The Future of Media: An Epic Battle

The media landscape is changing rapidly, making it difficult for policy to keep up. Top-ranked Wall Street analyst Laura Martin will discuss her newest report, “The Future of Media: An Epic Battle,” in which she explores the changes and their implications.

The Internet giants control global distribution platforms with billions of consumers visiting them each day. Each are planning to spend billions of dollars in 2018 to create original video programming in an effort to disrupt and displace the incumbent TV and film ecosystems. Who wins this epic battle has broad ranging consequences for consumers and policy makers.

Challengers. The “Internet Aggregators” built their fortunes by aggregating consumers (FB), information (GOOG), products (AMZN), content (NFLX), and apps (AAPL). Each of these Internet Aggregators has announced it will spend $3-8 billion in 2018 to create premium video content in an effort to take revenue, viewers, and time away from the incumbent TV and film content creators and distributors. They wield significant competitive weapons including: 1) deeper pockets; 2) a lower cost of capital because Wall Street holds them to different valuation standards; 3) global distribution and revenue footprints; 4) mobile dominance; 5) loss (ie, negative ROI) tolerance. Ominously, they move fast without regard to ecosystem health, as evidenced by the value destruction of several historical media ecosystems. We believe that their war will ultimately be against one another, but their battle over TV and film economics represents an important skirmish in that end game.

Champs. From an over-the-air US TV industry generating less than $10B in revenue in 1980, the US TV ecosystem spent the next 35 years together building one of the most successful US consumer products of all time: the linear TV bundle. At its peak reach in 2010, 88% of US households paid a subscription fee to the TV ecosystem for access to 250+ Pay-TV channels. Although mega-bundle Pay-TV subscribers are now declining, revenue has continued to rise, reaching about $170B in 2017. The US TV ecosystem has proven robust because it has hundreds of frenemy corporations negotiating (a core competence) unique long-term contracts with each other that forward their own best interest. Whenever any company gets an edge, others follow. Also, it’s an ancient ecosystem, meaning high specialization and companies that succeeded by out-competing every company that came before.

Best Questions. Will Internet Aggregators successfully disrupt the incumbent TV and film ecosystems? What does that fight look like and what do “defeat” and “victory” mean? What will the video content and distribution companies look like after the battle? Laura Martin has a point of view. She will discuss her report and address these questions, and yours, at this event.

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