Jon Steinberg & Cheddar: An OTT Success Story
Jon Steinberg, founder and CEO of the OTT business news channel Cheddar, made business news of his own last April with the announcement that New York-area Altice USA had acquired the two-year-old Cheddar for $200 million. The deal catapulted Steinberg into the position of president of Altice News, a unit that now includes, in addition to Cheddar, News Twelve and I24 news, an international news network.
On closing the deal, Altice USA’s CEO told the Wall Street Journal that it had been dancing around the Cheddar acquisition for a couple of years, but Altice first wanted Steinberg to prove out the model he was building, which he apparently managed to do.
Cheddar now airs live eight hours a day from the floor of the New York Stock Exchange as well as from New York’s Flatiron building, Los Angeles and the White House.
Prior to launching Cheddar, he was CEO of the Daily Mail North America where he grew U.S. revenue 45% and doubled direct advertising revenue. Before that he was president and COO of BuzzFeed.
What follows is an edited transcript of an interview with Steinberg conducted by TVNewsCheck Publisher Kathy Haley at TVNewsCheck‘s OTT News Summit in New York.
So, Jon, tell us about Cheddar’s story. How did you conceive of its initial value proposition?
So, when I was at Buzzfeed I did a lot of CNBC because it was a great way to meet advertisers. I have always been responsible for advertising revenue. For going on close to 10 years, I have had to hit advertising revenue numbers. But I fell in love with live production when I saw how CNBC was done. It was so efficient. It was just an amazing machine to me. And at the same time at BuzzFeed, we were getting into video production, but it was all edited video and that was incredibly laborious and time consuming. You would send things to be edited and they would just never come back.
Meanwhile, live was just this machine. And then I had always loved business news. I loved CNBC and then I found out how small its audience was in the demo — 25,000-30,000 people over the age of 54 — and they do $1 billion a year in revenue. So, I was like, if I make a live business news network that skews a little bit younger, that is going to be really valuable.
And you had an instinct that younger viewers would want a business channel?
I had an instinct that whatever the audience was, it would be big enough. That has always been my idea. Business news does not gather a large audience. The audience that it does gather is unbelievably valuable.
That is why CNBC produces so much revenue. You know, you can have a gazillion people watch a cat video — and I was in that business and I like that business — but you are never going to have millions of people watch an interview with a public company executive.
We had Dan Rosensweig on yesterday — he is CEO of Chegg, a publicly traded company, a multi-billion-dollar company — talking about how he has a new program where they are going to pay off the student debt of all their employees — unbelievably interesting interview, unbelievably interesting topic.
I bet that got tens of thousands of views if I had to guess. But the people who watch that are people who are interested in finance and substantive topics. So, the tens of thousands of people that watch that video are worth more than the millions of people that watch the animal video.
You’ve built Cheddars with distribution on various vMVPD platforms like Sling. Are they paying you sub fees?
None. There are no sub fees. No one is ever getting sub fees again. It is gone. I guess I wish I lived before the internet and there was only print newspapers. That seems so great. I wish I were a cable channel company when I could charge for every person on the cable box regardless of whether or not they watch my content. It will never be that good again because it is unbelievable that it was ever that good. It is the best model on earth. You get paid for everybody.
I have heard it called the taxation model.
So, when you hear these incumbent channels all crying, it is a bit like you got chocolate cake for dinner every single night and you didn’t get fat, and you stayed completely healthy and you thought that could last forever.
Where else do you want distribution for your network? Cable operators?
We have already said that Cheddar will launch on Altice systems [in New York] on ch. 84. I will work on getting a lower one. You can’t move stuff. On Altice right now, ch. 12 is News Twelve, ch. 14 is our other network I24 and you can’t boot PBS from ch. 13. So, I mean people have channel positions, right, so that will take time.
I would love more cable operators. We will take it wherever we can get it in paywalled environments. We really want the product in places where people have to pay to get it. We put a different version of the product in the free environments that has less live news. But each of our networks have 19 hours a day of live content. If you want to watch a full live day of Cheddar, you have to pay for it. Now we happen to not get any of that money, but you have to pay for it. I think that is important to our advertisers as well. The minute the product becomes free it just becomes degraded basically.
Talk about the programming strategy for Cheddar. How are you differentiating from cable news?
When you do these things, you can’t make everything different. So, you choose what you want to make totally different and what you want to keep the same. And so, what we made totally different was the content focus. The content for Cheddar is focused on technology, media, innovation, entrepreneurship — public and private companies in that space. We don’t cover oil and power, we don’t cover interest rates, we don’t have all the old mutual fund managers on. We chose topic areas that were distinct.
The ad product is totally different, too. Its branding content, sponsored content and integrations, which the traditional cable networks do a little bit of.
We do talking heads at desks with lots of guests because that model works really well and it is the only way that you can keep the cost structure functional at our level. We do some field stuff, but we are not sending reporters around the world. We have one field team that we send to conferences or to events like when Elon Musk had the boring tunnel and the cars were going through it.
Do you program to what [viewers] want or do you program to what you think they need?
One of the luxuries of being a news network is that we program two kinds of content. One kind of content that I feel is unbelievably important to the reporting — the reason why Cheddar is Cheddar — is we have public company executives on. We had all of the scoops around Snapchat, we had the scoops around JP Morgan Chase rolling out a new version of the Sapphire credit card. That makes us a business network.
We do know that the audience loves cannabis content, enormous appetite for everything to do with cannabis because it is surprising and amazing and shocking that marijuana is now legalized and there are giant multibillion-dollar marijuana companies. When we send somebody to tour Cannacorp or one of those things, people love it. People love self-driving cars because these things are amazing and mind-blowing. But a lot of that is the candy and we try to balance it out with steak and chicken.
Are there segments that Cheddar is missing?
We have a whole editorial operation and we have enough inbound where we are able to see everything. There isn’t really a story that we miss in terms of national politics. We’ve have senators, we had Elizabeth Warren on, we had Nancy Pelosi, we had AOC on, we had Larry Kudlow. So we get that caliber of politics guests from Washington.
In business, there is an echelon of business guests that we don’t get yet. We don’t get [Disney’s] Bob Iger, we don’t get [Facebook’s] Sheryl Sandberg. It will take time and we will get there. You know, when we started out, we got nobody. Nobody wanted to come on Cheddar. Now we get everybody other than the Tim Cook echelon.
Talk about your audience. What is your data telling you about your audience?
When we go through this thing with the advertisers that are buying traditional media, traditional television, they start talking about their media mix model. It’s the thing that sits in the basement that people who no one has ever met work on and this tells them how the billboards are working, how the TV is working, how the newspapers are working.
And then when you ask to why are you buying CNBC and not giving us a shot, they don’t really know about the media mix model. They just say, we have just been buying CNBC for a really long time, we really like CNBC.
That is always where it gets to. So like the Nielsen data is not real. The billboard data is not real. It is just that digital is held to a standard that has never actually been achieved. We were close to doing a deal with a chain that sells breakfast foods and they came back and they were like, yeah, we have been talking to our agency and our agency says we need to be able to show conversion. Show conversion? Like what? Like you want me to put a pixel in a pancake? Like how on earth could that happen? So we were laughing for days. We were calling it CPP — cost per pancake.
It is the whole performance thing and I hate it too.
It is not that I hate it. It’s that there is this view that the people that do brand marketing are lacking in rigor and that brand marketing doesn’t work and is all sort of BS, and performance marketing is all that works.
And, you know, what I say to people now when they come at me like that is go ahead, go build Blue Apron. The people buying Blue Apron, they didn’t even know what they were buying. Like the boxes were showing up, they were eating the food, they were churning like crazy, there was no brand established whatsoever.
This is why we don’t work with all the digital native brands, all the D-to-C brands, which I love by the way. None of them advertise with us because they have not exhausted direct response advertising. They are still in the process of finding every person on earth who doesn’t already buy their product. Eventually they exhaust that and they need to be in the business of demand generation.
Now look, one of the good things that I think we are facing now is that — for the first time in all my time doing this — the marketers are saying Facebook is not working as well for them. What they are really saying is that they have reached a point where they have harvested everybody that is there to be harvested.
What about discoverability? Are you challenged by that and how do you deal with it?
I think that [with] the traditional cable systems, neighborhooding was a very smart idea and remains very, very effective. It works very, very well and so in places where there is neighborhooding Pluto does a very good job of this. I am a very big fan of Pluto. The news channels are together. So that has been the most helpful to discoverability. I wish Roku would do a better job on it.
Media fragmentation is like being eaten alive by minnows, right? It happened to broadcasters; it happened to cable programmers. Is it happening to Cheddar?
No, because one of the benefits of starting with nothing is you only can go up. So what we have benefited from is two trends. One trend is, yeah, the audience has grown up in the places where we are. But the trend that we have benefited from more is we are in more high-quality environments, all the skinny bundles that we rattled off that wanted a free high-quality news product. I mean we are in the base bundle at Sling. CNBC is not in the base bundle at Sling. So we have benefited from more places that have wanted to distribute our content and there will be more that continue to go like that. So no. We have not been hurt by any kind of fragmentation. We have only gone up. We have never gone down.