Plain English with Derek Thompson - Burning Questions About the Future of Media: Netflix vs. Disney, TikTok vs. Everyone, and the Metaverse

Episode Date: July 12, 2022

Will Netflix be the king of streaming in five years? What's the biggest threat to dethrone it: Apple, Disney, or HBO? Are movie theaters back for real? How has the pandemic changed the film industry? Is TikTok the biggest arch-villain in entertainment? Where do hits come from? What is the metaverse, and will I like living in it? Derek has a lot of questions. His guests—Bloomberg entertainment reporter Lucas Shaw, and author of 'THE METAVERSE' Matthew Ball—have many answers. Host: Derek Thompson Guests: Lucas Shaw and Matthew Ball Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

What's up, everybody? Are you tuning in to the Challenge USA on CBS? Well, tune in to me, Tyson Apostle, as I break down each and every episode with my co-host, Amelia Weddemeier. I'm also a contestant on the show, which gives you all the insider scoop. Amelia, how stoked are you to do this? Tyson, I'm freaking excited. I cannot wait to sit my butt down every single week to watch the show, then come here and recap it with you on the Ringer Reality TV podcast. Today's episode is a double feature on the future of media and entertainment. I was thinking recently that this has been a really weird summer for Hollywood. The theme of the last decade has been streaming is taking over the world,

and movie theaters are in slow motion stagnation or decline. And you could absolutely say that the pandemic put that narrative into hyperdrive. Movie theater tickets plummeted. Box office was obliterated for two years. Streaming was zooming forward. It just seems so obvious that the future of, film was moving away from theaters and toward your living room couch. But then, this summer happened.

Netflix hit a subscriber wall, and lots of media and entertainment executives are now looking at that subscriber wall and thinking, hmm, does our streaming pureplay make as much sense as it did six months ago? Is the ceiling of global streaming subscribers really like a billion like we thought it was just a few months ago, or is it a lot lower? They're recognizing the benefits of being, you know, an old-fashioned company that is diversified, where your fortunes are balanced among theme parks and merchandise and cable and, yes, movie theaters. This summer, Top Gun Maverick set the all-time box office record for a Memorial Day opening.

Then Minions set the all-time box office record for a July 4th opening. Does that sound like an industry? that is dying, you can scream, it's ticket inflation, it's ticket inflation all you want, but it doesn't change the fact that the movies are back, or at least the movies as a tentpole business, are back. This intersection really fascinates me. I see the history of media and entertainment as the history of frontiers that rise and fall like waves coming after one another. movie theaters were the wave of the early 1900s. They rose and rose and then tickets bought per American peaked in the 1930s, 1940s at about 35 movie tickets bought per person in America, an astonishing number.

It's been declining ever since. It's now about two or three. So what happened? Well, in the 1950s, linear TV comes along, changes the world, TV, changing everything. But then linear TV itself peaks around 2010. And what's the next wave? Well, it's streaming. Streaming sores.

It revolutionizes entertainment. Everything's just going to be streamed to your couch. Your couch is the future of all entertainment. And yet now we see that might be peaking. Movies, TV, streaming. What's next? My guest today are Lucas Shaw, an entertainment reporter at Bloomberg,

and frequent guest on The Town Podcast. And Matthew Ball, investor essayist, author of The Metaverse. I have burning questions for both of them about peak TV, Netflix, Disney, Apple, the Metaverse, and the future of our attention. As always, please send your comments, criticisms, ideas for future episodes to plain English at Spotify.com. I'm Derek Thompson. This is plain English. Lucas Shaw, welcome to the podcast.

Thanks for having me. It's great to be here. Absolutely. So you wrote this piece for Bloomberg that I was just waiting for somebody to write this. I have a list on my computer of like ways the weird economy is going to change X. And I had like the millennial consumer subsidy and I had crypto and I had all this stuff. And then I had this one little tiny note that was like TV spending down. Like that's all I had. But that was covering up this larger story I was so interested in, which is having followed people like you and Matthew Ball for a long time. I knew that original scripts in Hollywood had increased from just over 300 in 2012 to nearly 600 in 2021. But now you're saying this is coming to an end. So take us inside your peak TV hypothesis.

What is peak TV and why is it happening? Yeah, so if you take a step back, there was always this belief in Hollywood, among critics, all that, that film was superior to television. That was, I'd say, subsisted for the entirety of the 20th century and even some of the 21st. And that started to change as HBO invested in original programming. And you started to see this huge spike in programming on cable.

And broadcast didn't change. So as HBO and AMC and FX and all these cable networks are spending more, the total number of TV being produced and the quality of television being produced grew appreciably. Then Netflix comes along. it tries to, at first just copy HBO, but eventually copy the entire cable bundle. And so even though broadcast cable production stays the same, cable network production stays the same, even grows a little bit, streaming comes. And so as you point out, the volume of TV being produced was just unprecedented. And it struck all of these traditional people in the

industry as unsustainable, because it didn't seem like there were enough customers to watch all of it. But there was this exuberance about streaming that was seen as the future and the sense that, or this belief that you could invest any amount of money to grow. It was sort of a more of a Silicon Valley mindset of let's burn money now, lose money in the short term, but we will make it up in the long term. And that stayed true for several years because Netflix kept growing. I mean, Netflix was really the company that precipitated all of this. And as it kept adding 25 million customers a year, and as every other media company restructured it, merged and so on to try to copy Netflix.

They kind of copy this play. They also copied Netflix and making a bunch of shows. And we seem to have finally reached a breaking point where because Netflix has run into a wall and it's contracted so far this year, its spending is not going up at the same rate it was. And every other company that was using Netflix as its model can now must copy Netflix again just in being more responsible about its spending. Yeah, so what I think is so interesting about this is, I wonder in the era before what we're

calling peak TV, right, whether it was the not just the golden age of TV, but like the platinum age of TV, the age of TV where the number of original scripted shows was just going up and up and up every single year. Netflix was really well positioned to dominate in that era. We had a low interest rate environment. Netflix had taught its investors to judge it not just based on earnings, but on subscriber growth, very akin to Jeff Bezos in the early 2000s telling investors, don't judge me on earnings. Trust me, earnings will come.

Judge me on cash flow. Judge me on the amount of cash that I am producing. And eventually, I promise I will get enough of a monopoly that I'll be able to raise prices. That kind of worked, but also kind of worked for AWS reasons. We won't get into Amazon's future. But it worked for Netflix for a long time. And then suddenly, as you said, Netflix hits this wall. They assumed maybe that the total addressable market of Netflix subscribers is going to be significantly higher than it actually was.

We're going to get to sort of Netflix, qua Netflix in just a second. But I want to ask you if Netflix was perfectly set up for all these macroeconomic and strategic reasons to thrive in the era that's coming to an end, who is set up to succeed in this, the post-peak TV era? Couple nominees. Number one, we have Apple, which can still spend like a drunken sailor because it's got the iPhone, which is basically like a private sector, financial, like Federal Reserve. It can just print money. Number two, you got HBO, which I think it is fair to say has, is famous for having the highest batting average per swing on its shows. Maybe that's just a classic East Coast overeducated

journalist bias. But I think pound for pound, their shows are certainly the most celebrated by critics. There's Disney, which has the IP and can maybe more. money ball its way through the next few years by making Star Wars and Marvel spin-offs that even if they don't all go crazy berserk popular, have a high audience floor. So Apple, HBO Max, Disney, who do you think is in the driver's seat for the peak TV era? I mean, I think you picked the three best candidates, although you did omit Amazon, which sort of plays by the same rules as Apple. Yeah, let's fall on Amazon. Yeah, yeah, talk about Amazon. The case for Amazon is that they've been doing it for a long time. They already have certain shows that people like to watch. And unlike Apple, there's

at least more of a track record. The case against Amazon is they've been doing it almost as long as Netflix and Netflix releases more hit shows in a year than Amazon's probably released in its entire time as a studio business. You know, I think of the ones that you identified, Disney is probably in the strongest position. Apple is... is in a good position to make shows that people care about. I just am always reluctant to give too much credit or believe as much in a company where the programming is an afterthought.

I just don't think it matters enough to Tim Cook and to the leadership at the company. Will they make good shows? Will the streaming service grow? Probably. Will it be, you know, are we going to have a conversation in five years about how Apple screwed its company over

with how much it spent on programming? No, but I don't think we'll also have a conversation about how Apple is now the leading streaming service and entertainment. I could be wrong. HBO is in a really good position, and as you point out, they do have a very high batting average. They have sustained quality even while trying to deal with Netflix and increase its output. I'm a little reluctant to crown them the obvious leader because they're going through their second merger in five or six years, and there are a lot of indications that their new CEO,

the new Warner Brothers Discovery CEO, David Daselav, is pretty cost-conscious. You know, he's saying all the right things about HBO being the one thing he doesn't want to touch, but he's got to figure out how to combine HBO Max, their streaming service with Discovery Plus, because David Zazlev had previously run Discovery. There's just a lot of uncertainty there. As they continue to lose executives and change things, it's just a more vulnerable company.

they also have a ton of debt, which is not an issue that Apple and Disney really have. Disney, the reason to believe in them is because it's Disney, and it's a company that has engendered so much goodwill with fans. It's a diversified company, and that it's got theme parks that are doing incredibly well. Right now, it's had the movie studio that has really dominated the industry for the last 10, 15 years. And, oh, by the way, it's had the fastest growing streaming service in the world for the past couple of years. and may catch Netflix way faster than some of us had anticipated. We'll see. It's going to lose some customers in India because of a cricket deal that we don't necessarily

need to go into. But it's just a really well-positioned company. The red flag there is, of course, that the great momentum Disney had over the last many years was under the previous CEO Bob Iger. It is now under a new one in Bob Chepec. And there are a lot of concerns about him, at least in the entertainment industry. I think what at least Disney has that Apple and, and HBO Max don't have,

which I think you summarize pretty well, is a kind of focus. With Apple, their focus is the iPhone because it should be the iPhone. The iPhone is their business, and TV is not. With HBO Max, TV is their business, but they're going through this transition.

It's very hard to predict strategic changes when new people are coming into office. They should let HBO remain its own fiefdom, but they should do a lot of things, and that doesn't mean that it's going to happen. Disney, I think, not just because of its IP, which is incredibly strong, totally unparalleled, but also because, as you said, it's so diversified. And so, you know, it has the opportunity to do really well in box office while maybe its TV doesn't do one year.

And then really well in its amusement parks, while it's, you know, movies don't do well one year. I think that gives it the kind of strength that the 2020s might need if it's going to be a little bit of a janky era. So my first brilliant question for you was about peak TV. my second burning question is simply stated, how should Netflix fix Netflix? So let's talk about the right side first. This is a really successful company. Netflix has more than 200 million subscriber accounts around the world. And subscriber accounts aren't like ticket sales.

It's not like one equals one. These accounts are not individuals. They are entire families. They are friends of families. They are entire families of the friends of those families. It's conceivable that one billion people around the world have easy. access to a Netflix account, which might explain why they hit this ceiling. But despite all that, despite that extraordinary penetration, Netflix subscribers, as you said, fell last quarter. The stock plummeted

66% year-to-date. That is a crypto-level crash. And the company seems to be suffering a kind of mini-existential crisis despite its strong position. It's talking about adding advertising. It's talking about cracking down on passwords. So that was a long wind-up. But Lucas, what do you think is Netflix's biggest problem? And is it fixable? Well, if I had the solution for Netflix's problem, I could probably get paid a lot of money to do something else. Their biggest issue is they don't seem to know what the solution is.

You know, this is a company, I think you're right in identifying them at being at having something of an existential crisis. I'm sure that the leaders, Reed Hastings and Ted Sarandos would push back on that a little bit. but it's the company that has habitually seen around the corner and anticipated the problems that were coming its way before they happened. So when it was a DVD by mail service, they saw that streaming was coming, and they created a streaming service, and they had this. They ended up splitting the business. No, Cicester. Temporarily, but it ended up working in the long run.

They saw that their biggest suppliers were going to pull TV shows and movies from the service, so they started making their own. They built up a huge studio before they lost too much of that. We all know how well that worked out for them. They saw that there was going to be kind of a globalization of content and that they needed to get ahead of it. That's their biggest advantage on all of the competition is that they have a huge business and all these other markets. But the issue of competition and saturation, which they were asked about ad nauseum in over many years, they either didn't see coming or willfully ignored or there was just some, they had some blind spot to this. And they seem to have been legitimately caught off guard over the last kind of four to six months by this pretty dramatic slowdown in their business.

Can I just pause you right there? Why do you think they didn't see this coming? Like, Reed and Ted are brilliant. And they were, as you just said, their foresight was immaculate up until November 2021. Is there some particular reason why this crisis you think caught them off guard? I remember, God, what podcast was I listening to? I think it might have been the All In podcast, where Chimath was talking about how he thought that maybe Apple's privacy changes, which we know have screwed over Facebook and we know have screwed over Snapchat, might have also reduced the efficacy of Netflix's advertising to pull in new subscribers, which would have increased the churn rate for Netflix. And we have seen some evidence that Netflix's churn rate has increased, right?

the ratio of people leaving the service versus those coming in has gotten a little bit wonky. Do you have any theory about why this was the corner that Reed Hastings and Ted Srandos didn't see around? That's a really interesting theory. I will say my explanation is a little bit simpler than that, which is if you talk to those executives over the years, they were pretty clear that they saw the market opportunity at being 400 million subscribers, 500 million subscribers, maybe 600 million subscribers. maybe 600 million subscribers. You know, these huge numbers, Jason Kailar, who has run both Hulu and WarnerMedia, talked about there being a billion subscribers out there for a streaming service. And so I just don't think they thought they were at that saturation point yet.

You know, they had their best year ever in 2020, which was fueled in part by the pandemic and people being at home, but I do think obscured some of the other changes that were happening. They had seen the entry of these new competitors, and it didn't seem to have a dramatic effect on them at first. And so they may have assumed that there would be room in the market for many people. And I think there was probably a mistake in not recognizing that it would take 18 months to two years before you saw the real impact of the so-called streaming wars because you'd have people

experiment with all these other services and realize what they wanted to keep and what they didn't. there are the macroeconomic factors that you talked about with regard to interest rates and inflation and things that are really beyond their control. And I do think have some impact, because it's affecting spending in a lot of ways. And, you know, I think there's a little bit of a little bit of hubris here. It's just a company that has been so right about so many things that despite it seeming kind of apparent that they would run into some problems as there was more competition and as they got to a certain scale, they just didn't believe. believe it was going to happen to them. Yeah. When you talk about a company like Netflix having

one billion subscribers and you add the multiplier that one subscriber is a household, sometimes you have households of what, four, five, six, sometimes. I think they average, yeah, like three and a half is what they'll say one household is. Okay, so one household is three and a half, but they're probably sharing it with their sister, their cousin, their cousin's best friend. I mean, I don't, I've never seen the internal figures of what Netflix associated the, assumed the multiple on their account was. But if you're talking about a billion paid accounts, you may very well be talking about 3.5 to 4 billion people watching a Netflix show every single year. And you are, at that point, you are straining credulity, right? There's only, what, 7 billion people on Earth? You're talking

about 60% of them watching squid games every year? Like, it just doesn't seem plausible. But I want to move on to my follow-up question on Netflix, which is, should someone buy them? Like Disney, Apple, Amazon. This is a distribution platform for one billion people, 220 million subscribers, one billion people. Its price earnings ratio has fallen from about 400 in 2015 when I was screaming about the company being overvalued to 16 today, which is basically the average for the S&P 500. Netflix is a good deal. It is a great company with extraordinary, unprecedented reach, and it is trading. cheaply. Why shouldn't Disney or Apple try to buy it?

It's very possible that that will happen, especially after they report their second quarter financial results in the middle of July, about a week after this episode will go up, I think. And all expectations are that it will lose customers again. And I think that if it had, and this is despite having Stranger Things, the biggest show in the world over the last month, if they have another bad quarter, I think you can expect the stock to continue to drop. Right now, I forget when I last looked, it's probably in the 80 billion range. That's still pretty hefty for some of these companies,

but if it gets down to 50, 60 billion, that the number of companies that are capable of buying it grows. You know, I think that the challenge for an Apple or one of those big tech giants is there's a lot of doubt that they could get that through the regulators in DC. Now, maybe the fact that that Microsoft seems to be pulling off Activision would convince Apple that, oh, we could probably pull off Netflix too, because it seems somewhat similar. Right.

You know, Microsoft's having the biggest gaming platform and then buying the biggest studio, one of the biggest gaming studios, why couldn't Apple, which is some major distributor buy a major entertainment company? I think for all the traditional... It might be a difference between sort of vertical integration versus horizontal, right? The hard driver's in software is a little bit different

than Studio Studio. But I understand the larger point. Just in terms of big company and size and all of those things. But for the other media and entertainment companies, I think, you know, some of them would love to try to figure it out. Like there's been some discussion about how Comcast and Jeff Shell and all that, but Comcast had such a hard time just getting the NBC Universal deal done. There would certainly be a lot of concern about trying to get the Netflix deal done. You know, Disney just did this huge transformational deal with Fox. I'm just coming up with the reasons against it, but I think you're totally right that this is

something that a lot of these larger companies have to consider because if the stock keeps dropping, it becomes this incredibly valuable asset that is suddenly available for a sixth of what it would have been just a few months ago. I think, look, it would be an extraordinary steel. I think it's an amazing company. It's an amazing product. It's taken a beating because conditions have changed so dramatically. But my God, that area seems pretty frothy for possible consolidation.

One thing I did. one thing I did want to point out, and this is more to what we were discussing earlier, but in talking about kind of peak TV, peaking, and all these problems, it should be noted that it's not as though spending on entertainment is actually declining. It continues to stay the same and or go up a little bit. It's just not going up at anywhere near the rate that it used to be. And given some of the inflationary impacts on some of the inputs, you could argue that kind of adjusting for inflation, it's down or flat. But there basically is not a world in which companies slash their production budgets by $5 billion. Right. But it might change the way

that they spend money and how they allocate that money. And that actually ties into the third burning question that I have for you, which is moving from television to film, what lesson we should take from this summer's surprisingly, even shockingly strong movie theater season. So movie theaters. Like, remember when those were supposed to be dead? Remember when they were dead? Like, when the pandemic was supposed to kill movie theaters because everything was just going to be streamed to flat screens and living rooms. So, you know, spoiler alert, they're not dead. Top Gun Maverick scored the highest Memorial Day weekend opening ever. It's now gross to a billion dollars. Minions, the rise of grew, just broke the box office record for a debut over

the Fourth of July weekend. The media narrative, I think, is that these movies were sort of lofted by very different and even opposite forces. On the one hand, with Top Gunn, you have the force of celebrity, like the might of Tom Cruise and the Zillion Watt smile. And then with Minions, it's a sequel, yes, to a very popular franchise, but it was also buoyed by this viral TikTok meme of dudes going into movie theaters and suits and calling themselves gentle minions. So you've got old-fashioned celebrity, on the one hand, new-fashioned or new-fangled virality, on the other hand, what broader lessons for the movie industry, if any, do you draw from this summer's blockbuster season? So I object to the first part of your question, and it's not specific to you, but I've seen a lot of people frame it in the weren't movie theaters supposed to be dead, wasn't the business over.

And I will admit that some of this might be defensive on my part because people group me in with the people who said theaters were done. I don't think that was ever the argument. I think the argument was the movie theater, the movie business was already facing something of a crisis because attendance was going down every single year, and it was clear that people were more than happy to watch most movies at home. And so movie studios and theaters needed to figure out a way so that they could release movies at home either directly

or get movies that were in theaters at home sooner. And this is a problem that the pandemic actually forced them to solve, because these companies had been talking about doing this for a decade, and they could never get anywhere, because theaters saw it as counter to their interest to let studios make movies available at home after, say, two weeks or a month or six weeks, instead of the traditional window, which had been more like three months or six months or nine. And so this was this huge problem in the movie business that the pandemic actually helped solve. And so I think that is one thing we're seeing, is that because studios now have more flexibility. They can release, they can release movies in the way that they should

be released. So you have movies like Minions or Top Gun where they're huge and it makes sense, there's a, those are events. There is a reason to go to the theater to see them. The movie theater business is now more than ever. It's an event business. It is not a habit. It is not something that people, most people do every week or even every other week. It's something that they do every couple of months. And so they're going to go for a big event. And that movie should be in theaters

and it should be exclusive in theaters for a period of time. And they are. And there are all of these other movies that studios have to figure out how to release. And that's the one that's tricky. Because to me,

the fact that a movie like Top Gun worked or the movie like Minions work shouldn't be news. I mean, it's great that this business that suffered for so long now seems to be mostly back. But Hollywood had become a hits-driven business.

It's even more of a hits-driven business. It's even more of a hits-driven business. You've tweeted and written about this many times. The hits are as big, if not bigger than ever. And the question is, what do the studios do with everything else? That's exactly right. And when I was tweeting about this, I think you and I were going back about one aspect of my interpretation, and Sean Fennessey at the Ringer and I were going back about a different

aspect of my interpretation. And he pointed out that, I think I'm just quoting from Sean's Twitter feed at this point. So 121 films released in the US in 2019, before the pandemic, earned at least $10 million at the box office. Halfway through this year, 2022, only 28 movies have reached that same threshold. The middle's not back. End quote. That's Sean. And I totally agree. The hits are as big as ever. The event job of the movie theater is still doing its job. People are still responding to event movies the same way they always were. But the middle and the low end isn't back. Americans aren't coming back for West Side Story, right? For those kind of, and everything below Westside

story, for those kind of movies Americans are saying, you know what, it's going to be on streaming in whatever, three weeks, five weeks, maybe it's already on streaming. I would rather watch a movie that doesn't have enormous characters, big explosions, big movie stars. I'd rather watch that movie on my couch with ice cream that I don't pay $19 for than go to the movie theater, spend $100 bucks on popcorn and have to go through that whole experience. And also, to your point, like, you reminded me as I was, you were, you were totally right in your initial criticism of my framing that I made the mistake of, and the classic journalism mistake of using the word dead or death to refer to a downturn in the second derivative.

Like when something stops growing, the media always says it's dead. I remember like in a like, 2015, there was all these articles about like, is cable dead? It's like, no, cable TV isn't dead. Tens of millions of people still watch lots of shows, but it has stopped growing. And from that definition, from the media definition of dead, movie theaters have been dead. since the 1940s. Like, tickets bought per person peaked at about 35 in the late 1930s, 1940s, and now it's about 2.5-3-ish, I think, per year, movie tickets bought per person. So the movie theaters have been, quote, unquote, dead for the last, you know, 70 years by the media definition. But by the actual economic definition, they're still making, you know, hundreds of

millions, billions, billions of dollars in revenue. One aspect of this that I wanted to ask you about, and it ties us a little bit back to the streaming question. I look at the 2022 box office, and it's all sequels. Top Gun Maverick, number one, Dr. Strange, number two, the Batman, reboot, number three, Jurassic World Dominion, number four, Spider-Man, number five, Sonic the Hedgehog 2, number six, minions, number seven, et cetera. Movie theaters are doing this, excuse me, movie studios are doing this because they know what people watch. They know what people want to watch. And so when they have scarce money and they have to drive people back to the movie theaters, they make sequels, adaptations, and reboots.

To what extent do you think we're going to see that logic come into streaming? Like, why won't streaming in a austere world follow the sequelization path of movies? You will definitely see it at some place. I mean, look, Disney's streaming strategy is already that for the most part. You know, Disney Plus is largely predicated on Star Wars and Marvel. I guess I was mostly thinking Netflix here, but yeah, you're totally right with Disney. But if you listen to, you know, Netflix has been, at Netflix as a company is kind of obsessed with Disney now.

And also, they've talked a lot about trying to create franchises because, you know, the biggest hurdle in streaming, or one of at least is minimizing churn, which is people who cancel. And one way to do that is if they know that, you know that, you know that, you know, you know, you your service has a certain type of programming, or they know that there are new seasons of something that they love coming, they're probably not going to cancel. I mean, maybe they'll do the drop and sign up again thing, and there are certainly people who do.

But it definitely mitigates churn if you are the home of Stranger Things, and you are the home of Squid Game, and you are the home of all these shows that people love. And so Netflix is trying on the franchise front. It's just creating franchises from scratch is really hard. The reason the movie business is all sequels is because most of these studios, have struggled to create new IP that people love. And that's, I mean, that's another reason to, at least for the time being, be bullish on the future of Disney in this.

But you're certainly seeing it across the board. I mean, HBO is working, has a prequel to Game of Thrones coming, and they are developing other ideas. You know, Amazon bought MGM in part because it has this library of movies and shows that supposedly people love, and it can turn into properties that people know. It also has Lord of the Rings. Paramount with Paramount Plus has definitely leaned into creating worlds. It's their show Yellowstone, hugely popular. Yellowstone is basically becoming its own Marvel. And so now they're trying to create a Yellowstone universe.

This idea that Disney created of the Marvel Cinematic Universe, people tried to replicate movies with very mixed results, and there are increasingly efforts to do it in TV. So I think you'll see that. At the same time, you'll see, I think, a swing towards cheaper, easier programming. So, like, there's been a huge boom in unscripted. And I think that will continue unabated because you can get more people watching an unscripted show that costs a million dollars an hour than, you know, as you can getting, you know,

people to watch a show that costs 15 or 20 million dollars an hour. Yeah, no, right. It's interesting. You know, the thought that came to mind and it's probably a little bit too glib is that first TV mimicked film in terms of production qualities, and now streaming in an age of austerity will have to mimic film in terms of turning its content into worlds, worlds that can be sequelized and pre-equalized and accessorized with all sorts of different spinoffs. And it's not, I don't see it as cynical. I see it as, frankly, intelligent. This is people like watching

iterations of what they know. And if Yellowstone is a huge hit, why wouldn't you make 18, 80, whatever? And why wouldn't you do 14 spinoffs so that everyone who loves those characters can gobble up as much of the Yellowstone universe as they possibly can?

Well, and if you think about the impact of austerity, you could see it to some extent in what's happened in broadcast, where the budgets stopped growing a long time ago because it wasn't the area of growth. And NBC is basically the Dick Wolf Network. network. CBS has all of certain NCAA, all these procedurals and shows like that that it has a million copies of. There are seven different singing shows. The variety of programming on broadcast has

shrunk appreciably recently. Okay. Burning question number four. Is TikTok eating the world, like the entire world? I don't know what the most sophisticated way to ask this question is. So maybe I'll just ask it in a stupid way. When I talk to people, about, you know, what's plaguing Facebook, Instagram, Snapchat, the legacy social media companies. And it's kind of funny to call them legacy. They're like three years old. But they keep saying, all right, well, TikTok is eating young people's attention. All right, got it. Social media. But then I talk to people in the music industry about what keeps them up at night. And they're like, well, there's this problem that TikTok is creating all these surprising hits. TikTok is eating

people's attention. And then I talk to people in TV and film about their big picture fears. And they're like, well, you know, there's only so many hours in a day. TikTok is eating attention. So I'll ask you the stupid question. Is TikTok eating entertainment? So TikTok is posing the same existential challenge to media that YouTube did 10 or 15 years ago where it's so popular and so many people are using it that they have to be there. You feel you can't, right?

If you have a new movie, if you have a new album, if you have a new show, you need to use TikTok. There's too valuable an audience there, especially because they tend to be younger viewers. But the more you feed it, the more time people spend on TikTok and not using a thing that you're trying to get them to use. It's best argument, especially in music, has always been that it's not a substitute, right? You're not going to listen to a full song there. You're certainly not going to watch a full movie there. And that's true to a point. But there's also some concern, I think, that it's training people to not need that.

You know, we've seen this evolution in sports where a lot of younger sports fans, and don't watch the full events. They just catch up on social media. I'm raising my hand. Like you, Derek. Yeah. I love basketball. I love baseball.

I follow basketball, not exclusively, but say 70% through podcasts. And I follow baseball maybe 85% exclusively through box scores. It's remarkable the degree to which I watch these sports by not watching them. It's actually very, very bizarre the way that I practice my fandom with basketball and baseball. With football, totally different. I schedule Sundays for football, basketball, baseball, we could have a three-hour conversation about the nitty-gritty of the Yankees lineup or the Kevin Durant trade. I do not watch these sports during the regular season, basically, at all.

So sorry to take that in a longer direction. But you're absolutely right. There are ways in which people can learn to consume a piece of media in a way that is totally not its intended consumption. Right. And I think that's the real challenge for these, because there's only, there's finite amount of time. right? We see the crazy numbers about the number of hours every day or week that people watch TV or the amount of time they spend on TikTok or Facebook or different social media, but there's still only so much time. And so the larger share that TikTok gets and the more beloved it is by a younger generation, it does pose a risk to some of these companies. I will, the one thing I'd say, you brought this up a little bit with Minion, so I don't want to be redundant. But I do think sometimes we give TikTok too much credit because I think they're undoubtedly, songs or movies or projects

that where TikTok is not creating the trend, it's just amplifying it. And so, like, Enkanto was already really popular, and then people liked it, and so they made things, and then that song blew up, and it undoubtedly made it much bigger. But that doesn't exist without the

original movie. Or without the original distribution mechanism, right? Original advertising, or original label reach. Yeah, that's right. And so, or like with minions, how much of it, I was debating this with a coworker of mine this week, like how much of the gentle minions

and the whole minions blowing up on TikTok is organic and how much of it is because illumination, the company behind it, started posting to TikTok two years ago and they clearly had some, they sort of seeded the idea. TikTok is like the all-purpose cedar. It seeds music hits, news topics, culture trends.

It's really astonishing how much of the media and entertainment world is somehow downstream of something that happens on TikTok. It really does seem to me to be gobbling up attention in an attention finite world. And I hope we have more time to talk about it in future episodes. So Lucas Shaw, thanks so much for coming on.

We'll have you back soon, man. Thanks so much. Thanks for having me. That was Lucas Shaw, entertainment reporter for Bloomberg. And next up, my interview with Matthew Ball, investor, essayist, and the author of the new book, The Metaverse. Matthew Ball, welcome to the podcast. Happy to be here.

You have a great new book out next week called The Metaverse, and we're going to talk about it in just a few seconds. But first, I wanted to get your brain on the topic of Netflix and hits. You and I've talked a lot over the last few years about Netflix and what it takes to make a hit and what it's worth to have a hit. I think I'm quoting or misquoting Jeff Bezos here when he said in some earnings report, in baseball, a home run is worth four runs, but in business, a home run is worth. birth a thousand runs, because the iPhone is not just like four times more valuable than the typical successful product. It's a million times more valuable. And in entertainment, a home run like Game of Thrones or Stranger Things or The Mandalorian, it's exponentially more valuable than a typical break-even show or film. But it's not clear to me that for all its operational brilliance, Netflix is getting better at doing this. And so I wonder, it seems, that gets become really hard to build new franchises in the 21st century. Do you agree that Netflix has a hit problem, a franchise problem, and why do they have that problem? I definitely agree that they

have a hit problem. And what's interesting about that is what you mentioned, which is they don't seem to be getting better. One can argue that they're getting worse, in fact. And that's despite the fact that let's compare versus 2016 when I joined Amazon Studios. Since then, they've probably spent 60 or 70 billion on original content. A good assumption would be that you have gotten much better. And yet the data seems to suggest relative stagnation. Let me give you a good case study. There's a company parrot analytics. They're a portfolio company. They do demand measurement. How excited are audiences about shows? How much do they talk about it? Do they pirate it? Do they share GIFs about it? Review on IMDB? Do they download it? They show that in 2019,

Netflix had a total of 16 outstanding or excellent series. That means essentially in the top 3.2% of all releases. 16 sounds good, but they released 135 series total. Let's compare that to HBO. HBO released 14. That's too fewer, but they released 30 total. So we had roughly one quarter the batting average at Netflix that we did at HBO.

in 2021, two years later, that Delta had actually exacerbated. We now saw that HBO was at nearly 20 series, and Netflix had actually retracted to about 13, despite increasing their output. And so why is this happening? Like, my first order explanation would be Netflix is an amazing company that has grown its user base to extraordinary levels, but it does not own the kind of valuable 20th century IP

that's really easily merchandisable, like easily sequelized. It's it owns a lot of new stuff that it has to build like squid games and Stranger Things, but those don't easily lend themselves to the kind of universes that we see something like Game of Thrones or Disney Marvel or Disney Star Wars. So is it just as simple as other companies have a 30, 40, 100 year head start building this IP library and Netflix is in the process of trying to grow those trees right now, or is there something else happening that I'm not thinking of?

That is a big part of it. Why? Because the floor on content that we're deeply bonded to is quite high. Marvel is a good example. If you take a look at the reception to their TV slate,

it's pretty mixed to awful, in some instances. Moon Night, as an example, was pretty widely panned. And yet the floor, especially if we're talking about demand, again, the parent analytics focus, is still high,

because there are tens of millions of people who are 15 years into the Marvel Cinematic Universe. Their delight for the next entry depends on consumption of the last. And so the lack of intellectual property into storytelling ecosystem or cinematic universe is a big part. But their overall challenges reflect four things that are unique to being an upstart. When they started their original programming really in 2013 but ramped up by 2016, they had no pipeline. You option books, you sign talent, and you cultivate and develop those early stage ideas.

They had to start from zero. Fox in 2016 had over 65 writers already signed to deals. Sony has over 100. Starting from zero takes time, partly because the best talent is not available. You have to wait for new books to come out to option them, and you have to win them. The second challenge was speed.

HBO is famously slow. They often take four to five years to put even the most beloved franchise into production from development. Netflix could not wait. They needed shows tomorrow globally. And so they often had a reputation for producing before something might be ready.

That's nice for talent who doesn't want to sit around for years, but it may not be the best for quality. I should have paused you there as you're going through three before you hit three and four. It's so interesting because like four years ago, I was talking to people that were relatively high up at Netflix, and they mentioned that this was a benefit to them. This was a strength. They said there's all this red tape at all these other organizations. You go to Sony, you go to HBO, you go to whatever, Fox, and they are going to put you through screenwriting hell. You are going to be in purgatory with your script for years and years and years, and we tell them, come to Netflix and make your dream project basically immediately. This is why people want to work with us. And it's interesting because there's no such thing as the pure good when it comes to strategy. Everything has some kind of trade-off.

And in the short term, this worked out well for Netflix because they had to go from zero to 60 or zero to 100 when it came to having writers that were consistently within that Netflix ecosystem. But in the long run, it might have come at the cost of quality because you didn't have all these hands and fingers massaging the original screenplay to make sure that by the time it went to production, it wasn't B-minus, maybe pushing B, it was A-minus. A. So I think it's just, it's interesting to think back at these arguments and how they age over the last four years. Sorry to interrupt you. No, no, it's quite right. And part of that is they often picked up whichever projects were fairly mature, but passed on late stage from another network. Often, this is why they were renewing canceled series or bringing back canceled series. And that's sometimes very successfully, like you, for example, right, which languished on TV and then became an enormous hit on Thanks. But it was partly a reflection of we don't have time to wait to develop new potential hits, but we see something that did well enough elsewhere that we believe our economic model can float.

So let's green light it. Sometimes that meant you found the diamond in the rough. Often there was a reason why discarded series were discarded. But the third and fourth reasons are important because they answer your question of the inversion of that argument. And that is there's that old adage from William Golden. In Hollywood, nobody knows anything. HBO and Kevin Feige at Marvel prove that that's wrong, as does Pixar. They continuously, for decades, produce quality. And that is because of two different things that also lacked. Process knowledge, that's the establishment of a very specific approach to programming, and employees who know not just the process, but one another.

They've developed for a decade. They know how their boss thinks. They know shorthand. They have a good instinct for their partners within the network on the marketing side, production side, and development. It's one of the reasons why you take a look at one of the most consummate developers of the past decade, Ryan Murphy, who worked deep in partnership with Dana Walden, with John Landgraf, with the FX marketing team to enormous effect,

but at Netflix has been fairly muted. So it's interesting because one of the first things that I said was butchering maybe that Jeff Bezos quote about how in business the home run scores a thousand runs. I was thinking that the runs scored by home runs in entertainment are sequels, prequels, adaptations, and reboots. If you have a hit like Game of Thrones, it means you can make a prequel. You can make a spinoff. You can do what Disney is doing to Star Wars and Marvel and just spin off this entire enormous universe. But you're making a really subtle extension of that point, which is that another run that is scored by business home runs is that you build a culture of success. The people who participate in that home run know how that home run was done.

And they can say this is how we can do it again. And then when we get that next big hit, we can take lessons from A and B and apply it to C. And so these places like Pixar and Marvel and HBO, people have been working together and making these hit shows over and over again, it is precisely because they have this long legacy of making these hits and spinning them out, if they might have a slightly higher slugging percentage going forward. Make your last point on Netflix, and then we'll move on to your book. Well, so I'll give you my favorite example, which is that in late 2019 or early 2020, HBO canceled a shot pilot with an all-star cast for another Game of Thrones spin-off.

Imagine how hard it would be for HBO at the time when AT&T owned them under extraordinary pressure to make what we know wasn't a successful investment work, going into the pandemic, any other network would have said, it doesn't matter how bad this spin-off is. It doesn't matter if it's just a B-plus. It's going to air. We'll fix it in season two. Instead, we're going to go three years without Game of Thrones because they said it doesn't work. We're not going to fix it, we're going to move on. And that is the culture that you're speaking about. That's the bar that they aspire to, and it has endured for decades. Let's move speaking of possible hits to the platform upon which the next generation of possible hits might form, and that is the metaverse. So you wrote

this wonderful book about the metaverse, the future of the metaverse, and the deep history of how for at least a century people have been thinking about ways that we might live to. And the future, the future, together in virtual worlds. I want you to first tell me what the metaverse is, but not from a vocabulary perspective. I want you to tell me what the metaverse could be from a day in the life perspective. If I were describing in 1995 the future of the consumer internet to someone in a way that they might understand it, in 95, I might say like imagine there's a strip mall that you can visit by driving down the street and parking in front of the footlocker. Well, imagine instead you sit at your desk, you pull open a virtual screen, and you can visit the footlocker and CVS and department

store on that screen, load a program that allows you to click on, make contact with various products at that footlocker CVS and department store and conduct all your shopping from the couch or from a desk. That doesn't explain, obviously, the entirety of what the internet would become, but it might make it concrete to someone who didn't understand in the early 90s what the internet would do. It's a virtual strip mall. In that same kind of hopefully not too oversimplified way, what is the experience of the metaverse going to be like in your imagination? Well, so let me hit on the fun part, which is what you just said is exactly true. And yet the lesson from Jeff Bezos from the dot-com crash is that in 1995, few people would have imagined that had utility.

and almost no one on earth actually imagined that as a scalable experience. That is to say, one that could span as many retailers, that could have as much utility, and that could be relevant to as many people as we would have imagined. I would describe the Internet as a consistent, comprehensive, and reliable system for the exchange of all forms of information, which spans 40,000 individually operated networks four million different servers, nearly every country and almost every private, public, governmental system globally. Now, that asked the question of what is that, that the Metaverse is not? And the answer is the experience you described, the experience that is possible today,

is two-dimensional. You can send an email. You can download a web page. But you can't do much that's in 3D that sustains that connection. They're all isolated. This is where your mall example exists. We can access every retailer through a web browser from almost any device, but all 3D experiences are isolated. They can't communicate with one another. They can't find one another. So we think of the metaverse as that evolution. I have a cheeky question for you about defining the metaverse. When I'm on Twitter with other people, we're participating in a game. The game is called discourse. I didn't say it was a good game, by the way. It's often a terrible game. But that's the game. The game is called discourse. I have a separate identity on

Twitter. I'm not Derek, the guy that you have had beers with. I'm at D.K. Tump. And when I say something that people like on Twitter, I get little tokens specific to Twitter. I get likes, retweets, follows. When I mess up, I get dragged on Twitter, and typically in ways that don't actually make contact with my corporeal life. So this world on Twitter exists. It's persistent. It's synchronous. It's an economy of reputation. And while it's not VR, it is in a very real way, a virtual reality, a non-physical layer of experience with continuity of identity and history. So maybe you wouldn't say Twitter is a metaverse. I don't think I would say Twitter is a metaverse, but maybe Twitter is a metaverse.

Like, how would the metaverse make my experience of Twitter different or better? So it's a really fun question. I think the first starting point is to ask whether or not we're talking about an entirely different experience

or just a 3D version of Twitter. And the answer is likely to be the former, not the latter. Email still exists in the era of instant messaging and social networking. We didn't just replace it with the latter.

In fact, the latter is a different version of it. And so perhaps part of the problem is you're thinking about what if Twitter in 3D. Instead, it looks a lot more like social gaming experiences. And this is one of the fun observations of Neil Stevenson, who wrote Snow Crash in 1992, coined the term Metaverse. And he says, he imagined people in virtual space getting a beard together, as you mentioned, but instead we had raids in Warcraft. You can tell when that quote comes from. And so part of it is we're going to reimagine that experience. I grew up on the internet. using IRC, kids today interact very differently.

In fact, they're primarily doing it in Roblox. But this question of Y3D, there are a few different elements. One is to recognize that 3D and immersive experiences are a lot more natural. We didn't evolve for thousands of years to tap a flat piece of glass, for you and I to have a Zoom call by me staring at a camera two inches above your head so that it looks like I'm talking to you. When you take a look at other use cases, such as education or health care, going to 3D starts to make a little bit more sense, not just for surgery, but for lifestyle, fitness, diagnostics. But lastly, we can look at children. 75% of those between 9 and 12 in most Western markets use Roblox alone on a regular basis.

That is their social form. Talk a little bit about what Roblox is for people who don't engage with it regularly. What is this product and why is it so important to your vision of the Metaverse? So Roblox is a limited example because it is purely focused on consumer leisure and typically just for children. But it's an instructive example of the internet but in 3D because it's a network of over 70 or 80 million different virtual worlds that can be seamlessly accessed with consistent identity, payments, virtual goods that has hundreds of millions of people. interacting together, and not just for play, but increasingly for concerts, for education. There are actually a number of different classes you can take, the construction of a Rube-Goldberg machine, testing different chemical combinations and so forth, that starts to express the potential.

I know that virtual reality and 3D is a critical part of your vision of the Metaverse, and I really want to like your vision of the Metaverse. I really want to like VR, but I don't like VR. I don't like VR. I don't like Oculus and other virtual reality headsets that are on the market. I think they're heavy. I think they're sweaty. I think they're uncomfortable. I don't like having them on my face. And that makes me think that lightweight AR VR glasses are a absolutely essential piece of this puzzle. So where are they? Why is that technological barrier such a hard nut to crack? So we should first highlight that VR really stands for virtual reality, which is any computer generated.

simulation of a virtual environment. Super Mario is virtual reality. When we use the term conventionally, we mean an immersive virtual reality headset. That is not the Metaverse any more than a smartphone is the mobile internet, but it may be the best, most popular,

and preferred way to access a 3D environment at some point in the future. But why is it so technically challenging? The answer is it faces more constraints than we've ever encountered. Consider a PlayStation 5, very far from being able to pull off what we want to do in the Metaverse, but it has advantages that wearables don't.

It can have a constant access to a power source, so it doesn't need a battery. It can sit under a credenza, not on your face. That means the sightliness of it doesn't matter. The weight doesn't matter. It's not resting on your spine. And the heat. The heat is a big one. It has multiple fans in it because it can

cool itself and the space doesn't matter. Having an ultra-powerful, lightweight, pleasurable to look at device that sits on your head and doesn't melt your face or break your neck, we just have not encountered those problems before. And we imagine that these devices need myriad things no consumer electronics required today, such as dozens of sensors and so forth. Let's talk about education. This is a topic that I've changed my mind on, more than almost anything else in the last decade. Like 10 years ago, I think I would have said, like, yes, college is expensive, but it's a product that basically works.

It's worth it for the vast majority of people who finish a program. And there's nothing fundamentally broken about this industry, despite the fact that the price tag has gone higher and higher. I feel myself becoming a little bit like the Joker on this topic. Like, with every passing year, I find myself a little bit more radical on the idea. The price inflation that we've seen in higher ed is utterly out of line with the value. of so many programs. I wonder how you see the metaverse intersecting with the future of education. Why could this technology that you're obsessed with make education for the masses better?

So you're spot on. Education is the category I get most excited about for three reasons. Number one, it's of utter importance economically, but mostly societally. Number two is we've long expected disruption in the digital era. Harvard will come out with an online course that reaches 10 times as many people for 100 of the cost doesn't happen. And third is what you just spoke about. The consequence of non-disruption in the digital era has been extraordinary. Since the internet was formalized in 1983, it is the single major cost category in the United States that has experienced the highest cost increase. It's up 12 to 1,400 percent. Healthcare is only up 600 percent. Why? Because as useful as technology seems, we have not actually seen productivity improvements. Why? Because we don't teach more students

effectively per teacher than ever before. We don't teach faster than ever before. And the cost or time required to teach has also not changed. The pandemic was proof of how digital solutions today aren't sufficient. We know what you lose. Not having eye contact with a teacher matters. Not having your peer beside you matters. Not having a tactile experience. matters. We have hopes that 3D simulation in shared environments can actually improve the number of people who are taught by a teacher, the efficacy of a lesson. And I'll give you an example. I learned about physics most effectively by watching a NASA commander drop a feather and a hammer on the moon, and they fall at the same rate. And then your teacher does the same thing. We'll still do that

in the future. But kids today in Roblox and Fortnite and Unreal are building complex Rube Goldberg machines where they learn about physics under multiple different gravitational environments. Some students are able to dissect a cat if their school board can afford it. But now you can do a virtual dissection, and if you so choose, go magic school bus, shrink down to the cellular level and travel its circulatory system. This plus the sort of of experiences we're used to with Travis Scott, a single concert being performed for millions live that's endlessly repurposable with no incremental cost that is still individualized, starts to give us hope. I agree that there would be something very special about a future

where remote learning felt equivalent to in-classroom learning. Because when you learned remotely, you literally felt like you were in the classroom next to your peers in front of your teacher. I think that's pretty neat and I'm interested in it. But one thing that always makes me skeptical about the argument that technology is going to change education norms is that at least certainly before the pandemic, technology didn't really change education norms. Like YouTube existed, mobile video existed, webinars existed, but the lecture hall was still the bread and butter of education, right? This technology from 500 BCE Greece. So, yes, I see now that the pandemic has accelerated.

certain aspects of remote learning, but they haven't necessarily been successful. So how do you get schools to embrace VR and the metaverse? Certainly, but those policy changes are a response to the emergence of substitutes or compliments that need incorporation. And what you've outlined is how those substitutes and compliments are inadequate today. I would say that remote education is one of two things. It's Netflix, that is to say, it's offline or online playback of previously recorded content, or it's a window. It's staring into a classroom that you're not really in. And yet we know what really matters. Co-learning, co-experience matters to education, a profound amount. As does tactility. How do you learn about math? A teacher doesn't say one plus one

equals two, they probably draw two apples separately and then together, or perhaps they show you those two apples. If you believe that tactility, that hands-on experience, that constructing in a sandbox matters, if you believe that having a personal connection with the instructor and the person beside you matter, then those are things that have not been made available, and for which having 25 Hollywood squares, one of which is a teacher, and 23 of which are your peers, just simply does not, cannot, and will not. The last question that I have for you is about Meta, the company. I wonder how important it is for the future of this technology

that a company like Meta, formerly known as Facebook, is becoming relatively synonymous with it. So there's a cynical read, I think, that says that Mark Zuckerberg isn't interested in the metaverse as a technological frontier. He's interested in the metaverse as a defensive maneuver because of Apple. He doesn't control any hardware in the current Web2 world. He's essentially, he's a tenant. Apple's the landlord. And when the hardware landlord, the iPhone says, hey, we're changing privacy settings. And now your ad business is screwed because it's harder to track behaviors and target psychodemographics. Facebook can't appeal, right? Facebook is stuck as a tenant. And so Mark is thinking, Zuckerberg, screw this. Like, I'm moving to another city where I can

be the hardware landlord. I want to build, I'm not going to be able to build just like a better iPhone, but with the right runway, I might be able to build better AR or VR glasses, which could be the next generation's iPhone. So I wonder, like, how much do you think this sort of cynical read is wrong, that, like, Mark Zuckerberg is only pivoting to the metaverse out of fear rather than out of a positive vision of what this next internet could be? I think it would be wrong to say that it is a response to what he can't do. Now, he has certainly been stymied than almost any other. Their app tracking and transparency problem absolutely cost them $10 billion in profit this year alone. They've tried to launch a cloud gaming service for years, not allowed. They want to have a UGC creator platform. Well,

if you have to pay 30% to Apple and then at least 15% to yourself, it's pretty hard to appeal to creators when they're getting at best half of what a consumer tries to give them. And so he certainly has reason to want a new platform, but that's not reason enough to try and build something that isn't ready. And that's where we get into the second element, which is, it is clear that he has been focused on this long before Apple became a business blocker and long before the term came up. In 2012, they bought Oculus for twice what they spent on Instagram. In 2015, we know he tried but failed to buy the largest gaming engine globally. In 2018, later, but again before most of the primary problems,

we know that an internal memo came that said the Metaverse is quote-unquote hours to lose. And while anything can change, at a technical level, what Mark has released thus far, even if people don't want to hear this, is actually the most open console operating system operating globally. They have openness to alternative app stores to alternative payment. They use common standards that no one, not Microsoft, Sony, Nintendo, Apple, Google, that no one uses. Those policies might change, but it actually does seem like he is setting up to say, I've been on the wrong side of the equation, and I will not build a system that does the same to others.

This is my very, very last question for you, very last. And it is my biggest fear about the metaverse. So you look at a book like Ready Player 1, which features something very much like a metaverse, and it's a dystopia. And the fact is that the more immersive social internet has become, the more dystopian certain elements of it have become. I wrote recently about how young Americans are more sad, hopeless, and depressed than ever.

And there's a lot of circumstantial evidence suggesting, that the only big thing that has changed in all the different countries where young Americans have become more sad, hopeless, and depressed, the only thing that's changed this much is the fact of social internet, that all of these kids are trading the physical world for the digital world and losing something psychologically in that exchange. So why is more internet the answer to what ails us? So I think that there are two things.

The first is to recognize how we live our lives today. The average American is awake for 14.5 hours per day. That spans three different uses of time. Leisure, work, and necessity. Necessity is sleeping, going to the restroom, eating. We spend five and a half hours of our 14.4 hours watching television. 75% of television is done alone. It's almost all done when you're sedentary.

Hollywood actually describes it as lean-back entertainment as though disengagement is aspirational. And so if you actually look at the use of time, the primary substitution has to come from TV, if you believe that we're going to access the quote-unquote metaverse a lot outside of work-related use cases. I would consider substituting time that is alone, not moving, to social and more active and engaged,

a positive substitution in and of itself. We are a TV species, which means we are a species of private, stagnant entertainment. The second thing is to recognize that intracicle changes are tough. We don't like a lot about the internet and digital existence today, but there's very little we can do about. We're entrenched in certain social networks with certain software. No one's getting rid of the iPhone today.

there's marginal shifts in terms of tracking and data collection, but it's hard. But as we've seen over and over, IBM destroyed in consumer hardware, Microsoft displaced by iOS and Google, Internet Explorer destroyed as well. Between cycles, we have extraordinary opportunity to change. And so my final point, and part of the reason why I wrote this book, was to better educate on how we can affect the future. If you don't like today's paradigm, it will be different. It might be worse. It can be better. And we get to make that decision.

Matthew Ball, thank you very, very much. Thank you.