- Scott Galloway, the bestselling author and well-known tech-industry pundit, is a professor of marketing at New York University’s Stern School of Organisation
- The following is his recent article, republished with consent. It initially ran on his own blog, “ No Grace/ No Malice.”
- Galloway lays out how huge tech is slowly sneaking into controlling the entertainment market through the streaming wars.
- ” What happened in retail, over the last years, is about to happen in entertainment media. This juggernaut of an industry, with hundreds of billions in value and cultural impact like no other market worldwide, is being featurized as a device to sell batteries and toilet paper,” he says.
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Jack Warner, co-founder of Warner Brothers, constructed an empire that birthed films including “Casablanca,” “Batman,” and “The Shining.” Warner built a 13,600- sq-ft Georgian-style estate in the 1930 s, supposedly, and unlikely, with the wood floor that Napoleon was basing on when he proposed to Josephine. It was typically the site for a who’s who of the golden era of Hollywood, the archetypal studio magnate’s estate.
David Geffen, who likely amassed a larger fortune from music than any 20 th-century figure, purchased the estate in1990 In 2009 Mr. Geffen, no joke, called me on my cell and asked if he might purchase the New york city Times (I was on the board).
The most powerful males in Hollywood have occupied this house, and still do. Jeff Bezos now owns this storied address as he constructs the best collection of guy caves ever put together. I’m captivated by Mr. Bezos’s midlife crisis, and how the streaming wars embody the perversion of our democracy and economy. The idolatry of innovators infection continues to spread out.
What tech has done to retail is unfolding in media. Each year countless youths move to LA to pursue a career in home entertainment. And each year, tens of thousands leave– the land of broken dreams. No other area has a monopoly over an industry the way LA has actually assembled the best skill in entertainment. Up up until now, the culture of creativity and domain proficiency have worked as shark repellent for the residents of Malibu. No more. Jeff Bezos has the cash to break a great deal of dreams.
What happened in retail, over the last years, will take place in home entertainment media. This juggernaut of an industry, with hundreds of billions in worth and cultural impact like no other market in the world, is being featurized as a device to sell batteries and toilet paper.
Many big home entertainment media firms (Comcast, AT&T, Verizon, Netflix, Fox, Sony, and so on) will cede worth to Amazon and Apple over the next decade. Similar to Walmart, Disney is the only incumbent with the properties, leadership, and investor base to land counterpunches on the purveyors of paper towels & AirPods.
This week I shared my take on the streaming wars with 700 individuals tuning into our livestream We built a framework to separate winners from losers.
In the streaming wars, everybody provides great content. If you were on a deserted island with nothing to do except watch streaming video on need, any of the gamers would keep you occupied.
My associate Sonia Marciano teaches to discover success, find the measurement with the best difference– the greatest delta in between best and worst. In the streaming wars, both flywheel and distribution provide the biggest difference, and monopolies control those categories. Many of the above terms are obvious, except flywheel
A flywheel is a disk that shops kinetic energy and after that spins it out to a close-by engine. In the context of service, as the flywheel turns it increases output or revenue without increasing input or expense. The supreme flywheel is Amazon. Amazon Prime attracts buyers who want a broad assortment of items with fast satisfaction. These subscribers also delight in the advantages of services like Amazon Prime Video, which increase the stickiness of Prime and time invested in the platform.
My coworker Aswath Damodaran says Amazon isn’t an ecommerce business or a cloud business, however a disturbance platform that through terrific execution and unequaled access to low-cost capital, utilizes the flywheel effect to spin into entirely different industries.
The sheer volume of individuals on Amazon (82%of families in the US) makes the platform more appealing to advertisers. Amazon Advertising is now a $15 billion service, making it, in 2018, the third-largest advertiser in the world behind Facebook and Google More advertising leads to more products, which results in more purchases, which causes greater financial investment in Amazon Prime Video to continue to increase the stickiness … and the wheel flies.
This flywheel is now the mother of all chainsaws wielded by a bald 56- year-old in a hockey mask.
Apple owns distribution through iOS (the most affluent 1.4 billion individuals on earth). That’s the island all survivors fight on. Apple gathers a toll on every SVOD service through the app shop. In addition, the Cupertino firm has greased the rails they own, and can remove most of the friction from the 19 actions needed to download and sign up for Netflix on your iPhone (vs. 3 actions for Apple TV ). Individuals will choose for a sh– ty seat in coach on a Plane A320 vs. a first-class cabin on the Queen Mary 2 to get from London to NYC.
In the context of the streaming wars, SVOD adds momentum to the flywheel. Motion pictures and home entertainment evoke powerful feelings. The connective tissue of the flywheel is progressively emotion. The NPS score (consumers’ emotional connection to a company) is negative to zero for ecommerce and web business, but it’s strong for SVOD companies. Caring “Fleabag” implies you’ll purchase your next toaster from Amazon, not Target or Williams-Sonoma.
The outcome? In the last 13 months Apple and Amazon have included Disney, AT&T/ Time Warner, Fox, Netflix, Comcast, Viacom, MGM, Discovery, and Lionsgate to their market capitalization. Check out the last sentence once again.
I’m not even sure Netflix gets out alive. Netflix is now the United States economy, vulnerable to a spike in rate of interest as it handles increasing quantities of financial obligation to fund incredible financial investments in initial content. The initial gangster can’t rely on gross margin dollars from Mandalorian action figures, handsets, or paper towels (no flywheel). The key concern is can Netflix’s first-mover advantage/skill be duplicated in other markets.
The worst-performing unicorn in history
No, it’s not WeWork, but Quibi. Founded in 2018, Quibi boasts a first-ballot hall of fame tech leader (Whitman) and among market’s excellent storytellers (Katzenberg). The firm has actually raised $ 1.4 billion from some of the most sophisticated value-add investors and partners. Because Quibi was announced 24 months back, Apple, Amazon, and Netflix have spent around $40 billion on original scripted material as Whitman and Katzenberg do interviews with Range attempting to describe their non-strategy method. Over before it started.
Back to Jack (Warner)
Paradoxically, the business managed by the original resident of Bezos’s brand-new house, Jack Warner, underwent antitrust action by the DOJ in1948 Warner Brothers was forced to different production and distribution of motion pictures from showing them in theaters.
Fast-forward to today, when the only thing standing between Hollywood and the Night King is Assistant Attorney General Makan Delrahim, who supervises the DOJ’s antitrust division. Put another way, Los Angeles will become the land of the undead.
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