In Q2 2023, PARQOR will be focusing on three trends. This essay covers "3. "Premium content" is being redefined by creators, tech companies and 10 million emerging advertisers”
A reminder that this newsletter is now The Medium. It's the same newsletter focused on three to four key trends per quarter, but it is now oriented a bit more narrowly.
And, as you may have figured out, the new branding is a nod to Marshall McLuhan's "The medium is the message" and my focus on the moving pieces of media's evolution from wholesale to retail models.
PARQOR will remain the corporate brand, and I will be building out membership services under that brand.
Disney CEO Robert Iger showed up in Apple’s presentation for its new Vision Pro spatial computing device, the lone legacy media executive to do so. His personal decision to appear seemed obvious: the emergence of the new device harkened back to 2005, when then-Apple CEO Steve Jobs demoed the video iPod to him in private for the first time. Iger wrote about it in his autobiography, “Ride of a Lifetime”:
I could feel his enthusiasm as I stared at the device, and I had a profound sense of holding the future in my hand. There could be complications if we put our shows on his platform, but in the moment I knew instinctively that it was the right decision.
After that meeting, he announced with Jobs onstage at the Apple launch that five Disney shows — including “Desperate Housewives”, “Lost”, and “Grey’s Anatomy”, which then were three of the most popular on TV — would available for download on iTunes (at $1.99 per episode) and to be consumed on the new video iPod.
Obviously, the video iPod in 2005 and the Vision Pro in 2023 are fundamentally different technologies: the latter is exponentially more advanced than the former, and with more profound implications for consumers. If the video iPod preserved the business model and viewing experience of video in 2005, the Vision Pro preserves Disney+ but reinvents and reimagines the viewing experience.
But, the common thread of Iger and Disney appearing in both presents a question: if the video iPod in 2004 is analogous to the Vision Pro in 2023, then is there a CEO in 2023 who is like Iger, understanding the future of the media business while staring within a pair of technologically advanced ski goggles?
Meaning, if past is precedent, 15 years from now, there will not be a memoir from an Iger-like legacy media CEO who bet on Vision Pro before everyone else did. If Iger has been one archetype for a legacy media CEO who successfully navigated the disruption of internet distribution models — and given Disney+’s $4 billion in losses and plateauing growth, that is a big “if” — we do not have an archetype for a CEO who will navigate the potential disruption of Vision Pro.
Or do we?
Key Takeaway
There must be a media executive in 2023 who understands the implications of Apple's Vision Pro for their company's future as Disney CEO Bob Iger did with the video iPod in 2005. But who are they and what do they look like?
Total words: 2,000
Total time reading: 8 minutes
Iger’s two bets in 2005
Iger is not a visionary CEO in 2023, even if that was probably his intent with the optics of his appearance. He is just under one year into both a surprise return as CEO, and also into a promised two-year succession process. It matters little what Iger foresees because the end of his second tenure looms in about 18 months and Disney’s future will be his successor’s to shape (unless, according to an anonymous executive interviewed by CNBC’s Alex Sherman last year, Iger will stay on).
Back in 2005, Iger was making two bets for Disney's business. The obvious bet was that Disney shows and movies would be inevitably consumed on Apple hardware devices. Being on those devices would keep Disney relevant to new generations of content consumers, despite its risk of disrupting DVDs and linear (or "free money"). He described this as Disney being “willing to try something that might disrupt his own business model.”
That bet put Disney hand-in-hand with Apple’s growth curve for iPods, from 4.4 million sold in 2004 to a peak of 54.8 million sold in 2008, and 400 million total.
The less flashy bet was on iTunes as a distribution channel. It was initially a limited bet with only five shows, a low price point ($1.99 per episode), and with episode availability the day after airing.
One year later, Apple released a version of iTunes offering downloads of movies at DVD quality that offered 75 plus movies from Disney, Pixar, Touchstone, and Miramax (all then Disney-owned). New movie releases cost $14.99 apiece, preorders $12.99, and older titles $9.99. That bet was more ambitious than in large part because Apple’s connected TV device — now known as Apple TV — had emerged.
Ultimately, Iger’s bet on cannibalization of Disney's distribution business with the optics of growth and technological relevance. Over the lifespan of the iPod’s dominance between 2005 and 2014, Disney’s stock price quadrupled.
Iger’s bet in 2023
On Monday Iger pitched that Disney+ will launch on day one of the Vision Pro, which Apple said will start shipping early next year.
Surprisingly, it is a much simpler decision than selecting library titles that will help sell devices. Disney+ is also already built for and integrated across Apple’s various operating systems (iOS, iPadOS, TVOS), so there is a plug-and-play element to it for both existing Disney+ subscribers and also future new subscribers.
Iger also demoed new ways of watching NBA, MLB and soccer games on the ESPN+ app. The experience was described by Tim Bajarin of Forbes as “as if I was sitting on the sidelines”. But the content demo that seems to have had the most impact with critics is “Avatar 2”. John Gruber of Daring Fireball had the best description of the experience:
Watching a regular movie on a virtual huge screen is incredible. It’s way more like watching a movie in a real cinema than like watching on a TV. One of the movies Apple had us watch was James Cameron’s Avatar: The Way of Water, both in a window floating in front of us, and then in “theater mode”, which immersively removes your actual physical surroundings. Cameron shot Avatar 2 with state-of-the-art 3D cameras, and the 3D effect was, as promised, better than anything I’ve ever seen in a theater or theme park. I don’t generally like 3D feature-length movies at all — I find myself not remembering them afterwards — but I might watch movies like Avatar this way with Vision Pro. But even though Avatar is 3D, it’s still a rectangular movie. It’s just presented as a very large rectangle with very compelling 3D depth inside that rectangle.
Others liked the 3D experience as being “inside the film itself”. There is very much a new model for movie consumption that looks less like Disney’s past, and more like the present and future envisioned by director, screenwriter and producer James Cameron. Notably, Disney acquired “Avatar” via their deal with Fox, and none of their core franchises or brands were demo’ed in 3D.
The difference from the user of experience pay-per-download TV shows in 2005 is extraordinary. However, the economics do not yet reflect that: as of now, for $6.99 per month Disney+ users will be able to have this immersive experience in 3D for which moviegoers pay $20 to see in IMAX.
Why bet on Vision Pro in 2023?
In 2005 and 2006, the price of video iPods ranged from $249 to $449.
The Vision Pro will go to market at $3,499. It appears out of reach for the majority of consumers and is more expensive than comparable headsets from Meta like the Quest 3 for $499.99, and the Meta Quest Pro at $999.99. The latter two seem closer to the video iPod in terms of consumer accessibility. But Vision Pro and Vision OS seem closer to the video iPod and iTunes in terms of disruptive potential in the long-run.
But right now, there are billions of smartphones and tablets on the marketplace. They are the now default consumer behaviors for streaming content, with more than 50% of Netflix and YouTube consumption on mobile devices (and close to 100% of TikTok consumption). That was not true 18 years ago. If past is precedent — and as a rule of thumb it is — we have probably just witnessed the birth of virtual reality movie and TV distribution.
So the uncomfortable question presented by this data point is why is Disney betting on this technology now? The economics don’t make sense — $6.99 for an IMAX-like 3D theatrical experience in VisionOS will be a steal for consumers — and none of its library on Disney+ is currently streamable in 3D. The device is about the same price as an average travel package to a Disney theme park. The choice for budget-conscious (and rational) families will be obvious.
That said, many of its movie titles — most notably its Marvel blockbusters — have all been released in IMAX on 3D. The investment in the 3D format is a sunk cost. Looking ahead, it will be all upside as Disney moves iteratively towards a Vision Pro being another distribution outlet like the video iPod, and VisionOS App Store as the new iTunes.
What does a Vision Pro CEO in media look like?
That new reality for Disney’s bet on Vision Pro presents two paths:
What does the future hold for the Vision Pro?
What does a CEO who understands the future of the Vision Pro look like?
I think the first question is going to have endless takes, and I offered one such take, above.
But the second question is more interesting: If we believe Iger’s recollection of “a profound sense of holding the future in my hand”, then there has to be an executive in 2023 who understands what the future of the Vision Pro holds for Disney. Meaning, they grasp how the economics of content distribution are going to change, interfaces for content consumption are going to radically change, and media businesses will inevitably need to disrupt themselves in ways as bold as the bets Disney made to reorient itself for the era of digital distribution.
Readers familiar with my writing may recall that I think the next generation of CEOs should “entrepreneurially embrace the intersection of content, data and distribution.” Also, as I wrote last month, they should have an ambition to make “ARPU more accurately capture digital media consumer behavior.” Meaning, they understand that the era of “free money” is now over, and that building customer lifetime value from a retail-first business “may be more accurately framed as a consumer database problem”.
So, it would seem a retail-first skill set seems optimal in an Iger-like figure for Vision Pro (and Iger, a longtime TV executive, was always wholesale-first). The challenge is there are very few young executives currently in the media C-Suite who see the world that way: right now, it’s Netflix Co-CEO Greg Peters (49), Starz CEO Jeffrey Hirsch (51) and former WarnerMedia CEO Jason Kilar (52).
But the hardware of the Vision Pro enables the blending of the physical world with the digital world — all the demo videos showed VisionOS overlaid on top of views of living rooms. That is more along the lines of the “experiential lifestyle platform” former CEO Bob Chapek was promising investors: “A platform for the whole company to embody both the physical things that you might be able to experience in a theme park, but also the digital experiences that you can get through media.”
The "experiential lifestyle platform" returns
On this point, it is worth noting that Disney cut its metaverse division — which had been devoted to building an “experiential lifestyle platform” — this past March. So, the obvious takeaway from Apple’s Vision Pro presentation is that Disney cannot build those experiences but that Apple now can.
Disney has a real-world ecosystem, if not a platform, across Disney Parks and Resorts and Disney+. Comcast is the only other business offering its consumers both theme parks (Universal Theme Parks) and distribution (NBCUniversal's Peacock). So, there are really only two business ecosystems that could map one-to-one to Vision Pro's blending of reality and digital.
But, the operating income of both companies is driven primarily by non-digital businesses and both leaders are Baby Boomers. Disruption via the Vision Pro is not just identifying a new device or store for content. The device presents the reimagining of all businesses, from theatrical to theme parks. It presents an existential risky for Disney ($169 billion market cap) and Comcast ($168 billion market cap).
Therefore, a media CEO understands how to map their existing business ecosystem to the Vision Pro will be the business equivalent of a unicorn. Like Iger in 2005, he or she or they will need to be willing to disrupt their own business in the name of Apple. But, unlike Iger in 2005, they are going to have to be able to imagine and execution a vision where disruption is existential.