Can media companies survive a recession? Executives say yes

Delegates line up on the Cannes Lions Worldwide Pageant of Creativity, Cannes, France, June 2019

cannes lions

Whereas media executives will meet with promoting leaders this week sporting rose glasses on the annual Cannes Lions Worldwide Pageant of Creativity, they can not assist however speak concerning the disconnect between relationship celebrities on yachts and the creeping sense {that a} recession is simply across the nook.

“It looks like a celebration right here,” NBCUniversal CEO Jeff Shell advised CNBC’s Julia Boorstin from Cannes on Wednesday. “I do not know if it is as a result of most of you’re away for the primary time in a very long time or if it is as a result of we’re within the south of France in June, however no, it would not really feel like a bear market.”

However Shell acknowledged that there are warning indicators, albeit sophisticated ones. “The dispersion market has weakened a little bit bit,” she stated, referring to the real-time price of TV commercials, somewhat than the preset “up-front” market. “It’s extremely sophisticated as a result of loads of issues are taking place.”

Traditionally, macroeconomic downturns have led to a spike in layoffs throughout the media trade. With Recession odds on the rise and executives bracing for a decline in advert income within the second half of the yr, media corporations aren’t shedding employees or furloughing workers, at the very least not but. As a substitute, trade leaders really feel their corporations are lastly lean and balanced sufficient to climate an promoting downturn with out sacrificing earnings or shrinking enterprise.

“Our focus has been on constructing a very resilient and adaptable digital media firm.” BuzzFeed Chief Govt Jonah Peretti stated earlier this month. “We thrive amid volatility. We’ve constructed an agile and diversified firm enterprise mannequin”.

Jonah Peretti, founder and CEO of Buzzfeed; co-founder of the Huffington Submit

Courtesy of Ebru Yildiz/NPR

“Whereas an financial downturn might have an effect on the media promoting market, we’re on observe to attain our enterprise development objectives after a document yr of profitability,” stated Roger Lynch, CEO of Conde Nast. The corporate, which publishes The New Yorker and Vogue, made a revenue final yr after a few years of shedding cash.

A part of why smaller digital media corporations really feel ready for a recession is tons of of workers have already been laid off lately, stemming from acquisitions and a need to chop prices. BuzzFeed Introduced extra layoffs just some months in the past.

Nonetheless, many digital media corporations make most of their cash from promoting, together with Conde Nast and BuzzFeed. And never everyone seems to be optimistic that media corporations are out of the woods. Because it went public, BuzzFeed Shares are down greater than 80%. BuzzFeed earned $48.7 million in advert income within the first quarter, about 53% of complete gross sales.

If corporations need to get monetary savings on advertising and marketing, there’s little they will do to keep away from taking it critically, Graydon Carter, founding father of subscription media firm Air Mail and former longtime editor of Conde Nast’s Self-importance Truthful, he stated in an interview.

“Should you’re within the programmatic promoting enterprise, which most digital media corporations are, you are going to undergo in some unspecified time in the future when the financial system modifications. It is simply out of your fingers,” Carter stated. “I believe [a downturn] It will likely be brutal and probably lengthy.

Media layoffs in recessions

The final three recessions โ€“ the one in 2020 COVID-19 setback, the monetary disaster of 2007-09 and the bursting of the dot-com bubble of 2001, have induced spikes in job losses amongst media corporations, lots of which have traditionally lacked the stability sheets to disregard momentary downturns in promoting. Whereas the media trade has contracted within the final 20 years2001, 2008 and 2020 have been the three most necessary years for job losses, in line with information from Challenger, Grey and Christmas.

It is pure for executives to really feel optimistic about their firm’s prospects. However his sense that “this time will likely be totally different” isn’t with out benefit, stated Alex Michael, co-head of Liontree Progress, which makes a speciality of working with rising media corporations. That is very true for smaller digital media corporations, together with newspaper and journal homeowners, who’ve needed to diversify into subscriptions, e-commerce, occasions and different merchandise to chop advert income.

“Prior to now, these companies did not have their fashions proper and weren’t absolutely mature,” Michael stated. “Now they’ve gone by way of waves of consolidation. There’s completely been rationalization and optimization. Plenty of the remaining corporations now have endemic audiences that may open their wallets in loads of alternative ways.”

How dangerous might or not it’s?

There are blended emotions amongst trade contributors about how massive of a push again media corporations may even see in advert income.

TikTok’s head of worldwide enterprise options, Blake Chandlee, stated he is heard there’s been a 2% to six% contraction in advert spend up to now, although he notes TikTok hasn’t seen it.

“I’ve talked to different individuals and I believe there are different people who find themselves sorry,” Chandlee stated in an interview. “We’re not seeing the headwinds that others are seeing.”

Learn extra: TikTok exec: We’re an leisure platform, not a social community

Nonetheless, others are being cautious. Snap, the proprietor of Snapchat, stated final month the “macroeconomic atmosphere has deteriorated sooner and sooner than anticipated,” inflicting its shares to drop 40% in at some point. Purpose and Twitter have instituted partial hiring freezes. digital media corporations Effectively-informed individual Y Media They’re reportedly slowing down hiring.

A digital media government advised CNBC that whereas a minor slowdown might have already occurred, a 20% minimize in advert income by the tip of the yr isn’t out of the query.

get the appropriate mannequin

The important thing to weathering a recession is having a product that resonates with a selected viewers, stated Michael of Liontree Progress. Digital media corporations and magazines which were too huge open have been unable to compete throughout financial downturns as a result of manufacturers haven’t had passionate consumer bases.

“Advertisers have requested, what do you stand for?” Michael stated. “What are they promoting towards?”

There has additionally been a “loosening” amongst advert consumers keen to take cash from Fb and Google on ethical grounds, stated Justin Smith, former CEO of Bloomberg Media.

Smith is within the course of of creating visitors lights, a brand new media firm for world information. Whereas Google and Fb have dominated the digital advert house for greater than a decade, there’s a rising motion amongst some advertisers which can be diversifying advert spending away from tech giants to assist the information trade within the face of privateness violations and Massive Tech misinformation.

“Earlier than, advert entrepreneurs actually averted information media, particularly digitally oriented, due to model security. Information was so carefully tied to negativity, battle and famine,” Smith stated. “Now you are trying on the reverse of that: model bravery. The one true antidote to disinformation is human intervention. It is a multi-hundred billion greenback fund. Even a little bit leisure from that group is lots, lots.” cash”.

Smith is not apprehensive about throwing Semafor right into a potential recession. He stated that whereas Semafor goals to draw school graduates from world wide, a broader viewers than area of interest websites with passionate audiences, even common curiosity publications are in a greater place now than they have been 10 or 15 years in the past. . He credit the subscription’s huge adoption.

“Should you have a look at the final 5 years specifically, whether or not it is the pandemic, the fascination with Trump, or the rise of Spotify and Netflix, there’s been a sea change with subscription,” Smith stated. “There may be instance after instance of cross-category client adoption for information subscription fashions.”

Smith applied a client paywall on the Bloomberg Information web site three years in the past. At this time, greater than 400,000 individuals pay for entry. Semafor, which can launch this fall, will begin out as a free ad-supported service and can keep that means for “six, 12, perhaps 18 months” earlier than putting in a paywall. Some articles will at all times be free, Smith stated, like many different digital information companies.

Smith additionally stated the trade has morphed into methods to higher join audiences with reporters, even throughout downtime. Smith is selling this enhanced linkage by straight recruiting expertise brokers, who will likely be tasked with matching journalists on merchandise and occasions exterior of Semafor’s core enterprise to broaden its attain.

“The media trade is in higher form than it was a decade in the past,” Smith stated. “Methods are extra smart. Digital adoption is extra ubiquitous. Fashions are clearer. Income streams are extra various. Executives are extra skilled. Though we’re in all probability headed for a worldwide recession, I believe the media enterprise will resist among the downward strain extra strongly than up to now.”

Disclosure: NBCUniversal is the mum or dad firm of CNBC.

LOOK: TikTok promoting chief Blake Chandlee speaks from Cannes

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