Did Hollywood Ever Have a Chance Against YouTube?

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1:14Back in the 80s and 90s, if you were an advertiser and you wanted to reach young people, there was really no way to avoid MTV, Nickelodeon, BET, Comedy Central, the networks that specialized in younger audiences. And few people were more powerful in that world during that time period than Tom Freston. He was there at the beginning of MTV in 1981, the night they flipped that switch with Video Killed the Radio Star, all the way through the acquisition of MTV Networks by Viacom, then Sumner Redstone's purchase of the company in 1987, the launch of tons of networks, and then the acquisition of Paramount Pictures in the early 90s.

1:48Freston led MTV Networks during the heyday of the$15 million music video, the launch of South Park, Jon Stewart joining The Daily Show, and when Viacom for a period was the biggest media company on earth. It also had a particularly unique culture thanks to those younger skewing brands, a particularly wild culture. Late nights, receptionists who sold cocaine, sex on motorcycles, spring break debauchery, and a fire from a lit cigarette that nearly burned the headquarters down in New York. Freston was there for it all, eventually becoming CEO of Viacom until Redstone fired him in 2006 after only eight months in the job after he failed to acquire MySpace.

2:26And now he's thankfully written a memoir about it. I read it. It's got great stories about his world travels both before and after his media career. But I was of course most interested in what it was like to be a TV mogul at a time when TV really ruled the media before the internet disrupted everything. That same year he was fired, YouTube caught on. Viacom lost its young audience and the downward spiral began. Was there anything that could have been done at the time or was the future preordained? I wanted to ask Preston, so he's here today to talk about it all. His thoughts on the Viacom assets today, David Ellison's plans for the company, is MTV salvageable, all of it.

3:03Today, it's Tom Preston from The Ringer and Puck. I'm Matt Bellany and this is The Town.

3:12okay we are here with tom preston who is the former ceo of viacom which is now paramount and now an author of the book unplugged which i have read and very much enjoyed welcome tom great to be here matthew nice to see you okay so you've done many many things in your life You have traveled the world, India, Afghanistan. You built a multi-million dollar clothing export business. You've been a bartender in the Virgin Islands, orphanages, Burma, all over the world. I'm going to ask you about none of that. I'm going to ask you what I am obsessed with, which is your time at Viacom. And specifically, I want to start with the key time, which I think is the key time in the evolution of the entertainment industry, which is that early 2000s, mid 2000s period, when TV is king, Viacom at one point was the biggest media company in the world.

4:13And the commercialization of the internet is a real thing. And all of a sudden, YouTube launches in 2005. Do you think looking back that there was anything that Viacom and the traditional television-based media companies could have done at that point to either stave off or box out or take advantage in a better way of the digital revolution back then? Yeah, that was a period of time when sort of the decimation of the legacy media business was really getting underway. It's still before the birth of the iPhone, but it was well underway. We saw all the stocks of the legacy companies kind of stagnant.

4:59And YouTube, particularly for us, was a game changer thing. I mean, they came in in short form. They were the first form of social media where you could upload anything, share it, comment on it, and so forth. And today, it's worth like almost$600 billion. Well, and the initial clips that went viral on YouTube were Viacom clips of The Daily Show, South Park, all sorts of stuff. You guys, you know, Viacom sued. They sued after I left. I mean, it was owed to stone in their shoe. We brought up YouTube. I mean, and you can remember it was sold for about$1.6 billion, which was the same amount we kind of offered for Facebook back in the day that Mark Zuckerberg turned us down.

5:38So it was sort of in our wheelhouse in terms of what we could afford, but it was viewed sort of more or less as a copyright infringement machine by Ford, who you could say didn't see what was really coming. They weren't alone at that, but that was a moment when I think MTV really began to lose its mojo. When you could begin to get a clip on YouTube and didn't have to sit around and wait to see Nirvana on MTV, it kind of lost a lot of its raison d 'etre, if you will. Totally. And the power that MTV had where you could negotiate exclusive windows with the record companies for these clips essentially created a moat around the company where you couldn't really launch a competitor platform on the linear platform.

6:27and then YouTube comes along and any music video in the world can be available to anyone. And the labels saw that and saw that as a weapon to use against MTV and Viacom. Yeah. I mean, the labels were not jumping up and down ready to give us rights to be on digital. I first thought we were ready to just to roll into the digital revolution. We had written the sort of the TV revolution to the top of its game. But when it was disassembling, With digital, I thought we could take, we had like 25 ,000 videos in our library. We could just spin that out and have the ultimate sort of streaming music video on demand service.

7:08But the record labels either did not want to license us or wanted exorbitant fees. They did not want to create another MTV on the internet. Because they felt we had built a business on their backs. Forget the fact that we had helped made stars out of a lot of their acts and a lot of music. that never came up in discussions at one point. No, I get it. It's interesting you say the board wasn't interested in this stuff because like you said, you guys did go after Facebook. You turned down Netflix at one point. The whole music business was being upended by Napster and then iTunes. It's hard for me to understand because I was not covering the business at the time.

7:52I was a lawyer in the early 2000s. Hard for me to understand how the board didn't see what was going on, didn't look at what was happening in China and other Asian countries via mobile and what was growing. Like, how did everybody miss that? Or was it just that the business was so entrenched that even if they had said, we're going to be a shadow of our former self in 10, 15, 20 years, they just couldn't look away from those linear dollars? Well, in a way, you could say they were so far into it, they were out of it. I mean, the legacy business had turned it pretty well. There was a lot of people that did not know of the level of the paradigm shift that was beginning.

8:37You know, when things begin, you don't really see it so clearly. And there was an outrage about YouTube because they were taking content and they were seen as just being infringers on it. NBC, on one hand, they put up Lazy Sunday on YouTube from Saturday Night Live, and that went viral. They were using it as a promotional device. When I left, you got to remember, Philippe Demont sued YouTube for a billion dollars. I remember. I did cover that. Which made Viacom kind of radioactive in the digital world as like we were nasty people. I was gone. and they settled it, you know, like 10 years later, they lost in spending tens of millions of dollars in legal fees.

9:22They couldn't believe that YouTube was going to be able to get away with this in the end. This was so against, you know, all sort of legal precedent that someone could pull this off. No one ever could have imagined what YouTube might ultimately evolve and turn into, which is this unbelievable enterprise that they've really crafted and built out really deliberately. and I mean, it's quite a business. It is. And I think being attached to Google has enabled a lot of help. I mean, if we had bought it, I mean, we brought this up with the board. If we had bought it while we could have afforded it, it was seen that we would just be hit with lawsuits by everybody because we were a public company.

10:03And we also would have had a problem underwriting and paying for all the expansion that needed to be done, turned into what it was. we were a public company and it was sort of a little bigger than our appetite. And you're a, I mean, it's a sort of paradox that happens all the time. You guys were a mature company. Your investors expected earnings every quarter. Google was a growth company. They didn't need to show profits. In a way, it's a pure case of innovators dilemma. We were the king short form. And here comes an interloper. They're really small at the beginning, sort of ignored in a way and, you know, not treated that seriously.

10:41And ultimately they triumph. I mean, it's what happened with Netflix and now it's happening in AI. I mean, do you think the same conversations we're having right now about the legality of ingesting all this content into the models and spitting out AI generated TV shows, clips, do you think that will go the same way that YouTube went where eventually in five years it will just be accepted and all of these lawsuits will be dismissed or fought into the ground and it will be yet another example of the big tech companies trampling all over Hollywood? It could be. I mean, that's the big question. You know, history would say that that's the case.

11:22I'm the lawyer and I'm not totally on top of it, but it's exactly the same argument. You know, they're just vacuuming up stuff, you know, using up all this electricity, vacuuming up everything and churning out, you know, everything from news hosts to actors and scripts. So I don't know what's going to happen, but I don't think that that's an unlikely result. And if it is, it has huge consequence. Yeah, I mean, think about the media industry. I'm just curious from your perspective, having seen it evolve over the past 30 years, are people right to be pessimistic and defeatist about where media is?

11:57I mean, your former boss, Sumner Redstone, his entire mantra was content is king. Do you think content is king these days or are the platforms king and will dictate the future from now on? I think the balance has changed to the platforms. I mean, that's obvious. I mean, content is still important. You got to have some content people want to see and want to use and be engaged with, but it's the platforms who kind of dictate how that all works. But can they operate without content? Is the future of AI-generated content going to be enough for these platforms where the value of original, professionally produced content is just going to go down, down, down.

12:36Or as people, some in Hollywood say, no, even with all the slop out there, it's just going to make the good stuff more valuable. Yeah, I kind of go there. I mean, I think they could take a hunk out of the business, but the top stuff, the great stuff with real people and real scripts and real writers' rooms, I think ultimately will triumph. There's always a longing for authenticity. right and it's like the people want to have an ai companion i mean it just sounds so weird to me a personal companion i mean i don't know maybe if you're an incel or something but you want to see movie stars you're going to want to see who's going to go on the tonight show assuming it's still there and tell me about their new movie i mean uh it isn't a layup you know using ai to replace what's currently being made in the hollywood machine so you are pretty bullish on the Ellison family taking over Paramount.

13:31And I've read some of your interviews talking about how they have kind of saved the company. But other than having money and having ambition, what about them gives you hope? Well, look, I looked at the alternatives of who was going to take Paramount over. And it's like your old high school. You don't want it to burn down or have it deconstructed by some private equity people. the the ellisons first of all david's a smart guy he he makes movies he like they actually like movies they said and they sat down with you right and some of the the uh old mtv people and kind of picked your brains they were kind of doing due diligence they had a meeting with me and judy mcgrath and doug herzog and jason herschorne you know so you guys were there in the golden era what was it like we're not in that era anymore what you might recommend that you we could do to maybe bring it back.

14:22They kind of explained how bad things were with their linear networks. I've had one thing too. I mean, another bright sign I saw. They put Sherry Lansing on the board. Yeah, big move. It was another sign. I mean, she's fantastic. Yeah, former head of Paramount Pictures, first woman to run a studio. And that's just a good signal. And they're used to working with creative people. And compared to the other options for Paramount, this to me was the best option. You wanted to, If they had had no deal and had to go to October and pay a$400 million kill fee to the Ellisons, I think they would have been teetering on the brink of bankruptcy almost.

15:00Did you have a relationship with Sherry Redstone? Yes, I did. I had a good relationship with Sherry. I wouldn't call her a close friend, but we were close. She thought it was a mistake for her father to can me. She was very clear about that. I was asked a couple times if I wanted to come back and be on the board, for which I declined. But it was a favorite redstone. Your favorite redstone? That's funny. Yeah, I won't ask you about the sex club that Sumner made you go to with him and his wife. I think that's been pretty well covered in the media, but it is funny. Yeah, it was. Bangkok Sex Club.

15:40If you want, you can Google it.

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17:37The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com slash Spotify. The thing with the Ellicens that is interesting is that they are talking about trying to revive or salvage or do something with these MTV networks brands like Comedy Central. And I have heard that they are out there having meetings with people who can come and pitch them and say, this is what I would do with MTV. This is what I would do with Comedy Central. What would you do with these brands? I'll tell you what I told them.

18:18Not that I know everything, but mtv has been drained of any equity it had musically for years and years they put no craig basically craig barely knows what it is it's the home of jersey shore to him yeah it's been a collection of b-grade uh reality shows that they play you know 15 times in a row when they saw music television off the bottom of the logo those words that really i never i never gave it a second thought again because all the music people who were there who were good and they were ardent about it. They've all gone and they were replaced by more mainstream kind of Hollywood production people.

18:54But there's a corner. MTV could be reimagined for the digital age. How so? I don't know exactly how. I said, you know, get 20 to 30 smart 20 to 30-year-olds and put them in a room, put them in a room with like Rick Rubin or John May or somebody and see what they can come up with his ideas they have a they have a library that's considerable they've got like 30 years of music news they've got all kinds of shows unplugged i could go on and on and you know there are people still watch music videos and they're made they're made as many made today as there were in the heyday they're just not on mtv so and i think people at least some segment of the music viewer or listener, which is a huge amount, is a little, you know, they're not totally thrilled with the algorithms and what it has done.

19:48Curation, you're saying. Maybe someone who's a good curator and you have a place where there could be music conversation instead of just video after video, you know, the equivalent of modern day VJs or bring on critics and they can talk. And it would be a place for people who really enjoy music on a higher level. Now, maybe it's never going to be as big as what MTV was because we don't have the monoculture we used to have, but it could be a way to resurrect themselves. Then again, maybe it's not going to work. I don't know, but it's worth a shot. Yeah. It's always been strange to me that Paramount Plus does not do any of that kind of curation.

20:22I mean, a lot of that stuff from MTV is there on Paramount Plus. If you look like you can go back and look at old episodes of Real World or Unplugged or things like that, but it's not curated really in any way. And I wonder if, you know, something similar to what Disney has done with their brands, which obviously are much stronger, if they could kind of capitalize on nostalgia at least, or maybe even make them relevant with some new content. I believe so. I mean, look at some of the record companies, look at Columbia Records. They have a whole department that kind of goes through Miles Davis and Bob Dylan, these catalogs, and they reshuffle stuff and put out masters and B-sides and things or whatever.

20:59There's a lot of stuff that could be done and someone who really focuses on the libraries and taking things out of them and making new products to put out there. That hasn't been done. There's been nothing done. Right. And maybe they do need a partner. Maybe they need someone who cares about the brand to come in and partner with them and say, listen, I want to take this on, split it 50-50 with you. If I can do something with these brands, then I benefit, you guys benefit, and give me a little bit of money and I'll bring my own and let's do it. That could be the perfect solution. But hey, it's a huge business, the music business.

21:33And here you had a leading, iconic brand, and it's just all doing nothing and doesn't mean anything to anybody. Right. Do you think that it is even possible in this day and age with Facebook and Google and Amazon and the others taking up most of the money in the media business, do you think it's even possible to have a robust kind of media culture or industry? Or is that now off the table? Well, I know Buck's giving it a good shot. But we're so small. I'm talking about a media company of the size and influence that you once ran. I don't think so. I mean, I think you can thrive around the edges like you guys are.

22:15You know, there's niche things you can fill and do, but these platforms are like impenetrable. They're not about to be dislodged. And that's sort of the story. I think it'd be very difficult. Speaking of difficult, you are close to David Zasloff, CEO of Warner Discovery. Does he listen to people like you? Does he listen to his friends? I know he does these Zoom meetings with his buddies. I've heard from friends of his that say, we tell him this. We tell him his salary is too big. Take a pay cut. We tell him not to do this, this, this. And he doesn't listen very often. Do you think he listens? He listens.

22:50I don't know if he acts on it. when he's someone's telling him something he's not getting up and walking out of the room i mean i haven't talked to david in a while i'd say we kind of came up together in the 80s so we have a solid friendship and i've watched him and early advice was hey go out to hollywood because he had like a year before they could do the deal and get to know people people in hollywood want to hear somebody uh who really cares about the business is coming in as a new boss and build up some relationships it's a relationship business it's not a cult but it's a it's a hard thing to break into.

23:21David was able to kind of break in and build relationships at the top level there. And you know, that salary thing is a, you know, that's a big blaring neon sign over his head. It is. And it's so easy. He's made so much money in this business. He could just cut his salary in half and it would be such a gesture at a time when there's so much pain in the industry. And this merger that he engineered between Warner and Discovery has just been so awful for so many people in the business. And it was really, if you look at it from the big picture, it was a salvage attempt by the Discovery people. We're going under, who can we latch on to that might give us a lifeline or a few more years?

24:01And that's what Warner was. And now, three years later, he's selling it for parts. Or he wants to sell it for parts, but we'll see if the Ellisons get it first. I mean, you're right on the first count. It was a real move by Discovery because they were like just a bundle of linear channels. Yeah, they would have been AMC, the network's company, which is not doing great right now because they're a TV company with small digital. What do you think is going to happen now with this so-called auction of the parts or the whole? I still think that money wins here and that the Ellisons ultimately will get to a number that the board has to accept for the whole company.

24:42I think we are going to see bids from Comcast with a partner and Netflix. I'm not sure how serious Netflix is, but they're going to go after the studios and streaming unit. Comcast will also do the same. I think Netflix is mostly in it to run up the price and to look at their books. I just don't see how this is a priority for Netflix to spend 50, 60, 65 billion dollars on assets like this. So I think the Ellisons ultimately get it. Do you agree? Disagree? Yeah, I don't see why Netflix would possibly need it. They're doing just fine. Who needs to buy all those headaches? Yeah, I mean, listen, if you're Ted Sarandos, you covet that lot in Burbank.

25:24You covet the IP. Imagine if a Batman movie would go directly to Netflix. Like, that's pretty compelling. But they don't need it. You're right. They're already the leader, and they've got so many regulatory headaches. potentially the republicans are also already making noise about it um so i just uh i don't know i don't i don't think they want it it's not must have and when you're spending that kind of money i think you got to look at the players that consider it must have looking backwards you know it's it's hard to see another studio get subsumed we saw fox get subsumed by disney you have another one disappear i mean it's painful precious entities when we started mtv there were like 40 record companies, Matthew.