• Evan Ryan

Why The News Media Is The Way It Is

Seconds and Cents, Episode 13. Today is July 22 2020. We are going to talk today about media. We're going to talk about print media. We're going to talk about kind of my perceptions of the media. And the reason why we're going to talk about it is because of Lede AI. So Lede AI is a company that I that I am in collaboration with with a newspaper called Richland Source. It has been one of the great collaborations of my professional career so far. And what we do is we write automated high school sports articles. So high school sporting event takes place, we get the data for that we write the article about it, we publish it on behalf of on behalf of our clients. And so our clients, our newspapers, our clients are mostly local newspapers. We only publish high school sports articles. So we don't have a national audience for high school sports. But we're publishing into hyper local outlets. We're publishing into outlets that are underrated. And they're really struggling right now. And all print media is really struggling in the small newsrooms are struggling the most. But today we're going to talk mostly actually about kind of what is the state of the media? And why is the media the way that it is? And why does it kind of act the way that it does. And this is, this goes for print media as well as it does for television and everyone else? Well, it starts with money. So follow the money. And I'm looking at a graph right now from Ben Thompson, who's the founder of trajectory, which is a newspaper newsletter that I subscribe to. And if you look at the share of advertising, overall, the share of advertising newspapers and magazines in 1940, owned effectively 100% of advertising radio owned a tiny bit And over time, radios advertising kind of took a little bit away from newspapers and magazines, but ultimately even into 2010 newspapers and magazines made up about 50% of advertising and then there's television, which of course came in absolutely huge. And there's internet, which came in absolutely huge. But if you look at the Internet and the internet as a whole while the internet is subsidized by advertising, Google is subsidized by advertising. Facebook is subsidized by advertising. In large part, the internet in its development has been subsidized by advertising. Well, why is that? And why is it that newspapers and media outlets are struggling right now? Well, newspapers and magazines and media outlets in general used to own all of the real estate. That was for advertising. So there's only a certain amount of real estate there's only a certain amount of places where eyeballs can go in 1965. In 1985, in 1995, there were only a certain there were only certain places where eyeballs could go and where the eyeballs go where the attention is where the advertisers go, because the advertisers want to get their brand their product in front of as many people as possible. So newspapers and magazines. They come onto the scene. Of course, they are the People that there the companies that are really crushing it, and as they're making an absolute fortune, and they were able, they because they had such limited real estate, they were able to leverage these ads into enormous into enormous revenues and into enormous profitability. And then over time newspapers in particular, they found out that economies of scale would work really well for them. So they started syndicating content, right? And so now you have an article that affects the entire United States, you can publish that in your newspaper that's published in New York, and in California and in Chicago, right. So you pay one time for the article, but you actually got to sell it three times. And over time, newspapers became really profitable, really powerful entities. Well, when the internet came along, the internet brought about a new type of real estate. So the real estate that was in newspapers and magazines was the real estate of print. It was a real estate up, you have a media outlet that is telling you what's going on the world. You read that every day, you see the pictures of people sitting with their bowl of cereal and a cup of coffee and a cup of orange juice reading the newspaper, or you hear people say, Oh, my dad used to read the newspaper every morning, or I used to read the newspaper with my mom every morning. Right? And so, over over the decades, over the centuries, where newspapers and magazines were absolutely crushing it, it's because they had all of the attention. It's because they were the media outlet. Well, TV makes a grand entrance, and the 50s, the 60s or 70s. And TV starts to occupy advertising revenues. But not every family could afford a TV. So newspapers, magazines, still absolutely crushing it, they still have the lion's share of all of the advertising dollars, TV starts to take over. And ultimately, TV did end up winning but that was because TV created a new type of real estate that newspapers and magazines could not compete with. That was through the box, right. So now all the sudden If I own a television channel, I can choose what programming goes on that television channel. Also, I can play that television channel 24 hours a day, or I could play it 18 hours a day. Whereas instead of needing to meet print deadlines every single day, I could repurpose content that we were that we paid for last year. And I could sell advertising on the same content. So now television is starting to take a large a large aspect of, of those ad dollars of that media spend of that Media Buy. But ultimately, television and newspapers and magazines didn't really compete that much, except in news, except in the six o'clock news or in the 10 O'Clock News. That's where they had the direct competition. But newspapers and magazines were fine. The real problem became the internet. The real problem became, when everyone had a voice anyone with an internet connection had a voice. The real problem became one anyone with an internet connection could publish. So The newspaper and magazine age, there was a really high barrier to entry and publishing. And that barrier to entry was you had to have the equipment, you had to have the printing equipment available to you to be able to publish. And then you had to have the distribution network like paper boys, and to be able to actually throw the paper onto every single person's driveway. And if you are a one person shop, you weren't able to, you weren't able to do all that and meet print deadlines. And so maybe you had a subscriber list of 200 or 300 people and you're making an honest living, but you weren't really competing with the newspapers and the magazines. And when the internet came along. Now, it became effectively free for you to be able to publish content, and you didn't have to have printing equipment. You didn't have to have a delivery mechanism. You just needed to have an internet connection. And now all of a sudden you can publish your opinion with whatever facts that you want to on the internet. Well, because of that, it's not a about who was publishing content, it's about the amount of content that was being published. Newspapers and magazines got to dictate advertising prices for decades, decades upon decades upon decades, because they only could write a certain amount of content. So

if It's a supply and demand equation, right, if hypothetically, a newspaper is going to be 50 pages long, and they have 100 pages worth of advertisers, well, the newspaper has to raise their rates, but their costs stay the same, because their salaries for their journalists, their salaries for their freelancers stay the same. And so the newspapers make more money in the end well, in the internet now that anybody can publish and now that the real estate is so vast that you can just create as much real estate as you want. As soon as you have internet connection on a website. Well, the advertising rates go through the floor. On top of that, because Google and Facebook built such advanced algorithms, they got so many eyeballs to look at their to look at their services every single day, while they were able to do The kind of aggregator for advertising on top of that they built such effective tracking mechanisms, that now you knew as a brand, exactly how many people saw your ad and you knew exactly how many people viewed your website or purchase a product or did whatever they did because of the ad. And so now, Google and Facebook have this unlimited ad real estate where they can just put the prices of the ad through the floor versus through the ceiling, which is what the newspapers and magazines were doing for decades. And they can show as many ads as they possibly can. And they can provide better tracking to know what did your ad spend really do for you? Did your ad spend really move the needle in your business? That was the issue with newspapers and magazines, the issue with newspapers and magazines and the reason why a lot of the media is the way that it is, is because they started being the kind of recipient of Google and Facebook ad dollars. They started to put Google ads and Facebook ads onto their websites. Well, if you were doing a revenue share where Google is the one who's actually finding the advertiser, and then they are sharing some of the money with you, Google at the end of the day is going to make the most money because they're doing that with everybody. Well, if you predicate your entire business, around advertising, and you predicate your entire business around having Google do all of the ad sales for you, well, now all of a sudden, Google has to dictate the terms of what they're going to pay you. And so now, if you have a perfectly optimized webpage, that webpage will will net us $6 per 1000 clicks if you have Google ads on it $6 per 1000 clicks. So if we're gonna operate like we're in a click economy, which we are, you have to get a lot of clicks and or its return on investment. So going back to lead AI, why are we talking about the media today? Well, lead AI exists To serve the newspapers just as much as it exists to serve the readers. Ultimately, the readers want to know what happened in their region in high school sports. Every hyper-local newspaper needs to publish high school sports. It's just what's happening in the area and affects the people in the area. It's very interesting reading, did team a beat TV last night, but it's very difficult to return the investment on a high school sports article. So here's what happens. You send a freelancer to a high school sports event. We're going to call it basketball. You send a freelancer to a basketball game on a Friday night. The reporter has to spend two hours at the basketball game they have to spend an hour or a half hour getting to the game. They just spent a half hour getting back and then they have to spend two and a half hours actually writing the piece. Depending on where you live in the in the country. Let's say that article cost you $125 well at $6 per 1000 views. You have to get Effectively 20,000 visitors to that web to that article, just to return your freelancers investment. You're not making a profit, you're not paying for your website, you're not paying for anything, you're not paying for insurance, you're paying absolutely nothing except your Freelancer and you need 25,000 views. Well, the reason why, why you need so many views is because Google and Facebook are now able to dictate the programmatic ad prices that they serve to websites. And because they're able to dictate the programmatic ad prices. And because the amount of real estate on the internet is effectively limitless, they're able to say, well, we're only going to give you $6 per 1000 views, if you have a perfectly optimized website. And that's because Google is only charging $10 per 1000 views. So Google's keeping $4 you're getting $6 and now that's just how it's gonna be. And so you have to figure out how to get as many clicks as possible. People wonder why we're in a clickbait world. It's because ultimately, the news paper or the media outlets revenue model is based off of clicks. It's based off of how many eyeballs see the article. And so if you see a really catchy headline that catches your attention, the headline is ultimately what's doing the selling to allow you to get you to look at the article, or to look at the webpage. It's going to show you all those ads that allows the newspaper or the media outlet, or BuzzFeed or whoever it is to stay in business. So if it's going to take 20,000 page views to return one Freelancer investment, just just the freelancers payroll, right, well, let's remember what content we're writing