To remind you, The Medium identifies a few key trends each fiscal quarter that reveal the most important tensions and seismic shifts in the media marketplace. The key trends help you answer a simple question: "What's next for media, and where's it all going? How are the pieces lining up for business models to evolve, succeed, or fail?"
Read the three key trends The Medium will be focused on in Q3 2023.
I am going to reference Dante Alighieri’s “Inferno” because this market moment keeps reminding me of the final moments of the epic poem.
Now, as I rule I try not to use literary references when writing about business. Many (but not all) executives and investors simply don’t think of literature as applicable to business, and yes, references to classical literature can seem out of touch and pretentious. I'm going to make an exception here because the final moments of Inferno help to illustrate an important insight.
The narrator (Dante) and his guide (the poet Virgil) end their evening-long descent into Hell by climbing down the body of Satan, who is entombed in ice. Virgil climbs “down from tuft to tuft / between the tangled hair and icy crusts” as Dante holds onto his neck. But, at the moment they reach Satan’s “thigh joint”, Virgil seems to reverse direction. They are now climbing upwards, except they are still headed towards Satan’s feet above them. They find a crevice in a rock to climb upon, where a disoriented Dante asks Virgil how down suddenly became up, and how night instantly became morning.
I felt similarly disoriented while researching stories and analyses for The Medium’s three themes for Q3 2023. But nothing was more confounding than the extraordinary, sudden emergence of Meta’s new Twitter-competitor Threads. It reached 70 million users within less than 48 hours on Friday, and it is on track to reach 100 million users on Monday (if it didn’t already hit the milestone over the weekend).
Key Takeaway
Meta's extraordinary launch of Threads revealed a new paradigm that points to consumers investing more in to creators as premium content, and less into "core brands and franchises" or the “beloved characters and worlds”.
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Total time reading: 4 minutes
I thought this description from Jessica Lessin of The Information last Thursday night helped to frame the significance of Threads:
“A tech platform, in a matter of hours, skyrocketed to millions of new users—almost 50 million now—using an algorithm (informed by your Instagram followers) to predict exactly what you want to read from your friends. That’s the amazing thing to me about Threads. You can’t (yet) manually limit your Threads to people you want to follow. Meta is using its vast machine-learning knowledge to predict what discussions will be the most engaging to you—the direction in which it has been taking Instagram too.
And Threads is pretty good at making those predictions.”
It reflects how “the demand for ‘premium content’ is being redefined by creators, tech companies and 10 million emerging advertisers”. Meta did not launch with any flashy legacy media brands, there was no presentation by Disney CEO Robert Iger (like at the Apple Vision Pro unveiling), nor were any Hollywood summer blockbuster movies or stars attached to the launch. Rather, as Business Insider reported that Meta exclusively offered early access to “a slew of content creators — from influencers to public figures to journalists” prior to the surprise launch of Threads last Wednesday evening.
It is clear from Jessica’s description that Threads may be as good an example as any of how “Artificial intelligence (AI) and cloud computing applications and services are increasingly dictating content consumption.
Meta defined creators as premium content, and built the value proposition of Threads upon that premise.
The attention economy
As for the trend of “Legacy media companies are throwing in the towel on their bets to own the consumer relationship in streaming and beyond”, the extraordinary success of the Threads at launch has little to no relation to the streaming marketplace. That said, it does reinforce something I wrote in last December’s “The Linklater Problem” about the little-discussed way social media is disrupting legacy media:
In the attention economy, there's no longer a line between us and the giant screen and these people we may never meet or encounter. The "universal" characters who might inspire a future [Hollywood director like] Richard Linklater can now disintermediate the storyteller via YouTube and TikTok, and make money from it.
Threads may not be a legacy media business producing and distributing shows and movies, but it is built to be a media business. It leverages creator content to capture the attention that users might otherwise devote to other media on other platforms, including ones that it might pay for.
Disorienting Demand
The past week also highlighted the extraordinary speed at which audiences are willing to be “trained” to adopt a new platform, if not switch behaviors altogether. This concept of being “trained” comes from a recent, notable quote from Peter Docter — Pixar’s creative chief officer — in response to a question from Variety’s Jazz Tangcay about the strategy behind putting releases on Disney+. His answer:
“In the long run, there’s been a bit of a mixed blessing because we’ve trained audiences that these films will be available for you on Disney+. And it’s more expensive for a family of four to go to a theater when they know they can wait and it’ll come out on the platform.
We’re trying to make sure people realize there’s a great deal you’re missing by not seeing it on the big screen.”
Docter is referring to the heart of the pandemic in late 2020, when Disney debuted three Pixar films in a row (“Soul,” “Turning Red” and “Luca”) on Disney+, and bypassed theatrical distribution. Last month “Elemental” delivered Pixar’s worst opening-weekend result ever in the United States and Canada, despite having a budget of $200 million dollars (and a likely additional $100 million in marketing spend). The competitive concern for Disney now is whether “Pixar movies as more than just Disney+ food” now that audiences have been “trained” by Disney over the past 3.5 years to expect those movies on a different platform and at a lower cost .
In this light, Disney’s problem is not just poor performance at the box office. It is that consumers are willing to pay less to watch the same content on a software platform that they could in theaters, and that platform competes for user attention with other free platforms like YouTube, TikTok and Threads. In a similar vein, Threads is training Twitter users to expect similar content at no cost on a Twitter-like platform at a time when Twitter is increasingly putting more paywalls up to try to “train” its 535 million monthly active users to pay more. The subscription ambitions of both Twitter and Disney seem equally vulnerable after the sudden emergence of Threads.
Consider the savvy consumer
Last, it is worth noting something Instagram head Adam Mosseri said in an interview with The Verge’s Alex Heath:
Creators are becoming more and more savvy. They’re using more and more platforms. It’s becoming rarer that a creator is completely attached to one platform because they’re always worried about the risk of being overly beholden to one company that they obviously can’t control. So I do think this is the direction of travel, and I think that a new app offers us the opportunity to really step into this space. It would be very, very difficult to take an existing app like Instagram and then integrate it.
His perspective is a creator-focused one. But it’s implicitly a consumer-focused one, too, and it elegantly sums up why this market moment is so disorienting: neither creators nor consumers seem to have any loyalty to any platform. They seem to only have loyalty to each other. They both just want to be delighted, if not on a familiar platform, then somewhere else where someone knows how to delight them.
Put in different terms, there is no single platform or channel whose supply of content is capturing consumer demand. Meta may have proved this week that it is better to have multiple platforms across multiple formats of media from creators than it is to bet on one platform with one format of media. Threads seems to have revealed a new paradigm that points to consumers investing less into "core brands and franchises" or the “beloved characters and worlds”, and more into an ongoing relationship with creator(s).
Must-Read Monday AM Articles
The demand for “premium content” is being redefined by creators, tech companies and 10 million emerging advertisers.
* Snap’s efforts to lure creators and their followers back to its platform show early signs of traction, enticing popular internet personalities with a slice of the ad revenue their content generates.
* EA CEO Andrew Wilson announced it will split its studios into EA Entertainment and EA SPORTS “to empower our studio leaders with more creative ownership and financial accountability to make faster and more insightful decisions around development and go to market strategies. These steps will accelerate our business, drive growth, and deliver long-term value for our people, our players and our communities.”
* Critic Terry Nguyen writes “TV will always be a popularity contest, but like yearbook superlatives, there’s some room for diversity. Pick a lane; you don’t have to stay in it. If there is no center, no mass appeal, the future of television depends on nailing these content niches.”
* “Brands are extremely keen to be associated with the Netflix content” ($ - paywalled)
* Twitch is introducing Partner Plus, a program boosting the cut that streamers earn to 70% of subscription revenue, but with a few conditions.
* Twitter’s new chief executive, Linda Yaccarino, is preparing a series of measures to bring back advertisers who had abandoned the platform under Elon Musk’s ownership, including introducing a video ads service, wooing more celebrities and raising headcount ($ - paywalled)
* Amazon.com Inc. CEO Andy Jassy is taking a hard look at how much the company’s Hollywood studio spends on original TV programming.
AI & cloud computing applications and services are increasingly dictating content consumption
* Andy Weissman of Union Square Ventures asks (and answers), “While there has been much discussion about how to engender trust with respect to hallucinating AIs, does this mean that hallucinations are de facto something to be avoided or erased? Or rather, do these “artifacts and happy accidents” enable new businesses and forms of media?”
* BCG Senior Advisor Doug Shapiro wrote about the disruption of content creation from AI and offered a framework for thinking about how it might play out.
* Google remains incentivized to ensure publishers are compensated one way or another, therefore, and helping them generate revenue from subscriptions and reader revenue could enable it to maintain visibility into their content.
* Popular demand-side platform (DSP) MediaMath, which at one point was valued at over $1bn, filed for Chapter 11 bankruptcy two weeks ago. A court filing indicates that the company owes more than $100m to its many creditors.
* Author and former Facebook employee Antonio García Martínez argued “The ad tech paradox is that ad tech is the money plumbing for the entire Internet, and somehow every component in the machine hemorrhages money and dies except for FB and Google.”
Legacy media companies are throwing in the towel on their bets to own the consumer relationship in streaming and beyond.
* A good, must-read roundtable discussion between showrunners Taffy Brodesser-Akner (Fleishman Is in Trouble), Ryan Condal (House of the Dragon), Katori Hall (P-Valley), Sharon Horgan (Bad Sisters) and Ashley Lyle (Yellowjackets)
* Two noteworthy interviews with leaders of The New York Times on their DTC model (which I wrote about in May’s “The ARPU of Storytelling”): David Perpich, Publisher of The Athletic (WSJ interview - $ paywalled) and Publisher A.G. Sulzberger (The New Yorker)
* “The formerly outlaw Barstool Sports is becoming a destination job” after ESPN downsizes and sheds veterans with decades of experience.
* Kathryn Porter argues in Paste “The misstep that streaming services made was one of overconfidence. Television is an art, not a science, but it feels like that line of thinking has been pushed to the wayside as of late.”
Other
* Under a shift announced in 2017, Nike significantly slashed its number of retail partners to better focus on direct-to-consumer (DTC) sales. It’s walking away from that, and here is a good LinkedIn essay as to why.
* By 2027, the U.S. television industry will see $30 billion less annually from traditional subscription and advertising revenue than it did a decade earlier amid ongoing cord cutting, according to a new forecast by PwC.
* Yahoo is planning to return to the public markets. ($ - paywalled)