Disney’s Wonderful World of Collapse

Prophets of doom are sometimes right.

Disney CEO Bob Iger in early 2023.

HERCEG NOVI, MONTENEGRO, July 21, 2023 – Take note of the dateline. For reasons having nothing to do with the cool, blue, buoyant Adriatic Sea or the encircling Orjen Mountain range or the 14th-century Stari Grad (Old City), the venue will be strangely relevant forthwith.

For the moment, however, please have a look at an excerpt from today’s New York Times about the state of the entertainment industry even before the writers’ strike:

It’s a slowly dying business, but it’s at least better than a quickly dying one. Fewer than 50 million homes will pay for cable or satellite television by 2027, down from 64 million today and 100 million seven years ago, according to PwC. When it comes to traditional television, “the world has forever changed for the worse,” Michael Nathanson, an analyst at SVB MoffettNathanson, wrote in a note to clients on Thursday.

Disney, NBCUniversal, Paramount Global and WarnerBros. Discovery have relied for decades on television channels for fat profit growth. The end of that era has resulted in stock-price malaise. Disney shares have fallen 55 percent from their peak in March 2021. Paramount Global, which owns channels like MTV and CBS, has experienced an 83 percent decline over the same period.

On Thursday, Robert A. Iger, Disney’s chief executive, put the sale of the company’s “noncore” channels, including ABC and FX, on the table. He called the decline in traditional television “a reality we have to come to grips with.”

In other words, it’s over.

Yeah, it all sounds pretty dismal.If only someone could have seen this coming. Like maybe 18 years ago. Oh, wait. Someone did.

Meet George Jetson, circa 2020.

He doesn’t have a personal hovercraft or a food computer, but the rest of the future is more futuristic than he thought. Spacely Sprockets and Cogswell Cogs are out of business. Digits are the new widgets.

Over-the-air network TV is gone, along with program schedules, affiliate stations and hotel demand in Cannes in the third week of June. George, Jane, Judy and Elroy get their entertainment, and their news, any way they wish: TV, phone, camera, laptop, game console, MP3 player. They get to choose from what the Hollywood big boys have funded and distributed, or what the greater vlogosphere has percolated to their attention.

The space-age family of the future can still watch CSI, any episode they want, whenever they want, but not on any advertiser’s dime — unless they choose for their viewing costs to be subsidized. Yet advertisers know everything about them and understand virtually every move they make.

Mind you, when this prognostication was published in Advertising Age, social media scarcely existed. Facebook was still “The Facebook,” for college students only. Google was only just going public. YouTube was launched that week. There was no over-the-top — what we now know as “streaming.” There were only the earliest expressions of digital technology that to one heroic, drunken visionary, defined a  trajectory inevitably to be realized through tech innovations at the time as fanciful as Rosie, the Jetsons’ robot maid.

The aforementioned drunken visionary might have been merely a hung-over visionary, but the moment of his epiphany happened so shortly after the end of a long night of drinking at the 2005 Ad Age staff retreat that he sat in the morning session still significantly shitfaced. He raised his hand waiting to be recognized by the magazine’s editorial management, and they were shocked. For this member of the staff was the ad critic, who reviewed TV commercials and awarded stars based on his evaluation of likely efficacy, ethics, production values, writing, acting, etc. His evaluation of Advertising Age editorial matters, on the other hand, was of no interest to anyone. Still, the editor recognized his waving hand, “Well look. Bob Garfield has a question. Can’t wait to hear this.”

Oh, yeah. The drunk was me. I was offering only the observation that the magazine had been publishing an increasing number of stories about digital technology’s gradual impact on the analog status quo, and suggested that we create a small logo to run with each such article, to create the illusion that we were being systematically attentive to this nascent technology. “Chronicles of a Revolution,” I proposed as a branding gimmick.

But, as I say, I was in my cups, and I might not have been altogether clear. Management erroneously believed I had volunteered myself to chronicle the revolution. Well, fuck. Now I had to do that. So I got sober and got busy, yielding, three months later, “The Chaos Scenario.” Subsequent chronicles led to a 2009 book of the same name. Truthfully, it wasn’t difficult. All you had to do in 2005 was connect some dots. I’m pleased to see that Disney CEO Robert Iger took only 18 years to see the same constellation of doom. But all the evidence was in plain view even way back then, when George W. Bush was president and the top movie was Sahara. Here’s more, edited for brevity:

So let’s return to contemporary business reality, the digital revolution, already in progress. … Because revolutions by their nature are neither seamless nor smooth … On the contrary, there is nothing especially orderly about media’s New World Order. At the moment it is a collection of technologies and ideas and vacant-lot bandwidth … a space-age treadmill, cycling too fast for George Jetson to keep his footing. “Jane!” he pleads. “Stop this crazy thing!” But Jane can’t stop it, and nobody can quite hang on.

Ah, yes. The Chaos Scenario.

The statistics are already getting tiresome, but let’s review a few of the more salient ones, shall we?

According to Nielsen, network TV audience has eroded an average of 2% a year for a decade, although in the same period the U.S. population increased by 30 million.

In the last sweeps period, for the first time, cable commanded a larger audience than broadcast.

The cost of reaching 1,000 households in prime time has jumped from $7.64 in 1994 to $19.85 in 2004.

A 2000 Veronis Suhler Stevenson survey showed that Americans devoted an average of 866 hours to broadcast TV annually and 107 to the Internet, a ratio of 8:1. The projection for 2005 had the TV/Internet ratio at 785 hours to 200, or just under 4:1.

U.S. household broadband penetration has gone from 8% in March 2000 to an estimated 56% in March of this year, according to Nielsen/NetRatings …

Shawn Burns, managing director of Wunderman, Paris, looks at the 2005 upfront and sees “the last strand of the rope bridge.”

“It’s an inevitable kind of slow collapse of the entire mass media advertising market,” says J.D. Lasica, author of Darknet: Remixing the Future of Entertainment and president of the Social Media Group consultancy. “What we’re seeing is that not only does television have to reinvent itself from the content point of view, it has to reinvent itself as an advertising medium.”

But it’s not just the ad model; it’s the content model, as well. Writer and former venture capitalist Om Malik looks at TiVo and the video-on-demand horizon and is prepared to call in the backhoes for the institution of the prime-time schedule.

“Hasn’t it collapsed already?” asks the author of Broadbandits: Inside the $750 Billion Telecom Heist. “Look at their viewership. Isn’t it going down every day? I mean, we can pick and choose what foods we eat, what car we drive, what clothes we wear and what colognes we use. And some guy sitting in New York decides how I should watch?”

Precisely, says David Poltrack, executive vice president of research at CBS, who sees incremental revenue opportunities in video-on-demand, but no end to the dominance of broadcast TV in the foreseeable future. “Unless the advertising community finds something to replace television advertising, I think the relative value of the top-quality inventory is always going to be appreciating relative to all the other options,” he says. “Unless someone can come up with a more effective way of introducing a new product than broad-based advertising exposure, I think that business is always going to be there.”

Steven Rosenbaum, pioneer of citizen-produced TV and founder of MagnifyMedia, envisions a world of content created by and for individuals over broadband. He snorts at Mr. Poltrack’s defense of the status quo.

“These guys,” he says, “their job is to postpone the future.”

Producers and broadcasters capitalized with billions of dollars will be on approximately equal footing with podcasters and video bloggers capitalized with $399.99 12-months same-as-cash from Best Buy. And just as DailyKos, Instapundit, Wonkette and Wil Wheaton have coalesced large followings in the cacophony of the blogosphere, some of the citizen-video programmers will find not just a voice but an audience.

All right, I won’t ask you to read much more. This was a 5,000-word article. But the point was made. Broadcast television was sucking wind. Cable TV was subject to all of the same pressures. Audiences would be fragmented infinitely, the content glut would drive ad prices down, and advertising-supported media would be faced with the double whammy of smaller audiences and lower rates per thousand sets of eyeballs. Hence: the Chaos Scenario.

I should mention that being a Cassandra can be a bitch. My dire predictions were widely derided by the powers that be, from the Cable Advertising Bureau to the chairman of WPP, the largest ad-agency network, to CBS, to Bill Gates. There were a fair amount of insults tossed about, unless “Chicken Little” is a compliment. But the chaos kept chaos-ing.

It is why the newspaper industry collapsed. It is why the magazine industry collapsed. It is why broadcast and cable and Hollywood are circling the drain. To me, it sounded awfully familiar.

Think: Yugoslavia.

Perhaps you are familiar with it. It used to be a country, ruled by an authoritarian criminal. Then it began to fragment. There went Slovenia, and Croatia next. Then Bosnia. Kosovo made its move, and in the ensuing madness, the regime collapsed. The unshakeable Slobodan Milosevic, who had fomented four wars in the name of Greater Serbia, was overthrown. Democracy! Empowered individuals! A new model!

And, five years later, unemployment is 32%. The average monthly income is $336. The prime minister was assassinated by organized criminals and the country’s most notorious war-crimes suspect is at large. Unmediated.org’s Mr. Pantic, formerly of Belgrade’s freedom-fighting radio station B92, is only too familiar with the problem.

“There is no way,” he says, “to make the transition into anything that is different or new or whatever without chaos. Because as with democracies you need five or six newly elected parliaments, you need to replace people who have ties with the old regime.”

So how curious that I should read about the planned Disney divestiture of its TV properties as I sit here in Montenegro, one of those ex-Yugoslav republics. Seventeen years after offering the analogy, Croatia and Slovenia are stable members of the European Union. Serbia’s average monthly income has increased 10-fold, and unemployment is down to 10.1 percent, which is better than 32, but not ideal, and its government is autocratic just this side of dictatorial. Bosnia-Herzegovina, Republika Srpska and North Macedonia remain mired in poverty. And Montenegro — not counting its robust, but off-the-books smuggling industry — has a GDP of $6.1 billion, which is ⅙ the annual revenue of Northwest Mutual Insurance Company, which is America’s 99th largest corporation.

In other words, revolution — digital or otherwise — is a chaotic affair. So now that I’ve offered my bona fides as a media oracle, mark my words: the next thing on Iger’s chopping block will be its erstwhile TV crown jewel, ESPN. Disney’s fan is running full blast, and the shit is heading toward it at full speed.