This Week in Startups - FTX fallout: Sequoia's LP letter, SBF's crisis comms + Lon Harris on Andor, $DIS earnings | E1609

Episode Date: November 11, 2022

J+M kick off the show by breaking down even MORE fallout from the FTX saga: SBF's Twitter thread (2:26), Sequoia's letter to LPs re: marking its FTX investment to $0 (12:02), and more! Then, Lon Harris joins to discuss Andor's brilliance (20:49), Disney's earnings (32:42), and Netflix considering live sports! (48:45) (0:00) Jason tees up today's segments! (2:26) More FTX fallout: SBF's notorious Twitter thread (10:32) Vanta - Get $1000 off your SOC 2 at https://vanta.com/twist  (12:02) SEC and CFTC probe FTX, Sequoia's letter to LPs (19:19) Mayfair - Get 4% APY on your idle cash automatically at https://getmayfair.com/twist (20:49) Lon Harris joins to break down Andor's brilliance (31:15) House of Macadamias - Get 20% off at https://houseofmacadamias.com/twist by using code TWIST20 (32:42) Disney earnings: Disney+ subscriber growth, how to integrate Disney+ to its parks and merch segments, and more (48:45) Netflix considers live sports and recommendations from Lon! FOLLOW Lon: https://twitter.com/lons FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1

Hey, everybody. It is Thursday. First up, we're going to break down this crazy FTX news. Sam, Bankman-Fried, as you know, has been in some hot water the last three or four days. We've been talking about it every day here on this weekend startups. Well, he just did a Twitter thread for the ages. The Wall Street Journal also reporting that SBF told investors that Alameda research, which is FTX. His sister company, if you've been following this craziness, was lent $10 billion in customer funds, co-mingling, really bad, red flags everywhere. And Sequoia posted a note about their loss with FTX. They're writing it down to zero. But it's in a fund that's made billions of dollars. So really a lot of transparency in a really interesting moment where Sequoia shared a note to their LPs, something that venture firms never do.

And of course, we're going to talk about streaming because it's this week in streaming every Thursday here on this week. And startups, Lon Harris is back. We're going to talk about Disney earnings and a lot of ideas I have. and Molly as well for a Disney Super app. What would that look like? Disney's app did everything. Netflix is getting into sports.

And the greatest Disney plus show ever is Andor. If you aren't watching it, we're going to break down why and why you need. Even if you hate Star Wars or you've never watched Star Wars,

this is the best entry point ever. Choose Star Wars. Of course, I always ask, Lon, at the end of the show, what should we watch this weekend? And he has two amazing, amazing, amazing, amazing recommendations. One of them is for kids of the 80s and the other one, if you loved

boardwork empire, Rocky or the Sopranos, it's got a second recommendation that I am going to watch tonight. Stick with us. It's going to be a great show. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at Vanta.com slash twist. Mayfair helps venture-back companies earn 4% on their idle cash automatically. No market risk, no switching banks required. Go to get mayfair.com slash twist to get started today. And House of Macadamias is the next big health trend. Get 20% off your first purchase at House of Macadamias.com slash twist by using code Twist 20. All right, Molly.

I hate to make this this week in crypto every day, but I just interviewed SBF two or three weeks ago at that private event with like $252,200 people. Man, I got to get that tape. I know. Anyway. Were you sold?

Were you all? I love this founder? No, I was talking just sort of about regulation with him. And so without getting too much into detail because I agreed to keep it off the record. But, you know, we were talking about regulation. I asked him a lot of tough questions, but I didn't get the sense that the House of Cards was about to crumble.

So. Yeah. So what really today is, honestly, is this week in amazing stories because we're going to talk about this for a minute and then we got Lon coming up. But either way, this is like the drama that is going to, I mean, call Adam Newman. Like, I want him to play SBF in a weird way. But here's the latest that has developed even since we did our emergency pod and yesterday. This morning, SBF took to Twitter to apologize for the collapse of his crypto-amproids.

Empire. First, he said, I'm sorry. That's the biggest thing. I effed up and I should have done better. He posted a long Twitter thread following up his apology by tweeting about, for example, his lack of communication. He said, my hands were tied during the duration of the possible finance deal, but then he also had one other tweet was like, I was too busy to talk to anybody about what was going on. What? Which is a tough. I know. Like, honestly, this is the, yeah. I mean, the CEO's job is to communicate. This is manic. It's just, well, and it's getting distracted by like all the wrong things as opposed to here's what's happening in our business. Meanwhile, he assured FTX international users international. Remember that we're talking about FTCS.com.

Two different companies. He assured them that FTX International is fine. I'm sure that's true. Everything's fine. Says there's more than enough assets to cover deposits. But he said FTCS international does not have liquidity for delivery. he went on to peg some of the reasons for this complete collapse on, quote,

poor internal labeling of bank related accounts. Oh, they put the wrong labels on. They were like, this is customer accounts. This is the operating budget. I guess like this one is the mark, but this one is fidelity,

but they forgot to put a little posted note on that or something. Unclear what that means. He then said he thought he was, because of this poor labeling, they were substantially off on their sense of users margins. I thought it was way lower, said SBF. He thought that FTX's margins, that the leverage was zero, that they hadn't loaned out any money, I guess,

that USD liquidity was ready to deliver. He thought that was 24X, the average daily withdrawals. But the actual numbers were that they were 1.7x leveraged and had 0.8X Sundays withdrawals. He also pointed out that there were $5 billion of withdrawals on Sunday, which is where we should note that on Monday, he then tweeted, everything is fine and we have more than enough liquidity. But those people were able to withdraw. So as much of a house of cards or shenanigans or mistakes are occurring here, some number of people were able to get their money out. I guess so before. And then they froze, well, they froze withdrawals for a while.

Yes. Some number of people were definitely able to get the money out. It seems like now he says, and here are the real headlines, right? He's like, they're trying to raise money. They have some letters of insignificance to raise money to try to pay people back. Okay. And that Alameda research will be winding down trading. And that at some point he said he might have more to say about a particular sparring partner.

so to speak. But says that for now, all I'll say is, well played, you won. Oh, he's referring to CZ, who was going to buy it,

did the rugpole, liquidated his position, all the stuff. And, yeah, CZ just said he's not buying this thing. Yesterday, that was part of the,

or that was two days ago. The Wednesday he said he's not going to buy it. Anyway, after Dillard said he's not going to buy it. The most interesting thing about all this is, and this is always like really good psychological, human thing, is that people who are screwing,

up the most, Molly. They blame other people in some cases. They blame circumstance. And then they have these, what they call it, a persecution complex. You know, you think of like frauds like Madoff or Theranos, Elizabeth Holmes, you know, like the world's against them. It's not true, whatever. So this is good that he is, in fact, owning this. That to me shows something that maybe this is, without knowing, obviously, but that maybe he did get. caught under, he got a, he got ahead of his skis kind of situation. I mean, yes, I think like when judges, for example, look at things like this, they do sometimes want to see remorse. And so it would be wise to show remorse when, for example, the Wall Street

Journal reports that Alameda research borrowed, oops, which I think is a loose term, $10 billion in customer deposits from FTX. So, or as, One of our notice puts it, they sold $10 billion in customer deposits to send to their hedge fund. According to this investor, FTX had $16 billion in customer assets and lent out over 50% of them to Alameda. SBF described the decision as a quote, for judgment call. Alameda not only collected fees from the exchange. They pursued riskier bets to bump up revenue, including arbitrage, which is buying coins cheaper on one exchange than selling it on another for a higher price. market making offering to buy and sell assets on crypto exchanges throughout the day

and collecting a spread between the buying and the selling price. And then, of course, yield farming, which is the thing that he himself described as almost exactly a Ponzi scheme, which is investing in tokens. And Matt Levine described it. He described it. And Matt Levine was like, you've described a Ponzi scheme word for word. And he was like, yeah, that's fair. That sounds right. Fair enough.

Yeah. That was investing in tokens that pay interest rate like rewards. And this is like the kind of thing that you were talking about, which is like, you're saying has 18% yield. Where the hell is they? Who's paying the 18%? Just to take you inside a gambler's mindset, which he has, because I've seen this. Gamble's always thing, especially if they're good at what they do, that they can thread the needle and they can come back, right? So they let it ride, right? And they always think they can come get whole because they probably have so many times. So when you're really good at gambling, I know some people who are like really pro gamblers,

and they can always figure out a way to pull out a win. You got to win somehow. They put their nose to the grinds down enough. And I think he's that kind of guy. And I remember when I was in LA, I'll obscureify this a bit, but let's just say somebody who had client funds and also made a lot of money, was playing in high-stakes poker games from what I understand, unverified, unverified, unverified. And then he started losing,

they started playing out of the, not his money, but out of his customer's money in their fund. So this was a venture capital fund in this case, it wasn't, but let's imagine it was. Yeah. It'd be like taking the venture money and then playing blackjack or poker with it. Now, if you're in your mind, you're like, well, they're just bankrolling me, but I'm a winner. I'm a net winner.

So it doesn't matter where I pull the funds from. I'll be able to put it back until you get a couple of bad beats and then you have no more bankroll and then you can't come back. And this just seems like a lot of gambling going on. And it seems like SBF is really good at finding Edge. And this is something that gamblers go through. They find Edge. They find a casino where, you know, the office. are a little bit better.

They find a weak poker game where there's two or three bad players who are wells. They just, they find edge wherever they can. Yeah. When they think they find an edge, they try to exploit it,

but you could also get caught and, you know, just lose six or seven coin tosses in a row, even though the statistically, it's hard for that to happen. It's also inevitable that that happens. Right. If you happen to run into it,

you know, it can be bad. Listen, founders, very important. If you're in SaaS or you're in services and you store customer data in the cloud, you need to be Sock 2 compliant yesterday. And you might be hearing this and you may not even know what sock two is or maybe you're heard about it.

You know you're behind the eight ball. Let's get this solved today. This week, I want you to be compliant from a third party so that you can close big deals. Do it now. Do not look like a dope when you try to close a deal. And they're like, do you have sock two? And you're like, uh, that long pause. That's going to be the sound of them going to your competitor.

use Vanta, which makes it incredibly easy to get and renew your SOC 2. On average, Vanta customers are SOC2 compliant in just two to four weeks and compare that to three to five months without Vanta. And they partner with over two dozen audit firms who have been trained to file SOC2 reports directly within Vanta. I was able to invest in Vanta. It's a great company. A bunch of my portfolio founders have used Vanta. They've had amazing experiences. They give it their highest rating. And let's just be clear here. If you're not stock too compliant, you can't close measure. customers. It's that simple. It's one of the first things they're going to ask for. Here's the best part of this ad read. Vanta loves this week in startups. They want to support founders and they want to support

founders early. And they don't want you to break the bank. So they're going to give you $1,000 off. Think about that. Get $1,000 off at vanta.com slash twist. V-A-N-T-A-com slash twist. Get your sock to now. The thing that I found most interesting was Sequoia, which I guess was getting dunked on, because they put money in and they were saying, oh, there was no diligence, yada, we were speculating about that as well. Like, where's the diligence here? By all these venture investors, they put out a note. Did you see that? Here it is. I see the note. I was not on that because I was still looking at, I was still going to point out that the feds seem to have been on to the gambling even before. Is that right? Oh, unpack that person. Bloomberg reported that the SEC and the CFTC were looking

into FTC months ago, investigating mishandling on customer funds check. And FD. FTCX's relationship with Alameda research, check, both of those things. FTX International might fall outside of the regulator's jurisdiction, but the SEC and that CFTC are looking into how FTX and FTX U.S. are structured and how related they might be. So there's all kinds of noise. This is where compliance comes in. In governance. I mean, speaking of Sequoia, like, this is a governance, right?

So, like, you've described the gambler's mindset. The question is, who was in place? clearly no one at FTCS to make sure that this didn't become a casino and state a business. If they had an outside accounting firm and there was a board of directors and there was a compliance officer, all that stuff could have resulted in some financial accounting that would be brought to the board, Molly. Yep. At once.

And it wouldn't be brought from the CEO. It would be brought from the external accounting firm that would say, hey, here's, you know, hey, we just did this audit, or we did this review, or here's October's numbers, here's the cash in the bank. And, you know, those kind of accounting folks would have just checked everything. And you might have gotten an early signal here, right?

So. Yeah. But yeah, so here's what Sequoia said. Sequoia Capital had previously invested in FTX. There has been some dunking about the internal Slack messages that were apparently sent during one of SBF's, one of SBS pitches to them, which do sound a little, you know. Oh, there were.

I don't understand a little group thing. Oh, the I love this founder. That's why I made that comment. Oh, okay. Yeah. Comments. Like, you know, that here he was talking about how he wanted to make FtX into an everything app and that there was a lot of behind the scenes like, we love him.

This is so great. I'm a 10 out of 10. And then later, you know, he turned out he was playing League of Legends the whole time that he pitched people. I don't know. Whatever. I don't, I totally will probably never understand the obsession with the Everything app, but that's separate. Here's the email, Sequoia Capital sent to their LPs and then tweet it, like, put this out publicly.

They said, we're reaching out to share an update based on our investment in FTX. In recent days, a liquidity crunch has created solvency risk for FTCX. The full nature and extent of this risk is not known at this time based on our current understanding. We are marking our investment down to zero. Sequoia Capital's exposure to FTCS is limited. We own FTCS.com and FTCS U.S. in one private fund, Global Growth Fund 3, FTCS as not a top 10 position in the fund,

and our $150 million cost basis accounts for less than 3% of the committed capital of the fund. The $150 million loss is offset by $7.5 billion in realized and unrealized gains in the same fund. So the fund, they note somewhat dryly, remains in good shape. So, just so people understand, when you see some of these big bets,

What they're saying here essentially is, yeah, you're going to have zeros. You're going to have outliers that overperform. And then we're going to have ones that disappoint. That is the nature of business. This is a great note, by the way. Yeah. Because what happens is when you are a fund manager. I'm sorry, I missed what you said.

Oh, I just was saying it's math, right? It's great in the sense that it's great communication. Perfect. It's super direct and super straightforward. And also it's got like math. Math. That makes you feel better because you're like, oh, okay, these numbers are fine. but here's the underlying issue.

It's kind of almost like a VC Sunday school. When you're in LP and a fund, and you'll, yeah, I'm going to presume in the coming years, as your career goes on, you'll take advantage of perhaps opportunities that come up for you to LP other people's funds because now that you're in the game, people might offer you if they want to do your favor.

And so when you're in LP in a fund, some people want to know, oh, what are all the names in the fund? And so you get a yearly audit. And it says, here's everything that the fund invested in. And then sometimes it has like, weird names that are like some L, some, I don't know, I'll see, but some company name that doesn't match the actual name of the company, right?

Because, you know, they invested when the company was being formed or whatever. And you're trying to decode, like, what did they invest in? And then sometimes you find out, oh, my God, this fund has Instagram in it or this fund has, you know, FTX in. And then you read the headline. So you're an LP, right? You're seeing this outside signals. Like, oh, my God, I got a winning ticket.

And your winning ticket is in this group of tickets that's in a fund. And then there's like, what is the fund's value? And then there is what is the fund realized, right? So you have like, here's what we're marking the fund at. Here's what it's worth on paper. And then here's the cash or equities we've distributed to date. And as a fund LP, what I like to do is just not start looking at all the tickets, right? All the bets that were made.

I'm like, this is a road to getting distracted. I put a fund manager in charge of making 30, 40, 50 bets in a fund. Let me know how it all works out. What some people do is they like the rush of getting in there and like tracking all the individual companies. And that's what I believe a note like this is. There's probably people who have been looking at their fund statements every year and they see, holy cow, that fund has picked the highest profile company. You know, the front has, you know, Airbnb in it. It would be very reasonable for an LP to be.

at this. You know, I mean, like, of course. But that's not what you're doing. You're not doing. You're, you're betting on a, a mutual fund essentially, a collection of assets. Yeah. So this is not to the professional LP who looks at it and says, yeah, we put in a hundred million. We hope to get 300 million. This is the person who put in them, I don't know if they have a person with a millionaire, but this is a person who's like, oh my God, I'm, I'm sweating, which is a family term, I'm sweating every bet. There are people who gamble who want to watch every play of the game.

There are other people who gamble. Let me know after the game's over, you know, Sunday night, how I did all my tickets. I picked a bunch of football games on Sunday. Tell me how I did at the end of the day. Other people want to sit there for 12 hours and grind their teeth.

This is for the teeth grinders who are swearing every bet. I think it's very smart. And then did they, they tweeted the letter knowing it would get leave from their Twitter account, which is a superpower move.

Oh, because they knew the letter we get leaked. They just went ahead and tweeted. Yeah, which was also super smart. Which is like a super flex. We're like, yeah, we lost 150 million in a fund that's up 7.5 billion or whatever it is. I mean, that is seriously. Such a power move. It's a beef cake. Okay. And next up, Lon Harris. That's right. Talking about Disney earnings, Netflix getting into sports and Andor. Here he is. There we go. Inflation and rates are two of the hottest topics right now. We talk about them every single time. We do an all-in podcast. And we talk about them increasingly. on this weekend startup. Most founders don't know how to leverage this inflation and these

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G-E-T-M-A-Y-F-A-R dot com slash twist. Get Mayfaird.com slash twist. Hey, Molly, it's Thursday and you know what Thursday means. The Lonster. I'm here. Lon Harris is here. so much to talk about. Yeah.

Disney's earnings came out. I know that. But most importantly, Andor had its 10th episode. Only two left this season. You know what? If this was the last episode, I would have been Chef's Kiss at 10th. Yeah. I got no complaints.

I'm playing with the house money. Well, that's right. Because we got the conclusion of this three episode prison arc written by Bo Willem and the creator of House of Cards, by the way, who knocked this out of the park, I thought. Wow. This three episode arc where he's been in the prison has been just completely stellar, I think. I just am not caught up.

Feel free to, like, spoil away, because I will be, but I just watched the episode where he got sent to the prison and I was like, whoa, whoa, plot twist. We're only a few. So you met Andy Circus and his little table of guys. Yeah. Oh, no, you just saw him get sent to the prison. Oh, okay.

Yeah. That's next. The prison itself is extraordinary. the show had zero lightsabers. Yeah. To date. Mostly politics. No force chokes.

Most episodes didn't even have a blaster. Is there any, maybe? Is there force even? No force. Nobody's used to force. Nobody's used a force. No Jedi has showed up. And it is as taught and as intense as any of the most intense moments of Star Wars.

It's a plus. Yeah. It's the best, I think it's the best Disney Plus anything so far. best show, it's the best thing I've seen so far that was made for Disney Plus, I think. Mandelorian, I think we forget how good that was, but yeah, I would say, I really like Mandelorea, but this is, every other Star Wars thing shows, films, all of them. They're very different. They'll explore different genres, but they always try to keep that core, that, that tone, that vibe, that George Lucas throwback retro, adventure serial. It's like Flash Gordon and all the pop

art stuff that George Lucas grew up with and like that's what Star Wars is sort of honoring. And I love that this is in a recognizably Star Wars world, but it doesn't have that tone. This is 70s conspiracy, you know, thriller. This is spy movie. Like, this is just going after a totally different tone. It's still in the Star Wars, you know, timeline. But it just doesn't, it's the first time ever that it doesn't feel like Star Wars. And it's so refreshing.

I love that. I feel like it also might be the most stylish Star Wars, anything that I have ever seen. Like, I am obsessed with the outfits in the show. I tweeted last night, I was like, Andrew has made me realize that I need a lot more dramatic hoods in my life, like a lot. I need that red belted quilted coat with the big hood and the like knee high boots immediately. I need everything Mon Mothema has ever worn. Like the style in this show, I know that seems like a silly thing to focus. on, but every time I watch it, I'm just like, you are not incorrect.

It's beautiful. Last night, my wife was like, hold on, I want to see that shot again. It's just amazing shot of Mon Mothra in her apartment, which we find out is an apartment that is somehow like a national treasure. I don't know if you caught that lawn. She's not allowed to make changes to it. Right. So she's living in the, it would be the Chandraelaan embassy.

She's the Chantrilla and Senator. So I guess she's living in, yeah, their government building on. So, Molly, it's just such a tiny little throwaway line where she says, you know, I can't make many changes to it, but because the person is like, my God, this is so gorgeous. And she lives in, you know, a space that is inspiring, but classic, looks like it's a thousand years old. And there's just a shot of her through like a couple of the doorways with these geometric shapes of the doorways that is just next level. And I think, Lon, you really hit on this. It does have a 70s thriller. It does have a 60s to 70s architecture planet of the apes when they had them

return back to, you know, the movie where they come back to the United States in modern times. And that was actually filmed, I think, at the Beverly Mall, whatever that mall is, Century City Mall, which was a... Right, yeah. What is it? Is it conquest for the planet of the AIDS? I think it's conquest. So the really interesting thing here is, I think you nailed it. Whoever is driving this, or different aspects of it, did a heist film? they did a psychological thriller like three days of the Condor. Yeah.

They've done a prison escape from Alcatraz type send-up. Yeah. This is five or six different omages, it feels like, are coming to roost of perhaps the greatest era of cinema, 60s and 70s. For you and I, the avant-garde 60s and 70s, the Easy Rider era of films, the godfather. The way they're also layering in, it's so smart. Star Wars, it's always played, it's very like black and white, good versus evil. That's by design. You know, that's the kind of story. It's a space opera. That's the kind of storytelling it is. But this is, I think he's trying to bring a little bit more of a sense of real, the real history of revolutions and to make it a little bit more like gray, like especially this past week, which I won't spoil. But there's a like part of the theme of everybody's compromise, you know, like the even the early rebels have to, to adopt the tactics of the imperials in order to fight

them. And so everybody's kind of getting plunged into this morally gray kind of morass. There's an episode even, and you might have seen this already, Molly, I'm not sure. Where they're back on pharix where Andor's home planet and you basically recreate the

Boston Massacre, this very famous incident from the American Revolution, where there's stormtroopers marching on this side and there's protesters on this side and they're throwing rocks or whatever. And these guys end up in the middle trying to break it up and then the stormtroopers turn around and they open fire. And it's a tablo, like there's a really famous painting of the Boston Massacre that they're obviously recreating. And I mean, to put that level of thought into the Star Wars

revolution, you know, like not a real historical rebellion, but we're kind of treating it like it is and thinking about all the little steps that would lead to it is so smart, really cool. I have it. It's been great, but peripheral. Oh, yeah, yeah, go ahead. I have a professional too. there it is. There it is. Oh my God. It does look just like that. Yeah.

And they didn't actually show the blasters go off. So. Right. But they did think about it. Which is even more upsetting. Yeah. I think they did think about the architecture of that. Like the way that the way that famous painting sort of captures it, they recreated it pretty clearly.

But this is my confession. I went ahead. And I watched two episodes, three episodes ahead of my life. I'm not proud of it. But I did it. and I apologize, but I told her, it's so effing good. I had to get ready for the show, and I watched it again. And this is what, when I know, something is clicking in this oversaturated golden era of content production

and the variability that comes with that. I paid more attention on the second viewing than the first. The first viewing, you know, you have your phone, you know, you get a little distracted here or there, a little Twitter comes in, text message, signal, whatever, you get a little distracted. The second time I just turned my phone off and I gave it 100% of my attention because when I was giving it partial attention when I watched it on my own, 80, 90%,

like I normally do with these shows, because I'm a little distracted. I wanted to savor it more. It was like for me going back to a great restaurant and saying, you know what, I had such a profound experience with these two or three dishes. I'm having them again, but I'm going to eat the food slower.

And that's what I did. This show is tremendous. The only other time I've watched, something twice on Disney Plus to date was I did take the girls through Mandelorian a second time because they loved it so much and kudos to everybody over there. It's just incredible.

If you haven't seen Handor yet, I will say, even if you've never watched a Star Wars film, start here. I think that might be the legacy of the show on. Is start here. And you don't have to. You don't have to watch any other thing in the Star Wars universe, honestly. Like this is a standalone. It's kind of like Logan, you know, the film.

Like, you have to care about X-Men or comic book movies or whatever. You could watch Logan and be like, holy crap, that is a phenomenal movie and story. And that's kind of how I feel about and or it's almost like decoupled. Could be completely decoupled from the Star Wars universe in a way because it's just like a fantastic show. Yeah, that's what I, that's exactly what I was thinking too. I, you almost don't. And that's what's another thing that's so great about it is it's not, it's not about elbowing you in the ribs and remembering that guy and that Easter. and who's that guy from that thing and there's room for that. I'm not saying I never want to do

that or never want to show like that. But it's so nice to not ever be expected to do that. There's no guys you need to remember. They have had a few random references to the original Star Wars films, like real deep cut stuff just for the, there's the guy who runs the Imperial Security Bureau, the ISB, like, not the guy we're used to seeing the old guy who runs those meetings, but his boss. Yeah, the must-ish guy. That's a character from the original Star Wars films that they've kind of retconed, like a random imperial officer. He was around the table during the debate where Vader chokes somebody. That's exactly right.

He's a guy that is in a new hope, but they've just retconned him that he was in the ISV in this era. So there are those things there if you are a big enough fan to catch them. But you don't need to. It's not over fan service. I'm a little exhausted from watching. certain shows and having to say Easter eggs, get the list, and then find the screenshots. So, like, I just watched Man of Steel with my daughters, my six-year-olds, they loved it. I took three sittings.

I like Manif. I think not a bad film. Not a bad film. Not a bad film. And I just had to go online to find the 18 Easter eggs in there, of which only two or three of them were relevant. But, yeah, congratulations to the Disney Corporation. Yeah.

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Today the stock market is surging again because inflation. is apparently tempered a little bit and we might be seeing some light around the corner but it was all green today, Lon. I just want to, I know that you've been wondering if I'm going broke or not.

Apparently, I'm not going broke, folks. I'm still in the game. Your Facebook trade apparently is up 15%. You made seven grand. This is what I've learned, Lon. Wow. Yeah, but I'm on the mend here. I was down as much as 20 plus percent.

Yeah, well, that's everybody. Yeah. But I feel particularly good about my, in a sea of red, my absolute cutthroat Facebook trade based strictly on Zuckerberg channeling his inner

you know, Darth Mall has paid off. But let's talk about my Disney. Let's talk about my Disney. Let's talk about Disney. Yeah. Let's end how much it's spending on really, really good shows like Andor.

So Disney reported fiscal Q4 and full year earnings per fiscal 2020. The stock was a initially down about 13% on Wednesday due to missing revenue expectations. I would imagine that is not the case today. Q4 results, let's see, because they have this offset fiscal calendar, by the way, in case you're wondering how it's already Q4, Disney lives in the future.

That revenue was $20.1 billion up 9% year over year. That was a slight miss on expectations. Disney stock is up 2.5% today. Parks revenue grew about 36% year over year to 7.4. billion dollars. So the COVID effect is clearly over in the parks. People are back. And then media and entertainment revenue fell about 3% year over year to $12.7 billion. Net income $162 million up 1% year over year, basically flat. Free cash flow was $1.37 billion. That number is down about 10% year over year. But still positive. Like, you know, they have free cash flow of $1.3 billion.

All that matters. All that matters is that they keep pulling the string on Disney Plus. Yep. They must, they must invest in Disney Plus. And they must start selling merch from Disney Plus, which they have said they were going to do after I told them for a year. On CNBC, I told them, Lon years before they said they were going to do this. I said, imagine if, you know, you could buy merch.

They need to break the silos. There is one product. and I'm not saying I'm going to be a CEO of any large corporation at the moment and I'm including that I am not going to become CEO of Disney but for F's sake

I need to be the CEO of Disney because here's what I do day one that chat back guy, so sorry day one bring me the head of Disney Plus the head of Disney merch

the head of blah blah blah bring me all the heads and I say where do you live lawn and I have one guys I'm here. The other lady says, I'm over here.

This other person says they're here. I say, great. You know, you live now? This is where you live. And I just point to the giant conference room. I said, nobody leaves the conference room until this product is one singular product. No more fifthums. I want one product.

You log into Disney Plus. You buy your tickets to the park. You go to the park. You buy whatever lunch you want to buy in Disney Plus. Disney Plus is one Uber super app. The end, we're done here. Make it work as one consumer experience. I want to open Disney Plus, and I want my daughters to see the top 10 best days to go to Disney

based on how many people are going to be there. I want them to see the top 25 Marvel products that are coming, the limited edition, the sneakers, whatever. One product to unite them all. That's what needs to happen here. They'll get there. It's going to take two or three years. Topik has said this is the end.

end goal. And he tends to talk about it not only in terms of everything, you're saying in terms of practical integration. Like, I'm on, I'm watching Moana on Disney Plus. Hey, do you want a Moana T? I feel like that's obvious. But Chavez is talking about it even on the next level of integration, which would be the data. Like, Disney Plus knows you went to Disneyland last month and that you went on Pirates of the Caribbean twice. So when you load up Disney Plus today, it's going to feature Pirates of the Caribbean on the front page and be like, hey, do you want this Jack Sparrow Funko? You love this ride. And like, so to not only have your experience all integrated, but Disney Plus is smarter about your Disney taste than you are maybe.

Molly, give me your best Disney's super app idea because maybe I put you on the board. What is your bet? Take a second to think it through because, Lon, building on yours, nobody leaves the room until this is fixed. I want a Disney in Disney Plus each child gets a login right my kids have logins whatever ride they went on

with their Disney wristband or whatever Right that's that's the idea is with the wristbands They can they're tracking you all It's Westworld they're following you all the time through your app And so it says Marvel Disney Pixar Star Wars And the fifth one is parks You click on parks It shows how many times you've been to the parks

How many times you've been on each ride Which rides you haven't been on And it shows your path through the park You know in the pictures Apple shows you the pictures of your pictures of your life previously and they're like, remember like, you want to cry dad? And there's, it starts showing me like London's first trip to like, you know, Disney and stuff like that, right? I start getting some of those. I want all that

in the app. I want to be reminded of all the joy we had there. And then just show me the rides we did, what we didn't go back, take another picture. Hey, here's a picture from when you went on pirates. Take another picture with your family and add it to your collection here. Everything in one, the one Disney super app. And every album. And listen to every song. When you think about how that everything that gets integrated in that way then makes the core company smarter. I mean, that's really what they like is that they can then see like, look at all these people not only watching Enkanto, but buying the soundtrack, getting this. We need an Enkanto parade at the park. You know, like, it's that level of integration where every division is learning from every other division and making it better.

Oh, now. See, this is weird. The three of us at the table, Molly, makes everything different. Right. So here we are in the Disney War Room. And Molly, now that we have all this data on in Conto, we say every first Tuesday, which happens to be the slowest day of, you know, whatever, at Disney Parks, in Conto Tuesdays. The parade, the food, everything goes Tuesday, Wednesdays to that theme.

And you know who knows that? The people who watch in Conto more than three times and who sing. the songs. They get that when they open the app. Now, we all get Andor. And they are going to have an Andor meet and greet with the characters, and they're going to do a cosplay, and they're going to have Andor outfits, and we come on the Andor weekend. This is the stuff that would make Disney 10x. And I as a shareholder is a very influential shareholder. I am just letting people know, I'm not activist. I'm constructivist at this moment in time. But I will not say constructive. I'm a constructivist. I think that's a word in the English language. I don't know. Hopefully that isn't

some dog. It is, but I think it's a, I think constructivism is like a thing. It is a thing. Please don't let it be some horrible thing where they massacred people in the world. May day, May day. It's a constructionism is a check on that. It's an educational theory that deposits that individuals or learners don't acquire knowledge and understanding passively, but in a direct process of knowledge transmission. So there you go. They didn't commit genocide, right? The constructivist didn't wipe out of continent.

There's really like a, there's a community building play that can be built into that too. I will give you my one idea and then I will go back to the revenue for Disney Plus specifically. But not all. So everything you said, I get to the park. I pull up the app based on my. viewing history in the app. It has a map for me. It's like you are going to enjoy this and this and this. Here's your personalized map. And here are other people in the park who share the same interests as you. You could opt into this obviously. But you could literally have, you could sort of

have data feed meetups in the park. You could share pictures. Like you could literally just make friends and be part of a community of people who are into all of the same things you are based on Disney guiding your experience through the parks with information about what you have watched and purchased in the past. I mean, it's also how they can start to think about and divvy up their own consumers. I mean, you were talking about Andor is a great example. If you're watching Andor, it probably leans towards your older.

You maybe have a little bit more disposable income. And you love Star Wars. Those are the people we need to promote the Star Wars cruises to the higher end experiences. You know, the people watching Tales of the Jedi, they're probably younger, those are probably more kids. They're the ones to promote video games too. But you know, like, you could start to slice and dice the audience that way. Yeah.

All right. Well, let's go through real quickly, some of the streaming metrics because I want to talk about Netflix briefly. But this leads into that. So total Disney Plus subs were up 39% year over year to 164.2 million. Those people are, it's an average monthly revenue per user of $3.91. sense. Disney Plus is on a $7.7 billion revenue run rate at its current size and price. Let's compare to Netflix, which currently has 223 million paid subs growing at 4.5% year over here.

And that's an about $11.84 cents average monthly revenue per user. Netflix is currently on a $31.7 billion revenue run rate at its current size and price because of pricing. So in August, you see, I think what you're starting to see in these numbers is a little bit of the impact, right, of Disney in August, announcing a price hike for Disney Plus,

starting December 8th. Monthly will jump from $8 a month to $11 a month. I think they probably had a surge. I am one of people who signed up real quick to get grandfathered into this pricing. Yep. I don't know if you are grandfathered in. But monthly, anyway,

monthly pricing will jump from $8 a month to $11. annual will jump from 80 per year to $110 year and then they're going to offer this ad supported tier for $8 a month. It's original price, which is a 37.5% price hike in both areas. Let's go. Introductory pricing is just that. You pay for value.

The advertising tier is going to be insane. I'm just letting people know now. The ability to capture whatever number of people they get on the advertising tier is going to be extraordinary. And I think there are creative ideas they could use it here around consumption. Like they could do a special where they say, hey, we're signing people up for $1. Let's say they start hitting that Netflix natural audience. Sign up for $1.

Pay with Apple pay, you know, like super easy, double click, pay $1. And you get the summer free. but we got to get yeah you put your email address in whatever they can do all kinds of interesting things like that or say you know what this this uh documentary series is very important or star wars is having its 30th anniversary whatever the 40th anniversary of the original film right 27 would that be we're going to make star wars for free for the month all star wars series free for the month but you got to sign up they can do all kinds of crazy stuff like that that would be ad supported again let's get around the table here who's our biggest average

Advertiser, who we want, oh, Olympics are coming up. Olympic advertising, great. We're going to make Disney, you know, or this new Ford is coming out, family car, new minivan. The summer of the new Honda Odyssey, Disney brought you by Honda Odyssey, or the summer for your kids. You can sign up and get 100 hours of watch whatever shows you want, and it just has the Honda Odyssey logo on the bottom right for the whole thing. It zips by, it tells you all the features.

Now, the entire country and your kids are obsessed with the Honda Odyssey because it's got 18 TVs. Every, they turn left lawn, they see a TV, they turn right, there's a TV. They look down, they fall asleep. There's a TV in their lap on the floor. Just TVs everywhere. So your kids are just super programmed. That's why I'm buying the stock. I'm not telling you to buy the stock, Molly, but buy the stock.

Wait, so you redesigned both Disney and the Honda Odyssey in this conversation? For sure. I brought a lost track a little bit. Honda Odyssey is coming to the War Room. Yeah, I mean, it's interesting. In the Honda Odyssey is where I'm going to watch a hell of a lot of Netflix. Exactly. Let's move on to Netflix.

They're also kind of adopting this philosophy of using the ad-supported tier as kind of both a introductory sales pitch and a way to bring in revenue. Like the Knives Out sequel, that's going to run ad free or they're going to have just a quick pre-roll ad to like induce you. Like sign up for Netflix with ads. You don't even have to watch any ads and watch Knives Out too. And then that's how they're going to like lure in new people, I guess. So it's a similar kind of idea That they could start bespoke streams Just to get people interested

It feels like the battle is really on In streaming So much so that Lon just dipped Yeah, I'm happy Let me run this up the flagpole Let's see if we're on salutes Take the Shehawk episode You do a bonus between season episode

Only available For the next 30 days If you go buy a happy meal You take a play of fish is my choice You take a picture of the QR code on your Flay Fish Happy Meal, and it unlocks in your app that bonus footage, a full bonus episode that will launch with the new thing. They could drive a million people into a McDonald's this weekend to buy a happy.

We are standing on the very press. Like there's a whole world of these kinds of these levels of deep integrations that are right over the horizon. I mean, this is what everybody's working on right now. They're just sitting around the table. We're faster and harder. Let's go. It's the first round of like,

what can we do tying all this stuff together? So that's right now. And then by next year, 2024, we're going to start seeing very weird, creative, interesting, deep integrations of all of these kinds of things. I think of a kind we've never really seen before because, yeah, just as you said, because the competition is hot.

It's everybody's got these apps on their phones and they're at your home and they're everywhere you are. They're on your laptop. They're wherever you're going. And all of these networks and media companies know that. and these, yeah, these deep integrations of, oh, you're at this place. We've got this deal at this place because you watched this thing. Exactly.

Three lessons. Yes. Raise your prices. Innovate. Engage. This is what great product and founder, CEOs did. Raise those prices. You want to innovate and you want to increase engagement.

Not those two users. They have to go together, those first two. You can't just do the one thing without the other thing. We've talked about this entirely in terms of Disney Plus, but bear of mind, Hulu ESPN Plus, they're the same. It's basically, from Disney's perspective, it's all one thing. So it's the same with all your Hulu shows. It's the same with all your streams on ESPN Plus, whatever sports you're into. Like, they're going to know all of that as well.

Speaking of sports, according to Wall Street Journal sources, Netflix is looking into getting into live sports, which is something that I think people have been after them to do for a long time. Netflix has been bidding on streaming rights for live sports. Talk about an area that's getting more and more competitive, though. They have in those, that bidding has included the UK rights to the women's tennis association and cycling competitions, France and UK rights for ATP tennis and F1 racing. And last year, Netflix was actually in talks to buy the world surf league, but talks fell through overpriced.

Other big tech streamers, of course, have been investing in live sports recently. the Amazon spent that $11 billion for an 11-year Thursday night football deal. I know at least one person who canceled cable over that. Just like now, I mean, if sports was the thing that was keeping a lot of people in their cable bundles, that is, we have reached a tipping point now, I think. Apple paid $85 million, or pays $85 million a year for its MLB Friday night baseball deal. And then, of course, Apple and Amazon both rumored to be in the bidding war for NFL Sunday

ticket. Yeah. And like that, that's, we're kind of. last big one to fall is like Sunday ticket. And once that's figured out, basically almost all the major sports have kind of figured out their streaming plans and were just left with the stragglers and the last second ones. And yeah, I mean, you know, Netflix kind of waited a really long time. I feel like they might have waited a little too long and now they've gotten out bid and what's left. I mean, I don't even, you know, World Surf League great, but that's not appointment viewing in the way

that baseball and football and soccer games are for people. What's up with NBA? Like, why not? I could, why not, why is nobody bidding on NBA? Like Netflix take NBA, do that. That's going to be starting. Yeah,

it's the next big package that comes up, I think, 2024 or something will be NBA. Yeah, a couple of years out. Right. It's just when the next, when it comes up for auction next, it'll be on the,

on the, I may say that's going to be like the big one. That'll be a massive. They're saying player salaries are going to get upwards of like 80 million a year at Monly. So this whole like 30, 40, 50 million a year, like super packages, people do five years for 40 to get 200 million. You know, like we saw those 200 million dollar deals. We're like, whoa. Now imagine 80 million times five, 400. These people are going to be getting a half billion dollar deals as a all-star player in the league. That's, that's the rumor is that that that deal will

double it. You know, NBA really was working NBA League pass in a big way. So I've been paying for NBA League pass for six or seven years as a Knicks fan not living in New York anymore. just because I want the ease of it. So they have a two-prong strategy. Sell this stuff to networks, TNT, ABC, NBC, and let you buy direct. So it's very interesting. If you buy NBA League tasks, I get the local MSG feed. And when it's commercials, I pay Molly to not have commercials.

And I see them doing like the local Kia, Sarenta, you know, half-court shot. Like they don't put commercials in you get to see like what's going on the arena, which to me just makes it like some really cool throwback. But that's going to be a major one. I think the NBA one is, right after the NFL one is going to be huge. You get the kiss cam going, you know? When they do the kiss cam. Well, they always do it.

Like, it's like, you know, like me and Lawn are sitting next to each other. And like, we're like, no, no, no, no. Then we like pretend we're going to kiss. And then they widen the shot and our girlfriends are on the other wives are on the other side. Exactly. Yeah. And we get those memeable moments on your streaming network.

Yeah, they know how to go viral with the kiss cam. Yeah. I'm telling you, the literal best thing, the literal best thing I've ever seen at an NBA game ever was baby racing ever in my entire life at a Cleveland Cavaliers game in Cleveland Baby Racing like put that stuff on Netflix people pay extra I you know I saw that I just thought you know the the electric prod was a little too much for me

with the baby racing like just let them organically do it you totally they don't remember and yourself that's true I don't make new memories yet yeah yeah exactly and good no good point in our notes too which is that once you go ad based like with Netflix rolling out an advertising tier you got to get some sports in there because that is one of the few things that advertisers still really, really want to pay for sports. They love live.

They love live. They love live. Yeah. Big thing. Perfect synergy. All right. Anything left in streaming or is lawn dismissed? Lone is dismissed.

That's the big stuff. With love. Of course. I understand. We didn't even talk about the peripheral though. Watch the dang peripheral. Yeah. I'm really enjoying.

I'm really enjoying the peripheral. Amazingly, it is so complicated, but it's never confusing. Like, I don't ever feel like, even, Because it's the producers of Westworld. But even it, I feel it feels even more streamlined than Westworld. I never have that moment of like, wait, who was that guy and who does that guy work for? Like, they're doing a very good job of keeping all these different timelines and all these various characters kind of clear. Which is impressive.

As somebody who read the book, I can tell you, like, that is a hard task because it's a flask, but not the diffusing. Right. You're always able to tell who's who and where they're, like, what the, what the mission is and where they're going. and what the goal is. But when you really step back and think about this world, it's a very elaborate sci-fi premise. I mean, it's William Gibson. So it's very like, it's got that, yeah,

neuromancer sort of complexity. Give us the number one obvious choice for the weekend in terms of media consumption, and then give us one deep poll, and then you are dismissed, sir. Okay. What's the obvious choice this weekend? What's everybody going to go do?

What's everybody looking forward to in the next week or so? And then what's a deep poll? I think, you know, a big thing I would recommend that's been out there for a week or so that anybody can watch because it's on Roku is Weird, the Weird Al Yankovic biopic, very funny, not what you're expecting, very well done. Daniel Radcliffe Stars is Weird Al. What? You've got Harry Potter's Weird Al?

David, Daniel Radcliffe Stars is Weird Al. Everett Rachel Wood plays Madonna. Rain Wilson is Dr. Demento. It's done like, it's both a real bio. Dr. Demento? The radio guy? Yeah. It's both a real biopic about Weird Al's actual career and rise to fame, but also like a walk-hard

parody of Bohemian Rhapsody and Walk the Line and those kinds of movies. So it invents stuff about his life and career, but also tells like the real kinds of story. So like a Pee-E-Herman type thing, yeah, like semi-Germit Ticoni from Lonely Island plays Pee-E-Herman in the movie. Pee-E-Hirman in the film. Oh, Pee-Wy makes a little cameo? There's a lot of that. Kinta Brunson plays Oprah Winfrey. there's a lot of people playing 80s celebrities working into the movie.

That's fantastic. I really like that. The other thing that's coming up this weekend that is a high profile on Sunday night, Tulsa King debuts on Paramount Plus, that's the new Taylor Sheridan show, starring Sylvester Stallone. Sylvester Stallone's first major TV role ever in history. And it was co-produced by Tyler Sheridan, who does Yellowstone, but also Terrence Winter from Boardwalk Empire and the Sopranos. is the showrunner on this on this bad boy. What?

Boardwork Empire Sopranos person is doing a show. Terrence Winter co-created this show with Taylor Sheridan and it is Sylvester Stolo plays New York Mafia Don or Capo who got out of prison after like a 20 year prison sentence and his boss sends him to Tulsa like go to move to Tulsa and start a new crew for us in Tulsa, Oklahoma. So it's sly as this like old New York gangster trying to start a new. What time here at 80s, 90s, 70s today? I think it's present day.

I believe it's set in the present day. Whoa. So he's going to have a smartphone, maybe. He's going to have a smartphone, but it's like he's got to start a crew and that, you know, there's not a mafia presence in Tulsa, but there's all sorts of like freelance, you know, people just doing crime. So it's like he's got to organize these guys. And it looks really fun.

Well done. And that's coming up paramount. Everybody just doesn't do a good job of promoting yourself. Twitter.com slash lawns, L-O-N-S. on the Twitter. Verified account. No blue check, yeah, but maybe I'll pay my handbooked.

I had the blue check. I got you the blue check back in the day. I never had a blue check. I thought I made that call for you. Okay. My bad. I'll see what I can do. One day.

You have eight bucks. So, good luck, Lon. And we'll see you next Thursday. Oh, good luck. National Treasure. Lon Harris, the National Treasure. You're going to get enough lawn here, inside.com slash streaming.

He does a newsletter for me too. Lon's awesome. Just I love that guy. His Twitter views a damn delight. All right, everybody. Thanks for tuning in. It's Thursday. What a long couple of weeks it's been for all of us. Stock markets roaring back. Companies are crashing and burning like FTX. And the wheel keeps on spinning. And if the wheel is going to keep on spinning, we're going to be here with you every day.

Molly, myself, Rachel reporting, Lon Harris, producer Nick, all of the cast of characters here on This Weekend Startups to break down the news with you. If you have ideas for topics or things you want us to address on Twitter with TWA startups or you can email producers at thisweekendstartop.com. goes to the whole crew. So tell us who you want on the program, ideas you have, topics you want us to cover. And there's still two days left in this week. So tomorrow Friday, we got a great show for you. And then Sunday, we do VC Sunday school and climate. Tell your friends about this week and startups. And go to YouTube.com slash this weekend. Sign up, hit the bell. You'll know when we go live to randomly talk about breaking news stories. Okay, that's it for us on a Thursday. I'll see you tomorrow Friday. Bye, bye.