Are Single-Revenue-Stream Media Companies Dead?

There is a lot of talk these days about the challenges  being faced by media companies with single revenue streams, like broadcast TV networks and local affiliates and radio stations. All have seen very significant year-over-year and quarter-over-quarter drops in advertising revenue, their only true source of income. It’s hard to find an interview of a high-profile broadcast media exec these days that doesn’t contain some envious statement about the dual revenue streams of their cable network brethren, most of whom receive substantial affiliate fees in addition to ad revenue.

Yes, it’s easy to bemoan the whipsawing that broadcasters endure when their single revenue stream hits one of those terrifying, roller-coaster-like plunges in ad expenditures, like what we’re seeing in this current recession. However, I do not believe that all is lost, or that days are numbered for media companies with single revenue streams. Quite the opposite, in fact.  I am a big fan of ad-supported media companies. I just think they may need to change some of the ways they operate their businesses going forward.

Here are some suggestions:

Recognize that domestic media advertising is a mature business. Yes, it’s troubling but true: Media advertising is a mature business and as a category is not likely to grow very much in the U.S. over the next 15 years. It will continue to be a really big business for a long, long time; it’s just not likely to grow a lot.

Manage cost structures to harvest value. Like businesses in other mature industries, the ad-supported media industry needs to structure its businesses to “harvest” value out of those areas that are not growing or in decline. It is all about taking out costs. This isn’t fun, but it is necessary.

Leverage science. Technology can help companies do more with less, and do it more predictably. This is the time for media companies to automate and optimize as much of their businesses as possible. It will not be possible to compete with Internet-driven low-cost producers of content, context, audience and advertising (like Google, Facebook, Craigslist, et al) without taking this step.

Focus. When you make all of your revenue from a single revenue stream — advertising — make sure that each and every one of the company’s activities and investments  is measurable against the revenue it produces. No exceptions. Single-source dependence on a mature revenue stream with declining margins requires nothing less. If it can’t be tied to ad revenue today or in the measurable future, jettison it.

Yes, it’s nice to have two revenue streams, but many, many media and marketing businesses will never achieve this goal. It doesn’t mean that single-revenue companies can’t survive. It just means that they need to be operated more efficiently. What do you think?

By Dave Morgan
Dave Morgan is the CEO of Simulmedia. Previously, he founded and ran both TACODA and Real Media.
Courtesy of http://www.mediapost.com