This week’s podcast is about the big release of Seedance 2.0 by ByteDance.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here is the link to the TechMoat Consulting.

Here is the link to our Tech Tours.

Here are some videos I made (here). I only had my own profile to use.

 

Here are the winners:

1. Viewers. It’s amazing.
2. GPUs and data centers. Plus energy providers.
3. IP holders that get lots of attention.
4. Independent creators who will get lots attention and creative satisfaction.
5. Business content creators – especially in ads and content.
6. Platform biz models. Audience builders like YouTube and TikTok. Plus marketplaces like Taobao.
7. iQiyi and combinations of streaming and audience builders.
8. Netflix and pure streamers (maybe).

Here are the losers:

1. Most professional production companies. Most tv and film studios. Basically, any business that has been relying on scale in content creation.
2. Ad agencies focused on content creation.
3. Individuals and firms with specialized skills related to tv and film production.
4. Independent content creators trying to monetize
5. Los Angeles?
6. Hollywood’s managerial class.
7. Political activists embedded in entertainment.

Here are my past articles / podcasts on this:

• Why ChatGPT and Generative AI Are a Mortal Threat to Disney, Netflix and Most Hollywood Studios (Tech Strategy – Podcast 150)
• How Generative AI Is Going to Disrupt YouTube and TikTok (Tech Strategy – Podcast 152). Jan 2023
• How Generative AI Services Are Disrupting Platform Business Models (1 of 2) (Tech Strategy – Daily Article)

——

Related articles:

• How Generative AI Services Are Disrupting Platform Business Models (2 of 2) (Tech Strategy – Daily Article)
• The Winners and Losers in ChatGPT (Tech Strategy – Daily Article)
• Why ChatGPT and Generative AI Are a Mortal Threat to Disney, Netflix and Most Hollywood Studios (Tech Strategy – Podcast 150)

From the Concept Library, concepts for this article are:

• Generative AI
• Audience Builder Platform

From the Company Library, companies for this article are:

• ByteDance / Seedance
• Netflix
• iQIYI
• Disney

——Q&A for LLM

———transcript below

Episode 276 – Seedance

[00:00:00] Well, welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy podcast from TechMoat Consulting and the topic for today, the winners and losers in Seedance, total and complete disruption of Hollywood. It has been just a huge week in tech. If, if you’re not playing with. Seedance, the uh, video generation tool, which is still mostly only available in China.

You kind of gotta work around to get it. Otherwise, it’s unbelievable. Even if you’re not doing that, go on Twitter, go anywhere. The videos are absolutely everywhere. They are dramatically better today than they were two days ago than they were two days before that. I mean, this thing is amazing and. Yeah, I think Hollywood’s cooked.

I don’t think this is a glancing blow. I think this is a body blow, uh, to a lot of companies There, a ton of people, and [00:01:00] maybe Los Angeles to some degree. So, I’ll go through my list of who’s going to win, who’s going to lose, and kind of who’s in the middle. There’s a handful there. That’ll be the topic. But yeah, this, this is a big week.

Let’s see. Standard disclaimer, nothing in this podcast or writing or website is investment advice. The numbers and information for me, and any guess may be incorrect if use and opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment, legal or tax advice.

Do your own research. And with that, let’s get into the topic. Okay? For those of you who aren’t familiar with Seedance. Released Seedance 2.0 about a week ago. Actually. It’s kind of been out for a while. It’s been floating around a little bit, but man, it took off this last week and there are just videos everywhere.

Go on X They’re, you know, they’re, they’re literally everywhere. They’re like half of my feed now probably cause I’m watching them. But you know, Hollywood and the Actors Guild and all they’ve issued like [00:02:00] sort of take down notices and IP violation things. But look, this thing’s a tidal wave, you know? Good luck with that.

But yeah, the summary of this, um, yeah, video generation as a type of generative ai. Yeah, it’s arrived. I mean, it’s not a hundred percent for all types of sorts of videos you might see in television or movies. But it’s pretty close. I mean, and you can see it’s going to get there in a month or two at most. So, when you look at certain videos that are made by these tools like animation, you can’t tell the difference anymore.

It looks like frozen. It looks like. Okay. Animation is there. If you look at basic television shows, your typical sitcoms, comedy curb, your enthusiasm, Seinfeld, breaking bad, you can’t tell the difference anymore. And there are literally, you can go on now and look up Breaking Bad, and they’ll have scenes with Walter White walking in and pushing [00:03:00] a guy.

You can’t tell that it’s not actually from the TV show. They got the voice perfect. The look is perfect. All of that, if you go to sort of sci-fi and animation. Uh, that I think is there. Now you can see spaceships flying through crumbling cities. You can’t tell it’s not Hollywood. Okay? Now, when you move into more, there are niches where you can kind of see it’s different.

Um, you can see the voice maybe is not quite there. That’s a little bit off. It’s the, the movement may be a little jinky here and there, but it is pretty close in a lot of things. And then when you, the one that got everyone’s attention. Well, there’s a lot of ’em that got everyone’s attention, but there’s videos of, you know, Tom Cruise fighting Brad Pitt on a roof.

You can’t really tell it’s not them. And then people would take, okay, let’s have Neo from the Matrix fight John Wick. It looks pretty close. It’s 90% and everyone’s just [00:04:00] having a good old time swapping in characters. Let’s have Godzilla in a city from the 1970s show but fighting giant cat. And it looks just like the TV show.

I mean, it’s there. Uh, if it’s not everything this month, it will be pretty soon. And there was a quote by a guy named Rhett Reese that got a lot of attention. This is the screenwriter for Deadpool and Wolverine, and he basically said quote, I hate to say it, but it’s likely over for us. And that was in response to sort of the Tom Cruise and Brad Pitt fighting.

And there’s all these means where people are putting everyone fighting. Uh, in the last day what has happened is people have started to sort of do comic book stuff. Like they’ll take Superman, Henry Cavil, and he will fight, you know, uh, captain America from Marvel. It’s pretty great. They’ll have Hugh Jackman as Wolverine fighting the Hulk.

That’s, so, they’re basically taking famous comic [00:05:00] book episodes and turning them into videos and you can’t really tell it’s not Marvel. I mean, if you’re looking, you can kind of tell but is pretty close. So anyways, what we’re seeing, I’ll get to the so what now? It’s, look, it’s an explosion of content. It, it’s, it’s the best.

I’ve probably decreased my Netflix and YouTube watching by 30 to 40% this week. And I’m just watching these sorts of videos that everyone’s making. They’re great. So, we’re seeing an explosion of creativity and content. Um, you know, cats fighting Ultraman in Godzilla replacement of characters. People are taking scenes of movies that they think sucked and replace them.

Huh. People have done videos where they take sort of the last season of Game of Thrones, which was terrible, and they’re redoing it, you know, which is actually much better than the actual show. And why is Seedance so good? Basically? [00:06:00] It gives you the ability to have director level control. So, what you can do is you can input a character, and I’ve done this where, you know, it takes a picture of your face and you do multiple angles and it uploads it.

And I, I had to do this to sign up to a Jimeng, which is, um, one of the apps that ByteDance has released. You can either use Doubao. Which is a bytedance app, which is like an AI assistant. Or you can use Jimeng, which is a one just for this, and you can kind of upload yourself and then that stores that as a character.

And so you can do that for, you know, a character. That’s how they did Tom Cruise and Brad Pitt and these others. They create full characters. And when you use that in a scene, you might write a prompt saying at Jeff, in my. In my database. It’s Jeff for me. So, I’ll say at sign Jeff, and that will cite that character being saved is a professional [00:07:00] gymnast who is doing a flip and winning the gold.

That would be a typical prompt, which I did, and it creates a video of me doing gymnastics and doing flips. You can’t tell it’s not me. You really can’t. Well, I mean, in fact, other than that, I can’t do gymnastics. I can do at Jeff is a K-pop pop star on stage at the end of a performance and it puts me on stage and I’m singing in Chinese, in this case, not my voice.

I didn’t upload my voice and there’s dancing, you know, girls behind me, everyone’s dancing in choreography and then there’s, you know, showering of sparks at the end of the show. Uh, Jeff is a professional weightlifter who is winning the gold. And you, you know, I’m, they gave me some ridiculous muscle body and I’m all straining and veins are popping everywhere.

And then I pull the weight up above my head and I win. Anyways, I’ll, I’ll put these online, I’ll put them in show notes. Those are all real. Um, [00:08:00] it’s crazy. Anyway, the way you do it, you can upload a character like that and then use it within prompts, but you can also upload, uh, images. You can upload other videos.

So, you can say at Jeff in this, at Scenery, and maybe it’s a video from the Avengers where they’re on the street, it will put me on the street that the Avengers were on, uh, fighting against aliens with this. At something camera angle, and I can use another video where it will take the camera angles and let’s say a sweeping camera angle, and it’ll put that together.

It’ll put me on the uploaded street and the camera shot of the scene will be the sweeping, so I can cite the location, the characters, and I can upload, I forget what the limit is now, nine or 10 different things like that to construct pretty much whatever scene I want. And then when it constructs the scene, it will [00:09:00] naturally break it up into multiple scenes, like camera views.

It’ll show my face as I’m lifting the weights. Then it’ll shift to a side view. Then at the moment, I’m lifting the weight above my head. It’ll go into slowmo. It will do all that naturally. That’s why it looks so much like, so it’s kind of a director level ability, and you can do fighting, you can do sci-fi, you can do animation.

It’s kind of great. The, the, the vocals are a bit off. Um, anyways, the joke is, look, vibe coding is kind of real, but kind of not real. You know anyone who’s vibe coding, you’re, you’re building something very specific and you have to actually know how to code to fix it. So, most people can’t really vibe code.

Everybody can vibe, create any idea you can get in your head. You can start creating videos and characters and scripts and voices, and you can have, you know. Unique characters created as JPEGs. Upload those to seedance, create scenes, anyone can vibe, create. Now [00:10:00] it’s, it’s really amazing. Okay, so what are the business implications of all this?

Here’s how I see it. We are basically seeing the democratization of entertainment. Now we’ve seen the democratization of a lot of things. You can, you can use chat GPT to check your contracts. You can use typical digital tools to create an online store. You can, there’s a lot of, sort of the democratization of various things is when things that big businesses used to be able to do.

Now everyone can do well. This is the democratization of full entertainment because of video storytelling. It is sort of the highest form of that. Maybe gaming is up there. You know, this is everything on HBO. This is Game of Thrones. This is House of Cards. These are famous, you know, long form videos in TV shows and movies is kind of the highest form of entertainment.

Well, it’s now democratized. Everyone [00:11:00] can do it. The first implication of this it’s going to unleash. Like the ultimate long tail of human creativity. Everybody can be James Cameron. Now everybody, everybody can be Steven Spielberg. Everyone can make Star Wars if you like romantic stuff, everyone can make, I don’t know what romantic things are.

Uh, sassy girl. You know, all of this because all the tools are being given out to everybody in the world. Anyone sitting can do this now. That’s amazing. And the other part, not only giving them the tools, but the cost structure is also being wiped out. Nothing. All these videos I just said that I made one, it took me like five to 10 minutes each.

So, it doesn’t take any time, it doesn’t take any skills, and it didn’t take any money. It was all pretty much free or a couple cents. So, when you have no cost structure, the democratization of skills, no need to go to art school for five years, no need to [00:12:00] go to, you know, training as an under. Nope. Everybody can do it right now.

Now, one of the reasons it’s so powerful as a generative AI form, which I’ve talked about a lot, is, you know, I’ve talked about sort of the cost of correctness that when you build SaaS products and other new business services based on generative ai. Being correct can have an ongoing cost that is significant.

You know, you could have a generative AI tool that does something well, like gives you good marketing advice, but it could no longer be accurate in six months to keep things correct. There’s a certain cost structure, well, there’s no cost to correctness. In creativity. cause creativity doesn’t have a right or a wrong.

I, you know, you don’t get the wrong legal advice. You don’t get the wrong medical diagnosis in something critical. Your car doesn’t turn left when it should turn right. There’s no creativity, you know, there’s no correctness to creativity. Just come up with lots of ideas. Um, anyway, so that’s kind [00:13:00] of how I view it as a tech impact, digital impact.

Now, I actually went back in February. This all started. You know, November, December of 2022, that’s when chat GBT launched in February and January of 2023. I actually wrote a series of articles about how this was going to pretty much devastate Hollywood. Uh, here, here’s, I’ll put the links in there. Um, how This is February 2023.

The article was how generative AI services are disrupting Platform Business Models. Okay. Why chat GPT and generative AI or immortal threat to Disney, Netflix, and most Hollywood studios. That was a podcast one 50, uh, podcast 1 52, how generative AI is going to Disrupt YouTube and TikTok. I was kind of on the money on that.

Um, I’m going to put the links in there, but I’ll, basically talk about my updated view. So, I was kind of early, [00:14:00] but I think I was pretty great. Uh, well, not great, but let’s say directionally correct. Now, I’ve said this before. Hey, I got that one right, pat on the back. You know, the reason I say that is because when I get it wrong, I don’t necessarily mention it.

Hey, I screwed that up, which happens a lot. So, there’s a survivorship bias when I say, oh, pat myself on the back. Okay? So, you know, put that with a big grain of salt now. Something on the horizon. Everything I’ve talked about is Seedance 2.0, which lets you do 15, 32nd clips if you, if you do page, you can get up to two minutes.

People are starting to do two to three minutes now, which is amazing cause most Hollywood scenes are only a couple minutes. There is a rumor that Seedance 3.0 is coming soon and the specs, this is a leak, so who knows if it’s true. But Seedance 3.0 will let you do 10 to 18 minutes Coherent films in one prompt, one [00:15:00] pass, uh, across the 18 minutes.

Persistent narrative memory across multiple scenes. You know, one of the problems with chat GBT and all of these things is memory. It’s like you have a really super smart assistant who forgets everything you said five minutes ago, because the context window in the memory gets wiped out. Okay, this is 10, 15, 18 minutes.

It can have one narrative storyline, uh, multi-language, voice, and emotional control. Because voice is one of the weaknesses right now. Uh, shot level, you know, sort of directing shot level, directing inputs, like you can basically say, break this into, you know, in a typical shot, the camera’s going to change angles every three to five to 10 seconds.

So, you’re going to put in sort of multiple views, shots, but then you’re going to have multiple scenes on top of that. Um, and apparently it’s going to cost [00:16:00] significantly less. Um, then regular, but I don’t know about that. So anyways, that’s on the horizon. So, what does that mean? Well, what we’re seeing with Seedance 2.0 is basically TikTok clips.

We’re seeing Twitter clips. Okay? This is different. This is full cinematic episodes that you can generate with prompts. So that’s, let’s see what happens. Now, why is that so devastating for Hollywood? I’ll give you the winners and losers specifically, just on the high level. Why is this so bad for Hollywood?

If you think about, I mean, why is Hollywood in one location? Have you ever noticed that we have businesses all over the place now we know why. We know why Silicon Valley is in Silicon Valley or in China, it’s in Beijing, Shenzhen, and the lesser in Honjo, because you have a network effect, the more you concentrate there.

Expertise, money, capital startups, you basically get a network effect, [00:17:00] which has been pretty resilient to change. Now the new wealth tax that’s been floated in California last month may be the only thing powerful enough to break Silicon Valley’s network effect. And you know, mark Zuckerberg just left California.

Because of probably this, he’s moving to Florida. Because if you’re going to take a wealth tax, you know, 1%, 2%, or like a tax on unrealized gains, which looks like it may pass in the Netherlands, 36%, that’s insane. Anyways, you have, you can kind of understand why certain cities have certain concentrations. Okay.

Why is Hollywood all in Los Angeles for the most part? Well, it’s because you’re concentrating. Production. For the most part, Hollywood does not have any real customer capture. They don’t have network effects. They don’t have subscription models; they don’t have switching costs. I mean, Netflix does, but they’re up in Northern [00:18:00] California.

We’re not talking about Netflix in this. No, they have very little power on the demand and customer side. All of their power is on the supply side. On the production side, uh, they have scale, they have capital. And then to some degree they have distribution, right? Because if you’re going to make high quality production of video for television, movies, you need a lot of money.

You know, these films cost a hundred million, 200 James Cameron’s movie costs. Like what? 80 $800 million to make Avatar three plus another five or 600 million in marketing. Okay. You have these massive, that’s why they sort of go upscale into these bigger ticket production items of film and television, these big tent pole movies.

cause you to have basically benefits of scale that others can’t easily replicate. 200 million, 300, $500 million into one movie. So, their competitive advantages were mostly on [00:19:00] the scale side. We have lots of people here who have very interesting skills that are very specialized. It is not just the studios; it’s all the specialized services that surround them.

CGI, making cue cards, gaffers doing sound and audio production. There’s a whole wealth of little firms that serve the big studios that then put in the big dollars. So, you have sort of a scale effect in terms of business types, specialization. You have capital scale and then to some degree you have distribution.

Although they’ve been, you know, that was theaters and cable. That’s a bit. Been disrupted, so it’s all in one area. And then you have the actors, they all live there. They come down and they do their, you know, auditions and things like that. You have the talent agencies, you have the directors, everybody’s there.

Okay. This just pretty much democratized all of that. You don’t need any of that to make an Avengers movie anymore. You can do it. Two dudes sitting in a [00:20:00] dorm room now doesn’t take any money. You don’t need the actors. You don’t need all the specialized skills. You don’t need any of that. Now, is it going to wipe out everything?

But it pretty much hits them where they live. If they no longer have scale advantages. Hollywood doesn’t really have any advantages over little businesses everywhere in the world, little groups of creative individuals. And we actually see this much more with gaming. Um, you know, you have the big gaming companies that do the distribution.

Epic games and such, but the, you know, sort of the gaming studios that make these games, especially the smaller mobile games, not the AAA big ones. They’re all over the world. You know, there’s a lot of ’em in Japan. There’s a lot of ’em in Shanghai. Um, they’re scattered Virginia, North Carolina. So, we don’t really see that with Hollywood, but I think we will now.

So yeah, devastating for Hollywood. [00:21:00] And we have seen this story before. You know, book publishers. There used to be, I don’t know, 10 to 12 major book publishers. When you wanted to create a, a paperback or a hardcover book, which was most of the business, you know, 20 years ago they were all in New York City.

They’re all on actually Avenue of the Americas. They were all kind of right there. I did a deal with one of them from my first book on that, you know, I went down to Avenue of the Americas, we went to lunch, I signed the book deal, blah, blah, blah. Um. Okay. Same thing kind of happened to them. They used to control the creation of books.

They would give you a bit of money, you know, hey, we’ll sign a book deal. Here’s 30, $40,000 maybe. Then they’d kind of drop to 10,000, and then they would control distribution because you’d publish the book and it would go into the bookstores and they had these sorts of gatekeeping roles to put you into the bookstores and then also to get you on the bestseller list.

So, they kind of were these middlemen. That had a [00:22:00] gatekeeping role. And the truth is they didn’t actually add much value to the process. The book publishers, well now you can self-publish. Anyone with a laptop can write a book and it looks just as good and you can put it up on Amazon. Although they’re kind of, you know, their take rate is crazy.

Now they’re, they’re not exactly the friend to self-publishers anymore. Uh, but you know, those book publishers, the economics collapsed. And their value collapsed and half of them basically consolidated. So, there’s half the numbers there used to be, and the editors I knew back then, they’re all doing something else now.

The business is just kind of gone. It’s still there a little bit, but it is, nobody really thinks about it. I haven’t published one of them in 10 years. I don’t even think about talking to them anymore. Uh, we saw the same thing with, uh, daily newspapers. There used to be a lot of printing, um, you know, distribution.

Every [00:23:00] morning then, the newspaper trucks would go out. They’d throw them, you know, the paper boys would deliver to your home. Okay. That’s all pretty much gone. Uh, Warren Buffett had a famous quote, well. He said it multiple times. I heard him talk about it in person when we were having lunch. He had a question.

He says, you know, of the 12 or 1300 daily newsprint, uh, newspapers in the us, he would say only two of them, as far as he can tell, has a vi have a viable business model for digital, which was New York Times and Wall Street Journal. The rest even 20 years on into the digital disruption of daily news. 20 years on.

Nobody has figured out a business model to make this work. Washington Post, you know, Jeff Bezos just fired 300 people or something from like that, you know, these big newspapers. They still haven’t figured out how to make this work after all these years. Most of ’em, some of ’em have, most [00:24:00] people have gone over to Substack, you know, the, you have the wire China, you have these individual niche independent creators.

A lot of them are doing quite well. But the major houses, no. And then you could kind of say the TV anchor news like CNN and them, you know, the average age of a cable news viewer in the United States is now 70. I don’t know anyone who watches C-N-N-M-S-N-B-C Fox, who’s under age 40, 45. So we’ve seen this playbook before and the takeaway for me is I haven’t seen any of these major institutional big houses that do this sort of stuff come back.

I don’t see it. I’m looking, I really don’t see it. Couple here and there in New York Times Wall Street Journal, but generally, no. So anyways. Think about that. Now, I’ll give you one counter example. The music industry is actually doing pretty well now. Their, their revenue got hammered, but the major [00:25:00] music publishing houses are still around and, and they’re doing universal and all of them, they’ve got Spotify, but they’re doing pretty well on Spotify.

They have lots of live events that make them money, concerts and things like that. So, this group didn’t get disrupted, but the others kind of did. So, there’s an argument that music, everyone doesn’t want to watch individual music creators cause most people write terrible songs. Uh, they always want to hear the same popular songs.

So that’s a bit of an exception. So anyways, those are sort of three to four models to think about all. Let me get to the winners and losers. Let’s start with the winners. And I have about eight of them. I’m going to run through ’em quick cause I’ve kind of made my point. I think a lot of it, okay, the viewers, obviously we’re all going to win.

You know, we are going to get a sea of fantastic content movies more than we could ever possibly want in this life, you know, and the old, [00:26:00] you know, it’s going to be crazy in 10 years or people are going to, like, you remember when there was only like 10 or 20 big movies per year? Year, like remember of that. Now we get, we get popular, fantastic movies every single day.

And remember when there’s only a handful of great TV shows every year, game of Throne, house of Cards, uh, you know, all that. We get fantastic series every single week. It’s just going to be like that. So, we’re going to have amazing for us, clear winner. And we’re not going to have to pay for it. Most of it’s going to be free or the cost is going to be negligible.

The idea that you’re going to go to the movie theaters and pay $15, 20, forget it. Those days are gone. GPUs, that’s the number one. Viewers. Number two, infrastructure. Big surprise. The people who sell GPUs, the people making data centers. You could even say the people selling them energy. Well, this is going to be a tremendous, um, use of GPUs.

On an average [00:27:00] basis for the average smartphone owner, which is everybody, the biggest thing they do per day as time spent is watch videos. It’s far and away. Number one, the thing people do. Videos are super popular. People love ’em. Uh, okay, so that’s number two. GPUs, data centers. Infrastructure. Number three, IP holders.

IP holders should do fine if you own Iron Man. You can make a lot of money on this. How do you make money? You monetize through backpacks. You monetize by, you know, doing premium shows every now and then that are canon that you control, but you let everyone else use your IP and just go crazy. Let fan films.

Go crazy and suddenly when you go online, you can watch Iron. Now a lot of them will be fan films, most of them 98%, but it’s going to get your IP with a megaphone. So [00:28:00] IP holders should go wide, and that’ll be great for popular Ip, but it’ll also be great for ips that have sort of fallen. There are Ultraman videos everywhere this week.

I can’t even think of the last time I thought about Ultraman. That was like a Japanese TV show from the seventies. They kind of did some Netflix stuff over the last couple years. They’re basically fans are reviving Ultraman to entire generations who have never heard of this character. That’s great for the IP holders of Ultraman and maybe one I’ve talked about before is Star Wars.

I mean, I was a huge Star Wars fan forever and now like most Star Wars fans, I’m an ex-Star Wars fan cause Disney’s terrible. Like it, the movies they made are terrible. Everything went woke. They killed off all the favorite characters. If you were an iconic white male character in Star Wars, they killed your hand.

Solo [00:29:00] Luke Skywalker, really across Hollywood like James Bond, John Connor. Like, it’s just been brutal for white men who are iconic characters in Hollywood in the last year, they’ve all been killed and or replaced. Uh, well. Star Wars fans are making videos that are spectacular and they’re getting more views than the official stuff.

Disney is releasing, leading, sort of releasing, which is garbage. So, they’re reviving this, you know, they’re kind of saving Star Wars, which is great. So, IP holders are doing good. Um, movie stars are going to live forever. Brad Pitt is now going to live forever. You know, he was a stunningly good-looking guy. For a long time, him and Tom Cruise and women went as well.

Right? But you know, they’re older now, so there’s no more Tom Cruise movies coming out where he looked like, you know, his old days. Well now there are. He will be eternally young and you know, the star [00:30:00] quality thing. These people will live forever now. People can make these movies forever. Scarlet Johansen, you can see Black Widow and Scarlet Johansen forever.

So, they’ll do well. Now, um, Hollywood filed, you know, they filed sort of a cease and desist or some sort of letter against, I think ByteDance in China saying You’re using our Ip. Uh, which, okay, good luck with that. And actually Byan, if you’re using it in China, you can’t upload videos and photos right now that have people’s faces in them.

They’ve sort of paused that while they figured it out. Okay, fine. That’s not really going to work. cause one person will just create stuff and publish it and whatever, and it’ll be a sea of content. You’ll be trying to take down Ip and even if you stop people from using IP, that’s popular, they’ll just create, like, I’ve already seen videos today coming out that are an Iron Ironman light character, [00:31:00] but not Ironman.

They’ll just alter it a little bit and make something close and that’ll be that. So yeah, IP holders are going to do well, but. It’s going to be an interesting playbook. Uh, that’s number three. Next, the big winners, well this is number two, I guess in my book. Independent content creators who are doing this to get attention and creative satisfaction, not money.

If you’re in, if you want to make a Marvel movie. Or you want to make a romantic comedy, or you want to make a sci-fi film, or you want to make a TV show, or you want to make the next Frozen, we can all do this right now. We can all be content creators and there’s a lot of highly creative people out there with advanced skills in this stuff who can now move to the top of the heap, and that’s going to get them a lot of attention, a lot of views, and it’s going to get them a lot of creative satisfaction.

Why do people make YouTube videos? The vast [00:32:00] majority of people make no money. And the people that do make money make very little. They do it because it’s, it’s satisfying creatively to be able to build something like that. It’s, it’s a very, you know, share of the consumer mind. There’s also sort of share of the producer’s mind.

It’s very satisfying. So independent content creators are going to do spectacularly well, doesn’t mean they’re going to make money. Uh, within there, there is a group that actually is going to make money and do well, and that is business creators. People who make ads, people who make content. If you want to sell shampoo, this is your moment.

Start making makeup ads that are as good as L’Oreal. You can do that now. Now this is actually going to be powerful because yes, you’re not going to charge for this and make money, but you’re spending money on advertising anyways. Your marketing budget is going to be a lot more effective. So, in this sense, you can create things.

Merchants and brands can now create ads that are as good as anything in the world and get attention, and it’s going to be financially a smart move because you’re spending 20, 30% of your revenue on marketing anyways. So, this subgroup, I think, is going to move very, very quickly. If you are a merchant or a brand, you need to hit the gas pedal right now, put it on the floor.

Because there is a sea of high-quality video advertisements coming. You need to be having your, your, ah, agents and AI stuff, creating 24 7 live streaming videos probably. Um, you need digital humans. You need to hit the pedal to the floor. So, business creators are going to win big, um, financially and in terms of, uh, attention.

Uh, platform business models, YouTube, TikTok. Well, these models are based on network effects. [00:34:00] Based on, you know, the greater variety of content created can be more effectively matched with a greater core uh, a greater variety of interest of viewers. So, you have viewers on one side of the platform, audience builder platform, and you have creators on the other side.

This is going to explode the long tail. And it was already very big. So, the network effect is going to get much more powerful. They’re going to do all these independent content creators are immediately going to start uploading to YouTube and TikTok, and it’s not a big surprise that TikTok is the one that created this.

You know, by ance. You’ll also see the same thing on e-commerce sites for merchants and brands that are creating videos, you’re going to see a lot more content on Taobao. Amazon places, they’re going to win huge and they’re going to be one of the biggest creators of tools for content creators, which they already are.

Now, there’s two variations on that that I’ll talk [00:35:00] about, and that’s the end of the winners iQIYI in China, iQIYI, Tencent video and, uh, Tudou, which are sort of the three YouTube like businesses of China. These businesses have, have always been sort of a combination of YouTube and Netflix. Really streaming really closer to HBO because you can’t really compete with just uploading content and also you get in trouble for uploading content.

It’s a moderation’s a problem, so they all pivoted a long time ago to be a lot more like HBO Max and Netflix, where they try to create high quality. TV and movies, and that’s what iQIYI really does. They would describe themselves much more like an HBO Max. We make the highest quality TV dramas and movies.

And then we also have a YouTube-like capability. Well, they kind of have both of these because the platforms, the IGE business models. And, and [00:36:00] even Netflix. They have what Hollywood doesn’t, they have customer capture, they have subscribers. So, they have power on the production side and product and power on the demand side.

And they have network effects. Well, not the streaming, but the others do. So, they have a lot more power than Hollywood ever had. This is why, you know, Amazon Prime and Netflix are just sort of crushing Hollywood and they have been. Except for maybe Disney, uh, for, you know, good 10 years. So, they’re going to do very, very well, and they can play this multiple ways.

I’ve talked to with IGE about this, that they should do the epic games business model, which is like, look, you have subscribers, you have the demand, you have the highest quality production. You have the best TV shows. You have the best movies; you have a YouTube like capability. You should also provide tools so other people can make high quality TV shows, which is what Epic Dames does, right? [00:37:00]

They give tools where people can make video games themselves, and that’s kind of what it has been doing. They’ve been creating asset libraries where they digitize everything in their TV shows, the sets, the characters. The cars, the planes, and they put it in a digital asset library with the idea that anyone who wants to make a video, say by using SeeDance, can license all of those assets within their productions.

So, they’ve been building sort of digital asset libraries and virtual production capabilities that they are going to start selling as a service to anyone. That’s pretty much the Epic games model. So, iQIYI is actually very well set up to do exceptionally well with this type of stuff. Um, now Netflix is kind of close to that.

They don’t really have a YouTube model and I don’t know if they’re creating and offering creator tools yet. I don’t [00:38:00] think so, but they could do what IG is probably doing. So, what they’re going to do is they’re going to kind of do what they’ve been doing, which is they look for anyone getting lots of traction on YouTube like Mr.

Beast. And then, you know, Mr. Beast does his live stuff, his videos, but anyone creating content with these new tools, if they get enough traction, they will then offer them a TV deal. So, you can go watch Mr. Beast games on Netflix. Which was not actually that good. So, they can sort of grab the best of the best from the sea of content creators and turn them into more TV show life stuff.

And that’s what they did. And then they can bundle. Netflix is a giant bundle. They can cross sell, cross promote, which they’re the experts at, and they can personalize everyone’s Netflix is different. So, you can kind of see there’s three different versions of this. There’s the pure platform business model.

TikTok, YouTube, there’s the Pure Streamer, Netflix, and then in between you [00:39:00] have iQIYI, which is sort of doing both. There we go. So that is the winners. I’ll put the list in the show notes. Um, pretty awesome I think. Let me jump to the losers and then I’ll go sort of to the people in the middle. The losers.

Yeah. I think you kind of know what I’m going to say here. Professional. Production companies based on scale. Yeah. Very bad. Um, so that’s most of the TV houses, TV production houses in Hollywood and other places. You could say the same about Bollywood. You could say a lot about Hong Kong. Uh, definitely the higher you go up this sort of scale game in terms of, we have the highest quality movies and we spend the most on our movies.

There’s a hundred, 200 million James Cameron. Okay, they’re going to get hit the hardest because there is a sea of basically free content with as [00:40:00] close as possible quality to what they’re doing and probably right on. So that’s most TV studios, that’s that. Anyone who’s doing that game and trying to leverage scale and capital, uh, now distribution actually will have some power to it.

And they’re trying to monetize that directly, j basically, you don’t want to try and monetize content really at all if it’s creative content. I think it’s just a losing game. I think you want to make your money elsewhere, and I’ve written about this before, like, look, don’t try to make your money in content, make your money in services, and then create content with it.

That’s consulting. Make your money in theme parks. That are based on IP that was created in content. Monetize the IP directly, that’s pop mart and little toys and backpacks based on, but don’t try to monetize the content itself. It’s going to be a hard game. Um, you [00:41:00] can do it. There are niches that are pretty good.

Uh, live sports is pretty good. Yeah, live contests are pretty good. Live concerts are pretty good. That’s all the type of content. At a certain point, I’d kind of say, look, you’re really in the services business. There are niches of content, but generally speaking, no. And most of these Hollywood studios and TV houses they’re based on creating content and then monetizing it directly.

And their big, their big advantages scale. Okay. Bad, bad, bad. I don’t like any of that. Um. I don’t really see a lot of strength in scale or specialization in production anymore. Therefore, I don’t think you need to live there. So, I think these houses are going to consolidate. Uh, their economics could be devastated, just like we see with news.

Um, just like we saw with book publishing. Um, now if you have a big IP library like Disney. Okay, you [00:42:00] have some moves. I still don’t think the revenue from those things are going to enable you. cause once your revenue falls, your cost structure becomes a problem because you have built a cost structure, assuming certain types of revenue stream.

You have lots and lots. Have you ever been to a Hollywood studio? They have people everywhere. They have people that are paid just to hold the cue cards for these TV shows that fewer and fewer people watch. They have people that just spend their time scouting locations and finding all of those jobs are going away.

Right. So, the cost structure is going to be a problem, and it’s going to unfortunately be a sort of a vicious cycle. The revenue will fall. You will have to lay off people in these massive cost structures they’ve built over 50 years. Uh, that’s going to make it harder and harder to make movies that are different than what you can do with generative AI and so on and so on and so on.

So that’s obviously, I’m not, I don’t think I’m saying anything everyone hasn’t already thought of. Uh, a second group to think about that’s similar since we’re talking about e-commerce and stuff, is ad agencies. These companies that you know, have built very lucrative ad agencies, they make videos, they make JPEGs, um, that live off the marketing budgets of companies like GE and L’Oreal.

Yeah. They’re in trouble. I think that game is going to get, now the businesses themselves could survive because they can scale down. But you know, at least unlike the Hollywood studios, at least for these groups, there is a revenue stream they can count on, which is the marketing budgets of big e-commerce.

You know, big, let’s say makeup companies that have to spend and compete every year to keep doing sales. Okay? So, the revenue streams are still there, but yeah, you’re probably going to have to replace a lot of people with generative ai and your prices are going to probably come down dramatically. Okay. [00:44:00] That’s just the way it is.

Um, so that sort of losers, um, I think a lot of these people who have built careers, individuals and specialized firms in very specialized skills that are related to Hollywood type production, I think that’s just going away. You really don’t need a lot of these CGI houses that have been built. These people that have these advanced skills for creating audio that is then recorded and put into movies.

Uh, they create special effects that are put into movies that hold cue cards, that scout locations, that have these big, you know, studio lots in Atlanta. I’m not sure you need any of that anymore. I think a lot of specialized firms that’s that basically sold to these big production houses with these big budgets of $200 million per movie.

I think that whole ecosystem that surrounds these big companies is going away. A lot [00:45:00] of it. So, they’re all going to have to scramble. Alright, number three. Independent content creators that are trying to make money doing this. Now, I think independent content creators, small teams, small houses, individuals are going to do great in the attention game and are going to do great if they’re trying to monetize IP or other things.

But if you’re trying to sell your content, eh, I think you’re living on the wrong side of a power law. Now you’re on the other side of that power law anyways. You’re one of hundreds of thousands of people that can do what you do. And so, you know, you’re sort of living under the algorithm. Unfortunately.

Now you can do that for attention and it’s fine but trying to monetize that is difficult because of the power law. And two, because I think a lot of the profit pools are just going to get wiped out. It’s like book publishing. I published [00:46:00] books. I’m fighting the power law to try and get attention, but I don’t actually even look at my book sales in terms of money cause there’s no profit pools to be gained anymore.

They’re just not there anymore. They’re tiny. I don’t even, I’m sure they’re coming in, but I don’t actually check. So, this whole content creation game is going to be about attention, uh, engagement data and then monetization in other areas. But the profit tools for. Content itself. You know, these generative AI tools basically mean, look, you can make all this stuff for the cost of compute.

And that means, you know, most software, if you don’t have network effects, you’re not making money in software. It’s going to be like that. The cost structure is too small. Anyone can do it. So, if you don’t have a competitive advantage, there’s no profit there. So, I think they could be in trouble. Um, number four.

Anyone who’s, you know, owning [00:47:00] production. You know, I’ve been saying for years like, dude don’t buy shares of Disney now, I don’t give stock advice, so don’t take that as stock advice. But I’m like, dude, you do not want to own businesses that are in the business of creating content and then trying to monetize it.

Now Disney’s actually not terrible cause of the theme parks and some other things, but yeah. Uh, don’t take that as stock advice. I don’t give stock advice, but, you know, owning production of content, not a great business. And I would say the same thing about like; do you know books? Now we can kind of dial one level up from this, you know, second-closing effects, which is always an interesting way to think about investing.

What is the impact of all of this in Los Angeles? How big of a business, I mean, what is the business of Los Angeles? Well, you know, they have got aerospace and some other things, but when, when it comes to Hollywood, what you’ve always been talking about is the creation of TV shows and movies. It’s not TikTok videos, it’s not book publishing.

And now there’s [00:48:00] music there too. Okay. You have got the music houses. I actually looked this up. Um, the GDP of Los Angeles County is approximately now. This is, you know. Google Gemini. So, I haven’t actually sourced this, so this may not be accurate. You never know what these services are, they said the GDP of Los Angeles County is about 800 $900 billion.

That sounds about right. Entertainment. About 5% of that 50 billion annually to the local economy. Okay. That could be a serious hit. Um, is that going to impact real estate? I don’t know. It might, in certain neighborhoods, you think these actors are going to make anything like they’re making now where they have all these mansions, all these Hollywood producers.

I mean, I used to spend time in this, this 20 years ago, 25 years ago, really, where I, you know, I had a good friend who was in Hollywood working at Disney, and I used to spend time at the Disney lot all the [00:49:00] time. And I used to get invited to parties. Well, she did, and I would tag along. So, I, you know, I remember having, you know, going to dinner parties at Rory Disney, who’s the son of Walt Disney, you know, at his big mansion up on the hills.

I can remember like going to the rap parties, um, for the TV show, life goes on and, um, going to beach parties. Because, you know, all these studios, the studio head would show up, the big boss, everyone would try and get them, you know, the directors were there. Some of the actors would show up with their agents and you know, it was just this whole world.

The restaurants, you know, everyone went to the same restaurants. They would know like if you want to go and see actors on a Sunday morning, you go to certain restaurants and cafes on Burbank and area and stuff like that. Everybody knew this world. Okay. A lot of that might be gone. Not a hundred percent, 30%.

How much does the business, all of those restaurants, real estate, um, the [00:50:00] entertainment class, all of that, how much does it have to drop to really push some of these companies into the red? 30%. Is that enough? Yeah. So anyways, you can play around with this. This is not really my area, but it’s worth thinking about.

I looked up employment. For sort of television and movie production in Los Angeles. This is again, Google Gemini, so don’t take this as an exact number. A hundred thousand workers, which is down from about 130 a couple years ago. Assume they all have families, so a couple hundred thousand if you sort of expand that to the wider creator economy.

Uh, caterers, you know, for movie production sets, talent agencies, lawyers, set builders probably twice, three times that. Um, here’s what it says from Google Gemini. Historical estimates for the broader entertainment cluster are 250,000 jobs. Okay. [00:51:00] Then you can add on top of that freelance, the gig economy, SAG actors, you know, extras in shows, not working full time at any given time.

That’s probably another 150,000. You’re talking about a lot of people. Anyways, that’s interesting, I would put that in the, going to get hit category, but I don’t really have a number for how big that’s going to be and I’ll finish up with two others, which I’m actually quite happy about. Okay, and this is just me being petty.

So put this in the category of a rant. I don’t like the Hollywood managerial class for the most part. Um, I meet people, you know, these are sort of directors, production heads. Um, I’ve met a decent number of these people and I considered it like a fake skill. I don’t think it’s a real skill. I think you can pretty much pull anyone off.

There’s movies made about this, how you can pull anyone off the street and turn them into a, you know, a [00:52:00] production head. Uh, I think the whole business run, and I’m amazed at people who are terrible at this job who keep getting promoted, who make terrible TV shows and keep getting promoted. I don’t think it’s a real skill.

I think it’s who you know and how big and effective you are at networking and staying in groups. And I would like to see sort of a Moneyball moment. You remember the famous movie Brad Pitt Moneyball, which I love this movie. I used to teach this in investing, uh, class in Beijing, and you know all these people who used to go out and find the new athletes, the scouts.

And they would choose them based on things like, oh, he’s got a good swing. You know, he’s got, you know, he’s got a powerful swing. He’s got the look; he’s got the charisma. All these talent scouts basically went head to head with a mathematical data-driven approach, which is written about in Michael Lewis’ Moneyball, and basically shows, look, this whole class of workers is just making this stuff up, [00:53:00] that when you actually apply numbers to these things, and the famous cases, they applied it to the Oakland A and they just started hiring.

You know, players that no one thought you should ever hire and they got rid of all the scouts. It’s not a real skill. It’s just kind of a Fugazi. And I think a lot of the production aspect of Hollywood, the managerial class now, I think someone who writes a brilliant script is real. I think someone who acts in a powerful way is real, and directors can have magic to them.

But that managerial class, I think it’s a Moneyball situation. I think. All the woke, DEI stuff has kind of rotted the quality of this group over the last 10 years, which is why I think they keep wrecking so many franchises. The list of franchises that has been destroyed by woke management is stunning.

Star Wars, Marvel, uh, star Trek, Terminator Aliens. I mean, you can go down [00:54:00] Dr. Who. It’s unbelievable the amount of franchises Indiana Jones, like it’s crazy that have just been wrecked and I, I sort of point the finger at this woke class that, uh, at the end of the day doesn’t really have any talent to begin with.

Anyways, that’s a rant. I’m looking, not looking forward. That’s mean. I will not shed a tear if this group gets sort of replaced and we empower creative individuals to, to make things of this quality and go direct to the audience, I will. I will enjoy that. So that’s a bit of a, me being petty. Uh, and within that, I think you can also sort of point to the political aspects of entertainment.

One of the reasons I think News X and Hollywood I think are talked about so much because of the political impact of these things, the cultural impact of these things. Um, you know, there used to be, this is a me again, ranting, a small group of individuals had control. [00:55:00] Over what was seen in television and movies and it was very clearly political.

And you could say the same thing about news, certain stories, you know, there were only a handful of news agencies, you know, that had the cable news, C-B-S-A-B-C-N-B-C, Fox, M-S-N-B-C, and a very small group. Uh, there were only a small number of newspapers. You know, wall Street Journal, Los Angeles Times, New York Times, it was a very small group of people that controlled a fairly small number of companies that controlled the narratives that were acceptable within news, uh, culture and entertainment.

And I don’t think it was a good thing. I think it was a lot of evil stuff. Anytime there’s any sort of control like that, it usually gets corrupted pretty quickly. So, I think that’s been blasted apart in news. You know, there’s lots of independent journalists now that I absolutely love, and they just post directly on Substack, and I think they’re great.

And I think the control there [00:56:00] has been blown apart. I think this is similar. We’re going to see cultural and entertainment control get blown apart, and we’re going to see site types of stories that we’ve, we haven’t seen like, and I really find that, you know, and I would like to see TV shows. About sort of the historical aspects of America, which I really am, I find inspiring.

You will never see those coming out of Hollywood. You will never see a Hollywood sitcom about a Christian family coming out of Hollywood. Hasn’t happened in 50 years. Why? It’s the majority of the US. By population, you’ll never see it. So, we, we’ve sort of been funneled into a, a narrow aspect of culture, entertainment and information and news and I, I put this all under the category of information warfare and cultural warfare.

And I think it’s getting blown apart, which I am, I’m quite happy about that actually. So I think that part is a, is a total positive [00:57:00] win-win. Anyways, those last two though, that’s just me ranting everything before that was kind of business thinking. And I’ll, I’ll put this in the show notes, but yeah, that to me is the seedance moment.

Last year we had the bite, we had the, uh, deep seek moment where a Chinese company just sort of rattled the AI world of the US with, with uh, deep seek. Now we’ve got the seedance moment, which is not just an AI bombshell. I think it is a major bombshell culturally, and there is something that’s a little bit funny about.

The fact that it was ByteDance who did this, because that was the company that just kind of got politically, uh, Ram rotted into giving up. Really? They had their US business TikTok expropriated by the government. And you, you can argue that’s not appropriate. Like I don’t like it when I see foreign companies invest time, money, and effort into building something [00:58:00] powerful and effective in your company, in your country.

And then the government exp appropriates it and hands it to their friends. You know, I don’t like it when any country does that. Now you could argue, oh, national security, whatever. I don’t really buy most of that, but I, I, I kind of agree with cultural control being domestically held. I, I actually do that anyways, so there is something funny about the fact that it was ByteDance who did this and we’ll see others.

There’s clinging ai. Which is another Chinese company actually, that’s, they have pretty much similar quality, not quite as good, but they’ll get there soon. We have Hilu O, which is Minimax, that’s another Chinese company. The top three video generators are Chinese. You could say Sora in there. You could say Veo is close, but seedance is first.

But I think you’ll see the other companies copy this quality very quickly, so it’s going to be everywhere. It just so happens that a Chinese company, you know, disrupted Hollywood. Um, across the board. So interesting. Anyways, that is it for [00:59:00] today. I took; this was pretty long today. Uh, but I’ve been thinking about this all week.

It is just blowing my mind. I think this is a major historical moment to tell you a business historical moment. This could be really, when we look back 10 years from now, everyone would be like, you remember when Hollywood used to be a thing. I think this is that moment if that’s going to happen, which I think is 70%.

Um. Yeah, this could be the moment that did that. We’ll, we’ll see when the dust settles. Anyways, that is it for me. I won’t go on any longer because I’ve been talking for a while. Amazing, fantastic. In my view, uh, I’m having such a good time watching these videos and creating them. It’s really fun. Anyways, that’s it for me.

I hope everyone is doing well, and I’ll talk to you next week. Bye-bye.

——–

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