WEBVTT - Aryeh Bourkoff: How Big Media Can Change the Narrative in 2021 0:00:08.800 --> 0:00:13.200 Welcome to Strictly Business, Varieties weekly podcast featuring conversations with 0:00:13.240 --> 0:00:16.960 industry leaders about the business of media and entertainment. I'm 0:00:17.000 --> 0:00:20.720 Cynthia Littleton, co editor in chief of Variety Today. My 0:00:20.760 --> 0:00:24.200 guest is ari A Borkoff, Founder and CEO of Lion Tree. 0:00:24.560 --> 0:00:27.840 Borkoff is the banker to the media elite. He's almost 0:00:27.920 --> 0:00:30.360 always in the middle of the action on big mergers 0:00:30.360 --> 0:00:34.000 and acquisitions. Investors of the caliber of John Malone and 0:00:34.040 --> 0:00:38.000 Shari Redstone have him on speed dial. In our conversation, 0:00:38.360 --> 0:00:41.680 Borkoff talks about the profound effects of the pandemic and 0:00:41.720 --> 0:00:44.720 how it will shape the media and entertainment ecosystem for 0:00:44.800 --> 0:00:48.479 years to come. He gives his insights into the great 0:00:48.560 --> 0:00:53.239 direct to consumer realignment underway for traditional Hollywood giants, and 0:00:53.360 --> 0:00:56.040 he explains why his team at Lion Tree is closely 0:00:56.080 --> 0:00:59.720 watching the video gaming world. Normally, people pay a lot 0:00:59.760 --> 0:01:02.840 of money for a half hour with Aria Borkoff, so 0:01:02.960 --> 0:01:05.720 consider this episode a perk and a good reason to 0:01:05.800 --> 0:01:12.800 listen to Strictly Business all year long. Area Borkoff, founder 0:01:12.880 --> 0:01:19.200 and CEO of Lion Try the elite media investment banking 0:01:19.240 --> 0:01:22.679 an advisory firm. Thank you so much for taking time 0:01:22.680 --> 0:01:25.600 out to join us. Thanks for having me. As we 0:01:25.680 --> 0:01:28.399 look to kick off the new year, what do you 0:01:28.440 --> 0:01:32.760 see what is the most significant things that you see 0:01:32.840 --> 0:01:35.360 on the horizon for media companies to deal with? And 0:01:35.440 --> 0:01:38.520 that is a loaded question because there are about twenty 0:01:38.840 --> 0:01:41.280 thousand things that they have to deal with. But what 0:01:41.360 --> 0:01:44.560 do you think for the media giants that you work 0:01:44.640 --> 0:01:47.560 with and and study, what do you think are the 0:01:47.600 --> 0:01:50.960 biggest issues that are going to need to be addressed 0:01:51.040 --> 0:01:55.880 in Well, obviously a great open ended question to start, 0:01:55.920 --> 0:01:59.120 but it's, like you said, it is uh the question 0:01:59.160 --> 0:02:02.000 that the media cup but he has grappled with every day. 0:02:02.040 --> 0:02:05.600 I always think about public companies and CEOs of public 0:02:05.600 --> 0:02:11.440 companies having to assess what their shareholders are going to 0:02:11.639 --> 0:02:15.800 be interested in UH and be demanding of them UM 0:02:15.960 --> 0:02:18.519 not only at the moment but in the future and 0:02:18.639 --> 0:02:21.680 UH and have to predict that UM and then obviously 0:02:21.760 --> 0:02:25.480 drive the company risk, appetite and investment horizons towards that 0:02:25.560 --> 0:02:30.960 shareholder base, media company strategies and the company executives have 0:02:31.120 --> 0:02:33.440 to do the same thing for their consumers. And so 0:02:33.480 --> 0:02:36.160 the answer to your question is what does the consumer 0:02:36.240 --> 0:02:38.919 look like in the future By the end of twenty one. 0:02:39.280 --> 0:02:41.960 So we're sitting here beginning the year. What does the 0:02:42.000 --> 0:02:44.119 consumer appetite look like at the end of the year, 0:02:44.160 --> 0:02:46.480 and how do you position your company for that? And 0:02:46.560 --> 0:02:48.320 so it very clearly has a lot to do with 0:02:48.440 --> 0:02:52.680 video streaming, and we've been we've been very much binging 0:02:52.800 --> 0:02:57.919 of video content and the creative um explosion of everything 0:02:58.480 --> 0:03:02.080 at the Disney Plus usen HBO Max and Apple TV 0:03:02.320 --> 0:03:06.440 and Discovery Plus and Amazon Prime and and everything around 0:03:06.560 --> 0:03:10.040 the world that we're consuming all the time. But we've 0:03:10.040 --> 0:03:13.480 also been in consuming a lot more audio content like 0:03:13.600 --> 0:03:16.400 this right, and audio has been, in our view of, 0:03:16.960 --> 0:03:19.400 you know, growing a lot faster than even video and 0:03:19.440 --> 0:03:23.239 I think we'll continue to do so. And then there's gaming, um, 0:03:23.280 --> 0:03:26.760 and not not just video games as an activity, but 0:03:27.000 --> 0:03:30.320 video games as a metaverse, as a as a as 0:03:30.360 --> 0:03:34.360 a new universe. So is Fortnite the new Internet. And 0:03:34.400 --> 0:03:37.600 we saw in the last year Travis Scott premier a 0:03:37.680 --> 0:03:41.160 concert within the Fortnite ecosystem. Maybe we'll start seeing movie 0:03:41.200 --> 0:03:45.760 premiers within the Internet of the within the video gaming ecosystem, 0:03:45.920 --> 0:03:50.040 or other concerts or other you know, activities that are 0:03:50.040 --> 0:03:53.040 more virtual. If you actually notice towards the end of 0:03:53.120 --> 0:03:56.840 last year with the pandemic, a lot of advertisements on 0:03:56.880 --> 0:04:03.000 television were, um, we're animated or virtual. So you may 0:04:03.120 --> 0:04:06.480 not even really notice the difference over time that because 0:04:06.520 --> 0:04:10.400 of production issues around the pandemic, you didn't really have 0:04:10.640 --> 0:04:14.920 a chance a chance to see the video in person 0:04:15.440 --> 0:04:20.360 commercials being filmed or produced. So those were replaced by 0:04:20.520 --> 0:04:23.520 you know, C g I or animated commercials and most 0:04:23.520 --> 0:04:26.240 people didn't even notice it, but they were really appealing still. 0:04:26.600 --> 0:04:29.320 So that is a new way of doing things that 0:04:29.360 --> 0:04:31.920 happened right before your eyes. And so I think it's 0:04:31.920 --> 0:04:35.400 really about predicting the future consuming patterns of the of 0:04:35.480 --> 0:04:37.920 the of all of us. And I think position for that. 0:04:38.000 --> 0:04:41.799 And I think savings has picked up a lot during 0:04:41.839 --> 0:04:45.039 this pandemic in because we've all saved a lot of 0:04:45.040 --> 0:04:47.080 money and comming to save a little bit of money 0:04:47.080 --> 0:04:50.159 and we haven't traveled and we're waiting to consume it 0:04:50.279 --> 0:04:52.240 inside the home and outside the home, and that will 0:04:52.279 --> 0:04:54.800 have to be balanced with all of our leisure activities. 0:04:55.120 --> 0:04:58.040 That that could be one silver lining, because you know, 0:04:58.080 --> 0:05:02.520 the general statistics are pretty scary about how little Americans actually, 0:05:02.560 --> 0:05:05.640 you know, actually put in the bank, so so that 0:05:05.640 --> 0:05:08.160 that could you know that there could definitely be some 0:05:08.200 --> 0:05:13.240 silver linings there. Do you think that UM Let me 0:05:13.240 --> 0:05:15.039 ask in terms of in terms of M and A, 0:05:15.480 --> 0:05:18.240 do you think there's been There has been a lot 0:05:18.320 --> 0:05:20.760 of activity, but there's also been a feeling that there 0:05:20.920 --> 0:05:23.880 is a there's a great roll up waiting to happen 0:05:24.360 --> 0:05:27.599 with some smaller companies, whether they're active in cable or 0:05:27.640 --> 0:05:32.320 active in content. Do you think that the pandemic conditions 0:05:32.760 --> 0:05:36.680 have made another wave of media M and A more 0:05:36.800 --> 0:05:40.440 likely or less likely in this coming say twelve to 0:05:40.560 --> 0:05:43.360 twenty four months. I wouldn't draw a parallel between the 0:05:43.360 --> 0:05:46.160 pandemic and M and A activity, but I would draw 0:05:46.200 --> 0:05:51.600 a parallel between the market and financial stimulus and M 0:05:51.600 --> 0:05:54.760 and A activity, both in the sense of interest rates 0:05:54.800 --> 0:06:00.280 being low, capital being infused into the economy, of vaccine 0:06:00.360 --> 0:06:03.760 being a stimulant for a rebound economically and with jobs, 0:06:04.360 --> 0:06:10.400 innovation picking up, unemployment coming down, currency devaluation in the 0:06:10.520 --> 0:06:15.599 US UM and public market activity, So not just debt 0:06:15.600 --> 0:06:19.160 financing being strong, but equity financing being strong, probably the 0:06:19.240 --> 0:06:23.520 strongest has been in my lifetime. UM, with not just 0:06:23.600 --> 0:06:25.560 SPACs but I p O S and other forms of 0:06:25.600 --> 0:06:30.960 equity capital, all providing for a framework of activity levels 0:06:31.600 --> 0:06:35.040 that will lead to not just consolidation in the way 0:06:35.080 --> 0:06:37.560 you're talking about it, which is a kind of scaling up, 0:06:38.400 --> 0:06:42.880 but also a deconstruction of companies where we're looking for 0:06:42.960 --> 0:06:45.839 more of an opperable portfolio. So when you look at 0:06:45.920 --> 0:06:49.000 companies like A T and T or Viacom, CBS or 0:06:49.720 --> 0:06:52.080 any of the kind of conglomerates let's say, like the 0:06:52.120 --> 0:06:55.680 old I T T shared ins, where not every asset 0:06:56.160 --> 0:07:00.440 will be best situated in the same company structure, you 0:07:00.480 --> 0:07:03.200 can separate those more easily today in the public markets 0:07:03.520 --> 0:07:07.600 or with other strategic companies by realigning the asset mix. 0:07:08.200 --> 0:07:12.960 Everything is available and there's a certain frenetic nature. I 0:07:12.960 --> 0:07:16.720 think the deal making coming that will be especially in 0:07:16.760 --> 0:07:19.320 the first half of the year with a recovery kind 0:07:19.360 --> 0:07:21.760 of embedded with some talents, I think it will be 0:07:21.920 --> 0:07:24.240 maybe one of our busiest years. And I do think 0:07:24.240 --> 0:07:27.200 that that that that that like Sony is has has 0:07:27.240 --> 0:07:30.640 been breaking off small pieces, small collections of like you 0:07:30.640 --> 0:07:34.760 know Asian Asian TV channels that that that can be 0:07:34.840 --> 0:07:38.160 that were sought after by some investors that knew that 0:07:38.240 --> 0:07:40.320 business and have come in and I think that that 0:07:40.920 --> 0:07:43.960 aspect the fact that companies might be breaking off parts 0:07:43.960 --> 0:07:47.120 that people didn't even you know, previously, wouldn't have even 0:07:47.160 --> 0:07:49.400 thought would have been remotely for sale or would have 0:07:49.440 --> 0:07:53.520 been either too small or to embed it into larger operations. 0:07:53.560 --> 0:07:57.560 But I think that having seen that, my senses that 0:07:57.600 --> 0:08:00.400 people feel like there's a lot of opportunity. But cything 0:08:00.480 --> 0:08:02.280 you like when you when you think about like deal 0:08:02.320 --> 0:08:04.560 flow and I think you know, I've had these conversations 0:08:04.560 --> 0:08:08.360 over the years, um and I appreciate our conversations because 0:08:08.400 --> 0:08:11.640 there's a narrative behind them versus like the deal of 0:08:11.680 --> 0:08:15.560 the moment that's breaking, which we of course never talked about. 0:08:15.880 --> 0:08:18.760 You're always working on them, and you can never you 0:08:18.800 --> 0:08:21.600 can never tale, you can never talk about them, which 0:08:21.640 --> 0:08:26.240 is so funny. All most roads in media run through 0:08:26.320 --> 0:08:29.520 lion try and that is not an exaggeration. I appreciate that. 0:08:29.520 --> 0:08:32.560 But I I and I really love the deal and 0:08:32.600 --> 0:08:35.480 the execution of the deal, and we obviously spent a 0:08:35.480 --> 0:08:37.760 lot of time cultivating to make sure those deals happen. 0:08:38.120 --> 0:08:43.240 But the narrative arc is is journalistically where we align 0:08:43.360 --> 0:08:47.040 because I find the story of what we're actually doing 0:08:47.120 --> 0:08:49.839 to be most interesting, and there's there has to be 0:08:50.000 --> 0:08:53.400 rational for these deals. So for example, hypothetically, let's say 0:08:53.440 --> 0:08:56.640 like regional sports networks kind of a troubled segment of 0:08:56.679 --> 0:08:58.599 the media world right now, right, I mean is a 0:08:58.720 --> 0:09:01.880 melting ice cube, like you know what, what's what's the 0:09:01.880 --> 0:09:05.880 they're there in non demand streaming world. Correct, So so 0:09:05.920 --> 0:09:07.800 how do you so this is not like the high 0:09:07.840 --> 0:09:11.560 flying growth segment of you know, technology and digital and 0:09:11.559 --> 0:09:14.280 that other parts of the world you know, would talk 0:09:14.320 --> 0:09:17.240 about there's going public, but regional sports stutworks has to 0:09:17.280 --> 0:09:20.760 get reworked and maybe become less regional. Maybe they should 0:09:20.760 --> 0:09:24.360 become more natural nature. Maybe we should recreate a regional 0:09:24.600 --> 0:09:28.199 sports network that's super regional or national, which looks a 0:09:28.200 --> 0:09:31.760 lot more like ESPN recultivated. Right, So that's M and 0:09:31.800 --> 0:09:35.120 A in a different way. And those are the kind 0:09:35.160 --> 0:09:37.240 of things that we think about a lot, which is, 0:09:37.480 --> 0:09:40.079 you know, how do you take segments of the media 0:09:40.160 --> 0:09:44.880 industry and reorient them towards a better narrative that has 0:09:44.920 --> 0:09:49.640 strategic value, that unlocks upside and minimize the downside to 0:09:49.679 --> 0:09:54.320 create a more defensible asset mix. And and that is uh, 0:09:54.360 --> 0:09:57.120 that's where we allign in terms of thinking about problems 0:09:57.120 --> 0:09:59.760 that have to get solved, not just deal making for 0:09:59.840 --> 0:10:04.040 do making sake. Right? Do you what what what is 0:10:04.080 --> 0:10:08.240 the impression from investors, especially people that haven't been as 0:10:08.280 --> 0:10:12.920 active in the core entertainment media space. I would think 0:10:12.960 --> 0:10:15.880 that investors that would be looking at this space might 0:10:16.000 --> 0:10:19.040 be a little cautious, going, Wow, this business needs to 0:10:19.080 --> 0:10:22.840 reinvent itself, you know, unpack itself and you know, re 0:10:23.120 --> 0:10:26.360 fashion in different ways. I'm going to stay out for 0:10:26.400 --> 0:10:28.400 a few for a few years and let them figure 0:10:28.400 --> 0:10:30.280 it out and then I'll come in. Or do you 0:10:30.320 --> 0:10:32.320 find that there is a lot of interest in a 0:10:32.480 --> 0:10:35.280 market that is going through a kind of a creative 0:10:35.280 --> 0:10:38.679 destruction right now? There's a there's a great book called 0:10:38.679 --> 0:10:40.760 The Powers that Be that you may have read, and 0:10:40.760 --> 0:10:43.200 it's like, uh, it's not a new book, but it 0:10:43.240 --> 0:10:44.960 goes through like some of the the origins of the 0:10:45.000 --> 0:10:47.720 media companies, and like, did you know that the beginnings 0:10:47.720 --> 0:10:49.720 of the uh, you know, the pay leeagus of the 0:10:49.720 --> 0:10:53.160 CBS was a star company. Uh? And did you know 0:10:53.240 --> 0:10:56.960 that the beginnings of Time Warner was a car garage 0:10:57.040 --> 0:11:02.440 or funeral homes company? Can shoes right? Car garages? Yeah? 0:11:02.480 --> 0:11:08.120 And like these are great stories of entrepreneurialism well before 0:11:08.200 --> 0:11:09.959 the Amazons of the world, in the faithfic of the 0:11:10.040 --> 0:11:13.560 world and the Zugerberg's and the basis so that it's 0:11:13.600 --> 0:11:16.199 the delta, it's the change that's interesting to invest in. 0:11:16.720 --> 0:11:19.600 It's the reinvention that's interesting to invest in, not the static. 0:11:20.080 --> 0:11:23.880 I always say stagnation leads to decay. Motion leads to value. 0:11:24.400 --> 0:11:26.000 So if you had the best company in the world 0:11:26.120 --> 0:11:29.560 that printed the same revenue every year, the way that 0:11:30.040 --> 0:11:33.520 equit markets work, the stock goes down because that equity 0:11:33.640 --> 0:11:36.520 trade is based on the future growth of a stock. 0:11:37.400 --> 0:11:40.880 So um, you have to have motion of growth and 0:11:40.920 --> 0:11:44.960 being able to reinvent more construction of value out of 0:11:45.040 --> 0:11:48.920 something then to keep it, even if it's a great company. 0:11:48.960 --> 0:11:51.439 So that creates a lot of reinvention and investment. Some 0:11:51.480 --> 0:11:53.360 of that works, but that doesn't. But I think to 0:11:53.400 --> 0:11:56.680 invest in that risk, appetite and that reinvention is the 0:11:56.720 --> 0:11:59.240 whole game. And I think that's what's most interesting about 0:11:59.240 --> 0:12:01.480 the media industry. It's always reinventing itself. It has to 0:12:01.920 --> 0:12:04.840 m HM. And my sense from your comment is that 0:12:04.880 --> 0:12:06.880 there is a lot of money, there's a lot of 0:12:06.960 --> 0:12:10.400 quote dry powder out there waiting to find the place 0:12:10.720 --> 0:12:12.800 to park itself or put it, you know, to put 0:12:12.840 --> 0:12:15.880 itself if there's dry powder. There are companies looking for 0:12:16.000 --> 0:12:18.920 a quote unquote third leg to the stool where they're 0:12:18.960 --> 0:12:21.480 looking for a new business to buy or to do 0:12:21.600 --> 0:12:24.040 invest in UM that in a lot of cases, like 0:12:24.080 --> 0:12:27.560 I said, is audio or gaming driven UM. There are 0:12:27.559 --> 0:12:30.600 also companies are looking to expand in their core business 0:12:30.600 --> 0:12:32.640 in this data age, coming out of a pandemic, you 0:12:32.679 --> 0:12:35.000 look at your portfolio and say, how much do we 0:12:35.080 --> 0:12:38.160 have in our business that's out of home versus insulated 0:12:38.200 --> 0:12:42.240 in home because obviously had a premium for being insulated 0:12:42.280 --> 0:12:45.319 in home versus out of home like theme parks, etcetera. 0:12:45.679 --> 0:12:47.640 And should we reorient that a little bit we have 0:12:47.720 --> 0:12:50.880 more gaming in home versus theme parks out of home. 0:12:51.200 --> 0:12:53.880 But you can't really react to a pandemic. In my mind, 0:12:53.920 --> 0:12:56.800 I always say, decisions that you make in a crisis 0:12:57.760 --> 0:13:01.360 probably are biased to the consider of side. And you 0:13:01.400 --> 0:13:03.480 really want to play a long term to a more 0:13:03.520 --> 0:13:07.560 normalized environment and not just have a diverse life set 0:13:07.559 --> 0:13:10.000 of assets, but an assets that that will grow to 0:13:10.080 --> 0:13:12.800 the consumer in all ways. Since as that gets back 0:13:12.840 --> 0:13:15.840 to your first question is how to media company position themselves. 0:13:16.000 --> 0:13:18.360 You want to have multiple products. You don't want to 0:13:18.360 --> 0:13:21.000 just have video streaming all the time. You know, what 0:13:21.080 --> 0:13:23.400 else are you offering the consumer? You know, I don't. 0:13:23.440 --> 0:13:25.559 I do believe that people will come back to theaters. 0:13:26.040 --> 0:13:29.600 I do believe that there's an experiential model that people 0:13:29.600 --> 0:13:32.880 will long for in the In the time of the twenties, 0:13:33.280 --> 0:13:36.640 in the prohibition, we all long for a bottle of alcohol. 0:13:37.520 --> 0:13:39.800 In the time of the pandemic, we're all longing for 0:13:39.880 --> 0:13:42.559 a gathering. Let's face it. I mean, it's much more 0:13:42.559 --> 0:13:45.920 interesting to be together. That's like a creative spark to 0:13:45.960 --> 0:13:48.520 be together. That we have to find safe ways to 0:13:48.559 --> 0:13:51.839 do that that are more forward leaning versus backward leaning. 0:13:52.160 --> 0:13:54.160 I don't think there's any activity that you can tell 0:13:54.200 --> 0:13:57.920 me about what happened in pre pandemic that didn't resume 0:13:58.000 --> 0:14:03.480 post pandemic. So things resumed, It just maybe accelerated towards 0:14:03.520 --> 0:14:07.640 its normal outcomes, and models will get reworked, and digitization 0:14:07.720 --> 0:14:09.600 is here to stay at our day and age, and 0:14:09.679 --> 0:14:12.760 so we'll just accelerate that. In areas like education, which 0:14:12.760 --> 0:14:16.679 probably should have happened anyway, in healthcare, in e commerce, 0:14:17.360 --> 0:14:21.640 in mobile gaming, in other areas. That's great, But we're 0:14:21.640 --> 0:14:23.360 going to do those things, I think anyway, at a 0:14:23.400 --> 0:14:25.640 faster pace, and I think we should just get on 0:14:25.640 --> 0:14:28.560 board with that. I think that I have seen a 0:14:28.560 --> 0:14:31.080 lot of commentary in the last couple of weeks about 0:14:31.080 --> 0:14:35.040 looking at you know that nineteen eighteen. It was about 0:14:35.040 --> 0:14:38.200 a twenty four month period and then hello, what did 0:14:38.200 --> 0:14:41.400 we enter what did this this America enter into? Was 0:14:41.640 --> 0:14:45.920 the literal the Roaring twenties, So you know, here's hoping 0:14:46.880 --> 0:14:51.400 bring back two percent needle beer. Also, the twenties is 0:14:51.440 --> 0:14:54.440 one analogy. The seventies is another analogy. And not not 0:14:54.480 --> 0:14:57.840 to be nostalgic, because I only say that because I 0:14:57.880 --> 0:15:01.440 think nineteen the late nineteen sixties, um, and I have 0:15:01.520 --> 0:15:06.200 to say I wasn't born then. Sixties seemed like it 0:15:06.720 --> 0:15:10.600 probably felt like a very heavy period of time. You 0:15:10.640 --> 0:15:15.760 had a war, you had the assassinations of MLK, JFK 0:15:15.920 --> 0:15:20.560 and RFK all around the same time. Imagine how scary 0:15:20.600 --> 0:15:24.240 that must have felt. Um, And it's in the sciet 0:15:24.320 --> 0:15:28.360 and Democratic National Convention. Correct. So that was a very 0:15:28.400 --> 0:15:33.320 heavy period would emerge with a very gritty seventies lightness 0:15:33.360 --> 0:15:41.000 of being a creative um revolution that ended the decade 0:15:41.040 --> 0:15:43.920 in the nineteen seventies and seventy seven. I think with 0:15:43.960 --> 0:15:47.520 Star Wars, a tale of morality of you know, good 0:15:47.520 --> 0:15:51.200 and evil and fantasy and sci fi and you know, 0:15:51.320 --> 0:15:54.240 and so I think that was like everyone got on 0:15:54.280 --> 0:15:58.520 board with this this beautiful like creative, like fantasy world 0:15:58.920 --> 0:16:01.360 that carried us for a while until like obviously the eighties, 0:16:01.400 --> 0:16:04.520 which was a high finance, you know world, and you know, 0:16:04.800 --> 0:16:07.360 Reagan and everything else. So um and I just I 0:16:07.400 --> 0:16:09.920 just think there's maybe a potential of we're both in 0:16:09.920 --> 0:16:14.480 New York, like a grittiness of creative like uh, explosions 0:16:14.520 --> 0:16:17.520 of output of what the culture will look like coming 0:16:17.520 --> 0:16:19.560 out of this. That's I'm really interested in that. From 0:16:19.600 --> 0:16:22.560 a media perspective, I wanted to talk about gaming because 0:16:22.560 --> 0:16:24.880 you mentioned you've mentioned gaming as a you know, as 0:16:25.040 --> 0:16:27.360 a force, and it's been interesting to me as long 0:16:27.400 --> 0:16:31.080 as I've been covering entertainment, gaming has always been just 0:16:31.240 --> 0:16:35.440 a little to the side of the core film and television, 0:16:35.480 --> 0:16:38.800 the core sort of Hollywood entertainment business. Do you ever 0:16:39.080 --> 0:16:42.160 do you see an activism Blizzard or anyone of the 0:16:42.520 --> 0:16:45.760 or an e A. Do you see ever a tighter, 0:16:46.600 --> 0:16:51.560 a tighter consolidation with a traditional Hollywood company. We've seen 0:16:51.600 --> 0:16:55.680 it in Sony PlayStation, but as many times as they've tried, 0:16:55.760 --> 0:16:59.360 they've never I don't think you've ever really seen an 0:16:59.360 --> 0:17:04.720 integration of PlayStation technology and movie technology or television. They've 0:17:04.760 --> 0:17:06.800 tried it in different one offs, but never on a 0:17:07.080 --> 0:17:09.920 It's never like on a level that it really stuck. 0:17:10.240 --> 0:17:12.959 Is there something about the gaming business that is just 0:17:13.000 --> 0:17:18.160 sort of necessarily arms length from traditional film and TV? Yeah, 0:17:18.240 --> 0:17:20.639 I think that that's changed. I think the way you 0:17:20.720 --> 0:17:24.080 describe gaming as sort of an activity or an application 0:17:24.160 --> 0:17:26.960 of a platform, I think is a thing of the past, 0:17:27.000 --> 0:17:29.960 and I think it's a matter of having gotten to 0:17:30.000 --> 0:17:34.359 the scale and the reach of the consumer um that 0:17:34.440 --> 0:17:38.520 we're now at today makes an activision more take two 0:17:38.640 --> 0:17:42.560 or an e a kind of simulate a Netflix like 0:17:43.119 --> 0:17:46.120 uh customer profile, and then once you have that same 0:17:46.200 --> 0:17:49.960 kind of reach, then it's all about having the content. UH. 0:17:50.000 --> 0:17:53.480 And once you have that reach and the content, you 0:17:53.520 --> 0:17:57.359 can create the same kind of ecosystem where you have 0:17:57.400 --> 0:18:01.399 a subscription model with a with different types of content 0:18:01.760 --> 0:18:04.400 that's both you know, gaming as well as the video 0:18:04.400 --> 0:18:10.240 consumption Similarly, Netflix, with its reach and video content, can 0:18:10.400 --> 0:18:13.080 become more of a gaming platform. And I think you're 0:18:13.080 --> 0:18:19.000 gonna see those platforms kind of mailed closer together. And 0:18:19.119 --> 0:18:21.040 uh and I think that's where I say gaming is 0:18:21.080 --> 0:18:23.960 more of the new Internet. It's more of a platform 0:18:24.000 --> 0:18:27.600 that will have video not just games inside, because it 0:18:27.640 --> 0:18:31.280 will be a way of doing things virtually. Then that 0:18:31.280 --> 0:18:36.080 that that is kind of generational, um, but completely now 0:18:36.280 --> 0:18:39.160 part of the mainstream than when I grew up, at least, 0:18:39.640 --> 0:18:42.000 where it was more of an activity. And uh and 0:18:42.040 --> 0:18:44.159 I think that Uh. I talk a lot about that 0:18:44.200 --> 0:18:47.879 in the letter because it's really it's a metaverse. Uh. 0:18:47.920 --> 0:18:50.399 And we strongly believe that we've invested a lot in 0:18:50.920 --> 0:18:54.440 not just our gaming advisory and banking franchise and advising companies, 0:18:54.920 --> 0:18:58.919 but also in investing and the growth companies pre I, 0:18:59.040 --> 0:19:02.439 p O and pre Eminent, because I think there are 0:19:02.480 --> 0:19:06.040 social networks to gaming, like the discords and the roadblocks 0:19:06.040 --> 0:19:09.520 of the world. Um. So it's not just the consoles, uh, 0:19:09.520 --> 0:19:12.040 it's and the scope leaves of the world. So we're 0:19:12.119 --> 0:19:14.320 very active in the gaming business, even even the ones 0:19:14.359 --> 0:19:18.040 that't a private mm hmm. Fortnite is as much a 0:19:18.080 --> 0:19:22.720 competitor to Netflix as Amazon and Hulu for both time 0:19:22.920 --> 0:19:27.760 and also, as you said, just purely from a streaming platform, 0:19:28.000 --> 0:19:30.920 it will if there was a movie studio for sale, 0:19:31.520 --> 0:19:36.000 I would bet on a gaming company looking to buy 0:19:36.040 --> 0:19:39.360 it as much as a media company looking to buy 0:19:39.359 --> 0:19:42.480 it or technology platform. Is the era of the bundle over? 0:19:42.960 --> 0:19:48.520 Has streaming? Has streaming made the traditional notion of the 0:19:48.520 --> 0:19:52.320 the m v PD cable bundle that drove twenty five 0:19:52.400 --> 0:19:56.240 years of earnings for the largest media companies? Is that bundle? 0:19:56.880 --> 0:19:59.640 Is that bundle praying to the point of not being 0:19:59.680 --> 0:20:02.800 able to really be be put back together within like 0:20:02.840 --> 0:20:05.439 a couple of years, or do you think that that 0:20:05.440 --> 0:20:08.760 that that the impact of streaming has been maybe a 0:20:08.840 --> 0:20:14.159 little overstated on the on the content companies. Um I, 0:20:14.160 --> 0:20:17.400 I definitely think we're in an ali card world. Um 0:20:17.560 --> 0:20:20.720 I don't think that's being widely acknowledged, but it certainly 0:20:20.840 --> 0:20:24.280 is an ali card world, which, like anything direct consumer 0:20:24.400 --> 0:20:28.679 or digital, has risk of pricing coming lower for the 0:20:28.720 --> 0:20:33.240 content companies unless packaged in a different way. So when 0:20:33.280 --> 0:20:38.000 you see Disney Plus have proprietary exclusive content on its 0:20:38.040 --> 0:20:41.119 own platform, that's another form of bundle, just bundle in 0:20:41.200 --> 0:20:45.080 its own ecosystem right or Warner with HBO Max that's 0:20:45.080 --> 0:20:48.040 its own bundle. Right, it's just bundle at the exclusion 0:20:48.080 --> 0:20:52.359 of other content. Um. And over time the next stage 0:20:52.359 --> 0:20:55.560 of that development will be the platform players will either 0:20:55.760 --> 0:21:00.080 have proprietary content that they own on their platform and 0:21:00.119 --> 0:21:02.960 that's it in a closed in a closed garden, or 0:21:03.000 --> 0:21:05.800 they will open it and least other content, which will 0:21:05.840 --> 0:21:08.760 give power to the platform long term with the biggest 0:21:08.760 --> 0:21:13.639 reach versus UH content that's not owned by those platforms, 0:21:13.640 --> 0:21:15.640 and the content that's not owned by the platform will 0:21:15.680 --> 0:21:19.320 be leased by by many platforms, and the long term 0:21:19.359 --> 0:21:21.480 power will be in the distribution. Of my mind, what 0:21:21.520 --> 0:21:25.560 do you think is the runway to profitability, for true 0:21:25.600 --> 0:21:30.639 profitability for a Disney Plus or an HBO Max, given 0:21:31.640 --> 0:21:34.760 you know what they compared to what they would have 0:21:35.200 --> 0:21:37.639 been able to earn, say five years ago, in a 0:21:37.640 --> 0:21:41.720 more stable traditional m v p D environment. You're you're 0:21:41.720 --> 0:21:46.159 really getting to the question of as a traditional model 0:21:46.200 --> 0:21:50.639 between content and distribution with the cable operators or the 0:21:50.680 --> 0:21:55.119 satellite operators breaks down in a bundle format and the 0:21:55.200 --> 0:22:00.320 content companies go direct to consumer, is their value leakage UM, 0:22:01.280 --> 0:22:04.520 that's a much better way to say it. We live 0:22:04.600 --> 0:22:07.000 this every day. It was the economics. They gotta break 0:22:07.119 --> 0:22:09.720 to the point where maybe it looks sexy in these 0:22:09.760 --> 0:22:14.080 business models. Uh, director consumer around the whole plus side 0:22:14.119 --> 0:22:16.640 of what these companies are going, but it really doesn't 0:22:16.720 --> 0:22:19.680 hold up financially long term to a shareholder. So the 0:22:19.760 --> 0:22:23.240 answer to that question is, um, there's definitely economic risk 0:22:23.320 --> 0:22:27.000 to the content companies as they abandoned the cable companies 0:22:27.400 --> 0:22:31.600 and go direct to the consumer unless two things happen. One, 0:22:32.400 --> 0:22:35.840 they have enough global scale to make up for the 0:22:35.960 --> 0:22:39.000 regional ecosystem that the cable operators owned, because the cable 0:22:39.040 --> 0:22:42.520 operators are really super regional. You know, there's no real 0:22:42.680 --> 0:22:46.159 national cable operators still, right. We have many in the 0:22:46.280 --> 0:22:49.080 U S still two, three or four, but not a 0:22:49.200 --> 0:22:52.159 national player. So if you could have global reach and 0:22:52.280 --> 0:22:55.440 Disney can reach a global customer base like Netflix, then 0:22:55.480 --> 0:22:57.760 you can become a global channel and make up some 0:22:57.800 --> 0:23:01.399 of those economics um and maybe even super seats on 0:23:01.400 --> 0:23:04.760 those economics with a loyal consumer base too. You have 0:23:04.920 --> 0:23:08.399 to have an investment in content that continues over time, 0:23:09.240 --> 0:23:13.399 that allows the consumer to stay with your platform and 0:23:13.480 --> 0:23:16.879 allows Disney, as this example, how to have pricing power 0:23:17.240 --> 0:23:20.479 over that consumer because you have to keep raising prices um. 0:23:21.200 --> 0:23:23.880 That will want the consumer to feel like they're getting 0:23:23.920 --> 0:23:28.399 more value for that for that subscriber, for that subscriber cost. 0:23:28.880 --> 0:23:31.080 And then three, you have to bring the capable operators 0:23:31.080 --> 0:23:33.920