Survival of the Smallest

We have all been focusing on the mega deals which are currently reshaping the media business. The drivers of this dash for size are obvious. Scale economies and buying power, fast-tracking strategic developments, sharing tech investment, filling knowledge and skills gaps, taking out the direct competition - these are all good reasons to buy or collaborate, sometimes with competitors, to get things done and to move the business on.

Yet a contrary trend has been picked up in successive waves of the mediafutures survey - the increasing amount of activity in what we define as “small” companies, with an annual turnover of under £5m. Dive deeper and drop below £1m turnover, and there is a seething mass of highly creative, innovative, but largely unprofitable activity in content creation in three key areas: hyperlocal news, indie micromagazines and individual influencers and content creators.

For news operations, the mediafutures figures echo the findings of the latest Public Interest News Foundation (PINF) Index 2022 report. This puts the average annual turnover of hyperlocal units at around £100,000, with the centre of gravity (median average) at only £31,000. They struggle to generate consistent and reliable revenues. They also fight to cover their costs, the biggest of which is people. The typical publisher employs the equivalent of two to three full-time staff, who are made up by up to eight people working part-time. These kinds of numbers look very similar to what is happening in the consumer micromagazine sector. These titles go under a number of different labels, such as indie, artisan, new wave, post-digital, hyperspecialist.

Another area of “micropublishing” is the output of individual influencers and content creators. Although beyond the scope of the core mediafutures benchmarking project itself, this whole area includes platforms such as Substack as well as more general social-platformed activity, most prominently on Instagram, but increasingly on TikTok. This is both a threat and an opportunity for more traditional “publishing” operations. Here again, the scale is often very similar to hyperlocals and micromagazines. Whilst many people’s impression of this market is shaped by a handful of multi-million pound businesses (the Kardashian family being right up there at the top!), the average influencer is generating just over £40,000 of revenue per year, according to the recent Tilt Content Entrepreneur Benchmark Report 2022.

In a number of ways, each sector is very different. Take content delivery as an example:

• Hyperlocal news is equally split between digital-first and digital-only. According to PINF, just under half of the hyperlocal operations publish a print newspaper (with an average circulation of 8,000 copies), whilst just over half are digital pure plays. Yet for everyone, the branded website is the core content platform – the hub for newsletters, video and audio products. The typical publisher reaches 542,000 consumers over a year via their own website. Just under half publish a newsletter, with an average of 1,200 subscribers per title. Broad social media platforms (principally Facebook, Twitter and Instagram) have an average 12,000 followers per title.
• By contrast, micromagazines are almost exclusively print-first. They may use digital tools in their marketing and comms, but part of their whole raison d’être is the print reading experience itself. They also revel in the print purchasing experience, which is catered for by a growing range of specialist outlets, such as Magculture, Shreeji and Magazine Heaven.
• The influencers and content creator sector was almost exclusively digital-only. Yet now some print publications are beginning to appear, although this is being restricted by print and paper prices and availability.

The key sources of income are also very different, both from sector to sector and from brand to brand. For hyperlocals, the largest single revenue source is advertising (43% of the total) followed by philanthropic grants (24%) - ranging across individuals, government organisations and tech companies including Alphabet and Facebook - and reader revenues (22%). Interestingly, the revenue mix varies markedly by the type of content. The highest dependence on reader revenues (38%) is for investigative journalism and the lowest (17%) is for solutions / engaged journalism. Reader revenues are dominated by two streams: small, regular reader donations and membership programmes. For micromagazines, reader revenues are critically important, with single copy cover prices that range from £2 through to £100+. Yet traditional display advertising is also a key stream. Influencer incomes have a growing subscription element, but the big play is still ecommerce – recommending other people’s products or creating their own ranges.

Yet despite all the front-end differences, there are some similarities in the challenges and drivers.

• The basic driver behind all of them is passion and knowledge about a clearly delineated vertical. That vertical may be defined geographically, as it is for news operations. It is often defined by a hobby or a lifestyle - a “community”.
• There is a redefinition as to what “content” actually means and who creates it - usually much more of a two-way dialogue between creators and users. For many news operations, there can be a high moral vision to inform. Yet there are also issues of news avoidance (because it can be so negative and depressing) and the generally falling levels of trust in the “news” that is out there. Yet relevance and adding value to people’s lives (even if that is just a bit of fun) lies at the core of all engagement.
• Each sector divides into three tiers. At the bottom is never-for-profit operations, which are either vanity / ego projects or which have no clear path to monetisation. The second is potential-profit operations, but which generally still need to grow bigger to survive. The third is made up of attractive, scalable businesses.
• The costs and challenges are the same whatever the size of operation: in descending order, staff, tech and general operating costs, including office space.

The larger media companies are looking on at these micromedia hotspots with a wide range of reactions: from bemusement through to the careful copying of interesting ideas and techniques. Micromedia may never replace what has been lost at the top end of the market from declining legacy brands and businesses. And being small most certainly does not guarantee survival. Yet there is something going on, often off the radar, which needs to be watched and understood better, as it demonstrates the passion, creativity, innovation, risk-taking and leaps of faith which will drive the media business into a new phase and a new shape.

mediafutures is an annual benchmarking survey of the industry undertaken by Wessenden Marketing in partnership with InPublishing and Collingwood Advisory.