Both my recent essays on The Medium and my Medium Shift columns on The Information have predicted at least four key market moments between now and 2034:
2025: The Ellison family takes control of Paramount and NBA broadcasts launch on Peacock, Amazon and ESPN;
2026: Showrunner founder Edward Saatchi predicts one Hollywood studio will take the plunge on a generative artificial intelligence (AI) platform and “massively profit”;
2029: The NFL may opt out of its existing distribution deal; and,
2034: The first Superman comic enters the public domain, and the official expiration date of the NFL deal.
It is an incomplete back-of-the-napkin sketch of the future that could be read as optimistic: Hollywood studios will embrace and find a licensing model in AI.
It could also be read as cynical: Generative AI could disrupt Hollywood studios in two years or less, the NFL will likely opt out of its broadcast and streaming distribution deal and whoever owns the Superman intellectual property (IP) in 2034 will see its competition grow exponentially.
If one subscribes to “The Doom Loop of the Mogul” and “The Big IP Doom Loop”, two separate predictions I made for the future of media conglomerates and studios, all four moments point to the decentralization of the media conglomerate:
2025: Paramount is in the hands of an unsentimental tech executive (Larry Ellison);
2026: A Hollywood studio turns to third-party generative AI for badly needed licensing revenues;
2029: One or more of the NFL’s distribution partners will lose access to the most viewed sports league in the U.S.; and,
2034: Superman entering the public domain will kick off a wave of paradigm shifts (e.g., Batman enters the public domain in 2035, Wonder Woman in 2037).
All read like external forces that will drive inevitable change. The one to watch may be the Ellison family. The other one to watch but not listed is Apple.
Key Takeaway
Apple and/or the Ellisons can drive the inevitable decentralization of media conglomerates because they are in position to use technology to create free marketplaces to replace "walled gardens" in Hollywood.
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Total time reading: 5 minutes
Doom Loops
In the Doom Loop of the Mogul:
Legacy media management is unable to deliver shareholder value in streaming within the constraints of their strategic, financial and/or management structures; and
Therefore they engage in self-dealing to keep costs low, and
Therefore writing and acting talent protest with strikes, and with less content produced for their streaming services…
Legacy media management is unable to deliver shareholder value in streaming within the constraints of their strategic, financial and/or management structures… [repeat cycle]
On Monday I wrote that because strikes are now over and content production is on the upswing, the self-dealing reflects how “there is no real [free] marketplace in Hollywood right now” for buying and selling content.
“The Big IP Doom Loop” highlights the negative impact of this self-dealing on the IP behind the “walled gardens”:
The media conglomerate bets big on content budgets and promises fans will be hyper-served across streaming and theatrical,
The shows and movies perform poorly at the box office and/or on the streaming service,
Fans of the IP are left unhappy, less passionate fans lose interest,
Fundamental questions are raised about the long-term value of the “big IP”,
The company cuts back on film and TV output around the “big IP”, but prioritizes “big IP” over product development.
[Repeat Step #2]
In both instances, the “walled garden” model of the media conglomerate model drives outcomes that kill the value of its IP and kill the value of its streaming services.
Blame Apple
Last week I wrote about “portfolio reconstruction”, a proposed solution to these problems from Anand Shah, who is the COO of the production company EffinFunny.
Shah also looks at Apple as another solution. He believes Apple is part of the problems for what I described as its “protective subsidy" for Hollywood. Meaning, Apple has delivered an influx of money into Hollywood that helps to insulate a content production business increasingly endangered by technological change.
But, because that money came in at the top of the market of “Peak TV”—a 20-year period starting in 1999 when both the supply of and demand for television shows were at their peak—their generous spending ended up having two negative effects.
First, it has paid a premium for content that audiences do not value or consume at scale: Apple TV+ was just 0.26% of U.S. viewing on TVs in July, according to Nielsen’s The Gauge.
Second, it has paid a premium without an existential need to recoup that spend. As Apple CEO Tim Cook told investors back in January 2022, "We don’t make purely financial decisions about the content. We try to find great content that has a reason for being.”
It is the economics of “Peak TV” without free markets.
Apple’s Opportunity
For this reason, Shah puts the onus on Apple to tear down its TV+ walled garden and become a marketplace like Amazon Web Services (AWS). AWS customers pay for access to storage space and computing capabilities in the cloud. AWS customers use what they need, and their costs are scaled automatically and accordingly on a “pay-as-you-go” model.
Apple would create a product that curates “prestige” third-party content across studios and opens it to over two billion customers who can pay for what they want to watch. In essence, it is a PVOD model but driven by the per-month usage economics of the cloud.
This would create three opportunities that currently do not exist:
Suppliers would have a more direct route to demand from over two billion Apple customers worldwide
Customers would have more power over the “bundle”, and
Apple would simply collect transaction fees.
By opening Apple TV+ supply to third-party studios—so that Disney or Paramount could buy content on the free market to be distributed to Apple's two-billion-plus devices—Apple could create new distribution inventory accessing almost 25% of the world's population. Studios will be able to focus on buying and selling productions.
In doing so, Apple could single-handedly stop both “Doom Loops”. An open marketplace would end self-dealing and the "walled garden" market dynamics that are killing audience demand for “prestige content”.
Watch The Ellisons
When the Ellison family buys Paramount, it will be the only media company with a streaming service with both the technological talent and the stomach to make such a pivot.
The Ellisons may go down this route with Paramount+ and Oracle (a cloud business). The broad brushstrokes of their public statements map to this concept. The Wall Street Journal reported that with the backing of his father, Oracle co-founder Larry Ellison, Skydance CEO David Ellison “has laid out a plan to grow Paramount by investing in technology, moving aspects of the business to the cloud and putting more resources behind its studio.”
Also, Jeff Shell—the presumptive soon-to-be President of Paramount—told investors in a presentation back in April that prestige content is still valuable, too:
“Our belief is that you can’t be a ‘B+’ anymore. You have to be an ‘A’ … I think when you create that culture of fostering creativity and setting a high bar, our hope is that the most talented people in the world will want to call Paramount home.”
The implication is Paramount+ could follow the path laid out for Apple TV+, above. The challenge, of course, is that it does not have 2 billion customers worldwide and Oracle’s customers are all businesses. Or, Paramount's new management will decentralize to position itself for the next decade. Both now seem possible.
Revisiting The Future
The Ellisons taking over Paramount could be the catalytic event for the next decade. I could change the calculus of a movie studio to embrace Showrunner or the NFL to change its decision to opt out of its streaming distribution deals (less likely). Whether either will happen will depend on whether the Ellisons still believe in the media conglomerate model.
Ultimately, the moral and marketplace arguments place the burden on Apple. Its ill-timed bet on streaming has done damage to Hollywood's model and the scale of devices offers the broadest and most viable base for a free market solution.