How the Creator Economy is Helping Dismantle ‘Old Media’

Creators have quickly matured from crude meme videos to distributing full cinematic-quality productions to rival the best of Hollywood, with budgets to match.

Recent announcements across the worlds of technology, media and venture capital are serving as a harbinger for how traditional media will be fundamentally transformed in the years ahead. While none of these events might appear seismic on their own, in the aggregate they mark clear territory for the battles ahead that will both determine the future of media and the lasting influence of the Creator Economy.

In May, one of the industry’s most prolific venture capital firms, Andreessen Horowitz, rebranded its content site, Future, and issued statements implying it was evolving into a new kind of organization — one some characterize as ‘a media company with a venture arm’. Weeks later, Harry Stebbings, the 24-year old founder of the popular 20-minute VC podcast, announced that he had raised $140mm across a pair of inaugural funds, making his fledgling firm, 20vc, one of the largest seed investors in Europe virtually overnight.

So, in the space of a month a respected VC fund announced plans to become a content creator, while a respected content creator announced plans to become a VC fund.

Separately, in late May, Amazon announced it was acquiring media giant Metro Goldwyn Mayer (MGM), home of the James Bond franchise and 4000+ other iconic films, for roughly $8.5 Billion. The bold acquisition would ostensibly complement Amazon Studios, which has been occupied with producing TV programming, and would provide a wider audience (and greater monetization) for the deep MGM catalog of works.

Mega mergers between media companies and technology companies are nothing new, of course. Many still remember the AOL/Time Warner merger of 2000, the wave of mergers that that deal triggered, and the shadow that those pairings would cast over the industry for much of the next decade. Yet this Amazon/MGM acquisition feels different and has broad implications across media and tech. Let’s examine some history…

The Media consolidation era of 2000–’10

Twenty years ago, the media landscape looked very different. In the dot-com era, media companies were under enormous pressure as their traditional points of distribution — television stations, movie theaters et al — were increasingly being disintermediated by the internet. The level of centralized control and the cushy franchises that media companies had enjoyed for decades were eroding as consumers were increasingly able to access content by circumventing media companies entirely.

Telcos were facing an existential crisis of their own as consumers were increasingly going wireless and, hence, abandoning the landline services that had been the bread-and-butter of Telcos for generations. Yet, for Telcos the business of providing internet access was both not an especially attractive one and one that was rapidly becoming commoditized. In the face of this, Telcos such as AT&T and Verizon felt they needed to provide greater value to their consumers; accordingly, they went on a media company buying spree through much of the 2000s.

Over the next decade, Yahoo, AOL and TimeWarner would ultimately be passed around like hors d’oeuvres trays between these players as Telcos struggled to find ways to add value in combined offerings.

In the final analysis, however, many of these acquisitions failed and the acquired companies themselves were often spun off or otherwise disposed of.

2010–’21: Media rewires itself…

Over the subsequent decade, many media companies that avoided partnering with or selling out to a Telco during the 2000s went on to build internet businesses of their own. Tech companies, somewhat in parallel and in response to these potent offerings, determined that they needed to develop their own media companies.

Over the next decade, billions were invested in content development as companies such as Amazon and Netflix built their own robust film and television studios and, in short order, became major players on the media landscape.

…But not without an unwinding

More recently, many of the same Telcos that led the media buying binges of the 2000s have been shedding those assets. In 2019, Verizon unloaded Tumblr for a sum believed to be roughly $3 million, a far cry from the $1.1 Billion Verizon paid for the blogging platform in 2013. In 2020, Verizon sold Huffpost to Buzzfeed and took a $119mm loss on its quarterly earnings for doing so.

In early May, Verizon announced that it was selling AOL and Yahoo to PE firm Apollo for $5 Billion —half of the roughly $9 Billion it paid for the combined pair. This sale effectively ended Verizon’s decade-long troubled experiment with media production and advertising.

Separately, AT&T cut itself loose from Time Warner in a $43 Billion merger of WarnerMedia with Discovery, a deal that analysts have called a debacle for AT&T shareholders. Clearly, Telcos running media businesses turned out to be a bad idea whose time had passed.

Content becomes commoditized

Today, Telcos are grappling with the difficult question of where growth will come from in a world where consumers are increasingly circumventing their traditional business lines. Tech and media companies, for their part, are engaged in a fierce battle over slivers of market share across dozens of subscription services in an increasingly competitive landscape of siloed, balkanized content.

In response to all this upheaval, consumers are increasingly having to choose from whom they are going to purchase content; and those choices have only become more complex: “Do I go with the cable company bundle or just use Netflix? What about Hulu? or Disney+? Or Peacock? Would my Amazon Prime membership be duplicative to any of this?” And so on.

Will scale matter any longer in media?

In a world awash in media content, it’s clear that content itself has become commoditized and is no longer a differentiator. As such, no one platform can dominate when there is such diversity of quality content.

Traditionally, this is where size and scale brought enormous advantages. In the past, large media conglomerates would use their influence and scale to push content to consumers and, in the process, quash smaller players that didn’t have the balance sheet to compete in the content wars. But that world no longer exists.

The emerging threat to media companies is not coming from smaller media players any longer but from the creators themselves. Enter the Creator Economy.

How Creators are changing the content landscape

  1. Better Technologies. Fueled by vastly improved smartphones, inexpensive high-resolution cameras and user-friendly video editing software, user-generated content (UGC) has leapfrogged from the crudely produced parody videos of a decade ago to the full-length cinematic-quality videos of today. Across a host of social platforms from YouTube to TikTok, consumers are increasingly choosing to view this kind of content over the packaged offerings coming from major media outlets.
  2. UGC is edgier, more topical. Moreover, consumers find UGC more topical, edgy and relevant in the fast-paced media environment where a viral video can have global impact in minutes and can launch lucrative careers for content creators seemingly overnight.
  3. Immediacy. Current technologies enable a content creator to seize upon a news events or an emerging meme, produce a high-quality video, and distribute it to his or her millions of followers across an array of social platforms in just minutes. A media organization, with its Standards & Practices and other bureaucratic bottlenecks, cannot compete with that speed to market and relevancy.
  4. Content itself is changing. Formats are also becoming a factor. Less willing to sit through long, episodic content formats, an entire generation of consumers is being conditioned by TikTok and other social platforms to consume content in 15–30 second snippets. The staggering monthly active user numbers on these platforms bear this out. This shift is not temporal, and it’s changing how we think about content.

As content changes so do the economics of the media business

As the costs of producing high quality content continue to fall, as more content creators emerge, and as run-time lengths shrink, the economics of the media business will continue to erode. The increased balkanization of content means that producers of highly demographically-targeted content (i.e. Disney, et al) that can engender loyalty from niche consumer segments will have the advantage over producers of broad-based, mainstream content who will struggle to find an audience.

I predict that we will see another clumsy game of musical chairs across the media landscape as players scramble to partner or acquire their way to remaining relevant (and solvent) in the new world order of media fast coming into view.

Media decentralization and ‘Going direct’

This fundamental dismantling of ‘old media’ has many causes but one irrefutable driver is that content creators of all stripes are increasingly going direct. This includes groups as diverse as an Andreessen Horowitz or Coinbase—who’ve opted to tell their stories directly rather than relying on news organizations to do it — to a Tween influencer who still lives at home but has an 8k video camera and 2 million YouTube subscribers.

And that Tween influencer has no desire to communicate with her 2 million followers through an intermediary.

The ‘Creator Economy effect’ in the fields of music and journalism

This media decentralization is also evident in the fields of journalism and music. Musicians are increasingly producing their own music and distributing it directly to their fans, circumventing industry gatekeepers in the process. This is a dramatic shift from the days when industry players like now-defunct record store chain behemoth Tower Records (no relation, unfortunately) once held so much power that record labels would weigh which musical acts to sign based upon how artists would be marketed in the chain’s stores.

As with video content, audio content has also become dramatically less expensive to produce. What would once cost weeks of expensive recording studio time and take dozens of musicians to produce can often now be done on a Pro Tools-equipped laptop in a matter of hours.

In the world of literature and journalism, there is now Substack, which provides a platform for writers to build a following with loyal readers and then facilitates the means to charge for content.

‘Kardashianization’ of media and commerce

Once at scale, every content creator will want to control and monetize their relationships with their followers. One might call this new phenomenon the ‘Kardashianization’ of media and commerce — a nod to how Kim Kardashian and Kylie Jenner cleverly built billion-dollar media and branding empires by leveraging media platforms to get to scale and then migrating their millions of fans to their own platforms to monetize them through online and offline commerce. And we expect this trend to continue across broad swaths of the economy.

The Opportunities Ahead

While I believe we are likely in only the 3rd or 4th inning of a fundamental transformation of the media industry, the Creator Economy is as much a driver of this evolution as anything else on the media landscape today. As investors in the category, Catapult is enormously excited by the opportunities to support creators who wish to develop meaningful content, to find new audiences for that content across mediums they control, to communicate with their audience directly, and to generate significant remuneration for themselves, all unfettered by intermediaries. We believe transformational, billion dollar businesses will emerge from this period and look forward to partnering with many of those media innovators in the years ahead.