Wetpaint CEO Ben Elowitz on the Future of Digital Media
Despite their coveted value, the great brands of old media aren’t proving out to be much of an asset online. And to the extent old media is relying on the value of their brands to ensure a digital future, they are headed in the wrong direction.
For this new analysis for Digital Quarters, we measured audience and visits (from comScore) for sites across the major media categories, comparing the metrics of sites operated under old media brands (e.g. ABC, Entertainment Weekly) in each category to those of new upstarts. Over the past year old media brands lost share of online audience to new media in nearly all of the traditional magazine categories (TV, entertainment, business, fashion, tech, and teens), while the offline brands in the News category grew share during that same period. Although total visits were up 5% for old media, new media visits grew far faster — 10% — from April 2009 to April 2010, leading to share loss for old media in six out of the eight categories that we tracked.
Overall visit growth was positive in all media categories other than TV, but despite this, old media brands experienced an absolute visit decline in Entertainment News and Teens which are rapidly shifting towards new media sources.
Conventional wisdom has held that building a brand is a momentous challenge in developed spaces such as media; and that disproportionate returns accrue to the most established brands. But my new analysis shows that legacy brands are on the defensive, far more threatened by new entrants than the other way around. The upshot appears to be that upstarts’ execution is earning new audiences (and building their new brands), drawing audience on average away from more established players.
The reason for this shift, and the dominance of new media in categories such as Tech News is simply that the old media magazine model is ill equipped to compete with more nimble online competitors. For the most part, weekly and monthly publications are struggling to keep up with the new pace of information exchange and social interaction demanded on the web. Understandably, the value to consumers of days, weeks, or months-old “news” on fashion trends, celebrity gossip, and technology is far lower in the presence of up-to-the-minute coverage from new sites.
However, the success of offline brands in the News category offers hope for other old media brands. Companies such as The New York Times, BBC, and ABCNews have grown their online presence and are clearly investing in digital as core to their business. They are actively experimenting with rich media, social marketing, and engaging their audience. But while news outlets have always operated on a fast pace, magazines are at a particular disadvantage in that they are not structured to turn information around quickly. For old media magazine brands to maintain or grow share, they’ll need to go further by transforming their organizations, incentives, and sources and embracing the new definitions of publishing quality to provide the experiences that consumers are now seeking online. With online share falling — in some cases dramatically — now is the time for offline legacy publishers to take action and get their brands working harder before it’s too late.
Source: comScore panel-only visit data for April 2009, July 2009, September 2009 (panel only was unavailable for October), January 2010, and April 2010, including only properties with more than 500,000 monthly unique users. Properties were manually categorized into old media if they originated offline, and new media if they are entirely online or originated online (e.g. TMZ and MSNBC are considered new media). comScore category names: Business News/Research (Bus News); Entertainment – News (Ent News); Beauty/Fashion/Style (Fashion); Lifestyles; News/Information (News); and Technology – News (Tech News); Teens; Entertainment TV (TV).
Recently I’ve written about why I think the Hulu Plus subscription model will be successful. Yesterday, Peter Kafka (@pkafka) wrote in AllThingsD that Hulu’s price point is both too high for consumers and too low to satisfy media companies. I respectfully disagree.
My prediction is that Hulu Plus will be driving more than $100 million in incremental revenue for the company in 2011. If Hulu grows modestly from its current 19.5 million monthly uniques in the U.S. according to comScore*, and they’re able to convert a small fraction of that audience at $9.95, the numbers are compelling even accounting for the likely double-digit monthly churn. I expect that the service will reach or exceed a million subscribers by the end of 2011. Meanwhile, 30% margin or $30+ million would be welcome for a company that only recently announced profitability, particularly if they’re able to avoid traffic cannibalization on their existing free, ad-sponsored streams.
Granted, most media companies are making more on their own sites, but this is largely upside to their existing online revenue. Meanwhile, a paid model preserves the “premium” value of the majority of their catalog.
Beyond the financial benefit, offering a paid subscription also provides several strategic benefits to Hulu:
Is $9.95 monthly too much for consumers to pay? When your content is exclusive, and more importantly, the experience is this compelling, I think a small but meaningful segment of customers will open up their wallets. Of course, that is assuming that Hulu’s subscription offer and experience demonstrate the same outstanding execution as their free service (and marketing) to date. Many services have failed at charging for video online, but Hulu is in a unique position to finally succeed.
* Footnote: Interestingly this is substantially less than the 43 million uniques announced by Hulu CEO Jason Kilar back in December, perhaps due to the comScore hybrid measurement debacle; I’m using the lower numbers to be conservative