A couple of months ago, Felix Publishing unloaded Maxim, Stuff and Blender for some $250M to Quadrangle. The company’s fundamentals were eroding as print advertisers fled online, pursuing readers. Men don’t read magazines, I learned pretty quickly once I entered the media business. I hate to say it, but apart from the odd flight or think tank reading material, magazines are so out amongst men.
Anyway, when I competed against Maxim in the early 2000s as a member of the executive of an online lad mag, I thought it was a matter of time before Felix Dennis made us an offer we could not refuse. For whatever reason, he never called. Neither did his bankers. Over time the fundamentals of print got too shaky, and their corresponding online business was not developed enough, so they sold, instead. While Felix had hoped his assets would fetch $750M, they got but a third of that, $250M or so, in a sale that was handled by Allen & Co.
Now, it’s Emap’s turn. Emap has a lot more than lad mags, but they do one one of the grand daddies of men’s magazine: FHM. Word comes that they too want to unload some of their assets, and waiting in the wings is APAX, another private equity firm.
Really odd thing about the private equity blokes is that they buy magazines to run them as magazines. I’d do quite an overhaul and position them more robustly online. But, no one is giving me a blank check to do that… so who cares.
Bottom line, we sold our company for a mere $13.5M. Had either Emap or Dennis Publishing paid a penny more, they would have positioned themselves to reach men online. Instead, they music is slowing down and they’re finding that finding a mating partner ain’t as easy as the articles in their lad mags suggest.
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WatchMojo NewsletterOne of the many distribution points we partner with to get WatchMojo.com to the masses is Azureus’ Vuze. I’ll be honest with you, I had no freaking clue what either Azureus or Vuze was until I walked by their booth one day. I did some research and realized it was basically the legal Bittorrent, for lack of better word. I also realized we had to partner with them.
We reached out to them and yada-yada-yada, we distribute a small portion of our library of 4,000 clips through them. Read the press release here.
Today I read that they crossed 7M unique users:
Vuze, the world’s largest High Resolution and HD internet video portal is experiencing unprecedented growth from the heart of an organically grown community who appreciates high resolution and HD video content. Millions of videos are being downloaded from Vuze every month, and July saw content downloads grow well over 100% compared to June.
“Vuze continues to see adoption from unique users at an unprecedented rate,” said Gilles BianRosa, CEO, Azureus. “Our active community has been following Azureus for a very long time, and is now embracing Vuze and its unique features. The community sets Vuze apart from other Internet video and entertainment sites and we strive to give users everything they need and nothing they don’t.”
Good for them. Good for us. Note to self: Get Vuze more clips. But what is becoming very clear is that beyond the technical and economic challenges that the Web poses for TV companies, the distribution model is very different.
On TV, you have ABC, NBC, CBS and of course, FOX (disclaimer: News Corp. was my one time employer until they deposed me). They’re great companies run by fine people, but they’re technically a cartel.
It’s not like ABC will undercut CBS drastically, or as if FOX is going to really get into a slugfest with NBC. Sure, when FOX plans for FOX Business Channel - which I’m sure will be a fine manifestation of fair and balanced reporting (no, I’m not being cynical) - NBC’s Jeff Zucker says it won’t be a slam dunk. But they’re all ultimately one and the same.
With the Web, it’s very different. It’s a fragmented world out there. Whereas on TV, over time, things consolidated quite a bit with viewership and dollars amongst the four horsement, with the Web, what’s happened is the fragmentation (or deportalization, as some would say) of viewers/readers and dollars.
That’s why TV executives don’t really welcome Web distribution. Quincy Smith put it well, CBS.com/Innertube might have well been called CBS.com/NoOneComesHere… and that really confounds the TV playbooks.
Interesting story regarding television coverage of the next Olympics on the day that private equity firm VSS comes out with the most bullish Web advertising study, ever.
After airing 1,210 hours of programming covering the 2004 Summer Olympics in Athens, NBC will air a mind-numbing 3,600 hours next year in China. Naturally, most of that will come online.
The Beijing Games take place Aug. 8-24, 2008, so 16 days.
Let’s do the math, 3,600 hours, 16 days.
3,600 hours of content over 16 days means on average 225 per day. In other words, they’re simply going to be playing non-stop coverage on the Web.
First off, I’d like to state that this is a great move by NBC. There are no two ways about that. But, I’d like to use this as a simple example of how the Web does little to boost revenues for TV companies, and how digital is really not incremental for TV companies.
Raise your hand if you think that NBC sells the Web component of the Olympics separately from the TV ad deals?
Indeed, they don’t. NBC bundles web advertising into the expensive packages they sell online.
[Side-note #1: Yes, away from these extraordinary, high profile events, some offline companies are using the Web to force advertisers to buy print ads. I believe Vogue was doing this last year, with their fantastic Style.com website for men and women. But even there, digital is not in fact incremental for print, it is obviously coming at the expense of print].
But, the point is, by and large, the Web does little to offer salvation to traditional media companies. The sooner media companies come up with distinct content strategies for the Web, the sooner. The sooner traditional media companies get their content online, the sooner they shrink their businesses. It’s not an enviable position.
[Side-note #2: In fact, I’d argue that you will probably at some point, believe it or not, see online content producers exert reverse pricing power (cheaper cost of production) and go offline… it sounds crazy now, but if you think about it, it will make sense when traditional media finds it no longer efficient to publish offline and moves online, creating an opportunity].
Either way, the Olympics is a classic example of how even the most premium content does little to boost the top line for TV companies, because
- the argument that the people watching Olympics on NBC.com are very different from those watching on TV, too (at different times of the day) is a weak one. It’s basically people who a) would spend hours when home who would tune in at work, too, for example, or b) niche sports and foreign American viewers tuning in to see their country as NBC goes overboard with American coverage.
- it’s something they have to toss in to the higher, more expensive TV packages.
- worst off, if they tell advertisers that they have to buy the Web separately than TV - in an effort to build an incremental revenue stream - then advertisers will simply choose the Web, cause it’s cheaper.
I really don’t want to paint a doom and gloom scenario, but having studied the fate of newspapers and magazines, I cannot possibly imagine a bullish sentiment in TV company boardrooms.
Some time ago I ran some numbers are suggested that by 2021, Web advertising would be bigger than TV advertising. I admitted that this was an example of me running wild in Excel (yes, my life is so tantalizing). I really do think that due to economic and technical factors, TV media companies will suffer a fate as bad if not worst than print companies: shrinking revenues, eroding margins, less value. Much of that comes from what I see day in, day out running WatchMojo.com. Some TV companies will do great, most won’t. Because a lot of TV companies are more diversified than print companies, you might not see it, but inside those companies, there’s a lot of angst and envy amongst TV executives.
Anyway, this morning I see that indeed, the Web is running ahead in terms of growth, and according to Veronis Suhler Stevenson, by 2011, web advertising will surpass both TV and newspapers with $61.98B in spending.
2011? Really? That soon? That’s somewhat crazy, too aggressive, but who knows.
FT published an article, so did Mediapost.
I did some more researching, and indeed, we’re not alone in this assessment, the following is for Australia, but the trendline is interesting:
According to the study, in Australia, the compounded annual growth rate of online ad expenditure between 2005 and 2009 is 25 per cent per year, and based on current trends, the internet will surpass newspapers in 2016 and TV in 2021, effectively making online the dominant medium in 15 years time.
Pardon my language, but this is why TV companies are caught between a rock and a hard place, even though over time Web ads will become larger than TV advertising, the Web companies (YHOO, GOOG, MSFT, AOL, etc) will get the lion’s share. So not only are there far more options to spend money online, but the top of the mountain isn’t even occupied by TV firms.
