With almost 50% of media consumption now on Digital platforms, technology has torn down the cozy barriers to entry that have allowed traditional media companies to harvest audiences and profits. New tech-driven competitors have siphoned off eyeballs and ad dollars, undermining consumers’ willingness to pay. They have also redefined consumer experience expectations, centering them around on-demand, multi-platform, and personalized offerings.
In this new media landscape, unexpected winners and losers are emerging. Here is a list of Do’s and Don’ts for media brands looking to succeed, picked from L2’s Intelligence Report: Media Winners and Losers.
Do: Choose Mass Market or Luxury
A new class system is bifurcating media brands into thriving premium brands (marked by exclusive, must-have, high-cost content, subscription revenue) and mass market brands (enormous reach, commodity or non-exclusive content, ad-driven model), while those stuck in the middle class struggle to survive.
Mass market brands – the Walmarts of the media companies – are Buzzfeed, Facebook, Pandora, and Google. They have enormous reach, which they have leveraged with sophisticated targeting, and they have found ways to produce content at little to no cost. Combining these elements, they have created a winning formula for sustaining on ad-driven revenue.
Luxury – New York Times, NPR, HBO, Vice, Spotify, Disney – is the other group that will thrive in the future. The New York Times is no doubt a luxury brand with deep journalistic content, brand loyalty, a destination, and high cost structure. And NPR is maintains luxury status with proprietary content and its ability to engage its listener to the point of being able to survive with donation-based business model. Vice is the luxury brand for the younger set, offering premium and more in-depth content than BuzzFeed and Huffington Post. Vice generates a large portion of its revenue by high-CPM ads but adopts the pay-per-view model by distributing on HBO.
Don’t: Stay in the Middle Class
Magazine publishers have been relegated to digital’s “middle class” as they lack the scale for a subscription-only revenue model or premium content compelling enough to incentivize enough people to pay. Magazine saw the shift to digital years ago and scaled back their print investments to focus their efforts on digital. However, they had little competitive advantage in digital and found it difficult to maintain their status as luxury brands online.
Other members of the middle class are Vox Media and Business Insider. While these brands are not flailing, they will struggle as they experiment with different business models to cover costs. (Business Insider supplements ad revenue with research and conference businesses and Vox is searching for alternative revenue models such as licensing its content publishing platform.)
Do: Follow eyeballs with ad dollars.
Although brands are allocating a larger portion of their ad dollars to digital, there is still gap between time spent on certain types of media vs. ad dollars. For example, 18% of total ad dollars in the U.S. is spent on print, which accounts for 4% time spent on media. Brands are over-invested in television as well, allocating overall 47% of ad budget to the medium that accounts for just 37% of consumers’ time on media.
Yet, that is bound to change. A comparison of last year’s media spending to 2007 shows a dramatic shift towards digital and away from print, which is likely to continue. The graph above suggests room for growth in mobile, as consumers spent 24% of their media time on the device and mobile ad dollars remains 8% of the total ad budget.
Don’t: Mistake digital for low-cost.
Contrary to popular belief, digital has not evened the playing field. In fact, as consumers expect to experience media on all channels – mobile, television, desktop, social – a ubiquitous presence becomes essential to survival. Even brands with low cost content have sophisticated technologies – Buzzfeed, Huffington Post – that enable them to achieve scal
Furthermore, competition in media has become more intense and expensive as all types of media are competing for the same eyeballs and in the same channels. Prior to digital, CNN, NPR, and The New York Times were different media categories that could exist without cannibalizing each other.
Do: Invest in Premium content
Contrary to popular belief, millennials are willing to pay for content that takes time and labor to make. This translates to movies and TV shows, which 3 in 5 millennials are willing to pay for, and doesn’t bode well for news and magazines which only 10% of millennials think are worthy of a paywall.
Even the digital natives built on low-cost content and aggregation are realizing that quality content is key to a sustainable audience and are investing accordingly. Netflix won five Emmy’s in August and Amazon’s Transparent won Best TV Show at the Golden Globes. Vice is another company that has successfully created premium a broad segment of users are willing to pay for, as evidenced by its continued presence on HBO.
Don’t: Ignore technology
However, to be successful media companies need to be content and technology companies. Digital has redefined what it means to be a traditional media company; technology expertise and content are both king and need to share the throne. Even the strongest media brands – HBO, Time Inc, New York Times – are not immune to the need to reinvent themselves as tech savvy entities with initiatives such as HBO Go. Meanwhile, tech giants Facebook and Google have achieved unprecedented scale without creating content.
Do: Engage fans
The Huffington Post and Buzzfeed have obtained their enormous reach through social, as each receive four and three times the engagement of The New York Times. NPR is not the largest radio brand, but it has four times the social engagement of second in line iHeartRadio.
Social sharing can also be a proxy for the strength of a brand, as the conscious, self-expressive act signals perceived quality of content. TV is the most shared type of content on digital platform – and also the type of content most millennials are willing to pay for.
Don’t: Become a niche brand.
While an engaged audience is valuable, media brands need enough scale in order to survive as independent entities. Niche brands – Gigaom, Newsweek, San Francisco Chronicle, Re/code, re-run dependent TV channels– are definite losers in the new media landscape. Despite their success as an arm of the Wall Street Journal, Kara Swisher and Walt Mossberg were unable to scale and remain independent. And Gigaom – another tech news website with a small but loyal following – went under in March. These niche brands have expensive or low-cost content, low reach, and an ad-driven model, a combination that is lethal in the new media landscape.
For more on how 146 media brands are adapting to digital, download a copy of L2’s Intelligence Report: Media Winners and Losers.