The Future of Media

Traditional, Creator, and Personalized

Modern media has been a twisting, turning journey of creative destruction.

In the late 1930s, the radio slowly fell out of favor as the so called “golden age of Hollywood” boomed. Artists were on retainer, and the studio systems of MGM, Paramount, Fox, Warner Bros., and RKO were literal entertainment factories, each producing more than 50 movies a year.

To put that in perspective 71 movies in total were released in 2023.

The industry pivoted to support the war effort in the 1940s, producing propaganda films and newsreels and selling war bonds.

This was the dawn of what I’m denoting as “Traditional Media”

Traditional Media

Hollywood faced its first disruption as modernism ended and the postmodern world began to take shape. Television became more accessible, more varied, and cheaper. And by the 1960s, Hollywood films were increasingly out of touch with the cultural zeitgeist.

How did it survive?

In a word: quality. The industry adapted and started making better movies. They turned the keys of the kingdom over to young filmmakers and actors who weren’t squeamish about sex or violence and had something to say about the crises and traumas of the time. Midnight Cowboy, The Godfather, and Jaws were the Datsun 240Zs of their time, but produced by American studios.

In the 1980s the studios discovered the power of the “blockbuster,” the special-effects-driven dramatic film tied into fast food marketing campaigns and action figures. These film-based enterprises were the first zero-to-a-billion-dollars businesses to be built in 24 months, or less. The Hollywood ecosystem didn’t just survive, it thrived.

Hollywood remains the economic and cultural capital of entertainment, and the “Hollywood” studios are still the major players. In 2023 the top eight studios by U.S. box office receipts were all based in L.A. (though several are owned by out-of-state companies), and enjoy a combined 86% market share.

— Peak Hollywood, Scott Galloway

But this is where the curtain may be closing on traditional media. Traditional Hollywood now has to play in the same sandbox of the attention economy we find ourselves in. They’re not just competing against other movies and TV shows. They’re competing against anything else a consumer could choose to do with their time.

Throughout the first and latter half of the 20th century, media was centralized. Even with the disruption of television, media came from one of maybe ten hubs. The barriers of entry were high, the moats, easy to construct.

By the late 20th century, we began to see the decentralization of media, first heralded by trends of differing consumption. Barry Diller, former CEO of Twentieth Century-Fox and creator of the Fox Network, was one of the first to see the writing on the wall in 1995. He retired from traditional media to pursue the fad that would become internet ecommerce.

Then came Netflix in 1997 as a DVD consumer business. Netflix’s key competitive advantage was it allowed consumers to save time. Rather than drive to Blockbuster, who might not have what you want, you could order a DVD online. It would come in the mail. Keep it as long as you want. Watch it when you’re ready. No late fees. One monthly rate. Entertainment as a Service.

By 2007, only a decade after its disruptive play into its DVD consumer business, Netflix began allowing its customers to stream its content directly to their computers.

And in 2013, Netflix released their first original series House of Cards, which exploded their subscriber base from 33.26 million in 2012 to 44.35 million in 2013, representing a 33.3% growth in subscribers during that period.

So while Netflix is still a media company, its more like the studio system of old. They have vertical integration, controlled production and distribution of content, as well as first look and production deals with power house writers, directors and showrunners.

But the key is, they are more a tech company than a media company. Same with Amazon, which launched its streaming service around the same time as Netflix, in 2006.

Traditional media and cable companies have been unable to compete with streamers like Netflix and Amazon. And what’s worse, they haven’t been able to pivot the same way they did when television originally threatened to disrupt their business.

They have, in contrast to the 1970s, not produced better content. They seem to be laboring under the delusion that another cop or doctor drama will pull eyeballs away from the premier content distributed by Netflix and Amazon.

And what’s worse (or better, depending on your perspective) is the strikes that plagued the entertainment industry in 2023 basically left Netflix (a major target of the strike) relatively unaffected. Because much of Netflix’s production actually takes place overseas and is not privy to American labor union regulations. Netflix is a WGA and SAG signatory studio, but the vast majority of their talent, especially below the line talent, is not part of those unions.

To put this in perspective, the company will spend $2.5 billion on Korean content over the next four years, and it’s increasing investment in Brazil, Spain, Italy, and other countries, while “pulling back” on overall spend.

(Translation: It’s reducing budgets for U.S. content.)

It reminds me of when Hollywood began to flounder a bit in the early 1960s and productions fled LA. Spaghetti westerns emerged in the mid-1960s as a subgenre of Western films. The term "spaghetti Western" was coined by Spanish journalist Alfonso Sánchez to describe the low-budget films then being made in Italy which went on to become worldwide phenomena. Think Clint Eastwood.

There are now five Netflix offices in the U.S. and 24 internationally. Of its subscriber base, 69% resides abroad, up from 45% in 2016.

I did an entire write up on the entertainment strikes, so if you want to dig deeper, you can find the article → here.

But the point I’m driving home is that traditional media is getting swallowed by decentralization, led by tech companies. But even Netflix is now at risk now of being replaced by ByteDance, Meta, and Google.

Take a look at the churn among streamers:

Netflix has a monthly churn of about 4%. That means year over Netflix, which is the stickiest streamer, will lose 40% of their subscriber base. Some of these subscribers will come back. Some won’t.

To play in this space you need to have a robust content library, as well as a new flavor of the month, every month, which keeps consumers on your platform. And that costs massive production and marketing dollars to always have something splashy in the pipeline.

As Chamath Palihapitiya points out, the only real winners here are Meta and Google, because that’s where the ads will appear to try to reacquire these subscribers.

The Creator Economy

Speaking of Meta, while Warner Bros. Discovery reported a net loss of 700,000 subscribers across its streaming platforms in its latest earnings report, and Disney’s market valuation has seen a 42.5% reduction from the beginning of 2021 to December 2023, Mark Zuckerberg casually dropped that Reels has increased Instagram usage more than 40% since launch.

Forty percent engagement growth in less than three years on a platform with more than 2 billion users. This would be headline news for Warner Bros. Discovery or Disney. For Meta, it’s a footnote.

The ascendance of Instagram, TikTok, YouTube, and the talent pools they’ve inspired, is hard evidence that the future of entertainment will be user-generated. YouTuber MrBeast collected 4 billion views from his videos in 2023.

At an average video length of 16 minutes, that’s 1 billion hours of viewing time generated by one man, 30% more than what Netflix captured this year on its most watched show, The Night Agent — filmed in Vancouver.

And I think this phenomenon is easily explained.

1. As discussed, traditional cable shows lean heavily on lack luster cop, lawyer, doctor dramas. This is low hanging fruit, allows for easy exposition, and doesn’t force you to be invested in the storyline. These shows generally aren’t heavily serialized. It’s not must see TV. It’s junk food.

2. Even premier media put out by Netflix or Amazon suffers because its behind a paywall, which they’ve had to increase in price recently. Streamers have significant churn as people subscribe to watch a specific show, then peel off once they finish. Tubi has been an interesting anomaly to observe since its Super Bowl ad last February.

3. Like Tubi, media consumed from TikTok, Reels or YouTube shorts is free (your attention is the fee. They sell ad space).

   1. Social media in particular weaponizes the dopamine reward pathway by serving you content that appeals to your amygdala.

   2. It’s doing what Hollywood producers have been doing for years, but on a much larger scale: make it primal.

      1. Sex appeal

      2. violence

      3. outrage

      4. pretty colors

      5. stimulating music

And there’s something more going on here. Remember when we said Netflix saved you time? Well if that’s true, TikTok is a time machine.

The TikTok Time Machine

I spend what feels like 20 minutes deciding with my family (or even by myself) what to watch when I turn on a streamer.

I kind of miss the old days when I could just channel surf. 

And what if, while channel surfing, the TV learned what I liked and didn’t like?

And what if it served me videos based on what I like, and the longer I watched, the better it got?

And what if there were millions of channels, and the content was being produced by millions of creators every day, at zero marginal cost? 

That’s what’s happening on TikTok, and to a lesser degree, Reels and YouTube shorts.

So once again, tech companies are winning. Not traditional media companies. But Bytedance, Meta, and Google. 

Media is getting democratized. And it’s coming direct to consumer. And this trend is accelerating still further through a new market I’m calling "personalized media”.

Personalized Media

This trend has been established for a while now. Netflix serves you content it thinks you will like. Spotify is on demand, allows for the curation of personal playlists, and even has an AI DJ for personalized music recommendations.

But this trend is going to explode in 2024 and beyond.

In the early 2010s, if you were really into a show (like REALLY into it) you could go on something like Wattpad or Reddit and see if anyone had written fan fic. Or perhaps you would write it yourself.

That was how close we were to personalized media ten years ago.

Today we’re already seeing the release of AI consumer apps like Character AI and Talkie, which allow you to create any character you want, and talk to it like a real person.

This is going to be its own category of entertainment. But what I’m interested in is what happens when you combine that tech, with the advanced versions of Pika and Artflow, which I spot lit last week.

What happens when anyone can create a whole short film, or longer, using no-code AI tools?

What happens when you can monetize your creations and share them on a platform, the way people are already doing on Talkie?

What happens when anyone can crowd fund a content project, and distribute it on the Ethereum blockchain to the waiting audience who funded you?

What happens when you can start to do this with video games? Combining two award winning games or adding hours of gameplay to a beloved title? Bethesda is already allowing and encouraging fans to mod their venerable games, like Skyrim, adding hundreds of hours of new content and gameplay options.

Predictions:

Traditional Media

For traditional media, we are going to see consolidation. It will be Netflix, Amazon, Apple, and Disney. Viacom/WarnerDiscovery/NBCUniversal will either merge or be gobbled up, in an effort to expand and pool their content libraries and reduce churn.

One final word about Disney: from Rick Rubin’s book The Creative Act:

When you create, the art comes first, you come next, the audience and third parties come last. There is an integrity to the art. An idea is something pure and our job is to transmute and transmit the idea in its purest form. Diluting the idea to appeal to an audience, a cultural trend, to use it as a mouthpiece for a political agenda, or to maximize its commercial potential, is to abuse the child the universe has entrusted you to nurture.

If Disney (and indeed Hollywood) doesn’t return to making great art, then I expect the House of Mouse to continue recording negative growth quarters, consumer churn of up to 50% per year, empty parks, and be the biggest business loser of 2024.

In the 1970s, when faced with disruption, traditional Hollywood made better products that weren’t tone deaf to what their consumers sensibilities were, and had become.

I think there is a place in the future for traditional media. But it will be based around live sports, live events (like UFC, concerts, stand up comedy), and big tent pole experiences.

This has already been the trend for years.

Last year, U.S. box office revenue amounted to just $9 billion.

Of that $9 billion, Greta Gerwig and Christopher Nolan accounted for 10%. Barbenheimer’s success has been widely recognized as the saving grace of Hollywood, scooping up 17 nominations and seven awards at the Golden Globes. People think this is a good thing. In reality, the industry is becoming more concentrated as the big-budget, high-production-value projects collect an increasingly greater share of dollars and the rest of Hollywood is left behind.

Here is Matt Damon explaining this trend and why movies are more spectacles than cinema these days.

In short, traditional media will continue to be based around spectacle and live events. What can you show me that I can’t already get in my living room?

Creator Economy

I expect the creator economy to continue to grow. YouTubers like Mr. Beast have become must see TV.  Podcasts like the All in Podcast and My Favorite Murder have been weekly rituals for millions of people. And TikTok continues to explode in popularity, (much to my chagrin) with a user growth rate of over 1200% between 2018 and 2023. Thanks pandemic.

Disruptors like Netflix are in danger of being disrupted, which is why if we aren’t going to ban TikTok, we need an American competitor that isn’t a carbon copy (yes I’m looking at you Reels).

Ted, 

I hope this message finds you well. 

NFLX should partner with a deep-pocketed AI firm (e.g., Anthropic), horny to demonstrate differentiation in an increasingly crowded field, and launch a TikTok competitor (e.g., NetVibe, NetBeat, NetReal). When you acquire content, negotiate the rights to parse it into bite-size clips. Your business has the largest block of cheese (i.e., content) in history. Slice it more thinly and charge 10x for it. The deft use of your technology and capital could create a viable competitor to TikTok that has tangible differentiation. I want to watch The Crown, just not all of it. You tried this before but were too early and too timid. Think remixes, not highlights. TikTok is an evolutionary platypus of snippets and retakes — Netflix should be the king of that jungle. This is, in my view, the ripest opportunity in media, and tech.

-Peak Hollywood, Scott Galloway

TikTok is kind of already doing this. During the pandemic, I watched what felt like half of The Intern on TikTok before finally looking it up and deciding to watch the whole thing.

Netflix could do this with their entire consumer library, on their own app, and not have to worry about copyright infringement because they own all the IP.

Personalized Media:

This is a brand new market that is exploding right now. Character AI has over 164,000 reviews on the Apple Store, and an overall score of 4.8 out of 5.

Talkie has 66,000 reviews and an overall score of 4.6 out of 5.

Those numbers don’t even factor in reviews and downloads on the Google Play Store or the consumers who downloaded the app and didn’t leave a review.

The PC Gaming subreddit has 3.4 million members.

There is a huge market for AI generated, modded or personalized entertainment experiences, especially among Gen Z and Gen Alpha.

The next unicorn in the media space will be a platform that combines the video production quality of ArtFlow with the personalization of Talkie, to create a truly personalized and novel user experience.

This will compound with the network effects of the platform, leverage the channel surfing model, and allow for revenue sharing to inspire user engagement, similar to the TikTok creator fund.

Conclusion:

The future of media is bright. Both for creators, and consumers. But it will be progressively decentralized and personalized.

Barbie and Oppenheimer did well because they were fresh ideas from established directors. Hollywood needs to lean into this model more than ever. Take risks. Bet on talent. Go big. Give me something I can’t get in my living room. Either superior performances, incredible set design, or writing than can’t be produced by your average content creator. A good recent example is The Gilded Age on Max.

You can’t rely on tired franchises anymore. You can’t push an agenda and virtue signal, no one cares. Make great art. And if you can’t do that, get out of the content business and just exhibit live events.

Because there are people like Mr. Beast who are going to run laps around you, while the next big idea is stuck in your development hell. And that creator isn’t going to wait for your greenlight. They’ll produce it on a shoe string budget using AI tools, or crowd fund it and distribute it using Patreon, or create a personalized AI experience and get a slice of rev share.

The world isn’t going to wait for you to figure it out. Don’t get left behind.