Laura A. Martin, CFA & CMT •
[email protected] • (917) 373-3066 January 4, 2018 Dan Medina •
[email protected] • (212) 705-0295 Entertainment & Internet NeedhamNeedham InsightsInsights Thought Leader Series Providing in-depth analysis of significant industry issues The Future of Media: An Epic Battle We have funded or followed visionary billionaire entrepreneurs in the media space for nearly three decades and never has the outlook been so intriguing. It is clear to us what happens next, but the unintendedconsequencesandultimateoutcomeoftheimpendingbattleisanybody’sguess. Challengers.WeexpecteachofthedominantUSconsumerͲfacinginternetplatformstospendbillionsof dollarsin2018tocreatepremiumvideocontentinanefforttotakerevenue,viewers,andtimeawayfrom theincumbentTVandfilmcontentcreators anddistributors.Becausethesecompanieshavebuilttheir fortunesbyaggregatingconsumers(FB),information(GOOG),products(AMZN)andapps(AAPL),welabel them the Internet Aggregators. Their competitive weapons are significant. They are much larger, have deeperpockets,areheldtodifferentvaluationstandardsbyWallStreet(implyingalowercostofcapital), haveglobaldistributionand revenue footprints, are dominant in mobile, and theyarewillingtosubsidize losses for a decade, as YouTube has done. More ominously, they are fast movers with agendas that have little to do with ecosystem health, as evidenced by the value destruction of several historical media ecosystems.Webelievethattheirwarwillultimatelybeagainstoneanother,butthattheTVandfilm ecosystemsrepresentakeystrategicbattlegroundinthatendgame.