Big Media Growth Playbook

The woes of the big media companies (Disney, Fox, NBC Universal, Paramount and WarnerBros. Discovery) have been well documented: linear TV is in decline; streaming has not proved the panacea most hoped; the box office is weak, with many prospective blockbusters disappointing of late; the ad environment is tepid; and two strikes are underway, both the WGA and SAG-AFTRA, with little sign they’ll be resolved soon. And while generative AI isn’t affecting the business yet, in recent weeks the threat it poses has come center stage (something I’ve written about a lot over the last six months, such as here, here, here and here). Investors are bearish, the press is brutal and morale in Hollywood is turning ever darker. We know the bear case, but what could go right?Some of the conglomerates are clearly positioned better than others, but the reality is that, in general, it will be very challenging to grow. The media conglomerates are essentially video companies (>80% of revenue); most of this is linear (~60%), which is declining; the overall video business is already massive (in terms of time and money); and video arguably over-monetizes relative to other forms of media. For perspective, a 1% annual decline in the U.S. “video business” (linear, streaming and studio) over 5 years would produce a $10 billion hole that needs to be made up somewhere else. But the conglomerates have a few things going for them. Some of their problems are self-inflicted and can therefore be reversed; people spend an enormous amount of time watching video; they make a product people love; they own or control vast amounts of IP; and while Internet economics are always value destructive for incumbents, they can try to exploit lower costs. This yields a framework for thinking through potential sources of growth. They can “fix it” (reverse some of the destructive decisions make in the rush to streaming, a process that is already underway); better monetize attention; better monetize engagement; capitalize on Internet economics; or shrink-to-grow. Below, I provide an overview of specific opportunities in each category. Fix it (operational optimization, industry structure rationalization and “verticalization” of video offerings); better monetize attention (addressable/programmatic advertising and shoppable TV); better monetize engagement (gaming/metaverse, XR, NFTs and fan creation); exploit Internet economics (international streaming and lower cost production technologies); and shrink-to-grow.

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