WEBVTT - Radial Entertainment Shops for Content Libraries as Pluto TV and Paramount Alum Jeff Shultz Takes Over as CEO

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<v Speaker 1>Welcome to Strictly Business, Variety's weekly podcast featuring conversations with

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<v Speaker 1>industry leaders about the business of media and entertainment. I'm

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<v Speaker 1>Cynthia Lyttleton, co editor in chief of Variety. Today. My

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<v Speaker 1>guest is Jeff Schultz. He's the newly appointed CEO of

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<v Speaker 1>Radial Entertainment. Radio was formed last year when private equity

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<v Speaker 1>firm oak Tree Capital Management brought together Film Rise with

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<v Speaker 1>Shout Studios. Those are two indie content ventures that focus

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<v Speaker 1>on distinct fan niches. Schultz is a Paramount and Pluto

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<v Speaker 1>TV veteran who has plans to rev up radio on

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<v Speaker 1>all fronts, from fast channel streaming to original production to

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<v Speaker 1>international licensing. Right now, he's out in the marketplace shopping

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<v Speaker 1>for libraries to buy. Earlier this week, Radio announced the

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<v Speaker 1>acquisition of New Dominion Pictures, which is the home of

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<v Speaker 1>evergreen unscripted series including The New Detectives, The FBI Files,

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<v Speaker 1>and a Haunting. In our conversation, Schultz maps out his

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<v Speaker 1>growth plan for Radio and why he's so bullish on

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<v Speaker 1>the company's potential to grow in this fast changing marketplace.

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<v Speaker 1>Jeff Schultz, CEO of Radio Entertainment, thank you so much

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<v Speaker 1>for joining me.

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<v Speaker 2>Hi, Cynthia.

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<v Speaker 1>I got to know you during your tenure at Paramount,

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<v Speaker 1>where you were very senior in building their streaming businesses,

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<v Speaker 1>both Paramount Plus and working on the Pluto TV side

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<v Speaker 1>as well. What was it about Radial Entertainment? What was

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<v Speaker 1>it about the company and its assets and its ambition

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<v Speaker 1>that made you want to take the reins as CEO.

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<v Speaker 2>Let me start by describing radio at a high level,

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<v Speaker 2>and then I'll share how it came together, how I

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<v Speaker 2>got involved. So I'll describe Radio in three parts. One.

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<v Speaker 2>Radio is the largest independent catalog of film and television

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<v Speaker 2>in the industry, So that's seventy thousand films in shows,

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<v Speaker 2>classic TV, massive factual and reality catalogs, Deep film catalog

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<v Speaker 2>and then major new films. And by independent, I mean

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<v Speaker 2>we're not a studio, We're not a division of a conglomerate.

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<v Speaker 2>We're truly an independent player. Two with integrated distribution, So

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<v Speaker 2>we operate a diversified distribution portfolio, distribute through AVOD s,

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<v Speaker 2>FOD broadcast, cable, transactional, even physical, theatrical international. We operate

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<v Speaker 2>a portfolio of hundreds of fast channels and generate directly

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<v Speaker 2>billions of streaming hours annually. And then the third part

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<v Speaker 2>is integrated capital. Oak Tree is a two hundred billion

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<v Speaker 2>dollar plus alternative asset manager and is our strategic partner

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<v Speaker 2>in growing the business. So the way to think about

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<v Speaker 2>Radial is the largest independent catalog of film and television

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<v Speaker 2>in the industry, with integration distribution and integrated capital. So

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<v Speaker 2>here's how it came together. In twenty twenty three, oak

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<v Speaker 2>Tree acquired Shout Factory, which Garson Fuz and his team

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<v Speaker 2>had built over a couple of decades into a super

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<v Speaker 2>respected independent film and TV distributor, acquiring and distributing genre content,

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<v Speaker 2>classic TV shows, horror, anime. I remember twenty fifteen we

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<v Speaker 2>launched the Mystery Science Theater channel with a Shout at Pluto.

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<v Speaker 2>We actually Radio Now own that as of January of

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<v Speaker 2>this year. And then during the two years between the

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<v Speaker 2>investment in Shout and the merger with film Rise, there

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<v Speaker 2>were deals with Gravitas and Millennium, Open Road, Golden Princess,

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<v Speaker 2>and so you can look at each of these as

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<v Speaker 2>catalog or company acquisitions that were based on the same

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<v Speaker 2>premise of content being fragmented and under valued and using

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<v Speaker 2>Shout as the platform to pull it all together. And

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<v Speaker 2>and so then in July of last summer, you have

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<v Speaker 2>two businesses that are actually sort of roughly the same

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<v Speaker 2>size in terms of scott Catalogs scale. This is Shout

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<v Speaker 2>and all of its platform roll up, and then film Rise,

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<v Speaker 2>which was super early in fast and free streaming, one

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<v Speaker 2>of the first players to make fixed feed bets against

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<v Speaker 2>sort of variable upside in free streaming. Are these are

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<v Speaker 2>deals that, to be honest, like I would have loved

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<v Speaker 2>to do myself at Pluto, but in the early stages

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<v Speaker 2>we didn't have the access to capital. We were independent startup,

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<v Speaker 2>and then as part of Icon and then Paramount, we

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<v Speaker 2>were focused on our internal library, like you know, monetizing

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<v Speaker 2>our proprietary library. So film Rise moved quickly to capture

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<v Speaker 2>large catalog licenses and in some cases acquisitions. That was

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<v Speaker 2>that was likely based on their data perform very very

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<v Speaker 2>well in free streaming.

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<v Speaker 1>When did you come into the equation for being the

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<v Speaker 1>person to lead this the combined entity.

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<v Speaker 2>I wasn't aware of what oak Tree was up to.

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<v Speaker 2>I didn't understand the scale and ambition of their strategy

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<v Speaker 2>until I read the shout in film Rise News, and

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<v Speaker 2>then it was still a few months before oak Tree

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<v Speaker 2>and I started talking about it, how I'm looking at

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<v Speaker 2>at oak Tree having put these pieces together. I look

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<v Speaker 2>at the combined platform, the pieces being sort of catalog

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<v Speaker 2>breadth and depth, distribution infrastructure, and then the capital behind it.

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<v Speaker 2>And by the end of a couple of conversations in September,

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<v Speaker 2>I saw something that I legitimately hadn't felt since the

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<v Speaker 2>early days of Pluto, which is that this was an

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<v Speaker 2>opportunity to build something transformative. The fact that our starting

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<v Speaker 2>point is the largest independent catalog of film and television

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<v Speaker 2>in the industry. The creation of Radial with these acquisitions

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<v Speaker 2>culminating in the merger with film Rise, was just the

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<v Speaker 2>starting point. So the integrated capital element of the business.

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<v Speaker 2>It wasn't just the capital to assemble the platform. Our

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<v Speaker 2>plan is to aggressively deploy new capital to grow the

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<v Speaker 2>catalog and grow the business again based on a thesis

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<v Speaker 2>that the independent content space is fragmented and undervalued. There's

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<v Speaker 2>hundreds of libraries sitting in disconnected companies, undermonetized and distributed,

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<v Speaker 2>and we think we're in a position to unlock their value.

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<v Speaker 2>And actually the acquisition of New Dominion Pictures is a

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<v Speaker 2>perfect illustration of how.

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<v Speaker 1>That model works, right that's a deal you unveiled earlier

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<v Speaker 1>this week.

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<v Speaker 2>We've been working on it a while. It's a business also,

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<v Speaker 2>a business that I know very well from the Pluto days.

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<v Speaker 2>I'll just say that when I learned that New Dominion

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<v Speaker 2>was in the pipeline late last year, I was thrilled

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<v Speaker 2>and pushed as quickly as we could. The New Dominion

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<v Speaker 2>Pictures is one of the largest independent factual production catalogs

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<v Speaker 2>in the industry. There's about eight hundred hours in the catalog,

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<v Speaker 2>but there's three genuine franchises, New Detectives, FBI Files and

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<v Speaker 2>a Haunting. So by franchises, I mean shows that are

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<v Speaker 2>known shows that have scaled on television previously but now

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<v Speaker 2>on streaming and free streaming, and that actually have huge audiences,

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<v Speaker 2>you know, and significant scale and streaming. So Radio already

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<v Speaker 2>today distributes the New Detectives and FBI Files, two of

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<v Speaker 2>those three franchises that I mentioned. So by operating the

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<v Speaker 2>those titles in the in the ecosystem, we already have

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<v Speaker 2>really like real performance data. We know how the content

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<v Speaker 2>performs and how drives data dollars hours. As a result,

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<v Speaker 2>this was less of a bet than a sort of

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<v Speaker 2>conviction buy based on proprietary data. It's a flywheel. So

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<v Speaker 2>we invest in content based on proprietary data and insights.

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<v Speaker 2>We're in a position to see the performance across the ecosystem,

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<v Speaker 2>so we know what works, what platforms need, what might

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<v Speaker 2>be undervalue, and then that gives us conviction that other

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<v Speaker 2>buyers don't have. We distribute the content through this integrated

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<v Speaker 2>distribution engine that we already have on day one, multiple platforms,

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<v Speaker 2>multiple territories, increasingly globally. Then we monetize it and that

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<v Speaker 2>cash flows back into the business to fund the next investment.

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<v Speaker 2>Greater volume, greater speed, and then better data. Every deal

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<v Speaker 2>creates intelligence and that feeds back into the decision making

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<v Speaker 2>for the next deal, and so that makes us a

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<v Speaker 2>compounding advantage, which is why I call it a flywheel.

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<v Speaker 1>Let me ask you sort of the really thirty thousand

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<v Speaker 1>foot view question. Oak Tree clearly is giving you capital

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<v Speaker 1>to work with the largest companies Disney, Warner Brothers, Paramount, NBCUniversal,

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<v Speaker 1>The largest companies are struggling with their streaming strategies.

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<v Speaker 2>Here.

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<v Speaker 1>What is oak Tree seeing that is giving them so

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<v Speaker 1>much confidence to put money into this and to give

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<v Speaker 1>you that capital upfront.

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<v Speaker 2>The Tree is a long term investor in this business

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<v Speaker 2>to have a long term time horizon, which is critical,

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<v Speaker 2>which allows us to inform the investment case not just

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<v Speaker 2>steady state where it stands today, but as we grow

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<v Speaker 2>the business over time. Again, the platform, as big as

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<v Speaker 2>it is, is just the starting point. The reason why

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<v Speaker 2>oak Tree has such confidence in the investment is that

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<v Speaker 2>we continue to see the same sort of dislocations in

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<v Speaker 2>the market in terms of content independent content, content not

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<v Speaker 2>owned by a conglomerate or a studio or in cases

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<v Speaker 2>where they are being underutilized and under monetized, and that

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<v Speaker 2>it's undervalued, and that you know, we increasingly as we scale,

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<v Speaker 2>will be sort of the highest value use of this content.

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<v Speaker 2>So we're evaluating an acquisition pipeline that's based on their

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<v Speaker 2>criteria and rigor and acumen, as well as our content

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<v Speaker 2>expertise and distribution data. Oak Tree isn't underwriting the value

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<v Speaker 2>of a catalog for an investment in a vacuum. They're

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<v Speaker 2>underwriting the value of the catalog in our hands right there.

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<v Speaker 1>And your primary monetization vehicle is the fast channels or

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<v Speaker 1>do you do a lot of licensing in different territories.

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<v Speaker 2>The diversity of the distribution model is in my mind,

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<v Speaker 2>one of the huge strengths. So there's a concentration in

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<v Speaker 2>AD supported streaming engagement driven streaming. Now that's not to

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<v Speaker 2>say in our portfolio of fast channels, that's just one piece.

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<v Speaker 2>So licensing in content for someone like Pluto to maybe

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<v Speaker 2>publishing their own fast channels, for someone like two B

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<v Speaker 2>to program on an avon basis, but because of the

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<v Speaker 2>volume of the catalog and the type of content that

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<v Speaker 2>it is, where it drives just incredible engagement. Free ad

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<v Speaker 2>supported streaming is sort of a lynchpin of the distribution portfolio,

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<v Speaker 2>but it's just one piece, So we're licensing it regardless

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<v Speaker 2>of business model, to really every streamer. We're still licensing

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<v Speaker 2>into network and broadcast television. We have a theatrical release

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<v Speaker 2>business and a physical business, digital transactional business, and so

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<v Speaker 2>all of these pieces roll up into sort of the

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<v Speaker 2>total value of a piece of content or a catalog

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<v Speaker 2>in our hands. So we're leveraging the market trend in

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<v Speaker 2>streaming and in free streaming, but we're able to diversify

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<v Speaker 2>the business model across really all different categories.

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<v Speaker 1>Is it largely domestic or do you have do you

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<v Speaker 1>also have international outlets as well.

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<v Speaker 2>We do operate internationally. The scale of the business is considerable.

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<v Speaker 2>We distribute in fifty markets give or take right now,

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<v Speaker 2>but the relative size of that business for US is small,

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<v Speaker 2>maybe even very small, which along with every other sort

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<v Speaker 2>of shortcoming of the business that oak Tree and I

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<v Speaker 2>talked about in the months between you know, September and January. First,

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<v Speaker 2>we are just scratching the surface of the opportunity outside

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<v Speaker 2>of the US, and that's reflected in the relatively very

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<v Speaker 2>small percentage of our revenue and EBITDA generated outside the US.

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<v Speaker 2>You know, days into the job, we announced the appointment

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<v Speaker 2>of a new head of international who previously worked at Fremantle,

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<v Speaker 2>and so that this is not a twenty seven plan,

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<v Speaker 2>It is a front half of twenty six plan for

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<v Speaker 2>us to put some real big levers in place to

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<v Speaker 2>grow internationally. So another great example is the Golden Princess

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<v Speaker 2>Library out of Hong Kong. So this is one of

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<v Speaker 2>the largest catalogs of Hong Kong films. But the crown

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<v Speaker 2>jewel is the John Wu Library. And so we brought

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<v Speaker 2>John Wu back to the market in the US for

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<v Speaker 2>the first time in decades. We actually did four k restoration.

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<v Speaker 2>We did a theatrical limited theatrical release that's still underway,

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<v Speaker 2>and then began distributing this. So there is a Hong

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<v Speaker 2>Kong Fight Club fast Channel that we're able to program

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<v Speaker 2>with the Golden Princess Library.

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<v Speaker 1>Let me ask you, as you are building this and

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<v Speaker 1>organizing the company now under a different structure, how are

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<v Speaker 1>you thinking about AI at a time when you're doing

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<v Speaker 1>a lot of restructuring, you have a lot of opportunity.

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<v Speaker 1>I'm curious how you're thinking about this.

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<v Speaker 2>Yeah, we are thinking about it. I've sort of broken

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<v Speaker 2>the thinking into two categories. One is how does AI

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<v Speaker 2>enhance the business, and then the other is how does

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<v Speaker 2>AI potentially disrupt the business. So on the first you know,

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<v Speaker 2>AI isn't a standalone initiative that we sort of charge

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<v Speaker 2>somebody with a radial where where in early days, but

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<v Speaker 2>we're going to embed it in everything we do out

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<v Speaker 2>provide some illustrations by what I mean by that, so

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<v Speaker 2>function by function, like imagine content valuation. It's just so

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<v Speaker 2>much of the story we've been talking about so far

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<v Speaker 2>is about the proprietary insights that we're able to glean

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<v Speaker 2>from our proprietary catalog and distribution, Well, imagine what happens

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<v Speaker 2>when AI helps us analyze the engagement patterns across tens

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<v Speaker 2>of thousands of titles, and much as that has been

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<v Speaker 2>a historical strength of the businesses, we're scratching the surface

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<v Speaker 2>and so that's where it will only enhance our ability

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<v Speaker 2>to make high conviction investment decisions. International expansion, which is

0:14:12.360 --> 0:14:17.280
<v Speaker 2>localization of content, has been just a cost and time

0:14:17.720 --> 0:14:20.880
<v Speaker 2>barrier that every business that wants to grow outside the

0:14:21.000 --> 0:14:24.320
<v Speaker 2>US has had to take into account. And AI driven

0:14:24.400 --> 0:14:27.600
<v Speaker 2>localization is a real thing. It's moving so so fast,

0:14:28.120 --> 0:14:31.400
<v Speaker 2>and so we'll be able to lower that bar in

0:14:31.480 --> 0:14:35.880
<v Speaker 2>terms of investment and time horizon to globalize our business

0:14:36.160 --> 0:14:39.480
<v Speaker 2>with AI much faster than we ever could on our own.

0:14:39.640 --> 0:14:42.600
<v Speaker 2>And then on the disruption side, here we're talking about

0:14:42.840 --> 0:14:46.680
<v Speaker 2>primarily synthetic content. Things are going to get weird. They

0:14:46.720 --> 0:14:49.000
<v Speaker 2>already are, but we need to focus on the slope

0:14:49.040 --> 0:14:51.760
<v Speaker 2>of the curve which is sharp up into the right

0:14:51.880 --> 0:14:56.680
<v Speaker 2>with no prospects for decelerating, which just means we kind

0:14:56.680 --> 0:15:00.520
<v Speaker 2>of have to operate from a not too distant future

0:15:00.960 --> 0:15:05.000
<v Speaker 2>where AI is capable of producing content that at least

0:15:05.000 --> 0:15:08.239
<v Speaker 2>in its appearance, can be regarded as a direct substitute

0:15:08.280 --> 0:15:10.960
<v Speaker 2>for what we call premium content. And so that's what

0:15:11.000 --> 0:15:14.080
<v Speaker 2>I mean by things getting weird is their value in

0:15:14.240 --> 0:15:18.280
<v Speaker 2>fake true crime, right, fake true crime, So true crime

0:15:18.320 --> 0:15:23.720
<v Speaker 2>being one of our strongest categories. Those stories are compelling

0:15:24.080 --> 0:15:28.120
<v Speaker 2>because someone actually died and someone else actually.

0:15:27.960 --> 0:15:31.960
<v Speaker 1>Killed them, because the stakes were as real as they get, right, And.

0:15:31.920 --> 0:15:35.520
<v Speaker 2>So yeah, one hundred percent. And I think that that

0:15:35.800 --> 0:15:40.800
<v Speaker 2>is a great illustration of the human connection with an

0:15:40.920 --> 0:15:46.160
<v Speaker 2>authentic story that even if pixel by pixel, fame by frame,

0:15:46.520 --> 0:15:49.760
<v Speaker 2>it can be replicated by AI and the form of

0:15:49.880 --> 0:15:55.280
<v Speaker 2>synthetic content what makes those stories compelling won't actually translate

0:15:55.880 --> 0:15:59.480
<v Speaker 2>to that synthetic form. And then if through that lens,

0:15:59.480 --> 0:16:02.720
<v Speaker 2>if you look at our content strengths, my point of

0:16:02.760 --> 0:16:07.160
<v Speaker 2>view is that the radio catalog is extraordinarily well positioned

0:16:07.200 --> 0:16:12.320
<v Speaker 2>to actually not just survive the growth and synthetic content,

0:16:12.680 --> 0:16:17.240
<v Speaker 2>but maybe even grow in value. Authenticity is an asset

0:16:17.320 --> 0:16:18.760
<v Speaker 2>that appreciates over time.

0:16:19.040 --> 0:16:21.120
<v Speaker 1>Jeff, my last question for you, just when you think

0:16:21.240 --> 0:16:24.600
<v Speaker 1>every content library has been bought up by some combination

0:16:24.800 --> 0:16:28.240
<v Speaker 1>of six companies and tech firms that are coming in,

0:16:28.320 --> 0:16:31.720
<v Speaker 1>but it sounds like you are finding pockets of content.

0:16:31.760 --> 0:16:36.240
<v Speaker 1>I'm thinking about the early days of cable original unscripted content,

0:16:36.520 --> 0:16:38.560
<v Speaker 1>when people didn't think it was going to be worth

0:16:38.560 --> 0:16:41.000
<v Speaker 1>a nickel as soon as it aired. I'm guessing there's

0:16:41.000 --> 0:16:43.720
<v Speaker 1>a lot of small and medium sized firms that might

0:16:43.760 --> 0:16:45.720
<v Speaker 1>have had some traction with a couple of shows at

0:16:45.800 --> 0:16:48.000
<v Speaker 1>some time, and we're able to amass those rights.

0:16:48.240 --> 0:16:53.200
<v Speaker 2>Yes, we think that there is plenty of unrealized opportunity

0:16:53.640 --> 0:16:58.720
<v Speaker 2>in unscripted factual reality. Also in classic TV. I think

0:16:58.720 --> 0:17:02.760
<v Speaker 2>it's fair to say that Fast uncovered value there that

0:17:02.800 --> 0:17:06.640
<v Speaker 2>a lot of people didn't understand was there. The way

0:17:06.680 --> 0:17:10.320
<v Speaker 2>to look at it is that some players might have money,

0:17:10.600 --> 0:17:14.280
<v Speaker 2>some might have distribution, some might have an existing catalog

0:17:14.680 --> 0:17:18.159
<v Speaker 2>in the independent space. We're want with all three of those,

0:17:18.520 --> 0:17:21.919
<v Speaker 2>and so for that reason, we're super optimistic and we

0:17:22.040 --> 0:17:25.600
<v Speaker 2>expect to be very active in acquisitions this year and

0:17:25.640 --> 0:17:26.280
<v Speaker 2>going forward.

0:17:26.400 --> 0:17:28.040
<v Speaker 1>There's a lot of people out there that will be

0:17:28.320 --> 0:17:30.919
<v Speaker 1>very interested to hear that. I have no doubt that

0:17:30.960 --> 0:17:34.200
<v Speaker 1>your phone is ringing quite a bit, Jeff. Anything else

0:17:34.240 --> 0:17:36.159
<v Speaker 1>you want to leave us with about your vision for

0:17:36.240 --> 0:17:38.840
<v Speaker 1>the company or ambition for the rest of this year,

0:17:38.880 --> 0:17:41.160
<v Speaker 1>or anything else we should be looking out for from radio.

0:17:41.359 --> 0:17:44.399
<v Speaker 2>When I look at radio all that has happened and

0:17:44.440 --> 0:17:47.600
<v Speaker 2>taking place, all the investment and hard work that was

0:17:47.640 --> 0:17:51.080
<v Speaker 2>required to create radio as a platform and a foundation,

0:17:51.560 --> 0:17:54.479
<v Speaker 2>and to look at it and realize that despite the scale,

0:17:54.840 --> 0:17:56.440
<v Speaker 2>once again, we're just getting started.

0:17:56.560 --> 0:18:00.080
<v Speaker 1>I love your optimism at this moment of intense consolidation

0:18:00.160 --> 0:18:05.520
<v Speaker 1>and everybody squeezing everything. Green shoots from well capitalized independence

0:18:05.720 --> 0:18:09.399
<v Speaker 1>are really important signs. Jeff, thank you so much for

0:18:09.480 --> 0:18:11.520
<v Speaker 1>taking the time to walk us through what's going on

0:18:11.560 --> 0:18:14.720
<v Speaker 1>at radio. Thank you, Cynthia, Thanks for listening. Be sure

0:18:14.720 --> 0:18:17.159
<v Speaker 1>to leave us a review at the podcast platform of

0:18:17.200 --> 0:18:19.879
<v Speaker 1>your choice. We love to hear from listeners. Please go

0:18:20.000 --> 0:18:22.520
<v Speaker 1>to Variety dot com and sign up for the free

0:18:22.560 --> 0:18:26.159
<v Speaker 1>weekly Strictly Business newsletter, and don't forget to tune in

0:18:26.200 --> 0:18:28.880
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