This week, several large traditional media companies provided us with data points that nicely illustrate today's confusing media world:
Let's start with Disney, which announced its quarterly earnings on May 8. This week, Sinclair acquired Disney's 21 regional sports networks (which it got when it bought Fox) for $9.6 billion, and Disney wrote down its investment in Vice by $353 million, leaving the company with an investment it thinks is worth nothing. In 2016, it raised funding at a valuation of $5.7 billion.
The pervasive narrative around media for years has been disruption.
Netflix is the poster child for new technology upending the dinosaurs. A company Time Warner CEO Jeff Bewkes once likened to the Albanian Army is now worth $157 billion, while Bewkes' Warner, now named WarnerMedia, is a subsidiary of AT&T and has lost nearly all of its top executives in the past year.
But outside of Netflix, it's hard to name another successful media disruptor.
The successful digital media startup stories are now exits at relatively tiny valuations. Streaming news service Cheddar sold to Altice last week for $200 million. PlutoTV, an ad-based streaming platform, sold to Viacom earlier this year for $340 million. And remember, these are the successes -- the failures are more like Mic, which sold to Bustle for about $5 million last year.
In the tech world, an exit at $200 million or $300 million is typically viewed with a shrug or sometimes as a failure. Unicorns are the successes. Decacorns are the goal.
Buzzfeed, Vox, Refinery29, Group Nine Media, Bustle and the rest of the digital media gang still struggle with how to break through as multibillion companies.
We're left with a bit of a paradox: If every media company talks about disruption, why are regional sports networks -- a dying business -- selling for $10 billion? Why is The New York Times growing in value quarter after quarter?
There are several answers.
First, nothing has been disrupted about media except the distribution model. Instead of reading newspapers, we read online news. Instead of watching TV, we can get video on demand on our mobile devices. Instead of buying albums, we stream unlimited music with a subscription service.
That's really it. Consumers want the same content as always. They want engrossing and meticulously reported news articles. They want high quality HBO-level TV shows. They still want to watch live sports. They still want to listen to The Beatles.
This may be tough for a lot of venture capitalists and entrepreneurs to hear, but in the aggregate, not enough people value the original content digital media companies provide. If they did, more people would pay for it, or advertisers would pay more to reach those users, and the companies would be worth more.
For a little while, this wasn't as clear because the internet equalized distribution and erased a lot of old media advantages. Everything was free, and one click away from everything else. New media companies quickly figured out how to game readership with search algorithms and playing off social media while keeping production expenses low -- often by sacrificing on quality.
But over time, the most successful of the old guard learned how to play the distribution game while maintaining a consistent level of quality, which kept audiences engaged and advertisers willing to pay to reach them. The rise of the paywall over the past few years has helped crystallize that content drives valuation, and has saved the New York Times' business -- it now has 4.5 million paying digital subscribers. Branding and quality matter.
The traditional media companies that have really struggled -- local newspapers, some cable networks -- are the ones whose content hasn't kept pace. Some of this, of course, is related to the distribution challenge -- if you can't keep pace with how people consume content, you start making less money and are forced to cut back on the content itself.
In addition, it's a lot easier for a huge traditional company like Disney to disrupt itself than it is for a startup to start from scratch. (Again -- Netflix did it and the market now lets it spend $15 billion a year to keep pace. No one else has).
While Disney transitions to something that looks more like Netflix, its properties -- ESPN and ABC and the movie studio and the theme parks and the merchandise business -- will keep chugging out cash. That makes life a lot easier for traditional media companies to take risks on $6.99-per-month streaming services.
Another reason for the paradox: Some media businesses die a lot more slowly than the disruptors would like to believe.
For instance, more than 2 million people were still paying for AOL's dial-up Internet connectivity service in 2015.
There's no doubt the regional sports network business are dying. Millions of people cancel cable TV each year -- in large part because channels like RSNs inflate the bill and make the bundle too expensive.
But Sinclair estimates its RSN acquisition will increase its own revenue from $2.8 billion in 2018 to $6.7 billion in 2019 and boost earnings before interest, tax, depreciation and amortization (EBITDA) from $1 billion to $2.6 billion.
Like Michael Corleone says in "The Godfather: Part II" about Miami-based mobster Hyman Roth, the pay TV industry "has been dying of the same heart attack for the last 20 years." About 78% of U.S. TV homes subscribe to a pay TV service of some kind, according to an October Leichtman Research Group study.
That's down from around 86% in 2013. But that's still about 99 million U.S. households.
That's real money. And it's not going away as soon as you might think.