Is A Superstar Exodus From Traditional Media Coming?

JohnWallStreet

The New York Post recently reported that Jason Whitlock is “believed to be looking into starting his own direct-to-consumer business.” Unable to come to terms on an extension with Fox Sports, the former Kansas City Star columnist is said to be considering the possibility of “sidestepping traditional media” in favor of trying his hand as a standalone media outlet. It remains to be seen if Whitlock ultimately ends up launching his own endeavor (he told Front Office Sports that he had conversations with Jimmy Pitaro about rejoining ESPN prior to the pandemic), but with the tools needed to be successful widely available (think: email distribution, social media platforms, video and podcast capabilities), the roadmap set (see: Bill Simmons, Joe Rogan) and Coronavirus bound to negatively impact talent budgets across the industry it begs to wonder if other high-profile sports media personalities will look to launch their own platforms at the expiration of their current deals.

Our Take: John Kosner (Kosner Media) foresees a superstar exodus on the horizon “in part because top talent will have no choice but to examine what they could do [in a D2C capacity] moving forward.” The former ESPN EVP of digital/print media explained that as the established players’ own businesses continue to shrink (think: post-COVID economy in the short-term, cord-cutting in the long-term), their budgets for talent are going to decrease accordingly. When high-paid talent comes up on the end of their contracts, they'll likely have to decide between taking a salary reduction or launching their own digital outlet (or both).

Transformational talent (the D2C model only works for those on the A-List) no longer needs to work for an established media company with readily available D2C channels enabling them to both push out content and build a following. In fact, a prominent C-Level executive at one sports network suggested that remaining employed with a legacy player could actually hold capable individuals back from achieving a major financial payday. He cited Bill Simmons, who was reportedly earning ‘just’ $3 million/year at ESPN before leaving for HBO in 2015, as an example of a personality who brought significantly more value to his/her employer than he/she was being compensated for. The Ringer founder managed to parlay his brand and podcast empire into a $196 million payday back in February (Spotify bought the company).

If the D2C movement gathers steam Kosner suggested it could result in the creation of a new content bundle. “The Sports Illustrated of the future might be a collective of the most influential voices - each with their own digital subscription service - who could make more money packaged together then they could if they were each a standalone.” Customers would have the ability to personalize their individual package with their choice of different "experts".

Simmons, Dave Portnoy and Joe Rogan have all managed to experience tremendous success in the emerging D2C space, but that doesn't mean what they've done can be easily replicated. As Kosner reminds, “those men are personalities and there aren’t a lot of other examples of individuals who have built valuable media companies within the sports world." That's because aside from being hard work, it’s difficult to monetize digital media with the likes of Facebook and Google dominating ad budgets.

Subscription is the only viable business model for most in the digital space (few have the audience size needed to monetize existing platforms the way Rogan has), so a new media co. will likely need to generate content people would be willing pay for if it's going to be successful. That's easier said than done. Kosner said to build a paid subscriber base the outlet needs "to be in the business of telling the audience something they don’t already know (i.e. consumers are not paying for hot takes), be able to do it consistently and deliver the insight on platforms the audience cares about” (see: podcasting).

It reasons to believe there are media personalities who believe because they’ve managed to accumulate “tremendous follower numbers on platforms like Twitter and Instagram” that they could/would be capable of launching a widely profitable D2C subscription service. But it’s important to remember that none of those social media followers are paying for the content produced and as Kosner said it’s “not trivial to convert people who are used to being served content for free into paid subs; particularly when some - or all - of the personality’s best contributions are available for free elsewhere” (like on Twitter and IG).

If top-end talent ends up deciding to take salary reductions Kosner believes it could come with some additional freedoms (as opposed to the exclusive terms the legacy players currently enjoy). The tech and media investor said he“could see a scenario where the media personality remains with a traditional outlet to do television at a reduced salary (as that is where much of the advertising value lies), but they’re allowed to take their digital presence elsewhere” (and monetize to the best of their ability). The sports media exec we spoke to agreed and mentioned Pat McAfee and Clay Travis as examples of individuals already pursuing that path. “[Those guys] are selling their services almost as if they were individual studios.”

Editor Note: Please note that joining our community (below) will entitle you to receive our free daily sports business email newsletter.

Join the Community on John Wall Street
Enter your email address and press the Join Now button to sign up for updates from John Wall Street
Comments

Sports Business

FEATURED
COMMUNITY