Podcast Summary
The Future of Entertainment: Technology's Role: Technology is transforming entertainment with user-generated content, streaming services, and immersive storytelling, disrupting traditional media. Intellectual property, specifically immersive fantasy worlds, is at the forefront of our obsession, and business models continue to evolve.
The way we consume and create entertainment is constantly evolving, with technology playing a significant role in shaping the landscape. Bottomless, a smart coffee subscription service, is an example of how technology can make our lives more convenient. In the entertainment industry, we've seen the rise of user-generated content, streaming services, and immersive storytelling, which have disrupted traditional media. Matthew Ball, a former head of strategy at Amazon Studios and a business essayist, discusses these trends and their implications for the future of movies, music, television, video games, and the metaverse. He argues that intellectual property, specifically immersive fantasy worlds, is at the pinnacle of our obsession, and the business models surrounding this content continue to evolve. Overall, the conversation explores how technology is enabling new forms of entertainment and storytelling, and what that means for the future.
IP expanding across multiple mediums: Companies are shifting focus from IP dominance in one medium to being omnipresent to meet audience demands and boost customer retention
Intellectual property (IP) is becoming more expansive and valuable as technology allows for expression in various avenues, with greater user control and input. The Witcher series, which started as a novel, gained renewed popularity through a television show and video game, leading to increased sales and stock value. This trend of immersing ourselves in franchises across multiple mediums is driven by the audience's desire for continuity and control. The consequence is a shift from IP competition within a single medium to IP becoming omnipresent. Companies like Disney, Marvel Cinematic Universe, and Netflix are embracing this trend by building cross-platform universes to meet audience demands and boost customer retention. Netflix, while not traditionally seen as a cross-media world builder, has been hiring senior leaders from Disney's parks and consumer products departments, indicating a potential shift towards expanding franchises. The growth of IP is no longer about being the biggest in a single medium, but rather being everywhere the audience wants it to be.
Netflix's Competitors Are Diverse, From Traditional Media to Fortnite and YouTube: Netflix faces competition from various sources, including traditional media companies and non-traditional players. Consumer behavior plays a significant role in Netflix's success, with frequent use and large subscriber base giving it an edge in content launches.
Netflix's competition is not just traditional media companies like Disney or HBO, but also non-traditional players like Fortnite and YouTube. Reed Hastings, the CEO of Netflix, sees these companies as significant competitors for viewers' time and attention. Netflix's success in creating new intellectual property has been criticized, but building a pipeline of content takes time and resources. The company's acquisition of Miller World, for example, is part of a strategy to use the Netflix platform to launch new titles and serve as a source for intellectual property creation. Scale is a crucial factor for media companies in the next 10 years. Netflix's competitors admit that it would be difficult for another company to achieve comparable scale by 2023 or 2024. Understanding consumer behavior is essential to understanding the resiliency of market leaders like Netflix. Consumers don't behave rationally when it comes to media subscriptions, and most of us don't want to invest extra time in finding the perfect thing to watch. Instead, we want to watch what is good enough at the time. Netflix's enormous advantages in the number of subscribers and the frequency of use of those customers give it an edge in launching content to success. Shows like Tiger King might not have gained popularity on other platforms due to infrequent use and limited reach. Netflix's ability to engage viewers more frequently and effectively sets it apart from competitors.
Netflix's Advantage in Producing Hits and Franchises: Netflix's vast reach allows them to economically produce worse content to greater success than competitors, enabling them to stay competitive as content is pulled out of their ecosystem. Movies, music, and TV will continue to be valued by audiences, with formats shifting over time.
Netflix's vast reach gives them an advantage in producing hits and franchises, allowing them to economically produce worse content to greater success than their competitors. This advantage is crucial in the content business as it enables Netflix to stay competitive even as content is pulled out of their ecosystem. Despite the rise of streaming services and games, movies and music will continue to be valued by audiences, and while the dominant cultural narrative may shift, these formats are not going away entirely. The role of theaters has changed before, and it's likely that television will give way to other formats in the future, such as interactive gaming and social media. Music, as an on-the-go form of entertainment, has unique characteristics and Spotify has been the dominant player in this industry, reaching 285 million Americans for an average of 2.5 hours per day.
The Value of Platforms Reaching Huge Userbases in Gaming: Platforms like Spotify hold immense value due to their large userbases, driving growth in mobile gaming and innovative features like Fortnite's 'Just Chatting' mode.
Platforms reaching hundreds of millions to potentially billions of users, like Spotify, hold immense value due to the significant economic relationship and user investment. The on-the-go element of these platforms is particularly intriguing, as it's driving growth in industries like gaming, which are increasingly focusing on mobile and cross-platform experiences. The convergence of mobile and traditional gaming is resulting in innovative features that allow users to engage even when they can't play, such as Fortnite's "Just Chatting" mode. Age plays a role in this media transition, with a significant generational divide in gaming penetration but an even larger disparity in time spent. The potential monetization lift from closing the gap between gaming and other media is significant, and the future lies in creating additive, immersive experiences that enhance engagement for users of all ages.
The gaming industry's demographic shift and evolution: Staying updated with gaming trends is crucial for investors and media companies to avoid falling behind in the competitive landscape, as the industry evolves exponentially with graphics, monetization, and interactivity.
The gaming industry has seen a significant demographic shift, with each generation adopting gaming more significantly as they age. This trend is important because the cost of being behind in gaming for investors or media companies is substantial. Over the past 15 years, gaming has evolved exponentially in terms of graphics, monetization, and interactivity. The Marvel Cinematic Universe serves as an analogy for this evolution, with its success leading to a crowded competitive landscape. The Marvel Cinematic Universe's success is unprecedented, and no one has come close to replicating it. The franchises are becoming more expansive, immersive, and unbound, squeezing ever more air out of the competitive landscape. To compete with the Marvel Cinematic Universe, one would need to increase output volume by 2.5 times while simultaneously increasing revenue by 50% and decreasing costs. This is a daunting task, and it highlights the importance of staying up-to-date with the latest gaming trends.
The Future of Entertainment: Gaming IP and the Metaverse: Gaming IP and the metaverse offer potential solutions for emotional attachment and engagement in today's media landscape. The metaverse, a virtual space with underlying technology, standards, and protocols, has the potential to unlock new opportunities for content creation, discovery, and economic growth.
In today's media landscape, creating emotional attachment and keeping audiences engaged is a significant challenge, especially when competing against media giants like Marvel and Disney. The sheer volume, quality, and reach of their content make it difficult for other media categories to compete. Gaming IP, however, offers a potential solution due to its ability to immerse audiences deeply and allow for greater audience ownership of characters. The concept of the metaverse, a virtual space where people interact and participate in an economy, could be the future of entertainment as it scales and thrives on commonalities and interconnectivity, much like the Internet. The metaverse goes beyond just virtual worlds or avatars and encompasses the underlying technology, standards, and protocols that enable seamless communication and sharing. Ultimately, the metaverse has the potential to unlock new opportunities for content creation, discovery, and economic growth.
The Future of Interoperability in the Metaverse: The metaverse, an interconnected digital world, will allow users to carry their identity, items, and wealth across platforms, but achieving interoperability will be complex and require collaboration among various players and the resolution of technical challenges.
The metaverse, an evolved version of the Internet, is the future of interoperability in virtual immersion and digital connectivity. This interconnected digital world, which brings together technological advancements from the past 40 years, will allow users to carry their identity, items, and wealth across platforms. However, achieving this interoperability will be a complex process that requires collaboration among various players, including existing tech giants, game engines, device owners, and ecosystems. The technical challenges are immense, with the need for mass concurrency, common standards, and forward-compatible code evolution. While the vision of a seamless digital world is compelling, it will take decades to achieve, with no clear-cut beginning or end. Companies like Epic Games, Unity, and others will play key roles in shaping this future, but the process will be messy and collaborative. The metaverse's potential is enormous, but the road to getting there is long and filled with technical hurdles.
Maintaining Flexibility in the Metaverse: The metaverse requires flexibility to adapt without disrupting the economy and user experience. It's a platform for content, portability, business models, and evolution. Upgrading physics or standards can have unintended consequences, so it's crucial to ensure the metaverse remains adaptable.
The metaverse, as a persistent simulation, needs to evolve while maintaining flexibility to avoid breaking the economy and user trust. The metaverse is more than just a virtual world or an app store; it's a platform where content, portability, business models, and evolution coexist. Upgrading physics or standards can lead to unintended consequences, such as horses sliding when they eat in Second Life, which can disrupt the economy and user experience. Therefore, it's crucial to ensure that the metaverse maintains the flexibility to adapt without causing significant disruptions. This is one of the biggest challenges in creating and maintaining the metaverse as a valuable and viable ecosystem. It's also important to remember that the metaverse is not just a virtual theme park or a new app store; it's a space where users create value and interact in new ways. As an investor, it's essential to understand the atomic parts of the metaverse and their interconnectedness to make informed decisions.
Building the metaverse: Infrastructure and innovation: Epic Games' Tim Sweeney is leading the way in metaverse development by building infrastructure and disrupting traditional business models, recalling the strategies of early tech pioneers and visionaries like Jeff Bezos.
The metaverse, while having a clear technical foundation, is still an emerging concept whose full potential and economic models are yet to be fully understood. Comparing it to the early days of the Internet and the rise of companies like Snapchat and TikTok, it's clear that the most successful players in this space will likely be those who can create the underlying infrastructure while also embracing innovation and disrupting traditional business models. Tim Sweeney of Epic Games is a prime example of this long-term vision. He is building out technology and capabilities while simultaneously giving away value and destroying margins in the gaming industry. This approach, which recalls the ideals of early tech pioneers and the business strategies of visionaries like Jeff Bezos, could lead to significant TAM creation and market dominance. However, it's important to note that this strategy carries risks, and skeptics may view it as a modern-day version of Microsoft's "embrace, extend, extinguish" tactics. Ultimately, the success of companies like Epic will depend on their ability to navigate the complex and evolving landscape of the metaverse and create value for both themselves and their users.
Epic Games' Strategy to Build the Metaverse: Focus on Creators and Consumers: Epic Games, led by Tim Sweeney, is investing in Unreal Engine to drive down costs, accelerate metaverse growth, and enable interoperability, using Fortnite as an R&D platform.
Epic Games, led by its CEO Tim Sweeney, aims to drive down costs and suppress profits in the short term to accelerate the growth of the metaverse, a virtual world worth trillions, by focusing on creators and consumers while minimizing the role of middleware and infrastructure providers. Central to this strategy is Unreal Engine, a powerful simulation software originally developed for gaming but now used in various industries due to its versatility and capability to simulate diverse environments and experiences. Unreal's long-term development and expanding reach have made it a potential cornerstone of the metaverse, enabling interoperability and the emergence of new experiences. Fortnite, Epic's popular game, was not a commercial success in its original form but served as an R&D platform for the company, demonstrating its commitment to innovation and flexibility.
Epic Games' Business Model: Prioritizing Developers and Building a Metaverse: Epic Games, known for Fortnite, invests in flexible tech, supports other devs with free multiplayer services, and launched a store with lower commissions, fueling a developer-friendly ecosystem and metaverse growth.
Epic Games, the company behind Fortnite, has built a business empire by prioritizing flexibility, extensibility, and developer-friendly practices. Fortnite, which launched in 2017, was designed to be a social space and a proto metaverse, where various IPs intermingle. Epic invested heavily in creating the technology to support this massive, multiplatform, and persistent world, which no other company has replicated at scale. They then used this technology to launch Epic Online Services, offering free multiplayer capabilities to other developers. Epic also used the cash generated from Fortnite to launch the Epic Games Store, which has lower commissions than competitors and is now installed on tens of millions of devices. Additionally, Epic established Epic Games Publishing, which offers developers the best terms and distribution agreements. All of these elements interconnect, driving innovation in Unreal Engine, growing the reach of the Epic Online Services, and driving content to the Epic Games Store. Investors should consider Epic Games' unique business model, which prioritizes developers, interoperability, and creating a metaverse, setting it apart from competitors.
Epic Games' disruptive business model creating value for creators and investors: Epic Games' unique business model allows content creators to keep IP, improve economics, and potentially increase profits, as seen with Remedy Entertainment's doubled value after shifting to Epic Games Publishing. Companies like Tencent, with a presence in both content creation and distribution, are well-positioned to dominate the metaverse.
Epic Games' unique business model, which focuses on owning the content and technology rather than just distribution, is disrupting the traditional publishing industry and creating significant value for content creators and investors. This was exemplified by Epic's deal with Remedy Entertainment, which resulted in a doubling of the company's value after they shifted to Epic Games Publishing. This shift not only allows content creators to keep their IP and improve their economics but also has the potential to significantly increase their profits. Additionally, companies like Tencent, which have a strong presence in both content creation and distribution, are well-positioned to dominate the metaverse, which is expected to be the next big frontier in technology and entertainment. Overall, the intersection of content, business model, and technology is creating new opportunities for innovation and value creation in the gaming industry.
Gaming industry's additive growth and unique structure: The gaming industry's unique structure and reliance on technology enable additive growth as new formats and platforms emerge, creating opportunities for new companies and content studios.
The gaming industry has unique characteristics compared to other media categories. Unlike music or film, gaming has seen additive growth as new formats and platforms have emerged, rather than replacement or disruption. This is due to the reliance on technology and the ability for late entrants to build multibillion-dollar businesses. The industry's structure also differs, with fewer major players in comparison to other consumer media categories. Cloud gaming represents another potential platform shift in the industry, and its disruptive potential is expected to create new winners. The gaming industry's history shows that when technology platforms change, new segments are unlocked rather than old ones being replaced. This creates opportunities for new companies and content studios to emerge and thrive.
The uncertain future of cloud gaming: Cloud gaming offers potential benefits but faces significant costs and limitations, including high hardware and delivery costs, no clear consumer savings, and uncertain TAM expansion. Long-term vision remains optimistic for new content categories and experiences.
The future of cloud gaming is uncertain and may still be several years away from mainstream adoption. Despite the potential benefits, such as access to high-performance games on any device, the costs and limitations of cloud gaming are significant. The cost of hardware runtime goes up due to the need for remote servers, and the delivery costs are high due to the need for real-time, high-bandwidth transmission. Additionally, cloud gaming does not make games cheaper for consumers, and there is no clear TAM expansion since many potential gamers already have access to popular games. However, there is optimism for the long-term vision of cloud gaming as it offers the opportunity to create new content categories and experiences that cannot be achieved on traditional platforms. The speakers' skepticism towards the short-term future of cloud gaming is shared by industry leaders such as Strauss Zelnick and Phil Spencer.
The future of media is interactive and collective experiences: Media companies must embrace interactivity and feedback loops to create compelling content and adapt to the changing landscape.
The future of media lies in interactive and collective experiences. This is evident in the growing trend of cloud gaming and simulations, which offer more realistic and immersive experiences that go beyond traditional gameplay. The focus is shifting towards creating shared experiences that foster engagement and community, rather than just optimizing engagement and monetization. The media industry, including Hollywood, is recognizing the importance of interactivity and feedback loops in driving content design and consumer enthusiasm. The success of live interactive platforms like HQ Trivia is a testament to this trend, as it demonstrated the value of real-time engagement and audience focus. As technology continues to evolve, it will be crucial for media companies to embrace these new trends and adapt to the changing landscape. Interactivity is the key to creating compelling and engaging content, particularly for reality programming, and will be a significant factor in evaluating new media businesses.
Innovative business models and technologies disrupt media industry: Examples of Minecraft, GTA, Fortnite, and Marvel's shift in release schedule showcase the impact of innovative business models and technologies on media industry. Starting a new media business is easier but standing out and gaining consumer awareness is the challenge. Future lies in transmedia storytelling and live performance virtual production.
While the content itself is important in media, the real disruptive opportunities often come from innovative business models or technologies. Examples like Minecraft, Grand Theft Auto, Fortnite, and even the Marvel Cinematic Universe's shift in release schedule, demonstrate this trend. However, starting a new media business today is easier in terms of capital requirements and distribution, but the challenge lies in standing out in a crowded market and gaining consumer awareness. Personally, I look for innovative ideas around content formats, user behaviors, and interaction. I believe the future of media lies in transmedia storytelling, where a cohesive narrative exists across multiple platforms and is persistent and interactive. Companies like Epic are already investing in live performance virtual production, which could be a step towards this metaverse-like future.
Disney's Success in Entertainment: Innovative Business Strategies and Exceptional Storytelling: Understanding the importance of good IP, effective storytelling, and the ability to extract value from stories is crucial for success in the entertainment industry.
The future of entertainment could involve immersive experiences with beloved characters and stories, as technology advances and business models evolve. Disney's success with the Marvel Cinematic Universe and other franchises can be attributed to their innovative business strategies and exceptional storytelling skills. While many stories have been attempted by other studios, Disney's execution and monetization capabilities set them apart. As we look to the future, understanding the importance of good IP, effective storytelling, and the ability to extract value from stories will be crucial for success in the entertainment industry. Additionally, I am personally interested in learning more about payment platforms and blockchain technology, as they will play a significant role in the creation and monetization of content in decentralized virtual worlds.
Technical challenges in mass interaction, commerce, and creation on a global scale: Blockchain and distributed computation may provide solutions for computational sophistication, persistence, and payment infrastructure in the future of mass interaction, commerce, and creation on a global scale, while managing data and entitlements becomes increasingly crucial.
The future of mass interaction, commerce, and creation on a global scale poses significant technical challenges, particularly in regards to computational sophistication, persistence, and payment infrastructure. Blockchain and distributed computation may offer solutions to these challenges. Additionally, as we move towards more online activities and virtual worlds, the importance of managing data and entitlements becomes crucial. Companies like Shopify and traditional payment providers may struggle to keep up with the massive potential TAM in these new realms. Overall, the kindness and support of others, especially parents, have played a pivotal role in many people's success stories.
