Paramount’s UFC Knockout and Amazon’s Podcast Flameout

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0:31Go further into Hollywood by becoming a Puck member today. Adobe Firefly is the all-in-one creative studio with AI-powered image and video editing for today's creative process. Built for creators of every kind, Firefly helps you generate, edit, and experiment fast. because the asks aren't getting smaller, the budgets aren't getting bigger, and the timelines, oh yeah, still tight. With all the best creative AI models in one place, Firefly brings your ideas to life. Unlock a better way to make with Adobe Firefly. For adults with Crohn's disease or ulcerative colitis symptoms, every choice matters.

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1:46Before treatment, get checked for infections and tuberculosis. Tell your doctor if you have an infection, flu-like symptoms, or need a vaccine. Explore what's possible. Ask your doctor about Tremphia today. Call 1-800-526-7736 to learn more or visit TremphiaRadio.com. It is Monday, August 11th. Lots of movement in the digital media landscape, so two topics today. First, it's kind of the best and worst times in the podcast business. In some ways, the forum has never been more popular. 55 % of people in the U.S. have consumed a podcast in the past month, and 40 % in the last week, according to Edison Research.

2:27Each measure is an all-time high. Podcast revenue was up 26 % in 2024. New hits like Amy Poehler's show, Shannon Sharp, they keep launching. And the genre is increasingly video. YouTube accounted for more than 30 % of the U.S. podcast audience recently, and that number keeps growing. Spotify and other platforms are increasingly offering video as well. Yet on the other hand, last week, Amazon, they gutted their podcast unit, Wondery, firing 110 people, folding it into Audible and putting people on a new creator services team for celebrity shows, mostly focused around video, basically acknowledging that heavily produced narrative podcasts aren't a great business.

3:07Spotify is cutting back there, too. They got rid of Gimlet Media and Podcasts. The Ringer, which produces this show, is one of the only big studios left out of that buying splurge of about five years ago. And its success is an outlier. Ashley Carman, the podcast reporter at Bloomberg, she wrote that this marks the end of the serial era in podcasts, meaning the narrative podcast boom that began in 2014 has fully shifted to video talk shows. So today, Ashley is here with Lucas Schar, Normal Monday guy. We'll also get into today's big UFC news. Paramount, which was just acquired by the Ellison family, they signed a seven-year,$7.7 billion rights deal.

3:47Pay-per-view not happening anymore. Paramount Plus will offer all the UFC's marquee events and additional fight nights with select events going on to CBS, the broadcast network, starting next year. Pretty staggering, but where's Paramount going to get the money to pay for this? Today, no call sheet. It's a double whammy. The weird state of the podcast business and Ellison's UFC knockout punch. From the Ringer and Puck, I'm Matt Bellany and this is The Town.

4:17All right, we are here with Lucas Shaw, our normal Monday guy, and Ashley Carman, supporter at Bloomberg, covers podcasts and the music industry. We got both of you. Welcome. I know Bloomberg takeover of The Town today. I know. I should be afraid. You guys are coming for my job. All right. So we're going to start. I know my voice is not great today. You had too much beer at the Dodger game yesterday. Too much screaming at the many, many players left on base during a very brutal loss. But we're going to start with UFC. UFC,$7.7 billion deal over seven years. Paramount swoops in here. Netflix thought they had this deal.

4:57ESPN thought they were going to be able to get some matches. Paramount comes in over the top. This is a game changer, correct? This is not what people expected to happen. Well, I think it's a huge swing right out of the gate by David Allison. People came in and they knew that he was going to cut costs. They knew that he was talking about technology. But the perception was that this was a company that didn't have a lot of money to spend, right? Like their cable business is shrinking. People were asking if they even had the money to hold on to their NFL games when that deal comes up or if the NFL exercises an opt-out.

5:30And he comes and bids over the top of Disney, Netflix, Amazon, YouTube, a bunch of much, much larger companies with the belief that this is going to be a major driver to the streaming service. And I think in many ways also as like a signal to the community that he's here to spend and play big. So where is this money coming from? Because obviously the Ellisons are worth hundreds of billions of dollars, but Paramount itself is not. And I spoke to someone this morning who was questioning the rationale here and saying, listen, we worked so hard to get Paramount Plus to profitability. This is going to set us back years.

6:08This service is not going to be profitable for years. Are they going to be able to add enough subscribers to offset the cost of this? Because ESPN Plus, where the UFC matches were, they got to about 25 million subscribers. And yeah, UFC was a big part of that. but it was also part of the Disney bundle. And the Disney bundle provided the perception, at least, of value there. Not a lot on ESPN Plus besides UFC. But can Paramount expect a similar number of subs? I mean, the big game changer here is that it's not pay-per-view. If you subscribe to Paramount Plus, you get the UFC matches. You don't have to pay extra.

6:50But is this deal going to pencil out in the end? Well, they're betting on three possibilities, I'd say, or three sources. One is that they get more people to sign up, right? There are UFC fans who may not pay for Paramount Plus right now, and you can bring them in. Two, it'll reduce churn or cancellations because one of the things that, you know, Paramount Plus has pretty high churn rate relative to some of its peers. And if they have like basically no sports over the summer, and the UFC is a year-round event. So if you can have stuff where people are just going to say, okay, I like UFC enough, especially now that there's no pay-per-view, I'll just pay for Paramount Plus for the year.

7:29That reduces a lot of customer acquisition costs and having to lure back some of the people who've canceled. And then the last is they obviously hope it can generate real ad revenue between streaming and then also the matches that they put on CBS. I'm not saying it will, but their framing of it is going to be the money is backloaded. It increases over time. If we can bring in enough customers, it'll help pay for it. and they're obviously going to cut a bunch of money in other places. Well, that's the thing is, does this come out of the overall content budget and do they make fewer shows? I think they do.

8:01I've been saying that for a long time. You think they make fewer shows for Paramount Plus? I think so. Yeah. And I think especially for CBS. But that is not what they're messaging. I know. Their messaging is, we got to be like Netflix. We got to make a lot. We're going to flood the zone, but maybe make them for less than the$18 million an episode that Taylor Sheridan gets. Yeah, I guess that's what I'm saying. I think the overall content spend on Paramount Plus scripted content may go down, at least in the short term, to pay for some of these other things. We'll see. Or may just get shifted over from what they currently do.

8:35But maybe they can dump some of this UFC cost onto CBS and the Linear Group because some of these matches will air on CBS. I don't know how the accounting is going to work on that. The churn issue, I think, is a complete no-brainer. This is 43 matches a year, similar to what the WWE does for Netflix and giving it some constant presence on the service. How did Netflix let this happen? Is it just that Ari Emanuel is a consultant to David Ellison as well as the CEO of the parent company of UFC? The Ari Emanuel factor definitely helps. But look, Ari's out there trying to get the best deal possible.

9:14No one's going to question that either. I mean, this is a great deal. He doubled the rights fees. People may ask, did Ari take some advantage of David with the price? But Netflix, Amazon, and YouTube all only wanted the numbered marquee matches, the stuff that had been pay-per-view. And so Netflix and others offered a lot of money for those, but Paramount was willing to take everything. And I think if TKO had tried to split the rights between, let's say, Netflix and ESPN, they might not have gotten to the number that they got to in this case. Now, you could argue that splitting between Netflix and ESPN would be better for exposure, right?

9:49Because Netflix is a much bigger platform than Paramount. But they felt like this was the best deal. And this was just US. I mean, the international rights are still largely up for grabs. And Netflix could go for those. Paramount says they will be winning for those. Yeah, but I don't see Netflix wanting to take the one-off. They're going to go for the UFC rights in Italy. That doesn't feel like a Netflix thing to do. No. Ashley, do you currently pay for Paramount Plus? no and would the UFC make you pay for Paramount Plus I'm just asking the question Lucas oh come on Lucas I'm not paying for UFC on Paramount Plus I'm paying for Taylor Sheridan that's what I'm paying for I am sort of curious I mean this is something you guys obviously follow so closely but I come at it from the cultural angle of like Rogan and the podcast world and all that and then obviously the big story about Colbert being canceled and the death of late night and now you have this UFC deal Is there some sort of broader culture shift with this acquisition that we're seeing here?

10:49Well, one benefit of getting these rights is that the Venn diagram of UFC and Taylor Sheridan is pretty strong. Like there's a lot of crossover there and the CBS audience as well. And, you know, CBS is the biggest, broadest broadcaster. And UFC, I think, reaches that a cohort of that audience that will be beneficial. Now, obviously, ESPN had that audience as well. So I'm just saying the product brand market fit here is pretty strong. Yeah, I'm trying to think about that question of a cultural shift. Like, is this David Ellison going for the MAGA audience? Right. You know, taken together, it can appear that way.

11:34I don't know that in isolation, any of those deals are like, it's a concerted strategy per se, right? Like the Colbert decision between the money lost on the show and maybe the added sizzle of getting the deal approved. I don't think they were like canceling Colbert because he's too left wing. Right now, if they were to replace him, which they're not going to, would they probably take someone who's not going to antagonize the president every night? Yes. Much as the comments that have come out on their feelings about CBS News and it being perhaps not as as impartial as they'd like it to be. Well, I also think these rights were available.

12:11Like if the NBA was available, they probably would have gone after that. There is no other big sports right available until the NFL doesn't opt out and assuming the NFL doesn't opt out. And if that happens, frankly, the best Paramount can hope for, I would guess, is to like hold on to what they have because the NFL is so expensive. I don't think they're going to have the money to like take another package on top of what they've got. It's interesting you say that because if you watched the CNBC interview with Ellison last week, David Faber, the reporter, seemed to think that Ellison already has a at least handshake deal with the NFL to avoid that opt out.

12:49No, no, no, no. I'm not talking about the change of control provision. Oh, okay. Yes, the NFL is not doing the change of control with Paramount for that. I think they will use that moment to get a little some things that they want. I'm talking about the opt out that the NFL has with all of the networks in 29. We've got a little ways to go on that. And the other overarching thing here is that the pay-per-view numbers on ESPN were going down. So what significance do you see for the overall pay-per-view market in them choosing to just not do that anymore? If people are already paying$7,$8,$9,$10,$15,$20 a month for streaming, you're really going to ask them to pay for events on top of it.

13:32I think it mostly goes away. I mean, ESPN's new sports streaming service is$30 a month. You can't expect someone to pay for something in addition.

14:06of nature. This episode is brought to you by FX's The Bear, with season four now nominated for eight Emmys, including Outstanding Comedy Series. The New York Times declares the series from comedy director Emmy nominee Christopher Storer a masterpiece. The fourth season of the acclaimed series features Emmy-nominated performances from Iowa Debery, Rob Reiner, and Jamie Lee Curtis. All episodes of FX's The Bear are now streaming on Hulu and Hulu on Disney Plus for bundle subscribers for your Emmy consideration. Speaking of the MAGA media angle and some of the media moves lately, I want to pivot here to what happened at Amazon this past week.

14:44We have seen a pretty big retrenchment or I guess a realignment in the podcast space. In some ways, the podcast business has never been better. I mean, we're seeing new hit shows. We're seeing the numbers keep going up on podcast adoption and especially on video. But now, one by one, these big tech players that invested heavily in the space, Spotify, which obviously Disclosure produces this podcast via The Ringer, and Amazon, they have been pulling back. And we saw the Amazon Wondery situation last week where Wondery was not, they're very careful to say it was not eliminated, it was not shut down.

15:26But we're seeing a big change there. Ashley, explain to us what is really going on here. Yes. So Amazon bought Wondery, I believe it was 2020, for hundreds of millions of dollars. They now are folding the Wondery brand partially into Audible. So the narrative series will go into Audible. They'll have a new creator services team that they say is going to manage the Kelsey's, these big, splashy personality-driven video show deals, basically allowing them to have sponsorships across all of the Amazon platforms. like LeBron James is kind of the example here. He has a podcast. He's also a spokesperson for Prime Day.

16:05On Prime Day, he also markets his own product line. It's sort of this 360 taking advantage of the entire Amazon ecosystem. And then they also made some changes to their ad sales business, which is basically the ad team has leeway now to represent themselves kind of across Amazon Music and these podcasts and all of that. So you wrote in your newsletter that this is the end of the serial era of podcasting. And I assume what you mean is that people are waking up to the fact that narrative podcasts that cost a lot to produce and drop on services and are one-offs, and that's not the business that everyone hoped it would be.

16:47And podcasts, they're essentially turning into talk shows, the modern equivalent of the late-night shows, where they're always on, they have hosts that people find appealing and they have guests or topics that sustain them that is the that is where we're going in podcasts right well and it's video first right or at least video centric people still consume on audio but it really is piggybacking on youtube and tiktok and instagram reels and all these places where you can discover shows through video but yeah that is the argument i'm making is that serial kind of kick-started this idea that podcasts could be mainstream.

17:26It could kick off conversations. People want to talk about podcasts. And then it has largely proven to be true. Podcasts are more relevant than ever. We talked about in the context of the election. People are paying attention to podcasts. They are culturally relevant. However, to your point, those limited series, journalistic endeavors, public media strain of podcasting is really struggling here. And this is the personality video-driven aspect of podcasting that's thriving. I still see a lot of the true crime stuff show up on the top list. though totally but they're usually always on also like it doesn't mean that you can't do reporting or something or tell a story it just is that you can't really have audio only one-off shows that go on seasonal breaks for months on end you're going to potentially lose your audience or at least you're going to lose your sponsors and not make enough money that's why this audiobook model with audible actually is kind of interesting like on a per unit basis maybe a show makes sense sold like that rather than relying on advertising.

18:27Because Audible is very profitable and Amazon Music is not, right? Audible has relatively low margin and people sign up and pay a pretty high monthly subscription fee. And they've engineered the model so that it makes sense. I mean, the other thing with podcasting that Ashley was getting at, it's like you want it to be always on so then you can have kind of consistency with advertising and you have volume. But also you want to reduce the cost, right? So the appeal of a talk show, the show that you host, is like you sit in a room. The cost is not very much. The cost is you. And even with some of the true crime podcasts, they've evolved a little bit, but a lot of them are much less expensive because they don't do the extensive reporting that something like a serial did or some of those limited series.

19:10It's like making an audio documentary. Documentaries have never been a great business, whether in video or audio. Right. This whole subscription model is interesting. Ashley, you cited this, what Sony Music is doing, where they have true crime series that they bundle together into a subscription that they call The Binge. Is that a potential way forward to fund a lot of these more ambitious style podcasts? Like, do you need people to pay for them? And if they are good, would people pay for them? Everything I've seen on subscription podcasts outside of like Patreon or some of these other subscription pods don't really work.

19:49I do think it's a way forward. And the subscription business in podcasting is growing. And it's pretty significant. I mean, Wondery had a subscription business that I think many places would be happy with. But when you're part of a big tech company, the returns you need and the revenue you need to make it interesting to an Amazon-sized company has to be way more significant. It is not a Wondery-level business. And I think part of this is also just the fact that the tech companies thought this could balloon into a huge new revenue line. and that just hasn't panned out yet. They see the potential in these sponsorship deals where you're tied to NFL stars, but I don't think they're seeing it in regular journalistically driven audio series that are on for a season at a time.

20:30Yeah, that makes a lot of sense. And the video component, I mean, obviously video is a lot easier to sell for these platforms because many of them are already in the video sales business. But do we have any stats on whether people are actually watching the videos that these podcasts put out. I know so many people who, yeah, say they watch or they consume podcasts on YouTube, but it's a minimized tab on their computer or it's a YouTube video they put on during a walk and they don't actually watch it. If I was an advertiser, I'd really want to know what is being actually watched on YouTube versus just played on YouTube.

21:20Why does that distinction matter to you? Well, if I'm an advertiser, it means my ad is not being shown to eyeballs. It's only being listened to. And then it's effectively an audio ad. And if you're paying a higher video rate for what is an audio ad, that would piss me off. Audio ads are more expensive. They are? Audio ads are more expensive in podcasting, I guess. Yes. Not relative to like a television advertisement. Like YouTube CPM is super low for AdSense versus, I mean, podcasters. I think the average for a audio podcast ad, and maybe at this point they're including video, but the average is around $40 CPM.

21:56Okay. And the average for YouTube is much lower. Then why is everybody moving to YouTube? Is that just where the eyeballs are, where the audience is? You got to go there, even if it's a race to the bottom? Well, for what it's worth, The audio-centric podcasters that also do video are not willing to give up their audio inventory at all. This is why Spotify has really struggled to convince podcasters to put video on the platform. The dynamic audio ads that they have in podcasts, they would have to sacrifice those in order to put video on Spotify. And that is really expensive and precious inventory that these podcasters do not want to lose.

22:34So they're not fully pivoting out of audio by any stretch. They're just now adding video in. And if you already were an audio podcaster, YouTube ad revenue is just gravy on top. It's additive versus subtractive. Using YouTube makes sense for the creator because you can reach even more people because YouTube has such a big audience. I think the question you're sort of getting at is, does video make a lot of sense for Spotify? Spotify would argue that they need to do it because people like to watch the podcast, but it's not really why people come to Spotify. And if the CPM they get is not actually higher, then it will be somewhat counterproductive unless they really increase the amount of time spent.

23:16But competing with YouTube usually doesn't work out well for people. And Spotify isn't compensating them on a CPM basis now. So if you watch the Bill Simmons podcast on YouTube, you're going to see different ads than if you listen to the Bill Simmons podcast on Spotify. Potentially, depending on... For sure, for some shows, yes. I don't know about Bill Simmons specifically, but yes. And yeah, and the economics of those ads. I look forward to our text message about this exact topic. Fuck you, man. My ads are great. So Ashley, how high does this video push go? In five years, are all podcasts or the vast majority of podcasts video as well?

24:00or does it top out at 50 % consumption? We're at about 30 something percent right now on YouTube. So does YouTube just eat this entire business? I don't think YouTube eats the entire business. I think the most successful podcasts, definitely from a popularity standpoint and then from a revenue perspective, will have video included. I don't think audio is going away. I think there are plenty of people who, to your point, even with YouTube, want to listen to podcasts. So I just think the video side of this, I mean, the creator economy is so much larger than podcasting revenue. So really what could end up happening is that the video side of the business continues to grow and make more money and podcasting as an audio only format suffers as a result because less advertisers begin putting more budget in audio and they keep putting more budget in video.

24:51So I think that's kind of where things could get a little tricky, but I don't think audio as a format is going away. It's just that the biggest shows will have video. Bottom line, you think the town should be on video? You seem to be killing it without video, so. We'll do it. I think we're officially the last Ringer show to not have video. But at some point, we will do it. The world needs to see our faces, Lucas. Yeah, especially first thing in the morning on Monday. Exactly. All right, so instead of a call sheet today, we're going to do a prediction on which podcast has the best shot of dethroning Rogan long-term.

25:28Not a one-off, not like if Taylor Swift goes on the Kelsey's podcast and that shoots the number one. I'm talking sustained, consistent, number one status of a podcast. What's your pick? Can I give you mine first? Please. I think the Midas Touch, those guys. They are a liberal-leaning, sort of resistance, anti-Trump podcast that I think the Democrats have been looking for the answer to Rogan, the answer to Megyn Kelly, all these people. And there isn't that many that have a vast, broad audience. I mean, obviously the Crooked Media guys do well. I think the Midas Touch podcast is the one that could be consistently number one.

26:11I'll take the other side of that bet. You can name the odds and I'll take the other side of that bet. Oh, really? Why? You think they're going to not, this is only a function of Trump? Well, that's part of it. One, for whatever reason, like if you think about podcasts as the new talk radio, like conservative podcasts always did much better than left-wing podcasts on talk radio. And I think just given the kind of the divide in the country, being someone that like only appeals to, is going to immediately alienate a large swath of your potential listener base makes it very hard to be number one. Okay.