After On Podcast Episode #13
And no, I DON’T think Ev has lost his mind
Incumbents who dominate vast markets for decades and then lose their grip echo Hemingway’s depiction of sliding into bankruptcy: they do so gradually, then suddenly. Major network dominance of programming was an eternal fact of life when Netflix launched its first original show in 2013. But next year, the streaming leviathan’s $8 billion content budget will dwarf that of any broadcast network. Similarly, just a few years after launching in San Francisco, Uber eclipsed the revenues of the cab companies which had jointly monopolized that market for decades by a factor of 350%.
Shifts this big only happen when network effects are in play. Which is to say, that virtuous cycle in which more users make a platform more valuable, which draws more users, who make the platform more valuable still, which summons still more users, etc. In the digital era, we’ve seen network effects fuel the rise of messaging apps, social networks, and dating sites; as well as two-sided markets for Beanie Babies, handicrafts, and (of course) short-haul rides, to name but a few.
After a couple hours in conversation with Ev Williams, I wonder if the mass commercial market for the written word might face a similar transformation. One which (like some of its antecedents) will seem laughably improbable until shortly after it’s complete. Now, a few caveats and definitions. I don’t mean all written words, as I don’t believe Ev’s company — Medium— has designs on books or breaking news (at least not yet). By “commercial,” I mean articles whose writers are paid for their work. And by “mass,” I mean aimed at a general audience (as opposed to specialized output, like financial analysis or industry surveys).
So I’m basically talking about magazines — which admittedly fall short of Hollywood and transit on the ginormity scale. But despite declining print circulation and ad dollars, this remains a large industry with immense cultural weight (oh — and it’s still bigger than Beanie Babies). I now believe Medium’s budget for professionally-written articles will soon exceed that of any magazine. Though it’s far from certain, I believe within a few years it could go on to exceed that of every major US magazine combined. And it’s not out of the question that it will one day exceed that of all magazines.
You can hear the interview which lodged this possibly-daft idea in my brain by clicking this link. It’s the latest episode of my podcast, in which I interview Ev-like folks about giant issues in tech and science. My conversation with Ev is wide-ranging, covering all of his major startups (Medium, Twitter, Odeo, and Blogger), plus one that made a Cornhuskers Football CD-ROM back in 1993.
But for me, the most surprising section concerns Medium’s new business model of charging people five bucks a month to access premium content.
Though it was greeted by headlines like “Ev Williams Has Lost His Goddamn Mind” when it launched in March, Ev reports that the system is hitting its numbers. I’ll add that he said this both while we were recording and beforehand, and I know him well enough to be confident that he wouldn’t bluster or dissemble about this. More interesting still is his growth target — which, he revealed to me (I believe for the first time outside of the company) is to reach ten million paying subscribers in five years.
Here’s where things get a bit speculative. Let’s first imagine Ev hits that target. Which is not an insane proposition. He has seven months of data on his new model, five years on Medium as a whole, and has spent his career turning network effects into usership and revenue. In our interview, Ev indicates that he’ll pass 70–80% of subscriber revenues on to writers. Against ten million subscribers, that rounds to $450MM/year.
I’m pretty sure that would exceed the content budgets of the top hundred US magazines combined. I’m not certain of this, because no one can access all those numbers. But I surveyed several people who run, or have recently run magazines, and all agreed that $2 million per year would be a hefty article budget in 2017 — one unlikely to be found much beyond the top hundred-ish magazines, and fairly respectable within those ranks.
Power law curves are common in fragmented media markets. So while budgets at the truly moneyed magazines should exceed this comfortably, budgets should also drop quickly as you exit the very highest echelon. And I’ll stress that I’m talking about budgets for written work. Not central functions like layout or editing, not business or administrative functions, but money spent on freelance work, plus the prorated salaries of full-timers who spend part or all of their time writing. Simply stated: money for articles, or that which Medium traffics in.
I’ll admit that a world in which a website pays out more to writers than all of our best-known magazines combined feels alien enough to belong to a truly distant future. But the thought of non-cabs outgrossing local taxis by a factor of three would have seemed even more remote to me as a San Franciscan in 2009 — yet that was just a few years off.
I’ll add that I’m not an indiscriminate partaker of any Kool-Aid Ev happens to be slinging, having publicly debated him about another element of his new model (the clap system) on Medium itself. But though I wasn’t a fan of that element, I knew it was rolled out after intense consideration, as Ev is a famously deliberate thinker (I’ve also since come around to it a bit). I’m likewise certain that this ten million subscriber target wasn’t plucked out of thin air, its immaculate roundness notwithstanding.
Meet me back in here five years and we’ll discuss the results.
Here’s that link to the podcast again. Enjoy!