Speaker 1: Welcome to Strictly Business, Varieties weekly podcast featuring conversations with
Speaker 1: industry leaders about the business of media and entertainment. I'm
Speaker 1: Cynthia Littleton, co editor in chief of Variety Today. My
Speaker 1: guest is ari A Borkoff, Founder and CEO of Lion Tree.
Speaker 1: Borkoff is the banker to the media elite. He's almost
Speaker 1: always in the middle of the action on big mergers
Speaker 1: and acquisitions. Investors of the caliber of John Malone and
Speaker 1: Shari Redstone have him on speed dial. In our conversation,
Speaker 1: Borkoff talks about the profound effects of the pandemic and
Speaker 1: how it will shape the media and entertainment ecosystem for
Speaker 1: years to come. He gives his insights into the great
Speaker 1: direct to consumer realignment underway for traditional Hollywood giants, and
Speaker 1: he explains why his team at Lion Tree is closely
Speaker 1: watching the video gaming world. Normally, people pay a lot
Speaker 1: of money for a half hour with Aria Borkoff, so
Speaker 1: consider this episode a perk and a good reason to
Speaker 1: listen to Strictly Business all year long. Area Borkoff, founder
Speaker 1: and CEO of Lion Try the elite media investment banking
Speaker 1: an advisory firm. Thank you so much for taking time
Speaker 1: out to join us. Thanks for having me. As we
Speaker 1: look to kick off the new year, what do you
Speaker 1: see what is the most significant things that you see
Speaker 1: on the horizon for media companies to deal with? And
Speaker 1: that is a loaded question because there are about twenty
Speaker 1: thousand things that they have to deal with. But what
Speaker 1: do you think for the media giants that you work
Speaker 1: with and and study, what do you think are the
Speaker 1: biggest issues that are going to need to be addressed
Speaker 1: in Well, obviously a great open ended question to start,
Speaker 1: but it's, like you said, it is uh the question
Speaker 1: that the media cup but he has grappled with every day.
Speaker 1: I always think about public companies and CEOs of public
Speaker 1: companies having to assess what their shareholders are going to
Speaker 1: be interested in UH and be demanding of them UM
Speaker 1: not only at the moment but in the future and
Speaker 1: UH and have to predict that UM and then obviously
Speaker 1: drive the company risk, appetite and investment horizons towards that
Speaker 1: shareholder base, media company strategies and the company executives have
Speaker 1: to do the same thing for their consumers. And so
Speaker 1: the answer to your question is what does the consumer
Speaker 1: look like in the future By the end of twenty one.
Speaker 1: So we're sitting here beginning the year. What does the
Speaker 1: consumer appetite look like at the end of the year,
Speaker 1: and how do you position your company for that? And
Speaker 1: so it very clearly has a lot to do with
Speaker 1: video streaming, and we've been we've been very much binging
Speaker 1: of video content and the creative um explosion of everything
Speaker 1: at the Disney Plus usen HBO Max and Apple TV
Speaker 1: and Discovery Plus and Amazon Prime and and everything around
Speaker 1: the world that we're consuming all the time. But we've
Speaker 1: also been in consuming a lot more audio content like
Speaker 1: this right, and audio has been, in our view of,
Speaker 1: you know, growing a lot faster than even video and
Speaker 1: I think we'll continue to do so. And then there's gaming, um,
Speaker 1: and not not just video games as an activity, but
Speaker 1: video games as a metaverse, as a as a as
Speaker 1: a new universe. So is Fortnite the new Internet. And
Speaker 1: we saw in the last year Travis Scott premier a
Speaker 1: concert within the Fortnite ecosystem. Maybe we'll start seeing movie
Speaker 1: premiers within the Internet of the within the video gaming ecosystem,
Speaker 1: or other concerts or other you know, activities that are
Speaker 1: more virtual. If you actually notice towards the end of
Speaker 1: last year with the pandemic, a lot of advertisements on
Speaker 1: television were, um, we're animated or virtual. So you may
Speaker 1: not even really notice the difference over time that because
Speaker 1: of production issues around the pandemic, you didn't really have
Speaker 1: a chance a chance to see the video in person
Speaker 1: commercials being filmed or produced. So those were replaced by
Speaker 1: you know, C g I or animated commercials and most
Speaker 1: people didn't even notice it, but they were really appealing still.
Speaker 1: So that is a new way of doing things that
Speaker 1: happened right before your eyes. And so I think it's
Speaker 1: really about predicting the future consuming patterns of the of
Speaker 1: the of all of us. And I think position for that.
Speaker 1: And I think savings has picked up a lot during
Speaker 1: this pandemic in because we've all saved a lot of
Speaker 1: money and comming to save a little bit of money
Speaker 1: and we haven't traveled and we're waiting to consume it
Speaker 1: inside the home and outside the home, and that will
Speaker 1: have to be balanced with all of our leisure activities.
Speaker 1: That that could be one silver lining, because you know,
Speaker 1: the general statistics are pretty scary about how little Americans actually,
Speaker 1: you know, actually put in the bank, so so that
Speaker 1: that could you know that there could definitely be some
Speaker 1: silver linings there. Do you think that UM Let me
Speaker 1: ask in terms of in terms of M and A,
Speaker 1: do you think there's been There has been a lot
Speaker 1: of activity, but there's also been a feeling that there
Speaker 1: is a there's a great roll up waiting to happen
Speaker 1: with some smaller companies, whether they're active in cable or
Speaker 1: active in content. Do you think that the pandemic conditions
Speaker 1: have made another wave of media M and A more
Speaker 1: likely or less likely in this coming say twelve to
Speaker 1: twenty four months. I wouldn't draw a parallel between the
Speaker 1: pandemic and M and A activity, but I would draw
Speaker 1: a parallel between the market and financial stimulus and M
Speaker 1: and A activity, both in the sense of interest rates
Speaker 1: being low, capital being infused into the economy, of vaccine
Speaker 1: being a stimulant for a rebound economically and with jobs,
Speaker 1: innovation picking up, unemployment coming down, currency devaluation in the
Speaker 1: US UM and public market activity, So not just debt
Speaker 1: financing being strong, but equity financing being strong, probably the
Speaker 1: strongest has been in my lifetime. UM, with not just
Speaker 1: SPACs but I p O S and other forms of
Speaker 1: equity capital, all providing for a framework of activity levels
Speaker 1: that will lead to not just consolidation in the way
Speaker 1: you're talking about it, which is a kind of scaling up,
Speaker 1: but also a deconstruction of companies where we're looking for
Speaker 1: more of an opperable portfolio. So when you look at
Speaker 1: companies like A T and T or Viacom, CBS or
Speaker 1: any of the kind of conglomerates let's say, like the
Speaker 1: old I T T shared ins, where not every asset
Speaker 1: will be best situated in the same company structure, you
Speaker 1: can separate those more easily today in the public markets
Speaker 1: or with other strategic companies by realigning the asset mix.
Speaker 1: Everything is available and there's a certain frenetic nature. I
Speaker 1: think the deal making coming that will be especially in
Speaker 1: the first half of the year with a recovery kind
Speaker 1: of embedded with some talents, I think it will be
Speaker 1: maybe one of our busiest years. And I do think
Speaker 1: that that that that that like Sony is has has
Speaker 1: been breaking off small pieces, small collections of like you
Speaker 1: know Asian Asian TV channels that that that can be
Speaker 1: that were sought after by some investors that knew that
Speaker 1: business and have come in and I think that that
Speaker 1: aspect the fact that companies might be breaking off parts
Speaker 1: that people didn't even you know, previously, wouldn't have even
Speaker 1: thought would have been remotely for sale or would have
Speaker 1: been either too small or to embed it into larger operations.
Speaker 1: But I think that having seen that, my senses that
Speaker 1: people feel like there's a lot of opportunity. But cything
Speaker 1: you like when you when you think about like deal
Speaker 1: flow and I think you know, I've had these conversations
Speaker 1: over the years, um and I appreciate our conversations because
Speaker 1: there's a narrative behind them versus like the deal of
Speaker 1: the moment that's breaking, which we of course never talked about.
Speaker 1: You're always working on them, and you can never you
Speaker 1: can never tale, you can never talk about them, which
Speaker 1: is so funny. All most roads in media run through
Speaker 1: lion try and that is not an exaggeration. I appreciate that.
Speaker 1: But I I and I really love the deal and
Speaker 1: the execution of the deal, and we obviously spent a
Speaker 1: lot of time cultivating to make sure those deals happen.
Speaker 1: But the narrative arc is is journalistically where we align
Speaker 1: because I find the story of what we're actually doing
Speaker 1: to be most interesting, and there's there has to be
Speaker 1: rational for these deals. So for example, hypothetically, let's say
Speaker 1: like regional sports networks kind of a troubled segment of
Speaker 1: the media world right now, right, I mean is a
Speaker 1: melting ice cube, like you know what, what's what's the
Speaker 1: they're there in non demand streaming world. Correct, So so
Speaker 1: how do you so this is not like the high
Speaker 1: flying growth segment of you know, technology and digital and
Speaker 1: that other parts of the world you know, would talk
Speaker 1: about there's going public, but regional sports stutworks has to
Speaker 1: get reworked and maybe become less regional. Maybe they should
Speaker 1: become more natural nature. Maybe we should recreate a regional
Speaker 1: sports network that's super regional or national, which looks a
Speaker 1: lot more like ESPN recultivated. Right, So that's M and
Speaker 1: A in a different way. And those are the kind
Speaker 1: of things that we think about a lot, which is,
Speaker 1: you know, how do you take segments of the media
Speaker 1: industry and reorient them towards a better narrative that has
Speaker 1: strategic value, that unlocks upside and minimize the downside to
Speaker 1: create a more defensible asset mix. And and that is uh,
Speaker 1: that's where we allign in terms of thinking about problems
Speaker 1: that have to get solved, not just deal making for
Speaker 1: do making sake. Right? Do you what what what is
Speaker 1: the impression from investors, especially people that haven't been as
Speaker 1: active in the core entertainment media space. I would think
Speaker 1: that investors that would be looking at this space might
Speaker 1: be a little cautious, going, Wow, this business needs to
Speaker 1: reinvent itself, you know, unpack itself and you know, re
Speaker 1: fashion in different ways. I'm going to stay out for
Speaker 1: a few for a few years and let them figure
Speaker 1: it out and then I'll come in. Or do you
Speaker 1: find that there is a lot of interest in a
Speaker 1: market that is going through a kind of a creative
Speaker 1: destruction right now? There's a there's a great book called
Speaker 1: The Powers that Be that you may have read, and
Speaker 1: it's like, uh, it's not a new book, but it
Speaker 1: goes through like some of the the origins of the
Speaker 1: media companies, and like, did you know that the beginnings
Speaker 1: of the uh, you know, the pay leeagus of the
Speaker 1: CBS was a star company. Uh? And did you know
Speaker 1: that the beginnings of Time Warner was a car garage
Speaker 1: or funeral homes company? Can shoes right? Car garages? Yeah?
Speaker 1: And like these are great stories of entrepreneurialism well before
Speaker 1: the Amazons of the world, in the faithfic of the
Speaker 1: world and the Zugerberg's and the basis so that it's
Speaker 1: the delta, it's the change that's interesting to invest in.
Speaker 1: It's the reinvention that's interesting to invest in, not the static.
Speaker 1: I always say stagnation leads to decay. Motion leads to value.
Speaker 1: So if you had the best company in the world
Speaker 1: that printed the same revenue every year, the way that
Speaker 1: equit markets work, the stock goes down because that equity
Speaker 1: trade is based on the future growth of a stock.
Speaker 1: So um, you have to have motion of growth and
Speaker 1: being able to reinvent more construction of value out of
Speaker 1: something then to keep it, even if it's a great company.
Speaker 1: So that creates a lot of reinvention and investment. Some
Speaker 1: of that works, but that doesn't. But I think to
Speaker 1: invest in that risk, appetite and that reinvention is the
Speaker 1: whole game. And I think that's what's most interesting about
Speaker 1: the media industry. It's always reinventing itself. It has to
Speaker 1: m HM. And my sense from your comment is that
Speaker 1: there is a lot of money, there's a lot of
Speaker 1: quote dry powder out there waiting to find the place
Speaker 1: to park itself or put it, you know, to put
Speaker 1: itself if there's dry powder. There are companies looking for
Speaker 1: a quote unquote third leg to the stool where they're
Speaker 1: looking for a new business to buy or to do
Speaker 1: invest in UM that in a lot of cases, like
Speaker 1: I said, is audio or gaming driven UM. There are
Speaker 1: also companies are looking to expand in their core business
Speaker 1: in this data age, coming out of a pandemic, you
Speaker 1: look at your portfolio and say, how much do we
Speaker 1: have in our business that's out of home versus insulated
Speaker 1: in home because obviously had a premium for being insulated
Speaker 1: in home versus out of home like theme parks, etcetera.
Speaker 1: And should we reorient that a little bit we have
Speaker 1: more gaming in home versus theme parks out of home.
Speaker 1: But you can't really react to a pandemic. In my mind,
Speaker 1: I always say, decisions that you make in a crisis
Speaker 1: probably are biased to the consider of side. And you
Speaker 1: really want to play a long term to a more
Speaker 1: normalized environment and not just have a diverse life set
Speaker 1: of assets, but an assets that that will grow to
Speaker 1: the consumer in all ways. Since as that gets back
Speaker 1: to your first question is how to media company position themselves.
Speaker 1: You want to have multiple products. You don't want to
Speaker 1: just have video streaming all the time. You know, what
Speaker 1: else are you offering the consumer? You know, I don't.
Speaker 1: I do believe that people will come back to theaters.
Speaker 1: I do believe that there's an experiential model that people
Speaker 1: will long for in the In the time of the twenties,
Speaker 1: in the prohibition, we all long for a bottle of alcohol.
Speaker 1: In the time of the pandemic, we're all longing for
Speaker 1: a gathering. Let's face it. I mean, it's much more
Speaker 1: interesting to be together. That's like a creative spark to
Speaker 1: be together. That we have to find safe ways to
Speaker 1: do that that are more forward leaning versus backward leaning.
Speaker 1: I don't think there's any activity that you can tell
Speaker 1: me about what happened in pre pandemic that didn't resume
Speaker 1: post pandemic. So things resumed, It just maybe accelerated towards
Speaker 1: its normal outcomes, and models will get reworked, and digitization
Speaker 1: is here to stay at our day and age, and
Speaker 1: so we'll just accelerate that. In areas like education, which
Speaker 1: probably should have happened anyway, in healthcare, in e commerce,
Speaker 1: in mobile gaming, in other areas. That's great, But we're
Speaker 1: going to do those things, I think anyway, at a
Speaker 1: faster pace, and I think we should just get on
Speaker 1: board with that. I think that I have seen a
Speaker 1: lot of commentary in the last couple of weeks about
Speaker 1: looking at you know that nineteen eighteen. It was about
Speaker 1: a twenty four month period and then hello, what did
Speaker 1: we enter what did this this America enter into? Was
Speaker 1: the literal the Roaring twenties, So you know, here's hoping
Speaker 1: bring back two percent needle beer. Also, the twenties is
Speaker 1: one analogy. The seventies is another analogy. And not not
Speaker 1: to be nostalgic, because I only say that because I
Speaker 1: think nineteen the late nineteen sixties, um, and I have
Speaker 1: to say I wasn't born then. Sixties seemed like it
Speaker 1: probably felt like a very heavy period of time. You
Speaker 1: had a war, you had the assassinations of MLK, JFK
Speaker 1: and RFK all around the same time. Imagine how scary
Speaker 1: that must have felt. Um, And it's in the sciet
Speaker 1: and Democratic National Convention. Correct. So that was a very
Speaker 1: heavy period would emerge with a very gritty seventies lightness
Speaker 1: of being a creative um revolution that ended the decade
Speaker 1: in the nineteen seventies and seventy seven. I think with
Speaker 1: Star Wars, a tale of morality of you know, good
Speaker 1: and evil and fantasy and sci fi and you know,
Speaker 1: and so I think that was like everyone got on
Speaker 1: board with this this beautiful like creative, like fantasy world
Speaker 1: that carried us for a while until like obviously the eighties,
Speaker 1: which was a high finance, you know world, and you know,
Speaker 1: Reagan and everything else. So um and I just I
Speaker 1: just think there's maybe a potential of we're both in
Speaker 1: New York, like a grittiness of creative like uh, explosions
Speaker 1: of output of what the culture will look like coming
Speaker 1: out of this. That's I'm really interested in that. From
Speaker 1: a media perspective, I wanted to talk about gaming because
Speaker 1: you mentioned you've mentioned gaming as a you know, as
Speaker 1: a force, and it's been interesting to me as long
Speaker 1: as I've been covering entertainment, gaming has always been just
Speaker 1: a little to the side of the core film and television,
Speaker 1: the core sort of Hollywood entertainment business. Do you ever
Speaker 1: do you see an activism Blizzard or anyone of the
Speaker 1: or an e A. Do you see ever a tighter,
Speaker 1: a tighter consolidation with a traditional Hollywood company. We've seen
Speaker 1: it in Sony PlayStation, but as many times as they've tried,
Speaker 1: they've never I don't think you've ever really seen an
Speaker 1: integration of PlayStation technology and movie technology or television. They've
Speaker 1: tried it in different one offs, but never on a
Speaker 1: It's never like on a level that it really stuck.
Speaker 1: Is there something about the gaming business that is just
Speaker 1: sort of necessarily arms length from traditional film and TV? Yeah,
Speaker 1: I think that that's changed. I think the way you
Speaker 1: describe gaming as sort of an activity or an application
Speaker 1: of a platform, I think is a thing of the past,
Speaker 1: and I think it's a matter of having gotten to
Speaker 1: the scale and the reach of the consumer um that
Speaker 1: we're now at today makes an activision more take two
Speaker 1: or an e a kind of simulate a Netflix like
Speaker 1: uh customer profile, and then once you have that same
Speaker 1: kind of reach, then it's all about having the content. UH.
Speaker 1: And once you have that reach and the content, you
Speaker 1: can create the same kind of ecosystem where you have
Speaker 1: a subscription model with a with different types of content
Speaker 1: that's both you know, gaming as well as the video
Speaker 1: consumption Similarly, Netflix, with its reach and video content, can
Speaker 1: become more of a gaming platform. And I think you're
Speaker 1: gonna see those platforms kind of mailed closer together. And
Speaker 1: uh and I think that's where I say gaming is
Speaker 1: more of the new Internet. It's more of a platform
Speaker 1: that will have video not just games inside, because it
Speaker 1: will be a way of doing things virtually. Then that
Speaker 1: that that is kind of generational, um, but completely now
Speaker 1: part of the mainstream than when I grew up, at least,
Speaker 1: where it was more of an activity. And uh and
Speaker 1: I think that Uh. I talk a lot about that
Speaker 1: in the letter because it's really it's a metaverse. Uh.
Speaker 1: And we strongly believe that we've invested a lot in
Speaker 1: not just our gaming advisory and banking franchise and advising companies,
Speaker 1: but also in investing and the growth companies pre I,
Speaker 1: p O and pre Eminent, because I think there are
Speaker 1: social networks to gaming, like the discords and the roadblocks
Speaker 1: of the world. Um. So it's not just the consoles, uh,
Speaker 1: it's and the scope leaves of the world. So we're
Speaker 1: very active in the gaming business, even even the ones
Speaker 1: that't a private mm hmm. Fortnite is as much a
Speaker 1: competitor to Netflix as Amazon and Hulu for both time
Speaker 1: and also, as you said, just purely from a streaming platform,
Speaker 1: it will if there was a movie studio for sale,
Speaker 1: I would bet on a gaming company looking to buy
Speaker 1: it as much as a media company looking to buy
Speaker 1: it or technology platform. Is the era of the bundle over?
Speaker 1: Has streaming? Has streaming made the traditional notion of the
Speaker 1: the m v PD cable bundle that drove twenty five
Speaker 1: years of earnings for the largest media companies? Is that bundle?
Speaker 1: Is that bundle praying to the point of not being
Speaker 1: able to really be be put back together within like
Speaker 1: a couple of years, or do you think that that
Speaker 1: that that the impact of streaming has been maybe a
Speaker 1: little overstated on the on the content companies. Um I,
Speaker 1: I definitely think we're in an ali card world. Um
Speaker 1: I don't think that's being widely acknowledged, but it certainly
Speaker 1: is an ali card world, which, like anything direct consumer
Speaker 1: or digital, has risk of pricing coming lower for the
Speaker 1: content companies unless packaged in a different way. So when
Speaker 1: you see Disney Plus have proprietary exclusive content on its
Speaker 1: own platform, that's another form of bundle, just bundle in
Speaker 1: its own ecosystem right or Warner with HBO Max that's
Speaker 1: its own bundle. Right, it's just bundle at the exclusion
Speaker 1: of other content. Um. And over time the next stage
Speaker 1: of that development will be the platform players will either
Speaker 1: have proprietary content that they own on their platform and
Speaker 1: that's it in a closed in a closed garden, or
Speaker 1: they will open it and least other content, which will
Speaker 1: give power to the platform long term with the biggest
Speaker 1: reach versus UH content that's not owned by those platforms,
Speaker 1: and the content that's not owned by the platform will
Speaker 1: be leased by by many platforms, and the long term
Speaker 1: power will be in the distribution. Of my mind, what
Speaker 1: do you think is the runway to profitability, for true
Speaker 1: profitability for a Disney Plus or an HBO Max, given
Speaker 1: you know what they compared to what they would have
Speaker 1: been able to earn, say five years ago, in a
Speaker 1: more stable traditional m v p D environment. You're you're
Speaker 1: really getting to the question of as a traditional model
Speaker 1: between content and distribution with the cable operators or the
Speaker 1: satellite operators breaks down in a bundle format and the
Speaker 1: content companies go direct to consumer, is their value leakage UM,
Speaker 1: that's a much better way to say it. We live
Speaker 1: this every day. It was the economics. They gotta break
Speaker 1: to the point where maybe it looks sexy in these
Speaker 1: business models. Uh, director consumer around the whole plus side
Speaker 1: of what these companies are going, but it really doesn't
Speaker 1: hold up financially long term to a shareholder. So the
Speaker 1: answer to that question is, um, there's definitely economic risk
Speaker 1: to the content companies as they abandoned the cable companies
Speaker 1: and go direct to the consumer unless two things happen. One,
Speaker 1: they have enough global scale to make up for the
Speaker 1: regional ecosystem that the cable operators owned, because the cable
Speaker 1: operators are really super regional. You know, there's no real
Speaker 1: national cable operators still, right. We have many in the
Speaker 1: U S still two, three or four, but not a
Speaker 1: national player. So if you could have global reach and
Speaker 1: Disney can reach a global customer base like Netflix, then
Speaker 1: you can become a global channel and make up some
Speaker 1: of those economics um and maybe even super seats on
Speaker 1: those economics with a loyal consumer base too. You have
Speaker 1: to have an investment in content that continues over time,
Speaker 1: that allows the consumer to stay with your platform and
Speaker 1: allows Disney, as this example, how to have pricing power
Speaker 1: over that consumer because you have to keep raising prices um.
Speaker 1: That will want the consumer to feel like they're getting
Speaker 1: more value for that for that subscriber, for that subscriber cost.
Speaker 1: And then three, you have to bring the capable operators
Speaker 1: along with you. You you really, you really have to
Speaker 1: in order to to not cannibalize your existing business. You
Speaker 1: have to bring them along with you. That that potentially
Speaker 1: could be done in in the revenue splits or working
Speaker 1: with the cable operators in different digital ways. And that's
Speaker 1: gonna be important. By and large, we're talking about the
Speaker 1: have and have not. The Disney of the world is
Speaker 1: a scale player. The other content companies may not be
Speaker 1: able to do that. Discovery could do that, um, but
Speaker 1: they're very few content companies that can actually have a
Speaker 1: global reach of the consumer. So as the bundle breaks,
Speaker 1: it definitely hurts the content industry overall, except for the
Speaker 1: top players, which must must yield more consolidation among the
Speaker 1: content companies to have more power and breath around the
Speaker 1: global consumer base or have alignment with other platforms like
Speaker 1: technology platforms. Long term, if Disney, since Disney has put
Speaker 1: those numbers out there, Disney put out Um, I believe
Speaker 1: that they're aiming for as many as two thirty to
Speaker 1: sixty million subscribers to Disney Plus long term. If they
Speaker 1: get within that range internationally, they will not miss the
Speaker 1: seven dollars a month that they were getting per sub
Speaker 1: in the old world. For ESPN like that, the business
Speaker 1: model is strong. And if they reach that scale, in
Speaker 1: your in your view and I know you your folks
Speaker 1: study this all day long, that they if they reach
Speaker 1: that scale, that they will be that they will be
Speaker 1: even better off than they were in the glory days
Speaker 1: of let's call it, you know, ten, ten, twelve years
Speaker 1: ago in the cable business. Yes, as long as those
Speaker 1: customers hold. Because there's a concept around any consumer business
Speaker 1: that's called churn. And then there's another concept called price lasticity,
Speaker 1: which means, you know, what is the price that you
Speaker 1: could you know, raise your rates at without risking turn
Speaker 1: And um, that is a hallmark of any distribution model,
Speaker 1: whether it's a wireless model or a cable model, or
Speaker 1: a satellite model or a you know, five G model. UM,
Speaker 1: we've always had to measure these things over time, and
Speaker 1: so pricing is not you know, in elastic you know,
Speaker 1: you have to really look at what you're offering the
Speaker 1: consumer to be able to raise prices. If you're in
Speaker 1: a broadbad environment, that's about speeding capacity and access, you
Speaker 1: have to be able to raise prices. If you're in
Speaker 1: a video environment, you have to give them more content,
Speaker 1: and you have to give them more offerings, or maybe
Speaker 1: you have to offer more than this video, like I said,
Speaker 1: gaming and audio or other things, more products and services.
Speaker 1: So you have to spend to offer more. That's what
Speaker 1: Netflix has been doing, and so you have to reach
Speaker 1: a point of critical maths to be able to have
Speaker 1: that marginal costs to spend affordable on the platform. And
Speaker 1: that's only going to be there for very few players.
Speaker 1: Everyone else will have to align with other platforms or
Speaker 1: merge with other platforms to create ecosystem of five or
Speaker 1: six or seven global competitors. Everyone else will be part
Speaker 1: of that, and that's a new ecosystem that basically similarly
Speaker 1: it's the old cable model we've been talking about, very
Speaker 1: traditional Hollywood. There's a lot going there's a lot in
Speaker 1: the ether right now about big tech and a lot
Speaker 1: of you know, there's a lot of talk about the
Speaker 1: threat of regulation of antitrust concerns and even bringing breaking
Speaker 1: up Facebook's Googles, you know, the dominant duopolis in the market.
Speaker 1: Do you see a do you think that there isn't
Speaker 1: is a real threat of of of there will be
Speaker 1: a lot of noise about regulatory activity, but do you
Speaker 1: think that there's a real head of steam to put
Speaker 1: regulations around things like Facebook and or or UM. You know,
Speaker 1: Google is under a lot of antitrust and you know,
Speaker 1: market scrutiny right now for various various operations. Do you
Speaker 1: think that, especially with the Biden administration coming in, that
Speaker 1: we will see actually real activity on the regulatory front,
Speaker 1: beyond beyond hearings and you know, noise, that there will
Speaker 1: be actual action. I think that Google and Facebook will
Speaker 1: be regulated UM. I don't think Google and Facebook will
Speaker 1: be forced to break up the regulations. When I say regulated,
Speaker 1: I mean there's things like Section two thirty. I think
Speaker 1: that there is UM elements of restrictions on UM, the
Speaker 1: privacy rules and the way that their different divisions work together.
Speaker 1: I think there's certainly glacier already coming out of the EU,
Speaker 1: even more stringent than in the US. UM. But by
Speaker 1: and large, I think these companies have been very innovative
Speaker 1: and should not be penalized by virtue just being innovative
Speaker 1: platforms UM, you know. And I don't think that any
Speaker 1: of them are too big for this environment because I
Speaker 1: think the access to capital for other companies are available
Speaker 1: to try to to be built as well and UM.
Speaker 1: And I think that the way that the FTC, which
Speaker 1: really regulates Facebook and Amazon, the way that the d
Speaker 1: o J, which really read grades Amazon, UM sorry, Google
Speaker 1: and Apple approaches that will be very different. Uh. And
Speaker 1: I think that the FTC has moved faster with the
Speaker 1: Facebook lawsuit UM at this point, but I think over
Speaker 1: the next few years UM, we will see much more
Speaker 1: kind of headline noise than any kind of risk of breakups.
Speaker 1: But I think there is a real need for regulation
Speaker 1: around replicating what traditional media has had to deal with,
Speaker 1: which is like what you can say, what you can't
Speaker 1: say UM, and that should approach some kind of UM
Speaker 1: standard with social networks as well as traditional media networks.
Speaker 1: That should be some sort of consistency there that I
Speaker 1: think you'll see the next few years. How the democratic
Speaker 1: administrations deal with M and A and tech UM remains
Speaker 1: to be seen. I mean that also kind of goes
Speaker 1: into materiality these companies are so big, whether they buy
Speaker 1: something that actually gets to a point of a shareholder
Speaker 1: vote or a regulauthority vote remains to be seen because
Speaker 1: a lot of these transactions are too small to even
Speaker 1: get to the kind of scrutiny. Um but um, but
Speaker 1: certainly democratic institutions and administrations tracially speaking are more more
Speaker 1: cautious with respect to M and A and will have
Speaker 1: to be uh cognizant that that's a big rispect for
Speaker 1: all of us. Do you think that the that the
Speaker 1: that the sense of you know that there's going to
Speaker 1: be some governmental active the around big tech. Has that
Speaker 1: made media a little more attractive for investors? That there's
Speaker 1: there's big issues that big tech is going to have
Speaker 1: to deal with. Is that is that making media look
Speaker 1: a little more attractive? I mean, yes, that in the
Speaker 1: sense of media is not in in the ire of
Speaker 1: the regulators, But no in the sense of if we're
Speaker 1: expecting media to be acquired by the tech companies. So
Speaker 1: um um. I think it's an intertwined ecosystem at this point. Um.
Speaker 1: And I think there's a lot of power that that
Speaker 1: the tech companies have in terms of the reach of
Speaker 1: the consumer UM, but there's a lot of UM. There's
Speaker 1: a lot of respect the media commis should get in
Speaker 1: terms of being able to really produce great content. And
Speaker 1: I think the relationship with the talent it's hard to
Speaker 1: replicate UM, but but ultimately we'll have to be aligned
Speaker 1: with the platforms. I think they getting the alignment between
Speaker 1: the content production, the talent, and the innovation with these
Speaker 1: economic models is where the complexity sits. The the I
Speaker 1: was saying to you earlier that UM, the relationship between
Speaker 1: talent and economic models and innovation in the media industry
Speaker 1: is so nuanced and has to be respected in a
Speaker 1: way that's not like any other industry where you can
Speaker 1: just innovate your way through economic models and say we're
Speaker 1: now going digital, we're going to e commerce, and all
Speaker 1: just makes sense because talent has a lot of power
Speaker 1: in this ecosystem that we live in, and they shouldn't
Speaker 1: have a lot of power because the brands or the
Speaker 1: creative engine that makes media special UM has casual streams
Speaker 1: attached to them. They're not just UM. You know, voices
Speaker 1: are artists. They have casual streams and maybe they have
Speaker 1: more power than the corporations. A lot of ways and
Speaker 1: if you disenfranchise the talent, you kind of lose the
Speaker 1: engine of what makes the immediate strey special, so that
Speaker 1: that relationship has to get cultivated in a similar way
Speaker 1: as that, you know, content and distribution has found its
Speaker 1: harmony and marriage and a trictional cable and cable network
Speaker 1: ecosystem are a What is your boldest prediction for Well,
Speaker 1: it's a great question because everything about this industry has
Speaker 1: an element of boldness to it. But let me see
Speaker 1: if I could, um stretch my thinking for your podcast
Speaker 1: a little bit, um for I'll do for plus in
Speaker 1: the vein of of the letter and how we're thinking
Speaker 1: about things. So the branding of the industry, Yeah, exactly,
Speaker 1: Um so a few things. Music concerts and festivals will
Speaker 1: come back faster than movies from your lips. The sports
Speaker 1: industry will be completely realigned and adjusted. In the Buffalo
Speaker 1: Bills will win the Super Bowl good defense. A major
Speaker 1: university will go digital as a long term strategy to
Speaker 1: expand its reach and innovation fully virtual, Intriguing people are
Speaker 1: going to travel to space, and tourism of all kinds
Speaker 1: will take off in the coming year. And the next
Speaker 1: US president will be a woman. Finally, Wow, all exciting
Speaker 1: things to look forward to in plus Aria, Thank you
Speaker 1: so much for your time. Always a fascinating conversation with you.
Speaker 1: Thanks so much, Cynthia, have a great time. Thanks for listening.
Speaker 1: Be sure to tune in next week for another episode
Speaker 1: of Strictly Business, and please leave us a review at
Speaker 1: Apple Podcasts. We love to hear from listeners.