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The Medium identifies a few key trends each fiscal quarter that reveal the most important tensions and seismic shifts in the rapidly and dramatically changing media marketplace. The key trends help you answer a simple question: "What's next for media, and where's it all going? How are the pieces lining up for business models to evolve, succeed, or fail?"

Read the three key trends The Medium will be focused on in Q3 2023. This essay focuses on "Legacy media companies are throwing in the towel on their bets to own the consumer relationship in streaming and beyond."

The recent news cycle reminds me of something Disney CEO Robert Iger shared in his interview with Andreessen Horowitz’s a16z podcast. After being asked by co-host Sonal Chokshi about whether he ever had “concerns or doubts or fears about being able to shore up on the technology side” before building Disney Plus in 2017, he responded:

“Reed Hastings from Netflix tried to convince me that there was no way we could do it. ‘You won't have the platform. You don’t know how to manage things like busted credit cards, all the issues with geotargeting and so many different factors.’ We had no ability to do any of that.”

In January’s “Be Like Peacock to Solve for Scarcity”, I argued it was Hastings asking: 

“If Disney cannot figure out the software then why will people subscribe? How will Disney grow and maintain the scale that advertisers want to buy and investors want to own?”

Today, I would add two bits of context. First, replace Disney with the name of any other legacy media company with a streaming service — AMC Networks works particularly well — and my interpretation of the questions still holds true. Second, the back-drop of accelerating cord-cutting suggests Hastings’ was also pointing out Disney would be solving for streaming churn as a wholesale business that never previously needed to solve for churn because its linear distribution partners had been:

1. Solving churn as a go-between with linear customers and 
2. In doing so, keeping churn at or below around 1%. 

Netflix has long envisioned a new era of streaming entertainment. Hastings’ prescient warning to Iger was, effectively, that it is hard to solve for cord-cutting churn as a wholesale business, and it is also hard to solve for churn in a retail streaming business. It is the hardest to solve for both. The success of a corporate strategy in this new era was ultimately going to be defined by the version of churn that management would focus on solving.

Key Takeaway

Media's growing problem of churn may in part reflect a "gerontocracy", and in part may reflect the loss of debt as a solution, but it especially may reflect a monopoly of a narrow skillset over an entire industry at a pivotal moment.

Total words: 1,400

Total time reading: 6 minutes