An Optimistic Outlook for the Entertainment (TV/Film) Industry

A lot has been made about the coming streaming wars and how difficult and bloody they will be.

• Netflix, Apple, AT&T/Warner, Amazon Prime, Disney, Hulu, and new entrants like Quibi, NBC/Universal are all competing for same viewers and only a handful will survive.
• More and more time spent is shifting to mobile video and short form, lowering the net pie the long form streamers are battling over
• Movies are a dying art form. Theaters will cave to streaming releases and only big tentpole IP will remain and have a chance at theatrical. Creative talent and big buyers have shifted to series.
• Consumers/Households will spend on a couple streaming products at most, so only those with mass scale and consistent hit programming will win in the end
• Traditional cable networks are dying businesses that will milk as much linear TV money as they can until the 45+ crowd fades away and they either get bought by one of the big 5 or 6 media conglomerates or turn into production companies at best
• Speaking of which, the business of being a successful content studio is over. Owning IP has shifted to working for 15% production fees and original content is slowly becoming commoditized as Netflix shifts the model from quality ---> quantity and everyone follows suit

For a while, I was pretty much in line with everything above. I know because I wrote those bullets a couple years ago. However, as I've looked deeper at whats happening in the industry and with consumer behavior, I'm ready to debunk most of the above and provide some wishful thinking for the entertainment industry.

Lets take those viewpoints and break them down 1 by 1:

1) Netflix, Apple, AT&T/Warner, Amazon Prime, Disney, Hulu, and new entrants like Quibi, NBC/Universal are all competing for same viewers and only a handful will survive.

Let's make something clear upfront, even though all these services at their core are financing and licensing premium programming and asking consumers to pay for it, NONE of them are identical. Almost every single one offers a slightly different and unique value proposition to the consumer, meaning they all have avenues of acquiring and retaining paying members because they are not all playing the same game.

Netflix - The world's largest unbundled cable channel. Competing on quantity and ensuring there is enough regular compelling content for each type of user, of which there are many. People make mistake of calling out Netflix for having so many "bad" shows and not enough mega hits. That just means you don't understand their model. What's bad to you is interesting for another. They only need a couple mega/4-quadrant type hits per year be it Stranger Things, Blue Planet, BirdBox. Otherwise, they aim to please smaller pockets per show/movie. You are not meant to like all of the shows, nobody is! And while I think their subscriber growth will slow as more global competition steps in, I don't think they are going to churn or lose much. And I think they can further monetize their user base in new ways in the future, beyond just increasing price as they just did. So their market cap is where it should be and I think will hold nicely.

Apple - the are ALL IN on services. That's what happens when you drive a crazy valuation based on unsustainable hardware margins and forecasts and are not properly managing your stock for the long term. Apple will bundle Music + News + TV together into 1 bundle, likely for $15-$20, making it highly competitive. Throw in some cloud storage space too while at it. They also have the brand cache, and install base with the hardware. This means they don't need to compete on quantity of shows/films and trying to hit and retain a broad set on video alone. Cause they have many ways to keep users in that bundle. So expect them to make bigger bets on fewer shows, cause they just need a couple broad mega-hits per year to fit their need.

Amazon Prime - I hope everyone by now realizes they are not competing on video as the baseline metric at all. Its free shipping on the world's largest and most convenient store. And grocer. And maybe video game provider, and healthcare, and so on. Prime is the single greatest business model created since Google's AdWords. Prime members spend nearly 250% more per year on Amazon than non-Prime members, and that gap is widening. For Amazon, Video is one part Retention, and one part Awareness. Make it 80% retention, 20% Awareness. They want some breakout hits for the Awareness piece, to then acquire them for the broader Prime offering, but it's really a retention play. So even if you slow down buying, you still get value and don't leave Prime. And now it has a free video service to help its foray into advertising. Like Apple, Amazon will want to make smaller bigger bets on high end TV. And then I think gobble up a lot of libraries and remnant programming to fill out its free service and Prime quantity. So expect Amazon to be the savior to studio library monetization that was once DVD and then TVOD and briefly Netflix.

AT&T/Warner - And here we have another wholly different model and approach. Their service is all about a) Warner film library, b) "Free" HBO, and c) Bundling with phone & internet. Most of this has been hinted by their execs. By "free" HBO I mean no variable cost for those in their 1st and 2nd highest pay tiers. Whereas HBO will be $17-$20 as add-on to competitors. Don't take this competitive edge slightly. HBO is still the crown jewel in TV. They have the best programming team, attract the best talent without having to pay them 9 figure lock up deals as Netflix/Apple/Amazon are doing, and they operate at such a higher hit rate of successful shows then any of the field. That can always change, but after ESPN, HBO was the most valuable asset in cable/pay-cable and was a big driver of AT&T's acquisition. I don't expect a lot of big new programming investment from AT&T beyond ramping up HBO and experimenting here and there opportunistically. The bundled service is valuable cause it provides a ready paying customer base, and like Amazon Prime, one that is already paying AT&T for life essentials it needs. I think they are going to see how this first 12-18 months go with what they have and then reassess.

Disney - The Mouse House is an interesting place with 2 bites of the apple with Disney+ & Hulu, and perhaps the eventually merging of each. Not to mention ESPN+ as well. But let's start with Disney +. We know its armed with the most valuable collection of IP in the industry - Marvel, Pixar, Star Wars, Disney Animation - and we expect them to leverage the heck out of it. We know its aimed to be a bit more family friendly in the initial go around. Likely not as young as Disney Channel, but more FreeForm + traditional Disney. Whether or not the younger side of Disney gets lumped in or becomes its own standalone offering remains to be seen. Likely a Netflix/Netflix Kids type arrangement. They have lots of options at their disposal. For example, if it struggles a bit they could fold in free ESPN as AT&T does with HBO. Or full on combine with Hulu. Many possibilities. But I'm sure Disney would prefer to have 4 successful services in the end - Disney+, Hulu, ESPN, and DisneyChannel - so early on expect Disney+ to ride existing IP and ramping up more family friendly original content.

Hulu - sort of the tortoise to Netflix's hare. Slow and steady its been growing and growing. What once was a service built on OTT second helpings of linear TV shows has now found its footing with original content + well, a whole lot of those second helpings of linear TV shows + push into live paid channel ad-ons. It's starting to look more like a OTT version of an MVPD, or "skinny bundle, rather than an unbundled cable channel like Netflix. And its strength in original content thanks to smart hiring last several years gives it a leg up over similar skinny bundles like Sling & YouTube TV. They have a bit more audience focus then Netflix, which can be valuable when programming a more consistent slate of shows and being more targeted in your marketing efforts as well. They are also the only ones on this list who has successfully mastered a paywall + ads (Amazon doesn't count cause the Prime paywall is for the broader Prime offering, no just video), meaning Hulu can drive a higher ARPU than almost anyone else. Meaning they can do more with less. At 25 million paid subs as a domestic only service, its big time player. I like their business right now.

YouTubeTV - lets put aside the utility/video library part of their business and focus on their premium video offering, which is a combination of YouTube Red & YouTubeTV. This looks like a very similar model to Hulu. Originals + LiveTV + Paid Channel Add-Ons. And you would think YouTube with their massive video platform + Google cash to spend should crush Hulu at a similar fight, only thats not the case. Cause execution matters. YouTube Red has not done well and the slate has not been strong. But it's also confusing messaging from YouTube. YouTubeTV has fared much better and they should just shutter Red and make some original programming bets as part of YouTubeTV. Making it one offering with on-demand 3rd party channel add-ons. Their unique value is the massive upper funnel of video consumption, and YouTubeTV is the right premium service to convert them too, not Red.

Those are the big boys for now. And as you can see, no 2 look exactly alike. The unique value props allow them all room to find footing and more growth.

There is also those pushing into free-ad supported streaming as a counter-punch to subscription. Its a leaner way to get to market and avoid some upfront content licensing costs via-rev share, but like a new subscription service battling against the weight of Netflix & Amazon, these services have to battle the advertising duopoly of Facebook & Google. The chinks lately in Facebook's armor and rather putrid execution to date of Facebook Watch leave opening for competition.

Look ad-supported video is not new despite media touting lately as this novel idea to fight subscription. Broadcast TV pioneered it long before cable. There is also this fairly large platform called YouTube that has been quite good at it. It's will be more home to libraries and mid tier programming rather than expensive originals - as Amazon is doing, or PlutoTV, or of course YouTube - but there is certainly value there.

Still, its all about execution, so lets look at the players:

• Facebook Watch - this has been a colossal fail if you ask me. I mean, what are they doing? How can you have 2 billion users to distribute to and an endless cash stock to spend and do this poorly? Bad hiring and no vision and plugging your "premium" video into an over-featured product that wants to be everything to everyone. Look at in another way - Facebook users are aging, its 35+, the same demo still holding onto linear TV. Those are not the folks who need premium OTT beyond Netflix. Also that audience doesn't watch premium video on their phones! It's set-top-boxes and connected TVs with some desktop mixed in. The strategy of "we are making shows that create community" is the most un-unique and undifferentiated statement of all time. You think the "community" for Game of Thrones is strong? Yeah, it is, and it didn't need to launch on a social platform to get there. It's cause its a GREAT SHOW. Great shows create community, not Facebook. Much like their core social product, Facebook Watch is just throwing stuff at the wall and hoping something sticks. Good luck. Will need a house cleaning and complete reset to have a chance to be a factor in premium content. It's possible given the platform size, but not with the current execution. And it goes to show you, just cause its "free" doesn't mean its compelling.
• NBC/Universal Announcement - this was just announced. After I first read it I thought it was a way too early April's fools joke. Then I realized, no, it makes sense, it's NBC. Can we all admit this company has no idea what the heck they are doing with digital? They purchased a massive stake in Buzzfeed after the publisher had already peaked, bought $500M of Snap stock in the IPO because Snap got them excited about its role in the future of media & content when its really a messaging/communication app, there was the SEESO catastrophe, and how in the world can they year after year not figure out a stronger, more streamline online experienced for the Olympics? Can we just decree that they have to lose those rights and give them to a company that has a clue? So now they are entering the field with a free service. Only catch that, it's only free for those who pay for cable. Which means it's not free. It's the same freaking thing every god damn cable channel has been offering for years. I'm channeling my inner Lewis Black as I type this cause its so frustrating. There is only one major media company on par with NBC in digital frustration.....
• Oh Viacom. I actually like Bob Bakish the new CEO and some of the moves he's made to cut middling assets and invest in experiences so far. But he inherited a complete shit show that is about 20 years behind. Rumor has it they will also acquire an existing video platform and try their hand at free-ad supported. I beg they don't follow the terrible playbook NBC just launched. Break free from cable and go invest and run at digital. Its probably too late for you, save maybe for Nickelodeon, but you have nothing to lose. You are a dying company with dying assets so do something, anything. If it means buying PlutoTV and going all in on free, ad-supported service for your library, then have at it. But actually make it a free ad-supported service unlike NBC. Don't let those carriage fees blind you about looking out at a 10+ year horizon.
• Roku - at roughly 30% US household penetration for their STB, they are a player as well. Slowly but surely, they've been ramping up their offering, recognizing that if they are hardware only for too long, they will one day be obsolete. Their ad-supported free Roku channel has been pretty successful, gobbling up library content not getting the licensing fees from the major players and making some smart, simple bets in new programming. On top of that, they offer a skinny bundle of sorts as well with a myriad of on demand subscriptions. 2 years ago I was a bit bearish on Roku despite their household penetration. Now they are actually using that hardware advantage to built out services and getting smart about it.
• Walmart - owners of Vudu and the biggest retailer in the US, there have been lots of rumors they will start to invest more and more in programming to offer an Amazon Prime like service to their customer base, charging for a variety of free 'membership' components of being a Walmart shopper and layering an improved video suite on top of that. Its hard not to look at Prime if you are Walmart and want the same thing. Meanwhile, Amazon is jealous of Walmart's retail locations and is investing a ton there, and I think will end up buying Target. So in many ways, Amazon & Walmart will end up looking very similar on the retail front. If they do step in more full force, expect it to be family friendly programming similar to Disney+ in some ways, as well as another buyer and savior of libraries via expanding Vudu.

And finally, there is Quibi. The much hyped mobile premium video effort led by Jeffrey Katzenberg. It's hard to put a prediction on this one. I do understand the intuition - we are spending more and more time watching video on our phones, but its all long tail UGC across YouTube, IG, Facebook, TikTok. So while the rest of the premium video business is competing in more traditional long form that is not being consumed in mass on mobile, lets go build and own premium short form on mobile. Although it's not really short form. Its long form just cut up into smaller pieces. Which is essentially what TV used to refer to as cliffhangers between ad breaks in a way (although I'm sure Quibi's episode cuts will be more concrete).

For those out there who say yeah, we saw this before with Go90 and it failed, lets be clear, while both efforts aimed at the same possible white space, they are far from identical

• Quibi recognizes it needs to invest a lot in content, in high quality, super premium to even have a chance. Whereas Go90 tried to maximize quantity and minimize risk by buying a bunch of junk, which has shifted to our friends at Facebook Watch, the new Go90!
• Go90 had a fatal flaw in being owned by Verizon. This limited its ability to get carriage and cut deals with other mobile carriers for distribution. Quibi gets to play Switzerland in this regard.
• Katzenberg is one of the sharpest content minds in the business. There are a few folks you don't bet against in this business. Katzenberg, Peter Chernin, Richard Plepler, John Landgraf, Kathleen Kennedy, Dana Walden. These are a few.

All that said, Quibi has the hardest task ahead of it because it needs to compete on churning out hits. Every other service above has another value proposition to sell and does not need to just rely on hits to acquire and retain audience. Yes, they are going to try to get into opt-in bundles with all the carriers. And work with some existing media publishers and brands to acquire audience.

But make no mistake, Quibi will only get as far as its ability to consistently deliver hit programming. Consistently delivering hits for a broad audience is really, really hard. They need to have a batting average at HBO levels, maybe even higher, to succeed. My prediction is they for sure will churn out some great content, the team is stellar. And it will be enough to get them out of the gate and even get to a few million subscribers. It will hit a lower ceiling than they hope, and it will likely get acquired by one of the companies above that stubs their toe and fumbles their own efforts, but has the cash war chest and desire to still compete. Picking up an incredible team, a few million subs, and a small but meaningful library of content will be worth the price. So this will end well for Quibi I believe.

2) More and more time spent is shifting to mobile video and short form, lowering the net pie the long form streamers are battling over

So yes, there is no doubt that more and more time is being spent consuming mobile, short form video. Instagram is a monster. TikTok is rising fast on the back of aggressive growth spending, and YouTube still occupies a ton of real estate in mobile video.

In the US, in 2007, Americans watched 5:27 minutes of video per day across all devices. This average has shifted to 6:16 in 2018, a 15% increase.

When you throw in the success and growth of free to play social games like Fortnite and eSports overall, one can conclude that there is more competition than ever for attention and entertainment, and this shift to mobile video, social video, social gaming will undoubtedly take time away from traditional long form video, leaving increasing competition competing for less attention per user.

However, the reality is, at the same time, our overall daily time spent consuming recreation/entertainment is increasing at an alarming rate. Because our lives are getting easier, more convenient. Our work will get more and more automated, more efficient. Freeing up more and more time. Think about it. 10 years ago we all had to go to the local store to get our groceries 1x per week. Thats usually a 60 minute round trip. Now we order them in 5 minutes for delivery at now additional variable cost if you are say an Amazon Prime/Fresh member. Thats 55 extra minutes per week right there. And most of us sadly don't spend that extra time learning a new skill or reading a book, we watch video, be it Netflix or Instagram.

This is going to compound more and more with the rise of AI, robotics, home assistants, etc....there is no reason to think that in 30 years that might won't be 10 hours per day of consuming video (or AR, VR, etc.). We are a far way still from the full on Walle-E envisioned future of being plugged into a monitor of joy and gluttony 24/7, but maybe not as far as we think.

While this is probably net negative for general humanity and intellectual thought, with increasingly difficulty focusing attention and learning deep skills, it's net positive for the entertainment industry. More down time + more rather mindless people = more time consuming content.

3) Movies are a dying art form. Theaters will cave to streaming releases and only big tentpole IP will remain and have a chance at theatrical. Creative talent and big buyers have shifted to series.

2018 was a banner year for the domestic box office, checking in likely over $11.5B. Yes, part of this is we came off a record breaking 2017 of economic growth where everyone had more money to spend. Part of it is or continued never-ending fascination with superhero movies. And higher ticket prices. However, a big part is movie theaters are social.

We are social creatures. It is deeply ingrained in us. We want to get out and experience things. This is why e-commerce is investing in retail, why Live Nation continues to grow its music touring business, and why people will keep going to movie theaters. So long as they invest in innovating and evolving the experience, which they are doing. Much as physical retail will evolve as well with automated checkout.

I do think the movie experience will be dominated increasingly by bigger titles. As you need some degree of assurance its worth the time and investment. But there are also other signals for social interest in films - namely those debuting on the streaming services, which I feel poses a unique opportunity for theaters.

Let's talk Netflix's Bird Box. If you timed it right, just as this was becoming the dominant internet meme you could release it theaters and I think get a lot of people to want to watch it together, some for the 2nd time. Netflix of course wants the subscriber acquisition and so why should they make it available to non-subs in theaters? Thats an easy solve. Work out a deal with theaters where its $20 to see it if you are not a Netflix sub, and $5 to see it if you are. The theaters still get the audience they sell concessions too, and Netflix can afford to let them keep the entire $5 for current subs for the marketing exposure. If you are not a Netflix subscriber, you are going to be VERY motivated to sign up and save $15 on that ticket. Everyone wins.

We go to movie theaters because its social. Bigger movies attract more collective attention and thus are more social in nature. Season premieres of big established series can work this way as well.

And as theaters continue to improve their direct relationship and communication channels with their consumers, marketing can become more efficient as well. This is part of what MoviePass wanted to offer which made sense, only at the expense of hijacking the theater business model like a hostile takeover, which did not.

Then there is the option of theaters agreeing with streamers to go day and date and share 30-day proceeds on TVOD window on both sides. Point is, theaters have options.

We have increasing disposable income. Increasing down time. And increasing need for offline social experiences cause of the hours per day we plug into our phones. Movie theaters will be fine.

As for the world of smaller to mid-size films, that will still happen, but shift to the established streaming players.

In early days of launching a streaming service, funding movies makes little sense because you are optimizing for Net Hours Added as you deepen your offering. So if the average 1 hour drama costs $3M per episode and the same caliber of movie costs an average of $30M, of course you are going to choose 10 hours of the drama over 90 minutes of the movie.

But once either your offering is deep enough (Netflix) or you are value prop is NOT depth of video offering (Amazon, Apple), this changes. Netflix for example is not optimizing for net hours added, they are optimizing for cost to retain subs month to month. They should be looking at content and asking, for what we spent, what was its retention value?

This is where movies get interesting. I for one seek out movies on Netflix now more than series. The reason is I like finishing something. I like a beginning, middle and end. I'm more likely to finish a mediocre movie than a mediocre series. And with the quantity they are programming with, the odds are of course that most content won't be incredible and won't be for me even if presented well. There is a feeling of accomplishment in finishing a movie I don't get from most series I start.

If you were to strip out the top end performing content on Netflix, and move into the tier below that, I would argue that movies often have better retention value than series for this very reason.

So I think for the services not needing more sheer depth of library to deliver their core value prop, of which there are many, we will see more and more investment in movies. Maybe not as much as still as series, but the gap will shrink.

4) Consumers/Households will spend on a couple streaming products at most, so only those with mass scale and consistent hit programming will win in the end

So debunking this is just a matter of some simple economics.

While nobody with a clue wants to pay $100+ a month for 500 channels, 95% of them we never turn on, that doesn't mean we aren't willing to pay the SAME amount of money for what we want - which is entertainment & escapism. It's not the price of cable that was the problem, its the efficiency of what we are buying. I have no problem paying $15 for Netflix, $5 for ESPN+, $10 for Hulu, $99/year for Amazon Prime, $99/year for NBA League Pass, $8/month for CNN, and $4/month for Dropout..as long as they all have something I want. I have no problem paying for things I want. I just don't want to pay for things I don't. I assume most people are the same.

Most likely, households will still end up spending $100-$120 per month on average for consuming in-home entertainment. The combination of how you get there is unique for every consumer, and thats the beauty of this new world order. We are not all buying the same massive bundle of stuff. We get to pick and choose. Some of us want to pay for video game streaming access, some for live news, some for sports, some realityTV.

This means that there is room for smaller to mid-size players as well in addition to the big broad general offerings referenced up top. Whether its CollegeHumor offering its super fans Dropout for a few bucks a month, or AMC offering an awesome collection of genre movies and smaller slate of similar original programming for $8/month, or CBS offering its die hard loyalists direct access - there is audience for each of them, just a matter of being smart about your potential customer base and balancing your spend accordingly to sustain and profit.

The growth of subscription services spanning music to entertainment to news shows consumers willingness to spend, you just have to be offering something of actual value and know who your target consumer is.

5) Traditional cable networks are dying businesses that will milk as much linear TV money as they can until the 45+ crowd fades away and they either get bought by one of the big 5 or 6 media conglomerates or turn into production companies at best

I think here are a few possible outcomes for traditional cable networks.

1. They will be acquired, and used as free offering on their parent company service and a la carte on others (like HBO with AT&T). This is likely only for the strongest with deep brand affinity.
2. They will try to bundle together to form their own D2C service, so long as they have a consolidated brand and point of differentiation, and manage expectations on the ceiling of their business model. Like Discovery & Scripps.
3. They will become much smaller lifestyle like businesses moving from cable/satellite bundling to OTT bundling but revenue will be smaller and they will be run out of passion, not profit scale.
4. They will become more or less studios/production companies and providers of content.
5. They will die.

When looking at the 500+ channels on cable, most will fall into 3, 4 or 5. They were built in a time when just getting on cable was half the battle. And they all still make some money from carriage so are sort of one foot in and one foot out of direct to consumer, hoping skinny bundles and YouTubeTV & HuluTV's and Amazon Channels will save them.

But that salvation will look more and more like options 3 and 4 above. And options 1 and 2 will only be there for the Tier 1 consideration set.

Still, traditional cable and satellite still has another decade or so of feeding them until the older generation of linear TV viewers starts to fade out. Which is like Chinese water torture of just seeing your business eroded inch by inch.

All that said - options 1 through 4 are still viable businesses. They just have to be honest to themselves about which one is truly possible for them and go after it. Sitting back and milking what's there for now will undoubtedly end up in option 5.

6) Speaking of which, the business of being a successful content studio is over. Owning IP has shifted to working for 15% production fees and original content is slowly becoming commoditized as Netflix shifts the model from quality ---> quantity and everyone follows suit

Investing in content has never been a safe bet. Even during the heyday of independent film producing in the 80s and 90s when the Joel Silvers and Brian Graziers of the world made incredible amounts of money, on the spectrum of where to invest capital, it was always on the riskier end.

The business model has for sure changed. For series, you are now longer selling US rights to a cabler and retaining worldwide where you can make bank and then get more money in syndication for a hit show. You are selling global rights to Netflix and working for 15% fees with step-ups per season. The world of independent film finance has dried up because the model of making it and then finding a distributor who will give you back-end on box office is gone, cause there is no rev-share with streaming.

And yes, the quantity of content buying has lowered the overall average product coming out, and does making original content a bit more commoditized, and there is more consolidation of studio and distributor happening (Warner--->AT&T) which means some can be done in house.

All that said, the studio business is not dead, its just changing. And those that change with it can prosper.

First, let's all agree first that even in this super fragmented world of distribution and content quantity, water cooler, culture hits still happen. We are more connected than ever, and we can share more than ever. This means groundswells around content will continue to exist. There is still home run potential for content creators, and content distributors will always be the next "Hit" away from acquiring a big swath of users. Look what Handmaid's Tale has done for Hulu. Or what House of Cards, Stranger Things, and recently Bird Box have done for Netflix. Making hits is NOT easy. There is no exact science, it requires a ton of trial and error, a ton of spending, and a lot of luck. Hits will continue to exist and provide value for both ends of the content food chain.

Second, while the notion of original shows may be commoditized a bit, actual GREAT originals shows/films is not a commodity. This is because it takes incredible human talent and ingenuity to happen. Every great show or movie you see took the effort of many many people at the very top of their game. If you've been part of production, you know the incredible group effort it requires. This means the very best content creators and visionaries will and should create disproportional value in the content ecosystem, because again, every platform regardless of business model greatly benefits from Hits. And it takes wondrous talent to make that possible. Even in the rare case of an incredible show seemingly coming out of nowhere - Stranger Things coming from 2 unknown writers/showrunners - almost has an elite talent shepherding it, in that case, it was Shawn Levy. Making content being commoditized, making great content is not.

And for the fools who think AI is just around the corner of making great storytelling at scale, you don't understand AI or where it's at. Chatbots are still decision trees using structured data. Google Assistant for as amazing as it is has no ability to truly understand context and emotion and human creativity. Drawing from thousands of music tracks and synthesizing new beats is NOT the same as writing a song. We will have AI-assisted creative processes, for example - helping editors expedite labeling and churning out poor quality cuts, but not actually editing a movie.

So making great content is enormously valuable, and more and more players need it because Netflix has shifted the competitive angle to quantity of new stuff. Although again, most competition is not playing the same value prop and thats a good thing, cause if everyone had to produce at the quantity of Netflix we have far more demand than the truly talented folks in Hollywood can supply, and things would get diluted real fast.

The net increase in volume means more buying. So the business model has shifted away from putting a lot of stock and development into getting that one smash TV series that can run in syndication for a decade, or the next Big Fat Greek Wedding that provides a lifetime of back-end returns for everyone involved.

Instead, it's about regularly developing and churning out strong material. You will sell more of what you develop as a % but make less with each successive sale. You need to know who you are selling to and how it fits their value proposition and business model vs. simply thinking every streamer wants sheer volume of content. You need to be as data driven as they are in understanding who your audience is. You need to be able to deliver efficiently and systematically, and build an expansive network of scalable production services.

The studios who operate this way + focus on quality will stand out and win. For example, because of the higher sales rate, rather then developing 10 shows knowing only 1 will likely get bought, you develop 5 really good ones knowing 2 will likely get bought, but the increased 2x time spent on development for each should lead to better product and thus better outcome and deeper relationship with that streamer.

Likely over time, more and more of the very best consistent producers will get either purchased (by a roll-up strategy or distributor) or exclusive deals, and that is where the upside can be vs. individual projects.

There are more nuances to this of course, but the point here is being in the studio business is not a kiss of death, in fact it can still be a great business if you manage it right. But if you are doing it hoping for that one production that you can retire on like yester-year, you are not paying attention to the new world order and you will likely not succeed in the end.