About PARQOR

PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business. Through in-depth analysis from a network of senior media and tech leaders, Andrew Rosen cuts through what's happening, highlights what it means and suggests where you should go next.  

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This past Saturday marked the start of Q4 2022, and the beginning of the final stage if a roller-coaster ride of a year in media, now one of the most dynamic marketplaces out there.

My goal for Q4 is to reveal the trends and market signals that identify the seismic market shifts in media that are poised to play out in 2023.

I think a “seismic” market signal is a market development that demands us to “stop and look” or “stop and listen". It's when key pieces on the board have moved, it’s important to understand the how/when/where/why/who of the pieces that moved, and the signal helps us to predict what comes next. 

I think the best use of my time and your time in Q4 2022 is to focus on three or four buckets of these “seismic” market signals.

I will still keep an eye on seven key trends that I curate articles for each Monday under “Must-Read Monday AM Articles” (see below). But, after conversations with readers and executives in my network there are four trends that stand out as gaining momentum and seem poised to play out at a larger scale in 2023:

1. Media companies have consumer credit cards on file. What happens next?
2. Linear channels seem doomed. What happens next?
   
3. There is no such thing as a TV household anymore. What happens next?
   
4. Hollywood’s future lies in the creator economy. What happens next?
   

Obviously, in a dynamic marketplace such as media new trends will inevitably emerge. But, of the many trends I've seen and written about over the past year, these four are the most important and far-reaching in their consequences.

[Author's Note: This essay is available to all subscribers.]

Total words: 1,300

Total time reading: 5 minutes

1. Media companies have consumer credit cards on file. What happens next?

I have been describing this as “Consumer Data Platform”  or CDP business logic”, to date. But that may be one step ahead of where media business models are. As I wrote on Friday, legacy media companies with streaming services now face the question from Wall Street: “OK, you have consumers’ credit cards. Can you milk these cash cows?” Meaning, they can monetize them with streaming, what else can these companies get their consumers to pay for?

I have labeled it “CDP business logic” because CDP software is arguably the best software and operating model available for media companies to monetize consumers as they pivot towards direct-to-consumer (DTC) business models. To remind you, a CDP is software that combines data from multiple tools to create a single centralized customer database of data from all consumer touch points and interactions with a product or service. 

But, a Forrester study commissioned by Zeta Global in January 2022 found that only 10% of CDP owners today feel their CDP meets all needs, and that number drops to 1% who believe their CDP can address future requirements. In other words, even if a CDP is the future of media business models in DTC, it’s currently a suboptimal solution and we’re very much in the early days.

So, as Wall Street demands more average revenue per user (ARPU), a CDP business model is a solution that offers a helpful framework for what media businesses "should" look like as they try to monetize users via DTC in channels beyond streaming, and why some companies are closer to that outcome than others.

2. Linear channels seem doomed. What happens next?

To date, much of the market focus has been on the impact of cord-cutting on legacy media: as these trends continue (down 6.1% overall in Q2, according to Moffett Nathanson), and all prime time ratings drop except for NFL viewing, there is the looming question of when the model stops making sense. Yet, “linear TV is still paying the bills. Linear TV revenue, at $86.3 billion, is nearly four times that of streaming ($22.6 billion)”, as analyst Craig Moffett recently told NextTV’s Mike Farrell.

Peak TV production continues - last December 2021, Ampere Analysis projected total global content investment will exceed $230 billion. Morgan Stanley forecast that the top spending Hollywood giants — Disney, Comcast, Warner Bros. Discovery, Amazon, Netflix, Paramount, Fox, Apple, Lionsgate and AMC Networks — would collectively spend north of $140 billion across entertainment and sports content in 2022. 

The question is, what happens when Peak TV production hits a wall because of cord-cutting? As I asked last month in “Why The End of "Peak TV" May Bring "Jurassic Park"-type Chaos”:

Survival is very much the mindset of the post-production marketplace. What if a studio like Disney or Warner Bros. decides to cut back its theatrical releases by one movie (à la Batgirl): who gets impacted by that in the short-term and what are the longer-term consequences?

Or, as an executive asked me, what happens when an AMC Networks or a Paramount network disappears due to lack of demand, how will the post-production marketplace adapt to the sudden drop in productions?

That question, on its own, is interesting. But then there are three additional levels to it. 

• As gaming production ramps up for larger audiences, media production will  increasingly need to compete for visual effects editors schooled in Epic Games' Unreal Engine (a gaming VFX engine used increasingly in video production); 
• Artificial intelligence is beginning to disrupt what we understand to be a produced video; and,
• Despite cord-cutting, NFL and sports betting will keep linear alive.

These are all longer term trends and they are all playing out *now*.

3. There is no such thing as a TV household anymore. What happens next?

Back in August, I framed this question as “How do we think about the future of TV advertising when the TV is no longer the center of the living room, but eMarketer and Nielsen are telling us it is?”

I argued there were offers two obvious answers:

1. The service with the most scale and the best first-party data will win. That may be YouTube with 135MM CTV users, or the smart TV operating systems with the most penetration (Amazon, Comcast, Roku or Samsung); or,
2. The future of TV in the home trends towards fragmentation and finding audiences across devices beyond the TV because Connected TV advertising is such a mess.

So, there is an emerging tension between the narrative around CTV solving for the "attribution gap", CTV not always solving for that gap, and the problems emerging from Apple's Anti-Tracking Transparency (ATT) initiative, which has killed the ability to track consumers via third-party cookies.

The emerge of other smart devices in the household (see Amazon Echo story, below) opens the door to the outcome of CTV being less important to ad buyers, and there is no consensus yet as to the most optimal means of reaching consumers in a post-ATT world.

4. Hollywood’s future lies in the creator economy. What happens next?

Again, YouTube and now YouTube Shorts reaches 135MM Connected TV users. TikTok has over 1B users worldwide, and 136.5MM users in the U.S. So they have achieved enormous scale.

They also create a difficult challenge for legacy media: creators like Jimmy Donaldson aka MrBeast and YouTube’s Partner Program are actively evolving and redefining the definition of premium content, as are TikTok creators. 

A paradox has emerged for legacy media and Hollywood especially, which I've labeled “The Netflix Paradox”, “'The Office' Paradox” or “The YouTube Paradox”:

• Streaming services have invested billions into exclusive IP libraries at a time where the value of IP is fragmenting across platforms;
• The best business models for monetizing this IP should be PARQOR Hypothesis businesses because they centralize the value of IP and monetize it in multiple ways; but,
• Without a centralized model for the IP, the YouTube ecosystem and algorithm may be more valuable to building fan bases for IP than the exclusivity of a “walled garden”.

Moreover, as I wrote last Friday, YouTube creators like CocoMelon are finding success on Netflix, and creators like MrBeast are beginning to see opportunities for hit-making on Netflix. They're all seem to be delivering an emerging model of a faster, cheaper and better version of "premium" than legacy media's models.

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Must-Read Monday AM Articles

The Vibe Shift

* Google announced it’s revamping the traditional Google Search experience and introducing a number of new features, including tools to drill down into topics and other changes that will make using search a more visual experience, highlighting maps snippets, imagery and even video in new ways.

* The move was into TikTok’s emergence as the next SEO opportunity

The 200 vs. The 10 Million

*  Disney says that it has entered into a support agreement with Third Point Capital, which will include “customary standstill, voting and other provisions through Disney’s 2024 Annual Meeting of Shareholders.” It also appointed former Facebook and Instacart executive Carolyn Everson to its board.

Aggregator 2.0 & Bundles

* Netflix opened a second mobile game studio in Helsinki, Finland, as the company pushes further into gaming.

Sports & Streaming

* Major League Baseball (MLB) has launched a dedicated 24/7 free, ad-supported, streaming TV (FAST) channel in Europe via a partnership with the SportsTribal platform.

* Sinclair Broadcast Group’s Bally Sports+ has officially rolled out, and customers can have multiple bundling options, even if some of them are redundant. The bundle prices vary depending on the number of RSNs available and included, but range from $25.99 to $29.99 and can include two or three different channels.

* The National Basketball Association (NBA) has leveraged its partnership with Microsfot Azure to overhaul its global application into a one-stop shop for basketball fans around the world, promising a data-driven personalised experience that aggregates team and league content, as well as integrating live streaming.

Creator Economy, Platforms & Transparency

* Netflix is changing how it compensates some of the comics it features, a move that could trim its costs and shift some financial burden to the artists, while giving them more control of their work

* Tom Cruise, Sandra Bullock and the creators of “Jackass,” believe they are going to miss out on millions of dollars because of a deal involving Paramount, its Paramount+ streaming service and the cable channel Epix, which is owned by Amazon.com Inc.

* Twitch's recent change to the way it pays top streamers has raised questions internally, on top of the backlash the move sparked from creators on social media. ($ - paywalled)

Original Content & “Genre Wars”

* Research from Publisher's Clearing House's Consumer Insights suggests that there are two paths for streaming to evolve: with expanded gaming, or with expanded live sports

* A good article on Paramount’s experimentation with the Star Trek brand on streaming: There are nearly as many currently running Star Trek television series as there are completed Star Trek television series.

* Hello Sunshine’s Reese Witherspoon and Lauren Neustadter are The Hollywood Reporter’s Producers of the Year

AVOD & Connected TV Marketplace

* Amazon revealed that through a software update it is bringing the Fire TV experience to its Echo Show 15 smart displays, which now effectively double as TV sets.

* A 2022 report on the global CTV ad supply chain from Pixalate, a fraud and privacy software company, found in the first half of 2022 that 94% of U.S. households are now reachable through open programmatic CTV ads

* I liked this investor’s take on why Charter Communications has hit a wall (CEO Tom Rutledge recently announced he was stepping down as it struggles with a loss of broadband subscribers and a stock price declines)

Other

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