The commoditization of content production and how it affects digital publishing

Oct 9, 2015
Vote on Hacker News

media-wall-1600x700_c

The following is a guest post from Nathaniel Philippe, Co-founder & Head of Content, Business Development & International at LeKiosk.

In the last few months, weeks, we have seen a dramatic increase in terms of deals in the media sector. A sector that has been for a long time criticized for its lack of innovation, dynamism and sustainability. So what is happening?

X. Niel & M. Pigasse are creating a new shiny fund of 500M€ to invest in media properties, Le Figaro bought last week CCM-Benchmark (which was for a long a time to sell in the market) for an amount of 120M€ (the amount was not disclosed, but was confirmed by sources close to the company), Webedia bought for a non-disclose amount Mixicom evaluating the company more than 70M€,…but we can also talk about the bulimia from P. Drahi (new Altice Group) who bought Libération, Groupe Express-Roularta, BFM TV (soon), and others or similar moves in the US with AOL being bought by Verizon or Buzzfeed by NBC.

One of my strong belief is that this movement is still at its early stages, and it will keep growing. Why?

First, technology companies are receiving tremendous amounts of funding with skyrocket valuation. Paradoxically, those companies are strongly dependent on media: they do need content producers to use and widespread their technology. We can name: Taboola, Outbrain, Ligatus, Wibbitz, Gigya, or Sharethrough that allow customers to sell “native” advertising that is displayed in feeds, is announcing 100M€ in revenue for 2015 and is working with more than 400 publishers.

Also, print publishers desperately need to adapt their traditional business model. We all have heard and known about the slow death of the traditional business model for print publishers based on circulation, newsstand sales and advertising. In 2014, Presstalis (the main distributor in newsstands in France) claimed that 950 physical newsstands (3.5% of the total) closed. Some of the print publishers are eager ton invest in digital media. Earlier this year Prisma (the number 1 print publisher in France) declared having a 100M€ envelope for investment in new media. They announced in September the launch of the French version of Business Insider for 2016. We can also quote the great example of Axel Springer, a traditional print publisher, that is now having more than 60% of their revenues coming from digital, which also proves the emergence of new and long terms business model for publishers.

The combination of native advertising, events, e-commerce, video production / advertising,… is starting to create a new and sustainable source of revenue for media outlets online from giants to independent publishers. We can refer to BonneGueule, a community about men’s fashion, which started as a blog, then released a lifestyle book about fashion, and online e-shop, and just started early 2015 to open its first physical shop. The company claims to reach more than 1M€ in revenue in sales without any advertising, or affiliation revenue! I can also speak about Gustave & Rosalie, a media which addresses the vertical of “couples”, which business model is based on native advertising. They just added a new pillar of their business model with the release of a box “La Petite Attention”, which consists in offering a classy gift for your boyfriend or girlfriend each month for 40€ a month that has been subscribed by a couple of thousands of their readers just a few weeks after their launch.

There is a new momentum in my opinion in the market with larger smartphones, the auto-play function on Facebook, the rise of Snapchat and vertical videos,…to tell stories, create new narratives. We are seeing famous actors releasing their serie exclusive on Snapchat like Sofia Vergara that is teaming up in the US with Fusion. Vertical video has now its own festival and the VideoCity Event in Paris early November that gather all the Youtuber, Viner creators is expecting to receive 25,000 people!! Pure players, publishers want and have to be at the edge of those new trends.

Of course, we can say that some players in the market are taking advantage of low evaluated media properties, or that media business models have still to be proven and validated in the long term and are being threatened by ad blockers. Still, we already see a value transfer to publishers, brands becoming media and new content producers. News has been for a long time a commodity, which means, it is available everywhere and for free. I believe one of the already emerging trend is that producing content will also become a commodity, and should reinforce the power of new media and storytelling, which is at the heart of what a publisher is.