Private Equity and the media - the destroyer of brands
In a week where iconic US assets Sports Illustrated and Pitchfork were gutted, it means investment in sports brands needs to be met with a serious reality check
It’s been a dismaying week if you’re in any way interested in iconic media brands being able to continue doing what they do.
The US content media market has been a wasteland of acquisitions and vulture capitalism for some time, but last week it crystallised in the destruction of two world-renowned brands in their respective genres.
Pitchfork emerged to become as iconic for music writing as Rolling Stone had once been, or the NME in the UK. But their owners have taken the executively stupid decision to roll up the site into GQ, halving the editorial team in the process and effectively spelling the end for the type of long-form musical criticism which had become its forte.
But what will resonate more with followers of sporting media will be the needless collapse of 70-year-old Sports Illustrated, whose entire staff were put on notice of redundancy last Friday, and only a few will be retained.
The reasons behind these decisions have their own individual complexities, but American capitalism, which is now rotten to the core, lies at the heart of their respective disintegrations.
It is, in the main, the result of private equity, and the understanding of one quite simple rule; just because an investment group has access to a huge pot of money, doesn’t necessarily mean they have any idea what they are doing with it.
Weaving through the ludicrously difficult-to-follow ownership structure of Sports Illustrated is part of the challenge; a company (Authentic Brands) that owns the brand name but doesn’t execute the content, sub-licencing said name to another ‘Group’ (Arena Group) who then subsequently reneged on that deal, leads to the situation where the remaining staff are left wondering what the future holds.
If you don’t believe me when I say that some of these funds make acquisitions without knowing, or caring, about what they are buying, consider that when Authentic Brands spent $110m on acquiring SI in 2019, they begun by firing 30% of the entire editorial team, including established names who had become synonymous with the brand itself.
They instead hired a team of SEO optimisation writers to flood the internet with more of what it didn’t need, and left the old SI - that of an iconic magazine, of instantly recognisable covers, and of high-class sportswriting - as simply another publisher in a gigantic bunfight for low-quality eyeballs.
Yes, these people simply do not have a clue what they have, and what to do with it. They merely deal with the fact that $110m was spent on it and they have to claw that back somehow, despite how impossible that is for a media publisher in 2024.
To generate revenue now you need a stable ad market (which is barely ever the case), a sales team which can drive branded content, huge socials which can maintain brand interest and a truckload of content to feed Google’s incessant machine. And even then, you have a battle on your hands.
The idea that developed as funds begun collecting sites on behalf of their shareholders is that media could be worth insane amounts of money; Vice are the poster boys, once accepting a $450m investment that valued the company at an insane $5.7 Billion, yet filed for bankruptcy in 2023.
Buzzfeed raised $250m in multiple rounds yet the brand is now a shell of what it was at one point. The Athletic was bought wholesale by the New York Times for $550m in 2022 but the brand runs up massive losses every quarter and isn’t delivering on subscribers as anticipated.
In short, we hear quite a lot about the demise of media brands at this level, and it’s because they have been through the process of:
Being massively overvalued
Acquired for an obscene sum
Loaded with additional corporate structure and salaries
Lumbered with people with no experience in media
Cost-cutting procedures to provide shareholders with a route to profitability
From there, there really isn’t much of a future and it’s happened on repeat. And as private equity has become emboldened - but not more astute - in recent years, it’s happened with regularity. And, yet…
All Hope for media publishing is not lost!
But it doesn’t have to be this way. Media publishers don’t have to be gigantic unicorns. They don’t have to drive nine-figure valuations, and they don’t have to be acquired for unfeasible amounts of money.
There is a profitable existence for media publishers out there. Yes, the environment is more hostile than ever, but maintaining realistic expectations as to what a publisher can do, how they can monetise, and what a projection for growth looks like is absolutely essential.
It’s still easy for the wrong people to run media organisations in all the wrong ways. It’s also still easy to be seduced by spending money with a route to growth that isn’t necessarily there.
If media firms stay agile, adaptable, and can smartly navigate market conditions, there remains a strong future amongst the unorthodox nature of the world we live in.
This news has been tough to swallow at the beginning of what will be another difficult year. But it’s doesn’t all have to play out like this.
The truth is Wokeness and politics, particularly progessive politics, are not sustainable as business models. It has been proven time and time again -- starting with radio going back 30 years -- that without some sort of loss-leading financial backing (NPR continues to survive as a propaganda engine on, amazingly enough, gov't funds) they will not sustain themselves. SI decided to destroy it's No. 1 brand -- the swimsuit issue -- with Woke programming. And it didn't take long for things to come to a screeching halt.