IAC Chairman Barry Diller is back in the news with another quotable—and dire—read on Hollywood’s future. He told The Financial Times that Hollywood’s hold over worldwide entertainment is:
“gone. It is no more. Netflix, Amazon and Apple are really the controllers of the worldwide film and television business.”
Is this read as prescient as his past predictions?
Back in 2019, he told CNBC:
“No one is going to compete with Netflix in gross subscribers. I believe they have won the game. … There’s nothing I can see that’s going to dislodge them.”
The confidence of his conclusion drew fire from the media and the social media chattering class. It seemed premature. When Netflix’s stock price fell by nearly 75% in 2022, it seemed wrong. Today, Netflix is streaming's clear winner and Diller has been proven right.
Notably, he left out Comcast and Disney, two of his other past predicted winners. In 2020 he believed Disney was the only studio that “will remain relevant into the future,” and the rest were “caddies on a golf course they’ll never play.” In 2021, he believed Comcast was the only company "with both feet on both sides” of the streaming marketplace because it owned both Peacock and a broadband business.
This time, Diller is missing two key details. First, YouTube’s growing success on Connected TVs is transforming the economics of premium content away from the film and television business. Second, for this reason, big bets by Netflix, Amazon and Apple on traditional production models are also being disrupted by Silicon Valley.
Key Takeaway
“The shift of power from Hollywood to Silicon Valley” is not about traditional production models. It seems to be much more about technology driving the evolution of human storytelling beyond the mediums of traditional film and television businesses.
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“Premium Content” Changing
I wrote last month that “YouTube Is Forcing Netflix to "Break" Its Business Model”: “The more YouTube UX becomes more like Netflix on TVs, the more the definition of ‘premium content’ will get fudged." In the essay, I quoted Reed Duchscher, CEO of Night, the creator talent management agency: “Most top creators no longer view premium distribution [on platforms like Netflix and Amazon] as the ultimate goal”.
Instead, the emerging competitive dynamic in Hollywood has been best summed up by YouTube creators Colin and Samir: “Creators are becoming Hollywood faster than Hollywood is becoming creators”. Meaning, the scale of YouTube and its creator ecosystem—over three million creators in its partner program—are redefining both premium content and its production models.
The more YouTube captures Connected TV viewing time—it captured nearly 11% in the U.S. in both August and September, according to Nielsen’s The Gauge—the more its model is setting new standards for premium content on TV. In the “new business of living room content”, consumers no longer perceive Hollywood’s content “quality” as an impetus for spending money on media or devoting time.
The implication is that YouTube is is disrupting the importance of the worldwide film and television business.
“Production” Changing
I also wrote last month that “the lines between the fans as consumers and fans as producers are blurred. What it means to be 'invested' has evolved from something emotional into something financial.”
For this reason, Netflix’s, Amazon’s and Apple’s streaming platforms are not constructed for consumers to be ‘producers’ of the content they want to watch.” Fans either indirectly fund YouTube creators through watching ads or directly through subscriptions, merchandise and tips (all enabled by YouTube’s Partner Program). Whereas on Netflix the content is only funded by Netflix and/or third-party producers.
The more YouTube competes with Netflix on television screens worldwide, "the more YouTube is proving that consumers' ‘choice and control’ over the medium of the internet means fans are the producers of the content they want to watch.”
This is a key dynamic that Diller is missing with his focus on Netflix, Amazon and Apple. All of them are certainly invested in traditional film and television productions. But, YouTube and consumers are forcing the economics of film and television production southwards. Diller’s focus on what the three have captured from traditional Hollywood and global studios misses the real-time disruption to those models.
Netflix and YouTube are also proving there are limits to exclusivity in these streaming models. As I wrote on Monday, intellectual property (IP) like CoComelon and the Amazing Digital Circus (“TADC”) can simultaneously thrive on both Netflix and YouTube. Netflix co-CEO Ted Sarandos is embracing this model and has told investors YouTube and Netflix “feed each other pretty nicely".
Broader Disruption
Ultimately, “the shift of power from Hollywood to Silicon Valley” is not about traditional production models. Instead, it seems to be much more about technology driving the evolution of human storytelling beyond the mediums of traditional film and television businesses.
Netflix, Amazon and Apple certainly are big investors in the worldwide business of film and television production, spending billions of dollars per year. But, recently all three have been looking to pay talent less up front and cut back on spending.
In particular, Apple is “trying to pay less up front for shows and is quicker to cancel ones that aren’t working” It is also “forcing third-party studios to shoulder more of the burden when productions go over budget and is starting to license programming from competitors to reduce the service’s reliance on original series.”
At the same time, “back to the people” models are emerging—in gaming, generative AI, meme coins and creator economy—that enable professional amateur creators to create and monetize stories using public domain and legacy media IP. Those models reflect what Diller describes as “the best organisation for making content — movies, television, whatever — is a linear and narrow one.” The only difference is that they generally operate at a smaller scale and target smartphone screens more than they do TVs or theaters.
An old model is disappearing as media conglomerates disappear. Diller’s nostalgic focus on the past of TV and film storytelling misses the many exciting opportunities that Silicon Valley technology is building for human storytellers. It may simply be that Diller has spent his career looking for blockbuster business models and he does not see one yet in newer video distribution models.
But, storytelling still matters and exponential scale remains possible in internet distribution models. In pining for Hollywood's past, Diller is ignoring the birth of exciting storytelling business models that are emerging in real-time.