Category: Essay

As soon as you start learning about the business of entertainment, you learn this aphorism.

“Content is King”.

I yell this from the rooftops too. I learned it so early that I can’t even credit one specific class or book or article with it. Searching my articles, I found that I wrote it on 5 different occasions in just the last year. It feels so true for me, that I won’t ever bother to quantify it or prove it analytically. Principally, I don’t think it’s something you can “prove”, but more importantly, it doesn’t matter. 

However, it makes a great question: if content is king, what the heck is everything else? 

That’s what I’m going to try to do today. To explain which different business functions are who on the entertainment chess board. Chess is a game of war, and these are the streaming wars, right?

King – Content

The obvious first choice. Or is it?

If the chess analogy is true, the King on his own can’t win you the game. In fact, he does hardly anything in a typical chess match. He runs from his problems, just hoping to avoid getting trapped in a corner.

Yet, content is fundamentally an offensive tool. It’s on the attack, conquering viewership in box office, ratings points or whatever streamers feel like telling us. That sounds a lot like the Queen, the unstoppable killing machine moving any direction she damn well feels like on the board. As I thought about it, in terms of power/influence, the Queen is best analogue to content’s ability to shape the competitive landscape.

Let’s use the King for something else then. The endgame for a chess match is check mate. If the King dies, you lose the game. You’re out of business. What’s the one thing if you don’t have, you go out of business? Cash. Money. Financing. So…

King – Content Finance

Finance shouldn’t run any company—that’s the player moving the pieces in this super-extended analogy—but they are the rulers, usually, at the end of the day. And lots of great companies have succeeded simply through clever financing. Even if the finance folks don’t run the business, they’re usually second or third in charge. So the King is finance.

Queen – Content

Content is what enables everything else. If you don’t have great content, no matter how well you leverage the other pieces, you’ll be at a disadvantage, just like losing your queen in an unequal trade. And if you ever doubt if content is powerful, well, look at Disney’s movie slate. So the Queen is content.

Bishop – Distribution

After you learn that “content is king”, you learn that it is locked in a war with distribution. The battle gets phrased as the question, “What’s more important, content or distribution?”

In a classroom, both sides can be right trying to answer that question. Even if you end up deciding content is more important, you can’t deny that distribution can make or break your strategy. Right from the start. That’s why I made distribution “the Bishop”, the piece who is the most valuable at the start of a chess match.

Distribution isn’t the most powerful piece remaining—that’s the Rooks—but it sits next to the Queen of content and King of finance in the middle of the board. If you get down to just a one Bishop at the end of the game, you’ll have a damn hard time trying to checkmate your opponent. The way you can have great distribution, and bad content, and hence no viewership.

I also like it because Bishop’s are incredibly useful, in a misdirection sort of way. The Bishop never comes at you straight on, but from the side. Distribution is the same way. Most consumers don’t think about the deals a major studio signs to distribute their content, but happen to stumble upon it on their streamer of choice. Netflix convincing the studios to give it library content or the Pac 12 failing to get DirecTV distribution are examples of how distribution can make or break business models. Consumers may be aware of these squabbles, but often times they are oblivious to these conflicts.

I also like the historical symbolism of the chess board. For much of human history, power was a battle between rulers and religion, monarchs and bishops, like content versus distribution.

Knight – UX [Technology]

Before we go too much further, I should admit I’m not very good at chess. If you’re a former military officer, this is like admitting you don’t like running or short haircuts. But there, I said it.

I’m not a good programmer either, but I know good user experience (UX) when I see it. In fact, everyone does, if a current survey by PwC is true (and yeah, just one survey). But despite that survey and the blaring headline, UX isn’t more powerful than the money or the content or the distribution of said content. 

But once you have a platform—especially in the internet age—understanding how consumers engage with your technology is key. If that experience sucks—fine, is “suboptimal”—than customers don’t want to come back. Sometimes even the best content can overcome this, but only so much. 

Knights are thus the UX or technology of the chess match. They can really screw up your strategy by taking the queen off the board. But they can only hop two spaces forward and one to the side, so they aren’t the most flexible weapon. And they are slow to escape from a battle, like how UX is hard to update once you’ve screwed it up.

Rook – Marketing

You can’t watch a show you’ve never heard of. That seems simple enough. Usually, the best way to overcome this is brute force spending of marketing dollars. Marketing is a blunt tool. It fires straight at consumers, despite the dreams of targeted addressable marketing, it is still usually one trailer for everyone. 

Which is as blunt as a rook marching straight ahead or to the side. Moreover, Rooks get most of the action at the end of the game, the same way that marketing only starts once the content is finished and ready to roll out of the gate. 

And yet, the power! A great marketing campaign will ensure a TV show or movie gets launched. (Check out the buzz around The Mandalorian–in my opinion a well-made trailer–to see how good trailers can make a show or film.) And that trailer will make or break the content it is supporting. Good marketing can build buzz and bad marketing can end it. Losing your rooks recklessly can end your game too. Marketing is the Rooks.

Pawns – Research, Business Affairs, Business Development/Sales

It takes a village to be a studio, but I only had five major pieces to work with. (I guess I could have split the board in half, but eh.) 

Everyone else is a Pawn. Which sounds bad in our nomenclature—being someone’s Pawn means being manipulated—but yeah most of the other groups are manipulated for content’s ends.

(To read my vision of a super-mega-conglomerated future—where six companies control all media, entertainment, technology and communications, click here.)

Maybe I spent too much time on Wednesday’s essay. While I haven’t been working on it non-stop, I’ve been dabbling with it since December. Planning the next 12 years of mergers and acquisitions is fun. And time consuming.

That’s a lot of time, though, for a vague prediction of the future. Isn’t it a bit frivolous to decide, without any data really, how a bunch of companies could hypothetically merge in a potential future? That seems more fiction than fact.

But I don’t buy that. Beyond the fun, “Map of the Universe” I made—which is a pretty useful tool I’ll leverage in future articles—a strange hypothetical like this can often unlock ideas I wouldn’t have thought of via traditional means. And those ideas in some ways are more important than the exercise. Essentially, consider yesterday’s albeit hypothetical article the data set for today’s insights. 

So we’ll start with those, after one quick diversion:

Behind the Scenes – This was harder than I thought.

For two reasons. First, getting the companies “right” meant a lot of moving around to find what seemed to fit (Apple and Disney; Comcast and Vivendi), what didn’t seem to fit (Google, Apple and Amazon merging, for one) and what capabilities filled what needs (Netflix and Facebook). So playing around with that took some time.

Second, it never ceases to amaze me how much more there is to learn about entertainment. This is an admission from someone who calls themselves, “the entertainment strategy guy”. But you can always overturn another rock and find a whole bunch of new stuff to read and discover. In this case, the foreign conglomerates were my biggest blindspot. I knew about Vivendi (thanks to an HBR Vivendi Universal case study), but didn’t know much about Endemol Shine, Entertainment One and Bertelsmann (in particular) beyond name recognition.

I’d also add, you forget that even with all the consolidation in this industry, there are a ton of players. In the last 15 years, there have been plenty of new entrants from A24 to STX to Relativity (that is also now gone). 

Insight #1 – Europe is why this doesn’t happen.

After I’d assigned out all the American conglomerates, the missing piece was Europe. So I looked there to find the potential European champions, and ended up adding Vivendi and Bertelsmann, who I ended up lumping into Microsoft/Comcast/NBCUniversal and AT&T, respectively. 

But this won’t happen.

Likely many of my proposed mergers never happen. But this is one of the bigger leaps of faith. Even if I see a world where antitrust enforcement all but evaporates in the US—and even there I don’t see that—Europe is already tacking in a different direction. Even if, as a recent Economist article pointed out, Europe is looking for “European champions”, that doesn’t mean they suddenly love media consolidation. It also really means they don’t want their media companies being swallowed by giant American media and tech companies. The EU has gone after Google, Apple, Netflix and Amazon in various ways, so I don’t see it happening. This exercise further reinforced that in my mind.

(I did debate joining Bertelsmann, Vivendi and ITV, with maybe others as the European company, who could then swoop in for Dish, AMC Networks and Discovery (Scripps), but again tried to limit it to the rule of 6. But I do really like that company. I may have to update the article now…)

Insight #2 – Companies still ended up with “weaknesses”.

Even in a world of six massive, super-mega-corporations, they each still had weaknesses. This result surprised me, even as I was the person deciding on the fake mergers. In this new world the following companies have the following weaknesses:

Disney-Apple: No cable, cellular or satellite distribution.

MCV-NBCU: No social

Google-Mart: Limited film or TV production

Facebook-Flix-Ify: No TV channels

AT&T All Media: Limited technology

Amazon would be the most well rounded, especially if they buy Twitter. Amazon is the only studio without one of the former “Big Six” studios, but between Lionsgate, CBS Films and Amazon Stuidios, this isn’t really a big weakness. Some years Lionsgate beats Paramount for box office. Still, it was interesting that as you build out mega-conglomerates, it is still really hard to own it all and dominate every field.

Insight #3 – Device carriage will become the new “retransmission fee”.

One conclusion I had that wasn’t in the initial prompt was for “device makers” to get heavily involved. Obviously, Apple buys Disney. Everyone predicts that. But then I paired Microsoft with Comcast-NBCU and Sony with Facebook. Amazon and Google already make devices. 

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It’s been two weeks into the new year, but M&A is back!

Well, not officially. As I wrote about in December, despite the first six months of movement (with all its tricky ways to calculate), the last six months were relatively quiet in M&A in media and entertainment. (The biggest deal was Pandora getting snapped up by Sirius. Big but not earth shattering.)

But January is for predictions! With the end of year surge in “predictions for 2019” articles came the old standby prediction, M&A! I’ve seen predictions that Viacom and CBS will merge, that they won’t merge, that Apple will buy something (Disney?), Walmart will buy Roku, and Verizon will buy CBS.

On Twitter, I wrote at some point that with all the M&A expected, at some point between all tech, entertainment, media and communications companies we’ll have four companies left.

Huh. Four companies. Is it possible? 

So I started deciding who would join with who. Apple buys Disney. Easy. But who would Comcast buy next? Oh, Cox to expand its footprint. Amazon buys a cell phone company, because “Prime!” Others were harder. Who wants Sony? What happens to Facebook?

Once I started, I couldn’t stop. And now that joke turned into an entire article. But fear not! We can learn something about the strategic strengths and weaknesses of our current media & entertainment conglomerates by trying to imagine their hypothetical future.

The interesting part is that it isn’t like we were short on media overlords before this point. In 2000, we had six giant media conglomerates. In 2010, we had six even larger media conglomerates, but a cable company had just offered to buy one. In 2019, we lost a media conglomerate (Fox), but Netflix arguably replaced it. And AT&T bought another media conglomerate (while buying another communications juggernaut). If Paramount goes away, but Amazon buys Lionsgate and a some TV networks, arguably we’ll be back at six.

So that’s the goal: six mega-corporations who control our media and entertainment futures. Once the vertical integration barrier was broken, it was only inevitable that the rest join up. So let’s push this to it’s logical conclusion. Who are the six companies that will remain by the end of say the next decade? 

The Ground Rules

– I’m focusing on entertainment, media, communications (meaning telecoms/infrastructure) and technology firms. The tech firms are the big addition from, say, 10 years ago. However, if fun tangential companies pop up (they will), I’ll include them. 

– I’m going to avoid stealing M&A pitches unless they are very obvious (Disney and Apple) if I can. (I loved the if “CBS and Viacom don’t merge, and Verizon buys CBS” prediction from THR, for example. Since they came up with, I’m not stealing it. Though I am stealing the idea that Viacom and CBS ultimately don’t merge.)

– Microsoft gets invited to the technology party. Why? Well they have briefly overtaken both Amazon and Apple for largest global company by market capitalization. So they’ll join our other tech giants.

– This isn’t realistic. Especially from a regulatory perspective. This is contingent on the Department of Justice, FCC and FTC just about giving up. So basically, a second Trump presidency. Maybe just a Pence presidency.

– The mergers should make sense, from size, culture and need perspectives. I mean, since this is all fake, I can’t call this realistic. But economic rules should apply. For example, Netflix has a larger market capitalization than most entertainment companies, so an entertainment company can’t acquire it. On the other hand, Netflix has tons of debt, so it would struggle to acquire a movie studio. It’s complicated.

– My main criteria for matching up firms will be linking synergies, needs and then cultures.

– I need to end up with six. Some much smaller companies can be left out, but the goal is six super-giant conglomerates. 

The Candidates

Here’s my rough lay out of the “media, entertainment and communications” universe as it stands in 2019:

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