Front Burner - The wild saga of Ozy Media

Episode Date: October 5, 2021

New York Times journalist Ben Smith discusses his bombshell investigation into U.S. media organization Ozy Media and its defiant founder, Carlos Watson.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. Last week was traumatic. It was difficult, heartbreaking in many ways. And at the end of the week, we did suspend operations with a plan to wind down. But as we spent time over the weekend, we talked to advertising partners.

We talked to some of our readers, some of our viewers, our listeners, our investors. I think Aussie is part of this moment. And it's not going to be easy. So that is Carlos Watson on the Today Show defending his flailing company, Aussie Media, after a wild week of scandal and negative press coverage, triggered by his own right-hand man pretending to be someone else in a high-stakes meeting, hoping to secure funding from one of America's biggest banks. Today on FrontBurner, the wild saga of Aussie media. One media analyst, Colby Hall at MediaHeight, put it this way,

calling Aussie media a dumpster fire is an insult to dumpsters and fires. We're talking to Ben Smith, the journalist behind that story that almost led to the company's collapse and even a potential fraud case. Hi, Ben. Thanks so much for being here. Thanks. Thanks for having me on. So I want to start at the beginning of this story. This company was founded eight years ago, right, by this former MSNBC news contributor named Carlos Watson. And can you tell me a bit about Watson and his vision for this company?

Yeah, I mean, Carlos was, you know, grew up kind of parents were teachers in Miami and had this very kind of, you know, impressive academic career. He went to Harvard, went to Stanford Law School, Goldman Sachs, McKinsey, sort of all like the kind of great American kind of credentialing institutions. But also and did some education startups, became friends with Lorene Powell Jobs along the way, but also like always wanted to be a talk show host. He's talked about this, really always wanted his own talk show and spent a lot of time trying to get a show on MSNBC or CNN and had some kind of tryouts, but never really made the team. And then in 2013, kind of essentially started a media

company in his image, you know, a sort of upwardly mobile black guy from Miami who's sort of achieved the absolute heights of sort of American elite status. And I think in a way it was aimed at people for whom that was a compelling story and he was very much the face of it. It was also, by the way, aimed at investors for whom that was a compelling story. Yeah. Yeah. I want to get to the investors in a minute, but can you give me some examples of, like, the kind of content that he would be producing, that the company would be producing? They were very, their sort of line, it was the new and the next,

and they were very, very focused the whole way on exciting new figures and sort of writing friendly, simple little introductions to, and, you know, often to lots and lots of people who they thought might be the new thing. So, you know, they cast a wide net and included lots of people who were the new thing, early pieces on Simone Biles and on Alexandria Ocasio-Cortez, on Madison Cawthorn, the far right congressman. And so these were pieces about sort of the leaders of tomorrow. I mean, the problem is that, you know, you're reading it today, and so there wasn't a huge audience for it,

but it allowed them to say later, like, see, we were there first. Carlos Watson making an impact of his own, the co-founder and editor of Ozzy.com. Where do you see yourself now? That's what I ask myself. When you get dropped from a record company, all the other labels are like, all right, well, something's wrong. We have to reclaim ourselves. Reclaim the power of who we just are. I mean, our diversity is one of our strongest assets.

If we're going to be a country that is united, we can have big debates. You better hop on board. You mentioned that the founder story is probably really attractive to investors, but can you talk to me a little bit more about how they were able to get that kind of money that they raised? Like you know, in your article, according to one investment site, Ozzy had raised more than like 83 million bucks by April 2020. How did they do that? Well, Ozzy, you know, was basically in the advertising business. And they had something that was really valuable to advertisers, which is that they kind of presented themselves as this millennial news site

that wasn't doing anything that would make advertisers uncomfortable. Nothing controversial, no conflict, no breaking news, not covering anything messy. No harsh politics, very much about kind of bipartisan conversation. No, I don't think they have too much power. They're just going by their freedom of speech. We need somebody to speak for the people who can't. And I believe Silicon Valley is doing so much technologically-wise. They have that power to make stuff happen that who can't. And I believe Silicon Valley is doing so much technologically

wise. They have that power to, you know, make stuff happen that we can't as private individuals. And that brought in advertising revenue, which I think appealed to investors, but also the core message really appeals to Silicon Valley billionaires. Like, you know, there's a diverse new generation of millennials and all they want to do is sit in conference rooms impressing Silicon Valley billionaires. Like, that's a story Silicon Valley billionaires want to hear. And I think it was sort of a way to buy into this idea of, like, America's changing, and there's going to be this kind of diverse new generation. And by the way, it's not going to make anybody uncomfortable or change anything.

Was that backed up by any data, though? Like, were people paying attention to this site? I had actually not heard of Ozzy before this week, so I was wondering if that was weird that I hadn't. No, it's sort of emblematic that you haven't. I mean, you are part of, I think, this sort of millennial generation that they would like to reach all over the world,

even including Canada. But you haven't heard of it because not very, very few people ever plugged into Aussie on purpose. They were very, very aggressive in buying emails to build a giant email list. They paid for views on YouTube for people to watch their shows essentially as pre-roll advertising. They never found an audience. And did the investors know this? No, I think as far as I can tell, the investors did not know this and are, you know, living at such a high altitude from reality that they didn't even know anyone who knew this.

I want to go back to this moment where this all really started to unravel. And it's this fabricated phone call that Ozzy arranged between Goldman Sachs, who at the time were set to put $40 million into the company, right? And who they claimed was Alex Piper, this big YouTube exec. And you detailed what really happened here in the Times. And can you walk me through that phone call and what happened here? Yeah, I think it's important. Some of what has come out since then is pretty important context,

which is that Ozzy was betting everything on the Carlos Watson show. The Carlos Watson show. Oh, look at that. Oprah, Larry, Carlos. Season two is going to be loaded with good stuff. You know, they had four episodes of a special on oprah they'd done you know an hour here an hour there but the real money in tv is is selling a daily show and just producing it every day and getting hundreds of thousand dollars a day from a network and then you're really in business and they had never quite gotten that and so they

decided that the carlos watson show this talk show starring the founder, Carlos Watson, who by the way, is basically the star of all of the things they did, was going to be it. And they put all their resources into it. And they tried really hard to sell it to A&E networks. That didn't work. And then they went ahead and lied to their staff and told them they were making it for A&E networks. And when they got caught, the staff quits. They tell the next people that they're doing it as a YouTube original, which YouTube is paying for. That is also false. They're just uploading it to YouTube, like a video that you or I could make on our phones and upload. And then at some point, and it's, I guess at some point they needed to tell these potential investors that their business with YouTube was going great. When the reality was they weren't

really in business with YouTube. They great, when the reality was they weren't really in business with YouTube. They were uploading videos there and then spending tons of money on YouTube to promote them. They weren't making any money from YouTube. And that's the point at which, according to them, one of their co-founders has a mental health break, which causes him to impersonate a YouTube executive. And I have no idea, really, what the state of his mental health is, and I don't mean to make light of that.

But it was also certainly consistent with the kind of pattern of deception around this specific point. What else have you learned about, about the company since you started digging into this? I mean, more than anybody ever wanted to know. You know, just they were, they were, you know, they were deceiving. But on one hand, they were deceiving advertisers and investors on a lot of different fronts. Sometimes kind of ludicrously, they had these big posters up with fancy quotes saying how great the show was that were basically fabricated. But the other kind of thing is that they actually had this very hardworking staff who were pushed really, really hard, who were churning away,

making a lot of content that was not getting a lot of organic consumption, but they worked people very, very hard. There's also, I wonder if you could tell me this anecdote that has to do with Sharon Osbourne and Ozzy Osbourne. Incredible. So there was a dispute over using the name Ozzy. And part of the settlement was that Ozzy gave, paid essentially its damages with some shares of the company Ozzy. At which point Carlos starts referring to Sharon Osbourne as an investor in his company because he's been forced to turn over shares to her. So it's true that she hasn't met me. And it's true that as a result of her suing us, so she sued us over the name Ozzy Fest, which is our music and ideas festival. The agreement was that we were going to give her shares in the company. And the way I think about it, I think the way a lot of people think about it, if you own shares in a company, you're an investor.

She, like, came out and just eviscerated him, too. It was quite entertaining. And then the company has announced that it was shutting down, right? But I understand that now on Monday it has switched gears. It's not shutting down. Carlos says that they're going to forge ahead? Yes, it's unshut down. It's shut down and then it unshut down.

And he's trying to forge ahead but with no employees at the moment. So it's pretty hard to tell what's going on. Okay. You know, we did this. This all makes me think about this episode that we did not too long ago on Elizabeth Holmes and Theranos. And, of course, she's on trial for fraud right now. And it brought up this discussion around this fake it till you make it culture in Silicon Valley. Ozzy, of course, refutes this.

But, you know, can you talk to me a little bit about how that culture could have potentially played a role here with Ozzy Media? I mean, you also hear it with companies like Tesla or Uber, right? These companies that fundraise, you know, largely on their future potential. I mean, yeah, this was, you know, Tesla makes cars and sells cars. And there are real cars out there with people driving them. And you can call an Uber. And I think there are shades of gray, and there is a lot of you're sort of selling a dream and people are investing in a dream.

I do think it's different when you're describing a reality that is not, in fact, reality. And this was really orders of magnitude away from normal puffery. I mean, Theranos obviously was, too. And I think in both cases, I think Elizabeth Holmes and Carlos Watson set out to build real companies that would really change the world. There's just some point at which you start faking it. Right. So you see this as different than, you know, any media company that sort of tries to put their best numbers forward, right? Because, I don't know, kind of exaggerating isn't, it's not new, right? Yeah, I think that comparison

is kind of nonsense, like that, oh, all digital media companies are all smoke and mirrors. Like, in fact, in any industry, you know, people will lie sometimes and exaggerate what their revenue is or whatever, what their, how many customers they have sometimes. But I don't think that's, I mean, certainly that was true in the great old days of radio and television as well. But I don't think this is really a function of digital media in particular. I mean, these were really flat out lies. Coming back to the investors here,

I just want to pick up on what you said before that they didn't seem to know sort of the fundamentals behind this company. What does that say to you? I mean, a lot of them were, you know, people buying into stories, and they loved the story. I think that's really the core of it. A lot of them were really wealthy people and wealthy investors who weren't really media experts. Some of them, though, like Axel

Springer at the German media company, really were media experts, and they just kind of bought the hype. I think they liked the idea, too. They liked backing a, I mean, they liked backing a black-owned business that wasn't going to challenge or threaten their existing views in any way or ever cause any controversy. When you say, like, they didn't, just to go back to that, when you say that they didn't rock the status quo or cause any controversy, like, what do you mean when you say that? I mean, just that their content was not politically provocative or controversial. politically provocative or controversial. The way that, and I think a lot of other black media operators feel like they were pushing, particularly recently, to have advertisements in particular and investors

look at black-owned media companies being told, ah, this is too edgy or your metrics aren't good. And now they're just like, come on, you know? What do you think, if anything, are the big sort of broader lessons here? I mean, I guess I think they have to do with this sort of political moment and cultural moment and people who want a kind of, you know, the sort of people want to no conflict, with nothing, with no challenge to the sort of underlying ideas of what they're doing or to the power structure or anything like that. They want, you know, it's a little bit Kendall Jenner carrying the Pepsi in that ad. They want kind of the aesthetics of this political moment without any of the content.

Right. Okay. Ben, thank you so much for this. Really appreciate it. Thank you. All right. So before we go today, a new development in the ongoing scandal of sexual misconduct in the Canadian military. The Ottawa citizen has learned that Major General Peter Dahl has returned to work and will work on a number of sexual misconduct reviews. Back in May, he was put on leave after it was revealed he had written a positive character reference for a military member convicted of sexual assault. According to the citizen, Dahl will review recommendations from an investigation into military sexual assault that is being done by former Supreme Court Justice Louise Arbour. That's all for today. I'm Jamie Poisson. Thanks so much for listening to FrontBurner. We'll talk to you tomorrow.

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