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.
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.