Companies Capture Value Via AI, Fashiontainment, and Energy Infrastructure

In this conversation, Jack Crivici-Kramer and Nick Martell of "The Best One Yet" podcast dissect the evolving strategies of major brands like Spotify, The Gap, and GE Vernova, revealing a seismic shift in how companies are approaching customer engagement and operational resilience. The most striking implication is the growing necessity for brands to move beyond traditional product offerings and embrace "fashiontainment" and self-sufficiency in critical resources like power. This requires a long-term vision that often clashes with immediate market pressures, creating hidden competitive advantages for those willing to invest in durable, albeit less immediately gratifying, strategies. This analysis is crucial for business leaders, strategists, and investors seeking to understand the non-obvious forces shaping modern commerce and identify opportunities where conventional wisdom falters.

The Hidden Cost of "Free" and the Rise of "Fashiontainment"

The current business landscape is a fascinating study in how companies are attempting to capture attention and value in increasingly saturated markets. Spotify, a dominant force in music streaming, is not only raising subscription prices for the third time in four years but is also strategically integrating AI-generated music. This move, while seemingly a cost-saving measure that boosts profits by reducing royalty payouts, hints at a deeper, more complex relationship between technology and content creation. The implication is that as AI becomes more sophisticated, the very definition of "content" and its associated value will shift, potentially creating a future where human artistry is devalued in favor of algorithmically generated, cost-effective alternatives. This is a critical insight for creators and consumers alike, as it suggests a future where background listening might be dominated by AI, pushing human-created music into more niche, premium spaces.

This strategic pivot by Spotify is mirrored by The Gap's bold move to hire a Chief Entertainment Officer and embrace "fashiontainment." This isn't merely about product placement; it's about weaving brand identity into the fabric of popular culture through film, TV, and gaming. The rationale, as articulated by The Gap's CEO, is that "fashion is entertainment." This represents a significant departure from traditional marketing, aiming for "plot placement" rather than mere advertisement. The success of Mattel's Barbie movie, a billion-dollar hit, underscores the immense potential of leveraging intellectual property (IP) in entertainment.

"Ads get skipped, movies get shared. So toys, coffee, and now fashion. One in, besties, while traditional Hollywood studios are struggling, brands are bringing them in-house instead. It's not product placement, it's plot placement. One brand woven throughout."

The consequence of this "fashiontainment" strategy is a potential for deeply embedded brand loyalty that transcends transactional relationships. By creating compelling narratives around their products, brands like The Gap can cultivate a more profound connection with consumers, turning everyday items into cultural touchstones. This approach, pioneered by brands like Red Bull with its extreme sports content, is now being scaled up with in-house studios, suggesting a future where entertainment companies are increasingly indistinguishable from consumer brands. The delayed payoff here is significant: while traditional advertising is easily ignored, a well-executed film or series can embed a brand into the collective consciousness for years, creating a durable competitive advantage.

The BYOP Imperative: Powering the AI Revolution

The third major theme emerging from this discussion is the burgeoning crisis of power generation, driven by the insatiable appetite of AI data centers. As electricity prices surge, particularly in regions hosting these massive facilities, a new imperative has arisen: "Bring Your Own Power" (BYOP). This isn't just a suggestion; it's becoming a policy requirement for tech companies building data centers, forcing them to invest in their own power generation or upgrades. Microsoft's commitment to funding new plants and upgrades exemplifies this trend.

The historical context is striking: the current surge in power demand rivals that of the 1960s, when the air conditioner became mainstream. Today, AI is the new "cool product," and its energy consumption is on a scale that dwarfs even traditional computing. The consequence of this demand is not just higher electricity bills for consumers but a fundamental bottleneck in the expansion of AI capabilities.

"Basically, every time Jack asked ChatGPT how to microwave a burrito, an entire lake vanishes."

This observation, while hyperbolic, highlights the immense energy requirements of AI. The immediate solution for many companies, and the one with the shortest lead time, is to utilize natural gas turbines. This is where GE Vernova emerges as a significant player. With a backlog of $135 billion in orders for new turbines, the company is experiencing demand comparable to Nvidia in the GPU market. This creates a powerful feedback loop: the demand for AI drives the demand for power, which in turn drives the demand for GE's turbines. The delayed payoff here is immense for GE Vernova, as the long lead times for building new power infrastructure--including nuclear--mean that gas turbines are the go-to solution for the foreseeable future, allowing GE to command premium pricing. This situation illustrates how a critical resource constraint can create unexpected beneficiaries and redefine market leadership.

Actionable Takeaways

• Embrace "Plot Placement" Over Product Placement: For brands, shift focus from traditional advertising to integrating brand narratives into entertainment content. This requires a long-term investment in IP development and storytelling.
  • Immediate Action: Identify existing brand IP with entertainment potential.
  • 12-18 Month Investment: Develop pilot projects or partnerships for content creation.
• Prepare for AI-Influenced Content Consumption: Understand that AI-generated content will increasingly fill background listening and viewing spaces. Creators should explore how to coexist with or leverage AI in their work.
  • Immediate Action: Experiment with AI tools in creative workflows.
  • Over the next quarter: Analyze how AI-generated content impacts audience engagement metrics.
• Develop Power Resilience Strategies: For companies reliant on significant energy consumption (e.g., data centers), proactively explore BYOP solutions, including on-site generation or long-term power purchase agreements.
  • Immediate Action: Audit current energy consumption and projected needs.
  • This pays off in 12-18 months: Secure power supply contracts or explore partnerships for dedicated power generation.
• Invest in Durable Infrastructure: Recognize that critical infrastructure, like power generation, faces long-term demand growth. Companies like GE Vernova, positioned to meet immediate needs, offer significant long-term potential.
  • Longer-term Investment: Monitor companies providing essential infrastructure for high-growth sectors.
• Diversify Revenue Streams Beyond Subscriptions: For subscription-based services, explore complementary revenue opportunities that reduce reliance on price increases alone.
  • Immediate Action: Explore tiered service offerings or value-added services.
• Re-evaluate Brand IP as Entertainment Assets: Treat brand assets, from logos to iconic products, as valuable intellectual property that can be leveraged in media and entertainment.
  • Over the next quarter: Conduct an audit of brand assets for entertainment potential.
• Anticipate Increased Operational Costs: Factor in rising energy costs and potential power supply constraints into future business planning and financial models.
  • Immediate Action: Review operational budgets for potential energy cost increases.