Good morning!
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”.
For my final mailing of 2023, I sent out my Top Essays of 2023 and revisited my Predictions for 2023.
[Author's Note: Happy New Year! I am going to send out two mailings this week. Today's predictions for 2024 and then tomorrow a short essay on how the movie "Maestro" unintentionally exposes a weakness for Netflix as it pivots into advertising.
Two things to put on your radars for 2024:
Netflix will tell investors on its Q4 2023 earnings call on January 23rd that its "Grand Theft Auto" bundle helped to drive subscriptions past initial projections. The success will convince gaming publishers to release more IP marquee titles on the platform as it builds towards releasing its own, major-publisher-type console game. With the games marketplace in a downcycle—2023 saw a glut of games releases to make up for pandemic-related delays and therefore 2024 will see fewer releases— Netflix will have more gaming publishers willing to take risks with valuable IP on a new platform.
Also, it is worth noting two things that are true about gaming and streaming in 2024: An overlap is logical and inevitable. It is logical because both Netflix and legacy media increasingly see value in games and gaming IP (“Media Executives Covet Games, but Are Ill-Suited to Run Them”). It is inevitable because Netflix is setting a new precedent by evolving its direct-to-consumer model into a cable bundle-type offering with gaming for 250 million subscribers worldwide. Also, gaming companies like EA increasingly need to capture the “watch” behavior of their 700 million consumers who play EA games online (“Imagining An EA Sports-ESPN Partnership”). In 2024, streaming and gaming will increasingly need each other to protect and grow customer lifetime value, especially with Generation Z—people ages 13 to 27—and Generation Alpha—people younger than 13—consumers.
With advertising, gaming and livestreaming Netflix's business model story is more complicated for investors accustomed to a simpler story built around subscription growth. Investors will struggle to buy into those initiatives because that story requires a more sophisticated explanation of how the moving pieces drive growth. They also don't have the data. The stock gains from 2023 (158% since April 2022) and 2024 will begin disappearing in Q4 2024 or Q1 2025, if not sooner.
Adding to Netflix's challenges, the supply of English language content will be more expensive because of the agreements ending the actors’ and writers’ strikes in Hollywood. Netflix will license more valuable library content from arms-dealing legacy media companies, while its pipeline struggles to deliver newer English language content for audiences due to these new costs and complexities.
Total words: 1,600
Total time reading: 6 minutes
To repeat what I wrote in November:
[I]t is hard to imagine how mergers across any legacy media companies will result in a more agile consumer-savvy model like Universal’s with gaming IP, or a more agile tech-savvy model like ...