Wily old fox, Rupert Murdoch, has pulled off another masterstroke with his deal to sell 20th Century Fox and other Fox assets to Disney for $66billion.
While most commentators analyse what this all means for the Murdoch dynasty, or how such a merger can yield synergistic benefits, for me this deal has a more significant meaning. It signals the beginning of the end of the decades old mass media industries as we currently know them. Most players in the mass media and entertainment industries have lost their way as their historically successful strategies of franchise content creation, mass delivery, and vertical integration are reaching the end of the line. This is a result of mismanaging the transition to personalised delivery, consumption and interaction, and the technological changes that have fuelled it. Examples include:
- The music industry has halved in size since the conversion of music to infinitely transportable digital files.
- News and other publishing is undergoing similar disruption as the medium shifts from paper to screen, with shifting revenue models and credibility as a result.
- The film industry is polarising around action franchises and losing much of the traditional creative talent to cable TV and OTT streaming, both of which are enjoying a golden era through a focus on long-form TV drama.
- The rest of the TV industry is stagnating as its audience ages and it continues to fail in its quest to find “the next big thing”, pondering along the way over how it missed the rise of UGC (eg YouTube) and OTT streaming (eg Netflix)
- The advertising industry’s increasingly fragile relationship with mass media content delivery is being stretched to breaking point by a combination of unstoppable fragmentation of content delivery and consumption, and the continued rise of personalised digital advertising. What happens when the tipping point comes and significant advertising dollars move out of mass media?
It is a seemingly complex landscape with each industry being impacted by multiple, specific factors. Yet the reality is that the factors disrupting the global media and entertainment industries have broadly the same origins, as follows:
- The transition from mass media to personalised delivery and consumption of media and entertainment content.
- Mass connection between people via multiple social media platforms transferring the job of marketing/awareness/curation from mass media to “word of mouth” at scale. This is fuelling the rise of influential core fans and early adopters, unlocking their latent desire to get much more involved and immersed in the content of the future.
- The transition of revenue streams from advertising-based to transaction-based and other more imaginative ways to commercialise content.
- The balance of power is transferring from “distribution” to “content” with the former being commoditised by the internet so the latter really can become King.
With this backdrop, it is easier to see why Murdoch wants to bow out at the top. After all, what do moguls do when they look to the future and see that there is nothing there but managed decline or status quo at best? You focus on reducing costs because there is no strategic growth route to create shareholder value. Indeed, much of the reported rationale behind the merger is ascribed to annual $2bn cost cuts through merging together duplicated internal departments and the more cost-efficient creation & marketing of major franchises like Marvel and X-Men. Great - just what the world needs, more action hero movies! It’s lazy thinking - where’s the spark of future brilliance in the merging of these two giants of mass media?
Before the remaining creative businesses despair that the ongoing juggernaut of mega studio consolidation leaves them out in the cold, remember that the very factors that led to this mega-merger are the ones that point the way to a bright future for those, unlike Fox and Disney, nimble and imaginative enough to plough a more enlightening, consumer-centric path.
The major technology-driven changes of the last 20 years or so have come from players external to the media and entertainment industries. The TV industry has been at the forefront of changes such as screen quality and the introduction of 3D, and the music industry has led changes to audiovisual recording technology and physical distribution. However, it was Apple who created i-tunes and the iphone, Zuckerberg and his friends who created Facebook, Google who spotted and acquired YouTube, and Amazon/Netflix who have driven the mass-adoption of streaming TV over the internet. As a result, the incumbent media and entertainment giants, once the masters of change, have been largely passive players in the more recent evolution caused by technology advancements. Incumbent players have suffered, and continue to suffer, the ignominy of being the disrupted rather than the disruptors.
The relentless focus on the consumer, and the personal experience, has been the key behind the success of these technology giants. As a result, the future of media and entertainment is now being driven by the involvement of consumers in a way not previously possible, allowed, or encouraged, and the Fox/Disney deal is the best signal yet that the powers that be know it. Now it gets personal!