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“Do you have a studio?”
'Don’t need one, I said. Podcasts can be produced at home with equipment that costs only a few hundred bucks. Plus our hosts and their guests are based all over the world, it doesn’t make sense to have an expensive centralized studio.'
“What about broadcaster training?”
'Broadca-what? Training? We’re working with creators who are great at what they do. We get out of their way and give them creative license to do it. We’re not in the business of producing cookie cutter podcast hosts who all sound like insufferable radio hosts. We’re in the business of relatable, authentic voices.'
“What about production?”
'You mean adding some intro and outro tracks, maybe some ads, and normalizing the sound? Yeah, we’ve got $20 a month tools and a small team of folks in the Philippines who do that for us for $10 an hour. '
This has been the essence of conversations I've had with execs from old media companies when sharing a digital media concept I'm building. These old media companies are struggling to retain audiences, advertising revenue, and market cap.
A great example of this is the aging Nine network in Australia, which has seen its market cap slashed from over $5BN three years ago to less than $2BN today (below).
Despite all their talk and millions of investment in ‘digital transformation’ projects, these aging behemoths often still operate like it’s 1999.
What use is new technology when the way you make decisions and create value is still as bureaucratic and bloated as your local council?
Sure, revenue is respectable.
Nine generated $2.6B this year.
Rival network Seven West Media generated $1.4b.
But headcount, expenses and underlying profits paint a different picture.
Nine generated just $135M profit (down 30% on the previous year) - a profit margin of just 5%.
Seven West fared about the same - a profit of just $78M, also for 5% margins.
There are numerous factors contributing to these poultry margins - bureaucratic ways of working, old school methods, and most of all, headcount.
Let's take a closer look.
These numbers alone don’t tell us much of a story.
It’s how they compare to modern day digital media and tech companies that does.
It’s pain as day to see that these tech-first digital media companies (two of which - Google and Meta command about 55% of all digital advertising revenues globally) are way more capital efficient at creating value.
In fact, they’re generating about 10X more profit per employee, and in the case of Netflix, 61X more market cap value per employee than Nine and a whopping 408X more than Seven West. And I haven't even converted the Australian dollars to American, so the disparity is actually far worse.
Holy bunions, Batman!
There are several reasons for this.
If a problem can be solved or a task performed by technology at a Group B company, it will be. While the legacy media companies might pour tens and sometimes hundreds of millions into digital transformation projects, 70% of these projects fail, and cultural inertia often prevails with people reverting to old, comfortable, dated ways of working.
It can be almost impossible to retrofit new tech and ways of working into large organizations with entrenched systems, processes, values, people, and politics to contend with.
Group B companies will create a majority of their value by working with third-parties, independent contractors, and the general public.
This is true of OnlyFans (independent creators), Netflix (third party licensed content), and Meta (independent users and creators).
Not only that, but on the back-end these companies aren’t shy to offshore work to capital-efficient labor markets where commensurate quality work can be done for a tenth of the cost of local talent.
Modern tech companies - the good ones anyway - typically have a high-performance culture that makes little concession for mediocre or substandard work. Whatever you think of Elon Musk, his prompt firing 80% of Twitter’s 8,000 employees without facing a material impact on its ongoing technical operation is an example of this.
Sadly in the legacy Group A media companies, people can hide in the shadows, attend unnecessary back-to-back meetings, outsource accountability, and ultimately, coast.
Legacy media companies are no doubt falling victim, in no small part, to the principal-agent problem (a conflict in priorities between the owner of an asset and the person to whom control of the asset has been delegated).
While Group A companies struggle to untangle themselves from a decades-long buildup of bureaucracy that harkens back to an era of micromanagement, modern day tech and digital media companies first empower their people to make decisions fast, to learn, to fail, to improve, and so on. They operate with short feedback loops and experimentation at their core, which means they not only learn faster, but they get a lot more done.
They ruthlessly reflect on their work, eliminate unnecessary or low-value processes and tasks, operate asynchronously where it makes sense to do so, automate what can be automated, optimize for deep, creative work, and leave only high-value task on the table for their best people.
This not only results in more and higher quality output, but a more fulfilled and motivated workforce.
Importantly, this lower cost to serve means that modern media companies and independent creators can take more risks, run more experiments and figure out what kind of content resonates, whereas at bloated behemoths, a bet is often big and heads roll if it fails.
Legacy media companies tend to churn out lowbrow content that appeals to the masses - you know, radio presenters that all sound alike, make crude jokes, and play the same several Top 40 hits on repeat all day, or TV shows like The Bachelor and Married At First Sight. But people have choice these days. They’re gravitating towards authentic, relatable voices across numerous niches in a way that legacy media companies are struggling to respond to.
This trend accelerated after the political watershed that was the COVID pandemic and the global response to it, which left many - for better or worse - questioning and even quitting mainstream media altogether.
Building upon point 5, people are not only gravitating towards relatable, authentic and independent voices, but they are becoming fans of them in a way they never were of traditional media personalities.
This opens the door for new media companies and personalities to decrease their reliance on fickle advertising revenue, and open the door to revenue from recurring subscriptions, events, and merchandise.
And it’s not just modern digital media companies that are showing these legacy behemoths how it’s done, but also independent media personalities.
Nine’s highest ranking podcast, the true crime series The Ultimate Sacrifice, scored a commendable 550,000 downloads in August 2024. But given the investment in its content, compared to some independent creators, Nine is under-performing.
Chris Williamson of Modern Wisdom routinely gets well over a million downloads not per month, but per episode. And most of his time he did it alone, recording from home with what is a comparatively inexpensive setup.
Others like Diary of a CEO’s Steven Barlett gets well over 10 million downloads a month, while the undisputed GOAT of podcasting, Joe Rogan, gets more than this per episode - yet it’s just him, his AV guy, and a guest booker all working part-time with absolutely no guest research or interview prep done before recording.
These independent creators are striking at the heart of cashed up 25-54 year old demographics that advertisers seek out. Meanwhile, 80% of people that catch prime-time programming by the likes of legacy outlets like CNN are outside this age range.
With the recording and distribution of media having been commoditized in recent years, we’re only going to see more independent creators chip away at the heavily financed market share of yesteryear’s players.
In the early 2010s, venture capital firms that invested at the intersection of cloud, mobile, social media, and the emergence of a faster, cheaper internet were handsomely rewarded - it was one of the best vintages of all time with firms generating more than double the usual ROI.
Today in media, similar opportunities exist at the intersection of::
The trends towards capital-efficiency at new media companies will only accelerate as AI agents begin to proliferate in the next three to five years. AI agents mimic human knowledge workers and are essentially autonomous software programs designed to perform specific tasks or solve problems with minimal human intervention, typically by observing their environment, making decisions, and taking actions.
For example, AI agents could eventually be deployed to work autonomously on single tasks across areas the entire media production value chain such as content planning and research, guest outreach and booking, editing and post-production, transcription and show notes, promotion and marketing, data analysis, and revenue optimization.
Embedding the six above-mentioned components into a media company’s operations will not only lower expenses significantly - offering more flexibility to test ideas rapidly and better compete for advertiser dollars, but also supports tapping into new and global revenue generating opportunities.
But if anyone is poised to take advantage of these opportunities, it’s the media speedboats (independent creators and modern digital media companies), not the relative media cargo ships for whom changing direction is a Herculean effort, and is a turn that's often done too late.
It's not so much a case of Nine or SevenWestMedia losing their way, but more that a new way emerged.
When it comes to the application of new technologies, and in particular AI to media, it’s the new guard who are best positioned to leapfrog the old.
And to quote Bon Jovi, we’re halfway there.
If you’d like to learn more about what I’m building in this very space, email me!
Steve Glaveski is on a mission to unlock your potential to do your best work and live your best life. He is the founder of innovation accelerator, Collective Campus, author of several books, including Employee to Entrepreneur and Time Rich, and productivity contributor for Harvard Business Review. He’s a chronic autodidact and is into everything from 80s metal and high-intensity workouts to attempting to surf and hold a warrior three pose.