🎯 What Netflix knows about the AI endgame

Hi Friends,

In 2013, Ted Sarandos, now Netflix’s co-CEO, said:

“The goal is to become HBO faster than HBO can become us.”

Last week, Netflix agreed to spend $82.7 billion to buy HBO - and the rest of Warner Bros.

That includes DC Studios (Superman & Batman), Harry Potter, Game of Thrones, The Lord of the Rings… but also a number of declining businesses, ranging from movie theater production to comic books.

This is happening at the exact same moment:

• TikTok is eating everyone’s lunch with short-form doom loops,

• AI tools like Sora and Google Flow are making it possible for anyone to create Hollywood-level video from their couch,

• “AI actors” like Tilly Norwood are auditioning for roles against human actors

• and budgets for traditional film and TV are under unbelievable pressure.

On the surface, this acquisition makes no sense.

Why is Netflix buying a legacy studio whose best days, honestly, look like they’re behind it?

Even crazier:

• Netflix makes around $9B/year in free cash flow

• Warner Bros. was worth about $30B before the deal.

At $82.7 billion, Netflix will be feeling the weight of this acquisition for almost a decade - an eternity in the world of AI.

It’s the kind of number that forces you to ask:

What does Netflix know that the rest of the world hasn’t processed yet?

The answer is surprisingly simple:

Netflix understands the AI endgame:

As AI lowers the cost of creation, the value shifts from making content to owning the IP rights underlying it.

Let me explain.

We’re entering a strange environment where creation is infinite: from movies to software to product manuals - it will soon all be generated by AI.

Ask anyone with some AI savvy what their moat is and you’ll hear the same thing:

“Our data.”

As ChatGPT increasingly mediates how users use the web and even desktop applications, the data will be all you can charge users for - via ChatGPT.

But this is a half-truth.

Yes, proprietary data matters, but the real moat is something deeper; it’s the:

• the IP that creates the data.

• the IP that structures it.

• the IP that makes it valuable.

• And the IP that legally protects it.

To understand the implications for our world, we can swap the word “data” for “content” in Netflix’s.

Anyone, with the right prompt, will be able to generate:

• A Lord of the Rings-style epic starring themselves

• A Harry Potter spinoff with custom characters

• A gritty Gotham crime drama where Batman is their sidekick

• A Game of Thrones prequel… but with dragons that actually get enough screen time

AI doesn’t care about budget, schedules, actors, weather delays, VFX houses, writer strikes or multi-year production timelines.

The cost of creation is collapsing toward zero.

But here’s the twist:

Even if you can generate your own movie… you can’t generate your own Hogwarts, your own Middle-earth, your own Gotham, your own Westeros… without permission from the owner of this IP.

Those worlds are legally protected.

The more AI floods the world with infinite media, the more valuable the finite, legally protected, culturally entrenched universes become.

Netflix bought IP created decades before our attention became fragmented into millions of TikTok-shaped pieces.

This is a moat that - ironically - becomes more valuable as AI gets better, flooding the world with noise.

And in doing so, they may have just ended the streaming wars. 

So what does this mean for you?

Gather your team to answer four questions:

1. What’s your hidden IP? What are your hidden methods, frameworks, processes, naming systems, formulas, taxonomies, scoring models, internal lexicon.

2. Which of these increase in value as AI drives the cost of creation to zero?

3. Which ones are worth protecting legally? i.e. as trademarks, provisional patents, or simply behind a paywall.

4. Which ones are worth promoting and driving awareness of, under a brand?

At my company - PreScouter - we’re starting this process ourselves.

The questions I’m asking our teams include whether we can codify methods from every project we undertake as well as whether - as a consulting firm - our brands are our consultants.

I may share how that goes.

Best,

Dino