Tech Brew Ride Home - (TWTR SPC) - WTF Netflix? W/ @loudmouthjulia

Episode Date: April 23, 2022

The great Julia Alexander (@loudmouthjulia) joins us to talk about Netflix's big earnings bomb, CNN+ biting the big one, and the state of the streaming wars. Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome everybody to the TechMeme Ride Home podcast show The Experience. Let me try that again. Welcome everybody to the...

It's not like I haven't done it. Keep it all. It's good. Welcome everybody to the TechMeme Ride Home Experience for April 21st, 2021. We are here today joined by at Loudmouth Julia to talk about what is going on with Netflix and the streaming wars and whatever came up in. my mouth from vomiting a little bit about like what happened in their earnings report. But Julie, why don't we start with you just introducing yourself, your background.

I know you've been on the show before, but for folks who are coming back to you for the first time or I guess it doesn't make sense. But anyways, you get the idea. Say hello. Yeah. Yeah. Hi. I'm Julia.

I am a senior strategy analyst at Pairt Analytics. And I work with a number of clients across the OTP. T-space, many of whom you subscribe to their platforms for. Before that, I worked at the verge. Shout out, I see my buddy Phil Estizito in listening. And I used to work at the verge and then at Polygon and IGN. And I was covering streaming. And so I made the transition from reporting on it to effectively consulting their strategic roadmaps on it.

So, Julia, what I wanted to start off with was that you're one of my favorite people in media, I read everything that you do. And I'm making a liar out of that by realizing that I didn't know that you had transitioned to where you are now. So congratulations. Thank you. Chris, can I, can I tee it off? Please.

And dive in. Super simple, Julia. WTF Netflix. I think maybe the easiest way into this. is there's some famous quote that maybe a peacock guy or one of them, one of them suits said a couple years ago that like it's going to be an interesting five years for Netflix because all of the competition was coming for them. And I mean, is that essentially bottom line what we're seeing now is just competition coming

for Netflix? Or is this the streaming wars are going to be more. difficult for everybody than we think. I want to start this off by saying there are two vastly different opinions on the situation, which is the street, which is Wall Street, and the investors who are saying the streaming wars have come to an end because Netflix is now valued at less than $100 billion and they were valued at their peak, you know, a couple of years ago at just over $300 billion and what has happened.

That is true for investors in Netflix, where, oh, my goodness, we're not going to make the same amount of money that we were going to make when Netflix had a monopolization on the OTT space. That is true. The other side of it, which is where reality exists, is the streaming wars have just started. This is the exact situation that Netflix knew it was going to find itself in, albeit much worse than they thought it was going to be three or four years ago, where they said all of the clients that we work with were licensing to us that their best content are pulling it back And we have to invest $17, $18, $19 billion in order to kind of create this type of content that we hope has the same level of demand. And demand is a term that we use at our company.

Demand basically just means if there is inherent interest and love for this property, it results in additional subscriber acquisition and subscriber attention, which is the revenue model that they're built on. So if they have less demand for their shows, and we see that demand is stagnant. And we see that they're losing their catalogs, all of those licensing deals that they've made because those companies like Disney and Paramount and NBC Universal and across the board are taking their content back. All that means is that Netflix is now in the position that we all thought they were going to be, which is this idea of like, hey, you have major competition in the entertainment space. The biggest issue with Netflix from a stock perspective is that Netflix was included in Fang, which was Facebook, Apple, Amazon, Netflix, and Google. When the idea of what Netflix was never really made sense within that category, the idea that Netflix was in there as a media conglomerate, but also a tech company, like an American company, it never made any sense. And now Netflix is reaching the valuation. It's the correction and valuation that is where it should have been many, many years ago.

And so I think what we're seeing with Netflix right now is, again, this overcorrection in the space that was going to happen regardless of it. We're still seeing a pullback effect from, oh, sorry, excuse me, a pull forward. effect from the pandemic, which we were still in, but I feel like we refer to in the past tense now, in the pandemic moment, which is 2020, 2021. All those years did was that anyone who didn't have

Netflix, got Netflix, and they decided, with all the new increased competition in the space, I don't know if I necessarily need this. I've got five or six other streaming super specific to subscribe to. So Netflix has a tough road ahead of them in terms of competition in terms of figuring out of create

long-term value out of the investment. that they're making. How would you not just think of the short term 12 to 18 months, but how to think of a five-year plan, how to create a flywheel effect? All of these things that its competitors have spent 50 years expertly crafting. But I also say this at the top of the hour. I don't bet against Netflix. I think the business revenue is still strong. The model is still strong. I think the executives are still strong. I think they're in a moment of R&D in the way that many of the NASDAQ top stock are in a moment of R&D, and they're figuring out what the next step is. But I do think it's going to be a rough year or two minimum for Netflix going forward.

So would we have seen this, if not for COVID, maybe a year ago or two years ago? The earnings that we saw today, the sort of situation that they're in, we would have seen this earlier except for COVID times pulling everything forward. Exactly. This is just competition. Like it's so funny, we're so used to monopolization in the tech space without even realizing that we're used to monopolization in the tech space, that we're not used to how vast competition affects these companies. But what Netflix is encountering is many of these companies saying, hey, we're going to take a $200 million hit on our own revenue in order to pursue exclusivity, which we think will increase value perception for our subscribers, that they will eventually sign up for our service and stay with us marks a month. And I'll give you a great example of that Disney in their first quarter of 2022, which is Q4 2021. The best way to think of Disney is there's always one quarter ahead.

They came out and they said, we're going to take a $200 million loss on licensing. And we realized two weeks later they came out with a news announcement saying we're taking all of the Marvel Netflix shows. We're taking all of the American crime story, American horror story. We're pulling that to Disney Plus and Hulu as we try to figure out what we can do exclusivity-wise. And those are really in-demand shows. Those are shows that we see as potential acquisition drivers, which means if you're not signed up for Disney Plus or the Disney streaming service bundle, which includes Hulu, that might get you to subscribe. But also it might lead to extra retention and engagement. And engagement is a super interesting word within the OTC space because engagement, on the one hand, means people value what your service is because they're watching it over and over again.

But as many of these companies lean into an advertisement-supported tier, engagement is the best way to increase the ad revenue they're getting. So if Disney says we have all these shows, people watch them over and over again, and that's great for our advertisers. They actually increase their revenue in terms of advertisement, and they can increase their general average revenue per user, which we refer to as ARPOOC because they can say, well, our churn drops 2%. Like let's say Disney Plus churn in the next six months sitting at 3.5%. They can say we're actually losing less subscribers. We're gaining additional subscribers. They're staying and they're watching and we can increase our revenue models in this way. And so I think Netflix would have encountered this regardless.

The pandemic just had a very strong effect where they saw 2020 as a massive year for them, a groundbreaking record-breaking year for them. And if we didn't have the pandemic, that would have happened over the course of three or four years. now it's just happening kind of all it was since they have to come in and say, what's our next line of defense in this, you know, colloquial streaming wars? You've sort of alluded

to this obliquely, but to what degree is them having to rely primarily on their own catalog at this point? I mean, they've known this. They've always said we want to become HBO faster than HBO can become us.

So, you know, going back to House of Cards, they're, they're trying to create their own back catalog. But I'm curious for people that analyze the industry in a competitive sort of analysis of it, the fact that they don't have Marvel, they don't have Star Wars, they don't have, you know, the office and things like that anymore. And now they're basically left to their own devices. Is that having an effect, do you think, on their retention and churn and stuff like that? Yes. And there is a multiple. see a part answer to those

question. Let's start with the very basic. The very basic answer to those question is if we look at Disney and the Marvel equation, which I think is the most obvious equation that we could look at, but it really speaks to the value of it. Disney spent $4 billion in 2009 for Marvel

Entertainment, which gave them access to about 10,000 characters. Since then, at the box office alone, this does not count for any ancillary revenue, which is just as important as the box office revenue and BOD revenue and streaming revenue, they've made about 30 billion plus in streaming revenues. They've made $26 billion in profit on that initial acquisition. It will go down

as one of the best acquisitions in media and entertainment history. At the same time, if we look at Netflix, and Netflix's attempt to do this, they spent about, I believe it was about $150 million. It might be a little bit less if I'm getting my numbers wrong on Jupiter ascending, which is based on Mark Miller's comic of the same name, really big comic, huge fan base. The show was canceled within three weeks of its premiere, if I remember correctly.

And that's a huge loss on Netflix's balance sheet. Netflix says we put this money into it. We expected to have multiple seasons and possible flywheel effects. And flywheel for anyone who's listening is basically if I put out this show, can I make it into a movie or a secondary show? Can I do merchandise? Can I do a video game? Can I do

all these different things? You know, at a theme park that leads to additional revenue that comes in based on this franchise. So Netflix wants to be there. And this is always my question with the Netflix executive, because you'll have people like Ted Sarando's, who's the co-CEO, say things like, we want

hits, we don't want franchises, when that is just unabashedly untrue. Like, we know they want franchises because they'll talk about trying to develop a flywheel effects in the same way that Disney, NBC Universal, and Paramount really have within their own franchises, and Warner Brothers, of course. And they can't develop it.

The big question with Netflix going forward is if you're losing revenue and therefore your average revenue per user drops because people are canceling and therefore you're bringing in less money. You don't want to raise your debt necessarily. You're hitting positive cash flow. Like you're figuring out all those factors. But you have to spend $19 billion a year on content. The question is no longer what is the ceiling for content spend, which is what it used to be a year and a half ago, two years ago. It was, well, everyone has to spend $8 billion, you know, $8 to $15,000. dollars. The question is how much

value long term can you derive from those investments that they effectively start paying for themselves? If we think about what Marvel has become for Disney, Marvel is still a very big investment, of course, across the board. But Marvel also, to an extent, fees for itself in the ancillary revenue, in terms of licensing those characters for video games,

in terms of the park essentials that comes with it, in terms of clothing. Everything that comes from it is a really great addition. Netflix does not necessarily have that. Netflix wants to have it. And so I think this is the big question for them going forward. It is how do you widely spend your money while also realizing like, hey, we're trying

to be a four quadrant service. And from anyone listening, who's maybe interested in not an entertainment, for quadrant literally just means are you hitting above 25 and below 25? Are you hitting female and male? And are you hitting within all of those things? So HBO, for example, went from being from HBO, which tends to be, tends to skew, I should say, heavily male, heavily above 25. And they said we need under 25 and we want female. HBO came out with a small show called Euphoria, became their

biggest show ever, basically alongside Game of Thrones. And that was their way to say, hey, we have additional revenue coming in. We have this additional audience that we can tap into and that we'll build upon it. Netflix is trying to, Netflix is trying to be a four quadrant service. And in many ways they are, but what they don't have that HBO has, what they don't have that Disney has and what they don't have that Warner has and Paramount is this ability to say we have the longevity of these franchises that we can tap into and really build on top of to increase our revenue as we try to find new originals. And the last thing I'll say on this point is that we talk about the strength that everyone has and the weaknesses everyone has. Netflix's strength is still its originals. You know, it still has a 42% market share when it comes to demand.

Like in terms of what people are interested in watching, it's still very much. that what Netflix is lost out on and what is a really hard thing to get a grasp of, and it's really difficult for a new company in a new era that has less than 15 years of streaming, you know, in their blood and original content, is the licensing, is it, sorry, is the back catalog that they can no longer license because all those companies are taking it back for their own exclusive offer. So it's a really tough position to be in. Yeah, I, you know, for sure, everybody knew.

even the people that were selling to them at the time that Netflix was making their business on the backs of the back catalogs of these other companies. But at the same time, in recent years, I remember thinking that, you know, them committing to spending, what is it, $20 billion a year to produce content was sort of like a bludgeon that they were using against these other companies because it would be so long before these other companies could show a return on that investment. And now I almost feel like it's kind of a millstone around them. But, okay, my specific question is, you said at the top that you're still confident in them,

you wouldn't bet against them. But let me run down a list of things that they have done just recently that they have said that they would never do. I don't know, they said they would never crack down on password sharing. We knew they would do that inevitably. But that's one thing. ads supported, they swore up and down, they would never have ads or even a tier that included ads. They're pulling back or they're claiming they're going to be a little bit more frugal in terms of spending on content or at least maybe smarter about what they spend or whatever. So that gets to that bludgeon thing.

But then also, you know, the video game thing also seems to be like a Hail Mary sort of throw. So those are four things that I feel like that doesn't sound to me like a company that is confident. That sounds to me like a company that is trying to grasp a lifeline. Well, I think if we use the example that Ted Serendos and re-pacings always just to say, which is we want to be HBO before HBO becomes us, HBO introduced ads via HBO Max before Netflix did. And I think that was a really big moment for them. I think they had a moment where HBO Mac at this point under the regime of Jason

Kyler, who recently left and is now Discovery and under the CEO of David's love and taken over, Jason Kyler introduced an advertisement supported here and said what I basically have been saying about Netflix, excuse me, which is for people who don't want ads, nothing is going to change. Like, you're going to have your ad, you're going to have the regular thing that you pay for, and nothing will go on. But if we look at the cancellation rates and the turn rates for Netflix, there's this huge turn rate between people who are 50 plus and people between the ages of 18 and 24.

18 to 24 tends to be single users. They tend to be on the basic plan and they're willing to pay for the cheapest just them and they want to pay, you know, like eight bucks a month to get the basic needs that they want. 50 plus, almost the same, except 50 plus tends to be low engagement, whereas 18, 24 is high engagement. And so they're not really using the platform. So many times that you bring in a price hike,

that's a really complicated thing for them to deal with because they're like, well, I don't really use this. I kind of want maybe one or two shows that I'm interested in checking out, but a price hike that makes things really difficult. And as the point here, all it does, and this is what HBO Max figured out too, was it's going to give people maybe three quarters of the same content, but they'll do it for half the price and they'll be really happy with what they have because they don't mind that.

And this is effectively, like, if we talk about this strategy, I mean, this is cable. Like, this is what cable figured out. It's like, you don't mind paying $150 a month because you don't mind as a subscriber paying top dollar for ESPN and CNN and FX or whatever it might be in HBO that you're really happy to have. And so you get the ABC and the CBS and the NBC and then also some other other channels for ads supported and you get all these things come in. And it works out to be a really valuable bundle.

we are effectively moving back towards that. I won't say we're moving back towards cable, although there is a strong argument to be made for that. We're moving back towards that value proposition, especially as consolidation becomes a key factor, where you're looking at, well, Discovery and WarnerMedia can do this because they own three-h-streaming services,

you know, Disney can do this because they own three-streaming services. So like that value proposition comes a part in a bundle, and so you're kind of like, oh, well, this makes sense. I get Hulu for free, I get ESPN Plus for fear. I get CNN Plus, which we'll get to a second RIP for free. But like, you know, we'll do all these different things. And it really worked out.

Netflix doesn't have any of that. Netflix does not have the content that like the additional source. It's like, oh, well, you're going to get sports. You're going to get this. You're going to get that. So Netflix has to come out and say, well, what can we do to keep these people from cancelings? That way we can increase. And remember, Netflix, unlike many of these other companies, does everything in USC,

which all that means is that across the board around the world, Netflix pays for and values everything in U.S. dollar. A lot of other companies will say, well, we're going to value everything in the local currency, and then we'll pay for it based on local currency. Netflix goes like, no, we're going to do it on U.S. dollar. So if you can, the region of the United States and Canada, starts the fall, which is what has happened in the last quarter,

that's a really bad effect for what the company can spend unless they take on more debt. So they're in this position where they're like, well, we need to make more money. We know that we have a huge potential loss of customers in password sharing. So we're going to correct down on that. And that's in conjunction, right? So what you're saying is if they can add the ad tier at a lower cost point,

I don't know, $5 a month, $7 a month or whatever. So then when they start to nudge people off of the password sharing, they have this thing to shovel them into that is maybe a little more palatable. Exactly. And the password sharing is not going to come first. United States and Canada first. It will come for it last. The password sharing will start in Land and America

where there is massive amounts of piracy and parts of Amia, which is Europe and the Middle East, and parts of APEC, which is the Asian Pacific region, where the plans are a little bit cheaper because they have to be. We can have a whole 40-minute conversation on India. Like the reason that Netflix is not doing well

in India is specifically because of the price valuation and the price valuation of cable in that country. So Netflix has to go well, okay, if they're going to share passwords, how can we really try to bring them in as additional subscribers beyond this and really get them to subscribe and then, you know, not cancel? And so they'll start there.

Eventually, password sharing will come back to the United States and Canada, especially if Netflix is not adding the amount of subscribers that they want to add. They'll say, well, you're sharing a password. We can get another, let's say, 10 to $10 to $15 out of you. The problem with this is that Netflix, the core issues that it always comes back to demand for content. If we look at what HBO Max and even Apple TV Plus do really well, it is those TV shows are constantly in conversation.

Those movies are constantly in conversation. And so you're like, I'm going to sign up for it. And there's something every two, three weeks. I was listening to Twitter spaces with Harris Swisher and Casey Newton. And Casey said, you know, HBO Max over the course of the pandemic, thanks to the movies, but then also the TV shows became my go-to streaming service. And that's what Netflix has not had in a year. Like they have not had that.

So that was going to be my next question. which is I went down the list of the things that they said they would never do and they've done or at least announced they're going to do in the last year. And so basically the last one remaining is the whole we release everything all at once as opposed to doling it out over the course of weeks. And listen, man, if what it is, and there's articles that I saw today that we're talking about the churn and things like that. Not just the churn, but like how easy it is to, oh, they've got to,

a great show, I'll sign up again. And then when that show ends, I'll cancel and then come back when there's another. If you dole it out 10 episodes over the course of 10 weeks, that's sort of to your benefit in a very big way. Do you think that the next domino

to fall will be this whole release everything at once thing? They're already doing it. They're already trying it with unscripted in reality series. They're already doing it with stranger things to an extent where they're splitting into two seasons, which was the Mad Men effect.

And when we looked at AMC doing it with Mad Men, it felt like an Emmy's play with Netflix. It feels like a subscribers play. We're already seeing that happen. And they won't admit to that until they have concrete proof that is really working. But of course, if the value, I mean, look at Disney Plus. So I think going forward, I should say,

the minimum that we will see happen is that they will do the three episode release at once to get people interested and then weekly. So you get maybe seven weeks out of it. But seven weeks translates into a quarter of subscribers, a quarter of reduction in turn, a quarter of additional subs. That is what the street wants to see. That is enough for investors to continue giving you money to continue doing what you're doing. And so I think Netflix is already doing this. They will continue to do it.

And I think, well, what I will give Netflix credit for is that Netflix has never said we're going to grow our subscriber population by, you know, 3x, 4x of the margins. I think this is a thing for Disney that's going to come back to bite them in the butt, for lack of a better word. I do think Disney is promising three times what they should be promising, and they're going to introduce a bunch of different ways to get subscribers in to try to meet those goals by 2024, 2025. I think what Netflix has always done extremely well is saying, we have these subscribers. We're number one. We have the content spend. We're now cash goal positive. We don't have much debt.

We're trying to figure out what the next step is. The biggest, I say this all time on Twitter, making a lot of TV is extremely simple. Making great TV is nearly impossible. There is a reason that Casey Blois and his team at HBO are as protected as they are every time there's new acquisition. No one can make great TV like Casey Blois and his team. And that is, again, why they're so protected. So I think for Netflix going forward, the question that comes out of every investment they make is, what is the longevity prospect of this?

What is our, if we're going to invest $100 million into this or if we're going to invest $10 million into this, what are we hoping to get out of it that will last longer than four weeks, five weeks, six weeks? No, do we want to get a season, two or no? Do we think there's a way for us to combine this with our gaming strategy going forward, whatever it might be. That's going to become a question that's super important to them. And the irony is that is the question that has been important to legacy media operations

for years. Like that is something they're hyper-aware of. is like how do we take this brand that we're investing money into and really expand it, you know, five, six times what the investment is. And so Netflix is saying that point now. I think it was naive. No, I don't use the word naive. I think it was maybe a little bit arrogant to say we don't worry about competition because

we're doing fine when the competition that's coming in is from some of the greatest legacy media and entertainment content creators in the world who are saying, like we know what we do, we have the relationship to do what we do. But I've said this before and I'll say it again. I don't bet against Netflix. I didn't bet against Netflix before. I don't bet against Netflix now. They're in an R&D moment.

I think they need three to four years to show what their changes will be because they take three to four years for those changes to show. But it's a tough moment. I will say everyone is always decrying this as the end of the streaming wars because Netflix is not doing well. Netflix not doing well is just proof that monopolization. in a capitalistic moment does not work, and that competition is great actually for the economy,

and so I'm extremely excited to see what happened over the next three or four years. That was a lot. There were so many threads that I want to pull on in what you're saying. Big one, I think, does come to this question, I suppose, related to what you use as kind of like legacy, you know, media companies, but actually I would think about them as kind of like, I guess, well,

known franchises. And you know, you brought up Jupiter's legacy, and I'm a big Milar World fan, and I read Jupiter's legacy as a comic. And I was excited to see it actually come to Netflix. And I was like, oh, this is like so smart because they were actually putting out Malar World comics, which they had acquired, Netflix had acquired, and they were doing the shows. And that was something that was new and a little bit different. And what I was noticing for a period during the pandemic was that Netflix seemed to be partnering and exploring different things that streaming. companies hadn't really done before. Obviously, the comics was one thing.

I'd love to hear more about your thoughts about their gaming plays, which seems very early and not really in their wheelhouse. However, lots of people are going there. And as Brian has been reporting on platforms like Xbox and Sony looking into bringing advertising into games and with new technologies like Unreal Engine 5 and some of the deep fake stuff that's coming, you're going to be able to have these dynamic. advertising-driven environments, you know, where people can walk around like in Blade Runner and all the ads are personalized to you, you know, and so everyone's seeing a slightly different movie,

and that's very potentially interesting and lucrative. So I guess I want to bring it back to the point about competing with these, I guess, platforms that have been around like slumbering giants for a long time. And now they're really getting into the streaming game. It used to be that Netflix could be just advanced from a technology and streaming, you know, capacity. And they're like, no, we're going to get rid of the DVDs. We're going to move full on to streaming and internet delivered content. And that's going to be the future. And they've built that.

And now they've trained their competition in a way to use this new distribution platform very effectively. I mean, I've been really impressed by HBO Max and what they've done, you know, even though the naming was confusing in the beginning, I think they've really kind of like hit their stride and they're developing great content and so forth. So if Netflix doesn't have the kind of, you know, Mickey Mouse style or Star Wars style or Marvel or DC franchises, what can they do? I guess I'm fixated on the Jupiter's legacy part because there was an opportunity to create a franchise to rival Marvel or something along those lines and then it didn't work out. So is it just that it's really, really hard to build up those types of long-term storylines and that type of investment in characters if you're focused on the

next thing and moving so quickly through content? It's a beautiful question. And I think what the answer comes back to, and I was just talking about this on a podcast I host, or co-host, I should say, with Jason Snell. Yes, please, please name that. Yeah, yeah, podcasts all downstream. But I was just talking

about the Harry Potter to not drop that Warner Media, now Warner Brothers Discovery, finds itself in. And this idea of like, Warner, you know, Harry Potter's a $25 billion franchise that they They can't make $500 million off of it anymore. Like they don't know how to monetize that adoration for Harry Potter. And there's a whole lot of things that go into it.

I won't get into it now. But I think to your point, Chris, about the video game specific side of Netflix, the question I have for them. And the question that I'm not the only person to raise. And many people have asked this question is if we assume that Apple, like let's just assume that Apple as a service beyond hardware, Apple is a service. their whole thing is like we make 80% of our revenue via ads for games and in game monetization, and that's where we make it all of our revenue.

To be within a competitive gaming sphere on mobile requires you to be on iOS and Android. To be within that means be willing to give 50% of 30% of your revenue to Apple and Google, who are going to take that. You know, Netflix has kind of already gone around. that by saying like, well, we don't really have an app purchases. People come here and they come to an app. But because they have a separate app, it's not within Netflix. It means that nobody's really playing it.

There's not really many downloads. And so the question then becomes, well, what is your, to become a very successful video game publisher is one of the most complicated and one of the most, like, notoriously difficult tasks to take on within this industry. I worked at Polygon. I worked at the verge. We're just many, many incredibly smart gaming reporters who, would talk to me about the economics of gaming publishing.

It is extremely difficult. So for Netflix to say, like, well, we're going to get into the space. We're going to do mobile. And then we might be on platforms like PS4 and Xbox One, at 1X or 1S. It's like, well, that's extremely difficult. You're still getting 15% of your revenue away. If the idea is to create a flywheel effect and ancillary revenue for the main franchise, if the idea is like we're going to take string to things, Umbrella Academy, Jupiter, sending back

in it like that has been successful, whatever it might be. And we turn this into a flywheel effect, maybe. But I don't understand how that necessarily generates better awareness, attention, and adoration for them. And this is the thing that comes up quite a bit. I talk about this with a lot of friends in space. There is this very macabre. And I say macabre because the idea of monetizing love feels gross in like a very like

capitalistic way. But it's true. Is this idea of like, how do you monetize adoration and love? And Marvel and DC have figured it out super well. It is like, hey, here, like we could do. everything from PJs to video games to theme parks up, like whatever it might be, we're involved in it,

we're making money off it. Netflix doesn't have many franchises where it can do that. There's maybe a handful. And even then, Netflix does not own the right to a lot of them. If you think about the fact that like Umbrella Academy and The Witcher have actual ownership beyond Netflix, like that does not necessarily mean that Netflix is going to profit off these moments.

Bridgeton and the Chandra Ryle like in Ventana and the Chandra Rhymes, universe, maybe there's something there. But for all the 13 years that Netflix has been involved in original content, there hasn't been much produced in terms of longevity. And I think that's the conversation that the street is actually coming to without actually labeling it. Is this idea like, well, after 13 years, what can you show us that says you're going to start making, your money is going to start making money? Like the investment that you put in is actually going to start generating and through your revenue and a point that then goes back into content feeding, that we can then say we're going to develop the next franchise. That does not exist.

with Netflix. And that's a really typical thing to, I mean, Baja Bajaria, who is the head of content for Netflix, said this. Like, all of these decisions in terms of like, what is a success, what is a success comes down to creative output and the ability

to have a really creatively engaging show. For all of the data that we have, and I love that, I sit with data all day. For all the data we have, a lot of this stuff is like a creative feeling. You know, it is T.C. Blois, again, at HBO saying, like, I have a feeling succession is going to be a big thing or euphoria has an audience and taking that bet.

I think with Netflix, the issue that that that that they have because there's so data reliant almost is this idea of well, we have to hit every four quadrant. We have to have a show for everyone. We have to be everyone for someone, everyone for everything for someone instead of something for everyone. And that is going to come back to bite them. But when we think about what that means for the company's additional revenue going forward, it's much harder to generate a lot of adoration and love for short-term plays instead of long-term bets. And what Disney and Warner and NBC Uni and Paramount have done exceptionally well is play the long-term bet game and say, like, we think there's room here that we can derive additional revenue from these franchises that we're going to put a lot of money into over the course of the 10 years.

And Netflix just seemingly isn't willing to do that right now. I mean, it does just seem that Netflix is so much more focused on hits and on, you know, getting something else. up, getting it out there, and then shutting it down, like if it doesn't get a certain amount of views in a certain amount of time. And that, I think, notoriously, worked really well when there weren't a lot of competitors with good quality content that was easily streamable and accessible. But now that you actually have pretty decent choices from a number of different areas, and, you know, it's easy enough to switch. It's easy enough to cancel your subscription. It's easy enough to bounce around. I don't know that, as you said, sort of like churning through

content actually will prevent churning through customers. because now they actually have a place to go. Well, and two points to your exact statement right there, Chris. One, if we take the general ideology, and this is, this is, it seemed to be true for the last, you know, decade in terms of how we think of OTT revenue economics, is that big talked about shows in movies, specifically movies, are your acquisition drivers for subscribers. But it is sitcoms.

I would actually throw musicals into this bucket. I would throw thrillers into this. And, of course, procedurals are your big retention drivers. Netflix does super well in the first part. Netflix does a really good job of having a thing every once every few weeks that people have to check out, whether it's a TV show or a movie. Netflix has a thing that's like, I got to watch this thing on Netflix. What Netflix does not have, and this really sucks if we think about how cable you stop, right?

Because this is cable figures out extremely well. Is that Netflix goes, well, we don't have something every month necessarily. So you're going to lose a lot of subscribers. If we look at the recent churn rates that came from Antenna, which is a great company that does a lot of excellent analysis of kind of churn and acquisition rights for OTT services. We look at Netflix and the biggest churn rates on Netflix are between the 18 and 24 user group and the 50 plus user group. 18 and 24 tend to be single users who are extremely aware of how to use technology and are going every month to month with their wallet. They're kind of like, oh, I want to be on Disney Plus because Moon Nights out. Once Moonnights done, I'm going to go to Huluks.

I want to watch Pam and Tommy. Once Pam and Tommy's done, I'm going to go to Netflix because they want to watch in Ventigan, like whatever it might be. They're hyper aware of how to control their finances with streaming. 50 plus is an interesting group because 50 plus is, again, low engagement user, or sorry, rather a lower engagement user. So if they see price hike, if there's nothing they're necessarily interested in, and that was where the back catalogs really comes in, that they were getting from

licensing from its partners, they're going to say, well, I'm going to cancel, especially if I can get NCIS, CSI, law and order, wherever, on Poole or Peacock or Paramount, whatever might be, I'm going to go over there and that makes me happier. So what Netflix really has to aspire to is solving those two user group crises. One is an issue that cable figured out, which is, if we make it really difficult to cancel, you're not going to cancel. Like, it's just, if you're on hold with us for five hours and also it's a whole thing, you're locked in, going to pay for the full year. The other side is how do we get that back catalogs for retention? How do we get everyone's favorite show? When we think about how people sign up for OTT streaming

services, which is streaming, it is not necessarily with the whole breadth of the catalog. It is, do you have 5-10 of my favorite shows and movies that I will pay month after month after month for. I will say anecdotally, as long as Hulu has law and order SPU, I will pay for Hulu. Like, I'm going to watch that every single night before I go to bed. And the minute it was to Peacog, like, I might cancel Hulu to go to Peacog. And so I think this is the situation that Netflix is in. It's like, not only do they not have the back catalog of procedural that people, it keeps people engaged. Not only do they not have the adoration of for shows that keeps people subscribe to Disney Plus or Paramount Plus or Apple TV Plus or whatever it might be, but Netflix is now

also trying to figure out, well, we're spending 10 times what our competitors are spending, and we're still not reaching those same goals. So again, it's why I think, like, the three major takeaways that we have from Netflix's earning specifically are how do you approve long-term value derived from the investment that you're making or for people in this chat who are working business, you know, what is that ROI percentage per hit dependent on what you are necessarily looking to achieve over a quarter per quarter basis and then year by year basis. That's one. Two is how do you deal with competition who is taking back their most beloved series that they're going to have no matter what if we look at we

I have a term that we use their company called decay rate. And decay rate just basically means if you have let's say you had no new content within the span of a quarter but your HBO MAG. If you have friends, friends is actually going to keep people engaged longer than you think. So it's actually a really great purchase for you to have because the decay rate of that show is so low. that it actually evens out the rest of your balance sheet. So two, it's like plutonium. It just never,

yeah, loses value. Exactly. Exactly. So if you're Netflix, you don't have any of that because you don't have shows that last, that last past five seasons. You don't have any of those procedures.

What do you do invest in that point? And then three, you have to figure out the ancillary revenue that is based entirely upon adoration of franchise. And Netflix does not have franchise beyond stranger things. Like, let's think about it. Netflix does not. own the Witcher. Like Netflix, like that is a

CD project read and a book publishing IP. Netflix does not necessarily own a lot of its other franchises where they're partnering with gaming publishers. They're partnering with other people. Does that, does that also mean, I'm thinking Witcher? Like, does that also mean they don't know when the next season of Witcher will be available to them? So they do know because they own I mean, they would know, but do they have control of it? They do. They do have control over the TV rights. But the idea

like what is the answer your revenue of the witcher for a company like disney like when disney takes over a marvel they go we own the tv we own the film rights that's great we can also own we also own the comics so we can do a bunch of comics stuff we can a bunch of books you know a bunch of podcasts you know a bunch of clothing lines those rights get much more messier with netflix when they're saying hey we're going to partner with the major gaming publishers like ebosaw to real end and stony produce these words tony and eubesop are not going to give them the rights the ancillary stuff.

They're not going to be like, hey, you get apparel, you get like additional video game stuff like that. All right. We're going to give you the right to develop TV shows because it actually helped us out. When the Witcher premiered, the Witcher was great for Netflix

back when it premiered in 2019 or 2020, whatever year that was, it was much better, arguably for YubaSaw, not Yubesop, excuse me, for Sini Project Res, who saw a massive investment in terms of people signing up to play

The Witcher 3. It created longevity for that franchise for that game publisher. And so I think that's where Netflix is in this really tricky position where Netflix does not necessarily have this ability to control the entire flywheel effect, the way that Disney and Warner have structured their deals to do so. So as Netflix continues to compete against them, when they're already losing on the back catalog side, when they're already losing out on their demand for originals, continues to diminish quarter after quarter. And they're trying to figure out, well, how do we compete with these guys. This is where legacy media is going to come in and say we have the relationships. We know how to do this part of it. We're also getting into streaming and we're

going to figure that part out. And I think it's much easier for the legacy media to figure out streaming than it is for streaming media to figure out legacy. Yeah, just on that, as you're as you're talking, I'm just sort of thinking back to like the history and the legacy of Netflix now. And it just, it seems like their whole model was about speed, you know, and I remember, you know, I worked at Uber, and Uber was all about, like, speed. It was about getting you from point A to point B super fast, you know, inexpensively, cheaply. And a lot of that growth was, I think, predicated on spending a lot of VC money, you know, money that sort of came cheap and was easy to burn.

And in a way, if you think about sort of like a rocket metaphor or something, Netflix, you know, had a huge amount of thrust behind it. It was moving super fast. And it seemed like it was, you know, getting into, what's it called when you're in space and you're sort of, you've hit the point where. Escape velocity. Thank you. Yeah, exactly.

But it seems like the difference is that the slow burn, kind of more gradual, I don't know, slow content in a sense that's more, I don't know, everywhere, like prolific actually is a much stronger term, long-term bet. And it just, it wasn't as, you know, sexy as kind of like the new guys coming out of Silicon Valley and disrupting Hollywood. You know, I just, I actually went on vacation in Disneyland. And, man, to try to imagine a. a Disneyland type experience run by Netflix actually sounds pretty horrible. Like, it sounds like the fire festival, you know, like it's just, it's sort of like there and it's built and it's like fast and quick and, you know, you're moving on to the next thing, the next day.

But it doesn't have as you're saying. And I think your analysis is super interesting to think about where this goes. It doesn't have sort of a deep bench of content and of collateral and of relationships and of, you know, like you said, pajamas that people are wearing because they love. the stuff so much that they can't let let it go. And whenever they, you know, want to get their Netflix, or I'm sorry, their Marvel fix or their Disney fix, they know exactly where to go for that content. And as you're saying, you know, Netflix just doesn't have those type of iconic shows, you know, that are kind of of a different realm or a different order. I mean, like being in the

DC or the Marvel universe, like you're sort of living it. It is almost like an augmented reality before it gets to your eyeballs because you're living in those worlds and those narratives and those stories. And I just don't think that I can't observe a similar level of engagement that persists over years on the Netflix side of things. The biggest question I get from my clients across the board is how do we create? It's really interesting actually because I did a study for a client, who will remain unnamed. And they're basically like, you know, what is the future of theatricality in terms of what movies are Can you just give us a little color on that client?

Is it like a, what do they do? I can't give any, I can't give any color, a big client. I'll just say the big of the entertainment phase. I guess I mean, like, would they be competitive with Netflix or creating content for Netflix or something? I would say competitive. Okay, great. Yeah, competitive. And they were asking, you know, what is the future of theatricality?

And I, when I first delivered, it's kind of deliverable for them. I said, well, well, here's what Marvel does. It was interesting because they immediately emailed back and said, we don't care about Marvel. And in a sense that, like, of course we care. Like, of course we care about what Marvel is doing. But they're such an outlier. Like, we can't, we're not going to compete with that.

Like, like, that's such a like, well, okay, beyond that, what else can we do? And so it's really in, um, trained my thinking of how to think about a lot of this stuff where when a lot of my clients come to me and they say, how do we develop a franchise? I actually remove like, okay, Marvel and DC. I'm like, sure, let's remove that. Like, if we take that out, how do you create the next? I always use this example, because this show started as a procedural and became a 20-year-run thing. I was like, how do you create the next CSI? They create the next law and order.

Like, how do you create the next, like, oh, yeah, that's a franchise. Like, it developed seven spinoffs. Like, you give Dick, I always say to the people, you give Dick Wolf a new city, you will create six franchises. Like, it's fine. Like, you give him New Orleans and he'll do something with it. And so this is the thing I have with Netflix a lot where it is this idea of what is. the value proposition that you're getting for your investment. You're spending all this

money trying to create the next Star Wars. Star Wars exists. If you create a weird Star Wars feeling thing or a weird Marvel feeling thing, people are going to react to that really negatively because Marvel exists in Star Wars. They don't need that. I think

what is a really great example of how to do content investment well and how you can build franchise out of low investment situation is the Taika Waititi method, which is Taika Waititi was like, what if we just subverted this idea of genre that people know really well? What if we subverted the idea of vampire? What if we subverted the idea of pirate and suburb the idea of superhero? And we take this idea that people have, they know because it's the most mainstream thing in the world, and we provide a

really holistic, vulnerable, sweet take on it for like one, one hundredth of the price and we deliver four times the profit. And that is what Tycho ITC for anyone who's listening has done considerably over and over and over again for three different networks. Like it's impressive. Like he's done that with our flag mean death. He's done that with what we do in shadows. He's done it with Thor. Like he's, that's exactly his proposition. Is this idea of like, what if we deconstruct the genre to its most humane level and then subvert it? And there's this beautiful thing where with the franchises that everyone is trying to either recreate in their own way or to exploit in their own way, what that really is is just really solid character development.

Now, I want to say this easier said than that. I'm not saying like, wow, look how easy it is. Like everyone should have a takeaway. Like, like, everyone should just figure that stuff out. But what type that does, what Kevin Feige does at Marvel, what Walter Hamada does at DC, and what Dave Filoni does at Star Wars is having an architect who understands. understands what the core attribution is to all of those

franchises that really makes them succeed in different formats, animation, anime, live action, live action comedy, live action drama, whatever it is, film, television, they understand how to make a series turn into

a $10 billion franchise. And that is something that Netflix I hope desperately invest in. I think it's much easier again said than done, but they need someone who can say, here's what you need to do with what you actually own. And here's how we expand it into something across 10 different revenue. But are they built for that? I mean, as you're as you're describing this, it occurs to me that, you know, the franchise model that

you're kind of talking about, actually, there's kind of an analog with like restaurants and with good chefs, you know, that go to different places and maybe do some fusion or they have a style. What you're talking about is how you can remix content in different ways once you really have mastered the ingredients of what goes into each thing. And then you're just kind of like substituting, you know, I'm going to not think of any spices right now, but, you know, remixing a bunch of stuff that is familiar, that's known, but, you know, taste like things that people want. And I guess I just wonder if Netflix is kind of like a ghost kitchen.

And so you're never going to build like that long-term brand value that when everyone comes back from the pandemic, like they want to go and they want to stay in those places because those places are known to provide a certain quality of experience that you just want to, like, luxuriate in. So I guess, like, structurally, is Netflix set up to do what you're describing? Yeah, Chris, that's a really good point. I had someone asking their day, why doesn't Netflix let things run past five seasons, right? I remember.

Well, they cancel things after four weeks at this point. Yeah, and I think, I'm going to take a guess. I'm sorry for anyone who was born after, like, 2000. But for the majority of people in this chat, I imagine. Probably. We all remember, like, five, like, shows would last five, like, five to not ten, But five to like six seasons. And I was saying to a person who asked me, who was born at $6,000.

And I asked, and they said, why don't they let them run that? And I said, well, Netflix doesn't have syndication rights. Like, why would Netflix run things to syndication points where they can then make double their revenue? Because they send, well, we'll lend it out to TBS and lend it out to whoever, and they just run reruns of it. You know, the idea of, like, Seinfeld their friends or how I met your mother or whatever, or even New Girl's Expoint. Or even Veronica's closet or even. Yeah, like existing doesn't make sense from a revenue model. Like, it does not make sense to that company.

So unless that they can make it work within the first five to six weeks, like it doesn't make sense. And I think to your point, Chris, like that is the issue that Netflix comes into, that legacy media has, where ABC, who's under Disney, of course, goes like, modern family is syndicated on 190 networks, like globally. Like, it doesn't matter. That's going to produce revenue for us, no matter what. And then we can take that money.

And like this is the other issue that Netflix runs into. that the other legacy media companies don't. But legacy media companies are always going to have stuff on broadcast because that's still where the huge portion of their ad revenue is, a huge portion of their audiences. They put shows out there. Those shows do decently. They syndicate half of them.

And then they have all those additional revenue coming in. They take that revenue, ensure that broadcast and cable's fine, but then say we're going to do what everyone's been doing for the last five years. And we're going to take all of our best content. We're going to put on streaming. You know, this idea, like I was talking to my aunt. I was home in Toronto last week. I was talking to my aunt.

I said, what are you watching? And she goes, you know, it's unfortunate. I have all these shows I want to watch, but I don't want to sign up for all these services. Japan and pain in the butt. And I said, yeah. And I said, you know, the issue is that all these companies, even the ones who have broadcast cable channels,

are putting all their best content on streaming, because that's where they think they need to be. And so I said, but they have the ability to do that with low risk of overhead interest because they're getting all this. revenue from the linear side. As long as the linear side is protected, they can put all that extra revenue coming in into streaming and they can build that product up. Netflix does not have this. Netflix is licensed exactly two shows. One was BoJack Course from the Comedy Central and it was only like the last season. And I can't remember the other one. It was also comedy. And it might have

been actually, excuse me, I've been narcos. But Netflix basically took something and was like, hey, we're going to do this to get additional revenue. But otherwise, Netflix is entirely sub-based revenue. Like it's entirely sub-based revenue. That's the only thing they have. So if demand for those shows drops off as it has consistently over the last eight quarters, then that means that Netflix is in a position where it's like, well, if our sub-revenue

is not generating the revenue that we need to increase our investment in shows, we need to get an additional debt. We don't want to do that because then the street knocks us down and then we're under $100 billion for there now. It's a really complicated position for them. They don't have the avenues, I should say that the legacy media does.

But I do think we're seeing this very interesting moment where if you take your at your Y axes and your X axes, they're just hitting that crossover point where Netflix is kind of going like, well, we need some of the what cable has. And broadcasting cable is going like, well, now we're in a position to really take on Netflix. Julia, I want to be respectful of your time. And I really want you to comment on CNN Plus before you go. But can I squeeze one thing in here real quick?

because I've read a couple times today now references to TikTok, and I have heard now enough times from people inside Meta that the whole reason that Meta is going through its midlife crisis, well, there's tons of reasons, but is because they are, they know the numbers better than anybody, and TikTok is basically eating everybody's lunch. I'm curious, are you seeing that in your, analysis and your numbers, is TikTok something that is not just maybe eating Netflix's lunch, but maybe everybody's lunch in streaming right now?

I would say I get where people are coming from in terms of attention for content. Like TikTok is an increasingly interesting competitor. It's not the same, though. If we were going to talk about this in the way that people really love to get on and say, like well, TikTok is the reason Netflix is failing. We would have seen that

happen with YouTube. There are two vastly different things competing for vastly different audiences. And I will tell you that the people who are watching TikTok and YouTube are watching eight to nine hours of content a day. Like they're splitting their time between the hot teen show on Netflix.

Are they paying for YouTube? No. And they're not paying for YouTube. Like they're watching it with ads. They're happy to watch it with ads. Speaking about TikTok, half of TikTok is ads at this point. I will say extremely,

well done, like very innocuous, but that, you know, those are ads. That audience is on their phone and on their laptop all day, every day. Like, they're watching everything. So I think, well, it's an interesting question. So you're saying that there was no substitution happening between increased usage of TikTok or reels or content like that? No, I mean, it's like, again, if we think about, like, YouTube and its heyday, and, like, I spent many years covering YouTube as a reporter, YouTube and Dayday was like 2012 to 2015, which was also a great moment for Netflix coming into the space, but also for cable television still.

And those numbers didn't necessarily drop. Like cable was dropping as Netflix came in, but that had less to do with YouTube as it had to do with like just the transition of how people were consuming their content. And so I think this idea of well, TikTok exists. Well, of course it does. But I will say anecdotally, I watch TikTok in bed when I wake up in the morning. It's like the first thing I do.

And then I'm at the end of the end of the, night, so I'm watching the new Netflix, the new Hulu, the new HBO Max thing. And I think, and that is what our research says a lot of people who use TikTok and OTC services do. Like, there's more than enough hours a day. You know, when Reed Hastings used to say, we compete with sleep. Like, yes, it was, it was arrogant. But it was this idea of, like, if we think about the minutes and the hours of our days, we all watch TikTok between, like, between like conference calls. Like it's like I have 10 minutes.

I'm going to eat a sandwich and watch TikTok. But at night when we're going to bed or when we're making dinner or when we're sitting on our couch with our loved ones or our friends or by ourselves, like it's that moment of like I'm going to throw on the show that everyone's talking about. There's a reason that the nine o'clock spot is still so important to HBO and all these other networks. Like there's a reason that exists.

So I think for all the pressure that Netflix, excuse me, that TikTok puts on competitive to create more attention-driving content. It's more so a competition between YouTube and Instagram, and it will be for many, many years than it is with Netflix and HBO and Disney. Interesting. I mean, one thing, and, you know, to get to the CNN Plus question, you know, that YouTube does have. Of course, with its creators is, you know, potentially in some ways,

relationships that viewers have to those creators. And, of course, that moves into like the Twitch world and to even, you know, Discord to some degree, but mostly on YouTube, you've got people that you subscribe to, you follow them, and you're there for their content. Whereas again, Netflix really doesn't have that. You don't follow a certain actor or something and you see all of their stuff. You know, you kind of go for the content, for the shows, for the high production value. And so in terms of, again, thinking about the deep bench analysis, YouTube actually has that because, you know, maybe you have built up a relationship with a, you know, a YouTube star or

creator over years. And so that would be one reason to keep going back there, you know, despite the ads and despite some, you know, other experience changes that, again, makes Netflix a little more vulnerable in terms of being able to be substituted for. Okay, so setting that aside, CNN Plus, like, what the hell? Like, that seemed to be even worse than Quibi. And like, I just, my brain is kind of exploding. And at the same time, looking backwards, it feels like that would have been really, really hard lift to get people to want to pay for something that, you know,

frankly is available for free on airport TVs and you kind of just put it on the background and you're like, wait, wait, what, you want me to pay for this now? Help us break this down. Yeah. So I think, I think I tweeted earlier today basically that, you know, like CNN plus this quick closure was as much a result of conflicting like top-down strategic views from two executive teams, which would be totally, totally. Yeah. And also the David Daslow game at Discovery. As much though, I agree, I like, I agree. I agree with myself. As much as it's good. I agree with myself earlier today. I agree with myself into, but I think it was as much of a misread into the value proposition of news with an OTD service and a mystery into how consumer appetite for news and new style content changes from linear to digital.

And by that, all I mean is if we took the New York Times an example, and I think it really is a perfect example of how the New York Times looked at its subscribe requisitions, it is not new. like we have games, we have cooking, we have wire cutter, we have the athletic. And the athletic by means, I'm trying to say sports betting. Like that is why they acquired that company. It is sports betting and is local sports because local sports and help with sports betting. It is them saying the habit for this idea of news is that you're going to get some kind of monetary value or like cultural value out of your life that you might not necessarily associate with a new subscription. But when you subscribe for that for these reasons, you're also going to get news. news. CNN Plus went the opposite route. And CNN Plus said, what if we said, you're going to get really niche versions of TV shows that appeal to, like, media Twitter, and like very specific parts of the country. And also, you're going to pay six bucks for it. You're not going to get any actual live news, but you're going to get these different documentaries that would have been on HBO Max. The question of, sorry, the issue of CNN Plus was a question, a wrongful question.

but what the value perception of news is in people's lives. Now, I want to differentiate between these two so that it's important. The inherent value of news, everyone on this call will understand. We like news. It helps support a democratic country, like news is extremely important. The perceived value of news for what people actually want to pay for is much lower than that inherent value. Because we live in an era of tweets, of Twitter, of Apple push notifications, and have extremely good free news websites.

Like I think I used to work at The Verge and the Verge covers everything from science and politics and culture and technology, of course. And it was free. It was ad-supported. Incredibly good reporters. Like some of the best reporters in the business, you never had to pay for it.

So why would you pay for the journal? Why would you pay for Bloomberg? Why would you pay for the internet? Like if you were someone who was coming up, you know, and you're 21 years old right now, there's not a good reason necessarily to subscribe to news. There is, however, a great reason to subscribe

to the New York Times if you are trying to make bets on who's going to win in the Celtic a net like series. Like there's a great reason to subscribe if you're trying to cook for the person you're trying to impress. There's a great reason to subscribe if you're trying to find out which is the best, I don't know,

stove to purchase. All of those things at perceived value for that consumer on top of the inherent value of news. And so I think that's where CNN Plus failed. It was just there was no perceived value that made it attractive. Now, I think just to give Jason Kyler credit, I'm a big fan of Jason Tyler.

I know Brian knows this. Huge. I really love what he did with HBO Max in this time at WarnerMedia. He always envisioned CNN Plus as a tile. So if anyone who is listening to this is outside of the United States, then you have Disney Plus, the tile is basically what star is. It is this idea of like you put on a tile and there's this whole new world of content that open to you because they brought it in. CNN Plus was supposed to exist as that you click on the CNN

plus tile and there's this whole new role to CNN. And I think that made much more sense than trying to do it as a standalone streaming subscription service. I do think you get two very different executives, one who's on his way out, one who's on his way in, both trying to kind of compete with each other. And that creates this beautiful moment of like chaos. I mean, was there any world in which, I mean, given those dynamics, those politics, that CNN Plus had any shot whatsoever? No, there was never a world in which CNN Plus is a standalone ad makes sense, ever. Unless you were able to actually, because, I mean, here's the thing. This is the joke with CNN plus.

And I don't mean that the service is a joke. I mean, like, the irony with CNN Plus and the irony with, like, an ESPN Plus. It's actually CNN minus ESPN Plus, right? Like, you don't actually get the service and then stuff. You get some parts of the service. And so I think the biggest issue that... The Venn diagram doesn't actually work out in your favor. Right.

And if we think about like Peacock and Paramount Plus, which offer live news, they didn't have to compete with this idea of this insanely popular and world-renowned cable brand. Like CNBC, like CNBC was never going to be offered on Peacock. NBC was going to offer a version of news that you were going to get on Peacog. But I think SanBC is my favorite example to bring up in part because they, David Zadla's life as the CEO of Discovery helped create it. Why is CNBC is so important? If we think about who that consumer audience is,

one, it is people who are retail investors who want to know what they're going to spend their money on. It is analysts and journalists who want to know what the next move is, and it is other executives who want to know what other executives are saying. The perceived value and the inherent value are one-to-one, and that is exactly where you want to be. It's like visual Twitter. Exactly.

CNN to CNN Plus is not that. CNN is I want to know what's happening. And you've created the moment it's happening. I want to know if, you know, like, knock on what a plane goes down. I want to know what's happening. I'm going to turn to CNN. You're not going to get that on CNN Plus. What you're going to get on CNN Plus is like a very good Brian Stelter show,

which I really adored. And that was great for like media nerd. You're going to get a really great Murdoch documentary series, which I love the Murdoch because I love the Murdoch. Well, I don't love the Murdoch, but I love the story of the Murdox, I should say. But like you're going to get that and that's really exciting. but the story of the Murdoch should exist on HBO Max when they have a succession, where they have three series airings simultaneously that are basically about the Murdox.

That should be where you put your content. So this idea that it was ever going to exist as a standalone never made sense, but it was never designed to. And I think that's what people are forgetting. It was never designed to be a standalone. You are in this moment of unfortunate turnover where one team is saying, this was what we had, a plan for HBO Max. One team is coming in and saying, we have this really great idea for a unified app.

And then you get a lot of people who will unfortunately lose jobs in the crosshairs where it's like they're just trying to do the best that they could do. Right. So Occam's Razor is this was, this was politics where some team or some executive have had enough juice to be like, we're going to try this experiment. Everyone else behind the scenes was like, this isn't going to work. And as soon as it doesn't work, they've got enough rope to pull the plug, basically. exactly they the clear was no question

that the CNN plus was going to be shuddered and then thrown into basically a combination of HBO Max which would have been the documentary docucus series so that would have been like Anthony Berdain and by the way that back catalog and that content opinionated news content is still the most

sought after content on cable TV docus series like Anthony Berdain is still the most sought after docus series that content is extremely valuable to HBO Mac like that is beyond valuable to them, especially at the low cost that it takes to invest into it. The other content goes as supported to CNN. They want to do some form of a live news show.

They want to do some form of a news recap. That goes to the CNN app, which is an app that needs some redoing. But like it exists over there and it's fine. But the idea, yeah, it was never, ever, ever going to be a successful standalone app because the perception of what the value of news is to someone. You know, I saw a news store. I'll just say this. I saw a news story that said,

David Daselab, and I really give him credit for this. I think it's what, I think it's what the country needs, wants to go back to, like, straight up news journals and Montaena. And I give him credit, I think it's what the industry needs. If you give up that 9 o'clock slot, which used to be Chris Cuomo,

he was fired from Kinnett. They've lost 70% of their core demographic in that space since he's lost. If you give it up and you go back to global news, you're going to give more people to MSNBCN and Fox, whichever way you want to go. Both of them are going to take. more people because what people are tuning into at 9 p.m. on linear network is they want an opinion.

They is they want entertainment, is they want a version of the thing that they're turning into. They have conflated the team at CNN, that idea of what that audience is with an audience who wants news. Those are two completely different audiences and you can do two completely different things with it. But I think there's this idea of like a misdirection in what CNN plus or what a CNN digital output, which is effectively protecting the longevity of CNN's future is compared to what the 7 o'clock, it's 11 o'clock CNN primetime lineup is. And I think that's going to be where they really struggle. And I'm interested to see what Chris liked those now that he's overseeing it.

Julia, they're going to sell CNN now, right? Full stop. I mean, I'm going to make a bid, obviously, with all my money. I've heard, I don't think it's much of it. a secret that that's a possibility at this point. Okay, I want to make a quick sort of Tesla analogy, if you can believe it. Are you going to talk Elon? I feel like, oh, no, no, Chris, no, I made a vow on the show today.

It's been bought in today. No. Until we have some actual news. Yeah, yeah, no, no, no. Funding secured, whatever, it's fine. Okay, no. Hear me out because this makes sense. And I've heard this several times today.

it's Netflix to Tesla, which is what has happened to Netflix? They were somebody that completely transformed in industry, had a decade's head start on everybody else. Everybody else figured out, caught up, and now is competitive. And multiple people today have made the analogy to Tesla, which is the same thing that, you know, again, like I've said a million times before, you know, in the early 2000s when I lived in Detroit and all the Detroit people, all the car people were like, Tesla's a joke. And now everybody's trying to be Tesla just like everyone's trying to be Netflix. Now, Tesla had great earnings, but could the day come where Tesla is in a Netflix situation, which is everybody is doing what Tesla does? And it's not that they have the back catalogs, but they do have residual brand value.

They do have, I don't know, bigger factories, bigger sales channels, things like that. that's it no one has to comment on that but I'm pointing that out but Chris I actually I actually do have just one small comment on it and one I don't want this to come across

and I'm saying this in part because I do like Tesla and in part they don't want Elon fan boys to attack me we love Elon on this show all of us do we do love Elon it's like talking about the mafia in New York City we love Elon I generally appreciate Elon you know I don't think you should run Twitter, but to Chris, we'll talk about that's for a later

competition. I, here's the thing. I love, nothing more I love than a competitive marketplace. And so I, I kind of hope, and here's what I'll say this part. Like, I don't want Tesla to lose this value. I'm not saying like I hope Tesla shareholders lose out a bunch of money, any of that. I am saying, I hope that there becomes a moment in the

electronic vehicle space where there is more competition, just because I think it creates better product. I think competition is what leads to better product and better economics and better value for customers. And I think right now, Tesla, to your point, exactly, Brian, Tesla has this monopoly in the way that Netflix had a monopoly in 2014, 2015. And I would love to see more competition coming to the space. I think it's already happening.

We saw, I can't remember, it was a Japanese carmaker. I don't think it might have been Honda. that might have been Hyundai, I can't remember which one, that they're going to invest like $2 billion into the electronic car vehicle space. Like that's what I would love to see more because I do think it is better for consumers the long run, even if it's worse for shareholders in the short term. And I think that's the point about Netflix I want to come back to,

which is you're going to see people listening to this, a lot of doom and gloom about Netflix. And a lot of that comes from people who are investing in Netflix. Or Netflix was that in 2019, 2018, 2018, 2020, when they were a part of Fang, which never made

any sense. Like, that is not going to happen again. But if we think about the fact that Disney is trading at like 140, if we think about the fact that Paramount is trading

at like just, I think it was like 120 last I checked and I did on up or down. Like that is where Netflix should be. As much as Netflix is a technology company

with an amazing algorithm, and there's also a content company and media company and that is where media and content companies are trading at. Like, don't take doom and bloom in the stock.

as a sense that Netflix's business model is failing. And I hope that when we think about Tesla, if Tesla were to come down a little bit in stock because there's extra competition, I would not think that as a negative sign that the space is going down or that the space is worse off. It just means that the people who are hoping to make $1,100 off Tesla stock

are no longer making that and they're selling. But it actually is great if we have more competition. Like more competition leads to better product and to happier consumers and better products for consumers. that's kind of where I said. You know, just building on that, it does occur to me that one of the questions that actually we need to be, I guess, contemplating is what is Tesla?

What is Netflix? Because I think the way that I would respond to Brian's question and thought is if you are trying to turn a Tesla orange into a Ford Apple, and what I mean by that is like apples to to oranges, like, Tesla, I mean, as Alon talked about on. the earnings call today is so much more than a carmaker. In fact, that's like one of the things that is incidentally part of their business model, and that is the thing that customers obviously have a connection to, but, you know, they are getting into the insurance business, you know, which is amazing margins, especially if you're able to track everything that your drivers are doing

and you know exactly what rate to give them. You know, they're getting into the, you know, home electrification space and solar and to energy. I mean, they're an amazing energy company. They have distribution for their superchargers. The thing he talked about today is apparently robots are going to be a big part of Tesla's future. And they're also, I guess, investing in autonomous taxis. And that's going to be enormously transformational. Elon is always going to say a lot of things. But I love Elon.

I remember, I love him. I'm sure the high is still left over from yesterday. But my point is more about what is Netflix going forward. We're about to enter into a world where augmented reality and glasses are fixated on people's faces, presumably, you know, if the experience is right. We know that Facebook or meta has bet the farm there. We know that Snap talked a lot about augmented reality experiences. So Netflix strikes me as a company that was bringing the Internet to kind of two-dimensional moving pictures.

And they don't seem to have a lot of immerses. you know, content experiences yet that suggests that in the next 10 to 15 years, I'm going to be subscribing to Netflix in my MetaQuest or whatever, you know, Apple goggles might be. So given, you know, we're in this interesting moment post-pandemic, you know, where maybe there's some correction going on in the market, where do you think Netflix goes if they don't build these long-term kind of metaversian environments that, that you have these long-running narratives that people can move in and out of in these immersive spaces. Or, I mean, I suppose these new mediums don't have to replace the current mediums, but it does give me, I guess,

some, you know, some pause or question about how much Netflix and the Netflix model will be aligned with where content seems to want to go. I think that's the question. I think you hit the nail on the hat. That is exactly it is. If Netflix does not get into a place where it is creating the type of longevity within his own franchises and content that it can then rest on or continue to build on. It's in a big predicament. I will say, you know, I think one of the things I think about all the time is in 2003, Michael Eisner, who is the then CEO of Disney, passed on Marvel because he said it's too out of the box for us, right? Like, it's not, doesn't make his sense for Disney brand. You fast forward to 2011, or 2009, excuse me, 2009. And Kevin Mayer,

who was the chief strategy officer of Disney with Bob Eager, who is obviously the most, arguably the most famous CEO of Disney, said, I think we can make Marvel work for us. We're going to bring this kid, Kevin Feigen, and he's going to oversee it all. And that's a $30 billion profit on a $4 billion dollar investment so far at the box office alone. Like that's just box office. I think that's where Netflix is at. Netflix has to figure out what is the strong bet that we make that we think will derive long-term valuation out of the investment that we make. And not just in terms of content, like if we think about what Marvel has done for Netflix, excuse me, for Disney, beyond content, it is beyond TV and film content.

It is the idea that they are licensing those characters to Fortnite, and Fortnite paid a huge part for them. It is the idea that with the Star Wars acquisition, they're going to EA and they're going to, I forget the other video game publisher, but they're going to, not 343, it's the other one. And they're the Titanfall developers, and they're going to them and they're saying,

like, we're going to give you guys these characters and you can use them. You're going to build our Star Wars universe on the game effect. We don't want to do that. We don't think we can do that, but we're going to license it out to you. And Netflix doesn't have that. And again, like, we, it's so easy, it's easy to sit here and say, like, oh, I think I tweeted this the day of the Netflix journey.

And it's so easy to sit here and say, do better content or make franchises. Like, it's extremely difficult to do. There was a beautiful moment at Disney where Kevin Mayer, Bob Eiger, Kevin Feigey, Dave Bologna, Kathleen Kennedy. A bunch of people existed at the same time and they all had the same rough ideas and it worked out super well for them. Ellen, Allen Bergman, Alan Horn. Like,

it's just worked out. Like, like, they figured it out. That does not happen that often. It is rare that that happens. And so, like,

Netflix is in a point where Netflix is trying to figure out, who's the best team to oversee this? Who is the best team that we bring on to develop this? Do we buy production companies? Do we just, do we go exclusive on the production companies that we acquire? Do we do more showrunners exclusivities? I think that's a long move.

I don't think they should do more showrunner exclusivity. but it's this position where they have to really start saying, what do we invest in that is going to be high ROI beyond unscripted in reality? Because we know that unscripted docuseries in reality is going to be high ROI because the investment is so low. But on the sci-fi action adventure drama side, where is the investment that you're going to create,

that you're going to put in order to create a franchise? And on the comedy side, where is the investment that you're going to give them 70 to 10 season to produce an actual franchise and a longevity franchise that people will come back to and say this is my favorite show. I want to watch this over and over again. Netflix does

not have a friend Seinfeld, How I Met Your Mother, 3 Rock, or New Girl. They do not have any of those types of series. They don't have any of those types of shows. And they need one. They need one show to say because the correlation between why people sign up for cable and why

people sign up for an OTT service is so psychologically different. People sign up for cable because they want access to a bunch of different things. Ninety-nine percent of time, it's sports and news, and then they happen to have a bunch of content on there as well. Why people sign up for an OTT service and why they keep signed up is because they have access to their favorite show or franchise, and that's it. People will pay month after month if they have access to one show. It's one show that makes your break many times. And Netflix does not have the one show. Like they lost the one show. They have Seinfeld, which is great, but they lost friends.

They lost the office. They lost a bunch of other shows, and they don't have one. It's like, why I need to have this because I watch it every single night. Where Paramount and Peacost will end up thriving in the next two to four years, this is my prediction, is that they will have nine times of the shows that, of that exact caliber. Where it's like, I want criminal minds, I want law and order. I want CSI. I want whatever it might be. They have it.

I want friends. They will have those shows. That's where it will exist. For Netflix, what is the move going forward? It is thinking longevity and not just short-term play, and that is disappointing Wall Street. And I say this because what the street thinks and what a solid business plan are often two different things. And I hope that Netflix leads into the solid business plan as opposed to keeping Wall Street happy. Got it.

Thank you for that. Brian has a slightly different topic from a very different medium. that he might bring up. This is the end, but I just wanted to bring up two books because I occasionally do that on the show. But the first one,

I'm glad Julie is here because Julie might already have gotten through it, but it's binge times inside Hollywood's Furious Billion Dollar Battle to take down Netflix. I think it came out on Tuesday, but I'm already in, I think, four chapters in. Is that Don's book? It's,

Don, whatever, however you pronounce her last name, and date, date hates. Yes. Yeah. So basically, it's telling the story of the last decade and getting to the streaming wars. So far so good. I highly recommend that. And then the other one, germane to our interests, it came out in February. It's called The Founders, the Story of PayPal and the Entrepreneurs who shaped Silicon Valley.

And I'm recommending this one not only because Jimmy Sonny's a friend. He did a book about Claude Shannon and the whole idea of information science. But when I wrote my book, one of the big missing pieces was the PayPal story. Because there have been books on PayPal, but they were all sort of by insiders who had their own access to grind. So it's not about the PayPal Mafia. It's literally because of the PayPal Mafia, it goes back and tells the story of PayPal itself, which is one of the most insane company stories ever. I mean, people don't know the fact that friggin Peter Thiel led a boardroom coup to kick out Elon Musk as CEO, right?

So-Liske's way back. The Haguel mafia story, like as someone who listens to the All-Win podcast, like, it's just truly. It's like, it comes up all. Well, so, I mean, all of the people in the mafia show up in this book. Everybody participated. Musk, Teal, everybody, you know. Reed Hoffman. So I highly recommend it.

It's called The Founders, the Story of PayPal and the Entrepreneurs who shaped Silicon Valley by Jimmy Sonny. And I'm two chapters into that. I will show the link. Yes. And I'll try to put them in the show notes as well. Listen, we're going to wrap, Julia. I'm so thankful that you gave us so much of your time. Yes.

I want you to plug whatever you want, but I also want to put a plug in there for, you know, Julia is an insanely good analyst in this stuff. So anybody listening that could use analysis in the space, get in touch with Julia and her company. But Julia, tell us anything you want to tell us. I would actually just love to plug a few analysts and very smart people I follow. I follow Andrew Agave, who used to be at Bi-com, and now he's on his own. Matthew Ball, of who many people who listen to us would know, of what I love Matt, good friend of mine. Casey Moore, who's one of the most underappreciated

Netflix analysts in the space. Entertainment Strategy Guy is what his name is on Twitter. He's one of the smartest people in the world. Lucas Shaw, great journalist, who I listen to and read all the time. Joe Lynn, do I read all the time. I only learn from the people that I read, and those are just some of the names. And I will say this because I'm a woman in the space. and I want more women in the space.

And the men and I all listed are incredibly smart, but they're all men. Well, I love dearly, but they're all men. And I just, if anyone is, who identifies as a woman or whatever is interested in learning more of the space, please, like, be on me, we need more women in the space and especially more women of color.

And, yeah, I would just say, Twitter, despite Elon making a tender bid for it, is a beautiful, beautiful, beautiful space in that I have gotten many of my career opportunities through it. I've met many great people like Chris and Bryant through it and many of the people I just listed. So I would love to just connect more. Please feel free to reach out. My DMs are open. And yeah, that's it.

I'm just so grateful to be asked to be on it, guys. Thank you so much. You're just towing up to the line of breaking our promise not to talk about you on Twitter. Listen, I Again, I am not blowing smoke. I say on the show lots of people are the best, but Julia literally is the best in this space. And so I'm not blowing smoke at all.

I can't say it highly enough. Follow Julia, whatever she does, whatever she writes. What's the podcast again? Downstream podcast with Jason Snell, who Apple. Oh, nice. Yeah, yeah, exactly. Yeah. Jason gives me good tech advice.

And I say, my mic won't work. And he said, have you updated? And I said, I refuse to do that. But he's great. So we do that podcast. It airs every two weeks. It's a fun, fun time. All right, Chris, bring us home.

Awesome. Well, once again, thank you, everybody, for your attention today. Julia, thank you so much for spending so much time with us and so much of your knowledge and wisdom. I learned a lot and had a great time having this conversation. So thanks for showing up. And we will probably be here back again next week on Thursday. Thanks, everybody.