Is Hollywood Broken? A Savvy Investor’s View of 2026.

0:00Coming to Acorn TV. There's a killer on the loose. Brooke Shields stars in the new original murder mystery, You're Killing Me. You spin some crackpot theory and I find the evidence. I solve mysteries for a living. I think I'm good to go. Murder has met its match. You cannot be here. This is a police investigation. I've written you. What does that mean? He was a big city cop with a small jurisdiction. Boomers are so cute and they flirt. You're Killing Me. New series May 18th, only on Acorn TV. This episode is brought to you by Holiday Inn by IHG. Everyone knows Holiday Inn, right? Or they think they do.

0:37Because 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. Whether you're traveling for work or getting away for a minute, it's comfort that hits different. So yeah, Holiday Inn. It's a new day and a new stay. Book your next day at HolidayInn.com. It is Friday, January 9th. By most accounts, this is going to be a pretty big year for big money deals in Hollywood.

1:14It's not just the ongoing saga surrounding Warner Brothers Discovery and who will end up owning Batman and HBO Max, although that's still a pretty important and open question. And we'll have an update there today now that Warner's has rejected Paramount's hostile offer again and is sticking with its Netflix deal, despite the fact that the value of the Netflix transaction is dependent in part on the leftover networks like CNN and TNT and what's going on with Versant, the spinoff of Comcast's cable networks that is down about 25 % since it launched publicly this past week. Not great. But bigger picture, I'm talking about the shifting landscape within the entertainment business, where the smart investors are putting their money these days.

1:53Trends like the rise of the creator economy, vertical video and free services like YouTube and Tubi as Netflix and the other subscription streamers become more like the old cable TV model. To preview the year and what the investor community is thinking, I invited Jeff Zagansky to come on the show. He's a longtime investor and producer and the former president of CBS and Sony Pictures and Paxson Communications. He's always smart on where the money is really being made in Hollywood. And you can often see where the business is going. He predicted a few years ago that the power of these streaming services would grow to consume the entirety of Hollywood and that the creative talent would suffer as a result.

2:29He said, we're in the golden age of content production and the dark age of creative profit sharing. That was during peak TV. Now, three years later, that content recession is here. And Jeff has some new thoughts on where everything is going next. So today it's the year ahead in Hollywood deal-making, the big trends, and where the money will be made and invested with Jeff Zagansky. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

2:56Okay, we are here with Jeff Zaganski, who's media investor, producer, former top executive at several studios, currently the founder and proprietor with Harry Sloan of Eagle Equity Partners. Am I getting everything right there? Pretty good. Okay, there we go. Listen, I wanted to have you on for a while now because you're very smart about this stuff and you have a great sense of what's really going on in the business of Hollywood. And you aren't afraid to speak your mind, which I enjoy. So we're going to get into a bunch of topics here. But I got to first ask you about the state of play in the Warner's Netflix Paramount threesome auction situation.

3:42What are you seeing? Where do you think this is going next? You know, the best way to think about this is sort of reflecting back to the Disney acquisition of Fox in the spring of 2019. Because as you remember, it faced relatively muted opposition. There was concern about Disney using their combined clout to get the best playdates. The theaters now wish that was the case. And there was some concern about the cutback in volume of movies, which of course was 100 % correct. But in retrospect, I think of that as an absolute disaster. for both the business and Los Angeles. And the only people that really made out were the investors in Fox.

4:27And I'm not sure even Disney benefited from it. Right. Still unclear. Yeah. Well, the Disney stock is where it was six years ago. But there was a loss of an estimated 7 ,000 jobs. And you never really hear from these people who lost their livelihoods. Some people lost their homes during the process. They work for the company that's getting acquired. And their job is just to shut up and hope that they're not one of the redundant employees. And there was virtually no protest at all. Just like, you know, what's happened in the local and state government failed the people of Altadena and the Palisades.

5:01I think the Justice Department failed both the consumers and the entertainment industry with allowing the deal to be consummated. Well, I don't think the Trump people were going to go against what Rupert wanted, given they care about his news network very much. And also, I feel like the people in Hollywood were sort of like either bamboozled or just didn't understand. There was a sense that Fox was not big enough or strong enough to survive on its own and kind of needed this. And it wasn't making the size of movies that it wanted to. And I don't know. I think there's a lot of people that are remorseful now that they didn't go after that.

5:35And I think we're going to see that manifested even more in what's going on with Warner Brothers. So, yeah. So here we are six years later, and we're starting with a streaming business that has really consolidated into a very strong oligopoly. And it has all the characteristics of one. One, you have four players, big pricing power, prices, consumers have far outstripped inflation. Two, led by Netflix, the terms of doing business with the creative talent that makes the show dictates that there's no back end for anybody. You want to be invited to the oligopolis ball for producers and top talent.

6:10You have to give up your back end. We'll get to that part. We'll get to that part. But so do you believe Netflix when they say that their true competitor here is YouTube and not the other subscription streamers that they are going to own more than 40 % of the market of? I think it's coming. But no, I think, you know, I think for this, for Netflix right now, you know, you see they've got 29 % margins. those margins are approaching the margins of the legacy cable business, they're in the catbird seat and they've got an unbelievably strong business. And that business is dictating the terms for everybody in the business.

6:51And you've got a decrease in production the last three years because this is another thing that the oligopoly can do. As long as everybody cuts back together, then no one's hurt the churn is the same and that's what you're seeing so you know you've got a really toxic sort of start i think for this looking at it from the next netflix point of view and you know i don't think that netflix is going to prevail because i think that you know for netflix this is a both an offensive and defensive acquisition offensive because it gives netflix the ability to have a lot more subs and revenue growth and the ability most importantly does take those HBO subs and monetize them more effectively.

7:36HBO has got one of the highest churns in the business, 7 % or 8%. Netflix has 2 % for now, five years running. And if they can go and bundle these things, they can make this a very, very powerful package. So why don't you think it will happen? Because, well, let me give you the defensive part of this. If all of the studios, Paramount, Universal and Disney, which are the big parts of this 44 % of viewing that Netflix has from licensed content. If they were to pull back their licensed content from Netflix, it would be a huge and very expensive hold to fill with original programming. But I think that given the combined streaming share of over 30%, the Justice Department is going to block this.

8:25You think so? They seem pretty confident, but you think they will ultimately block it. Trump's already making noises about concentration. We know that he favors the Ellisons. And I think the both the Democrats and Republicans on the Hill, you can see them now coming together. And most of the town as well will coalesce around blocking this. So I don't think if Netflix is winning, I think they're going to end up, you know, losing this and paying the$5.8 billion breakup fee. And so what about the Paramount side? Do you think they can get this through or do you think they're going to raise their bid?

8:58So Paramount, if they're chosen, you don't have the concentration risk. You know, together they maybe represent only three and a half percent of TV viewing. But what's interesting here is not what the Justice Department will do, but rather what the states will do. You know, the Sherman Antitrust Act of 1890, together with the Clayton Act 25 years later, to this day, they are the key pieces of legislation that prohibit restraint of trade. However, what I don't think people really focus on is before the Sherman Act, there were 12 states that had already passed their own antitrust legislation. States have always been active and effective in their attempts to enforce antitrust.

9:38We've had Elizabeth Warren on the show and she basically said as much that they're gonna go after this, but not because of necessarily the big, bad, Paramount swallowing another studio. they just don't want the proprietors of CBS News now to have CNN. Well, I think, though, when you look at California, which is going to be most effective, they have, you know, it's probably a 125-year-old Cartwright Act. And that antitrust legislation can be applied to mergers that affects jobs and worker competition within the state. So the governor and the attorney general have a lot of power here to enforce the law, despite what the federal government wants.

10:19And they have David Ellison's own words to throw back at him. He's talking about$6 billion in cost savings. There have to be if you're paying that kind of money. And the question is whether the guilds, unions, the talent agencies, the legal community can coalesce to lobby the state and Congress to block this merger. You know, when I started in the business 50 years ago, there were industry leaders who really cared about the welfare of the L.A. entertainment community. You know, when I got my first big job at TriStar Pictures, Sid Scheinberg, who I didn't know from Adam, called me up to say, congratulations, you're now going to be sitting on the NCCJ board.

10:58Ran Universal and one of the most powerful people in the history of the business. Yeah, I didn't know him at all, but I think he could hear my bewilderment from the other side of the phone. And he said, you know, we have a responsibility of the community to make sure it thrives. Yeah. David Zaslav has a responsibility to the$600 million that he thinks he's going to get out of this deal. Yes. And when I moved from Sony to CBS, he called me again, Sid. He said, okay, here are the new boards you're going to be sitting on. And by the way, Sid sat on every board. He really, those guys in that generation, they felt a responsibility to the business and to Los Angeles.

11:37And my gut, my hope is, I don't know if that selflessness, and maybe you do, Matt, exists anymore, but my gut, My hope is that those leaders are going to step forward and neither Netflix nor Paramount will be given permission to buy Warners. No, the modern leadership cares about themselves and their shareholders and keeping their jobs. And it's not about that. But I want to get to this question of what happens if neither Netflix nor Paramount gets Warners. Because the Warners board is not going to go away. They are just going to restart the process and try to find another buyer. and potentially someone who's even worse, potentially some private equity vampire that's going to just break it up and, you know, suck all the juice out of it.

12:24Yeah, you know what? Look, Warners does, you know, what backs Warners got$5 billion a year of library revenue. But, you know, David Zaslav has done a great job of reducing the net debt by$20 billion. When these two companies are spun off separately, the studio and HBO Max, it's going to have less than three times leverage on it. It's going to have lots of liquidity to go into other businesses if it wants. And it can thrive on its own. It doesn't have to be bought. So you think they could buy Lionsgate, they could buy other stuff to bulk up, and they could survive? Yes, I think they could survive.

12:59And by the way, I mean, this past year, we've seen what a standalone studio is capable of. They've done an incredible job. They've had an incredible year. They have, and it didn't move the stock at all until a suitor came along. And that's the whole problem here. Okay, but, Matt, that stock is tethered to a bunch of cable assets, which we know trade for less than four times. We saw it this week. You know, Versin got spun off. It's trading for less than four times even though. No, the Ellison say the value of the cable networks is$0. Yeah. And by the way, when it's got$15 billion of debt on it, it might be very true.

13:40Yeah, maybe. I know. I looked at that. I was like, oh, maybe I should buy CNN. You and me, we'll go in. We can get it. I think you've got a better gig, by the way. Maybe so. Maybe so. Yeah. Certainly. Yeah, certainly in prime time. All right. Three years ago, you said that it was a rotten time to be a producer in terms of being paid fairly for the work you are doing. and that was at the kind of height or just the kind of very end of peak TV. What about today? I mean, what is going on? Do you think that there is any chance of a reversal in what's going on in the business right now? Well, look, I think given what we're seeing in terms of the cutback in production, you know, even if you look at the residuals, which, you know, was a way for people to have some back end, And, you know, when you look at the individual residuals of talent, they have gone down.

14:36Everybody is suffering. And it's because somehow Netflix and then it was quickly adopted. Who wouldn't adopt it? You don't have to pay anybody after they create something. Imagine if we said to all the authors in this country and all the the the singers in this country and the composers, hey, you are no longer going to get any back end from your creation. I mean, what kind of shitstorm would that start? But that's exactly what's happened in our business. 75 years. That's how long this profit sharing has been part of our business. 75 years and overnight it's eliminated. it. Yeah. Well, not if you're Ben Affleck and Matt Damon.

15:16They just did a big, splashy New York Times piece about their deal for The Rip, this Netflix movie where they're getting everybody on their cast and crew paid, just like some of the other movies they've made for Artist's Equity. And they say they have broken the Netflix model. Netflix is very cheerily saying, we have not changed our model. We just agreed to do it for them. Is that the model for others to go for? Well, the model for others to go for is basically what John Boyd, I think, is talking a little bit about, and that is reinstituting the FinCEN model. And that is you can license the product, you can pay for it, but it reverts back to the creators and the creative participants, as well as the financiers after four or five, six years.

15:59That sounds great, but I just don't see that happening. Is there any path to that happening? Yes. There is. Do you know something I don't? Do you know of a movement? Do you know something that's going to be public soon? I think there's a lot of people talking about this. I know there are very important people talking about it. And I think that it could happen because of the way that these streamers basically have changed the business overnight. And I think it would be the single best thing for our business. When it happened the first time in 1971, no one thought it could happen then either. By the way, there were three networks.

16:40They own 95 % of all the ancillary rights of anything they put on the air. Now that 95 % has become a hundred percent. No one is able to benefit after, um, you know, after the run. So how did they get it passed? They got it passed. Interestingly enough, it was a political process. And what happened was Nixon, who was going after the media in 1971, he felt like that he wasn't getting a fair shake on the Vietnam War. He basically did it to punish CBS and the other networks in the way that they were. Oh, man, sounds familiar. Certainly does sound familiar. Oh, wow. So Hollywood has to engineer some controversy that would allow Trump to screw someone over by reinstating FinCEN.

17:31Well, is he screwing somebody over or is he basically helping to rectify all the people that have been already screwed over? Right, right, right. I know. We got to get like Kid Rock and Scott Baio and those guys to talk about all the residuals that they have lost.

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18:48Plus, trading derivatives involve significant risk and may not be suitable for all investors. Manage your activity with our consumer protection tools. All right, so let's move on to the M &A landscape for the year. You keep hearing about how deals are back, money's out there, people are looking to buy stuff. What are you seeing on the media landscape and media entertainment? So it's going to be a very active year in the M &A markets for basically both media and non-media assets. And for two reasons. One, you know, debt is becoming cheaper as the Fed lowers rates, and this is going to accelerate as soon as Trump appoints his new Fed chair.

19:25And then equity is plentiful from both traditional private equity shops and also from the sovereign wealth funds in the Middle East. We saw that this year. You know, Electronic Arts, one of the biggest deals in all of the capital markets this year,$45 billion. and funded by TIFF, the Saudi Arabian Private Wealth Fund, and the PE fund Silver Lake, which also owns WME. So looking to 2026 here, you have a number of legacy media companies in play, obviously Versant, which, you know, the spinoff that just happened this week, which has a lot of cash, but had a very, very rough outing. But you've got a number of these.

20:02You know, I think Warners will spin out in April, at least to separate the two companies. And you've got Starz also already spun out of Lionsgate. We helped make that happen. But they're also looking to do deals. And we've already seen that A &E, the fourth big cable network player, is already in play. They announced that they're looking for a sort of strategic help there. Don't forget OnlyFans. They're for sale. Okay. And OnlyFans. By the way, he would love to be public, I'm sure, but who's going to do that? So, you know, look for a continued consolidation of cable assets. But, you know, as well as the actual cable themselves, you know, Charter and Cox announced their merger.

20:45It's going to create the largest cable company ahead of Comcast. And you think this will happen despite the uncertainty with the Trump administration and the kind of haphazard way in which antitrust and merger laws are being enforced right now? I do. I do. I think if you look at from 22 to 24, there was virtually no IPO market. They were the lowest new issuance in decades. But then last year, it started to pick up. There was$44 billion raised last year, 202 IPOs. And that recovery is going to continue this year. And it's going to be led, by the way, by some huge names, OpenAI, SpaceX, Anthropic.

21:26They're all going to excite the market. But in the entertainment media business, you're mostly looking at private transactions, short form video, generative AI tools, live events, social media. We're going to see a lot of deals announced. And by the way, it wouldn't surprise me if one of the agencies, big agencies, changes hands. You know, two of them are still owned by private equity. Yeah. Well, CAA just got put into a family office, so I don't think anything's happening there. But UTA, UTA might. Yeah. And we're in a period when private equity has been sitting on assets for far too long. And they need a monetization event, either an IPO or a sale.

22:04And when you look at the assets that are in private equity, everything from candle media to content partners to boardwalk pictures, DirecTV, Yahoo, Soundstages, Legendary Media One, the huge big European production company, Cast and Crew, these are all in private funds that need to be monetized. You think that there will be consolidation in the management world, the talent management? I know that TPG is trying and Blackstone has made some noise and Carlisle's in Management 360 and Entertainment 360. Yes, it's going to happen because it worked in the agency side. I know, it's just funny because managers are not agents.

22:43It's very different, but maybe they don't know that or they don't care. Yeah, I mean, look, they basically got clients that stay for a long time. True. And they can produce. And yeah, and these things are selling it 15 times, so those are big multiples. What would you do with Candle Media? Blackstone went into this, bought Moonbug with Cocomelon, bought Reese Witherspoon, overpaid for her. They got an amalgam of assets. They've tried to sell off some. Kevin Mayer is like, depending on what you read, either involved not that much or a lot. What would you do with them? I don't know because I haven't seen how productive those assets are.

23:23But look, Moonbug, I think, as everybody's acknowledged, was a pretty good purchase. I'm not sure about the rest of it, but... I just hope Reese finally gets paid. I'm kidding. Yeah, yeah, exactly. Well, we don't have to throw any benefits for her. Right. Let's talk about some other trends that you are watching this year. What's the big one? It's got to be the rise of the free services, right? Totally. Absolutely. If you're putting your chips on the table in media, you're going to bet on free right now. You have to because 18 % of total TV viewing is just free services. You've got YouTube, Roku, Freevi, all these things.

24:02No more Freevi. Freevi is gone. RIP Freevi. Freevi is gone. You're right. You're right. Yes, it was sucked into Amazon Prime Video, which most people believe is free anyways. But there's Tubi, there's Pluto TV. There's a lot of them and they are growing. and people like it's been true since the very beginning of media people don't like to pay for shit they just don't well but they also don't like to pay i mean because of the prices the the incredible acceleration of price increases of streaming people want to you know people want some free content you know by the way you know i i wonder all the time whether the business practices of the streamers is the root of this free trend.

24:46Oh, explain. Well, we saw this in cable. Cable, 13 years ago, it was a juggernaut. 88 % of all American homes were subscribing to pay cable. And yet every year that they did these marketing studies, they had a negative net promoter score or NPS, meaning more consumers disliked them than had a positive feeling about them. It was obviously because of that cable, the cable guy. Yeah. And the box and you can't cancel and they screw you. And yeah, there's a lot of ways that they... Consumers felt more importantly, they were getting ripped off. They were being charged a hundred bucks a month for 300 channels.

25:21They were watching 12 of them and they couldn't buy on an a la carte basis, those 12. So streaming comes along from Netflix 2007 and then Amazon 2009 with just a library product. And you looked at those first MPS scores. And by the way, it had three great things going for it. No ads, you could low price and you can watch whenever you want. So Netflix launches just with library product. It's got an MPS score of like 68, which is unbelievable, unheard of. These are the highest in American industry. Now, because the price increases, now because most users and Netflix and all the services are being driven to ad-supported tiers, you're seeing NPS scores that are still good but have come down considerably.

26:09Yeah. It's becoming just like regular old cable, regular old media. Right. One thing that I see and notice is Netflix became Netflix because its vast reach, being an internet-enabled television network, enabled it to basically become the first global TV network. And it produced economics of scale that could fund this constant firehose of high-level A-list actor shows and movies that rival the movies you see in theaters and essentially outdo what has traditionally been possible on the television networks. Now, Now, it seems like the economics of free are threatening to do the same thing to Netflix that Netflix did to movie theaters and cable systems.