WEBVTT - The State of the Media Sector Midway Through 2021 0:00:08.000 --> 0:00:11.319 Welcome to another episode of Strictly Business, the podcast where 0:00:11.320 --> 0:00:13.280 we talk with some of the brightest minds working in 0:00:13.400 --> 0:00:18.040 media today. I'm Andrew Wallenstein with Variety. We're midway through 0:00:19.280 --> 0:00:22.000 so what better time is there to step back and 0:00:22.079 --> 0:00:24.600 taken the big picture for a media sector that has 0:00:24.640 --> 0:00:28.400 been impacted by the pandemic in many different ways. To 0:00:28.480 --> 0:00:30.639 sort through it all, I've brought back to the podcast 0:00:30.720 --> 0:00:35.600 Navine Sarma, Senior director of SMP Global Ratings. He first 0:00:35.600 --> 0:00:38.920 came on Strictly Business in early where he demonstrated a 0:00:39.040 --> 0:00:42.400 keen eye for understanding the industry from his vantage point 0:00:42.400 --> 0:00:45.320 as a credit analyst, and now he's back to offer 0:00:45.360 --> 0:00:48.559 an updated perspective. It's all coming up today on this 0:00:48.600 --> 0:01:00.080 episode of Strictly Business. Welcome back to Strictly Business is 0:01:00.080 --> 0:01:02.520 where my guest is an E. Vins Arma, Senior director 0:01:02.560 --> 0:01:06.039 of SMP Global Ratings. I wanted to start with sort 0:01:06.040 --> 0:01:10.039 of the broadest possible context in terms of taking a 0:01:10.080 --> 0:01:14.360 look at where the global economy is in the emergence 0:01:14.520 --> 0:01:18.479 from the pandemic and then sort of put that within uh, 0:01:18.640 --> 0:01:22.280 put the media business within that context because obviously one 0:01:22.319 --> 0:01:26.720 impacts the other, sure absolutely, so it's A. It's an 0:01:26.720 --> 0:01:31.040 interesting time right now because you know, we've certainly had UM, 0:01:31.080 --> 0:01:32.760 you know, a lot of growth this year, a lot 0:01:32.800 --> 0:01:36.000 of expectations. We expect in the US that GDP will 0:01:36.040 --> 0:01:39.759 grow more than than six clearly off of a base 0:01:39.880 --> 0:01:42.759 last year, but still that's really strong growth. But you're 0:01:42.760 --> 0:01:47.280 starting to see signs of pressure on potential growth that 0:01:47.319 --> 0:01:50.000 could lead to you know, slow different growth, and those 0:01:50.000 --> 0:01:53.040 are primarily things around inflation. We've seen inflation step up 0:01:53.080 --> 0:01:55.240 in the United States, and that's really from a couple 0:01:55.280 --> 0:01:57.640 of reasons. Right you have the stimulus money that the 0:01:57.680 --> 0:02:01.120 government has UM. The US government has it into UM, 0:02:01.240 --> 0:02:04.000 you know, to to UH to the population. A lot 0:02:04.040 --> 0:02:05.800 of that money is sitting in bank accounts and is 0:02:05.840 --> 0:02:08.360 not being spent, and that's driving at prices. And the 0:02:08.400 --> 0:02:11.799 other thing is you're having pressure from supply chains, which 0:02:11.840 --> 0:02:13.400 is something that we're spending a lot of time looking 0:02:13.440 --> 0:02:15.680 at as well, not just within media but across all 0:02:15.680 --> 0:02:19.280 of our corporate ratings. UM is supply chains are under pressure, 0:02:19.520 --> 0:02:21.800 and you're seeing pricing go up because of that. And 0:02:21.840 --> 0:02:24.600 then the second thing is the pressure UM the potential 0:02:24.600 --> 0:02:27.359 pressure from interest rates going up. And you know, we've 0:02:27.360 --> 0:02:29.000 heard some some statements out of the FED over the 0:02:29.120 --> 0:02:31.520 last couple of weeks. And then the case that maybe 0:02:31.720 --> 0:02:34.160 an interest rates could go up sooner rather than what 0:02:34.200 --> 0:02:38.280 people expected, which is twenty two maybe twenty three, And 0:02:38.280 --> 0:02:41.000 and what that means from a media standpoint, and really 0:02:41.000 --> 0:02:44.000 from a corporate standpoint, that you had a lot of 0:02:44.040 --> 0:02:47.240 companies make it through the crisis by issuing a lot 0:02:47.280 --> 0:02:50.160 of debt to sharp liquidity, um, you know, could cash 0:02:50.200 --> 0:02:52.680 on their balance to try to you know, to survive 0:02:52.720 --> 0:02:56.200 the pandemic. They've survived the pandemic, but they have balance 0:02:56.240 --> 0:02:59.360 sheets that are are over levered, and so you know, 0:02:59.480 --> 0:03:01.519 the last they want to see is inflation and you 0:03:01.600 --> 0:03:04.240 know kick in and also interest rates go up. And 0:03:04.280 --> 0:03:06.400 so that's a that's something that we're spending a lot 0:03:06.440 --> 0:03:08.760 of time thinking about because we have a lot of 0:03:08.760 --> 0:03:11.400 companies like that, and I'm sure we'll touch on some 0:03:11.480 --> 0:03:15.320 of them. Sure. I'm also curious to hear your perspective 0:03:15.320 --> 0:03:20.120 of what this sort of global economy means with regard 0:03:20.200 --> 0:03:23.919 to advertising, because I would imagine, I mean, we're seeing 0:03:23.919 --> 0:03:27.080 the data come in both on the TV side and 0:03:27.080 --> 0:03:30.320 the tech side. It just seems like marketers are chopping 0:03:30.360 --> 0:03:34.040 at the bit to get at consumers again. Yeah, yeah, 0:03:34.080 --> 0:03:37.680 absolutely right. What's interesting. I mean we thought advertising would 0:03:37.720 --> 0:03:41.280 be you know, weaker last year, it wasn't. Um and 0:03:41.440 --> 0:03:43.440 and we can talk about you know what this year, 0:03:43.440 --> 0:03:46.400 which is you're getting you know, a bifurcation some sectors 0:03:46.560 --> 0:03:49.000 that are recovering faster than others. But let's just start 0:03:49.040 --> 0:03:52.840 off by saying, you know, digital advertising was down maybe 0:03:52.920 --> 0:03:55.960 negative for one month last year, April, and then it 0:03:56.000 --> 0:03:59.200 came roaring back. And so you know that the shifts 0:03:59.240 --> 0:04:04.120 in spending to digital really helped overall advertising recover much faster. 0:04:04.640 --> 0:04:07.520 And if you look at more traditional advertising, whether it's UM, 0:04:07.600 --> 0:04:11.440 you know it's on television or radio or outdoor television, 0:04:11.640 --> 0:04:16.000 especially national television hung on really really well. Advertisers seemed 0:04:16.000 --> 0:04:18.039 to back off a bit, but then realize that the 0:04:18.080 --> 0:04:20.039 recovery was coming, and so they wanted to be in 0:04:20.040 --> 0:04:23.120 front of consumers, you know, pitching their brands, and so 0:04:23.160 --> 0:04:26.080 they didn't pull backs as quickly or as as thoroughly 0:04:26.120 --> 0:04:28.000 as we thought they were going to. And then you know, 0:04:28.160 --> 0:04:31.400 you had you had political advertising which really helped local 0:04:31.920 --> 0:04:34.960 and really helped support local television UM and then you 0:04:35.000 --> 0:04:36.599 know you kind of spring to this year. You have 0:04:36.640 --> 0:04:39.560 outdoor coming back really strong. You have local when some 0:04:39.600 --> 0:04:42.440 of these sectors are talking about already being in twenty levels, 0:04:42.800 --> 0:04:45.520 which is far faster than we thought. Um, you know 0:04:45.640 --> 0:04:48.840 National is trailing a bit, but you know a bit 0:04:48.880 --> 0:04:51.120 of that as a secular trends as well. But I 0:04:51.160 --> 0:04:53.840 think overall, when you look at advertising, it's a it's 0:04:53.920 --> 0:04:56.200 a lot better shape then we thought it was going 0:04:56.240 --> 0:04:58.920 to be at this point. But Navine, it seems a 0:04:58.960 --> 0:05:01.919 little nutty to me the TV side, because what we 0:05:01.960 --> 0:05:06.760 have seen clearly even before the pandemic, accelerated by the pandemic, 0:05:07.240 --> 0:05:10.599 is linear television is I don't I don't know what 0:05:10.680 --> 0:05:15.880 metaphor do we use, falling off a cliff, clearly declining precipitously. 0:05:16.560 --> 0:05:21.359 So why are they getting more money for less viewers? 0:05:22.680 --> 0:05:26.200 You and I talked about this recently. It's crazy because 0:05:26.240 --> 0:05:29.760 you know, you think that, you know, given those dynamics, 0:05:29.760 --> 0:05:32.359 you'd start to see a weakening and CPMs, but it 0:05:32.440 --> 0:05:35.600 just isn't happening. And I think primarily it's because television 0:05:35.640 --> 0:05:38.360 is really the best way and at the moment, the 0:05:38.400 --> 0:05:41.040 only way to reach the broadest audiences. So if you're 0:05:41.080 --> 0:05:44.960 advertising you know, to to generate transactional revenue, you're gonna 0:05:45.000 --> 0:05:47.880 go digital. But if you're looking to build brands, you 0:05:47.920 --> 0:05:50.279 still have to go to television. And so you know, 0:05:50.320 --> 0:05:53.240 at the moment, advertisers still want television, and I think 0:05:53.240 --> 0:05:55.640 you're going to see that start to weaken eventually. And 0:05:55.680 --> 0:05:58.080 I think I think the other thing that's complicating it 0:05:58.160 --> 0:06:02.560 is linear television is being combined and sold with UM 0:06:02.640 --> 0:06:05.080 with with you know, with digital television, you know, the 0:06:05.080 --> 0:06:08.000 streaming services, and so you're getting, you know, sales across 0:06:08.040 --> 0:06:10.560 both platforms. If you were to break one and the other, 0:06:11.000 --> 0:06:13.480 you'd see dynamics that are different. But if you combine 0:06:13.520 --> 0:06:16.360 the two, um, the digital side is definitely supporting the 0:06:16.600 --> 0:06:20.480 linear television side. Well, let's talk a bit more about streaming, 0:06:20.480 --> 0:06:24.360 because advertising obviously isn't just the entire picture there. It's 0:06:24.400 --> 0:06:29.320 the subscription dollar infusion that is been so interesting to 0:06:29.360 --> 0:06:34.480 watch all these media companies chasing Netflix right now, and 0:06:35.080 --> 0:06:38.400 you know, the pandemic again seem to have an impact there, 0:06:38.480 --> 0:06:42.200 although very positive one, much more consumption than ever, all 0:06:42.240 --> 0:06:45.480 these streaming service coming into the market at that time. 0:06:46.040 --> 0:06:48.280 Where does that set us up in terms of the 0:06:48.320 --> 0:06:52.000 next leg of the race for these streaming services. Sure, 0:06:52.680 --> 0:06:55.120 it's it's interesting because you had a pull forward of 0:06:55.160 --> 0:06:57.560 a lot of subscribers over the over the last year. 0:06:58.000 --> 0:07:00.480 And so I mean Netflix is a perfect example call 0:07:00.680 --> 0:07:02.760 of all of a sudden, all these new subscribers came in. 0:07:02.839 --> 0:07:05.719 And I think just seeing part of that um manifest 0:07:05.760 --> 0:07:09.159 and may call it, you know, slightly weaker subscriber growth 0:07:09.160 --> 0:07:11.960 this year, but you know, comparing the last year is 0:07:11.960 --> 0:07:15.200 is a bit unfair. UM. But I think what we've 0:07:15.280 --> 0:07:17.080 what we've got now is we have a number of 0:07:17.080 --> 0:07:20.600 companies that have decided that they want to be global 0:07:21.120 --> 0:07:22.880 and and go after you know, in kind of the 0:07:22.920 --> 0:07:25.320 Netflix model. But what you need for that is you 0:07:25.360 --> 0:07:28.160 need too things. When you need um, scale of content 0:07:28.600 --> 0:07:30.320 and scale of distribution, you need to be in a 0:07:30.400 --> 0:07:32.520 lot of countries. Um. And if you look at all 0:07:32.600 --> 0:07:34.840 the players, they're all have different they're all in different 0:07:34.880 --> 0:07:37.320 stages of that kind of competition and that kind of 0:07:37.760 --> 0:07:40.800 goose characteristics. If that's what they want to do. Um. 0:07:40.840 --> 0:07:44.400 You know, clearly Disney has both the scale of content 0:07:44.640 --> 0:07:48.160 as well as the geographic scale. They benefited from the 0:07:48.280 --> 0:07:50.600 you know, the twenty one century Fox acquisition and so 0:07:50.640 --> 0:07:53.720 they're pretty far along in terms of UM if you 0:07:53.760 --> 0:07:56.240 want to call it, you know, compaion against a Netflix. 0:07:56.480 --> 0:07:58.400 But if you look at UM some of the other players, 0:07:58.600 --> 0:08:02.480 you know, they're either lacking scale yelled geographically. And I 0:08:02.480 --> 0:08:05.600 would point to like you know, Concast, NBC and and 0:08:05.680 --> 0:08:08.120 Time Warner, which we'll talk about our Warner brothers, which 0:08:08.120 --> 0:08:10.560 we'll talk about. I'm sure UM, but they all are. 0:08:10.680 --> 0:08:12.960 And then you have other companies that are lacking in 0:08:13.160 --> 0:08:16.080 in content and I think Discovery is a good example 0:08:16.120 --> 0:08:18.800 of that. They're certainly one of the um one of 0:08:18.840 --> 0:08:21.880 the most diverse geographically media companies in the world, but 0:08:21.960 --> 0:08:24.920 they don't have the same kind of content scale. And 0:08:24.960 --> 0:08:26.520 so I think what you're seeing is a lot of 0:08:26.560 --> 0:08:28.720 companies have decided we're going to go down that path, 0:08:29.160 --> 0:08:31.400 or those companies have decided they're going to go down 0:08:31.400 --> 0:08:33.880 that path looking at the assets that they have and 0:08:33.920 --> 0:08:36.800 making decisions on do they have the right set of 0:08:36.840 --> 0:08:39.240 assets and do they want to keep playing this game? 0:08:39.840 --> 0:08:41.920 And you know, and I think Fox or I think 0:08:41.960 --> 0:08:45.920 Discovery and Warner are clearly in that boat. Well, to me, 0:08:46.040 --> 0:08:49.120 this is the biggest question mark looming over this space 0:08:49.240 --> 0:08:52.560 because as you're describing it. There are these companies that 0:08:52.600 --> 0:08:57.760 are trying to play by the Netflix playbook, spending what 0:08:57.880 --> 0:09:01.560 I could would assume seem to be putting them well 0:09:01.840 --> 0:09:07.760 in front of their skis as they cannibalized their core business. So, 0:09:08.240 --> 0:09:11.120 you know, is the market taking it on faith that 0:09:11.480 --> 0:09:15.920 the Netflix playbook can still be played years after Netflix 0:09:15.960 --> 0:09:20.920 has already played it. It's a good question. Um. I mean, initially, 0:09:20.960 --> 0:09:22.480 if you looked at some of the run ups and 0:09:22.559 --> 0:09:24.600 let's let's you know, I mean, what happened to Discovery 0:09:24.600 --> 0:09:27.400 and Viacom was a bit of you know, an anomaly 0:09:27.480 --> 0:09:29.240 this year, but you did see her run up in 0:09:29.280 --> 0:09:32.520 the like the Disney Stock where you know, investors looked 0:09:32.559 --> 0:09:34.880 at this and gave them credit for two hundred and 0:09:34.880 --> 0:09:37.839 fifty million subscribers. And then as we kind of got 0:09:37.840 --> 0:09:39.520 into the first court and the name just came maybe 0:09:39.559 --> 0:09:42.120 a little weaker than people expected, they pulled back a little. 0:09:42.280 --> 0:09:44.280 And so I think you're going to have over the 0:09:44.320 --> 0:09:49.080 next year, um, a separation um in in in the 0:09:49.080 --> 0:09:51.320 market's eyes about who are the winners and who are 0:09:51.320 --> 0:09:54.360 the losers? But you know what were we spent a 0:09:54.440 --> 0:09:56.560 lot of time to getting asked this question and a 0:09:56.559 --> 0:09:58.200 lot of times, and we're spending a lot of times 0:09:58.200 --> 0:10:00.360 deflecting it at the moment because I think it's too 0:10:00.400 --> 0:10:03.160 early to pick winners and losers. But I also think 0:10:03.160 --> 0:10:05.760 it's a bit unfair to look at everybody and paint 0:10:05.760 --> 0:10:07.599 them in the same brush and say everyone needs to 0:10:07.640 --> 0:10:10.839 be like Netflix. We talked to Comcast about their you know, 0:10:11.120 --> 0:10:13.600 about what they want out at NBC. It's different than 0:10:13.600 --> 0:10:16.280 what Disney wants to achieve, and so I think you 0:10:16.320 --> 0:10:17.959 have to look at it within the context of their 0:10:18.000 --> 0:10:21.160 strategies and so and what they're trying to achieve. Well, 0:10:21.200 --> 0:10:23.360 when you look at this, as you put it, this 0:10:23.520 --> 0:10:27.840 separation that is happening in the streaming land, deals like 0:10:28.840 --> 0:10:32.480 Warner Media and Discovery makes sense. Deals like Amazon and 0:10:32.640 --> 0:10:37.680 MGM makes sense. They're trying to get into that top tier. Uh, 0:10:37.760 --> 0:10:40.800 what do you think of Warner Discovery. Let's let's let's 0:10:40.800 --> 0:10:44.439 start with that. That combination. Well, I think one of 0:10:44.480 --> 0:10:47.400 the things, and I keep reminding investors of this point, 0:10:47.440 --> 0:10:50.760 which is, prior to a t T buying, Warner Warner 0:10:50.960 --> 0:10:53.839 was arguably the best media company in the world. And 0:10:53.880 --> 0:10:57.560 this is before Disney merged with with we kind of 0:10:57.559 --> 0:11:00.240 forget that right, because it got buried within any team take. 0:11:00.360 --> 0:11:02.320 And so now you stand back and you look at Warner, 0:11:02.760 --> 0:11:07.079 and what's interesting from the transaction I think was more 0:11:07.200 --> 0:11:10.920 a function of both companies looking at what they had 0:11:10.920 --> 0:11:14.040 and realizing they needed to do something. A T. T 0:11:14.240 --> 0:11:16.320 looked at Warner and looked at frantically all of its 0:11:16.360 --> 0:11:18.800 other businesses and says, you know, we have a limited 0:11:18.800 --> 0:11:20.800 amount of capital. It's a T T. But it's a 0:11:20.880 --> 0:11:23.520 limited amount of capital. What do we have to spend 0:11:23.559 --> 0:11:25.880 it on? And it was Spectrum and it's five G. 0:11:26.400 --> 0:11:29.120 And so the Warner's side of the business wasn't going 0:11:29.120 --> 0:11:31.760 to be able to get the kind of investments aid programming, 0:11:32.360 --> 0:11:34.880 but also an expansion overseas because they don't really have 0:11:34.880 --> 0:11:38.240 that big a footprint overseas compared to some of their peers. 0:11:38.360 --> 0:11:40.160 And so they realized A T. T. Realized they just 0:11:40.160 --> 0:11:43.680 couldn't make the investments to make Warner a truly global 0:11:43.720 --> 0:11:46.360 streaming service. And then you turn it around and you 0:11:46.360 --> 0:11:49.960 look at Discovery, Discoveries and two odd markets, and so 0:11:50.000 --> 0:11:53.520 they've got the um the global footprint. But I think 0:11:53.520 --> 0:11:57.040 what they've discovered is that launching what the content they 0:11:57.120 --> 0:11:59.760 have is a bit of a challenge. It's a good content, 0:12:00.000 --> 0:12:02.079 it's niche content, and so if you're trying to get 0:12:02.080 --> 0:12:05.800 the two hundred or three hundred David zaslofs at formimillion, 0:12:06.000 --> 0:12:07.240 but if you're trying to get to it, you know, 0:12:07.320 --> 0:12:10.720 hundreds of millions of subscribers. I don't think the Discovery 0:12:10.760 --> 0:12:13.320 content on its own as it can do that, and 0:12:13.360 --> 0:12:15.679 you need to have kind of you know, the the 0:12:16.280 --> 0:12:19.440 the Warner Brothers, big movies and you know, you know, 0:12:19.480 --> 0:12:21.880 big brands, and so the combination of the two I 0:12:21.880 --> 0:12:25.600 think is a reflection of the limitations that both companies have. 0:12:26.559 --> 0:12:28.959 And so that made a lot of sense. Yeah, And 0:12:29.600 --> 0:12:33.040 it also creates another big question for this space, which 0:12:33.120 --> 0:12:35.640 is you look at what's gone on now and if 0:12:35.679 --> 0:12:41.880 you're Viacom, CBS, if you're NBC Universal, must you make 0:12:42.040 --> 0:12:46.720 similar moves in the M and A arena in order 0:12:47.160 --> 0:12:50.520 to be able to compete at the highest levels to 0:12:51.200 --> 0:12:53.840 be among the top tier streaming services. Do you do? 0:12:53.880 --> 0:12:56.080 You do you see much activity coming on in this 0:12:56.200 --> 0:13:00.160 as a result of the Warner Discovery deal. I don't know. Oh, 0:13:00.160 --> 0:13:02.480 I don't think so. And I say that because I 0:13:02.480 --> 0:13:04.320 think there's been a lot of I would say there's 0:13:04.320 --> 0:13:07.360 been probably a lot more internal discussions within both companies 0:13:07.400 --> 0:13:10.199 and so what there, what their goals are, And I 0:13:10.280 --> 0:13:12.120 think you have to look at them separately. I think 0:13:12.160 --> 0:13:15.480 if you look at Comcast, it's a cable company. I think, 0:13:15.840 --> 0:13:19.680 you know, I think Brian realizes that that NBC is 0:13:19.720 --> 0:13:23.679 called limited scale, you know, compared to the other companies, 0:13:24.320 --> 0:13:27.520 and and that's fine for him. If all of these, 0:13:27.640 --> 0:13:30.720 all of these, if all off all he is thinking, 0:13:31.240 --> 0:13:33.920 get that one out, is that NBC is there to 0:13:33.960 --> 0:13:37.120 support the cable business and the Sky business in Europe. 0:13:37.280 --> 0:13:40.079 And if that's all it is, it's plenty. It's plenty 0:13:40.200 --> 0:13:41.920 large enough in terms of the amount of content it 0:13:42.000 --> 0:13:44.840 has and the and the content that it produces, not 0:13:44.920 --> 0:13:47.080 just as library but also um, you know, it's it's 0:13:47.120 --> 0:13:49.160 production out of this film studio. To be able to 0:13:49.160 --> 0:13:53.040 support that business. Vicom is a separate question because they 0:13:53.040 --> 0:13:56.280 don't have, you know that those kinds of businesses to 0:13:56.400 --> 0:13:59.080 lean on um and so if they really want to 0:13:59.080 --> 0:14:03.559 be like you know, Disney, they've got more scale and 0:14:03.720 --> 0:14:05.679 it kind of what's interesting is the guidance that they 0:14:05.679 --> 0:14:09.880 gave so far for their global subscribers was the top 0:14:10.120 --> 0:14:14.400 seventy five million. You know, maybe that's just something about 0:14:14.440 --> 0:14:17.880 their intentions overseas, or you know, it's a question that 0:14:17.920 --> 0:14:21.119 they have to answer. I don't know if Emine necessarily 0:14:21.160 --> 0:14:23.920 solved that problem, but maybe they need to scale back 0:14:23.960 --> 0:14:30.200 on their you know, on their expectations overseas. We need 0:14:30.240 --> 0:14:32.000 to take a quick break, but we'll be back with 0:14:32.080 --> 0:14:42.480 more from Navene Sarma. And we're back with Navin Sarma, 0:14:42.600 --> 0:14:47.600 Senior director of SMP Lottal Ratings. I also mentioned a 0:14:47.720 --> 0:14:51.640 very different deal Amazon MGM. Different in the sense that 0:14:51.680 --> 0:14:55.080 it brings together entertainment and big tech in a way 0:14:55.120 --> 0:14:58.560 we haven't really seen before, but also I think is 0:14:59.160 --> 0:15:03.280 similarly motivated in terms of the Warner Discovery deal. This 0:15:03.360 --> 0:15:07.000 is about competing in the streaming race. It's not scaling 0:15:07.080 --> 0:15:09.440 up for the global push, but it is scaling up 0:15:09.600 --> 0:15:13.080 the sort of the content arsenal. Anything I do, I do, 0:15:13.160 --> 0:15:15.560 I agree with you. For the longest time, I was 0:15:15.600 --> 0:15:19.680 a bit skeptical about whether or not either Apple or 0:15:20.160 --> 0:15:23.120 or Amazon would really want to get into into the 0:15:23.200 --> 0:15:27.520 entertainment business. To the media business, it's expensive, it's full 0:15:27.560 --> 0:15:30.840 of I mean, you know, it's a difficult industry to 0:15:30.840 --> 0:15:32.880 try to break into. You see other companies try to 0:15:33.200 --> 0:15:36.960 get into media and realize it's it's got a bunch 0:15:36.960 --> 0:15:39.560 of characteristic to make it very difficult for you to 0:15:39.600 --> 0:15:41.960 get in and be successful, especially if you're not a 0:15:42.000 --> 0:15:45.480 media company getting into there. Um So what Amazon is 0:15:45.520 --> 0:15:47.920 doing is interesting because they've always kind of dabbled on 0:15:48.000 --> 0:15:51.320 the side of the studio. They hired people, they want content. 0:15:51.920 --> 0:15:54.960 This just seems to be a bigger push. Having said that, 0:15:55.480 --> 0:15:57.800 it's I think there's their intention still is to try 0:15:57.840 --> 0:16:01.560 to sell you know, diapers and retail stuff, and so 0:16:01.800 --> 0:16:04.640 the content. How big they want to get in terms 0:16:04.640 --> 0:16:08.280 of their content base, Um, it will be interesting to stay. 0:16:08.600 --> 0:16:10.640 They don't want to get too big, I think, but 0:16:10.680 --> 0:16:12.560 they also want to be able to offer enough content 0:16:12.800 --> 0:16:15.600 that people will stay on their websites and use that 0:16:15.720 --> 0:16:18.640 as a kind of a selling point to get people 0:16:18.640 --> 0:16:21.480 to sign up for Amazon Prime, especially in those markets 0:16:21.640 --> 0:16:24.800 where you know, either the shipping costs are higher or 0:16:24.840 --> 0:16:28.000 you can't do one or two day deliberate got it. 0:16:28.800 --> 0:16:31.240 I do wonder whether this will end up forcing the 0:16:31.320 --> 0:16:34.400 hand of Apple in terms of its investments in this space. 0:16:34.480 --> 0:16:37.920 They kicked the tires at MGM at the very least, 0:16:37.920 --> 0:16:40.840 and there's other entities out there, like a lions Gate 0:16:40.880 --> 0:16:44.560 and a MC that could make sense if Apple wanted 0:16:44.600 --> 0:16:47.760 to make a similar move. Yeah, I a great. Great, 0:16:47.800 --> 0:16:50.560 We'll see. They haven't done anything. They let a lot 0:16:50.600 --> 0:16:53.360 of deals go. I mean, you know, they haven't completed 0:16:53.400 --> 0:16:55.720 any deals. So we'll have to see if if they're 0:16:55.720 --> 0:16:59.400 really serious about being a serious media player. So we're 0:16:59.440 --> 0:17:02.680 talking about all these companies that are spending you know, 0:17:02.800 --> 0:17:06.240 tens of billions, well not everyone spending tens of billions, 0:17:06.320 --> 0:17:09.159 but single billions, tens of billions to be in the 0:17:09.200 --> 0:17:13.920 programming space. What does this mean in terms of the 0:17:14.000 --> 0:17:18.199 backlog of production that we've seen building up out of 0:17:18.240 --> 0:17:22.760 the pandemic. It's amazing, isn't it. Every time I pick 0:17:22.840 --> 0:17:25.120 up Variety or I get an email from Variety it's 0:17:25.160 --> 0:17:30.040 another project that just got greenlit. You've gotta wonder how 0:17:30.080 --> 0:17:32.440 they're gonna space us all out and actually produce all 0:17:32.480 --> 0:17:36.119 this stuff. It's got to be years and years of backlog. 0:17:36.760 --> 0:17:40.200 Um they called the Golden Age of television. There's a 0:17:40.280 --> 0:17:43.040 lot of content. There's just a lot of content, and 0:17:43.119 --> 0:17:45.720 you know, and and from our standpoint, it's putting stress 0:17:45.760 --> 0:17:48.879 on a lot of companies balance sheets because you know, 0:17:48.880 --> 0:17:50.520 the revenue is not going to come in for a while, 0:17:50.600 --> 0:17:53.400 especially streaming services as you grow that and so you're 0:17:53.400 --> 0:17:58.399 gonna see twenty three twenty four before any of these 0:17:58.440 --> 0:18:02.320 streaming services even chief break even status. And so that 0:18:02.440 --> 0:18:04.560 stresses the you know, the balance sheets of all these 0:18:04.600 --> 0:18:07.639 companies and the cash flows of all these companies. Um. 0:18:07.680 --> 0:18:10.880 You know, from a rating standpoint, it's a concern. And 0:18:10.880 --> 0:18:13.880 and we've taken rating actions where we've downgraded some companies 0:18:13.920 --> 0:18:17.080 because of that, um you know, and eventually and the 0:18:17.119 --> 0:18:20.320 problem is, you know, if a company doesn't win and 0:18:20.400 --> 0:18:22.760 spends all that money and doesn't grow out of that, 0:18:23.920 --> 0:18:26.440 you know, then they're kind of locked in longer term 0:18:26.480 --> 0:18:30.800 with with credit measures that are just are weaker. That's 0:18:30.840 --> 0:18:33.320 to me a big red flag. And yet I also 0:18:33.359 --> 0:18:36.280 wonder whether investors kind of as we saw with Disney 0:18:36.320 --> 0:18:40.000 at the end of will still say, wait, I see 0:18:40.000 --> 0:18:43.760 a big streaming service success story happening here hundreds of millions, 0:18:43.960 --> 0:18:46.280 So we'll just give them a pass and they'll just 0:18:46.400 --> 0:18:49.520 keep spending. I don't know, I think you're gonna get 0:18:49.520 --> 0:18:50.800 some that are going to get a pass and some 0:18:50.800 --> 0:18:53.760 companies that aren't gonna get a pass. Yeah, that's that's 0:18:53.800 --> 0:18:56.480 that's basically how this competition is going to play out. 0:18:57.000 --> 0:18:59.760 UM also wanted to ask, you know, we're we're talking 0:18:59.760 --> 0:19:03.880 about streaming, but of course movie theaters remain a big 0:19:03.920 --> 0:19:06.919 part of the business. Movie theaters, of course, took a 0:19:07.000 --> 0:19:09.960 huge hit during the pandemic, and so I wanted to 0:19:10.000 --> 0:19:14.080 get your sense of how you saw the exhibition business 0:19:14.600 --> 0:19:17.520 as we return to normal. Yeah, it's a great question. 0:19:17.880 --> 0:19:19.679 When we look at all of the sectors that we 0:19:19.760 --> 0:19:24.280 cover print TV, UM, the one that that has popped 0:19:24.320 --> 0:19:26.120 up on our raider screens and one as the one 0:19:26.119 --> 0:19:29.040 that we think is the most impacted and the one 0:19:29.080 --> 0:19:33.040 that's less most likely to be to change permanently because 0:19:33.040 --> 0:19:36.199 of the pandemic. Our movie theaters. Other ones we think 0:19:36.200 --> 0:19:40.879 we're gonna come back, whether it's theme parks or you know, um, 0:19:40.920 --> 0:19:43.760 you know, live events. But you know, for us, you 0:19:44.240 --> 0:19:46.919 had the rise of streaming, you've had the change of 0:19:46.960 --> 0:19:51.120 the of of windowing. UM, people may be a bit 0:19:51.960 --> 0:19:54.720 not reluctant to go back to the theaters, but certainly 0:19:54.920 --> 0:19:57.000 less likely to because you're gonna have other options to 0:19:57.000 --> 0:20:00.159 see the same piece of content. Um. Having said that, 0:20:00.320 --> 0:20:02.359 you know, we've always thought for years that there were 0:20:02.359 --> 0:20:06.560 just too many screens in the US, and UM and 0:20:06.560 --> 0:20:08.280 and I just I don't want to sound like, you know, 0:20:08.320 --> 0:20:10.359 we were hoping for this would happen, but we certainly 0:20:10.400 --> 0:20:13.959 thought that the pandemic would be an opportunity for for 0:20:14.040 --> 0:20:15.720 the the the industry to look at the number of 0:20:15.720 --> 0:20:19.120 screens and to reduce those numbers of screens. It doesn't 0:20:19.160 --> 0:20:21.800 appear that that's going to happen. UM. I think we've 0:20:21.840 --> 0:20:24.200 seen a couple of comments by a couple of companies 0:20:24.200 --> 0:20:26.760 that Cinemark talked about this the last week or a 0:20:26.800 --> 0:20:30.280 couple of weeks ago, where they think, you know, maybe 0:20:30.320 --> 0:20:33.679 it's five or five percent of screens might shrink. That's 0:20:33.720 --> 0:20:36.800 probably not sufficient. But I think the ones who are 0:20:36.800 --> 0:20:39.080 going to benefit from that are the larger guys. The 0:20:39.119 --> 0:20:42.360 smaller guys, UM are the ones who are probably going 0:20:42.400 --> 0:20:46.040 to consolidate or shrink. And we've seen some bankruptcies, but overall, 0:20:46.280 --> 0:20:49.960 I think the fund, the small business funding that came 0:20:49.960 --> 0:20:51.600 from the US government has supported a lot of these 0:20:51.640 --> 0:20:54.920 smaller studies, the smaller exhibitors, and so they've managed to 0:20:54.960 --> 0:20:58.159 survive their way through the pandemic. So you're saying a 0:20:58.240 --> 0:21:09.200 smaller footprint overall consolid bigger companies. Um, you're you're not saying, 0:21:09.280 --> 0:21:12.320 as as some seem to say lately that we're a 0:21:12.440 --> 0:21:15.480 Vergin extinction for theaters, like there's a place for them 0:21:15.480 --> 0:21:18.560 going forward. There's no. Yeah, yeah, we don't think that 0:21:18.560 --> 0:21:20.520 that's gonna I mean every no, No, I won't happen 0:21:20.560 --> 0:21:22.920 that quickly. I think I think there's still in need. 0:21:23.000 --> 0:21:25.600 If you talk to all these studios, they still want 0:21:25.720 --> 0:21:29.080 to put big blockbusters into the theaters. Um, you're you know, 0:21:29.119 --> 0:21:31.600