Goodbye Pay Windows, Hello Experiences & AI Platforms?
Why Disney, Lionsgate, and others are pivoting to experiences and AI partnerships as traditional licensing collapses
The Medium identifies essential signals on how technology is shaping the business of culture, and how the marketplace is evolving in response.
Owners of popular brands and intellectual property (IP) face a harsh new reality: Existentially valuable IP will struggle to survive either inside or outside the walled gardens of large media companies or traditional IP holders. The convergence of AI-generated content, streaming platform dynamics, and changing consumer expectations has fundamentally altered the perceived value of even the most established franchises.
I have offered two versions of this dynamic in past essays as “The Doom Loop of the Mogul” and “The Big IP Doom Loop”. Last week, I argued that because both the creative and distribution parts of the content supply funnel are “flattening”—neither limited to a handful of well-resourced studios or distribution monopolies—they now require the operational and technological machinery to compete with an influx of new IP which audiences may perceive as equally compelling.
This IP emerges, grows and loses value in shorter lifecycles.
Meanwhile, IP holders—especially studios—increasingly need cash as the profitable cable business disappears with cord-cutting. According to nScreen Media, U.S. pay-TV subscriptions have plummeted from 101 million to 49.6 million in eleven years, now reaching only 37.6% of households.
One obvious solution would be to license the IP to third parties. That is the long-standing model of the entertainment business: In the past, movies and TV shows found pay windows that created lucrative licensing revenues that were effectively “free money” (e.g., millions of cable households paid to access content they did not watch). However, in the streaming era two dynamics have emerged to mute demand for licensing:
On the supply side, the strategic and investment calculus of the streaming era weights keeping IP behind “walled gardens”;
On the demand side, dominant platforms like Netflix and Amazon see selective marginal value in licensing TV shows and movies where third parties see extraordinary, if not existential, value.
Even if we remove the supply side constraints, the critical question remains: If emerging licensing models seem too complex to be viable, where can studios find licensing cash flow in the age of AI when traditional channels are disappearing?
Key Takeaway: As cash flow from traditional pay windows collapses, large media companies are experimenting with experiences and AI partnerships, which require significant compromises and scale advantages that most IP holders cannot replicate.
The Problem With Traditional Licensing
Last week, former WarnerMedia CEO Jason Kilar argued in a short essay on X/Twitter that there are two strategic consequences to the traditional licensing model from these market dynamics.