Content is not king
Posted on .What is the thread that connects the great media companies of the last 20 years? I think the answer will surprise you.
In 1995, Yahoo was founded as a personal project of two Stanford PhD’s. The project aggregated links from around the web, creating an index of third party content in one place. It was a brilliant business model because it had no content costs yet created billions of ad impressions that could be sold to advertisers.
In 1997, two Stanford PhD’s created Backrub, which eventually became Google. They built a new index – this one more advanced than Yahoo’s because it mechanically crawled the web instead of using human-based curation. From a publishing standpoint Google created an infinite number of pages – all a user had to do was type a word into a box and it generated a new page. From a media standpoint it was a brilliant model because it had no content costs yet created billions of ad impressions that could be sold to advertisers.
In 2003, Mark Zuckerberg started Facebook. Facebook was an open forum for users to contribute content, about themselves or about their friends. Looking at my stream it has now morphed into a way for people to share links that they find interesting. From a media standpoint it is a brilliant model because it has no content costs yet creates billions of daily ad impressions that can be sold to advertisers.
When I look at the best outcomes in new media I see very little original content, but rather low cost ways to aggregate audiences. Huffington Post has a network of unpaid bloggers, Twitter has a network of user-generated content, and YouTube has a network of “sometimes-pirated-sometimes-user-generated” content. These are all no different.
Not surprisingly, the most successful traditional media companies have adopted a similar model, emphasizing reality television and live sports over content production. Content creation has now been outsourced to independent shops that compete for distribution. Many of them struggle and lose money while they search for the next hit.
Maybe the pendulum will swing back in the future, but candidly I think the days of media companies deficit financing content and trying to make it up later on advertising are coming to an end. I can see how some subscription properties, like HBO, can continue to finance high-cost original programming – they have stable cash flows after all – but I think other media companies are on a short fuse. I don’t know what this means for the quality of television in the future (or print or radio) but I assume that my kids will grow up watching more sports, reruns, and reality television than I did. That is if they watch television at all.
Ian Sigalow
http://sigalow.comIan is a co-founder and partner at Greycroft Partners in New York City. He has been a venture capitalist since 2001.
AUTHOR josh guttman
Posted on 11:19 pm March 31, 2011.
Good post Ian. No question UGC and platforms with traction deploy capital more efficiently than those who professionally produce their own content, though the future I see is less about studio-produced programming and more about UGC or lower cost production distributed over the internet in shorter formats and less expensively thereby not requiring the massive distribution of cable companies to generate decent returns. The photo sharing trend is just another UGC platform using peoples’ images to create their library of content. It’s still the content that is king because without it, these companies wouldn’t have anything, but these models are far more efficient at generating that content for little or no money other than cost of managing the platform.
AUTHOR josh guttman
Posted on 11:19 pm March 31, 2011.
Good post Ian. No question UGC and platforms with traction deploy capital more efficiently than those who professionally produce their own content, though the future I see is less about studio-produced programming and more about UGC or lower cost production distributed over the internet in shorter formats and less expensively thereby not requiring the massive distribution of cable companies to generate decent returns. The photo sharing trend is just another UGC platform using peoples’ images to create their library of content. It’s still the content that is king because without it, these companies wouldn’t have anything, but these models are far more efficient at generating that content for little or no money other than cost of managing the platform.
Ps. What is livefyre. Horribly slow. Please switch to Disqus.
AUTHOR bradmehl
Posted on 11:27 pm March 31, 2011.
I can see TV going in two overall directions:
1. Low budget user generated content, repackaged and curated with network quality production. This basically would be like shows on related topics or themes (from You Tube etc) strung together and possibly moderated when being aired on networks.
2. Monster, movie quality shows that blow away traditional TV in their production quality and connect the public through gripping shared experiences. Movie studios do it when a big director backs a project or Tom Cruise signs on. Ian, as you point out, this is cost prohibitive as a regular practice but why can’t TV networks make selective big bets? Take Steven Spielberg’s upcoming show on Fox, Terra Nova. It will be an interesting experiment with this model, which pretty much says “we’re going for it.” The show will feature time travel, dinosaurs, and guns. What more do you need?
That said, if I were starting a content company today, it sure would not be a TV network that does either #1 or #2 above. It would fuse functionality with content aggregation, to Ian’s point. Just trying to predict, though, the direction that the established TV networks will take in the future.
AUTHOR IanSigalow
Posted on 11:27 pm March 31, 2011.
I am trying out LiveFyre. Sorry you had a bad experience but it has worked at parity with disqus in my experience. Plus it supposedly has some @ reply features that are very powerful, although it is still in beta and candidly I haven’t gotten them to work yet.
On your points, Google and Yahoo would have a lot without UGC. The more recent “no content cost” models are using UGC (although even Facebook is moving more and more into link-land). Unfortunately UGC remains painfully hard to monetize so the ultimate goal is to build a lot of traffic and figure out a way to create ad-safe topic pages. Either way, you are right in that “social media” sites need “social media”. Photos are another story but certainly there are large photo sites on the web too
AUTHOR IanSigalow
Posted on 11:34 pm March 31, 2011.
@bradmehl It sounds like the only thing missing from the Steven Spielberg show is scantily clad ladies… although I am sure those are in the fine print.
It would be great if the networks had more of content type #2 – serial movies played out over a dozen episodes, and each show leaves you with a cliff hanger. Given the production costs of delivering that type of experience I think it is highly unlikely, but good to hear that Fox is going for it. if I didn’t TIVO through every commercial I might have even known about it…
AUTHOR JMattHicks
Posted on 6:53 pm April 1, 2011.
You bring up some valid points, @IanSigalow , it’s a very unique way to look at things. I think part of it has to do with, at least in America, the cultural desire for “on-demand convenience”, if that makes sense. We want results and entertainment now, but not just any results, EXACTLY what we what and need at that moment. Google, the way it’s designed, most often provides that. And reality TV as you mentioned, which appeals to drama, scandal, and emotion, that too provides instant entertainment satisfaction for what many American’s want from a television show.
Great stuff, Ian!
AUTHOR JMattHicks
Posted on 6:59 pm April 1, 2011.
@josh guttman “It’s still the content that is king because without it, these companies wouldn’t have anything, but these models are far more efficient at generating that content for little or no money other than cost of managing the platform. Read more: Content is not king.”
You hit the nail on the head. Content will always be king, but in terms of revenue, if there was a “KingA” and a “KingB”, content and then supplying the content would often “co-reign” over that kingdom, if you will.
And do you have any additional feedback for Livefyre? We’re making numerous improvements every week and we’d love to hear more of your thoughts. Drop me a line sometime: jeremy@livefyre.com if you’d like to chat!
AUTHOR josh guttman
Posted on 2:09 pm April 16, 2011.
@JMattHicks @josh guttman Hey Jeremy – had a feeling I was going to hear from you after leaving that comment. For me, I have lots (probably hundreds) of comments already stored and logged in Disqus and so I’m hesitant to begin another collection of comments elsewhere. It works, it’s easy and I happen to be friendly with some of the team, so I’m biased. Some of your features with LiveFyre seem very cool, but given my investment of time already in disqus, there are some switching costs for me to consider.
AUTHOR JMattHicks
Posted on 2:48 pm April 16, 2011.
@josh guttman Well I can definitely understand your care for your user generated content and I have a personal appreciation for that. But if by switching costs you mean losing comments, Livefyre imports each and every pre-existing comment as long as it’s written back to your WordPress database, which Disqus comments are. So there’d be no loss of comments there at all.
Thanks for taking the time to add some more insight, great to hear from you again Josh.
AUTHOR matthew putman
Posted on 7:59 pm May 7, 2011.
This is a good observation, and does seem to be true. I would like to know your personal opinion, not as an investor, but a s a consumer of media, if you think this trend is a positive one for society? This is not a leading question, as I oscillate on this constantly.