Episode 162

Anonymous Banker's bleak view of the media M&A market

I spoke with Anonymous Banker, an M&A advisor with a front-row view into the market for buying and selling digital media companies. Needless to say, it’s a buyer’s market.

AB breaks down the market for digital publishing assets – broadly those with page-based models – into three types of buyers:

  1. Harvesters
  2. CAC jockeys
  3. Vanity projects/rich person playthings

“If you're a publisher with a mostly ad-supported site, odds are your business will be worth less next year than it is now,” he said. 

Deals are still getting done, but the buyers are different. These are no-name PE firms above ice cream shops in the outskirts of Miami. We go through the list, which ranges from Valnet to Static Media to Savage Ventures to Regent. The playbook is to buy undervalued media properties, slash costs, and milk the programmatic revenue with hyper-lean models that rudely dispense with the nostalgia of “when the going was good.”

“Any content they invest in has to be ROI positive within 30 days,” AB said. “You’ll never see them spend $20 million hoping advertisers show up. Those days are done.”

Other topics we covered:

  • How AI uncertainty is creating overhang that depresses valuations and makes long-term modeling nearly impossible
  • Why the most resilient media businesses are lead-generation machines or conversion front-ends
  • We debate whether the Chernin Group content-to-commerce thesis was wrong
  • How Substack’s recommendation engine is the most efficient user acquisition channel in media
  • What kinds of content investors still believe in (hint: high-intent verticals, not general news)

Check out The Rebooting's new media product research report

Sign up for The Rebooting's Online Forum on May 21 at 1pmET featuring a case study on how Recurrent migrated its CMS across a portfolio of sites without disruption

Transcript
Brian:

Welcome to The Rebooting Show.

Brian:

I am Brian Morrissey.

Brian:

Before we get to today's episode, I wanna take a moment to highlight a couple of things that we have going on at the rebooting.

Brian:

this is one of our busy seasons, which I think is mirrored throughout the entire industry.

Brian:

I, I used to joke that there was, there was an event season, like a Taliban have a fighting season and usually it is around now, it's sort of late.

Brian:

April through Cannes, and then it starts again in October, November, and those make up like one third of the year, but they make up like two thirds of the business.

Brian:

So we have a lot going on and, I'm very excited by a lot of these projects And I wanna highlight a couple, for you.

Brian:

If you'll indulge me, first we just released a new research report.

Brian:

We're doing a lot of these and, I think they keep getting better.

Brian:

we have a good system going and we're getting good insights.

Brian:

So those of you who have participated, thank you very much.

Brian:

I'm hoping to put together a program I. that rewards people to, you know, share their insights with us.

Brian:

But we did this, we, you know, we surveyed over a hundred, product leaders of publishers and then we complimented that with a series of stakeholder interviews and we were basically trying to get how publishers are navigating

Brian:

the, the shift from the scale era platform to dependency to product led growth and doing it against the backdrop of, you know, the reality of this being a more with less era.

Brian:

Some of the key findings are that, you know, audience engagement remains a top priority, product priority, but there are tech limitations in organizational silos that often prevent progress.

Brian:

And a majority of respondents, you know, allocate most of their technology budgets to maintaining existing systems.

Brian:

And this leaves a little room for experimentation.

Brian:

Now, as for ai, it is being used no surprise to streamline workflows and assist in marketing and operations.

Brian:

But right now, editorial adoption.

Brian:

Remains kind of off limits at a lot of places.

Brian:

I think people are very wary about diving into that.

Brian:

can understand that, but I think it might also be a mistake because this, this is a, an assistive tool that will be part of every single process, if not replace a lot of them, to be honest with you.

Brian:

another finding was that many companies, you know, are using third party or hybrid CMS solutions.

Brian:

The, the era of like creating your own.

Brian:

CMS and giving it some name from Greek mythology is those days are over.

Brian:

and finally, product leadership is often fragmented.

Brian:

and that leads to conflicting priorities.

Brian:

and we get into, you know, how this manifests itself, in the day to day and the report.

Brian:

So do check out that report.

Brian:

secondly, we are hosting another online forum also with WordPress VIP.

Brian:

This is later this month.

Brian:

This is on, May 21st at 1:00 PM I'll be joined by Aaron Siegel, the head of product and engineering at Recurrent.

Brian:

And Lauren Stefano, customer success Manager, WordPress, VIP.

Brian:

We're gonna dig into how recurrent overhauled its tech stack, across, you know, multiple brands in its portfolio and how it did that.

Brian:

You know, without stopping innovation or compromising, you know, the user experience.

Brian:

And so this online forum, we like to go deep.

Brian:

It's very interactive.

Brian:

I try, I treat these things less like quote unquote webinars and more like digital programs.

Brian:

so definitely check it out.

Brian:

We'll get into like why flexible open source platforms, are replacing custom CMSs, how to consolidate infrastructure without, Without slowing down product cycles.

Brian:

And, we also get into how recurrent, makes the most out of one-off traffic spikes in, in order to convert them into long-term and sustainable audience engagement.

Brian:

So do join us for that on May 21st.

Brian:

this is all against the backdrop we are doing to actually later today because this is delayed.

Brian:

I admit.

Brian:

This podcast is delayed today.

Brian:

we're doing the media product forum.

Brian:

With WordPress, VIP at Chelsea, peers, and we're gonna get together about 150 top product people at publishers.

Brian:

I'm gonna be doing a conversation, with Neil Vogel, the CEO of Dot Dash Meredith.

Brian:

We've got product leaders there, from Hearst, from the Free Press, from Forbes, from a whole swath of Politico, a whole swath of publishers.

Brian:

So it's gonna be a great event.

Brian:

anyone who's listening, the day of the event, I look forward to seeing you later.

Brian:

anyway.

Brian:

Do keep in touch on all these events.

Brian:

I'm gonna, be promoting, various things we're gonna be doing in Cannes later if, if you go there.

Brian:

But I wanna get on to the conversation.

Brian:

And again, you can find links to, to the report and to the online forum in the show notes and on the rebooting.com.

Brian:

this week's episode, I'm joined by someone who is familiar to listeners of, the other podcast.

Brian:

I. They do, which is called people versus Algorithms.

Brian:

And that is Anonymous banker, AKA ab, AB is something of a breakout character, from PVA.

Brian:

so I wanted to do a standalone episode with him to get deeper into how the m and a market and media is actually working or not working.

Brian:

and AB has, has a, a tight grasp on that.

Brian:

So he breaks down what's changing in deal making and why many media assets are trading.

Brian:

Like in his words, a declining chemical business and how the current market has coalesced around.

Brian:

Three types of buyers.

Brian:

One is the financially driven operators.

Brian:

These are people that you know are not household names.

Brian:

They're people like Static Media or Val Net.

Brian:

They optimize for cash flow.

Brian:

They often are very reliant on programmatic revenue.

Brian:

These are canny operators.

Brian:

We get into the different players in this.

Brian:

The other ones are, you know, strategic acquirers who are using media to reduce, customer acquisition costs.

Brian:

Or just to gain soft power.

Brian:

You know, the soft power part is the billionaires, you know, it, it gets you into parties, whatnot.

Brian:

But there's a lot of companies with contiguous businesses to media who see it as a way to cut down on their acquisition costs.

Brian:

and.

Brian:

AB breaks down, why that makes sense to them.

Brian:

and, you know, there are still, you know, related high, high net worth, you know, vanity buyers, who treat media as a way to get cultural access.

Brian:

you know, or just, you know, virtue signaling, let's be real.

Brian:

So it's a wide ranging, sometimes depressing, but I think, very insightful conversation and I hope you enjoy it.

Brian:

As always, love.

Brian:

Your feedback.

Brian:

My email is bmorrissey@therebooting.com also you can leave us a rating or review wherever you get these podcasts.

Brian:

I always love to see them.

Brian:

And now onto my conversation with ab.

Brian:

Ab, welcome to this crossover episode.

Brian:

you, you are a breakout star on, People Versus Algorithms.

Brian:

So I wanted to, I wanted to do it without Troy hovering around.

AB:

Got it.

AB:

Cool.

AB:

I met actually a fan last week.

Brian:

Did

AB:

In the wild.

AB:

Yeah.

AB:

My first, I've never had that before,

Brian:

Oh really?

Brian:

It's fun.

AB:

yeah,

AB:

didn't sign any

AB:

autographs.

Brian:

did they recognize your disguised voice?

Brian:

Do you walk around with your

AB:

Exactly.

AB:

Yeah.

AB:

With my 11 Labs app.

AB:

no, it's, it's been fun on the, other podcast talking about this market stuff.

AB:

A lot of times I don't think it's that interesting, but people seem

AB:

to find it

Brian:

it's interesting because like most of the people listening to this podcast are not deep in your world.

Brian:

We would always find these things.

Brian:

when I was at Dig Day, we would do these, which is kind of like this.

Brian:

We would do these confessions, which were like anonymized q and as in particular areas.

Brian:

And usually the reaction would be twofold.

Brian:

The people who were in that area would be like, no, duh.

Brian:

And the people who were not in that area would be like, holy shit, that's screwed up

AB:

Yeah.

Brian:

and you wanna like, it's perfect.

Brian:

You know?

Brian:

'cause I'm like, I would get, I would get the, those two types of messages that were sent to me.

Brian:

All I care about is I get the messages, so I

AB:

thing is to prepare you, like provide insights that people wouldn't normally have or peel back because like some of this stuff isn't a secret, but I just don't think the information is fully distributed.

Brian:

Okay, so let's talk about what's not a secret, but like is is not distributed.

Brian:

And I wanna start with the state of the sort of publishing and then we'll go broader into media.

Brian:

m and a market.

Brian:

I, I know this having over the years, having talked to investment bankers, you guys think it's always a great time to be doing deals.

Brian:

If the market's up good time to be doing deals.

Brian:

If it's down good time to be doing deals, is it a good time to be doing deals ab.

AB:

For digital media or traditional media, I think you're at this place right now where you can, with a 90% certainty, predict that the value of your company will likely be less next year than it is this year.

AB:

Right?

AB:

Just because of so many significant headwinds between audience fragmentation.

AB:

advertiser fragmentation and ai.

AB:

people have asked me like, when is a good time to sell their business?

AB:

And this is like a digital media site or someone who has something that has a subscription plus a digital site.

AB:

I think that's like a simple way to think about it is you're always trying to figure out, okay, with market timing, if I can grow my business a little bit more while I get a higher multiple, will there be more buyers?

AB:

I, I think next year there's gonna be continuing to be less people interested.

AB:

the multiples will not change or have gone down and just the market continues to get tough.

Brian:

So what, so that is basically the market has kind of hates these businesses to some degree.

Brian:

Any business that is a webpage business, it seems like the market is almost marking to zero to,

AB:

off.

AB:

Yeah.

AB:

They're risk off.

AB:

Yeah.

Brian:

That's a nice way of putting it, risk off.

Brian:

and that basically means that it's clearly a buyer's market.

Brian:

but who are the buyers, right?

Brian:

Because I think we've seen emerge and we talked about this on PVA, which everyone should check out.

Brian:

we talked about this new set of buyers.

Brian:

they're different, you know, they'll, they'll, they'll have offices in like, you know, like an, a nondescript area of LA or, you know, they'll

Brian:

be, you know, they're, I just feel like what we're seeing come in the market is not like big name strategics, but people who are very good.

Brian:

I think we call it like harvesting

AB:

Yeah.

AB:

I was visiting one yesterday in South Miami.

AB:

They were the second floor above an ice cream

Brian:

South, my house, second floor above an ice cream shop.

Brian:

I love it.

AB:

and they make a lot of money.

AB:

so I think the people that I. Still exists here.

AB:

You have companies like Static Media, thal, Val, that's the one that just bought the, the asset from, Vox a couple days ago.

Brian:

God, the asset we're, we've gone beyond calling them brands to be calling them the asset, the

Brian:

thing

AB:

and so there's probably Polygon.

AB:

There's like, there's like 10 of these folks.

AB:

There's like five that are relatively big.

AB:

and what they do is they look at these businesses and like the first part of my career, I sold a bunch of newspapers.

AB:

and the unfortunate thing after most of those newspaper deals closed is I knew like half the people were gonna be fired, at the company that

Brian:

You're like Bud Fox.

AB:

Yeah.

AB:

It's like a

Brian:

Do you even know that?

Brian:

Do you know Wall Street?

AB:

I don't know.

Brian:

The movie Wall Street.

Brian:

But Fox was the Charlie Sheen, you know, and they would, they would strip out like the Overfunded pensions.

Brian:

They would go after the overfunded pensions to.

Brian:

Milk them.

Brian:

That was how it was done in the eighties.

AB:

And so in the newspaper world, same thing with these digital sites, like you're effectively, and I don't think it's just the operators trying to necessarily maximize value and cut.

AB:

Any valuable person.

AB:

What's happening is Google's changing how it perceives content and how it drives users to these websites, which means, and this started really happening about two years ago, where publishers

AB:

were rewarded for publishing more thinner content because through Google Discover and Google News, that's where a lot of websites are finding net new users to come visit their pages.

AB:

And so people shifted their editorial staff to much more freelance, less thinking about expensive articles, evergreen content, and more focused on purely just writing a bunch more.

AB:

And so the normal owners of these businesses like Hearst and Conde, they're kind of just sitting there.

AB:

They obviously have much more diversified businesses, family, money that can keep their media operations going.

AB:

But the people that are succeeding now buy the businesses, cut a bunch of headcount, and then rely a lot on programmatic, to, to drive revenue.

AB:

They've, they've all dipped their toes into affiliate direct sales, things like that.

AB:

but most of them, their core, 80% of their revenue is from programmatic advertising.

Brian:

Okay.

Brian:

So gimme some of the players in here.

Brian:

'cause we've seen them, like it says to me the like.

Brian:

The consideration set when we talk about the harvesters, right, are like the people like Savage, I mean the name Savage Ventures.

Brian:

I know that there's a guy whose name is Savage, but it just, it fits.

Brian:

Like, I don't know if you want to be owned by someone who, whose name Savage, like, you know, the name is on the label at that point.

AB:

yeah.

AB:

So they acquired Vice last year, and then they acquired pop culture media from CBS.

Brian:

Right?

Brian:

and, and and the play there is, it's not like they're going to rebuild the vice of old, this is not gonna be the, the swashbuckling vice.

Brian:

This is an asset and the asset has value and that's why it was traded.

Brian:

That value is very different.

Brian:

And you know, they're gonna run, they have a playbook.

Brian:

Like what is, what is the playbook of someone like Savage?

AB:

To turn back on the content in a very inexpensive way using freelancers.

AB:

there's a lot of SEO juice that they're relying on, so like the domain authority of the website.

AB:

So when, when they publish, they know it's gonna get syndicated better.

AB:

yeah, the, the deal value was honestly probably mirrored one year of Shane Smith's.

AB:

TE budget, that's like the degradation and value that happened at Vice between, from the investment rounds to the, the, the deal last year.

AB:

so it's cheaper content.

AB:

They're republishing some video, they turn back on the magazine with a limited run, I think it's published quarterly with like five to 10,000 print copies.

AB:

they're, they're not gonna just completely like, abandon any of the creativity around content.

AB:

So they'll probably turn on a couple podcasts.

AB:

There's ways to do that content in a economical way and use the brand and use that halo, but it's, they're never gonna invest like that, that vice deal too, to be clear, it's Vice Media.

AB:

It's not the TV and the production assets.

AB:

So it's two separate things.

AB:

So Vice Media owns vice.com, motherboard, all these things in the YouTube channels and, and the food brand.

Brian:

munchies.

AB:

Munchies.

AB:

And so I think they'll selectively invest in those, but you'll never see.

AB:

' all the investment is gonna come from cash flow.

AB:

There's not an investor that's going to sit there and say, I'm gonna spend $20 million and put a bunch of new content out there and hope the advertisers come.

AB:

Any content that has to be R-O-R-O-I positive within 30 days.

AB:

And so it's just a different way of, of running these sites.

Brian:

Okay.

Brian:

And is that the sort of common, sort of approach?

Brian:

Like, I mean, like we saw Geom Media keeps shedding assets, right?

Brian:

Like, and I think I joked with, with Jim that he used to sell ads and now he sells websites.

Brian:

Maybe he made the joke himself and I just repeated it to him.

Brian:

and I mean, they shed, and I always find these things like pop up that I've, I've heard of tangentially, you know, like for

Brian:

instance, geom Media sold Quartz, which look, it was a withered, it was basically a minimally viable brand at the that point.

Brian:

But at the same time, like Quartz used to have, like, it used to be a pretty robust company and it was from a different era in, in many

Brian:

ways because the playbook then, you know, when it was started out of the Atlantic, was we're gonna lose money for like three to five years.

Brian:

And that was the typical way you built these properties is you're gonna lose money.

Brian:

And then it, it got unloaded.

Brian:

To this Canadian software firm, red Brick.

Brian:

I mean, I had known them for buying like a, a, a newsletter, basically outsource ad network.

Brian:

but kind of an unusual, I mean, these are the, are these the kinds of, of, are they in the same sort of world as this savage or they're different?

AB:

Yeah, I think where, where someone like that comes into play, and you'll always see these like unique things of where someone like a credit card company is buying a food media business.

AB:

It's like someone said, we need to reduce the cost of customer acquisition.

AB:

So if we have this media company, everything will be magical and our CAC will go down.

AB:

I don't.

AB:

Don't think it usually turns out that well.

AB:

because a business that's not a media company running a media company, they don't know the levers of growth.

AB:

They typically hire a bunch of consultants, spend a bunch of money, and then either shut it down or spin it out.

AB:

you saw that with GameStop.

AB:

They owned, I think it's, they had this magazine called Game Informer, that they shut down and they finally sold off.

AB:

But that was like an amazing title inside.

AB:

They could have done so much with it, but they just didn't have the, the wherewithal to operate it properly.

AB:

And so I think that type of buyer's completely different.

AB:

There's probably like, if you had to break it up into sort of three pockets, there's at a go, they sold Onion, right?

AB:

And Onion was acquired by, I forgot the lineage of the person, but it's someone that's had a billion dollar plus exit, wanted to play around.

AB:

I think they're running it actually pretty well, so it's not gonna cost him a lot of money.

AB:

But you have this bucket, mark Benihoff with time Magazine.

AB:

Where they try to bring some cultural relevance back to those brands, grow them and kind of have them as like a, a thing.

AB:

People have used media since newspapers to, I mean, they talked about, Jared, Jared Kushner using the New York Observer to kind of make his way into the New York scene.

AB:

And I think magazines, other dot coms, you know, if they have the right cache can help get you into different parts of society that you may not have been

Brian:

Okay.

Brian:

So their economic purpose, their economic purpose is totally different in

Brian:

that model.

Brian:

And in a lot of these models, the economic purpose is very different than it used to be.

Brian:

And I think this is a simple point, but an important one, you know, in that it's less about connecting a, buying a sell site and serving

Brian:

like an important role in the marketplace with, you know, with connecting, you know, information and being an intermediary there.

Brian:

it's more being a front business to a different business, whether the job is being done to lower CAC or you know, whether it's just

Brian:

a pure arbitrage play and that there's an opportunity here if you cut costs to financially engineer these into being profitable assets.

Brian:

I mean, I think, you know, Reed at Apollo will, will regularly remind me that like a OL is like a massively profitable business.

Brian:

You can, you can make money off of a lot of things at different.

Brian:

Parts of their lifecycle, or it's a way to get, you know, into parties for rich people, I guess.

Brian:

You put on the party, it's the best way to, to

AB:

Yeah,

AB:

there's effectively, it feels like there's three buckets, right?

AB:

And ROI is different in every case.

AB:

So the wealthy folks, and I would even say this of, the Steve Cohen, like the Feast Bulls acquisition and things like that is there might be other ways that they're calculating ROI versus pure just money ROI and then.

AB:

Second bucket is probably like these adjacent companies that wanna bring down cac, and then the third one being the Val net Static Media Savage, where they're actually trying to get real ROI.

AB:

and they've been pretty successful.

AB:

I think where they struggle is they're still at the whim of Google.

AB:

a lot of them are happy because Facebook is giving publishers back its traffic right now, which they had turned off for a few years.

AB:

which means that like Facebook is now being much more open about letting people click on links and go out off the site.

AB:

But even though they're so operationally minded and profitable, there's still under constant, pressure because Google keeps changing things and, you know, AI's here.

AB:

So the traffic's just getting less.

Brian:

Yeah, I mean, I did, I did the, an online forum with, James Koser from from val Net about their Facebook strategy.

Brian:

And like, 'cause a lot of, it's like we've sort of moved on from the Facebook, but Facebook sort of came back like, and I, I guess in journalism you always say something happened quietly when you just didn't notice it originally.

Brian:

it quietly came back and, you know, they're really smart about how they operate these businesses and you have to be, you have to be executor first, like vision comes second.

Brian:

Like, I feel like at in, in these, like it's very, and media's always been an execution business, you know, I mean, Shane painted a

Brian:

great, great picture, of the future and, you know, he was able to like, you know, close massive deals over a thousand dollars bottle of wine.

Brian:

but it's a spreadsheet game now.

AB:

Yeah, the, at the kind of the twilight of the newspaper land is like when they started to put together the editor and publisher role.

AB:

'cause it was always supposed to be separate, right?

AB:

Business and editorial.

AB:

But as you said, these businesses are, are focused on the bottom line.

AB:

And so yes, they have editor people, but the, the direction of the different titles is completely based on business motivations.

Brian:

So how much is there an AI overhang in, in the m and a market when it comes to valuing these assets?

Brian:

Because it's very uncertain what the value of a, to me, I would think it would be uncertain what the value of these assets is gonna be in three to five years.

Brian:

There's not a lot of, visibility.

Brian:

I can remember, you know, my first job in journalism, it was right in the.com implosion, and so I would listen to all these, Earnings calls of people who had, like, were running

Brian:

like web design agencies, but were, were for some reason publicly traded and they were totally in over their heads, you know?

Brian:

And so they were like cracking under the pressure and they're like, we don't have visibility.

Brian:

And that's, it's like, we have no idea what's gonna happen.

Brian:

How much of that is because like, you know, I feel like I compare it to like Wiley Coyote, like going off the cliff, his, like, his, his legs were still churning and he wasn't dropping immediately.

Brian:

Right.

Brian:

And it seems like with, with ai, you play out a lot of these scenarios and it is not good for a lot of these assets.

AB:

Yeah, I think the, the Ben Thompson interview with Mark Zuckerberg where he's like, we just want the, the brands to come with their credit card and we'll get 'em customers that,

Brian:

vending machines, that is what people want.

Brian:

They do not wanna buy advertising, they wanna buy customers and they want it to be predictable.

Brian:

And Facebook prove this like.

Brian:

Remember when, remember when they just basically pulled the rug out from the brands and said, nah, you're not gonna get your organic.

Brian:

You helped build this.

Brian:

You advertise Facebook.

Brian:

Now you're gonna have to pay for distribution.

Brian:

I, being a moralistic journalist type was outraged . I did not like this.

Brian:

I was like, this cannot stand.

Brian:

Guess what?

Brian:

The marketers didn't care.

Brian:

They were like, we'd rather have predictability and we will pay for like predictable distribution.

Brian:

We pay for distribution all, all the time.

Brian:

We don't care about ads.

AB:

And so that's like, to me that's, I know we're a little bit off topic of what the question you asked, but that to me for, and

AB:

then basically the way that Mark talked about, like, I just want to give, he just basically, I need to give the machine more power.

AB:

Right?

AB:

And when you think about what Facebook is doing, so they're building the data centers, in some cases they're now adding power factories.

AB:

Like they're taking the marginal costs out of so many processes where people used to get a spiff.

AB:

So there would be a power company and then there would be a data center company.

AB:

And like a lot of these businesses like Google, Amazon, they're literally, it's, it's kind of a weird thing to think about, but they're end to end.

AB:

They're like capturing all like they're no cost.

AB:

They're capturing a lot of the value.

AB:

And I think that.

AB:

Even if you were to build an hour, and I know you don't have the distribution of a Facebook and the audience, but the, to try to even just compete with Facebook going forward, is there gonna be

AB:

able to compete so much better because they're not paying middlemen for anything for compute power, da da da, they're building their own chips.

AB:

Like, and everyone else is gonna have to basically use someone else's model, to, to drive similar, not similar experiences, but similar kind of outcomes.

AB:

So where I see, I guess what scared me is like I see a lot of these ad tech companies, everyone will always figure out different

AB:

ways of like, I'm going to test for adjacency and, and guarantee identification and, and reduce waste and fraud and da da da da.

AB:

But I think what's interesting in the, in those instances is Facebook is basically the kingmaker because Facebook doesn't give that data to

Brian:

No total black box.

Brian:

And it is a, it is what, what Martin Sorell used to call it, like, he would say like in a very British way, like it's transparently untransparent, which I kind of love.

Brian:

And it seems like the market is moving towards that.

Brian:

And I think we always talk on PVA about, you know, media, media being downstream of, of all kinds of different things, starting with tech and being downstream of a market that has shifted to outcomes.

Brian:

And is less, is less about are you whatever, MRC certified or whatever.

Brian:

Like they're just, you know, I, I'm reminded of, you know, for a while the TV upfronts were the Wiley Coyote, you know, it was, it wouldn't drop.

Brian:

It was like the, the, it was like, why is this still up?

Brian:

And it was like literally like the, the brand managers were like, you know, look, I don't care about your like, counting clicks and stuff.

Brian:

When I run a flight of TV ads, I don't care what the, like my sales go up, like things happen and that's all I sort of care about.

Brian:

And you know, mark Zuckerberg is basically just gonna use three Mile Island.

Brian:

I know it's Microsoft opening that, but allow me some poetic license in order to create an end-to-end system that does away with not only

Brian:

a lot of the ad tech, that sits in between, but he's coming after like the advertising agencies too, to some, to a large degree.

AB:

Yeah, I mean, if you, if you're doing hyper-targeted ads, the creative can be built with ai.

AB:

There's so many things that AI can probably do a better job than a bunch of 25 year olds at a ad agency running around putting creative together and

Brian:

like if you think about it, like I remember, like I know like, Troy has like what Chamath derangement syndrome.

Brian:

but I thought one thing that he said that was very smart, although he said it very slowly, was, you know, that SaaS companies were basically arbitrage on software talent, right?

Brian:

And, companies couldn't hire that software talent, themselves.

Brian:

It just would be inefficient agencies in some ways were just, you know, have been, I mean, they're basically arbitrage for creative talent like you do you.

Brian:

You couldn't get a ccra, you couldn't get a top-notch creative to sit in IBM.

Brian:

That was the old thing, you know, forget about IBM now, but like, so you, you would rent them from Droga, right?

Brian:

but now that like everything, it's just a form of content.

Brian:

When the cost of that goes to near zero doesn't mean you don't need creative talent.

Brian:

But you don't need, like, you don't need McCann.

Brian:

You know, you don't need there, there's a few people that will need that kind of like distribution, whatever.

Brian:

But like the majority of the market, it's already been shown is the overwhelming majority of the market is people who are just doing self-serve.

Brian:

You know, that's why any of these advertiser boycott cots never get outta the gates.

Brian:

'cause it's like you have no leverage.

Brian:

Not when someone has millions of customers.

AB:

Yeah, and the, the palette of most consumers is actually relatively low.

AB:

So that's what's so, so on the AI side, we talked about Facebook and Google and how they're gonna eradicate all these different layers of age agencies.

AB:

One thing to think about on the consumer or like a service side, is as you have to spend less on, say, a call center, they're gonna have more margin to then push into advertising.

AB:

It's this really interesting flywheel that will just, I think, make Facebook and Google more valuable, because as businesses.

AB:

Get better and more productive because they're able to wipe out costs for with headcount or other services by bringing you in-house or using some sort of AI vendor.

AB:

Is there gonna put all that margin to going after customer more margin to going after

Brian:

Right, so you could have a situation.

Brian:

So advertising usually, I forget what the percentage is, but like it was always a percentage of GDP and so like when GDP falls, advertising falls, that's why advertising is

Brian:

a really good canary in the coal mine with the economy really is because the first levers that that companies like when you're looking for.

Brian:

You know, I think what like five of the last three recessions have been predicted?

Brian:

Isn't that the old, expression?

Brian:

and that's clearly been happening since the pandemic.

Brian:

'cause things are just wildly gesticulate.

Brian:

I, I even forget, like, there's been so many, many recessions that have been predicted.

Brian:

I, I like forget some of them.

Brian:

but now we've got the tariff recession coming and like one of the things that stood out to me at possible was, again, to go back to this Wiley Coyote, is like everyone was preparing for the tariffs to hit in a couple of months.

Brian:

And already they're seeing softness in advertising.

Brian:

Because when you look at the levers that can be pulled by the CFO, I don't know if the CFO reads those adage articles that say do not cut, you know, advertising in a downturn, but they never pay attention to them.

Brian:

And they have a few levers, you know, and what I saw was.

Brian:

I'm out there inviting a bunch of marketers to one of the dinners that we did.

Brian:

I hope that's protected, by the way, from ai.

Brian:

We can talk about that.

Brian:

but so many people were like, we're not traveling.

Brian:

We, they cut our t and e. And I'm like, oh, you know, 'cause like that's one that's like, it's an easy first step.

Brian:

Advertising comes next.

Brian:

Like, 'cause you don't wanna start to like lay off people.

Brian:

But to me that was like a sign that I looked at was like, oh, that's a little weird.

AB:

so the other side of that is a lot of these performance businesses are having some of the best months because as certain

AB:

brands leave the market, they're able to kind of come in and get customer and they're, they're just spending more and more money.

AB:

'cause there's, there's insurance, there's a lot of advertisers that still want customers and as long as they know that they can pay for them and still make return on that investment, some of these guys are having massive, Q ones and Aprils.

AB:

Yeah.

Brian:

But I think my like larger point was that I was trying to get at was that advertising as a percentage of GDP, I forget who said it should go up, it should actually decouple and that would be like historic.

Brian:

And so you would think like if this were a normal market, like publishers would be like, wow, this is amazing.

Brian:

The market is getting bigger.

Brian:

We're actually in a market that's growing because we're exposed to advertising.

Brian:

But the problem is all of the gains are gonna go to not to publishers.

AB:

Yep.

AB:

And that's how it's always happened, right?

AB:

So like they, they always have those pie charts which show whatever.

AB:

80% of every dollar that comes to digital advertising goes to Meta and Facebook, or sorry, meta and Google.

Brian:

So is there a future then like, so I mean basically the market is, is saying that a lot of these ad supported page-based models are.

Brian:

Almost worthless to a degree.

Brian:

I don't wanna say worthless because you, you have intangible value and brand and you have distribution.

Brian:

You have SEO juice and whatnot.

Brian:

But that there isn't necessarily a future for these businesses as they're operating to grow.

Brian:

The, the future is you can financially engineer growth in different ways, but like what they do is not gonna have a greater economic, you know, value in five years.

AB:

Yeah, so I think there's sort of.

AB:

Two groups you have, you know, Don Dash Meredith is turning on like new ad tech, right?

AB:

Because they're like, Hey, we have such good intent data.

AB:

Let's figure out how to better monetize this both on our properties and then off of them.

AB:

And so I think if you're a bigger platform, you can make a push to becoming more like an ad tech business where you're starting to decouple necessarily people advertising directly on your

AB:

sites, but you're getting more of this brand money just to find these customers wherever they are and become more performance-based advertising.

AB:

I think the way that the rest of the world, like when some of these smaller assets are trading in, the multiples are trading at, which is typically 4, 5, 6 times current near ebitda.

AB:

That's indicative of al of almost like a. Old, like a chemical business, right?

AB:

So lower margins, low grower.

AB:

I think to your point, there's not going to be massive value increases for these typical mainline digital media sites or, or media brands.

AB:

but that's how they're trading, right?

AB:

And so you can still, depending on how much leverage you use, how conserv conservative you are with capital, you can still make a pretty good return, just to make sure you're buying them at the right price.

AB:

And the expectation is you're never gonna go tw grow 20% year over year.

AB:

You're gonna get the uplift by cutting costs.

Brian:

ahead.

AB:

always opportunities to do like unique tuck-in, like there's a, the best kind of glue factory and not in a mean way, but is this group out of LA called Region lp, which is a private equity firm.

AB:

So they got cheddar and along with TR Cheddar, they got raped.

AB:

My professor was, which is actually a really valuable business.

AB:

they just got a bunch of those assets, like the tech publications for like Apple.

AB:

news.com or like a bunch of like esoteric kind of tech focused things.

AB:

and so the goal there is just to kind of like the, they get these assets for effective or they got tech crunch too.

AB:

they're not paying that much for these assets and they're just kind of getting nice dividends from the cash flow

Brian:

I mean, that's like a, that's a great example of one of, is it region or Regency region?

Brian:

Region Regency is the, they used to be a, a, a movie theater chain.

Brian:

so like region is a great like example of one of these companies, right?

Brian:

That is collecting a lot of these assets.

Brian:

And they're, their main thing is that they, they are great operators of these assets, right?

Brian:

Like, it's not like they are building assets, you know, they're, they, they don't create media or anything, you know, they're a holding company, right?

AB:

People go to Regent, like corporates go to Regent when they have a problem and they just want to spin off a division and fire a bunch of people and don't want the negative press.

Brian:

Oh my God, this is depressing.

Brian:

Av this is very depressing.

Brian:

People say that I am like, I'm like, no.

Brian:

I was like, I, it's the people I talk to.

Brian:

It's not

AB:

Yeah, I mean there are, there are like a lot of fun things happening in media.

AB:

Like I think audio is doing, like obviously audio had a pretty good run, seven or eight.

AB:

Six or seven years ago with some really great exits.

AB:

There's new money going in, people are figuring out better ways to monetize.

AB:

The whole newsletter ecosystem is growing and interesting.

AB:

I don't know how much real enterprise value will be created there versus just really good jobs for people on the newsletter front, on the substack front.

AB:

but it's like, you know, just to kind of to pause on Substack for a second.

AB:

So I did not appreciate how much people say like your newsletter or we take Pat's newsletter, a daily upside.

AB:

I didn't realize how much you have to pay for new subs.

Brian:

Oh,

Brian:

I don't pay.

AB:

mark, okay, but if you have like a 1440, like how much 14, 40 is paying, right?

AB:

It's a buck.

Brian:

Yeah.

Brian:

Buck 52 bucks or so

AB:

just for like, the ability to register somebody and then the potential for them to register, open it up and actually become an active person is like T 20%, right?

AB:

And so, I guess what surprised me is as much as people hate on Substack, it's like it's bringing Ensure they're stuffing people with all these extra newsletters they don't need, but you're not paying for these

Brian:

Oh yeah, no, it's a great deal.

Brian:

It's a great deal.

Brian:

I mean, I was on Substack for, I dunno, two and a half years, right?

Brian:

And you know, all of a hundred percent outside of like word of mouth and people forwarding around.

Brian:

Almost all of my growth came from their recommendations Network.

Brian:

And I paid $0.

Brian:

I hosted, I paid $0.

Brian:

I didn't have subscriptions at the time.

Brian:

I paid $0.

Brian:

So like I was a complete cost center.

Brian:

To Substack, every single email gets delivered.

Brian:

I mean, it's like amazingly amazing service in that way.

Brian:

And I'm like, thank God for venture capital money, because like, that's not a good deal for substack to be basically subsidizing me.

Brian:

because my model was in basically reaching high value audience segments and getting them to take some kind of commercial action on behalf of my partners.

Brian:

And, you know, the growth features were real, like didn't have to go and pay.

Brian:

Now, the, a lot of the people ended up on there, you know, were not, you know, they, it wasn't like a co-reg, you know, it's like somewhere in between, like, I think a lot

Brian:

of times people, and that's, I think, you know, a lot of media, particularly in this area has gotten over the aversion to, you know, that idea that only losers pay for it.

Brian:

because, you know, acquisition.

Brian:

Paying for, for distribution is going to be just the common cost of doing business, I think in many of these areas.

AB:

Yeah.

Brian:

Yeah.

AB:

So to your broader point on the sky is falling, there are fun places that people, I think sports media, as we talked about that before, on

Brian:

Yeah.

Brian:

Good.

Brian:

Good golf, good

AB:

yeah.

AB:

I mean, they're, they're interesting businesses.

AB:

They're not gonna look like they were in the past.

AB:

I don't think they're ever gonna be as stable.

AB:

There's not gonna be like this monopolistic power, that existed before.

AB:

You just have to kind of keep innovating.

AB:

But like, it's not all bad.

AB:

Right.

AB:

Cons.

AB:

Consumer attention is still up for grabs and advertisers

Brian:

Okay, so what areas are, what areas are growing outside of the freaking tech companies?

Brian:

Obviously they're growing in media and media adjacency.

Brian:

I mean, like I look at media, like anything, like anyone who uses media as a front end to a commerce business or like any kind of media.

AB:

Yeah.

AB:

So I think.

AB:

So the reason why, just take, take one specific thing that I know a little bit about.

AB:

So sports is interesting because there's a change in consumption habits.

AB:

And what I mean by that is like the amount of people that watch sports on linear TV in a live environment is shifting to now not live on their phone, on social media.

AB:

So the value that these large broadcasters use to favor for sports rights is changing.

AB:

In some cases, it's staying the same or going down a little bit.

AB:

And so the teams, the leagues, everyone else has to figure out, okay, how am I gonna make value off of these sports rights?

AB:

and then more broadly speaking, like these athletes are marketable people.

AB:

Like how do we build content around them?

AB:

How do we use them to convince consumers to basically buy stuff and feel good about, feel good about it?

AB:

And so in the good, good golf example, you see a company that's both going after the media side, but also the commerce, and hoping to kind of stitch it together in a, in a relatively large market, it's like 50.

AB:

I looked up the number before, it's like 50 million people that play golf either on a golf course or at a golf simulator or some sort of hitting range.

AB:

So that's a, a big part of the US that is touching a golf club and they're buying the clothes and all that thing, like same things like that.

AB:

And so, that me sports is an interesting space because the sports rights that's getting all broken apart in terms of where that value's being allocated, the audience is shifting.

AB:

And then the other thing is like, in the golf example, you have live and PGA sort of competing for people.

AB:

And so they're willing to kind of lean in and give out some of these sports rights to the YouTube folks to get people back into the linear environment to support their advertising ecosystem.

AB:

So in the sports space, it's, it's helpful that things are fragmenting and people are changing habits because it's allowing new companies to be built to go capture that audience.

Brian:

Yeah, I mean it seems like, it's funny 'cause we talk about platform power, right?

Brian:

As if it's just, you know, black and white.

Brian:

But the reality is, you know, these platforms and particularly YouTube, but also Substack now too, are enabling tons of businesses that would not ha have otherwise existed.

Brian:

So, when a lot of people, you know, look at the doom and gloom media extinction event, on one hand you can be like, okay, that's, that's fair.

Brian:

But on the other hand, you're like, wait a second.

Brian:

I mean, I'm operating one of these businesses, like wouldn't have existed 10 years ago, could not have existed, and there's.

Brian:

I, I am not alone as every paragraph or like the fifth paragraph of every story does, in which you like list all the different people and

Brian:

there's tons of these businesses being built on YouTube that look a lot different, that are being built on substack that have different needs.

Brian:

And I think one of the things that I've noticed is the market will absolutely need to adapt because I think a lot about, like I was at, I was, at the Possible conference,

Brian:

last week in Miami and like in the font and Blue lobby, it was like 5,000, well I think it was 5,000 people at the conference.

Brian:

They said 33% or 35% were brands.

Brian:

My experience, my lived experience was 95% were like ad tech people, which is fine.

Brian:

Maybe it's somewhere in between, but like.

Brian:

This sheer number of middlemen that were there was just shocking.

Brian:

And I think about how the, the parts of the media ecosystem that are growing fastest are absolutely not exposed to that.

Brian:

or, or less

Brian:

exposed to to to that world.

AB:

on it.

AB:

Yeah.

Brian:

when, when you're,

Brian:

when you're, when you're in harvesting phase, yeah.

Brian:

You're gonna be like programmatic, like you're gonna be jacked up on all the programmatic

AB:

A hundred percent.

AB:

so I would say that like, value is accruing in much different ways.

AB:

Like in your example, in your business, like it's effectively you, I mean you have some people helping, but, I think one nuance with,

AB:

as there's more opportunities to kind of put out your own shingle and create a brand on YouTube or Substack, it's like there's less people needed.

AB:

and so it's a, it's a, it's a negative trait in my mind because if you built a media company 20 years ago, you're gonna hire a bunch of people now.

AB:

You don't necessarily need that.

AB:

'cause you can freelance it out and a lot of the value can

Brian:

Yeah,

AB:

risk.

AB:

Yeah.

Brian:

I mean the challenge is like, not to make this about me, but like the challenge is like how do you build enterprise value?

Brian:

Like you said, it's like basically me, which is basically what you're saying and like investment

Brian:

banker is like, I, I don't have a business, I have a job that just without health insurance.

Brian:

Is that what you're

AB:

Yeah,

Brian:

Oh, you cut that

Brian:

out.

AB:

can get a, you can get Obamacare,

Brian:

I do have it.

Brian:

I'm not like, what a raw dogging healthcare.

Brian:

No.

AB:

I think a lot of these people that are more consumer focused, like the way they're gonna make their mo the most money is either through audio or through doing production of content that has much wider distribution.

AB:

I don't think they're ever gonna, they're never gonna make the most money on Substack.

AB:

They're gonna do it in some other venue, other media form.

Brian:

Wait, explain, explain that.

Brian:

Like with an example?

AB:

let, let use Lenny as an ex,

Brian:

I, I think,

Brian:

I think Lenny makes the majority off Substack.

Brian:

He has a big subs business, but that event business is, is, is big.

Brian:

He said, I think he said he makes more money off the podcast than the newsletter.

AB:

Yeah, I mean, we could use Emily as an example,

Brian:

Okay.

Brian:

Emily Sunburg, feed me.

Brian:

Feed me, Emily.

AB:

Emily does an amazing business on the paid side.

AB:

has a much bigger audience, non-paid, has a bunch of advertising, but as she thinks through, like, and she says this pretty directly,

AB:

she like sees it, the businesses more like a studio to do other creative endeavors, like the newsletter's, not necessarily the end all be all.

AB:

And so in other mediums like movies or TV or podcast, if you do that right, you'll make so much more.

AB:

Val say she's making whatever, a couple million on the substack.

AB:

Doing something in a, and partnering with a much larger media company that has massive distribution, the potential there, you get an HBO show the potential value there could be millions or more dollars.

AB:

and it's not, you don't have to work every day.

AB:

Right.

AB:

And so I think it's just something for some of these more consumer focused sub stackers, the value they're gonna create is not gonna necessarily, necessarily come from that person paying whatever, $8 a month.

Brian:

Yeah, there's no, there's no, there's no B2B HBO unfortunately for me.

Brian:

But, you know, I'll, I'll, I'll try to find it.

Brian:

Maybe

AB:

Yeah.

AB:

I mean you have the work that work the work week guy, right?

AB:

Adam, is like, yeah, he's trying to do things that are like.

AB:

Marketplace is, I mean that's, I guess that's what I'm trying to say is like if the way to create enterprise value is taking that audience and figuring out some other way to monetize that their attention.

AB:

Right.

AB:

And so that's like simple speak.

AB:

But my point is like, I think on the consumer side, I could just give you the Emily example 'cause it's like easy, but on your like, I know

AB:

you don't wanna do this, but conference, like a bigger conference, like that's where you would actually create a business that could be sold.

Brian:

Right.

Brian:

Yeah, because it gives you leverage in, in other businesses, right?

Brian:

Like, I mean, I use the sort of leverage of media in a lead generation in sales enablement business, right?

Brian:

versus like a typical like events business.

Brian:

But I understand that the economics are probably better, with doing, you know, the, the rebooting summit.

Brian:

I don't know, maybe, I just find it's funny 'cause there's, there's always this divide between what the market wants and what's what you want and what's better for your business.

Brian:

And like, maybe I talk to the wrong people, but like none of the market tell me that they want like, another big event.

Brian:

Like literally everyone says that they want like smaller, more meaningful and just, you know, your incentives as a provider.

Brian:

I mean, you know, I think I did.

Brian:

18 private dinners like last year.

Brian:

Yeah.

Brian:

I mean, I would rather just do like one event.

Brian:

Why, why, why do 18?

AB:

yeah.

Brian:

But you, I also try to be responsive to the market.

Brian:

but like I think we see this across like the entire swath.

Brian:

That's why I think of media as a front business as like a, a mega trend.

Brian:

You know, look at Brian Goldberg and BDG.

Brian:

I mean, I give Brian a ton of credit, you know, he is, he's on that ship.

Brian:

He's got his Napoleon hat on.

Brian:

Is Napoleon ever on a ship?

Brian:

I don't know.

Brian:

but he's got, he's got his Napoleon hat on.

Brian:

mark Stenberg just did a story, I dunno if you were quote in this, some people we weren't.

Brian:

he just did a story about how, you know, you know, someone is in the market when, when they do one of these stories.

Brian:

I find like anytime anyone was like really eager for me to and open about their business numbers, I was like, oh, you're for sale, huh.

Brian:

and.

Brian:

It was saying how sales were up 25% and we're gonna get a 10% margin.

Brian:

And like when you're bragging about a 10% margin in a, a business that is over, well over a decade old, like the dog is not hunting and it's an events business, he says, basically

Brian:

in this thing, instead of being a website that publishes stories, we're now basically an events company, which I give Brian a lot of credit for, just like, you know, flying that flag.

AB:

Yeah.

AB:

I mean, it's kind of like this, this, I think some of our has figured out that there's, and look, this can change really rapidly.

AB:

I think when you talked about the people not being allowed to travel to a conference, one of the things that a lot of these businesses are benefiting from is where these ad budgets, I.

AB:

Where these advertisers have allocated budgets.

AB:

And so today, I went to an event a couple nights ago and it's like the cash app is there.

AB:

All these people are paying probably way too much on a CPM basis to be at this event and to have their logo.

AB:

But I think if the economy gets tougher, which it probably will, is a lot of this live event, these live event budgets is, are some of the first to become Right.

AB:

These activations and things like that.

AB:

'cause they're, they, they, they feel good.

AB:

And the CMO likes to talk about the partnerships and things like that,

Brian:

they're

Brian:

fun.

AB:

performance.

AB:

Yeah.

AB:

They're

AB:

and and so I think it's, and I wish Brian well, but he like.

AB:

10 years ago, I remember like he had this, like his thing was like, I'm gonna apply for any RFP.

AB:

I don't even care if it doesn't fit with our brands.

AB:

Like I'm just gonna apply for it.

AB:

'cause you never know and it'll get our name out there.

AB:

And like he leaned in

AB:

heavily on the direct side as he shifts and talks about live events.

AB:

Like obviously it's a big money maker right now.

AB:

but that could vary.

AB:

It's probably one of the first things to change and get cut is like, people are like, as long as this isn't fully committed and we can cancel and get our money back, we don't need to do this stupid activation.

AB:

So

Brian:

Yeah.

Brian:

No, and I, I think like, you know, the nylon house, it's not like if you pull out your sponsorship from the nylon house that your business is, is gonna like, it's like, oh no, we're not gonna make our quarter yet.

Brian:

I don't mean it as like a knock on the nylon house.

Brian:

It's a great, it was, it wasn't my kind of party, but it was, it was, it was a good party.

AB:

I think I went to Formula One and I have to say like I've never seen.

AB:

An event so adapted to corporate, to corporate money.

AB:

It's like the amount of infrastructure they build for a, a race that lasts two hours and like how much they, obviously any person can go and buy random tickets, but the amount of amenities and suites they have.

AB:

Like if you looked at the ratio, and I'm probably gonna get this wrong, but it's like, it feels like it's getting close to parody where the number of people in suites or in seats is getting close and

AB:

all those suite people, it's like, you know, when they show the diagram of the plane, it's like the people in business class pay for the profit.

AB:

It's like, it feels like that is like, the cost of these sweets for two or three days is insane and they're just giving you cheap food and, and, and alcohol.

AB:

So I have to say, going to like a new upgraded, like liberty owned formula of the one race, it's pretty eye-opening in terms of how much they're able to just suck from the corporate.

AB:

God is, and just so much money just pumping through there.

AB:

and it's a great event.

AB:

It's a good, it's a good thing.

AB:

So,

Brian:

Yeah, I mean, look, F1 is supposed to have a billion dollar impact to the Miami economy.

Brian:

It, it supposedly, it had it in its first three years, right?

Brian:

So like, I mean that's everything from the like $5,000 bottle service that like clubs during F1 to, you know, all of this.

Brian:

And,

Brian:

you know, whether the, I, I actually had a conversation last F1 with the guy Greg, with Greg Moffitt, like from

Brian:

Liberty

AB:

Great ma.

Brian:

Ma. Oh, he is Ma. Hmm.

Brian:

very fancy.

Brian:

I had no idea.

Brian:

and.

Brian:

I asked him like, what, like what other businesses he was into for media and he just said women's sports, is kind of interesting.

Brian:

I don't know, it was a year ago.

Brian:

But, yeah, amazing business.

Brian:

I don't know if there's that many, one business that I think deserves more attention, the overall media system.

Brian:

He gets some, but I think it's an interesting model is like, is a 24, like I wonder if that model can be, can be replicated, in other areas.

Brian:

What, for those who don't know what, why is that, we didn't prepare for this at all, but I'll put you on the spot.

Brian:

I have a feeling you, you know it.

Brian:

Like why is a 24 interesting to you?

AB:

It's interesting because they're figuring out.

AB:

New ways to make money in an old medium.

AB:

I think filmmaking and TV production is a really tough business.

AB:

typically, like I sold a production company before and like you're, you're building enterprise value normally on like one or two hits and then everything else is just kind of sucky.

AB:

but a 24, I think there's obviously a lot of taste makers there.

AB:

They have the right creatives and they're producing interesting content, but then they're also attaching value through the merch.

AB:

And now they turned on a 24 music.

AB:

And so there's a lot of other places where they're just, they're basically thinking about the business differently.

AB:

I saw they got the guy from Adobe to come over to do more AI stuff and so, yeah.

AB:

And so I think once you.

AB:

have the right, like once people write signaling in a market and you ha you're taking, taking, starting to take market share as long as you

AB:

continue to produce great content and then figure out other ways to attach revenue to it through me, and it, it becomes a really strong business.

AB:

The problem is, like, legendary pictures is a good example, right?

AB:

It like had this like ins unique flywheel.

AB:

It said it was able to get the right people and the right content, and it got bigger and was able to sell at a, an amazing value.

AB:

I just don't think that business was sustainable over the long, long term because you basically have to make new things every day.

Brian:

That,

AB:

Yeah.

Brian:

that's why it's a sucky

AB:

But it's different.

AB:

But a, a movie is much different than an article, right?

AB:

Like

Brian:

I

AB:

if you mess up on a movie, that's a a and there's ways to fix it along the way.

AB:

But I think that's the one hard thing about this content production world is like.

AB:

A mess up

Brian:

Yeah.

Brian:

I mean, I was wa I was, I was walking through the, Greenwich Village this weekend.

Brian:

I walked by like a theater that they bought Cherry Lane Theater.

Brian:

I mean, they're, they're going in lots of different directions.

Brian:

I like, hope it doesn't like, you know, they don't get, You know, it, it's a financial mess.

Brian:

Like that's my home.

Brian:

Anytime these companies are doing all kinds of interesting, cool things, I was like, uhoh, they must not be in good financial shape.

Brian:

So I hope it's actually a successful business too, because it's interesting, it's kind of like mischief on the agency side to me.

Brian:

It's like, if you think about what a, if creative agency is, it's gonna, it's not gonna look like BBDO.

Brian:

It's gonna look like mischief.

Brian:

and, and how mischief makes money.

Brian:

Yeah.

Brian:

In a lot of ways I believe it's like, kind, it's similar to agency work, but in some ways it's not.

Brian:

Right.

Brian:

Like, I mean, agencies would always have to try to get permission to like, you know, say that they did the work that they did, you

Brian:

know, and which kind of tells you where they are in the pecking order when like, you have to get permission to say you did the work.

Brian:

And then on top of that, your client is calling you, quote unquote non-working media.

Brian:

I mean, not a

AB:

Sure.

Brian:

good, not a good label.

AB:

Yeah.

AB:

I, I would take the opposite.

AB:

So I know mischief the people maybe that listen to this podcast know mischief, but I don't, like, you have to understand like the typical,

AB:

and this is not being me, be me, like coming from a coastal elite perspective, but the average consumer does not know who mischief is.

AB:

They may be bumped into like a Mr. Beast activation with like a game that mischief created, but I don't think the palate is like refined enough to care.

AB:

They're like going to the supermarket and like buying something based on where it's positioned and like, it's

Brian:

no, I get that.

Brian:

But I guess what I'm saying is even in a B2B context, in that they are able to decommoditize themselves in an industry that is always, always been a race to the bottom.

Brian:

Like

Brian:

I covered agencies for a long time and agencies would always be like, we need to be paid for pitches.

Brian:

We can't be doing all this, these payment terms.

Brian:

And then they would line up around the block to pull their pants down anytime Coke had a pitch.

AB:

Yeah.

AB:

You know, I, I, I get your point.

AB:

And there, there are I at South by Southwest, I met this guy who all he does is run Twitter handles for B2B companies.

AB:

And so there are fun ways to, like he

Brian:

Charlie, what is his name?

Brian:

I feel like I know this guy, Charlie, is that his name?

AB:

but it's just like people are pecking away.

AB:

I, I think not having permission is an interesting way to frame it.

AB:

but I think

Brian:

That guy's, by the way, that guy's, that guy's probably gonna have like an agency worth more than like BBDO.

Brian:

Like he's running like B2B Twitter account.

Brian:

Like who even knows at this point,

AB:

Yeah, I met this guy who's in his early twenties with a college agency, and in two years he's basically comparable to some of the incumbents without any tech.

AB:

He has a team, but he's done it based on his connectivity and influence with the creators that the brands want to get to.

AB:

So Amazon and Netflix, and everybody comes to him when they have premieres that they want creators at when they want to get the college influence.

AB:

And so I do think if your point is like, look, there's other ways to attack these markets and completely Yes, sir. the traditional model, a hundred percent.

AB:

This guy is so young and he's like, the amount of revenue he's generating in EBITDA is like insane.

Brian:

you tell us who this is or No?

AB:

secret.

AB:

I could have some secrets.

Brian:

Your name is a secret.

Brian:

Isn't that enough?

Brian:

All right, let's wrap it up.

Brian:

Let, let me give, give me like, give me three, three businesses that everyone should know about that are either in media or tangent.

Brian:

Take it in as many directions as you want.

Brian:

It just, you know, it has to, in some way map to media and where media is going as a business or as a front for other businesses.

Brian:

You can think we'll play the Jeopardy theme music Vanya.

Brian:

Put the jeopardy theme music on now.

Brian:

Okay.

Brian:

Jeopardy theme music's over ab.

AB:

The thing is, like, I know companies that are interesting to me, but I don't know, they're not interesting to most people.

AB:

they're, they're people just making a lot of money on the

Brian:

I love money.

Brian:

I love

Brian:

it.

AB:

the fun, thing is like, I bump into people that, like.

AB:

I made this joke to you, it's like the private jets and ketamine, like, it's kind of wild how much some of these people make

Brian:

A wild, give me a wild story.

Brian:

If someone makes a lot of money on, on the internet that in some ways touches media or the dynamics of media.

AB:

basically it.

AB:

It's one of these companies, if you Google like best vacuum cleaner, da da da dah, I'm not gonna tell you the name of the company, but it's like 15 people and it makes like 15 to 20 million of ebitda.

AB:

And like most of the people at the company are not executive.

AB:

They have like three or four executives.

AB:

And so the two founders of this business make a majority of the, of the money.

AB:

Right.

AB:

And so

Brian:

Okay.

Brian:

So they're each peeling down millions a year, like they're just

Brian:

taking

AB:

seven seven or $8 million each.

AB:

Yeah.

AB:

And they don't work.

AB:

They work like 30 hour, 40 hours a week.

Brian:

Vacuum cleaners cleaner.

Brian:

Okay, good.

Brian:

All right.

Brian:

I'm getting into that business.

Brian:

Forget this.

AB:

Yeah, I'll tell.

Brian:

Forget these dinners.

Brian:

Cleaners.

AB:

2 more.

AB:

Yeah, it's crazy.

AB:

So I think, I think these companies in this like functional, so there's a business called Function Health, which just bought an MRI scanner.

AB:

I think there's a really interesting play which will happen whereby you basically decouple from going to your average doctor, and AI becomes a better for the, for the non-sick person, right?

AB:

So I can tell you get older, and you're literally seeing the doctor for maintenance.

AB:

Or maybe, you know, you go through the cycles of life around pregnancy or something like that where you need to see the doctor.

AB:

But for the most, for most of your life, unless you break a bone, you're not seeing a doctor.

AB:

And so I think there are companies that are gonna play in this space.

AB:

It's really interesting.

AB:

When you go through the function health checkout, you can literally end up with like a $2,000 blood test even.

AB:

'cause they trick, they like scare the shit out of you.

AB:

but I think there's gonna be a lot of money made by people helping you maintain whatever you wanna say, a more healthy lifestyle by

Brian:

Okay, so basically be being like an affiliate front for like a DECA scan or something.

AB:

Yeah.

AB:

But, and then they're buying their own thing.

AB:

So, but the, the outputs are interesting.

AB:

They do a better job than your doctor.

AB:

But I think you'll like no longer care about, you'll go to the doctor if something bad happens.

AB:

Otherwise you're not gonna go see your, your, your general

Brian:

Okay.

Brian:

Function health.

Brian:

I'm gonna check them out.

AB:

Yeah.

Brian:

Gimme a third.

AB:

Good, good call.

AB:

I, I know this is like, but I just love, I love these golf companies.

AB:

'cause I think the market, the more I did research on it, the market is like massive.

AB:

It's, it's much bigger than tennis.

AB:

It's much bigger than like basketball.

AB:

And so you saw the churning group, try to go after like surfing with, they did a roll up in surfing.

AB:

They've done it in a couple niches.

AB:

but I think these golf ones are gonna be some of the first roll ups that actually work and that will eventually exit and sell to probably back to a bigger media

Brian:

Okay, so that's a true media business.

Brian:

I, I think that you're totally right on that.

Brian:

My, my nephews, are into golf.

Brian:

I'm not a golfer.

Brian:

but, and they were wearing gear from like, good, good golf or one of these, I forget which one it was.

Brian:

And, you know, they're, they're teenage kids and that's a lifelong thing.

Brian:

Like, they came up, you know, they play lots of different sports, but they're into golf too, and their like, experience with it.

Brian:

My, my dad's got the, like, you know, the PGA tour like on, you know, the volume on like 55.

Brian:

But like, their experience is all these like YouTubers and, and that is.

Brian:

Their entry into the sport.

Brian:

I don't think that's changing.

Brian:

I don't think that that is like a way station to like, you know.

Brian:

Okay.

Brian:

Turning to like Jim Nance and,

Brian:

I don't

AB:

Yeah, and the nuance with the PGA is like, the players have a little bit more flexibility off the course,

Brian:

they're independent

AB:

versus, versus some other sports.

AB:

And so that's why, you know, Bryson can show up on these random YouTube guys channels and make content, and then your family members watch it.

AB:

So it's kind of one of these fun things where the, the athletes can pop up in a bunch of different

Brian:

Oh, final question and then I'll let you go.

Brian:

I could do this forever.

Brian:

Chernin group, you brought them up.

AB:

Yeah,

Brian:

Tell me if I'm wrong, like their thesis was totally wrong.

Brian:

I mean, I understand it and I understand that the market was different, et cetera, but like the way I understand the Chernin thesis, right, was that there was a ton of these barstool opportunities out there and they were gonna find them.

Brian:

But the thing was like Barstool was completely sugen eras, like it was happened to be located at a time and a place when a massive

Brian:

market that had always been suppressed by the government having a law against sports gambling all of a sudden opened.

Brian:

That is like a generational opportunity that

Brian:

ignites a land

AB:

And a lot of media companies sold into that thing at basically what was typically EBITDA multiples and applied to revenue.

AB:

So they were selling at like five, 10 times revenue, which never happened.

AB:

So I think it's really tough to like.

AB:

sort of nitpick a private equity firm.

AB:

'cause we don't know, we know the, a couple successes and a couple of the failures like K dinky.

AB:

it's just hard to see like across the portfolio.

AB:

Like we're not an lp, right?

AB:

So we're not getting like where things are marked in how things

Brian:

That's true.

Brian:

That's true.

Brian:

I'm just judging their

Brian:

thesis

Brian:

because they're a thesis driven PE firm.

Brian:

Correct.

AB:

so here's the thesis that was wrong, that this is what I believe is when they wanted to basically build a full stack media commerce company.

AB:

Being a retailer sucks.

AB:

And I don't know, like if you own even a small retail business, it in a month, you're like, this is the worst business that anybody could ever own, especially with Amazon.

AB:

Like, because your p and l, which is like the profit and loss, doesn't actually show what's happening at a retailer.

AB:

You could be massively hemorrhaging cash based on mis mis.

AB:

Ordering inventory, and look like you're profitable because you don't have to recognize the cost of the inventory and tell you sell it.

AB:

And so I think the part of the thesis that was wrong is like, let's try to monetize consumers.

AB:

Let's get 'em to the website and then sell them things and like let's own what we sell.

AB:

But I think there's like really interesting things that they've done recently.

AB:

They have this whole collectibles business, which is like amazing.

AB:

So they own all the companies that rate collectibles

Brian:

Okay.

Brian:

So basically it's like any of these businesses, they can be wrong nine outta 10 times, but if they're right, like one, like they can, they can have like nine ho dinkies,

Brian:

but if this collectibles business becomes like where it is, like it doesn't matter anyway, so you make tons of mistakes anyway.

AB:

no private equity meets.

AB:

So VC is like, you can make nine mistakes in one, good one.

AB:

Private equity you wanna make, if you have 10 companies in your portfolio, you wanna make a couple of mistakes and you actually, I. You're trying to never make a mistake where you lose all of your money.

Brian:

Well, yeah, that's my goal too.

Brian:

all right,

AB:

so I think they had a couple wrong bets, but they're like in that portfolio, there's a lot of interesting companies, but there are like some insane willows like ho dinky, right?

Brian:

they basically like handed it back to, to, to Ben Climber.

Brian:

I mean like any of these deals where they're just like basically handing the asset back to, I mean, it, it churnin and it, you know,

Brian:

it, they sold it to Penn and Penn basically handed it back to, to Portnoy and like, that's like, first of all, great deal for him.

Brian:

Like any of this things, like when it's like, I remember I, I covered like the aqua deal.

Brian:

When Microsoft bought Aqua, it was like the worst deal in history.

Brian:

I don't know.

Brian:

Ask Brian, ask Brian McAndrews.

Brian:

I don't think he thinks it was somewhere steel in history.

Brian:

Think he thought it was like the most amazing deal.

AB:

Yeah.

Brian:

two sides to all the deals.

AB:

Yeah, if you try to capture events in specific, like, okay, they sold it back to Dave.

AB:

It's like, well, you don't, there's a lot of maybe other places along the way where value was created.

AB:

You don't know if the CEO got some great stock options that he sold as the pen stock was going up pre covid.

AB:

Like there's a lot of other factors that despite them giving the assets back to Dave, they're also, they have to be good corporate stewards.

AB:

So they also had no other places to probably sell that.

AB:

Right.

AB:

So that's another kind of thing.

AB:

But what I would say is like, it's really tough to say, oh, someone's dumb, or they did a bad strategy because of the end outcome.

AB:

They might have gotten other value along the way.

Brian:

Yeah, but I wanna, I, I, I like to call balls and strikes here.

Brian:

A b, so.

Brian:

If, if they got a lot of hype on the way up.

Brian:

I, that was always my rule.

Brian:

I'm like, look, if you're gonna rise 'em on the way up, you gotta take your shots on the way down.

Brian:

That's just how the, that's how the business works.

Brian:

That's, those are the rules.

Brian:

All right.

Brian:

This was fun.

Brian:

Thank you.

Brian:

Come back

AB:

Okay, talk to you later.

AB:

Bye.

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