Have Platforms Unseated Content as King in Hollywood?

0:04Matt Belloni:This episode of The Town is presented by HBO Max. For your awards consideration, Max presents Hacks, the Emmy award-winning series starring Gene Smart and Hannah Einbinder. In the aftermath of mistaken news reports that Debra passed away, she and Ava returned to Las Vegas determined to secure Debra's legacy as a comedian. Don't miss the series Variety is calling one of TV's best comedies ever. Hacks is streaming on HBO Max. Watch now. This episode is brought to you by FX's Love Story, John F. Kennedy Jr. and Carolyn Bissett. The critically acclaimed series explores the undeniable chemistry, whirlwind courtship, and high-profile marriage of one of the most iconic couples of the 20th century.

0:45Matt Belloni:With Sarah Pidgeon and Paul Anthony Kelly leading a cast including Naomi Watts, Constance Zimmer, Alessandro Nivola, and Grace Gummer. Called A Stunning Portrait of Love by Variety, Love Story is Emmy-eligible in all limited series categories. Now streaming on Hulu and Hulu on Disney Plus for bundle subscribers. It is Wednesday, June 17th. The late Paramount donor Sumner Redstone popularized the phrase, content is king in the media industry. And for decades, that was pretty accurate. Thinking back to the big cable TV carriage battles of the 90s and 2000s, the standoffs usually ended when a big show like Friends or CSI or a football game was about to air.

1:27Matt Belloni:The content owners ultimately dominated over the distributors. Incidentally, that's how your cable bill ended up costing more than$100 a month. But that was before the platforms for watching content went global and achieved scale never possible in the heavily regulated TV industry. And by 2019, Jeffrey Katzenberg, the former Disney and DreamWorks mogul, he declared that while content is the king maker, it's not the king. The king is the platform, he said, in the modern media landscape. YouTube, Netflix, Spotify, Amazon, all our favorites on this show. Jeffrey's point was that you need great content, and a lot of it, to be a player in entertainment, but ultimately the platforms are now the gatekeepers, and they own that audience.

2:06Matt Belloni:Do you agree with that? We see it playing out all over the Hollywood landscape. La Brea, a low-rated time travel show that NBC aired a few years ago. That's now the most popular acquired show in America, according to Nielsen. Why? It recently dropped on Netflix. Similarly, why is Fox acquiring Roku in a$22 billion deal? After all, Fox has some of the most valuable content in the world in Fox News and the NFL license. And Roku is a platform and technology company. It barely produces any content at all. But it has the platform, the 100 million users, iHeart and The Ringer, which produces this very show.

2:41Matt Belloni:They took a bunch of their very popular podcasts off of YouTube and put them on Netflix. Did YouTube even blink for a second? Will we see any decreased engagement for YouTube on the monthly streaming chart? No. It's basically too big to fail at this point. And that's a scary fact for Hollywood content owners and producers. Or is it? Is there anything that can be done about this at this point? That's what we're discussing today with John Mass. He's the president of Content Partners, which is a big film and TV library company. They just did a big billion-dollar re-up with Carlyle. They own or co-own major movie libraries, the CSI franchise, a bunch of others.

3:17Matt Belloni:Today, it's forget whether content is still king. Is content still in the royal family? From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:30Matt Belloni:Okay, we are here with John Mass, president of Content Partners and returning champion on The Town, third time on the show. Welcome back. Thank you. Good to be back. Do I get like a mug, a town mug or a hoodie or something like that for being on The Third We can maybe arrange for you to have one of the A24 hats that they keep sending Craig.

3:52Matt Belloni:No, we do have some merch. We have some stickers and we have some mugs. I can get you a puck hat. I'm sure. It will be like a five timers club at SNL. You'll get a jacket after your fifth time. That is a good idea, Craig. We need to come up with something for like, well, Lucas, obviously, but like the rich Greenfields and like, you're on your way, John, someday we'll get you there. I like it. I like it. Why I like having you on the show is because you are a fantastic avatar for all of the content industry. You buy and sell assets, movies, TV shows, the essence of the business. And you see where the money is made throughout the waterfall going on decades after some of this stuff is made.

4:34Matt Belloni:And we've had you on to talk about how money is made on films, how money is made on television. But what we haven't really discussed, and I want to today, is how money is made in distribution. Because it is such an important part of the Hollywood ecosystem, and one that is arguably more important than ever. This notion of whether content is king or distribution is king, that's been a tug of war for decades. And it feels like the distribution people have basically pulled the content people into the mud and are doing a little dance in victory. Do you agree there? Well, I think they're inextricably linked and very sort of symbiotic relationship between the two, obviously, right?

5:21But Katzenberg said, Jeff Katzenberg, who I think is such a smart guy, said, and I'm going to paraphrase this. I think he said something like content is king, but distribution is king maker. And I think, you know, the deal with Roku and Fox yesterday is sort of emblematic of that. So I think they recognize how important distribution is going forward because, you know, for years, you know, for the last few years, we haven't really thought about distribution. It used to be our business was based on distribution. Everybody in television, you wanted to go five years for a TV show and then it would go into syndication, you know, off network syndication.

5:57You'd see it on your local TV stations, and then it would get into cable and go through all these windows.

6:02Matt Belloni:And that's where the real money was made. Exactly. And it's ended, right, with the demise of syndicated television and the vertical integration deals that are being done by the big media companies. That sort of goes away. Now you make it for Netflix. It stays on Netflix, at least for now. Some of the others are experimenting more with different windows, but the heyday of two and a half men airing 10 times a day, that's over. That's gone. And same thing with DVD. You think about the DVD business. That's about distribution, right? They aren't making content. They're distributing content. And that went away.

6:35But now what you have with distribution is you have data, right? We're getting a ton of data. We aren't getting data. And usually content owners aren't getting a lot of data. I don't have it. I don't own the pipes. Right. But now Fox owns the pipes, right? They have both TRC, the Roku channel, and they have the app store, you know, that they own. That's their two lines of businesses. And because of that, because of the Rokey stick and their integration in huge percentage of households here, you know, that now are smart devices, it gives them data that they never had before. And that data helps them buy content because they're a licensor of content.

7:11They don't make a lot of content themselves. Right, Fox. So they'll buy smarter and they'll sell advertising smarter, better, more effectively. And I think I thought it was a bold, really smart move by them.

7:23Matt Belloni:So the important thing there is that Fox is buying nothing content-oriented. They're buying the pipes. They're buying the platform. And they believe that it's worth a$22 billion deal to get in that game. And I kind of agree with them that Fox has been an also-ran because they are the quintessential content owner. They have very compelling content in Fox News for that audience and for football fans. but beyond that you know maybe a hit here and there like world cup going on right now fox is not a player and now they are and it's all because of this distribution that they now have that's right that's right and i think we have to think i have no idea what's going on in the boardroom but my sense is they look at fox news which is a joggernaut and you know huge ratings for cable but that business is dying cable is dying the audience is literally dying and the audience is aging out, right?

8:20They're getting older too. And the people who are cutting cords, right, who are no longer subscribers to cable are moving to services like free streaming, like a Roku channel, and they don't watch that.

8:33Matt Belloni:AVOD is where it's at. Every company wants to have an AVOD service and they see it as the growth engine for the next five to 10 years. Right. So they're going to keep raising your price on ad-free television, right? And they'll have a strata of people who are probably very affluent and do not care to watch ads. And then most people, I think 90 plus percent people, more than that, 95 plus percent of people are going to have advertising of some sort, even if it's just when you launch your homepage, there's going to be advertising. People are going to be served up ads because the services can and people are willing to watch it.

9:12Matt Belloni:Well, we have a great test case in what Amazon did because Amazon turned on ads for everybody and you had to affirmatively go to your prime video page and turn the ads off and agree to pay more. So the vast majority of prime video subscribers now, granted, those are people that are getting the service along with their free shipping. So they are less kind of motivated to make changes there. They, for the most part, took the ads. Right. Can I just say one more thing about the whole Fox thing. I just thought of something. Sure. You know, their, their audience is not only aging out and there's cord cutting going on the cable.

9:47So people who might watch Fox news who are younger have cut the cord, don't have access to Fox news. Okay. Now they do, right. Because Fox news will be on, be available on Roku, right. So now you have access. So you may be able to get a younger audience to attract the younger audience, Fox Fox News and extend the life of Fox News. The thing with NFL, and I think it's a big problem, is they are so reliant on that, that there's going to be another licensing period that's going to come up, right? And they're going to go back into the market. And the question is whether or not the NFL does an exclusive deal with a broadcaster anymore, right?

10:23Right now, they're doing co-exclusive deals, right? But will they do exclusive deal with a streamer going forward? Or if not is a co-exclusive and what they do in the short term while the nfl is on fox linear they buy exclusive rights that they'll be able to put it on the roku channel or some other channel that they you know the fox sports channel on roku and you know so you'll have that app so the people who have cut the cord do not have access to fox sports or do not subscribe to youtube tv where you have the nfl package the sunday ticket now you've access to it well they have fox one they do they

10:58Matt Belloni:do have a service now fox one but i don't know how much penetration they don't have the i mean unfortunately don't have the install base that right you know roku has that i just it's you know it's fine it's a bundle of of fox content but it's not the same installed base that roku has right and you're talking about the sunday nfl packages and i do think i said this with lucas that i think having roku if this deal closes we should caveat that having roku will give fox ammunition in those negotiations because they do have a bigger platform and they don't need it as much because they have this you know extended platform obviously they still need nfl but it's not an existential question for the company like it would have been if they had just been an nfl and fox news company sure and this gets to the question of the power of this distribution because Because I continue to marvel at the Nielsen chart when it comes out.

11:57Matt Belloni:And a show like La Brea, which was kind of a joke NBC show. It did get three seasons. But it was like a lost ripoff and time travel show that aired during COVID. Not a huge hit. Goes on Netflix. Immediately shoots to number one. the Netflix audience continuously has shown that it will gobble up older shows when it's put in front of them. And to me, that is just such a flex by the distributor. It just shows that in this modern marketplace where all platforms are not created equal, like they were in the cable TV era, where you had all of them presented to you at all times on equal footing, and you chose which one you wanted to watch.

12:44Matt Belloni:Now, the platforms kind of choose for you. Yeah, I mean, look at Suits is a great example of that, right? When Suits went on there, you know, it's either in the new to, you know, the service or, you know, even though it's algorithmic, right? They still, where they place the carousel and what they stack first, like new to Netflix or top 10 or whatever it is, depending on what their placement is on that carousel, people watch it. And certainly Suits had not been talked about for years, right? Had been on the air for years and hadn't been talked about for years and was not getting much play on Peacock.

13:18Now, all of a sudden, it's a top show and people are binging, you know, suits. Same thing for Breaking Bad, right?

13:24Matt Belloni:Yeah, that was the original. It was a very good show, critically acclaimed, but was not very successful, right? Yeah. But who made it a king? Netflix. And then people, they not only that, they drove viewers over to ABC. I mean, excuse me, AMC. So it's a very powerful. Distribution is a powerful mechanism for making kings. But you control some of those libraries and some of those shows. Can you negotiate in your platform deals to get that carousel placement? We don't distribute ourselves. We use third parties to do our just even the libraries that we own. We'll use a Sony or Lionsgate or Warner Brothers, Universal, Disney will distribute them on our behalf.

14:01And so we aren't involved in those negotiations.

14:04Matt Belloni:But have you have you I mean, is that a thing in the licensing world? I haven't heard. I have not heard that. I think that's in the discretion of the platform because they want to control that and they want to be able to say that it's organic, even though we all know it's not. Right. It's not. But I mean, imagine what, and we'll go back to Fox again and Roku. Imagine what they can do with the Roku Avenue. When you launch onto Roku City, you're going to be able to promote your shows. You're going to be able to promote advertisers and you're going to get a ton of data. not just about how your content plays on Roku, which they never had before, but they're going to understand how other studios' content plays because Roku is an aggregator of other studios' content.

14:51So they're going to see what works and what doesn't work with their competitors as long as their competitors keep the content on Roku, right?

14:58Matt Belloni:Right, they could pull it all off, but it's a pretty powerful platform. You know, you do that at your own peril. Again, reinforcing the power of a distributor like this. True. But we live in a very competitive environment. We've gone from 12 companies that were pure play media companies that were greater than$5 billion in valuation 10 years ago to six that are pure play media companies that are greater than$5 billion. So there's been a lot of consolidation. And I think with that kind of consolidation, it breeds a lot of competition for, you know, the eyeballs and content. And so I wouldn't necessarily be surprised if someone pulled their content because of that competitive nature between them, right?

15:37Matt Belloni:Well, I do feel like we've gone away from the walled garden era during COVID though, where it was hoard, hoard, hoard. Now it's make as much money as you want, as you can while you can. This episode is brought to you by Holiday Inn by IHG. Everyone knows Holiday Inn, right? Or they think they do. Because though they have the same name, they've got a whole new energy. They kept the global icon status and upgraded pretty much everything else. We're talking modern rooms with real reset mode vibes, spaces that feel like your living room, just a little more low-key chic, and dining done right, from breakfast to dinner and drinks.

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16:53Matt Belloni:All episodes available for Emmy voters at ParamountFYC.com. From your perspective as a content owner, does this evolving landscape scare you? Does it show you that this asset that has always been the North Star of the entertainment business, owning the content, that it is less important now than perhaps it has ever been on an individual basis? Or do you disagree with that? I disagree. I think, like I said at the beginning, I think it's a symbiotic relationship between content and distribution. It's push-pull. You know, sometimes distribution has more leverage. Sometimes the content owner has leverage.

17:33Matt Belloni:But look at YouTube. Any one piece of content, any thousand, any million pieces of content on YouTube does not matter. It just doesn't. They're so big and so powerful and the engagement machine is just so dominant that you can be Mr. Beast and pull your content and it just doesn't matter for YouTube. True, but there are what, you know, what Backroom's obsession proved is that you could take someone who is a content creator from YouTube and put them on another distribution channel, you know, so to speak, in theatrical distribution and get an audience that YouTube has nothing to do with, right? They don't participate any step of the way.

18:13So I don't think, I think YouTube is unbelievable. It's a joggernaut. It is, you know, it is, it is television. I think people fail to realize that what you are watching is television. My child, you know, does not watch traditional television or programming. All of his content is consumed via YouTube. And a lot of it looks like traditional television. And, but I don't think it's the only place, you're going to get your content going forward. And as powerful as they are, and, you know, the fact that they take a 45 % VIG for stuff that they don't own, right, they don't, they don't pay anything for it, is pretty amazing.

18:48But there's always going to be other distribution channels to compete with with YouTube. And there's also the sort of quality level, you know, that that certain, you know, channels are, you know, HBO is known for. So people gravitate toward HBO, because it's got a certain type of quality, and it filters through,

19:04Matt Belloni:It just feels like there is going to be a point where your libraries, you're doing deals with YouTube because that's kind of where you need to be. Well, we already do. Our film's already on YouTube. Yeah. And I guarantee you the economics of that are not as good for you. You know, you'd be surprised that, you know, depending on, you know, like certain content that we have, we're generating an incredible amount of money from YouTube. Okay. That's good to hear. And yes, it's a 45-55 sort of split on some of that content, but it's not exclusive to YouTube. So our distributors are very smart in how they slice and dice the deals to maximize value.

19:46So some of the parts is greater than the whole.

19:49Matt Belloni:Okay. Well, that's good to hear. You know, the opposite of this and the argument that content is still king, despite the power of these platforms, is the behavior of Netflix over the past two years. Just the mere fact that Netflix went after Warner Brothers as hard as they did. There was a report this morning from Semaphore saying they're interested in Lionsgate. I don't know how real that interest is. They were in on Roku. Netflix is looking for deals. And the question is, why are they looking for deals? And I think the answer is they need IP. They need library. They need content because they see their engagement slowing.

20:35Yeah, I think, look, content's really important to, you know, they can create a great show like Stranger Things and people will flock to it for a period of time, but it doesn't create a lot of library. right? Because it's just not a lot of episodes versus licensing a modern family or a Seinfeld or Grey's Anatomy gives him a lot of heft, right? So it's a very sticky sort of, it's a form of content that people will go to, to go through every episode of the show and then repeat it again. It's comfort food. So when you can't find anything, which is quite often for me, when I can't find, people spend average 20 minutes trying to find something to watch on these platforms, Netflix included, that you go, you always revert to comfort food, which is, oh, I'm going to watch an episode of Law and Order.

21:21I'll watch an episode of CSI. It's more predictable, more, you know, I know what I'm getting. So I, yes, to answer your question, library is really important. So I'm not surprised that they went after Warner Brothers. I'm not, I think that some of it was just to stir things up with Paramount. I don't, I think it ended up that they bid up the price and And I think effectively they won in certain ways. But the same, you know, they could get a lot of library when they, if they were to buy Lionsgate. Sure.