A publisher’s journey to diversifying revenue streams should start with leveraging financial planning and analyses.
As part of a three pronged approach to finding new pathways to sustainable revenue models, Lee Fentress, Vice President: Business Development at the LA Times, said smart publishers should start to think more seriously about unit economics. They should know exactly what a piece of content costs and what its potential is to generate revenue. This approach should cut across all content, should this be copy, audio or video.
The FIPP World Media Congress takes place through all September, with 80+ media leaders sharing insights and knowledge from around the world. Sign up to view sessions live or On-Demand. See the list of speakers here. Get access here.
Financial planning & analysis
Speaking to FIPP President and CEO James Hewes during one of two sessions dedicated to the search for diversified revenues on the first day of the third week of FIPP’s 43rd World Media Congress, Fentress said the journey to diversification starts with a “quant approach”, meaning you should “get your numbers down” to understand how and where you can start diversification of revenue from pockets of content.
He said it is a given that any article in a newspaper can primarily create revenue in two ways: subscription revenue and advertising. To add on to this, you will need to learn how to develop affiliate revenue, as well as levels of commerce and profitable recirculation of content. You cannot start this process if you do not fully understand what the per unit economics of content is. “The devil is in the detail when it comes to numbers.”
Fentress, who described his mandate at the LA Times as one in which he constantly tries to identify new revenue streams that will be sustainable, said despite the fact that “circulation revenue will always remain the primary driver” of their newspaper business, finding additional revenue streams demands an ability to think outside of traditional revenue streams such as advertising and consumer revenue. In fact, this demand has become ‘mission critical”.
As a second tier to a diversification strategy, he said publishers should learn how to leverage partnerships.
He referenced the LA Times’ partnership with a wine company to start the LA Times Wine Club at the end of last year. With the demand for home delivery of wine during lockdown this initiative has proved to be extremely successful. “Start thinking in terms of partners. I don’t think there is any way we can operate and fulfill a wine club on our own. But now that we have partnered with that company we have a wine club that allows us not to significantly invest from a resource standpoint.”
When you start looking at your partnership stack and better understand how to launch such programmes, while being iterative about it, many profitable successes can be achieved, he said.
The third tier of building alternative revenue – commerce – is the one Fentress is most excited about. “I would encourage everyone to think about what commerce means to their organisation and audience. If you are already selling subscriptions to your audience it is not out of the realm to also sell more products to them.” This can lead to a multi-faceted commerce approach.
Responding to a question from the online audience, Fentress said most publishers think of selling products in terms of ecommerce. The ‘e’ should be dropped and publishers should think merely in terms of commerce because the products that can be sold could be from your own store or directing readers to places where they can purchase items based on what your news organisation has written about from an affiliate standpoint.
“We need to get more serious in commerce if we want to invest in commerce. Since the beginning of time the news industry has been doing such an incredible job of informing (the public on) purchasing decisions.”
The problem these days, he warned, is that readers will read about a product, Google search to find it, purchase it through a Google link and the entity that will get the credit for the purchase will be Google. The news organisation that created the original content about the product gets nothing. “We need to change that as an industry.”
He referenced the idea to create affiliate links within book reviews to enable purchases. “This is table stakes.”
Affiliate revenue is proving to be profitable for publishers, he said, especially if you look at the successes being achieved by Wirecutter, a product review website owned by The New York Times, as well as BestReviews owned by Tribune Publishing.
In fact, he said, the LA Times is in the process of launching a similar affiliate called BestCovery to leverage their content to commerce abilities.
Building routes to market that do not involve big tech giants scooping up huge percentages of profits involves building large commerce stacks with the right partners, he warned. Some of the examples Fentress mentioned are the launch of the LA Times store selling anything from T-shirts to framed news photos, the LA Times Wine Club, a prescription drugs programme and a coupon business.
Brands and the value of merchandise
Building on this notion that iconic media brands can and will increase the value of pieces of merchandise, Markus Grindel, Managing Director, Global Licensing at Condé Nast UK, explained how merchandising continues to grow as part of Condé Nast’s strategy to increase consumer revenue.
Referring to the Condé Nast online store – condenaststore.com – he said sales of merchandise has shown significant increases during the recent times of lockdown.
“The long term strategy is to expand our footprint. We have launched ecommerce efforts across most of our brands with a focus on the United States but now it is all about a geographic expansion.
The company is also starting to take a new approach to this business. “We are not licensing this kind of business any more. Rather than taking 10 cents on the dollar, we decided to take a certain amount of ownership. This changed our position on the value chain.”
He said media companies can do this because they know how to advertise and sell products, and have access to consumers. To want to take control of commerce (and profits) makes sense, especially if taken into account the recent experience of seeing how advertising spend crashed during Covid while commerce “went through the roof.”
Grindel also mentioned the Condé Nast’s restaurant business called Condé Nast Restaurants, a chain of branded restaurants around the world as a commercial extension of its magazines such as Vogue and Gentleman’s Quarterly (GQ).
He said despite the recent hardships of Covid-19, these restaurants are a natural way to extend brand awareness and values. “Restaurants create an alternative touch point to our brands… consumers can interact with our brands in an absolutely different way.”