Monday AM Briefing #67

*Need* to know stories and trends for this morning & the week ahead; A Short Essay Following Up on Magnolia’s Dotdash Future(?)

A Short Essay Following Up on Magnolia’s Dotdash Future(?)

Last Friday’s Mic Drop — A Dotdash Future for Chip & Joanna Gaines? — is the gift of an “aha!” moment that keeps on giving.

I since realized there are likely two scenarios where Magnolia adopting a Dotdash approach for Magnolia Journal, if not, could happen post-IAC acquisition.

Scenario #1

The first scenario is unusually narrow: IAC’s acquisition of Meredith should lead to a conversation around Dotdash potentially hosting Magnolia Journal content.

Right now, Meredith distributes the physical copies of Magnolia Journal but Magnolia — the Gaineses’ joint venture with Discovery — hosts paid digital downloads of Magnolia Journal (example). So, any outcome that diverges from physical distribution will require negotiating a new contract between Magnolia, IAC, and Discovery.

Because this involves a new contract, the conversation in that scenario likely will be brief.

Scenario #2

The second scenario plays into the close relationship between IAC Chairman Barry Diller and Discovery Chairman & CEO David Zaslav.

It now seems largely forgotten that it was Diller who convinced Zaslav to invest in discovery+, as per this anecdote shared in The Wall Street Journal’s report on the launch of discovery+:

[Mr. Zaslav] said Discovery made the decision to offer a comprehensive streaming service after the company surveyed consumers and found that they wanted a one-stop nonfiction streaming destination to complement the fiction-heavy Netflix and Disney+.

Late last year, Mr. Zaslav wanted a second opinion on that plan. So, he invited his old friend, media mogul Barry Diller, out for lunch. Over poached salmon and chopped salad at the Grill in Midtown Manhattan, Mr. Diller rendered his verdict: It could work. But to be successful, Discovery would have to go big.

“I told him Discovery could own nonfiction programming and be an essential streaming service—about the only one that could have a chance at competing with Netflix profitably,” Mr. Diller said in an email.

Ten months later, Zaslav has thrown out that original gameplan and the Warner Bros. Discovery merger has become the outcome necessary for “a chance at competing with Netflix profitably”.

This leads to a fun question. Is Zaslav willing to diverge from the Warner Bros. Discovery salesman mode and agree to listen to Diller and IAC pitch:

  1. Dotdash hosting Magnolia Journal and/or and

  2. Turning Magnolia Journal into an SEO-driven marketing engine for both and discovery+ (and/or Warner Bros. Discovery streaming)?

Why The Discussion Should Happen

Thinking about IAC’s strengths, there is a powerful sales pitch that Diller and IAC can make to Zaslav, Discovery and the Gaineses:

  • IAC and Dotdash monetize Magnolia Journal content with ads (revenues shared with the Gaineses)

  • Warner Bros. Discovery and the Gaineses better monetize on-site shopping and video views from IAC direct-marketing and Dotdash traffic (100MM+ monthly visitors)

  • Dotdash delivers contextual advertising for discovery+ across Dotdash’s 14 brands

IAC would also bring:

But why would Discovery and the Gaineses agree to this?

It solves for an obvious DTC pain-point: Discovery has only 18MM subscribers as of August and that includes several international streaming products and Magnolia (the “majority” are discovery+). The slowdown in subscriber growth reported by Disney (last week) and Netflix (negative growth in US and Canada in FY Q2 2021) seems inevitable to impact Discovery, too.

But, it’s also an outcome that requires unusual humility and buy-in from Zaslav, Discovery and WarnerMedia.

Zaslav displayed this humility in his pivot of discovery+ in the Warner Bros. Discovery merger back in February, three months after its launch. But this move would mean admitting Discovery’s entire DTC strategy is suspect at a time when he’s publicly selling a “shock and awe global strategy” in streaming.

But corporate buy-in at Discovery would be an entirely different animal: no executive involved with will agree easily to the optics of IAC coming in as “savior” of, even if the solution is only transforming Magnolia Journal into an SEO and DTC traffic machine.

As for the Gaineses, they would go from worrying about counting downloads to entrusting the future of their business to a (successful) team of strangers from IAC. But, IAC’s strengths are likely to translate into both marginal and meaningful gains in engagement and revenue for Magnolia and discovery+.

So, my irrational, intuitive guess is the Gaineses would be unusually open to this conversation with IAC. Magnolia Journal content currently has $0 value in SEO as downloadable PDFs. Any deal would unlock if not unleash a ton of direct marketing value for their brand, and growth for Magnolia.

The deal seems too obvious not to happen — especially given the closeness of Diller and Zaslav — but also obvious enough that it probably will not.

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