Seeds of hope in a dark media landscape

This year, we are looking dark for the information sector.

Faced with a set of harsh financial realities – resulting from a mix of news fatigue, an unstable advertising market and a steep drop in traffic from tech giants – many media outlets have been forced to close their doors or to make significant budget cuts in recent months.

But there are some signs of hope. A small cohort of for-profit digital media companies that have sprung up during the pandemic have found success — at least for now — by taking the opposite approach of many predecessors, such as BuzzFeed and Vice, which inevitably relied on huge amounts of investor money. prioritize growth.

The new class of information start-ups — Puck, Punchbowl News, The ankle And Semafor are among the largest – have cut expenses and hired carefully. They are all focused on newsletters covering specific niches with broad appeal. They attracted high-profile journalists by placing them at the heart of the business, sometimes as co-owners of the companies.

“Maybe 10 or 15 years ago, there was a disconnect between funding structures and media companies,” said Jon Kelly, co-founder and editor-in-chief of Puck, whose 14 journalists write on topics such as politics, finance and media. “And I think the whole industry has learned from that.”

These start-ups illustrate a shift in conventional wisdom about how to make money in digital publishing. A decade ago, many venture capitalists and media executives believed that the then-emerging class of digital startups could eventually dominate the industry. The large influx of investor money was devoted to chasing as many people as possible.

But traffic from social media giants like Facebook and Twitter fell, and the economics of digital ads didn't work. Predictions of supplanting traditional television networks or sprawling print media empires never came true. The most recent outlet to try this playbook, The Messenger, folded in January, less than nine months after its launch.

Instead, the formula adopted by new start-ups is sustainable growth built on a mix of revenue streams, including advertising, paid subscriptions and sponsored events. Instead of trying to reach everyone on the Internet, they kept narrower coverage lanes and targeted high-income readers, following a path more similar to 10-year-old technology website The Information , or the political media Politico.

“What they all have in common is this intense need to serve specific audiences rather than serving everyone,” said Jacob Cohen Donnelly, founder of A media operatora newsletter on the media sector.

Other new businesses that have found early traction include posts on the Substack newsletter platform, such as The free press And The rampart, which attracted tens of thousands of paying subscribers. Several worker-owned publications, such as Defector And Hell's Gate, show promise. And some older digital outlets, like Vox Mediahave survived by expanding into businesses like podcasting and cutting costs.

Punchbowl News, begin in 2021 by three former Politico reporters, aggressively covers Congress and has become “the local newspaper of Capitol Hill in many ways,” said Anna Palmer, founder and chief executive officer. Now with 30 employees, Punchbowl publishes three newsletters per day and now covers more of the financial services sector. It seeks to expand into other policy areas.

“What we've really focused on is not something that people might find interesting, but what they actually need to be able to do their job at,” she said.

Punchbowl offers its morning newsletter for free, while subscribing to its other newsletters costs $350 per year. Access to Punchbowl's political reporting starts at $1,200 per year. The model is akin to Politico Pro (which starts at five figures per year), Axios Pro ($599 per year), and The Information Pro ($999 per year), the premium offerings of these websites.

Ms Palmer said Punchbowl had been profitable since its first year and had generated $20 million in revenue in 2023, although she declined to discuss subscription figures. A person with knowledge of Punchbowl's finances said that in the first two months of this year, the company had already reached 90% of its annual newsletter sponsorship goal.

The Ankler, a paid Hollywood-focused newsletter, is hosted by Richard Rushfield, an entertainment journalist who has established himself as Hollywood's ruthless gadfly, chronicling the industry's endless chaos and skewering actors, agents and managers responsible for its creation.

Ankler Media raised $1.3 million at a $20 million valuation and has been profitable for over a year, said Janice Min, CEO and founder of the company, who previously led The Hollywood Reporter and Us Weekly. The Ankler now has seven employees and publishes several newsletters, including Wake Up, a compendium of Hollywood news.

“If we want to make an analogy with Hollywood, it’s like these growing franchises are multiverses,” Ms. Min said. “People love what we do and see our newsletters as an extension of the voice that might have attracted them in the first place.”

Semafor is the largest of the group, with around 75 employees and the ambition to provide global news. But the company is charting a cautious path, said Justin Smith, one of the founders and its chief executive.

Semafor spear by the end of 2022, with 30% to 40% fewer employees than its original business plan anticipated, Mr. Smith said. The company decided to start smaller as interest rates rose and the economic outlook darkened.

“The pandemic has really marked the transition from the social media era to what we call the post-social media era,” Smith said, emphasizing that media outlets must now focus on direct relationships with their audiences .

For Semafor, this meant engaging in newsletters focused on a handful of topics, as well as the geographies of the United States and sub-Saharan Africa. Semafor now has more than 650,000 unpaid newsletter subscriptions, according to a spokeswoman. The outlet is hiring a Middle East editor and plans to add a newsletter focused on the region.

The company generates revenue through advertising and events and has a sponsorship deal with Microsoft for global election tracking and a generative artificial intelligence-assisted news feed. Mr. Smith declined to share specific financial figures for the company, but said it had enjoyed a few profitable months in the last six months of 2023.

Of course, nothing in media lasts forever, especially in a rapidly changing digital world. There is therefore no guarantee that the rapid success of these companies will translate into sustained growth.

Many of these start-ups are also making a somewhat risky bet on talent.

At Puck, the startup that covers topics like entertainment and finance, early hires like Matt Belloni, who is a definitive chronicler of modern Hollywood, and Julia Ioffe, who has established herself as a read A fixture of Russian politics, are “founding partners.” In addition to a salary, they receive bonuses based on how many people subscribe to their email newsletters and how many of them stay. New employees also get a small stake in the company.

Puck, which has about 40 employees, now has about 40,000 paying subscribers. Shortly after the company launched, Mr. Belloni accounted for about 30 percent of paying subscribers, according to a person familiar with the figures.

If one or more star journalists left the publication, would Puck's subscribers follow?

Mr. Kelly said he didn't “want to even consider a world” in which one of Puck's journalists came out.

“We made a promise to everyone: You will do the best work of your career here and we will find a way to make sure you are valued for it,” Mr. Kelly said. “And I really think our model is becoming one of the strongholds of our business.”

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