Chapter 1

1. The Consumerization of Media and Marketing

In 2012 and 2013, I flew from New York to LA once a month and went to Burbank to meet with the Marketing team at Warner Brothers. I was brought in by the CMO as an expert on trends in social media and how those platforms were influencing consumers. One afternoon in February 2013, I was at the Warner Brothers headquarters to speak, among other things, about a content upstart from Stockholm called Spotify.

Founded by Daniel Ek and Martin Lorentzon, Spotify began as a small startup that developed its platform in 2006 as a response to the growing piracy problem the music industry was facing. Ironically, the founder used money from the sale of his ad-tech startup in 2006 to fund his new project (he got out of advertising at the right time!). In 2008, record companies awarded Ek licensing deals they would never have struck with a US-based company. Being headquartered in Sweden meant Spotify seemed to have relatively limited potential reach.

By August 2009, while Spotify remained unavailable in the United States, Sean Parker of Napster fame and an inspiration to Ek emailed: “Ever since Napster, I’ve dreamt of building a product similar to Spotify.” By September, when Facebook launched its Open Graph with Spotify as a partner, the music upstart reached two million users.

The same month I visited Burbank—February 2013—Macklemore credited Spotify (and iTunes) for making “Thrift Shop” a “slow-burn hit.” It seemed the company was on the cusp of something even bigger.

Far from Sweden, on the executive floor that can only be reached by a special staircase, I looked over the Warner Brothers studio lot. California sun glinted off the enormous mahogany table onto the finely pressed suit of the President of Home Entertainment, one of the company’s three presidents. Filling the seats on either side of him were another dozen or so senior people, CMO included. The room was stuffy, and its inhabitants offered rare, begrudging smiles. Feeling slightly underdressed and outmanned, I reminded myself that at least I came armed with plenty of data.

I had two hours to present on trends in social media and consumer behavior, which is an incredibly long amount of time for this kind of an audience. During my talk, I told the tale of Spotify. From its quiet beginnings seven years prior as a “response to the growing piracy problem” in the music industry, Spotify had pushed their offering up an octave and turned up the volume. Arguably, they’d composed an entirely new audio landscape. What’s more, listeners were not only migrating to this new territory but liked what they were hearing.

Slide after slide of data supported two important trends that seem painfully obvious today: consumers wanted to pay for content on their own terms, and they no longer got the same satisfaction from owning media content. Where college dorms used to be filled with display cases of CDs and DVDs, consumers today were perfectly content renting access to that content (now called streaming).

Although early, the trends were laid bare, in particular that streaming was going to be a big part of the future. At that time, Warner Brothers was the number one studio in the world and all eyes were on making in-home 3D movies the future of home entertainment. They had the biggest franchises in recent memory on their hands—Batman, Harry Potter, Lord of the Rings, and a dozen other blockbusters. In fact, when you look at the top ten highest grossing films ever produced by Warner Brothers, all of them were released between 2001 and 2014. Not only that, they had the world’s largest content catalogue, worth its weight in gold.

If anyone had the opportunity to recognize these trends and do what every entertainment company is now trying to do—build streaming services—Warner Brothers did. They could have made all of their content available and cornered the market while it was still in its infancy. Late to the game but always a player, in December 2020, the company did just that. Warner Brothers Picture Group announced that all its 2021 films will be concurrently released for one month on streaming platform HBO Max.

Near the end of my two-hour presentation, I said, “Spotify is clearly demonstrating an important trend among consumers—that they now prefer to rent content rather than owning it.”

The President of Home Entertainment raised one finger at the end of the long table (seriously, the gesture was almost cartoonish). It was his only interjection of the day, and the room was totally silent as everyone looked at him.

Finally, I thought, this is going to be the moment.

Instead, he replied with five words that feel as much made-in-Hollywood today as they did back then. With his entire marketing leadership team gathered around, the man with the power to corner the streaming market looked me in the eyes and said, “How do we stop this?”

By 2019, after a 19 percent year-over-year decline in sales, Warner Brothers had relinquished its place as the number one studio in the world to longtime archrival Disney and was in effect equal in size to Universal Studios. Perhaps more importantly, Netflix was occupying the nation’s interest and Amazon Studios was spending a billion dollars per week on production. Meanwhile, Spotify now has nearly 200 million global users with more than half of them paying a monthly subscription to avoid advertising.

Netflix and Spotify are leaders in the new world order in which consumers—not advertisers and not media companies—have the greatest control in this triumvirate. Consumers have taken back their power and aren’t likely to relinquish it.

Source: “Financials,” Spotify Investors, Spotify Inc.

The Triumvirate and the Social Contract

Since its inception, advertising has represented a social contract between marketers, media, and consumers. Marketers offered to subsidize consumers’ sports, news, and entertainment experiences in exchange for them viewing ads. Media are the medium on which the transaction occurs. In this triumvirate, the consumer has always held the least power. Therefore, as tends to happen with power imbalances, the group(s) with the most power have exerted their influence over the group with the least. If we look at the latter half of the twentieth century, the golden era of the media industry, this meant that media companies exerted their power over advertisers and consumers alike.

In the 1980s, Jerry Taylor was one of the most prolific and successful publishing sales leaders in the media industry. Having been publisher of the Lampoon magazine, which peaked at number two on magazine racks, Jerry went on to hold roles as publisher of Spy magazine (famed for its sarcastic needling of prepolitical Donald Trump) and Harper’s Bazaar. In fact, before opting to join his wife’s, Maureen’s, business (Lippe Taylor), Jerry declined offers to run both Vogue and Playboy.

Thinking back on the predigital media landscape, the picture Jerry paints is vastly different from today. It was a time when publishers held so much power that advertisers would shower their salespeople with gifts and incentives, vying for the opportunity to buy the best advertising slots in their publications (the first advertisement to appear when you opened the pages of Harper’s Bazaar, for instance).

Scarcity—specifically the relative scarcity of great media content—accompanied by relatively little advertising space to reach the world’s consumers, meant that media companies held all the power. This all changed with the internet but specifically with Google.

Google Was the Harbinger of Change

In the early 2000s, consumers using Google, Facebook, and YouTube grew accustomed to having control over how they experienced the content they chose to consume. Perhaps the most disruptive impact, however, was Google creating the expectation that media content should be free.

Google’s success in making access to information free disrupted traditional media companies more than any turmoil-inducing force that had come before it (although arguably less than Facebook has since). Until that point, most media outlets had begun adapting their existing business models to the digital era—building digital experiences that prioritized quality content but holding them behind a paywall (more on paywalls in Chapter 3). But as Google increasingly became the first point of entry for every browser session, the percentage of people who paid to access content from established media outlets plummeted.

There’s a reason why Wikipedia dominates the top of Google search results—its very ethos of egalitarian, freely available information aligns perfectly with Google’s mission statement. Unfortunately for the former titans of media, that mission statement is to “make the world’s information universally accessible and useful.” Putting content behind a paywall does not jive with this ethos, and Google punished any media...