Media sage Colin Morrison OBE on media M&A, entrepreneurs, niches and more

“Sometimes businesses make the mistake of thinking the market is broken, whereas it’s just the business model that is broken. And when the business model is broken, that’s when outside funding can be the solution because somebody can see more clearly what you can do with your business.”

If you are an entrepreneur today, should you consider starting a media business? And if you were successful in developing it, how would you scale up? What role would there be for technological innovation like AI? And how would you view the future of reader revenue and advertising? What would be your end goal? Are there still companies across the globe looking to purchase hot media properties?

Colin Morrison, a UK-based media consultant with a global track record and founder of the email newsletter and blog Flashes & Flames, is ideal to answer these questions.

He began his career as a journalist, but has since advised a wide range of media companies, including Reed Elsevier, Future, Axel Springer, Hearst and Australian Consolidated Press about everything from tech implementation to business models.

Yet Colin says that he is still a journalist at heart. This is reflected in Flashes & Flames.

“It is a weekly newsletter that is mostly a deep dive into the activities and prospects of one media company or a media category or some kind of trend information,“ explains Colin.

“It started as a blog and is now available as an email newsletter. Subscription is £149 per year and its reader base is split roughly fifty-fifty between the US and the UK. It has a very global remit and regularly examines companies and trends from Asia, Europe and beyond.

“It helps me keep in touch with all kinds of people and all kinds of things,” adds Colin. “I’m covering the whole world of media, so it helps me maintain a lot of contact. It’s part of my continuing education.”

Who is the audience? Are they mainly people from legacy media companies or entrepreneurs or investors?

“The target of Flashes & Flames is mainly people running businesses, but they range from legacy media who are strong in magazines and newspapers to entrepreneurs who are running startups of one sort or another. I think it’s reasonably representative of what the media industry is.”

Where next for media entrepreneurs?

Let’s talk about those entrepreneurs then… I wondered if Colin thought there are still opportunities for ambitious individuals to create big media companies. Or is the entrepreneurial journey now in the media largely about founders creating smaller, but sustainable businesses?

“I think that it’s easier than ever for people to start businesses. It doesn’t mean it’s more encouraged though. If you go back to the 90s, starting a business when you didn’t have any capital was impossible. Now, you need a computer and a little bit of wherewithal, but not very much. Back then you wouldn’t be viable if you didn’t have an office. Now, post the pandemic, no one says that.

“There are all kinds of individually successful entities going on backed by venture capital. And I don’t think we see enough of those examples in the UK. In the US though, there are lots of new-ish growing media businesses that are scaling. Vice and Buzzfeed have not proved to be successful, but then look at those newsletter-based businesses. That’s the definition of how low-cost you can be, because it’s just something you send to people’s inboxes.

“Having said all of that, the key is that you’ve got to have something that somebody else wants, you’ve got to have information that’s new and useful. People are getting very picky on the type of information that they are prepared to pay for.”

“So you have got to come up with something that is valuable because increasingly media is about reader revenue.”

How media businesses should respond to AI

Through his day-to-day interactions, Colin speaks with a lot of media executives about their businesses. So I wondered what was top of their agenda. What keeps them awake at night? AI? Or something else?

“AI is a very new issue for media executives. It has arrived at a time when self-esteem among media companies isn’t what it ought to be. Therefore companies are worried. Most of the big companies have got teams of people looking at this yet some of their experimentation is quite primitive.

“Everybody’s groping around for what it all really means. And I think, clearly, there’s a separation between the AI that helps you run your business better, that applies to all kinds of business, not just media companies, and generative AI.

“When it comes to the media, I think we’ve come from a world where very basic information was regarded as worth paying for. Then people got picky because they realised they didn’t need to pay for it, they were using Google Alerts, which is a great way of getting all the stuff that you wanted about the subject you wanted to read about them into one place very quickly.

“Google Alerts feels to me that it was a bridge to AI in the sense that now we’re in a world where I can still produce something that somebody will pay for, but it has to be worth it – it has to be tailored. I need to know who I’m talking to and so on. So, it seems to me that the chasm between things that are really valuable and things that no longer are very valuable is widening.

“I’ve always felt that there was too little appreciation of the difference between nice-to-know content and need-to-know content. I think in this type of environment, it makes it even more valuable to have unique information. It’s the reason why in b2b media there’s such a surge in the value of businesses with price information. These kinds of businesses are more valuable than they ever were, because that truly is unique information. It’s very valuable. I can’t do without it when I’m running my business.

“Conversely, legacy news organisations still devote a lot of space to things that are freely available and that we’ve heard on TV or accessed online before seeing the newspaper And they have got to open up that gap and focus on the valuable things that a lot of those legacy organisations have like columnists, opinion pieces and deep dive analysis. That is where the value is.”

Are we heading for an advertising renaissance?

Colin alluded to his belief that advertising has become less important to the media. I asked him to expand on this perspective. Businesses of any type hate uncertainty, and there are clearly questions surrounding the future of third, and indeed first party-based, advertising. When the dust settles though, will there be an advertising renaissance?

“When it comes to print media, it seems straightforward that it became really dependent on advertising revenue. Then along comes the web and it is a better place to target people or reach out to bigger audiences. 

“It has taken legacy media companies 20 years to get readers to pay sensibly for their media as opposed to paying cost prices subsidised by advertising. So, it seems clear to me that advertising will never again be as important for news media. Advertising will be very ancillary and mostly won’t be very important. I think what everybody now understands, particularly in the age of subscriptions, where people are happy to commit for what they really want, that organisations are better off building themselves around the reader. And, you know, if there’s some other revenue from other places, whether it’s e-commerce or advertising, I think that is a bonus.”

The current state of media M&A

One area that Colin, and indeed Flashes & Flames takes an in-depth look at, is the current state of M&A in the media world. I suggest that the key movement in this niche in coming years will be media companies looking to add tech companies to their portfolios. Colin concedes that point but underlines that there is still huge value in traditional media.

“I think media companies in the future will be as much technology as media and indeed some media companies are already at that point. So, in a sense, media companies will need to be tech companies as well.

“Everybody understands where the media’s got to go. And the old-fashioned newspapers have to find the runway to their new business. If you look at the sale of The Daily Telegraph, I am sure will go for 500 billion plus pounds. Maybe 700, and that will be more than 10 or 12 times Ebitda profit.

“So I think this type of media is still a relatively hot market. If you extend our discussion to include trade shows and exhibitions, well they’re very hot indeed. Private equity firms, in particular, will pay 12 to 15 times earnings for exhibition companies and their businesses, and that’s after two years of paralysis because of the pandemic. So, I think the opportunity for investors is always in areas of doubt, churn and change because you’re looking for the opportunity.

“I actually think some other businesses, like in B2B, have value because they have content that they haven’t really known how to package up and sell properly. And that’s where I come back to the exact price information and so on. These are the kinds of businesses that could do that. Sometimes these businesses make the mistake of thinking the market is broken, whereas sometimes it’s just the business model is broken. And when the business model is broken, that’s when outside funding can be the solution because somebody can see more clearly what you can do with your business. And if you’re in that situation, that’s where things get attractive.”

So I don’t at all think that this is a bad market for financing and M&A. I think it’s exactly the opposite.