To remind you, I am running the test for subscribers in PARQOR Platinum, the most engaged readers on the list, and subscribers who asked to participate in the test. One brief framed the call from the perspective of a studio IP owner’s licensing team, and the other framed it from a brand licensing team’s perspective.

Subscribers are already sending me enthusiastic feedback. If you would like to learn more or be a part of the test, please respond to this mailing.]

Faced with signs of slowing growth and growing churn in the U.S. and Canada markets in particular, Netflix laid off ~6% of its workforce and fired top executives like Chief Content Officer Bela Bajaria and Chairman of Netflix Films Dan Lin. The company’s withdrawn bid for Warner Bros. was also a bet on content—a successful acquisition would have given Netflix’s algorithm more content to serve subscribers.

Both signals message the market that the content is the problem. Netflix’s value proposition has been an interface for finding something to watch in a big library—because cable TV guides made that difficult—and at a fraction of the price. It serves the people who learned to watch TV that way. That group is shrinking. Cable fell from 26.7% of total TV consumption in July 2024 to 18.7% in July 2026, a 30% decline, according to Nielsen’s The Gauge. Data from research firm MoffettNathanson shows that pay-TV homes fell 10.5% over the same period, from 68.76 million to 61.51 million.

YouTube’s share of television viewing over those two years has grown 36.5%, increasing from 10.4% in July 2024 to 14.2% in July 2026. Netflix has lost its share, dropping from 8.4% of consumption in July 2024 to 7.8% of consumption in July 2026.

I wrote about why Netflix does not feel any urgency to change its interface or technology in January, where I quoted an argument by Craig Hepburn—a Perplexity Fellow and the former Chief Digital Officer of both Art Basel and UEFA: “The entire field of user experience design has essentially been compensation for machine stupidity.”

This read suggests that the problem Netflix solved for cable is no longer the relevant problem with U.S. consumers.

Past essays related to today’s analysis:

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To remind you, I am running the test for subscribers in PARQOR Platinum, the most engaged readers on the list, and subscribers who asked to participate in the test. One brief framed the call from the perspective of a studio IP owner’s licensing team, and the other framed it from a brand licensing team’s perspective. The premise is that you are “seeing” developments at the intersection of IP licensing and emerging AI technology from the perspective of the two key players in an IP licensing deal.

Subscribers are already sending me enthusiastic feedback. If you would like to learn more or be a part of the test, please respond to this mailing.]

With the Skydance merger with Warner Bros. Discovery officially closed, the big question on investors’ minds is how it will service its massive ~$80 billion debt. Those questions—plus a release of 471 million stock warrants to Class B shareholders yesterday that dropped the stock price—have dampened investor enthusiasm for the merger. I have argued that the combination of the merger, a partnership with Oracle Cloud Infrastructure and the Ellison family’s control enables a consumer-facing generative AI model:

“Build cloud infrastructure to protect the intellectual property of Paramount Skydance and Warner Bros. Discovery (post-merger, if it happens), and then license it to creators and advertisers. That protection is built into access controls and licensing terms enforced at the platform level.”

To date, I have pointed to some technologies and business models that help explain what this business could look like. However, I have not offered concrete examples that would explain how that model might work in practice.

Hasbro is building one version with its new AI studio called Sixth Wall. In June, Hasbro announced: the AI studio “will enable the toy giant’s stable of characters to be deployed by third parties across the new experiences that the technology allows for.” Sixth Wall CEO Roberta Thomson describes the complete offering as “an authorized end-to-end blue check version of the character that a company could license from us.” The company is currently focused on experiences and enterprise use-cases that cater to consumers 13 and older.

We can boil Hasbro’s strategy down to five elements:

1. A separate business unit

2. A record for each character

3. Behavior sold as a right

4. A deal with the performers

5. A consumer products business underneath it

The first three are what Skydance and Oracle would need to build. The fourth is harder at their scale. The last one they do not have in place, as I highlighted two weeks ago in “Skydance’s New Co-CEO Moves From Buy Side to Sell Side”

Past essays related to today’s analysis:

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“I read the whole call. The headline finding: PepsiCo’s call says nothing about licensing, characters, entertainment IP or studios. Every brand mentioned is PepsiCo’s own (Doritos, Gatorade, Poppi, Mountain Dew), and the only AI mention came from an analyst [who asked about ‘any AI that you’ve been using for productivity’]. Nobody from PepsiCo addressed AI.”

The only partnership it discussed was its recently announced exclusive global media partnership with Publicis to “build a new ‘One PepsiCo’ media model ‘underpinned by AI and data,’ combining strategy, planning, activation, connected identity, and technology.” (also, I liked this LinkedIn essay by strategic advisor Alex Brownstein on PepsiCo’s partnership decision).

Chairman and CEO Ramon Laguarta shared on the call that management “do not feel good about the beverage business” and so they are “cutting costs in many areas of the business, including corporate unallocated, including overhead costs everywhere, to invest back into the beverage business, also the food business in North America.”

Kraft Heinz solved for a similar growth challenge in its recently-announced partnership with Disney. This suggests that a holding company will be its interface with studios around marketing.

I will send out briefs generated from Hasbro’s Q2 earnings transcript exclusively to PARQOR Platinum members and a select group of highly engaged subscribers. If you would like to learn more or be a part of the test, please respond to this mailing.]

I spent part of Tuesday and today at Advertising Week. The big themes were creators and data in advertising. I found a few that sat on the overlap between AI tools and targeting advertisements.

I struggled to find sessions that discussed AI creative—I have identified around 10 in the schedule including a few this afternoon and two of them demos by the generative AI video platform Higgsfield.

One explanation for this lies in two key buzzwords I heard repeatedly: Consumers value trust and authenticity in their engagement with creators and brands.

That suggests we are still in the early days of AI creative solving for trust and authenticity. A few slides from a presentation by market research firm Cint—which surveyed around 1,000 respondents (63% female) in August 2026 in the US “to take a closer look at the evolving relationship between artificial intelligence and the advertising industry”— offered some early insights as to how consumers are reacting to AI creative from brands.

Past essays related to today’s analysis:

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The core hypothesis driving a growing proportion of my essays, to date, is that the decline of cable and theatrical business models is forcing owners of enormous libraries of IP—especially studios—to find new ways to monetize them. AI is rapidly emerging as a solution for IP monetization for studios, brands and rights holders—but all are risk averse about embracing the technology, especially with questions around copyright law making their way through U.S. courts. Despite fears of AI replacing human creativity in Hollywood, the most promising business model for AI is licensing underused IP to brand-led content creation.

I have been telling people it is 1941 all over again—much like Bulova running the first 10-second advertisement against a broadcast of the Brooklyn Dodgers playing the Philadelphia Phillies at Ebbets Field, brands are emerging in the driver’s seat for the future of IP and the entertainment industry.

This is because they have more business models for monetizing IP than studios, especially as cable and theatrical revenues decline. IP licensing is already a large market and it is growing. Licensed merchandise and services generated $389.8 billion in worldwide retail sales in 2025, up about 5% over 2024, according to Licensing International. Entertainment and characters accounted for $161.8 billion of that. Corporate brands accounted for $98 billion—meaning brands are a quarter of the licensing market as licensors, and that is before AI creates faster and cheaper ways to make content and merchandise around what they license.

The important question now is how this market will play out as AI catalyzes more structural changes. Because it is more a dynamic than a trend, there are many ways it can play out.

Using Claude Code, I have built an agent that writes briefs from quarterly earnings calls for studio and brand executives. Every call produces two briefs from the same transcript, one for each side of the table. An investor reading both sees what one side put on the record and the other left off it.

The briefs apply a game theory lens. Earnings calls are where both sides of a deal speak on the record, under pressure, with lawyers listening and their counterparties taking notes. Written from the studio’s side and the brand’s, each brief shows two parties holding information the other wants, choosing in public what to disclose and what to hold. Tracking those choices across a quarter is how I follow whether companies are adapting as AI shifts the ground beneath them.

The agent reads each call against my hypothesis and drafts the brief. A second pass checks every claim against the source. I choose which calls get covered, read every brief, add my edits and thoughts, and then decide what gets published.

This week’s essay was going to announce a market test of that service and a plan to move over to Beehiiv.

But, then I had second thoughts. The model is closer to equity research than to a Substack or a Beehiiv publication. Equity research is sold by the seat, not by the month, and publishing these anywhere on a subscription list would price them as a newsletter before I know what they are worth.

So, for now, I will start sending the briefs next week exclusively to PARQOR Platinum members and a select group of highly engaged subscribers. If you would like to learn more or be a part of the test, please respond to this mailing.]

This week, the news broke that Mattel CEO Ynon Kreiz is stepping down and has been tapped as co-CEO of Skydance, the new name of the merged entities of Paramount and Warner Bros. Discovery. Chairman and CEO David Ellison announced Kreiz “will focus on the company’s day-to-day management and integration of the combined businesses.”

Kreiz is effectively the replacement for former President Jeff Shell, who was forced to resign after getting entangled in a legal dispute with a professional gambler.

Ellison’s description of Kreiz’s role has been interpreted as being responsible for overseeing the integration and delivering the $6 billion in promised cost-savings. However, if a media company were to solve for the lack of relevant skillsets in the C-suite for the digital media marketplace in the AI era—a problem that I have long argued was the Achilles heel that hobbled legacy media efforts in streaming—Kreiz’s background brings valuable experiences with creators and IP licensing. They map well to both my hypothesis (in the Author’s Note, above) and a related hypothesis that the partnership of Skydance with Oracle Cloud infrastructure will become the technological foundation for licensing IP to advertisers and creators.

Here is why.

Past essays related to today’s analysis:

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Paramount Skydance announced today that it is launching a syndication to raise $7.5 billion through a proposed senior secured incremental tranche of term “B” loans. Morgan Stanley analysts estimate that by the end of 2026, the combined company’s net debt will be $77.2 billion. This new debt raise will push that total higher, though some of the raise will be used to pay off older debt.

The questions around how post-merger Paramount Skydance plans to pay off $80 billion in debt bring to mind one of my favorite quotes from AT&T management after its acquisition of Time Warner: Former AT&T CFO John Donovan told Fortune Magazine in 2019 that “10 basis points of churn is a billion dollars.” CEO John Stankey made a similar pitch to investors in January 2020: “A reduction of 1 basis point of wireless churn across the base is worth about $100 million to us annually.”

They were both describing their vision of how an exclusive streaming service like HBO Max within AT&T wireless mobile plans would reduce churn and attract new users. They were also assuring investors that despite the additional $23.5 billion debt they took on by acquiring Time Warner in 2018—and the $180 billion in total debt the company was carrying post-merger—there was a path forward to paying down that debt.

Two years later, despite the efforts of WarnerMedia CEO Jason Kilar and his team to improve HBO Max, Stankey threw in the towel and spun off both WarnerMedia and $55 billion of its debt into a surprise merger with Discovery, Inc.

Within the short window when AT&T owned WarnerMedia, Wall Street analysts and industry experts openly wondered how streaming would deliver the level of revenue to service the debt. With the Paramount Skydance-Warner Bros. Discovery merger weeks away from closing, we are hearing similar questions from the marketplace now. The key difference, however, is that Paramount has both an $80 billion debt burden and an equity burden—Oracle founder Larry Ellison has personally guaranteed more than $40 billion of the equity financing for the merger (his son David Ellison is CEO of Paramount Skydance).

Yesterday Semafor reported that Paramount executives “have discussed asking Elon Musk to become part of a syndicate of equity investors” into the post-merger company. The implication is that there exists a marketplace of wealthy individuals who are willing and able to assume some of the risk that Larry Ellison took on personally.

The Math Behind $77.2 Billion in Debt (and Growing)

Morgan Stanley analysts project $6.37 billion in interest payments per year. Paramount Skydance will service that debt in part by more than $6 billion in cost-cutting “(representing 11% of operating expenses) through the consolidation of tech stacks, procurement efficiencies, ‘rationalizing real estate’ — and layoffs in redundant corporate overhead and marketing functions”. Morgan Stanley projects the company should be able to reduce its leverage of net debt to adjusted EBITDA from a ratio of 6-7x at the closing of the deal to 3-4x within three years.

The $6 billion in savings is a one-time step up in EBITDA—Paramount will not find another $6 billion in savings in year four. Meanwhile, linear and affiliate revenue will keep eroding on their own. The ratio falls only as long as that one-time bump outruns the decline. After that, Paramount will need a business that is actually growing.

Streaming alone will not cut it as a solution for growth. The post-merger company had less than $20 billion in combined streaming revenues in 2025 ($8.6 billion from Warner Bros. Discovery and $10.9 billion from Paramount Skydance). 10% margins in those combined businesses will iteratively chip away at the $80 billion in debt.

The closest comparison to AT&T's wireless subscriber base is the affiliate payments Paramount Skydance receives from distributors for its cable channels—though the comparison cuts against the point. AT&T's wireless base was growing in 2018. The cable industry’s consumer base keeps shrinking as cord-cutting continues, even as per-subscriber rates rise to offset the losses. Its will still total nearly $19 billion in annual revenue post-merger. It will also earn $12 billion in advertising revenue per year. With margins of 20% in the WBD linear businesses and 36% margins at Paramount Skydance, these revenues will go further than streaming at chipping away the debt.

But as AT&T already proved, $80 billion is a tall mountain to climb in streaming, and nearly $7 billion in annual payments are a burden.

Growth = Consumption Based IP-Licensing?

My argument in yesterday’s essay was that “without ‘free money’”—the extraordinary profitability of both the cable and DVD business models—Paramount must invent an entirely new marketplace in order to service its debt. I suggested the model most likely to emerge from this merger will be a generative AI model where “Paramount stor[es] IP in the cloud and pricing access to it based on advertiser [and creator] demand”. That model “seems like it could be a highly profitable business” and better than streaming.

I offered this example:

“An advertiser spending $12,000 to license unused or less-used Paramount or Warner Bros. IP [for a campaign[ is spending 10x what a consumer will spend on a cable bundle in a year. For the sake of illustrating this math, assume 1% of Meta advertisers begin licensing IP at $12,000 per year from post-merger Paramount Skydance, that is $1.2 billion in revenue per year from Meta, alone. Compare that to 82+ million Paramount+ subscribers spending less than $100 per year worldwide, and it becomes clear that debt service alone requires a different business model.”

The back-of-the-napkin math makes sense. The size of the advertiser marketplace in the U.S., alone, presents a path to revenue growth. Assuming the pricing model is similar to consumption-based pricing for cloud models—and I assume this because this model most closely aligns with the short durations of advertising campaigns—suggests the model could be highly profitable for Paramount simply because its IP and Warner Bros. IPs are effectively sunk costs. All future approved advertiser and creator use cases will be upside.

There is an obvious counterargument to this example: The math works only if that market exists. Nobody has licensed IP from Paramount or Warner Bros. at that price yet — the $1.2 billion figure describes a market that would have to be built from nothing, not one that already spends this way. If this is going to be built, when will it emerge?

The sense is that cost savings will buy the combined Paramount-Warner Bros. entity some time with debtholders and investors. But as investors become more bearish on Netflix because of its declining engagement metrics, the sense is that—like AT&T’s bet on HBO Max four years ago—management’s financial promises for a new model are not the same as management’s execution of that new model.

Paramount is gunning to build the type of streaming platform that AT&T executives envisioned reducing churn. But the better business model lies in licensing IP to advertisers and creators. Much like AT&T four years ago, the pieces are on the table and the growth opportunity is compelling. The only question is how they plan to get from here to there. Because from my own research, there is not yet a marketplace at scale that shares the vision for this growth opportunity.

It may be four years before we get there. Like AT&T in 2022, the question facing Paramount Skydance will be whether shareholders and management will be willing to see the vision through.

Past essays related to today’s analysis:

I wrote about “free money” back in 2023—how the extraordinary profitability of the cable bundle has driven financial and creative growth in the cable and movie industries between the 1970s and today. The Acquired podcast recently did an episode on Disney which highlighted how ESPN has generated close to $75 billion of operating profit over the past 30 years, and that profit funded the acquisitions of Pixar and LucasFilm. For a short period of time—from the 1980s until the emergence of streaming in the early 2000s—the extraordinary profitability of the VHS and DVD business padded that financial growth. An interview with actor Matt Damon on the YouTube series “Hot Ones” went viral for highlighting how the decline of DVD sales in the 2000s dramatically reduced the maximum amount of profit any film could make, leaving box-office profits as the only determinant of a film’s success.

I believe that the zero-interest-rate policies (ZIRP) by central banks of the 2010s created a third window of “free money”, enabling media companies and Netflix to take on billions in debt with minimal-to-no interest payments burdening their cash flow statement. But for that policy, AT&T would not have taken on a $23.5 billion debt load—pushing its total debt to over $180 billion—to acquire Time Warner in 2018.

Someone looking at that history, the declining year-over-year revenues from theatrical and cable, and the disappointing profit margins from streaming might reasonably conclude that a new source of “free money” is necessary to both protect and revive the entertainment industry. A good policy would be for the state and federal governments to build incentives towards new infrastructure for “free money”.

A lawsuit does not accomplish—and this lawsuit did not seek to enable—this outcome. It focused solely on the merger’s effects on theater and cable distribution models, and also its impact on the “editorial independence” at CNN and CBS News. The settlement offers toothless solutions to both.

With the uncertainty of the lawsuit now removed, and now that Paramount Skydance can get back to building, the question facing the industry is: What will be the next source of “free money”?

Past essays related to today’s analysis:

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• 11.8% price growth in streaming subscription prices over the last year against 3.9% for cable and satellite and broader inflation (3.84 percent annually since 2019);

• Data from research firm Luminate showed that hiatuses of streaming originals that last more than 1.5 years cost hit shows a fifth to well over half their audience upon return.

Also, a data point from Bank of America in April that “about 44% of 2,000 Americans surveyed by Bank of America plan to keep their streaming subscription slate as-is, while another 44% plan to either cancel or downgrade one or more subscriptions.” Lurking in the background is YouTube’s growing dominance of U.S. television viewing (14.2% in July, according to Nielsen’s The Gauge).

There is an obvious story in this data about the supply side in streaming: The economics do not work at their current scale, so prices need to increase. There is also a story about consumer demand for streaming. Consumers not only are price sensitive to the economics of Hollywood content on streaming but also do not value the production model as much.

That presents a problem for the advertising-supported models: They require more scale to compete and attract advertising dollars; but in streaming, price increases are a tactic for combating lost revenues from churn at the risk of growth. The best evidence of this problem is almost every streamer (excluding NBCUniversal’s Peacock and Paramount+), has stopped reporting total subscribers since relying more heavily on price increases.

Streaming’s subscription business can get healthier by getting smaller and pickier—forcing out lower value customers while earning more from higher value, more loyal customers. However, its advertising business requires more people and not fewer. Both moves are happening inside the same subscriber base at the same time.

These echo a problem I argued back in April: “The traditional media value chain—produce content, attract audiences, sell advertising against those audiences, measure with Nielsen—is collapsing at each node.” In that argument I also highlighted how that problem opens the door for generative AI on both the production and advertising sides, but really on the latter.

These data points suggest that this is a problem of scale that generative AI not only cannot solve, but price hikes also undermine.

Past essays related to today’s analysis:

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There has been an abundance of conflicting market signals over the last few weeks. What does one write about the emergence of generative AI in the middle of a storm of AI Doomerism and oligopolies pantomiming threats to humanity just before their scheduled IPOs—with the twin objectives of achieving those IPOs for their investors and steering the future government regulation of their industry (aka regulatory capture)?

How can I distract you from the public fervor of the “>10%” chance that “AI could kill all humans” within the next decade? The simple (and not so simple) answer is to identify and synthesize a few notable market signals in the digital media and emerging generative AI marketplace.

I will not synthesize those signals into an essay today. There is both a book and an essay about that book to be written that will better accomplish that. For now, a Substack is the best place to summarize those signals individually and connect them piecemeal over time.

I believe the most important story related to generative AI is a Hollywood Reporter story from last week “AI Is Deflating Hollywood’s Microdramas Scene”:

“Not every firm is going the route of My Muse or Inkitt Ironblood, apps that exclusively release AI verticals, often fantasy, period and action stories that would require some serious budgets if they were filmed in live action. But some major players, including DramaBox, DramaWave and FlareFlow, have increasingly been embracing synthetic actors and settings and showering their apps with prompt-generated, sometimes uncanny fare, no human actors required.”

The co-founder of a verticals platform Shortical told the trade that “We all started adopting when Seedance 2.0 came out” in February. This both echoes and counters an argument I made back then:

“Seedance 2.0 is ‘faster, cheaper and better’ at producing Hollywood moments for short-form consumption. It is TikTok for IP pirates. But it is not a tool for AI storytellers. Storytelling with sustained narratives over longer periods of time belongs elsewhere, either on legacy media-owned streamers or in YouTube creator channels.”

Seedance indeed became an engine for producing “faster, cheaper and better” content for short-form consumption. I also predicted:

“Hollywood’s business runs on walls. You cannot stream their movies and shows unless you pay, and you cannot use their characters unless they say yes. AI video tools take those walls down, and Seedance is only the latest one.”

The piece dives into a long list of examples of these walls coming down—“unscrupulous use of the tech on the work of creatives […] on the rise”. Some of these were previously reported by Business Insider: Actors whose “faces are being used in fake AI sex scenes to sell micro dramas” and other actors who are “losing roles to AI knockoffs of themselves”. Also, actors who have managed to secure contractual AI protections are still finding they are vulnerable: “Sometimes, platforms will hire a third-party ad company with which actors don’t have a contract; that company will “‘take many creative liberties that are overtly sexual, rage-baiting, clickbaity’ for advertisements.”

Notable, but Not Precedent

The obvious temptation is to treat the micro-drama marketplace as a warning signal for the rest of Hollywood in the age of generative AI. That is a mistake. Microdramas are a hot content market and consumed at extraordinary scale—see a top 10 microdrama titles from 70k+ titles across 20 apps tracked by media and entertainment consulting firm Owl & Co. below.

However, it is a market that is limited to distribution on smartphones and tablets and requires the swipe-based interactivity that is only possible on touchscreens. Both the constraints of the medium of touchscreen devices and the power law dynamics of the algorithms demand cheaper economics that favor AI production models.

According to data from AppMagic, a SensorTower company, at least five of those 20 apps are in the top 50 most downloaded apps for 2026, averaging over 132 million downloads in 2026, to date. The top microdrama apps outperform Threads from Instagram and the gaming platform Roblox (which also has 132 million daily active users).

Despite that extraordinary scale, something I wrote in February still applies. I argued then that Seedance 2.0 unintentionally limits the market problems of “faster, cheaper, better” to the micro-drama marketplace:

• “License original content to Netflix for upfront fees and exposure? That requires surviving Netflix’s strict AI guidelines and producing something entirely original.

• Leverage AI production speed for volume on YouTube? Only 4.4% of YouTube’s 67 million creators monetize their content, and that power law intensifies as AI-generated content floods the platform.”

The Information reported that a new AI startup from Jeffrey Katzenberg—the former co-founder of DreamWorks and CEO of DreamWorks Animation—is fundraising for a company that would train its own video models and try to win over filmmakers. He is doing so alongside Bill Peebles, the former Head of Sora at OpenAI, and Sujay Jaswa, the former CFO of Dropbox. They are doing so amidst “serious concerns that AI could inhibit creativity, displace talent and steamroll intellectual property protections”.

The bet is that AI production in Hollywood requires proprietary video models and not larger models like Seedance. Given that Runway already hit a wall with that model—and pivoted to AI-generated short episodic series with Lionsgate IP—it is not clear why they are pursuing this model unless they believe they can scale similarly to Bytedance. That alone is reason to believe that the market problems Hollywood talent are experiencing with AI are limited to the microdrama and gamified video-on-demand (GVOD) marketplace alone.

Past essays related to today’s analysis:

Rockstar Games gave this title to Netflix for a six-hour exclusive before it was also released on YouTube, where that version has aggregated 26 million views over the last 11 days. It is worth noting that Netflix defines a view as the total hours viewed for a title divided by its runtime, meaning one household watching a program twice would be counted only once. Whereas On YouTube, a view is counted as soon as any video starts to play.

This was a hit for Netflix and Rockstar Games. It marks a significant leap in Netflix’s gaming ambitions, which were launched five years ago when it hired former EA executive Mike Verdu to build the foundation of its games strategy.

My favorite detail of that pivot is that it was announced soon after Netflix’s $200 million bet on comic book IP—a TV series called “Jupiter’s Legacy” from the universe of comic book publisher Millarworld, which it acquired in 2017 for an undisclosed amount—was not renewed for a second season. “Jupiter’s Legacy” was Netflix’s bet that it could compete head-to-head with Disney’s Marvel and Warner Bros.’ DC Comics in comic-book blockbusters. Its cancellation was announced less than a month after its release date.

Effectively, that now-forgotten show and acquisition marked the end of Netflix’s ambitions of becoming the next Disney. Instead, it sent Netflix on a path focused on becoming an interactive mobile and now TV cloud gaming destination. I have argued Netflix has underperformed if not failed in its pursuit of its objective. Others have argued that Netflix has simply failed.

The success of “Grand Theft Auto VI: An Extended Look” suggests Netflix’s audience overlaps with gaming culture more than both I and others have assumed. This presents two questions:

1. Is it the foundation of a broader gaming strategy suggested by Unity’s announcement in late July of “dedicated Engine support to Netflix Games, making it easier for developers to build and deliver games across Netflix’s multi-platform ecosystem on mobile and TV”?

2. After EA went private to compete, is Netflix’s listing as a public company a limitation on these ambitions?

The first question is whether Netflix is building a product people want. The second is whether its size and its shareholders will let it pursue these ambitions.

Past essays related to today’s analysis:

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Runway first generated headlines two years ago for its partnership with Lionsgate, promising to build a new, custom AI model that the studio can use in the editing and production process in exchange for access to Lionsgate’s content library. That partnership hit a wall, as reported by “The Wrap” last September: A model requires “as much data as possible for it to understand context and then to render the right frames, human musculature, physics, lighting and other elements of any given shot”. Lionsgate did not have enough and copyright concerns created a long list of other issues.

Instead of responding by rethinking and streamlining the production process with AI tools, Runway pivoted. Solaris is a screen interface that draws software as you use it. The examples in the Solaris announcement—retail (clothing), restaurant (building a salad), and science (an interactive demonstration of combustion)—are not traditional media.

This contrasts with the emergence of AI tools in pre-production, editing and VFX. If everyone actually wants a new layer rather than better tools, those strategies are aimed at the wrong problem—and the company building the layer is not in the film business at all.

In April 2025, I outlined Fable Studios founder Edward Saatchi’s vision for platforms like Runway and Showrunner in Hollywood. Runway’s tools could be used to “pre-visualize” an entire film. Production executives would watch this pre-visualization, and pre-production would become an interactive process. We are seeing studios fold AI tools into pre-production, editing and VFX.

Runway’s pivot suggests that the thing these true AI visionaries foresee in entertainment requires a new layer rather than better tools.

Past essays related to today’s analysis:

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The fun lens to look at these two announcements is through Netflix’s long-stated objective of 10% of U.S TV consumption (according to Nielsen’s The Gauge). YouTube surpassed the target over two-and-a-half years ago and has soared 40% past it since. Over that same period of time, Netflix has stayed flat and since struggled to reach it.

The yet-to-be-met goal tells two stories. There is a YouTube-centric story of its success in connected TV since Nielsen first started sharing the metric in November 2023. That is largely a story of YouTube’s scale and creator economy model reshaping the smart TV and broader TV ecosystem—and generating over $40 billion in advertising revenue and around $20 billion in subscription revenue (from YouTube Music, YouTube Premium, YouTube TV and NFL Sunday Ticket) annually.

There is also a Netflix-centric story about the broader marketplace which has evolved away from subscriber growth and user engagement, and towards advertising growth and ~$11 billion of net income on $45.2 billion in annual revenue. Both share a key detail: What separates these platforms is not how much premium content they make, but what remains of their businesses without it.

Past essays related to today’s analysis:

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For those who may not be familiar, an MOU is a framework that guides both parties—it is not a binding legal agreement. That is a crucial detail—the best deal that the most powerful rightsholders in entertainment could secure from a Chinese technology conglomerate is a concession that copyright does not apply to AI training and generation.

It also means that everyone has agreed to rules of conduct but not a contract. MPA Chairman and CEO Charles Rivkin labeled these rules “meaningful guardrails on Seedance and Seedream”, and John Rogovin, general counsel of ByteDance, referred to them as “an important framework for continued collaboration as the technology evolves, across a variety of products and platforms.”

As I highlighted back in April, a key problem of studio copyright infringement lawsuits against AI companies overseas is that “U.S. copyright law does not reach conduct that occurred entirely abroad.” Videos generated on servers outside the U.S. are simply not covered by U.S. copyright law—and the 52 infringing videos at issue in the Disney v. Minimax case were created by the studios’ lawyers and not by any U.S.-based creators. This deal confirms that reality—IP protection in the generative AI space is a negotiated set of rules of engagement between studios and popular Chinese AI platforms, but not a legal guarantee.

That problem points to the real question underlying this MOU: if the law could not force ByteDance’s hand, why did it sign?

Past essays related to today’s analysis:

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On July 22, Lavazza released a digital short directed by Francesca Scorsese which follows her father—famous director Martin Scorsese—through New York while he drinks espresso. It is one example of brands importing the operating skillset of a studio and running it inside a marketing budget.

The Hollywood Reporter’s recent cover story, ”The Pillsbury Doughboy Is Coming for Hollywood” details a wave of productions like it—a Prada short directed by Barry Jenkins, a scripted series from Albertsons and Procter & Gamble—and frames brands as “keeping an ailing industry afloat.” But it also presents brands as outsiders stepping into a market with declining opportunities for talent and building studios to create content with that same talent.

This complicates the argument made recently by activist hedge fund Anson Funds to Lionsgate management that third parties will license or even buy libraries of existing IP from studios like Lionsgate. I have previously argued that advertisers are the optimal licensing partners for this IP, especially in an era of generative AI: “Advertisers can license ‘five or six IPs’ from the major studios while figuring out the ‘big swings’ through many ‘little swings’ in the background.”

The story suggests, instead, that brands now prefer to build their own IP and implies some additional challenges for brands as third party customers for licensing.

It also suggests the demand for libraries of IP from brands is not as strong as my past essays argued. This is because brands who might license IP from Lionsgate and other studios are choosing to build new IP by funding original content instead. In April, I predicted brands would “build their own entertainment infrastructure” and shift dollars away from “the traditional advertising value chain altogether.”

Last month I flagged two risks in a world where brands license IP from studios for generative AI campaigns. First, advertisers will only license if IP can still be kept excludable—meaning the owner can prevent creators and advertisers who do not pay for access from using the IP—and be enforced outside the walls of the IP holder’s cloud ecosystem. For example, an advertiser licensing “Teenage Mutant Ninja Turtles” from Paramount Skydance will want Oracle to watermark every output so misuse of authorized content can be traced though not enforced.

It is worth noting watermarking would do nothing to stop a separate, unauthorized model trained on the same characters and hosted on other platforms. If exclusivity cannot be enforced, the thing a studio is actually selling—premium IP with the right to exclude everyone else—becomes unenforceable by default. That presents a bigger, more existential question of whether IP ownership still functions as a business model once any well-resourced actor can train a separate model on the same characters. That is a key reason why studios reacted so strongly to Seedance 2.0’s release in February.

Otherwise, brands will be forced to build their own IP. The precedent of Gulf+Western owning Paramount Pictures suggests they could buy a studio, too.

A second risk is that audiences must care about the IP enough to engage and pursue a direct relationship with authentic, high-quality representations of the IP from a brand. WME head of entertainment marketing Liz Walaszczyk told The Hollywood Reporter that brands now “have more of an opportunity now to be more targeted in terms of the audiences that they’re trying to reach”. Kraft-Heinz CMO Todd Kaplan added that the guiding “philosophy” is how to “create organic conversations that are really opt-in from consumers and things that people want to share with their friends.”

Kraft-Heinz is currently betting on Disney IP to revive sales of iconic brands like HEINZ, Philadelphia and Kraft Mac & Cheese. If third-party IP cannot accomplish these goals, there will be more reasons to build original IP than to license it.

A Marketplace Before Generative AI

Today, brands are opting to build. The question is when, if ever, license or buy enters into that calculus.

I argued the Kraft-Heinz deal reflects two different futures for how generative AI can enter the fold. If Kraft-Heinz “has generative AI and branding savvy” and Disney agrees to use cases of its IP similar to its failed deal with OpenAI's Sora, we will see these ads within the next year. If either falls through, it will reveal how risk-averse, and how far behind, these two giant companies are in the AI marketplace

This leaves an open question the Hollywood Reporter article does not answer: Are brands building because they do not want licensed IP, or because the licensing market is not yet liquid enough to serve them? The distinction matters. If it is the latter, Anson’s licensing thesis for Lionsgate is too early and has obstacles to manifest.

The signal to watch is whether a brand licenses a major franchise character for a generative AI advertising campaign within the next two quarters, especially with the holiday season approaching. If that deal does not happen, the answer is the first one: brands do not need licensed IP, regardless of how liquid the market becomes.

It may be simpler for a brand to buy a studio on the cheap, or build its own with the tools of a new medium.

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The letter posits that Lionsgate could “enjoy a premium as the owner of thousands of films, given the IP licensing that could come from that library.” Management has “struggled to define that to investors.”

Semafor appears to be the only external media party to read the letter—it is not sharing the full letter, only the core logic of the Anson Funds’ arguments. That said, this logic echoes something I argued back in June about Lionsgate’s equity investment in Runway, the video generative AI company:

“Lionsgate and Runway seem to be taking the traditional studio approach to AI. It is a studio that thinks short-form AI content and new IP with a hot AI platform counts as risk-taking. That contrasts with the Bollywood ecosystem where the entire production model is being reimagined and restructured.”

Anson’s logic is similar but narrower: Regardless of what may be happening in Bollywood or elsewhere, emerging models like Sora and Seedance present the traditional production model with a new calculus of build, license or buy.

Anson’s argument is that licensing is the best path ahead to unlocking shareholder value. The firm understands that there are limits to building in the new calculus of build, license or buy. But Anson does not appear to grasp the emerging “first principles” of the calculus of license or buy.

Who can Lionsgate sell to? Who can they license to? And how will it license it? There are limits to what a standalone production company can do in this marketplace—much less than a relative behemoth like Disney or NBCUniversal.

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Author’s Note #2: There were a few copy errors in the mailing which have since been fixed.]

In its FY Q3 earnings call, Disney sounded like a company that finally understands the “inherent contradiction within their pivot to streaming”. Back in March, I argued former Disney CEO Robert Iger’s legacy from an aggressive, multibillion dollar pivot into streaming is “a database at the heart of where human creativity once resided.” Direct-to-consumer software models live and die by their databases of consumer data.

Disney Experiences division is a DTC business driven by a database. Its Entertainment division was not—affiliates (broadcast and cable) and theatrical distribution are passive consumption models—until Disney’s pivot to streaming. After that, Disney Entertainment became a messy hybrid of two passive consumption, profitable businesses in secular decline and an interactive, increasingly profitable (12.9% in Q3, up from 6.6% in 2025) growth business in streaming.

For these reasons and more, I argued in March that new CEO Josh D’Amaro must:

“simplify the role of the database in Disney’s flywheel. The new reality is that creativity has become a commodity in Disney’s distribution model. Marginal value from creativity must be extracted elsewhere across the flywheel. It is operationally and technologically more complex and inefficient to pursue that model across multiple databases.”

Disney management addressed this new reality with three announcements:

1. Data unification

2. A move of consumer products from the Experiences to the Entertainment division, and

3. A content-sharing partnership with TikTok

Data Unification

On the call D’Amaro outlined the company’s path to data unification. He acknowledged that Disney’s multiple acquisitions under Iger had created “disparate data sets that sometimes don’t talk to each other.” To fix that, Disney is “unifying” its consumer data “across the entire company so that we can serve our fans better and then drive lifetime value.”

D’Amaro needs this data foundation for a more ambitious bet he shared back in March: turning Disney+ into a “super app” folding streaming together with theme-park tickets, cruise bookings, games and merchandise into one hub. Bloomberg reported in July that the concept remains an early internal idea, with no concrete build underway.

D'Amaro echoed a sales pitch former CEO Bob Chapek had made years earlier when he said: “There are very few companies in the world with the breadth and richness of data that Disney has across parks and streaming and studios and consumer products.” Chapek saw that overlap as the basis for Disney become a DTC company at its core and an opportunity for a “Disney Prime”-type service.

That all said, D’Amaro also acknowledged in an answer to another question that “There’s still work to be done on unifying the tech stacks between the legacy standalone services, as well as on integrating what have historically been disparate data sets.”

Effectively, he was conceding that Disney had done more work to impress investors than to build the platform that could deliver the promises it was making to those same investors. The super app is a preview of why data unification matters beyond customer service. It is the precondition for a product Disney has not built yet but envisions as table stakes to compete with Netflix and Amazon. Even if it is now headed in the right direction, it has a long way to go.

Consumer Products

Disney announced the day before its earnings call that “Disney Consumer Products will shift the majority of its businesses from Experience over to the Entertainment division, sitting within the Studios.” In its letter to shareholders, management said the move “shift will have strategic and operational benefits by bringing the monetization of our IP through consumer products closer to the studios that create that IP.” It added the move “will better reflect the returns our Entertainment segment is generating from the content it produces and make our Entertainment segment more comparable to peer reporting methodologies.”

A memo from Thomas Mazloum—chairman of Disney Experiences—and Alan Bergman—chairman of Disney Entertainment Studios—explained that the objective of the move is to create “cohesion” across the entire Disney ecosystem “from the very beginning” and extend the relevance of its franchises “for generations.”

Consumer products is a profitable business, generating $560 million in operating income on $1.1 billion in revenue in FY Q3. Nothing in Disney’s portfolio has the same 40% margins at the same scale of revenue as cable had. Combining consumer products into Entertainment boosts operating income by 30% from 11% to 14.3%.

It is also worth considering this move in light of the recent deal with Kraft-Heinz, which “unlocks opportunities for integrated marketing campaigns, digital content and brand-led marketing campaigns across Disney’s media platforms.” The implication is the move makes it easier for the content side to execute this part of the deal. The framing of “majority of its businesses” suggests that the division responsible for the Kraft-Heinz products related to the various Parks and Cruises will remain in Experiences and oversee that part of the deal.

It is reasonable to assume this will be a new model going forward.

Content Sharing with TikTok

Disney announced a pilot with TikTok to “bring an expansive collection of thoughtfully curated Disney-centric fan-created content from TikTok to the Disney+ app.” As part of that pilot, “TikTok will offer their creators access to assets related to hundreds of films and series from Disney’s vast library of enduring franchises and beloved IP.” When the pilot launches, “short-form videos from participating creators who opt-in to the program will live on both TikTok and in Verts on Disney+ and feature characters and stories from across Disney’s brands including Pixar, Marvel, Star Wars, FX and more.”

Disney has found an alternative solution to the sudden collapse of its planned Sora pilot alongside its $1 billion investment in OpenAI. This deal was unthinkable at the beginning of 2025, if not heresy to suggest it at Disney 20 years ago.

As D’Amaro explained on the call, the experiment has a clear DTC rationale. First, it helps with awareness and engagement for Disney+: “It’s important for us as The Disney Company to be out there with the fans, making sure that they’re seeing us, they’re engaging with us.” It also helps with retention: offering native TikTok content on Disney+ will create “a more complete experience on Disney+, and it’s a stickier app. People stay around for longer.”

But, “Work To Be Done”

We can see the pieces in place for the new models that are emerging in the post-cable media marketplace. In moving consumer products to Entertainment, Disney has positioned its IP for brands as both advertisers seeking to create content with its IP and licensors seeking to build merchandise with Disney IP. In partnering with TikTok, it is building creator-led entry points into the Disney flywheel.

These are promising opportunities. That said, the key takeaway from the call is that data unification is a necessary condition for these moves to truly succeed. Streaming’s margin gains came from data streaming already owned, and Disney has not shared the extent to which they came from unification with other divisions. The TikTok and consumer products announcements require exactly that kind of cross-division and cross-platform connection to succeed—which D’Amaro says is still incomplete. The TikTok deal will not work if Disney cannot connect a viewer’s TikTok engagement back to their Disney+ profile to know whether it is actually driving retention. Nor will it work if valuable data from that engagement is not actionable across Disney because there is still “work to be done”.

The consumer products move will mean little if the disconnects between databases interfere with the performance of brands’ ad and merchandise campaigns. The slower and/or more problematic data unification is within Disney, the less progress these deals will make for the company despite its obvious business logic and promise.

That suggests that even if the consumer products move makes it easier for Disney to pursue generative AI ad marketing deals with Kraft-Heinz and other advertisers that use its characters, D’Amaro is acknowledging there is still “work to be done” on “unifying the tech stacks” and “integrating disparate data sets”.

He may be intentionally understating the challenge here, given how much of the reorg's logic depends on investors believing the unification story on its face. Disney is well behind where it should be technologically. That was the case that Wells Fargo analyst Steven Cahall made last month when he suggested that Disney should exit the streaming video business. Even with a deal like the one it made with TikTok, Disney is not positioned to compete effectively with high-volume streaming platforms such as Netflix and YouTube. He also questioned whether Disney releases content frequently enough to control subscriber churn and support long-term margins.

Data unification could help to alleviate those problems and create new business problems. But D’Amaro’s explanation suggested there are operational, cultural and technological disconnects across Disney’s data silos. It may be too far behind the speed of the market’s evolution to truly solve this issue.

Cahall’s arguments suggest Disney has insufficient technological resources to compete. I have suggested it also lacks the technological resources to protect its IP and therefore needs a cloud company as a strategic investor.

The real risk D’Amaro revealed is that its data still does not offer a complete picture of which of its ambitious new initiatives will earn their keep.

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Implicitly, Unity is messaging that Netflix is changing the way it looks at its distribution architecture. The story Netflix has told about its gaming strategy, to date, is a business logic of “Engagement, revenue, profit drives [the] flywheel”. Recently, that story to investors has been both a careful retreat from mobile gaming and careful entry into the TV gaming space. The former suggested “Netflix is retreating from gaming exactly when gaming architecture becomes the model for AI-era media.” The latter has been a quiet success: According to data from AppMagic, a Sensor Tower Company, the Netflix Game Controller app has been downloaded over 22 million times since March 2026.

To date, Netflix has tightly managed developer access to its ecosystem. It began acquiring game studios back in 2021. It launched both first-party games using its own IP—like “Stranger Things”—and third-party games with the sales pitch “no ads, no fees, no in-app purchases”. In recent years, it opened up its ecosystem to popular games like Rockstar Games’ “GTA: San Andreas”—which delivered nearly 60 million downloads between December 2023 and December 2025, according to AppMagic.

The obvious message of Unity’s announcement is that Netflix will be trading its playbook of one-off curated deals for a platform-scale gatekeeper model, much like Xbox or Steam’s certification systems. By comparison, Sony’s Playstation Store has almost 10,000 titles in its digital store, Microsoft’s XBox Store has over 17,000 games in its store and Steam—an online store for PC games—has over 120,000 playable games.

If Netflix is indeed making this trade-off, it is messaging two changes to its business model. First, it is messaging a more dynamic gaming business model—effectively a mix of B2B (access to the Netflix ecosystem) and B2C. Second—and less obviously—it is seeing that consumers value interactive experiences more than the passive viewing experiences of Hollywood movies and TV series.

These are not small changes.

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So the decision facing IP holders in traditional media is build, license or buy. If the logic of that dilemma reads familiar, it is because Eisner’s successor Robert Iger and other legacy media executives faced it when confronted with the competitive threat from streaming in the 2010s. Disney first acquired a one-third stake in BAMTech in 2016 and then acquired a controlling stake in 2017—effectively a mix of licensing and building. Other media companies opted to license commoditized third-party software while Netflix and YouTube iterated on their own platforms.

I wrote on Monday that the emergence of generative AI is “rapidly upending traditional processes and business models for content production, distribution and the legal protections for intellectual property. For this reason, it is harder for anyone to identify when to license IP versus when to build.” In doing so, generative AI is disrupting both traditional licensing models and streaming models.

The open question from Eisner’s framing is where buying fits into this calculus. He argued that IP acquisition is “a means to an end” in both traditional entertainment and gaming:

“The key is after you have five or six IPs, you make a great game that nobody’s ever heard of. It’ll be a giant game. But it’s going to take a while.” From the build, license or buy perspective, Eisner is arguing that buy is a survival tactic and build is a strategy.

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At The Paley Center last week, former Disney CEO Michael Eisner framed this crossroads as a familiar pattern in Hollywood. Media companies “possess enormously valuable IP”, but also consistently misjudge how or whether to extend it into unfamiliar formats. His talk focused on Hollywood’s long, troubled history with entering the gaming industry: “The problem wasn’t creative, he argued — it was technological illiteracy: gaming ‘was so technologically driven in the beginning, which was not the strong suit of any of us.’”

This problem of technological illiteracy still persists between Hollywood and gaming. A gaming executive told me in 2023 that it is a generational problem: “They aren’t gamers” (something Eisner appears to have indirectly acknowledged).

Eisner did not discuss generative AI, but the new medium is as “technologically driven in the beginning” as gaming was in the 1980s. The emerging technology is rapidly upending traditional processes and business models for content production, distribution and the legal protections for intellectual property. For this reason, it is harder for anyone to identify when to license IP versus when to build.

He did discuss Warner Communications’ failure with Atari—it purchased the video console owner in 1976, and had success until it reacted to competitive pressures from home computers by oversaturing the market with video game titles. That contributed to the video game console market crashing in 1983. Eisner’s point was that because Warner management had no background in gaming, it made product decisions that did not reach sales expectations. Disney had a similar experience with gaming under Eisner’s successor Robert Iger with Disney Interactive Studios, which lost $200 million per year from 2008 to 2012 and had already begun licensing to third-party publishers like Electronic Arts by the time it shut the division down in 2016.

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Yesterday’s multi-year strategic alliance between Kraft Heinz Company and The Walt Disney Company—which “spans foodservice, media, events and more”—seems straightforward.

Kraft Heinz will be the exclusive provider of cream cheese, some condiments and macaroni and cheese at Disney’s North American parks and resorts, and on the Disney Cruise Line. It will be able to use Disney’s characters and stories across 10 of the food company’s brands, including Heinz, Philadelphia and Kraft Mac & Cheese.

As for the “more”, this deal also “unlocks opportunities for integrated marketing campaigns, digital content and brand-led marketing campaigns across Disney’s media platforms.” It is not core to the deal, but as phrased, it opens the door to experimentation in the marketing space.

These two elements of the deal mirror two recent themes.

First, the licensing of Disney’s characters and stories echoes the “INVERSION” strategy being touted by People, Inc. Chairman Barry Diller—a bet on products and services “birthed out” of its “enormous reservoir of content”. Diller aims to own the branded products instead of licensing, but the business logic is effectively the same: Brand equity from popular IP with existing fan bases translates into product demand.

Unlike People, Inc., Disney is able to find win-win scenarios with giant CPG companies like Heinz because of its extraordinary theme parks business model ($10 billion in operating income in 2025) and broader fan bases for its IP. By comparison, People, Inc. has much less leverage.

Second, the integrated marketing deal heads in the direction of where I believe generative AI advertising is headed.

In April, I wrote an essay about how Nielsen’s The Gauge is “broken” and how “the traditional media value chain—produce content, attract audiences, sell advertising against those audiences, measure with Nielsen—is collapsing at each node.”

I cited an essay from Secret Level founder Jason Zada. It argued that brands are now learning to develop original IP, put it in front of an audience, learn in real time and iterate, the same way a tech company ships and improves a product, rather than betting everything on one expensive, slow-moving campaign.

Kraft Heinz is partially doing that in this deal, but is renting Disney’s IP and audience to “learn in real time and iterate”. Zada adds, “The fear of the big swing gets a lot smaller when you can take fifty fast swings first, each one more informed than the last.”

I also argued in April that Netflix’s ad inventory is increasingly worth more than its streaming content. The same logic applies here. “Integrated marketing campaigns, digital content and brand-led marketing campaigns across Disney’s media platforms” enable Kraft Heinz to take many “fast swings” within Disney’s ecosystem and with Disney’s customers.

The upside for Disney is that it reaps the benefits from the licensing deal—We do not know the terms of the deal, particularly whether the licensing revenues are tiered based on success parameters. The downside really depends on the generative AI and branding savvy of Kraft Heinz.

I wrote in May that “All roads of the [conversion] funnel lead to a sale. The economics are obvious to all parties, production cost savings from generative AI are real and brands have every incentive to adopt.” So if Kraft Heinz has generative AI and branding savvy, we will see these ads within the next year. If it doesn’t, that will confirm this is a traditional licensing deal from risk-averse executives, and reveal just how far behind these two giant companies are in the AI marketplace.

On its surface, the deal seems quite traditional. But it will be worth keeping an eye on what the two companies do together around marketing.

Disney’s deal with Sora—which collapsed when OpenAI abruptly killed it for reasons unrelated to the deal—signaled its openness to third parties creating videos using its characters. It is opening a similar door for Kraft Heinz to do so. We are not far from AI-generated ads pairing Disney characters with Heinz ketchup.

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Co-CEO Greg Peters explained to investors on the earnings why that story has evolved:

“[W]hen I started about 20 years ago, we had one number to describe engagement, hours, just flat hours, no weighting, no adjustments and very similar to how we’ve evolved other metrics in the business. Since then, we’ve gone through about a dozen major iterations of our understanding that.

We get more and more sophisticated because we know, ultimately, it’s combined quality, variety and quantity of engagement that translates into satisfaction and value for members.”

Technology companies like Apple have ditched their vanity metrics when unit sales became disconnected from the actual profit engine, so this pattern is not unusual on its own. But subscription revenue is price times subscriber count—there is no abstraction layer between them the way there is for Apple's unit sales.

Peters’ answer is a wordy concession that Netflix has lost the simplicity of its subscriber and advertising engagement story. In the past, growth was told through subscriber growth. Engagement was told through various reports and Top 10 lists. Its decisions to stop releasing subscriber numbers and to reduce the releases of “What We Watched” to once per year concede that it cannot tell either of these stories anymore.

It does not have an alternative story for investors yet—it relies on a financial story about profit—and they have reacted logically: Its stock price is down 8.4% since the earnings call.

Netflix has long set the market standard for the storytelling of growth in streaming. It is worth asking in the flux that Peters describes: What if they not only do not have a story now, but have lost the story of the media and entertainment marketplace altogether?

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