The Slow Death of Traditional Media
Desperation time as old guard clings to falling market share
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Bill Gates once famously said that we systematically overestimate the change that will occur in two years, while underestimating the change that will come in the next ten.
The ongoing conversation about the death of legacy media definitely fits that mold.
Over the last five to ten years, people have been talking about how the newspaper, magazine, or radio station would become all but obsolete. And while certainly things have changed in all of these industries, it’s clear that there has not been a full paradigm shift yet.
Here is the evidence that we have finally reached that inflection point.
Fixing the Plane
In a recent interview at the City University of New York’s journalism school, Ken Lerer described the challenges of traditional media as follows:
You have to fix the plane while you’re flying it.
Lerer, a co-founder of the Huffington Post and currently the Chairman for Buzzfeed, is alluding to the fact that legacy media has to maintain old business models based on subscription and print ad revenue, while successfully venturing into the digital world. The latter category is already hard enough, even without taking into account the balancing act of the former.
The moral of the story? Some of these “planes” are going to land safely, but most of them are going to crash and burn.
The cost structure of legacy media just doesn’t make sense in today’s digital world. Overhead is high, and revenue is harder to find due to the limited success of paywalls, rampant ad blocking, and the steady fall in display ad prices due to the emergence of programmatic bidding.
Why has legacy media been so slow to adopt change? Why don’t they just lay off half of their staff, ditch print operations, and start from scratch?
It’s because their major revenue sources are as slow at adopting as they are.
In 2015, there was only one age demographic with more than half of its constituents reading a daily newspaper, and that was “65 years old and up”:
That said, the people that still read newspapers are among the wealthiest people in the country. Warren Buffett, for example, reads five a day. But even he does not know how to save the print industry from its woes.
Meanwhile, Madison Avenue has been notoriously slow at evolving to meet the needs of the digital revolution. If the biggest advertisers are still demanding the status quo, it makes it very difficult to “fix the plane”.
All of the above companies are “unicorns” valued at $1 billion or more by private investors, which include venture capital stalwarts such as Andreessen Horowitz, Accel Partners, Khosla Ventures, RRE Ventures, or Lerer Hippeau.
More importantly, however, they’ve also posted strategic investments from legacy media companies that are trying to wisely hedge their bets. Some of these include NBC Universal, The Walt Disney Company, 21st Century Fox, and Hearst.
Digital will become the largest channel for ad revenue globally by 2019 – investors and companies that believe in the media business should position themselves accordingly.
How the Top Cryptocurrencies Performed in 2021
Cryptocurrencies had a breakout year in 2021, providing plenty of volatility and strong returns across crypto’s various sectors.
The Returns of Top Cryptocurrencies in 2021
2021 saw the crypto markets boom and mature, with different sectors flourishing and largely outperforming the market leader, bitcoin.
While bitcoin only managed to return 59.8% last year, the crypto sector’s total market cap grew by 187.5%, with many of the top coins offering four and even five-digit percentage returns.
2021 Crypto Market Roundup
Last year wasn’t just a breakout year for crypto in terms of returns, but also the growing infrastructure’s maturity and resulting decorrelation of individual crypto industries and coins.
Crypto’s infrastructure has developed significantly, and there are now many more onramps for people to buy altcoins that don’t require purchasing and using bitcoin in the process. As a result, many cryptocurrency prices were more dictated by the value and functionality of their protocol and applications rather than their correlation to bitcoin.
|Ethereum||Smart Contract Platform||399.2%|
|Binance Coin||Exchange Token||1,268.9%|
|Solana||Smart Contract Platform||11,177.8%|
|Cardano||Smart Contract Platform||621.3%|
|Terra||Smart Contract Platform||12,967.3%|
|Avalanche||Smart Contract Platform||3,334.8%|
|Polkadot||Smart Contract Platform||187.9%|
Sources: TradingView, Binance, Uniswap, FTX, Bittrex
Bitcoin wasn’t the only cryptocurrency that didn’t manage to reach triple-digit returns in 2021. Litecoin and Bitcoin Cash also provided meagre double-digit percentage returns, as payment-focused cryptocurrencies were largely ignored for projects with smart contract capabilities.
Other older projects like Stellar Lumens (109%) and XRP (278%) provided triple-digit returns, with Cardano (621%) being the best performer of the old guard despite not managing to ship its smart contract functionality last year.
The Rise of the Ethereum Competitors
Ethereum greatly outpaced bitcoin in 2021, returning 399.2% as the popularity boom of NFTs and creation of DeFi 2.0 protocols like Olympus (OHM) expanded possible use-cases.
But with the rise of network activity, a 50% increase in transfers in 2021, Ethereum gas fees surged. From minimums of $20 for a single transaction, to NFT mint prices starting around $40 and going into the hundreds on congested network days, crypto’s retail crowd migrated to other smart contract platforms with lower fees.
Alternative budding smart contract platforms like Solana (11,178%), Avalanche (3,335%), and Fantom (13,207%) all had 4-5 digit percentage returns, as these protocols built out their own decentralized finance ecosystems and NFT markets.
With Ethereum set to merge onto the beacon chain this year, which uses proof of stake instead of proof of work, we’ll see if 2022 brings lower gas fees and retail’s return to Ethereum if the merge is successful.
Dog Coins Meme their Way to the Top
While many new cryptocurrencies with strong functionality and unique use-cases were rewarded with strong returns, it was memes that powered the greatest returns in cryptocurrencies this past year.
Dogecoin’s surge after Elon Musk’s “adoption” saw many other dog coins follow, with SHIB benefitting the most and returning an astounding 19.85 million percent.
But ever since Dogecoin’s run from $0.07 to a high of $0.74 in Q2 of last year, the original meme coin’s price has slowly bled -77% down to $0.17 at the time of writing. After the roller coaster ride of last year, 2022 started with a positive catalyst for Dogecoin holders as Elon Musk announced DOGE can be used to purchase Tesla merchandise.
Gamifying the Crypto Industry
The intersection between crypto, games, and the metaverse became more than just a pipe dream in 2021. Axie Infinity was the first crypto native game to successfully establish a play to earn structure that combines its native token (AXS) and in-game NFTs, becoming a sensation and source of income for many in the Philippines.
Other crypto gaming projects like Defi Kingdoms are putting recognizable game interfaces on decentralized finance applications, with the decentralized exchange becoming the town’s “marketplace” and yield farms being the “gardens” where yield is harvested. This fantasy aesthetic is more than just a new coat of paint, as the project with $1.04B of total value locked is developing an underlying play-to-earn game.
Along with gamification, 2021 saw crypto native and non-crypto developers put a big emphasis on the digital worlds or metaverses users will inhabit. Facebook’s name change to Meta resulted in the two prominent metaverse projects The Sandbox (SAND) and Decentraland (MANA) surge another few hundred percent to finish off the year at 16,261% and 4,104% returns respectively.
With so many eyes on the crypto sector after the 2021’s breakout year, we’ll see how developing U.S. regulation and changing macro conditions affect cryptocurrencies in 2022.
The Periodic Table of Commodity Returns (2012-2021)
Energy fuels led the way as commodity prices surged in 2021, with only precious metals providing negative returns.
The Periodic Table of Commodity Returns (2022 Edition)
For investors, 2021 was a year in which nearly every asset class finished in the green, with commodities providing some of the best returns.
The S&P Goldman Sachs Commodity Index (GSCI) was the third best-performing asset class in 2021, returning 37.1% and beating out real estate and all major equity indices.
This graphic from U.S. Global Investors tracks individual commodity returns over the past decade, ranking them based on their individual performance each year.
Commodity Prices Surge in 2021
After a strong performance from commodities (metals especially) in the year prior, 2021 was all about energy commodities.
The top three performers for 2021 were energy fuels, with coal providing the single best annual return of any commodity over the past 10 years at 160.6%. According to U.S. Global Investors, coal was also the least volatile commodity of 2021, meaning investors had a smooth ride as the fossil fuel surged in price.
Source: U.S. Global Investors
The only commodities in the red this year were precious metals, which failed to stay positive despite rising inflation across goods and asset prices. Gold and silver had returns of -3.6% and -11.7% respectively, with platinum returning -9.6% and palladium, the worst performing commodity of 2021, at -22.2%.
Aside from the precious metals, every other commodity managed double-digit positive returns, with four commodities (crude oil, coal, aluminum, and wheat) having their best single-year performances of the past decade.
Energy Commodities Outperform as the World Reopens
The partial resumption of travel and the reopening of businesses in 2021 were both powerful catalysts that fueled the price rise of energy commodities.
After crude oil’s dip into negative prices in April 2020, black gold had a strong comeback in 2021 as it returned 55.01% while being the most volatile commodity of the year.
Natural gas prices also rose significantly (46.91%), with the UK and Europe’s natural gas prices rising even more as supply constraints came up against the winter demand surge.
Despite being the second worst performer of 2020 with the clean energy transition on the horizon, coal was 2021’s best commodity.
High electricity demand saw coal return in style, especially in China which accounts for one-third of global coal consumption.
Base Metals Beat out Precious Metals
2021 was a tale of two metals, as precious metals and base metals had opposing returns.
Copper, nickel, zinc, aluminum, and lead, all essential for the clean energy transition, kept up last year’s positive returns as the EV batteries and renewable energy technologies caught investors’ attention.
Demand for these energy metals looks set to continue in 2022, with Tesla having already signed a $1.5 billion deal for 75,000 tonnes of nickel with Talon Metals.
On the other end of the spectrum, precious metals simply sunk like a rock last year.
Investors turned to equities, real estate, and even cryptocurrencies to preserve and grow their investments, rather than the traditionally favorable gold (-3.64%) and silver (-11.72%). Platinum and palladium also lagged behind other commodities, only returning -9.64% and -22.21% respectively.
Grains Bring Steady Gains
In a year of over and underperformers, grains kept up their steady track record and notched their fifth year in a row of positive returns.
Both corn and wheat provided double-digit returns, with corn reaching eight-year highs and wheat reaching prices not seen in over nine years. Overall, these two grains followed 2021’s trend of increasing food prices, as the UN Food and Agriculture Organization’s food price index reached a 10-year high, rising by 17.8% over the course of the year.
As inflation across commodities, assets, and consumer goods surged in 2021, investors will now be keeping a sharp eye for a pullback in 2022. We’ll have to wait and see whether or not the Fed’s plans to increase rates and taper asset purchases will manage to provide price stability in commodities.
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