Could crypto solve the media's money problem?
Making money in media isn’t as easy as it looks.
Sure, money has been made. Empires have even been built on media. Logan Roy of Succession was modeled after Rupert Murdoch, whose News Corp earns nearly $10B annually by serving TV, print, and digital media. Netflix, a relatively young media company, has a higher market cap than McDonald’s. Even legacy outlets like the New York Times and the BBC still do well in today’s digital-first environment, most recently earning $2.4B and $7.2B in annual revenue, respectively.
But empires don’t come easy. Media companies navigate a fast-changing landscape that offers few foolproof paths to profitability. At the same time, the work itself involves unique risks. Firms can end up on the losing side of a shift in the political climate or find themselves disrupted by consumer tech innovations. This is an industry that calls for constant care and reinvention, with no guarantees and nothing immune to change.
Sounds a bit like crypto, doesn’t it?
Crypto is already working its way into other industries like finance, fine art, social networks, and even real estate. Wen media? Crypto could bring foundational innovations to media, most likely starting with monetization.
Monetization (a blanket term indicating the various ways media companies earn revenue) is key to growing any empire. Without it, media companies fail. Look to abandoned projects like Quibi or CNN+, which litter the media landscape like the remains of frozen hikers on Mt. Everest, for proof that monetizing effectively should always be job one.
This article will explore how monetization works across the current media landscape, including advertising, subscription models, and community-based monetization. Then, we will contemplate how crypto could flip the script and potentially remake monetization for the better.
Advertising: turning attention into revenue
Advertising has come a long way since the days of Mad Men. Here’s how it works today:
WAGMI Inc. is launching a new product: a hardware wallet. The company has invested a lot of capital in researching wallet technology and developing a secure, easy-to-use wallet for storing cryptocurrency.
You’re WAGMI’s VP of marketing overseeing the launch of the WAGMI wallet. Fortunately for you, the gigabrains on the engineering and product teams absolutely killed it. Your research and industry experience suggest that any crypto user who buys and uses this wallet will be delighted by the experience. These users will then promote the wallet to their friends and followers, kicking off a virtuous cycle based on love for the product and affinity for the WAGMI brand.
Your job as a marketer is to get the WAGMI wallet into the hands of that critical first wave of users. You want to target power users — people who are into DeFi and on-chain opsec, who are more likely to have other crypto power users in their network.
During the first three months post-launch, your success will depend on three factors:
Reach — how many potential power users became aware of WAGMI wallet?
Conversion — of the potential power users you reached, how many bought a WAGMI wallet?
Cost — how much did it cost to generate this reach and these sales?
You might reach out to some Crypto Twitter influencers. You might pay for a booth at a crypto conference. Or, you might set up an ad campaign that promotes the WAGMI wallet wherever your target audience likes to hang out online.
Media companies are great at driving attention. They know what people like. This means that crypto-focused media outlets are probably a good place to advertise the WAGMI wallet. But keeping in mind reach, conversion, and cost, where should you direct your advertising budget for maximum ROI?
Large, established sites like Coindesk and Cointelegraph attract 10M+ visitors each month. They offer an impressive amount of reach, but how many visitors to these sites are true crypto power users?
There are also smaller outlets like TheBlock and Blockworks that attract a few million monthly visitors, but cater to a more sophisticated audience. Advertising here may drive higher conversion rates, but these outlets may not offer the reach necessary to hit your 3-month sales target.
Finally, you might reach out to independent creators on Youtube, Substack, etc. whose audiences are almost exclusively crypto power users. Sponsoring a podcast or blog will promote the WAGMI brand, but small outlets generally have less data about users and thus are unable to offer precise ROI forecasts for advertisers. I mean, do people who listen to podcasts even have disposable income?
As a marketing leader, your responsibility is to deliver results while managing cost. Given your budget, you need to find an advertising strategy that will offer the highest probability of meeting your sales targets. You can research, analyze, negotiate, and develop strong creative in support of this mission. But in the end, there’s no guarantee that people will click your ads. So, what’s the path forward for WAGMI?
You tell me. You’re the head of marketing, aren’t you?
The WAGMI wallet is a straightforward example, but this rabbit hole goes deep. Digital ads have now gone full dystopian thanks to new tools that let marketers track everything you say and do. Ever wonder why the sneaker brand your friend mentioned in conversation is now showing up all over your feed? Or why you keep seeing ads for that hotel you Googled three weeks ago? Zuck is listening.
There will always be demand for advertising because there will always be people trying to turn capital into growth. This fact is good for media companies. What’s not good for media companies, however, is that tech companies (primarily Google and Facebook) have cornered the market on attention. For every dollar that a company like WAGMI spends on advertising, an increasing portion is siphoned off to the tech giants — meaning media companies have to produce the same content, but earn less revenue.
Therefore, under the big tech regime, advertising isn’t the most attractive monetization plan for most media firms. Next, let’s take a look at the subscription model.
Subscriptions: turning exclusivity into revenue
In the days before streaming, there was something called TV.
TV was a self-contained universe. It included movies, shows, sports, news, and even weather. TV was like a babbling creek in the woods that gurgles on regardless of whether anyone is there to witness it. You could turn your physical television on — like going with a cup to collect fresh water from the creek — but even when the screen was off, there was TV on. Like a livestream, but forever.
Folks paid for TV. It was called “cable”, and it was a subscription — meaning that you paid a flat fee each month for a basket of channels. It didn’t matter if you never used it or if you had the screen on 24/7. The bill was the bill, and if you wanted the option to amble down to the content creek for a drink of fresh springwater, keeping an active subscription was the only way to do it.
Today, TV is alive and well in the form of “streaming services”.
Streaming services like Netflix, Hulu, etc. disrupted TV by disaggregating content delivery. Whereas previously, a family might pay $600 per year for cable TV, they can now pay just $6 per month for the streaming service of their choosing.
This sounds and feels like a better deal. However, much in the same way that crypto novices are blinded by unit bias (e.g., buying $100 worth of tokens that cost $.01 each “feels” cheaper than buying $100 worth of tokens that cost $1 each), subscribers are not always getting more bang for their buck.
Source: Wall Street Journal
Researchers have found showed that American households are subscribed to an average of 4.1 streaming services (up from 2.9 in 2020). That’s:
~$32/month on average for basic plans with ads
~$50/month on average for ad-free plans
That’s in the same ballpark as a cable TV subscription. What’s more, a family might pay $50 per month for streaming services and still miss out on the content they want. New season of White Lotus? Hope you have MAX. Black Mirror dropped a banger? Rotate to Netflix. Feeling nostalgic for The Simpsons? That’s on Disney+ for some reason. Based on the chart above, a full, ad-free infinity gauntlet of streaming services will cost $94 per month, or $1,128 per year. Disaggregation is a helluva drug.
But the subscription model extends far beyond TV and streaming. You can subscribe to news sites, software, meal deliveries, and tons of other stuff. Amazon’s “subscribe and save” feature even lets you enroll in scheduled deliveries of diapers, toothbrushes, and other essentials. In the long run, this can be cheaper and more convenient than sourcing your purchases a-la-carte.
Unfortunately, the subscription model has a fatal flaw. It assumes demand that isn’t necessarily there.
Imagine a user who wants to watch one episode of Yellowstone. Unless they want to sit through some truly vibe-shattering ads, they’ll pay $15 for one month of Netflix. Now imagine another user who pays $15 for one month of Netflix and binges the entire series in a week. Both users paid Netflix the same amount, but one of them received 50x the services.
Some platforms offer a 7-day free trial. This is reasonable and helpful, but can cut both ways. Ever signed up for a 7-day trial, only to forget to cancel it and get charged anyway? Max pain.
On the supply side, the marginal cost of delivering services is the same for Netflix, no matter whether a user streams one or fifty episodes. The value isn’t in the volume; it’s in the exclusivity. You can’t find Yellowstone anywhere else. If that’s what you want to watch, you’re paying Netflix.
(Note: you actually can find Yellowstone — on Amazon Prime for $2.99 per episode or $19.99 per season. Netflix doesn’t sound too bad now does it?)
Ya went 15x leverage into CPI day again, didn’t ya son.
Exclusivity is a great revenue driver for subscription-dependent media outlets. If you want to read Bloomberg content, Bloomberg is where you go. Same with The Kobeissi Letter or Bankless. Large or small, broad or niche — people need to like YOUR content, specifically, before they will subscribe. This is why the media organizations that succeed in driving subscriptions are obsessive about their content.
They know the rule: you post cringe, you lose subscriber.
Speaking of cringe, let’s study a newer twist on the subscription model which we’ll call community-based monetization.
Community-based monetization: turning affinity into revenue
From a user perspective, the advertising and subscription models of monetization aren’t optimal. No one likes ads, and no one likes to pay a flat fee for services they might not use. What if there was another model that focused on user satisfaction as a driver of revenue?
Community-based monetization is how independent content creators on platforms like Patreon are compensated for their work. If you’re a podcaster, game designer, or video essayist with an established fanbase, these platforms enable you to monetize your audience by offering unique benefits in exchange for subscription revenue. This model differs from the traditional subscription model in two important ways:
It’s “freemium”
Independent creators usually offer part of their content library for free. Distributing free content wins attention and fans. The goal is for a segment of these fans to develop so much affinity for the creator that they’re willing to pay for extra, “premium” content.
It’s white-labeled
Most small-scale content creators don’t need the kind of payment and subscriber management systems that large media organizations use. Monetization platforms make it seamless for subscribers to pay (and for creators to get paid). Many platforms even allow creators to upload content and manage their mailing list directly on the site.
It’s difficult to deny that these new platforms have created value where there was none. Without Patreon, what are the chances that podcasts like Chapo Trap House and TrueAnon could generate monthly revenue streams of over $100,000? Clearly, there’s significant demand for what these creators produce. Patreon and its competitors have simply created a vehicle where (unlike traditional media outlets or even Youtube/Spotify) talent captures the lion’s share of the value.
The tools to build an empire are all there. But Patreon is building its own empire. Let’s stick with them as an example of the fee structure that small creators are subject to. From the Patreon site:
Patreon platform fee: 8-12%
Payment processing fee: 3-8%
Currency conversion fee: 5-10%
Total fees: 16-30%
Oof. Yikes, even.
It’s reasonable for these platforms to take a cut (they’re providing a real service, after all) but 8% for payment processing? 10% for currency conversion? Not since Ethereum mainnet have users gotten worked this hard by fees.
Without these platforms, independent creators would have a much more difficult time monetizing their content and managing their community. With them, creators capture more of the value and pay less of the overhead. Setting the fees aside, the community-based model is a step in the right direction because it democratizes value capture. (This should sound familiar to crypto natives.)
Now that we’ve covered how the prevailing Web2 strategies work and where they could be improved,, let’s think about some ways that media organizations — big and small — could better monetize their content with the help of crypto.
Web3: turning ownership into revenue
Crypto is what you make of it. Some of us trade, some of us invest, and some of us create content. A few of us even make money.
The most important common thread is that all of us (hopefully) believe in the power of decentralized networks. How could such networks be used to disrupt the monetization models we’ve covered in this article? To name a few ways:
NFT gated content
Users who hold a specific NFT can be granted access to exclusive content.
Pros: NFTs can be traded or transferred, and demonstrate a historical record of ownership. Publishers can reward “OG” subscribers with special perks or airdrop tokens to NFT holders who consume content according to specific requirements. Different NFTs can grant different levels of permission.
Cons: Could replicate the same potential drawbacks as a traditional subscription model, plus the added risk of erosion in value of NFT. There’s no guarantee that holders will be rewarded commensurately with the cost of acquiring the NFT, and like any project, NFT launches can be vulnerable to sybil attacks or exploitation by insiders.
Tipping
Users can pay for content directly without using a trusted intermediary.
Pros: Payments remain one of crypto’s most promising use cases. The ability to pay for subscriptions or content via crypto rails could further disaggregate the subscription model, allowing Yellowstone fans to pay Kevin Costner directly instead of going through Netflix. Low tx fees also mean users could tip 25¢ or 50¢ for a piece of content they particularly love, with the creator collecting almost all of it.
Cons: Tipping isn’t compulsory, and often depends more on the generosity of the tipper than on the quality of product/service provided. Onlyfans aside, most tips are very small. To earn a living or build a media business from tips requires a broad, engaged audience and low transaction fees.
Socialfi
Users can buy and sell tokens that represent membership in a community and confer unique benefits.
Pros: Beyond enabling speculation on the value of a media company’s output, socialfi tokens can have actual utility. Anything that users want to do in the current media landscape — like skipping ads, accessing subscriber-only content, tipping, or DMing creators — can be priced and paid for in social tokens. This new economy could integrate with platforms like Twitch or Substack where media creators and audiences are already active.
Cons: We already saw Friend Tech rename their tokens from “shares” to “keys”, presumably in response to regulatory concerns. (Don’t call them shares bro.) This raises questions about how ready the media industry actually is for crypto-enabled disruption given its history as a tightly-regulated sector.
Decentralized networks offer promise. They offer a more democratic way to organize our companies and governments. They offer faster and more transparent ways to transact. Media (and its monetization in particular) could certainly be remade around these new crypto-native values.
Wen could/will that happen? Today, the monetization strategies we see across media don’t align the incentives of users or content producers. It’s a paradise for middlemen: ad engines, publishers, social media platforms, etc. These groups deserve compensation commensurate to their contribution. Today, they’re earning more than that.
In order to disrupt this status quo, web3 needs to deliver solutions that benefit audiences and creators alike. Creators own the content, while audiences own the access. This way, the people who do great work in media and the people who appreciate that work are brought closer together.