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Why Spotify and a casino bought The Ringer and Barstool

Digital media companies were supposed to be sold to TV companies. Look what’s happening instead.

The Ringer founder Bill Simmons onstage at the Code Conference in 2017.
Asa Mathat
Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

Two big, splashy digital media acquisitions in the last week tell us something important about the future of media: The old predictions that the Big TV guys were eventually going to own all the upstarts were wrong.

Instead — for now, at least — the ones who are willing to pay real money for growing digital publishers are a music streaming service, and ... a casino?

That is: Barstool Sports, a sports blog/podcast/video company, is being sold to Penn National Gaming, a regional gambling company, in a deal that values Barstool at $450 million. And The Ringer, a sports blog/podcast/video company, has sold itself to Spotify, the music streaming service. The price is to be determined, but Wall Street analysts are guessing it will be $200 million or more.

That’s notable. Because a few years ago, when investors were very excited to throw money at digital media companies like BuzzFeed, Vice, and Vox Media (which owns this site), the Big TV guys were the presumed buyers. But that never happened, and now the Big TV guys seem to have moved on.

That has also affected what digital media companies are making these days. Instead of concentrating on making theoretically Facebook-friendly stories and videos, designed to be spread to Mark Zuckerberg’s 2 billion-plus users, digital publishers are doing just about everything else, and hoping some of it works: They’re publishing stories designed to be friendly to Google’s search algorithm, making videos designed for YouTube, and developing content that Amazon and other retailers might pay to add product-promoting links to. They’re also churning out podcasts, putting up paywalls in the hopes that consumers will subscribe to see what’s behind them, and pitching TV shows to Netflix, Hulu, and everyone else with a streaming service.

To back up: The old idea — sometimes expressed out loud, other times just implied — was that a new crop of upstarts had figured out millennials and Facebook and digital video, and that this expertise would be very useful to TV conglomerates that were seeing their audiences melt away, because internet. The TV guys, the argument went, had declining businesses that still threw off a lot of money, and they would use that money to buy the new guys. And the new guys would help the TV guys find those elusive millennials, using Facebook or whatever — but usually Facebook — to track them down.

Not coincidentally, some of the biggest initial investors in the Voxes, Vices, and BuzzFeeds of the world were those Big TV conglomerates: Comcast threw hundreds of millions at BuzzFeed and Vox; Disney did the same to Vice; the company formerly known as Time Warner made bets on publishers like Refinery29, Mic, and Mashable; and Discovery invested in what’s now called Group Nine, which includes publishers like the Dodo and NowThis News. Univision, oddly, bought what was then called Gawker Media.

Then it stopped. Starting around late 2016/early 2017, those same Big TV conglomerates that had written big checks for digital media companies decided that they were done doing that — and that they were especially done supporting free, ad-supported digital media companies.

Facebook, it turned out, wasn’t going to help new digital media companies grow — it was going to compete with them. And new media companies may have had lots of youngish readers, but that didn’t mean they could turn those readers into valuable video watchers. And while lots of the new companies had — and have — plans to make TV shows, the one thing the TV guys didn’t really need help with was making TV shows.

Disney may be the best example of this turnaround: CEO Bob Iger, who had signed off on deals to put some $400 million into Vice Media, has instead decided that he’s better off spending billions to build up his own digital media offerings, most notably Disney+. And Disney has formally concluded that it’s never going to see the money it put into Vice and has told investors it now considers the investment a goose egg.

We haven’t seen investors completely abandon media: A new cohort of buzzy startups, including Axios, The Athletic, and Overtime, have been able to raise funding rounds in the last few years. But they’re still modestly sized compared to the Facebook-fueled go-go days: Think $25 million to $50 million, instead of $200 million-plus.

The two deals we saw in the last week are similar and different in interesting ways: Penn National is buying Barstool’s brand and its audience, which it wants to turn into bettors; Spotify is also buying The Ringer’s brand and is definitely interested in its audience. But it also hopes that The Ringer will become the equivalent version of an in-house music label — a content-creation engine that will end up costing much less, per listen, than the stuff it has to license from the likes of Universal Music.

Another way of putting it: Spotify’s purchase of Ringer is closer to the logic that we thought the TV guys would use a few years ago: Buy digital media companies that can make stuff your audience likes, but cheaper/better. And Barstool is a much different idea: buying audience/brand as a way to bring in new customers for your core business.

I think we’ll see more of the latter in the future. Think of the up-and-coming — or aging and brandless — commerce and retail businesses that might be interested in owning a direct connection to their customers instead of having to rely on Facebook and Instagram ads to find them.

But as much as I’d like to believe that Spotify is kicking off a wave of media companies trying to snap up podcasters (I have a vested interest in this outcome), I don’t think we’ll see many more of these acquisitions. That’s because I think most companies will conclude what Netflix, Apple, and Amazon have concluded (so far) as they build out their media businesses — they don’t need to buy companies when they can buy talent instead.

Still, the idea of buying a digital media upstart and imagining it might be the next version of a big, valuable TV company is hard to shake. Just ask Spotify CEO Daniel Ek, who used this phrase to describe his acquisition of The Ringer this week in a Recode interview: “With the Ringer, we’re basically getting the new ESPN.”