Media scion James Murdoch gave his current assessment of the state of play in the global entertainment business Tuesday during an opening keynote discussion at APOS, Asia’s leading media summit.
The former 21st Century Fox CEO said the past decade for large media players has been “a journey of scaling in order to compete in a new streaming environment.” The current question, he believes, is not whether that is the right move, but rather “how many of these companies are going to be more profitable in the future than they were in the past.”
Murdoch spent decades in various leadership roles within his family’s media and entertainment empire, but he stepped back in March 2019, founding the private holding company Lupa Systems — bankrolling the firm with his $2 billion share of the $71.3 billion sale of 21st Century Fox to The Walt Disney Co.
“The really exciting opportunity was to do something more entrepreneurial with a small team,” he explained at APOS. “After a career in turnarounds and legacy businesses adapting to digital,” Murdoch said he set up Lupa Systems to “think about future questions and our 2040 selves — the long-term trajectories in our industry.”
Murdoch was hosted and interviewed at APOS by Vivek Couto, executive director of Media Partners Asia, the event’s organizer. When asked to survey the current moment in media, Murdoch said the common assertion — already “an old saw” — that COVID-19 has acted as an accelerator for digital change is “clearly true.”
“The substantial if not complete collapse of the theatrical window in the U.S. and a lot of other markets is here to stay now,” he explained, “and that was something that was fought tooth and nail by exhibitors over decades.”
On the perennial questions of whether the great unbundling of cable services will ultimately lead to a rebundling in the streaming sector, Murdoch insisted that it has essentially already happened. “The scaling of the streaming platforms is itself a kind of rebundling,” he said. “Netflix is, in and of itself, a bundle of services — a kids service, a movie service, a serialized television service, and so forth.”
As more streamers switch online, both in the U.S. and globally, further rebundling is “inevitable” but also a “good thing,” Murdoch added, noting the difficulty for consumers of juggling so many new subscription services. “It’s pretty confusing, and your total price is already where it was with cable, if not higher.”
The danger for some media firms will be the possibility of being left out of the coming reaggregation process, Murdoch said. “Because if you’re not one of the top three choices, where are you really?”
He noted that the companies engaged in the streaming battle “really have very few levers,” because the investment costs both for creating the technology for an amazing consumer experience and a constant stream of high-quality content are sky-high; “but at the same time you really don’t have downstream retail pricing power” — because of the startup-style race for market share.
“This downstream competition will be incredibly intense for a long period of time,” he said, “whether you’re Amazon Prime, Netflix, Apple or Disney+ — or, god forbid, Paramount+, Peacock or whatever else.”
“A transfer of value upstream” will be the less intuitive result of the competitive frenzy, according to Murdoch, as inflationary pressures increase the competition for content creators. “There is a real question about what the creative output is going to look like within these large conglomerates and what established and talented creators are going to want to do,” he said. “I feel like there is more value for creators in the future, not just in terms of selling for a high price and on a work for-hire basis.”
The industry’s ongoing consolidation has resulted in higher budgets in film and television but “less room for truly original work [and] lots more derivative work,” he added. “That’s going to create a reaction to this massive conglomeration of businesses.”
As the giant streamers compete for creative talent, “what you’d actually like to see,” Murdoch explained, “are new creative centers of gravity emerge that really apportion the rewards of their authorship appropriately — to writers and artists and so on.” He said he expects that “creator-led franchises are going to be very powerful” as the streaming wars unfold. “Each one may not be at the scale of these giants, but they can very profitable businesses — if they can take a little more risk to own their IP and creativity.”
Murdoch said one of the big trends he envisages across the entertainment sector will be authors insisting on retaining ownership rights, “as people don’t necessarily want to sell all of their work for forever and a day,” he said. One of the downsides of the streaming model, he added, is the absence of a secondary syndication market, which might limit potential value for creators. “If you sell a product to Netflix,” he explained, “there’s a risk that it just becomes a number on a shelf of titles forever, where it could be under-exploited.”
But the same structural dynamics that are giving big-name talent new leverage also risk locking out storytellers who don’t have preexisting industry clout. “It is probably harder than ever for new voices to have those opportunities,” Murdoch said.
This unfolding scenario is creating an opportunity for smaller companies to aggregate and empower emerging voices within the major streamers’ shadow, Murdoch argued. He cited Lupa Systems’ 2018 investment in independent comic book company AWA (“Artists, Writers & Artisans”), which accords IP ownership to its authors. “AWA is a small business, but I think it’s an expression of the trend for creators — of seeking to own more of their own copyrights and more control over how they are exploited,” he said. “There’s going to be conflict there, but new companies like AWA can play a role and add a lot of value.”