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[Author's Note: This essay is a little longer than usual because my drafts of Monday's essay were shorter attempts at the argument below, and all suggested the need for a longer essay.]
I wrote in February's "This Magic (& Weird) Market Moment" that “the ‘gatekeepers’ in traditional media could never be ‘gatekeepers’ in digital media because in retail-first, consumer-first models, some elements of their traditional media bundle will always be greater than the sum of all parts.” Part of gatekeeping is media conglomerates aggregating valuable intellectual property—think Disney buying Marvel and Star Wars and Paramount owning "Mission Impossible"—and leveraging economies of scale to monetize that IP across multiple distribution channels (linear, theatrical, streaming) and business models (merchandise, theme parks).
An essay by journalist Joe George on intellectual property like Winnie-the-Pooh entering the public domain sparked my realization that we have crossed the rubicon away from the media conglomerate's gatekeeping model. There is value to consumers in delivering highly produced versions of popular IP exchange for their hard-earned cash:
“In short, Mickey Mouse, Winnie-the-Pooh, Superman, and others do not belong to Disney or Warner Brothers. The people who created those stories have long since died (and, in many cases, the key creators were cheated by others who claimed sole credit, as in the case of Walt Disney and Ub Iwerks). The characters only matter now because we decide to keep them in our imagination and we continue to tell and retell their stories.
Disney and its fellow corporations have fought to keep their mental colonies intact and limit our imaginations, reducing us to consumers who have to purchase the tools of our identity formation. But public domain returns these characters and these stories back to the people, back where they belong.”
George’s argument reads biased towards a populist and politically progressive perspective, both in structure and spirit (e.g., “mental colonies”), in part because it was written for The Progressive Magazine (NOTE: I found the essay through a Google search for the movie “Winnie-the-Pooh: Blood and Honey”). Politics aside, George rephrases my point above: In retail-first, consumer-first models, consumers no longer need media companies to shape and dictate the storytelling of popular IP.
That is an alternate version of a point I made in “Investors & The Unsentimental Media Consumer”: “Consumers seem increasingly more sentimental for the intellectual property of media companies more than they are the formats.” It is also an alternate version of a point I made in "Fare Thee Well, Media Conglomerate": "If the legacy cable media conglomerate cannot figure out how to allocate resources to delight consumers across its own ecosystem, and therefore create shareholder value, why should any of their individual subsidiaries/pieces of the business exist within or without the conglomerate?"
The emerging story is that the media conglomerate model of the 20th century is no longer capable of generating the same value for shareholders and consumers in the 21st century. So, arguably now the question facing media conglomerates is whether to opt for business models that return characters and stories “back to the people”, instead. The best answers still lie in blockchain models, despite the past few years of ugly precedent.
Key Takeaway
The economic rationale for media conglomerates controlling enormous libraries of IP under the protection of copyright law is beginning to weaken. But, currently the most viable alternatives seem to be a range of models that fall somewhere in between Bored Ape Yacht Club's early days and memecoins.
Total words: 2,000
Total time reading: 8 minutes
“Back to the People” Models
There are four broad buckets of “back to the people” models being funded by investors private and public:
Gaming (e.g., licensed third-party character “skins” in online games like Fortnite and Roblox)
Blockchain (e.g., non-fungible tokens (NFTs), memecoins)
Generative AI tools (e.g, learning language models that learn from data and produce content autonomously); and,
Creator economy (e.g., media companies partnering with influencers for promotion)
This list partially mirrors a list that former WarnerMedia CEO Jason Kilar tweeted to me two years ago:
“Andrew, I believe there are 4 powerful growth vectors - in terms of audience, revenues, and cash flow - for the best positioned modern storytelling companies: streaming (but only for those that can achieve scale…many won’t), FAST channels, gaming and digital collectibles.”
As I wrote in “Investors & The Unsentimental Media Consumer”, Kilar has long argued that a business that focused on streaming, alone, misses what consumers were willing to pay for. But, as I argued in "YouTube, FASTs Share Suboptimal Models for Connected TV Growth", I am now less sold that FASTs and subscription streaming services belong in this list. The FAST model may be proving that “growing demand for the video advertising—a vestige of the broadcast and linear TV business —does not reflect how the format is valued by either the supply side or the demand side.
Also, as I argued recently in “A Pivotal Two Weeks for Media's Gerontocracy”:
“Streaming is not trending to replace the lost “free money” revenues of the linear model (down 7.4% in 2023), the DVD rental model (down 55% in 2023) and the DVD sales model (down 16% in 2023). The more streamers are “working more for less” growth—research firm Antenna reported there were 17 million fewer net additions in 2023 than in 2022— the less streaming feels like an alternative to theatrical.”
So, to reconcile the two-year divide across both lists, the best areas to focus on understanding where the business models of returning characters and stories “back to the people” are gaming and blockchain. (NOTE: My next Medium Shift column for The Information will cover generative AI tools and Disney’s “Steamboat Willie” Mickey Mouse and Minnie Mouse in the public domain).
A Quick Aside on Copyright Law
It is worth considering what returning characters and stories “back to the people” may mean in practice. U.S. copyright law protects published original works by giving the copyright holder the exclusive legal right to reproduce, publish, sell, or distribute the matter and form of their works. Original works in the public domain are not limited by exclusive intellectual property rights—anyone can use those works without permission from the author. Those rights may have expired, been forfeited, expressly waived, or may be inapplicable.
But, the concept of returning characters and stories “back to the people” does not underlie copyright law. With this phrasing, Joe George was putting a distortive mirror on the history of media conglomerates hoovering valuable IP into content libraries, protecting them with legal teams and funding from large market capitalizations, and then leveraging channels of mass distribution to monetize them. Generally, for most works created after 1978, protection lasts for the life of the author plus 70 years. For anonymous works, pseudonymous works, or works made for hire, the copyright term is 95 years from the year of first publication or 120 years from creation, whichever comes first.
It generally has been a great business model, to date, and for Disney in particular: LucasFilm has generated nearly $12 billion in value to the company, and Marvel has generated some $13.2 billion in value to Disney, per a presentation management posted during its recent proxy fight against activist investors like Trian Advisors’ Nelson Peltz. Both Marvel and LucasFilm were acquired for $4 billion apiece in 2009 and 2012, respectively.
That has not been a negative to Disney shareholders over that time. But, now, given Disney’s obvious struggles with streaming and gaming, the returns of this IP to both Disney shareholders and consumers are diminishing. Therefore, the rationale for a conglomerate controlling all that IP under the protection of copyright law is beginning to weaken.
Blockchain: Gaming & NFTs
Lately, I have been reading Chris Dixon's “Read Write Own”. Dixon is a general partner at the venture capital firm Andreessen Horowitz focusing on web3. His discussion of tokens helps to simplify the case for why gaming and NFTs may be solutions. In gaming, billions of dollars of virtual goods are sold per year in games like Epic Games’ “Fortnite” and Riot Games’ “League of Legends”. That is the business rationale driving Disney’s recent partnership and $1.5 billion equity stake in Epic Games.
The agreement will create a “new persistent universe” powered by Unreal Engine and interoperating with Fortnite where “players, gamers and fans will be able to create their own stories and experiences, express their fandom in a distinctly Disney way, and share content with each other in ways that they love.”. But, as Dixon points out:
These kinds of digital goods aren't bought; they're borrowed. Users are renters. The company behind a game can remove or change the terms at any time. Users can't transfer the goods outside the game or resell them or do any of the things people associate with ownership. The real owner— the platform —calls the shots. If the value of an item goes up, the user doesn't reap the reward. Almost invariably, games eventually fade away or shut down, and along with them their virtual goods blink out of existence.
He argues that tokens—”data structures that can track quantities, permissions, and other metadata for users on a blockchain”—enable ownership, and ownership means controls that consumers do not otherwise have on the Internet. For example, to solve the problem of users as renters, Dixon highlights the example of NFTs created by Nike that represent digital sneakers that owners can wear and display in Fortnite.
Memecoin Media Businesses
Two years ago, I wrote about Bored Ape Yacht Club’s (BAYC) experiment with NFTs in “Where Web3 & Legacy Media Overlap”. Its model focused on community-owned intellectual property, giving NFT-holders to create their own media and merchandising. I argued there was a case to be made that it offered an outline for a compelling alternative to the legacy media conglomerate: only 10,000 BAYC avatars were available then, but they had generated $1B in total sales within a year since it had been founded.
Fast forward to today, BAYC prices are currently down 90% from their peak. But, TCG Partner Jarrod Dicker argues that memecoin markets now represent a new model of a media business. Dicker defines them as “a bunch of people coordinating around timely pop culture topics (existing or newly created), building real markets around them, and then socializing the fuck out of them.” He then adds:
“but unlike traditional media where you create content to drive attention and then try to monetize it, memeland does the opposite-- the signal of a topic worth discussing is dictated through ‘dollars’ and once big enough, holders of these coins create media around them to drive more awareness. this, in return, (hopefully) drives the value of their holdings up. rinse and repeat.”
Dicker concludes by asking that if the role of media is to entertain and inform, "when people are showing you where they are spending their time, attention and money, do you ignore it? or do you lean in?"
Beyond Walled Gardens
Conceptually, Dicker seems to be headed down a path where a media conglomerate may be best off pursuing a range of models that fall somewhere in between BAYC’s early days and memecoins. One might argue this is a negative trend because memecoins are speculative. But, as the book “The Curse of the Mogul” highlighted, the media business has long failed to deliver profitable business models with billions of dollars spent on speculative bets on movies, magazines, TV shows, and games.
In other words, by taking IP from within the walls of media conglomerates and putting it in the hands of creators creating media businesses to drive awareness for memecoins, the possibilities for that IP seem endless. That may undermine the rationale for a media conglomerate, but that rationale is already being undermined by conglomerates’ growing list of failures to adapt to a retail-first, consumer-first world.
I concluded in “Disney, Epic Games, "Steamboat Willie" and Creators”: “In some ways, ‘Steamboat Willie’ Mickey in the public domain suggests there is a better business case to put Disney IP in the hands of its fans (with more parameters than ‘Steamboat Willie’ Mickey will have) and figuring out the business model than to bet on fans making purchases within a virtual theme park.”
This may not be the outcome Joe George was pushing for in “Blood, Honey, and the Public Domain”. But, it would be one that converts users from consumers who “purchase the tools of our identity formation” to those who sell and/or participate in them.
The takeaway from the above is not that memecoins are the solution that BAYC never delivered. Rather, it is that if media conglomerates are going to start rethinking the value of their IP, blockchain tokens and memecoins seem to be building a compelling case for greater returns at a smaller scale.