Axios Media Trends

Two interconnected white triangles on a red square, both pointing forward.
February 18, 2020

Today's Media Trends is 1,861 words, a 7 minute read.

Situational awareness: SNL's Kenan Thompson and comedian Hasan Minhaj will be featured at the White House Correspondents’ Dinner.

1 big thing: Streaming revives record labels

Illustration: Caresse Haaser, Rebecca Zisser / Axios
Illustration: Caresse Haaser, Rebecca Zisser / Axios

An explosion in people paying for music via streaming services is helping to revive the decades-old record label business, which is now preparing for a slew of public offerings.

Why it matters: "There hasn't been this much optimism in the music business since the invention of the CD," says Ross Gerber, co-founder, president and CEO of Gerber Kawasaki Wealth and Investment Management.

Driving the news: Record labels are eyeing public exits at huge multiples of what they were once worth just a few years ago.

  • Universal Music Group is planning an IPO within the next three years, according to its parent Vivendi's latest earnings report out last week. In December, Vivendi sold 10% of UMG to a group of buyers led by Tencent Holdings, valuing the company at $33 billion.
  • Warner Music Group said two weeks ago that it's filed to go public. The company is owned by Access Industries, which is owned by billionaire Len Blavatnik, who bought Warner Music in 2011 for $3.3 billion. It's likely Blavatnik wants to bring Warner public now after seeing UMG's valuation skyrocket with the Tencent stake sale.

Be smart: The valuation jumps are not because they are bringing in more money than ever before, but because they are on an upward trajectory.

  • "The music industry still hasn't touched the revenue that it used to make 20 years ago," says Gerber, "but it's going up versus going down."
  • "There's been double digit revenue growth for each of the last three years," says Larry Miller, Professor and Director of the Music Business Program NYU Steinhardt. "Wall Street respects that momentum."

Yes, but: A slew of public offerings may indicate that executives think there's a growth ceiling on the horizon.

  • Studies indicate that most consumers aren't willing to pay much more than the roughly $10 monthly they pay for music streaming service, and unlike video services which are differentiated with exclusive content, most consumers will only pay for one audio streaming service.

The bottom line: "I think that's why these companies want to go public now. I think there's some growth limits to this model," says Miller.

Go deeper.

BONUS: Streaming, by the numbers

Paid subscriptions now account for about 80% of streaming music revenue.

Reproduced from  Recording Industry Association of America; Chart: Axios Visuals
Reproduced from Recording Industry Association of America; Chart: Axios Visuals

According to Mitch Glazier, Chairman and CEO of the Recording Industry Association of America, that's up from about 25% just five years ago.

  • "Five years is a short amount of time for an industry, even one adapting quickly. That kind of transformation in revenue base and streaming growth adoption for subscriptions is really remarkable," he said in an interview with Axios.
  • According to recent earnings and company reports, Amazon Music currently has roughly 55 million subscribers. Spotify has about 124 million and Apple Music has over 60 million.

2. National papers thrive, locals struggle to survive

Illustration: Sarah Grillo/Axios

While big national newspapers grow stronger, local newspaper chains that have for decades kept the vast majority of the country informed are combusting.

Why it matters: Local communities are increasingly losing the power to set the agenda for the news that most affects them.

Driving the news: McClatchy, the publisher of dozens of local papers from the Sacramento Bee to the Kansas City Star to the Miami Herald, announced last week that it voluntarily filed for bankruptcy to allow the company to restructure its debt and pension obligations.

  • The bankruptcy ends family control of one of the largest newspaper publishers in the country, Axios’ Rashaan Ayesh reports.
  • It plans to hand the majority ownership to Chatham Asset Management, a hedge fund that also owns the National Enquirer tabloid.

The big picture: McClatchy’s bankruptcy is the latest in a string of major newspaper group fire sales and mergers in the past year.

Meanwhile, the national giants are thriving.

  • The New York Times has passed $800 million in annual digital revenue and has 5 million+ digital subscribers.
  • The Wall Street Journal has topped 2 million digital subscriptions.
  • The Washington Post has been profitable and growing for the past several years under the ownership of Amazon founder Jeff Bezos.

Go deeper.

BONUS: Print's lonely fall

Data: eMarketer and Zenith Media; Chart: Axios Visuals
Data: eMarketer and Zenith Media; Chart: Axios Visuals

While some traditional ad businesses, like television and radio, have plateaued in the digital era, print ad revenue has plummeted.

  • Since 2005, newspapers have lost more than $35 billion in ad revenue, according to a report from PEN America.
  • Since 2004, newspapers have lost nearly half (47%) of newsroom staff and nearly 1,800 newspapers — about 20% of the estimated national total — have closed.
  • Overall, newspaper guru Ken Doctor estimates that there have been about 20 newspaper bankruptcies since the Great Recession.

3. Europe nixes Facebook's plea for friendly rules

Illustration: Aïda Amer/Axios

Facebook is doubling down on its big pitch to lawmakers across the globe, but key regulators aren't buying it.

  • Hours after Facebook CEO Mark Zuckerberg met with lawmakers in Europe to discuss the company's new proposals for regulation, a French commissioner overseeing the EU's data strategy rejected the plan: "It’s not enough. It’s too slow, it’s too low in terms of responsibility and regulation."

Why it matters: Facebook hopes that by embracing the push for regulation, it can build more trust with policymakers and better influence future regulation in its favor. But so far policymakers are wary of Facebook's attempts to help write its own rules.

Driving the news: In an op-ed in the Financial Times Monday, Facebook CEO Mark Zuckerberg called for more regulation around four key areas: transparency around content moderation, political ads, openness around data sharing, and oversight and accountability.

The big picture: The press blitz comes just days ahead of the U.S. Justice Department's workshop on a critical law that protects Facebook business model, Section 230 of the Communications Decency Act.

4. News industry wants to cut Big Tech's safety net

Illustration: Rebecca Zisser/Axios

Exclusive: The News Media Alliance, a trade group which represents thousands of U.S. newspapers, plans to propose limits to a rule that, to-date, has helped Big Tech companies dodge responsibility for the content people upload to their platforms.

  • The 24-year-old provision, Section 230 of the 1996 Communications Decency Act, allows tech companies like Google, Facebook and Twitter to host user-generated content on their platforms without being liable for what it contains.
  • The rule has paved the way for the modern internet economy, but has also been blamed for giving tech companies little incentive to police nefarious content or false information on their platforms.

According to a written testimony provided to Axios, NMA will tell parties on Wednesday at the Justice Department's upcoming workshop on Section 230 that policymakers should limit the safe harbor exemption within the law that protects tech platforms from being sued for the content that other people post on its site.

  • "[W]e should start by limiting the exemption for just the very largest companies who both derive the most benefits from Section 230 and have the greatest capacities to take legal responsibility for their commercial decisions around content and reach," the testimony says.
  • NMA CEO David Chavern will be testifying.

The big picture: U.S. Attorney General William Barr said last month that the DOJ was looking into the law because “many are concerned that Section 230 immunity has been extended far beyond what Congress originally intended,” per Reuters.

More on Section 230.

5. Scoop: Inside the Trump campaign's big hedge on Facebook

Illustration: Eniola Odetunde/Axios

The Trump campaign has invested most of its advertising budget to date on Facebook, testing thousands of versions of ads per day to maximize its spending, Axios' Jonathan Swan and I write.

Behind the scenes: A source familiar with the campaign tells Axios that the thinking has shifted: "[T]he percentage of our total media budget [on Facebook] is shrinking."

The big picture: Since the last election, it's become obvious that all campaigns are at risk of the changing algorithms and policies at Facebook, or on any platform.

  • People familiar with the Trump campaign described its thinking in detail to Axios.
  • Last fall, the campaign urged Facebook to keep the same tools for political advertisers that they make available to companies.

Details: Today, the campaign is testing new strategies on several dozen platforms to reduce dependence on Facebook — though the platform will still play a crucial role in the Trump 2020 strategy.

  • The Trump campaign began buying ads on conservative podcasts last spring, including shows hosted by staunch Trump allies. The goal is to get Trump supporters more engaged in the months before Election Day.
  • "When you are quick, have speed, and money to spend, you need more levers — more places to pivot," says one source familiar with the campaign. "Better expanding outside of Facebook allows that."
  • "We're trying out dozens of places where we can communicate with voters," the source added. "Wherever that comes in an efficient way, we'll spend more money on that."

By the numbers: While the Trump campaign still spends big on Facebook ads, the percentage of its ad budget spent there has fallen significantly over the past few months, according to data from Advertising Analytics.

Between the lines: Right now, the Trump campaign uses Facebook ads to drive sign-ups for its email and text alerts — forms of outreach that don't get more expensive with time.

  • Facebook sells ads on a bidding platform, which makes them more expensive as Election Day nears and demand goes up.
  • The campaign has several million people on its text list and tens of millions of people on its email list, according to two sources familiar with the lists.

Sign up for Swan's weekly political newsletter Sneak Peek.

6. Media companies push voter registrations

Illustration: Axios/Rebecca Zisser

Telemundo will announce on Tuesday the launch of a multi-million dollar voter initiative aimed at Latinos called “DECISIÓN 2020," executives tell Axios.

Why it matters: "This is a big moment for the Hispanic community," says Cesar Conde, Chairman of NBCUniversal International Group and NBCUniversal Telemundo Enterprises.

  • "For the first time, Latinos will be the largest ethnic voting block this election, making up 13-14% of all eligible voters."

Details: The effort includes the launch of a new network news broadcast every weekday, new digital shows designed to target young Latino viewers, more Sunday public affairs shows in local Telemundo markets, polls about the Latino vote and voter registration events and nationwide town halls.

  • Conde says the success of the effort will be measured by "the number of voices heard, and the amount of participation at national and local levels."

The big picture: Telemundo isn't the only group to spend many millions on voter registration efforts. It's part of a bigger wave of media and tech companies pushing robust voter registration and election engagement efforts.

  • MTV and its parent Viacom, now ViacomCBS, have for years focused efforts on youth voter turnout through programming and on-the-ground registration partnerships.
  • Snapchat helped more than 400,000 users register to vote in less than a month during the 2018 midterm elections. It's planning to do further voter engagement this cycle.

Go deeper.

7. The messy world of internet influencers

Illustration: Aïda Amer/Axios

Facebook said Friday that political candidates, campaigns and groups can use paid branded content across its platforms, a clarification prompted by a move from Michael Bloomberg's campaign to pay top Instagram influencers to post memes on its behalf.

Why it matters: Branded content is a tricky area to define and regulate because it is more obscure about being an advertisement by design.

  • The Federal Trade Commission released native content guidelines years ago, but the enforcement of its rules has been very difficult in the social media era.
  • Recently, the FTC has cracked down more on influencers that haven't disclosed paid promotions, but there have been few examples of promotions for political purposes that were evaluated by the FTC or the Federal Election Commission, which also sets rules and boundaries for campaign expenditures.

The big picture: Publishers have always felt as though the FTC's enforcement on influencer content and branded content was not a serious threat.

  • The agency doesn't have the resources needed to monitor every single post online for the proper ad disclosures, especially as more ads have become ephemeral via formats like "Stories."
  • As a result, the responsibility falls to the platforms, but they have little incentive to do anything but to push influencers towards their ad tools so they can take a cut of the pay. 
  • Most platforms, including Facebook, don't make money off influencer content. Most of the money that is brokered between influencers and brands is done directly, or through influencer agencies or talent agencies.