Swimming With The Megalodons
When the media world’s most predatory shark realizes he’s about to be someone else’s lunch, you have to wonder whether we all might need a bigger boat. Only four years ago, Rupert Murdoch was circling the waters of Time Warner in the hope of hooking those prized assets and feeding them into his own 21st-century entertainment factory. Today, he is the one hocking most of the family jewels to the Walt Disney Company in a $71.3 billion deal that leaves his clan with a stripped-down entity focused on live news and sports, as well as a passive stake in a supersized behemoth with mouse ears. Ominously for all the bottom feeders among us, the Murdochs must have concluded it was only a matter of time before one of the FAANGs (Facebook, Amazon, Apple, Netflix, Google) of Silicon Valley or the BATs (Baidu, Alibaba, Tencent) of China would sink their rows of teeth into a standalone Fox empire. The iconic studio of Darryl F. Zanuck and The Sound of Music, of Avatar and 12 Years a Slave, had reached its evolutionary apex.
Murdoch is certainly not alone among the Hollywood superpowers in feeling existential angst and the survivalist urge to adapt or die. Time Warner, to the evident consternation of the U.S. Department of Justice, has also mutated in a bid to keep its lineage going when all those cord-shaving millennials start spending their projected $24 trillion of wealth by 2020. The renamed Warner Media is now an entertainment division of AT&T following a $85.4 billion merger that has gathered Warner Bros., HBO, and the Turner networks into the same telecommunications house as DirecTV, U-Verse, and an exotic array of subscription video providers that include Ellation, Crunchyroll, Fullscreen and Rooster Teeth.
With “scale” the operative word again, this monopolistic wave of consolidation will likely continue. At the time of writing, Comcast was waiting to pounce on the UK’s Sky empire, and the likes of Sony, Paramount/Viacom, CBS, Lionsgate and MGM were all seen as potential acquisition prey in what has become a global feeding frenzy for content. In 1983, 50 companies owned 90 percent of the media consumed by Americans. By 2012, just six companies controlled that 90 percent, according to testimony before the House Judiciary Committee examining Comcast’s acquisition of NBCUniversal. How long before just three Studio Death Stars become the Standard Oils of the knowledge economy’s Gilded Age? And where does that leave the independent small fry that live off that storytelling ecosystem?
The answer to both questions, to borrow a script note so often attached to indie film projects, is execution dependent. Size alone won’t determine who will succeed in the entertainment world’s transition to a direct-to-consumer model any more than volume necessarily will. While the current model of licensing films to distribution platforms has certainly favored gatekeepers, the new paradigm of going straight to the consumer from the entertainment assembly lines largely flattens that hierarchy. There are no real gates to guard any more, although some of the toll roads may well be costlier than others.
Goldman Sachs believes that Netflix will be spending an annual $22.5 billion on content by 2022, a sum that comes close to the total spent on entertainment by all of the now-terrified U.S. networks and cable companies combined. But that won’t guarantee a lock in this winner-takes-most marketplace. Just as Facebook usurped MySpace (having itself overwhelmed Friendster), so Netflix will be forever vulnerable to competing claims on the audience’s time. Sleep may be Netflix’s biggest declared competitor, but that also applies to Apple, a video newcomer with access to 1.3 billion active devices globally—not to mention marketing chops, a chain of premium retail promotion/exhibition spaces, and a menu of other subscription services that could now all be bundled up in one Amazon Prime–style membership offering.
The key perceived advantage that these large companies do hold over others is not so much size, or even financial firepower, but rather vast troves of customer information. This is what is really driving the media merger mania. If the first wave of disruption was led by a small number of platform giants that benefited from the network effect, the next phase is about knowledge. The winners of Disruption 2.0 will be those best able to wield their propriety data, expertise, and yes, artificial intelligence in ways that anticipate our real-life behaviors. Which means that the big legacy companies stand to regain the edge over digital start-ups. “I believe this is a ’now’ moment for the incumbent companies” declared IBM CEO Ginni Rometty in 2017. “You can go on the offense. You can be the disruptor, instead of the disrupted.”
Certainly, giants such as Apple, AT&T, Disney, Tencent and Amazon are all swimming in personalized data. But now comes the tricky, execution-dependent part. Information is not the same as wisdom. It will require some nimble reinvention on the part of these lumbering enterprises to ensure that their wealth of insights can be harnessed in ways that go beyond the predictable. Not even Netflix, the poster child of data-driven decision-making, has clarity on how much to rely upon its reams of customer “engagement” numbers. Three years ago, when asked by The New Yorker how much of the company’s analysis was the result of computational crunching or human intuition, Netflix Chief Content Officer Ted Sarandos said it was probably a 70-30 mix. “Seventy is the data, and 30 is judgment. But the 30 needs to be on top, if that makes sense.” Since then, the equation seems to have flipped. “It’s 70 percent gut and 30 percent data,” Sarandos told Vulture earlier this summer. “Most of it is informed hunches and intuition. Data either reinforces your worst notion or just supports what you want to do, either way.”
Sarandos also says that the best use of its data is to be able to more confidently size its production budgets. But for independent filmmakers, so much more rides on that data-crunching, instinct-bolstering ability beyond arguing over filmmaking costs. At worst, AI-powered pattern recognition leads to just more confirmation bias: Money will keep going to already proven filmmaking teams and tried-and-tested talents rather than those trying to break in or break the mold. But at best, as Netflix has started to discover when it replaced demographics with “taste clusters” based around shared microviewing habits across the globe, the data can enhance diversity and creative risk-taking by challenging long-held industry myths and assumptions about which stories are supposed to work in the marketplace. There is less reason to say “no” now to the unconventional pitch.
In the end, it will be in all the megastudios’ interest to look beyond the programmatic tendencies of mass data use and focus instead on surprising their audiences by searching for the unexpected. The profusion of recycled, reverse-engineered stories, no matter how slickly made, is already leading us all to what writer and director Paul Schrader once dubbed “narrative exhaustion.” What we need more of are the algorithmic outliers. In this regard, independents represent the lifeblood of conglomerates; without indies pushing the boundaries with new forms and faces, even the mightiest studio will eventually run out of fresh ideas. The Megalodon, the largest shark of all, became extinct when it ran out of prey. We can only that hope that Disney’s data has the intelligence to nourish those that swim alongside it. After all, Walt Disney himself was once an independent.