TL;DR
- Media industry consultant Doug Shapiro aims to establish a framework for thinking about how value flows along the media industry value chain over time between creators, intermediaries and consumers.
- Shapiro’s framework comprises four “tectonic trends”: fragmentation, disintermediation, concentration and virtualization.
- Shapiro says “The greatest hope for creators lies in better monetization tools and business models, not more equal popularity distributions.”
Media industry consultant Doug Shapiro has given detailed consideration to the current state of Media & Entertainment and where it might go to next. It’s a helicopter view to escape the noise of day-to-day news and looks at how media value is created and flows today and tomorrow.
The goal of his four-part series is to establish a framework for thinking about how value follows along the media industry value chain over time between creators, traditional intermediaries, n
ew intermediaries, and consumers. It comprises four “tectonic trends”: fragmentation, disintermediation, concentration and virtualization.
All these trends started with digitization, which has created a universal language (bits and bytes, or data) for information goods and a standard for distribution (also bits and bytes, or data) from which his four trends flow.
As Shapiro puts it, “Bits have universality, in the sense that they are the standard unit for representing, processing, storing and transporting all digital information, regardless of the source, application, device, medium or communications network. This standardization of all media paved the way for all innovation that has followed since.”
View Shapiro’s summary here and presentation here.
Fragmentation
The first trend, Fragmentation, is occurring because systematically declining barriers at each step of the content development process (production, marketing, distribution and monetization) have led to a near-infinite amount of content; and because the very introduction of that content is changing consumers’ definition of quality.
What this means is that while time spent on content is effectively saturated, the means by which consumers consume it has splintered into a thousand digital apps and continues to do so.
What’s more, generative AI will only accelerate things. “Production has been the toughest nut to crack, especially for the most expensive and complicated forms of media. The advent of GenAI could pull down this last barrier by democratizing high production value creation of video, music and games and blurring the quality distinction between professionally-produced and independent/creator content.”
There’s a ripple effect. As content supply continues to grow faster than time spent with media, consumer attention becomes scarcer. This means that knowledge of the consumer is highly valuable for companies to target content and advertising.
“As fragmentation continues and the constraints on using third-party data increase (post-GDPR/App Tracking Transparency/Google cookie deprecation), having first party data, at scale, is arguably more valuable and scarcer than ever. Data will likely be a — if not the — key source of competitive advantage in curation and marketing.”
The one area that technology hasn’t managed to commoditize down to bits and bytes — yet — is the scarcity of a live event.
READ MORE: The Year(s) Ahead in Media – Fragmentation (Doug Shapiro)
Disintermediation
Shapiro’s second post turns to the disintermediation of traditional intermediaries, or the declining bargaining power of studios.
“They have historically taken the lion’s share of value because they do things that have been hard for creators to do themselves such as financing and coordinating production, marketing, monetization and distribution.”
Technology, says Shapiro, is systematically making all these things easier for creators to do themselves, improving creators’ bargaining power or enabling them to circumvent these intermediaries altogether.
“Some intermediaries still own or control very valuable IP, they are marketing machines and many creators will still want the validation of working with them, but on the margin, they are getting squeezed,” he writes.
“And the clear arc of technology is that it will continue to marginalize them. For instance, GenAI will democratize high-quality production tools and NFTs may democratize access to capital.”
READ MORE: The Year(s) Ahead in Media – Disintermediation (Doug Shapiro)
Concentration
The third fundamental trend, concentration, is the consequence of putting everyone on a big network. Networks are subject to powerful positive feedback loops that produce extreme outcomes. In the case of media, they concentrate both power (on the supply side) and attention (on the demand side).
Historically, distribution of media was siloed, local and one-way. Today, most media is distributed on universal, global, two-way networks (Meta, YouTube, TikTok).
“Combined with these companies’ global reach and universality, that means traditional media companies are now contending with distributors and competitors with unparalleled scale, resources and the ability to cross-subsidize losses indefinitely,” Shapiro says.
Creators and consumers, he adds, are contending with “new gatekeepers” with unprecedented power, although they wield it differently than traditional intermediaries.
The network effect also amplifies the popularity of certain content and becomes in and of itself a new form of currency. Popularity (or number of hits/clicks), he essays, contains within it information about content that other people use to judge the quality of the content. It is a metric which is largely taken out of the hands of the original gatekeepers.
READ MORE: The Year(s) Ahead in Media – Concentration (Doug Shapiro)
Virtualization
With the fourth and last trend, virtualization, Shaprio tries to tie it all together.
Virtualization refers to the steadily blurring lines between the physical and the virtual. For Shapiro this is the most hopeful trend for media overall, but also the most uncertain and furthest out.
“The promise of virtualization is that as our lives become more virtual (and more digital), there will be new ways on interacting with media — new modalities — that increase time spent with media and/or the value consumers place on these experiences,” he writes.
Associated technologies include those that enable new immersive experiences (XR and virtual worlds); more engaging experiences (fan creation and ownership); and new leisure time (AI efficiency gains and autonomous vehicles).
The most tangible of these is the Apple Vision Pro, which could eventually herald a new media software upgrade cycle, and, even further out, Level 4 self-driving, which could free up some commute time. But neither is likely to have a material effect for years.
“The greatest hope for creators lies in better monetization tools and business models, not more equal popularity distributions,” Shapiro says.
“For traditional intermediaries, all of these trends are just…bad,” he argues. “They will likely continue to lose consumption share, cede bargaining leverage to top talent, contend with stronger competitors and face riskier and less profitable businesses.”
