Unbundle. Rebundle. As trust in the mainstream media (MSM) continues to collapse, new business models are emerging in the media space as the race to reform and innovate heats up. The advent of Subscription platforms is Layer 1, the question is what will Layer 2 be?
The public has awoken to the fact that not only is the mainstream media in the West slanted, but about half of the people in Canada (more in the US, and even more globally) believe that they are being intentionally misled.
As in many other sectors of the economy, many of the Media Incumbents are either in decline or on the verge of bankruptcy, while the Disruptors are up-and-running with fresh capital, new models, and broad public support for anything that brings them better perspective about what is happening in the world around them.
Unfortunately, the media business model typically encompasses a right vs. left ideological debate, where each side of the aisle will have pundits pushing viewpoints using an Advertising Business Model. This model incentives salacious and often times misleading content, giving rise to the term ‘click-bait’ over the last several years.
We talked about the rise of New Media Publishers such as Substack and Ghost, who themselves help journalists and their colleagues to build subscription-based business models where the email inbox is the new mailbox. Subscribers (Subs) pay a small monthly fee and gain access to a growing number of world-class journalists. These journalists span both the global and local levels, and touch across all major topics that you would find in a traditional newspaper.
This is Layer 1 of the New Media business model. The question is what is Layer 2?
How does the New Media Business Model work?
If you start with the Unbundling process, then you typically take a star journalist who migrates to a platform like Substack or Ghost, and then brings their audience with them. While it is unclear whether or not this hurts the Incumbent Media brand on their bottom-line in the short-term, the obvious effect in the mid-term is that consumers begin to see more value in Independent Media and therefore will unsubscribe.
But a typical newsroom or media business will involve multiple different positions: journalists, illustrators, editors, legal experts, etc. That means that once a few journalists across multiple different segments of the News begin to leave, we would expect that in the future their work will be Rebundled.
The problem is the emerging complexity in the digital world in regards to fragmentation, censorship, and regulations, making it increasingly difficult for publishers to monetize their content in a sophisticated way. Paywalls have emerged on many websites, but these often result in reduced clicks, forcing publishers to typically create a tiered model where a limited number of articles are free every month or certain types of content is designated as premium and requires a subscription to view.
But when Incumbent Media sites are paywalling their content and requiring Subscription, consumers are more likely to migrate to lower-friction platforms like Substack, etc. where the Sub. mechanism itself lends towards more of a Creator mindset. In this lens, an individual can view the content in a certain way for free, but to see it when it is published and support the author(s) you should subscribe.
Phase 1 of the Rebundle is thus to combine with other newsletter writers on Substack, for example.
The “Everything Bundle,” founded by Divinations author Nathan Baschez and Superorganizers writer Dan Shipper, is a recent example of authors finding benefits in joining forces. After a few months of working on their respective newsletters largely on their own, the two friends decided to join forces to give readers a discount if they sign up for both products. They tell Axios the plan brought them more new subscribers during the first week than any before that.Axios
Phase 2 of the Rebundle is to then turn the combined venture (which usually results in a bump in revenue) into a more formal ‘newsroom,’ which may require some external financing.
Every has more than 2,400 subscribers, according to documents reviewed by Insider, and the publication raised $600,000 in funding from Eric Stromberg at Bedrock and a group of angel investors. This war chest will allow Shipper and Baschez to pay freelancers, offer advances to writers interested in joining Every, and fund expansions to their site.Business Insider
Phase 3 of the Rebundle is to move cross-platform (beyond the walls of Substack, etc.) and to expand the business model itself in the same way that newspapers did 100 years ago.
On their new website, which Baschez built, the publication will operate much as it did on its previous platform, though now with a tailor-made content management system, free of Substack’s revenue share, and as a writers collective. In an arrangement similar to Forbes’ newsletter operation, Every will split subscription revenue generated by its member newsletters 50-50.Business Insider
Advertising is a natural fit as a first source of additional revenue, but as we will explore below, there will be others.
What is the Business Model Innovation in New Media?
There will always be a pull towards Advertising and/or Sponsorship in any media business. The incentives between eyeballs and Ad dollars are very well aligned, except in an environment where consumer trust is collapsing. Naturally, there will be many New Media brands that find the right balance between journalistic integrity and Ad monetization, but in this post we are going to look at it from the alternative lens of what is possible if we Rebundlewithout Ads as the core business model.
As a starting point, it is not uncommon to see ‘Cooperative’ media outlets launch on Kickstarter to raise funds from their fans.
From there, many New Media brands will ask for ‘donations’ or even move onto cross-platform, cryptocurrency-based initiatives. These new platforms are enabling them to effectively monetize their fans on a more spontaneous, one-off basis based on the content they post.
The combination between Kickstarter and Cryptocurrency-based initiatives are designed to align the incentives between the audience and the writers. A recent example of this phenomena is BitClout which enables users to convert their ‘Influence’ into a new cryptocurrency. This type of incentive creates new ways to both make and monetize digital content, something previously unavailable to any media outlets.
Imagine the difference between being able to say “I retweeted her early on” vs being able to say “I bought her coin when it was $0.50 and now it’s $500– and by the way I’ve done this hundreds of times, and I can prove it because my track record is on the blockchain.” The latter is clearly a very different game.”Bandt
We are also seeing Creators – in the form of journalists and other news aficionados – testing the waters on audio platforms like Clubhouse where they are now able to receive tips for their work directly from the audience.
“One of the biggest trends that we saw happening was creators were building a big audience on certain social media platforms but then having to move off of those platforms to actually monetize that audience,”Forbes
Now, New Media publications can scale out their core Subscription business model with content onto new platforms like those mentioned above, and directly monetize on those platforms rather than simply competing for Likes, Follows, and Shares.
Layer 1 of the Rebundle is Subscription-based revenue models. Layer 2 of the Rebundle is scaling the content onto platforms where there is a monetizable audience for it.
Competition & Their Business Models
The current variety of mainstream news media players are operating on Subscription and Advertising models. The vast majority of their revenue comes from Corporate advertising or Government subsidies.
BMi – Key Components of the Canvas
What unique value does a company’s product or service create for customers?
The value of New Media is that they are able to bring in honest and fresh reporting, along with innovative, new ways to consume News. Unlike Incumbents, they are not meant to be held accountable by their Advertisers or other Special Interest Groups, but rather by their Subscribers/Fans/Communities.
What group(s) of customers is a company targeting with its product or service?
In Layer 1 of the New Media Bundle, writers and their companies are targeting readers who are already familiar with their work to become Subscribers. As the company grows and more revenue comes in, these New Media Cos. can advertise and use other tactics to increase the Subs base.
In Layer 2 where content is king, New Media Cos. must find platforms where there is an audience for the specific topic, niche, or locality that they cover. This is a very nascent industry at this level, as new platforms are only now springing up and beginning to target readers/viewers themselves.
How does a company plan to build and maintain relationships with the customers it is serving?
In comparison to Incumbent Media Cos., where Customer Relationships are much more arms-length, most New Media Cos. have a tighter relationship with their customers and thus are able to maintain and build on those relationships throughout the life of a Subscription, rather than just up-selling products.
What channels does a company use to acquire, retain and continuously develop its customers?
The Channels are also significantly different between Incumbent Media Cos. and New Media Cos. as one operates on more of a pull model (driving traffic to the website), whereas the other operates on more of a push model (via the inbox) where content is pushed to Subscribers and Fans on certain platforms. This creates new opportunities for customer engagement and retention.
How is a company pulling all of the above elements together to create a revenue stream(s) and generate cashflow?
Layer 1 is all about building a critical mass of Subscribers to sustain and grow the New Media publication.
Layer 2 is all about experimenting with new ways to monetize content on Creator platforms, especially for New Media Cos. that have a strong brand and/or influential writers.
The above 5 Building Blocks represent the right side of the canvas and contribute to the Revenue side of the business model.
What assets and knowledge does a company possess that allow it to deliver its value to customers in ways that other companies can’t?
Writers, journalists and content producers (ie. talent) are the Key Resources at this stage of the cycle. The brand image is also key, as trust is paramount in the News business, and building and maintaining that trust with the audience is reflected in how the brand is perceived by the wider market.
What activities does a company engage in that allow it to execute its strategy and either establish a presence in the market or gain market share?
Expanding the Subscription base by bringing on other writers, or exploring JVs (Joint Ventures) with other publications to increase the reach initially. As cashflow is optimized, experiments on Creator platforms can help to find a second revenue stream and potentially reach a whole new audience for the Subscription business.
What strategic and cooperative partnerships does a company form to increase the scalability and efficiency of the business?
Forming strategic partnerships to help compete with other entities is essential, as it can help New Media Cos. to reach new audiences, optimize resources, and expand content production abilities.
What are the key costs associated with running the business and how can key partnerships/resources be leveraged to reduce the cost structure?
Paying staff/writers is the main cost in the early stages, when everything is fairly free-form. Any New Media Co. using Substack will pay 10% of their total Subscription Revenues in commission every month.
As the industry begins growing and new competition emerges, the main cost will be producing content and ensuring that content is protected via the traditional legal mechanisms. Legal is a cost that many Incumbent Media Cos. bear as part of their effort to produce stories on difficult and sometimes inflammatory subjects, while many New Media Cos. may find themselves wading into waters where they need to protect their IP if the content itself starts to hold tremendous value in the market.
The remaining 4 Building Blocks come together to form the left side of the canvas, and contribute to the Cost Structure of the business model.
Business Model Analytics
In this particular case, the main Business Model Analytics in Layer 1 relate to the performance of the Subscriber Base and ensuring that the business is operating at a break-even level, or as close to it as possible. In the Canvas on New Media, we talked about the importance of optimizing pricing, measuring engagement (via open rates), and then using engagement to gauge churn, as the last thing a New Media Co. wants is to lose many of its hard-earned Subscribers.
- pricing per subscriber x # of subs (MRR – Monthly Recurring Revenue )
- % open rates (higher open rates means more engagement )
- churn (if too many users pay and leave, publication will have low LTV)
As the business scales up and new opportunities emerge, the typical view towards LTV emerges, as ideally a New Media Co. wants loyal customers that will stay with the business for many years, thus creating a high LTV. A business that projects having a high LTV can be more aggressive with a Customer Acquisition strategy in the early stages, something that could pay huge dividends for New Media Cos. in the early stages.
Layer 2 is more complicated from a Business Model Analytics perspective. The new Payments/Cryptocurrency models for Creators are so new that there is no real way to know how to optimize them. Simply put, the experimentation is up to each platform, but the goal here seems to be to diversify the Revenue Streams beyond simply Subscribers, so there should be a view towards earning substantial enough revenue in Layer 2 within a target time period.