What If All Media is Marketing?
The Logical Conclusion of Plummeting Creation Costs
There are a lot of open questions about how GenAI will affect the media business (some of which I outlined in How Far Will AI Video Go? and a recent presentation). Most important, we don’t know how good the technology will get or to what degree consumers will accept it, and for which use cases. There are still critical legal questions around the way that AI models are trained. The copyrightability of AI-assisted or enhanced content hasn’t been tested at scale either.
But we can chart the general direction and think through the possible consequences. So, it’s worth asking: if over the next 5-10 years GenAI reduces the cost of content creation as much as the internet brought down the cost of content distribution, what happens? The short answer: most content won’t be profitable and value will shift to complements.
Tl;dr:
Strictly speaking, the internet disrupted media distribution. Content creation businesses only felt the indirect, upstream effects.
GenAI will deliver a direct hit. While a patchwork of technologies has chipped away at the barriers to creation too in some media formats—DAWs and sample marketplaces in music; cheaper cameras and editing software in video; free gaming engines, etc.—GenAI looks poised to completely collapse barriers to creation across media.
What happens then? Here’s a common pattern. When barriers collapse in a market, supply explodes, consumer price sensitivity increases, prices migrate toward marginal cost, and all the value shifts to the scarce complements. This has happened in markets as diverse as food, stock trading, digital photography, PCs, consumer electronics, and many others. In all cases, the commoditized product becomes a loss leader, customer acquisition cost (CAC), or, at best, marginally profitable and value shifts elsewhere.
If the same pattern plays out in media, most content may cease to be a profit center. Instead, it will become top-of-funnel to something else. Media will become marketing.
To be clear, there’s a difference between “media sells marketing” and “media is marketing.” Today, content is the product and one way it monetizes is by renting out the attention it generates—selling advertising. In this new model, content is the cost and the only sustainable profits will be for media companies to own the complements themselves.
This may sound extreme, but connecting some dots, we can see that this pattern has been happening in media for years. Prices are deflating. Consumer price sensitivity is increasing (see: struggling box office). Content is increasingly top-of-funnel for complements: Amazon and Apple monetize video through higher customer spend or ecosystem lock-in; recorded music is effectively promotion for concerts; mobile gaming is free-to-play and instead monetizes status or community; and the biggest creators (YouTubers, podcasters) are now making more selling snack foods, beverages, merchandise, courses, or live events, than the direct monetization of the content they create.
As this continues to play out, media companies will have to re-orient their businesses. What used to be called “ancillary” sales will now be primary. Fandoms, communities, franchises, merchandise, and live experiences will be the economic engines, not the content itself.
They will need to: 1) own the tried-and-true complements where possible—consumer products, live events and experiences, and transmedia exploitation; 2) create new scarce complements (such as those built on status and exclusive access); and 3) bundle these scarce complements to increase consumer lock-in.
Some media companies already think about content franchises holistically (Disney being the canonical example). Most don’t.
It’s an opportunity for media companies that can position themselves accordingly. For others, it will be a hard pivot.
The Internet Disrupted Media Distribution
Sometimes people say that "the internet disrupted music” or “Netflix disrupted Hollywood.” If we’re going to be precise, neither is correct. The internet has not disrupted content creation businesses. The reason lies in the distinction between direct and indirect disruption.
Direct disruption occurs when a new competitor shows up with a cheaper, less performant product that is “good enough” for some of the incumbents’ customers and the incumbents can’t respond due to internal constraints. Indirect disruption occurs when one part of an ecosystem or value chain is disrupted and other parts feel the effects.
The internet disrupted distribution directly and content creation indirectly.
The difference is important to us because, for the most part, the internet disrupted media distribution directly and content creation indirectly. Consider music and video as two examples:
Music: iTunes and digital distribution disrupted traditional music distribution directly, especially music retailing. Tower Records, Virgin Megastore, and HMV went bankrupt. Major labels were adversely affected indirectly. They acquiesced to Apple’s demand to let iTunes unbundle albums into singles, which resulted in people spending less on recorded music. That hurt everyone in the value chain, including labels. But the labels were upstream from the disruption itself.
Video: Same thing goes for Hollywood studios. The advent of streaming, namely Netflix, directly disrupted video distribution: TV stations, pay TV distributors (cable, telecom, and DBS), movie theaters, and home entertainment retailers. TV stations have been slammed; DBS has been demolished (unlike cable and the telcos, it is not supported by comparatively healthy broadband and mobile businesses); many theater chains have struggled; and retailers like Blockbuster, Hollywood Video, and Redbox went under. Streaming didn’t disrupt the business of making movies and TV shows, but studios continue to feel the indirect effects of lower pay TV, home entertainment, and box office revenue. Again, they are upstream of the disruption.
When disruption hits one part of an ecosystem, that part will be the most adversely affected, but every other part may feel the indirect effects.
From this, we can draw a general rule: when disruption descends on one component of an ecosystem or value chain, the component that takes the direct hit will be the most adversely affected, even though everyone else may feel the indirect effects.
GenAI is a Direct Hit for Content Creation
The main story in media for the past two decades has been the plummeting costs of content distribution,1 but in recent years technology has been chipping away at the barriers to create content too. Unlike the disruption of distribution, which was uniform across media, this has been occurring unevenly across media formats—over different timelines, to different degrees, and due to a variety of different technologies. To stick with our examples of music and video: In music, today it is easier for independent artists to create high production value music owing to better in home production equipment, autotune, DAWs, beat and sample marketplaces, and collaboration platforms. In video, independent creators can shoot and post decent video owing to higher quality cameras in phones and better, cheaper, editing software.
These kinds of advancements have enabled independent artists to start eating into traditional content companies’ market shares in a meaningful way over the last five years or so. Continuing with music and video: In music, Spotify data shows that almost 30% of streams are now from independent creators, up from 10% in 2017 (Figure 1). In video, YouTube represented 13% of video viewing on TVs in the U.S. in July, which has more than doubled over the past three years (Figure 2).
Figure 1. Independent Musicians Represented ~30% of Streams on Spotify Last Year
Source: Spotify.
Figure 2. YouTube—and Therefore Independent Creators—Now Accounts for 13% of Time Spent With TV in the U.S.
Note: (1) ESPN+ estimated prior to January 2025. (2) Discovery+ estimated prior to March 2025. Source: Nielsen, The Mediator estimates.
While the internet had an indirect effect on content creation businesses and media-specific technological developments have started to chip away at the barriers to content creation, GenAI will deliver a direct hit.
But these incursions into content creation are likely just a taste of what’s to come. Relative to the patchwork of format-specific technologies that has lowered barriers, GenAI represents a step change function that looks poised to collapse them. Of course, one major difference is that GenAI enables purely synthetic content. It is already feasible to build some sort of agentic content creation-distribution loop. The agent (or more likely several agents) scans the network for trending topics, creates content, seeds it out on the network, sees what works, develops more content, and so on. You could construct a content creation machine with no human involvement at all. Whether you want to is another story.
But even presuming that we will always need a “human in the loop” to make anything interesting, GenAI will dramatically reduce the barriers to creation for a few reasons:
GenAI is a general-purpose technology and will improve accordingly. GenAI is attracting unprecedented amounts of capital and brainpower. As everyone who tries to keep up with the latest developments in GenAI knows, that all but ensures a bewilderingly fast and compounding rate of improvement. By contrast, the latest improvements in media-specific technologies—like, say, video editing software—are pretty marginal.
It completely collapses learning curves. Media-specific production hardware and tools (DAWs, phone cameras, gaming engines) all made creation cheaper and more accessible, but they still have learning curves (music theory, editing workflows, coding) and require some threshold level of skill or craft. GenAI collapses these learning curves because it shifts the interface to natural language and simple prompts.
It solves the “blank page” problem. Traditional tools are still passive. They only do what you tell them. You still have to supply the vision and first draft. GenAI is active. It generates starting points, fills in gaps, and coaxes you along. It is a co-creator. That collapses arguably the toughest barrier of them all, the friction of starting.
It will diffuse into existing tools. Previous democratizing tools generally existed in siloes. You either learned the new tool or you didn’t. GenAI will be embedded in all other tools—Adobe’s editing suite, Avid, Unreal, Unity, CapCut, YouTube Studio, TikTok, Canva, etc. It will be a universal accelerant, regardless of how a creator creates.
So, while the internet had an indirect effect on content creation businesses and media-specific technological developments have started to chip away at the barriers to content creation, GenAI will deliver a direct hit. In other words, we ain’t seen nothing yet.
What will we see? Most content may cease to be a profit center.
When Marginal Costs Plummet, All Value Shifts to Complements
I recently wrote a post called All is Not Lost for Traditional Media. I made the point that when one input into a value chain becomes abundant, other things become scarcer and more valuable. On reflection, that skipped over half the story. It’s not just that value usually shifts to scarcities when a product is commoditized, but all the value.
It’s not just that plummeting creation costs will shift value to scarcities, but all the value.
Here’s the usual pattern:
When production costs fall, barriers to entry decline, and new entrants flood the market with lower-priced products. That puts downward pressure on prices.
The availability of so many new low-priced substitutes also increases the elasticity of demand (i.e., consumer price sensitivity), even for differentiated goods.
Value shifts to the complements that are still scarce. Complements are simply goods and services that are used together. Usually, when one gets cheaper, the other gets more valuable. For instance, hot dogs, buns, mustard, sauerkraut, napkins, and beer are all complements. If the price of hot dogs fall, that will increase demand (and pricing power) for buns. Categories of complements include necessary hardware or software (e.g., gaming consoles and games); functional or experiential enhancements (e.g., high-end headphones and phones); support services (e.g., training programs or customer support for enterprise software); access or distribution (e.g., broadband service and streaming services); ecosystems and networks (e.g., app stores and apps), etc.
As consumers become more price sensitive and value shifts to complements, competitors who control those complements have an incentive to drive the price of the commoditized product to marginal cost to increase demand for their goods.
In the case of information goods like media, marginal cost is essentially zero, so pricing moves toward zero too. Free has a very strong gravitational pull, because there is a lot of friction between paying something and paying nothing.
Maybe this all sounds theoretical, but it happens all the time across a wide range of sectors:
Agriculture: When yields rose, food got cheaper and value shifted away from raw commodities toward distribution, brand, and processing.
Consumer electronics: As the cost of chips fell, the price of TVs, phones, and other goods moved toward marginal cost and value shifted to services, brand, and ecosystem lock in.
PCs: As PCs became modular and commoditized, prices fell and much of the value shifted to software ecosystems and operating systems.
Photography: Lower digital processing and hardware costs pushed the price of digital photography toward free and value shifted to editing software, cloud storage, and social networks.
Stock trading: Electronic trading drove the marginal cost of a trade to zero. Value shifted to order flow, margin lending, bundled financial services, and ecosystem lock-in.
Enterprise software: In open source markets, the cost of creating code is essentially zero. Value shifted to support, integration, customization, switching costs, and network effects.
The idea that “all media is marketing” is the media-specific expression of a more general law: when marginal costs of a product fall to zero, the product stops being the business.
So, while one implication of falling content creation costs is that value will shift to the complements, another implication is that content creation itself will no longer be profitable in most cases. Whether you want to call it a loss leader, customer acquisition cost (CAC), top-of-funnel, or just “marketing” for whatever complements remain scarce, the “content unit” will become a cost center.
Media *Sells* Marketing vs. Media *Is* Marketing
I should be clear about what is new here.
Media companies currently make money by selling marketing (duh.) Most media businesses are at least partially ad supported and advertising makes up about half of all media revenue (Figure 3).
Figure 3. A Little More than Half of All Global Media Revenue is Derived from Advertising
Source: PwC, Omdia.
By “all media is marketing,” I mean something else. In the traditional model, content is the product, and ads are a way to capture value from those who need to rent attention to sell their goods (whether toothpaste, cars, or telecom services).
Today, media companies sell advertising to companies that use it to sell their goods. In this new model, the only sustainable profits are in owning the complements themselves.
When creation costs collapse and competition explodes, however, content itself stops being profitable. At that point, the only sustainable profits are in owing the complements. Media isn’t what you sell, it’s what you spend: a top-of-funnel cost whose purpose is to drive demand for higher-margin products, services, or communities the media company owns directly.
Connecting Some Dots: It’s Already Happening
So: barriers to entry for a product come down, prices fall, elasticity increases, value shifts to complements, and the product becomes top-of-funnel to those complements. The idea that will happen across media may seem extreme, but if you connect some dots, you can see that this pattern has been playing out for years. It’s especially evident in those forms of media that already have low barriers to production.
Media Prices are Deflating
It may not seem like it, as Netflix, Spotify, Disney+, cable operators, movie theaters, and Apple TV+ raise prices, but in general the trajectory of content pricing is down. I discussed this at length in Price Deflation in Media: decades after the internet disrupted media distribution, new forms of media still monetize at a much lower rate per hour of consumption than traditional media.
Consider Figures 4, 5, and 6. Pay TV still monetizes 50% higher than Netflix and 3X YouTube; console games monetize 70% higher than PC and almost 2x mobile; and a CD monetizes about 10x more than Spotify. The idea that increasing supply pressures prices is Econ 101, but here it is in action. Logically, if GenAI enables even more supply, that will yield even more price pressure.
Figure 4. In the U.S., Last Year Monetization per Hour of Linear Video Was 50% Higher than Netflix and 3X YouTube
Source: Nielsen, S&P Capital IQ, MoffettNathanson, The Mediator estimates.
Figure 5. Globally, Console Still Monetizes Much Higher than PC and Mobile
Note: Based on NewZoo estimates of global revenue, gamers, and playtime for each category. Source: NewZoo, The Mediator estimates.
Figure 6. Monetization per Hour of a CD Purchase is Probably ~10X Spotify
Note: CD purchase assumes $10 average price, 45-minute average playtime, and ~20 plays per CD. Spotify monetization is estimated between $0.04-0.08 per hour, based on Spotify 2024 revenue, average MAUs, and assumptions on average weekly usage based on IFPI survey data. Company reports, RIAA, IFPI, The Mediator estimates.
Box Office Woes Illustrate Rising Elasticity
Another part of the equation is that rising cheap substitutes will make consumers more price sensitive (in econ-speak, you’d say “demand will become more elastic”), even for differentiated products. Today, measuring elasticity for individual content assets in media is difficult. So much content has shifted to subscription-based models that the marginal cost of consumption is effectively zero—once you’ve subscribed, watching an additional show or listening to another song is free. That makes it hard to see how changes in price lead to changes in demand.
But movies are one of the few remaining pay-per-unit experiences, which makes theatrical attendance a useful lens. Rising price sensitivity is arguably the biggest problem in the movie business today.
The moribund performance of the box office is a source of hand wringing in Hollywood. As shown in Figure 7, last year, box office in North America was down almost 30% from its pre-COVID peak.
Figure 7. Last Year, Box Office Was Down Almost 30% from its Pre-COVID Peak
Source: Box Office Mojo.
The story is even worse when looking at attendance. While revenue has been propped up by price increases, as shown in Figure 8, last year attendance was down almost 40% since 2015 (a somewhat arbitrary choice, but this was the year Netflix domestic subscribers surpassed 1/3 penetration of US TV households).
Figure 8. Last Year, Theatrical Attendance Was Down ~40% Since 2015
Source: The-Numbers.com.
The failure of the box office to bounce back post COVID has resulted in a lot of finger pointing. Many worry that Hollywood has turned risk averse and unimaginative and its reliance on superhero movies and reboots, sequels, and spin-offs is driving moviegoers away. Perhaps. But the simplest explanation is that we are seeing increased price elasticity at work.
The simplest reason why box office is struggling is not that today’s movies are unappealing: with so many free substitutes available, consumers have become much more selective.
Most analysts peg the cost of a night at the movies at $15-20 per head, when accounting for tickets and concessions. Throw in a babysitter and it’s even more. Today, there is a vast amount of content available on streaming services and, if you already subscribe, the marginal cost to watch is free. It’s tough to compete with free. The Occam’s Razor reason that box office is struggling: with so many free substitutes available, consumers have become much more selective.
Content is Increasingly a Loss Leader or Top-of-Funnel for Something Else
We’re also seeing increasing evidence of media acting as loss leader or top-of-funnel for complements. This is evident across video, music, gaming, and the creator economy:
Video: Amazon and Apple Use Video as a Loss Leader
Although they are no longer so new, recent entrants into video, like Amazon and Apple, are using video partially or entirely as a loss leader. Given the success of Amazon advertising, it is likely that Amazon Prime Video is now profitable (and management claims that it is), but that took 14 years. In prior years, Amazon executives instead claimed that Prime Video viewers had much higher renewal rates of Prime and Prime subscribers buy more stuff. According to The Information, Apple is losing $1 billion annually on its Apple TV+ streaming service—implying it must see some other benefit, such as further lock-in into its device ecosystem. As another example, last year I wrote about Invisible Universe, a digital first animation studio that explicitly states it doesn’t consider video to be a profit center. Instead, video is a tool to create franchises that are monetized in other ways, like selling books or merchandise.
Music: Recorded Music is Promotion for Concerts
Music is a harbinger of what happens to all media as barriers to creation fall. Anybody can cut a track and upload it these days. According to Luminate, 100,000 tracks are uploaded to digital streaming providers (DSPs) every day, of which only 9% come from major labels. Spotify has previously pegged the number of “professional and professionally aspiring” artists on its platform at 200,000, less than 2% of the 12 million who have uploaded at least one song. And that’s all before any real effect from GenAI.
The practically infinite amount of music available for free (or at least ad supported) on Spotify, Soundcloud, and YouTube (among others) keeps effective pricing of recorded music low. Artists often complain about the low per-stream payouts on DSPs, but that’s because the DSPs themselves make very little per stream. Referring back to Figure 6, I calculate that Spotify only generates $0.04-0.08 per hour of music consumption. Spotify, like other DSPs, doesn’t pay out per stream, it distributes a portion of its revenue based on stream share. Over the years, various estimates have pegged its effective payout at $0.003-$0.005 per stream—basically 1/3 to 1/2 a cent.
As the price of music information goods has fallen, value has shifted to the scarce complements, namely music experiences.
As the effective price of recorded music has fallen, value has shifted to scarce complements, namely concerts. You can see this in Figure 9. As shown, growth in live music revenue has substantially outstripped growth in recorded music since the advent of digital distribution in 2000. And while the monetization per hour of consumption has declined for recorded music over that period (revenue is up modestly and usage is up a lot), average ticket prices for the top 100 music tours are up more than threefold since then (Figure 10).
Figure 9. Live Music Growth Has Substantially Outstripped Recorded
Source: IFPI, Goldman Sachs.
Figure 10. Average Concert Prices are Up Threefold Since 2000
Source: Pollstar.
Interestingly, even the biggest stars effectively use recorded music as top of funnel—even the biggest star. Last year, Spotify again crowned Taylor Swift as its artist of the year, with 26.6 billion streams. If we stick with the high end of the per stream estimate above, or $0.005 per stream, that would yield ~$135 million in payouts from Spotify. Throw in streams on YouTube, Apple, and smaller DSPs and physical sales, and let’s say her music generated ~$300 million last year. Her Eras Tour surpassed $2 billion in sales (albeit over almost 2 years). The movie of the tour, the aptly named Taylor Swift: The Eras Tour, grossed $261 million globally, probably not far from her recorded music revenue that year. Her albums are top-of-funnel.
Gaming: Mobile Gameplay is Free, so the Value is in Complements
Another harbinger for the rest of media is mobile gaming. Free gaming engines for small developers, global app stores, and cheap cloud-based tools have driven development costs toward zero. The supply of games has exploded and the price for most games has moved to zero too, as most mobile games are now free-to-play. Historically, game developers primarily monetized gameplay. Today, gameplay is free. They have to monetize a complement instead.
In mobile, most gameplay is free, so developers need to monetize a complement instead.
These complements include status (like skins, clothing, emotes, and other non-gameplay digital goods); access to premium areas; expansion packs; time (energy refills, speed ups); community (private servers); marketplaces (through listing fees or commissions), etc.
Creator Economy: Media is Marketing
Perhaps the closest parallel to where all of media may be headed is the creator economy, where barriers are functionally zero. Supply is practically infinite and, although the power laws are extreme, even the most successful creators at the very head of the curve are increasingly using media—their videos, posts, or podcasts—as marketing for something else. This “something else” is often bigger than the media business itself.
According to Bloomberg, last year MrBeast lost $80 million on his media businesses, but made $250 million of revenue and $20 million profit on Feastables, his chocolate business.
Mark Rober’s subscription toy business, CrunchLabs, reportedly generates more than 10x his revenue on YouTube.
Prime beverages, founded by Logan Paul and his partner KSI, generated more than $1 billion in revenue in 2023.
This is true even of lesser known creators. For instance, Slow Ventures just invested $2 million with Jonathan Katz-Moses, who produces content about woodworking. They invested not because of the revenue he generates from his YouTube posts, but his booming business selling tools. As the lead partner told TechCrunch: “the role of creators has greatly changed in the past decade or so, from creators mainly focused on media and brand dollars to those now focused on building real, ‘off-platform,’ businesses.”
Prominent business writers give away their content to make money elsewhere. Scott Galloway writes on Medium for free, but uses it to market his podcasts, speaking engagements, or sometimes his courses. Packy McCormick publishes a Substack, Not Boring, including incredibly in-depth work (like this 40,000 word opus about the falling costs of electricity), for free. He monetizes partly through advertising, but it has also enabled him to launch a VC fund, Not Boring Capital.
Whether it is Emma Chamberlain’s coffee business, Alex Cooper’s hydration beverage line, the Sidemen selling out Wembley for a charity football match, or podcasters like the Acquired guys selling out live events, creator media is increasingly top of funnel or even just acquisition cost for something else.
The Dwindling Exceptions
The title of this post is "What if All Media is Marketing?” Absolutist words like “all,” “always,” and “never,” are dangerous. Even if the barriers to creation completely (another absolutist word) collapse, some media will retain profits. The Taylor Swift stats I gave above are an example. Although her recorded music revenue is dwarfed by her tour, it is surely profitable. To state the obvious:
Key sports rights. In many cases, these are government sanctioned monopolies, among the last true shared cultural experiences and, I believe, impervious to GenAI. (I don’t think anyone wants to vicariously experience “the joy of victory and the agony of defeat” by watching synthetic athletes.) Sports will likely retain pricing power.
Mega-franchises. A well-executed Harry Potter series or Star Wars installment will still be highly profitable. So will Zelda, GTA, and EA FC.
Mega-stars. To stick just with some ‘B’s: Bad Bunny, Beyonce, and Bruno Mars will still be stars.
The problem with this list, of course, is that this is the most rarefied of air. As the supply of content increases and power law distributions get ever more extreme, it will no longer be possible to run a media business under the assumption that content itself makes money.
What’s a “Content Company” To Do?
Remember where we started this post. We don’t yet know whether GenAI will really drive the costs of creation to “zero.” But, over the next 5-10 years, that’s the direction we’re heading. And, if we go all the way, what waits at the end of that road is very clear: when costs fall to zero, the product stops being the business. It becomes the funnel to whatever complements remain scarce. So, what can content companies do?
Organize around the complements. Some media companies are already organized around franchises and multi-format exploitation of IP. Disney is the canonical example. After all, Walt Disney sketched out this idea almost 70 years ago (Figure 11). This entails thinking about content assets as franchises and owning the tried-and-true traditional complements, whether live events, experiences (theme parks and other location-based entertainment), consumer products, or transmedia platforms (film, TV, music, gaming, publishing).
Figure 11. Walt Disney’s Original Vision for Disney Was Multi-Format Exploitation of IP
Source: Disney.
Develop new scarce complements. Companies should also develop new forms of scarcity, which may require new business models. A great example is mobile gaming, mentioned before. When development costs went to zero, developers launched free-to-play models and created (or commercialized) new complements, like skins, emotes, premium access tiers, and communities. In console games, live services, like EA FC Ultimate Team, are a powerful suite of complements built around status, community, marketplaces, and sometimes live events. MrBeast and Mark Rober created new packaged goods complements, as also mentioned above. K-pop bands have subscription fan clubs, with exclusive merchandise and content. Livestreamers monetize emotes, badges, private Discord servers, merch drops, and callouts on stream. Similarly, Substack enables writers to offer subscriber-only chats and livestreams. The common thread in all these examples is that they all create scarcity on top of the essentially free or cheap product.
If the thing you sell is abundant, you need to manufacture scarcity.
An interesting question is how GenAI-native applications will enable new scarce complements. That’s probably a better topic for another essay (I touched on this before in GenAI Video as a New Form), but imagine being able to chat with AI versions of your favorite characters or artists? Create personalized versions of content? Convert content from one format to another (like watch a video recreation of an article)? Get access to exclusive tools or content assets for fan creation? These applications will evolve in emergent and therefore unexpected ways, but GenAI will likely open up all kinds of new scarcities.
GenAI will likely enable all kinds of new scarce complements.
Bundle complements. Another approach is to bundle complements together to increase consumer lock-in. The New York Times’ multi-product bundle (news, games, cooking, The Athletic, Wirecutter) is a textbook example: each complement is valuable on its own, but bundled together they are much harder to walk away from. Amazon Prime and Apple services bundles are other examples.
Historically, in media the content was the product. In the future, the content will be an input into a broader ecosystem—a funnel for complements. This isn’t a small shift.
Today, most legacy media companies are structured around individual content assets. They may pay lip service to franchise management, but the economic engine runs on producing individual units of content (the film, series, book, game, etc). The project is the revenue source and anything else—merchandise, live events, licensing—is considered “ancillary” and opportunistic. (That’s actually the term of art in media: “ancillary sales.”) It is also often managed by separate divisions.Company cultures revolve around creative success (development executives, editors, A&R execs) and prestige and money are tied to hits, not ecosystems.
What will change now is that what used to be ancillary will need to become primary. That will require several big changes:
Media companies will need to reorganize around complements. In my recent post All is Not Lost for Traditional Media, the subtitle was “New Moats and New Opportunities.” The word “opportunities” was a mistake. “Imperatives” would’ve been better. Opportunities are optional. This is not optional, it’s existential. If most content ceases to be a profit center, the only way forward is to reorganize media businesses around the scarce complements and focus more on ecosystem design than content development. Complements have to be the core of strategy, culture, org structure, and compensation. If content is top-of-funnel for something else, the people who manage franchises, community, distribution, and monetization across complements will be just as important as development executives.
The success of content will need to be measured differently. It will need to be evaluated holistically, not based on the weekend box office, ratings, concurrents on Steam, spot in the Billboard charts, or number of likes.
Content creation businesses will need to be run like other CAC/LTV businesses. That means knowing who customers are, how they engage with content, and how they are monetized over their life. That will require a fundamentally different approach to data management and putting these analytics at the center of investment and operating decisions.
Like all shifts, this will prove an opportunity for media companies that can position themselves accordingly and some already are. For others, it will be a hard pivot.
This occurred for two reasons, which I detailed in Chapter 3 of Infinite Content: the internet unbundled information from infrastructure, so it was no longer necessary to own the expensive cables, lines, towers, satellites, or retail stores to distribute media; and by virtualizing distribution into software, it put those costs on a downward sloping curve.
Are the graphs of box office sales and music sales adjusted across time for inflation? That seems crucial to understand what is going on. If the sales are going “up” because the dollar just buys less than it did before, that’s a different story.
Really excellent piece, Doug.