Bill Simmons had a quick aside about Taylor Swift on the most recent episode of his eponymous podcast.

I have never seen anything like the phenomenon around this concert tour, and I have been alive for all the concert tours since the mid-70s…from a cultural standpoint, from a multi-generation standpoint: fathers and daughters, daughters and moms, multiple generations. You have people like my daughter who is 18, who has not even known life without a Taylor Swift song, and then you have people in their 30s who grew up with her, and then you have the moms who are used to listening with the daughters, and then the show itself: I had friends who went to the first show, and I think she played 45 songs — it was 3+ hours. This is like Michael Jordan shit, whatever is happening with her…

She’s sold out 6 straight shows here in Los Angeles; I’ve been here for 21 years I can’t remember anything as important as these Taylor Swift tickets, just being in the building for that. People coming from all parts of California to go, it’s really something. This is the summer of Taylor.

There is much to say about the summer of Taylor that is pertinent to technology and the Internet: start with the desire for communal in-person experiences driven not only by the pandemic, but also the general fracturing of culture inherent in a media landscape where personalized content delivered directly to your personal device is the norm. Then there is the way in which social media acts as a FOMO¹ generator: being able to access every moment of every show on social media doesn’t decrease the value of attending the show, but rather increases the desire to obtain a scarce number of tickets to see the spectacle in person. And, it must be said, there is the excellence at play: not only does Swift have an incredible catalog of popular songs, the show itself spares no expense — or exertion on Swift’s part — to give the fans exactly what they were hoping for.

What made the final LA show unique though (which I had the good fortune of attending with my daughter), was the announcement of 1989 (Taylor’s Version). It wasn’t exactly a secret that the announcement was coming on 8/9, and obviously Swift’s ongoing project to re-release her old albums is well-documented at this point. What is surprising is just how much people care: Speak Now (Taylor’s Version), which was announced earlier in the tour, hit number one on the Billboard charts, giving Swift more number one albums than any woman in history; it seems inevitable that 1989 (Taylor’s Version) will be lucky number 13 for her career.

Taylor’s Versions

What is striking about the popularity of these re-releases is that it is the latest manifestation of Swift’s insistence that the opportunities for musicians are greater than ever. I had never really listened to Swift’s music when she wrote an editorial in the Wall Street Journal in 2014 entitled For Taylor Swift, the Future of Music is a Love Story:

Where will the music industry be in 20 years, 30 years, 50 years?

Before I tell you my thoughts on the matter, you should know that you’re reading the opinion of an enthusiastic optimist: one of the few living souls in the music industry who still believes that the music industry is not dying…it’s just coming alive.

There are many (many) people who predict the downfall of music sales and the irrelevancy of the album as an economic entity. I am not one of them. In my opinion, the value of an album is, and will continue to be, based on the amount of heart and soul an artist has bled into a body of work, and the financial value that artists (and their labels) place on their music when it goes out into the marketplace. Piracy, file sharing and streaming have shrunk the numbers of paid album sales drastically, and every artist has handled this blow differently.

In recent years, you’ve probably read the articles about major recording artists who have decided to practically give their music away, for this promotion or that exclusive deal. My hope for the future, not just in the music industry, but in every young girl I meet…is that they all realize their worth and ask for it.

Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is. I hope they don’t underestimate themselves or undervalue their art.

I had two reactions to this editorial. The first echoed Nilay Patel’s take that Taylor Swift doesn’t understand supply and demand:

This might make sense if you’re Taylor Swift and your enormous army of fans will pre-order anything you tell them to, but the most important lesson of the Internet music revolution is that the vast majority of consumers actually reward convenience. That’s why the iPod was a huge hit even though digitally-compressed music sounded terrible at the time, and it’s why teenagers today get most of their music on YouTube, even though YouTube sounds worse still. It’s also why the album is dead: you can’t sell a handful of singles and some okayish filler songs to people for $10 or $15 or $25 anymore, because convenient Internet music distribution has utterly destroyed the need to bundle everything together. You can just Google the singles and listen to them for free…

The single hardest economic problem posed by the internet is the end of scarcity. Even just 10 years ago, most people experienced a one-to-one relationship between creative works and the physical objects they were delivered on: your music came on CDs, your movies came on DVDs, and your news came on printed magazines and newspapers. Since there’s a scarce number of these objects in the world, it’s easy to buy and sell them, because their prices will follow the laws of supply and demand: limited-edition vinyl records will be more expensive than regular CDs, because there are simply fewer of them. If you wanted a CD full of songs in 1995, you went to a store and paid for them, because there was essentially no other way to get those songs. Even if you wanted to steal the music, you had to pay some price: you needed to have a friend with the right CD, and you needed time and blank CDs to make a copy.

But on the internet, there’s no scarcity: there’s an endless amount of everything available to everyone. The laws of supply and demand don’t work terribly well when there’s infinite supply. Swift is right that “important, rare things are valuable,” but she’s failed to understand that the idea of rarity simply doesn’t exist in the digital marketplace.

All fair points! Swift, though, persisted: later that year she pulled her music from Spotify, which meant fans had to actually buy the original 1989 when it came out in October (it was my first Swift purchase); what struck me about this move, in conjunction with the editorial, was that this was, from a certain perspective, a gift she was giving her fans. From an Update in November 2014:

Swift has long since proved herself a master at building a connection with fans, engaging on social media, customizing her concerts, and spilling her secrets through her songs. And, for 1989 she took things to a new level. What I think Swift has realized, though, is that reaching out to your fans is not enough: it has to be reciprocal: what selling an album for actual cash money does is give people a way to commit. They are quite literally giving Swift something valuable in exchange for her work…

The problem with Spotify is that at a very fundamental level it treats music as a commodity. You can’t choose where your $10/month goes based on the emotional impact of a song; the hot new hit by the artist you’ll never hear from again is treated exactly the same as the artist that was with you when you needed him or her the most. It cheapens the connection, not by withholding money per se, but by denying the commitment inherent in an explicit purchase…

And so, Swift has put up something of a door: access to her costs fans at least $12.99. Here’s the thing about doors though: while they keep people out, they also keep them in. Simply by virtue of having paid money directly to Swift for Swift’s music that album is already more meaningful to its 1 million buyers than the exact same music would have been were it listened to via Spotify’s all-you-can-eat subscription (or free with ads!), no matter how much money Ek and team pay out.

A few months later, though, and 1989 was on Spotify; every album since then has been also, and 1989 (Taylor’s Version) will be as well. Something funny will happen, though, when 1989 (Taylor’s Version) is released: streams of 1989 will plummet, while 1989 (Taylor’s Version) will shoot to the top of the charts; the realities of music are such that not even Swift can hold out on streaming,² but she has still given her fans the capability of reciprocating their relationship by making the conscious decision to only listen to (Taylor’s Version)s.

Still, the value of a streaming choice doesn’t go that far; Patel’s economic argument was right, after all. The real money for Swift comes from the concerts, with the Eras Tour set to be the first to gross $1 billion; physical scarcity is still the best way for a creator to capture value.

Disney’s Earnings

Last week Disney reported earnings, including a 23% decline in profit in its traditional TV business; that was more than made up for by an 11% increase in profit in its parks, experiences, and products segment, which accounted for 68% of Disney’s profit. Disney’s theme parks and cruises have always been an essential part of the Disney model; from a 2017 Update:

The answer reminded me of this famous chart Walt Disney created to show how the Disney business worked:

At the center, of course, are the Disney Studios, and rightly so. Not only does differentiated content drive movie theater revenue, it creates the universes and characters that earn TV licensing revenue, music recording revenue, and merchandise sales.

What has always made Disney unique, though, is Disneyland: there the differentiated content comes to life, and, given the lack of an arrow, I suspect not even Walt Disney himself appreciated the extent to which theme parks and the connection with the customer they engendered drive the rest of the business. “Disney” is just as much of a brand as is Mickey Mouse or Buzz Lightyear, with stores, a cable channel, and a reason to watch a movie even if you know nothing about it.

It was the theme park angle that made me excited about Disney+; I wrote in 2019:

This is the only appropriate context in which to think about Disney+. While obviously Disney+ will compete with Netflix for consumer attention, the goals of the two services are very different: for Netflix, streaming is its entire business, the sole driver of revenue and profit. Disney, meanwhile, obviously plans for Disney+ to be profitable — the company projects that the service will achieve profitability in 2024, and that includes transfer payments to Disney’s studios — but the larger project is Disney itself.

By controlling distribution of its content and going direct-to-consumer, Disney can deepen its already strong connections with customers in a way that benefits all parts of the business: movies can beget original content on Disney+ which begets new attractions at theme parks which begets merchandising opportunities which begets new movies, all building on each other like a cinematic universe in real life. Indeed, it is a testament to just how lucrative the traditional TV model is that it took so long for Disney to shift to this approach: it is a far better fit for their business in the long run than simply spreading content around to the highest bidder.

I think, in retrospect, that this was an example of my falling in love with elegance and spending insufficient time in spreadsheets: Walt Disney’s chart may have been a satisfying business model, but the reality of Disney’s TV business is that it was scalable in a way that that Disney chart never could be. The beauty of the cable bundle is that nearly every household in America paid for it every single month, regardless of whether or not Disney had a hit TV show or a must-watch sporting event; thanks to its suite of channels, anchored by ESPN, Disney received a big chunk of that money, and it grew like clockwork. In that world Walt Disney’s model was a nice side business to the real money-maker — that’s a pretty good reason for Disney to have held on to that model as long as they did.

In fact, you can very much make the case that Disney and all of its peers ought to have held on longer: yes, streaming — i.e. Netflix — leveraged the Internet for distribution of video, but that didn’t mean that Disney and Time Warner and Paramount and all of the rest had to. Those Netflix multiples, though, which far exceeded anyone else’s in Hollywood, were too tempting, and soon enough everyone was putting their best content on streaming services, leaving the cable bundle to wither.

Disney’s Taylor Swift Era

The end result is the inversion you see in Disney’s recent results. Disney is, from this point forward, not much different than Taylor Swift: sure, there is money to be made (hopefully) in areas like streaming, but the real durable value and outsized profits will come from real life experiences. This is, to be sure, a good business, but it has its limits: it is remarkable that Swift performed six shows in seven nights in Los Angeles, but it was still only six shows; concerts don’t scale like CD sales used to. Disney, similarly, only has so many theme parks, that only accommodate so many people, and operating those theme parks takes significant ongoing resources.

It’s interesting, then, to observe how differently Swift and Disney are perceived at this moment in time: I opened with Simmons analogizing Swift to Jordan, and I think it’s a fair comparison; the reality of the fractured world wrought by the Internet is that any star who can emerge from the noise becomes bigger than anything we have seen before, from hunger for a unifying experience if nothing else, and admission to that experience becomes valuable through unprecedented demand combined with physically limited supply.

That limitation, though, implies a lack of scale, which means that Swift is as big as she will ever be; that’s ok, because it’s bigger than anyone has ever has been. Disney, meanwhile, may have its own physical experiences, made valuable by their scarcity, but it will never be as valuable as owning distribution. The best thing Iger can do now is move the company on from the heights it once reached; maybe someday Disney and its investors will forget that those outsized profits ever existed.

1. Fear Of Missing Out ↩

2. It is worth noting that Swift’s fans still bought over 1 million physical copies of her most recent album. ↩