The Medium
Disney+ Technology, YouTube Creators, Generative AI Tools & "Free Money"
Good afternoon!
The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
On Tuesday, Disney CEO Robert Iger conceded to the 2024 Morgan Stanley Technology, Media & Telecom Conference, “We need to be at Netflix’s level in terms of technology capability.”
The diagnosis is right—as I argued three years ago—and the timing is poor. It has been five years since Iger publicly rejected the need for Netflix-type recommendation algorithms to The Wall Street Journal: “I think if people are clicking on Mickey Mouse, they mostly want Mickey Mouse.”
Mickey Mouse— specifically, Walt Disney’s 1928 “Steamboat Willie” version—is now in the public domain. Writing the prompt “drawing of Mickey” in the Stable Diffusion image generator, then following it with any description (e.g., “holding a sword”), will generate endless variations of Disney’s first animated Mickey Mouse (but which copyright law also forbids them to label “Mickey Mouse”).
In this use case, who needs Disney+ anymore to click on Mickey Mouse if they want Mickey Mouse? Isn’t it better to create and engage with a version of Mickey Mouse that delights them personally?
There is tension here between a subscription platform with billions invested behind it and a new, free platform with disruptive technology delivering a version of its most valuable IP. At the root of it lies a dynamic I described in last May’s "It's about the free money... and it's about the free money”:
- The TV and movie industries — as we understand them today — were subsidized by “free money” from (1) the DVD and VHS rental market, (2) affiliate revenues from the linear TV business model and (3) zero interest rate policies (ZIRP) from central banks (which drove streaming).
- That source of capital is steadily disappearing as cord-cutting accelerates and movie distribution evolves towards streaming.
- Nature abhors a vacuum, and it is unclear what will replace “free money”.
So, if the past is precedent—and I believe it is—understanding which platform will ultimately win requires understanding what will be the next source of “free money”. One answer lies in venture capital, which funded Generative AI and AI-related startups with nearly $50 billion in 2023, according to Crunchbase. The other is the YouTube ecosystem, where YouTube is offering free AI tools to all creators.
Key Takeaway
The smartest bet in the media business has been to follow the "free money". The disruption of streaming subscription models by generative AI tools and YouTube's creator program has a lot in common with past disruptions with "free money" models.
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Total time reading: 5 minutes
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