The global entertainment industry is currently facing a major economic challenge, as tech giants like Netflix, Apple, and Amazon continue to dominate the market. Traditional media players are now forced to make tough decisions, including merging with other companies, selling assets, or limiting production. This is not a new phenomenon, according to Ted Striphas, an associate professor who specializes in media studies at the University of Colorado Boulder. He traces this trend back to RCA—the Radio Corporation of America—where they realized that having devices alone was not sufficient, and that content was needed to generate sales. This shift in focus from hardware to content is something the tech industry has fully grasped, with companies like Amazon and Apple launching original content to boost sales of their devices, such as Amazon’s Fire TV lineup and Apple TV.
In contrast, Netflix has disrupted the market by offering a unique combination of original and licensed media, posing a significant threat to established players like Warner Brothers Discovery, Comcast, Paramount, and Disney. These companies’ forays into building their own streaming platforms resulted in combined losses of $5 billion in 2023, as reported by the Financial Times.
Striphas emphasizes that these legacy media studios still hold a sizable share of the traditional TV audience, making them formidable players. However, with the future of television shifting towards on-demand models, the uncertainty surrounding the future of these studios is understandable. Earlier this year, Warner Brothers Discovery and Paramount were reportedly exploring merger options to reduce costs. More recently, Paramount has attracted interest from Skydance Media and received a $30 billion bid from Allen Media Group in late January.
Striphas points out that mergers have been a common strategy for the legacy media industry for the past four decades, making it an unoriginal response to the current challenges they face. However, the situation is further complicated by the fact that the entertainment industry is now adopting the practices of the tech industry, which has an insatiable appetite for growth. While legacy media studios focused on content creation to keep viewers engaged, the tech titans prioritize selling more devices like Echo and Roku.
According to Striphas, Sumner Redstone, who played a pivotal role in Paramount’s expansion, famously stated, “Content is king.” This statement held true at the time. However, the tech industry has taught us that reverting to RCA’s model is essential for success in today’s market. Simply producing content is no longer enough; studios must also be involved in hardware production to remain competitive.
As the streaming landscape continues to evolve, legacy media studios must find innovative ways to adapt. The future success of these industry giants will depend on their ability to strike a balance between content creation and hardware development, aligning their strategies with the current demands of consumers. By embracing this change, they can seize new opportunities and secure a stronger position in the ever-changing entertainment industry.
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1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it