Well, maybe. Nothing Kim is doing is going to directly lessen demand for medallions from the city. In San Francisco, to own a medallion, you must work 800 hours per year as a taxi driver (source: http://www.economicpolicyjournal.com/2012/07/is-san-francisc...). So Kim himself is not a medallion holder at all.

(I gather that in other cities, this is a whole different story. But in SF, in theory as well as as far as I can tell in practice, medallion holders are themselves pretty committed cab drivers).

What Kim owns are the cars and the infrastructure to support the cars, plus a dispatching system. He rents the medallions from their owners, who drive his cars and also allow their medallions to be used by other drivers in the DeSoto fleet when their owners are not using them (this is legal, to be clear).

So in the short term, if Kim goes to a livery service, those medallion owners will by-and-large just rent their medallions to other taxi fleets in the city. The city won't lose any business directly from Kim, because he's not a customer of theirs anyway, and in the short term, as the article states, they have a waiting list of cabbies who want to buy medallions.

Now, it is true that fleet owners all over the city are reporting that they are having more and more trouble getting their cars to full utilization, as the profits from being a taxi driver decrease. And presumably at some point if current trends continue, there won't be people willing to throw down $100k+ for a medallion, and the city will be hurt by that. But that was a preexisting trend to Kim's hypothetical movement to being a livery fleet, and if he does end up contributing to a lessened demand for medallions, he'll be a pretty small part of the overall trend, which is mainly a result of Uber and Lyft undercutting taxis.

Source and disclaimer: I work for Flywheel, mentioned in the original article.