Tag Archives: analysis

My Favorite Slide Explaining Apple, Google and Amazon’s Domination of Entertainment Companies like Disney

Market Caps of Content Companies vs Distributors via BTIG

I LOVE LOVE LOVE this slide from Rich Greenfield at BTIG. His whole presentation is definitely worth the watch but this one graph truly says it all. (And I’m always trying to pull it up online to share in meetings… so I’m also posting it here to make that much easier.)

In the presentation, Rich first shows market caps of the companies below the line — all of our beloved entertainment creators. We see them in print and on every screen and think of them as massive, powerful companies. Then, he layers on the market caps of the “platforms” and distribution companies that sit between those companies and their audiences… and it’s easy to see how those content co’s are dwarfed.

Rich is looking at this through almost exclusively through a lens of financial analysis and market value… which might not tell the WHOLE story, but it paints a pretty dim picture for content creators and brand owners: Content is not king.

Some things worth noticing (many of these points are made by Rich):

  • None of the entertainment companies below the line — even the juggernaut, Disney — has a meaningful direct-to-consumer platform… they all depend on the companies above the line to reach their audiences
  • Apple could buy Disney in cash
  • Google or Apple could buy the entire entertainment industry in cash, except Disney
  • Every one of the distribution companies above the line have meaningful plans to make their own content that they own completely and perpetually (in other words, they could start to make their own content without depending on the content companies and their brands)
  • Netflix isn’t even on here but its market cap around $70B, making it bigger than everyone but Disney
  • Neither is Snap… it’s much smaller than Netflix at $20B (as of this writing), but it still stacks up above Viacom, Discovery and others
  • The digital-oriented distributors like Facebook, Apple, Google and Amazon have incredible volumes of data and knowledge describing their audiences, which is a huge advantage in content creation
  • While some of the content companies have partnered with and invested in the FANGS companies, they’ve missed their chance to buy one of them or build their own; Hulu is the only example and they half-heartedly participate in it
  • Nobody has been able to successfully create a large “direct to consumer” platform with content or brands alone… Netflix had to use DVD rentals, Amazon is using ecommerce, Spotify is using music and UI. In other words, we haven’t seen someone earn lots of subscriptions and ad revenue by only saying “we have ESPN.” It’s always content paired with some other strategy.

What Rich calls the “punchline” is this great thesis: content companies — especially Disney — have to make an acquisition in order to complete their business. What should they buy? Well, all of their options SUCK. Netflix is too expensive. Snap and Twitter don’t come with subscriptions. Pandora or Spotify aren’t video platforms.

That punchline explains many of the plays we see being made around the industry: Twitter continuing to pursue video in an attempt to demonstrate its value as a video platform. Time Warner selling itself to AT&T. Netflix spending billions on original content. NBC investing heavily in Snap. The list goes on…

The Most Important Thing About Creating Content Or: The Secret to Great Content Strategy

Have you ever watched a show and thought this show is perfect for me? Maybe a movie?

Screenshot of Matthew McConaughey in True Detective observing the opening crime sceneThe last time this happened to me was True Detective on HBO. It had a cast I love, a plot that intrigued me and cinematography I admired. That seems like a lot of expensive reasons to like a show: world class writing, acting and filmmaking!

People love all sorts of content. What do they all have in common? Some of my colleagues would say story, many would say character. But then how would you explain that some people hate a certain book… even though it’s a great story? How would you explain BuzzFeed or ESPN? How would you explain a stand-up comedian? Story and character don’t really explain those things… especially not why people love those things.

That’s because the most important part of creating content people will love is… understanding what people love. It’s the “understanding” part that’s important. It’s understanding them deeply — what they want and need. How they spend their spare time. Their fantasies and fears. In one word, it’s empathy.

Most people don’t think of it this way, but great content that you love is engineered to be that way. It’s not an accident that you like the shows you do. It’s usually not just some guy making something that he alone thinks is perfect for himself — at least not if it’s a show you love.

Great creators get inside your head, take out your thoughts and wants… then give it right back to you.

Kevin Spacey in House of Cards being turned down for Secretary of StateThe process of doing this kind of research and thinking is the essence of what some people call “content strategy.” Here’s a clear and perhaps simplified version I can think of and you may have heard of it before. It’s how House of Cards was allegedly developed. Have you seen that? If you have, you probably liked that it starred Kevin Spacey, thrilled you like a thriller and had a creepy tensions that’s probably hard to describe. Well, none of this was a mistake. Netflix found in its data that:

  • Netflix users like Kevin Spacey
  • Same with their computer-generated genre “political thrillers”
  • It also showed that films by David Fincher are popular — he produced House of Cards and his involvement leaves you with that hard-to-pin-down creepy feeling… you’ll sense this pacing and style in other movies like The Girl with the Dragon Tattoo or The Social Network
  • (Bonus: The DVDs of the original House of Cards mini-series were also popular among Netflix’s by-mail customers)

In fact, Netflix was so certain of their content strategy here that they didn’t ask the producers to do a pilot of it.

This actually makes a ton of sense! What does a pilot really do? It’s engineered to get into a different kind of head: a development executive’s head! A great pilot empathizes with a development exec by introducing the characters and showing them the direction of the show. It’s not really for the audience. You don’t have to sell a show to the viewer in the very first episode if you already know they love Kevin Spacey, David Fincher and political thrillers. You’re reading their mind already. The pilot doesn’t matter — it’s a homerun for that audience.

And a homerun for an audience entertains them. And the key to entertaining them is understanding what they want. And truly understanding someone — truly getting them — that’s empathy. I have a literally religious obsession with that word, empathy. And that’s why I think it’s the most important part of creating content.

Next time you create something, think less about what you like. Consider what people like you like. And you’ll know you’re creating something they’ll love.