Business Breakdowns
· Matt Reustle
[00:00:00] S0: This is Matt Reustle and today we are exploring the world of media deals. My guest is Blake Saunders. Blake has been in media investment banking for about two decades. When I first met him, he was a banker, so I wasn't expecting to lean into this relationship. But I often introduce Blake to others as the banker that is really great, that I really love and he's been one of the best resources for me over the past three years because he's simultaneously involved with those making eight or nine figure deals, those who pay his paychecks as he is with the new media upstarts and everything that's happening in the podcasting universe, the Substack universe, the YouTube universe. So I took what would otherwise be a private conversation and did it for the podcast. We get into the deal landscape that exists today and some of the realities of the media market and how companies are dealing with this new era, and then who's best positioned for the next chapter. I benefited from Blake, who had previously been known to some as the anonymous banker who wrote some amazing things over the past year because he came out of hiding and was willing to come onto the podcast with us. So please enjoy my conversation with Blake Saunders. All right, Blake, I am excited to finally have you on the show and I can have you on without having to refer to you as the anonymous banker, as you've come out of hiding here. You have a deep history in media. You've been an incredible resource to me as a media banker over the past few years. I wanted to start this out very high level. We're going to get into a lot of the weeds, but as I was trying to come up with topics, it's incredibly difficult for me to define media. So I thought the best place to start was to have you share your view on what media means to you.
· Blake Saunders, Matt Reustle
[00:00:00] S1: Media at a high level is effectively content that's monetized via subscriptions or advertising. It takes on so many different forms and continues to evolve. It started at the beginning with books and manuscripts, and then it evolved to newspapers and then radio and then television. And I think each successive iteration of media to where we're at today gets more addicting, more engaging. At the end of the day, either the media company is making money because someone's paying them directly, or they're helping an advertiser, brand agency get someone to make a purchase decision and make that purchase. [00:00:00] S0: You hit on a good point at the end there in terms of who the actual customer is, whether it's the advertiser or the audience itself. But going into your history as a banker, you've been in this media market, in the M&A markets for decades now. Not to get into age dynamics, I'm right there with you. But what would you sketch out as the major thematic changes in terms of what has changed from the early days in your career to where we are today? And I would use an M&A lens if you can, but whatever you would say to capture thematic changes.
· Blake Saunders
[00:00:00] S1: I think the biggest change that happened in media, just in general is the Internet. Even though it made distribution free, people's perception of what they were building and how to create value in the last 25 plus years has been to build it quickly and then sell it. I think before that, newspapers and things were owned by families for multiple generations and they were really stable and great businesses. TV there's a lot of media companies today that still have family ownership, Condé Nast and Hearst. So that's a big change. And the reason why it's changed and it's not the best is the lens has shifted from businesses that maybe don't take that much money to start and are very cash flow, generative and stable. Newspapers, they had basically a monopoly and the federal government actually regulated what you could own. This was a rule that went away, but you couldn't own TV, radio, newspapers in the same market because they were worried about a monopoly. The problem is Google and Facebook now came into these markets and effectively took a lot of the advertisers because they just were able to get customers easier. Starting 20 plus years ago, you saw people that were raising money to build media businesses that may not ever be profitable with the pure goal to get it big enough to then sell it to another media company. Where we find ourselves today is we're in a spot where it's really tough. Every company is struggling. I think people that have subscription and direct contact with their consumers are doing okay, but anyone that's relying on organic search traffic to drive advertising revenue, anything is really tough because the degradation you're seeing in consumer engagement is really high. And this is also on the TV side, too. In the US, a fully distributed cable network used to have 110 million households. This was seven or eight years ago, so it's not that long ago. Today it's 55 million. And the reason why that matters for TV and cable is that each of those households that are subscribing are paying a fee to Comcast or one of the other distributors. And part of that fee is then making its way to ESPN or whatever cable network. If you half that, you've effectively halved your revenue. And they have other places to get revenue from, advertising.
· Blake Saunders, Matt Reustle
But these businesses are changing rapidly, and most of the value is accruing in the hands of a few people. Google, Facebook, Amazon. [00:00:00] S0: It's incredible, the breadth out there where there's literally no barriers to entry now for anyone in the media space. I did want to put the lens back on you in terms of going through your career working for institutions. You've made this change recently, which I want to get into. Can you talk about why you left your firm recently and whether any of these developments had anything to do with you taking a different strategy personally?
· Blake Saunders
[00:00:00] S1: I was at a small firm called Methuselah Advisors for 15 and a half years. I think 14 and a half years. And then I spun out a couple of weeks ago, started my own platform. Being at a small firm, you're always your go to market. When you talk to clients, yes, it's about your partners, but it's also they're hiring you. When you're at a larger bulge bracket, you have a multitude of services to sell into a client across the board. So debt capital markets, equity capital markets. So you're able to provide more services. I started at Citigroup for a year and then joined the smaller platform effectively for 15 years. I was just selling air, literally ideas. I just see the world changing a lot in terms of how firms will be structured, what clients want, and sort of the services we can deliver. I wrote this unique LinkedIn post and I titled it Conscious Uncoupling. When you're in a partnership for 15 years, it's a conversation. It's not I'm sending an email or I'm sending a PDF with a signature on it. It was a conversation, and I think it just made a lot of sense. I want to build something that can sustain these changes that are happening. Across the landscape, there's going to be less deals. In media, the way to take businesses to market is changing dramatically. Typically the best sell side process, so when a banker sells a business is getting an asset that you can market. You can basically have someone young on your team, send it out to 30 people and get five or 10 or 15 bids back. And then you decide and then you take whoever you want to a second stage and pick the ultimate winner of an auction process. But that's changed. And in order to sell media companies or media adjacent businesses, it's much more hands on, much more custom processes. So that's what we're building. It's different.
· Matt Reustle, Blake Saunders
[00:00:00] S0: I think there's a lot of strategic insights from the media that you know very well. And not to blow smoke, but you're incredibly well plugged in in terms of the new developments. But I also think there's a parallel to what's happened in media and seeing individuals go out on their own versus working under institutions and for a variety of different reasons. So it's interesting when these things come together. One of the things that I wanted to get your insights on was I get a lot of exposure to the theoretical sellers, those that are building media businesses from the ground up. And these tend to be smaller size. But even some of the medium size, I don't have nearly as much insight in terms of the buyers and how do you frame buyers in the medium market. We could take this so many different ways. But do you have a framework for thinking about who are natural buyers in this market? And you can elaborate on that however you like. [00:00:00] S1: It's super dynamic with some of my clients or people that I'm trying to pitch. I make this basic statement, which is if you're thinking about hiring a banker, because a lot of times most of what you do in banking is you just copy and paste what you did six months ago because you're doing a bunch of busy work. [00:00:00] S0: Don't give away the secrets.