Media Business: What Digital Publishers can learn from Cable TV networks

By NativeAI / November 15, 2018

As online media publishers well know, finding a viable business model presents a huge challenge.

A few prominent outlets appear to be on a good path: The New York Times reported a $24 million profit last quarter driven largely by its growing roster of 2.9 million digital subscribers. However, most organizations are struggling to find their footing in a challenging landscape that includes an Google/Facebook online ad duopoly, barriers to subscriber growth, ad-fatigue among consumers, and limitations to scaling distribution.

Put simply: for many digital publishers the most-utilized current frameworks for monetization — ad supported, hybrid/freemium, purely subscription-based — are not yet delivering enough revenue to maintain and grow a sustainable business.

So, what can be done?

While there's no silver bullet, one option is to turn to similar industries for ideas. Specifically, online publishers may benefit from looking at the successful and sustainable (relatively) model of another set of content-focused organizations: cable networks.

Of course, cable networks face their own challenges these days from changes such as cord-cutting and the rise of OTT operators like Netflix. Nonetheless, they continue to be highly profitable and relatively stable businesses.

So, what can be learnt from cable networks? Here are three areas publishers may be able to draw inspiration from:

1. Decouple content creation from distribution

For the most part digital publishers have followed the old print model of tackling both content creation and distribution. This has important benefits — full control of owned channels such as apps and websites, no need to split revenue, journalistic independence, etc. — but it also places a huge burden on organizations.

Cable networks, on the other hand, have traditionally tackled the content development while leaving the distribution to cable providers (though that has been clouded by changes such as Comcast's purchase of NBCUniversal). This frees up networks to focus on creating programming. Moreover, it delivers carriage fees — per subscriber payments distributors make to networks for content — that provide an ongoing, predictable revenue stream which compliments advertising revenue.

While this model may seem like an impossibility for online publishers, the digital landscape isn't actually all that different from cable television: there are currently a set of platforms such as Google and Facebook that have tremendous reach and which are largely dependent on third-party content offerings. There have already been rumblings from publishers, especially in Europe, about getting properly compensated by these companies for content, and it's not inconceivable that a day will come when digital distribution is largely decoupled for content creation in exchange for consistent revenue.

2. Focus on subscription across both owned and non-owned channels

Of course, when it comes to content business models, it doesn't have to be all-or-nothing. While in the past cable networks were the poster child for fully decoupling creation from distribution, recent history provides examples of how they've successfully developed hybrid approaches.

Specifically, cable networks show digital publishers that it's possible to nurture subscriptions on both owned and non-owned channels. A case in point is HBO, which has maintained its strong relationships with cable providers both through set-top offerings and authenticated experiences such as HBO GO while also building its subscriber base for HBO NOW — a fully owned platform that does not require a cable subscription.

With platforms such as Google News increasingly focused on enabling subscriptions, the cable TV network model is becoming more and more viable for online publishers: organizations can simultaneously focus on encouraging digital subscriptions on their own channels as well as on third-party platforms, thereby reaping the benefits of both.

3. Dive-deep into data on audiences behavior and content preferences

One of the things that's interesting about the cable television ecosystem is that it's made up of symbiotic relationships: providers want networks to do well to maintain and grow their subscriber base, networks want to do well to maintain and grow their carriage fees from providers as well as their revenue from advertisers, and advertisers want networks and providers to do well in order to continue to reach valuable audiences.

This has led to a lot of data-sharing: providers give networks access to proprietary insights, networks conduct their own research, and third-party organizations such as Nielsen provide unbiased metrics that all the players can utilize. The result is that cable networks often have a better understanding of their audiences than online publishers — a big irony given that understanding behavior on digital channels is much easier.

For online publishers, the cable network approach to insights is a good reminder to cast the net wider: to truly develop better content it may be necessary to partner more fully with distribution channels and to utilize more robust analytics tools (such as our NativeAI analytics platform) that can provide richer insights into audience interests.

None of this is meant to imply that cable networks have it all figured out. They too are struggling in this period of rapid change and there are a host of reasons, both practical and philosophical, why online publishers take the approaches they do. Rather, the way cable networks operate raises a series of interesting questions for publishers such as: Can the current business models be reworked and expanded upon? Will subscription approaches evolve in the same fashion? What are better ways to understand audience behavior? And, is this where we're headed? Hit us up on Twitter to tell us what you think.

Written by NativeAI / November 15, 2018