WEBVTT - AT&T and Warner Media: A Failed Love Affair 0:00:04.400 --> 0:00:07.800 Welcome to Tech Stuff, a production from I Heart Radio. 0:00:12.240 --> 0:00:15.120 Hey there, and welcome to tech Stuff. I'm your host, 0:00:15.280 --> 0:00:18.400 Jonathan Strickland. I'm ad executive producer with I Heart Radio 0:00:18.480 --> 0:00:21.680 and I love all things tech. And this is the 0:00:21.880 --> 0:00:26.720 third part of the continuing story of the evolution of 0:00:26.760 --> 0:00:30.560 Warner Media, which A T and T plans to spin 0:00:30.600 --> 0:00:33.879 off to merge with Discovery, and we will talk a 0:00:34.000 --> 0:00:37.040 lot about that at the end of this episode. Our 0:00:37.159 --> 0:00:40.800 first episode in this series trace the very early history 0:00:40.920 --> 0:00:45.239 of Time Incorporated, that is, the publishing company that was 0:00:45.320 --> 0:00:49.839 on you know, one side of the episode and Warner 0:00:49.880 --> 0:00:54.440 Brothers known as the Movie, TV and music studio on 0:00:54.480 --> 0:00:57.840 the other side of that podcast, and trace their evolutions 0:00:57.880 --> 0:01:00.600 up to their merger in the late night teen eighties. 0:01:00.840 --> 0:01:03.840 Our second episode backtracked a little bit to talk about 0:01:03.880 --> 0:01:07.000 the early days of cable TV and the emergence of 0:01:07.160 --> 0:01:11.560 HBO and then how Time invested in that particular endeavor 0:01:11.959 --> 0:01:15.240 and thus brought HBO into the mix upon the Time 0:01:15.280 --> 0:01:18.840 Warner merger, so HBO became part of that group. And 0:01:18.880 --> 0:01:22.920 we also talked about the disastrous merger between Time Warner 0:01:23.440 --> 0:01:26.880 and America Online or A O L and how that 0:01:26.959 --> 0:01:32.039 deal went sour even while it was being executed. Between 0:01:32.080 --> 0:01:35.360 the announcement that the merger was going to happen and 0:01:35.560 --> 0:01:38.360 the completion of that deal, which took about a year, 0:01:38.800 --> 0:01:42.280 the whole dot com industry had a massive financial collapse. 0:01:42.840 --> 0:01:46.360 So that acquisition completed in two thousand one, and in 0:01:46.480 --> 0:01:49.920 two thousand two, A o. L. Time Warner had the 0:01:49.920 --> 0:01:54.480 worst financial quarter ever of any company up to that point, 0:01:55.320 --> 0:02:00.120 losing fifty four point two four billion dollars in a 0:02:00.160 --> 0:02:06.200 single quarter that is just three months. Yikes. For about 0:02:06.240 --> 0:02:09.320 a decade, A O. L. Time Warner struggled to get 0:02:09.360 --> 0:02:12.400 its footing and tried to become the new model for 0:02:12.440 --> 0:02:18.480 all media companies, you know, combining traditional media like music, publishing, movies, 0:02:18.520 --> 0:02:22.640 and TV with the futuristic world enabled by the Internet, 0:02:23.120 --> 0:02:25.160 which is what we're seeing today, by the way, Only 0:02:25.440 --> 0:02:28.440 back then it just totally didn't work. Now, to be fair, 0:02:28.480 --> 0:02:32.040 there were a lot of extenuating circumstances that contributed to that, 0:02:32.200 --> 0:02:37.239 like the aforementioned dot com crash that was a big one. Uh, 0:02:37.280 --> 0:02:40.280 there was the terrorist attack in two thousand one that 0:02:40.320 --> 0:02:44.120 was another big one that There were general economic recessions 0:02:44.160 --> 0:02:47.480 that contributed to them. Also, the company at that point 0:02:47.520 --> 0:02:52.000 had changed its name to Time Warner Incorporated in two 0:02:52.080 --> 0:02:54.320 thousand three, dropped the A O L. I mean A 0:02:54.440 --> 0:02:58.320 L was still part of the mix. But because of 0:02:58.360 --> 0:03:02.080 that dot com drop and because of some scandals that 0:03:02.160 --> 0:03:05.760 A O L was pulled into or was you know, uh, 0:03:06.000 --> 0:03:08.600 some scandals that involved A O L. It's not that 0:03:08.680 --> 0:03:12.240 A was pulled into it. They were complicit in them. 0:03:12.720 --> 0:03:14.640 I feel like the company felt it was in the 0:03:14.639 --> 0:03:18.239 best interests of the organization to rename itself and kind 0:03:18.240 --> 0:03:21.320 of you know, not advertised, that was part of A 0:03:21.400 --> 0:03:23.200 O L. Still for me and for a lot of 0:03:23.200 --> 0:03:26.280 folks of that time period, we still called it A 0:03:26.360 --> 0:03:29.799 O L Time Warner for a while, and I mean, 0:03:30.040 --> 0:03:32.440 like I said, A O L was still part of 0:03:32.440 --> 0:03:36.360 the company at that point. Well, anyway, we're gonna look 0:03:36.400 --> 0:03:39.160 a little bit more today at what happened towards the 0:03:39.320 --> 0:03:42.080 end of the A O L Time Warner days and 0:03:42.120 --> 0:03:46.200 then see what happened with Warner following that failed marriage 0:03:46.200 --> 0:03:49.640 between old and new media. And one of the things 0:03:49.680 --> 0:03:52.320 I failed to mention in my last episode, and honestly, 0:03:52.440 --> 0:03:55.760 I hadn't even seen this bit of the history while 0:03:55.800 --> 0:03:58.640 I was doing my research, So this was due to 0:03:58.720 --> 0:04:02.240 my own ignorance. Was that during the time of A. O. L. 0:04:02.320 --> 0:04:05.760 Time Warner, the company divested itself of a major part 0:04:05.920 --> 0:04:09.240 of its assets, and that part was that in two 0:04:09.280 --> 0:04:13.040 thousand three, the company sold off its music division to 0:04:13.200 --> 0:04:18.000 the tune Ha Ha of about two point three billion 0:04:18.080 --> 0:04:20.680 dollars according to the New York Times, although some other 0:04:20.680 --> 0:04:23.200 sources put it as high as two point six billion, 0:04:23.880 --> 0:04:27.240 so I'm not sure who's in the right there. Anyway, 0:04:27.839 --> 0:04:30.480 the reason for that move was that A. O. L. 0:04:30.560 --> 0:04:34.000 Time Warner was in a lot of debt. And I've 0:04:34.000 --> 0:04:37.160 talked about this previously, like whenever you're talking about mergers 0:04:37.160 --> 0:04:40.880 and acquisitions, typically you're talking about companies that are really 0:04:41.000 --> 0:04:45.440 over extending themselves in order to acquire another company, and 0:04:45.480 --> 0:04:47.040 then they have to figure out how are they going 0:04:47.080 --> 0:04:50.360 to manage all the debt that results from that. And 0:04:50.400 --> 0:04:54.000 that's that's before you get into things like you know, 0:04:54.080 --> 0:04:57.680 market crashes in really bad years. So there's this enormous 0:04:57.680 --> 0:05:00.640 amount of debt to settle. And when the two companies 0:05:00.680 --> 0:05:04.400 initiated their merger, Time Warner was struggling a little bit 0:05:05.000 --> 0:05:07.120 and A. O. L. Was was king of the mountain, 0:05:07.240 --> 0:05:09.880 but then just a few months into the acquisition process, 0:05:10.760 --> 0:05:13.320 we saw that switch places right A O L suddenly 0:05:13.360 --> 0:05:16.839 saw a massive drop in its market value as its 0:05:16.880 --> 0:05:20.600 stock price plummeted, and suddenly the company that had been 0:05:20.680 --> 0:05:25.360 flushed with cash as an Internet giant was now in 0:05:25.640 --> 0:05:29.719 a really rough place financially as a giant media company. 0:05:31.160 --> 0:05:34.520 So who bought the music group? Well, the party that 0:05:34.600 --> 0:05:39.080 made that purchase was led by Edgar Bronfman Jr. Bronfman's 0:05:39.120 --> 0:05:42.719 family had run the company Sea Gram since the nineteen twenties. 0:05:43.320 --> 0:05:47.719 Uh So, the Bronfman family had a whiskey distillery company 0:05:47.839 --> 0:05:51.960 and then Seagram. The Seagram family also had a similar company, 0:05:52.000 --> 0:05:55.760 and the two companies merged. The Bronthman's effectively took over, 0:05:55.920 --> 0:06:00.320 but they kept the Seagram name. Edgar Bronfman Senior was 0:06:00.600 --> 0:06:03.560 chairman and CEO of this company from the nineteen seventies 0:06:03.640 --> 0:06:06.960 until the mid nineteen nineties, and in that time the 0:06:07.000 --> 0:06:10.960 Seagroom company diversified and through a complicated series of events, 0:06:11.480 --> 0:06:15.240 ended up becoming the largest shareholder of the DuPont Company, 0:06:15.279 --> 0:06:18.000 which you might remember played a really big part in 0:06:18.040 --> 0:06:22.280 our episodes about General Motors a few months ago. So 0:06:22.400 --> 0:06:25.039 Edgar Jr. Took over the business for his dad in 0:06:25.160 --> 0:06:29.159 nineteen and he made the controversial deal to allow the 0:06:29.240 --> 0:06:33.960 DuPont family to buy back the shares held by Seagram 0:06:34.000 --> 0:06:37.839 for around nine billion dollars. They said, well, Seagram holds 0:06:38.520 --> 0:06:41.360 these enormous shares in DuPont, That's where a lot of 0:06:41.400 --> 0:06:43.400 money is coming from. But I kind of want to 0:06:43.480 --> 0:06:45.920 use that money to do other stuff, so I'm gonna 0:06:45.960 --> 0:06:48.000 sell it back to them. Now. I say that this 0:06:48.040 --> 0:06:52.800 was controversial because Seagram's ownership of that steak accounted for 0:06:52.920 --> 0:06:57.080 nearly seventy percent of the company's revenue, So, in other words, 0:06:57.200 --> 0:07:02.000 Seagram's dependence upon DuPont was very high, So getting rid 0:07:02.000 --> 0:07:04.760 of that meant that sevent of your revenue source is 0:07:04.800 --> 0:07:09.039 just gone. Then Ed Junior began to invest that money 0:07:09.120 --> 0:07:13.120 into the entertainment industry, buying up controlling interests in m 0:07:13.160 --> 0:07:16.960 c A, which was the parent company for Universal Pictures. 0:07:17.000 --> 0:07:19.080 We'll talk more about that a little bit later in 0:07:19.080 --> 0:07:23.240 this episode two, and he also purchased PolyGram record label. 0:07:24.120 --> 0:07:27.240 Things did not go smoothly, and so Ed Junior led 0:07:27.320 --> 0:07:31.360 Seagram into a deal that would see Vivendi acquire Seagrum 0:07:31.880 --> 0:07:36.160 in an all stock transaction into thousand. Vivendi then sold 0:07:36.160 --> 0:07:39.320 off the beverage division of Seagram, you know, the part 0:07:39.320 --> 0:07:42.640 of the company that was the core of the business 0:07:42.720 --> 0:07:45.560 at the beginning. Anyway, things didn't work out, and within 0:07:45.600 --> 0:07:49.240 a couple of years Bronfman had stepped down from his 0:07:49.320 --> 0:07:54.160 position within Vivendi slash Seagrum. Perhaps he viewed the acquisition 0:07:54.200 --> 0:07:57.160 of Warner's Music division as a second chance to have 0:07:57.200 --> 0:07:59.520 a go at running a company in the entertainment industry. 0:07:59.560 --> 0:08:02.280 So he had already had this one go of trying 0:08:02.280 --> 0:08:05.560 to become an entertainment mogul, and that didn't work out, 0:08:05.560 --> 0:08:08.960 and Vivindi came in and took up the gap. So 0:08:09.000 --> 0:08:10.800 now he was trying it again. He was going to 0:08:10.920 --> 0:08:15.360 buy the Warner Music Group. Part of the negotiation included 0:08:15.400 --> 0:08:18.360 the rights to use the name Warner Music Group, even 0:08:18.400 --> 0:08:21.160 though this new company was no longer part of the 0:08:21.200 --> 0:08:25.240 Warner family of companies. So w MG would go public 0:08:25.360 --> 0:08:28.360 in two thousand five, and Bronfman would hold on to 0:08:28.640 --> 0:08:31.800 w MG until two thousand eleven, when he would sell 0:08:31.800 --> 0:08:35.320 it to a company called Access Industries for more than 0:08:35.440 --> 0:08:39.280 three billion dollars. Bronfman would step down as chairman of 0:08:39.280 --> 0:08:42.240 the board in two thousand and twelve. Apparently at one 0:08:42.240 --> 0:08:46.800 point was considering purchasing Time Incorporated. But that's kind of 0:08:46.840 --> 0:08:50.240 peaking ahead a little bit. So by two thousand four, 0:08:50.520 --> 0:08:54.160 the Warner Media empire no longer included all those music 0:08:54.240 --> 0:08:59.560 studios like Warner Records, Electra Atlantic, Rhino Entertainment, and more. 0:08:59.640 --> 0:09:02.319 All of these were part of Warner Music Group. Word 0:09:02.400 --> 0:09:05.360 Music Group still existed, but was no longer connected to 0:09:05.480 --> 0:09:10.760 Time Warner. Again super confusing. Now I mentioned that the 0:09:10.760 --> 0:09:14.480 company spun off its cable service division in two thousand nine. 0:09:14.559 --> 0:09:17.839 That was Time Warner Cable, so we're gonna jump over that. 0:09:18.400 --> 0:09:20.679 And that was also the year that Time Warner and 0:09:20.800 --> 0:09:24.120 A O L would part ways, and Time Warner spun 0:09:24.240 --> 0:09:27.160 off A O L to do that, which still makes 0:09:27.200 --> 0:09:31.079 me think that businesses all food do because effectively A 0:09:31.240 --> 0:09:35.360 O L acquired Time Warner back in two thousand and 0:09:35.400 --> 0:09:39.120 then we see in two thousand nine Time Warner spinning 0:09:39.200 --> 0:09:42.280 off A O L, which really just shows how far 0:09:42.400 --> 0:09:45.320 the mighty had fallen at that point. All right, so 0:09:45.360 --> 0:09:49.720 now we're up to Time Warner, freshly divorced from A 0:09:49.840 --> 0:09:53.920 O L, tried to find its new path Turner Sports 0:09:54.280 --> 0:09:57.440 division within Time Warner, because remember at this point, time 0:09:57.440 --> 0:10:02.760 Warner includes the Turner family of products like Turner Broadcasting. Well, 0:10:02.760 --> 0:10:06.240 Turner Sports signed a fourteen year deal with the National 0:10:06.280 --> 0:10:09.720 Collegiate Athletic Association or n C Double A, and that 0:10:09.800 --> 0:10:12.920 agreement gave Turner the job of managing all the digital 0:10:12.920 --> 0:10:16.080 platforms for the n C Double A and also gave 0:10:16.320 --> 0:10:19.720 Turner more access to coverage of all eight eight inn 0:10:19.760 --> 0:10:22.960 C Double A championships, So that was a pretty big deal. 0:10:23.520 --> 0:10:26.960 That year also saw Time Warner expand operations in Chile. 0:10:28.040 --> 0:10:32.720 So the company already operated CNN Chile, but in it 0:10:32.760 --> 0:10:37.000 acquired a television station called Chile Vision from the former 0:10:37.040 --> 0:10:40.040 president of Chile. And this gives me a quick chance 0:10:40.080 --> 0:10:43.040 to talk about the cable channel side of business. I 0:10:43.120 --> 0:10:45.640 have some insight into this because I used to work 0:10:45.679 --> 0:10:49.160 for a company that, among other things, was a cable 0:10:49.240 --> 0:10:53.160 channel company. So let's say you happen to own a 0:10:53.320 --> 0:10:57.200 group of cable channels. You've got one that's your primary channel. 0:10:57.320 --> 0:10:59.960 This is the one that lots of people are familiar with. 0:11:00.040 --> 0:11:03.520 It's the most famous of your channels, and maybe you've 0:11:03.559 --> 0:11:06.720 got a few second tier channels that are popular, but 0:11:06.760 --> 0:11:09.760 they're just not as widely known as your primary one. 0:11:10.360 --> 0:11:13.040 And then you've got maybe a few other channels that 0:11:13.080 --> 0:11:15.720 are more niche in appeal and so they have lower 0:11:15.800 --> 0:11:20.559 viewer numbers. Now, as a cable channel owner, your job 0:11:20.679 --> 0:11:26.040 is to get your channels carried on various cable service providers. Right, 0:11:26.160 --> 0:11:29.400 you're making the content, you have to make the deals 0:11:29.440 --> 0:11:34.320 for the cable companies that service homes to carry your content. 0:11:34.720 --> 0:11:36.680 So you want to make these deals with these various 0:11:36.679 --> 0:11:40.319 cable service companies that provide cable feeds to customers. So 0:11:40.559 --> 0:11:43.040 they're the ones who own the pipes. You're the one 0:11:43.080 --> 0:11:46.439 who's making the content. So you negotiate deals that are 0:11:46.480 --> 0:11:51.000 called carriage agreements with these various cable companies. And typically 0:11:51.320 --> 0:11:54.600 the way this works is that you, as an owner 0:11:54.720 --> 0:11:58.280 of these cable channels, you want all of those channels 0:11:58.320 --> 0:12:01.280 to find a space on the feeds of these various 0:12:01.320 --> 0:12:06.240 cable television providers. Now, the television providers might only really 0:12:06.280 --> 0:12:10.080 be interested in that primary channel, or maybe they want 0:12:10.120 --> 0:12:14.240 the primary and maybe the secondary channels. But you end 0:12:14.360 --> 0:12:18.760 up drafting a deal that requires the cable TV providers 0:12:19.080 --> 0:12:21.880 to carry all of your channels or else they don't 0:12:21.920 --> 0:12:25.840 get any of them. So for the beginning of your business, 0:12:25.960 --> 0:12:30.520 that's really your focus, your negotiating and then renegotiating carriage 0:12:30.520 --> 0:12:35.640 agreements with various cable TV providers and satellite providers. But 0:12:35.720 --> 0:12:40.000 eventually you're gonna hit market saturation. You're going to get 0:12:40.040 --> 0:12:44.000 your channels on pretty much every major provider, and then 0:12:44.040 --> 0:12:46.920 there's nowhere else to go. So now you're also going 0:12:46.960 --> 0:12:50.240 to make money by selling ads space on your programming 0:12:50.360 --> 0:12:53.840 to various advertisers. Assuming you're not just an outright pay 0:12:53.960 --> 0:12:58.040 TV channel, you're gonna have ads, so the primary channel 0:12:58.120 --> 0:13:01.040 is likely going to be your premium products, right, advertisers 0:13:01.080 --> 0:13:04.160 are going to spend more money to put ads against 0:13:04.360 --> 0:13:08.240 those popular programs because of course more people are watching 0:13:08.280 --> 0:13:11.560 those and it is harder to sell ad space on 0:13:11.679 --> 0:13:15.800 the niche programming channels, so often add deals will actually 0:13:15.800 --> 0:13:18.520 include ad space on some of the smaller channels in 0:13:18.559 --> 0:13:22.199 addition to prime space on the big ones. It all 0:13:22.320 --> 0:13:25.280 tends to get wrapped up into these very complicated ad deals. 0:13:25.320 --> 0:13:29.640 But again, eventually you start to maximize your profits and 0:13:29.679 --> 0:13:32.880 you don't have really anywhere else to go. So what 0:13:32.920 --> 0:13:36.560 do you do? I mean, you pretty much saturated your market, 0:13:36.800 --> 0:13:39.679 you don't have more channels to put on cable, so 0:13:39.720 --> 0:13:44.600 you can't add stuff you've already carried. You're already carried 0:13:44.600 --> 0:13:47.000 about all the major cable service providers, so there's no 0:13:47.040 --> 0:13:50.680 one to else, you know, to jump onto. So unless 0:13:50.679 --> 0:13:53.720 you knock it out of the park with a few 0:13:53.800 --> 0:13:57.360 real big hit shows, your ad revenues are going to 0:13:57.440 --> 0:14:00.640 start to plateau. And if you do hit it out 0:14:00.640 --> 0:14:02.400 of the park, if you do make like the next 0:14:02.520 --> 0:14:07.400 Blockbuster TV show, well, in order to grow in subsequent years, 0:14:07.440 --> 0:14:09.760 you've got to do it again. It's hard enough to 0:14:09.760 --> 0:14:13.000 get that to work once, let alone multiple times. So 0:14:13.640 --> 0:14:17.920 one solution at this point is to expand into new markets. 0:14:18.559 --> 0:14:21.520 This is why if you follow news about cable companies, 0:14:21.600 --> 0:14:24.160 as in you know, the companies that are making cable 0:14:24.200 --> 0:14:28.680 television content, you'll frequently see that they announced that they're 0:14:28.680 --> 0:14:33.360 expanding into places like South America or Asia. The companies 0:14:33.400 --> 0:14:37.479 will develop regional offices that are dedicated to creating programming 0:14:37.720 --> 0:14:41.600 for those markets or their localizing content that you know, 0:14:41.640 --> 0:14:44.840 originated from somewhere else. And this is one of the 0:14:45.080 --> 0:14:48.920 few opportunities for growth once you reach this stage, and 0:14:48.960 --> 0:14:51.320 if it weren't for the fact that we typically judge 0:14:51.360 --> 0:14:54.360 the health and success of a business by how much 0:14:54.400 --> 0:14:57.840 it grows year over year. This wouldn't be a big deal. 0:14:57.960 --> 0:15:00.480 You know, you could just operate as is and you'd 0:15:00.480 --> 0:15:03.280 be fine, But that's not how things work. We do 0:15:03.400 --> 0:15:07.560 judge companies on that metric of growth. That means that 0:15:07.600 --> 0:15:12.800 an entity like Time Warner or Discovery often has to 0:15:12.840 --> 0:15:16.960 look at ways to grow beyond regional borders in order 0:15:16.960 --> 0:15:19.800 to appear healthy, because it's not just good enough to 0:15:19.840 --> 0:15:24.120 do good business, You've gotta grow. So what happens once 0:15:24.160 --> 0:15:28.800 a company starts to approach a global reach, Well, I 0:15:28.840 --> 0:15:32.120 suppose they could weep like Alexander, for there are no 0:15:32.280 --> 0:15:36.240 more worlds to conquer. Or they could try something else, 0:15:36.400 --> 0:15:40.480 like merging with another big media company. We'll get back 0:15:40.520 --> 0:15:44.840 to that anyway. Beyond Chile, Time Warner made some moves 0:15:44.880 --> 0:15:49.200 to increase its ownership stake in various regional HBO networks. 0:15:49.760 --> 0:15:54.160 So HBO was kind of operating like a franchise. So 0:15:54.280 --> 0:15:58.160 Time Warner owned some, but not all, of these regionally 0:15:58.320 --> 0:16:02.240 focused branches of h BO, which were you know, co 0:16:02.400 --> 0:16:06.880 owned by other partners. So companies like HBO Latin America 0:16:06.960 --> 0:16:10.960 Group UH. Time Warner HBO purchased a larger stake of 0:16:11.000 --> 0:16:14.240 that particular group in two for more than two hundred 0:16:14.240 --> 0:16:18.240 million dollars, which gave HBO an eighty percent ownership in 0:16:18.280 --> 0:16:22.480 the Latin America Group. Similarly, over in Europe, HBO bought 0:16:22.520 --> 0:16:26.560 out its partners that had some ownership in HBO Europe UH. 0:16:26.880 --> 0:16:29.760 The companies spent about a hundred thirty six you know 0:16:29.800 --> 0:16:33.440 million bucks in order to buy those partners out. And 0:16:33.560 --> 0:16:36.640 Time Warner also purchased a company called Shed Media in 0:16:36.680 --> 0:16:41.080 twenty for one dred million pounds. Now, as that implies, 0:16:41.400 --> 0:16:45.080 Shed Media was a UK based TV content creator and 0:16:45.120 --> 0:16:50.680 distributor and behind such shows as Waterloo Road and Footballers Wives. 0:16:51.640 --> 0:16:55.080 I admit I'm not familiar with those shows, but anyway. 0:16:55.120 --> 0:16:58.400 In twenty ten, Time Warner acquired a majority share in 0:16:58.520 --> 0:17:01.600 shed Media. The the management team still owned a bit 0:17:01.640 --> 0:17:05.320 more than of the company at that point. In fourteen, 0:17:05.400 --> 0:17:09.720 Time Warner increased its ownership and purchased the remainder of 0:17:09.760 --> 0:17:14.200 the company. Then they transformed Shed Media into Warner Brothers 0:17:14.280 --> 0:17:20.600 Television Productions UK in the Warner Brothers Home Entertainment Group 0:17:20.680 --> 0:17:25.040 division of Time Warner acquired an online social platform dedicated 0:17:25.080 --> 0:17:28.639 to helping people discover movies that they might be interested in. 0:17:29.400 --> 0:17:32.520 That site was called flick Ster, and at that point, 0:17:32.560 --> 0:17:35.719 Flickster was also the parent company of another site that 0:17:35.760 --> 0:17:40.320 relates to movies, one called Rotten Tomatoes, and that would 0:17:40.400 --> 0:17:44.320 raise a few questions which I'll talk about after we 0:17:44.440 --> 0:17:55.919 take this quick break. Run Tomatoes started out as a 0:17:56.000 --> 0:18:00.119 pet project for Sinduong. It was just a site at 0:18:00.160 --> 0:18:04.000 aggregated movie critic film reviews so that people could, you know, 0:18:04.080 --> 0:18:06.760 pop on over to the site, look at the reviews, 0:18:06.840 --> 0:18:08.720 and get an idea about whether or not they might 0:18:08.880 --> 0:18:12.439 like a particular film. So it was a pretty simple idea. 0:18:12.720 --> 0:18:16.320 Now obviously that grew quite a bit, with the site 0:18:16.359 --> 0:18:19.919 developing its own metrics to judge the quote unquote freshness 0:18:20.080 --> 0:18:23.320 of a movie. Uh. This is essentially looking at all 0:18:23.359 --> 0:18:26.160 of the positive reviews and all of the negative reviews 0:18:26.560 --> 0:18:29.280 and doing some quick math on that ratio. So if 0:18:29.320 --> 0:18:32.520 there are more positive than negative reviews of a film, 0:18:32.600 --> 0:18:35.639 then that film is fresh, even if those positive reviews 0:18:35.640 --> 0:18:39.359 are just lukewarm. So if you see a high freshness 0:18:39.520 --> 0:18:43.040 rating on a movie, it doesn't necessarily mean that movie 0:18:43.080 --> 0:18:46.879 is spectacular or better than movies that have lower ratings. 0:18:47.280 --> 0:18:50.959 It just means that more critics gave it a positive review. 0:18:51.440 --> 0:18:54.680 But that positive review might have been like, it's okay, 0:18:55.400 --> 0:18:58.679 right as opposed to this thing is amazing anyway. I've 0:18:58.680 --> 0:19:01.040 done a full episode about Atten Tomatoes, so I'm not 0:19:01.080 --> 0:19:03.679 gonna go over the whole thing here. I g N 0:19:03.760 --> 0:19:07.800 Entertainment bought Rotten Tomatoes in two thousand four, but then 0:19:07.920 --> 0:19:11.240 News Corps, the parent company of Fox at the time, 0:19:11.440 --> 0:19:15.280 acquired I g N in two thousand five. Five years later, 0:19:15.560 --> 0:19:19.119 the I g N division of News Corps sold Rotten 0:19:19.160 --> 0:19:22.760 Tomatoes to flix Stir. Okay, so let's flip over to 0:19:22.800 --> 0:19:28.520 flixster just really quickly surround. Chari and Joe Greenstein founded 0:19:28.560 --> 0:19:32.000 flixter back in two thousand six. Flick Stir was a 0:19:32.119 --> 0:19:35.879 social media platform centered around movies, and you could watch 0:19:35.960 --> 0:19:39.879 trailers on the site and explore posts about new and 0:19:40.040 --> 0:19:43.280 upcoming films. Clearly, the site grew large enough to purchase 0:19:43.359 --> 0:19:48.560 Rotten Tomatoes from I g N, and then in Warner 0:19:48.640 --> 0:19:52.640 came calling. People began to express some concern that a 0:19:52.720 --> 0:19:55.879 company that was in the movie business, that is Time 0:19:55.920 --> 0:20:00.119 Warner with Warner Brothers Studios was purchasing a different come an, 0:20:00.440 --> 0:20:03.639 this one being Rotten Tomatoes that was in the movie 0:20:03.720 --> 0:20:06.760 review business. So would that mean that Warner Brothers would 0:20:06.800 --> 0:20:10.359 pressure Rotten Tomatoes to make sure that Warner Brothers films 0:20:10.400 --> 0:20:14.520 got a fresh rating. Turned out that concern was largely 0:20:14.640 --> 0:20:19.359 not a problem, though people would occasionally make accusations otherwise. Um, 0:20:19.400 --> 0:20:21.960 but it was, you know, something to think about, Like, 0:20:22.040 --> 0:20:24.960 there is clearly a conflict of interest if you are 0:20:25.000 --> 0:20:28.840 the owner of both a movie production studio and a 0:20:28.920 --> 0:20:34.359 movie review aggregator. Anyway, the incorporation of flick Stir into 0:20:34.359 --> 0:20:38.040 Warner Brothers was supposed to lead to a bunch of 0:20:38.080 --> 0:20:41.320 new digital products that would give Time Warner opportunities to 0:20:41.320 --> 0:20:45.280 reach customers in new ways, not that different from how 0:20:45.680 --> 0:20:47.800 you were looking at a O L and Time Warner 0:20:47.880 --> 0:20:50.640 just a couple of years earlier. But by twenty sixteen 0:20:51.040 --> 0:20:54.000 things had changed. Either Time Warner had gotten all it 0:20:54.119 --> 0:20:57.080 needed out of the arrangement or the arrangement just didn't 0:20:57.119 --> 0:21:00.840 work out, and so Time Warner sold off Flixster and 0:21:00.960 --> 0:21:04.919 Rotten Tomatoes to fan Dango. Now, Time Warner got a 0:21:04.960 --> 0:21:07.639 little stake of ownership in fan Dango as a result 0:21:07.640 --> 0:21:11.879 of that, which is also complicated because fan Dango's parent 0:21:12.040 --> 0:21:16.199 company is NBC Universal, and that means that now two 0:21:16.440 --> 0:21:20.280 major media companies, both of which have film divisions, have 0:21:20.720 --> 0:21:24.600 some ownership of Rotten Tomatoes. The conflict of interest concerned 0:21:24.600 --> 0:21:27.920 remains intact, though again from what I've seen, there's been 0:21:28.400 --> 0:21:32.439 little evidence of any actual manipulation. The Rotten Tomatoes scores 0:21:32.480 --> 0:21:35.840 for movies out of w B and Universal don't seem 0:21:35.880 --> 0:21:39.240 like they've been boosted at all, so at least there's that, 0:21:40.160 --> 0:21:44.160 all right. So that Time Warner acquisition of flick Ster 0:21:44.560 --> 0:21:47.680 happened inven and we're gonna skip forward a little bit 0:21:48.119 --> 0:21:50.200 because a lot of the nitty gritty stuff is just 0:21:51.119 --> 0:21:56.560 not that interesting, gets tiresome. It's mostly like smaller acquisitions, 0:21:56.840 --> 0:22:00.320 so we're gonna move up to twent that year, Time 0:22:00.320 --> 0:22:03.919 Warner was looking to actually offload a property rather than 0:22:04.000 --> 0:22:07.000 make another acquisition, so in this case, it was the 0:22:07.040 --> 0:22:12.160 publishing arm of Time Incorporated. So originally, Time Warner entered 0:22:12.200 --> 0:22:16.719 into discussions with another company called Meredith Corporation. Like Time Warner, 0:22:16.840 --> 0:22:19.679 Meredith is a media conglomerate company, and one of the 0:22:19.720 --> 0:22:23.919 things Meredith owns is a Publishing arm a magazine publishing arm, 0:22:24.000 --> 0:22:26.200 and arguably I would say it's best known for the 0:22:26.240 --> 0:22:29.360 magazine Better Homes and Gardens, which always makes me think 0:22:29.359 --> 0:22:32.560 of the musical Little Shop of Horrors. But this is 0:22:32.560 --> 0:22:35.560 not a show where you know, I sing stuff typically, 0:22:35.960 --> 0:22:38.640 so to endure that kind of punishment, you should listen 0:22:38.680 --> 0:22:42.639 to large nerd Dron Collider. Anyway, the talks between Time 0:22:42.680 --> 0:22:46.960 Warner and Meredith Corporation focused on the two companies combining 0:22:47.000 --> 0:22:52.280 their publishing divisions into a single independent entity, but Meredith 0:22:52.520 --> 0:22:55.360 eventually backed away from that deal, so Time Warner went 0:22:55.480 --> 0:22:58.800 with their backup plan, and that was to spin off 0:22:59.200 --> 0:23:02.520 the publishing to vision of Time Incorporated into its own 0:23:02.520 --> 0:23:06.160 independent company. And it's easy to understand why they wanted 0:23:06.160 --> 0:23:10.639 to do this, by the publishing world in general was 0:23:10.800 --> 0:23:16.040 really struggling. The Web had disrupted the industry. Subscriber numbers 0:23:16.040 --> 0:23:20.679 were dropping, advertising revenues were following suit. So across the board, 0:23:20.720 --> 0:23:24.960 companies were scrambling to find solutions as they saw revenues decrease. 0:23:25.520 --> 0:23:28.399 For Time Warner, this became a point of concern because 0:23:28.440 --> 0:23:30.480 you had a company that you know, kind of wanted 0:23:30.520 --> 0:23:34.880 to restructure more around television and film. So Time Incorporated 0:23:34.960 --> 0:23:39.720 got spun off from Time Warner. In Time Warner retained 0:23:39.760 --> 0:23:42.960 the name Time Warner even though the Time part was gone. 0:23:43.000 --> 0:23:47.560 Now as for Time Incorporated, that company became a publicly 0:23:47.600 --> 0:23:53.520 traded media company, and then in another company came around 0:23:53.600 --> 0:23:58.359 and acquired Time inc. So what company was that? Well, 0:23:58.400 --> 0:24:01.199 it was Meredith Corporation, you know, the same company that 0:24:01.240 --> 0:24:04.560 had been in discussions with Time Warner about combining their 0:24:04.600 --> 0:24:08.760 publishing arms of the respective entities, and now Meredith had 0:24:08.800 --> 0:24:13.800 scooped up Time all for its own. In fourteen, Time 0:24:13.800 --> 0:24:17.240 Warner got another suitor. This time it was twenty first 0:24:17.440 --> 0:24:22.000 Century Fox. So just imagine how different our world would 0:24:22.000 --> 0:24:26.320 be if that deal had gone through. If Fox had 0:24:26.359 --> 0:24:31.640 purchased Time Warner, and then subsequently, if Disney had continued 0:24:31.680 --> 0:24:34.840 to go on and purchase Fox, that would mean that 0:24:34.920 --> 0:24:38.479 Disney would own both Marvel and d C Comics at 0:24:38.520 --> 0:24:42.840 the same time. Imagine those possibilities, except, of course, I 0:24:42.880 --> 0:24:45.440 suspect that the US government would have thrown up some 0:24:45.520 --> 0:24:48.600 major roadblocks to that kind of merger. At that point. 0:24:49.119 --> 0:24:52.240 The US allowed a lot of really big media companies 0:24:52.280 --> 0:24:57.720 to get really really bigger, sometimes in extremely questionable ways. 0:24:58.080 --> 0:25:00.520 But I think if Disney were to own the sets 0:25:00.560 --> 0:25:03.960 of both Fox and Warner Brothers, that might be a 0:25:04.000 --> 0:25:06.399 bridge too far. That would probably be saying that Disney 0:25:06.440 --> 0:25:10.080