Public stocks took a hit the last few days, in part due to fears triggered by a Citrini Research hypothetical about what the US economy could look like in June 2028 due to the rise of agentic AI.
It outlines the rapid unfolding of a doomsday scenario over the next 24 months. Here’s a very simplified summary:
AI means low-cost software development that undercuts the B2B SaaS market due to greater competition and company’s willing to build in-house alternatives. Software prices drop, mass layoffs hit B2B tech, then AI efficiency drives white collar layoffs across corporate America.
A downward spiral develops of intense competition where companies vying to survive have to lay off more staff and invest more in AI. The aggressive AI investments only drive more productivity improvements and more competitiveness, requiring further rounds of layoffs and further AI investment to stay ahead.
Vast categories of businesses that depend on inefficiencies are undercut by AI agents that can handle shopping, price comparison and negotiation, and other tasks quickly and cheaply.
Upper income white collar workers are the hardest hit and suddenly many are out of work and the rest fear they could be next. This demographic is responsible for the majority of consumer discretionary spending and they get very frugal. Private credit markets are collapsing because of they bullish exposure to SaaS companies, and the housing market stalls because the most stable demographic of homeowners are now the most unemployed and least stable.
A spiral continues as the adoption of AI tools by companies and consumers drives more cutthroat competition to survive, accelerating it further.
Plenty of people disagree with this thesis. Let’s play along with the scenario though, since so many people are discussing it, and consider…
How would this impact media & entertainment?
The initial wave would be business-side efficiencies: fewer staff needed for a wide range of business and administrative tasks. Business functions would face more cases of full replacement through automation while the creative side retains more humans in the loop as creative decision makers. Bad for individuals for good for the industry financially.
UGC platforms become flooded with entertaining content of increasingly high quality, capturing consumer attention and increasing ad revenue. Good for the tech side of the industry but more competition for content creators.
White collar job cuts start to sink in and high-priced entertainment is first on the chopping block: tickets for live entertainment experiences like big concerts and sporting events. High-income workers pull back, companies pull back from corporate spending on suites, more families seek low cost entertainment. Ticketing, touring, and sports leagues get hit.
Free and low-cost digital entertainment sees surging engagement as more people are out of work with time on their hands: streaming video, gaming, podcasts, music, etc. Beloved IP franchises and creators with deep audience trust are most defensible as the supply of UGC greatly expands.
Ad rates drop because consumer spending is nose-diving, per-seat B2B software spend is nose-diving, and AI agents create intense price comparison competition in e-commerce. ARPU declines meaningfully online even as engagement surges. The whole sector hurts here.
In-person, community experiences (sports, concerts) that are sustainable with low budgets and affordable ticket prices may be better positioned for survival than major franchises which have huge locked-in talent expenses and depend on expensive tickets, VIP experiences, and massive media rights deals. The exception are the most prestigious, sought after live events that fit the interests of a fairly small tech elite generating enormous wealth (at least for a while).
Media & entertainment companies put greater emphasis on content that appeals to people with manufacturing or in-person service jobs and less emphasis on appealing to the tastes of college educated knowledge workers.
Some initial thoughts by subsector…
Film & TV: Better positioned are AVOD and the SVOD services people care most about, plus owners of beloved IP franchises. Weakly positioned are “nice to have” SVOD, VFX and digital-centric production services, entry level talent trying to break in. Cinemas could break either way but likely negative given the cultural comfort with watching from home and decline of “going to the cinema” as a low-cost social activity.
Social & digital video: best positioned are UGC platforms with freemium models not wholly dependent on ads and creators who can break through the noise to build a large, devoted following.
Publishing: niche B2B with proprietary data/insights, print books, and beloved brands/writers people want to consume for joy and sense of connection will be best positioned; aggregators, affiliate e-commerce, and ad-based attention monetization will struggle to exist amid agentic task completion.
Music: flooding AI generated music will improve streaming service engagement with lower royalties; touring will take a hit at the high-end or arena/stadium tours except the most sought after…audience demographic could be biggest determinant of touring sustainability.
Podcasting: surge in content creation and consumption but severe reduction in ad rates given the dependence of advertisers who seek white collar workers’ personal and business spending.
Gaming: sandbox experiences with network effects and UGC tools like Roblox and Fortnite, tech companies enabling virtual economies, and AAA-quality games creating advanced immersive virtual worlds (with NPCs you can have complex relationships with) well positioned as escapes from the real world. Casual mobile games likely see IAP decline after an initial surge of use as spending on non-core experiences tightens.
These are early thoughts. I plan to do a deeper project on this and gather a lot of perspectives from executives across the industry.
How do you think the industry handles rapid adoption of AI over the next couple years? What rises, what falls, and what stays the same?
Share your input at eric [at] monetizing media [dot] com and I will feature some responses.