After/while building the cable industry with TCI, John Malone proceeded to create Liberty Media, with investments in media & technology companies to fill the distribution pipes he had built with programming (Malone’s biography Cable Cowboy lays it out all splendidly and is one of the must-read books for all media entrepreneurs and executives).
With YouTube replacing TV as the leading consumption platform and WatchMojo being one of the biggest media brands built on the platform, WatchMojo is where ESPN or MTV were in the mid-1980s as the cable / YouTube revolution continues to develop. Those pioneers of cable went on to reach their full potential within Disney and Viacom.
In 2019 YouTube generated more ad revenues than any other TV entity and by recently growing quarterly revenues to $4B, it’s a matter of time before it generates more revenues that all TV/cable brands combined. Covid will accelerate that by doing to TV advertising what 2008’s Great Recession did to print media. Covid “has elements of the fear that we felt after 9/11, the financial worry that we experienced in 2008, and the unknown that surrounds a natural disaster like a hurricane or tornado all rolled into one;” ultimately it’s an acceleration of every trend. What was to materialize in the 2020s will happen in 2020.
“The Next Viacom”
When time stands still, your runway and perspective change dramatically. I’ve heard many fellow entrepreneurs say they were building the next Viacom… to which I’d counter that “Viacom will be the next Viacom (for better or worse).”
By the late 1990s, MTV and ESPN were the pinnacle of quality programming. But they didn’t start that way: I Want My MTV and Those Guys Have All the Fun are great testaments to that. Considering Viacom/MTV’s missteps and Disney/ESPN’s current predicament, you recognize how fragile and vulnerable everything is. Instead of building the next MTV/ESPN brand or Viacom/Disney company, I’ve turned my sights on how to create the next version of Liberty Media around that first building block, WatchMojo (TCI).
Rome wasn’t built overnight
Now the parallels between TCI and WatchMojo are not perfect, no analogy is, but having reached 100 billion minutes of watch time on YouTube alone (a feat few can match), with 50 million subscribers and 150 million monthly uniques across 30 channels in every corner of the world, it’s an enviable anchor to parlay. Liberty Media’s portfolio has evolved over the decades, it’s hard to envision achieving the scale of Liberty Media, but given that the Internet shrinks industries, I’m not sure that’s possible or even desirable.
Conventional wisdom was that MySpace first, YouTube next were “the next MTV.” I always felt that YouTube was bigger than that, it was cable or even, television, which is why I went “all-in” with WatchMojo in 2012.
If I was content with building the next MTV/ESPN, I would just have accepted one of the many buyout offers we’ve received over the years. But with the luxury of not having a complicated cap table or debt, profitable with the right unit economics and commanding large reach with organic engagement, you develop a better appreciation for the cards you’re dealt, and parlayed into.
When announcing Vice’s latest layoffs, CEO Nancy Dubuc stated: “we grew our digital business faster than anyone,” but with digital accounting for 50% of costs but only 21% of revenues, impatient and frustrated investors, she cut where the future lies: digital. In the process, she proceeded to throw Big Tech under the bus as an excuse for that disequilibrium. In general, the challenge for those high-profile digital media bellwethers is three-fold:
a) they have way too much overhead & fixed costs;
b) their businesses were never really profitable and the size came via capital-as-strategy;
c) even if they were to merge, it would be like merging two conglomerates with so much overlap that they’d spend 1-2 years integrating while morale was decimated;
d) And all for what? The only people recouping any money there are the latest Series E/F/G/etc. investors… and it would still likely be a write-off for those guys. TPG invested at a $5B+ valuation in Vice.
Always Be Closing
With the rise of programmatic, the rules of engagement have changed in sales, and I think that’s partly why you’ve seen more sales veterans retire: they have a lot of expertise and knowledge, but the transactional value of that has fallen.
In his 2005 post “The Future of Media,” Fred Wilson wrote:
1 – Microchunk it – Reduce the content to its simplest form.
2 – Free it – Put it out there without walls around it or strings on it.
3 – Syndicate it – Let anyone take it and run with it.
4 – Monetize it – Put the monetization and tracking systems into the microchunk.
While he wasn’t 100% right on the details, there was something to be said about how monetizing media in the 21st century wasn’t going to be done the way it had been in the 20th.
We’re seeing that now. To Dubuc’s point, many digital natives sought to build traditional media organizations (as Buzzfeed did with their News unit), not realizing that these were built over a century and grown large, slow and redundant. Whereas it’s easy to blame big tech, the real nuance is that previous media and news behemoths were financed on the largesse of local advertising (mainly classifieds) monopolies, i.e. the newspapers, whose owners at least directionally had a vested interest in funding the content that such ads would run adjacent to.
Once tech – big or small – democratized the creation, production, publishing, distribution and commercialization of content, then the demand and supply dynamics of editorial and journalism was thrown into a downward spiral.
Editorial was the first hit, and now you will see that with sales, too.
The Field of Dreams
Not having a sales force early on, our top line remained small, but by investing in producing a catalog of evergreen library (instead of timely news with little shelf life), we evolved into a content production machine, deficit-financing a revenue-generating engine with massive degrees of operating leverage, with top-line trickling down to the bottom line. And with a foundation consisting of timeless content, it built a distribution pipeline that – while carrying platform risk – has proven relatively speaking resilient.
Coffee is for Closers
As a tinkerer, eventually I gave in to temptation and recruited a direct sales force. But, instead of doing what Machinima or Funny or Die did, we tested the model in a relatively safe and small way but admittedly, the results weren’t what I’d hoped for. Thankfully, we didn’t jeopardize the company’s health in doing so: after all, “you can’t produce a baby in one month by getting nine women pregnant, according to the Oracle himself.
Before YouTube overtook TV and generated more revenues than other TV networks or cable channels, Machinima raised a ton of cash and then hired a massive army of sales people, then basically crashed and burned. Meanwhile, in 2012, Funny or Die raised financing from Turner Media (Time Warner) and struck a repping deal which turned out to be disastrous. Four years later it raised money from AMC, before suffering brutal layoffs four years later. Quite an Olympics!
Ad money was already flowing to programmatic at an accelerating pace before the pandemic, and Covid will force marketers to do more with less. It’s clear that Google, Facebook and Amazon will get the lion’s share of ad dollars, with less government inquiries into antitrust. It’s game over for direct sales for about 99.9% of sales organizations.
The smartest storytellers recognize that, and don’t try to take the fight to Big Tech on tech or sales, opting to build more capital-efficient, cash-flow positive businesses around their comparative advantage.
Depending on the life-cycle stage they’re at, their margins, growth rates and general level of masochism, it may makes sense to have a small sales force to have a direct relationship with the key advertisers in your #1 and #2 verticals, the so-called endemics. For WatchMojo, that’s entertainment and gaming. That’s where our brand authority lives and the extent of the permission that gives us to spread our wings. But to veer into the gray area and try to compete in CPG, automotive, travel and so on makes no sense. That’s no man’s land. That’s what killed one-time darlings like Mashable.
Ultimately, your comparative advantage isn’t sales or the tech that powers the analytics which delivers the audience around the data that marketers now demand; your comparative advantage is the editorial, and that means a given “content formula.” Roll your eyes all you want, but that basically means the alchemy that aligns a format, style, length and category that suits each platform best.
From New World Order to Brave New World
When Sumner Redstone said that “content is king,” he meant that as new distribution models emerge, there are new ways to commercialize that content. When I launched WatchMojo in 2006, a sea of change was sweeping through distribution as the portals were giving way to the search, social and video platforms. Content owners lacked any economic incentive to embrace the web, therein creating the vacuum that kept the MTVs on the sideline and opening which I saw and capitalized on. Today, that has given way to a new battleground where content owners are embracing direct to consumer (DTC) while distribution platforms are seeking content via development, licensing and M&A to capture the dollars that are flowing from TV to digital. Before Covid, Netflix/YouTube’s DTC success in SVOD/AVOD forced traditional media companies to transform their businesses. Here’s an article or video on that “New World Order.” You’re now seeing an acceleration with theatrical releases being shelved.
Principle of Specialization
After catching lightning in a bottle on YouTube, WatchMojo has since diversified and expanded considerably, reaching 100 billion all-time minutes of watch time with solid footholds in new geographies (WatchMojo Espanol), demographics (MsMojo) and platforms (Snap), but instead of solely relying on turning WatchMojo into a flywheel spinning content across a myriad of new channels, you can accelerate the foot print by recognizing that the best content assets are tied to one key distribution channel. Hence the Liberty Media model.
To build that next generation Liberty Media, I’ve begun to identify, support and back
i) entrepreneur/storytellers (i.e. Malone invested $500K in equity/debt to back BET founder Robert Johnson, the first African American billionaire);
ii) who like me found a given “platform/format” fit, as we did on YouTube with lists (hat tip: Letterman, and the OG himself: Moses and his Ten Commandments);
iii) to accumulate stakes in other media/content/tech companies, centralizing back-office undifferentiated services that don’t add value and create costly redundant overhead (accounts payable/receivable, treasury, human resources, technology, etc) which don’t add value and create costly overhead and let them focus on their core competencies in i) editorial, ii) partnerships, iii) sales.
Today, Liberty Media is known for late-stage investments in publicly traded companies. To walk before running, in phase one the plan is to invest in earlier stage companies, to help them grow faster while avoiding investing in redundant and undifferentiated areas. As an anchor to centralize the redundant services, our home base of Montreal has given us a key competitive advantage thanks to many natural attributes. For one, creativity, media and entertainment are in our DNA. WatchMojo follows in the footsteps of Cirque du Soleil, Just for Laughs, and Vice Media. It’s affordable. The time zone is ideal (central between West Coast and Europe). The multiple languages. The investments we make in technology are eligible for Scientific and Research Tax Credits and in some cases possible to be spun-out in new businesses complete the cycle.
I’ve recognized that the best storytelling entrepreneurs are resilient and rugged creative businesspeople who want to remain somewhat independent but who may not want to emulate the Buzzfeed’s or Machinima’s and stay small(ish) in overhead but large in scale.
If this resonates with you, reach out to me via Granicus Group.