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You have a company, now find the price

Through the past blogs I have expressed some of my views on how people start media companies from the idealization phase to vision. Well, now it’s time to figure out how companies make money and, thankfully for me, this is something I’ve had some experience with before.

Other then being a journalism student, I am also an economics student with a focus on analysis and game theory. All this to say, I spent many semesters studying price games.

There really is a vast number of ways companies can make money; so let’s focus it on media companies, more specifically on Fortune and Gimlet as examples.

Fortune is known worldwide as a legacy business publications going in depth about the ins and outs of small and large corporations. As a publication, it has not been immune to the changes facing modern journalism. Here is how it’s trying to adapt.

Traditional revenue generators like subscriptions, ads and sponsorship are still very much present in Fortune’s revenue pie; but it’s the more unorthodox ones that i find most interesting. Events is turning more then 1/3 of total revenue. That is a publication putting up sponsored live events to connect its consumers together.

In my opinion this is a great idea. Fortune is known for its list of “best companies” from the 1000 all the way to the 50. These events generate a group of powerful people all sitting in one room. Now, sponsorship is a great way to make large sales. Companies are enticed in being represented in front of this group of people so that the can get their name out there.

However, there is much more that Fortune could do, mostly dealing with price discrimination practices. Offering events in categories like IT, Finance, Supply Chain, Communication etc is differentiating the types of companies that invest in sponsorship. Even greater would be the ability to target more specific groups.

Think of Fortune 500 vs a Fortune 200 meeting. Just the name makes it sound more exclusive. Offering packages of sponsorship depending on the exclusivity would ensure that Fortune grabs more of that consumer’s surplus and fill in its revenue.

Similarly Gimlet offers podcast services, ads etc to consumers. It ties creators and consumers so the company can profit from both. Creating memberships and offering different services at different price points, Gimlet has been able to differentiate itself from some of the competition as far as business model and take more revenue.

Dealing with both consumers and producers of a product, in this case podcast, is not easy. There are limitations set forth by trying to keep the best interest of both groups, which, from personal knowledge, is what leads many of similarly positioned companies to have trouble fully understanding and supporting both sides.

However, having just been sold to Spotify for $230 million, I can imagine that Gimlet has figured out the right balance.

Overall I believe that traditional pricing schemes will always be there for media companies to use. In the revenue pie, they might just not be taking as big of a slice as they have in the past. It is up to each individual brand to find out what makes them special and leverage that into a differentiated pricing scheme that takes on different levels of consumers from the highly elastic in demand to the inelastic.

6 thoughts on “You have a company, now find the price

  1. I love how you’re bringing your unique point of view as an economics student to this post to discuss the revenue side of media. Your idea for Fortune to expand its live events to other categories, like finance and IT, is a great idea!

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  2. You are right. I never thought that when the two companies merged, it would give more benefits to customers. For example, I am a member of Spotify, and now I can enjoy podcasting products by paying Spotify membership fees. That’s something I never thought of before. I thought big companies would give small companies financial and technical support, but I ignored that customers could benefit as well.

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  3. It’s always surprising to me to think that events are such a large part of revenue for a media company. It shows that on the content side, we are beginning to view news more as a conversation than a retelling. On the business side, it’s a clear and exciting way to make MUCH more money than traditional means.

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  4. I found it interesting reading about how publications and startups make revenue. It was surprising to me that live events and other non-traditional methods are bringing in so much revenue.

    I also liked and appreciated how your post went more in-depth about the economics of media companies like Fortune. For someone who is not very knowledgable about this part of journalism, it was really insightful to read!

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  5. I like the way you viewed the company’s revenue. Starting with the classification (traditional way to make money and other ways), then knowing the portion with analysis: “Events is turning more then 1/3 of total revenue. That is a publication putting up sponsored live events to connect its consumers together.”

    I also like how you addressed your opinions, very critical and knowing the differences between companies: “Gimlet has been able to differentiate itself from some of the competition as far as business model and take more revenue.”
    If I am a founder, I would like to have a partners like you to give me advice. Seems really reliable.

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  6. Your knowledge behind economics in this blog post is amazing! I really like how you’re able to break down Fortune and its current revenue practices, and give us a new perspective on the new things that they could do to make more money My favorite idea was the one involving exclusivity. Fortune 500 vs. Fortune 200 could alone bring in more revenue for the publication in terms of sponsorships.

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