- Artificial Intelligence Practices and Law Will Continue to Develop. We expect the industry focus on AI that began in 2023 will become even more pervasive in 2024. Watch for: (i) the continued emergence of new products and offerings that exploit AI, (ii) the negotiation of restrictions and guardrails in more entertainment-related agreements, (iii) litigation that will test the limits of content protection for intellectual property used to train AI, and (iv) lobbying efforts that will continue to keep the Copyright Office and Congress focused on updates to federal laws and regulations to govern the use of IP to train AI and the protection afforded to content created by AI. We anticipate that private negotiations this year will begin to establish industry custom regarding many key AI-related issues, which will likely inform and be informed by litigation and lobbying efforts.
- Continued Evolution of Economic Models in Streaming. 2023 saw significant shifts in the economics underlying content streaming. Wall Street shifted its focus from subscriber numbers to profitability. Universal Music Group successfully pushed for new "artist centric" royalty models in audio-only streaming (e.g., Spotify). The historic WGA and SAG-AFTRA strikes in 2023 resulted in streaming bonuses and other economic concessions from audiovisual streamers (e.g., Netflix). Meanwhile, SVOD growth slowed, causing industry leaders to raise prices, cut production and shift their focus to ad-supported models (e.g., FAST, AVOD, and less expensive ad-supported tiers). All the while, perceived issues regarding transparency, how royalties are distributed, and the extent to which revenues are shared have continued to flare, as the total amount of content continues to grow (especially given the rise of AI-generated content) and the pool of revenue begins to stagnate. As a result, we expect continued reevaluation and evolution of economic models in the streaming space in 2024.
- Consolidation in the SVOD space. Continuing with the theme of a maturing streaming market, as churn rates in the SVOD space continue to soar and consumers become increasingly choosy about how many services they are willing to pay for in the face of rising prices, we expect the recent trend of acquisitions (think Amazon's purchase of MGM in 2022) and mergers (e.g., WarnerMedia's merger with Discovery, which resulted in HBO Max and Discovery+ being consolidated into Max last year) to continue throughout 2024 as legacy media companies lose ground to relatively new entrants.
- Increasing Revenue Through Monetization of Superfans. From start-ups to content giants, entertainment companies will be exploring new ways to support deeper connections between artists and their fans and to extract incremental revenue from those relationships and experiences in order to expand a rapidly maturing revenue pie.
- Continued Cooling of Music Catalog Acquisitions. Music catalog acquisitions are expected to continue to cool due to higher interest rates, which increase the cost and decrease the availability of capital for catalog purchasers as lenders pursue more traditional investment opportunities that were less viable during the ultra-low interest rate environment of the previous decade and a half. A renewed focus on seasoned, evergreen catalogs can be expected, as well as a trend toward international and niche-genre catalogs, as purchasers seek value with lower multiples. The scope of acquired rights can also be expected to increase beyond traditional music-related assets to include corresponding brand and IP rights to further support valuations.
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