Why Do Streamers Care About More than Eyeballs?

Welcome back to the Bulwark. It goes to Hollywood. My name is Sunny Von from Culture Editor at the Bulwark I’m very pleased to be joined today by Julia Alexander. Julia is the director of Strategy at Baird Analytics where she advises clients on the Tectonic shifts in tech media and telecom. She’s also contributor to puck and previously was at TMT and the and the verge.

I have been reading her stuff at puck and been enjoying it greatly. And she’s a good follow Twitter if you’re into analytics, streaming and all data. If you want TV data or whatever whatever we’re calling Visual medium. Now, follow her. It’s what, at loud mouth Julia.

Is that right? At

loud mouth Julia.

Yeah. So make sure to make sure to follow her. Today, we are talk there has been so much there’s been so much news in the world of streaming that I wanted to to get Julia on to talk about what is happening with some of these companies, you know, obviously, there’s the background Warner Bros. News. But that is all part and parcel of a big shift in strategy as overseen by their new honcho.

Right, Julia?

Yeah. So a couple of months ago a bit longer than that. Now, of course, Jason Colar, who is the former CEO of WarnerMedia, left a bunch of his former executive team, got laid off as new ownership came in, which was David Zaslow, who is the, well, now the head honcho of, yeah, Warnerville discovery, but used to be the head honcho of just discovery. And with the new management chain comes a tectonic shift in strategy where we’re moving away from we’re putting everything in to HBO Max and streaming and hoping that that is what will pay off in five to ten years. And now we’re going back a little bit too, well, what about theaters?

What about cable? And then of course. What about streaming? We’re kinda seeing that divvy up a little

bit. Yeah. Because I it’s it’s interesting how Discovery purchased HBO. Right? I mean, they they took on fifty eight billion dollars in debt or something like some some enormous some just tragically enormous amount of money that they have they have taken out in debt to buy the company, but that is that has changed what they are looking at in terms of spending and what they’re willing essentially willing to lose money on.

Right?

Yeah. I mean, I think you’ve got someone in the form of David Zaslow who is relatively shrewd in general and is kind of known for not being a massive spender if we look at the buildup of the discovery team just on an employee front. It’s very, very lean versus if you look at kind of what WarnerMedia is, especially going back to the Turner days, like, you effectively have a content that has a lot of bloating and that that might need a little bit of cutting, which is a really negative way to talk about redundancies in labor and and layoff, which is always always extremely not bad. But you have someone who’s coming in and is buying, we have to cut all the spending have to figure out how to get our cost down. We have to figure out what type of content to invest in that really works for us dollar per dollar and what type of content not to invest in.

And I think the reason you’re hearing a lot more about this right now for company like Warner Bros. Discovery is, you know, not only do they have a five eighteen million dollar loss on their streaming product, not only do they have a three point four one billion dollars loss in general on their quarter for the revenue, but you also have them saying that our projected EBITDA growth, like this the earnings that the health of this company is going to be missed by two billion dollars and our forecast for what’s going to happen over the next half of the year, potentially into the next year and is gonna be really poor. And so all of a sudden, you’ve got a company who’s losing the support of its of Wall Street and of its investors and shareholders really, really fast. The only way to keep them there is to kind of make an appeal to them as opposed to making an appeal to the creative community. Right?

Jason Collar could come in and say we’re gonna do a bunch of stuff HBR Max. We’re gonna greenlight a seventy million dollars background movie that’s gonna go to HBR Max. We’re gonna do something there. We’re gonna do a Scoop movie or whatever it might be. You’ve got Tesla coming in and saying, we’ve got to pay off this debt.

We have to figure out a way to really ensure our shareholders that this company is gonna be a profitable company that their revenue is is a is a top concern for us. And so where the brunt of that responsibility comes on is the streaming service. It’s them saying, hey, well, we are not necessarily just gonna put stuff there and hope that this becomes a profitable business in twenty twenty four, we’re gonna take some pretty drastic cost measuring cost cutting measurements to make sure that we’re both growing our streaming service, but also ensuring that our business is gonna grow in top and bottom line at the way that we need it to.

Yeah. I mean, like, it’s I I’m fascinated I’ve always been fascinated by HBO because it is, in a weird way, the perfect entertainment company you know, if you if you go there’s there was a great oral history. I’m looking for the title of the book right now. Tinder box, there was a great oral history of of HBO book called Tinder box. Everyone should check it out if you’re interested in HBO.

But one thing that that got at that I had I had always kind of understood but never really fully grasped is that HBO is not only a creative powerhouse. Obviously, Sopranos the wire, whatever. You know, we all we all grew up with, you know, it’s not TV, it’s HBO. But

it was

also an enormous moneymaker. I mean, just an enormously profitable center of revenue for Time Warner, Time more AOL, you know, going in and out of the various companies that it owned. And and trying to figure out how to manage that in the streaming age is Zaslow’s hardest priority.

Right?

Right. And so I think what we should be abundantly clear about is that, you know, while every team is going to be hit by these cost cutting measures, HBO is probably the most protected. It’s the most insulated Casey Boyse who’s the head of HBO and HBO Max, and his team are the most protected team in Hollywood. So HBO was not necessarily gonna be hit in the way that I think a lot of consumers, a lot of fans are looking at. I think where you really are gonna see a number of cuts is on the unscripted programming, which to an extent makes sense.

Right? If we think about what happened with with the earnings day, there was a slide that went viral on Twitter and it was like effectively an advertising slide. It’s an HVO Max SKUs male, Discovery plus SKUs female, Discovery plus SKUs as a strong retention driver, HVO because of its HVO Max of its fan dams and because of HBO programming is a customer acquisition tool. That’s what it is. And I feel personally that this became huge out of this got taken way out of context.

Especially by people who work in media and can ask their own companies for advertising decks that show how the websites, their audience is lean. But what that meant to say was, like, why would we spend money on a show, like, whatever I’d be cooking with Selena or whatever it is, and we have a food network. Like, it doesn’t make any sense for us to have this huge billion billions upon billions of dollars in investment in a programming sector that is not that is redundant. But HBO will do and especially with the PC Voice and what will happen with HBO Max, he’ll take the scripted side, and he’ll figure out, like, okay. We keep our flight means tab.

We wanna keep hats. We wanna keep these types of shows that feel like they can still thrive in an HBO environment. But we’re gonna really cut down on all this other bloated stuff that is either not seeing super high engagement or it’s just something that we don’t necessarily need because we’re doing it better on the unscripted cable side, specifically.

Yeah. And and moving a lot of that stuff over to Discovery. Plus is is a smart way to do that, but also, I mean, I this this brings us to a kind of secondary strategy question, which is I am deeply skeptical of the idea of a single HBO Max discovery app. For reasons that have less to do with economics or anything like that and more to do with how customers see themselves. You know, an HBO Max person does not necessarily see themselves as a flipper flop person.

And, like, I like, I don’t I don’t mean that I there are someone who enjoy both my I I have been known to indulge in the the occasional HGTV show. But, like, it just it does feel like two different worlds, but that’s that seems like it’s definitely happening. Right? Howard Bauchner:

It’s absolutely gonna happen. I think on so on the negative side, what they don’t wanna happen is that you as an HBO Max subscriber who loves whatever maybe DC loves HBO. Like, the reason you’re going into this thing, all of a sudden feels really bloated. It starts to feel a lot like where you open up Netflix and you’re like, none of this feels like quality programming. I don’t really know what I wanna watch.

None of this seems appealing to me. And so you kind of puts around for a little bit and then you go somewhere else. Like, you go to who or you go somewhere else entirely. That would be the worst thing that could happen. Was that yeah.

Some of you signed up specifically for HBO is now getting placement on their homepage, which is the most you know, it’s the prime real estate and streaming. Let’s get the placement on the homepage for, yeah, fixer upper or some food channel show or TLC show, whatever it might be. The positive side that can happen. This is what they’re betting on, is that in order to build a streaming service at the scale that they wanna build it to, it mean, it has to be a four quadrant It has to appeal to men and women above twenty five and below twenty five. That requires two different types of program, and not too different.

It requires a bunch different types of programming, but you really need, again, like, your high acquisition drivers and your high retention drivers. So what they’re hoping for is you get a family of four or five let’s just play into dumb gender stereotypes for a second. It’s just because that’s what’s going to my head. Dad really loves to watch those print and his mom really loves to watch house fixer up or whatever kid loves Batman, whatever it might be. All of a sudden, the read the value perception of that fifteen dollars month skyrockets.

When they increase the price of the streaming service, which they will do, it means that they’re not going to churn as many customers. And so they can continue acquiring customers and keeping them at a relatively low rate. The cost of acquiring those customers goes down and all of a sudden they can start to potentially reach profit margins that they are telling the street that they’re going to reach. That’s the hopeful anticipation that they’ll feel like it’s an added value that you’re getting what you paid for and then some. The concern again is that if you don’t manage that correctly, if it doesn’t feel curated, if you are not being extremely purposeful and how you’re recommending content, which is not just algorithmically.

It’s also contextually. It is like the way that people engage with a service the way that humans wanna watch stuff. You know, a a great thing I always point out to clients is, like, you cannot recommend always use the handmade sale. Cannot recommend another depressing show after the anime sale. People don’t wanna watch it.

Like, they don’t they they watch their hour. They’re thoroughly depressed. They’re looking at CNN. They’re not gonna watch something else. That that what’s like what I would recommend if I’m Hulu is something like brick and morty because they’ll they’ll stay for a coffee.

They gotta have a palate cleanser, but the the algorithms are not trained to do that. They’re trained to be, like, you like this show, therefore, you might like this show. I always say if you like criminal minds, you’ll probably like my under. Like, if that’s how kind of how they’re gonna they’re gonna do it, And so I think if they don’t take proper contextual recommendation on the HVOMAX side, once they bring in the discovery products, you do get that bloated feeling. And if that tarnishes the brand, which is all HBO has going for I mean, all of which it’s a great network, but it’s built on this reputation of creating great stuff with at a twenty four his built reputation for itself amongst LA and New York Phone Kids as making, like, you know, great movies, film after film after film for the most part.

If that’s tarnished, it’s really hard to change their value perception of that fifteen dollars, and it’s really hard to keep someone if you increase your price. Just from

a pure economic standpoint, why does it make more sense to combine. So I yeah. I’ll just use I’ll just use my household as an example. I subscribe to HPL Max and Discovery Plus. Like, I I I subscribe to both.

And I would assume that if you combine those into one service, the total price is going to end up being less like for me. Right? Mhmm. But for most people, that’s probably not the case. For most people, we’ll probably end up being more.

But what why does it make more sense to to combine them into one service or to say combine Hulu, Disney plus and ESPN plus into a single service as opposed to offering the option to subscribe to all three at a discounted rate or whatever.

See, this is in the big debate. Right? This is like and it really is actually your point, like, the Disney versus kind of what Wonder Woman’s is doing debate. With Disney, the reason that they like the idea of having the three different streaming services is that based on what I can understand. One, it it leads to the lowest churn rate in the industry.

The average churn rate, so people who are kinda cancelling Average churn rate is about five percent. Netflix used to be the lowest for years and years and years and years even when they were seeing issues with their programming and other stuff. They still have the lowest churn rate. Now the lowest churn rate is the Disney bundle. It’s it’s at, like, two point two percent.

Mhmm. And I think if you think about how the market the Disney bundle. It is like you’re paying for two services. You’re gonna get one free. That’s kinda how they do it.

You’re gonna pay for Hulu and Disney. You get ESPN plus kinda thrown in. And so for them, they use that plus the data collection from all those three different services, from three different consumer bases, three different audience bases, that they can then use for the flywheel, which which is their whole strategy. Their whole thing is, like, we would like Disney plus to sell Disney park tickets. We love ESPN plus to help some additional merchandise that we may sell or whatever whatever it is or go to games that we can figure out a way that keeps interesting NFL healthy that that reflects better with us and or whatever it might be.

That is their whole point behind the streaming thing. So they need to kind of have those different customer segments to understand what they’re doing and it keeps retention rates really high. And so they and they continue to juice their subscriber numbers a little bit, which is maybe not their best way to say it, but they get to count, you know, one subscriber three. Right? Across the board, they get to say who has gone up pretty much even if it hasn’t.

We don’t know. So that’s really works for them. I think if your discovery plus And and the last thing I’ll say on that is both Hulu and Disney plus, especially Hulu now with the FX kind of stuff thrown in. Are equally big selling points to to customers. So for them, it’s like we can generate a stronger average revenue per user at ARPU if we have these kind of three bundle the the bundle rather with the three streaming services.

If you’re discovering your HBO Max, Discovery Plus is a much harder product to scale. For as broad as it is, it’s actually relatively niche audience who’s gonna be signing up. That audience also tends to be older. They tend to still be in cable. They’re not falling off the cable cliff and for cutting as fast as others.

So Discovery Plus is kind of the service. It’s doing well for the operational cost that it is, but it’s not gonna be huge. But if you bring that into HVOMAX, you get to solve HVOMAX’s churn issues or potentially solve HVOMAX’ churn issues, and you help to create a four quadrant service without the necessary additional investment that H. B. Max would need.

Again, we come back to, like, they made looking with Selena. They made all these shows because they didn’t have the unscripted stuff that Discovery does have. So to bring it in, you create a really wholesome streaming service that has the ability to scale that the other one really doesn’t. So it just makes better sense for them versus Disney has two really in demand streaming services. ESPN plus is growing.

Actually, I was just told by Brent over there that they should have a pretty strong earnings on the USPAM plus side in a in a couple hours as as we’re recording this that’s kind of growing at the rate that they wanted to, and that’s really based on the bundle option. That is, like, the ability to to bring the deductible for free. So it’s just a different you look at your services and you kind of debate what your overarching goal is, whether it’s data collection for other stuff, whether it is to create a truly scalable global product, like, whenever it might be, you there’s a different approach to each one.

Mhmm. Yeah. That makes sense. I mean, I I like, again, I my my my big concern — Mhmm. — for HBO Max, which is my favorite, you know, service, is mostly that people will be like, well, I don’t wanna subscribe to HBO Max.

I’m not a Yeah. I’m not a grocery person. That’s not what I do, which I think is very possible. Alright. So I wanna I wanna bring up speaking of H.

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Which was the the shelving of back girl. Zazlop says we’re gonna take a tax write down on this instead of finishing the FX work or putting it in theaters. But explain explain the business sense for folks who who cannot understand why it’s better to just not publish a thing or not not show people a thing that they have already made and paid for than to show it

to them. Yeah.

Yeah. So and there’s a lot of healthy debate about this. So the keyword here’s amortization. And so there is this ability, there’s this brief window because new management is coming in. They get this brief window legally and through from an accounting perspective where they can write down a bunch of projects from the former company that will then effectively give them a tax break.

So when they look at a film like background, and this and then this is where all the asterisk come in. Right? Like, okay. How bad was this movie? That they’re not gonna release it.

And for them, you know, a seventy million dollar movie that, let’s say, with marketing and some reshoots, whatever it might be becomes an eighty, ninety million dollar movie, that has one major goal if it’s going to HBMax. It is one goal and it is to acquire customers. It is, like, you need to bring in two million subscribers in order for us to really see the revenue potential mean, this is the whole debate, something which I know. You know about, like, natural brush. Streaming in general.

Right? It’s an ongoing thing. So the the asterisk or is how bad was this movie that you’re not gonna really say, how close to being done? Was it that that, like, you’re not just gonna bring it across the finish line. What does this do to the relationship with talent?

Like, that alone and and and you saw the directors of those movies post at the screenshot and, like, Kevin Feige who emailed them and was, like, well, sounds like hell over there. Sorry about that. Like, we still love you. Hope to work with you more. You know, what does that do?

That might be irreparable. That does harm your bottom line down in the future. All of these are questions that I would argue previous management would have said, like, we don’t know what’s gonna happen in this movie, but let’s take a shot on it, which I also feel is very HBO in general. Like, where HBO would give out shows that the green letter, you know, Even through Game of Thrones, we’re kinda like, we don’t know if this is gonna be a thing that’s gonna do. Well, like, let’s try it.

Like, let’s see what we can do it that we believe in in the talent. Zazz love is other side of it. Zen’s love is someone who’s like, we don’t think this movie is gonna be very successful for us. Also, we’d have to continue paying month after month to have that movie on our platform.

This is, like,

how you last week, there were reports, a bunch of titles are being removed from h b l max. That’s because they have to pay for it. They’ve to ping month after month for it to have those titles on it even from HBO and from Warner. Like, they still have to pay for it. And so you have Zazlap who’s effectively modeling this in Excel with his team.

And he’s going, okay, based on what we think about this movie and his subscribers, based on all this other stuff that’s going on, do we think this movie is gonna be profitable for us even breakeven? And my my guess is that the numbers were so poor and Zaslow is so focused on this kind of poor cutting excuse me, on this cost cutting situation that he was like, it’s actually better to take advantage of this one opportunity we have to at least generate some meaningful tax rate that that brings, you know, that helps us with our bottom line, which is cutting debt, then try to release it. I think the issue you know, for Zafar who spent months months when the deal was first announced between Discovery and WarnerMedia of him going out to town with talent, saying, we’re going to theaters. We’re going back to theaters. We really want the best talent.

Like, you’ve come and done that, and then the first, you know, five four or five months that he’s he’s overseeing this company. Of sudden he’s making these decisions that aren’t necessarily talent friendly in the eyes of the present, in the eyes of talent. And so that’s a really difficult situation to be in. Because on the one hand, we’re business cent it might be more economical. It probably is more economical to say, like, we don’t think this movie is gonna do super well.

So we’re just gonna take this this opportunistic tax write down, this one time offer that we have because of the legality of how mergers work. And we’re gonna be able to kind of move forward and focus on projects that, you know, a direct to streaming movie is gonna be a ten million dollars movie. This is where Netflix’s bread and butter is. It’s a ten million dollar movie that generates really strong engagement audiences or whatever it might be or strong retention, whatever it might be. Instead of doing the seventy million dollars movie.

If we’re making a seventy million dollars movie, that would be better, be good enough to go to theaters. But he’s alienated, I think, some talent in the process. And if I’m Casey Bloys, that’s my big

concern. Mhmm.

That is, like, if we don’t play the talent game, at the concept sometimes talent needs. And I’m not saying that backhoe should’ve been a seventy million dollar movie. We got a movie with Michael Keaton as Batman. Like, you’re not gonna but it’s a weird thing to happen. But I think if you’re Casey Boyse, you’re hyper aware of two things.

One, your HBO and your reputation is built on being home for talent and support up to talent and putting out really great stuff. And two, you’re hyper aware that if you don’t do it, there’s a great team at Apple who has all the money in the world who will do it

happily. And

so I think that’s kind of the situation where the economical sense it does make sense. Like that, it’s really unfair, but it does make sense in the short term. And this is where you see Disney kinda going, like, we’re gonna take the short term hit because we need to focus on term. Whether what this did long term economically to the the potential for XYOSTED and talent going forward, you know? Who knows?

Yeah. I wanna I wanna pull back I wanna pull back to one thing you mentioned briefly because I think it’s worth hitting on it. I haven’t seen a lot of people talk about it. You know, there there was some news last week that some HBO original series like Vinyl, you know, the the the pilot of which was directed by Martin Scorsese, was pulled off of HBO Max. A bunch of other titles.

And and people were like, oh my god, these things are disappearing, you know. Where where will I be able to watch an American pickle? In the future. And and, you know, as somebody as as somebody who is a collector of physical media, I did get I told you so, you know, if you love something, you need to own it. But like but but there is there is an actual economic reason for doing this.

And and I don’t think people understand the licensing fees that HBO Max and Warner Brothers were paying for these these movies and these television shows.

Yeah. I mean, that’s the big that the that’s the big exclusivity play. Right? It’s like we’re going to take all these short term hits. Because we’re not licensing it out.

We’re not making that money. And instead what they’re saying is we’re going to have to pay that licensing money think of it when when project popcorn happened with Jason Clark and WarnerMedia and HBO Max, and they said we’re gonna take seventeen movies and release them in theaters on HBO Max the same day. It wasn’t like they said, cool. We’re gonna go to theaters, and this is free for us on the HBO Max front. HBO had to pay Warner Brothers to have access or H.

V. O. Max had to pay Warner Bros. Have access to the first run of those films. It was an expensive bet.

Like, even internally. I mean, yes. On the one hand, you’re saying, like, money is changing hand from here to here. But each different department has their own profit and loss that they oversee. They have their own budget.

So it’s an actual expense. If you’re not see. And this is where, like, I I mean, I talk about this on Twitter a lot. Like, what we’re effectively talking about with streaming, which we didn’t do as much in broadcast because the economic structure was so different mainly because of advertising and how and how that affected a bunch of TV shows and films and pay one windows. What you’re seeing with streaming is the dollar per dollar content valuation of a title.

It’s gonna become the number one question for any title that’s gonna be on the service. Well, how long it runs, whether they pick it up, whether they give it to another service? This will be the number one question and just like, okay. Well, how much money is title generating us. And that comes down to two things.

Is it keeping our subscribers retained thirty six thirty days, sixty days, ninety days, a hundred and twenty days after they after we have it? Is it bringing in new subscribers? If it’s not accomplishing those goals, what is its value? Now you say that to people who love and including myself, people who love to watch movies and TV shows that want access to everything. And that’s a really daunting thing to say, which is like if it’s not valuable, it could just disappear from streaming.

I mean, it’s still available on BOD. Those will be able to buy. But the idea is like if they’re not being engaged with and they’re sitting on the shelf, they are actually not just collecting dust. They’re they’re paying for this to collect dust, and they could be and they could give it out elsewhere. They could say, like, our audiences into American pickle, but Netflix might be into it.

And they’ll pay for this we make money off of them. But I think you’ll see happen and what should have happened with Netflix a long time ago, and it just didn’t is they should they have these titles that don’t do it. And do super well. Netflix has removed some of its originals. It’s like usually international, but they’ve done this too.

It’ll remove some from their platform. They should launch free advertisement supported platforms and take some of these titles and partner with a Roku, partner with a a Google, whoever it is, who have the fast channels with the Pluto, and say, like, we’re gonna launch the Netflix free channel, the HBO free channel. We’re gonna launch this thing. And it’s gonna be titles that are not doing a lot of our thing, but someone who’s not paying for content, the value perception of watching somebody is totally different. So they might say, hey, I’ll watch American pickle if it’s on my Roku or whatever it is.

I’ll I’ll watch it. And they can generate ad revenue through that. And they’re no longer in charge of the distribution. Now it’s like Roku and now it’s Pluto who are in charge of the distribution. They’re the ones who are have it who have it set up.

They’re generating that incremental income. They’re not giving it away to competitors, and they’re and they’re kind of within this very, very quickly building ecosystem of of facets that we call it, of customers who are watching a lot of free ads for the television. And I think we’ll see a lot more of that come to play yeah, no. I would not be surprised if you hear about more movies and TV shows leaving AtriumX, leaving Hulu, leaving others because they do have to pay month after month, year after year have those own service even if it’s from their own studio.

Mhmm. Yeah. It’s it’s I mean, it’s it’s interesting. I mean and this is also a there there’s a question here also of paying for the town too. Because, I mean, this is this is I mean, this is where residuals come from.

This is where all that stuff. You know? So if you if you want to have that sort of thing on H. V. Max, you have to pay somebody to to to have it.

I I your your point about what is the individual value of this individual movie to the service is a very key one. And I wanna look at two recent films from Netflix. Right? So Netflix famously releases The Greyman a couple weeks ago, and it, you know, gets a gets a cursory seven day run-in theaters. But it but it is really just going to and, you know, they talk about, oh, you know, two hundred million people watch it whatever, eighty five million hours, whatever whatever the number was.

But the movie again, movie costs two hundred million dollars to make. Right? It costs probably another they probably spent another thirty, forty million dollars on advertising. So in in the first ten days, if it’s watched by, you know, for a hundred eighty five million hours, that’s good. That’s good.

But it’s like the fifth best ever. It’s not like Amazing. Then you have a movie like, what with purple hearts, purple hearts. So purple hearts, nobody’s talking about purple hearts. We don’t have to think pieces about purple hearts.

There’s not, you know, memes about purple hearts, maybe somewhere, I don’t know, on Instagram. I don’t know. But purple hearts, movie costs about ten million dollars. Let’s say, I don’t know. I don’t know for sure.

But let let’s say in the in the ten to fifteen million dollars range, they spent nothing on advertising for it. It just shows up on the the the home screen. And it does a hundred fifty one million hours. Right? So you have a you have a movie that costs, let’s say, just for the sake of argument, let’s say, it costs ten percent as much to make.

But it still generates eighty percent of the eyeballs. Why is Netflix spending two hundred million dollars on a movie that is only getting them another twenty percent bump in eyeballs. I don’t I don’t understand it. It doesn’t make any sense to me as a business proposition. Yeah.

I mean, Netflix is Netflix is is a blockbuster strategy in general, doesn’t make much sense to me either. I well, I will say is I had talked to a friend in Netflix who worked within film and we were talking about titles like Purple Arts and and kissing both and and movies like that and the Christmas movies. And they were like, that’s our bread and butter. That those movies over perform in ways you would not imagine. Like, they just are extremely good at doing what they do and they cost a tenth, you know, a twentieth of what we’re doing on the big blockbuster stuff.

And

the way

that I kind of think about it I love this is accurate. The way I think about it is if anyone who’s listening has worked in a newsroom, you sometimes get newer employees who come in and they’re writing blog posts. So they’re they’re reblogging stuff. They’re kinda just putting stuff up on the site. They have to go up on the site.

And in a in an ad kinda supported media environment, you’re doing it because the the more people you have coming to your website, better ads you can get. Like, it’s it’s kind of how it works. And also by doing that, it allows the features writers to kind of go off and chase a Pulitzer. They get to go off and be like, I’m gonna spend six months this thing because they know that the feature, once it comes out, may generate a lot of hits or whatever you want. It’s like a lot of people reading it.

But it’s not gonna be the day to day thing that keeps the website going, that keeps people employed. Think about this a lot with Netflix’s movie strategy, where they need the five to ten million dollar movie that does the insane numbers that it does, it travels on to Talk. And this is where Purple Heart seems to really be thriving. It’s, like, all in TikTok. It’s not a different movie.

It’s definitely in TikTok movie. People are watching it and they’re creating additional content, which is earned media for the for the company. And

so you have

them, and and they do what they do. They keep people subscribed. They keep people watching that Netflix gets to say, like, we have this usage. We feel pretty good. It’s it’s bringing in some new subscriber That’s awesome.

Also, though, we wanna be at home for talent. We do these movies to pay Martin Scorsese to do the Irishman. You know, a movie that is phenomenal, but also know their studio was gonna do it. They’re, like, we’re just we can’t afford to. We’re not gonna do this and Netflix goes, hey.

We we have all these these movies I was talking about on Twitter, but they’re but they’re being heavily watched. So we can do this movie. You know, we’re gonna we need a huge franchise. We know that we kinda wanna get into theatrical. We know that we wanna get into gaming.

We know that we want big franchises to compete at Disney and and Warner Brothers. So we’re going to partner with the guys who did it for Disney. We’re gonna partner through so brothers and they’re in a production company. We’re gonna spend the money on it because then we’re gonna relay the sequel and the anime spin off and whatever it might be in the game. And then we’re gonna have a franchise that hopefully we can sell merchandise for in Target.

Like, that’s kind of their thinking is, like, we have to start taking these bets on it, and we’re gonna do it at the price that they need. So how do you do that? You have purple hearts. Say we’re gonna make these mistakes. I also work like, you know, there I I don’t think anyone on those teams, on those production teams would be happy with me saying, like, you exist to make sure that something really happens.

There’s you know, they’re I’m sure I haven’t seen it, but a quality movie or at least a a entertaining movie in its own right. Like like the don’t think it has an audience and that’s phenomenal. I think the smartest thing Netflix ever did coming up outside of getting very good into original television content was looking at the theatrical landscape around twenty fifteen, twenty fourteen, and saying there’s nothing here for young women. Like, there’s just nothing happening out here. It’s all superheroes.

Which tend to be young man. There are women, obviously, earned to them, but tends to be young man. And Netflix went out and did all the way to love before and the kissing booth. And all of a sudden, they’ve got huge, huge young adult teens audience, a woman who don’t cancel. They’re they’re they’re they’re they’re saying.

Awesome. Works out super well for them. And so I think Netflix learned from this. And he goes, like, we can do these these what what are called taste clusters. We can do these movies for different taste clusters at an insanely cheap price that has pretty strong engagement and that really keeps the service up and running keeps it brings in a little bit of subscribers not as many as before, but really retains them, which is why we see the low churn rate.

And now we’re gonna take the big bet. Can’t do the big bet without the support. And this is actually kind of Zaz’s last thing. Right? Like, he wants to do the streaming, but his thing is, like, we if we lose, if we get downgraded in it, like, if our stock is down period.

If we lose the the shareholder backing and the investment backing, we can’t do this. Like, it’s just we won’t have the money for it. We have to be able to put money into them. That means we have to make money and we make money on movies and theaters like the gray like, I I don’t know if a gray man would have made, you know, five hundred million dollars, but it definitely would have made some kind of money. If it was at least theatrically.

And so I think Netflix, when they’re looking at it, again, it’s that. It is like we wanna do the big thing. We need to be able to support the big thing and not be in the red as as much as we are. So we make ten of these five million dollars movies that do pretty well.

Yeah. Yeah. I mean, I the the strategy Netflix has appealing to younger younger women quadrant is makes tons of sense to me. Mhmm. And and you know, going after the Oscar movies makes a ton of sense to me.

Right? Going after Roma or the Irishman or whatever funding that makes sense everybody likes prestige. Everybody wants prestige. Mhmm. I get that.

It is it but it is those gray man style movies, red notice, you know, etcetera, that I I just don’t quite they they don’t jump out to me as things that make a lot of sense. I guess, unless as you say, they are planning a big movie the theatrical or merchandising, that sort of thing. You know where

they do? You know where it does make sense, and I I was thinking about this. I’m talking friend and I was like, oh, you know, we’re kind of mulling over this point. I said, you know, there might be something to this. One, those movies have global film stars.

And two, those movies are super easy to watch even if you’re not it’s not in English. Those movies are like big action thing happens. Global movie star that everyone knows. It’s like so they watch it. If you’re Netflix and your goal is not necessarily the United States anymore, it is like yeah, we’ve we’ve hit.

We’ve we’ve we’ve saturated, but we wanna get into India. We wanna get into South Korea. We wanna get into these things. Where they love the Big Western film star, the Ryan Reynolds, the Duane Johnson, the Galvan O. You do the movies because you’re like, hey, we think that this is gonna have a stronger return for us globally.

And we need the movies that are big action movies that we can dub. Obviously, we’re gonna dub the dialogue, and we can sub the dialogue, but also are, like, pretty easy to watch, which is what they are. They’re really, really easy to watch. I wouldn’t say they’re memorable. This is my main issue with any type of major blockbuster Netflix releases.

I can’t remember any part from any of them. And so and so I think with Netflix, it is, like, does this travel well. And — Yeah. — if it gets viewership in the US, awesome. Like, that’s that’s our main area in terms of revenue.

Like, that’s all. That’s great. But their biggest concern now is not the US. I mean, I think it should be. But their biggest concern is like, well, we have to continue growing in Latin America, in the United Europe, Middle East, Africa and Asia.

Like and like and that’s a thing. And I think those movies and those global film centers that cost a lot of money and their brands onto themselves do that. And now I still think it’s

bizarre to

me to not take to take a two hundred million dollars movie and not put it in theaters. Like, even especially because it’s a forty five day window. It’s not a huge window anymore. It’s like, you just go out where everyone else is doing it. And the exhibitors at this point, let’s be honest.

Right? The exhibitors at this point are, like, desperate that if you were to be like, we’re gonna do thirty five days, I’m sure they would come down. And they’re like, we just eat movies. Like, sure, whatever. So I think for Netflix, that move will happen relate, you know, not not in the immediate future, but the next, I would say, like, eighteen months, you know, two years.

But I think again, like, this the only aspect of that release strategy that makes any sense to your or the the acquisition strategy for that content is that it plays well globally. And they need that more than anything on the film front. Yeah. You mentioned

merchandising. Why isn’t Netflix so bad at merchandising? Mean, I like, you know, there’s there was I saw maybe you were writing or somebody was writing about, but Sandman, they’ve got Sandman out. And Sandman is a, you know, a a a toy able franchise or a flushable fan a fun callable franchise, something. And there’s just nothing.

There’s nothing forward. What’s what’s the deal with that? Yeah. I

mean, what was was saying, man, let’s get the yeah. I was just reading about the SimPuck, but with the acknowledgement that it’s Warner Bros. Television production. So maybe Warner Bros. Retain the the ancillary rights to it when they sold it or whatever it might be.

Who knows? If we take out the equation, because I think you’re asking a very important question. Like, what is the overall strategy for Netflix? Is merchandising. You know, if they wanna create a flywheel effect, like, everyone’s trying to follow Disney, which is funny because Disney’s trying to follow Netflix.

Everyone’s trying to follow Disney, and they’re kinda saying, like, we wanna have this, you know, self fulfilling revenue cycle where everything helps each other out. Think of it like an Arbor borrower’s head or snake. Then Merchandising is a really key part of it because merchandising is not just ancillary revenue. Right? It’s not just like I bought a t shirt.

Netflix makes four bucks. It is, hey, I bought a t shirt because I love stranger things. Like, it’s it’s my show of adoration. Right? It’s like what it it’s it’s it’s what it is.

And that form of adoration is monet highsable. This is the worst you can say to Kratos, but you can monetize love. Like, that’s what they’re trying to do on the on the finance side. Like, they’re trying to monetize that exec love. Therefore, merchandising is super important.

I think the issue and I was talking to a a a Palomine who works at Disney within consumer

products. And there’s two

main issues. One, they don’t have an actual leader at Netflix who understands, I think, consumer products very as well as the ones as well as the team at Disney. Two, I think they are in they’re they’re trying to kinda do everything. Like, they have the Walmart deal, they have the Target deal, but also they have a shop that’s, like, very e twenty four. It’s, like, we’re gonna partner with, like, streetwear brands and, like, companies, and we’re gonna try to do limited drops.

But three, and this is the biggest issue with almost all of Netflix stuff. There is no marketing for it. You gotta seek it out. There was I was on the Netflix shop the other day because I was trying to see if there was Sandman stuff. There’s all this really dope stranger things merchandise that, like, is not at won’t.

Like, it’s very specific limited in addition. And no one knows about it. And I was talking to my friend Casey Moore who runs what’s on Netflix, super smart Netflix analyst type guy. And he’s and he was looking at the traffic for the site. He’s, like, yeah.

The site gets, like, like, a thousand hits a month. Like, no one is going to see what is what Netflix says. They’re not marketing it. Netflix cut a big part of their marketing team. So I think there’s this issue of, like, Netflix is not in the merchandising team as much as they should be.

Two, they don’t really know how to lead that segment. They don’t really know what they’re doing in that segment. In my opinion, And then three, they’re not marketing what they do have. Like, they’re not out here being, like, we’ve got a bunch of school game stuff. We have a bunch of of BlueJeans and stuff, like, whatever it might be.

And so people are like, why would I buy? If we think about what a twenty four does, a twenty four, I mean, it’s it’s a small company, but those drops, they have the audience. Like, they’re hyper audience is very aware stuff comes out. And then if you think about the the best in class on the consumer products side, I mean, Disney. And Disney is like what Disney does extremely well is Disney partners with almost everyone.

Almost anyone can use Mickey Mouse at this point. And they’re like, yeah. Yeah. Each of them wants to do it, great. Put Mickey on a shirt.

A rug company wants to put Star Wars logo on the quote, put it on. Because in their mind, the more people stare at something or they wear something or they play with something, stronger the admiration is for the overall brand, so they’ll go watch the movies and their kids will watch the movies. And so they have this kind of world where they get to dominate attention twenty four seven. You know, it’s a lot, but it but it works. It works extremely well for them.

And so I think with Netflix, they’re not doing that and there doesn’t seem any inclination to really do it and even acknowledging that their method of approaching any type of launch for any type of product is walk, crawl, run. They’ve had enough time to walk. They’ve had enough time to sit on it and kind of be like, okay, what’s our next move here? And then let’s really launch and they haven’t really seen anything come of it. So it just feels like a mess.

Like, I wish I had an answer. I was like, curious exactly what’s happening with their end. I was like, I I don’t I have no idea what they’re doing And it’s very odd because we live in a moment where for better or for worse people’s identity are tied to their movies and their TV show. Like, people love it. Like, TikTok identities from Teams are built on being succession stand accounts, whatever it might

be. You can

they’re they want to buy stuff. And where are they buying it? They’re going to Etsy. Like, I wanna look like he’s bit right. So I don’t know.

I don’t know.

Yeah. It’s it’s weird.

I I wanna shift gears slightly and talk about analytics. Because you what what your, you know, your day job is is explaining to people what everyone is watching. And the thing I hear from a lot of folks, and frankly, I say this sometimes myself. Mhmm. That just isn’t true is we don’t know how many people are watching things.

Right? How do we know? Explain

explain to

me how you guys figure out what is being watched by who and when? So

for us specifically, we’re at a pair analytics. We look at to the being fully transparent, we’re not plugged into any of the services. Like, I cannot tell you how many people are watching agreement. Like, could not could not tell you exactly that number. And I will say that none of the services, Nielsen, antenna, no matter who it is, we’ll have better information than the services.

Right? Like, that’s it. Like, no one’s gonna try to sell to them as that option. What we look at specifically is a bunch of different things going from, like, social interaction at the very bottom of how we rank our demand expression, all the way to consumption be Pcamp C. And the reason that we rely on piracy a lot is because I was talking to a friend who works at a major streaming company in the Netherlands.

Today, I was talking to him. And he’s like, I can’t get the offer because I really wanna watch the offer. He’s like, I had a he’s like, I had a I just had a I hired it. Like, I had a I had a stream of it. And he said, how often do you do that?

He said, for most things. Because we don’t have the services. We don’t get the shows. And so when we launched years ago, we launched, you know, a decade ago, our thing was, have my team for Cardlytics is New Zealand. And they weren’t getting anything.

They were, like, we wanna watch stuff and we can’t get them. We looked at the Paris numbers and they’re, like, insanely high and it’s never been easier. Like, you just hit play on something. So what we do is we take consumption from that with a bunch of other consumption metrics, and then we create a demand expression. And then for that demand expression, basically, says, like, here is what is very demand.

And then we have there’s a statistics in our tool of this. There’s something called r squared. And so if you might have heard it, well, people talk about the economy recently, r squared is basically like what is the one to one relationship between this thing and this thing. And so if the r squared is like zero point seven, it’s pretty high. Means that there’s a pretty strong correlation between this thing happening and then this thing happening.

Our correlation between demand and Netflix subscriber growth was zero point nine nine, which is, like, unheard of. So we basically were, like, our demand for your shows is directly one to one with how many drive as you’re adding or losing every single quarter. Like, we can see that happening. So it’s what we do. We are, like and not to make this sound like a sale.

We are one of many companies doing things and tend to specifically look at credit card usage for activations and cancellations for streaming services to get an idea of, like, what people are interested in, churn wise. Nielsen obviously is plugged into viewership, but Nielsen is, you know, slightly antiquating how they’re approaching it. So they’re trying to figure their stuff out. All of us, I would say, are complementary to each other. You kind of take all of the data as much data.

I know that you know entertainment strategy guy. Like, you take as much data as you can get and then try to create a picture. But I will say the one thing that I really stress when I’m

thinking about,

how I do my job, whether it’s try interpucker, whether it’s my full day job. And then when I talk to other people, Casey, Brandon Katz, he’s a great reporter, Frank Caplado’s at CNN. He’s been on the podcast for whoever it might be. I’m an entertainment strategy guy. Viewership is very important.

It’s consumption. Consumption is the best form of engagement. That’s why we waited the highest. Like, it’s it’s very important. It is not the only metric that matters to streaming in the way that it matters to broadcast in in cable.

Right? Like, it was on broadcast, especially, it was this many people in this demographic are watching something, and therefore, the advertisements coming in are really great. And then we used the advertisements to get the show to season five and then we syndicate. Like, there was a whole strategy that they did and there was a reliance on advertising. Nielsen was created to help advertisers.

Like, it was a it was a big part of it. With streaming, the question of a show I think it’s more like like friends. Right? The question of a show with friends, friends is not necessarily gonna pop into a top twenty chart on Nielsen ever single week because there’s just not that many people watching friends over in Oregon. But it is the reason as we look at something called like a decay rate, the decay rate just means like, how high is the demand when there’s no new season of a show.

And friends has an extremely low to carry, which means people are keeping HBO Max because they have friends. People are

keeping

Netflix because they have new grow. Or, like, whatever it might be, they go back and they watch a show. And as long as that show is there, then they’ll they’ll pay for the service. That is kind of the biggest value proposition of that of that title. We talk about the the value of content.

Like, that is what that title is is really valuable for. And so I think when we look at viewership, especially for new titles where the question is like, okay, Paul, this this show. I don’t know. Ten million people watch the show in the first twenty days in the first thirty days. The question is Netflix asks, if you ever get to see a Netflix board for how they how they look at their shows data wise, They have a bunch of different charts.

And then at the very top, they have an efficiency rating, and then a value for the show that they assigned to it. And then the charts below all create the efficiency rating. Efficiency rating is based on how many people watched seventy percent of the show, hundred percent of the show. How many people that are then watched another Netflix original, how many people then watched a licensed title that Netflix had the rights has rights to. How many what was the sentiment of the people who watched it was a little, like, this, like, whatever I did, what was the sentiment of it, and it creates an efficiency rating.

And if the efficiency rating needs to be pretty high for Netflix to consider the success. Right? And so they look at this on a per total basis and then it creates value. And I think that’s a big part of how streaming is, which is okay. Cool.

People came in for this title. That’s awesome. Are they at one point Are they gonna cancel? It it did two weeks because they’re over it? Or did this title bring people in?

And then they were watching friends? And then they are watching something else, okay, cool. Like, how do how do we use all that? So I think that’s what I spend a lot of my time doing is talking to executives on the OTT side about that. And then producers on the creative side about how they should be going into these negotiations for renewals or whatever it might be, and and what they should be armed with data wise.

Always say I tell them, like, you can’t just ask for viewership. You might get something. They might give you a number, but that’s not what the only thing that matters to them. Like, that you could have a huge show. If if ninety percent of the people who you brought in churned, they canceled the week later, that show’s not gonna get renewed.

But it’s just it’s just not gonna happen. But it doesn’t make sense for the the TT platform. But your show came in. Didn’t have huge numbers, but it’s seeing incremental growth. There’s holding pretty steady at a solid rate for a hundred and twenty days.

That’s just gonna It’s just good. What’s gonna happen? And so understanding those metrics, I think, is so important on both sides. Howard Bauchner: So

when Ben Stiller

complains about not getting any numbers for severance. He’s he’s looking at the wrong thing. Unless unless he’s specifically looking for, you know, how many how many more people went to go watch you know, see afterwards. And I think and it’s

like, I never wanna play down, like, viewership because it’s it’s still a huge part of what we look at to, what we call it. It’s consumption for us. You know, how many people are actually watching because people actually sitting down to watch something for ten episodes or whatever might be. Like, that’s a huge thing. Like, cool.

This is actual intent to watch, and it and it is watched versus, like, this May show intent to watch, but they don’t watch someone who retweets a trailer or whatever it might be. So I think the first question should always be having people wash absolutely. But there should be other questions that are like, okay. Well and this is what will come up really in all the new back end deals. That’s when new contracts are being created.

It will be like, well, how many subscribers did I help you retain as a whole in your quarter with this title? How many subscribers did I oh, another big one. How many subscribers did I bring in from an audience demographic that you are currently trying to penetrate? Like, what like, every Disney plus doesn’t have a strong above forty crowd, that should be obvious to anyone. Disney plus wants to be a huge scalable service.

You know, you have to appeal to about forty. It’s like your Hamilton moment. You really need to appeal here above forty. Cool. So if your show, that is, I don’t know, the procedural, brings in that audience they bring

in.

Dads and moms who are at home watching them together on Wednesday night, that title is gonna be more valuable in many ways than another Star Wars title. It’s not gonna bring in huge subscribers. It’s gonna retain them, but it’s not gonna do huge. If your show brings in a bunch and keeps them and it’s different demographic, which is what Hamilton did, the value of the title increases. And if you’re a producer, if you’re Ben Stiller, you wanna know that.

You wanna know like, cool. I’m actually doing a lot for you. You know, you’re adjacent to Vegas. How much is Ted Lasso doing for the sentiment of this platform? How much is Ted Lasso actually making people think, oh, Apple TV plus may be valuable to me, and therefore, I will sign up for it.

So these are questions you’d have to ask with broadcasting. Well, the only question was how many people aren’t watching it in demographic? Are they launching it? Great. Like like cool.

Like, there’s an audience. I’m really excited. The advertisers are really happy. I think that’s awesome. On streaming, there’s a much larger picture to what is considered success.

But the streamers

aren’t gonna wanna give any of that up. Right. I mean, I I talked to I talked to folks mostly with writers who are terrified of a new strike. Yeah. There basically, the writers guild is, like, we’re probably gonna strike because we want more we want more money from the streamers.

Totally reasonable. You know, riders are getting shafted in all sorts of ways with small writer’s rooms, whatever. But the the but, like, what they actually want are good analytics. And that’s, like, the thing that the streamers will fight to the death to never give anyone. Yeah.

That’s

I mean, that’s exactly right. Until there there’s one or two things that will force their hand.

One, not like a law per se, but, like, literally

some kind of ruling that is, like, you must have you’d have to disclose this for equal for on shared grounds. Like, it has to be a thing you have to do. Right? Like, you know, it’s

I

was think I was gonna compare it to Bob off his results, but studios were the ones actually who were reporting those back in the nineteen forties. So that was a different situation. And or, two, to your to your point, it’s the gilts who will will try to the unions, who will try to force their hand. The only issue with the unions, which I’m sure a lot of the waiters who speak to are are wary aware. I’m like, I’m very pro union working unionized environment for a long, long time is that unions take a long time to get things done.

It’s it’s a long process back and forth. And in that time, a lot of people aren’t working, a lot of people it it becomes a whole situation. And if you’re

a company like

Netflix, you don’t necessarily there are other ways you make shows. Great. Like, you find a way or not it does it’s not a great way to do, but you find a way to kind of continue making content, and it’s not it’s not super great. But that’s what happens. And so I think it needs a combination of both.

I do think we are gonna see a strike. If it’s not the WCA at least some other kind, I think, you know, I also think sag aft should come out and be like, we want to like, we we wanna be aware of what this is, the PGA should come out. Right? Think of the producer. It’s producer of the ones who are trying to argue and, like, be in those and go negotiation rooms.

I think they should come out and say it. It’s your exact point. So I mean, if you you know, I think I was tweeting this about the ventilator thing. If you aren’t in a position of power. Why would you give anyone any room or any added leverage on the bargaining table?

Right? Like, you just wouldn’t, but doesn’t make any sense and you can say that you’re a pro talent as a company, you can say that you’re whatever. The only duty these the public companies have is a fiduciary they only have to make money. They just have to continue making money and they have to continue increasing their profit margins and cutting costs. And so part of the way to do that is by in being in negotiations and not giving out too much data because we give out too much data, then people get to come back and say, like, we wanna negotiate for a better rate, for a better pay.

Now you get some networks who are tourously very good for this. Right? Like HBO. HBO was very, very good. They don’t give out money numbers, but they tend to be fair with the negotiations.

They tend to do whatever. I’m not trying to say that any any company is not fair. But I do think you’ll start to see a lot more like what we saw with Disney and Scratch your Henson where there was a lawsuit and she was like, you know, again, like, what is my back end profit on this movie that now helps you bring in a bunch of people at Disney plus whatever it might be. That is where you’ll start

to see, like, like, the con

the idea of, like, of that and content. You’re being able to give someone a number and be like, hey. Like, here’s what your show does in this demographic and and here’s monetary value of it. And here’s why we think or who we might compare it Nielsen at ten or whoever it might be. Here’s why we might think that you the hip show is really strong on on Apple and here’s what Apple really needs to give you because of whatever.

And on the other front, you give the same kind of report or whatever it might be or or and they’re doing them internally already at the companies. But you have it it comes like Apple. You’re looking at the value of this title and you’re looking at how it compares to the value of other titles and you’re trying to keep that close to your chest. Right? And I think what you’ll see on the valuation side from from the OTT players is they’ll start to kind of look at what the value of that title is to them versus what it can be sold at.

So manifest. Right? Manifest. Mhmm.

Peak

Mhmm. Light at NBC, give it to Netflix for a pretty cheap price. Didn’t think any of it wasn’t doing super well on NBC. Didn’t think it was gonna do super well on PC. Go to Netflix.

Boom. Right? Like, huge huge show. All of a sudden, Netflix is like we’re gonna get it for season out of it. We’re gonna end it.

That’s great for us. If you’re NBC, if you kind of knew what the value of that title would be on Netflix before you sold it, you can have a higher negotiation fee. So we’re gonna in the economics of how business is done in Hollywood is is gonna change. I mean, not not hugely, but the way we kind of value stuff is gonna start to change pretty rapidly. And, like, that’s one and exciting for someone in my position who just likes numbers and data and likes to talk about these things.

But it does mean that the producers and the creatives and harm themselves with something that gets them into those realms and gives them a fair ground to stand on, in my opinion.

Yeah. That’s great. I this is everything. I I you’d still have, like, five questions left. But we’re we’re we’re we’re we’re we’re coming coming up on an hour here.

So I’m gonna I’m gonna just close with my standard. Close the question. I what should I have asked? What if that I felt asked? What do you think people should know about what’s going on in the world of of entertainment and streaming and analytics and all that stuff?

There’s

something that is affecting three of the biggest players in coming into streaming that is gonna become a huge topic of conversation, and it’s going to change and for for our listeners on on we’re listening to this who might not necessarily care about the financial side of it, who don’t care about the term link EBITDA. It is gonna impact kind of content investment, and therefore, the trickle down to what you’re seeing. The

companies that

doesn’t affect necessarily Netflix, Apple, Amazon. Doesn’t affect these companies. Warner Brothers Discovery, Paramount, NBCUniversal, the they had

something so there’s

something called profit margins. The profit margins they made on cable and on broadcast. We’re insanely high. Like, like, they’re like, insanely high is why they became as as lucrative as they became Discovery is another one. And see only high margins on it.

They’re looking at a future where those profit margins are, like, half of what they were doing, and they are trying to find a way to make peace with that future also moving into the future and trying to figure out how we get close to it. That’s a really daunting thing for a cable company to try and figure out. Well, while they’re still losing money on streaming, and they’re gonna be losing money on streaming for for a little bit of time. So the thing I always recommend, and I know it it sounds a little bit like homework. But if if you if you pay attention to earnings and you pay attention to the right questions that the analysts are gonna ask, what you’re all about profit margin?

It’s all about kind of the health of what they’re making versus what they’re spending, the the the cost of a customer acquisition. You’ll get an idea of how that might play out in terms of content and where they’re gonna invest in certain content. And so I was recommended someone who loves data, but also someone who was, like, a consumer person first. Like, I, like, I would I consume TV and film. Like, I came up at at Polyon, like, reviewing movies and TV shows, like writing about the stuff.

The more you kinda know

about that,

the more you’ll be able to understand why things are about to happen the way that they are about to happen. And it’s just it’s just advice I give to to anyone. It’s it’s be I don’t know. But but thinking about it because in your last earnings call about WBD. There are a lot of people who didn’t who didn’t understand finance, which is fine.

Like, not like, more less people should understand finance my opinion. But But it was in a room. I was like, what was matter or how to suspect it? And the more that you kinda spend time with that, like, reading the CNBCR component, whatever it might be, the better idea you’ll have of what is going to happen and why it’s gonna happen and how that how and and and how Disney paramount, NBCUniversal and Warner Bros. Discovery are going to have to change things at a very scary point for the executives and for for investors.

Where are you still, like, forty, fifty years of unprecedented level of just success in and and and economics success in in entertainment and are now going into a very daunting, almost irrevocable moment. So that’s what that’s what I would say.

Well, I

just to just to follow-up on this briefly. I mean, you excluded specifically Apple, Amazon, and Netflix from this. But let’s set Netflix aside because it has its own thing. I mean, Amazon and Apple are basically playing with a cheat code. Yeah.

Because they they I I like, what is what is their they they don’t have to make money on these services. They are all just adjuncts of, like, the larger iPhone production or, you know, shipping movies to people, you know, business. Right? Like, what what how are how are the other how are the other streaming services, the other networks supposed to compete with us?

Yeah. I mean I mean, good luck. It’s just kinda a thing, but I think, you know, with Amazon, and we we can look at the reasons for why these exist. Right? Tim Cook, gets a very scary presentation from a McKinsey consultant in twenty fourteen, twenty fifteen that says your hardware is slowing down.

Oh, like, your Apple, it’s terrifying. Your hardware company So Tim Cook and his CFO, Luke managed, they get together and they say, well, services, recurring revenues. They’re looking at Netflix. They’re looking at Xbox Prime. They’re looking at these things and they’re like, these, you know, Xbox is a hardware company, and that was a very successful software company.

Playstationality looking at this and they’re saying, we can do that. We have hardware. We have a built in thing. So they launch kind of all these different Apple services. Right?

Music, news, fitness, and then TV plus. And the idea is to walk someone into an Apple One bundle, which locks them into upgrading their hard road. That’s the idea. It’s the value perception of that bundle. Amazon, really you know, I’ve been thinking about this really interesting.

We think of Amazon Prime video as an add on to Amazon Prime in the United States because we as a country and in in Canada and parts of the Western Europe. We as a country spend a lot of our time shopping online. Like, e commerce is actually a huge business in the United States. It is not a huge business in other parts of the world where shipping is delayed where they just don’t have that type of infrastructure, whatever it might be. In other parts of the world, prime video is the thing you you sign in.

You you sign up. It’s the number one thing. And then you might buy stuff on Prime. But Prime Video is like the thing that you’re doing. So for Amazon, what they’re trying to do is really just create added value proposition.

I mean, their number one leadership principle is upset customer obsession. Their whole thing is, like, if we have something, that people really love on the TV side, on the gaming side with Twitch, on the music side where it might be, then maybe they spend not on the Prime side. But as long as they’re paying, we can continue throwing stuff at them that they’re then engaging with that either helps our advertising business or helps our subscriber business. To your exact question, I wanted to set that up because to your exact question, how you compete with that. They’re trillion dollar companies.

They have more money than god three times over. Like, they they can play in that game for as long as they wanna play. And I think with Amazon, they’re they’re restructuring their strategy a little bit. So I’m excited to see what Prime Video becomes, and I would say, like, a year, year and a half. So I or even what?

Year and a half to three years? Because they’re I think they’re in a new development cycle. I think they’re trying some new things. Apple very clearly would like to take from HBO like, very, very clearly would be like, hey. We’re we’re we’re doing this.

We don’t necessarily need a library. We don’t even need to be profitable. Like, we’re gonna sell forty million iPhones in in a month. Like, it’s it’s fine. But they wanna be, you know, the brand.

They wanna be the prestigious thing that Apple is. They wanna have the creative cloud. They want to be at the at the Oscars and at the Emmys. And and they do also wanna be profitable. Like, they they do wanna run a strong business.

But the way that they wanna do that is to kind of replicate HBO in the early sorry, late nineties, early two thousands. Right? They want that slate of, like, Siprantos wire on a Saxon City. And so they’re willing to kind of spend on it to really make that happen. And I think they’re looking at a company like Warner Brothers Discovery and saying, like, they’re gonna have to take all these cost measurements.

They’re trying to deal with their margins that are, like, coming down and structuring all that. They’re gonna have to pass on some projects. We wanna be the company that brings it up. The more that you have stronger sentiment for a platform, the more that that value perception rises with each title, the more subscribers you get in the last turn you have, and they need that. Like, they need just the good stuff month after month after month.

And I think that’s kinda where they’re sitting and they’re waiting and they’re actively pursuing those those speedways. But, yeah, if you’re any other company, go up. If they really wanna play in that field like they will dominate.

Yeah.

Julia,

thank you very much. This is a fantastic show. Everybody should follow you on Twitter at, Julia, loud loud mouth Yeah. Wait. At loud mouth, Julia.

Yeah. Sorry. Backwards. And and I always talk about how great puck is. My it’s, you know, puck and the Angler and, you know, those are the the two kind of com combo entertainment packages I read, so as always recommended.

My name is Sunny Bunch. I’ll be back next week with another episode of The Bulwark Coast Hollywood. So you guys had Get an inside look at Hollywood. With Michael Rosenbaum. Let’s get inside Deborah Ann Wall.

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