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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”.

Each fiscal quarter, The Medium identifies three or four new trends that have momentum and seem poised to play out at a larger scale in 2023. These key trends pinpoint dynamic and constantly evolving developments in the media marketplace that are emerging from incremental shifts or fundamental changes. The bi-weekly mailings analyze these trends as developments emerge in real-time. 

Read the three key trends The Medium will be focused on in Q4 2023. This essay focuses on "In the shift from wholesale to retail models, there are many business models that delight consumers but no single, dominant one."

Netflix had a good Q3, reporting results “ahead of forecast” with revenue of $8.5B, 9 million net added subscribers, and an operating margin of 22.4%. Also this week, Disney filed an 8-K report to recast its 2023 financial results through its fiscal Q3 to break out ESPN as a separate segment from the rest of the business. The report showed Disney has lost $2.1 billion in its Direct-to-Consumer segment to date, though quarterly losses have dropped from almost $1 billion in Q1 to $500 million in Q3. 

The contrast mirrors the rationale for the recent carriage deal between Charter and Disney. I wrote in Monday’s essay “Reconsidering Streaming's Subscription Models” that the deal “seems to be a step back to the future of the TV Everywhere model” because Disney's struggles have forced it to pivot to a wholesale model with Charter. Meanwhile, Netflix is continuing to find revenue growth with a retail first, consumer first business model. 

Liberty Media CEO John Malone suggested in an interview this week the deal “allows cable to start selling hybrid video services, mixtures of streaming and linear.” He then predicted those hybrid services “will prolong the life of linear and continue that revenue stream” and “slow down the transition of big tech becoming the primary provider of entertainment.”

I do not buy Malone’s sales pitch here. Consider the following scenario. If I want to consume older movies or shows from the pre-streaming era (before 2019), is that experience best within:

1. Netflix 
2. A legacy media Subscription VOD (SVOD) or ad-supported VOD (AVOD) like Disney+,
3. A free ad-supported TV service (FAST) or
4. A cable bundle?

The Disney-Charter deal creates one more free option—it basically converts Disney+ from #2 into #3—but price is not the only consideration in that scenario.  The world is more complex than Malone describes it: Older content is hard to find due to complex syndication rights deals and poor legacy media streaming user interfaces. Disney may ultimately benefit from a TV Everywhere, “hybrid video service” bundle offering. But no other legacy media SVOD or AVOD services will.

Key Takeaway

The Storytelling Moat has created additional complexity and frustration for consumers in the digital world. Netflix's successful Q3 proves The Distribution Moat is growing in value, and therefore Charter's bet on return of TV Everywhere will be, at best, a stopgap solution. 

Total words: 1,600

Total time reading: 6 minutes