Hello from Munich, Germany where I am excited to be back at the DLD Conference.
The title of this essay is a nod to “Baseball's Sad Lexicon” by Franklin Pierce Adams, a playful poem from 1910 about the shared chemistry between three Chicago Cubs infielders. This title updates it to Disney CEO Robert Iger, former Disney executives and Candle Media co-founders Kevin Mayer and Tom Staggs, and former WarnerMedia CEO Jason Kilar.
This analogy isn’t exact: Kilar is the lone non-Disney veteran in that “infield.” That said, all four executives have recently been publicly discussing whether a media business must still rely on its content only, or whether in the streaming era it must do more to solve for distribution to the consumer.
Key Takeaway
Disney’s value proposition of its library and IP is “a big niche, but it’s a niche nonetheless.” Maybe its best path forward is to embrace that reality and move on from its conglomerate past and present.
Total words: 1,300
Total time reading: 5 minutes
From Iger...
A must-listen interview with Disney CEO Robert Iger from last Fall emerged on Sunday on Andreessen Horowitz’s a16z podcast. About 18 minutes in, host Chris Dixon (partner of a16z) asks Iger whether there is an “ebb and flow in the media business between the relative strength of content and distribution". As Internet drove up the supply of distribution, "the leverage of the distribution side would decrease relative to content?”
Iger responds: "There’s an ebb and flow in terms of the debate, but there really shouldn’t be a debate that the content should always win out.”
He added the example of “Snow White”: “That was only movie theater distributed in 1937, it went through an era of tv in the 50s and in the 60s and then it ends up in a home video form. That’s kind of telling. It doesn't matter what the technology is that’s going to get that product to people. It's about the product itself.”
But, as I argued recently in “The Linklater Problem”: “Algorithms now surface and curate the stories of the "universal" characters” who inspired [indie director Richard] Linklater. The characters have agency and no longer need the screenplay, the director, or the production to find an audience.” In other words, the distribution algorithm now competes with the content.
To Kilar...
Back in March 2022, Kilar told Peter Kafka on the Recode podcast:
“the biggest opportunity in storytelling is to pursue a strategy that we have and let me explain what I mean by that. Which is, if you’re going to invest a lot of upfront capital in creating beloved characters in worlds, I think it’s only natural if you have the capabilities and if you have the skillset in terms of leadership and talent to be able to lean into telling those stories, both in a linear fashion with narrative storytelling but also an interactive fashion with gaming.”
It is a point mirroring Disney’s flywheel business logic, offering fans of Snow White “everything from a one-size-fits-all theatrical experience to consumer products, television and a magical visit to Disneyland” (as he wrote in a recent WSJ opinion essay). But it is also a point about distribution in 2023: streaming is not another distribution channel. In order for content to be found and to survive, the stories need to be told across media channels. He added in a Twitter conversation with me last March:
“Beloved characters and worlds matter. So too does community. I believe those that have the ability to seamlessly deliver both (which requires storytelling chops, community-building/nurturing chops and tech/product/design chops) have a big opportunity in digital collectibles.”
Kilar is implying that in 2023 a movie like Snow White needs more than distribution on a streaming platform. Its distribution requires engagement with community and “tech/product/design chops”. There’s also an element of commerce required, too.
...to Mayer and Staggs
Mayer and Staggs have an investment hypothesis of content, community, and commerce: “We feel that high-quality content with high-quality creators at the right brands create great connections in social media with large audiences.”
They both spoke recently at Variety’s Entertainment Summit at CES. Mayer told the story of René Rechtman, who founded Moonbug Entertainment”:
“[he] worked for us at Disney for a long time. He came up with an idea while he was there and said, ‘There are audiences that just aren’t coming to the Disney Channel anymore, they’re going to YouTube — and very specifically YouTube. And a lot of parents are parking their kids in front of an iPad and putting on YouTube and they’re finding fabulous content. And this content is wholly original.”
He added the story of CocoMelon, which had 60MM subscribers when Candle Media bought it two years ago:
“because of the techniques that we have at Moonbug to grow viewership and to feed the right content and understand what audiences want, when they want it, and how to populate the channel really well, it’s getting in front of 150 million subscribers. ‘CoComelon’ is the largest in the world YouTube channel, larger than Mr. Beast, which is like 110 million. Larger than anything else.”
I think this Cocomelon story confirms and also contradicts Iger’s Snow White example. It confirms that the product matters, that CocoMelon is content that is ultimately winning out, and outcompeting Disney animation across both Netflix and YouTube.
But Mayer’s point is that but for “the techniques that we have at Moonbug”, it would not have grown to 150MM subscribers. Meaning, that distribution on YouTube (and Netflix) requires more than just plugging content into the distribution channel and the best content wins out. The algorithm is as important, perhaps more important, to reaching audiences than the content itself.
The Best Business Model for Disney?
Back in November, I shared a conversation I had had with Andy Weissman of Union Square Ventures about Disney’s future. He believed that Disney’s initiatives to build a flywheel around Disney Plus — something Disney was describing internally as “Disney Prime” — would not delight a Disney consumer in ways that aren’t obviously delightful.
He asked, what are the paths for media companies to provide the best creation of value for shareholders? He proposed five paths:
An integrated ecosystem of delight à la Amazon or Apple (“maybe FB/Meta”);
A service you check 20 times a day, every day, for delight (e.g., YouTube, TikTok, Spotify);
A branded content service that serves primarily in one medium;
A conglomerate built via M&A and is a non-related collection of great assets; or,
A niche media community that offers e-commerce, experiences, and more so that “people can now almost always find something they love”.
His implicit point was that Disney embodies #4. So the logical question is if the best future for Disney is not as a conglomerate, which of the four alternative models above may be a solution?
The one common theme to the perspectives of Kilar, Mayer and Staggs is that they entrepreneurially embrace the intersection of content, data and distribution Iger’s master stroke with the acquisition of BAMTech as a solution was that it had the optics of an entrepreneurial reinvention of Disney.
But the last two years of corporate dysfunction at Disney — including a CFO undermining a board-approved CEO and the BAMTech and Hulu teams not meshing post-Fox acquisition— suggest that the entrepreneurial reinvention was not a reality. A conglomerate like Disney generally may not be able entrepreneurially reinvent itself in order to continue to delight users and therefore drive shareholder value, and especially if it rejects the premise of data as a solution to creative questions.
I argued in my predictions for 2023 that Disney’s value proposition of its library and IP is “a big niche, but it’s a niche nonetheless.” Maybe its best path forward is to embrace that reality and move on from its conglomerate past and present.