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Speaker 1: Welcome to Strictly Business Varieties, weekly podcast featuring conversations with

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Speaker 1: industry leaders about the business of media and entertainment. I'm

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Speaker 1: Cynthia Littleton, co editor in chief of Variety. My guest

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Speaker 1: today is Bart Spiegel, US entertainment and media deals leader

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Speaker 1: for p WC. Looking out at the deal landscape for

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Speaker 1: the year ahead, Spiegel sees a lot of repositioning for

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Speaker 1: traditional media giants. He predicts we'll see activity in the

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Speaker 1: unsexy world of broadband infrastructure, subscription and payment management systems,

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Speaker 1: the stuff that will make the emerging streaming bundle go around.

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Speaker 1: And he's watching with interest to see how video gaming

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Speaker 1: has grown rapidly in pandemic conditions. He sees a metaverse

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Speaker 1: of opportunity for content and distribution in the gaming arena.

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Speaker 1: Bart Spiegel, US entertainment and media deals leader for global

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Speaker 1: consulting firm PwC, which always crunches great numbers on the

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Speaker 1: macro economy of media and entertainment. Thank you so much

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Speaker 1: for joining us and taking the time to give us

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Speaker 1: your top line thoughts about the year ahead. That's great

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Speaker 1: to be here and I'm I appreciate you guys giving

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Speaker 1: us the opportunity to provide some of our feedback and

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Speaker 1: perspective based on the work that we've been doing. You know,

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Speaker 1: I think going into the pandemic last March, a lot

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Speaker 1: of us thought that this was going to be a

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Speaker 1: pretty contained, a month to month But now that we're

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Speaker 1: now that we know that it's going to be a

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Speaker 1: more than year, perhaps even two year event. What what

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Speaker 1: are the big trends that you're seeing for this marketplace? Yeah, no,

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Speaker 1: I mean when you go back, it's very interesting, right

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Speaker 1: because to your point, we all thought it would be

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Speaker 1: something that was relatively we were hoping at least relatively

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Speaker 1: you know, um short, and in some respects wouldn't have

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Speaker 1: have the impact that upended the entire industry that what

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Speaker 1: we're seeing now. And so when I think about that,

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Speaker 1: I think about, you know, what happened with you know,

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Speaker 1: the theater's closing and then the theater staying closed, what

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Speaker 1: that did for release dates. Then you've got to think about,

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Speaker 1: you know, just the overall economy, like you bring up

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Speaker 1: the macro economy and what is what exactly does that

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Speaker 1: mean for like subscriber churn, right, and for people that

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Speaker 1: are subscribing to cable packages and now all of a sudden,

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Speaker 1: we were seeing you know, maybe one or two percent

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Speaker 1: churn year over a year in terms of people starting

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Speaker 1: to slim down those cable packages. But right now we're

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Speaker 1: having more and more financial difficulties um for households and

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Speaker 1: as a result of that, you're seeing an acceleration of

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Speaker 1: that as well. And so I think there are a

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Speaker 1: lot of you know, can gentle um impacts that are

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Speaker 1: happening out in the market, and you know, some of

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Speaker 1: them we are easy to identify, and we talk about

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Speaker 1: some of them we may not realize for another year

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Speaker 1: or two down the road in terms of how it's

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Speaker 1: changing behaviors and how people are reacting to the new

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Speaker 1: world and what that means from a commercial entertainment perspective.

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Speaker 1: We saw early on, we saw a lot of the

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Speaker 1: lot of the largest media entertainment companies you know, moved

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Speaker 1: to take steps to you know, increase liquidity if needed,

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Speaker 1: the increased credit lines, some drew down on existing revolvers.

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Speaker 1: Do you have a sense of is their leverage pressure

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Speaker 1: now in this in the in the sector for the

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Speaker 1: largest companies that there was already some for for some

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Speaker 1: of the companies, but has this increased the debt pressure

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Speaker 1: that the largest players are feeling. I'm not I'm not

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Speaker 1: so sure that's the case. I think a lot of

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Speaker 1: the big players are you know, I would encourage them,

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Speaker 1: and I think they will be to be opportunistic after this,

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Speaker 1: you know, after this whole pandemic. Right if you look

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Speaker 1: at the last financial crisis in two thousand, two thousand

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Speaker 1: and nine, some of the best deals happened with the

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Speaker 1: highest r o I s coming out of that that

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Speaker 1: whole economic downturn. And I think you'll be able to

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Speaker 1: see some of that as well coming out of coming

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Speaker 1: out of this time. Um. You know, as you know,

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Speaker 1: I can't talk about specific assets and specific kind of

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Speaker 1: marriages that could happen out there, but I do think

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Speaker 1: and where that I understand. But I do think that

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Speaker 1: there are a lot of companies out there that are saying, hey, look,

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Speaker 1: in two thousand and two thousand nine, we know company X,

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Speaker 1: Y and Z really took in, you know, took an

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Speaker 1: aggressive position, was a market leader, was you know, um,

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Speaker 1: it was the first to act for how to first

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Speaker 1: move advantage. And as a result of that, we're going

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Speaker 1: to do the same thing now that it presents itself again,

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Speaker 1: and coming out of that, I think that there are

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Speaker 1: going to be winners and losers depending on your access

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Speaker 1: to capital and your ability to effectuate your strategy in

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Speaker 1: short order. My sense is I look at the landscape,

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Speaker 1: is that there's not a lot in that kind of

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Speaker 1: core entertainment TV and film space. Not a lot left

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Speaker 1: out there. But am I missing things? Do you feel

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Speaker 1: like there is a lot of opportunity out there? I

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Speaker 1: think there will be a lot of repositioning. And so

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Speaker 1: what I mean by that is there are companies out there.

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Speaker 1: Kind of going back to what I was I had

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Speaker 1: mentioned before, there are a lot of companies out there

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Speaker 1: that have a portfolio of assets and for one reason

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Speaker 1: or another may say, you know what, we like strategy X,

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Speaker 1: and so the portfolio, the assets that we hold that

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Speaker 1: have a strategy that's more in category Y, we're going

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Speaker 1: to sell them. And so when we think we think

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Speaker 1: of these big companies, when we think of these significant

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Speaker 1: companies out there that have a very rich portfolio, I

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Speaker 1: think what we'll see is them saying, you know, taking

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Speaker 1: a look internally and say, you know what, let's sell

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Speaker 1: this asset. And so when we the reason I bring

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Speaker 1: that up is because when you look at the the

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Speaker 1: macro environment, you know, you've got to think about what

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Speaker 1: individual pieces different companies may want to carve out and

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Speaker 1: sell in the market. And so also I think you'll

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Speaker 1: see some repositioning of assets and that all that will

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Speaker 1: generate additional M and A UM. And so that to

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Speaker 1: me is going to be a key thing going forward,

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Speaker 1: because I do believe in the fact that there's an

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Speaker 1: opportunity for that, going back to the whole concept around

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Speaker 1: two thousand and eight, two thousand nine, people taking advantage

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Speaker 1: of you know, just being aggressive um immediately following something

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Speaker 1: you know, and you know, a downturn like this. UM.

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Speaker 1: What I will say though, in addition to that is

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Speaker 1: those players, those people that are in a really good position,

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Speaker 1: I accept them, they too have an invested interest in

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Speaker 1: really kind of UM expanding from an M and A perspective,

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Speaker 1: because don't forget, we always think about, you know, like

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Speaker 1: all the for lack of a better term, the sexy

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Speaker 1: M and A right, but there's still a lot of

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Speaker 1: back office that needs to happen in terms of technology,

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Speaker 1: platforms and all that kind of stuff that makes this

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Speaker 1: new world operate. And it may not make the front

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Speaker 1: page of the of of like variety or you know,

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Speaker 1: like but but it is incredibly important for the effective

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Speaker 1: and seamless operation of their of their platforms and their

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Speaker 1: um and and their overall operations going forward. And so

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Speaker 1: I think you'll still see that going forward. And and

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Speaker 1: the truth is, in some respects there's a lot of

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Speaker 1: money to that gets that that plays in that space

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Speaker 1: as well. Another a well connected private equity person told

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Speaker 1: me the exact same thing, like tech may not be

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Speaker 1: sexy infrastructure any kind of kind of tools, as we're

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Speaker 1: in a world that is going to work remotely for

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Speaker 1: a while, and and there are some benefit you know,

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Speaker 1: there have in some benefits to being forced to work remotely.

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Speaker 1: That all of those areas are going to see a

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Speaker 1: lot of investment, a lot of innovation, and we may

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Speaker 1: look in five years time, we may look back at

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Speaker 1: these at our zoom connectivity that we all got into

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Speaker 1: in this period as seemingly quaint and antiquated compared to

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Speaker 1: what from our phones or our risk wrist watches. And

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Speaker 1: you know in the future that that that you know,

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Speaker 1: energy and investment will drive will drive a lot of

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Speaker 1: that's yeah, it's really interesting when you when you think

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Speaker 1: about it, right, because the UM, if you think about

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Speaker 1: your experiences, and you know, because you spend so much

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Speaker 1: time in front of your computer or your connected device

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Speaker 1: as soon as you're interacting with a platform or a brand,

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Speaker 1: and that experience isn't seamless, or that experience isn't optimal

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Speaker 1: for what you expect, it's a really big turn off nowadays.

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Speaker 1: And so I think that lets you know, it's more

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Speaker 1: are more content consumption and entertainment experiences shift online. UM

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Speaker 1: it the quality of your connection and all the back

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Speaker 1: office infrastructure stuff becomes even more important. And one of

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Speaker 1: the things I challenged my team about earlier in this

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Speaker 1: pandemic was what does that mean? Right? And so what

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Speaker 1: does that mean when it comes to like the absence

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Speaker 1: of net neutrality, which is something the FCC had you know,

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Speaker 1: had had passed UM, let's say several years ago, and

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Speaker 1: so you know, we don't hear a lot about that,

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Speaker 1: but I'll tell you at some point, UM, at what

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Speaker 1: point does it make sense for someone out there to

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Speaker 1: start paying for a fast lane into your house? Um?

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Speaker 1: And then you know whether or not we as consumers

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Speaker 1: feel that charge, as they know, because no one's gonna

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Speaker 1: want to compress their margins. You know that I you

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Speaker 1: would think that it somehow would be passed along to

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Speaker 1: the consumer. You just may not know about it because

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Speaker 1: maybe um a, you know, a an on demand movie

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Speaker 1: or something winds up just costing an extra two dollars

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Speaker 1: because there's a fastling into your house. You know, I'm

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Speaker 1: just pontificating, but you know, there's there's ensuring that that

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Speaker 1: connection and that experience is seamless and is optimized as

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Speaker 1: best as possible is going to be extremely important as

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Speaker 1: you request and ask your your consumer base to just

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Speaker 1: interact virtually in a virtual environment. Oh my god. And

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Speaker 1: the question of who picks up that tab is the

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Speaker 1: source of a hundred coggressional hearings and and it's it's

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Speaker 1: it's absolute true. And you know, depending on who you

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Speaker 1: talk to, you know, you a very different view of

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Speaker 1: net neutrality and what and what that means depending on

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Speaker 1: whether you're providing the brand broadband or you're consuming the broadband.

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Speaker 1: But but yeah, for sure, I think that that that

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Speaker 1: world is going to be very is going to be dynamic,

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Speaker 1: and it's going to take more and more bandwidth. I

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Speaker 1: would imagine that your clients are probably really excited that

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Speaker 1: that are active become active in the DTC arena. They're

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Speaker 1: probably excited about the data that they're harvesting, understanding what

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Speaker 1: the consumer is doing and when they sign on. And

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Speaker 1: what One thing that I find interesting is that, um,

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Speaker 1: I'm always hearing that that prime time remains prime time,

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Speaker 1: whether you don't demand or not, that that those that

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Speaker 1: eight to eleven p m viewing block is still you know,

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Speaker 1: is still primacy. Of course now with everybody at home,

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Speaker 1: there's a lot more. But but that even in the

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Speaker 1: in the you still see we are we are still

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Speaker 1: trained to at that time of day. Oh yeah, And

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Speaker 1: you hit on a really good point, which is around

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Speaker 1: data especially, you know, because we talked about earlier in

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Speaker 1: this segment just about how the you know, it's not

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Speaker 1: all it's the infrastructure of the back office stuff. It's

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Speaker 1: not always the the really sexy stuff that you think

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Speaker 1: about when you think about the entertainment and media industry.

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Speaker 1: But that is key, right, And I remember, you know,

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Speaker 1: historically we've always looked at video game businesses. And when

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Speaker 1: you look at a video game business and and just

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Speaker 1: be patient, because I'm going somewhere with this um, when

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Speaker 1: you when you look at a video game business, they

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Speaker 1: always has had always had really good user data and

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Speaker 1: they could you know, anticipate. Okay, Cynthia has been playing

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Speaker 1: this game for four months. About that four months, that's

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Speaker 1: the inflection point where we'll start to see her tail off.

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Speaker 1: And so we need to either market new things to

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Speaker 1: her to keep her in the game or marketing different

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Speaker 1: games that we think Cynthia would be attracted to keep

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Speaker 1: her on our platform and a customer of ours. And

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Speaker 1: you look at the the big entertainment and media companies

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Speaker 1: out there, a lot of them didn't have access to

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Speaker 1: this data, right because it just you know, it was

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Speaker 1: anonymised in terms of us consuming content. But now that

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Speaker 1: world is completely changing, and so that the the availability

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Speaker 1: for these big companies to have this data is game changing, right,

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Speaker 1: And so this is where it goes into you know,

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Speaker 1: acquire you know, like acquiring platforms or technologies that help

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Speaker 1: you kind of mind that data figure out what to

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Speaker 1: do with it. You know, how how do I how

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Speaker 1: can I AD beust kind of track user experiences what

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Speaker 1: they're doing market to them additionally, So that's huge, right,

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Speaker 1: and it's not and I and and so I only

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Speaker 1: think that that's going to interest in that sector will

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Speaker 1: continue to grow um because of just the whole DTC

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Speaker 1: model that that you're talking about. Yeah, I think that

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Speaker 1: we just scratch the surface of the data day lose

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Speaker 1: that's going to come in. And of course it's going

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Speaker 1: to take a lot of brain power to to um

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Speaker 1: you know, to process all of that, which is very

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Speaker 1: good news for your business and mind to absolutely, I guess.

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Speaker 1: I guess my last question for you would be we

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Speaker 1: have been having somewhat of a US sent trick conversation,

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Speaker 1: you know. I think certainly one of the one of

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Speaker 1: the most enlightening things that that the Netflix effect and

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Speaker 1: entertainment has been is to open the idea of the

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Speaker 1: playing field as truly being the world as opposed to

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Speaker 1: we're gonna make shows for the US, export them and

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Speaker 1: they everybody will loaf our shows overseas. It I think

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Speaker 1: the trends were already going that way and and Netflix

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Speaker 1: and other streaming services with their ability to be global,

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Speaker 1: have really just raised the states of the game art.

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Speaker 1: What do you see on the horizon in terms of

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Speaker 1: international media? Do you see the US based conglomerates getting

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Speaker 1: more aggressive in the in territories to have more of

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Speaker 1: a flipprint internationally. Do you see it happening vice versa.

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Speaker 1: What do you think we're gonna see kind of on

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Speaker 1: the international Yeah, you lost me after you said that

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Speaker 1: this was the last question because I could talk about

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Speaker 1: this before hours. Um. No, this is the great question, Cynthia,

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Speaker 1: And I think you have to be you have to

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Speaker 1: go global if you want to be successful, and you

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Speaker 1: really want to um, and you really want to make

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Speaker 1: make a statement and be competitive for quite for the

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Speaker 1: foreseeable future. Because US content, Yeah, there are like our

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Speaker 1: tent poles and everything, they'll play well globally, but local

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Speaker 1: content is extremely attractive in a lot of markets. And

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Speaker 1: so I've you know, done deals all over the world

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Speaker 1: and you know, like you're sitcoms are not popular in Turkey, right,

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Speaker 1: so um, they have you know, there's different content that's

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Speaker 1: more popular in different places. You know, they look telenovelas

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Speaker 1: and so like you really have to if you're not

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Speaker 1: if you're not operating with a global footprint with local production,

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Speaker 1: um to attract subscribers and consumers and viewers in those geographies,

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Speaker 1: I think you're setting yourself back a bit. Um, compared

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Speaker 1: to your competitor, because the truth is your competitors are

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Speaker 1: doing that, and so if you don't do it, you're

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Speaker 1: going to have a tougher time as local content continues

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Speaker 1: to stay popular and you just don't have the attractive

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Speaker 1: kind of compelling content that people want. Because look, just

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Speaker 1: just starting an O T t um platform is not

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Speaker 1: going to make you successful. We've seen that in the market,

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Speaker 1: right we were without naming names. We know we've seen platforms, services,

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Speaker 1: etcetera that even during a pandemic haven't been successful. And

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Speaker 1: um so what that tells me is you really need

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Speaker 1: compelling content to get people to subscribe, to continue to

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Speaker 1: continue to pay. And as a result of that, UM,

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Speaker 1: I really do think you have to look in our

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Speaker 1: national You have to have a global footprint and you

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Speaker 1: have to have that expectation that UM to survive, you

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Speaker 1: have the relationship to to to drive that content on

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Speaker 1: the ground in those territories. Well, the playing field is

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Speaker 1: literally worldwide. There is much to watch and certainly much

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Speaker 1: to study. Art. Again, thank you, I feel like I

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Speaker 1: feel like ohe you are you and p t BC

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Speaker 1: a debt for helping to put numbers down and and

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Speaker 1: just helping to orient our thinking and give us some

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Speaker 1: kind of some kind of a baseline to look at,

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Speaker 1: to look at at this incredibly dynamic market. Really, thank

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Speaker 1: you for your time and look forward to more reports

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Speaker 1: and more activity in Thanks for listening. Be sure to

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Speaker 1: tune in next week when my co host Andrew Wallenstein's

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Speaker 1: guest will be Scott Rosenberg of Roku, and please leave

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Speaker 1: us a review at Apple Podcasts. We love to hear

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Speaker 1: from our listeners.