Peak TV is here, but it’s not going to last because there isn’t enough audience to go around. The collapse and consolidation is just a bit more than two years away. Here are my predictions.
What happens after you reach a peak, any peak? You descend from the height… whether it’s summiting Everest, climbing that hill near your home, or what people have been calling “Peak TV” for the last few years.
There’s an amazing amount of great television out there, but it won’t last.
Advertising won’t save it. There isn’t enough audience attention to support all the channels and services out there spending lots of money on lots of programming. Netflix and HBO Max (Warner Bros. Discovery) are both embracing ads to make their shows available more cheaply, but that’s mostly just a story to keep Wall Street from panicking and devaluing their stocks.
A collapse and consolidation is coming, but it’s a bit more than two years away. This is beyond the range that’s easy to see according to a famous notion from Bill Gates in his 1996 book The Road Ahead: “People often overestimate what will happen in the next two years and underestimate what will happen in ten.”
Nothing much will change between now and the next Presidential election in November of 2024: the campaigns will pour money into any ad supported service, and that will delay the Mediapocalypse for a few months. The Paris Summer Olympics in 2024 will also help the entire advertising industry, particularly NBC.
But after Inauguration Day in 2025, regardless of who the new President is, we can expect to see big changes.
The real battle isn’t among the different creators of media: it’s between two different business models.
Mostly Media versus Bundles
On the Mostly Media side we have Disney, Lionsgate, Netflix, Paramount, and Warner Bros. Discovery. With the exception of Disney (which has amusement parks, hotels, cruises, and more), these are primarily movie and TV businesses.
On the Bundles side, media is merely one feature of a bigger business:
- Amazon has its mostly ad-free Prime Video and Freevee studio (and now MGM) and streaming services, but it’s part of the bigger Amazonian empire (ecommerce, grocery, AWS, ads). Prime Video mostly exists to make it a no-brainer to pay the annual fee. Freevee is part of its rapidly growing ad biz.
- AppleTV+ is part of Apple’s bigger hardware, software, and growing services businesses, which includes ads but not in a big way (yet).
- Comcast owns NBC Universal with all its channels, Peacock, and DreamWorks Animation, but it is part of a bigger cable, telco, and Internet Service Provider business.
- Sony owns Sony Pictures, which is part of a bigger Consumer Electronics business.
The economics of the Mostly Media companies will have a rougher ride than the Bundle companies: the Mostly Media companies have to make a profit on subscriptions and ads, while the Bundles can absorb media losses (for a while at least) if the rest of the company is profitable, and particularly if it can use the media to amplify other parts of the business.
Then There’s the Data
A combination of legislation by governments around the world plus preemptive changes by Apple and Google has made it harder for companies to put the right ad in front of the right person at the right time.
This is why Facebook has lost so much value since Apple started putting the “can this app track you everywhere you go online forever?” popups onto iPhones… to which no sensible person has ever responded “sure.”
Right now, Retail Media—when retailers like Target and Best Buy and Walmart and Amazon sell targeted ads on their websites—is the biggest growth area in advertising, but the next frontier is for big companies to acquire Mostly Media companies for their viewer data.
Here’s what I think will happen:
Walmart buys Paramount to compete with Amazon, which I’ve talked about before.
Warner Bros. Discovery (WBD) gets sold for parts. The company has been too big to sustain itself, but too small to compete with Disney, ever since the CNN acquisition in 1996. Things got worse with the AOL acquisition of Time Warner in 2000. AT&T tried to digest Warner in 2018, but it got a bad case of heartburn and spun it out to Discovery.
With $55M in debt, my guess is that it will sell off CNN and DC Comics as a stopgap in 2025, only to collapse entirely soon after.
Sony buys a lot of WBD’s TV assets: Sony’s weakness has always been its lack of its own TV networks for distribution. (Years ago, I argued that Sony should buy Yahoo! and skip over TV directly into digital distribution.)
If WBD has the fire sale that I predict, Sony will buy enough properties to roll its own video service across cable and streaming, making access to that content a free-with-purchase feature for all its televisions.
Google or Microsoft buys Netflix: Alphabet owns Google, which owns YouTube, which stopped making original content in January. YouTube has never figured out original content because it requires artistry as much as engineering. However, premium content attracts premium ads.
The biggest obstacle to this is that Netflix partnered with Microsoft to create its advertising technology, which means that another scenario is that Microsoft will buy Netflix and bundle it with one of its offerings (software or videogames).
Comcast buys Lionsgate because that gives Comcast both another content library and, more importantly, a premium, ad-free cable and streaming service in Starz. (Although it’s likely that this will happen even earlier than 2025.)
And finally…
Apple buys Disney: Sure, with a Disney market cap of $172B this would be a big pill for Apple to swallow, but Apple’s market cap is $2.2 Trillion. More importantly, AppleTV+ is too small to create enough data for the rest of Apple to use in order to target ads.
Apple doesn’t want Facebook to use iPhone data to sell targeted ads, but that doesn’t mean that Apple won’t use that data to sell ads itself.
Disney creates a lot of media (click here and keep scrolling) that in turn creates a lot of data, which Apple can use to create a killer advertising technology product.
What was an advertising duopoly with Google and Facebook has recently become a triopoly with the arrival of Amazon Ads. If Apple buys Disney, that triopoly will in turn become a quadropoly.
Plus, since much if not most of the media getting created will be watched on smartphones, this means that Apple will be the big media winner with all roads leading to the screen that people carry with them everywhere.
The Missing Piece
While I think that these changes will happen, I also think that in the long run the bigger issue is that the media audience isn’t just fragmenting, it’s also shrinking.
Gen Z and their younger counterparts aren’t watching nearly as many movies or TV shows as their parents and grandparents. Instead, they’re playing videogames and watching short-form videos on TikTok.
Even after the consolidation I’m describing, the true Mediapocalypse is that the surviving companies will be fighting over slices of a pie that’s only getting smaller.
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