Why do media companies struggle to produce anything of value?

It’s the absolute best economy the United States has seen in decades, and yet, you wouldn’t know it from looking at the employee rolls at major news and media outlets. Thousands of journalists have lost their jobs this year through restructurings and layoffs, while cities like Youngstown, Ohio have lost their one and only daily local newspaper.

That’s led to much hand-wringing: can media be saved? And even more specifically, can media companies ever build the kinds of scalable product businesses that we’ve seen in the software world? In short, why does media struggle to create value?

One trigger for this conversation was Maxwell Strachan’s in-depth HuffPost retrospective analysis of the rise and demise of Mic, which had garnered tens of millions of venture capital in its heyday before fire-selling to Bustle Digital Group. That piece led venture capitalist and former media company founder Om Malik to opine with a great post yesterday assigning blame for the (many) plights facing the media industry squarely on the shoulders of, let’s just call them dumb media executives:

When you have sales guys (they are mostly guys) in charge, decisions will reflect their usual approach, which is to maximize their personal gains as quickly as possible, cash in their bonus checks, and then move on to another outfit desperate enough to let them do it all again. This won’t work in an industry in need of the focus, foresight, and boldness that brings about transformational change. Sadly, the media establishment’s attitude appears to track more with our politicians’ thinking on climate change. They tell themselves, “I’ll be dead before the bad stuff happens.”

Malik’s answer is direct but only partially correct. Yes, media executives share plenty of the blame for what’s happened to the industry the past two decades. But part of the reason they failed to produce value is that they believed in this widespread notion that software “product” and media “product” are somehow similar and can borrow each others’ mental models and frameworks.

It’s just not true though, and the alchemical fusion of digital and media into our modern “digital media” hellscape is still predicated on a fundamental mistake: that somehow media can be made to look like software, and all we need is “foresight” and “innovation” to bridge the divide.

Let’s start with just the pure economics of these businesses. Venture capitalists and founders love software businesses because there is both leveraged scale and high rates of return on effort. Once you write code, you can deploy it today at global scale to as many customers as you want. It’s the old Java slogan of “Write once, run everywhere” and it is perhaps the single greatest profit driver in the past century if market caps are anything to judge by.

Once written, software produces revenues without additional labor. Yes, you need bug fixes and DevOps and analytics and monitoring to keep everything running smoothly, for sure. But like the building manager of a real estate investment, the entire engineering team can take a vacation for spates at a time — and yet the underlying asset continues to throw off cash.

Compare that to the media world. If the entire editorial team of TechCrunch or The New York Times takes a vacation … well, then, there is no site (or paper, as it were). Unlike code, which reproduces value, content has an incredibly short half-life in nearly all media segments. It doesn’t matter if a site’s business model is traffic or premium subscription — one way or another, you need to stoke that content boiler on a very regular basis, lest your readers shift their time (and wallets) to some other diversion.

Wealth in media comes from only a handful of places: a database that is reusable by a wide number of customers (think Crunchbase), evergreen articles that are good for repeated referencing (think WebMD) and brands that bring traffic, attention and customer dollars without additional labor (think Disney’s extended animated movie catalog).

In software, you are valued by the total effort expended on building your product. In media, you are valued by the marginal effort expended on producing your product, with the margin determined by your content’s half-life. Adding a new feature to an app is a capital expense. Adding a new vertical to a site is a recurring operational expense.

Other than glib summaries of “product” as “do what users need,” those differential economics prevent media PMs from just following software PM playbooks. Resources are different, staffing is different, metrics are different, brand is different, users and their willingness to pay are different.

Media companies struggle to create value since they borrow too much, but they also have too much of an obsession with finding something new over the horizon. Malik also wrote in his piece that:

To put it bluntly, media execs are good at aping, not at innovating. Most wait for others to try new things, and then adopt those things once they have proven successful. As a smart media insider quipped to me, “The smartest people in media get out.” It is a forest fire of an industry.

Counterintuitively, media has actually been too responsive to new avenues for growth and fresh products. That whole pivot to video a few years ago was pretty blazing stupid in retrospect — but a whole flotilla of smart PMs at major media companies sure got those products out the door. We might be headed the same way in podcasts given the extreme increase in audio hours being produced these days. Everyone in media is searching for the next frontier, that next disruptive innovation that is going to be magic formula for growth and profit.

Instead, we need to throw out pretty much everything we have learned the past decade to create value and double down on what makes media, media — which is consistent quality, engaging editorial voice and a true purpose that fulfills the needs of users.

It’s that last part that so many media companies continue to get wrong. Asking your users to pay is the first step to building a deeper relationship with them and ensuring they enjoy what they are consuming (hence why we launched Extra Crunch).

And I will tell you — and here the media industry does have a similarity with software and with all businesses — many of our readers are not interested in paying. Who can blame them when so much of media is so badly produced and targeted? Media brands ask their users, “Do we create value?” and a huge chunk of readers go, “Nah.”

That’s Malik’s forest fire in a nutshell. But like real forest fires and even metaphorical ones like the 2008 financial crisis, these conflagrations have a real purpose: to burn away the deadwood and replenish the soil with nutrients for future growth. These are tough times, but everyone in media — from executives to editors and writers and producers — needs to start focusing on how they are creating value to users who will pay.

All the jobs lost today can come back — if only people produced what users demand and will pay for.