The Prof G Pod with Scott Galloway - State of Play: The Streaming Wars — with James Andrew Miller

Episode Date: February 24, 2022

James Andrew Miller, an investigative journalist and the author of Tinderbox: HBO’s Ruthless Pursuit of New Frontiers, joins the pod to discuss how the entertainment legend has differentiated itself over the years, as well as the state of the play of the streaming wars. Follow James on Twitter, @JimMiller.  Scott opens with his thoughts on how Apple could steal market share from several sectors to become the first company to reach $1 trillion in revenue.  Algebra of Happiness: welcome guardrails. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Join Capital Group CEO Mike Gitlin on the Capital Ideas Podcast. In unscripted conversations with investment professionals, you'll hear real stories about successes and lessons learned, informed by decades of experience. It's your look inside one of the world's most experienced active investment managers. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Support for PropG comes from NerdWallet.

Starting your credit card search with NerdWallet? Smart. Using their tools to finally find the card that works for you? Even smarter. You can filter for the features you care about. Access the latest deals and add your top cards to a comparison table to make smarter decisions. And it's all powered by the Nerd's expert reviews of over 400 credit cards. Head over to nerdwallet.com forward slash learn more to find smarter credit

cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. Episode 140. FDR was elected as the first third-term president in 1940. We have nothing to fear but fear itself. As someone who struggles with anxiety, I can confirm that is in fact true. Was that funny? Was any of this funny? Does this make any fucking sense? Why do I have a podcast? I'm a fucking charlatan. No one believes I'm any good. Why am I here? My kids don't love me. I don't deserve to have any economic security. Jesus Christ, help me, mom. Help me. Go, go, go. Welcome to the 140th episode of The Prop G-Pod. In today's episode, we speak with James Andrew Miller,

an investigative journalist who has covered politics, media, and entertainment for the past few decades. Jim is also the author of several books, including Tenderbox, HBO's Ruthless Pursuit of New Frontiers, which is exactly what we're going to speak to Jim about today. This is sort of an indulgence for me. I'm an enormous fan of HBO. It's played a huge role in my life, or at least my media consumption life. I remember my dad, who is very charming and Scottish, which means he was able to spread his seed to the four corners of the earth and married four times.

He's now on his fifth wife, although we think this one's gonna stick because she's a young Latino woman who I pay to basically take care of him. Anyways, neither here nor there. But I remember noticing when I was a kid that when we were with other people, he would casually throw out that we

only watch HBO as if that was some sort of signaling device. Just the same way when kids go to good schools, within a few minutes of a conversation, like, well, and, you know, at Harvard or I'm at business school at, you know, whatever, do she you? It's the same thing. My father found some sort of self-expressive benefit in this media brand. I'd say other than Disney, HBO has probably had the most powerful brand. Is that true in media? Anyways, I'm fascinated with HBO. We're going to talk to Jim all about it and take a walk down memory lane. Okay, what's happening? We're thinking about something we refer to as the great heist, and that is Apple's ability to essentially shit in the punch bowl of every sector it enters.

Or, if you will, kind of show up and start stuffing their pockets with shareholder value by just looking at a sector and coming into it with their incredible brand and execution. So what do we mean by this? Over the last several years in tech, we've witnessed several firms breach a trillion in market capitalization. A few hit two trillion, but just one has touched three trillion. A more audacious goal would be a trillion in revenue. We're still a few years away from this. The largest company in revenue today is Walmart, which brought in about $560 billion last fiscal year. And while market cap can fluctuate more or less 20% in several minutes based on a variety of emotions or things we can't even figure out, revenue is closer to the epicenter of stakeholder value, or it's stickier, if you

will, or it has less beta because it benchmarks actual commerce. Revenue of a trillion dollars won't be found in any single category. Few categories even offer a market that's a trillion dollars in size. And market dominance in any category comes with its own host of problems. Specifically, it's better to have 20% share in five markets than 100% of one as diversity offers security and monopolies attract legal attention, as they should. A trillion dollars in revenue will require kind of showing up and starting to take share from markets that are dominated by other players. And Apple, Apple is the company better positioned than any firm in the world to go into enormous categories

and again, start filling their pockets. The company essentially has six assets or bullets, if you will, that are all unmatched. They have a sidearm that is basically a thermonuclear weapon. I got pushback on my references to gun culture. They're just fucking references for God's sakes. Anyway, it's not like I got a Glock in my glove compartment. Although in Florida, that would make sense because the drivers are really shitty here. Really shitty. Road rage, should not joke about it. Should not joke about it. You know what I do in road rage when someone gets angry at me? I wave at them like I know them. Hi, I pretend I recognize them and they're being nice to me. That's how I roll. That's my Buddhism meets a

Range Rover meets an old man trying to deal with his anger. Two, two, what do they have? Or one, first bullet in that chamber, a familiar operating system for the wealthiest billion people on earth. iOS is the operating system of their life. When presented with a smart television, home, car, or retail store, they don't want to learn a second language. By the way, one of my roommates, my freshman year in college, was failing English, which I found just hilarious. And they told him that if he failed English because you had to pass English at UCLA, that he was going to have to take English as a second language, even though it was the only language he took. I find that hilarious.

Anyways, now he's one of the most successful cosmetic dentists in Los Angeles. Two, two, they have the epicenter. The iPhone is the most successful consumer product in history and is the epicenter of tech. The phone contains speakers and microphones, a barometer, an accelerometer, a proximity sensor, an ambient light center, a gyroscope, and four cameras.

And it connects a web of interface devices that meet you everywhere you want to be. The living room with Apple TV, kitchen and home pods, keys and air tags, ears with AirPods, and wrists with the Apple Watch. Nobody else has this or any discernible path to it. Three, Beachhead. Specifically, Apple has established a beachhead in multiple businesses beyond its core hardware products,

including payments with Apple Pay, Apple Card, Apple Cash, games, App Store, Apple Arcade, media, Apple TV+, Apple Music, Apple News, mappingapping, Apple Maps, didn't see that one coming, Cloud and email services, iCloud, and even advertising, App Store search ads. Four, four, hardware expertise. As capital is increasingly funneled to a monster that would eat the world, that is software, Apple's been able to further differentiate its hardware competence from the others who were under-investing in hardware and has dominated the space for decades. Nobody, nobody rivals Apple's refined hardware or ability to produce actual things on a global scale. Think about what they've done with the iPhone. Imagine if you had the margins and price point of Ferrari with the production volumes of Toyota. Imagine that would be the most profitable product in history, which is exactly what the iPhone has done.

It kind of defies marketing gravity in that it's unusual for the premium price product to be the market share leader. It usually doesn't work that way. It's usually Toyota or Honda and Ferrari is the niche player. In this instance, the premium price product is the market share leader. Oh, my God, blow my mind. Mind is blown. Mind is the niche player. In this instance, the premium price product is the market share leader. Oh, my God, blow my mind. Mind is blown. Mind is blown. Five.

And arguably Apple's greatest asset, trust. Think about it. We consistently harp on the fact that big tech invades our privacy and has a stranglehold on our data. When Apple makes an announcement about whatever business venture it's pursuing, it's almost like a sigh of relief because we trust the brand to do no harm and to give us the most seamless experience. Apple has put privacy at the center of their brand positioning ever since Tim Cook declared that it's a fundamental human right. When we think about trust, it's not only about our willingness to do something with someone, but it's also the absence of fear, not worrying that the other party is going to do something bad. And that's exactly what Apple has mastered and earned. And lastly, number six, capital. In 2021, Apple generated an astounding $93 billion in free cash flow, which are funds that can allocate towards new opportunities. That's on top of a $22 billion R&D budget,

meaning Apple has potentially $126 billion annually to invest in new frontiers. This number is staggering and singular. Apple stock is also currency. Tech companies routinely make acquisitions equal to 10% or more of their total value. So let's use that. Let's use that. If Apple were to decide to get into a category or several categories and incur a 10% dilution, they would have $290 billion to go shopping with. What could they do? What could they do with that? Apple could swallow firms, including Nintendo, Zoom, Lululemon, Lyft, Zillow, and of course, I don't know, Peloton, and they would still have money left over.

That's what they could do with 10% of their market cap. That's not to say Apple could or should try to buy into all of these markets at once, but its market cap gives the company virtually unlimited strategic agility. And I should point out that it's unlikely they'll do this because one of the reasons for their success is that their culture is so strong that they have been very disciplined around not making acquisitions. I think their largest acquisition to date is a measly $3 billion for Beats. So it's just unlikely they're going to decide to become the GE of our generation and go start buying things. But they have that capability.

It gives you a sense of their scale. It gives you a sense of their scale. It gives you a sense of their assets. It gives you a sense of just how freaking gangster they could go and how many warheads sit on top of the projectile of cash known as their market capitalization. So with more than $100 billion in cash and $290 plus billion for M&A, where could potentially Apple go next? These aren't predictions as much as they are an exercise to really think about where Apple might go next and to talk about the capabilities of the company. And I think I will actually incorporate this exercise into one of my classes because I think it talks about economics and leverage and strategy. Anyways, let's break down just a few ideas that

the PropG Media team has come up with. First up, B2B. The big news that got us thinking about all of this was when Apple announced that it was turning iPhones into payment terminals, as in merchants can make a sale by tapping two iPhones together. This is bad news for other payment processors, especially Square, the payments division of Block. God, who came with that? Talk about brand has your head up your ass. Block. Who names their company Block? Anyway, Square, which has been hard at work installing terminals and coffee shops since 2009. Apple's strategy will be different. It'll simply turn on a feature in the next software update and boom, a billion credit card machines. Next up, consumer banking. Banks offer two things,

capital and trust. Check and check. The next step would be auto deposit into people's Apple Cash accounts so they can send money or print checks to recipients that are not on Apple Cash. Apple could offer checking savings accounts with modest tweaks to existing features. The largest U.S. banks each pull in around $35 billion a year in consumer banking revenue. Investment advisors, including Schwab and Fidelity, generate $10 to $20 billion in turnover. The industry, however, is awash in new entrants and uncertainty. However, Apple is a global player that already has many of the pieces in place. By 2030, this is a $75 billion business for the Iron Bank or could be a $75 billion business for the Iron Bank of Cupertino.

Oh my God, a Game of Thrones reference. Aren't we young? Aren't we cool? Where else could Apple steal some share? Search, that's right, search. Search is the most potent advertising channel in history. It's the bottom of the funnel for trillions in consumer purchases,

the point of maximum leverage for marketers. Google made $149 billion in revenue from advertising against search results last year. That's greater than the total for global TV and radio businesses and soon print combined. Think about that. In sum, search is becoming bigger than the rest of media globally. Apple is already in this business, albeit in a smaller way, selling ads against App Store searches. However, however, search is too big to ignore. And if you think that Apple is afraid to go vertical into complicated categories with dominant, well-resourced players, look at Apple's decision to start producing its own chips,

which they did, which seemed crazy at the time, which ended up being genius. And one of the reasons they haven't run into the same supply chain problems as some of their competitors. Moving into search would initially decrease Apple's revenue as the company would forfeit the estimated 15 billion per year

that Google pays to be the default search engine on the iPhone. And you gotta imagine that it's like 98 plus points of margin. However, it would be a strategic unlock. Keeping iOS searches inside the Apple ecosystem and integrating results with the contacts, calendars, locations, and other datas in that ecosystem would make the whole show more valuable and undermine the value of Google's ecosystem. Imagine if Google was no longer sort of the search iOS, if you will, or your portal into asking God for questions, which is what Google is, for the wealthiest people in the world. What if all of a sudden,

the billion wealthiest people in the world began searching and providing data to their other apps via iOS, driving year-over-year growth on Apple's iCloud subscriptions, and its soon-to-be supercharged Rundle. That's an idea. It's coming. All right, the last area we're going to talk about today, identity and inconvenience. The breadth of Apple's ecosystem will sweep up many more relatively small opportunities. Anywhere that requires an ID to enter could turn that infrastructure over to Apple. Expedited airport security is a premium service, similar to Clear as an obvious fit. And why would Madison Square Garden and the Coliseum at Caesar's Palace just hand over the whole interface to Apple?

Let's call that business, say, $4 billion. In sum, in sum, the road to a trillion dollars in revenue is a long one. At our Pivot MIA conference last week, my NYU colleague Aswath Damodaran called Apple a rare exception to the lifecycle rules that govern almost all companies. He credits Apple's success in part to discipline. Specifically, the largest acquisition the company has ever made, see above a mere $3 billion for Beats, nearly eight years ago. If it's the first company to get to a trillion dollars, and we think they have the greatest opportunity or likelihood if we were going to bet on one to get there, it'll likely be because Tim Cook and company isn't in a hurry to get there. They've shown the type of discipline such that when they go into any category, it's taken seriously. Raise your hand if you're going to get on the waiting list when they pull that cloth off of a car and there's an Apple logo on it. Right now, in my view, Tesla is a drunk tourist stumbling home with a new blow watch.

It is about to have their pocket picked. Who? Who? By the great thief, Apple. Stay with us. We'll be right back for our conversation with James Andrew Miller. of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Support for this show comes from Constant Contact. You know what's not easy? Marketing.

And when you're starting your small business, while you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind. But if customers don't know about you, the rest of it doesn't really matter. Luckily, there's Constant Contact. Constant Contact's award-winning marketing platform can help your businesses stand out, stay top of mind, and see big results. Sell more, raise more, and build more genuine relationships with your audience

through a suite of digital marketing tools made to fast-track your growth. With Constant Contact, you can get email marketing that helps you create and send the perfect email to every customer and create, promote, and manage your events with ease all in one place. Get all the automation, integration, and reporting tools that get your marketing running seamlessly, all backed by Constant Contact's expert live customer support. Ready, set, grow. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca. Welcome back.

Here's our conversation with James Andrew Miller, an award-winning journalist and author of Tinderbox, HBO's ruthless pursuit of new frontiers. Jim, where does this podcast find you? New York City. Nice. So I was introduced to Jim and his work by a friend and mentor, Jeff Bukas, who's the former CEO and chairman of Time Warner. And he's just so impressed with this. His general view is everyone gets it wrong about

HBO and Time Warner and that you were the first one to kind of get it right. And your book is sort of the, I don't know, the definitive work on how that organization came together and what were the underpinnings of it. So why don't we start there? Can you give us a sense of sort of the initial formation of HBO and what was unusual here and what are the misconceptions about how it got started? Sure. HBO, which started in 1972, was actually fueled by an investment in Sterling Communications. Time,. at that time had started Time Like Video, and they had decided to get into cable television with an investment in a cable system. And in an effort to branch out beyond print, they made a somewhat modest investment in Sterling. And Chuck Dolan, who was basically Sterling Communications at the time, came up with this idea that he actually wrote about in a memo to Time Inc. to have a dedicated paid channel with content.

Content at the time he defined as live sport events and movies that he felt like the company could get from the studios. And it went on the air, 345 people in Wilkes-Barre, Pennsylvania, the most modest of beginnings. And quite frankly, I think the thing that people lose sight of is that for a company like Time Inc. in the early 70s, one of the great bastions of not only journalism, but huge corporate success, HBO was a money loser. And there were many times when they almost hit the delete key on it. And in fact, in 1976, they lost $6 million, which was a huge amount. And they got a guy named Nick Nicholas to come in and take over for Jerry Levin. And he brought them to profitability. If he hadn't been able to do it, I don't think we'd be talking about HBO now. Yeah. I mean, I think 1972, that was sort of ABC movie of the week. So the notion that people would, it created sort of a different channel. And that is in between motion picture box office release and going to ABC, that there was some,

there was a window in between there for people who, for studios to kind of monetize content that would foot to a different value proposition. And that is almost like R-rated first run films without commercial interruption. Is that kind of the basic value proposition? Right. I mean, there was a powerful duality to it and that's how they started to sell it, which is we're going to show uncensored movies and there won't be any commercials. People hadn't experienced that. Remember, this is before Betamax and VHS. So it's a totally different kind of experience. They also, from the beginning, were smart enough to go pretty deep with boxing, which it turned out was an incredible driver of subscriptions, in part because men still controlled their remote.

And also in part because the networks had basically given up on boxing they had moved everything to saturday afternoons where people were cutting their lawns and there weren't um there wasn't a high level of interest and so hbo came along and said we're going to move it to prime time and they got you know for the next 20 years they got a ton of great fighters and they were around at the right time for some major events, beginning with Rumble in the Jungle and Thriller Manila and Onward and Upward. Talk about how HBO went vertical into original programming. Well, I mean, look, they didn't have a lot of money at the beginning, right? So I thought they did two smart things. First of all, instead of trying to mimic what the broadcast networks are doing, Michael Fuchs was probably four minutes on Johnny Carson. And if you go on Johnny

Carson, you sit down with the network censors and they basically do a colonoscopy on your routine. There's standards and censors and everything else going on. What HBO said to these comics, and the names are legendary, beginning with Robert Klein and George Carlin and so many others, Eddie Murphy and Chris Rock, and you run the list for the next 20 years. He basically said, forget about four minutes. We're going to give you an hour. And by the way, you can say anything you want about any topic. And so literally on HBO, George Carlin does the seven words that you can't say on television. I mean, what could be a clearer display of how unique HBO was? So before they even went into

descriptive television that we're all going to know very, very well in the 90s and moving on from there, they had a powerful formula in the 80s, and it was enough to, you know, combined with the live sports, it was enough to keep a pretty significant subscriber base. And what was, people think of The Sopranos as being kind of a big moment, but there was stuff well before that. This for me is kind of nostalgia reminiscing. I remember the Larry Sanders show, the mind of the married man dream on. What was sort of the first original programming that got everyone's greed glands going?

It said, okay, it's worth the investment in going vertical and creating our own content. Yeah, it's interesting because there's different definitions of success when you're that early on in a company, right? And like Larry Sanders, for instance, it was never a gigantic ratings hit. In fact, HBO really didn't care about ratings. But what it did do was it sent a huge signal to the Hollywood community that here was a place

where you could say, and a lot of things that you could never say on network, you could use language, sexuality, whatever. And most importantly, they made a critical decision, which is that they were going to be quote unquote, talent friendly. Like there were no guardrails. There were, and as a result, you started to see a migration from people who are working at the networks to come over to HBO. And so that was that incredible foundation. So by, you know, 2000, 2001, they are definitely in a league of their own. Yeah. I just, and one of the reasons I was excited to meet you, I adore HBO. I think there are a few media companies that have had more of an impact on me and the people I care about,

just six feet under for me. I thought that was the greatest serious finale in all of media. Ever. I say that in the book without a doubt. And it's really hard to produce a track record like that. And the other thing that I point out in the book, which fascinated me and probably one of the reasons

why the book is so freaking long, is from 1972 on, Scott, there was never a stock called HBO. HBO was never on its own. It always had a parent. between HBO and its parent company, starting with Time, Inc. Then we have a Time Warner merger, which was, I consider to be a real disaster. Then you have Time Warner taking control of Turner. Then, of course, you have the Armageddon of AOL and eventually AT&T. I mean, all of those things were huge on the Richter scale. And what happens is I was very interested in tracing the pedigree of how HBO is able to navigate and somehow survive those incredibly turbulent waters that are going on around it. I mean, there was a lot of infighting between

HBO and the Warner Brothers Studio. There were financial exigencies imposed on HBO because of the AOL merger and what the AOL people wanted to do using HBO. I mean, it's like the game of chutes and ladders when we were younger. And yet, somehow, HBO is able to prevail. And we're looking at 50 years now of content. That's not to say that it didn't have a lot of potholes along the way. But I think the HBO story, for me, is noteworthy, not only because of the incredible success it had with content, but also because it is a network that had to endure many different challenges that a lot of other networks didn't. What is it about HBO and the culture? What is the secret sauce there? And people say it's

the culture, but what is the secret sauce of the culture that to this day makes it such that if you're going to option a book or if you're a writer or showrunner, HBO, there's everyone else and there's HBO. How have they been able to maintain that? Well, first off, I would argue that it hasn't been a constant. I mean, there were moments where there were screaming headlines in the New York Times and elsewhere, HBO over. And that HBO, you know, Netflix had really stolen the thunder. And particularly given the fact that, like in the case of House of Cards, they're able to fundamentally change the economics in the business, right? HBO was thinking about making a pilot for House of Cards and all of a sudden, you know, Reed and Ted say to David Fincher, we're going to give you two years. I mean, there's no way that as a publicly held company, and this, we get back to the parent thing,

there's no way Time Warner could afford to play that game. Not to mention the fact, people always forget when they're comparing Netflix to HBO. Netflix is valued as a tech company. Their investors aren't looking at their earnings every quarter. They're not even supposed to be producing profits for a lot of that investor class. HBO is part of Time Warner. Time Warner has to fight off Murdoch and 14. They're desperate to maintain their independence. They have to produce earnings for their investors. I mean, it's so ridiculous because they're two fundamentally different. I mean, it's like baseball and football almost. I mean, yes, they're in the content business, but it's not a level

playing field. And so I think that there have been times when HBO, either because of its internal problems or because of the competitiveness and the power of a Netflix, their identity has been in jeopardy. What we're talking about right now, and I think you're absolutely right on with your characterization in 2022, is that the HBO patina is still alive and well. I mean, there was always that big question, just like there was after The Sopranos. After Game of Thrones, what happens now? And yet they had stuff in the pipeline and everybody's running home to watch Mayor of Easttown

and White Lotus and this series and that series and Succession and stuff. So I think part of it is just having a great track record with content. Yeah, what's what people constantly underestimate, and you touch on this in your book, is the importance of your shareholder base. And when you have one company that if it does $8 billion in revenues, it has to show $2 or $3 billion in profits. They get $5 billion to spend on content. And then you have another

company, if they do $8 billion in revenues, their shareholders are giving them $15 billion to spend on content. I mean, you can only, at some point, you can be super creative. But, you know, enough shitty mig fighters will take down, you know, a Raptor plane that is superior. And Netflix just showed up with so many tanks and so much gasoline that they could just sort of overwhelm the competition. I think the same is true, and we'll use this as a segue to talk about it. I'd love to get your view on the current landscape. Apple TV Plus, in my view, has been underwhelming. They basically produced Murphy Brown on Game of Thrones budgets, call it the morning show, and it's okay. But if you look at the budgets, each of those episodes costs what Game of Thrones, what HBO was spending on Game of Thrones. I would argue that relative to the amount of money they're spending, it's really, really anemic content. But here's the kind of weird thing. It doesn't really matter because five or six or $8 billion spent on content for Apple,

it's literally the sweat off their brow. So this has become more like, it's not even the streaming wars. I think of it as the capital wars. Give us your view. You've looked at the history up until now. Take that history forward. How would you assess the current landscape? Well, first of all, just to add to that list that you were talking about, about how much of an outlier Netflix is, we also have to think about regulatory issues and the fact that

the DOJ and other anti-trade, they just left them alone. They would have been all over Time Warner if they did some of the things, you know, if they were making some of the moves, Netflix did. But let's take a second and just to look at, you know, a couple trends. I personally, if I had to go back, you know, five years or whatever, I mean, none of what I thought should happen, and I said this at the time, did happen. But, you know, it's left us in a moment. Sometimes you write about content all the time. Sometimes it takes us a couple of years to realize what was going on at the time. We know now that we are straddling two eras. This is happening right now.

This is one of the most incredibly dynamic moments in content creation of the last quarter century. There is no way that this present equation is sustainable. There's going to be further consolidation, there's going to be further rules broken, and there's going to be, unfortunately, a lot of jobs lost. I mean, that is a reality. But I would say that let's start with Apple for a second. Because in a way, you take Tim Cook and John Stanky, two incredibly successful people. Tim Cook, I mean, I wish Apple had bought Time Warner. They could have bought it with the change in their couch cushions.

But Tim Cook said, and I think Eddie Cue wanted to, and they certainly were interested in HBO, but they didn't want TBS and Turner, the Turner problem, TNT. And Tim Cook said, look, we do a few things for our shareholders. We have a very small product line. We have limited product line and we have a limited scope of what we do, but everything we do, we do really well. And we really know it. We don't know the ad supported businessorted business, which, of course, at Time Warner was a big, big problem. The bundle was a huge problem. And so we're not going to move forward. Then you have John Stanky, who's in Dallas running a very successful telephone company.

They haven't had experience with that. And he says, no, no, we can do this. We're going to jump in. I mean, forget about the $16 billion we have to give in dividends every year. We can afford to do this. And so they come and they take over Time Warner. And it turns out that vertical integration is a lot harder than everybody thinks. And they don't have the money for it. And so your use of the word capitalization, I think is most instructive

because if AT&T says, oh my gosh, we can't afford this. We can't afford this war. We can't afford to do what we're doing. And they basically get out of it. That should send a signal. I mean, obviously it didn't to John Malone and to David Zasloff.

They are climbing Everest in a cold day in their shorts in some respects, because forget about the debt that they have. This is a very, very, very expensive game. Yeah. And let's talk about this. And as you've probably figured out, my questions are comments posing as questions that you get to comment on. I think, is it called Discovery Plus? Discovery Warner Brothers. Discovery Warner Brothers. And this isn't on a risk-adjusted basis a smart comment because technically I'm not an employee, but I'm a contractor for Discovery Warner as I'm doing a show on CNN, premiering in March. Anyways, but that makes no fucking sense to me either. I don't get it. If I had to, my sense is you have this ad-supported culture, which is entirely different.

It's like, just do anything to get eyeballs so we can sell more Nissan ads. And then there's the artisanal part, HBO, which is critical acclaim, do just outstanding work, and that will build over time. And people will pull out their credit card for outstanding work, even if it doesn't appeal to a huge audience. I don't see those two cultures coexisting. And I think at some point in the next six to nine months, and I usually get my predictions right, but I usually get the timing wrong, so maybe it's more like 18 to 24 months, Zaslav is going to provide all of the calories, and that is the expense of trying to build

a competitive streaming network with CNN Plus and HBO, with all of the bad taste of a declining ad business. And that is, he's going to take all the profits of a very profitable declining ad business and fuck that is, he's going to take all the profits of a very profitable declining ad business and fuck that up and not show the growth that very expensive streaming networks have been able to provide. He'll have one quarter where it's all the calories and all the bad taste. The market will throw up on this thing because Stanky wanted one class of shareholders to try and maximize his equity stake. And the thing's going to be split up again. And I actually think your dream of a

singular HBO that's just valued on the merits of HBO might be in the offing because I do think it's a trophy asset that someone might come in and pay up for. What are your thoughts on the Envision, Discovery, Discovery Warner, NewCo, if you will? I i mean let's take a half a step backwards for a second because bob arger is arguably one of the most successful media execs of the past quarter century by myriad measures but i thought he should have bought time warner he i did write in the book and i think it kind of made some news that that there was a conversation with Jeff Bukas. Unfortunately, it came pretty close to when AT&T was going to close the deal. But I still think if I were Bob, I would have gotten in there because they could have taken the Turner Networks ad supported and ESPN, put those together, spun them out and had a different entity.

And you would have had Warner Brothers and Disney Studios. Just think of the franchises combined. That would have been so impressive. The way that Warner Brothers discovery now is structured, it's almost like Malone built it for someone else to come along in a year or two, like you were saying. It is, if you really look at it, I mean, they have two enormous challenges. They have to, what is it going to be, $3.5 billion in debt and note to file? You can't fire your way, you can't fire

enough people to get to $3.5 billion. So at the same time, they're going to be trying to increase those development budgets and give Casey Bloys at HBO Max and the Warner Brothers Studio for movies the money that they need to compete, they're going to be wrestling with some big debt covenants, and that's huge. And then the second thing is scale. I mean, obviously, they have a footprint internationally that AT&T didn't, but I'm not sure that there's enough scale. I'm not even sure to tell you the truth. The big question for me, Scott, is what defines success? Because I think

if you're Amazon, Apple, maybe Disney, these called streaming wars are going to be advantageous to you as part of your entire company, the data and everything else that goes along with them. But to a pure play, I mean, it's very interesting. We've come into a new era now with Netflix. The street is starting to say to Netflix, okay, you've been on your drunken bender and spending, where are some profits? At the end of the day of these streaming wars, are there enough net profits to justify all these expenditures that are going to be made in the next several years if you're just a standalone streamer? I don't know. I'm not so sure. I'm curious to get your take. And just going

back to what you said earlier, I've thought this is the gold. I think this is original scripted television is the defining art form of this era. If you look back on, I don't know, furniture in the fifties or impressionist art and 18th century Paris or whatever it might be. I just don't think just through the amount of sheer resources and the talent those resources attracts, I don't think anything comes close to original scripted television at this moment right now. It is that there has never been a moment in history where it's better to own a really great couch and be into edibles. I mean, it's just, I don't think it's ever going to be anything like this because as you said, it's unsustainable. There's no way. It's also unmanageable, right?

Because how many times have you been at lunch or dinner with people and they say, by the way, have you seen, you know, Ricky Gervais's? Like, there's so many shows that it's like you can't even keep up with it. We'll be right back. To help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So, tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts. Support for the show comes from Alex Partners. In business, disruption brings not only challenges, but opportunities. As artificial intelligence powers pivotal moments of change, Alex Partners is the consulting firm chief executives can rely on. Alex Partners is dedicated to making sure your company knows what really matters when it comes to AI. partners spoke with nearly 350 tech executives from across North America and Europe to dig deeper into how tech companies are responding to these changing headwinds. And in their 2024 Digital Disruption Report, Alex Partners found that 88% of executives report seeing potential for growth

from digital disruption, with 37% seeing significant or even extremely high positive impact on revenue growth. You can read both reports and learn how to convert digital disruption into I'm going to read your thoughts specifically on CNN and CNN+. Do you think there's opportunity for news and politics in a streaming subscription world? I think one of the things that's happened, and it's been, I think, even bigger than any of us imagined when Roger Ailes started Fox News the way he did. I think what's happened is cable news is basically akin to a religious experience. We tune in Tucker, Sean Hannity, or Rachel Maddow or something because we want to be with – it's almost like our religion, right? So we're going to go and we're going to hang out with people who think the same way that we do. And we're going to take comfort in that.

And as a result, you have a very bipolar kind of existence, which magnifies the dividedness in our country. But it means that the CNN value proposition of, you know, straight news operating between the 40-yard lines and trying not to be overly polemical about what they're covering, there seems to be a real challenge to find an audience for that. The other thing is we can get it on our phones. So, you know, I mean, I found out on my phone last night about what Putin was doing in Ukraine. I didn't need to tune into a set. I didn't need to tune into a particular network. That is a real challenge.

And maybe you do it through personalities, but it's still going to be hard. So I'll make the bold case or the bold case comment and you respond to it. I, too, learn about it on Twitter and I learn about it on the CNN app. But I get sort of a taste. I get the cliff notes. And I would be interested in having Fareed Zakaria take 12, 15, 18 minutes that night uninterrupted, no bullshit telling me that I have restless legs or I'm bipolar or I need a light beer, and just give me a thoughtful, more extended, well-produced breakdown of what's going on

today in Ukraine. I used to get that from Lester Holt or Dan Rather or Peter Jennings. I don't even know. I barely even know where to find broadcast news anymore, and I cannot endure ads. I've gotten used to not enduring them, and so I'm just allergic to them now. I can't handle it. So the question becomes how many people with a triple digit IQ are willing to spend even more money to get that delivery system. And, you know, look, one of the things since the breakup of the bundle, we always used to complain about our 140, $160 cable bills. Now people are looking at them with fondness because they all of a sudden have figured out, holy shit, we're spending a lot more money than before because we're having to pay for everything and

everything's beyond a paywall. And we have to pay for New York Times cooking and we have to pay for everything. I'm not sure I know that people like you exist and that will be a service. But when you talk about the challenges that Zaslav and Malone face, are there enough people willing to do that? What kind of price point do you set given the fact that there are competitions? How do you navigate this minefield? Because the Atlantic is going to have something coming out too. The New York Times is going to have something. I mean, there's an abundance of choices and it's very, very unclear to see how you get to a dominant position that's going to be financially viable. So I've always thought when you finish writing a book at that moment for a small amount of time, you know as much or more than almost anyone in the world on that topic because you've literally immersed yourself in that topic kind of nonstop for 12, 24, 36 months. So right now, I think you know as much about streaming as almost anyone in the world,

just by virtue of the fact that you can't really understand HBO's history without understanding all the players and the dynamics leading up to now. So I'd love to just, I'm going to throw out some of the streamers and I'd just love to get the cliff notes of your thought and sort of a lightning round on their prospects. So Hulu, what do you think, tell me what you think happens with Hulu. It's going to get gobbled up by somebody pretty quickly. Who do you think the likely acquirer is? Well, you know, I think it's going to be interesting to see whether or not Warner Brothers Discovery is going to have the financial night to do it. If not, I could imagine Disney getting back in and maybe doing something, but I don't think it can stay the way it is now. Peacock.

I'm not sure Peacock's actually in the streaming wars. I think they're trying not to be in the streaming wars. But at the same time, obviously, they've had some success over the past couple of weeks with the Olympics and getting new subscribers. It's just a question of— Oh, so you would describe that as a success. And generally, I will defer to your judgment on here. I thought of the Olympics as like, we've jumped the shark. I don't know. I know very few people who actually watched the Olympics, but it was a success. We were conflating a lot of things, right? So if you deconstruct this,

I mean, did the Olympic brand suffer? Yes. Were the ratings, you know, not what they had wanted or not what they expected? I mean, off Pyeongchang, clearly, in a dramatic way, yes. I'm just talking about in terms of the Peacock silo, because there were challenges for Peacock in Tokyo, but they seem to fix a lot of those challenges like navigation and pick up new customers. So again, I'm just sticking to the streaming wars. And the big question always with Comcast is, is there more out there? Is there another acquisition? Is there a merger? What's going to happen next? But I don't think that they are in the streaming wars the way others.

I mean, look, it's amazing what's happened with Paramount. I mean, their market cap has just been destroyed in the past month. I mean, it's brutal. Paramount Plus, well, you know, that shows what the market thinks of streaming or the potential of streaming. That's really difficult. So you're not a fan of Paramount, but let me go back. It strikes me that Comcast, they still have a quarter of a trillion dollar market cap. These are very smart, aggressive people. And I don't think Peacock is going to get them where they need to be. They strike me

as a likely suitor for a big acquisition that if discovery warner throws up and the stock goes down or they come in for hulo i'd just be if someone said there's a big acquisition this morning in the world of media streaming i would bet comcast would be on the the acquisition side of it it feel it just feels to me you you don't fuck with those guys. Those guys aren't going to just muddle along. Yeah. I mean, look, a lot of people thought that they were going to be there before discovery was in terms of AT&T. Obviously though, remember, again, this is something that Netflix doesn't have to worry about. Regulatory issues are significant. When AT&T took over Time Warner, there was a 17-month delay, which Stanky continues to talk about,

in terms of how deleterious it was for them in the streaming boards because they were on the sidelines. Comcast went through that with Time Warner Cable. So you always have to factor in what Washington is going to be doing as well. And, you know, we probably going to have a change of leadership this November and possibly in two years. And that also has repercussions in terms of what could be done and what kind of justice department these companies are going to be dealing with. There's a lot of moving parts. So what about Disney Plus? I mean, look, Disney Plus has been formidable. And I think that for the most part, I mean, I know last fall they missed their numbers,

but they seem to be on a pretty good course with impressive numbers. And now they're just, you know, battling out with content and trying to make the most out of Marvel and all these other, you know, things that they bought through the year and monetize them and get everybody to come over. But it's, you know, I keep on saying this, but it's so expensive. Netflix. You know, I, I, I think we're starting to see some, I mean, I'm not a buyer of Netflix, uh, like in terms of the stock. And I think that it's been a sui generis position they've had because again, their investor class, they were the opposite. If, by the way, people keep on talking to me, why didn't Time Warner basically buy Netflix in 2005? Or why didn't they build an alternative? They couldn't have done that for so many reasons, including they

had just been through that ground war in Southeast Asia called AOL. If they went to their investors and said, hey, we want to do another internet thing, they all would have been fired. But I think that Netflix hasn't had to show profits. And now we're starting to see that people are paying attention to what kind of profitability that company can offer. And, uh, at the rate that they're spending, that is a big, big question. I mean, there's been an international growth, but I don't know if there's enough international growth overseas, Scott, to, to, to really combat, um, this huge expenditure. And HBO Max, we talked a little bit about it,

but how do you feel that they're doing? I mean, look, if you have, I mean, I did 757 interviews for this book. I admit I'm not particularly proud of it. I have a disease. I have a tendency to keep digging. But the one thing that I did discover was that Casey Bloys, who runs HBO Max and his team there, they're the varsity. They are really good. They've been together for quite a while.

They understand what they want to be. And even though AT&T kind of disappointed them in terms of how much money they had to spend, they roughly know how many hours they have to produce. And the other thing is the community loves them. So it depends how you want to define success. But in terms of just an entity that is producing great content, that's an impressive place. So and I'll end here, but it would be impossible for me not to ask you this question. What are two or three pieces of content that you're watching now that we should know about? Well, I mean, obviously I'm a big Succession fan. I think it's wonderful. I'm also a big Euphoria fan. I would never have guessed that I would be.

It scares the hell out of me as a parent. Yeah, me too. Of course. And it can be an ugly business, but I love the way Sam Levinson tells stories and those characters. More importantly, you know, Ricky Gervais did this show. Afterlife.

Afterlife, which I thought was so beautiful. It's just so beautiful. He's so talented and is just, you know, I just, I thought it was great. And, but, you know, I have a hard time. I happen to like to read book, God forbid. So I have a, I've been limited. I mean, there's just limited bandwidth. I mean, if you're going to do your job, if you're going to hang out with your family, if you're going to work out and exercise, I mean, how many days? I mean, you know, as it is, how many hours do you have to watch all this stuff? You got to commit. Make time.

This is the golden age of content. To not watch a lot of streaming video is to ignore the golden era. But I have podcasts that I have to listen to too, like yours. So there's just not enough time. I hear you. James Andrew Miller is an award-winning journalist who has worked in politics, media, and entertainment in a career spanning more than two decades. He's also the author of several books, including Powerhouse, The Untold Story of Hollywood's Creative Artist Agency, Inside the World of ESPN, and Live from New York, An Uncensored History of Saturday Night Live. His latest book, Tinderbox, HBO's Ruthless Pursuit of New Frontiers, is out

now. He joins us from his home in Manhattan. Jim, I absolutely love this. Thank you for the walk down memory lane and indulging me in my hobby here. Best of luck with the book. Well, thank you for having me. And again, I so enjoy your work. Congrats. Algebra of Happiness. I've been thinking a lot about Elon Musk's meme last week where he compared the prime minister of Canada to Hitler. Look, I'm not gonna pile on. I think he regrets it. He deleted the tweet or I imagine he regrets it. I'm pretty sure he did it while he was high.

I can't imagine anyone sober deciding to compare the prime minister of Canada to Adolf Hitler. But I've been thinking about the importance of guardrails. And that is, I think every young man and every young woman, or specifically boys and girls, need someone in their life that every day tells them, I love you immensely and you are wonderful. I try to every day, even when I'm really upset at one of my boys, which is a function not only of what they do, but the mood I'm in,

I try to make sure, especially when I say goodnight to them, that I do something for them, whether it's rubbing their back or making a plan with them that just reinforces that I just, I love spending time with them. I think they're great. Whenever they make an attempt at humor,

I try to dial up the laughter to give them the confidence that they're funny. I remember how much confidence I got from being funny or at least thinking I was funny. There's just nothing that replaces, if you tell a boy or a girl every day that they're wonderful, at some point they're going to believe you. And that is really important. Now, having said that, at an older age, men and women, and I think specifically men who tend to be more risk aggressive and more reckless, I think they need people who will tell them that they are wrong. I think they need guardrails. And I'm really worried about the number of men who aren't establishing relationships with women or just establishing relationships with whoever, other men, or maintaining strong relationships with their parents. And they have no guardrails. And they do stupid shit.

And they have nobody to tell them, that is unacceptable. That is wrong. And one of the real downsides, I think, to so many young men being shut out of the dating market, if you will, I think this is really the existential crisis of our time. And that is, we're engaged. Whenever big tech comes into a market, it consolidates it. And the mating market has been consolidated because of these online dating apps of poor performance in high school and colleges putting in place admittance standards that play more to female attributes. And by the way, women deserve it. We've seen a flip in college attendance. It used to be 60-40 male to female. Now it's 40-60. It's actually two to one female to male graduates because men drop out at a greater rate.

I think that is a good thing on a lot of levels. Women have caught up and surpassed men in terms of opportunities. And quite frankly, they deserve it. So I'm not suggesting we reverse those trends. What I'm suggesting is there's going to be this unintended consequence of so many men who are unattractive to potential mates that are locked out of relationships. And one of those second order effects is they don't have guardrails. The elemental foundation of any society is family. And one of the keys to family, specifically for men, is having a partner or relationships

that quite frankly tells you to get your shit together. Put on a shirt, blow dry your hair, get a job, stop drinking, don't get into fights, be nicer to your mother, whatever it might be. Just in sum, get your shit together. And I think you need to foster those relationships. You need to welcome them. I get consistently, even at my age, angry at my team when they say, you shouldn't say that, or that's a mistake, or that great story idea you think is genius, or that riff you went on. Well, Scott, you know what? It's not true. It's not true. Your data's wrong, or the way you characterize it is reductionist and makes no sense. And I immediately get angry and hate that person for about a second and then

recognize how important that is and take time to write them an email and say, I appreciate the pushback. I have sent, no exaggeration, 50 to 100 emails over the last year saying to people in my life, I appreciate the pushback. Because it's important. Because without those guardrails, you make really stupid decisions. And I'm not talking about some dumb meme from the world's wealthiest man. That's not what I'm talking about. I'm talking about your inability to read the label from inside the bottle. If you are blessed with people who care about you and are willing to tell you when you screw up and in a thoughtful, measured way, explain how you screwed up and how you can fix it, that is a gift. Run to those people. We try

to avoid pain and it's painful in the short run. So we have a natural tendency to avoid those people. And if and when we become more successful, we tend to find people start to edit their content and maybe they're impressed with you and maybe they kind of give you just good news or constantly tell you how awesome you are. And here's the thing, you're inclined to believe it. Fine, enjoy it, bask in it, but find people who care about you, who are willing to tell you when you screwed up. Erect those guardrails. It's important. You can't get very far without having ballasts in your life. And those ballasts are people who care for you

and are willing to tell you when you got it wrong. Our producers are Caroline Shagrin and Drew Burrows. Claire Miller is our assistant producer. If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prof G Pod from the Vox Media Podcast Network. We will catch you next week on Monday and Thursday. digital disruption, with 37% seeing significant or extremely high positive impact on revenue growth. In Alex Partners' 2024 Digital Disruption Report, you can learn the best path to turning that disruption into growth for your business. With a focus on clarity, direction, and effective

implementation, Alex Partners provides essential support when decisive leadership is crucial. You can discover insights like these by reading Alex Partners' latest technology industry insights, available at www.alexpartners.com. That's www.alexpartners.com. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters. your customer data into real-time connections across AI-powered email, SMS, and more, making every moment count. Over 100,000 brands trust Klaviyo's unified data and marketing

platform to build smarter digital relationships with their customers during Black Friday, Cyber Monday, and beyond. Make every moment count with Klaviyo. Learn more at klaviyo.com slash BFCM.