PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business. Through in-depth analysis from a network of senior media and tech leaders, Andrew Rosen cuts through what's happening, highlights what it means and suggests where you should go next.
In Q4 2022, PARQOR will be focusing on four trends: this essay touches on all four.
A four-year-old clip of YouTube and Netflix star Bo Burnham star re-surfaced and went viral this week. It’s from the promotional tour of his 2018 movie Eighth Grade, a movie about a teenage girl coming-of-age in the social media era.
It’s a short, two-minute clip where Burnham describes social media as a business that “colonizes” human attention, because human attention is the logical successor to land, which used to be the best model. And therefore, social media companies with public listings can only grow by capturing as much human attention as possible: “Every single free moment you have is a moment you could be looking at your phone, and they could be gathering information to target ads at you.”
The clip is an extreme version of a point I argued in “An Elegy to "Premium" Content Defined By Production Budgets” and also last week, and which a recent presentation at the IAB Brand Disruption Summit 2022 by Chris Bruderle, IAB’s Vice President of Research & Insights, offered data to support: “First, consumers are now spending more time with faster, cheaper and sometimes better creator content than more expensive professionally-produced content. And, second, advertisers are quickly shifting budgets to user-created content.”
The implication of that research is quality matters less and less to both consumers and advertisers. As this trend continues, the less valuable content will be outside of ecosystems and platforms that know how to capture and monetize attention.
Key Takeaway
YouTube creator and Hollywood director Bo Burnham's dystopian vision of attention-driven media growth models is here, but it's also evolving into much more than he had imagined it to be.
Total words: 1,600
Total time reading: 6 minutes
Social media users and the broader media have embraced Burnham’s prescient prediction as a critique of Elon Musk’s plans for Twitter. But in terms of timing, it also ends up serving as a funhouse mirror on recent quarterly earnings calls. In one way, it confirms Wall Street’s bearish perspective on legacy media: The best business model for growth is delivering attention, platforms like YouTube and TikTok are best positioned to deliver that, and legacy media streamers won’t be.
In another way, it makes Wall Street’s 2022 sell-offs of platforms like Google (-41%) or Meta (-73%) or even Netflix (-55%), seem like head-scratchers. Because those platforms benefit from this trend, the present and future of media is attention, and these platforms are winning at the expense of legacy media.
Attention=growth, but what drives growth?
Burnham’s point is that attention = growth, and therefore capturing more attention is the best growth model. So the story from platforms “should” be a zero-sum game: they’re capturing attention as legacy media streaming efforts fail to scale. YouTube and TikTok (which is private) have told that story through growth in total users and hours consumed. Netflix, notably, has only been able to tell that story through international subscriber growth and low churn in the U.S. and Canada.
Legacy media streamers have tried to tell that story through subscriber growth, but Wall Street seems savvy to the story that subscriber growth metrics are ultimately net of churn, and companies like Antenna provide insight into churn metrics for those streaming apps.
Two insights from Eugene Wei - former Head of Video at Oculus and who was also previously an executive at Hulu - from his terrific, must-listen interview with Stratechery’s Ben Thompson that sums up another dynamic at play: legacy media executives no longer understand their consumers.
I’m including both points, even though lengthy, because they flesh this point out so well. First, he thinks that technology has evolved well past legacy media executives’ understanding of their audiences:
It’s funny, you remember how Netflix used to say that our number one competitor is Fortnite, and then it later said it was sleep, and all these things. I think the general form of the argument holds, which is that one of the things that the Internet has done, and I think the smartphone is a huge part of this, is it has collapsed the barriers between different mediums of content, and made them all accessible to you at all times. And I always say that when I grew up, all these different mediums were, to me, spatially segregated. Meaning that I listened to the radio in the car because the cassette player or the CD player was there. I played video games in my bedroom because my computer was there. I watched TV in the family room because that’s where the TV and the VCR were. And I saw movies in theaters because that’s where we went to see movies.
I think if you grew up in those industries and you were running those businesses, you could easily become very complacent about competition from other mediums. I’ve seen this when I’ve gone and done talks at various entertainment companies, or the sports leagues, and everything. You’ll bring up something like a video game like Fortnite, or you bring up something like Twitch, and they’re like, “Well, oh, that’s different, that’s not the space we’re in. We don’t do social features and we don’t worry about it.”
The problem is from the consumer standpoint, you now, and this is kind of what you’ve talked about in the past with the newspaper forcing a bundle of news on you. Like with the newspaper, once the internet came along, if you’re like, “If all you care about is sports and the funny pages”, now you could consume that all the time.
With entertainment, let’s say you’re like, “Hey, I only like entertainment where I can play along with my friends. And Fortnite is the best option. I can’t do that on Netflix or HBO Max”. Those companies will argue, “Well, that’s not the business we’re in”. But that’s too bad, that’s just the way the modern world is.
Second, he thinks legacy media executives have what he calls “hindsight blindness”:
“People say hindsight is 20/20 but I think if you look at traditional media companies, sports leagues, all of these, they tend to be run by older executives who just don’t live and breathe younger mediums. They don’t feel the threat of the competition in the way that if you’re a kid and you go to high school today, and all your friends are on TikTok and you’re talking about the latest meme.”
Both points highlight an ongoing paradigm shift reflects Bo Burnham's point about attention: Winning media business models will be those that best monetize user attention in multiple ways during those rare, perhaps fleeting, instances when that attention captured.
So what exactly is Wall Street’s bet here?
Wall Street seems to understand that capturing consumer attention and time are now the high stakes, win-or-die game for media businesses. They’re clearly not buying the sales pitch from Paramount CEO Bob Bakish about streaming growth (down -20% since the earnings call), nor are they buying the sales pitch of quality content mixed with a better business model from Warner Bros. Discovery management (down -15% since yesterday’s call). They seem to understand that Bakish and WBD CEO David Zaslav are not executives who “live and breathe younger mediums”.
But they’re also not buying Google, a younger medium and one clear beneficiary of the battle for attention, either: The stock has dropped 18% since its earnings call on October 25th. Nor are they buying Spotify - an audio platform built for capturing listener attention - which is down -14% since its October 25th earnings call.
So, the clearest signal is that Wall Street doesn’t see legacy media or Netflix or any public company that is a media platform capturing enough attention to grow anytime soon. That seems reasonable, though a bit myopic in the case of Netflix (which I think is well-positioned to be an arms buyer for the long term) and Spotify (which I think is making smart creator economy bets).
The weirdest signal is that they don’t seem to pricing in a zero-sum shift to YouTube, which is happening according Nielsen's most recent The Gauge (YouTube had the most TV consumption among streaming services). Perhaps that’s because there was a softening in revenue this past quarter that diverged from search revenues, implying some impact from Apple’s Anti-Tracking Transparency initiatives (as I wrote about last week). Or, it may be that the macroeconomic and recessionary trends seem primed to impact Google.
But YouTube’s initiative to grow Shorts consumption is gathering momentum and it seems positioned to be a better source of monetization for creators than TikTok (YouTube has shared $50B with creators over the past three years, whereas TikTok made $4B in 2021, alone).
An Exception
One notable exception is gaming company Electronic Arts which has bucked the Q3 2022 earnings trend and whose stock price is basically flat since last week's earnings call. On the call, management promised investors “a new creative platform for our Sims community giving them more collaborative ways to play, create, connect, and share stories with their friends.”
That strategy of "play, create, connect, and share stories" has been the one they've been pushing to investors, one that captures a "real evolution" in how Gen Z and Gen Alpha consume media, as EA CEO Andrew Wilson told investors at the Goldman Sachs Communacopia Conference in September.
This suggests that - if we’re going off of stock buying and selling in this chaotic market moment as an imperfect proxy - EA’s stock movement may reflect Wall Street savvy as to where growth models lie in media. And those models seem to be more multivariable and more social than users sitting passively watching series or movies in front of their TVs, tablets or smartphones.
That also implies that YouTube-owner Google should be valued more highly by Wall Street: YouTube's and TikTok's creator economy models enable fans to pay and chat with creators, something analogous to EA’s “play, create, watch, and social”) That model may not be as dystopian as Bo Burnham had imagined it to be.