Big Technology Podcast - Google and Microsoft's Chatbot War, How AI Changes Hollywood, Disney In Crisis

Episode Date: February 10, 2023

The Wrap founder and CEO Sharon Waxman joins Ranjan Roy and Alex Kantrowitz for our weekly news recap show. We cover 1) Google and Microsoft's new chatbots. 2) How AI changes the entertainment industry 3) Yes, screenwriters are using AI too 4) Who's in better shape after this week: Google or Microsoft? 5) Why Disney is in crisis 6) How Disney stacks up against Netflix

Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. We are back at it with our Friday show, recapping the week's news. There has been a lot of big news. Big stories this week. We have Microsoft and Google both coming out with their chatbots, and then the streaming wars are heating up. Disney is going to lay off 7,000 people while cutting billions of dollars. in expenses. Joining us today, we have Ron John Roy. As always, welcome back. Ron John. Hello. And a special guest is here with us. Sharon Waxman, the CEO and founder of the

rap is here. Sharon, thanks so much for joining. Thank you. I sneezed just in time for you to introduce me. Perfect. Ignore me. Let's start with our big story of the week. Google and Microsoft both are unveiling new chatbots. There is a totally different reaction. to both of them, right? Microsoft unveiled their version of Bing, chat GPT, whatever they call it. And it's actually pretty impressive. And people started to say, okay, this is the future of search. And Google released its own very similar version called Bard. And it got a question wrong. The market cap dropped $100 billion almost instantly. And now people are saying Bing is the new king and Google is dead. Ron John, let's just start with your reaction to what happened this week.

Is it fair that Google got as hammered as it did? And when you look at Google versus Microsoft, which one are you more optimistic about? Bing is the new king. I had not heard that one, but that one's going to stick in my head. I think we need to kind of separate into a few different pieces and we'll definitely get to Google's barred mishap. At the high level, I'm very happy about all of this because search does need competition. Google search has progressively been getting worse and worse and they seem to have been okay

with it. So I think Microsoft entering the fray and bringing Bing back, I think is a very good thing. However, as a counterpoint, have you binged anything this week? I personally, I went to Bing just to see if that new chatbot is live and it wasn't me. Now, they're rolling it out selectively. So personally, I was again disappointed to be visiting Bing.com. It had been a long time since I typed that in. But I am looking forward to actually being able to use it when this new feature and you could call it a new way to search rolls out. Sharon? I mean, it's hard to, it's hard to break habits, right? Like those of us who started using

chat GPT, like we like it, that's a new enough behavior for me. Then I got, I didn't actually go to Bing because I'm super busy and it didn't feel like a compelling way to spend 60 seconds of my life. So, I mean, like, I'm waiting really for other people to say, you need to do this. I mean, that's really like folks who are, who have habits. It is so, so hard to shift entrenched habits, which I think was part of Bing's problem to begin with. We were also used to using Google Search and it worked for us. There wasn't a problem that needed solving that made us go to Bing. Now there's actually a very, very different set of offerings there for all of us who are, you know, using ChatGPT.

So I think that first mover status is always going to be really important. So why is it better? I don't know. The thing that's interesting here is that Bing and Google ostensibly will connect to the internet while ChatGPT says its training stops in 2021. And you can take a look at some of the examples. examples that they put out there have Bing's new chat bot plan a vacation and look at the current what's current and what's not obviously at this point it's not going to be as good as it can be but i think as you start to think about opening hours and starting to put this chat interface on top of a search engine you do i you do start to say maybe some of this hype is well-placed

like maybe this is actually something unlike web three that is going to make a change in people lives. Well, I freaked out my entire team because on a Google Meet screen share, I pulled up Bing.com and started typing in something, which caused the weirdest stares from everyone, because people who weren't people who weren't aware of the Microsoft News looked at me like I was a complete weirdo. But the results are not that interesting yet. And I've seen I have had the rolled out version, and it's kind of messy. Like I right now typed in to Bing, what is the future of Microsoft? They pull out and extract all this weird Wikipedia-style data to the right.

They have some videos. But in reality, there's no real answer that is different. It's not actually directly incorporating the chat GPT functionality or, you know, kind of the you can have follow-up prompts that actually build a conversation with it. So they're definitely still, you know, have a long way to go. Another thing that reminds me that as a business problem, Microsoft has a lot of work to do. If you go to Bing.com, it actually looks like Yahoo.com. There's all these kind of like weird news feeds in there, some sports scores.

I don't know how they're targeting me. And Microsoft internally, probably that's where a lot of the Bing revenues shows up. They show ads just as the default Bing.com. So going from this messy Yahoo style search engine to this perfectly clean, interactive, beautiful tool, I think there's a lot of work they're going to have to do. And again, like what? But I do like the fact that it's opening up the question of what should search be because it hasn't really evolved in the last 10, 15 years.

And I think if nothing else, it's very good that they've sparked that conversation. Well, I can tell you that, you know, we're looking at it over at the rap from a very different lens. And it's interesting to hear, Rajan, what was the response to in your staff meeting? Because as soon as this thing kind of launched and got some scale after a couple of weeks, we scrambled a big edit meeting and just threw on the table, like what do we think the implications can be for the areas that we're in, which is entertainment and media. And it was amazing, like the very long silence. is in a room of about 10 people as everybody's minds for like going at a furious pace to kind

of figure out like, oh shit, you know, oh, this could be really bad. And I think that I'm trying to steer our team and we're working on a series right now that we're going to start rolling out like as they come in the articles that were, you know, to try to move away from apocalyptic predictions for the industry of entertainment, which is a lot about writing or how you replace actors or directors or production design, everything, and then media, journalism, how, you know, we've already heard from some publishers like BuzzFeed, that they're starting to layer in some AI bots, I guess, to writing some stories. You know, we've done very little experimentation. The whole point of my creating the rap was to create a place for journalists to learn how to do

professional journalism. So the idea of having chatbots would be kind of antithel to what we do, but at the same time, I, you know that's where stuff's going to go. So, but I think that that already, as you use it people are finding ways to use it as a tool rather than, oh, this is replacing my job. But I think that's where like in where I'm coming from, publishers and people in entertainment are immediately kind of going there. And we are finding already screenwriters who've been using it for, for months. So Sharon, I'm so thrilled that you're here because this is like exactly the perspective.

that we need to hear you know there are so many different angles there's a technology angle which we've covered but also this is how how this is going to shake up publishing how this is going to shake up the entertainment industry so can you want i mean can you unpack that a little bit so you obviously have screenwriters that are that are starting to use these bots when you say this is also i would love to hear from your perspective how this is going to be used in the entertainment industry and whether it threatens any of the incumbents or any of the entrenched power and then also just from putting your publisher hat on if this is the way that it's going to go when you think obviously this is so early on but it's not a stretch to think this is the way it's going to go we've already

have publications that are jumping into it ronjan and i clearly believe that this is going to be the path that many will go on what is that future like for news publishers what does the future look like yeah yeah so that's i'll take the first part first so in entertainment we're just we're just starting to i'm not going to pretend to say that we have answers clarity on how AI is going to affect the entertainment industry. And we're just starting to do the reporting, which is kind of in real time as people are testing and trying stuff. So we have already identified screenwriters hither and yon who are figuring out ways

to use chat GPT to kind of like either frame out their screenplays. You know, you have to give them the ideas. You have to give it them. Who's them? You have to give it the plot points. But as we've sat down to try to think through as we're attacking just the thought process of where this might take entertainment, it really does appear to be something that will impact every single aspect of entertainment. So I don't just mean screenwriting, which is the easy, low-hanging fruit stuff. And it's really not that good at it.

We've seen some acceptable, like short. we've asked it to write it a scene and we've other people are using it um but for example actors casting so chat gpt can pull all the information on the internet about actors and feed it into an algorithm that can produce um scores now we Hollywood already does that Hollywood already looks as they're trying to cast a project, for example. You know, there are all kinds of ways they look at, they synthesize like what was their box office number, was their social media following. They do all of that stuff.

But chat TV doesn't like really instantaneously and in a way that pulls so many more data points than we ever, than they ever could during using the conventional thing. So I think it impacts casting, therefore it impacts acting careers. I think that we're talking to all the guilds about how like the directors guild, the producers guild, the screen actors guild, all the different guilds and wondering like, how scared are you? And, you know, how are you dealing with this? Because then there's another whole area which we have not scratched the surface of it, which is copyright. Who owns the ideas that are being generated in a screenplay or other? By the way, also another huge category,

animation, already being transformed. Dali and whatever else is rolling out is already being used to like you can speed up the velocity of animating something by, I don't know what the factor is, but it's, it is by a transformative number is what I'm trying to say. Have you found that people are receptive? Like, is it, is the typical emotion fear or excitement? I mean, maybe a little of both, but what's the prevailing emotion around this? I would just say, like, judging just by my newsroom, there's a little. lot of fear. Really, there's a lot of fear that this thing is coming for your job.

Is it coming for their jobs? I think it might be. I mean, I really hope not. It's possible. What we're saying is we've spent the first, the last 50 years automating our way out of most of the manufacturing jobs or the first part of the 20th century. And then we've now we've automated our way out of the service jobs. You don't have cashiers. and people at airline ticket counters anymore. So that's now been shrunk down. And now they're coming for the white collar jobs. Well, that's journalism, screenwriting.

Like, you know, I don't know about lawyers and computer. Probably lawyers. First they come for the lawyers. First they come for the lawyers. Legal Zoom has already come for the lawyers, but yeah. I think I saw someone had commented around like a Marvel script should be the first thing to be automated because they're often already. before they're as formulaic as possible but i think also uh what i'd read i think it was kyle chika was

he was talking about how all average content is going to essentially be like algorithmically you know generated away and there is going to be a huge bifurcation between original and good things because that can't be generated by an a i because there's no training data and things that are are as formulaic as possible. So I think hopefully it's bullish for consumers or the average person watching or reading something, but definitely from the job's perspective, it's gonna change everything, I think.

So I think that alone, that statement is fear-inducing to most people because change is scary. So Sharon, how are you, when you think about the ways that you might implement this as a publisher, what have you thought about so far and are there there there's been some talk about disclosures obviously i've been plagiarized already by this stuff not saying that yeah i mean i'm a proud partner with the rap so there wouldn't be any need uh to do that but i'm kind of curious like how this might look like what this might look like in production in the newsroom

we haven't really um gone there yet we i don't have a i do have a product development team but that's not what they're pointed at at the moment. So it's really most of us in our spare time fiddling around with it and seeing where it might go. But it seems that, and again, I'm really speaking speculatively, but it seems like there might be aspects of coverage, whether it's like weather reporting or basic sports scores, basic stock market numbers stories that could potentially be automated, you could take a press release, and that would save my having to employ a reporter to do that. What I would hope, if that ever was the case, and it might be a year from now, it might be never,

it's not a priority for me to move in that direction, right? I don't have the pressures on our organization, thank goodness, that BuzzFeed does. And as I've said, the outset, actually doing journalism is a core reason for the RAP's existence. So I'm not looking for ways to shortcut that, except I just think that if it becomes the standard for newsrooms, it seems a natural conclusion that we will be part of that shift. And I'd flip the question back at you as well. But not for any of the reporting where what I would say, that really matters. Here's this kind of story we write all the time.

A trailer comes out and we write up the trailer. If chat GPT can watch the trailer, I guess they can, and write up a summary, then I would not have a reporter spend their time on that. I'd rather them go try to uncover the next Harvey Weinstein or whatever, you know. So there might be efficiencies to be had there, but I would, myself, I would tread very carefully. Absolutely. But I want to ask you, like how would, might you as an independent individual building a following, use it? Look, I've always thought that AI is, and the more you look into it, the more you understand this, that AI is augmentive and it's not replacing in most cases. If you're doing it right, if you're running a business, use AI to do the things that will augment what you're already doing.

So for me, to have AI, if we get to a place where AI can, I can drop in a few links of stories, it can read them and summarize them accurately. And that becomes another edition of the newsletter on Friday being like, hey, here's a tech roundup. Then, man, like that Friday newsletter is going to get written. And of course, like I would go ahead and take a look at what's going to happen. but that's another space where you can still advertising. And it's obviously, and it's honestly a service to the readers who are also going to be like, we just had a comment this week of someone who was like, I'd like to be updated on the latest tech news. You write this one story a week.

What else is going on? And so if I could use AI to do that, that would be great. That's what this podcast is for, Alex. Exactly. Well, I think, so I think hopefully we'll be a little bit longer until something like this can be replaced by artificial intelligence. But I'm much more worried about the human competition on the podcast front than I am about the bots. But there's another thing that I think we should touch on. And I definitely want to get back to the question of who is going to be in a better position, Microsoft or Google.

And then we're going to move on to the second half. But I think this is important to touch on. So we have Microsoft, of course, and we've talked about this on the show, investing in Open AI. And part of that investment is coming in the form of Azure credits, credits for computing. that their AI needs in order to be able to function. We also have Google right now who is doing a $300 million investment in another company that requires them to use that money in Google's cloud service to be able to run their AI models.

Now, it sounds a little bit like, you know, Palantir, which had gone, made these investments, and then it had these startups run their business on its software and booked that as revenue, and it inflated, what the business was actually doing. So obviously this is going to be a little bit different, although you could ask, you know, is that Google startup going to end up being, is that Google startup going to end up counting its revenue, going to end up putting the money towards Google's bottom line that ends up showing up in earnings reports. Is that ethical? But there's also this

advantage that companies with a lot of computing power, with servers, with cloud computing operations have that they can deploy when they invest in these companies that nobody else can. And Rajan, I'd love to hear your perspective just on the financial aspect of what's going on here between Google and Microsoft. And is this going to be a bigger story than we appreciate right now? Yeah, I think especially as we start trying to break down their earnings and their actual revenue composition. So again, what they're doing, and Microsoft was kind of the invented this model with Open AI brilliantly to their credit. They said it was a $1 billion investment, but a huge chunk of that was essentially free Azure credits. So then Open AI uses them, and then this new $10 million investment also is broken down like this.

But Microsoft can then claim that as revenue. So it's essentially they're getting the upside of a potentially huge investment, and they're getting revenue generated based on them giving away those cloud credits. And Bill Gurley had a tweet on this. And I think this is going to be a big thing for anyone analyzing these companies, because one, it gives them a huge amount of leverage and power over the startup community because they have the cloud and AI infrastructure to do it. But then second, it really starts to paint a distorted picture of their businesses.

It starts to show that if you're giving away all of your Azure credit as an investment and then generating or counting billions of dollars of that usage as revenue, obviously that paints the potentially wrong picture of the business. That's a nice way of saying it. It sounds corrupt to me, but go ahead. It certainly sounds correct. When people use accounting, do smart accounting stuff all the time, that's not corrupt. Why do you say corrupt?

That's a loaded word there. I know it's a big allegation. Loaded. I know it is. Okay, maybe, well, I'm not even going to walk it back. It does. It feels like you're going to Wall Street. You're saying we made this much revenue.

And meanwhile, Wall Street wants to see your revenue grow. And meanwhile, yeah, your revenue is actually, you're just, if you go to Wall Street and say, like, I booked a dollar. spent that dollar on somebody to give you that dollar back. It seems to me like you need to be honest with them. And Palantir has already been through this and done it already and and has apologized. And but I think and so that so that's why I kind of say it feels corrupt. I don't know if it actually is or not in the legal sense. I think it feels like that way to me. And but the the real question is Ron John, I'm definitely go ahead, but I think the real question is how do

these companies get ahead? Like and not just the financial side. but the fact that they're able to invest with money and their computing, it seems like it will just consolidate power in this really important sector of the technology industry because of the infrastructure that they have. But yeah, Ron, go ahead. It's definitely going to consolidate power. I think there's almost no question. And almost the dangerous part of it is they're both consolidating power on the infrastructure

side and the consumer product side. Bing.com is the front end, chat GPT is the front end, all these actual consumer experiences, they're going to own more and more of, and they're going to own the infrastructure side. So I do think this is something that needs to be watched closely. It hasn't really been discussed that much. And then on the accounting side, I think this is something where analysts are going to have to really push these companies on how much of this money was invested. Because, again, what composition of that billion dollar investment was Azure credits to Open AI in 2019 didn't come out till this year until they started making the new investment. So,

So I think it's up to everyone to keep a watchful eye on this stuff. Great. Let's end this segment with this question, which again, I want to come back to. We've seen Google and Microsoft this week unveil their versions of chat in search, AI power chat and search. We don't know exactly where it's going to go off, but we have where it's going to go, but we have an idea of where the trajectory is. Who starts this week stronger? who ends this week stronger and who ends this week weaker after what we have just witnessed? I think we do. I think us, the consumer, again, competition is good. I mean, obviously there's

concerns about consolidation we just talked about, but search has gotten terrible because Google had no competition. So if nothing else, everyone is being forced to rethink and ask themselves, how do we make a better product. And I mean, maybe Yahoo's going to come out of nowhere on this one or I don't know. All right, fair. Okay, I agree with you. We're all going to come out better. Come on, pick a company, Ron John. And better shape than they were at the beginning of the week. I mean, as of this week, Microsoft definitely, because very quickly the mistake Alex had referred to, Google, this was this was amazing to me, especially someone who's done a lot of corporate marketing work. Uh, in Sundar Pichai, like in his tweet, they had a little video ad, and they type in the question,

what new discoveries from the James Webb Telescope can I tell my nine-year-old about? First of all, who asks that, actually? It's just a reminder that Google is so detached from basic people. But then who's going to ask that? But then the second thing is it got it wrong. It says the very first pictures of an exoplanet outside or solar system were taken by the JWST, when that's just wrong. It was a European Southern Observatory's

very large telescope in 2004. So the agency or whoever put that ad together. Okay, I have to leave this conversation. I'm sorry, this is like, this is way, way too nerdy for me. You've gotta be kidding me. I feel bad and I don't feel bad for whoever put that together

and took the heat on that one. They deserve it. They do deserve it. When your ad agency introduces an error in the ad, when errors and hallucination are the biggest concern they say it was the ad agency who did it no no no whoever it is maybe it was they've they've stayed properly quiet on the error itself but the market certainly didn't okay Sharon do you have a pick in terms of who do you think no what do I know about this stuff I have no idea I'm going to go with Microsoft too since obviously Google screwed up even though

I would never have known in a million bazillion years I see gotten the wrong answer to a question like that but it is it does seem like so you know basic so no no that that that that too as a journalist obviously getting the answer right to a question is is basic but I just basically more the cluelessness of asking such a an obscure question that's going to appeal to a point you know one percent of the people who see it is like you could really more properly ask who played you know who played uh who played uh who played uh who played the sidekick to Tom Cruise in Top Gun 1, that would be more of a question that I think you'd want to ask. But, you know, that's just me. That's what I would want to ask. This has always

been... Anthony Edwards is the answer. Okay. This has always been the thing of Google. Right. Great technological sense. Poor social sense. And that's why their chat apps have always failed. So it is kind of interesting. You have a company who can't build a chat app. Now it wants to build a chat bot. I'll just end the segment saying, I think that Microsoft is, also ending the week stronger than Google did at the beginning, then, yeah, then Google was before this all started. I don't think that this is an existential threat to Google. I think that that's overblown. The threat to Google is way overblown. Google's obviously going to develop this stuff and release it. But it's got, it's got people's interest, you know, peaked on the Bing thing.

Ron John's using Bing in meetings and search is such a big market that if you peel off even five percent, you're talking about an extremely large number of revenue. And by the way, that's a question we should get to in a future episode. How are people going to actually, how are companies going to make money off of these things? We're here on big technology podcast Friday edition streaming live on LinkedIn and YouTube. We're getting questions. This is awesome. Thanks everybody for participating. If you're listening on the feed, we do these every Friday at 11 a.m. Pacific, 2 p.m. Eastern, and then we drop them on the feed right after. Thank you again for being part of this.

We're here with Sharon Waxman, CEO, and founder of the rap, Ron John Roy of Margins. We'll be back right after this. Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show,

where their team of writers break down the biggest business headlines. in 15 minutes or less, and explain why you should care about them. So, search for The Hustled Daily Show and your favorite podcast app, like the one you're using right now. And we're back here for the second half of the big technology podcast. We're joined by Sharon Waxman, CEO and founder of the Rapp and Ron John Roy of Margins. Let's talk Disney, shall we? So, Sharon, I had no idea when I reached out that we were going to have a week where Disney

was going to say it was going to cut $5 billion of expenses and lay off 7,000 employees that broke a couple days afterwards. But it seemed like it would be an opportune time to speak about Disney because the company seems like it's in chaos. And now maybe you can bring the more nuanced view of it than I have from someone who's not watching it as closely as the entertainment, you know, someone who's reporting on the entertainment industry. But you have Bob Eiger, who was the old CEO, put a successor in place. it's Bob Chapec. Then he came back, said he's going to be there for two years. You have this massive cost cutting. You had an activist investor that came in, drove by, made a bunch of

demands, is now apparently satisfied. You have major losses in streaming. And then, of course, you're going up against Netflix, not only Netflix, but now Amazon and others. So why don't we just start with this? What is going on at Disney right now? And why does it feel like such a mess? I could, yeah, I could add a whole bunch of things to that list, too, by the way, which is that they've, they've lost a lot of important executive talent. They, they've lost a lot of time because Bob Chapick reorganized the company a certain way. And now Bob Iger is in the process of undoing that reorganization. So that's, that's another piece of it. But at the same time, the creative output is still very strong. So Disney is a, very, very strong company at its core. It's a phenomenal content flywheel in terms of how it manages to create successful content that people want to see and then monetize it through all of its different distribution platforms and then create live experiences that people want to see at their theme parks and sell them merchandise and nobody did that better. And Bob Iger created

that machine. So I would just say that he's coming in and it does feel like holy chaos right now. But I think that the reason why the stock went up sharply after earnings is that there is a feeling that there is a grown up at the helm who knows what to do. And he's taking measures that needed to be taken. So that includes putting control, financial control back in the hands of the top creatives at the company, the Dana Walden, Alan Bergman, who are now running all entertainment, undoing the whole, what was the dreaded D-Med is what it was called. Sounds like it might be like a medical unit, but in fact, it was where all of the financial decisions and budgeting decisions were siloed, and that was very much disliked across the company,

even though everybody smiled and nodded and said, this is a really great idea. And, you know, the cost cutting part has to do with the losses that you refer to in Disney Plus, which I think that really was what spelled the end for Bob Chapic was the earnings, not this quarter, but the last quarter where he really seemed to be okay in his tone of voice and his affect and the discussion with the CFO with investors about the losses, these massive losses that Disney Plus was racking up. And that had to be dealt with too. I think that if it does seem chaotic, it's because you're in the middle of a whole bunch of moves that Bob Iger's making. And it's going to take some months for that to play out.

But it's not like it's a chaos in the sense that there's no plan or strategy. I think that there is a plan and a strategy now. Well, as the parent of a three and a six-year-old, I can tell you, Alex, that Disney is not in chaos, that my children say the brand Disney plus every single day. and we had to go to Disney World last year, and they took a good amount of my money. But I'm wondering on the streaming side share, like, why did Bob Chepak get blamed when was Paramount lost like $1.8 billion, HBO Max is losing a ton of money. When everyone has made this big bet, streaming is a future, so we're going to try to get a foothold and, you know, invest heavily up front.

Why did he get the blame for Disney's performance? It's because he's the CEO, and he makes those decisions, and I don't think he's being compared to HBO and Warner Discovery. I think he's being compared to Netflix. So I think that's the comp. And also, he was putting these huge numbers out there in terms of we're going to hit X number of millions of new subs, which they were not hitting. In fact, they lost subs this quarter.

And so I think there has to be some, A, a content. strategy that works because what you're finding is you have so much more competition for the streaming dollar that you have to have a content strategy, which I do believe Netflix does, where you're putting out a must watch show all the

time or movie, all the time. Because otherwise people hop around and they subscribe and they subscribe and they unsubscribe and they unsubscribe and they unsubscribe because I don't really want to be subscribing to six streaming services. I think you're exceptional and you're a very big pot of exception

because you have young children and people who have young children are never going to unsubscribe from Disney Plus. I understand that I'm an example of somebody who doesn't feel the need to subscribe to Disney Plus unless there's something I really need to watch like

a live show of Hamilton or whatever it might be. If I'm a Marvel, if I'm a core like Star Wars nerd or a Marvel nerd, yes, you have my money and you'll have it every month. But they need everybody to make to scale, to keep the scale. On the content strategy side, so I had been reading and you mentioned it that kind

of Bob Eiger trusts the creatives, can you expand a little nut? Because as an outsider, it's almost, I never associate giving power to the creatives in a company with kind of the right financial disciplinary move. Usually it's the opposite. Can you explain a little bit more on that? Yeah, because they're not, I mean, they're not like, oh, I'm a creative person. I mean, the executives who are running ABC and the Walt Disney company, you know, the motion picture group, they are, they are hardcore business people. And they work, the difference is, is that they had in their unit and all of the business and creative teams to make decisions about what, at what budget you're going to green light this show.

Whereas it doesn't really, it feels super awkward to me. If you're actually in charge of the content to not have, A, the responsibility, but be the authority around making financial decisions, you're kind of like treated not like a responsible adult and like a responsible executive. You have to own your P&L and you have to own the balance sheet of your division, whether that's Disney Plus or all of the television networks or the motion picture group. and that seems that's the way it had always worked actually and it makes sense so somebody who was like peter rice or dana walden who peter rice who was bounced last year but who you know is you you need both and actually that really was Bob eiger's unique ability that he never really found a successor who had it which by the way we can talk about that because that's the next the real job he has to do is not just get Disney back

on the rails and get the stock back up, which has dropped like 40%. But he has to find somebody who is actually going to be able to do that thing. But the thing Bob Eiger has is the ability to assemble an unbelievable business team like he had and Kevin Mayer and Tom Staggs and the people who were there before and also have the relationships and the credibility on the creative side, whether that's the Imagineers and the theme parks or that's the Pixar, the crazy, wonderful, innovation on the creative side that Pixar does and that drove billions and billions and billions of dollars for them. Just think about it like on, uh, on however many friggin, you know, plush dolls they sold or, you know, for, um, whatever, whatever it might be, right? So that is the

balance, I think that Bob Eiger had that was so hard to recreate in a new, in a new CEO is the mix of that right brain, left brain, creative side and business side. And, um, I think that most studios, do ask that of their division heads. One of my favorite, speaking of the experience, one of my favorite things that I've heard about Disney is that in the parks, if you have a good moment, they refer to it internally as a magic moment.

And if you've a bad moment, they refer to it internally as a tragic moment. And they've done the math. It takes like 30 magic moments to make up for one tragic moment. 30.2 magic moments. Optimizing for magic moments. Exactly. That's fantastic.

That's a fantastic. An interesting anecdote. Wow. I love that. My next trip I'm going to track very carefully the magic first tragic ratio. So I do want to ask about the streaming thing again. I just want to get your perspective, Sharon, on why this has been so difficult for so many companies. We're talking about Disney losing a tremendous amount of money

and not meeting the targets that JPEC set. We'll see if Iger can do it. We talk about Netflix. Well, he lowered the target, so it'll be a lot easier. Maybe it is expectation management, but we also talk about we talk about Netflix almost every quarter about they and they contracted subscribers in a couple of quarters last last year and this year they're they're coming out the gate and they're still struggling and uh well amazon amazon for a long time couldn't really figure it out

i think that they're they're actually turning out some nice content and it makes money it makes a lot of sense for them to keep spending so but but i'm curious to hear your perspective on why this is so difficult for all these companies and then can you give us some perspective on why Disney's doing this and how important this transition to streaming is for its business? Well, on the former, I would say that you have to take the measure of the reality that about four or five major streaming companies came online within the space of 12 months. So Peacock and Paramount Plus and, you know, whatever changes are happening at HBO max at HBO and Discovery Plus and whatever happens there.

That's like about a year after Disney Plus launched or so, I think that's right. So the amount of competition that has been in the marketplace means you have to spend and the cost of everything goes up because the cost of talent, talent meaning like show runners and people who or spec scripts that are good, become. more, it becomes more competitive to own those. And so that's why you had Netflix spending those huge sums of money to do deals with Kenya Barris and Ryan Murphy and people like that who have a track record and a brand. So in some ways you could say that that is the model. I mean, tech is the, you know, apotheosis of that of spending to get your product out there and get

enough adoption that you can get to scale and then you worry about making money later. Didn't we all learn that from tech? That's actually, that's very interesting how you put that because the ubers of the world were kind of like the poster child for promising winner takes all markets and everyone tried to follow on the Google or Facebook's own social. But in streaming, does anyone really think that's still the case that spend get someone kind of hooked to your service and then they won't go elsewhere? Because everyone, I feel, everyone is, yeah.

I don't think so, but I think that there is a belief that there isn't room in the marketplace for 10 streaming services and they're not all going to survive and they want to be one of the survivors. Ah, okay, because I was going to ask, like, aren't they all kind of shooting themselves in the foot by this spending arms race? But I guess, so you're saying that's a survival. Yeah, that's, that's to survive. that's to make it through whatever the, you know,

um, gauntlet is right now of figuring out what, which are going to be the, and by the way, Paramount is doing really, um, is doing interesting work and Peacock is doing better than expected to. So,

uh, I wouldn't have necessarily bet on Peacock, for example, but there is a great desire to watch a lot of what's in that library. And I, I don't know yet if David Sasslaw has figured out really what his strategy is going to be. He's got lots of problems over there at Warner Brothers Discovery. I think that's what it is.

This is why they're all investing in AI, right? Or thinking about how they can use AI. They don't want to spend the money on the content anymore. Yeah, no, they're going to have to continue spending on the content. That's for sure. I don't see that being anything in the horizon that we could, that's predictable. But, you know, but honestly, that's really what it is. they need to stay in the game and they need to show big enough numbers and you know you've got these

smaller smaller things like stars for example who are trying to define a certain lane and if they're if they're if they're if they're must have enough in that niche does that make them valuable enough they're trying to sell you know lines gates trying to sell stars for example and where would that go would that tuck into another streaming that's sort of the the strategic thinking I would ask both of you, does this make you a happier consumer? Because normally in these kind of spending arms races, the people who benefit are us, the consumer. We get our $3 Uber rides that now are $30. But I guess I go back and forth because on one side, the prices keep raising. You just notice you get an email saying Disney Plus is now $2 more a month and it's a little annoying. But I

guess on the other side, the amount of good content out there almost feels like it's saturation of like 100% Rotten Tomatoes-type shows, and you can't keep up. Rhonda, do you have cable, or do you just, are you just over the top? No, long gone, but I'm back to, I have Paramount Plus, Peacock, Disney Plus, Netflix, I don't even know what the bill is every month, but got them all. But it's probably at this point, not less than you were paying before for the cable bundle. Oh, easily, easily. It's the same.

About the same, yeah. I don't think so, yeah. Yeah, yeah. When you throw on you. You could have the tennis channel and you gave it up. I could have the tennis channel. But I guess, yeah, so where does this end? Do we think is it like in the next few years?

Consolidation. I think it's consolidation and when does this end or where does this end? I mean, yeah, I don't know when it ends. We are still in the middle of a huge spend on content. But the thing is, Wall Street has now really clearly signaled in the past year that they want to see more financial discipline exercised by these companies and they want to see a profit or at least a wind a horizon to a profit i don't see for example it's interesting when you have competitors in the space like amazon and apple who really have um unlimited amounts of cash that they can spend and unlimited amounts of losses that they can take other other content play because it's it's immaterial to the bottom line of their business and it's it's quite

material to the the brand halo that it brings on that why are Amazon Apple in the business and Google I think just got NFL Sunday ticket and spent some number of billions of dollars like there I feel the argument was there for a long time brand halo as you said or you know peripheral they start on Apple TV and then we'll subscribe to Apple Music, but is that, does it, that having to compete against the dry traditional entertainment and media companies who it's existential for them, like, why are Amazon in them in this market? I mean, I think Amazon is in it because they want you to buy more toilet paper.

I mean, it's, it's, it's, that's the right answer. That is why. That's the right answer. Yeah, more people sign up for Prime when they watch Amazon Prime video. Actually, that's fair. Okay, Amazon's the most clear one, I guess. Yeah, yeah, because it's almost like it makes Amazon Prime as a membership just too good to be true. But Google confuses me a bit on the entertainment side. Or I guess it's not in the business. I mean, they're not in the business in any significant way. They have YouTube and they get billions of dollars of revenue off of YouTube, but they don't have, they're not in the premium content business at all. You could. ask you and apple obviously needs a reason for you to for their products to stay relevant for you to be in their system but they're the smallest of the tech you know investors and i mean apple if anything else if nothing else like i always thought apple and disney should find some way to work together

but it seemed logical because Bob Iger and Steve Jobs were very close. I'm going back some years now. And Pixar, you know, they were involved in that together. So, you know, I thought if they were going to get into the content business, they would do it that way. And that's not what ended up happening. So I think, I don't know that Apple knows exactly why it's in that business. It might be that Tim Cook likes to go to the Oscars because I always seen there.

I think that's a pretty spot on. perspective as well that sounds right to me and i mean they're also they worked on apple worked on the service business at a moment where we were in zero interest rates to go back to one of rod john's favorite topics and that service revenue looks a lot better than uh back then than it does now so when it's discounted a little bit more and you know back when they wanted to look like they were doing business beyond hardware which they are but it's worth a little bit less now shan can i ask one last question for you uh to you before we wrap When we think about Disney's business and the health of Disney, yes, we wrap.

Oh, there we go. So when we think about Disney's business in terms of, okay, it has this streaming component. It has the parks. It owns ESPN and has a partnership with Hulu. And of course, it's spending a lot. I'm probably missing a bunch. What do you think is the most important thing to be looking at when it comes to Disney's business?

Is it vision? Is it expense management? Is it successor for Iger? I mean, when you think about what Disney needs to be doing well in, what is it? I think it has the best collection of content brands of any entertainment company. And they need to manage the stewardship of those brands so that they don't wear them out and ring them dry for consumers. by overworking those brands and yet they also have to be creating content that is culturally defining and that everyone needs to see. So they did that with Avatar, which it's been 20 years

since the last avatar. And that is an example of how you wait, if you're Jim Cameron, to do something that is so extraordinarily different that it catapults. You off your couch, out the door, and to the theater to spend three plus hours hanging out with the world that lives between Jim Cameron's ears. And that they have done successfully. You can't do that once every 20 years, but you also can't expect people to show up twice a year for an Avatar remake. So what's the balance of leveraging the incredible, incredibly powerful brands? So in other words, if you tell me it's Marvel, I know it's going to be. between an eight to a 10 in terms of quality.

It has to stay there, but you also can't offer me that every six weeks because it will wear it out. That's the balance for me, and it's always, you're asking somebody who's not, who's more like on the creative side of the entertainment thing with also understanding the business, but I think that is what Bob Iger understands when he talks about giving control back to the creatives and motivating the creatives and saying everybody get your ass back to the office because this is a creative business where people need to exchange ideas and interact and and bump into each other at the lunch counter and come up with an idea that'll be the next Pixar movie. That is the core of it. So controlling the spend and all of that and understanding the balance of your different

distribution outlets, whether it's streaming, whether it's film, whether it's broadcast television, all of that stuff is a balancing act that everybody has to do. And that's essentially the current challenge, but the core challenge is the stewardship of the creative brands that Disney has. Yeah, and it sort of makes sense now that Iger's back and taking it, taking the minute. I mean, he did pick Cheapeck as a successor. We've had some comments on that. And Cheapak was looking a lot at the money, raising prices all over the place. But it is interesting that some of those are being rolled back.

And now you have someone who puts creative at the center. The question is Bob Iger isn't going to be around forever. So we'll see. What's your prediction? Bob is going to be around for exactly a year and a half longer. That's it. You don't think he's staying a day longer than a year and a half? I think that would be very tough.

Yeah, yeah. Okay, well, it's going to be a wild story, and we'll be following it for sure. I feel like we just touched the tip of the iceberg here today, and there's plenty more to discuss on the Disney side. So stay tuned for that. Thank you so much, Sharon. It's so great to have you on the show. Oh, thank you.

I didn't know that I knew that much about Disney. for asking such good questions. Absolutely. Sharon Waxson of the wrap. Ron John Roy, thanks again for being here. Great to have you again. Have a good weekend. You too. And thanks to all of you, the listeners.

Thanks to everybody who showed up live. Great to see you. We'll be back again on Wednesday. My interview with Dave Friedberg talking about his new SPAC is going to be pretty wild coming up this upcoming Wednesday. And then Ron John and I will be back on Friday next week talking again about the week's tech news. again for listening and we will see you next time on big technology podcast.