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What do I mean by the evolution of storytelling, Storytelling, whether factual or fictional, is an intrinsic human characteristic. However, the way we communicate with others has changed drastically over time. Storytelling originated with visual stories, such as cave drawings, and then shifted to oral traditions, in which stories were passed down from generation to generation by word of mouth. There was then a shift to words formed into narratives, including written, printed, and typed stories. 1800’s started the new era of storytelling with the development of cameras and projectors. It allowed audiences to experience moving pictures for the first time. With the rise of smartphones and streaming services, technology has made visual storytelling more accessible than ever. Many of us are literally walking around with the means to make and distribute a visual story in our pockets. The same ethos that was behind those original cave drawings, the urge to create a world for others to react and respond to, still remains. OTTs have given storytellers the freedom of expression like never before. This is evident from the array of content coming up on these streaming services.  

TV does a lot of jobs for us, it tells stories, it shows live sports, it educates, it informs, and provides news about breaking events, and more importantly, it is an escape from boredom. All of these jobs have a common business model: advertisement. Consumers tuned in to watch programs and ads. Everything was aligned, consumers like TV, they got it for free over the air and advertisers wanted to reach as many people as possible with persuasive mediums. The story changed with the introduction of cable TV. Antennas had their drawbacks as they could not be a reliable source to capture broadcast signals due to limited bandwidths. Cables provided the solution they had both extra bandwidths and had no requirement for spectrum licenses.  

Then, with cable came new means of distribution and a new business model. Cable companies started charging subscribers for access to ad-supported broadcast channels. Channels themselves started charging subscribers and cable companies became the medium to charge the subscribers. This shift was led by ESPN, which introduced affiliate fees in 1982.  

Evolution with internet 

The Internet has zero marginal distribution cost which helped the internet quickly take over some of the jobs of TV. Information and education content was a natural fit for the internet. It gave customers the ability to look at anything and everything they wanted, and with the rise of YouTube, that information was made available in video format.  

Then came Netflix. It aggressively pursued the storytelling and boredom filling jobs that TV did for a fraction of the price of cable TV. The reason both YouTube and Netflix succussed is because of their superior business models.  

• YouTube is ad-based and was free to use. However, the ads could be applied to any and all content algorithmically. It gave rise to user-generated content and accepted all content. You could search anything on YouTube and that content was available 
• Netflix, on the other hand, is a subscription service that is similar to cable TV but at a fraction of the cost. The biggest differentiator is the experience with Netflix, there are two things here. First, the content is ad-free so you get a better experience watching the content. Second, you can binge-watch on demand and do not have to wait for the next episode to air.  

Internet removed the means of distribution from the value chain. Television via the internet has solved the problem of reach. Now the big problem is getting user attention. This has dramatically increased the competition to snatch user attention to the respective products. The biggest competition for TV/OTT is time. All OTT services (Disney+ or Netflix or HBO etc.), Metaverse, and Social Media (Instagram/Facebook/Twitter) are fighting for space in the 24 hours we have every day.  

What is IP 

My experience of consuming stories as a kid was in India. Dr. Manmohan Singh, then finance minister of India, opened India’s gates for international trade in 1991. Globalized India attracted many brands to capture the untapped market with a billion people in it. Hollywood or the American film industry started testing waters in India in 1994 with Jurassic Park. Later with Titanic in 1998. Growing up in India in the 1990’s I was not at all privy to western shows until the late 2000s. Bollywood India’s movie machine was already 7 decades old and was heavily focused on making films that delivered value to the young Indian audience. During the ’90s Indian producers started a process of making TV series that would resonate with the upcoming generation. I still remember watching shows like Shakitman, Chacha Choudhary, Byomkesh Bakshi, etc, and replicating the moves of Shaktiman on our terrace. Shaktiman was the Indian superhero who used his powers to save the people of earth. Chacha Chaudhary was a comic about a frail but intelligent old man, whose “brain works faster than a computer.” He is always fighting against corrupt government officials, tricksters, roadside bullies, and local thugs alongside Sabu.  

There were millions of kids of my age replicating the moves from these shows behaving as superheroes. But Diamond comics creator Chacha Choudhary, or others had limited resources of what they could do with this franchise. Moving to the west during the same era kids were immersed in the fantasy worlds of Star Wars, Marvel cinematic universe, DC, etc., and played with a stick in their backyard behaving as Jedi Master. We were at some point in our lives crazy about Pokémon. The tag line “gotta catch’em all” was the mantra of every child’s or adult’s life.  

Pokémon, originally a Japanese game for the Nintendo Game Boy that features hundreds of monster characters, has expanded into globally popular animated series, toys, and video games, including the recent hit Pokémon Go for smartphones. The nostalgic chase has been embraced by young adults in soaring real-estate prices and a tight labor market. This is the IP I am talking about. Pokémon is no longer a card or cartoon it’s a franchise and they continue to build on this IP.  

Jobs to be done are a critical factor used by companies to define themselves. Their product lifecycle depends on what kind of job their product is helping consumers do. Historically, if you look at the entertainment industry you will see that Marvel was just a comic book company, Mattel a toy company, ESPN a sports network. It is evident that these definitions are no longer right. In 2019, Hasbro bought eOne so that it could sustain, if not build, its merchandise lines such as G.I. Joe, Transformers, and Battleship into an ever-growing cinematic universe-spanning TV and film. Mattel, too, is driving adaptations of its top franchises, including Barbie, Hot Wheels, and Magic 8-Ball. Most major sports leagues now see NFTs and sports betting as the key to their growth, while casinos are building out and acquiring lifestyle content publishing businesses. Marvel and DC haven’t been comic book-first companies for nearly thirty years. 

Pokemon is not the only example, In Jan 2020 Witcher had become the biggest ever original TV series release for Netflix. Although the show is an adaptation of a book series, much of the franchise’s (The Witcher franchise) success came after its hit video game adaptation. Following the release of the hit “Witcher 3” video game, the 25-year-old “Witcher” book series hit The New York Times Best Sellers list for the very first time. Once Netflix’s “The Witcher” started streaming, the video game saw its player count grow 3-4x, and the decades-old book series returned again to the Times Best Seller list (and a stunning 500,000-copy reprint). This phenomenon is well described by Matt Ball in his blog: 

Most of us would rather spend more time in a universe we love than find a new one 

IP and Entertainment business 

Popular IPs age like Scotch and become rare. Valuable IPs have exponential growth and become popular with time. There is no definitive scale for measuring the popularity of an IP but as IP becomes old it passes through generations. If an IP has an attractive magnet and sticks through various generations as a value to each passing generation there will be an exponential growth in its popularity. Taking the example of Pokémon, 20 years after the release “Pokémon Red/Blue”, million of (now) adults were delighted to jump back into the franchise following the release of the first mainstream AR game, “Pokémon Go”.  

Gaming and cultural impact  

Video games have gone from being a derivative medium that took its cues from other media such as books, films, and music to being a form that other types derive ideas from. The aesthetics and principles of gaming culture have had an amazing effect on mainstream culture. This has led to the gradual acceptance of marginalized social groups and increased comfort with virtual worlds and the pursuit of new means of interaction.  

Games are mimicking the modern world, and gamers can relate to the virtual environment. The concept of the metaverse is already available in the virtual environment for gamers. I talked about gaming being a primary use case of a metaverse in part III of the metaverse series.  

Before COVID-19, video games were already starting to blur the lines between virtual and physical events & activities as demonstrated by in-game events in Fortnite and Roblox (e.g., Star Wars: The Rise of Skywalker, DJ Marshmello concert, Weezer album debut), professional eSports players partnering with celebrities on Twitch (e.g., Drake and Ninja playing Fortnite), and Take-Two’s online casino in Grand Theft Auto where gamers could gamble real money. As a result of these in-game events and activities, these key franchises saw user base expansion and increased levels of engagement, consumption, and ultimately monetization. And on the other hand, these events allowed content creators to connect with the next generation in a new forum that boasts high levels of engagement. During COVID-19, social restrictions placed an importance on the need to have virtual events and connections, resulting in the social acceptance of virtual existence. During the pandemic, video games, streaming platforms, and communication apps allowed consumers to digitally connect, with canceled in-person graduations ceremonies, weddings, and many other significant life events taking place via Minecraft, Roblox, and other platforms. 

Over the past decade, the cultural impact of gaming on society has increased significantly and it’s not due to the growing gaming community. The gaming industry has made significant strides in technology with better performance, motion capture, and computing power increasing day by day allowing more concurrent users to join EPIC’s Fortnite. This has allowed people from all walks of life to connect using gaming platforms. Storytelling has become very immersive and the current technology stack allows more than jumping, moving, and shooting. All of this has allowed gaming to build an IP and has created very successful franchises including “call of duty”, “Grand Theft Auto”, and “Legend of Zelda”. The highest-grossing game of all time is now Pokémon. The success of these games has led movie businesses (like Hollywood) to reconsider their approach to monetizing gaming IP. Recently Matt Ball wrote a piece on this, here is the snippet that supports the above hypothesis.  

In recent years, however, this disposition has evolved. Video games are increasingly seen as a medium through which “real” stories can be told and fan love can be grown. Warner Bros. Interactive’s “Batman“ games, for example, have been substantially better received (and are more repeatedly successful) than any of Warner Bros.’ DC feature films. Similarly, Sony Interactive achieved much greater heights with the 2017 video game title “Spider-Man” than with either of its “Incredible Spider-Man” films (2012 & 2014). Every “Star Wars” film released since 1980 has struggled to appease fans. Yet, the franchise has seen some half-dozen games released to wide acclaim (and typically from an even “nerdier” and “obsessive” set of fans). And given the franchise’s need for a narrative reset and source material to draw from, it would be of little surprise if Lucasfilm decides to adapt a game like “Knights of the Old Republic” or “Jedi: Fallen Order” to the screen.  

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Comics and IP  

Who is your favorite comic superhero? Batman? Wonder Women? Black Panther? Spiderman? Comic books are a contemporary part of pop culture and a multi-billion dollar global industry. Franchises work to build on characters developed in original creative work for use in a variety of mediums (including games, movies, tv shows, etc.) 

New research by WIPO reveals that, over the last 40 years, Batman, Dracula, and Spiderman are the top three most-used franchise characters for movies and video games in the United States, the world’s biggest media market. And with Black Panther and Black Widow now featuring among the official top 10, the superhero universe has become more diverse. According to the study, the comic character Batman has seen the most revivals in franchise media (i.e. movies and video games). Since 1980, the character has appeared in 73 movies and 84 video games, generating more than USD 2.8 billion in movie and video game sales. Similarly, The Avengers, Captain America, Black Widow, and Hulk have evolved beyond comic books to become hugely successful franchises with top-grossing movies and video games.  

It’s not odd that comic books have proven to be the most fertile source of IP today. Marvel, one of the original comic book producers has created almost 8000 characters including Iron Man, Spider-Man, The Hulk, Thor, X-Men, The Fantastic Four, etc. As holders of IP rights in its creative form, Marvel has been able to leverage the commercial value of its superhero’s through a series of profitable licensing agreements. Its strategy has enabled it to distribute characters beyond comic books to multiple formats including films, television, and video games. This has given Marvel a “no–limit” on merchandising reach including toys to perfumes and clothing to luxury cars. They have used their IP to sell characters to major studios but have still kept full control over its assets.  

Before the acquisition of Disney, Marvel developed a low-risk move licensing strategy which meant film studios carried all the financial risks in developing the film. Even when a film, such as Ang Lee’s Hulk, was disappointed at the box office, Marvel enjoyed significant revenue from film-related merchandise sales and an upsurge in interest for comic books. The sale of role-playing toys such as Hulk hands has been valued at over $100M.  

Currently, unless you are in China, the audience attachment has no regulatory fear. We are not hearing regulators shouting about “Pixar addition” or “Marvel obsession”. Tencent and the Chinese government now limit minors to three hours of gameplay per day.  

So, what is an entertainment company definition today? Well in simple terms I can define an entertainment company as: 

Create stories 

For companies or franchises, their IP is unique and memorable. This is the linchpin of their entire business. Companies that own these IPs want to create differentiated content which leads them to invest both in animation, (which is wholly owned by Disney or Netflix, or Universal), and franchises, which are bigger and more valuable than the actors that bring them to life. Telling compelling stories does not change with technology. Movies of 2022 are not just the color adaptation of movies made in the 1900s. This applies to all mediums including movies, TV, books, comics, games, etc. Games that are essential in building and maintaining the IP, need to be able to tell the story that will hook the gamer for 200 hours of gaming and would want them to come and play again and again.  

If we take the example of marvel and understand why they are a leader in storytelling. Disney’s Marvel studies have led to preparing audiences for their movies for several years. The adaptation from the comics to movies has continued the bond that has lived for generations. These stories have been passed through generations and have stuck true to the comics. Since its inception, Marvel stories have been told via various methods, although all are contained in the form of comic books. This notion of transmedia storytelling unfolds the narrative across different types of media and alternate reality games.  

Disney is a leader when it comes to the collection of best stories. Disney is not only best at collecting them but telling them too. Disney’s Marvel cinematic universe consistently outperforms the Marvel films of Fox and Sony as well as comic book films of DC. Geoge Lucas creator of Star Wars stated in an interview that the only reason he sold star wars to Disney was based on the success they had brought to Marvel and the treatment they had given to the Marvel staff.  

For Disney, storytelling is key. Storytelling requires an emotional component that will appeal to consumers of all ages, and Disney has mastered the ability to create those emotions. Every advertisement, commercial, and billboard must remind consumers of those emotions and stories. 

“We’ve all known the power of attracting emotions through strong storytelling, and that’s what makes Disney so unique. At Disney, it’s about the power of narrative and being able to create a world with a theme and characters, to draw emotions that are common to all people around the world.” 

As Geoffrey de la Bourdonnaye, the chief executive of Chloé and a former executive at Disney

Build love for these stories 

As I stated above, Disney is not just a collection of great stories but also a company that has mastered the art of telling them in a way that people love. Marvel cinematic experience is a great example. Over the last few years, starting with phase 1 of the Marvel Cinematic Universe (MCU), they released 1.2 films per year and grossed $291M (inflation-adjusted) per film domestically. Since 2016, MCU has released 2.75 films per year and averaged $450M per film. MCU has released a total of 12 sequels, and these titles out-grossed their predecessor by 31%.  

Not only this, Disney has mastered the art of transferring love over generations. How many kids have photos of Disneyland with Mickey or Woody on the fridge? And these kids as they have grown up, now recreate the same moment with their kids or compare the photos with their spouses. Nostalgia remains a driving force behind Disney’s annual revenue. People don’t want a new Disney, They want the Disney they grew up loving as a child.  

Businesses based around storytelling franchises excel based on an intangible sort of operating leverage. Because it doesn’t actually ‘cost more’ to make someone ‘love your content more’, but the ‘value of this love’ is substantial, companies like Disney benefit from enormous “returns to marginal affinity 

Matt Ball 

The value of Disneyland is even stronger when applied to products/merchandise and movies. There is no real cap on movie tickets or TV viewers, but someone buying Elsa dresses is finite and the theme park entrance is controlled which drives substantial pricing power. The folks who go to Disneyland are not price-sensitive nor are parents whose daughter needs an Elsa dress. This love transcends to more revenue, driving substantial profits.  

Making money from Love

For companies with IP, it’s a high-margin game. Modularized content which is available on Facebook or Instagram or YouTube seeks to recoup its cost by spreading the content as far as possible. For companies with IP, the focus is on capturing more margins from differentiated content both when it’s created and in decades to come.  

Monetization of this love is done by restricting the addressable market to only the audience which will pay a premium to view the content on their service network. Although they have reduced the market size by increasing the amount of money they charge per user they try to make more money.  

Let us continue with our example of Disney from above. Theme parks, cruises, ice shows, Broadway, retail stores, merchandise, TV, and more. No other media company has more opportunities to monetize its content and love than Disney. In fact, theme parks are probably the world’s first hyper-optimized microtransaction games. Jungle Cruise photo here, Mickey cupcake there, click to buy a FastPass+, try on an Avengers Academy shirt inside, etc. (Update: Disney has since announced that its new Spider-Man ride will include purchase upgrades such as better web-shooters, powers, and personalized gear – only Spider-lovers need to apply!). Let us also understand one thing here, Disney does not actually collect most of its profits from products. However, the designers, manufacturers, and sellers of these products do. Disney, if they want, can monetize the products more but for them real transaction is the continuous love building. The $10 licensing revenue from a light saber is insignificant in comparison to the value of a little boy spending dozens of hours imagining as a Jedi Knight. 

One thing that can be really understood from these facts around IP is to build love as an entertainment company. Anyone can tell stories, but very few can tell a story well. MCU is not great because it has Captain America or Iron Man. It’s the ability to create a love for sub-characters like Falcon or Wanda. Let us also accept the fact, that people change and love changes. So as an entertainment company you must be constantly hunting new avenues to find that love. Music is another example of building love and monetizing this love. Musicians have more money outside music than in music. The same is true with athletes like Ronaldo, Messi, or Tiger Woods. In the last 2 decades, many franchises have been born and elevated from Twilight to Game of Thrones. Many have grown stronger like Marvel and Star Wars. But in general, most money has been made when these transcended to video games. This is unlocking the IP of your brand.