🍿 2022-05-12 11:00:14 – Paris/France.
[MUSIC]
(SONG) When you walk into the room, do you have Sway?
kara swisher
I'm Kara Swisher and you're listening to "Sway". The past few months have been crazy for streamers and the media. There was a nasty battle within the AT&T, Warner, and Discovery deal that resulted in CNN Plus shutting down. Netflix bleeds subscribers. Vice is for sale, and of course you may have heard that Elon Musk is trying to take over Twitter. Here to talk about it with two of my friends, Matt Belloni, founding partner of Puck News, and Ben Smith, the former New York Times reporter who is preparing to launch a new startup called Semafor.
Welcome, guys. Thanks for coming.
matte belloni
Thank you for.
ben smith
Thanks Kara.
kara swisher
Costs. So we're going through this bang, bang, bang. OKAY? Bang, bang, because you are that kind of people. So Ben, let me start with you. Does this seem particularly crazy in the media space, or has it always been like this, and we hear so much about it on Twitter?
ben smith
No. I think there are these periodic spasms and moments of change, and we're in the middle of one.
kara swisher
And how would you characterize it?
ben smith
I think a lot of the forces that people have been talking about for a long time, a shift from trust in institutions to individuals, a shift to subscriptions, kind of the end of the social media era, are all really like the beginning to become real at about the same time. And people are trying to build businesses in a new moment, like many of us tried to do 10 or 15 years ago.
kara swisher
So Matt, talk a bit about where you think it is right now. You write a lot about the evolution of things. And it's interesting, because I read you religiously, and you go back and forth on a lot of things where it goes. So I'd love to get your high level idea of what's going on right now because it seems like it's all up for grabs.
matte belloni
Absolutely. If you look at what's happened over the last three decades in the entertainment business, there's been a pretty solid business model based on the linear cable business, and everyone knows that's not going to last forever . So over the last five to seven years you've seen all these legacy companies completely abandon their business model and chase these customers by Streaming, because Netflix was so successful in reaching 220 million subscribers worldwide.
So what happens when the business model you're pursuing is absolutely attacked by Wall Street? Netflix has lost about 70% of its value in the past few months, and there is a real sense of dread and anxiety around Hollywood. Oh my god, what have we done?
We've set aside a very good company to chase that bottomless pit of money it takes to compete in the global race for Streaming. What if the promised billion subscribers who are supposed to be there, thanks to the model Netflix, and if these do not materialize? Where does this lead us now?
kara swisher
But the old model was not particularly going to stick. That's like saying what about the print subscription, if that internet thing doesn't work?
matte belloni
I think it's real, and I think that's the problem, because nobody knows what to fall back on. You can't just go back to the cable business because everyone knows that ultimately it's not going to go away. The problem is that the cable industry still generates billions of dollars in profits every year. So there's this push-pull among these businesses, where they have this revenue generator, and they have this other business that they know they have to be in, but the other business won't be as good as the business current.
kara swisher
To correct. So it's this digital thing for analog dollars, but Ben, talk about this idea how you – because you're starting a media company right now, which is always a good time to start, in times of downturn, honestly. It's the old trope, basically. How do you see the idea that they don't necessarily have a business ready to go, but the old business won't come back.
ben smith
I mean, at the end of the day, you have to start with the consumers who are in this new place and who have been trained to get what they want on demand digitally, whose issues they care about, that is, say they are overwhelmed by choice and quantity. They don't know what to trust. These are new problems that cannot be solved by going back either. And so I think, okay, I think it's a really good time to start something, if you can really stay focused on what people actually want.
And I kind of think the other era that's ending is this notion that Netflix also embodied, that you just spend unlimited money, all you care about is growth. You make up for your losses on volume. I think if you start something now – and that's certainly true for us. I think that's true for Puck and a lot of other startup people – you think a lot about building a business.
kara swisher
It's correct. So let's talk about Netflix. Netflix has lost subscribers and expects to continue losing subscribers. Shares fell 35% in one day. It's really quite low.
What's the situation, Matt, in Hollywood with that? Because they were free spenders. Ted Sarandos was circling all over Hollywood. What is their situation now? Because there is also schadenfreude about Netflix, which I think is probably partly deserved. But at the same time, they liked what Netflix, which is changing the relationship between talent and studios.
matte belloni
Yeah. Beyond the normal schadenfreude you see when the outlet that's been completely overpaying talent for 10 years, picking executives one by one, doubling their salaries, getting them to this upstart that's been fueled by a stock market hoard and release the debt they just spent, spent, spent. The correction absolutely had everyone in Hollywood thinking, oh, see, maybe we weren't so stupid to have these other companies. But then they look at their own business and say, wait a second, our stock is also down, because we're all tied to that anchor. And if they sink, we all sink with them.
So I don't think there's a feeling that people want Netflix go bankrupt. It injects between $17 billion and $18 billion in spending into the content ecosystem every year. Even if they pull out, it's a huge, huge spender. So I think there's this love-hate relationship within the Hollywood community towards Netflix, where at this point Hollywood somehow needs to Netflix.
kara swisher
What do you think, Ben, of what this represents? Because I still believe in the model, the digital content model.
ben smith
Yeah. I just think there have been these distortions that have come with massive amounts of private capital, public market capital flowing into the companies of Netflix to taxis, and which, among other things, subsidized all of our lifestyles and also subsidized elements of our – especially if you were in the studio of our businesses. And it's streamline and walk away, and there's a lot of math on all sorts of things, from the price you pay for an Uber to the studio revenue that you should expect as a media company that, I think, will have to readjust.
kara swisher
That is, up and down, because Ubers are now expensive and –
ben smith
That doesn't mean these things are fake companies or that you're going to start standing on the street again hailing a cab. I mean, I think there's often an overreaction in those times too.
kara swisher
So when you look at something like Netflix, what replaces him, first Ben, then Matt. What is that? Apple happened, they bought “Slow Horses”. They seem to have some momentum and endless money.
ben smith
I just think – and Matt is much wiser about that than me. But it just seems like the old realities of Hollywood being a successful business, where you watch shows that you're obsessed with because the creation is great, ultimately recoups a lot of Netflix, it's smoke and mirrors. And HBO Max, which had the worst launch imaginable, whose technology is still totally unusable, has better content.
And so I force – and I think a lot of other people force themselves to watch this. And finally, they will figure out how to operate a video player. We're not talking here about sending people to Mars.
kara swisher
Yeah, it's been a while. What do you think, Matt? Is it Apple? But you didn't mention Apple or Amazon, which have a lot of money.
ben smith
No, and I think he'll probably keep spending, but I guess I'm just going back to the truism that this is ultimately a content company and not a tech company.
kara swisher
Mast?
matte belloni
Yeah. There are two things about Apple and Amazon. First, they have no real accountability or even business model around their content. I mean, it's been purely – I don't mean a vanity game, but it really is. I saw Eddy Cue and Tim Cook at the Oscars, at the Governors Ball, right after the show, when they won best picture, and the expression on their faces was that we were in on it. We are gamblers now, and like that, drunkenness is very powerful.
It's also very dangerous, because it keeps people in companies that aren't necessarily big companies. And Apple has spent hundreds of millions of dollars on content. Do they get a return? They seem to want to spend more. We do not know.
In the end, they may be playing the long game, saying we have an assessment that no one else can top. So we're just going to spend to be the ultimate winner in this space. Hollywood loves Apple right now because they're spending like Netflix was spending. They buy all the big packages.
kara swisher
With a little more respect. To correct?
matte belloni
Yeah, and they're trying to be HBO. They're not trying to be CBS, which Netflix was ultimately trying to be. And if they can spend, spend, spend to become a version of HBO for the digital age – they're not there yet, so that's –
kara swisher
Yeah. This is exactly where they actually go.
matte belloni
The second thing is that the real winner – Apple and Amazon are trying to become the gateway for all online content. They want the interface to be not just where you go to watch Apple TV Plus and “Severance” or “CODA”. They want you to go there to get any channel, any movie, anything on the internet.
And if you're going there to rent pay-per-view or go through another network, whether it's HBO or whatever, that's the ultimate goal. Because those two, unlike the other contestants in the media right now, those two are the distributors. These are the platforms. And ultimately, the platform is where the real value is for these companies.
kara swisher
Yes, which has long been the weakness of Netflix. I always thought they should have been bought by one of them. But what does it mean that Netflix add an ad-supported level, which they said they would never do, Ben?
ben smith
It's just a reminder that these companies, the idea that people have principles about where their income comes from is ridiculous…
SOURCE: Reviews News
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