Collins | Controlling The Past Or Controlling The Future?

It was impossible to predict. When the internet became a “real” entity in the mid-1990s, some initially viewed it as the world’s largest library, which promised to provide information, data, education and insight in ways never before imagined. And it did play that role. But then something else happened to a degree perhaps no one envisioned — at least not 25-plus years ago: the internet became the great leveler of the media playing field, and would jolt traditional media companies into a new reality like nothing before it.

Quickly slipping away were the days when the major broadcast and cable networks, radio stations and newspapers were essentially the only ways we received news, information and entertainment. The internet opened up a world when some relatively small startups with names like Amazon, Netflix, Pandora and Facebook would use the medium to stretch aggressive and increasingly long tendrils across not only the country, but the world, showing consumers they could have access to any type of entertainment when and where they wanted, with the click of a mouse and a low-priced monthly subscription.

New media was born. And as these digital pioneers would begin to change our lives forever, traditional media was shaken to its core. Companies began scrambling and retooling in order to claim a piece of this unfamiliar, but clearly very tasty pie.

In an article for the March/April of MFM’s member magazine, The Financial Manager, former MFM board member John Sanders, a principal at valuation consultancy Bond & Pecaro Inc., along with firm associate Jake Lourim, take a look at what they see as “massive sea changes” in traditional media companies spurred by the advent of digital offerings. Their “Catching the New Wave” piece is the fourth in a series about media valuations.

Sanders and Lourim explain that the New Media Institute defines “new media” as “all that is related to the internet and the interplay between technology, images and sound.” In other words, not only TV shows and movies that can be streamed on your computer and beamed across your flat screen, but also the new world of social media sites like MySpace (RIP), Facebook, Twitter, Instagram and Pinterest, which promised to distract us further for hours on end.

A number of these startups were successful. So much so, in fact, that by the end of 2020, new media revenues eclipsed traditional media by magnitudes: Netflix alone reported its net revenue had reached $23.8 billion year over year, according to our Bond & Pecaro experts. They also compare that to the combined revenue of major TV stations E.W. Scripps, Graham Media Holdings, Gray Television, Meredith Corp., Nexstar Media Group, Sinclair Broadcast Group and Tegna Inc., which reported a total of $22.5 billion in the same quarter.

They point out that radio is facing a similar situation: Music streaming service Spotify reported $7.6 billion in revenue at the end of September 2020, overshadowing the combined $6.2 billion in revenue earned by Beasley Media Group, Entercom Communications, Entravision Communications, Saga Communications, Salem Radio Network, Townsquare Media, iHeart Media and Cumulus Media.

Advertising, naturally, plays a significant role in this overall picture. Similar to the competition for eyeballs on content, digital advertising brought in revenues of $34.1 billion in 2020, compared to U.S. newspapers, TV stations and radio scrapping together $8.3 billion between them. Sanders and Lourim cite S&P Global Market Intelligence, which estimated last September that Google alone would take in 41.9% of all U.S. digital advertising revenue for 2020, followed by Facebook, Amazon and Microsoft, respectively.

How did this happen? Perhaps more importantly, what might the media evaluation future look like?

The change came so quickly and abruptly, say the experts, that the FCC, which spent decades trying to keep traditional media companies in check, has now turned its attention to regulating the new media behemoths. Now it appears the tables may be turning on new media, as Washington is taking a very close look at what it needs to do to properly regulate new media, while at the same time loosening decades-long restrictions on traditional media.

Indeed, companies including Facebook and Microsoft are now facing a range of antitrust investigations, and are being slapped with much more stringent data privacy standards at the same time TV broadcasters are being allowed to use the FCC’s new ATSC 3.0 technical standard to offer new services such as internet and datacasting without incurring additional FCC fees. Further, in 2021 the U.S. Supreme Court is expected to decide whether to allow broadcasters to increase their holdings and possibly do away with crossownership restrictions.

Perhaps there’s a lesson to be learned somewhere in George Orwell’s 1984, which includes the famous quotation “Who controls the past controls the future. Who controls the present controls the past.” For both traditional and new media, there’s now a blending of the past, present, and future, with insights to be drawn from the ways traditional media operated — and formerly dominated. There are also learnings from how the internet has flipped traditional media on its head, created competition as never before, and forced media companies to take a hard look at how they can remain relevant as digital media titans push the boundaries.

You’ll read much more about all of this in the March/April 2021 edition of TFM, members’ copies are already in the mail. In addition, a digital copy will soon be posted on the MFM website.

As a pioneer in what could be called the first wave of new media — the cable industry — it’s fascinating for me to witness a re-playing of the innovation, creativity and boldness that led to cable’s success now being undertaken by digital media entities. I believe there’s room for success for traditional and new media alike, and even for companies not yet built. Lest you think I’m being a Pollyanna, I’m reminded that many decades ago there were those who thought television would supplant radio — and we know how that turned out.

I’m cheering both for the brash new media companies that usher in ever-increasing offerings of news, entertainment, social, and business content, and for legacy companies like Disney, Scripps, and Sinclair, which are aggressively racing to buy into new media, or to offer their own brands of traditional and hybrid services to consumers. They all deserve to develop and present competing options, and I truly believe consumers will be the ultimate winners.

Like MFM itself, our member magazine caters to the interests of media’s finance, accounting, and other business professionals. In addition to “Catching the New Wave,” the March/April issue includes our “Credit and Collections” Special Report that will be a must-read by those who operate in the financial sector of our industry. The issue also features several pertinent articles around the current challenges the industry’s financial teams face, particularly as the longer-term effects of the COVID-19 pandemic begin to fully surface. We present this issue in anticipation of both our CFO Summit on March 11 and 12 and our annual conference — Media Finance Focus 2021 — kicking off May 11 in its second year of virtual presentation with the theme “Together Toward Tomorrow.”

It’s an exciting time to be in media — traditional or new — and I eagerly anticipate learning, from our many experts in the weeks ahead, the ways in which the industry’s finance teams will play an increasingly important role in guiding media companies seeking to leverage the past and influence the future.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Facebook, Instagram and Twitter accounts.