“Stick to sports”. An edict that caused a mass editorial exit from G/O Media-owned Deadspin toward the end of 2019. Just a few months later, several of these writers had come together to form what is now known as Defector Media.
The new company is owned by its employees, and at the moment, is almost completely funded by subscriptions. Defector’s VP of Revenue and Operations Jasper Wang spoke to us on the Media Voices Podcast to tell the story of how the publication formed, how subscriptions are going, and whether other outlets could replicate its success.
“The quickest way to get some cash flow was to ask people to pay subscriptions directly,” Wang explained. “We knew there was a rabid group of readers. Is that millions? No. But is it tens of thousands, maybe even hundreds of thousands? Yes.”
The bet paid off. Within 24 hours of announcing the project last July, Defector had 10,000 paid subscriptions. Now just nine months after launching the website, it has 39,000 paying subscribers; an admirable total for a start-up.
Subscription tiers range from $79 for unlimited articles, to an ‘Accomplice’ tier of $1,000 per year which comes with a range of “goofy” benefits, including custom Paint art and an annual birthday video from a writer, the day after your birthday.
Pricing from experience
The team used their knowledge of the Deadspin community to set the price points for the different tiers. Wang said that there were a number of principles which led to the three subscription tiers available.
“We knew the commenter community at the old site was very strong,” he explained. “We just believed that we could charge extra for that. Some people don’t actually want the access to that, so we made that the anchor for a slightly more expensive tier.”
Looking at other publications, Defector initially played around with a lower entry price point of around $5 a month. “We did the back of the envelope math and said, ‘$5 a month, if we can convert 30,000 people, that’s actually not enough money,’” Wang said. “We have to make sure that we’re not shooting ourselves in the foot, and make sure that that floor is high enough.”
More than 100 people have taken up their superfan ‘Accomplice’ tier. The subscriber response has also meant the team have not just been able to pay everyone a workable salary; they’ve also been able to expand the newsroom, as well as take on freelancers.
An unconventional set-up
When it comes to revenue split, all staff get a salary that is paid bi-weekly. But then every quarter, the team look back at the last quarter and decide what can be distributed as additional salary.
“It’s pretty conservative as far as cash management goes; we’re never paying out ahead of actual, recognised profit,” said Wang. “But it only works if everybody is an owner, or feels that they are in control of the direction of the business in some way.”
The business model is working well, but it is the operating model that really sets Defector apart, according to Wang. “If you looked at the newsroom side, you would say, ‘Oh, this is actually pretty conventional,’” he commented, pointing out that they have staff writers and editors who assign stories and commission pieces.
“But if you look at the operations side of the business, it’s very different from other media companies or other companies in general. We have an array of outside partners and vendors…but our editorial staff – all of them – are expected to participate in the operations of the business.
“So depending on the week, or the person, I’d estimate they spend somewhere from 5 to 20% of their time thinking about business decisions that they otherwise wouldn’t in their editorial role.”
So could other media start-ups have the same success as Defector? Wang doesn’t think they are a one-off, but believes the position the company has found itself in is unique.
“We’re talking about two separate conditions; the first is subscription-supported media, and then two is cooperatively-owned media,” he explained. “[Deadspin] was a newsroom that was beloved and fell apart for non-financial reasons. So we already had this following.”
Although the writers had a stretch of unemployment after quitting en masse in late 2019, they were already known names due to their work with Deadspin. This meant that subscribers to Defector knew that they would be paying for quality content, even before the site had launched.
But subscription support is still hard for many start-ups, especially without the certainty of audience support. However, Wang believes the second condition of being cooperatively-owned is “really doable” for other start-ups.
“I think people get stressed out that they’ve never ‘done business before’,” he theorised. “Being a business person is not some concentrated expertise… It’s a bunch of smaller skills which you can assign out to different people and develop over the years.”
Wang recommended getting outside help with aspects like bookkeeping and the legal side. But he points out that editors already have many of the necessary skills. “You just have to apply it to a business context, rather than a writing or reporting one,” he pointed out.
Prioritising sustainable growth
When it comes to growing the business, Wang still believes they have a way to go on improving their revenue streams. “About 95% of our revenue right now comes from paid subscriptions, and the other 5% is a combination of [merchandise] sales, sponsorships on the side, podcast ad revenue, and Twitch streaming ad revenue split,” he outlined.
“For the subscriber base, we can still grow that. There’s still some low-hanging fruit to just reach those people who were wondering where this group of writers [on Deadspin] went.”
The team are also launching some new podcasts, and are exploring live events as the US opens back up. “All of those areas we’re bullish on, but it is all within a context of sustainable growth, which means not investing too much cash ahead of that revenue coming in,” Wang said.
But he is also cautious of staff burnout. “We’re a small team and we can’t overextend our editorial team to be doing podcasts and flying out to events, while also fulfilling their core responsibility of writing the best blogs possible.”
“We’re acutely aware of each individual person’s available bandwidth to do more. If we can grow 10% next year, that would be incredible, but that’s not even necessarily the goal.”
However the strategy evolves, Wang is a firm believer that the culture is what will make the business a success. “No single strict ‘strategic decision’ is going to fundamentally shape the direction of the business,” he concluded. “It’s so much more important that everyone feels good about how we got to that decision, that we’re all running in the same direction, and we’re all willing to execute it together.”
To learn more about Defector, including their anti-harassment initiative, fairly recompensing freelancers, and how the company started, listen to the full episode with Jasper Wang here.