Variety returns in-person for its annual Entertainment & Technology Summit, presented by City National Bank. This one-day event will explore advancing technology’s impact on TV, film, gaming, music, digital media and consumer brands.
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00:00Thank you, everyone. Thanks for sticking around. I know it's been a long day. We really appreciate
00:05you sticking with us and making this such a robust conversation. We've both had great
00:10– we've had great panels up here. We've had great hallway discussions, the hallmark
00:14of a great conference. And we are, as I hope you all know, we are the co-hosts since 2018
00:21of Strictly Business, which is a labor of love – thank you.
00:24Absolutely.
00:25Thank you. Thunderous applause. A true labor of love podcast that we do. It's a weekly
00:29interview and we, as we bill every episode, leaders in the industry of media and entertainment.
00:36And that is exactly what we have here today. This whole day has been just a delight, a
00:41treat for – both of us love to geek out on the future of entertainment and the nitty-gritty.
00:46And that's what I love about our events is we really dig into it.
00:49So we have a – so we're taping this. This will be a bonus episode. If I do my job right
00:55when I get home, it'll be out tomorrow afternoon. We're very excited about a quick turnaround.
01:00And we just wanted to start here by Andy and I chopping it up. This is what we do in the
01:07office and now we do it for fun on podcasts. But we're just going to chop it up a little
01:10bit on some of the stuff we've heard today. We're going to be a little skeptical. We're
01:14going to be a little, you know, cheerleader-y in parts and – because we do see green shoots
01:19even though we also – there's obviously a lot of headwinds in the business. And we
01:23have some very, very special guests. And we have a couch so we figured we're going
01:28to do a Tonight Show thing and bring some folks up and have a conversation. But for
01:32right now, let's just get right into it, Andy. And I will start with – I'll start where
01:37the day started with Adam Aaron, the CEO of AMC Theatre.
01:41The shy, retiring wallflower.
01:43CEO type. No, he has obviously been through a rollercoaster with AMC and the stock. I
01:49think everybody – we all know about the AMC stock drama. He's certainly very confident.
01:55He projected a great confidence about his company and the future of moviegoing. Obviously,
02:01you know, movies are the core of variety and we are absolutely rooting for that very important
02:06medium to thrive. But I have to admit, I was a touch skeptical. What did you think about
02:11what Adam had to say?
02:12Well, I think it's right for him to lean into the fact that the movies right now have come
02:18roaring back and that is good for his business and others. It's been remarkable when you
02:24compare the data from, say, the first quarter of the year, which was, I mean, flatline where
02:31people were like, the movie business is not going to exist much longer. And then the summer
02:35came and there was a few fall starts but it's been smooth sailing ever since. And here we
02:41are in fall. Beetlejuice, Beetlejuice doing great. So I can understand if Adam Aaron comes
02:46out here with some confidence, but I still, perhaps like yourself, feel like there are
02:52some long-term issues here where I'm not so sure AMC is not going to be out of the basement
03:01any time soon stock-wise.
03:04We looked and they're about $450,000. And that's a very low market cap for a company
03:09that has the reach and the footprint that they do. So it was very good to hear that
03:14their debt, he projected a great confidence about the debt, which was a huge issue. And
03:20I think that it was another good sign that you either file for bankruptcy or you don't.
03:25And speculation sometimes to the contrary, speculation about it obviously can be very
03:30harmful for a company. I always take note for those kinds of things when you hear from
03:34CEOs. But he sounded very proud to have escaped the Chapter 11, the trauma of going through
03:41even a reorganization. But I think he projected a confidence about moviegoing coming back.
03:48I think it certainly is a summer thing, but in terms of is it as a 12-month-a-year business,
03:55I think it is still not entirely out of the woods.
03:59But I did feel like so many people we heard from, Peter Safran, other people, there is
04:04so much energy and creativity and a sense that things that would have been hard for
04:08us to believe five years ago about will there be a future of moviegoing. At the same time,
04:13you and I wouldn't, you know, you and I would have been surprised 10 years ago to be talking
04:18about where the cable business is, the cable business that used to be the envy of television
04:22with its famous dual revenue stream.
04:24So how far we have dropped, things can change. Absolutely. Although I thought I found Peter
04:30Safran to be really interesting. DC, of course, has been in Marvel's shadow for such a long
04:37time. But here we are a week or two removed from the successful launch of The Penguin.
04:43And I'm feeling good about the hand that Peter is going to play. I thought that I got confidence
04:51watching that he knows what he's doing. And I'm looking forward to seeing DC gets the
04:57momentum.
04:58It's certainly you and David Zaslav, for sure. But it is interesting. We heard from Channing
05:03Dungey, chairman of Warner Brothers TV, an awesome, awesome executive. And she also it
05:07was interesting to hear from her. And then, Peter, that there's much more coordination
05:12and a much more more intricate plan for a true universe.
05:16Gee, I don't know where they got that idea, but much more of a true universe than it.
05:20We we remember, you know, Warner Brothers TV. It did Smallville. It did it. It worked
05:25more in silos. The films did not connect with the TV series and vice versa. Now that's going
05:30to happen and you're going to throw gaming in there. So it really is.
05:34And now I'm very confident that Warner Brothers Discovery is smooth sailing the rest of the
05:38way and their stock will just come flying back. You know, there's nothing Channing who,
05:44yes, is terrific, could say that is going to clear the let's say the confidence issue
05:51I have with the future of that company. There's so many other pieces of that puzzle that are
05:58really troubling, particularly on the sports side.
06:01It'll be interesting. Obviously, Q3 earnings are just around the corner. It'll be very
06:05that, you know, the green shoots, the indications for where Max is on its global rollout will
06:10be very significant. That is for sure. I don't think we have seen quite the end of things
06:15changing there. But I definitely from today got the sense that the studio, the Warner
06:20Brothers proper studio is revved up and they they have their plans and their targets. And
06:25now now it's about execution, which is you could pretty much say that about anything.
06:29But it is a very it is a very I don't want to drag this on because we have guests and
06:33we want to we also we are the thin line between the cocktail party. We so appreciate you guys
06:37hanging in there with us. I want to throw out one thing that I thought just throwing
06:41it out. There is so much interest in predictive markets, anything that can kind of give a
06:46window into where consumers, where trends are. And I something that I heard from the
06:51Pinterest executive who was on a panel earlier was Malik Ducard. Yeah, very. And a name certainly
06:57that is known in entertainment as well. He was talking about Pinterest predicts, which
07:02is something that sort of their predictive service where, you know, they have great visibility
07:07into what arts and crafts and people, you know, are they making, you know, macrame Taylor
07:12Swift paintings? Are they doing, you know, or has Charlie XCX taken over the you know,
07:17and that's just a small example. I mean, there are so many crafters on, you know, tens
07:21of millions. And it just just goes to show that anywhere you have audience and you have
07:26people congregating, you have data and data, data, data. That is the gold. That is the
07:32pot at the end of the rainbow that everybody seems to want. Absolutely. And obviously,
07:38that came through in the that came through in the Pinterest panel. It also came through
07:41in the generative AI panel that Carolyn Giardina presided over. Data is the new oil is the
07:49expression. And yeah, it was interesting to hear on the Pinterest side that that is useful
07:55information. But when Malik laid it out like that, I totally got it. I could see marketers
08:00kind of falling all over themselves for that. Yeah, there's a lot of interest there. Just
08:04real quick. I'm going to run through some things and we're going to bring up our first
08:07guest. I heard an interesting phrase that I hadn't heard before share of wallet, which
08:12is very interesting for a consumer direct to consumer subscription business can only
08:16imagine how they go about how they go about tracking that. But undoubtedly, AI tools will
08:21help us. Roblox, Roblox, Roblox. I heard Roblox mentioned a number of times. I think that
08:27is a clearly a platform to watch. Yes. Lots of incredible activations. I think even in
08:34the media business this year, Netflix, some other players, that is the hot platform now.
08:41Absolutely. Well, I think it's time we could we could go on, but I think it's time we would
08:46love to get some perspective. And I would like to bring up our first guest, Laura Martin.
08:52Come on up, Laura. Stairs right over there. Lauren, Laura, of course, is from Needham and
08:59Company, an analyst, peerless among and peerless and fearless, I should say, in her opinion.
09:07So let's just dive right in with her. Laura, I guess I would want to start with you were
09:14in D.C. recently, and it got me thinking about what the political environment is going to
09:24mean for the content business. I would assume there's going to be a very big difference,
09:30at least regulatorily. That's a word speaking based on which president we end up with in
09:36November, wouldn't you say? Yeah, I mean, I think that's true. I think that the current
09:41administration in the White House has Democrats at the head of the FCC, the FTC and the DOJ
09:48by law, because those are sort of agencies of the executive branch. And if Trump is elected,
09:54he will fire by law. He has to choose different chairman and therefore their agenda then takes
10:01precedence. So it is my opinion that if Trump is elected president, you will get more M&A
10:07activity, which would be good for the traditional Hollywood businesses because they need to
10:11merge because they're tiny and they have to. The only way to scale is to combine. Right.
10:16I would say that differently. I would say they're inherently growing low single digits.
10:21And when they combine, they can cut costs. They lay off people, but at least their earnings
10:26growth instead of like if they even if their revenue is growing three to five percent,
10:30at least their earnings growth can be 10 and 15 percent while they cut costs. And that
10:36makes it investable. And what do you envision? Should Kamala Harris be president? Does that
10:42mean regulatory ice? I mean, not going to happen. Yeah, I would guess that because she's
10:47sort of a Biden protege, she keeps a lot of the FTC, FCC and DOJ chairman in place. So
10:54we'll just have status quo. No mergers. Big is bad. It takes Amazon 14 months to buy MGM,
11:01which is a ten billion dollar acquisition for a three trillion dollar company in an
11:06asset they had nothing in before. So it just makes it hard on a lot of uncertainty to try
11:12to do mergers. And unfortunately, that's just going to put companies, more companies in
11:17the traditional Hollywood space out of business because Paramount shouldn't be independent.
11:22Fox is too small to be independent. A lot of these are just too small now, given their
11:26competitors are YouTube and Amazon Prime. Laura, given that you you primarily cover
11:31Google, Apple, you covered the companies with the biggest balance sheets in the world.
11:36How when you and you know, you know the entertainment marketplace well, you know, if you're Paramount,
11:43if you're Fox or even if you're Warner Brothers Discovery right now, what do you do?
11:48So one of the issues with the traditional businesses is they're over levered, right?
11:52Because of acquisitions. So they really ideally they could merge together. You know, ideally,
12:00as we know, distribution and content are complementary. So if Apple, which has distribution,
12:05could buy Disney, which has the ability to make content, that, of course, is fantastic.
12:11But to the extent mergers are not allowed, because big is bad, then what happens is basically
12:16these companies have to figure out a way to cut costs, cut costs, cut costs. But meanwhile,
12:22back at the ranch, public investors have opportunities like with gender day by driven assets that
12:28are much more interesting than the traditional media business.
12:31Do you think Tim Cook, if he could, would write that check today to buy Disney?
12:37So the issue that both Apple and Disney have are these cult cultures, which has a real
12:42not invented here problem. The answer is that what I think happens next with Apple is they
12:49have a library replacement cycle. I mean, they either the iPhone 17 or the iPhone 18
12:55have a super cycle, and then what happens to growth? So they have a big year, and now
13:00growth goes negative, because structurally we have like penetration of smartphones. So
13:05he then has to grow. Well, you know what a good way to grow is or grow engagement length
13:09is to own a film company or own a television company that's good at storytelling.
13:15So I do think, depending on the regulatory environment and depending on where they are
13:19in the growth trajectory, but Apple's doing nothing with Gen AI, which means to me they
13:23think making pink phones is a cool idea. And, you know, that's just not a thing.
13:28Wait a second. Isn't the new Apple 16 supposed to have a whole intelligence level to it?
13:33I mean, three or four months from now, maybe. And who knows what that means? Don't not launch
13:38it with the phone. It's not there yet. I know, but it will be there. And I think it will
13:43be a big deal for Apple. I guess we'll see. Oh, OK. Let me ask you, Laura, what is your
13:50sense? Apple, obviously, they've made inroads and they've made some significant impact with
13:55their content. They've had major hits like Ted Lasso winning Emmys. They've had some
13:59shows that really break through. But it's still the Hollywood sense is that it's still
14:03a very, very small business in the scheme of Apple. What is your sense of how Apple
14:08views content, the content that they produce? So they do 90 billion dollars a year of free
14:14cash flow and they spend two billion dollars a year on content, which means they don't
14:19care. And when you look at who they work with, it is the creme de la creme. Like they don't
14:24I don't think they care what Tom Hanks is going to do. They just know Tom Hanks is going
14:29to be safe and it will not hurt the Apple brand or Jennifer Aniston. They look at talent
14:34that is beyond reproach, that has the triple A rating that Apple has because they are deathly
14:40afraid of hurting their own brand. That's actually not a content business. That's a
14:44affiliation with an influencer that is got a triple A rating. But that isn't a mass business.
14:50I mean, mass businesses take risks like these this panel you just had. They're cutting edge.
14:55They're doing things that are actually broader and edgier to attract audiences, because that
15:03is the diversity of the global audience. So, no, they're not serious. Is there anybody
15:07out there that you think anybody in the in the traditional or the new entertainment space,
15:12anybody in the entertainment space that is really impressing you with their content?
15:17YouTube. YouTube is impressing me with its content because it's not with their content,
15:21with their their content strategy, I meant to say. You know, I like what Amazon Prime
15:26is doing, but of course, I focus on monetization. That's my day job. So I really like mine,
15:31too, that on the CTV frame, they're linking it to Amazon sales. Like, I think that's where
15:38advertising is going, that more and more we are not going to have proxies like like
15:44Samba TV or iSpot TV or or Nielsen. We're not going to have those anymore. We're going
15:50to have an ad linked to performance. So, of course, a lot of the Facebook ads are linked
15:55to performance. But now that's about to come to CTV or it is coming to CTV with Amazon
15:59Prime Video since January 24th. They're going to link it to online sales when Wal-Mart is
16:05allowed to buy Vizio. They're going to sell Vizio ads and link it to both offline and
16:10online sales at Wal-Mart stores.
16:12I would add, by the way, if Tick-Tock can manage to stay in this country, they will
16:18also be a player in this space. They're already showing some nice progress in terms of driving
16:24commerce opportunities off of the marketing that is on the platform.
16:28My pushback is Tick-Tock is not a CTV ad unit, which is a big difference. There's two dollar
16:34CPM units on a mobile phone and twenty dollar CPM units on a CTV.
16:38Right. But I'm saying there's a I think a broader commerce trend here that's broader
16:42than just CTV. And I think the social players are going to be a factor.
16:47OK. And I think you see that in YouTube. I mean, I don't mean that. I mean, Meta. I mean
16:51your news feed. You know how they're constantly trying to sell you stuff in the news feed
16:55for Instagram and Facebook.
16:57Absolutely. And I think all those players will be there. I just think Tick-Tock is taking
17:02it farther. Now they just got to stay in this country.
17:04Yeah. There's that. All right. Well, we're going to drill down a little bit more into
17:09content return on investment and who the pillars of this sort of new marketplace and how
17:17how we start, how we see the how how a top industry analyst sees the sort of pillars
17:24of the new streaming marketplace emerging. We're going to bring up our next guest, Hernan
17:29Lopez, who is an analyst and founder and CEO of Owl and Co. Research. There you go.
17:37We should also point out that he bought and sold a little podcast company called Wondery.
17:42So and the founder of Wondery.
17:45That's right. So no better person to get into this with.
17:48Hernan, can you talk you just this morning on Variety.com just posted a very interesting
17:53analysis of you've done a deep dive into some of into all of the numbers, the numbers
17:58that Netflix has released and others. And you've got some interesting analysis of how
18:02the marketplace is is emerging, but also some interesting R.O.I. analysis. Can you talk
18:08about what you what you have learned in all of your numbers, Crunchy?
18:12Yes. I started Owl and Co. with a framework called Streamonomics. It is essentially bringing
18:17unit economics into the new stage that the business is seeing of television making and
18:24remaking television and film licensing, marketing and merchandising. And what I mean by that
18:30is traditionally when I worked at Fox International Channels, we used to think of the unit as
18:35the movie, the television show, the hour of programming. But when I started Wondery and
18:40all of my investors came from the venture capital world, all of them had tech backgrounds.
18:45They really thought of the unit as the consumer, the customer or the hour of engagement. And
18:52as all the new entrants of large scale in the last years in the streaming world had
18:58been companies from the tech world, they've been Netflix, they've been YouTube, they've
19:03been Apple and Amazon. They all think with that unique economics framework. And that's
19:09I think is the adjustment that all of us in media need to make.
19:14So it's not just about bragging rights, your opening night numbers or your overnight numbers anymore?
19:21It is really about how to make the most out of each customer that you have and out of each
19:27hour of engagement that you have and how to get that extra hour of engagement for less.
19:33So the article that I published on Variety talks about the streaming for what I call
19:39the four core companies that are competing in streaming, that each of them have advantages
19:45that will be difficult for the other ones to replicate. And there are Netflix, they
19:49have the primacy advantage. They are the company that people think of first when they're trying
19:54to decide what to watch. They're YouTube and YouTube has what I call the urgency advantage.
20:01They are the place where people go for something that's trending right now and they have reach,
20:07they have format flexibility. You can watch from short form to long form videos, movies.
20:15Then you have Disney. Disney have the creative advantage. They have four core engines of
20:21great brands with their libraries and the creative engines in Disney, Marvel, Pixar
20:28and FX. And those are just the top four and no coincidence that they launched the last
20:33ten or the top ten biggest gross box office ever and they won 60 Emmys. And then finally
20:41I add Amazon to the mix because Amazon has what I call the marketplace advantage. They
20:47are the place that because of the connection between Prime Video and the fact that they're
20:52the biggest TVOD, the biggest video store in the world essentially, when you search
20:58any one title you're more likely to find it on Amazon than anywhere else. And because
21:02of their economic model, every time a customer engages with Prime Video they're more likely
21:09to spend on Amazon. That's half a trillion consumer business. So you can almost think
21:15of it as a marketing engine for Amazon and one that is going to become profitable on
21:20its own very soon.
21:22How do you think that looking at, rather than the numbers of the audience but actually sort
21:28of the quality and the size of your audience, how is that going to change the way Hollywood
21:33operates? The way people decide what content they need and what trends to go after?
21:39I think Hollywood and the media industry as a whole is going, obviously there's no secret,
21:44through a period of adjustment that comes from the fact that over the last five years
21:48there were so many projects coming into the market, so many television shows, so many
21:53movies and as a result each of them cost more to make and they're all chasing an audience
21:59that was growing but wasn't growing as fast as the cost of making all those television
22:04shows and movies. So we heard today in the panel where I think it was Sora Aubrey from
22:10Max that said that they're starting to think about making shows with longer episode runs,
22:15we're talking about procedural 15 episodes, that's partially because...
22:19Everything old is new again.
22:20Partially because you actually need to bring streameromics into every decision and that
22:27will impact not only the IP owners, obviously impacts the streamers, the streamers are the
22:31ones that are holding the purse string so to say, but impacts the IP owners even if
22:36you're a production house that is working on a cost plus model, you need to know what's
22:42going to maximize the chances that your show gets renewed and it gets picked up and then
22:46they call you again for the next show.
22:49Laura, when you hear, in your own research, when you hear things like the analysis that
22:55Ernan is doing, are there new metrics that you think that are going to be more important
23:02to the future of entertainment for whether it's discovery or deciding what companies
23:08go after?
23:09I love his idea that the four, like the four horsemen, I really like that differentiation
23:14of the creative, you know, the one that's competitive advantage is marketplace versus
23:18creative.
23:19It's a really interesting, I haven't read the whole piece, so I have to, but I like
23:22the idea.
23:23I do think Wall Street believes bigger wins and bigger accelerates growth and smaller
23:28doesn't have competitive advantages over time.
23:30I agree with that.
23:33I guess the question, I guess the issue I guess I would raise is are we defining the
23:38competitive field too narrowly?
23:41If we don't look at the Kardashians, which many people in this room might think, oh,
23:45that's trash.
23:46Well, to the people who watch the Kardashians, that's premium content, so are we too narrow?
23:51Are we forgetting Fortnite?
23:52Are we forgetting things that use time, that therefore siphons money away from these massive
23:57budgets that everyone you're talking about is the creme of the creme in this tiny little
24:02space called premium content, but premium content is under assault from user generated
24:07content aided by generative AI, which is lowering their cost to make content.
24:12And then Fortnite, the 15-year-old boys are gone, like they're all in video games and
24:16I don't know if they're ever coming back.
24:18And the 15-year-old girls are on TikTok.
24:20And the 15-year-old girls are on TikTok, which is not premium video.
24:22So I just worry that the four horsemen is sort of, you're right, but are you right on
24:28the scale that matters or is it just within this Hollywood, this bubble that we all live
24:34in here?
24:35Well, that's why I put YouTube as one of them because YouTube has really brilliantly executed
24:39a strategy of moving upstream in every single possible format that they can.
24:44Obviously they started as a platform on desktops, if you remember, then they moved on mobiles
24:50and then, and now they're one of the largest platforms for viewership on television sets
24:55and they really perfected that increasing format flexibility at the beginning was all
25:00videos that were three minutes to five minutes.
25:04Then people started to upload longer videos and even professional content you can find
25:09on YouTube today.
25:10People are uploading movies and television series.
25:13And then when TikTok became a threat to them, what did they do?
25:17They created a TikTok clone called YouTube Shorts and arguably more successful than TikTok
25:21in many respects because they have a business model that supports the creators and actually
25:27returns revenue share back to the creators.
25:29So I would push back a little bit and say, everyone ignored this company until they bought
25:33the Sunday ticket.
25:34Right.
25:35Once they got the NFL, every brand said, Oh my God, we, you know, we've always been on
25:40direct TVs, NFL, Sunday ticket.
25:42So they came over.
25:43That's when actually Hollywood took them seriously is when they got NFL rights, which are the
25:47most valuable rights.
25:48I don't think it's any of this other stuff you're talking about.
25:51Now they take it seriously.
25:53Maybe they should have, but now, now they're actually viewed a threat.
25:55Once they read her non's article on variety.com, it'll all be, it'll all be set.
25:59I can't believe it, but we have to surrender this room.
26:02I'm glad we brought up generative AI because we're legally obligated to mention it, but
26:07I really, we could, we needed a whole other hour to talk about that, but thank you all
26:10so much.
26:11I greatly appreciate you being here, greatly appreciate the audience hanging in there with
26:15us.
26:16Please, please look for Strictly Business, subscribe to it, listen to it.
26:20Thank you both so much.
26:22Thank you everyone.
26:23We are so grateful.
26:24Thanks so much.