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America's media fail to get the anticrisis formula

Digital portals have trouble finding funding while traditional publishers are not enough for digital transformation

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America's media fail to get the anticrisis formula

The Time Inc. group has been an informative benchmark in US for almost a century. Through its printed and electronic publications, it reaches 230 million consumers. But this base of readers and ir reputation is no longer a guarantee of profitability. Their income falls at an annual rate of almost 10% and losses accumulate first nine months of year around 60 million dollars (51 million euros).

The juncture is complex, also for new media as Mashable, which made precursors in transition from paper era to digital. The technology information portal began publishing in 2005. A year and a half ago valued company in 250 million dollars (213 million euros), a price identical to that paid by Jeff Bezos, owner of Amazon, by editor of venerable newspaper Washington Post. But skepticism that reigns towards digital media decreased its appeal to capture cash it needs to finance its operations. A week before Time Inc, Mashable was put in hands of Ziff Davis, editor of PC Magazine and Geek, for only 50 million of dollars (42.5 million of euros). The portal tried to focus on audiovisual content to raise revenues. But beads are in red.

Anxiety in media industry is high. BuzzFeed, an online group with a successful audience thanks to viral content, is no stranger to stress. He just froze his plan to place part of his capital on Wall Street. The income generated this year is 20% below target. I expected to close 2017 with a turnover of about 350 million dollars (298 million euros). But investors are nervous, because ir rapid expansion is costing costs and that affects ir profitability in medium term. Jonah Peretti, his CEO, informed his employees on an internal note that he should submit to company a restructuring that will affect 8% of workforce in United States. "Our strategy evolves and our organization also," Peretti justified.

Vice Media, great benchmark among new digital media, is not going to reach goal of 800 million dollars (682 million euros) in revenue. Like BuzzFeed, insists that its turnover grows and also visits to its content, as well as involvement of users. And y try to diversify ir income via electronic commerce, licenses and production of ir own audiovisual content.

Advertising owners

Because more dependent a media is on advertising revenues, more vulnerable your business is. To understand where threat is, you have to look at results of Google and Facebook. Toger y control two-thirds of cake of online advertising in USA, according to EMarketer, and y take 90% of increase in advertising revenues. The rest of platforms fight for what's left.

This year will be first in which online advertising is going to surpass in U.S. to which is broadcast on television networks. The domain of Facebook and Google, moreover, grows because y have a huge mass of cash that can invest in development of services that emulate those of ir competitors. The gap is huge. Vice's income goal this year is twelve times less than billed by that via Facebook only in third quarter, which shows how complicated it is to gain scale.

New collaborations

Vice Media, with an assessment of 5.7 billion, has among its main investors Fondo TPG. BuzzFeed, valued at 1.7 billion, has support among ors NBC Universal Media Group. The ory is that younger audience is moving away from television and traditional press to consume through ir mobiles. That's what Verizon saw when buying AOL and Yahoo.

AT T and Time Warner also justifies its merger as a way of gaining more weight and disputing online advertising contracts. This consolidation caused Disney, Comcast and Verizon to be interested in entertainment assets of Twenty-First Century Fox, which could lead Murdochs to reunify news channels with editorial news Corp division, which separated in 2014.

The agency that oversees communications sector has also eliminated restrictions that for past four decades prevented local television broadcasters from owning newspapers or radios in same market. The change occurs precisely when Sinclair Broadcast Group is trying to close purchase of Tribune Media with regulators.

The FCC, which also proposes deregulating Internet access, argues that se restrictions are no longer relevant to new online advertising resources and circulation of traditional press falling. That is why it is imperative that its owners have more options to gain scale and thus have opportunity to compete against great giants of Internet, instead of dying.

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