Media M&A - [Business Breakdowns, EP.230]

Summary

• Two decades of media banking distilled: the internet made distribution free, Google and Facebook took many advertisers, and “most of the value is accruing in the hands of a few people. Google, Facebook, Amazon.” A fully distributed US cable network went from ~110M households seven or eight years ago to 55M today, effectively halving affiliate-fee revenue, though networks still have advertising and other revenue. Saunders spun out of Methuselah Advisors after roughly 15 years because “there’s gonna be less deals in media” and the classic 30-buyer auction template has changed.
• The tradeable, category-level call: “there’s never been a cheaper time to buy YouTube channels.” Late-night TV used YouTube as second-run “shoulder” content; now brands buy YouTube direct like TV — adjacency, not just reach — which helps explain why Hot Ones sold at “a pretty good multiple” by buying its own inventory from YouTube and reselling it to P&G and Coca-Cola. Saunders argues that hosts and key-man risk are not automatically disqualifying: “there’s been hosts on most TV shows… Seinfeld has a lot of value.”
• Saunders expects more Substack M&A as slow-moving legacy media fast-follow one another — Bloomberg announcing it will turn on Substacks, CNN leaning into newsletters. Not every Substack is buyable; the ones that transact are “harmonized with the content of whoever’s buying it,” and “if a media company buys a Substack, they’re stupid to take it off.”
• The natural buyer is “anyone that has to pay a toll to Google and Facebook to acquire a consumer” — would Uber buy the top gig-driver signup site? “Maybe.” But non-media operators usually struggle to operate media assets (Estée Lauder’s beauty-YouTube push), real buyer lists are “like three to five,” and what’s actually bought is true fans: streamers who “cause pandemonium,” plus events “detached from CPMs” where brands pay thousands for 200–300 attendees versus about ten dollars for equivalent web traffic.
• “Google Zero” is a growing threat, with reported numbers lagging what Saunders is hearing — “double-digit declines” in organic traffic — and his answer on remedies is unhedged: “No… there’s nothing to do.” Publishers below the top 10–20 in a category, or fewer in a niche category, are “already suffering mightily”; the only defense is direct consumer connectivity, à la the New York Times’ subscription focus.
• AI plus IP libraries is the underrated angle: most content value degrades after the first 30–60 days, but reimagining catalogs with “just a kid behind a keyboard” — like the music company having 20+ musicians rework songs weekly for commercial re-pitching — could “change the entire value of a portfolio of songs.” Paramount runs the premium-IP counterplay: South Park and UFC as targeted draws into Paramount+.
• His macro warning: AI only needs to affect “a couple of percentage points” of jobs — COVID-lockdown logic — to potentially force UBI, higher income and capital-gains taxes, and “the Elon Musk tax” on unsold assets. Everything gets deflationary-cheap, “but most people won’t be able to buy it”; Saunders says the people best positioned are creators of economic value (“you can’t be an employee”) and independent creators scaling on authenticity — Kai Cenat’s generation gets to be “whoever they want.”

Deep dive

1. The internet broke media’s family-monopoly economics — and value is concentrating in three platforms

• Saunders’ definition sets the frame: media is “content that’s monetized via subscriptions or advertising,” and every successive format — books, newspapers, radio, TV — “gets more addicting, more engaging.” Either someone pays you directly, or you help a brand close a purchase.
• His biggest thematic change: the internet flipped the ownership model. Newspapers were multigeneration family businesses with “basically a monopoly” — the federal government even barred owning TV, radio, and newspapers in the same market. Then Google and Facebook took many advertisers, and for 25-plus years the lens shifted to “build it quickly and then sell it,” often without a path to profitability.
• The TV math is stark: a fully distributed US cable network had ~110 million households “seven or eight years ago… Today, it’s fifty-five million” — effectively halving the affiliate-fee stream flowing from Comcast-type distributors to networks like ESPN, although those businesses have advertising and other revenue. “Most of the value is accruing in the hands of a few people. Google, Facebook, Amazon.”

2. Legacy media are fast-following into Substack and YouTube — Hot Ones shows the mechanism

• Big media companies are “trained to be slow movers” — burned by Facebook Video, where they built teams for monetization that “never happened” — “but as soon as their competitors start to make moves, then there’s like a fast follow.” Current evidence: Bloomberg turning on Substacks, CNN leaning into newsletters. Saunders thinks buyers now see Substack “more as a platform instead of a competitor,” and says “if a media company buys a Substack, they’re stupid to take it off.”
• The bigger shift: YouTube moving from second-run “shoulder” content — Jimmy Kimmel clips — to a first-run destination, because brands are finally willing to buy YouTube direct “like they do TV,” and TV sells adjacency, not just reach. Hot Ones reportedly sold at a pretty good multiple; its mechanism is to buy inventory from YouTube and resell it to Procter & Gamble or Coca-Cola: “this is your reach, and this is who you’re gonna be next to.”
• The call is hedged at the category level, not made for every asset: “we’ll look back, and we’ll say that there’s never been a cheaper time to buy YouTube channels.” Saunders argues that hosts and key-man risk are not automatically fatal — “there’s been hosts on most TV shows… Seinfeld has a lot of value” — and even Hot Ones’ host gossip was forgotten “in two seconds.”

3. The real buyer list is three to five names — and deals now require custom processes

• After roughly 15 years at Methuselah Advisors (“effectively for fifteen years, I was just selling air, literally ideas”), he spun out weeks ago via a LinkedIn post titled “Conscious Uncoupling.” The classic sell-side — blast a teaser to 30 buyers, collect five to fifteen bids, run an auction — has changed: media deals now need “much more hands-on, much more custom processes,” and “there’s gonna be less deals in media.”
• His buyer framework: “anyone that has to pay a toll to Google and Facebook to acquire a consumer.” Example as told: the number-one private site helping Uber and Lyft drivers sign up — “Would Uber buy that? Maybe,” given acquisition costs and driver churn. But non-media buyers usually struggle to operate media assets — Estée Lauder’s beauty-YouTube push a decade ago “didn’t work out that well.”
• “There’s not 20 buyers for these businesses. There’s like three to five.” Some family-led acquirers are still top-down — “Go buy this, and I really don’t care what we pay for it” — and some of the best deals gestate through long-term relationships: the Free Press relationship traced, at least partly, to the Allen & Company conference, and “I don’t think Barry was for sale technically.”

4. What’s actually being bought is engagement — true fans, not channel count

• Person-led brands are “the easiest way to get audience and get scale,” and key-man risk is assessed case-by-case. MrBeast is the model done right — Feastables and everything beyond the channel, driving metrics “like any other really strong founder.” When TCG invested in Barstool, “Dave smartly said, ‘I’m gonna step back from the day-to-day CEO role,’” while still powering engagement.
• A newsletter with 50,000 engaged readers gets judged about the same as that newsletter plus five low-engagement side channels — buyers overlay their own growth and ad-sales machinery — so Saunders’ advice to independents is to “stick to your lane.”
• Events are the exception because they “become detached from CPMs”: a brand might spend thousands on a 200–300-person event versus about ten dollars for the same audience hitting a webpage. But supply feels full — Axios drew ~500 by breaking news; conferences “copying and pasting each other” will struggle, unlike Kara Swisher’s editorial-led Code with its Gates-Jobs cultural moments.
• The purest signal of asset value: livestreamers who “cause pandemonium” walking around New York. “Any media company wants to buy other media businesses that have true fans that are going crazy.”

5. Premium IP still matters — but platforms made “shitty content highly addictive,” and AI can reanimate libraries

• His American-diet analogy: “You go to Europe, you lose weight… you go to the farmers market, and you read the packaging for a couple of weeks, and then you go back to eating at McDonald’s.” Platforms optimize UGC because it is free to them — Instagram is “a lot like a media company, but they don’t pay for any of the content.”
• His read on Paramount: rather than agonize over where South Park and UFC live, identify the target customer and buy what they watch, ultimately drawing subscribers to Paramount+. This is an attempt to rebuild the zeitgeist MTV once gave them — UFC without pay-per-view but “a premium product that you can only watch on Paramount.”
• Sports, he concedes, was “a big miss on my part”: after Sinclair acquired RSNs and those businesses restructured, rights moved into different areas. He thinks sports is probably where we may see “billion-dollar-plus M&A-type deals or rights deals.”
• IP libraries are chronically misjudged — value concentrates in the first 30–60 days, then “degrades exceptionally quickly” — but AI changes the math: reimagining stories with “just a kid behind a keyboard” instead of actors. Live example: a company having 20+ musicians rework a couple of songs weekly, picking five at Friday listening sessions, and re-pitching them for commercials — one hit “could change the entire value of a portfolio of songs.”

6. “Google Zero” is a growing threat — and there’s no fix

• Google News distribution has changed, and publishers are losing the old flow of traffic to their sites. Public results lag reality — “when a company’s reporting, it’s a couple months old” — while “the numbers I’m hearing are double-digit declines from organic traffic.” Publishers below the top 10–20 in a category, or a smaller number in a niche category, are “already suffering mightily,” carrying fixed costs against traffic that used to be free. Some smaller and midsize publishers have retooled entirely to “cater to the algorithms, which sucks.”
• Matt asks whether any new outlet cushions the decline; the answer, unhedged: “No. It’s kind of scary, but there’s nothing to do.” Survivors need direct connectivity — the New York Times growing through subscriptions and targeting verticals such as sports — but “if you’re just a generic content news website… the future is really tough.”

7. The AI reckoning: a few percentage points of job loss could force a tax rebalance — and independents win

• His macro chain runs on COVID logic: the shutdown happened over “a couple of percentage points,” not mass infection, so AI “doesn’t really need to impact that many jobs” — taking out semi-truck and Uber drivers alone — to require a major change in how society supports people who are not working. He expects UBI and higher taxes, including on the “safe haven of capital gains,” potentially extending to “the Elon Musk tax of, ‘Let’s just figure out a way to tax assets that you haven’t sold yet.’” His precedent is the higher rates used while paying back World War II debt.
• Against techno-optimism: “We have more free time than we’ve ever had, and most people are stuck on their phones… more anxiety… less friends… less sex” — 60% of Americans are overweight, “just a fact.” “The only way to coexist with AI in, like, a normal way is to disconnect, not connect more.”
• Deflation does not save it — his cheap business-class-to-Japan anecdote notwithstanding, “everything will be cheap, but most people won’t be able to buy it.” Personal implication, and partly why he launched his own firm: “You have to be a creator of economic value… You can’t be an employee.”
• His winners: independent creators — comedians who no longer need a Netflix special, 21-year-old streamers with brand deals and product lines. Oprah had to fit the industry’s mold; “Kai Cenat or these younger streamers, they’re whoever they want” — one streamer’s highest-rated stream was a mouse running into the room. Authenticity now scales.