Unlocking High Margin Revenue With Licensing
After building up a robust advertising and subscription business, the conversation starts to pivot toward other avenues for generating revenue. For some, it might be an affiliate model. For others, it’s an event strategy.
One of the lesser discussed, but historically very lucrative models, is licensing. I look at content licensing through three buckets:
- Licensing content in your language
- Passive licensing
- International licensing
In all three cases, it’s a direct representation of your content versus, for example, licensing one of your stories to be made into a documentary.
The reason licensing is so compelling is because, by and large, the margins are unbelievably high. Let’s say someone wants to license an article. You’ve already paid for it, published it on your site, and monetized it through ads and subscriptions. So, if you earned $500 to license that article, there are not nearly as many fixed costs.
If it’s so easy, why doesn’t everyone do it?
Ultimately, those that are most successful with content licensing tend to have the resources to prioritize it. Whether you’re doing one off licensing deals or going international, it requires someone to focus on it. When I was in Portugal, I met numerous people whose entire job was to do licensing deals. And at larger media companies, it might be a team of people.
But if there are opportunities that present themselves, here’s how I’d think about each of them.
But before we really get into the meat of it… I have a couple of quick notes about the upcoming AMO Summit.
First and foremost, tickets are still available. I am incredibly excited to see everyone gather in October. We’ve got attendees from Hearst, Endeavor Business Media, Axios, Questex, Front Office Sports, Workweek, Every, Bloomberg, and many other media companies. You’re not going to want to miss this, so buy your ticket today.
Second, I am continuing to build out the agenda and am working on two panels: one about communities and one about media companies that have built SaaS-like products, such as Politico Pro and Blockworks Research. I’m looking for a couple of diverse voices to join these panels, so if you are either exactly what I’m looking for or know someone I should talk to, hit reply.
And now… Let’s get back to licensing!
Licensing content in your language
In essence, this type of licensing is where a platform or large-scale publication expresses interest in republishing your content on their site. A good example is Yahoo! Finance. As an aggregator of content and a destination for tens of millions of people, it is in Yahoo’s best interest to have as much content on its site as possible.
And so, it’ll make a deal with publishers to republish their content on Yahoo Finance. There are a number of ways this can play out. First, it can be a traffic play where you’re not getting paid, but instead, you can include links in the body of the article pointing back to your site. I’m not a fan of this type, so I will ignore it going forward. You can be paid a flat monthly rate with a predetermined number of articles. Or, you can get a revenue share.
As I said above, the larger you are and the more resources you have, the better the deal is going to be. I asked a friend of mine who has worked in licensing for much of his career how to even think about charging for this.
You have to build a bottoms up model. You effectively want to understand how much money they are going to potentially make. So, if they generate an effective CPM of $5 on a page and get 10,000 pageviews, that means they’re earning $50 per article. So, your deal could say that they get three pieces of content every single day for $25 a piece. Over a month, that’s 90 pieces of content or $2,250. That’s your licensing fee.
If they get 20,000 pageviews, they’ve made more money. If they get fewer than 10,000, they make less money. But it’s entirely out of your control. To provide more flexibility for both sides, I have seen these large aggregators offer a revenue share. If one story gets 5,000 pageviews with an eCPM of $5, then it’d generate $25 in revenue and with a 50/50 revenue share, you’d get $12.50. But if it got 100,000 pageviews, you’d make $250 after the revenue split.
The issue with this is you’ve basically got to trust the platforms and their methodologies can be annoying. And frankly, these types of deals are becoming harder to come by because banner ad rates have been so compressed. It’s just harder to monetize.
This model requires you to chase down these business development relationships and try to get it across the finish line. It’s a lot of work and often times might not be worth it if you’re not creating an incredibly large amount of content.
Passive licensing
On the flip side, there are a number of platforms that will pay a yearly fee that doesn’t require nearly as much back and forth on number of articles, rates, etc. The Bloomberg Terminal, for example, will sometimes pay for the right to put your content right on their platform. The benefit for them is they need to provide as much information as possible to their subscribers.
Factiva is another example of this sort of professional platform play. According to a Press Gazette story:
Factiva is a searchable online archive of news, analysis and research containing clippings dating back, in some cases, as far as 1944. The business charges customers a subscription fee for access to its catalogue, which it says comprises over two billion articles produced by 33,000 sources across 200 countries in 32 languages.
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Asked by Press Gazette how much publishers might expect to earn from a licensing agreement with Factiva, Mabrey said it depended on “the content that’s provided and the digital eyeballs, if you will, that are on it.
“But I would invite anyone that is in the journalistic world who would like to be part of Factiva to give me a call directly… We can certainly talk about what the potential royalty benefit would be.”
It’s a usage model. While we don’t know exactly how much revenue it is, I suspect the more revenue Factica generates from getting more paying subscribers, the more it pays to its partners. However, the more partners there are, the less each piece of content is worth.
Another player is the Copyright Clearance Center (CCC), which feeds on common misconceptions about copyright. Here are a few:
- If you pay for a subscription to WSJ and then you print an article to give to a colleague or even email that article and don’t pay WSJ, you have committed copyright infringement.
- If you take a piece of content you find online and put it in your intranet, you have committed copyright infringement.
- If you purchase printing rights, but not digital rights, and then scan and email a printed article, you have committed copyright infringement.
The reality is, the vast majority of us have committed copyright infringement thousands of times in our professional lives. Here’s a snippet explaining that in a video on CCC’s site:
Did you know there are on average 57 instances of unlicensed sharing of externally published information per employee per week. And, only 46% of professionals surveyed strongly agree that copyright infringement have serious risks and implications.
And so, what the CCC does is gives major companies an easy way to get their company out of infringement while at the same time providing another stream of revenue to publishers. But how much can publishers make?
As one licensing professional said to me, “The CCC is a black box. It can be one amount of money one year, you complain to them, and then suddenly you make more money. The squeaky wheel certainly wins.” It’s also incredibly difficult to get the CCC to talk to you if you’re a publisher that is not in their network.
But it’s also free money. According to one reader who worked at a financial media company and did a deal with the CCC, “it used to be a $2 million a year business.” And so, if you can figure out how to get a conversation started, it might be worth exploring.
International licensing
When I was at CoinDesk, we launched three international publications in China, Japan, and Korea. In these cases, we were licensing two things:
- The actual CoinDesk brand, which allowed our partner to launch a local language version of the site
- A license to translate and publish our English-language articles in their local language
Each deal looked different, but the general structure of them was a minimum guarantee and then a revenue share if the businesses grew. These deals could generate low six figures in guarantees depending on the country, language, and population.
There are inherent pros and cons to this approach, though.
The pros are that you don’t have to expand internationally and take on all of that fixed cost. At the same time, you are receiving revenue from these partners. Forbes is notorious for this business and has built a thriving business with dozens of Forbes [X] publications.
The cons are that you have to police these publications and make sure they are not doing something negative to the brand. You have to protect that and ensure that your agreements have iron clad outs if the partner causes harm.
The other issue with this is that it’s really only available to the largest publishers. Forbes, for example, can execute this model because so many people around the world know Forbes. But no one would license A Media Operator, for example. You effectively need to already have a brand in that country and then decide to find a partner to license to.
Is licensing worth it?
So, we’re left with the critical question. There’s obvious money out there in licensing, but should we be wasting our time trying to chase it down?
Ultimately, I think it depends. For larger publications, you likely already are. For smaller ones, you’ve got to be very intentional with this. If you can get a conversation going with the CCC or Factiva, it might be worth it. On the other hand, it’s likely not worth your time to chase down Yahoo for a licensing agreement. The money has been shrinking.
The other part of this is that you are potentially trading away some of your audience. If a Factiva subscriber wants to read AMO, they have to come to AMO. However, if I licensed to Factiva, those readers would never have to come here. Is the money worth that? In my case, probably not. On the other hand, would those readers have ever found me to begin with?
Ultimately, these sorts of content licensing discussions are a balancing act between not truly cannibalizing your business, maximizing your licensing revenue, and not wasting a ton of time. It’s not a perfect science, which is why most smaller publications avoid it entirely.
What about you? Have you played in this world? Hit reply or join the AMO Slack to talk more about licensing. I hope you have a great weekend!
