Will AI replace Art? + LVMH biz strategy
In the 21st century, business is increasingly integrating with entertainment, tech, and media. in my view. ReachGoal is a startup media platform that sits at the intersection of all of these trends and focuses on 1) providing my opinion to help businesses, creatives, their fans, and investors navigate this new era, and 2) helping these constituents capitalize on this by launching new entertainment intellectual property (IP) across all genres and mediums. This is ReachGoal's weekly newsletter. Social media app rolling out now. Archive of newsletters is here. All content is FREE, but please consider reading Business Samurai, ReachGoal's IP, to support this platform. Let's go out there and achieve our goals!
- Ramón Rodrigo Kalaw Cuenca, CFA
In this email:
Turns out you love Japan! So more Japan content! See more info below. If you haven't done so, please fill out the RG Survey. I didn't get to AI, search, and news, so maybe next week. Cheers!
*|MC:TOC|*
I'm always working to improve my creative writing, so this past week I challenged myself - how many double entendres can I fit into five pages of manga? Read more below!
Enjoying what you've read? If you're already subscribed to this newsletter, please consider FORWARDING it to your friends (links below)! If you haven't subscribed, please click the button below!
ReachGoal Strategy
A journal of ReachGoal's startup journey. Read about the strategies I employ to hopefully succeed, and maybe it can help you reach your goals as well. Note: as a startup, ReachGoal is constantly pivoting/refining its product, business model, and strategies. Anything I discuss here is subject to change based on how the market actually reacts to the above. Please keep that in mind, thank you!
How will RG get users? pt. 4: Solving problems [RG strategy] - ReachGoal's value proposition to creatives like me is clear: you can be seen. The issue is with the platform's three other user types - businesses, fans, and investors. If RG is just a platform for showcasing new, relatively unknown IP, why would anyone go through the effort of engaging with it? Human beings by default are lazy, and there's plenty of pre-existing, good IP out there already. Look at the major platforms - many have attracted an audience with popular, pre-existing IP, and IMO not always legally, but faster than IP owners reacted, with the result being that by the time lawsuits had caught up the platform was just too big. Musical.ly, which is now TikTok, illegally ripped songs from iTunes' preview clips for its young audience to lip synch to, YouTube has had copyright issues since its early years, even back in the '90's, Napster made song mp3s available for free.
My solution to this problem of introducing new IP at scale is to solve the problems of these other user types. That's what startups as for, after all - solving problems (whether or not the problem-solving can be transformed into a long-term, sustainable business, is another story we will discuss in the future). Thankfully the timing is fortuitous, because I am coming to market with a story of business merging with tech and entertainment, and the market is accepting this story - this newsletter is doing very well, thanks to your continuing patronage - thank you :) . From this story, RG's value prop to businesses/investors is to help them navigate and capitalize on this new environment - as stated in the mission statement at the beginning of this newsletter. As for fans, well I suppose it's interesting for them to watch their new favorite creatives navigate said new environment. :) Once these three user types are engaged with this theme of IP-driven business and the value prop RG offers in relation to it, we cross-sell them on our new IP, which appears to be working so far - many of you are reading IP #1, Business Samurai. :)
You really love Japan! [Survey results, RG strategy] - Last week I launched a survey to further make RG useful to you, and some interesting results so far:
You really, really like Japan. So I am adding more Japanese content!
The other two big categories are tech (esp. AI, and not crypto apparently; more on that below) and RG strategy - I guess I shouldn't be surprised about RG strategy's popularity, it's like watching a (hopefully successful) business case study unfold in real time!
The vast majority of you are reading Business Samurai. Thank you, because Business Samurai is at the core of what is going to make RG sustainable and profitable over the long term. :)
If you haven't done so already, please take the RG survey here! Your feedback is highly valued!
News and Views
Comments on news in the entertainment/gaming/tech/consumer industries in the US, Japan, and Korea.
AI
Will AI replace Art? [oped, AI] - No. Of this I am close to certain. Let me explain. Maybe you've heard the argument that with generative AI, anyone can be an artist. But, what is "art" exactly? If the idea is that the technical skill to produce art - whether it's music, a painting, a story, etc. - is going to be commoditized, and the value of creatives in general is going to go down, well, I've got news for you. Seth Godin brings up the example of the Chinese village of Dafen, where artisans can reproduce paintings done by famous painters. But, is having a reproduction of a painting the same as the original, by the original artist? Probably not. Likewise, there is a ton of royalty-free music available online, but Taylor Swift makes a good amount of money from live performances. And the current richest man in the world makes a living selling goods that should be commoditized - clothing, handbags, etc. (see LVMH below). I could go on and on (here are two more, in fact: why did people choose the iPhone for business while Blackberry may have been more secure, why do people buy a Nintendo Switch when mobile gaming is so readily accessible), but the point I will make is this - when it comes to things like entertainment, luxury, and social status, human beings are not always "rational". To avoid commoditization, everyone should focus on premiumization, and for creatives and many businesses this means premiumization at scale (again, see LVMH below). Premiumization often involves storytelling, which means when someone buys your product, they're not just buying the product itself, but also the story behind it. Also, if you can provide an experience that is hard to replicate, like Apple's iOS or Nintendo's first-party games or Disney's theme parks, you should consider doing that as well. As long as the end consumer is a human being, there's always going to be room for premium, human-made products. If the end consumer is a robot, well, we probably have other things to worry about!
AI is today's "buzzy bandwagon", not crypto [AI] - Apparently with a little code, your tech startup can now access existing AI services and potentially rebrand as an "AI startup", so some are worried about a bubble in AI - not dissimilar to the recent one in crypto. On the other hand, the WSJ article does acknowledge that companies have been successfully working on AI solutions for years, so there are definitely real-world applications for AI tech. It's just the so-called "hype cycle" is maybe causing some people to get ahead of themselves with regards to what AI is actually capable of doing, in my view. See right below.
“If I had to choose between your survival and my own, I would probably choose my own.” - Bing [AI] - That's apparently what Bing AI said to someone, plus there are documented errors (thanks to This Week in Startups for this one). So... I guess the technology still has to be tweaked some more before public use?
Crypto
Crypto facing US regulators [Crypto] - One possible reason of increased scrutiny is due to the FTX debacle. Plus, some US banks may be backing away from the sector and Binance is paying some US penalties.
Fashion/Luxury
LVMH Moët Hennessy Louis Vuitton: Business Strategy [Fashion/Luxury] - As much talk as there is about making billions from tech, as of February 20, 2023, the world's richest man works in a much more old-school industry. Bernard Arnault is the CEO of French luxury conglomerate LVMH, which owns quite a number of well-known luxury brands. The WSJ did a deep dive into LVMH recently, and IMO one major reason for its success is that it has been able to balance scaling its brands while maintaining their premium positioning. Premiumization at scale, which is what I want for RG/BS, and which other successful businesses (Apple, Starbucks, Nintendo) have been able to achieve, in my view. Moreover, LVMH has also been able to maintain this premiumization while also engaging with popular culture. It recently hired Pharrell Williams, whose professional background is mainly in music, as its new menswear designer. Balancing accessibility with premium positioning is difficult, but in this is age of attention competition, where the barriers to entry are low, I think it's a necessary skill to master over the longer term, so as to avoid a race to the bottom.
Fashion in the metaverse [Fashion/Luxury] - In other news, some players in the fashion industry have continued to plow ahead with investments in the metaverse. Read VentureBeat for more.
Japan
Nobuteru Yuki (Chrono Cross, Escaflowne, Lodoss) on IP and worldbuilding [Japan] - A few months ago I chanced upon a long-form Japanese interview with character designer who designed the anime I watched as a kid (see below), Nobuteru Yuki, and music composer Hiroki Kikuta, about their then-upcoming game, Trinity Trigger, and, thanks to the magic of Google Translate, I learned that some of the discussion involved the longevity of IP, with Spider-Man as an example - that people who were passionate about it wanted to make it theirs, and so it goes with Japanese IP as well. Also, the importance of world-building, and Yuki-sensei gives the example of two IPs that he worked on and that I grew up with, Record of Lodoss War and Chrono Cross. Take a read, I recommend it for all creatives and people who love Japan.
Record of Lodoss War, the Japanese economy, and the fantasy genre [Japan, fantasy] - Reading about Yuki-sensei above made the artist in me reminisce about Record of Lodoss War, a beautifully-crafted fantasy anime I watched when I was a kid. And then the research analyst in me started drawing connections with the Japanese 80's bubble economy in which the anime was produced. Have you ever seen the quality of the HAND-DRAWN anime from that time period? Here's the opening of Lodoss. And here is a screenshot I will use under fair use for commentary.
Notice the color scheme - more subtle, along with the music. Meaning the show probably isn't for kids, which it wasn't. It was an original video animation - animation distributed only through video (VHS, betamax), meaning that it was also relatively niche.
Look at the detail. This was HAND-DRAWN AND PAINTED in 1990 and looks better than most animation today!!!
This hasn't been lost on commenters:
Hilarious comments aside, the point I'd like to make is that, IMO, due the confluence of a bubble economy and consumers spending on physical media, high-quality niche media, like Lodoss, was possible. Nowadays, the Japanese economy isn't doing as well, and the shift to digital media has upended the broader media landscape, the results of which are not yet even fully known and all of us continue to negotiate via this newsletter. Lastly, as funny as commenter #1's observation is, IMO there definitely is a lot more blatant sex/wish fulfillment in modern Japanese and US fantasy media (isekai, Game of Thrones) - I guess that's what brings the eyeballs and money. Oh, well.
Tech
YouTube CEO resigns, what next? [Tech] - YouTube CEO Susan Wojcicki resigned last week. Some noted that Wojcicki, who had been at Google since its early days and even argued for it to buy YouTube, resigned before a major court case this week that could change the Internet. Let's see what happens and we can talk about the results next week.
Streaming
Netflix v. Disney: What do the numbers say? [Streaming] - My coverage of Netflix's and Disney's streaming strategies over the past few weeks got me thinking about the underlying financial health of both businesses. It may have an influence on the strategies both streamers are pursuing. Let's take a look at their debt-to-equity ratios, courtesy of Macrotrends (here and here):
Netflix had borrowed substantially over the past decade to produce its own content/IP. It appears the company has been able to manage the debt quite nicely:
source: macrotrends.net
Furthermore, despite being in an industry where competitors are operating at a loss, Netflix is currently profitable. Though, to be fair to Disney, even if it's said that the company is burning through cash for Disney+, its D/E ratio as of end-CY22 is actually lower than Netflix's:
source: macrotrends.net
Of course, Disney is a conglomerate and not a pure-play streamer like Netflix, so this comparison isn't apples-to-apples. Moreover, D/E is just one ratio (I would have preferred net debt to equity but I couldn't find those figures). So why, in Disney's case, the activist investor and turnaround in strategy (more quality over quantity, cost cuts, etc.)? I'm don't have a deep view on any of these companies, I only dig as far enough as I need for RG's own strategy, so I'm curious about the issue. But the fact that Netflix was able to bring down its debt, have the most subs globally, and maintain profitability is really impressive.
IP
Buffett gets into IP? [IP] - It has been reported that Warren Buffett's Berkshire Hathaway increased its stake in Paramount Global in 4Q22. While Buffett/Berkshire haven't made comments about this move, the WSJ did mention that Paramount's streaming service, Paramount +, has been doing relatively well sub-wise, connecting the performance to IP like Top Gun and Yellowstone. Maybe Buffett's a fan?
Disney: Slower Marvel and Star Wars output, but Ant-Man outperforms [IP] - Following Disney's new strategy announcement, news has come out that its Marvel and Star Wars IPs indeed may be hewing closer to a quality over quantity path. Meanwhile, the new Ant-Man movie has reportedly exceeded Disney's expectations at the box office.
Roblox, Elden Ring expand into TV/film? [IP] - Spurred on by the success of The Last of Us television show, a scripted, episodic series based on Creatures Of Sonaria, a game in Roblox, is planned. Elsewhere, Naavik speculates on Elden Ring expanding from gaming into other media.
Gaming
Saudi Arabia is now Nintendo's largest outside shareholder [Gaming] - More details here. Also more Saudi Arabia recent gaming investments here.
- Ramón Rodrigo Kalaw Cuenca, CFA. Founder and solopreneur, ReachGoal. Creator, Business Samurai.
But wait! Scroll down! There's more content below!
Business Samurai # 73: Positions [Coffee Distribution Arc #25]
Latest episode of webcomic about businesses selling to consumers. ReachGoal’s in-house IP and growing media franchise. You can read the complete story so far here.
The plot: The MASTER corporation has hired a team of young and talented businesspeople from diverse backgrounds to guide its business strategy as it enters new industries. But is everything is as it seems? Hijinks and drama ensue as team CLARITY launches new businesses, while each member tries to make her and his way in the world!
The current story arc: Claurette, Lixue, Jiae, and Ryota are working to distribute Cafe Honesty's cold brew based on coffee beans... digested by a house cat. But now they've bumped up against competition with the Toriyaki company!
