Monday AM Briefing #68

*Need* to know stories and trends for this morning & the week ahead; A Short Essay on Ozy Media, Its Tiny TAM & Co-Dependent Ad Markets

A Short Essay on Ozy Media, Its Tiny TAM & Co-Dependent Ad Markets

The collapse of Ozy Media is one of those stories that stick with you because it’s a tragedy, but primarily because it offers a funhouse mirror for many digital media executives and entrepreneurs on tactics used in both accounting and salesmanship (best summed up by this quote from Forrest Gump).

That said, the general marketplace reaction has been disbelief at the fraud at the heart of the story: COO and co-founder Samir Rao imitating the voice of Alex Piper, the head of unscripted programming for YouTube Originals, on a phone call to close a $40MM investment from Goldman Sachs.

The question of why Rao went to such lengths to secure the money has been covered thoroughly across media outlets (I liked these takes from Brian Morrissey and Simon Owens).

But why would Goldman Sachs even be remotely considering putting $40MM into Ozy Media with the go-to-market story Ozy had?

Why was hedge fund manager and co-owner of the Milwaukee Bucks basketball team Marc Lasry the chairman of the Ozy board, much less a supportive one in the brutal Ben Smith article?

The Total Addressable Market (TAM) is tiny - why didn’t they see that?

A Tiny TAM

Ozy Media’s mission had an emotionally compelling angle to it:

Their vision for Ozy to become the next big media company by focusing on untold stories of American heroes, many of which were people of color…

But who is the audience for that?

At its best — and this may be generous — Ozy Media was trying to scale a media business built around doing a “better” job on untold stories of American heroes that we often see on the nightly news or cable news as filler content.

In other words, what Ozy Media was building was an emotionally compelling, progressive/”woke” version of filler content that is an afterthought for cable news networks, and at a time when cable news networks are losing audiences precipitously.

Cable networks were delivering this filler content for an average audience of roughly 1.2 million viewers at best (and that’s Fox in Q2 2021). So TAM was in the hundreds of thousands, at best.

This TAM is tiny and decreasing for the content that Ozy Media wanted to produce.

It’s a bit of a head-scratcher why a smart media investor like Axel Springer ever invested in the first place.

Blame A Co-Dependent Ad Market?

Except there was a business, as highlighted in an interesting anecdote Ben Smith of The New York Times last night:

But nobody I spoke with over the last week was more piqued than Roland Martin and Todd Brown, two members of a group led by the mogul Byron Allen that shook the advertising industry this year, with a campaign meant to persuade marketers to spend more money with Black-owned media companies. The effort led to a wave of meetings and the hope that serious ad dollars would start flowing to companies like Mr. Martin’s Black Star Network, a streaming channel.

Instead, the giant ad agencies that steer much of the digital ad business “had found a safe Black space, a comfortable medium — and we were shocked that it was Ozy,” said Mr. Brown, a former head of ad sales of Ebony and Jet magazines whose company, Urban Edge Networks, owns a streaming service for sporting events at historically Black colleges and universities. “It was a story and not a business — but the story is what people wanted to buy,” he said in a telephone interview last week.

In other words, Ozy Media had found its customer with “advertisers who have a co-dependent relationship with premium publishers” (something I highlighted in Member Mailing #259: An Evolving Tension Between Data and Context in AVOD ($ - paywalled):

As advertisers shift their linear ad dollars to streaming, legacy media streamers are betting that they can rely on their “co-dependent” relationships with advertisers to sell both contextual advertising solutions, which have been core to those relationships, and “black box” ad targeting solutions. If advertisers are happy with the results of those “black box” solutions for targeting, they will continue to buy both contextual and addressable inventory and to pay a premium for those buys.

I don’t know if Ozy was a “premium publisher”, but it seemed to get the optics and relationships right with advertising agencies to buy contextual advertising as if they were a “premium publisher.” They played elegantly into the “co-dependence” of the marketplace.

Ozy Media’s mistake, and perhaps crime, was betting on its own black box of first-party data when every other premium publisher is leveraging far more advanced, in-house technology for their black boxes of data.

In that light, they had revenues and were trying to figure out additional models (events, TV). But, none of those would change a tiny TAM.

That’s the part that still doesn’t make sense to me, maybe because I look it through the lens of Blackstone’s, Kevin Mayer’s and Tom Staggs’ plans for Hello Sunshine:

“You should look to see us have multiple revenue streams beyond licensing and owning content. The great first step is to generate brands and franchises,” Mayer said. “We’re going to leverage that connection for other means” in line with the company’s stated focus on e-commerce transactions and building social communities around artists and brands.

Ozy Media never generated a brand or a franchise. It never pivoted towards other content models over nine years, or figured out adjacent models. It never aimed for a “flywheel” of content and e-commerce offerings across Creator Economy platforms.

Rather, everything seemed to be oriented towards, “how do we make this tiny market seem bigger?”

Neither prospective nor existing investors noticed.

There is only so much blame we can allocate to the co-dependent needs of advertisers seeking contextual advertising from “premium publishers”.

Must-Read Monday AM Articles

Emerging "Metaverse"-type convergence strategies

Aggregator 2.0

  • New Amazon CEO Andy Jassy told CNBC: “Increasingly, people will do commerce in these [Amazon Smart TVs]. Between what we do with Alexa and what we do in the living room, I think we have an opportunity to change what's possible for people and what's accessible to people.".

  • Patreon is investing in original content and Bloomberg broke down its strategy.

  • Wondery, the podcast studio owned by Amazon, is launching an audio subscription service for kids and families on Apple Podcasts.
    Wondery+ Kids is separate from Wondery’s premium subscription service, Wondery+, and costs $4.99 a month.

Sports & Streaming

  • Univision’s ratings successes are a result of a strategic push to extend their audience beyond first- and second-generation Mexican Americans. ($ - paywalled)

  • Recent reports indicate DAZN is engaged in late-stage discussions to purchase BT Sport, a deal that would provide the sports-centric subscription streaming service with valuable U.K. broadcast rights to the English Premier League. JohnWallStreet of Sportico writes, “The acquisition would also give DAZN an established business; in essence, the horse they need for their cart.”

Creative Talent & Transparency in Streaming

Original Content & “Genre Wars”

  • The new 10-episode Snap original series “The Me and You Show” taps into Snapchat’s Cameos — a feature that uses a kind of deepfake technology to insert someone’s face into a scene.

  • Le Monde asks, “Combien de films et séries français Amazon doit-il produire chaque année?” ($ - paywalled)

  • Ed Carroll, the longtime chief operating officer of AMC Networks, has decided to exit at the close of 2021 after 34 years at the company.

Comcast’s & ViacomCBS’s Struggles in Streaming

  • A standoff between Comcast and YouTube TV ended after NBCU was reportedly asking for higher rates for its channels than Google is willing to pay, and wants YouTube TV to bundle NBC’s Peacock video streaming service. It got neither.

AVOD & Connected TV Marketplace

  • Sahil Patel and Mark Di Stefano of The Information profiled Paul Kotas, the leader of Amazon’s burgeoning, multibillion-dollar ad businesses. ($ - paywalled)

  • IMDb TV is quietly becoming an “AVOD juggernaut”.

  • Roku’s platform revenue has grown rapidly over the past few years but one analyst expects half of that equation to come under pressure as the streaming wars slow down.