Mike Darcey: “Like trying to predict the impact of the internet from the standpoint of the ‘90s”

IBC

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Delegates will arrive at IBC in a state of flux, unsure of the direction to turn as tumbling economics and AI frenzy turn the industry inside out. However, if we take a step back and look at the bigger picture then not only is dramatic change nothing new, but the current state of disequilibrium could actually be coming to an end.

“The big changes have happened and in many respects we could be entering a relative steady state period,” argues Mike Darcey, media industry commentator and advisor who gives an IBC Keynote on 14 September. “But with one important caveat; if AI turns out to be the next massive disruption to kick off a new period of disequilibrium.”

Darcey has several decades experience at the top of the industry shaping content, business and M&A strategy as COO at Sky TV in the UK then CEO of News UK (formerly News International) and Chair of Arqiva. He continues to lend his acumen as consultant to a range of companies and organisations both inside media (as director at Sky TV NZ) and outside of it (as chair of British Gymnastics since 2019).

He contends that the distribution bottlenecks that characterised the TV business prior to the 1990s have been steadily removed, most recently leading to the growth of the creator economy.

“We might have arrived at the ultimate destination which is a world without any distribution bottlenecks at all with things starting to settle down into a new equilibrium.”

There’s evidence for this in the ubiquitous penetration of broadband and smartphones and signs that the streaming revolution is levelling out, even exhibiting minor declines in mature markets.

Darcey also highlights a reappraisal of the role of linear TV, pointing to UK commercial broadcaster ITV’s revised strategy which gives equal weight to launching new shows on streaming service ITVX and on ITV1.

“There are small hints that streaming might have limits, that linear might have a long-term role to play in an equilibrium in which the two models work in tandem.”

Even the rollercoaster plunge of cord-cutting in the US could be starting to flatten out: “Those subscribers who resented having to pay for sport have escaped while re-packaging on cable networks has addressed the egregious value problems.”

AI the next major disruptor?

But one major bottleneck remains: TV content (especially high end and long form) is still expensive to make. “In some respects it is getting more expensive, as viewers expect more and better – which continues to place limits on what gets commissioned, what voices get heard and who can participate,” he says. “The cost per hour of big shows is getting beyond the budgets of many ad-funded broadcasters – so there are still powerful commissioners who decide what to greenlight and what risks to take which means many creative ideas do not see the light of day.”

That could be about the change if AI solves these problems.

“We need to consider the possibility that it will no longer cost $100m to make a movie, or $10m an hour for high end TV. It might soon be $10k or less, which would seem to mean it would be open to almost anyone with a good idea. If that is a possibility - and it’s brave to exclude it entirely - we need to think about a world in which the production cost bottleneck has also been removed.”

Darcey is the first to acknowledge he has no crystal ball.

 “It's a bit like trying to predict the impact of the internet from the standpoint of the early ‘90s. Then, we sort of knew that distribution was going to become easier, but we didn’t understand all of what it meant. We are very much in speculative territory with the potential consequences of AI, but I think we've seen enough over the last 30 years to make some suggestions of the sorts of things that are coming down the track.”

History teaches that incumbents will tend to be incrementalists and will use AI to make marginal efficiency improvements in their processes. “A more likely source of serious disruption could be newcomers with no loyalty to the old models and who use AI from scratch. The incumbents will struggle to adapt. Very, very few will find a way to beat the innovator's dilemma. If you have any doubt, just think about the Union agreements that, it is already clear, will constrain incumbents but are irrelevant to anyone starting fresh.”

With the cost bottleneck to production removed, logically there could be near infinite content which will lead to some talented and creative voices being heard where previously they could not.

“In one sense, this would be putting rocket boosters on the existing creator economy. The YouTube story is already big, and growing fast – but it might be heading to a whole new level.

“Sadly, in a world in which production costs are reduced to near zero, there will also be a vast sea of slop as people with plenty of self-regard but no talent are free to create in vast quantities.”

Since consumer time and attention remains finite, discovery “already an unresolved issue in the current era” will become more important than ever. He says, “How will we ever find the good stuff? I don’t think we have come up with a good answer yet.”

Will there still be hits? “Probably, because we are social animals and want to be on the pulse and because human nature, in part, judges quality by what others think. If lots of others like it then it must be good. These effects compound and will drive some content to the top of the algorithm in a self-reinforcing way.”

This leads to the question of marketing which Darcey believes will remain a major fixed cost. “As choice has expanded in the last 35 years, marketing has become more important, if only to seed the algorithm. So even when you eliminate the fixed costs of production, you are left with fixed costs of marketing. It will still be the case that some projects, some voices, get backed and many do not. Some great content will drown in the sea of slop.”

If there’s one type of content almost immune to the impact of AI it is live sports. Darcey predicts that the authenticity of live sport will become even more distinctive in the age of AI.

“Tier 1 sport is the only distinct, non-replicable content around and going forward, it only becomes more and more standout among an infinite pool of other content.”

Darcey is consciously pushing the boundaries here, suggesting that we’ve reached the natural extension of zero barrier to distribution, which is essentially the story of the industry for the past 30 years.

“Obviously the catch is that the next revolution may be just as profound and could happen a lot faster (given that the propagation of new technology requires no major capital outlays by the TV industry).”

“I think we do have another profound shift coming but there are still parts of the production process that remain fixed costs. That means some kind of control and power over content will continue to vest with people who have access to money to back certain projects. I think marketing and brand remain important but will diminish and that the ad model has its limits. We spent the last 30 years discovering that if you don't have a paid for element you've got a problem."