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Speaker 1: Now.

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Speaker 2: Of course, Disney Earning is out a day after that

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Speaker 2: exclusive ESPN deal with Pen Entertainment. Let's discuss the future

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Speaker 2: of sports broadcasting with Leo Hendry. He's the Yes Network

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Speaker 2: founding chairman, and it's so good to speak with you.

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Speaker 2: I want to start a big picture here with ESPN

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Speaker 2: because we know linear TV and that's what ESPN is.

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Speaker 2: It's cable television is dying, but it's not dead yet.

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Speaker 2: It's still profitable and it still generates meaningful cash flow.

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Speaker 2: You can't fix court cutting. So Disney is managing a

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Speaker 2: declining business. What's the best way for Disney to manage

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Speaker 2: that declining business? When Disney, when ESPN plus is subscribers

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Speaker 2: is a paltree twenty five million.

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Speaker 1: You know, today's announcement, Scarlett is a lot more than

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Speaker 1: about Disney and its earnings. Every morn of the major

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Speaker 1: rules that dominated the media entertainment industry literally for decades

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Speaker 1: is broken or breaking. And I look at Disney this

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Speaker 1: afternoon more like a canary and nicoal mine. The linear

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Speaker 1: side is really broken. There were one hundred and ten

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Speaker 1: million cable subscribers is just a handful of years ago.

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Speaker 1: That numbers down to fifty six million and falling. Still.

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Speaker 1: The sports side on the RSNS, particularly the regional sports networks,

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Speaker 1: is very challenged right now, and there's no good there's

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Speaker 1: no good news on the horizon. The cord cutting is

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Speaker 1: a pandemic. It's not going away. It's continuing to follow

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Speaker 1: all of the secular changes that are underway or negative

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Speaker 1: in their formation. And you're going to learn from the

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Speaker 1: Disney announcement here in a few minutes some of the

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Speaker 1: specifics of that company. But the larger issue for your

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Speaker 1: for your listeners and viewers, Charlotte, is what does this

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Speaker 1: mean for the industry as a whole? And I'm not

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Speaker 1: optimistic about any part of its sports speed No, yes,

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Speaker 1: as well.

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Speaker 2: You clearly aren't. I guess that raises the question. Netflix

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Speaker 2: is the only streamer that is profitable. What parts of

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Speaker 2: Netflix's business model is replicable or do the legacy media

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Speaker 2: companies need to find their own unique path of profitability.

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Speaker 2: They can't just take something Netflix has done and do

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Speaker 2: it themselves.

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Speaker 1: Well. Netflix is in a unique position because it was

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Speaker 1: the first out of the box, so it's working off

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Speaker 1: of early momentum. But there are thirteen or so streaming

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Speaker 1: services Scarlotte today, not one of which other than Netflix,

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Speaker 1: is profitable. And these aren't profit losses that are manageable.

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Speaker 1: They're massive losses. They're in the billions of dollars. And

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Speaker 1: as you try to transition from the old linear world

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Speaker 1: of the cable bundle to the streaming world, both sides

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Speaker 1: are at this particular point in time deeply challenged. Sports

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Speaker 1: is part of that cable bundle. It's strange for me

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Speaker 1: to watch. And I was there at the start of

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Speaker 1: all of these services. ESPN was the very foundation of

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Speaker 1: the cable bundle. It was the scene que on of

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Speaker 1: the cable bundle, and now it's talking about itself going streaming.

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Speaker 1: So what does that lead behind? What leaves nothing but

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Speaker 1: detritus behind.

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Speaker 3: I am curious as about whether they can pivot. I mean,

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Speaker 3: let's just say on the sports angle, because there's been

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Speaker 3: a lot of the news about what they're going to

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Speaker 3: do with ESPN, how they leveraged that, And Bloomberg was

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Speaker 3: reporting just the other day that Disney was actually, along

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Speaker 3: with some other media companies, in acquiring a lot of

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Speaker 3: these local teams. But the whole idea was that they

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Speaker 3: wanted to have all this sort of a critical mass

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Speaker 3: of broadcast rights for a lot of local content, and

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Speaker 3: the idea that they could create something akin to the

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Speaker 3: Yes Network. But probably I guess maybe on a much

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Speaker 3: more broader scale. Is that something that you see as viable.

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Speaker 1: You know, we used to live and for decades Romaine,

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Speaker 1: we lived in the world called the Walled garden, and

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Speaker 1: it was sort of in the restaurant analogy. You ate

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Speaker 1: when I served, and you paid what I charged. ESPN

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Speaker 1: was an integral part of those hundred channels or so

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Speaker 1: in the bundle. Well, the number of subscribers that are

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Speaker 1: taking the bundle now is down by half, and following

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Speaker 1: further sports is not the panacea. It's not the it's

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Speaker 1: not the blessing down the road. It's going to turn

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Speaker 1: all of this around. All of the linear services, all

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Speaker 1: of the linear channels are deep distress. Advertising losses are

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Speaker 1: now secular, they're not cyclical. And watching ESPN lead the

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Speaker 1: bundle behind and try to do this in a streaming

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Speaker 1: fashion is It's a challenge that I would pay a

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Speaker 1: lot of attention to if I were mister Aiger.

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Speaker 3: Well, I mean, what's the other option? Though, I mean

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Speaker 3: it's almost like you're darned if you do, darned if

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Speaker 3: you don't, I mean, if you stay within that ecosystem,

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Speaker 3: you're probably going to continue to see at the climb,

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Speaker 3: both in viewership because let's face it, most of us

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Speaker 3: don't have those bundles anymore. And if you move to streaming,

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Speaker 3: then there's a cost proposition that is just out of

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Speaker 3: whack with I think what at least in the past,

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Speaker 3: what they've had to pay for the work of some

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Speaker 3: of these rights.

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Speaker 1: There's no correlation anymore between the costs of production remain

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Speaker 1: and the and the and the subscriber model. When you

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Speaker 1: destroy the subscriber model, the alikart model, and you blew

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Speaker 1: it up as card cutting came in the passing, you

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Speaker 1: destroyed the linear model. But in the streaming side, is

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Speaker 1: not the answer, as Romaine we heard from Scarlette a

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Speaker 1: minute ago. Of the thirteen streaming services out there today,

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Speaker 1: twelve of them lose money, massive amounts of money. Yeah,

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Speaker 1: they're how to control and their production costs, they're how

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Speaker 1: to control as they've abandoned the subscription model and advertising,

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Speaker 1: which for the deck the real help for all of

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Speaker 1: us we lived off of the decade the advertising world. Sure,

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Speaker 1: these losses are secular, not cycnical.

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Speaker 2: So Leo. Moving forward, a lot of people say there's

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Speaker 2: going to be consolidation M and A and certainly ESPN

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Speaker 2: is looking for potential boss for its traditional TV channels.

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Speaker 2: There's also the question that there is no controlling shareholder

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Speaker 2: of Disney the company to potentially block any kind of takeover.

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Speaker 2: There's no CFO or CEO with a conflicting agenda versus shareholders.

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Speaker 2: Is Disney a takeover target for a big tech company.

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Speaker 1: I don't think so. I think it's too big to takeover.

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Speaker 1: I think it will try its own M and A act,

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Speaker 1: But he will try to buy some of the losers

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Speaker 1: that did that today in the gaming side, when it

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Speaker 1: bought a pissant little gaming service. It's got the balance

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Speaker 1: sheet to do whatever it wants. But it doesn't have

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Speaker 1: is the capability to change these fundamental rules that have

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Speaker 1: been broken.

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Speaker 3: Well, this is a great conversation. You have to talk

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Speaker 3: once again here, of course, is Bob Iger really tries

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Speaker 3: to navigate what is a much different world, I think

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Speaker 3: than what he was used to in his previous tenure.

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Speaker 3: Leo Hendry there he's the founding chairman over at the

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Speaker 3: Yes Network