Sharp Tech with Ben Thompson - Disney vs. Charter and a New ESPN Reality, The Future of the Cable Business, Risks for the NBA and Other Sports

Episode Date: September 7, 2023

The ongoing Disney-Charter dispute, why the power dynamics appear to have shifted underneath ESPN’s feet, and what this dispute could mean for the future of the streaming landscape and cable operators. At the end: Why the NBA and other leagues should be careful about looking to big tech to replace big cable.

Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing? Doing good, Andrew. Chomping at the bit. We take a day off when a story drops right in our wheelhouse. So I'm ready to get going. It's honestly been hard to wait a week.

We considered an emergency episode late last week. It's great to be back. After a slow August, we've got our first giant. story of the fall. And it is right in our wheelhouse. And it cracked me up last week. For anyone who didn't listen to the last sharp tech, Ben, if you'll recall, at the end of the most recent episode, we had a quick update on ESPN. There was that report that they're debating between a price point that could be anywhere from $20 to $35 per month. And toward the end of our discussion, I said, look, that giant price range is ultimately a reminder that ESPN still has a bunch of details

to figure out with this stuff. They're probably a long ways from ever actually shifting their focus from cable fees to a streaming service. And lo and behold, within 24 hours of that episode recording, it might be time to update that take. I'm not sure. It seems like we're closer than anyone could have guessed. Yeah, I mean, we're obviously talking about the, ESPN spectrum standoff, which we, I think, we'll get into the details of to say the least. But there is sort of a meta point here, which is, you know, Bob Eiger has been talking a big talk.

He's been, you know, surprisingly assertive about the fact that, yes, we are absolutely going over the top. I'm not going to say when, but I have a date in mind. And very sort of like, look, I got this situation under control. And the reality is, is when you are a shrinking, declining business, that is facing a fundamentally shifting landscape, one of the costs of that is things are out of your control. You don't get to choose.

And things are forced on you. And ESPN for a very, very, very long time. And that was sort of what I wanted to lay out in my article, has operated from a position of strength. They have been the ones dictating terms to the carriers. They were the ones that built up the entire cable ecosystem, that built the idea of affiliate fees, that created this entire sort of industry

that we spent so much time talking about. And I think one of the biggest challenges they probably face by and large is just learning to operate from a position of weakness. Like it's one thing if you've been an underdog for a long time and you know your way around. It's a completely different thing when you've always been the top dog. And this is something we see in tech. I mean, I think one of the most remarkable cultural changes that Satchinadella Institute at Microsoft was. was exactly this. Microsoft had always been the top dog. Microsoft dictated what happened. They were masters of not just their own destiny, but the destiny of everyone else in the industry.

And the problem was when the bottom dropped out, particularly with the mobile phone era, one of the big mistakes Steve Balmer was making was like, oh, we're not going to put office on iPhone and iPad. Yes, it's built. Yes, it's ready, but not until it's ready for Windows, right? because we're going to dictate the timing. And in that case, dictating the timing was a big mistake. They left openings. They let a big explosion in the SaaS area happen because they just weren't competitive on mobile. So companies would find an alternative, even if they would have preferred to stay with Microsoft

because they needed stuff that worked on mobile. And this isn't just about Word and Excel. It's about all the other pieces and sort of the general sort of SaaS ecosystem. And Microsoft had to switch. They had to understand weak. can't operate from a position of strength. We have to hustle. And that took a cultural change. And there's a similar sort of dynamic that is sort of emerging here. Yes. Well, that's nice consolation for me. If it were up to ESPN, they would wait several

years before committing to any of this. We've talked about them being on the edge of a cliff here and having to sort of jump. And maybe they'll have a net from a strategic partner. Maybe they won't, but either way, I wouldn't be in a hurry. There's not any great urgency on ESPN side, and yet maybe the market will make the decision for them. So you and I have not really talked about any of this offline. It's part of why I was excited to come back tonight. You wrote a great piece detailing the history of ESPN and the rise and fall of its negotiating leverage over the last 40 years or so. I don't want to get into too much of that history. People should just go to Stratory and read the full article.

I'm a sucker for Ben's pieces that have good historical framing. Shout out to Bill Rasmussen, the Hartford Whalers. There's a lot of great stuff in there. Yeah, I do have to say, I think this might have been my favorite sort of introductions slash hook. At least it's in like top five for, for, for the 11, 10 years I've been doing trajectory. So I was very pleased with it.

So yes, go check it out. I'm going to, yeah, I'm blushing right now because it's not in my nature to praise myself, but I personally also enjoyed this one. It was a great read and it synthesized a lot of what we've been talking about with the cable industry and some of the advantages that they have with the physical lines into your house and how ESPN evolved over the years. And obviously the controversy standoff that gave way to that article, a run through some charter and Disney facts. Number one, Charter, which does business under the brand name Spectrum, is the second largest cable TV provider in the U.S. with about 15 million pay TV subscribers. ESPN went dark on Charter Spectrum channels as of last Thursday, as Disney is now withholding ESPN channels from Charter customers while both sides negotiate on affiliate fees. ESPN, for reference, charges Charter $9.42 per subscriber per month. Charter spreads that ESPN cost across its entire subscriber base, so if you're paying for

their cable, you're paying for ESPN. In total, Disney is making $2.2 billion annually from Charter and its customers, and moving forward, ESPN wants to raise their per subscriber fee by $1.50. And Charter is willing to do that deal if Disney allows Charter Spectrum cable customers to have free access to the ad-supported versions of Hulu and Disney Plus. Not sure what ad-supported Hulu costs. Disney Plus currently costs $7.99, and Charter wants to give that away for free. Disney refuses to make that compromise. And so here we are. Right now, it's sort of a stalemate. And as the stalemate continues, the Financial Times reported that Disney is quietly giving players at this week's U.S. Open direct access to tournament coverage via Walt Disney app because many of the best tennis players in the world are unable to watch their opponents play at the U.S. Open because those matches would have otherwise been broadcast on the spectrum ESPN channels in New York that are no longer coming over the air while these companies figure it out. That last note is not actually important.

I just found it funny. It is a delightful idea. I mean, I assume it's through the ESPN app because when you log in, you authenticate with sort of you can choose a list of cable providers. So I don't think it's like a special app per se, but it is a funny detail that I enjoyed seeing over the last couple days. The Financial Times interviewed one of the players who was talking about going to like illegal streaming websites to find U.S. Open matches.

Which I don't think that Disney wants being advertised in about the, the possibility there. 100%. Suboptimal if you're Disney. But in general, we have seen ESPN standoffs in the past, including most recently the situation in 2021 where ESPN had briefly pulled its channels from YouTube TV and YouTube TV had to cave after about 48 hours. Can you explain why this situation might be different?

We're coming up on seven days since ESPN pulled its channels from Charter. and this could get resolved by the time this episode publishes, but it has felt different over the last week or so. So what's going on here? Well, I would say number one, all these numbers are sort of reported. I mean, the per subscriber fee and all that is never published explicitly, right? But there's always sort of reports that are floating around about those sorts of things. It's certainly, you know, in the ballpark regardless.

To your point about this could be resolved tomorrow. So it could be right before this is published. You know, I had to put that caveat in my article. I think the big breaking point is going to be or the big question point is going to be Monday night. When ESPN has Monday night football, Aaron Rogers on the Jets. Pretty good game. Yeah. I looked it up.

Bill's Jets. That'll be fun. And both markets are spectrum markets. And so, you know, beyond the fact, there's going to be widespread national interest because, you know, Aaron Rogers on the Jets. So if it goes past Monday, you know for a fact that we're in for a major industry-shaping dispute. Batten down the hatches. It's going to get interesting the next couple months. Right. And these disputes are coming, we're coming, but it's still possible that both sides will kick it down the road and come to a deal before Monday night. I think that that's sort of the deadline that we're looking at.

So I will admit when this news first brings. broke, my mind immediately went to the YouTube thing. It went to a bunch of other disputes that have happened in the past, not just between ESPN and Disney, but all of the networks, you know, biacom, Universal, et cetera, in having these disputes with cable carriers. This isn't a new thing. And as I noted in my article,

this goes back to the very genesis of ESPN and the affiliate fee model. Like, they started out just their goal was to give away the channel and make it up in advertising and they quickly realized that was not going to be sort of sustainable. But that process of switching over to affiliate fees meant turning off, you know, a bunch of carriers turning it off. And ESPN had to leverage customer demand. It's almost like a, you know, a preview of like the Uber strategy, right? That would come along years later, where if you marshal consumers on your behalf to sort of campaign, then it's a very sort of powerful force that can bend different parts of the value chain to their will. And so my initial reaction is this is, this is,

just another one of those. But then came this sort of charter had a earnings call the next morning. And they're not an earnings call, like a meeting with investors. And basically they dropped this presentation and they made pretty clear that that this time was different. And I think their actions to date have certainly shown that. If it carries on through Monday, it will certainly demonstrate that that that is the case. And that is sort of the interesting part. Why is it different that I sort of wanted to, wanted to explore. And there's this bit where, you know,

at the beginning, paying ESPN, or number one, just getting ESPN, but the number two, the reason why ESPN succeeded in shifting to the affiliate fee model is because ESPN served as a customer acquisition channel. Like, you would go,

you would get the cable because you could get ESPN. It wasn't just that. And this also allowed cable operators to expand into places that were already served by broadcast TV, right? If you just had the old model, but you had a great signal from the tower because you lived on top of the mountain

or whatever might be, why would you get cable? Like, there's no purpose. Well, now if cable has the NCAA tournament or the first round of the NCAA tournament games and you want to watch your team or you like basketball or whatever might be, now there was a reason to get cable so you could get this new content

that was sort of not available anywhere else. So ESPN, at the beginning, the cost the cable workers were paying was almost a market. because they were acquiring new customers. You fast forward to first sort of the 90s and the satellite when satellite TV came along in the 2000s when things like 18T Uverse was basically IPTV came along. And now ESPN, you know, was a way to retain customers.

If you spent all that money to lay the cable on the ground and you had an ongoing customer, you wanted to keep that customer. And how did you keep that customer by having content they cared about? If that content were to leave, if you were to lose ESPN and that content was available on a competitor, well, you might sort of lose that customer and you're probably going to lose them permanently because if someone gets a- They're getting a satellite dish. Yeah. Right. And if they get a satellite dish, then they're gone forever.

Or in the 2000s, if they switch to AT&T to get TV, they're also going to switch to AT&T for broadband or Verizon or whoever else might be. And this was a particularly issue then because broadband was this rising business within cable carriers. And from a cable perspective, broadband was amazing because it had the same principles as cable TV where it's running over the wires and you can scale sort of infinitely. But you didn't have to pay content producer. All the content was free. You're not paying ESPN every month, you know? So in terms of where we are today, my sense of this standoff relative to the YouTube TV standoff is. that YouTube TV could not exist without ESPN because far too many customers would just cancel

their service and go find ESPN elsewhere. Whereas Charter is looking at this and saying, you can't kill our linear TV business because it's already dying on its own and we don't really care. We're making most of our money off broadband and that's our plan going forward. So unless you're willing to engage in some real cooperation here and structural changes to the way this business works, take a hike, Bob Iger, you're on your own and we're going to go our merry way here. Is that accurate?

Is that what's happening? That's exactly right. There is this kind of interesting phenomena where ESPN has already gone over the top, right? The whole thing was ESPN can't go over the top or the worry about it because they'll cannibalize their other business,

but ESPN is over the top. It's just not sold by Disney directly. It's sold by YouTube TV. It's sold by Hulu Live, sold by Fubo. It's sold by, you know, what are the other services that are out there? You know, direct TV, like, Sling TV. Like, you can get ESPN into your house through multiple channels or, you know, a broad channel, broadly speaking, that sort of a TV channel.

And that is actually ESPN's problem. Like, because of that, if you want to, if you can't get to say you really want to watch the New York Jets on Monday, what Maffa Nathson, And we haven't seen this yet, but I think this will be a very clear signal that this is going on for a long time if it appears. Right now, if you tune into Spectrum on your TV, you get this message for Spectrum saying, you know, Disney's being mean and we're sorry you can't get ESPN. What they are talking about doing is you will go to that channel and there will be a QR code there that will lead you to sign up for Fubu TV or for YouTube TV. And you sign up and boom, you can watch the game. And how are you going to watch the game?

You're going to watch the game on your charter internet connection, right? And that's the key thing. If they can give up in the 2000s where they're fighting AT&T and Verizon in the 2010s, the worry was if someone had to switch for ESPN, they would also switch for broadband. And that was intolerable. But now it's so easy to sign up for one of these services that you're almost guaranteed the user is going to keep their broadband. I mean, yes, you might be really mad at Spectrum, right? But at the end of the day, you want to watch the game.

right now. Changing your internet is a real pain in the rear end. And what you're going to do is just sign up for another service. And Charter's like, fine. That's fine. As long as you're paying for internet, we're all good. So in general, I don't want to put you on the spot here because we're talking about, you know, dozens of different markets. But how much to the territorial monopolies factor into the leverage that Charter has in a fight like this? Because it doesn't seem like in, you know, New York and L.A. It doesn't seem like there are that many options for people. who want a cable provider and broadband. And like these big companies have carved up the country already.

And so if you did want to change from spectrum to something else, like you may not have that many options depending on the market you're in. Is that part of the story here? No, I think it's the exact opposite. Okay. No, no, no. I think the GRF monopoly is a huge point, right? And that was something that gave them real leverage in the previous eras.

again, because the only alternative was first satellite TV, which is a huge pain in the rear end, and then after that was switching to your telecom provider, which is a still a pretty significant pain in the end, paying the rear end, right? Today, though, the whole point is you can trivially get another TV service. It's literally just putting your credit card and click a button. And like you go to like a YouTube TV, your account, you already have a YouTube account, you probably already have a credit card on file. It's install an app and click a button.

That's literally sort of all it takes. And so it's kind of interesting. It is very counterintuitive, but the thing that is giving them leverage is the fact that the alternatives are so accessible. Increased competition has been much more damaging to ESPN than it is to charter today. Now, that would not have been the case 15 years ago, 20 years ago. But what has happened in that intervening time is that Disney and ESPN and all the other cable channels have jacked up the rates so much that they have basically taken so much of charter's margin that do they still make money on TV? Almost certainly. Yes, they do. And this was

sort of a signal that Disney should have seen earlier, which was four or five years ago. I can't remember the exact date. But the cable companies basically said that, look, every time someone calls us and says, I'm canceling TV and why are you canceling? Oh, it's so expensive. I watch Netflix, blah, blah, blah. What they would do is offer a big discount, right? Well, how about, you know, yes, your TV costs $100 a month. What if we gave you for $50 a month for a 12, 12 month contract?

And people would do it. And there's like memes on the internet about how you would have to call, you know, call Comcast every year to get your discount, right? And look at the suckers that are just sort of paying throughout. And a few years ago, they're kind of like, you know what? No. We're already dying. You can't kill us. That's the theme that's coming from the cable companies here. That was an inflection point for cord cutting. That is when cord cutting really started to accelerate because they stopped propping it up with subsidies. And in retrospect, that should have been the blaring red flag for Disney and for everyone else in this area, which is, look, it's a big problem that our biggest money makers are indicating they no longer care, right? And they're becoming indifferent.

Now, I don't think they're totally indifferent. For sure, this will have an impact on sort of charter. Like, again, if they were actually losing money on TV, they would just unilaterally cut it. But I do think, you know, and it has benefits from, you know, customer acquisition to, you know, that's a reason to get, get sort of their broadband because you want the TV. That's why I ask is basically when I go, when I think about. my own choices as a consumer, like I would be open to switching my broadband provider. I just want to pay one company. So if there's another competitor in the market that has ESPN and the chief competitor that

I'm getting broadband from now doesn't have ESPN, then I would consider switching. But I think in a lot of markets, there's not really that viable competitor. Well, I mean, if I can sort of, you know, highlight your situation directly, you did switch to Verizon because, you know, I mean, in part because of what we do, having, you know, that fiber connection is very beneficial. You know, it's easier to have a video podcast, video may be coming soon, from Taiwan to Verizon. We're both sitting on one gigavit sort of connections. That's a great. Everyone out there, you're going to get to see Ben's face get red anytime he compliments himself on the podcast.

So look forward to that later this fall. But yes, it was so satisfying to call up. Xfinity, after all those years of crappy service, and be like, actually, I'm just going to cancel. And I'm going to become a Verizon customer. Right. But in this case, that was easier for to do because Verizon did offer TV, right? Yeah. One of the rising challenges to everyone in the existing service is there's more and more fiber

providers that don't have TV service. For understandable reasons, why would you want to get into this business? And basically, I mean, you basically become, it's kind of. devious, right? Where you saw tweets like this online, like, you know, Spectrum would be blaming Disney. There are people yelling at them on Twitter saying, you're

the one selling it to it. Stop passing the buck, right? You're the one raising it. You, you, you, you. And this has been beautiful for the Hollywood studios. They have been able to jack up prices for years. And who's been taking the abuse? These poor Spectrum and Charter sort of frontline sort of workers, right?

And you think about what's the reputation of Charter and Specter or charter and Comcast. It's in the dirt. And yes, part of that is the things that come from monopoly. I will say, by the way, I have Spectrum in Madison. Their customer service has been incredible. I've kind of been blown away.

That's great. I've had some issues. They helped me out. But by and large, they have been absorbing the abuse for the price raises that they are not collecting, that are actually decreasing their margins that are going to these Hollywood studios. And so if you're a new fiber. provider and you're sort of doing a build-out. I have a friend sort of in California. Their offering is,

oh, yeah, we have a TV bundle. You can subscribe to our fiber service and YouTube TV for one price, right? And why not? Why offer IPTV when you could just offer an app? And so there is a rise of alternatives that do not have TV. And that is a risk factor for Spectrum and a reason for them to hold on to TV. If they move everyone to YouTube TV or Fubo TV, which are the two they're sort of recommending, obviously, because they're not Disney properties or direct TV properties, 18T properties,

is they, that once people have disconnected TV from internet, then changing internet becomes a lot easier and more viable. So they do have reasons told onto TV, but not to the bitter end, right? That only goes so far.

So on the risk front, for ESP, One of the reasons I'm enjoying this story is because I feel like I'm living in a succession episode and there's all this corporate intrigue. And so one layer of stakes for ESPN. Before we get to the ESPN part, can I give you maybe the most interesting bit of corporate intrigue, the succession style intrigue in this? Please. Please hit me with it. So one of the anecdotes from James Andrew Miller is these guys have all the fun, which is a great book. It's like an oral history of the founding of ESPN. I read it years ago.

I've been kind of been wanting to use that book in an article for years. And so I'm glad I sort of saved it for this one. You stuck the landing. Congratulations. Oh, thank you. Now I'm blushing again. But there is an anecdote in there about when ESPN tried or they had just switched the affiliate model. And then they tried to raise their prices by like 22%, which they did successfully because they were ESPN.

That's what ESPN has been able to do all along. And where the anecdotes is, Malone came in the room pounding on the table or whatever. it is. Who's Malone? John Malone, right? One of the all-time business executives started as one of these cable operators. What is one of his jobs right now? He is a board member and major shareholder in charter. And there is a bit where this is coming 40 years full circle. He has been complaining about the collie wood and their extraction of fees. He's one of the best articulators of the sort of how value chain extraction works, right? And one company in the value chain is going to extract most of the profit.

And for years, that has been Disney in particular. Because they have the best content, you know, there's a direct negotiation between charter and Comcast and everyone else and Disney for who gets the profit from this customer. And Disney has continually extracted more and more and more and more of it. And to the extent they have forced charter and expedited to raise prices and endure the abuse of customers because that's been sort of the price to stay in business. And so he understands this very deeply, as you would expect, for someone who's been so successful.

But number two, he's been vocally pissed about it for 40 years. This has been a crusade for decades. There is a bit like this is John Malone's final revenge where finally the tables have turned. In this value chain, charter and spectrum, it's not that they necessarily have an advantage per se. they're not going to start extracting more from the TV bundle, but their advantage is the advantage of not caring.

And the problem is Disney cares a lot. They have to care a lot. And you can't extort someone that has nothing to lose. Yes, never get into a fight with somebody who's crazy. And John Malone may not be crazy, but has a lot of the same characteristics as he enters this fight with ESPN. It should be a concern because like no one understands this value chain dynamic. better than he does.

And so you know he's sitting there talking in the Charter CEO's ear. I'm sure he's deeply involved in this. And there is a bit where it is personal. And that would make me almost more nervous than anything if I were Disney. I'll tell you what. I've read so much Bob Iger hagiography over the years. Bob Iger myth making. I have no idea whether I correctly pronounced hagiography.

But I am definitely not one to help you. We need more John Malone hagiography. He's nicknamed the cable cowboy, and I was looking up before the show, he's worth $9 billion. There should be more John Malone myth-making out there. He owns like half the land in the West. Exactly. We've gotten enough books about Bob Eiger, give me more books about John Malone. But no, what I was going to ask, though, is is there a risk that an ESPN compromise in these negotiations with

charter spectrum then forces them to compromise with every other cable operator. Like, is that part of why this is so dramatic over the next however many days it takes for this to get resolved? Well, it's worse than that. There are sort of most favor nation clauses that attach to all this. So everyone is paying ESPN the same rate. So if someone were to negotiate a lower rate, that affects ESPN across the entire country. And, you know, does that extend to something like including Disney Plus?

it's not clear. I mean, I've never seen the actual wording of those contracts, but that's a safe assumption. Interesting. If ESPN and Disney give in to charter here, they have to give in to everyone. And it's one of those things where, you know, most favorite nation clauses generally work to the advantage of whoever is dominant and that has been to the advantage of Disney for a very long time. And, you know, someone can't sort of come in and sort of undercut them. And, but things can turn. If you're if you're on the other end of that sort of. the dynamic we were talking about just a few minutes ago. Yeah, well, and the whole world has watched this play out for several decades where ESPN goes to different operators and says, we're going to pull our channels if you don't give us what we're asking for. And it always ends up being a problem for the cable operators if they try to play hardball. And if that door is now open moving forward, it gets a lot more interesting in every subsequent

negotiation that they enter. Oh, for sure. And that's a reason for maybe Charter to push through with this, right? Or if it's not going to happen now, like it's going to happen on the next one. And or someone else is sort of going to do it. Maybe it's worth going through the pain now and enduring it. Again, TBD, this could all be resolved by the time this is published. But I think Monday, Monday is sort of going to be the big day.

I also think that this is the blueprint for how this can go sideways for ESPN. And it's clear that it can happen much sooner than anyone thought. I mean, even as recently as six months ago, we were talking about this in very abstract terms. Everyone knew that this is where things were headed. But I don't think anyone guessed that, you know, Charter could be sitting here Labor Day 2023 calling ESPN's bluff and not necessarily suffering many catastrophic consequences. Granted, their stock is getting shelved right now. Who knows?

TBD the consequences, right? It's sort of to be determined. I mean, I think the other sort of issue here is. This is kind of a surprise that you would think that, oh, we've been talking about this looming catastrophe, cord cutting, all this sort of stuff. Until I believe Q4 of last year, or maybe it was Q1 of this year, it was within the last year, Disney's revenue from its media networks division, which includes ESPN and all their other cable channels, was still growing. Even in the face of all these cord cuttings. Why? Because the affiliate fee increases were still outpacing the growth. Like their extraction of all the profits of the value chain has only accelerated as that

sort of value chain has constricted. And so, you know, they pushed it really to the bitter end. I mean, the first talk about ESPN losing subscribers that were as a huge deal was, I believe, 2016, when it came up on a Disney earnings call and Disney stock cratered and all this sort of stuff happened. That's when they really kicked into gear, the building of the streaming services and stuff on those lines. And it took seven years or six years for that sort of like heads up, this is happening, to actually manifest in lower revenue sort of going forward. Now, again, the revenue hasn't been growing, right? And over time, media networks, which used to be, I think,

like 67% of Disney's revenue. Now it's down to like 33%. But until now that's been a function of the other parts of Disney's business growing while media networks was sort of treading water. Now it's on the down slope. It is actually active declining, which is why Disney is asking for this 15% increase, right? And Disney's like, look, at the end of the day, you know, you can understand their perspective. It's like the only reason why people still have these TV subs is because they want sports. If they want sports, they want ESPN. And I think what they didn't appreciate was that Charter might say no, right? And remember, this was Disney that pulled the show on the first weekend of college football or pulled the channels.

Disney, I think, went into this assuming they had the leverage. I don't think that's been the playbook for 40 years. And it's worked well for them. And so I don't blame them for not necessarily anticipating that Charter wasn't going to play ball this time. This ties with the Malone point, right? This industry has been completely combative from day one. It has never been collaborative. It's always been combative.

That's the water within which these folks swim. And this actually, just to go back to my, I wrote a piece last year about cable sort of last laugh and sort of making the point that, look, all these streaming services have a big problem. And that big problem is churn. They're losing customers. They have to spend on content like crazy to sort of try to keep them. What's the best way to stop churn? The best way to stop churn is to have a bundle where your competitors can actually help pick up the slack. And as these companies mindset shift from customer acquisition to churn prevention, the allure of a bundle is going to make more sense.

And whose best position to institute a bundle is the cable companies? They already have all the people who have taken abuse for years out there in the field. They have the people that go to your house. They have the ability in the marketing to, and the stores to walk people through signing up for all these services, all these sorts of bits and pieces. And there's a few mistakes in that article. But I think one of the ones was I underappreciated and forgot about the issue with Hollywood isn't just that they all have a bunch of big egos and they were jealous of Netflix and all the very stupid mistakes that were made along the ways. But also the relationship between distributors and content companies has been so combative from day one. These people view each other as mortal enemies.

And they have been mortal enemies because they are fighting over a fixed set of the pie. There's like, like, once cable had saturated the U.S., the only way to grow profits was to extract a greater share of those fees or force the distributors to raise fees and then take more of that profit. So there remains structurally an opportunity for these entities to work together where they can actually help each other. But that is not in the nature of their relationships at all. It's 40 years of World War I type fighting over a limited amount of terrain. And this idea that we're going to build Pax Americana and like growth for everyone, it's just like it doesn't resonate with anyone in these industries. Okay, well, let's put on our utopian glasses here.

Matt says I've heard Ben talk about what content companies like Disney have done in the past to put themselves in this spot. But I'd be curious for his perspective on some of the things Charter wants for. from Disney. How should a company like Disney and a legacy distributor like Charter coexist going forward? So what do you think of the proposal from Charter, for example, to make Disney Plus free to all of its customers? I don't understand why Disney hasn't taken them up on that offer as they try to extract as much money as they can from this dying model. Well, because Disney and all the other haulage companies are double dipping. Like it's,

like it's, like, no, I'm sure. You've got people subscribe to cable and then they also have to pay for Disney Plus every month. Like it's not a bad business. But at the same time,

it's like, don't let perfect be the enemy of pretty good. Yeah. One of the issues is, let's use $100 as a round number, just for ease of discussion. Obviously, how much you're paying for TV is these days much higher than that.

Let's say you're paying $100 for your viewing entertainment. the rational thing to expect is that how much you're paying for entertainment increases with inflation, right? Like at the end of the day, it's like the number of hours of the day are sort of increasing. Companies can fight over what you want, what you don't want, but that $100 should sort of increase over time with inflation. Number one, that has not happened at all. That is increased much faster than inflation. And part of that has happened is because there has been because of the bundle and the fact that all these Hollywood entities have been able to shield those price increases from customers

because it's delivered by the cable company. And customers have just, they've just had to take it for years. So like these sort of increases, just as Charter and Comcast events sort of take it and pass it on over years and get called greedy when they're just passing a long degree. They're greed conduits, right? And so, number one, it has not been inflationary increase. It's been much faster than inflation for a long time. And at some point, charter and spectrum, your charter, Charter and Comcastle and it all, again, if there's no more profit in there and all they're doing is getting angry customers, then what's the point, right? But then customers also, they're like, why am I paying so much? And meanwhile, oh, I have to pay extra to actually get the

good content. And you go back, I was actually reading, I read a bunch of like charter earnings calls going back over the last six years. And you go back and they keep saying again and again, Yeah, I mean, the entertainment companies have to take this seriously. They're like they have TV everywhere and there's widespread password sharing. There's no, you know, they're giving away this content. And then they're also like taking off their best content, putting it elsewhere. This is going to fall apart. This is not great.

Yeah. And there was a bit where it was so repetitive that you can understand Disney sort of ignoring it. But they've been talking about this for, for years, like a very long time where why would someone like Disney, if they're putting stuff exclusively on Disney Plus, Disney's expectation is that you pay for the bundle, the price of which has outpaced inflation, price increase, and you pay for a streaming service. And so you went from paying $100 for Visual Entertainment to paying $250 or $300 or whatever it is. And that was going to break at some point for two factors. Number one, it's just too much.

There's not enough time in the day to even watch all this stuff for one. Number two, by going around the cable operators, all these streaming services are encountering two problems. Problem number one is the churn issue I talked about before. The fact they can go direct to consumers also means consumers can directly cancel them, right? They can sit down, they can watch a whole show and then cancel it and come back in four months and send those they want to watch. And why wouldn't you do that as a customer when your prices are going up to three X? So they're directly exposed to the customer ease of use of the internet. They saw it as an opportunity, just like newspapers.

Oh, look, we can put our content available with everyone. It's actually a problem in the long run. Friction is good. It being hard to disconnect is a good thing. It being easy disconnect is a problem. That's number one. Problem number two is they are putting the price directly in front of customers and asking them to evaluate their content and pay or not pay that price. is Disney plus with ad free worth $15, $16 to you, whatever the price is going up to you?

Is it with ads worth $8 to you? And Hollywood companies have not had to do that for a very long time. They've been shielded from that. And being shielded from that, you know, has been a huge advantage. And so now they're encountering both and it's not sustainable. And I think there's a bit where they've just pushed it too far. and they're trying to execute this shift, which is probably misguided. And the expectations ought to be reset to, look, if we can get back to video entertainment costs increasing faster than inflation, that's pretty good.

We were there for a long time. This idea we're going to get that and we're going to double dip. It just doesn't seem, it just doesn't seem sustainable. So all that to say, I love Charter's proposal. I think it's great for Disney. It makes sense, right? Yeah, like it's not the worst thing in the world if you're trying to gain market share with your ad free or, no, your ad supported streaming service. Like it at least serves some of Disney's long term goals.

Right. You get more customers. So you build up your ad network, make it more sort of, you know, more viable because the larger it is, the more compelling it can be. There's a real scale thing with advertising where being larger is is really worth a lot. And you get out of the collection. money from customers business and having to put an explicit price on your content. You get out of the, you're now tied to other stuff, the customer values that reduces churn. And the cost of that is you're foregoing the opportunity to double dip. But you have to question at some point,

what has double dipping gotten you? What it has gotten you is this crisis in the first place. Yeah. No, I mean, and look, our cable cowboy, John Malone, described it as the Oklahoma land rush of the entertainment business to jump into the streaming world and all of these people have been losing money the entire time. The other bit about ESPN and this circles around, you know, to the sports question is one of the challenges ESPN has is ESPN drove the cable bundle for sure, but ESPN also benefited from all the other channels in the cable bundle. That was a reason, like, like, it's a lot easier to get buy-in for paying the

ever-increasing rates for cable TV so one person can watch sports if the other person is watching other stuff on TV, right? The more people who are interested in it, the better. And what's happened is as these streaming services spun up, they're like, oh, it's okay. We can spin up these streaming services because we still have sports, right? And I'm laughing. It's become such a terrible deal for non-sports fans. They've taken all of the good content and thrown it on streaming networks.

and then they've also jacked up the prices to pay for ESPN and other sports on the cable bundle. So you're now paying twice as much money for like almost no content that you want if you're someone who doesn't care about sports. So yes, it's sort of accelerated the decline that was probably going to happen regardless. Right. And so there's another piece in this value chain, which is the sports leagues. And so they're like, wait, let's be clear ESPN. you Disney are double-dipping, you're destroying the value of the cable bundle. The only reason you're counting on people keeping the bundle is because of sports. Who owns the sports rights again?

Oh, we do. Guess what you're going to do? You're going to pay up for it. And there's an aspect where the sports leagues are doing to ESPN what ESPN did to the cable operators for years. And so you have these skyrocketing rights increase. You have the thing like the Big Ten deal last year. And the problem is the narrower your value chain becomes, the more subject you are to being extracted from, right? If you're the cable companies and you're already sort of locked in, you're just going to get taken advantage of, but it was the broad bundle.

As the cable owner becomes narrower and only one thing, you're going to get extracted from more and more because you don't have any defenses. you're not bringing anything to the table other than being someone in the middle. Okay, so that's where I want to close. I want to talk about the leagues and how this can affect sports as we know it. And so to do that and get us started, I'll go back to something we alluded to on the last episode last week. The information reported league executives say ESPN's deteriorating TV economics aren't their problem. They believe they can continue to increase the money they generate from licensing sports rights by striking deals with tech giants, including Amazon, Apple, and Google-owned YouTube,

multiple sports league executives told the information. So I want to come back to that Apple, YouTube, Amazon point in a minute here. But can we pause for a moment just to marvel at how terrible the timing is for the NBA to be renegotiating its broadcast deal right as the cable bundle collapses around them or potentially collapses around them? It's a disaster. It is, I think it is absolutely a disaster for the NBA. You know, the reality is, is that ESPN's deteriorating TV economics are their problem.

Like, like, you know, ship flows downhill, right? Like, if all of this, the reason why the leagues had leverage over ESPN was because ESPN had leverage over the cable providers. If ESPN loses that leverage, that's, that. That's a big problem, right? It's like the building that's, it's like the winchpin is gone. And, you know, I just articulated it about how they've done to ESPN, the ESPN has done to the weeks. And if ESPN can't do that on their behalf, then that is going to be an issue for sure. No sports league wants to go direct. People bring this up again and again. No, it's not doable. It's not viable. The reason it's not viable is because if you go direct, to even come close to the same revenues you have today, this price has to be astronomical.

If the price is astronomical, then you're not going to get very many subscribers. You're only getting hardcore fans, which might be okay for today, but what about the fans of tomorrow? You're going to have long-term sort of growth opportunities. We talked about this kind of the Phoenix Suns. You need to be sort of broadly available. It is not good for the sports leagues to not be in a bundle. This is a big problem for them. That statement, I should have attacked it more last week.

It's insane. It is their problem. It absolutely is their problem. And so there's a bit here where ESPN does still have. have the potential to provide value by being the bundler of sports. And when and if they go over their top, that value could actually increase because when you're streaming, your capacity is far larger. It's actually viable for one service to have all the sports, right?

You can see a future where Netflix owns all of entertainment. Like, they are the bundle. Why? Yep. Because their capacity is infinite, right? There's an opportunity to do that in sports. But the problem is, like, Disney is so. financially limited right now. And so, you know, I think the NBA will probably still be okay,

maybe not as much as they wanted, because ESPN to get to this future, they do need content. And the NBA does fill a lot of content, but they have a lot of rights fees to pay. And they just lost 12% of their revenue or 50% or whatever, like a few billion dollars in years. Like that, that's sort of, so Disney has to figure this out and the weeks need Disney to figure this out. So that's sort of number one. No, exactly. And going back like three and four years, like a couple years ago, there was a CNBC article that reported the NBA was expecting to triple its rights fees on its next broadcast deal. And that has been sort of like the baseline that has everyone has assumed is going to happen whenever the NBA signs this deal. And so first of all, in a salary context, you have all these B list and C list superstars signing like $500 million contract. and that's not far off. It's okay. The next salary cap will take care of it.

Yeah, the next salary cap, that will seem cheap. Exactly. People say, don't worry, the cap is going to rise by 10% each year because the money is going to get so much bigger on the next TV deal. And meanwhile, the league has been like bleeding audience for 10 years. The quality of the product is worse than it was 10 or 15 years ago. And it just didn't seem to matter to anybody. So it sort of felt like a house of.

cards. And now as Disney is having the screws put to it by the cable cowboy, it could get a little bit more interesting. And then there's the separate question of what does it look like if you shift NBA rights to a company like Amazon, Apple, YouTube TV? I mean, the NBA is splitting up its broadcast rights into, I think, a couple different buckets going forward. So they'll sell like the in-season tournament to Amazon. So they should do fine. Like overall, they'll probably maybe double their money. Who knows? But I'm curious, like, what the economics look like for a streamer. Like, are they, if they bought NBA rights, would they ultimately just treat it like a loss leader as they try to take market share? Because

the rights fees are so expensive that it's harder to pass those fees along to customers who have the ability to say, actually, I don't care about the NBA. I'm just going to cancel this rather than pay like 40% more than what you were charging me previously. So I'm just sort of curious as to like whether that's actually a viable long-term alternative to a company like Disney. So go back to that bit about value chains and who is going to extract the value. Guess which entities you do not want to get into a value chain extraction fight with. It is Apple, it is Amazon, it is Google.

They are such wide-ranging businesses. They bring so many business models to the table. They bring so many abilities to make money to acquire customers that they, in the long run, are going to extract every cent of profit that you can do. We've seen this again and again, right? All those stories about, oh, Google is rolling out this new program for newspapers or Facebook's doing XYZ. What does that end up as? It ends up as Google and Facebook taking all the money. And they don't do it because they're evil.

they do it because they have a dominant position in the value chain. And the companies with dominant position of the value chain extract all the profits. It's an iron law business. It's going to happen again and again. This idea that you are going to go in there and we are special enough that we are going to dictate value chain terms over the long run to our customers is insane. And yet that's exactly what the NBA is do. Oh, ESPN not our fault.

They are so much better with ESPN. ESPN is so much better with Charter. And they are even dipping their toes into this. And you would think you would see this what's happening with streaming. You're on there getting commoditized like crazy. You're churning like crazy. You're spending tons of money on customer acquisition costs. Oh, where's that money spent going to, by the way?

Oh, it's going to Google. It's going to Facebook. You're already getting destroyed by the tech companies. You're paying 30% per subscriber every month to Amazon because they happen to click through on the Amazon storefront or the Apple TV storefront. You're getting obliterated and it's going to get worse. And this idea that the tech companies are going to save you is crazy talk. The whole thing, the way you get away from the tech companies is you have to go direct to consumer.

But they don't want to go to direct to consumer because their whole business model has been taking all the money from the consumer, raising their prices faster than inflation. Guess what? The tech companies are going to put you out there. It's going to be very clear what you're paying for. And they're going to service the customer first. their whole advantage is about giving a good customer experience. They're going to make it super easy to cancel. You can go to the Apple right now, it's your ID.

Get your list of subscriptions. One quick. Boom. Canceled. Super easy. That's not great for business. It's a lot better for business. You have to call in.

You have to wait online. You have to cancel. And yes, we complain about this, you know, as sort of consumers. It's insanely valuable from a business perspective. And there's this bit. You have these small fry that have just been fighting each other for years and years in years. They're like, screw you, I'm going to go over here with the big guy and they're going to get obliterated. It might not happen right away. You know, they might go there. Oh, we need you to build up our service.

Oh, you know, we want to get a streaming service. Having this highly differentiated content is going to help us XYZ. And then you get to a situation like the last couple of years where, oh, Wall Street says cut costs. We're going to weigh off 20% of our workforce. Oh, why are we spending all this money on XYZ again? That doesn't seem worth it. And suddenly you're just a pawn. in this game when you used to be the big fish. Like, it's better to make friends with the fish in your little pond than to try to swim with the sharks. Yeah, well, and declining quality of the product aside, the NBA's strength has always been inventory. So, like, the talking point they returned to is from January to July, we're going to provide networks with a ton of programming.

But that strength is less elevated. That's much less interesting. context. Yeah. Exactly. Yeah, it's nuts. You need, I mean, again, it's not nuts. It's actually very rational. You have these entities that have been in the same value chain for years. They've been fighting over the same pot of money. They've been debating back and forth. But this idea that you're going to find salvation in tech, particularly in the long run, is nuts. Why don't they go to literally any other content industry and ask how it's gone? Right. Like, what is the shining example in newspapers? the New York Times.

How has the New York Times succeeded? They have succeeded by reestablishing a direct connection to customers and trying to build sort of a bundle. You can get news and you can get wordle and you can get all these different things. You can feel like you're plugged into the dominant sort of like view of the world or wherever might be. Like it's been a long slog and we talk about it number one because it's admirable that they've pulled it off.

But also number two, there's no one else. No one else is sort of pulling it off. Who else is successful in text? Well, someone likes trajectory, I'm successful in text. How am I successful in text? Because my costs are super well, right? It's a lot, like my revenue is great if I don't have to pay very many people. If you have to actually run a large operation, if you have to pay your players tens of millions of dollars.

Your cost structure, the NBA has a huge cost structure problem. They have to negotiate this. They have to split 50-50. And they have all these expectations built in. They have ownership groups coming in. that are assuming that it's going to sort of increase forever. So there's all these pressures. And so, yeah, you know, what's going to happen?

There's a good chance to do a tech deal. But all they're doing in the long run is sort of sealing their insignificance in into the negotiating position in the long run. Yeah. And by the way, by the way, if you're not widely available, if you're not increasing your fan base, your negotiating power is only going to decrease. We are, the internet puts the customer in charge in a, in a such a powerful way. And this idea that we don't need to worry about ratings is insane thinking.

It's insane because that is the source of your leverage in the long run. And it's that piece from the information. I believe that there are sports league executives who look at ESPN struggling and say, nope, not our problem. We don't give a shit. Other companies out there are willing to pay what we're asking. So, you know, figure it out ESPN. I think that those people are undervaluing the promotional value of ESPN. PN's existing distribution network because a league like the NBA, the product has been declining

over the last decade. They've lost a ton of audience, et cetera, et cetera. The franchises are still worth a ton of money because the league has a lot of cultural power and people want to own NBA teams. And long term, I'm not sure how much longer that continues if you're working with Apple TV and you're reaching 15 million people or you're on Amazon. and people have to like actively seek you out if they want to watch a basketball game. Like just being on in the background at bars actually helps the NBA a lot. And we've talked about the genius of bundling and everything else. ESPN is a bundle.

It's a bundle of broadcast rights. And bundles allow you to reach casual fans. And they've provided a ton of value to non-football sports over the years. in terms of customer acquisition. You reach those casual fans. Like football, I think, is in its own category. Football is the New York Times. Yeah, football is the New York Times.

Like, they can go direct to customers. They can command customers in a way that benefits everything else. And you even go back, I wrote about that, I mentioned that initial NFL deal with ESPN. That was priced so that ESPN didn't make any money on it. Like the whole point of it was that it increased the value of the overall franchise such that people would get ESPN and that's where they would make their money. Like, and you, you, this is well known. Like all these deals the NFL does, no one makes money on them.

All of the value is in the promotional value that you get. You have hours of time where people are plugged in to pitch your other shows to sort of push people to do other things, sort of X, Y, Z. So yeah, the, and the NFL is very good at understanding its value, extracting all that value, and also not becoming too dependent on anyone. There's a reason, the reason why the NFL. made the deal with ESPN in the first place. They wanted to spread their bets, right?

Like, that's always been their modus operandi. So, yeah, the NFL will be fine. The NFL is the New York Times in this sort of analogy. But all the other sports leagues are going to be a challenge, it's particularly the ones that are used to the current cost structure, that are used to the current model because they have the cost structures that won't fit, right? We're both F1 fans.

They're going to be fine. Why? Because the U.S. market is just gravy. Their cost structure in the U.S. is basically zero because they're already paid, like, in fact, they don't even have U. broadcasters. All they do is we have to endure Sky Sports promos in the middle of a race because all they're doing is just rebroadcast in the same signal they're already paying for. They're ESPN back in the 80s, right? And so that's great. If you're in that situation, then it's all upside. The internet

has been amazing for me. It's been amazing for anyone that has a business model suited for it. If your business model is pre-internet, though, and you see this in industry after industry after industry, you're in big trouble. It's so hard to adjust and to change. And it's not just about changing your cost structure. It's about changing your mindset. And the MBA's mindset is not ready for the internet at all. Well, shout out to Cable Cowboy John Malone,

chairman of the board at Liberty Media, who owns the rights to Formula One, owns Formula One, that is. And they gave their rights away to ESPN, as we said last week. And that move paid off big time. I just feel like customer acquisition is a big piece of the value that ESPN is bringing the table. And it's easy to lose sight of it because people are going to say, oh, well, this is a threat to the rights fees in the short term. It's also if ESPN goes away and you have to affirmatively seek out sports moving forward, it's going to be really hard to grow the fan base of basically every sport in America.

That's not the NFL. It's absolutely true. I mean, we see this in like with products, with, with, with, with, Amazon. There's a big difference between discovery or awareness and then like you, you know, CPG company, they'd run a commercial and then they would send you your coupons in the newspaper, and then you would show up to the store and they bought the NCAP. So it was right there. There it is. You've been hearing about it. It might as well grab it, right? That is a very distinct means of customer acquisition versus go to Amazon and type in the name of a product. You have to retrieve the name of

the product. You have to actively want it. And then you go and search it and then you put it in your cart. Much harder to be in that business. Much harder. And all these search, you see Amazon's exploding ad business. It's pure extraction. If you're in search, it's tough. The search companies are going to extract.

It's what we see happening, right? Where are they going to do? You search for a brand name on Amazon. The first 10 results are ads that triggering your ad name. You search in the app store on your iPhone. There's ads at the top that puts your name in. Google, same thing. and customers don't care.

They're just going to click what gets you there. And so you have this situation where you're an app and you have to advertise on your own name because when customers search for your name, if you don't, you're going to be the third or fourth result in the page and customers will click your competitor. No, so you have to pay to acquire customers who already wanted you.

Having a product that is in search is a tough business because you're in, you're going to get value extracted from you. You want this discovery business, this people stumble upon your, they're habituated to go to you, go to the channel guide, see what's on, quick on the show. Yeah. That's a much better business to be in for sure. Yeah, well, I'm going to miss ESPN if we look up 10 years from now and the entire landscape looks different. Yeah, I don't think it's going. Again, there is value in bundling sports.

Like in the weeks you would assume, you would hope, are going to realize this. They don't want to go direct, right? Yeah. It really doesn't work. They need a bundle of work. But do they recognize that Amazon Prime or Apple TV, like if you open those doors, the money will be great in the next couple years, but long term, you're lowering the ceiling on what everybody's going to make and how popular

the sport is going to be. It's unclear to me whether they recognize that. Yeah, there's real short-term interest within the sport, right? The players want money now, understandably, their careers are short, but then owners are sort of in a similar boat. How many owners, one of the, advantages the NFL has had is they have had family run franchises that where you have owners that have been there from the beginning they're still involved with the teams and that has

given the NFL I think a much long term perspective on a lot of these issues remember when people used to clown the NFL for not letting highlights freely on YouTube or on on social media and all that sort of stuff yeah looking pretty smart right now right well I don't know as as a shithead 24-year-old blogger. I was doing a lot of clowning of the NFL way back when. But to your point, it's proven to be a wise strategy. Yeah, the NBA is still talking about Twitter. How much money is the NBA making from Twitter? Yeah, it's fair. Yeah, well, I hope you're right. I hope ESPN indoors. I don't feel bad for ESPN and Disney because they've basically been shaking people down for 40 years. I mean, if you want to sketch out a scenario where the tech companies do come in and sort of just extract everything, imagine a scenario where, say, Amazon starts spying sports rights, right?

And then what they do is they start providing an interface. Like, here's a way to access all the different sports. You know, what are we missed when it's all the streaming service? We miss the guide. Like, where's the sports that are on right now? Honestly, yeah. Well, it's like a channel. Yeah, no, exactly.

So they build this interface shows all the live sports, things are going on. It burns your preferences. So it surfaces games. You might not have been aware that we're on. Shows it sort of XYZ. And they pull in content from all the different streaming services. And then over time, they're like, look, you know, this, we found, you know, the vast majority of our customers go through this interface. You know, to be a part of this interface, we're going to extract, you know, that 30% that we sold through, you know, they sell it, right?

Oh, this game's on. Let me click on it. Oh, you have to subscribe. You know, if they subscribe through this interface, it's not going to be 30% of revenue. It's going to be 40% of revenue. We're helping you discover your thing, right? And suddenly you've been aggregated. You're opening the opportunity for tech companies to provide the surface area for demand.

And that's what they do. And once they own that, you're in big trouble. Again, for all the disputes with the cable companies, at least at the end of the day, they just sold the whole thing and then everything was treated equally. Passed along to customers. Yeah. And the channels were just passed along. There wasn't like algorithmic ranking of the channel.

based on who was giving them a higher share. It was just a grid. Well, it's going to be really interesting to see how it evolves because the reason sports have been valuable is they are one of the last cultural touchstones where monoculture is still a thing. And we all sort of experience the biggest moments together. ESPN obviously a huge part of that. And to the extent we're looking at a future where everything is just balkanized

and ESPN is trying to replace affiliate revenue with high streaming prices. and aggressive gambling marketing and they're broadcasting to a much smaller audience, that would be depressing. So I hope somebody out there can re-bundle all this and have sort of a centralized place where we all experience sports together. But that's just my corny, sentimental wish at the end here.

My expectation is that it goes a little bit differently because generally the internet has just tended to widely disperse culture and interests and destroy any semblance of monoculture. And so ultimately, it's likely that the NFL is going to be where we all watch together. And then everybody else goes and subscribes to whatever they actually care about beyond that. Yeah, the other thing the internet does is make people stupid. Make business people stupid in particular.

Particularly they grew up in the pre-unit era. Because what happens is the internet comes along and it seems like an opportunity. And if you don't understand the fundamentally different demands, where in the analog world, if you controlled supply, that gave you power. On the internet, it's demand that matters. If you don't control that demand, you're in trouble. And you see it, we saw it with newspapers. Oh, big opportunity.

You saw it with so many other things. The best thing in my estimation, and I feel pretty strongly about this. And I, like I said, I wrote it a year ago, is that the, as much as you might dislike the cable companies, as much as you might be irritated by them, as much as you might have like 40 years of frustration with each other, these like this is such a better option to deal with them yeah don't want to get in with the tech companies but the reason the tech companies win is they are large these large arrogators that by definition is one entity so they operate you know coherently you have these other areas where you basically have a prisoner's dilemma sort of situation and this is what happened with streaming right if

everyone would have held strong and would have not watched streaming services and kept their best shows on TV and not made it available the next day on Hulu or whatever, but sort of like, yeah, maybe in a two years it'll be on Netflix, you can watch it then. We would still have, I firmly believe we would still have a good bundle today, right? People like, why? People like, they do have good content. People like the content. They want to go watch it. But the problem is they needed to collectively decide to do that. And as soon as one company starts deserting, Disney's working doing a streaming service, so everyone's going to desert. And you have this issue where then you're all running around as these little fish in this very big pond and you're going to get swallowed up by these big companies.

And that's probably what's going to happen here. I think the rational response would be for all these, like you're already, you've already got to streaming. It's too late now. Too many people have cut the cord. It's not going back. There are huge customer advantages to streaming. You can choose anything you want. You can get a no ad option.

You can search all these sorts of things. Like streaming is the future for sure. but how are you going to get that? Well, a la carte is probably going to be the case. But if you say, hey, you can spend 200 bucks, 250 bucks to subscribe to everything or for 150 bucks, you can get, you know, you can get it all. And yeah, maybe you don't watch the stream service for a while,

but you're not going to cancel because you have to go a la carte for everything else. You have to cancel all of it. Yeah. Yeah. But I think the mistake I made last year in writing about this was I was, I was too stuck in the elegance and sort of, to my mind, obviousness of this approach. And I forgot that these are humans that are making this decision. And I forgot what has happened in every other industry where to expect all these executives that made their name, made their fortune in one world where it was all about winning the negotiation, extracting more of the value chain, taking on your competitors, to suddenly buddy up because there's a.

bigger threat in the room, particularly when that threat comes bearing gifts, right? Oh, you know, be on Amazon Prime. We'll give you, you know, we'll promote you. We'll do XYZ. You're not going to get the coordination necessary. And so, yeah, as usual, big tech wins. Well, I'm just grateful to have discovered the legend of the cable cowboy and John Malone. We'll see whether he can win this particular negotiation.

I'm sure we'll have updates in the weeks to come. And Ben, it's great to see you, a full week without a podcast together. there felt too long. I'm glad we were able to talk through everything on this episode. And do you have any final thoughts here on how this might play out? Anything else on your mind before we close out? For the record, I support Aaron Rogers. I'm not a Green Bay Packers hater.

I am a hater of our front office, I think, drafting another quarterback. Who was the coach that you hated for all those years? Was it Mike McCarthy? Yeah. I mean, just a total waste of a career. And then I'm not a big fan of the current. and general manager. So you know what?

I don't think it's going to go well. The reality is, he has gotten old. He has really slowed down. And apparently the Jets don't have a good offensive line, which is not a good mix with old quarterbacks that can't really run anymore. But just for the record, I think that I blame the Packers for this divorce.

And so go Jets. I look, I really enjoyed Aaron Rogers on Hard Knocks this year. He brought me back to Hard Knocks. I thought the Jets were pretty fun. I don't have high hopes for them actually succeeding this season. Aaron Rogers has been a little shaky. What do you think of auction drafts?

I've heard that that's the only serious way to play fantasy football. Terrible. Can you confirm? No, they're terrible. They take forever. You're just sitting around. Like, I think auction drafts are awesome in person.

Like, so the only reason I do fantasy football, which is a terrible waste of time and is total luck and it's ridiculous, is this was actually our 30th year of doing fantasy football. And so I'm not going to give up on a 30-year sort of fantasy football league. But back in the day, when we have in-person drafts, like awesome, so fun, taking the crap at everyone. The auction is exciting because they're going back and forth.

When you're sitting on a computer screen watching people click buttons, you're like, I just want to finish on my team, the worst. So that's my fantasy football advice, maybe a bit too late for football. Auctions in person, snake drafts online. That's my take. Don't listen to the people who tell you, you have to do an auction draft. I've never really enjoyed the auction drafts. And I also don't play fantasy football anymore because I don't have a 30-year league that I'm obliged to keep.

It's an excellent. It's an excellent decision. It's terrible. When I am in the, it is also impossible in Taiwan. Like, when I'm in the, I watch a lot of basketball as easier in Taiwan. I'm not waking up at two in the morning on Sunday and seeing that guy. Catch the Packers. You can explode later this year. I'm going to pick him up. Yeah, that's not happening. Okay. Well, on that note, we are coming back next week. We've got a lot of non-streaming topics to get into. and we'll probably follow up on streaming to keep people updated on this standoff. And we'll see whether Spectrum is airing Monday night football.

You know what I mean? But Ben, until then, get out there, touch some grass, and let's come back next week. Sounds good. I'll talk to you later.