From executions at Disney, to the crashing of social media stocks in the face of TikTok, to the rise of NFTs, the breakdown of the current normative order in entertainment and media is underway – and it’s going to be “out damn Spot” soon.
The Internet visited damnation on the old school media industry in the late 90s with the three horsemen being high fidelity codecs (MP3, etc.), peer to peer file sharing (Napster and variants) and the villagers gaining access to fast Internet. What was built on decades of creators being found and packaged on records, videotape, CDs, DVDs, etc. and sold via main street retail, collapsed overnight taking with it the superstructure of record labels, studios and the like.
A decade of, sometimes abortive, reincarnation using Internet and connected device technology to mimic the old value chain followed, with Apple’s Model T Ford (all colors are black) – iPod/iTunes 99 cent downloads kicking off a phase of restructuring in the record and film business. The surviving labels and studios that came out of the other side of the looking glass emerged as mainly higher margin licensing businesses. Over time, with millions spent litigating the peer-to-peer demons back to their graves, the market gave way to subscription streaming models (once considered heresy) led by the likes of Netflix, Apple, Spotify and so on.
In an industry that eats technology like a glutton and is on the constant hunt for increased profits, the newly minted gatekeepers, who were also gatekept from content by the studios, entered the creative game, making their own content, and invading their suppliers. With the luck of Sonny Corleone in the toll booth, the studios retaliated by launching their own streaming services. As Disney+ is finding out the hard way, Amazon, Google, Netflix and Apple can afford to make content because they have a hedge (other peoples’ content, iPhones, an on-line empire that puts the Roman Empire to shame, data-driven advertising, etc.). Disney has Star Wars, Mickey Mouse and a billion-dollar hole in their pocket.
The pandemic put this whole scene on steroids, flooding streaming services with insane revenue from a very anomalous source and creating a mirage that growth would go on forever. When people were let out of their homes, it was no surprise that they found other things to do than binge watch everything under the sun.
However, one thing that did happen during the pandemic, which is the harbinger of a major disruptive change, is the rise of Non-Fungible Tokens, or NFTs. What appeared to be yet another crypto tulip fad had a major consumer behavioral change underpinning it: For the first time in history, consumers were buying rights not just content. Also, in NFT marketplaces, consumers and creators were connecting directly with no intermediaries or gatekeepers. Of course, NFT marketplaces of the first instance have several key flaws in that the content is unprotected, they offer only a simple business proposition – buy cleartext content and sell it to the next sucker, ad nauseum, and most human beings don’t care about cryptocurrency. All remediable with Digital Rights Management and cash wallets.
All of this means that we are entering a new era of creators and consumers connecting directly through services like TikTok. It also means that artists can find new funding sources, like directly from their fans, and new ways to market their work, though the word of 8 billion mouths.
Cathedrals like Spotify and Netflix must take heed. Their gatekeeper value chain positions will crumble rapidly, or will simply crumble through attrition, while subscribers walk right around the digital walls. Remember, the distance between two places on the Internet is zero. Publishers, labels and studios should also take heed. While they will continue to have a role in the new value chain, they should keep their accounts with McKinsey up to date, as a new era of restructuring and optimization awaits them, as they pivot more towards copyright management and talent development and further away from distribution.
In the end, this will be a boon for creators and consumers. The law of large numbers will play out, art will go back to its roots, with rapidly mutating talent refining itself and propagating across the web, filtered only by the will and taste of the audience.
Check out two stories in the NYT this weekend -
https://www.nytimes.com/2022/12/18/business/media/streaming-tv-shows-canceled.html
https://www.nytimes.com/2022/12/18/business/media/amc-networks-streaming-cable.html