Rebuilding The Mainstream Media
The triad of podcasts, newsletters, and cheap capital is turning the media industry into a talent agency.
“A transition from an author's book to his conversation is too often like an entrance into a large city, after a distant prospect.
Remotely, we see nothing but spires of temples and turrets of palaces, and imagine it the residence of splendour, grandeur, and magnificence; but when we have passed the gates, we find it perplexed with narrow passages, disgraced with despicable cottages, embarrassed with obstructions, and clouded with smoke.”
Samuel Johnson
It’s tough to remember now, but newspapers once held immense sway globally, over the cultural fabric of nations, and locally, over their respective cities. Harry Chandler, the heir at the then-fledgling LA times empire in 1917, was notable for his swashbuckling attitude and his hawk-like gaze over the city; no slight in LA escaped his wrath, small or large.
During his reign, he sold more than a million acres of land as a real estate tycoon, attempted to break off Baja California from Mexico to create his own nation, and constructed the rest of LA’s industries in parallel: Hollywood (he reared the famous hillside sign), aerospace with Howard Hughes, and broadcasting. Many would be surprised that he relegated himself to managing a newspaper; however, what people forget is that the industry spoke truth to power. If ambition is the mother of power, then information is the midwife – whoever owns the ink (or bits, in our case), controls the country forthwith.
It’s convential to say that the mainstream media needs to be rebuilt from first principles; we still rely on a method of news harking back to Gutenberg’s printing press in the 15th century – not much evolved until the dawn of the internet. The evolution of how we process information is perhaps the biggest difference between us and our ancestors a century ago.
As people become wealthier, they conspicuously consume – purchasing goods with higher signalling value. The same is now occurring with information – our podcast or newsletter subscriptions say more about us than the current flavor of Gucci bag or Supreme brick we purchase.
The ménage à trois of podcasts, paid newsletters, and new financing tools like Patreon, whose growth rates far surpass any of their competitors, each unbundle the power that mainstream corporations have held for more than a century.
Rather than watching CNN, people are viewing Twitter videos; rather than perusing the New York Times, people subscribe to writers like Emily Atkin; and rather than listening to NPR, they tune into Joe Rogan.
Why the shift?
Change always takes longer than we suspect. On this note, Hofstadter’s Law is a useful mental model, which states that everything takes longer than you think, even when accounting for Hofstadter’s Law. This was the case with radio penetration across America; despite its creation in the 1880s, it took 50 years, or until 1920, for radio to become mainstream. FDR made radio virtually a necessity through his fireside chats – that was the “iPhone” moment of radio, where it was clear that it was a new medium promising the ability to participate in the day’s most important discussions. Today, the crucial conversations are happening over podcasts perhaps because these conversations can’t be had on MSM anymore or because people crave authenticity.
Let’s think about the New York Times and fact-checking: like I said in Privatize the NSA, who watches the watchmen? Despite the media’s flawed coverage of the covid epidemic, it's unclear how exactly we can curtail their influence; but, what we have the ability to do is allow many more content-creators to flourish – they inherently carry their own diverse viewpoints. Gatekeepers can't exist when there is no gate to begin with: exceptional individuals can compound their talents and democratize their abilities with free distribution.
Every new medium carries with it different incentives – Jim Barkesdale, one of the pioneers of Silicon Valley, noted that “there are only two ways to make money in business: bundling and bundling”. The last century bundled everything from semiconductors to healthcare to media outlets, while our century is seeing those shackles evaporate: media businesses are only the first to face the consequences.
Bits and Letters
One of the consequences of software continually swallowing the world is that every market becomes winner-take-all, like I mentioned in The Last Industry. The classic example of how this works is that as software becomes more popular, the network effect becomes stronger, and henceforth the product becomes marginally more valuable to the next user. Beyond software, network effects imperceptibly rule the world writ large; the formation of religions and currencies to physical utilities like landline telephones depends on this seemingly natural law.
In fact, this is the case with any information-rich industry, in both bits and letters, where there is perfect information and no barriers to entry – the surplus value only goes to the top percentile of builders and creative minds. Creators don’t compete merely on their merits, their intangibles qualities matter much more, like their personal brand and social capital, which they can then leverage into financial capital.
Likewise, before the ink settled on Joe Rogan’s deal with Spotify, legacy media outlets, once again, saw the writing on the wall. People eagerly subscribe to one individual on a diverse set of issues; Rogan himself chats about topics ranging from Jujitsu and electric cars, often in the same sentence. Ben Thompson of notable blog, Stratechery, opines on technology regulation to music rights and everything in-between. From their 100 true fans, based around the world, they’re monetizing their passion – once they own both content and distribution, they become omnipotent threats to established players.
And more radically, these individual startups have an incentive to please their fan-base through innovating on topics, guests, or the medium itself. Once creators are assured of their 100 true fans, they have the power to navigate up and down the content stack. For example, Scott Galloway, business professor and entrepreneur, has leveraged his relationship with his thousands of newsletter subscribers to his new course on digital business strategy: at the cost of $500 for a 2-week course, students will receive access to other like-minded individuals alongside Scott’s personal takes on the future of e-business.
Schumpeterian competition acts as a stronger forcing function for independent creators than for larger media outlets, hence the creator’s financial volatility is an antifragility that carries unlimited upside. “I don’t have any layoffs happening at my newsletter” argued successful Substack writer, Emily Atkins, “so I’m doing better than most of the news industry.”
CNN or CBS, have eagerly kept the same format for decades: for them, the worst future would be one where tomorrow is different than today. Certainly, the death of centralized, print media is dying: many of these vast corporations are losing their best talent to Substack and other open platforms, so, in effect, they’re being eaten from the inside.
The Dream Team
This trend is starkly similar to the founding of the extraordinarily successful VC firm, Andreessen Horowitz (a16z). When Andreessen and Horowitz were pondering their edge in the investing business, they spoke to Michael Ovitz, the founder of CAA, who as it turns out, set them on the path to greatness. By the firm’s founding in 2009, many investors could see that top venture capital firms lived and died by the quality of their deal flow – a16z’s biggest failure would be if the next Zuckerberg or Musk never entered their offices hoping to close their Series A rounds. So, what could they do to guarantee a meeting with these future superstars?
The best people in any field want to be treated like such with all the perks that it entails. Therefore, Michael Ovitz’s advice from the talent business, realizing that it was isomorphic to software, was for a16z to use their management fees on assembling a full ensuite of services, from PR to graphic design to operations for their founders. They would be able to find all the talent to build their company in-house and the returns have proved the value of Ovtiz’s advice many times over: today, a16z sits cozily alongside the top echelon of venture capital firms.
Coming full-circle, Andreessen – an investor in Substack – claimed that the company would “do to big media companies what venture capital did to big tech companies.” Every industry is slowly becoming a Hollywood talent agency and that secret contains a surefire strategy to accumulate a moat.
Spotify’s rationale for paying $100 million for Joe Rogan, equivalent to 26 billion streams on their platform, captures this mentality; by aggregating the most successful independent creators, they become the middlemen between demand and supply. As we touched on with network effects, Rogan’s addition to the platform makes Spotify exponentially more powerful for any further user. If Spotify continues this deal-making spree and controls the majority of premier podcasting talent, their competitors, like YouTube or Apple, lose their supply and perish.
Meanwhile, Spotify gets a larger consumer base and can monetize their users in a multitude of ways made easier by little to no competition.
Takeaways:
Information is power and hence the age-old adage of never going to war with someone who buys “ink by the barrel,” although for us, ink may translate into ads. Slowly and then surely, these one-person companies are draining media companies of their demand.
To suspend the talent exodus, the five media corporations who dominate America must reorganize their business from one that treats all employees homogeneously into one where those who are the best are rewarded nonlinearly. Like in sports, the pay difference even between players on the same team can be enormous, the delta might be in the millions as one saw with Michael Jordan and Scottie Pippen.
But in nonlinear outcomes, disagreements are to be expected, as we saw with the turmoil in the Call Her Daddy podcast; Sofia Franklyn and Alex Cooper, the podcast hosts, had contradicting viewpoints on their contract from their employer at the time, Barstool sports. The aftermath disbanded the duo and now the ever-successful podcast is now run only by Cooper who owns 75% of the IP. And, she remained with Barstool – leaving Sofia in the dust.
Hence, the surefire strategy in the digital age is to abide by the talent agency model and bundle these teams of notable individuals – the whole is greater than the sum of its parts. The number of individuals matters much less than that of their respective quality, specifically the intangibles of the team. What edges do these creators have that will propel them beyond their competitors – their wit, humor, and devastating charm together will be more important than their IQ writ large.
Intelligence gets eyeballs, but while it’s necessary, it’s not sufficient. The key to greatness in media is combining these disparate personalities into a dream team, where they can stand steady and successfully grow from other superstars.