Plain English with Derek Thompson - The Biggest Losers of the Streaming Wars: ESPN, Movie Theaters, Peacock, and More

Episode Date: January 18, 2022

Do movie theaters have a future? What should Disney do with ESPN? And is anybody watching Peacock? Derek’s favorite entertainment-media analyst Rich Greenfield joins the pod to talk about the future of TV, movies, and live sports. Host: Derek Thompson Guest: Rich Greenfield  Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

The press box is here to catch you up on the latest media stories. Hosted by Brian Curtis and David Shoemaker, these guys have the insight on the biggest stories you care about. Check out the press box on Spotify or wherever you get your podcasts. Hello and welcome back to plain English. We have done a lot of heavy topics recently, Amacron, inflation, future democracy. And I wanted to talk about something fun today.

And fun to me is the future of entertainment. The Future of Movies, Movie Theaters, Streaming TV, ESPN, Disney, Netflix, all that stuff. As you know, if you're a regular here, you know I'm a theory guy. And I have two big picture theories about entertainment and media. And I think if you squint, actually, you can see these are really big picture theories about every business and every industry. Theory number one is everything changes, and that's okay. In the 1940s, the average American boss. more than 30 movie tickets per year. That's right, 30 movie tickets per person per year in the 1940s.

By 2019, before the pandemic, that number had fallen to about three. In 2021, during the pandemic, it fell to about one. So that's one history of the movie industry that you could tell yourself. Per capita annual ticket sales have declined by more than 90% in the last 80 years. And that alone sounds like death. If that's the only thing I told you about the movies, per capita annual ticket sales have declined by more than 90%, you'd say, wow, so movies pretty much died, basically. But the movie industry didn't die. It just changed. The studios found new streams of revenue, like VHS, and then DVDs, and then cable TV, and then streaming. And the movie theaters didn't die either. To stay in business, they responded to declining ticket sales by making the

screens bigger, by making the sound systems more fancy, by making the seats cushier, by making the tickets more expensive. Average, tickets price in 1996 was $4.42. Average ticket price in the U.S. today, $9.16. Average ticket price in Washington, D.C., where I live, about $13.50. So the business of movies and movie theaters survived by doing the thing that every surviving business does, by changing. Theory number two. The history of media is the re-bundling of unbundled bundles. What? Yeah, one more time, for good measure. History of Media is the re-bundling of unbundled bundles. So, for example, music, 25-year history of music,

here we go. In the 1990s, people bought CDs. These were called albums. Then iTunes comes along in the early 2000s. They say, hey, join us, and you can buy individual songs. The album gets disaggregated. The music album is unbundled. But then what happens? Spotify comes along. Hello, Spotify. Spotify says, hey, pay me a monthly fee and get access to 30 million songs. And so, music albums, having been torn apart by iTunes and Napster, get thrown together again in this mega package. So that is the history of music. Bundles, unbundled, and then re-bundled. And you're like, dude, I will pay any amount of money to get you to stop saying the word bundle. But too bad, because we're moving on to TV. A few years ago, there was a common critique of cable television.

It was that it shouldn't cost $120 a month to watch TV. So millennials and others, couples, the cord. They ditched cable. They said, we're just going to stream television. Thank you very much. But if you're like my household, you started to subscribe to Netflix, and then HPOMX, and Amazon Prime Video, and Disney Plus, and showtime anytime, and you thought about Paramount Plus, and you thought about Peacock, and you thought about Discovery Plus, and now you're thinking about CNN Plus. And because you need to watch football, and you need to watch The Bachelor, you got to sign up for Hulu Live. And one day, you're looking at your credit card bill, wondering where all the money is going and you add up the price of all these streaming services that you're paying for,

and you realize that having avoided the fate of paying $100 a month, you've now aggregated all these independent streamers to pay the monthly sum of $120 a month. And so a lot of people have successfully unsubscribed to the cable bundle in order to pay the same amount for all these unbundled sites. You can say we get more for our money, we get more shows, more on-demand viewing, and You're right, of course, we do. We do get more for our money. But this isn't sustainable.

As prices rise, people are going to look at this mess and say, I don't have time to actually watch half this stuff, and so you're going to get consolidation. The lower tier of streamers will merge with the upper tier, and you'll get the reconstitution of little mini bundles. So the history of television, like the history of music, will be the re-bundling of unbundled. bundles. So my question is what happens now? Who wins this war? What streamers are going to get

eaten? And what happens to ESPN and the future of live sports during the upcoming merger feast? I'm Derek Thompson. This is plain English. Today's guest is Rich Greenfield. Rich is the partner in media technology analyst at Lightshed, a research firm in New York. He is one of the smartest, spiciest minds in entertainment, and it is an honor to welcome him to the podcast. Hello, Rich. Thanks for having me. We're going to get to positive predictions about entertainment and media in just a second. But as somebody unafraid of delivering bad news, I thought maybe you could help us start with the bad news. So the movie theater business right now is obviously brutal in the pandemic. Twenty-twenty-one box office was about $4.5 billion. That's down 60 percent from 2019. But I think that's the movie. things might be even a little bit worse than they seem from that statistic. It seems practically impossible these days to have any non-sequal CGI-I heavy hit. I just looked at the top nine movies from 2021. They are as follows. Spider-Man 9, Marvel. Venom 2, Marvel. Fast and The Furious 9,

Marvel. James Bond 25, Quiet Place 2, and Ghostbuster, I guess you could call it 3. And you look at the bucket of prestigious non-sequels, West Side Story. I saw it in theaters. I thought it was fantastic. It is clearly a bomb. Putting all of this together, the decline of movie theater revenue and rising monopoly of franchise sequels, Rich, what is your outlook for the future of movie theaters? Look, I think as long as parents want to get away from their kids and kids want to get away from their parents, I think they'll always be a movie theater business, right? I mean, I think it is a fun activity to get out of your house and to do something, whether it's a date or group of friends. But I think there's a lot of competition for time and attention. And this is something we're seeing

across the entire media and entertainment ecosystem. And I think if you're thinking about the movie theaters, the price value and what warrants a trip to a movie theater, right? There's certain movies, a scream, you know, for a quiet place, an Avengers, um, There's going to be a Spider-Man no way home that you just pointed out. There's going to be certain movies that are actually better experienced with a crowd of people. West Side Story, if you think about Encanto, the animated Disney film or even Sing 2, are these movies really dramatically improved by having an audience or having other peers around you? Does it really make a difference?

And I think that's what you're starting to see is that there's a very small number of movies, Quentin Tarantino calls it the collective, like where movies benefit from that collective or shared experience. How many movies a year benefit from that collective experience? My guess is it's 10, 20, not the 400 movies that are released. And so the real answer to your question, Derek, is that the movie theater business is going to exist. My guess is forever, but it's going to be a smaller industry, far fewer screens, far fewer theaters. Probably what ends up happening is that companies like iMacs basically become the theater industry, right? Like where the large screen experience, that event ties experience of going to the movies

becomes what the movie business is rather than, you know, you go to your local movieplex and there's 20 screens and like I just think that's going to be a much, much tougher experience going forward because I think most movies don't really benefit from that. And I think the reality is the consumer. I mean, that's exactly right. I think what's interesting about the movie theater business is it's the rare industry where the business seems to be getting worse while the product itself is obviously getting better. So like when I went to the movie theaters to see Westside Story, and again, this is not a movie that is ideally engineered to be seen on like an IMAX screen. It doesn't need to like entirely surround you. You don't need a subwifor to listen to

Bernstein. But the seats were extraordinarily comfortable. Like the food. that they're serving at a lot of movie theaters is getting better and better. So the experience has had to reach a higher threshold in order to pull audiences out of their living rooms. And that's interesting, too. It speaks to an industry that might get a little bit smaller and a little bit more luxurious in a way. Would you agree with that? Yeah, look, I think the other part of it is that the price value is also getting really tough, right? So they have to offer you something really special to want to leave because think about it. The in-home movie experience has actually gotten pretty good.

I mean, what's a, think about with the price of a 55-inch or 65-inch TV and how low it's gotten on Black Friday and competition has driven prices down dramatically. So you can get an incredible home entertainment experience. And when, you know, subscribing to Netflix for $14 a month, I mean, think about how many movies you can watch, you know, don't look up with an incredible all-star cast that shot up to number one on Netflix, available at no extra cost. So you think about that relative to what is the cost in New York for a family of four to go to the movies. You're talking about just on tickets alone $60, layer in popcorn, soda, or if you're a date, a babysitter, whatever it may be,

like these things add up very, very quickly. And so the price value really is struggling for the movie theater business right now relative to what's happening on streaming. And again, it doesn't mean people aren't going to go to the movies. Spider-Man proves you create something that is iconic that people want to see. They will leave and buy a ticket at any price. It's just they're going to be more and more selective of what justifies a movie theater. And I think the end result of this, to your point on, it's going to get worse, is that the fewer movies that make money in movie theater.

So when West Side Story loses $100 million or when Eternals loses $100 million in a theater, I think the studios will go, well, wait, how many movies should we actually put in movie theaters? Fewer movies and movie theaters means box office, yes, it's going to bounce up to probably $8 or $9 billion this year because you have a full year without the full pandemic. But my guess is that's a lot lower than $11 plus billion in 2019, and it's probably going lower from 2022 and beyond. Like this is, I don't think it's going to get better. I think a lot of people don't appreciate the extent to which the movie theater business has been,

by some definitions and structural decline since the 1950s. I'm pretty sure that since 2002, the number on a ticket sold basis, if you just look at the number of tickets bought per person, it's basically been declining every year for the last 20 years. Even before the pandemic, all audiences were already beginning the process of becoming more selective about where they spent those three or four movie tickets per year, whereas you look at, you know, before the advent of not just streaming television

and computers, but TV itself, Americans are buying like, you know, 30 tickets a year to movie theaters in 1950s. What do you think is the future for movies like, you know, luxurious Stephen Spielberg films, Paul Thomas Anderson movies? Like, there are, of course, tens of millions of Americans who love Marvel.

There's also a lot of Americans who love complex dramas with gorgeous cinematography on big screens. Does the economic business model that you foresee for movie theaters serve those narrower interests? Well, first of all, I think for all of your listeners, everyone really should start thinking about what is a movie and what is a TV show?

Because the mediums are sort of merging, right? Like, you think about there's four and five episode episodic series now. Right? Like, movies are two or three hours in length. Like the, I almost feel like the mediums are starting to merge and obviously talent, right? You think about talent. Nicole Kidman was an actress in movies, right?

I think of Nicole Kidman now as a episodic television actress, far more than a movie. She's amazing at it. Absolutely. Absolutely. I'm not denigrating. I'm just saying, like, I think talent has seen, you know, you can do a tremendous amount in episodic TV. And, you know, you think about what was the biggest zeitgeist piece of content in the last 12 months

globally. It wasn't a movie. It was Squid Game, a Korean television show dubbed into lots of languages on Netflix, never played in a movie theater, like never played on a U.S. broadcast network or cable network, and was by far the biggest, most successful, most watch talked about, memed thing of the past 12 months. And so, you know, look, I think the mediums are going to merge, maybe stories that would have been told as a movie become told as an episodic television, maybe a short form, you know, limited series. I mean, I think all of those things become possible as you think out over the course of the next several years. No, there's a not entirely negative way of thinking about this that says that there are certain kinds of entertainment that will be, that will have

specialized for distribution in movie theaters, right? So what is what is appropriate for most Americans to see in a movie theater is a movie that is big, that is a familiar update to a franchise that they are aware of, and that is lush and loud and CGI filled. That is a kind of piece of entertainment that might specialize for the movie theater of now and the movie theater of the future, but there's all sorts of other lush entertainment that just has other specializations, that is just doing slightly different jobs, and they're going to thrive on different distribution platforms. I mean, another way of thinking about it is think about the Star Wars franchise. If you were to think back over the last decade of Star Wars, what has been more impactful on culture?

One of these recent Star Wars films or Mandalorian on Disney Plus? Right? That's a great question. I think most people would say Mandalorian and, you know, like the Baby Yoda had far more of sort of like cultural impact. I mean, The Last Jedi, like, I mean, seriously, like, I mean, I'm not, you know, I'm just saying like, I think filmmakers, creators are also seeing the power of global streaming services to impact culture is real. And so far, that's mostly happened through episodic TV. I think the big question is, can it happen on the movie side? We haven't seen a direct-to-streaming movie really become squid game-like or stranger things.

like or Mandalorian like yet. Can it happen? I think so. But it certainly isn't proven to date. Yeah. And the point that you make connects with your previous point about the sort of Nicole Kidmanification of talent right now, that if you have a lot of celebrities who are looking at how to sort of distribute their entertainment to the widest possible audience, you look at

Netflix, which is in, what, I don't know, 80 million homes in America? 200 million. 200 million. No, no. Globally, 200 million. million globally. A movie that sells 200 million global tickets is a movie that makes five billion dollars or something. There's no box office that's ever hit that. So you have the potential of buying into a distribution that's already at avatar levels by being distributed on Netflix,

and that might be encouraging a lot of celebrities to use platforms that have that mass guaranteed distribution, and then you can put money behind it. That's the same kind of money you would put behind lush entertainment that would be distributed in a movie theater in the first place. I think the right way of thinking about it is the biggest movie of all time is what, like $2.8 billion in sort of Avengers Endgame Avatar, like neck and neck right there. If you divide that by sort of a $7 or $8 average ticket price, maybe it was a little less than that back when Avatar was there, like it was 3D. So probably was, let's just say $7 or $8.

You're talking about 350 million people bought a ticket to Avatar, assuming there was no repurchased by the same person. Let's just say, let's keep it simple. 350 million people. Netflix, to what you just said, that has 200 million households. Right, right. There's probably 650 or 700 million people who have access to that Netflix account. And so by making a piece of content available on Netflix, more people can see it on Netflix the day it's released.

than have ever seen any movie in the history of the movie business. That's sort of a, like, you know, that mind-blowing type thought process, right, is that, like, if you're talking about reach and impacting culture, these global streaming platforms are incredible and reach far more people than the movie business can do. That is exactly the right way to think about it. I'm glad we walked there together and that you helped me with the math. Movie theaters are obviously one casualty of the streaming wars. I wonder which of the major streamers you think is set up for trouble in the next few years.

I look at this picture. Netflix, thrillingly successful, they're obviously going to raise prices again. Disney Plus in tens of millions of households, they're going to have to raise prices again. HBO, Paramount Plus, Apple TV Plus, Hulu, Peacock. This is a really crowded space. Someone is going to lose and someone I think is going to lose big. Rich, who do you think the bigger loser? will be. Well, in some respects, I sort of blame all of this on Bob Eiger. And it's funny, you laugh at that

or you smile. I'm sure you're smiling when I say that. But the reason it's true is that I don't think a lot of the services that you just, you know, I know you didn't name them by name, but when you talk to that there's just too many of these streaming services, in many ways, Disney was so successful in doing streaming and the stock, despite the pandemic re-rating, that I think it made everyone who was simply going to be an arms dealer and fuel the streaming services, it made them go, wait a second, we can do this too. This is actually not so hard. Put lots of content onto streaming. Wall Street re-rates the stock. Wall Street loves the story. Streaming is the future. Everybody can be Netflix. Everyone can be Disney. Off to the race to stock price. Bam, we got to do this. What do we got? Let's do it.

and we'll put a plus after our name, Discovery Plus. We'll take our logo, Peacock and call it Peacock. You know, like everyone is doing their streaming service, Paramount Plus, like, you know, which is the movie studio name. The reality is it was never supposed to be like this, right? Like this was not the plan. I think everyone sort of got addicted or excited that they could replicate Netflix and Disney.

And to your point, Derek, what I think is interesting now is, we're starting to start to see the early signs of this is really, this is really hard for everyone. I mean, this is not an easy space. Direct to consumer, growing your sub base. It's easy year one, but continuing to grow your subbase, retaining your subscribers, charging them more, making lots of content versus a little amount of content. Because remember, you know, most of the media companies, they didn't make lots of content. They made, they filled whatever hours of prime time they had to fill.

And then there was a lot of repeat as you. you probably remember late at night. They didn't make lots of content. Netflix and Amazon and now Apple, they're making crazy amounts of content because in a subscription streaming business, you've got to keep people engage. It's a war for time and attention.

And if you can click cancel, think about the old world of the cable ecosystem. Canceling cable required you to make, make one of the worst phone calls in your entire life, right? Like you dreaded, literally getting transferred, put on hold, hey, you know, could you hold for the retention department? And then you hold for the retention department. And then they give you 37 offers of why you shouldn't quit. And then they probably transfer you yet again. And then the ultimate insult to you and your listeners, right? If they wanted to cancel their cables, they had to unplug their equipment and then go return it in person, standing in line

in a service center. Right? It was like, it was literally like being tortured versus canceling Netflix or canceling any of these digital streaming services, point click, cancel. So all the friction is gone from canceling. And so every day these services need to make sure you're engaged and using them because canceling has become so easy. And so I think the answer to your question is a lot of them are going to struggle. You're probably going to see consolidation. It's hard to imagine that, you know, that Paramount Plus and Peacock and, I mean,

Look, Discovery Plus is probably going to get merging with HBO Max as part of the merger. I don't think there's any shot that there's a separate Discovery Plus in 12 months. Is there a standalone Paramount Plus, or does it get merged with something else over the next couple of years? Like, there's going to need to be consolidation. If you're going to see consolidation, if there's just going to be mergers because some of these companies, the Paramount pluses of the world, the Discovery Pluses of the world, just can't succeed for several years on their own without being sort of bundled up in something larger like HBO Plus, what do you think is going to end up as the Mount Rushmore here. I mean, Netflix obviously is on Rushmore. Disney Plus seems

to have had a really, really strong start. And Disney is maybe the most successful entertainment company in the last 100 years. It's hard to imagine them falling out. HBO, Apple Plus. I mean, what's your outlook for that sort of second tier of streamers? Look, I think the thing you have to think about is, and this is an issue that Disney has, Viacom, Comcast NBC Universal, Warner Media Discovery or Warner Bros Discovery as it gets created later this year, they're all balancing. Meaning they all sit around, they have executives that sit around in these conference rooms and go, hmm, does this movie go to the movie theater?

Does it go to our streaming service? Does it go to a movie theater for X days and then to our streaming service? Does this TV series? Does it go to broadcast television? cable network, television, direct to streaming. Does it go to cable network and then go over to our streaming platform? Does it go to our streaming platform and then we re-air it on our cable network? They have all of these intellectual debates because they have all these different outlets for their content.

Netflix, Amazon, Apple, they don't have any outlets. They have one. Their goal is to drive streaming. They wake up in the morning and the goal is how do we drive our streaming subscription business. So I guess where I'm going with this is just this idea that like, part of the answer to the question is, is like, who really is going all in on streaming? You have a lot of executive change, right? You've got David Zazlov coming into WarnerMedia through the discovery transaction.

Bob Chapic just took over at Disney. Everyone is sort of wondering which of these executives, who's going to be the most aggressive, who's going to really go, quote, unquote, all in? What does that look like? There's obviously some near-term financial pain to making those types of big decisions because you're, you know, you're cannibalizing revenue and profits. in the short term to build for the long term. But I think that's really the question.

I'd say the dark horse that I think there aren't enough people paying attention to is Apple. Apple TV Plus. They've got what? Morning Show, Ted Lasso, Myth at Quest. Right? Like it didn't exist. 27 months ago, there was no Apple TV Plus. They've won an Emmy Award.

They've had quite a bit of content. I mean, morning show just renewed. Like, there's a, for a two-year-old service, not a bad hit ratio. Obviously, they're taking much more HBO-like bets, you know, meaning very high-quality, focused bets. But as you look forward to 22, we think one of the big themes is going to be their movie business, because they're starting to invest a lot on the movie side, a tremendous amount of high-profile content.

You've got people like Ryan Reynolds and Will Farrell and Al Pacino and Scorsese direct. I mean, it's just Jennifer Lawrence. It is a who's who of Hollywood talent and directors all coming to Apple for Apple TV Plus on the movie side, not to mention very quietly. I don't think they've made a lot of noise about this. But on the animation side, Skydance is exclusively working on the animation front. with Apple. And so you know, you may not know Skydance, specifically, they're the studio behind things like Top Gun for Paramount and Mission Impossible. But on the animation side, they hired John Lasseter from Pixar. And John Lasseter has a 1,000 person animation studio creating Pixar-like

movies at Skydance that will be exclusive to Apple TV Plus. So the Apple TV Plus bull case is that you need to spend like $20 billion to compete with Netflix, and Apple makes $20 billion between the time I began the sentence and the time I finish it. To add to that, Richard PLEpler, who was the longtime genius overseeing HBO when it launched Game of Thrones, True Detective, big little lies, he has a first look deal with Apple TV Plus now. So that might explain part of why that streaming service has that HBO shine to it. But there's a bear case, too. And the bear case is that you were just talking about focus being core to success in streaming. Well, Apple, as a company, has like 20, 40, 100 things to focus on before it focuses on TV.

So how do you balance that sort of bull bear case for Apple? You know, first of all, I'd say, I think what's so interesting about this conversation, right, is that Apple can deploy all of this capital into this space. And they're not looking at it through a lens of, oh, my God, what's our EBITDA or even our subscribers this quarter, right? Like, it doesn't make a dent in Apple. And so it's what makes Apple so scary as a competitor and Amazon the same way, right? They're looking at the impact of streaming, not in terms of subscribers, not in terms of profitability, but on holistically, what does it do to the brand in many cases? Like when, you know, this is the side that I wanted to talk about in terms of the second

part of your question, which is why don't they just walk away from it? I think the answer is, or what's the risk that they just walk away from it one day, is they see the brand halo effect. And so I don't know if you went out and did a lot of trick or treating on Halloween. I don't know your Halloween game. But if, you know, I went to a Halloween party and there were multiple Ted Lasso's. And if you just Google like Ted Lassow Halloween, like it was pretty crazy like how many people were dressed up as Ted Lassow. And, you know, when the, you know, at the Grove in L.A., which is a big outdoor shopping mall in L.A., when the new Apple store opened up at the Grove, who showed up for a Q&A that afternoon at the Grove?

It was Tim Cook, Eddie Q, and the entire cast of Ted Lassau. I just think that there's this overall brand halo of when you have really high-profile content. And it ties to the Apple brand. It just makes one plus one equal more than two. Two ways to think about brand halo here. One is that if people like Apple TV Plus, they're folded more deeply into the whole Apple universe. So they're more likely to buy the iPhone 14 or 15, but there's a less sophisticated way of thinking about brand halo here.

I'm not sure if it's the dumb way or the galaxy brain way. But CEOs are people, and people like compliments and positive attention. So if you're Tim Cook, Apple CEO, or Eddie Q, vice president of services, it feels really good if a lot of people are talking about your company in a wonderful way. You want to feel like you're churning cultural waters. And, you know, as long as the company is selling, you know, a gazillion iPhones a year, why not spend 0.5% of that budget on a TV show that people want to wear on their face? But, okay, enough Apple.

I want to move on to Disney. And I want to start with a little bit of Disney history here, actually. This is a very old company, a 99-year-old company that has been surprisingly good at reinventing itself. In the 1920s through 1940s, it's basically an animated film company. Then it trailblazes into amusement parks in the 1950s with Disneyland. It trailblazes into TV with the show Disneyland. Under the outgoing CEO, Bob Eiger, the company totally revamped its content library.

They bought Pixar, they bought Star Wars, they bought Marvel. And today you look at the Disney catalog and you're like, yeah, Disney is Pixar, Star Wars, and Marvel. But it's kind of crazy to think that at the beginning of this century, the Walt Disney company was 73 years old, and it didn't own any of those franchises. So now we're transitioning from Bob Iger, who was the acquisition king to Bob Chepec, the new CEO. And I'm so curious to get your report card on how you think this transition is going.

So let me put the question to you this way. If the Bob Iger philosophy was buy strong franchises and turned them into global empires, what is the philosophy that will define the Bob Cheapek era of Disney. You know, it's somewhat interesting how you frame the question because I think I actually agree

with you that what defined Eiger was not Disney Plus. If anything, what I think you can actually say is that Iger in many ways waited too long. Like he was sort of, he was conflicted, right? Because he had this incredibly profitable legacy

business. I mean, let's go back. Netflix launched streaming when? 2007. Disney Plus launched in 2019. So, you know, Netflix had a 12-year head start on Disney. For Chapic, you know, I think the issue is, clearly the future now is all about streaming.

So, you know, Iger may have started this, but what is going to define the Chapic era is recognizing the massive shift in consumer behavior has taken place. and that Disney needs to move even faster into that streaming world, worry less about movie theater partners, worry less about broadcast television partners and cable network distributors, and recognize that what the consumer wants is all of this content in an easy-to-use environment at a click of their fingers anywhere, anywhere in the world, at any time.

How do you accomplish that? And I think the reality is you have to make Disney Plus, which has been a huge success, you know, with over 100 million subscribers worldwide now, probably 40 plus million in the U.S., you're going to need more diverse content. I mean, right now Disney Plus is great if your kids are under 10. If you're a huge Marvel or Lucasfilm fan, it's great.

But it's certainly not something for everyone. And I think that diversification of Disney Plus is what's going to define the Cheapak era, meaning he's going to have to figure out how does he buy in Hulu, how does he integrate Hulu into Disney Plus, how does he create a service that you never want to leave? And I think if you're sitting at Disney,

right now, if you're over the age of 10, you come in for one episode of Bubba Fett or of Hawkeye or of Mandalorian and you come back a week later for the next 50-minute episode. That's not capturing or that's doing pretty crappy in the war for time and attention. That is quote unquote not winning, right? Like Netflix, where you binge an entire series in the span of an evening. When my wife says I stayed up until 2 a.m. the other day to finish made because I couldn't

put it down. Or I watched Squid Game over the course of like, you know, seven days because I watched an episode or two every single night, you know, late at night. Like, that's how you win the war for time and attention. And you just need a diverse array of content. And, you know, I think whether it's Hulu, whether it's investing a lot more in content, like, Chapic's got to figure out. And I think what we'll define the Chapic era is how he evolves Disney Plus from where it is today

to be a much more comprehensive service because it's not that today. So Netflix has something Disney doesn't have, which is a global distribution web that can pull surprise hits from around the world, like Squid Games from South Korea, Lupin from France, money heist from Spain, and it can popularize these foreign hits in the U.S. Disney has something Netflix doesn't have, which is sports rights. Disney owns ESPN. Two years ago, a lot of people were saying Disney should spin off ESPN. Like millennials were fleeing the cable bundle, and so ESPN had gone from being this sort of soaring eagle to an albatross. What do we do with ESPN now? What's the smart way for Disney to integrate ESPN into the streaming strategy that you've just outlined?

I was one of those people calling for ESPN to be spun off. I actually, in my heart of hearts, like I still think it should be, but I also recognize that Disney needs to buy out Hulu from Comcast, needs to invest heavily in Disney Plus, and ESPN generates a tremendous amount of cash flow. And so I've sort of paused my view because I feel like, Like they have so much cash needs, is this the right time to separate out ESPN? Look, it's not lost on me that when Chapic wrote his sort of internal Happy New Year letter to his whole team, he never mentioned the word ESPN.

He alluded at the very end, he alluded to sports and news, but like ABC ESPN never mentioned. Disney was mentioned like five times as a word. Like, you know, I do, you know, it is ESPN's at an interesting point in time. If you think about it, the challenge with sports streaming, forget about ESPN, the challenge with sports in a streaming world, two huge issues for your audience to grapple with. Number one, you don't own the content, right? You're renting the content and every three, five, seven, whatever the length of the contract is, as soon as that contract ends, all the content can go away.

So like, I just speak clear, you mean like the NFL essentially rents, the content to whatever, CBS, Amazon, for three years and five years later. Yeah, go ahead. Let's just use the example of what's coming up. Right now, the NBA is on ESPN and Turner. In 2025, that could go elsewhere because if somebody bids more than ESPN or bids more than Turner, that content will go someplace else. I mean, Thursday net football. It was on Fox this past season. In September of 22, it'll be on Amazon. It won't be on Fox. And so, So sports streaming is hard because you don't have access to the content in perpetuity. Whereas when you create a show, Netflix controls Stranger Things, Disney has Star Wars,

those are forever, right? Like, I mean, unless they sell the IP, like they own and control that content. So sports is hard, number one, because you don't control the content. So that's just really high and really important as you think about it. The second piece is that sports is something that you pay a tremendous amount for in the bundle. So embedded, like when you're paying for ESPN, you're probably paying, like, we'll just think you pay your bill to Comcast or Charter or YouTube TV. ESPN and all of the different sub-brands of, you know, ACC Network, I mean, not Big Ten, SEC Network, all of those sort of sub-channels of ESPN. they're probably getting $12 out of your $80, $75 bill every single month is coming just from ESPN and its channels.

And so, you know, when you think about in a direct-to-consumer world where only the people that want sports would pay for sports, it's not 75 million homes. It might only be 30 million homes. So like, let's just keep the math easy. if it was half the number of homes, if 75 goes to 37 and a half, then instead of charging 12, you better charge 24. So would you pay $24 a month for ESPN to have it direct to consumer? But it gets worse than that, Derek. And here's where it gets really nasty and ugly for your listeners.

How many people would pay $24 a month for ESPN for the entire year? How many of them would only pay for football season? How many would only pay for baseball season? how many people are fans of football and baseball, like, you know, spanning sort of football, baseball, and basketball, so you span all three seasons? Like how many people in America really fit into that, have at least one person in their household who was such a diehard of all three sports that they would pay for a $20 to $25 a month service all year round?

I just don't think it's a huge number. And I think that's sort of the intellectual challenge or the mathematical challenge of sports going to streaming. I wouldn't want to be the CEO figuring this out for ESPN. I think this is really hard. And if I was Disney, I'd be going, whoa, wait, this is not worth it. I don't know how to predict this. This is hard. Let's focus on what we can control. If we execute on Disney Plus, we control our own destiny. If you put the Iger and Cheapik philosophies together, it cashes out as buy exclusive rights to really, really valuable franchises and merchandise the hell out of them with movies and TV shows and spin-offs of spin-offs and spin-offs,

that is the Iger-Chapex philosophy braided together. And renting NFL rights for $15 billion or something is not a perfect or easy extension of that core philosophy. So it might make sense. I'm not predicting that Disney spin-off ESPN. ESPN is still incredibly valuable to Disney. I'm personally a huge fan of ESPN. But it's just interesting to think through the fact that,

Yeah, when you spin forward these philosophies, it does get a little bit harder to see how ESP gets into it. And take it even one step further. I'm a big New York Giants fan. They suck this year. Right, exactly. I think I can say sucked. I probably should use a worse word.

And they've just fired their coach, Joe, Judge. You never should have been their coach. But like, let's leave that aside. Would I have kept paying for that, you know, like if all NFL games, like all my local games were even on, would I have kept. paying for the full season, right? Like, if your team all of a sudden starts to not perform well, how does that change your perspective, right? Like, all of these things are sort of unique to sports that are different than other forms of entertainment content. And so I guess it comes full

circle to Netflix probably has the best information and data on streaming of any company out there. If doing sports was so obviously a smart decision in a streaming world, you probably would see Netflix in the sports arena. And I think sort of Netflix is opting out of sports is a pretty clear signal that there is no great model for sports streaming right now that's obvious. You can try. People are continuing to try and you see Amazon putting more dollars in

and obviously with Thursday Night Football and you certainly see Paramount Plus and Peacock putting dollars. But, you know, literally is it a great strategy? you know, to take ESPN and just move it directly over the top, seems like a very risky bet right now, given where we are in the streaming world. It doesn't mean it can't work, but it seems very, very hard. I have one last question for you,

and it's not a technical question, it's not a business question, it's sort of a vibes question. When I think about fragmentation of media and the losers of fragmentation, I feel like one of those losers might be the very existence of a cultural mainstream. Like, I wonder, will there ever be another friend's

another Seinfeld, like people wax nostalgic about, you know, 100 million Americans used to watch the same thing at roughly the same time, and now that's kind of true about the Super Bowl, but it's not true about almost anything else. Do we just have to accept that those products, that the friends of the past are cultural fossils, and it's okay that we've lost them? Or do you think that there is some other future

for the reemergence of a shared cultural, mainstream. Well, I believe that there will be shared cultural moments. And I think if you looked at Squid Game, did we all watch it the same day? Do we all watch it at the same cadence? No. Squid Game certainly shows that we are going to have cultural moments from streaming. Just like they occurred, you know, do we all sit down at 8 o'clock and watch Ross and Rachel? No, I don't, I don't think we're all going to sit and watch at the exact same moment any of this content. But I do, think that streaming is going to produce, I mean, just even just look

at all of the online chatter around don't look up, which is sort of the climate change movie that Netflix just put out a few weeks ago with DiCaprio. I'm not saying it was a great movie. I'm saying it certainly created a cultural conversation where everyone over the span of a few

weeks was talking about what the show or what the movie was about. But the second piece, which I think is the far more interesting one, friends, what was 10 seasons, so I forget how many seasons, but it was a long time of, you know, sort of everyone being invested in those six individuals. I do think that those sort of like generational type shows that run for a decade more. I mean, I think Grey's Anatomy just greenlit season

19, I believe, of Grayson, Adam, which makes my daughters very, very happy. Just so you know, for all your podcast listeners, my daughters are ecstatic about that. Thank you for ABC and Shonda Rimes. But I don't think we're ever going to have series that go that long because I think in a world where so much content is being created, I think the reality is keeping the momentum on any of these shows past few seasons is very hard. And I think you're going to see just this continued tendency of like, let's focus on making two or three seasons as best we possibly can. Maybe it's just one or two, but let's just make them as good as we possibly can and then

move on to the next idea. I think keeping how many shows have you watched where, you know, seasons one and two were great, three, four, five, sticks were not great. Then they tried to reinvigorated, maybe, you know, I think of like Homeland, like great start, dead in the middle, great ending, right? Like, but like, and there's so many like that. And, you know, I've heard so many producers talk about, like, keeping it going. And you did it in the old world because of syndication and all of the ways the economic system of Hollywood worked, now that you don't have to support that economic model, I think you're just more apt to kill series and move on and find the next big idea. And so I don't think I would posit on this podcast, we are not going to see something like Big Bang.

We're not going to see any of those like things that run for seven, eight, nine, ten seasons. I don't think it's possible anymore. I just don't think the economic system isn't there to support it anymore. Right. Yeah. No, a future of cultural churn as a final prediction to leave us with. I like that. Rich, thank you so, so much

for letting your intelligence to the podcast. I really appreciate it. Thanks for having me, Derek. I look forward to doing more with you. Planning this with Derek Thompson is produced by Devin Manzi. Thank you so much for listening to this show.

If you like us, follow us on Spotify, rate and review on Apple Podcasts. We will be back with our second episode this week on Friday. We will see you then.