The New Media Arbitrage Moment

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Photo by Anna Moneymaker/Getty
Brian Morrissey
April 28, 2022

One of my favorite anecdotes regarding the oddity that is the media business appears in the early pages of Googled, Ken Auletta’s story of the early days of the media business’s uneasy collision with tech. In 2003, Mel Karmazin, then C.E.O. of a still-swaggering Viacom, visited Larry Page and Sergey Brin and learned how they’d built what was basically a perfect marketing engine that matched advertisers to users based on their expressed intent. His blunt reaction: “You’re messing with the magic.” (He didn’t say “messing,” but in the interests of optimization, I’m reluctantly censoring myself to improve email deliverability. Life is full of compromises.)

The media business was indeed built on magic, the ability to manufacture the whiff of exclusivity, quality, and cultural cachet that turns a piece of communications or entertainment into a valuable product. In the media business, every publisher assures you that they are premium. I never in my career heard someone describe their content as “second rate” or “filler” or “stuff they show at dentist offices.” After all, who’s to say, really?

Back in 2016, we started a magazine at Digiday—and for some reason gave it a bizarre name, Pulse. I wanted to produce a magazine mostly because of perception. It was an insane media product. We only printed about 1,000 copies for the first run, and it was missing for weeks because we used the wrong printer. Somehow, the sales team even sold some ads at what must have been the highest-ever CPM. But a magazine was a way of signaling premium value. I was told it had to pass “the tie test,” meaning that it had to be thicker than a tie. (Speaks to how old school the magazine industry was.) Glossy covers, nice type, good paper stock—these are all classic ways to signal premium value.

Moving media to digital channels erased the concept of scarcity that drove media value. What Karmazin foresaw was that applying math to media would separate the wheat from the chaff, and while John Wanamaker might want to know what half of his advertising was working, the ones selling the other half sure didn’t. Tech also zapped many of the distribution advantages that publications once possessed. Google and Facebook flattened distribution and gave control to tech companies, relegating all publishers to the same treatment in a scroll of links.

Publishing brands could still signal premium value through their packaging on websites. After all, good design shows you give a shit. Original photography was another method. Same for illustrations, slick videos on an embedded Brightcove player, or incredibly hard-to-navigate animations. These are “costly signals” as recently identified by Every’s Nathan Bashez:

There are universal principles of visual design that matter across time and in every cultural context. But also, there are certain processes and materials that are seen as premium. This is context-dependent; it changes over time based on technology and economics. When a design uses a premium material like an illustration or an intricate 3D rendering, it is seen as an honest “costly signal” that the company behind it has lots of resources to spare. This, more than grid alignment or proper typographic hierarchy, is the thing that sends a tingle down your spine and makes you think “I should sign up.”

These signals were, of course, weaker than in analog media, but still real. Those are being erased now, mostly as publishing moves to different surface areas and what former Hearst president Troy Young calls “full composability”: the “inevitable product of three plus decades of innovation in communication technology, in particular tools that support ubiquitous creation of sophisticated, high quality personal media.”

This is an important point that hints at a larger change in how value is signaled if we move to primary-engagement media. Media will always attract grifters who hand-wave their way to success. But my bet is that the breakouts of the coming years will be more rooted in substance than pizazz. And much of that is because the unfair advantages of being bigger are going away. Access to high-quality photography and design is now widely available. Design tools like Canva make an art department less of an advantage. DALL-E points to high-end illustration going that way. There will always be a place for craft, don’t get me wrong, but it will become harder to signal premium value through packaging.

And beyond that, expectations are changing. Across society, we’re seeing a creeping casualization. I found it noteworthy that Antony Blinken, the U.S. secretary of state, gave a very important official statement last weekend while wearing sneakers. To be clear, I believe a well-made pair of sneakers to be as premium as a pair of loafers, but it struck me we’ve come a long way from when conservatives lost their marbles at Obama wearing a tan suit. The pandemic normalized casual, making the idea of wearing uncomfortable clothing to work as weird as wasting two hours a week on a commute to an office to work at a computer. 

Consider video. It required significant upfront investment to reach a production quality level that maybe could make it worthwhile. But once CNN started airing Zoom video, it was signaling a more casual mode that does away with many of the high production costs. Tools like Riverside allow an individual to publish good-enough quality video.

Newsletters and talk-format podcasts got there first. Both are so constrained in their formats that differentiating through production quality is difficult. Is Matt Levine’s Money Stuff, at Bloomberg, any more “premium” than Adam Tooze’s Chartbook? Both are great, but I can’t say the product experience of a Substack newsletter is worse than one coming through Sailthru. Podcasts have long been this way. There is room for the highly produced variations on radio, like The Daily, but most popular podcasts—not narrative ones—are far more casual and under-produced, sometimes to a fault. (I draw the line at dogs barking in the background and waiters clearing glasses.)

And that’s in large part because the packaging of primary-engagement media is different. Websites are less important. The fancy C.M.S. is no longer a massive competitive advantage; in many cases, it is an albatross because it traps publications in pageview models. If you spent the last decade installing programmatic ad technology, you can be sure you’re going to use it. Powerful media brands are emerging that do not lean on any of these surface-level abstractions to lay claim to being “premium.” 

Publications will be judged by how valuable their communities are—and the connection they have to them. Much of the media business is still stuck in low-engagement mode. CNN fooled itself into thinking it was the type of primary-engagement media that thrives in a direct-to-consumer model. On the contrary, CNN has long been low-engagement ambient media that plays in the background. CNN+ would sometimes have a few thousand viewers at a time. I would bet that a Barstool+ service would outdo that while spending about 1/100.

Of course, audiences can be bought. That’s why you see so many media companies with hundreds of thousands of followers that seem to have very little actual engagements. Email open rates of 20 percent are common. Many have bounce rates over 80 percent.

Publishing has a long history of arbitrage opportunities, looking for new distribution channels where measurement has not matured. In the end, I think a lot of these efforts won’t work beyond selling some ads. The strongest brands will have real connections with real people. They’ll be able to motivate those communities to take actions and connect to each other. The biggest value of many subscriptions and memberships is that they are proof points that show a publishing brand is premium in the eyes of their audience/community. Of course, even here, many are faking it and won’t make it. That’s also a reason why subscriptions and ads work together

Publishers will need to adapt to the changes in signals. The way to signal premium value for a community is through the talent in the organization. That’s why the personal brand debate is particularly silly, because it will become essential for brand value. These publishers will also signal premium value by the talent profile of those in the community they serve, particularly the most ardent believers. That should lead to less of a premium on the fakery, both mild and egregious, that’s too often defined the media business.

This article was originally published in The Rebooting newsletter.