point, this list of potential buyers—are they actively seeking to find solutions to whatever problems they're having, like what you mentioned? Or is it coming in the opposite direction, where sellers are looking to strategically place themselves with buyers and you need to pitch the buyer on the reasoning?

I think it's both. Every company is really different. The way that you navigate it is different. Some of them, when they have family ownership, are still led from the top. Someone will say, “Go buy this, and I really don't care what we pay for it.” So they have a corporate development team that's good at negotiating pricing, but they're not price-sensitive.

But it's a mix because there are a lot of people coming to market. In podcasts, yes, assets are for sale, but typically, I think some of the best deals are born out of longer-term relationships. Think about the Free Press. That relationship is not something that... I guess it kinda started at The Allen Company conference, but I don't think Barry was for sale technically.

On the point around media, you always seem to hammer on the importance of content.

Is that still the holy grail in your view?

4. Premium IP Still Matters

There’s a nuance to that. Facebook, Snapchat, and TikTok are oriented to ensure that UGC content is the most addictive because they don’t have to pay for it. Instagram is a lot like a media company, but they don’t pay for any of the content.

One of the reasons why I have very strong views on how to fix Substack is because I want places where premium content can fully monetize to continue to exist. It’s kind of like the American diet, and I think this happens to everybody. You go to Europe, you lose weight, and you’re like, “I’m going to come home, and I’m going to eat healthy,” or, “I’m going to try to eat that way.” You go to the farmers market and read the packaging for a couple of weeks, and then you go back to eating at McDonald’s.

The unfortunate thing is premium IP matters, and we can talk about that in a second with Paramount, but the platforms have made shitty content highly addictive. That goes back to why certain YouTube channels will be less valuable or more valuable in the hands of a media company. But I think it’s because they’re creating premium-like content, maybe not using the budget of premium content, but creating premium content that users, using the analogy of food, are getting real value from.

An interesting thing with Paramount is that they spent a lot of money on South Park and a lot of money on the UFC. I think their strategy, because they have the budget to buy stuff, is that instead of worrying about where the stuff is going to live, ultimately, they want it to live in Paramount+ and get people to subscribe.

But I think their positioning is that they used to have the zeitgeist with MTV and all these cable channels. That’s gone, and so it’s, “How do we turn that back on?” Instead of worrying about where it lives today, I think they’re most focused on, “Let’s go figure out our target customer and what they’re watching that we can actually go easily get.”

The 2 things I just referenced are major draws. South Park, even in its 22nd or 21st season, is still funny, still relevant, and still making news. The UFC, I think, is one of the most watched sports. They did a good job during COVID, basically turning themselves back on really quickly. They’re bringing it in a form where you’re not going to do the pay-per-view, but I think it’ll still feel like a premium product that you can only watch on Paramount+.

Yeah, it’s interesting for both of those properties. You seem to hit a specific demographic as well, and you have this die-hard audience, for lack of a better term, where you can feel more comfortable that they’re going to port over with you versus the many other large audiences where, if something went behind a paywall, it might not.

I always reference The Economist, which had an 85% drop in its podcast listenership after it brought its podcast behind a paywall. I’m sure there are other things going on in the numbers, but it’s interesting to me that there’s a test of when something is free versus when something moves, and you see that same audience go with it.

It’s interesting just to hear the dynamics of what they targeted. How many assets do you think are out there that are that particularly powerful in terms of having scale, but also having this engagement, which feels stronger than what you would easily find in the top decile?

The interesting thing in media is that it’s ever-changing. New shows come along. One thing I heard from a producer is that the unfortunate dynamic of all these numbers and statistics is that a lot of shows are not getting a chance to breathe.

Most of the good content that we look back on and say, “That was a really good fucking show,” took 2 or 3 seasons to develop, and now shows get cut after 1 season if they don’t show the right metrics. A lot of the best shows, when Netflix first came out, were basically greenlighting their own content. So much of it was built in a way to have you binge.

A lot of new content that’s being created is more addictive but is not as good, so I don’t know if it will have the underlying IP and asset value. I think the way to think about it is: What do you watch? I don’t watch TV, so I have a hard time saying what’s valuable.

I think there are probably some really good podcasts. The next iteration is that some of these podcasts can have the same amount of advertising weight as a good TV show, and you’ve seen SiriusXM do a really good job of partnering because they have an insane audio sales team.

That’s why they do these deals: They know that they’re going to get the deepest penetration with the right advertisers and get good CPMs. Again, I don’t watch TV, so I don’t know any other valuable IP that has the same weight as South Park, because that’s a lot of money.

There are very few appointment-viewing things. I think that’s why you’ve seen this flock toward live sports. It is truly appointment viewing. I would put UFC into that category. South Park is one of the last things that I’m sure its audience would still view as appointment viewing, maybe not as strongly as it once was.

Sports is probably a big miss on my part. Sports is probably the easiest, most heavily weighted thing where you’re going to see a different adjudication of who owns the rights and how they’re able to be used, because there’s been sort of a shake-up.

Sports rights are controlled at a couple of different levels—in-market versus national broadcasts—and it was a way to basically put more value back to the teams. When Sinclair acquired a bunch of the RSNs and then ended up having to restructure those businesses, a lot of those rights got put back into different areas. They just changed.

Those were really valuable for the sports teams. It was driving a lot of the value. So probably sports is the place where you’re going to see billion-dollar-plus M&A-type deals or rights deals. I was having a hard time thinking about specific content.

It’s incredibly rare to have that type of “you want to be there in the moment” viewing, because now things you might want to watch just pile up. You’re getting fed so much content. I have books, TV shows, and things that have just been on my list for a while, which is a lot different than it used to be.

One of the things that’s always been misjudged is the value of IP libraries, meaning people misperceive them as being more valuable because there’s just a ton of degradation. In most content formats, the first 30 to 60 days are where all the value is, and then it degrades exceptionally quickly.

With technology now, I think there are going to be unique opportunities with these libraries of IP—music, TV shows, scripts, books, all this stuff—because you can reimagine it in a much quicker way. I’m sure there are some crazy esoteric union rules about what you can and can’t do and how you can use the actors, but it is something interesting to think about.

Good stories and narratives can be reimagined in a lot of different ways. I think there are going to be opportunities to use these libraries to reimagine content in the future. Imagine if, instead of having to hire actors and stuff, it was just a kid behind a keyboard. When Disney recolored some of the movies, it was that quick—with, obviously, new content, better content, and things like that.

It taps into what a lot of the studios did with Marvel originally: the idea of superhero movies where the superheroes sold the movie, not the actors, and there was a way to not have to pay nearly as much. Now things have come full circle, but if it’s not the humans who are attracting the audience, you can hire lower-cost labor, juice that up, and recreate the same things, and you’re still going to get a similar audience, which I think is interesting.

On the technology side, I think you saw it in the music industry, where a lot of those old catalogs—I mean, this wasn’t even reimagining them—but by having streaming come into play, you saw Spotify reinvigorate a lot of these royalty streams.

Not only did you have a pickup in terms of the income that was coming in, you also, in theory, had better visibility, or at least that’s what the funds were selling: Because you had this hard data, you had better visibility into what it would look like in the future. That industry took off, and that was from technology unlocking historic IP and bringing new income streams to it.

Taking the music example, a lot of musicians never make a lot, so you have hobbyists and stuff like that. There’s a company right now where they focus on a couple of songs each week and have 20-plus musicians do different versions of them.

There have been a few songs that have been used as the intros or outros to TV shows that have become hits. What they’re using is technology to help them produce faster. They send the songs out to everybody. Everybody works on them for a week. They come on Friday and have a listening session where they listen to everyone’s songs.

They pick 5, fully produce those, and then go re-pitch those songs for commercials and all these different things, taking it a step further. They’re using this base of IP, reimagining it with a slightly different tone, and turning it back on, basically.

First, they don’t have to pay these musicians that much at all. Second, if they hit and can grow the value of 1 song, it could change the entire value of a portfolio of songs.

Going back to some of the new dynamics of the media upstarts that we’re seeing today, one of the interesting themes up until the Churnin deal with Barstool was: How do you apply a multiple to a business where there’s such high key-man risk?

Where does that stand today, just in terms of the comfort level of acquiring businesses that are built around individuals, where it’s hard to separate the individual from the brand, versus those that are able to accomplish the brand while being a key individual, versus those that try to go the full-brand route and limit the individual connectivity?

5. Creators Build Valuable Brands

I think the reason why you see more person-driven brands is that it’s the easiest way to get an audience and get scale.

Obviously, most podcasts are led by the person because you can't have a brand. Certain forms of media, like cooking, are really personal. If you're selling a recipe website, you'll get dinged because people are worried about it, but what you're trying to show is, look, this person has been producing content for 10 or 15 years.

Even though they may get a large check at the end of a transaction, there are ways to tie them into whatever company is going forward. Each time, it's a unique situation, but MrBeast, I think, has done it pretty well. He's been able to raise a lot of money around Feastables and other things like that.

When you look at his go-to-market, it's not just the YouTube channels. It's everything else he's going to build that will create ongoing value. I think people see Jimmy as someone who is much more than just his YouTube channel. If you talk to people who work with him, he's very focused on the business, not just the content. The way he drives to metrics and things like that sounds like any other really strong founder.

It's a case-by-case basis. Most large media companies do a pretty good job of trying to get a sense of who that person is, and that's what they'll base what they're buying on. But when TCG invested in Barstool, Dave smartly said, "I'm going to step back from the day-to-day CEO role," but he still drove so much of the engagement. I think most media companies at a smaller scale need someone like that, or they have a team of people. There's a reason why you're showing up, and it's not just because of the brand.

On the idea of those individuals or those brands having a lane, we often think about certain creators or businesses and their Substack, YouTube, or podcast. But then you see them building out newsletters and all these other properties. Through the lens of a buyer, how important is it that they have maximum platform exposure, versus are they buying these businesses just for that single lane, whether it's the Substack or the YouTube?

Obviously, that's going to have most of the value, but how important is it to be spread onto all those other platforms as well?

Media companies are buying other things. They're adding a capability, so that's more of a tech-type acquisition. If they're buying another media company, they're buying audience. If someone has a really strong newsletter that has 50,000 engaged people versus someone who has a newsletter with the same audience plus 5 other random things that have no engagement, I think they'll probably judge them pretty similarly.

Effectively, when they look at it, they want to know, okay, if we overlay our ability to grow this, our ability to sell these ads, and our ability to bring this value back to our broader platform of consumers who are consuming our media today, it doesn't necessarily matter whether you're on 5 or 10 platforms. Whatever channels you're in, you just need to have the right engagement.

You see this right now with some people where they have their 1 main thing, and then they're adding stuff, and the other things have light engagement. It gives them an opportunity to test and learn to see what resonates, because each thing is different. That's the tough thing, especially if you're not raising any money or just a little bit of money as a media company. You can't copy and paste what you're doing on 1 thing and hope it works on the next, because it won't.

They all have different types of audiences. They all have different feed dynamics, how often you have to post, and things like that. So in order to be good on multiple channels, you probably have to have a person thinking about it. You have to change the content slightly. It's not an easy thing.

For independent, fast-growing media companies, I think it's best to stick to your lane. If you want to do other stuff, it's an opportunity to engage with people slightly differently and test things out. But that's more on the digital side.

If you do a newsletter and then have in-real-life events, that's just like a typical media company. The nice thing with events is they basically become detached from CPMs, and you can sell them on a different thing: influence. There are a lot of reasons why brands will buy events and give someone a lot more money than they would otherwise.

An event that has 200 or 300 people at it, a brand might spend thousands of dollars, whereas if a couple hundred people showed up to a webpage, they would get $10. If you have the right engagement on whatever channel you're on, you see some of these livestreamers who, when they walk around New York City, cause pandemonium. That, to me, is a pure signal that they have real fans. I think any media company wants to buy other media businesses that have true fans who are going crazy.

Where do you think we are in terms of the event cycle? After COVID, there was this pent-up demand for more in-person interactions. That has been met with increasing supply and an increasing pivot toward a focus on events for media businesses. I know this is not new, but do you have a sense of whether this is a cycle or whether there's a real secular trend here?

I'm not that popular, but I have event invites probably every day. So I can only imagine how many are truly out there.

Axios had its event last Thursday. I think they had 500 people at it. So there's always going to be room for really good events.

There are a lot more events. I don't know what happens there. It feels pretty full. There could be double the amount of events, but I don't think there's enough stuff to cover. In the way that it's being covered, I think Axios does a good job: They speed it along, and they try to break news.

I always make this anecdote. Why would I go to a conference when I can listen to the same content on a podcast and just have it sped up 1.5 times? Folks like Axios are doing a better job of trying to break news and making it important to be in the room.

But a lot of conferences that are purely selling content and not the connections are going to struggle because everyone has the same speakers. Especially if it's not a reporter interviewing the person, it's a very lightweight conversation that, in some instances, makes you think, "Wait, what did they even say?"

That's why Kara Swisher's Code Conference was really good, because it was editorial-led. She effectively brought people she knew really well, and she was willing to ask really tough questions. There are moments along the growth of technology where you can point to them and say, "Oh, yeah, that was that weird time when Mark Zuckerberg acted really weird," or, "Oh, you remember the time Kara brought Bill Gates and Steve Jobs together?"

She had these cultural moments, and I think that's usually the case when it's a journalist-led conference, not just a random person leading it. So there is room for a lot more. The problem is, everyone's go-to-market from a content perspective is literally copying and pasting each other, which I don't think works.

It's a fair point. Things moved away from what's happening on stage to who else is in the room. Now there feels like there's an abundant amount of, "Just trust who else is going to be in the room," without a real direction. So I think you'll just see a shaking of the weaker branches, and people who can dial in either what is excellent that's happening on stage or create better connectivity to the people in the audience, because that's what a lot of people go for: the relationships.

We've touched on the SEO dynamic a few times. I'll bring up a brand like the New York Post, where my consumption of the New York Post has dropped as a result of Google searches and social media posts. It just gets served to me a lot less, whereas it used to show up at the top, and I consumed it naturally as a result of that.

I'm not going to newyorkpost.com quite frequently—not to use them as the poster child for what's happening—but for brands in a similar context, what happens there?

6. Google Zero Threatens Publishers

Some of that's bounded by how Google News serves up content. Everyone's probably seen this. You see breaking news, and you go to The New York Times. They have 1 paragraph, and you're like, "Wait, why did they post this?" It was all to effectively make sure that you were at the top of Google News, because Google News used to give priority to people who posted first, and a lot of this is changing.

They used to have an embargo where they would push people off of Google News if it was within a certain content window. So if it was the first 6 or 12 hours, they would say, "Okay, we're going to let them come to your website now." They're keeping those people on the site.

Even big news brands are struggling to maintain the organic traffic that they once had, and it's happening really fast. When some of these changes in traffic drops happen, people will tell me, "Oh, well, this public company is doing fine." And I have to remind them, yeah, the numbers you're looking at are all historic. When a company is reporting, the numbers are a couple of months old because it's looking backward.

The numbers I'm hearing are double-digit declines in organic traffic. There's a lot of fixed cost at publishers. Most of them are already very thin today, because organic traffic is free. They didn't have to pay anything to get it.

So you start to get into this world where the whole economic model of a publisher—and I think the New York Post is probably a bit more insulated from this—but anybody that's below the top 10 or 20 in a category, or a smaller number if it's a more niche category, is already suffering mightily.

It has a dramatic impact because there's a lot of fixed costs in these businesses that they can't cut as quickly, and they've already done a lot. Some of the fastest-growing publishers at a smaller or midsize scale have basically completely changed their publishing model to cater to the algorithms, which sucks, because most of their content is not as well researched.

But they're focused on publishing more, faster, and in a lot of cases, there's not really direct reporting. It's just copying what everyone else is writing about. Yes, the decline of the New York Post is happening across the publisher landscape. The New York Times is focused on its subscription numbers. That's how they're growing their business. But I think more and more publishers talk about Google Zero, which is the day where they get no organic traffic.

Is there a solution? I do believe that sometimes secular declines are too hard to overcome. But do any of the new outlets offer a cushion to slow that decline down? Or if you were in their seats, is there anything you could do to offset that?

No. It's kind of scary, but there's nothing to do. That's the problem. When you enter this world where the platforms control who can view your content, it gets really tough. There's just going to be less media.

From a strategic perspective, what you see the media companies doing is being more thoughtful about where they're talking to their consumers. They're collecting more data. They're trying to make their websites more like a destination. For The New York Times, they should try to target you if you like sports—what sports teams you like to watch—and lean into the content verticals where there's probably resonance. But if you're just a generic content news website, or pick any vertical, the future is really tough unless you have direct connectivity to the users.

I stopped getting my news from some sources. Social media has overtaken the news sphere so quickly that it's incredibly hard to dig out of, especially if it's not well researched. Everything that we've talked about has a tie to what's happening in AI, but what would you wax poetic about in terms of the impact AI is having on the market, from any angle you want to hit? What would you say stands out?

7. AI Reshapes Media Economics

The biggest thing is that people still question whether it's going to have an impact and then use weird analogies to say that everything's going to be fine. Society is very fragile. The reason why we had to shut down during COVID was not because half of the population had COVID. It was because a couple of percentage points were infected, and we had to stop the spread.

So when you think about how our economy is built, the number of people actually working in the US is not 300 million-plus people. It's a lot less. And the number of people who actually pay taxes is less than that. AI doesn't really need to impact that many jobs, but if it impacts a couple of them, it will need to radically change how we deliver value to people who aren't working.

This idea that the more free time we get, the more creative we get—it's not true. We have more free time than we've ever had, and most people are stuck on their phones and have more anxiety. They have fewer friends. They have less sex. We're more overweight than we have ever been—ever. If there's 1 fact that someone can point to and say all this extra time and all this extra technology has made our life better, I don't see it.

I made this point last week. The only way to coexist with AI in a normal way is to disconnect, not connect more. The COVID point is that we underappreciate how significantly tax rates will need to increase—not just on ordinary income, but, I think, on the safe haven of capital gains. And you start to see regressive tax societies in Europe and other places where they start to come after retirement, and it's the Elon Musk tax of, “Let's just figure out a way to tax assets that you haven't sold yet.”

It has to come because you're going to have to rebalance out to help people make a living, which is going to be UBI. It's like a weird debate that I get into with people, and most of the time, the other side of the debate is just, “It's going to be so great,” and stuff like that. What's great in their minds, which they don't see yet, is everybody on GLP-1s and everybody on social media 24 hours a day. To me, that's not good.

If AI is naturally deflationary, where it could do all the roadwork and it could teach in the schools—pick your various government expenses—then maybe there's some offsetting impact.

I recently bought business-class tickets to Japan, and I was like, “This is so cheap, and I can just buy it.” For a personal expense, I would normally not buy business-class tickets on a 15-hour flight. Yes, the world will be completely deflationary, and I think most things will be cheap. The problem is most people will be given effectively government money, and the people who are creating assets and creating value will make a lot of money and basically be able to do whatever they want. Yes, everything will be cheap, but most people won't be able to buy it.

It's very dystopian, but I hear you in terms of the reality of it.

I'm not trying to be the 3:00 a.m. radio show—the aliens are coming. Play out these basic trends. So if everyone gets an extra hour because of technology, are they going to put down their phones? I see this every time I take my son to the playground. Everyone else is on their phone, which is crazy to me. Put your phone down.

If people are given an extra hour, AI is going to be more addicting, not less. The world's not going to end. For people who are operating businesses, it should be okay, but you just need a recognition that it's probably why I started my own firm. You have to be a creator of economic value. That's the only way to sort of exist. You can't be an employee.

And then there has to be, like, a significant recognition, one or two percentage changes in the economic base and how people are employed. If we just take out drivers in the US—semi-truck and Uber drivers—that's a big hit to the income base. It has happened before when we had to pay back the debt from World War II, when the tax rates were much higher for an extended period of time. It's less about worrying about it and more about looking at where the trends are going.

If you have the realization, you could see the COVID lockdowns coming a couple weeks before, and I think you can see this coming now, where the income base is going to go down. The taxes are going to go up. There's still a society that you and I want to exist in, which is less technology and more creative. I think there'll be a lot of creativity happening, but for the majority of Americans—and this is today—60% of Americans are overweight. It's just a fact.

It's fascinating. I think there's a lot of points that tie into everything else. To wrap things up, if you measure attention as value, which we can debate, social media and the platforms are gaining more and more of that share, getting that addiction humming stronger, faster, harder. So those feel like obvious winners. You can make the case that the individual creators or the upstarts who are creating this real connectivity to an audience are also net winners in this new environment. Is there anyone else you would point to who you think could be a winner that emerges from all of this, who maybe isn't as obvious?

The winners are independent content creators. Someone said this is like there's never been more independent bookstores. Comedians now don't need a Netflix special, even though they all still like to get that checkmark to say that they did that. Some of the highest-paid streamers are 21 years old. You see a future where a lot of them have big brand partners and sponsorships, and then some of them have made their own products and things like that.

So as much as there's a negative downside with social media and its addictiveness, there's also a platform where, when your content resonates, you can really scale. There's never been a time like that. Oprah says this. When she first got her break, that's why she changed her name. She had to fit within this mold of what they wanted. And then you look at Kai Cenat or these younger streamers—they're whoever they want.

I think the 1 positive thing is they give their generation the ability—you don't have to be polished. One of them said their highest-rated stream was when a mouse ran into their room and they freaked out. There is an opportunity to show a bit more of their real life and show people of any age it's okay to not live this perfect world. So I think that's a positive.

I think so too. There's a trust level and an authenticity, especially in the age of AI, which is even more powerful. This has been a pleasure. I know it was very wide-ranging, so thank you for diving deep on so many topics. Thank you again for sharing the knowledge here.

Yeah.