(soft music)
- [Batia Wiesenfeld] I would like to welcome everyone
to the latest edition
of the Stern Faculty Insights
virtual seminar series on COVID-19.
We have some really good stuff coming up,
although nothing as
good as today's session.
For next week, on
Tuesday we have Ed Altman
talking about COVID and the credit cycle
and then on Friday,
John Height is going to be joining me
to talk about positive psychology
and sort of how we can all
feel better in this context,
what lessons we can learn
to feel better in this crisis.
But for today, I have
the director of Stern's
Entertainment, Media, &
Technology program, Paul Hardart,
who is going to be able to talk to us
about what Coronavirus means
for our entertainment,
media, and sports industries.
And so welcome, Paul.
Just a reminder to everyone
to please go ahead and lodge
your questions in the Q&A box.
You're welcome to put questions in there
even while Paul is talking
and after his presentation is over,
I will put those
questions forward to Paul.
So thank you so much for joining us, Paul.
- [Paul Hardart] Well, first of all, Batia,
thank you so much for doing all these.
I really appreciate it.
I also wanna thank Rebecca
and Rachel and Paula
and also Sergio for
helping us technologically.
I really appreciate it.
I also appreciate
everybody being here today.
I know it's a strange time.
So I was just gonna go
through sort of looking
at the pandemic through the lens
of entertainment, media, and sports.
Obviously there's a lot of sadness,
a lot of tragedy out there,
and, you know, I think if there
is a silver lining in this
I think it sort of emphasizes,
at least for me,
how so many of all of
us are interconnected,
not just in the United
States but globally,
and also how a lot of our
economy is interconnected
and how something happening in one place
reverberates across other
elements of the economy.
And, you know, we're seeing, again,
which is in a nice way,
we're recognizing the
value of service workers
and hospital and responders.
So I think those are sort
of some of the things.
And also sort of coming up
with a solution or a vaccine,
it seems to be a global agenda.
And a nice thing, to me, sometimes
about entertainment and media
is it is also a, you know,
they're storytelling,
sports are global enterprises.
They get outside of politics.
You know, we all were aware this year
that "Parasite" won the Oscar,
the first time a foreign
language film has won the Oscar.
And again, because it was a really,
it hit the zeitgeist
in an interesting way.
And again, as we stream stuff, we start to
you know, all of us, I think,
are watching things from
other parts of the world.
So I think maybe coming out of this,
there may be some good
stuff that comes out of it.
To that end, I also think
that what we're gonna see
in entertainment, media, and sports
as well as in other industries
is trends that were happening
are maybe just gonna be
accelerated through this.
So the pandemic, to some degree,
will serve as an accelerant
to, say, things that maybe
were already happening.
There's a famous Hemingway quote of,
"How do you go broke, is
gradually then all at once."
And I think we're seeing things,
some of these trends that were
sort of gradually happening
and then the pandemic
may be the accelerant
that makes things happen all at once.
This is March 1st.
This was the Tokyo Marathon.
Again, it seems like a
very, very long time ago.
It was really the first step they took
in terms of,
they just had the 200 elite runners.
There were no spectators.
There was usually about 30,000 people
participated in the Tokyo Olympics
and that was March 1st.
Seems like a long time ago.
For context, Mardi Gras,
which a lot of people feel
was sort of the source
of the spreading of the
virus was on February 25th,
so just a few days earlier.
And I think a lot of you
also have heard the story now
that because the Chiefs beat
the 49ers in the Super Bowl,
that maybe averted a lot
of spreading of the virus
because there was no celebratory parade
in San Francisco.
Had the 49ers had a celebratory
parade on February 5th,
that might have also sort of...
So some of these things
that seem unintended
kind of connect in interesting ways.
When we look at media,
I do this with students as well,
is the baseline,
any kind of media, at the end of the day,
is some form of content.
And that can be a movie,
that can be a TV series,
it could be a book, it
could be a magazine,
it could be a song,
it can be a cat video,
it's some piece of content
that's trying to find an audience.
And then we go, generally, you know
you need the distributor, obviously.
We can all create our content now
but it has to be compelling.
So distribution is the way
that we reach audiences.
And what we're seeing is the
organizations or companies
that have that direct
relationship with the audiences
are the ones that are faring well now.
Obviously that would be Netflix, right?
They have a direct relationship
with its customers.
Amazon, the same way.
Weirdly, you would think
that sort of a fabled company like Disney
would have those direct relationships
but, oddly, they don't.
Disney, if you go see a, you know,
when we went to see movies,
if you went to the Union Square Theater
and saw a Pixar movie,
all Disney really knew,
you know, maybe some data,
a little bit from the theater companies,
was that somebody bought a ticket.
They don't know the age, the demographic,
or anything else about that individual.
Obviously Facebook, Google, Netflix,
all have a lot of information about that.
So the companies that did,
the other thing you're seeing
in terms of the content flow
is, you know, you can think about it,
we hear a lot about supply chains
you know, being disrupted by the pandemic.
Well, the supply chain of content,
there is no new production
really happening
so there isn't any new content
coming to feed these
distribution apparatuses.
And so what you are seeing
is the core organizations that
have a deep content library,
obviously those are the
sort of legacy studios,
and places like Amazon and Netflix.
What we're also seeing, though,
is user generated content,
social media content,
people turning to that.
It's got an endless supply.
I think someone's since told me
that YouTube has about 48 hours of content
uploaded every minute.
I mean, it is an unbelievable
amount of content.
And so a lot of younger people
are turning to social media or TikTok
or YouTube or Instagram Stories
to get their content.
This is from yesterday.
This is just looking at,
sort of emphasizing that
point I was just making,
is you can see here the Netflix stock
just hit a 52-week high.
Disney has been hit pretty hard.
If you think, and look at the Disney.
And again, Disney is a very
diversified, global company.
However, it's diversified in ways
that have been hit
directly by the pandemic.
Theme parks, cruise lines, movie theaters,
no one's going to see movies,
sports, ESPN.
I mean, if you think of ESPN,
there's, I think, six channels of ESPN,
24 hours of sports,
and there are no sports.
So how do you feed that?
And then lastly, you
can see the pink line,
that is Viacom,
and Viacom and CBS were the same company,
then split apart
and then just came back
together last August,
and you can see how that
has manifested in there,
the amount of value that
has been lost with Viacom.
Viacom, I think in August,
when they were coming together
were valued collectively
ballpark about $30 billion.
Today, it's closer to about $12 billion.
So you can think about,
the total value of CBS
has effectively evaporated
in the last eight months or so.
Now, they also have their
direct to consumer product
that's called Pluto, which
is an advertising thing.
So they may figure out ways
to move forward as well.
24 hours in a day, we sort of think
there's 24 hours in a day
now in the pandemic,
you know, who knows, it just seems like
maybe one long day we're
living in I don't know.
But we all are sort of
used to the 24 hour day.
And so when you start to think about
that seems like the outer limit
of how much content you could consume.
But prior to the pandemic,
that sort of thought was we're, could have
coming to what was known as peak media,
and kind of remarkably is,
we all collectively we're squeezing
about 31 hours of activity into a day
because we're spending
All this time multitasking
12 hours on average, we were watching,
you know, interacting
with media and technology,
you know, compared to
about seven hours of sleep
and just five hours work.
And again, we all know that if
you walked through an office
or you know, a cubicle farm,
you'll see lots of people
that are on their screens
or on social media
or something, you know, watching a video
that a friend had sent them.
I did a chat with students the other day,
young they were they
were 18 or 19 freshmen
and I asked them just sort
of more during the pandemic,
what, how much time they're
spending on their phone,
and they all looked at their phone,
you know, if you can
track it on your phone.
The average was 12 hours,
this is just phone time.
One woman with 18 hours,
she was averaging 18 hours
a day of just phone time.
So that's not including TV
or gaming or anything else.
So you know, it is a remarkable amount.
And again, these companies,
these algorithms are set up
to sort of get your attention
and hold on to your attention.
This is just a chart.
I always like this chart as my
students see it all the time.
And it's just sort of a
kind of perceptual map
of the various big media enterprises.
And it reflects quite a lot of M&A
that's gone over the last several years,
you have AT&T bought Time Warner,
Disney bought Fox, Netflix,
Comcast bought Sky,
Verizon you know had bought Yahoo and AOL,
CBS and Viacom came back together.
And then sort of on the side
there you see sort of waiting,
are Apple, Google, Amazon, Facebook
they sort of being in, sort
of have put toes in the water
but may come in.
And I think sometimes particularly
when I talk to students,
it's easy to sort of lose track.
This sounds like just deal flow
and kind of removed from
our day to day lives.
But the truth is, this deal flow really is
all about our habits.
It's all sort of jockeying for position
of how we are going to
consume content going forward.
We all carry our phones with us
which are, you know, they're
not even really phones,
they're just computers
that we carry with us.
There's screens that we have,
there was a statistic that Netflix
12% of Netflix users consume
Netflix in public bathrooms,
which is a weird statistic
but what it reflects to some degree
is that we are taking
our entertainment with us
it's portable, we need it so
and then the use of data is
gonna become really important.
Also, in this sort of jockeying around
you've seen jockeying
for executive talent,
various companies, poaching,
there's been lawsuits,
and then also for creative talent.
So you've heard a lot about,
you know, The Office
being pulled from Netflix,
Friends being pulled from Netflix.
Then Netflix is poaching
Shonda Rhimes, and Ryan Murphy.
So there's a lot of jockeying
for who's gonna have that calm
and it gets back to that concept
of its distribution and content.
Those are going to be the two things
that drive the success of
these businesses going forward
and scale to some degree.
So going back to the idea of acceleration
or accelerant of the pandemic
cord-cutting, cord meaning people
who are cutting the cable cord
has been kind of accelerating
over a long period of time.
And most reason you know the rationale
that has given most times
that people have cable
are for news and sports,
you love the Knicks, you
love the Green Bay Packers,
you love the giants,
whatever your team is,
most people that have
cable is for live sports.
And that sort of explains
why the value of these
sports rights are so high
because one they're live, right?
So you can't, you're not
really gonna be inclined
to have an ad blocker
or watch a time delayed.
You know, if you're going to watch a game,
you're gonna watch it live
therefore you're probably
going to sit through the ads
so you have to have your focus.
But as there is no sports going
on, and cable is expensive,
you'll start to see perhaps
that this accelerate this
accelerates over time
and more and more people
start to cut the cord.
One student of mine was saying
she was with her parents
and she finally got them to cut the cord.
They got YouTube TV,
which is Sort of a skinny
bundle version of TV,
it's much cheaper it's $59 compared
to CableApp, cable fees
can go up to $100, $200
in your plan paying for that
monthly fee to carry the box.
So we'll probably see
cord-cutting speed up
and in that we also might see
one of those big companies
like an Amazon and apple or
even a, probably not a Netflix
bid on some of these
expensive sports, right?
Like the NFL and the NBA.
We've also seen over
the last several years
movie attendance has plateaued,
you'll hear about Box Office going up
that's really just a
function of the ticket price.
But the actual people going to the movies
has been plateauing for several years
and is forecasted not surprisingly
to drop this coming year.
A lot of that is because
it's expensive to go to the movies
you know, it says in New York
City, it's about $17 a ticket,
use a family of four,
it gets you get popcorn
and expensive sodas, you know,
becomes a fairly expensive proposition
when you juxtapose that to the alternative
where you can sit at home,
watch a show, make your
own popcorn and stream it.
You know, at your own leisure stop,
go to the bathroom,
whatever you need to do.
This is the Box Office from last weekend,
a whopping, what is it?
$31,000, so people aren't
going, theaters are closed,
people aren't going to the movie theaters.
You can see these are just all
the messages on the marquees.
I particularly like the
one in the middle here.
It says, I assure you we're not open,
which I guess there's people coming up
and knocking on their door.
But heartbreaking because
the theater companies
were having a hard time
Anyway, a lot of debt,
people weren't going there as
frequently as they used to.
And so they were having
challenges nevertheless,
and again, I think the
pandemic may accelerate those.
Just announced today that AMC got a
$500 million credit facility
which will give them a lifeline
and I think Donald Trump
also announced today
somewhat of a plan of
how they're gonna start
to reopen the economy.
And he put movie theaters
and elective surgeries
in I think even schools under
the category of Phase Two.
Sports with fans would be Phase Three,
but sporting events
without fans may also be part
of that Phase Two scenario.
So, when you look at film,
the way film makes money over time,
and this is sort of expanded over time
was the
windowing approach, right?
So the idea is
you would charge different
prices at different times.
This is sort of your
traditional distribution windows
where movies were released in the theater,
where you pay the most, right,
you, it's a transactional experience,
you go you pay $16, $17
you get to see it once.
Then thereafter there
would be non-theatrical,
which is like prisons and military bases,
airlines, we've all experienced that,
Home Entertainment would be
like the DVD or the VOD rental,
pay television would be
your HBO, Showtime, Epix,
network TV, ABC, CBS, Fox, and NBC
and then syndication where
we sold individually.
And that could take
eight years that cycle.
And you could replicate that same thing,
internationally in every territory.
So, the deal structure of
films can get kind of complex
where you can sell the
Pay TV Rights in France,
and then Home Entertainment in Germany,
like you can start to parse things
in lots of different ways.
But what we've seen
over the last few years,
is these windows are
starting to collapse, right?
So the idea is,
it used to be you release
a movie theatrically,
and then you'd rerelease
it as a whole new product,
maybe 12, 18 months later
as Home Entertainment.
Those have come much tighter now.
And so the idea of waiting,
a lot of us will say,
you know, I can wait till it's on Netflix,
or I can stream it at home.
And here's just a representation of that.
So you can see, how these movies
and again, it's gone over day.
So if you look at the average in 2016
you can see it was three months 16 days,
2017 it came down to three
months 11 days which is saved
and then days and what
now what we're seeing
and this just happened
over the last week or so,
is that window is being
formally punctured.
So the theater owners are very,
very much have been protecting
this theatrical exclusive window
and that's kind of if you recall
from around the late end of last year
the movie "The Irishman",
the Martin Scorsese movie
was a Netflix movie,
was really you know, is that
three and a half hour film
and to famous director of famous actors
Netflix put it in theaters,
but none of the big theater chains
AMC and regal would carry it
because Netflix didn't
want to abide by these
this three month window condition.
So Netflix was unable to
release it in most theaters.
So they actually bought,
rented out the Belasco
Theater here in New York.
They also put it in the Paris Theater
which they subsequently
did a long term lease
for future projects and
they also did in California
and at "The Egyptian" in Los Angeles,
the idea was Netflix's business model is
"See it when you where you wanna see it,
"how you wanna see it,
when you want to see it."
And in the movie theaters
are no, we want an exclusive window,
that's the only place you can see it.
And now we've seen just last
week, following the pandemic,
the "James Bond" movie was supposed
to come out last on Easter,
and then MGM moved it to Thanksgiving.
Universal then had this movie "Trolls"
a sequel to the first "Trolls" movie,
and they moved it to the Easter weekend.
But then as the pandemic sort of deepened,
they realized they were just
going to release it directly.
So last weekend, Universal
punctured a formal hole
in the theatrical window.
So they released this
movie "Trolls World Tour"
reporting it was a record number,
hard to tell because
it's not really tracked.
But you know, self-reported
it did incredibly well.
It's for 1999, you get
you know, you have 48 hours
to watch it once you start it.
They also took the movie
"The Invisible Man"
and moved it faster into
the theatrical window.
And it's funny even in the wording here
you can see in-theater rental,
it's not actually never in theaters
'cause there aren't any theaters open.
And same thing they did with "Emma",
which is a focus film,
and I still believe.
And again, like I said,
I think you're gonna see this acceleration
or this faster move into this.
So how are people spending their time
while they're streaming, right?
And sort of probably, is born out
in a lot of our own behavior, right?
We're spending more time streaming
just even over the last several weeks,
and this is till March 15.
You can but imagine,
as we get a little more
comfortable in our home life,
we're streaming yet more.
And then obviously the
subscription gross is growing
and it starts to show you
the power of a subscription
relationship is,
you don't have to sort of
draw people's attention
to get them to leave their
home, go to a theater.
It's like the basically the deal is
we'll give you some good content,
you pay us a reasonable amount of money
9, 10, $15 a month,
and we'll just serve you stuff up
that you can watch when
you wanna watch it.
And like I said Disney,
Disney now is moving
aggressively into that direct
to consumer relationship with Disney+,
they reported last week they
have 50 million subscribers
which is a very big number,
Quibi which is the Jeffrey Katzenberg
short form video content
just came out last Monday
and HBO max which is coming out in May
and then Peacock which is NBC's version
of a direct to consumer relationship,
they were planning on the Olympics
to be sort of the the galvanizing way
to launch that service.
Obviously the the Olympics
were postponed to next year.
So Peacock, again trying to
seize on the people being home
is moving to an earlier date.
Right now if you're a Comcast subscriber,
you can get it amid as of today,
or you know, as of this week.
Other things we're seeing,
you know, we're on Zoom,
same thing, you know,
virtual classrooms is something
that has been talked
about for a long time.
Now everybody's doing it
because the pandemic has accelerated.
Same thing with telemedicine
things that people talk about.
TikTok is another hugely downloaded thing.
And TikTok traditionally
has been for teenagers,
you know, even college
students weren't doing it.
But increasingly, that's something that
I've had students tell me their mothers
are sending them TikTok videos
from all over the world,
I mean, so the pandemic
is changing our behavior
and maybe accelerating us towards
trends that we might have been embracing
over a slower process.
News apps have also been
downloaded at a very rapid rate,
again, people concerned
about what the news is,
and following that.
And then this other trend
that we've been seeing,
and again, not surprisingly,
is this shift towards digital advertising.
And the alarming thing is
about 75% of all digital
or online advertising
goes to two companies,
either Facebook or Google,
increasingly Amazon's in that mix.
And one of the things that
might be a bad outcome here is
that some of these smaller players
are having troubles, right?
Because advertising has taken a hit.
And the odd thing in in the media world
is TV ratings have never
been higher, right?
'Cause people are home.
But there really isn't any, the CPMs,
or the cost per thousands
to advertise, have come down
because there aren't any
companies really advertising,
automobiles, you're not,
well no one's gonna be buying a car,
you know, personal products
and stuff like that.
So the advertising has come way, way down,
and therefore, and that's
even going to affect
the BMS like Facebook and Google.
But you what you might see is
some of these smaller players
not make it through this process,
and some of that, the
advertising they were getting
would accrue to the benefit
of these large companies
like Facebook, Google.
Local newspapers or under siege
that's been happening for a long time.
People don't really need it
and confounding that has been the fact
that local newspapers oftentimes rely
on restaurant ads, live event ads
so there are no live concerts,
obviously, restaurants aren't advertising
and so you're seeing that the pandemic,
though people are consuming more news,
there's very little advertising.
And that's really
and again, going back to
my point at the top of
the interconnectedness of things is
that restaurants closing
you wouldn't really think
would have an impact on newspapers,
but that's where their
advertising flow is coming from.
So this is a sort of a tragic side of it.
Ben Smith, who's a media reporter
for The "New York Times"
has argued that we should
bail out reporters,
but let basically let local newspapers go
and let journalists sort
of reconfigure themselves
in a digital space.
So almost sort of concede
that the world is moving on
without local newspapers.
And we should support journalists
and how they can sort of flourish
maybe online in a new way.
This is another trend that we've
been seeing not surprising.
This is the vast amount of data
that is being collected by companies
and that's but accelerating
and that's gonna be an important part,
same thing for companies like Disney
and like I said, they don't
really have that much data
as they start to move
to the direct consumer
with Disney+, ESPN+, they're
gonna have more data,
they're gonna be able to sort of
target ads more effectively
and also ideally understand
what the consumer habits are
and consumers desires are.
5G is rapidly coming online.
And again, the main benefit
for 5G is also going
to sort of improve the
home viewing experience
and also for things like
gaming, or your driverless cars,
is it removes that
problem of latency, right?
If you're a gamer, and you're, you know,
trying to sort of do some process online,
you don't wanna have the
little spinning thing
same thing obviously in driverless cars,
you wanna be clear that if
that thing in front of you
is a bus or human being
you wanna understand it.
So latency will be one of
the big advantages of 5G.
And so yeah, this is just a
survey of asking sports fans
of when they think things will go back.
You know, not a lot of people think
is gonna be in the summer.
It's starting to seem, like I said,
we just got a report this morning of
Donald Trump sort of plan to
open the government again,
or open the economy.
But a lot of people are
saying they don't know
and it's going to be after December,
which is gonna have a
huge impact on sports.
So how does sports sort of
focus on this going forward?
Well, ESPN last weekend
did a rebroadcast
of the masters from last year,
but they did it sort of live
with Tiger Woods going through
every one of his shots.
If you're a golf fan,
that's fairly compelling,
because he's talking about it was
an inherently exciting masters.
But you can only do that so often.
So they're rebroadcasting
old classic games.
They're now playing HORSE,
which I don't know if you watch
it, it was pretty terrible.
It didn't really work.
So you know, but you
have to give them credit.
They're experimenting same thing
with the late-night talk
shows or news journalists
or reporting from home
and I think you will start
to see new ways of doing reporting
new ways of providing entertainment
and so there's different
ways of experimenting with
but God bless, you know,
ESPN, they've got 24 hours
to fill on six channels.
So HORSE seem like is good
enough answer as possible.
In Taiwan, they're putting
robots in the stands
to sort of, and there're
also a lot of talk
of maybe creating like a bubble
where only the athletes will play.
Keep in mind that the
real revenue generator
of most sports is the
broadcast and the media rights.
So though you want fans
there to sort of increase
the excitement of it,
and that is a lot of money
being able to sort of have
stuff that you can broadcast
will be important for
sports going forward.
There's also the trend of Esports, right?
Which has been growing on rapid basis
eSports if you're not familiar with it
is watching other people play
sports, so you're on Twitch
and you're watching other
people play video games,
so Fortnite and you know, I sort of
when I first heard about it,
I thought it was sort of insane
but the truth is, it's a skill
just like putting a ball
in a hoop is a skill
or hitting a little, you know,
white ball down a grassy,
you know, green, so it's a skill,
they're very good at it
and they're fans
and if you're a millennial,
you're really into it
more so than other traditional sports.
So again, if you start to
think of the acceleration,
people are home, they have
time there's no other sports
to sort of defray their attention
and as 5G comes on, at least eSports
will get even sort of more interactive.
So it does seem and I don't
know if you're familiar with it,
there's even colleges now
giving eSports scholarships,
there are franchises being sold,
so again, we are in a new world of this.
So where do we go from here?
There's, you know, there's no clear way
we're going, like I
said Trump has come out
with his recommended plan.
Here Zeke Emanuel, who's
a doctor a bioethicists
and his prediction is that,
you know, it's gonna take a long time
before you're gonna
start having conferences,
concerts and sporting events again,
because I think most people
are gonna be a little leery
of going to a place where
there's a lot of people.
The main reason I also use Zeke Emanuel is
he's well known as a bioethicists,
he's fairly outspoken,
he was involved in the
Obamacare initiative,
but he's also the brother of Rahm Emanuel
the former mayor of Chicago
and more notably Ari Emanuel
the head of William Morris Endeavor.
William Morris Endeavor
planned to go public last year
their public, their IPO was scheduled
the day after Peloton went public,
Peloton's underwhelmed in terms of its IPO
so the William Morris
Endeavor IPO was pulled,
they have a lot of debt
and again, I think this
is more of a reflection
of a lot of these media companies
as the companies with a lot of debt
are in somewhat of trouble.
IMG also, I mean, excuse
me, WME is a obviously
large talent agency only William Morris,
but they also own IMG,
the huge Sports agency
that they bought,
they also own Ultimate
Fighting Championship,
which is, you know, live sporting events
and also Pro Bull Riding,
so Professional Bull Riding.
So Zeke Emanuel's comments sort of go
right against his brother's
own interests as well in this
so it should get someone
interesting in that regard.
But I guess the main takeaway
and again, there's no
right answer is to me is
humans have been creating
art-telling stories,
sharing news, creating
music for, you know,
we learned only recently that
Neanderthal are creating art,
it's 1.8 million years ago.
So the need for storytelling
music entertainment
is not going away.
That is a human thing
and it is a nice thing about the pandemic
and that we can start
sharing stories maybe at home
and we're experiencing
stories from around the world.
But to me, that's not likely changing.
There's just gonna be
new ways of doing it.
It seems like the companies
that have that direct
consumer relationship
in a decent enough library of content
may be able to succeed this.
And last thing I'll
just show you and again
this is maybe a little too metaphorical.
But I remember being at
a national park a few years ago
and the park ranger talks
about how there's these
kind of strange plants that
the seeds are only released
at extreme heat of a fire.
So when there's a forest fire,
that's the only way
they're seeds are released
so they're in these cones
that are have resin,
and then they need the extreme
heat to release the resin.
So the point being stuck
in a metaphor would be that
this is a, what's it called
the lodgepole is that,
there is this pandemic
and a lot of the trends
that were happening
are accelerating and we're
going into this new world
but I do think there are
going to be new businesses
or new seeds that are launched,
a new ways of telling stories,
or communicating or sharing
whether that's TikTok,
whether that's eSports
or some of these legacy
things that have been around
as a pivot to sort of our new habits,
but those are my main comments.
Obviously, you know, we
could go on and on about this
'cause it's, you know,
it touches our lives
in all sorts of ways
but I'd love to hear your questions.
But again, Batia thank
you for your time with us.
- Thank you, Paul.
I have a couple of questions,
you touched on so many different things.
But one thing, one industry
that you didn't address
directly was music.
And there's a lot of,
there's a lot of money in
the live music performances.
So that seems like
something that's going to be
that's certainly under
threat in the short term.
Do you see any changes
in the music industry?
Or do you think that
they're going to be buffered
from the impact of this crisis?
- No, not bothered at all.
I mean, you make a good point.
I should have brought that up.
So, you know, music has
changed over the years.
For a long time the way
the music business work is
you could make your
money through publishing,
you can make your money
through sort of selling the mechanical,
their recording rights
and then lastly was live
and live with the purview of the artists.
That changed somewhat recently
where the other rights got
a little less remunerative
and so when they moved in
this world called 360 deals
where all those rights
and so live is become
a really important part
of most musicians lives
and things like Spotify,
are generally ways of spurring awareness.
You know, most artists will tell you,
they don't make a lot of money
unless you're a superstar.
And the challenge is,
and this is true throughout
the media spaces,
the very, you know,
when we think of music,
we oftentimes think of
the very famous artists,
but the truth is, for most artists
and most journeyman
artists that are working,
these live performances is
how they make their money.
And so when some of these
big events are canceled,
it becomes really painful
so it is not removed from it.
The artists that again, I
think going back to "The Pivot"
is a lot of these musicians
are coming up ways
of fostering or deepening
that direct relationship
with their their fans
using things like TikTok and Instagram
to figure out ways to relate to them
but it is a huge impact on most musicians
as where most of their
money today is coming from,
particularly outside of the superstars
is from live performance
and so it is a huge impact.
And that's a good question.
So I guess one person asked here
about the idea of how this
changes expectations
for over the top launches
during the pandemic
Quibi, Peacock and their life cycle
is gonna be drastically different
compared to past launches.
The challenge and again, I
think you all can hear me,
the challenge for a lot of these
over-the-top services
that are launching is
even Disney+, I have
Disney+, I also got Quibi
is what's known as churn
is that we're gonna get it
and then we're going to
watch it, engage with it
and then get rid of it at that moment.
So the the challenge is going
to be for things like Quibi.
They don't have a very
deep bench of content.
There's no new content,
they can feed that in.
So I got Disney, I mean, I
got Disney+ through Verizon.
So I have one year
and the question is I don't really use it,
I don't see the utility in it.
So that's gonna be the challenge
for a lot of these companies,
HBO max of the churn
of people getting it, getting
the introductory free trial
and then watching it and
then getting something else.
And let's see what else here.
One of them, is Dr. Emmanuel
and sports with crowds
is not ready until September 2021.
That's a good question,
that's from Len DeLuca.
It's a huge question.
And I think you know, a lot
of sports teams and leagues
are looking into ways that they
can get the season going.
It may be different, same
thing with social distancing,
or they've even talked about having
Major League Baseball start in Arizona
with all the players
and testing the players.
But none of it is as easy as it sounds
like having them almost in
like a little bubble biosphere
where they would just play and
almost for our entertainment,
but it's complicated
'cause there's nine players
on the baseball team at any one time,
there's huge staff, there's filming crews,
they're all gonna go home
and so it does get complicated
and how that will
actually practically work.
Here's another question from
Megan, who's an MBA student
is given the movie theater
business was already in decline,
do you think it will survive the pandemic?
Great question, like I said before,
a lot of these movie companies are saddled
with quite a bit of debt
and the trend wasn't going in their favor
and they've triggered that ways,
same thing with like these other companies
that have direct relationships,
so AMC having a subscription basis
or subscription relationship
going forward, I think you are gonna see,
keep seeing movies
and this was predicted a long
time ago by Steven Spielberg
and George Lucas that movies may start
to be something that you do
on a less frequent basis,
but for more money,
so you make may go, maybe
more like a Broadway show
where you pay $85 to go see " Avatar 2",
and it's an outing,
it's a whole experience
versus going to see,
you know, some romcom
that you might have, you
know, you could just watch
as easily at home.
- So do you anticipate that the crisis
is gonna lead to changes in pairings in,
you touched on the new launches
and so whether there
would be some M&A activity
as a function of this
and I guess Scott Galloway
apparently was recommending
that there might be some
devalued sports franchises,
sports oriented franchises and do you see
that as an opportunity, etc?
- Yeah, so I think, look,
companies that have a, you know,
a strong balance sheet at this time
and a lot of those FANG companies do.
And there's been talk for years
that should they go buy a
studio to get into this?
You know, I'm not sure they need a studio.
I mean, you know, if you
think of what a studio does,
it pays for content.
And that is something that
is a function of money.
But there has been a lot of talk saying
Apple should go buy Disney,
'cause Disney is at a
lower price right now,
they have been whipsawed
more than most companies by this pandemic
so maybe that's an opportunity for them
to be acquired by another company.
I'm not sure I see how they fit.
I don't, I'm not sure
these large tech companies
necessarily need it.
When we look at AT&T bought Time Warner,
AT&T stock is down by about
I don't know 25% since then,
even large hedge fund Elliott went in
and bought as an activist investor
bought a large percentage
about $4 billion worth of AT&T.
So some, you know, sometimes
this emerging technology
and content hasn't really worked
we think famously about AOL Time Warner.
So there may be an opportunity
but it also may be a you know,
sort of, it like dido for aeneas
it may not be the thing
that's good for them ultimately,
but I think there will be interest
and there certainly will
people kicking the tires,
but I'm not sure it
ultimately will make sense.
- Do you see changes in kind
of organizational life cycles
and growth patterns for different
sectors of the industry?
Do you think for example, that Coronavirus
did you discuss sort of the possibility
that Coronavirus will create
much more rapid growth
in the segments of these OTT organizations
that you touched on, Quibi and
Peacock and stuff like that,
and maybe others that will
fail because of the timing?
- Yeah, I think there is, um,
you know, I mentioned briefly is
the challenge for a lot of these companies
is this concept of churn.
And for some strange reason,
you know, you talk in
business school a lot
about the first mover advantage.
And sometimes the first mover advantage
is you become the canary in
the coal mine and you tip over,
and another company comes in
and does what you were
unable to do effectively.
That sort of happened
with Movie Pass and AMC,
but in this case, Netflix has such a huge
and Netflix has been
aggressively spending on content
and growing internationally,
then, and it's a strange thing
that most people I feel have Netflix
is almost like a baseline
almost like electricity in their home.
And then all these other services
are a little more like a variable cost.
So I think the challenge
is going to be churn
and clearly, you know, as we've seen
unemployment spiking a remarkable level
and the economic sort of
headwinds for all of us is,
you know, the idea of
taking on a new service,
even if it's $4.99 a month
is gonna be a hard thing to justify,
why are we spending money on something new
or trying something that we
might try it to see a show.
At the end of the day,
it's still relatively a
cheap form of entertainment
but HBO Max is gonna have challenges
'cause they have to be priced
at around a $14.99 price point.
So it might be a good opportunity
for something like Peacock
Peacock, which I had
mentioned is going to sort of
accelerate its launch
that is AVOD an
advertising supported product.
So you might start seeing people like,
I'll get rid of cable
and now I can still watch
some of these shows I love from NBC
and the commitment
I'm paying with my time,
I'm paying with ads
by watching advertising
and that may be a reasonable
value proposition.
That makes sense.
- It looks like there're
a bunch of questions
that are related to kind of
how is this changing Hollywood
and both from sort of scripted
content, reality television,
do you see there being changes
in any of those things?
Do you see it coming back, and when?
I wonder if you could comment on sort of
what are the implications
of this for Hollywood,
obviously right now, as you said,
there's nothing happening there.
- Yeah, well, you are, you know,
that action you are seeing is,
animation is still being
they're still delivering
shows in animation
'cause you do not need you know,
animators can work from home,
voice actors can, you know,
they're setting up little
studios in their closets.
So, you might, we probably
are gonna see a large amount
of animation sometime.
The usual thing is, there's going,
like I talked about that
sort of supply chain,
there is going to be no
new content for a while
and therefore there's gonna be a cliff
that we sort of fall off of
and need to fill that void.
And this happened years ago,
sort of the advent of reality TV
was born out of the writer
strike of people coming in,
they're like, alright,
we have to figure out
how we can do this cheaply,
we can just film people
in their homes and call it
and you know, make it dramatic.
So I think you might
see sort of new formats
of storytelling happening.
The other thing that we have seen
and I think it reflects somewhat
on the sporting world too,
is that I think the star culture is,
you know, the people that can really
that we really tune in
to see a famous person,
that list is getting shorter and shorter.
I think we're all watching shows now
that are about the concept,
you know, whether it's "Tiger King",
or it's, you know, some other show
on Netflix or Amazon or Hulu,
that is not driven by the star,
but it's driven by the concept.
And the other thing that we've seen happen
with that shift over the
tops, kind of programming is,
you know, there is a create,
a lot of creators want
to do, go to a Netflix or an Amazon
because they're not
constrained by the format
they can curse, they can have, you know,
maybe more violent or sexual incidences.
And also they're not
constrained by the format.
An episode can be 46 minutes, one week,
53 minutes and next week 104
whereas on TV, it's 22
minutes for a half hour
44 for an hour, you have to
have commercial breaks in there.
So there has to be sort of,
you know, sort of plot points
that are gonna keep the
audience's attention.
So that that freedom to
tell stories in a new way
or in a longer form, where, you know,
there's, you know, and again,
this is where the definition of content
gets kind of nebulous
where we are used to thinking of a movie
as something you see in the theater,
it's about two hours long,
and we're used to thinking of a TV show
is something that is serialized,
and it's either a half hour an hour
and increasingly you could
say "Game of Thrones"
is a 70-hour movie
and "Fast and Furious"
is there's nine of those,
it's an 18-hour movie.
And it's all just content,
and it's all just different
ways of telling stories.
And I think that such as
free the creative class
in a really interesting way
and I think we're gonna
start seeing more and more,
John Krasinski has
launched a YouTube show,
which has been incredibly popular
and he just, you know, it's
John Krasinski at his home
trying, and getting huge
following from that.
So, you know, I think there
are gonna be opportunities
to start selling things in new ways.
- Yeah, well,
you're just now talking about
is kind of highlighting
that there might have been some holes,
there might have been some demand
or, you know, some flexibility
that we wanted, and we didn't have before,
and that, that there
might be opportunities
to kind of fill those needs now.
And Emily Glazer poses a
really interesting question
on whether you think there
are other holes or gaps
in the industries that
aren't being addressed
and how we might be,
are there things that other opportunities
for new firms to walk in and address them?
- Well, definitely, you
know, the interesting thing
like sort of the saying before,
and I've said this to my students, too,
is the barriers to entry to create content
have come way, way down,
you know, we can all
be Make a video where,
you know, we're making
content here to some degree,
you can make a movie, you
can write a song at home
relatively cheaply.
The challenge is that
distribution element, right?
You know, we can make a song
and we can distribute it to the world,
we can make a movie,
distribute it to the world,
but there's so much
other content out there.
So there's, cutting
through is the hard part.
So what is it going to be
that helps you cut through
and you know, we're
seeing that with TikTok
that's effectively a new form of content.
And there are TikTok stars
being born out of nowhere
a friend of mines daughter does, like
TikTok videos of horror makeup,
and she has a huge following.
Now, she didn't embark on that,
I mean, it's so I think
there are new things
and I think the market
that's a nice thing about sort of the,
the global access that we
have with these platforms
is the market sort of speaks for itself
and things responded
and a lot of people said
that the appeal of something like TikTok,
Vis-a-vis Quibi is,
TikTok is stars are sort of
coming from the bottom up,
whereas the thesis behind Quibi is
it's expensive, premium content,
and we're gonna push it to you
and I think sometimes or
that discovery is lacking
in that regard.
Does that make sense?
- Okay.
We got a bunch of so many good questions.
One of them that,
that is an industry you
didn't really touch on,
that comes from Dolly Chug
is a question about what
do you think it means
for the book publishing industry?
- Well, really good question.
So for a lot of Kindle books and stuff,
they've actually been going
up quite a bit over the last,
and increasingly, you know, there so,
I think there is an increasing reading,
I think people are home more,
the challenge though, too, is
that everybody's attention,
you know, we are so, our
attention is so atomized,
focusing on books is hard.
So the book industry, I think, you know,
has plateaued in a fairly solid way.
It's still, you know, going strong
and increasingly with
some of these things,
some of these celebrities, you know,
whether it's Reese Witherspoon
or Oprah, famously,
you know, promoting
various forms of books,
promoting reading, that's doing it a lot.
And then also, because there's
such a demand for content,
there will be a greater
demand for content.
A lot of these books are being adopted,
adapted into Netflix
series, you know, sure,
and again, it's going
back to the format thing
is, you know, things that used them
may not have ever turned into something,
books are turning into a limit of
a four part series on Netflix or Amazon.
And then that increases
the awareness of that book
in a dramatic way people buy the book more
and then they get more aware of the author
and they may read other
things by that author
and they goes down this road of discovery,
but a very good question.
- So one of the things that
entertainment, media and sports
all really touches on is
that they are so essential to our culture.
They kind of shape the culture,
they reflect the culture
and obviously there are a lot
of things that are changing,
for example, with sort of not
being able to gather together,
sort of sporting events, in some ways
are like what you were talking about
with the 49ers, they represent the city,
they represent kind of
the group of people.
And I wonder if you see
changes in our culture
as a function of changes in entertainment,
in the industry and the practice
of entertainment, media and sports,
or either way, either direction.
- Yeah, I totally.
And I think, you know,
like in any business,
you know, most things that
we consume or participate in
are habits, right?
We, and again, that's why businesses
always want you to get trial, right?
They wanna try, you
try their shaving cream
or their shampoo, like it and then make it
part of your routine.
The longer we all stay in this sort of
isolation or quarantine,
our habits will slowly start to change
and the thought of going
back to a movie theater,
might, you know, every day that goes by
that we don't do that,
and we consume things,
that habit may get more ingrained.
And so I think what you are seeing again,
here we are on a Zoom call.
I mean, I think we've all,
like I think joked with friends
that I'm doing Zoom, like,
you know, party cocktails,
or whatever you wanna call it
with people, I don't socialize
with in normal life,
you know, so that's a new thing.
And you can start to see that,
you know, getting more ingrained.
And you're seeing that in
the entertainment space of,
again, a lot of this sort
of celebrities or people
using various formats to create content
and responding to it.
There's a thing on
Twitter of someone who's,
who evaluates people based
on their backgrounds,
of what their backgrounds, you know,
like, what their homes look like
and then again, that's a whole new thing
that didn't exist, you
know, even a week ago.
So I think we are gonna
see all sorts of new ways.
You know, there's concerts
being held on Zoom,
there's concerts being held on TikTok,
and so I think you're gonna
start seeing those things
and the longer we do this, the more people
'cause clear, the great thing
about entertainment media
is it's a creative outlet for a lot
of really creative people
and they will find a way
to express themselves
and get it out there.
And then if it's good,
it'll bubble up to us
and maybe that'll be a new
form of way we consume things.
- It looks like we've
got a bunch of questions
that relate to podcasts,
perhaps being kind of an,
an opportunity, I don't
know if you have any
sort of quick thoughts on podcasts.
- Well, weirdly, and again,
that sort of not I mean, counterintuitive,
but the podcast listening
has actually gone down
during the pandemic
because I think it was
something people would do
on an isolated basis, you know,
in transit, right? On their way to work
or doing something solo, running.
So podcast listening is actually decreased
somewhat during the pandemic.
The one thing that's
interesting about podcasts
that has become new, and again,
we may see new ways of doing this is
a lot of TV and film studios have,
you know, there's the concept
of development, right?
You read a script or you read a part,
or you make a pilot of a TV show,
increasingly, they're
saying, make a podcast,
that will be the very cheap
version of development.
And then if it works there,
then we'll may adopt it into a pilot,
then we'll adopt it into a series.
So it's sort of becoming
the lower costs, first,
first cut at development.
But podcasting has gone down.
But again, a lot of podcasts
have since been adopted,
adapted into series.
And so I think a lot of these companies,
sort of keeping their
development costs low
have turned to podcasting
as a way of sort of
that's sort of first round
of development is make it
and if it's good and the story is there,
then we'll use that as the framework
to turn it into a show or series.
- So you are kind of sounding
the death knell for local newspapers.
That was probably the one place
that you were kind of highlighting, hey,
this industry may not kind of survive
and I wonder if there and you know,
many people have been talking
about that even before,
I wonder if you see any other industries,
I mean, we know that there are
a number of other industries
in the entertainment arena that have been
that were already on the rocks before this
thing's like opera and classical music
and the question is Broadway
Theater, as you mentioned,
where there's but live theater in general,
which, you know, it feels like has some
has hit some challenges for now decades.
What, do you see any
industries not surviving this
or surviving in, you know, a
ghost of their original form?
- Well, again, I hate to be the one that,
'cause I'm a newspaper reader,
I worked in the newspaper,
so I don't wanna in any way
declare that the death knell,
but I do think they are
not in a good position,
they have large fixed costs.
So, and I do think the need
for local news is essential.
And therefore, I think,
sort of kind of echoing
what Ben Smith review was,
I think it's the journalists
and there are, there's now a local news
version of the Peace Corps,
you can effectively go,
they'll pay you to go be a
journalist in a small town.
So I think it's an essential,
important part of our,
you know, basically our democracy.
The challenge is the monetization of it.
And this is sort of
been, it's something true
that bigger newspapers
have also had to deal with
is where do you put the public
service versus the business.
Right, so a lot of them have
been lowering their paywall
related to the Coronavirus,
but at the same time, they're
like, alright, demand is up
and now we're giving it away for free,
they have to reconcile
that public service.
But I do think local newspapers probably
may not sort of make it through this
or may reconstitute
themselves in a new way,
and that may be online or
other ways of getting that
or being a part of a
larger news organization.
I think magazines are
also in a huge challenge.
I think magazines again, great
revenue, great business model
where there is two revenue streams
subscription and advertising
but both of those most people
aren't willing to pay for,
you know, aside from things
like the "New Yorker",
most magazine, the business
has been really hurt
and advertising is hurt.
So the two key revenue streams
have been sort of whipsawed.
And the other challenge with that is,
and I think some of these things, like,
if you think of "People"
magazine or "Us Weekly" magazine,
a lot of people would get that
so they could have some, you know,
they could see the
celebrities that they love
photos of them,
but increasingly the celebrities
again having that direct relationship,
they're taking pictures or videos
of themselves in their home, far better
than a paparazzi was able to take
you know, out of them
coming out of restaurants.
So I think you are gonna
see the magazine business
and some of them have tried
to pivot into a digital world
but it's that subscription
model, there's a hard thing.
I've said this before, I think,
particularly in economically hard times,
people are gonna look at their credit card
and go through all their subscriptions,
and then start making decisions of
I have a lot of subscriptions,
do I need all of these
and then, then you start
getting into the decisions
of which ones they're gonna cut and keep.
- Right.
So this is where, we're
right up against one o'clock
so just a quick thought
there were several questions
that we're looking at
whether this is gonna
make things more divisive,
more divisive internationally,
more, you know, the way
that our media has tended
to divide us in some ways,
social media has tended
to divide us in some ways.
Do you see that
accelerating or attenuating
now going forward?
- That's a good question.
Obviously, you know, the
media is a big part of
sort of driving some of these stories,
particularly in the news realm.
I'd like to hope that, like
I've said at the beginning,
I do think we are, you know,
even if you're in New York City
and you lean out the window
at 7;00 p.m. and clap
or hit a pot,
I do feel like, you know, the
pandemic is a human thing,
it's not a political thing,
you know, the virus is not
a republican or democrat or,
so I'd like to think that
the more we try to solve the
pandemic on a global basis,
you know, and the more that
we start to consume content
from other parts of the
world, from other cultures,
that there will be more empathy,
I might be naive in that,
you know, Fox News, you
know, still generates
the highest ratings in cable television
so, you know, there is a
fair amount of polarization
and I think, you know, I
think most people I think the,
the gray area, particularly
in the United States
in terms of like, republican democrat,
I mean that there's about
5% that's ever going to go
opposite of what that party,
their already established party is,
so you'd like to think that
there was some chance of that.
But I do think a lot of people move in
and finally, we talked about sort of data,
you know, the big data that
leads us to that echo chamber
of, you know, feeding the algorithms,
feeding stuff that sort
of feed our own opinions.
And that's the other problem with this.
And so I think that's a place
that we could maybe explore,
opening ourselves up to other viewpoints.
I don't think I would encourage everybody
to whether you like
Fox, or you like MSNBC,
or the "New York Times", or
"The Wall Street Journal" is
read both because I
think that's the only way
that there's gonna be some sort of
maybe sort of mellowing of that
political sort of conflict.
- That's great advice for us to end on.
Thank you so much, Paul.
There were a ton of other questions
that we couldn't really reflect on.
We'll get that sent to you
and see if there are ways
of getting the word out.
- Batia--
- Thank you.
- Thank you for doing this.
I really appreciate it.
And thank you all for being here.
Thanks, have a good
and stay safe, good weekend.
Bye bye.
- Bye bye.
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