Blake Saunders says the Internet made distribution free and shifted media from stable family businesses to companies built quickly to be sold.
Saunders says YouTube is becoming a first-run channel for traditional media, with brands buying directly on it like television.
Saunders expects more M&A around Substack, noting Bloomberg and CNN have moved toward newsletters, while only three to five realistic buyers exist for many media businesses.
Media dealmaking shifts toward YouTube, Substack and creator-led brands
Media dealmaking is being redrawn by free internet distribution. Traditional networks shrink while value moves to platforms and creators, so buyers now chase YouTube channels, newsletters, live sports and IP libraries. Those assets carry key-man risk and attract few buyers, which makes each deal a custom process.
Takeaways
Free distribution hollowed out traditional media. The Internet made distribution free, shifting media from stable family-owned businesses toward ones built to be sold. A fully distributed cable network fell from about 110m households to 55m in seven or eight years, and most value went to Google, Facebook and Amazon.
YouTube is becoming a first-run channel for media. Brands now buy directly on YouTube like television. Hot Ones sold at a good multiple, and its business resells YouTube inventory to brands such as Procter & Gamble and Coca-Cola, which has been very profitable. Large media companies are slow and fast-follow rivals.
Substack and newsletters are the next M&A frontier. Saunders expects more deals around Substack, as Bloomberg and CNN move toward newsletters. Media companies buy audience when acquiring media and capabilities when acquiring tech. Not every Substack or YouTube channel can be bought, because each one differs.
Key-man risk and few buyers limit creator deals. Content tied to specific people, such as Seinfeld and Hot Ones, carries key-man risk, and many media businesses have only three to five realistic buyers. TCG invested in Barstool, after which Dave stepped back from the CEO role.
Live sports and IP libraries hold durable value. Live sports is the clearest appointment viewing and supports billion-dollar rights deals. Libraries gain value when reworked, as with Disney's recolored films and Spotify's revival of old music royalties. Paramount wants South Park and the UFC on Paramount+.
Publishers must build direct audience relationships. Google News once rewarded whoever posted first, and publishers now face double-digit declines in organic traffic. The New York Times grows through subscribers. Saunders says publishers can do little beyond building direct user relationships. The Economist's podcast listenership fell 85% behind a paywall.
Media deals need custom processes, not auctions. Saunders spent about 15 and a half years at Methuselah Advisors before spinning out on his own. Bulge bracket banks sell a wider range of services, but media deals now need hands-on processes rather than an auction sent to 30 buyers.
Saunders on AI and society
The world becomes deflationary, with most things cheap but most people unable to buy them.
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On this episode 2
Show 1
Taxes rise and universal basic income becomes necessary.
People become more addicted rather than more creative, since platforms make unpaid user-generated content as addictive as possible.
Authenticity gains value, as seen in independent creators such as Kai Cenat and in Oprah Winfrey's early career.