Business Models For Digital Publishers : Transcripted
Chirdeep :
Hi everyone and welcome to the Webinar on business models for digital publishers. We have with us Parry Ravindra Nathan Parry Parry is the CEO and cofounder of the fintech startup called Converge. He is a global executive and an Angel investor and was until recently the president and managing director of Bloomberg Media, overseeing its international operations, everything outside of North America. Prior to taking over the global role, he was the Managing Director of Asia for Bloomberg Media, where he oversaw rapid expansion of its business, making it among the dominant news media companies in the region. Before Bloomberg, he worked with Al Jazeera Network 18 and CNN in various roles. He also serves on the board of Digital Media Company Asia and is the co-founder and Fintech innovation startup called Value Stat. Welcome Parry. Glad to have you on board.
Parry :
Thank You very much. Thank you.
Chirdeep :
So in today's webinar, this is mainly about the article that you had written on BQ Prime, I think a few weeks ago, the media hamster wheel and that our attention, we saw that doing the rounds in a lot of these media WhatsApp and Telegram groups about the interesting concept of what you have spoken about people pivoting from ads to subscriptions and now we're seeing that net like the likes of Netflix are pivoting back to the ads part of it tapering down, right. So we want to talk about this and see are there any other emerging business models that digital media companies can look into? But before we get started, I want to understand how digital media even land here? We see print and broadcast doing pretty well on ads, but digital media is really struggling to keep up with revenue in terms of ads. So how did the industry even land up here?
Parry :
So, you know, I started my career, believe it or not, I was right out of college I joined a little a company called india.com, I don't know if you guys will remember its most famous not for its product, most famous for its advertising which was a big red dot that they bought on Times of India at that time. It is a big ad campaign. Now I remember those days when you know there's a lot of hope in advertising you know digital advertising etcetera.
But one of the things that you know is one of the reasons that digital advertising kind of it's still sort of stuck in that limbo at least in India because the early sort of entrance of it were newspapers etc who kind of opened their digital arm. Now they didn't look at their digital arm as big money spinners, they looked at it more or less as a presence, right? They had to sort of just tell the world that we are present here. I mean I remember one newspaper story that when you really performed badly they sent you to the Internet Department. That's kind of how they looked on the Internet. Because the newspapers were really growing, newspapers continue to grow. They thought that this was just something that was just a sideshow. And maybe at some point we'll start making money.
So they start throwing their entire thing free. So what you and I bought for 6 rupees at that time? A newspaper, they were throwing the entire thing free on the Internet, right? Completely, completely not. Not at all thinking that at some point someone's gonna turn around and say why should I pay for this when I'm getting everything there right. So that's exactly what happened. You saw flip because in most mediums, the growth is not everlasting. You know you saw it in print when TV came everyone said this is this is the next big frontier. You know when TV started growing you know you know you and then once you know TV also reached this plateau. I think it's still not reached a complete plateau in India because of sport but essentially you reached a point, where digital continues to grow and outgrow everyone else. Right. So no I don't think anyone's 20 years ago you know could foresee that it was all it was all sort of going to be charged. You know it's something you can make money out of and now it's inverted. Now everything is stalled. All growth and every other medium stalled almost the only other growing medium is, digital, digital ads and subscriptions. But by that time you have already logged in because you gave it free for so long, you essentially lost your pricing power on digital by that logic and so now you're trying to recover that pricing power in whatever way you can and that's and that's a big challenge. So the industry has kind of dug its own hole.
Overtime and and look I'm not pretending that you know you know any of us are are you know sort of absolved of that blame but it is it was an early strategy that everyone kind of did. I mean there were early early entrants who tried to monetize it. I mean I you know I worked for TV 18 many years ago Network 18 you know I had money controlled kind of created its own bouquet of you know digital properties which are still very successful but their whole aim was to monetize you know they have their own subscriptions models they tried - subscriptions, models, you know there are plenty of people who experimented, but the big large players or at least the newspaper players who were sort of taking their brand online essentially gave it all for free and and and that spoiled the market in my view. You know spoiled the market very early in its growth and then it became, everything else has been a sort of catch up.
Chirdeep :
Is there a way out of this, or is it just a race to the bottom that ads are never going to make money for digital media?
Parry :
I don't believe there is loss of hope. I I do believe that eventually this will have to stabilize, right? We have hit bottom. I mean I don't know whether there's any bottom below this, but we're kind of going underground after this because what's happened is the whole ecosystem has changed. There aren't many big businesses left that there are. The newspaper's growth has stalled, TV growth has stalled. Cable TV growth is stalled.
The whole universe has changed to an extent that now you don't have a choice but to make money on digital. It's a question of survival. Now it's a question of survival. You do try and get better pricing etcetera. I do think that it's stabilize you know one good example I think I can give you is you know in sport the digital rights for IPL when for a gigantic sum now just for that that that alone to for them to recover it will want it to recover it they need to be able to raise the the the bar.
And I do believe that that will pull the entire industry, basically digital ad pricing up with it. Because, you know, sport is expensive. Sport is extremely expensive anywhere in the world. By the way, it's the, I always call it the last bastion of cable TV. If sport moved entirely off cable TV, cable TV will die in the US. It's almost entirely true, you know, and tomorrow that moves off. It is going to essentially die as a platform.
So I think that you know because these ad rates grow go up because they have to kind of justify it. Most of them will pull the entire universe up with it. I think that's at least that's what I believe is going to happen eventually. So there is, there is more than hope I think there's potentially a growth sort of up ahead of us for digital media.
Chirdeep :
So very similar to what happened with the telecom industry. Recently, everybody started raising their rates because it was pretty much the bottom line to get subscribers on board exactly when they realized that there's not gonna be any profits towards the end of it.
Parry :
Exactly. Yeah. Everyone dies, right. It's not just one person. Everyone dies if you continue because there is no, there is no path where one survives and others don't because you know, the pricing is for everyone. I mean you see it pretty much across the board. Of course, you know there will be more and more consolidation, but up after the consolidation.
Some of them would you know. Some of them will survive.
Chirdeep :
Yeah. And if you were to talk about the accurate and very few people talk about numbers in terms of programmatic ads, right. So if I were a medium or a large size publisher, that's or even starting up on a publication system right now - The CPMS that you get in India are very low. Maybe a national media English daily kind of thing would probably get you a 20 to 25 rupee CPM at best. And if you're looking at a region with a very local presence, you're probably surviving with maybe four or five rupees CPMS. Something like this, it's, I mean when you're looking at the numbers like that, it doesn't make sense to create content at all because you're never going to catch up. So do you see India, as the GDP per capita grows, do you see the ad rates also going up? Is this something that would happen naturally?
Parry :
Yeah, I mean I don't think it's GDP related in my personal view. It is more market related. You know, in terms of a market that already exists like in India like I said, I think when you think sport for instance the, the, the, the CPMS will go up. The economics of sport is, essentially when I say sport is essentially cricket in India, economics of cricket has changed so much that it has to catch up.
So along with that you will see everyone else seeing a catch up now will it, will it you know so in places like the US it is caught up years ago and I think I mentioned it to you.
And this is public knowledge. It's not me revealing anything new but you know for Bloomberg when I was running, you know, Bloomberg outside of the US essentially it had you know we, you know digital revenue had crossed TV years ago. I mean we had publications and as well as TV at the time they had crossed it years ago. It was a much larger piece of our portfolio. Even today, you know my former colleague Scott Havens just a few days ago, you know, they saw 30%.
Both more than 30% growth in digital but everything else is kind of 1 or 2%, three percent, 4%. So you've already seen that crossover in the rest of the developed world, I mean in revenue terms itself, right, I don't think that's happened in India yet, you know I don't think it's even comparable to the to the established mediums today where digital has not crossed over in any of the big established players.
It has not crossed over. But I do think that that is the way forward because everything else is stalled. I think digital continues to grow as your audience is growing, your viewership is growing and then CPMS are not growing fast enough. But essentially you're still seeing digital lead growth. If you take it only as revenue, as top line revenue, you're seeing growth eventually the economics have to.
Will have to catch up now how long that will take.
It is still you know it's the jury is still out there and what will it take to get it there. I think it is, it is a realization within the entire market. But you know the Internet, whatever is online isn't free. It is essentially there's a cost attached to it and those costs have come down as we discussed. Should we view asking before the cost of production has come down dramatically even for things like video has essentially plummeted because you can do it out of you don't need the huge beta cams etcetera that.
We don't need to use it on TV. You know when we started our careers you can use just a phone so the costs of production have come down but it's still not it's still the gap is way too large for it to actually be a growth sort of growth instrument in your arsenal.
Chirdeep : Got it, and is there a parallel that you can draw from anywhere else in the world? Have we seen rates being very low initially and then climbing up. Is there an example where the publishing industry has got together to go after Big Tech today, Big tech is eating all of music media lunch, right? So news media is pretty much either reliant on direct brand partnerships, which take a long time to get done, or reliant on programmatic advertising if you're pretty small. And programmatic advertising is really. The bottom of the barrel in terms of rates is there any example of publishers coming together anywhere in the world saying that, OK, we will, we will start increasing the rates and we will not just go off cannibalizing each other.
Parry : So one good thing is that we're living in a time where in the last, I would say in the last year, last 6-7 months - Tech is seeing for the first time their own lunch being eaten, right. We are seeing that for the first time like a meta, meta you know you guys have seen it metas done earnings and everything else. You're seeing a sudden slowdown on that ad growth.
There could be various reasons you know Android and Apple essentially putting restrictions on targeting etcetera is one of the reasons you know data privacy has become a much more important sort of part of our discussion. And a part of business which means that you can't target ads the way you used to.
So for once in our journey it is essentially our lunch is not being eaten, their lunch is being eaten for a change right. That's great as media we should always celebrate it but The thing is when we when you know when when I started out you were essentially you were dependent for a lot of a lot of things you were dependent on distribution on these social media platforms etcetera. I think that has changed.
You know so I do think that that in the US you're seeing a you know sort of there is a mature to a point where publishers are being able to stand up and say that they are they are they can grow on their own and we're seeing this in even in independent media when forget the large big networks or the big media companies like New York Times because their dynamics are a bit different. But even the smaller players you're seeing an Axios make $100 million within what four years of their existence and then getting sold over $500 million within five years of their existence is essentially a huge leg up for media right or The political which is an even bigger animal got sold for billion dollars there are these and you know my former boss Justin Smith just just moved out of of Bloomberg and started Semaphore which is his own new startup in media.
So you're seeing a lot of sort of activity in the mature markets largely because I think the market is matured and you can actually see the rates. And everything else is now mature enough for you to be able to make money out of it. So I think eventually it'll hit here as well. It's taken longer than I sort of expected. If you know about four years ago I said in a conference that it will mature and it's still not so. And maybe you know the pandemic kind of didn't help but I'm hoping that the next time I speak to someone three years down, two years down, it has reached a point of maturity where it is. So the developed markets have had a very different kind of growth trajectory till about 2015, end of 2015. I think I've given you an example. You could see that almost all the big media companies were in doldrums. They were trying to figure out how to survive.
There was a whole new generation of media companies like Vice, which came about and said that “the old media companies don't know what they're doing, we know what we're doing” and that's the distributed media sort of revolution, right? And now that is distributed. Yeah, it's kind of dead. You know, Weiss is essentially, you know, isn't in its own, in its own trouble, but now there's a huge, you know, jump back to what it was, you know, into the basic base things that advertising and subscriptions etcetera. So where all of those old players that everyone called, you know, sort of obsolete have suddenly come back because their credibility etcetera are appealing to an audience.
Chirdeep :
And you actually wanted to catch up on what you mentioned about meta, so everybody's talking about the metaverse. Everybody is going to be talking about news in the Metaverse. Nobody's doing that yet. I think that we hardly know anybody who's doing that. But I think what we see again is big tech is jumping ahead and capturing that part of the universe and probably getting the ad space as well out there, and traditional media has not yet even looked at this space. Is this going to be?
Parry :
I don't think everyone's jumped onto that bandwagon. It came from one guy's head, essentially, and whatever we have seen so far isn't impressive. You know it looks like a video game, if you guys play video games. It's like a really bad video game. So I don't think I've seen anything there that that kind of is a big threat to the way we are running media companies at the moment. I think it's in my personal view. The thing is actually a threat to metaverse existence if they don't pull it off it's a big they've hitched their wagon onto something that has no idea what it is, they're kind of, it just seems very floozy and kind of you know, they had to come with the narrative and I've been in media long enough to know and I play video games so long enough that they don't match up at the moment. Right now that could change. I'm not saying that won't but that could change. But at the moment it seems like it's in someone's head.
But you know, Google hasn't gone and put all their money into that basket, you know, or Apple hasn't done it. If all of them do it, that's they're seeing something that that we aren't. But the very fact that only one player has done it and frankly that one player to be slightly blunt about it has essentially sort of acquired themselves into the leadership position, whether it's Instagram or WhatsApp or or any of those, they've acquired themselves into it and not really produce their own thing apart from the original Facebook itself which itself came from iterations, but essentially I don't think it's as big a threat to media for sure. And I don't think every media company should suddenly just decide they should have a Metaverse department because it's a lot of cost for pretty much nothing at the moment, you know, you don't know it and you know, like I said before - We are living in a world, at least in India, where we just moved into 5G, right? I mean, when's the time when all this, this can take all the bandwidth to be in a, you know, in a sort of virtual world? I think it's a few years away. So I wouldn't go and put all my money in right now when all that is just looking pretty fuzzy and think.
Chirdeep :
It’s probably a few years away. Moving on, in relation to the article you had mentioned, the more media changes, the more it stays the same. There are mainly 2 business models out there, subscriptions or ads, and we've spoken about ads so far. Hopefully things will get better when publishers get together out here. Now let's focus on subscriptions, right, we see. The likes of Netflix who've been mainly running only subscriptions and been very vocal saying that they will be only subscriptions and never look at ads and now jumping on the ad bandwagon trying to see how they can bring a lower priced product in the market subsidized to that.
At the same time, we also see subscriptions. Everybody who started with a subscription product saw phenomenal growth in the first few years, but now we see everyone having a plateau, right? It's tapering off. It's not that exponential or the linear graph at all. It is getting to be a flattened curve towards the top. Is this something that you're seeing across the world? Is this something that you're seeing across industries as well?
Parry :
I think it is, you know, so Netflix is a very good example because Netflix saw its plateau after reaching 220 million Subs, right?
So I think everyone ends up, when you kind of look at a business plan and I've done so many of them, you kind of look at as sort of, you know, a populace and say all of them are going to subscribe to us, right? That is the universe that we want to subscribe. Like you know, the New York Times has sort of planted a flag and flag and said our universe is 100 million, right? Semaphore. My former boss Justin, who's a brilliant guy who's sort of said their universe is about 200,000,000, you kind of count your universe as the readership.
Which is obviously the most optimistic view of what that universe looks like. Now, two years ago, I had written a piece for Bloomberg Quint itself, which was on a subscription equilibrium, right? And I do believe there's a subscription equilibrium for each one of us. And in that equilibrium, in that world, we are our competitors and the competitors to publishers and not just other publishers. And that's a mistake. Most publishers end up looking at other publishers of their competitors.
No. Much like Netflix said their competitor is sleep a long time ago, very famously read Hoffman had said my competition is sleep. It's actually Disney plus, but anyway, let's call it sleep at that time. But you know very similarly, I think our competition, every app on your phone is essentially a competitor in the subscription world. Every app which you pay for from LinkedIn, from all those food apps that you kind of have, which you're taking pros, all of them are essentially part of your part of your subscription sort of thing. Essentially everyone has that at some point where you reach that point where I cannot subscribe to more things, which means that you kind of reach a point where you have two publications.
Well, you know two or three kinds of entertainment because entertainment is 1 bit that everyone makes a sort of flexibility. You've got you know a lot of the rings in, in, in, in, in Amazon you got sort of House of Dragon and Hotstar. So you need both, right. So you kind of and then in this Netflix something you like in Netflix, so you kind of have three, but you kind of get to a point where you cannot subscribe to more and that is that is the biggest threat to a publication.
So that is where you kind of hit and then say, OK, that's where growth is limited by the way Netflix hit that and they essentially decided ads is where they're going to go despite the fact that just three years ago and I think I wrote that in that piece that you mentioned. But three years ago Reed Hoffman said they won't, they, they don't see them. It's getting into ads that where, but now they've kind of had to reverse that because they've hit that equilibrium. And I think all publications are going to hit it very soon. And that requirement for most publications is not going to be 200 million. I wish, but it's not. But it's going to be, you know, New York Times, for instance, saw growth from say 1.51 point 6 million subscribers in 2015 to end of 2015 to about 10 million today that includes their acquisitions. But essentially 10 million today 10 millions a huge number for a publication right now I don't know if that 10 is 100, it could be because it's New York Times but if it is it'll be the it'll be among the one or two apps that I was just talking to you about that will be in your publisher list by 100 million people right. So that's how you should look at it.
When I look at publications under subscription strategy and you know if I were you know still running a media company and you know you could in the force you know who knows would have a media presence. I look at all of them as competition. So I do think that it will hit. The publication subscriptions are still too small to actually be able to have hit the limit yet, you know, and we don't know what that limit is. It may be fictional. We know that Netflix's limit is 220,000,000. You know, they're saying, OK, fine, 220,000,000, this is where we're hitting it. It looks like Disney Plus is going to hit that. We have not yet seen what that limit is.
Who sets the limit? I think it's going to be the New York Times. Who's going to set that limit of 10 million, twelve million, thirty million, whatever that limit is. And then you see a slowdown in their growth and that will be the sign that that's the limit that a publication can reach.
I don't think we've hit that limit, but we will, we will soon. We're going to have the same problem that Netflix and Entertainment has because in entertainment it is in sport entertainment, etcetera. There is, there's a need for it, there are cycles. You know, there's suddenly something like a lot of examples. You might want to subscribe to it for a while and then you might see a dip on sport. Hotstar, you know, once IPL is off that chart, the next IPL will be a big test for Hotstar, whether they manage to retain their numbers.
My guess is not and that's then that's the limit that they have set for themselves. So that's their limit. So you're going to see it in every industry and I think publication is what you're already seeing in publication because at the end of the day you know how much utility does a news product give you is a big factor in what you what you subscribe to and don't subscribe to or or or at least cancel a subscription.
Chirdeep :
Yeah. And just parallel to that, I think we're seeing a very similar story play out in India, right. So a lot of them are the publishers actually went down the subscription model, particularly it starts off with the financial news sites across the world. And then over a period of time, you'll see more of these niche publications going behind a paywall or at least going with a part paywall strategy, which is maybe 70% of your content is free, but 30 behind a paywall.
And we see that subscriptions are plateauing on these platforms as well. But one model that we are seeing emerge of late is bundling of subscriptions together. I think, I'm not sure if this is right, but I think Business Standard gives you a Wall Street Journal subscription. And the same thing with Bloomberg Quint was giving you a Bloomberg subscription or allowing you to read a lot of articles there.
Do you see this bundling of subscriptions as the next big thing? Because you're right on the subscription equilibrium that people don't have too much money to spend or wouldn't budget so much money to spend on paying for content. But if I could pay for one subscription, and probably get five different publications on my app, that would make sense for me.
Parry :
Yeah. So just before that, I'll just quickly qualify the B2B, the niche ones that that you mentioned, you are absolutely bang on the niche one. In fact I think the niche one said the ones that have grown the most in subscriptions. I mean there are so many B2B publications in in a B to B sort of publications, B2B quasi B to C publication like scuffed etcetera, which has grown like crazy in in the US and they maintain their, you know their they've kind of created a very robust businesses and that's because of utility value, you know utility value for niche, the more niche you are, the utility is higher right and holding key for watches kit for travel, there's so many others those niche ones which are grown and actually built new revenue models onto them. There's e-commerce attached to it and doing very well, which we can come to later.
But to your question on bundling, the biggest challenge in bundling and most of the examples you've given and bundling the challenge is one player is the principal in India specifically, the problem is regulation. Like none of these guys have their own gigantic presence in India because regulation doesn't allow certain things.
So they have to partner with them when they partner they have to lower their costs and that cost is essentially what's going to do that. It's defined by the Indian partner, right? So that doesn't work out very well for whoever the other partner is, right. It doesn't work very well because you're not making that much money out of it. You're making a lot less money than you make anywhere else.
I mean I can tell you for most international publications that would be the case but even then even if you even assume that is not the case and it's all equal relationships. The bundling part of it, the whoever bundles it has the big advantage because clearly the reason they are bundling under them is because they're a bigger brand than the others.
So their brand value is the one which is driving the bundle, right? And I think it just doesn't, I don't even match if you really divide it according to the thing because even in a bundling thing you're severely discounted.
In that discounted sort of world, I don't think that actually works out very well for all players involved including the one who's bundling because I don't think it actually really works out and we have seen many of these come and go. There are plenty of bundles that have come and gone. I'm talking about the sort of bundling by sort of disparate brands with each other because you can sort of Piggy Bank on someone else's, you know, brand power.
I just, I think it only works out for the guy whose brand power is being used. And it certainly doesn't work for the ones that are below that. I think everyone tries it. I've tried it many times, you know where you're bundling. When I was Bloomberg you know do you try and see if you can bundle other ones just I just don't think it works out for anyone the economics are sort of vague.
I may be wrong and there may be math that I'm not seeing, but if you really do the, if you really look at it from the big brand or from the small perspective, you know, you don't really see a cohesive way to do it.
Chirdeep :
Okay, You've spoken about ads, we've spoken about subscriptions. They are the dominant business models out here, but we see a few emerging right now, right? So we want to touch upon some of them as well. So live commerce is making a lot of noise across the world, particularly in China where it started off with just two days back we heard Amazon India is introducing like, is this limited to retail only? Is this going to be something like a very niche? Action Magazine can introduce live comments on their site or the app.
Parry :
Yeah, I mean I think you hit the nail on the head. I think a niche product, a fashion magazine, a watch magazine, you know holding keys etcetera, they all have potentially used this in a significant way and are you seeing it, it's growing, you know it's growing across the board. You know there are apps like fireworks which essentially help you integrate, help a publication, integrate video and live commerce, live commerce stream and there are plenty of players in this space as well which do it and so you know you are seeing that you are able to do it.
The challenge with news is the audience part, right? For Amazon it makes 100% sense. You know they've got the reach, they got users, they got prime users, etc. Makes 100% sense. There's no editorial imperative of any kind that comes in between. It's you know you can do it. You allow your creator to basically sell your space. If you're a, if you're a company you can do that the same way but and the better the content you're able to sell it. I mean I don't think we have ever reached a point where the absolutely right kind of content is actually served, being served for live commerce, but we'll get there because you know content evolves over time and the more mature it becomes, it'll evolve. And TikTok has also been doing this live commerce for a while. I mean they've been experimenting with it, absolutely the best platform to do live comments, right, because that is it's essentially feed left. But I think with news products I think it is slightly more complicated however bigger brand you are.
Because, you know, programmatic, contextual sort of life feeds, probably there is a way of doing it, but you know, you could always have mishaps where there's a big bomb, bomb blast that you're essentially covering and right below it you're selling something. Those things, those things happen even on just plain vanilla ads. And imagine what it could be in a live commerce scenario, that's even worse, right. So I think it's a bit harder. I won't say it's not possible, you know.
You can see you know big media news companies which have verticals, verticals of like tech and all sorts of things being able to do it, you know, doing being able to sort of bring that onto their feeds. But on the main sort of news, the thing it's it's a slightly harder one to do, but I'm sure technology will evolve and you're able to actually contextualize and do it over time. But yes, I think live commerce is going to be a very small piece of revenue for the foreseeable future but for niche products I think it would probably be a potentially a very large source of business over the next few years. But yeah, I'm very bullish on and live commerce as an overall tool in different scenarios including media and I think it will eventually at some point have its impact but I don't know how large.
It's still very early.