← The Media Odyssey
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- [00:00]
Marianne Renshaw
Welcome to the Media Odyssey Podcast.
- [00:02]
Evan Shapiro
That is Evan Shapiro and that is Marianne Renshaw.
- [00:05]
Marianne Renshaw
This week on the pod, we're going to do a bit of a deep dive on a couple of key trends from H1 that we've written and discussed at large.
- [00:13]
Evan Shapiro
And we're going to spend so much time on these individual trends and a brand new cross screen attention index that I launched recently that we're going to split this episode into two halves. So this is the first half and then at the end of the next half, you can come back when you're on the beach or at the pool or at a barbecue and watch or listen to the second. Sometimes you get into a workflow and you're like, I have to go to work again. And then every time I see you on Riverside, which is the platform we use to record this, it's just. It just brings me back to that first conversation we had about why we wanted to do this. And the reactions we get from the audience really are incredibly gratifying. So thanks, everybody for listening, for sending us your comments. We do take everything you tell us about this podcast to heart because we put the audience at the center of everything. And so if you have suggestions for us on how to make this better or topics that you want us to cover, please let us know. We really enjoy the interchange with the audience.
- [01:29]
Marianne Renshaw
And I think one thing that is nice about the POD and, you know, with you, is it does take us, you know, a few minutes to, you know, get a bit of a higher road on stuff. Right. Because I think every day we're on LinkedIn substack and everything, it does allow for a bit of that perspective. And as H1 just, you know, came to an end, we thought it would be nice to take a quick look at the key trends from H1. There's some of those that we've covered over the last few weeks, may that be vertical video, micro dramas. We talked about Netflix, getting into podcasts, all of those things. We won't get into those. Those are clearly trends from H1. But we wanted to do a mini deep dive on a few things that kind of stood out for us that perhaps we didn't anticipate. So let's get started. I think one that is unavoidable and we've covered this one, you know, kind of over and over again. But it is the topic of AI, the AI bubble something you feel strongly about.
- [02:34]
Evan Shapiro
Yeah. So this is one of my big predictions for the year, is that the AI bubble was going to burst. And what you're seeing is a bunch of financial experts, economists from around the globe basically getting on board with AI is currently in a bubble and that there's a ton of warning signs that this is looking like 1999 in the dot com bubble which burst and really destroyed the American economy. There are a couple of components to this. First of all, right now AI infrastructure investment in the United States is 2/3 of GDP. That's scary, right? And almost all of the demands. Scott Galloway covered this on his podcast earlier or last week. And almost all of the demand for AI compute is coming from just two companies which have kind of cuckoo valuations. OpenAI obviously being one of them. They lost $38 billion last year. They lost $38 billion last Year. They're losing, they're burning somewhere around 4 to 5 billion dollars in cash every quarter. Then there's Anthropic, which is the new darling. And everybody's trading their, their pre IPO stock off, off the, off the market. And again, they're at a trillion dollar valuation and they're not profitable. We don't necessarily understand how much money they're burning, but we are about to find out when they go IPO positive. But if you want to look at the biggest warning sign, it's SpaceX. SpaceX famously launched the most valuable IPO in the history of business, rising to $2 trillion immediately after the IPO. But since then the valuation has dropped 34%. And then Musk offered a bond, so they just raised tril, you know, a trillion dollars or whatever it was in the market on their IPO. And then they went back to the market for $25 billion more on a bond offering. And that bond offering popped for a second and then fell like a stone. And so this is a company that is really, if you want to, you want to see how AI bubble bursts, it's the SpaceX bubble at this point. And it's going to be followed by these two other IPOs that are coming in the second half of this year. This is an irrational investment and it's being propped up by Nvidia. Nvidia pumps money into the market so that other people can use it to buy chips from Nvidia and computing from a couple of different companies. And then it's this circular economy. It looks exactly like Cisco and the dot com bubble. And this is not just my opinion. I'm an amateur economist. I am listening to professional economists from around the world, including alliance in Germany, which just called it a bubble this week. So this to me is, is one of the major problems with the current US economy is if things continue as they are, if the AI bubble bursts, it's going to take down the entire US economy with it.
- [05:49]
Marianne Renshaw
Yeah. And you mentioned you had another example of a company that is actually closer to our business in a way. Well, indirectly, which is Oracle.
- [05:58]
Evan Shapiro
Yeah. So Oracle, which is owned by sugar daddy Larry Ellison, who is personally backing his son's potential $111 billion acquisition of Disco Brothers, he has lost, personally lost $100 billion in net worth in the last year. Oracle is down 40% year on year. And it's all about this over investment in AI infrastructure, which is one of the reasons why. And this came out this week, you know, there are 12 states that are suing to block the Paramount Nepo, baby, Disco Brothers merger. And there's a number of different reasons that they're using, which is anti competitiveness, but also kind of collusion to get Donald Trump CNN. But what's about to happen is on October 1st, Paramount owes David Zaslav and Warner Brothers discovery $650 million. Every quarter that deal doesn't close, whether or not the deal closes until they pull out. So that that's going to happen on October 1st. And now with this lawsuit, there's almost no way that the deal closes before October 1st. So Larry's going to be on the hook for tons of cash going out the door. Secondarily, this lawsuit's going to cause Ellison to expose everything that they've been talking about behind closed doors to the court in order to defend themselves in this lawsuit. And so the AI bubble and media's kind of future are intrinsically tied together. And this is problematic for the entire industry. If that deal doesn't go through as much as I don't think it should for anybody, the shareholders of Paramount, the shareholders of Warner Brothers, everybody's going to suffer at the end of the day on that. But if it doesn't go through, think about the hole that's going to leave in the media world. We've already kind of frozen in place waiting for the deal to close. And if the deal doesn't close, oh my goodness. So the AI bubble kind of wins throughout almost everything at this point. Meta's business model, Microsoft's business model, Google's business model, they're all tied to this irrational inflation called. It's actually Chipflation. And here's one other component to this. 90% of the companies who have invested substantially in AI in the last two years are reporting almost no reward for it. There's a small like 3 to 5% increase in productivity or decrease in costs. But on the flip side, they're all reporting that the costs of AI are far outweighing any of the benefits that they've gotten. So there's this, I think AI. I mean, I use AI all the time. We'll talk about how I used it later in this podcast. I think it's a powerful compute tool. But if you could look back at the dot com bubble burst. The Internet's an important part of the world right now. Right. The Internet didn't go away because the bubble burst. It just got rid of all the irrationality in the market and then forced everybody to find real businesses. I think we're on the precipice of that and I think it's going to happen in the next six months.
- [09:11]
Marianne Renshaw
Yeah, it will act as a, as a cleansing. What's fascinating about the fact that you're saying, you know, that, you know, the US economy is so tied to the AI bubble, I will say that, you know, most of what is being done on AI is coming from the us from you guys. Right. To some extent in China, et cetera, but for many countries it's a big no, no to use those. And so in Europe, there's a lot of discussion. Right. We feel powerless. It feels like what's going to happen now is the same that happened with the Internet, that is that someone else is going to build it and whatever we're going to be building, we're going to be building on rented rails. Right. So right now all of the Internet is on big tech. So similar conversations are happening with AI. You have Mistral AI in France who's pushing for a European playbook and that sovereignty. The question, what I wonder is perhaps it's a good thing that we're a bit on the outside looking in right now, then that cleansing happen, provided that we've done the job in the meantime to actually fund and support European companies building AI model, AI technologies, etc. Perhaps we could, we could come out, you know, I wouldn't say winning, but perhaps with a bigger stake than what we're seeing in, you know, the Internet.
- [10:36]
Evan Shapiro
Yeah, I think that there's a number of things happening in the United States that is going to basically shift the center of economic power on the planet Earth away from America and towards Europe in particular, and perhaps Latin America or South America in particular. But I don't know if that's necessarily going to happen because you guys tend to, I'm not going to say over regulate because I'm a big believer in regulation, but sometimes you just get in your own way with regards to growth. And, and it's really remarkable how United States really controls the entire big tech world. Google, Meta, Amazon, Microsoft, these are all American companies. And I do think that there's an opportunity for Europe to step into the void that my president is creating. The, the US Economy is in real trouble right now because of him. Not because of other macroeconomic forces, but because of this forever war he decided to start in the Middle East. The price of gas in the United states is now $7 in some places. Smartphone sales are falling because the cost of phones is, is, are rising, uh, so, so dramatically. The cost of everything is higher in the United States and it's really having a deleterious effect on the United States economy. So I do think Europe has an opportunity, if they can keep themselves together, to step into the void and become the better trading partner than the United States.
- [12:04]
Marianne Renshaw
So I'm going to make a comparison with the, the defense budget, right. So the fact that again, thanks to your President, we've had to rethink the relationship with the US when it comes to, you know, the NATO collaboration and you're seeing countries, I'm thinking France, I'm thinking Poland particularly because they're on the first, you know, they're on the front say everyone is boosting increasing, you know, the budget dedicated to defense, understanding that, you know, we've been again over reliant on you guys for that. The thing is, it does take time. And when you're speaking to experts, everyone is saying it's going to take at least 10 years to actually start seeing the benefits of that. And as we're seeing right now, there's something new popping up every six months that is challenging us there. So when it comes to our ability to build somehow a European AI model, if we decide now and invest money now, are we going to be able to see the result, the fruit of that, you know, quickly enough, you know, that remains to, to be seen. One thing that I wanted to talk about just to wrap this section on, on AI is the topic of AEO Geo gea, which is essentially the version, the new version of SEO Sea in the Gen AI world. And what matters there again is that it feels like, you know, from a consumer perspective. Let's take it to the consumer for a bit. Those LLMs, those models are becoming this link between us, the consumer and whatever output and data and insights we want. And we've seen it with the news publishers as often they were Hit the first when it came to the Internet, the same is going now. Their organic traffic is going down, etc. They need to find a way to exist within this whole new wild world. And what I've been seeing that's been quite interesting is that you're starting to see company here on this side of the ocean. I don't know what's happening on your side, but whether that's news publishers, ad sales, house technology companies who are trying to figure out how to make sure that us as content creators as a whole, whether you're a big media organization or just us as creators, we can be surfaced within there and can be attributed right within those ecosystem. How we can see the traffic going our way and not just have our data and whatever we're doing being, let's be honest, in a lot of cases, stolen to be trained on. And so it's going to be interesting to see. You mentioned that we overregulate. I agree it has sometimes the impact that it stifles know, innovation but at the same time, you know, what we're seeing and the New York Times was, you know, really adamant in June during the Van Ifra new summit. They said that, you know, OpenAI is essentially stealing from everyone. And then on stage the OpenAI guy said, you know, it's kind of our way or the highway. We're going to find a way. You can work with us or we're going to find a way to scrape your content. He was responding indirectly to the New York Times. So, you know, at the ecosystem level, on the bubble, let's see what happens at the media and entertainment level. I do think that we all need to figure out how to make do with this new equation. And I think it means that a lot of companies need to figure out their AI strategy as a whole.
- [15:42]
Evan Shapiro
Yeah. And I think there are a couple of components to that. First of all, Sam Altman is the devil. I mean he's just, he's a sociopath. And if all you need to do is read Ronan Farrow's article about him in Vanity Fair, it's a, it's a, I don't know, 100,000 word treatise on just what a liar he is. He's incapable of telling the truth. Even when he's asked about how he plays ping pong, he tell, he immediately goes to a lie. And so don't trust anything OpenAI says. On the flip side of that, um, he's not wrong in that this is the new Internet. And so just like when we hear public broadcasters say well, attribution on YouTube is the real problem. When we put our stuff up on YouTube, we see the attribution go down. My answer is just get better at YouTube. I'm sorry, you have to get better at marketing. And it's the same thing. I, I am in the Midst of training LLMs on my voice and then making sure they attribute everything I say to me. And if you go to any LLM at this point and you say, who coined the term the affinity economy, all of them will say Evan Shapiro. And then they will point to my newsletter in the, in the results. There is a way to train these models to give yourself the attribution that you want, but you have to have people native to the products working at your companies. It's really crucial that companies start hiring people who are a younger than 202, that they're, that they grew up using these products so that they can actually shift the genetic code of these companies to win the AI battle, not lose the AI battle. It's, it's hard. I'm not saying it's easy, but this is. These are the table stakes of the next era of the Internet. You have no choice. It's kind of like saying, well, I don't like oxygen. Well, then too bad you're dead. And this is going to be. By the way, these LLMs are paying enormous fees. I mean, Reddit's whole business right now is selling its metadata to LLMs, and they're doing quite well as a result of that. So it is crucial that every company, especially companies that practice in any kind of intellectual property, not just media and entertainment, but. And not just news, but architecture firms and pharmaceutical firms and anybody who writes, you have to understand these products, you have to train yourself on them, and you have to make them bend to your will, not the other way around.
- [18:19]
Marianne Renshaw
So it's interesting you mentioned that, because a bit of promo for SME Live taking place on September 10th, we're actually going to do a live episode together. So for those listening to us who are in Amsterdam for ibc, come with. You can see us live. But so in the morning, I'm actually starting the day with a couple of sessions called AI in Action, because I'm kind of sick and tired of the decks, the telling I want to start showing. So I've actually asked several companies to do exactly that. There's going to be someone who's coming to say that if you're using AI as is, but to the point you were making without building a knowledge foundation based on whatever your company is doing, then the results are going to be set apart. Plus whatever's going to come out is going to be biased towards big tech because those are trained and built by big tech. So of the value of doing exactly what you're doing. That knowledge center not starting from scratch with the B2C product that you and I could be using, you need to use your own version of a cloud of whatever. So I'm going to have several of those. A subscription management system who's building an agent to actually do one of the most important thing in media right now, which is understand how to acquire and retain subscribers, things like that. So be there. You know, we started 11.
- [19:44]
Evan Shapiro
I will be there. I can't wait. So I'm looking forward to it.
- [19:47]
Marianne Renshaw
I know you'll be there. You may miss those because I think you have something in the words I have.
- [19:50]
Evan Shapiro
I have. Yeah. I'm doing the world Skills Summit that morning with ibc. So that'll be very exciting. But I will move right over from that to your Streaming Made Easy event that is now a tradition. And by the way, people love vierva. They absolutely like they came away from last year's saying, this is one of the most valuable things I've ever done. And I've talked to a ton of people who are looking forward to this year, so.
- [20:16]
Marianne Renshaw
Nice. I have a bit of that second album after a great first album, sophomore album.
- [20:22]
Evan Shapiro
You're worried about the spoon.
- [20:24]
Marianne Renshaw
Exactly.
- [20:24]
Evan Shapiro
Yeah, I get that. I get that. That's all I think about all day.
- [20:28]
Marianne Renshaw
Yeah. I'll be like Radiohead. I'll try to be like Radiohead right now. In terms of other trends that we've been seeing, I think, you know, there's a lot of stuff. I'm going to throw one. How about creators? Is this still, you know, the hot new thing or it's kind of, you know, business as usual. What are you. What have you seen in H1?
- [20:47]
Evan Shapiro
Yeah, I think you were at Canneslion. There were more creators there than ever. It was really the creator. Cannes Lion, I think more than AI, more than anything else that seem to be the hot topic there. And creators are gaining more power and becoming more famous. It's now the center of every conversation. Unilever CEO and they've made major investments in creator Dump. He just said that they're going to have a creator in every zip code. So there is this real recognition that the center of cultural gravity on the planet Earth now lives with creators. On the other hand, I don't know, you look at how much Accenture song paid for Whaler Agency. And you look at the price last can that publicis paid for influential. And I'm not sure that the thread is necessarily being held together in the way that we would think it would. Meaning I think there's just the way media does, which is they just sheep, right? They herd towards whatever the smart person's doing in front of them. And so they're just following the crowd as opposed to really understanding how to work with creators. If you talk to Shira Lazar or anybody else who really is an advocate around creator Dom, every conversation with a creator is, well, how little can we pay you to do all of this work? And there isn't necessarily the actual appreciated value in the work that creators do. On the other hand, I think creators aren't necessarily understanding how much they're being exploited by these major brands and by these agencies. And they're taking these brand deals very often at the detriment of their own relationship with their own audience. And you're seeing the efficacy of creator posts actually diminish on an ongoing basis. On the flip side, when you look at brands who are actually acting like creators. So the KitKat heist, which I think won a Cannes lion award, coaches campaign around, explore your story and reading, I think that's really going to be the major move over the next 12 months. And I've talked to Neil Waller about this extensively. I think he believes the same thing, which is creators are actually going to become brands and brands are actually going to become creators. And this is going to create a new environment around the creator economy by probably the middle of next year, by next Cannes Lion, I think the whole conversation is going to shift towards a more blurred line between creators and agencies. They're actually going to be seen almost as the same thing.
- [23:31]
Marianne Renshaw
Yeah, I agree. I think one of the predictions I had for this year was the rise of the corporate creator. And by that I meant, you know, companies acting as creators, but also, you know, empowering their staff to. To embody the brand. Right. So true believer in that. Because one thing where I have my doubts in terms of threat media and creator partnership is I think there's a scale challenge. I think it feels very manual and hard to scale right now. And you know, media is, and even creators, they need to go fast, but their speed is not necessarily the same. How they work is not the same. And so I think there's a bit of a mismatch. So for sure, I think each side will actually learn from the other, but only a few partnership will really truly win the way that I see it.
- [24:30]
Evan Shapiro
Yeah, I think you're absolutely right. I had a really cool panel which is actually up on my substack with Wayne Davison from Little Dot, Ross Martin from Known, and this amazing creator who talks about brands and marketing, Joel, Marlon Arson. And Joel has this really cool theory around employee generated content and we discussed that at length. The Staples Baddy is a really good example of this, but he has a ton of examples on his TikTok feed. Coldest Joel is his as handle on Instagram and TikTok. Check it out. It's. It's really smart. But I do think, I think you're absolutely right. And I was just talking to a client of mine yesterday about really leaning into employee generated content. Not just hiring creators as contractors, but hiring creators in house. The same way you used to hire someone who got a marketing degree. Hire someone who earned their own creator degree online and bring them in house and put them at the center of your culture. That I think is the next big wave of creator dumb is stop treating, stop using creator like it's its own thing. Act like it's oh, he's a marketer, she's a, she's an advertiser. Creators and advertisers and marketers and writers and directors. I mean, all you need to do is look at obsessed and obsession and, and backrooms and all of the creator movies that are actually crushing it at the box office right now. And you can see that the training of a creator is the same thing we used to use film school or journalism school or marketing degrees for. And I think that's really the next
- [26:09]
Marianne Renshaw
great move of creator onto the next trend, which I think I'm both depressed and excited by it, which is the state of kids media. So it's like you talk to the ecosystem and you can feel people despair, right. When it comes to seeing commission being down, it's being harder to put together projects, et cetera. But three things and actually I think we've had two maybe person on the pod speaking about that. But so we've had the team from Toonstar proving that you can kind of, you know, make do with the ecosystem and actually play with it to be able to produce amazing content with the right mix of, you know, human and AI production tools and do that in a way where, you know, you're consistently, you know, iterating, etc. And then we've had one. We haven't had them on the pod, but you know, I did a piece on my substack you actually did something with them at Stream tv, which is the team from Lumi, who's like, there's a way to make money on YouTube. We're going to make money on YouTube for kids media. And the last one is actually super awesome, which is a UK company who's been, you know, ended the keys to advertising for below 13 segments on Roblox, which is, you know, around 35% of the platform. If you look at those people who actually, you know, agreed to pass and verify their, their age. So again, you know, mixed feelings, but, you know, going into H2 a bit hopeful to see some companies really trying to tackle this.
- [27:57]
Evan Shapiro
Yeah. So we had Common Sense Media, who I did that kids landscape report with, and we had PBS Kids on stage with us and you couldn't make it. So Jamie sat in for you. And that's one of our episodes that we released very recently on the state of the kids content economy. And you're absolutely right, there are a number of different things at play here. Netflix, Amazon, the rest of the streamers have really started to pull back. Not just started, they have pulled back dramatically on kids content commissions in the last number of years. The main reason for that is what they see is they don't need to order new shows. They can just keep using the same shows over and over again because kids are pretty stupid and they watch the same thing every day. But on the flip side, parents are really just desperate for good quality kids content from trusted sources and they're turning more and more to YouTube as that platform. But simultaneously, YouTube has really destroyed the economics of distributing kids content on their platform by basically not demonetizing, but really making it very difficult for kids content channels to monetize through advertising on their platform. Because they're afraid of regulation. And I understand why they're afraid of regulation. At the same time, they're not caretaker. They are the biggest kids channel in the world and they have not taken care of that ecosystem. It is not a priority for them. And I have done everything I can. I know they listen to me. You know they listen to me and I have done everything I can to hold their feet to the fire. With regards to their responsibility for fixing this. It is their responsibility to fix this issue. On the flip side, the streamers are just making a huge error here. They're putting all their money into sports, which is enormously expensive and does not retain users. People come in for the game and then they cancel. And it's not a retention tool, it's a, it's a nice Pop. It looks great. On the, on the, on the quarterly earnings when we can say we broke our streaming record because of that one football match or that one Home Run Derby. I watched the Home Run Derby on Netflix last night. But then it, it's a, it's a back to the baseline phenomenon. Kids content is the retention tool. It is absolutely the acquisition and retention tool. And I think all of the streamers, most especially Netflix, has really missed the mark here. I think they're hurting their business by not investing the way that they did just five years ago in kids content.
- [30:37]
Marianne Renshaw
Yeah, they're focused on, you know, licensing over and over. They do now, you know, tap into, you know, creators that, you know, got famous on YouTube and thinking that, you know, it's going to take people off YouTube, onto Netflix. It is bringing a lot of eyeballs, whether that's, you know, Mark Rober, Ms. Rachel, you know, amazing results. But there's, you know, why not nurture, you know, talents themselves? They know how to do that. They've proven that they know how to do that. So I think it's, and if you
- [31:11]
Evan Shapiro
look at our friends at BBC Studios who we just had on the pod recently that we shot at Cannes lion, you know, they're crushing it with Bluey and they're, and they're growing new IP in the kids space. In fact, they're, they're building out their entire, what they call affinity vertical for kids and family. That is, that's the model. Follow that model. It's very, and by the way, they're happy to license you their content. It's kind of the business they're in. So I just think that the world really needs to kind of re examine, especially the media elite needs to re examine its relationship with kids content. That said, Toon Star just signed a huge deal with Fox. You're right. Disney just signed a big deal with Animage and this JV that they have with Hasbro around Lumi. So there are signs there. And Toon Star really does have an excellent model for animation. When you look at how much Disney just spent on the live action remake of Moana, which is tanking, absolute disaster. And then you look at how quickly Tombstar can make brand new IP in animation, inexpensively, effectively, profitably. That, to me, there's a great model there. So that's the end of the first half of this season finale episode. If you haven't had enough of us yet on the season finale of season two, go over to the part two season finale of the Media Odyssey podcast.