Media executives say they can weather a recession

Delegates line up at the Cannes Lions International Festival of Creativity, Cannes, France, June 2019

Cannes Lions

As media executives meet with advertising executives this week over glasses of rose at the annual Cannes Lions International Festival of Creativity, they can’t help but talk about the disconnect between hanging out with celebrities on yachts and the creeping feeling that a recession is around the corner.

“It feels like a party here,” NBCUniversal CEO Jeff Shell told CNBC’s Julia Boorstin from Cannes on Wednesday. “I don’t know if it’s because most of you are going out for the first time in a long time or because we’re in the south of France in June, but no, it doesn’t look like a down market .”

But Shell acknowledged there were warning signs, albeit complicated ones. “The broadcast market has weakened a bit,” he said, referring to the real-time cost of TV ads, rather than the predefined “initial” market. “It’s very complicated because there’s so much going on.”

Macroeconomic downturns have historically led to increased layoffs across the media industry. As recession odds rise and executives brace for lower ad revenue in the second half of the year, media companies aren’t laying off or furloughing employees — at least not yet. Instead, industry leaders believe their businesses are finally lean and balanced enough to weather an advertising downturn without sacrificing profits or shrinking their businesses.

“Our goal has been to build a truly resilient and adaptable digital media company,” BuzzFeed CEO Jonah Peretti said earlier this month. “We thrive in a volatile environment. We have built an agile and diverse business business model.”

Jonah Peretti, Founder and CEO of Buzzfeed; co-founder of the Huffington Post

Courtesy of Ebru Yildiz/NPR

“While an economic downturn could affect the media advertising market, we are on track to meet our business growth goals after a pivotal year of profitability,” said Roger Lynch, CEO of Conde Nast. The company, which publishes The New Yorker and Vogue, turned a profit last year after many years of losing money.

Part of the reason small digital media companies feel prepared for a recession is that they have already laid off hundreds of employees over the past few years, due to acquisitions and a desire to cut costs. costs. BuzzFeed announced more layoffs just months ago.

Yet many digital media companies make the bulk of their money from advertising, including Conde Nast and BuzzFeed. And not everyone is optimistic that media companies are out of the woods. Since their IPO, BuzzFeed shares have fallen more than 80%. BuzzFeed earned $48.7 million in advertising revenue during the first quarter, or about 53% of total sales.

If companies are looking to save money on marketing, there’s little they can do to avoid going after the chin, said Graydon Carter, founder of the Air Mail subscription media company and former editor. in chief of Conde Nast’s Vanity Fair, in an interview.

“If you’re in programmatic advertising, which is what most digital media businesses are, you’re going to suffer at some point when the economy turns. It’s just out of your control,” Carter said. “I think [a downturn] will be brutal and possibly long.”

Layoffs in the media during a recession

It is natural for leaders to be optimistic about the prospects of their business. But their sense that “this time will be different” is not without merit, said Alex Michael, co-director of Liontree Growth, which specializes in working with emerging media companies. This is especially true for smaller digital media companies, including newspaper and magazine owners, who have had to diversify into subscriptions, e-commerce, events and other products to wean themselves off advertising revenue.

“In the past, these companies didn’t have their right models and weren’t fully mature,” Michael said. “Now they’ve been through waves of consolidation. There’s been streamlining and optimization. Many of the remaining companies now have endemic audiences that will open their portfolios in different ways.”

How bad could that be?

Get the right model

The key to riding out a recession is having a product that resonates with a specific audience, said Michael of Liontree Growth. Digital media companies and magazines that have gone too wide haven’t been able to compete during economic lulls because the brands haven’t had passionate user bases.

“The advertisers asked, what do you stand for?” said Michael. “What are they selling for?

There has also been a “slack” among ad buyers willing to pull money from Facebook and Google for moral reasons, said Justin Smith, former CEO of Bloomberg Media.

Smith is establishing Semafor, a new media start-up for global news. With Google and Facebook dominating the digital advertising space for more than a decade, there’s a growing movement among some advertisers to diversify their ad spend away from the tech giants to support the news industry in the face of breaches. of Big Tech’s privacy and misinformation.

“Before, ad marketers really avoided news media, especially with digital targeting, because of brand safety. News was closely tied to negativity, war, and famine,” Smith said. “Now you see the opposite of that – brand bravery. The only real antidote to misinformation is human intervention. This is a multi-hundred billion dollar pool. this band is big, big money.”

Smith doesn’t care about throwing Semafor into a potential recession. He said that while Semafor aims to attract college graduates from around the world, a wider audience than niche sites with passionate audiences, even general interest publications are in a better position now than they were. 10 or 15 years ago. He credits the wide adoption of subscription.

“If you look at the last five years in particular, whether it’s the pandemic, the Trump fascination, or the rise of Spotify and Netflix, there’s been a sea change with subscription” , Smith said. “There is example after example of cross-category consumer adoption for news subscription models.”

Smith implemented a consumer paywall for the Bloomberg News website three years ago. Today, more than 400,000 people pay to access it. Semafor, which will launch this fall, will start out as a free, ad-supported service and stay that way for “six, 12, maybe 18 months,” before installing a paywall. Some articles will always remain free, Smith said, like many other digital news services.

Smith also said the industry has transformed in ways that better connect audiences to reporters, even during downtime. Smith promotes this stronger connection by directly recruiting talent agents, who will be tasked with matching journalists on products and events outside of Semafor’s core business to expand their reach.

“The media industry is in better shape than it was a decade ago,” Smith said. “Strategies are more sensible. Digital adoption is more pervasive. Models are clearer. Revenue streams are more diverse. Leaders are more experienced. media sector will withstand some of the downward pressure in a stronger way than in the past.”

Disclosure: NBCUniversal is the parent company of CNBC.

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