When I was young, my Dad took me to Mac’s Smoke Shop in Palo Alto — a musty old store filled with tobacco, magazines and junk food — and let me pick anything I wanted so that I’d keep quiet while he ran errands. I always chose Sports Illustrated Kids.

In high school, I moved from SI Kids to Deadspin, before trading that for Barstool when I hit college. At that point I started creating media myself as a sports reporter for the UC Davis student newspaper. We printed four times a week and had a circulation of 12,000 papers, though advertising was declining each year.

The journalism that I grew up with is now largely defunct, as if my reading a publication foretold its failure to adapt to a changing media landscape. Sports Illustrated could not transform its massive subscriber base into digital revenue. Deadspin filed for bankruptcy in 2011. The Aggie — my student newspaper — all but collapsed before replacing its lagging advertising revenue with student fees (the BBC model).

The publication that remains — Barstool — is a case study in modern media success, having grown from a local blog to an expansive media company with an array of revenue streams. Diversification is a trend that’s visible across the media ecosystem, as brands like Complex, The New York Times, Vox, and The Athletic have decided they’re unwilling to rely on an advertising ecosystem dominated by Facebook and Google.

Below, I give an overview of some of the most intriguing media companies today, taking a key insight from each and identifying a strategic opportunity.

Barstool

Barstool has built a deeply loyal following across every online platform, leading to a recent investment that valued the company at $450M. Incredibly, 31% of Barstool’s ~$100M in annual revenue comes from merchandise sales.

Top:

Barstool’s revenue mix, via Penn National.

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Co-branded merchandise from hockey brand Bauer and podcast Spittin’ Chiclets

The secret to Barstool’s retail success is the deep relationship between Barstool’s various personalities and their audiences. Barstool’s online store is organized via its podcasts, so fans of various shows (Pardon My Take, ForePlay, Spittin’ Chiclets) can find a t-shirt or hoodie that speaks to them, versus generic branded gear.

Customization for specific audiences extends to other revenue streams as well. Foreplay, the golf podcast, hosts an annual golf tournament and publishes sponsored videos of the hosts playing iconic golf holes. Spittin’ Chiclets, the hockey podcast, launched a Northeastern pond hockey tournament sponsored by Dunkin’ and turned the hosts’ favorite drink into a co-branded vodka with New Amsterdam. For each of Barstool’s audiences, the company finds the right opportunities to drive incremental revenue, never using a one size fits all strategy.

Insight: Andreesen Horowitz describes a deep connection between individual creators and their audiences as part of the new “Passion Economy”, which expands on the gig economy (Uber for X) and adds a layer of individuality. Substack and Patreon have created platforms to support these creative efforts, and Barstool does the same. The brand can onboard unique talent, put audio/video, marketing, and merchandise support behind them, and create mutually beneficial outcomes (revenue, awareness).

Opportunity: Improve the subscription service, or cancel it.

Barstool launched a premium content subscription at the beginning of 2019 and it hasn’t taken off. A sub-par subscription risks alienating the company’s most loyal fans, especially if they are paying the list price of $20/month — 50% more than Netflix — yikes! If the revenue from Barstool Gold is negligible, it’s likely the content that’s living behind the paywall could be monetized more effectively through other channels.

Complex Networks

Complex CEO Rich Antoniello defines the company as an original content producer, which makes sense given that the company licensed a total of 16 television shows to Netflix and Hulu last year. In addition to streaming providers, the company also partners with traditional cable networks — its show Sneaker Shopping airs after Knicks and Rangers games on MSG Network.

Though the private company doesn’t disclose revenues, Antoniello described the variety of monetization channels in a podcast last year with Peter Kafka. The company does ~$20M in hot sauce sales, stemming from their viral hit Hot Ones, which has also recently been turned into a game show airing on TruTV. In addition to retail, Complex drives $15M+ from their ComplexCon events, which hosted over 100K attendees in 2019. All together, below 50% of revenue comes from advertising, says Antoniello.

Complex turned a hit YouTube show into a multi-dimensional revenue generator. Seen here: Hot Ones The Game Show, licensed to TruTV

Insight: Tentpole content creates incremental gains. When Baby Yoda made his appearance Disney+, there was a flurry of articles decrying Disney — the master of monetization — for not having merchandise ready to sell. Complex has no such issue with Hot Ones. The show drives advertising dollars on YouTube, where it has more than 35 million views, as well as merchandise and licensing fees. The company’s decision to forego its own distribution channels and focus on content creation has paid off in this case.

Opportunity: The final print edition of Complex Magazine was released just over two years ago, and there is currently no subscription offering for the brand. Upstart food review site The Infatuation provides an interesting model, based off of their membership program Friends of Infatuation. The $50/year fan-club provides VIP access to events, merchandise discounts, and behind the scenes content. The key: low price point for customers, no new products and little incremental cost. Complex would be wise to copy this.

New York Times

The Times counts over 5M digital and print subscribers and has a stated goal of 10M subs by 2025. Advertising still accounts for one third of quarterly revenue, but it’s clear the company’s focus is subscriptions.

One example: The Daily, the most downloaded podcast in the country with 2M+ daily listeners. Each episode typically has one or two ads, with at least one of those dedicated to asking listeners to subscribe to The Times. By choosing to promote their own subscriptions, the company gives up an estimated $40K in ad-revenue per episode, or $2.5M per quarter, based on industry average CPMs (probably conservative, given the audience). The Times added 232K digital news subscribers in Q4 2019, paying an average of $11 per month. This strategy breaks even if 1 in 3 of the new subs can be attributed to The Daily (unlikely), but the company is comfortable trading immediate advertising dollars for more valuable long-term recurring revenue.

An example of an ad during The Daily promoting NYTimes subscriptions

The company has found new ways to offset the decreases in advertising. New sources of digital revenues for the company include the licensing of their television show, The Weekly, to FX Networks and a growing affiliate program. Together these channels accounted for $28M in the most recent quarter.

Insight: The Times is arguably the strongest media subscription brand on the planet (Netflix has a case), and even they are not comfortable relying on a single revenue source. The diversified efforts of The Gray Lady shine light on an industry-wide need for diversification.

Opportunity: As a market leader in subscription and podcast revenue, The Times’ current area for growth is television. According to the most recent earnings report, The Weekly commanded $10M+ in licensing fees from FX Networks and Hulu. As streaming platforms seek high quality content to lure customers, The Times can leverage its built in scale advantages — 1,600 reporters in 160 countries — to produce news shows with much lower incremental cost than other providers. They could recreate 60 minutes minutes for Netflix, make short-form narrative news for Quibi, and replicate Hassan Minhaj’s comedy/commentary/news show for Amazon Prime.

Vox

Last year’s merger between Vox Media and New York Media added subscription revenue to Vox’s multi-faceted business. The company’s cash flow comes from an impressive six sources:

Advertising — Vox’s editorial brands — SB Nation, The Verge, Vox, and more — are old-fashioned, free for the consumer, ad-based sites. The company also has the Vox Media Podcast Network, which encompasses over 200 shows.

Vox created Concert in 2016, a digital advertising marketplace to connect clients like Buzzfeed, Variety, and Rotten Tomatoes with a network of premium advertisers. Vox takes a cut of all ad revenue coming through the platform.

Subscription — A digital subscription to the recently-acquired New York Magazine costs only $2/month, and it’s unclear how many subscribers there are.

Affiliate — Similar to the NYTimes, Vox’s editorial content contains affiliate links to commerce sites like Amazon and Walmart.

Events — Vox hosts both live podcast tapings (which allow them to sell tickets + ads, a nice efficiency) as well as large scale and high-profile conferences.

Digital Licensing — Through Vox Media Studios, their in-house studio in LA, Vox creates shows like Explained, which airs on Netflix.

B2B Tech — Vox’s Chorus platform is an all-in-one hosting service for media brands. “We’re providing a suite of enterprise-grade services… for brands to manage everything from content creation to monetization,” said Jim Bankoff in 2018.

Insight: Vox is unique in its efforts to build a B2B publishing platform, which creates two distinct advantages: a new customer base and recurring revenue. Media’s bills are typically paid by consumers or advertisers, depending on the model. Vox has a third customer: the tech teams of other media brands, who need a platform to host their sites. These B2B customers have larger budgets, fewer options, and once locked into the platform, are likely to be long-term clients.

Opportunity: Despite the unique advantages of Vox’s B2B strategy — they should exit the business. According to Linkedin data, full-stack engineers are the third most common job title at Vox and the company has 50+ software engineers total. That’s an expensive anomaly for a mid-size media company.

Vox pushed significantly into podcasts in 2019, tripling revenue YOY, hosting their first podcast advertising upfront, and inking a multi-million dollar partnership with Stitcher. Despite these efforts and 200+ total shows, the company fails to crack into Podtrac’s top podcast publisher lists.

The NY Times and Barstool crack the top 10 largest podcast publishers, but Vox does not. Only one other publisher on the list has more than 100 shows.

With Vox’s podcast infrastructure in place, the expenses of the B2B business could instead be spent acquiring top-tier talent. Former SB Nation writer Bomani Jones — whose show was just cancelled on ESPN — could be brought back to bolster the brand’s audio efforts.

The Athletic

Since its founding in 2015, The Athletic has focused on a single business model — subscription. As CEO Alex Mather tells the story, he knew he wanted to start a subscription business before he decided it would be in sports media.

The decision to be a sports subscription actually informs the growth strategy for the company. Instead of chasing general sports fans (a crowded market with low willingness to pay), The Athletic goes after dedicated fans who are willing to spend for high quality ad-free journalism. In order to attract that customer, The Athletic must first hire established reporters and editors in each market that it enters. It’s a capital intensive model (there’s more than 400+ editorial staff thus far) which explains why the company has raised $140M.

As of October 2019, The Athletic has 600K subscribers, and Mather says they’re well on their way to 1M subs.

Insight: A multi-product subscription offering is difficult to execute. Two years ago, The Athletic decided it would offer premium video content for its subscribers and hired a team of experienced journalists and producers to execute the vision.

The brand’s diehard customer base actually works against it in this format. Serious fans willing to spend $64/year for sports journalism are unlikely to cut the cord (cable is a must for sports fans) and probably have access to ESPN, ESPN+, HBO, Netflix, and more. For The Athletic’s video content to move the needle with that customer, it would need to be on par with the highest budget sports documentaries in the industry, a tough task.

While Amazon can afford to spend billions on video to reduce the churn of Prime, The Athletic must drive new subscribers as it attempts to reach growth milestones. The videos apparently didn’t reach acquisition targets, as the video team that was hired in 2018 has recently left the company. The Athletic now turns its focus to podcasts, which live outside the company’s paywall, broadening its marketing funnel.

Opportunity: Improve perceived value of the subscription by scaling back the discount offers.

The Athletic’s offers various discounts for new subscribers

At any given time, a new subscriber could pay full price, 30%, 40%, 50%, or even 60% off for an annual subscription to The Athletic. The promotions are often shared via Twitter, where current customers already follow the company and its reporters, but are locked into their previous annual agreement. While the strategy may work to drive subscriptions now, as the brand reaches maturity, it will be hard re-establish a premium price point due to the constant discounting.