The 10 Worst Things to Happen to Hollywood Since 2010

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1:54I remember back when I was at the Hollywood Reporter, I used to look at the archives over 100 years, and it was pretty remarkable to see how much the industry-wide freakouts over color television or the VCR or TiVo. They mirrored the modern debates about YouTube and Netflix and the streaming video industry. The difference, of course, is that Hollywood was always able to adapt and merge and eventually subsume all the other technologies and maintain its grip on the worldwide content distribution industry. Now, though, with the internet having disrupted that oligarchy of distribution, the past 15 years have been a slow march of disruptors refusing to be subsumed and, in fact, becoming the subsumers of a new version of Hollywood, one in which internet-enabled distribution has disrupted pretty much everything.

2:39But it didn't happen all at once, and there's been a bunch of incremental moves since 2010 that we can now look back on as key moments in this painful transition. That is today's show. Lucas Shaw from Bloomberg is here. We're going to rank the 10 worst things to happen to Hollywood in the streaming era. From the Ringer and Puck, I'm Matt Bellany and this is The Town.

3:03All right, we are here with Lucas Shaw from Bloomberg once again. Welcome back, Lucas. The Dodgers are back. They are back. They are back. I was in distress last week and then they sweep the Padres and they're back. If the government was listening to my or looking at my my chat, they would have been concerned about my mental health around Wednesday or Thursday of last week. Nice. They are. But now we're both in a great mood. It's Monday morning and it's a perfect time to talk about the biggest disasters of the past 15 years in Hollywood. In honor of the Sidney Sweeney movie bombing. Yes. The Sidney Sweeney movie Americana did not do well this weekend, despite her ubiquity for the past month.

3:44So sad for her, but that is not one of the most meaningful fails of the past 15 years. I want to define our terms here before we get into this, because this is not just disasters. This is not flops. This is not shows that bombed celebrities who flamed out. This is not that. We are looking for the 10 most meaningful disasters of the past 15 years. We picked 15 because that's basically the streaming era. That's the 15 years in which Hollywood went from the apex of influence and financial power to where it is today. Yeah, the way it was framed was initially was worse things to happen to Hollywood in the last 15 years.

4:25So I will give my bias, which is that I think that most of the problems that we're talking about today trace back the decisions in like the first half of that period. I don't think anything that happened in the last five, seven years mattered that much. Oh, interesting. I have a couple. but yes and we could all i mean everything goes back to the internet we could say like oh the internet ruined hollywood no but there were some strategic mistakes that companies made yes exactly and that's we are going to get into that and drill down on particular moments that have had meaningful and negative impacts on the entertainment industry so should i let you go first or would you like me to go first whatever you want you go first i feel like you have you have a thoughtful approach here.

5:06So my number one is the Breaking Bad phenomenon on Netflix. Oh, interesting. All right. Explain why that was bad for Hollywood. The deal for that happened just outside of our limit. So it was like 08, 09 or something. But Breaking Bad popped off in 11 and 12. And it was this show that had been a critical darling, but not a commercial success for AMC. It was almost canceled. And then it just starts to take off on Netflix. And it becomes not just the show that wins all the awards, but one of the most watched shows on television, at least on cable for a couple of years there. And the success of that show, I think helped convince a lot of other studios and networks to keep licensing and not only keep licensing, but license more to Netflix in pursuit of that type of hit, because Netflix was seen as the primary reason that Breaking Bad took off.

6:03And so all these other places are like, well, they're different audiences because Netflix did drive viewers back to Breaking Bad on AMC. Yeah, it became a hit on Linear after the Netflix job. Let's just copy that strategy. And the result of that, in fact, was Netflix just got all the popular shows, including contemporary popular shows from everyone else and started to pull people away from the television business. And while that was great for Netflix, obviously, I think it was bad news for basically every other traditional company. Instead of investing in their own streaming services, instead of paying attention to what was happening, they just took the short-term cash and they chased this sort of phantom of the Breaking Bad phenomenon or the Netflix effect.

6:41I agree with you. I had a slightly different approach here. My number three was Disney licensing Marvel movies to Netflix in 2013. Or just their original movies in general, the pay-one deal that they did. Exactly. And to me, that was just not only a tipping point, but a sign of the lack of vision about the future. And it took these companies five years to realize that the quick hits of licensing revenue were actually killing their businesses. And by the time they switched over in 2018, 2019 and said, oh yeah, let's not do that anymore. Let's start our own services. It was too late. So I'm more okay with the movie one.

7:23Not to say it was the best decision, but these studios had been licensing their movies to sort of premium networks like HBO and Showtime and Starz forever, right? Like there was actually, you know, Disney's movies had been on Starz before then. It didn't hurt them as much. I don't think movies move the needle as much as like just all the new television shows being on Netflix. But they were going to start competing with them for big movies. They didn't see that if you build a scaled streaming business, you can start to make $200 million movies that Disney once thought they were the only ones that could make those.

7:57A hundred percent. I just don't think movies matter as much as television. Television is way more of the viewership and drove way more of the economics for these companies for the most part. Pay TV, they're pretty important, having original movies on there. And I remember back then that it was huge that you could go to Netflix and see the Disney movies. Yeah, it was a very big moment. And when Bob Iger wanted to say, fuck Netflix, we're done with this, we're going for it. If you remember, he announced like we are taking our movies off of Netflix. That was like at the earnings. All he's like, we're taking our movies and we're starting Disney Plus.

8:29I also think movies just matter more to Disney than any other company. All right. So my number one, and this one is a deal that people would recognize as being a disaster, but I think it's actually been under discussed as how big of a disaster and it's got to be AT &T buying Time Warner in 2018. This was my number four. Okay. $85 billion deal. It was very clear. I'm sure you got the same impression the first time you talked to John Stanky, the CEO of AT &T, or now CEO. We all knew this wouldn't work. This idea of melding a telecom with premium content, disaster from the start. And not only was it a bad transaction for this company, I think the larger ecosystem of entertainment really suffered from this.

9:18because imagine if HBO had just focused on being HBO and growing that digital business and transitioning over from the pay TV model to a digital model, then licensing out its digital app or its digital content everywhere. Instead, 10 years later, they're subsidizing David Zasloff's renovation of Bob Evans' house. They've been saddled with debt. They've got this ridiculous Scripps discovery company attached to it. AT &T recognized it was a bad deal. They merged it with Discovery, tried to turn it into Netflix, didn't work. And they are back now to trying to grow HBO as its own digital service. Imagine if they had not wasted 10 years on that.

10:04Two thoughts. One, can I offer a counter moment? Because I did think about this. It's related. But instead of the Time Warner sale to AT &T, it is Time Warner turning down that Foxes did. Oh, interesting. Because that was sort of what put Time Warner in play. Had Time Warner instead done the Fox deal, I would imagine that Rupert Murdoch and the team he had around him at Fox would have done a much better job with integrating that company and it would have created this much larger media business that could have been a real competitor to Netflix and to some of these other streaming services. Because I think now it is clear, I don't think the problem was trying to expand HBO per se, or making it a little more of a competitor to Netflix.

10:48The problem was the way that they went about it and the lack of consideration for brand. Yeah. Well, you think that in 2019, that starting from where they were, they could have created a Netflix competitor for real. Well, part of the problem with that was that they got waylaid by the DOJ. True. But that was a A year-long delay. Two years, pretty much. Okay. A year of closing, a year of that. I think, look, Fox made the bid in 2014, I think. That obviously would have been subject to regulatory scrutiny and all that stuff. But if they had gotten that through, let's say in 2016 and really went after it, I think that was not too late.

11:29Hmm. And you think that Rupert Murdoch would have done a better job than John Stanky? That feels safe to say. I think that's safe to say as well. Time Warner had been paring itself down for a sale for seven years before this. It was not a shock that they were in play after the Rupert offer. I just think that the deal they did was great for Time Warner shareholders. They got paid on an$85 billion transaction. Congrats to Jeff Bukas for that. But the impact of that, we are still feeling. And HBO is probably going to have a new owner in a year or two and we'll go through this all over again. Yeah, a cursed company.

12:09It is sad. Especially when you think back on the AOL Time Warner, right? If we were to, instead of doing the last 15 years, we did the last 25, we'd probably put AOL Time Warner somewhere on the list. Sure. I know they're the magnet for horrible corporate deals. It's kind of amazing that they produce the shows that they still do, given all the chaos there. All right, let's go to number two. My number two is also a deal. much smaller deal, but I think a symbolic deal, which is Disney's acquisition of Maker Studios. Oh, okay. I didn't have that. So go ahead. If you go back in time, kind of 10 to 15 years, you had a lot of the traditional media companies saying, hey, YouTube's a big deal.

12:51We should figure out how to handle, do something with YouTube. And they started investing in these businesses that were called multi-channel networks. Maker ended up being the largest. This was the biggest deal. And these companies basically rolled together a bunch of YouTube channels and helped them with maximizing their audience, sometimes helped them with selling ads, all sorts of little sort of like... But they didn't own them. Yes, they enhanced them. But importantly, they did not own them and they did not own the IP. And so the soaring valuations for these businesses reflected just really bad thinking and strategy by venture capitalists and media companies that both invested and then many of them bought them, right?

13:29Warner Brothers had Machinima, At least that had a brand. AT &T, Time Warner kind of bought one. Paramount bought the Brian Robbins one, Awesomeness. Paramount bought Awesomeness as part of Comcast NBCU's deal for DreamWorks Animation, which had owned it. But the Disney Maker deal was the biggest of them all. It was initially advertised as a$900 million deal because it was such a disaster. And this was contingent on performance. I think it ended up being between$500 million and$600 million. But this was supposed to be the moment where all these media companies were going all in on YouTube. And they just made the worst possible decisions.

14:03Instead of investing in IP ownership, instead of investing in brands, they went after these networks that didn't have anything. And not only was that a problem because they wasted a bunch of money and they didn't really develop the strategy, but because those didn't work, they chose to go back to basically ignoring YouTube for the next five years, other than using it for promotion. And what they should have been doing was using YouTube as an incubator, using it to develop new properties or go out and buy some popular channels on there that you think you can develop into something. And instead, now they're looking and they're all sort of afterthoughts on the most important video platform in the world.

14:42Okay, I like that. I have a related number two, and mine is the failure of Quibi, the Jeffrey Katzenberg website app that burned through$1.4 billion in short form, professionally produced studio quality content shut down in 2020. And I think not only was this a laughingstock and everybody made fun of Quibi and it's now a joke around town, but I think it spooked people. I think it spooked the industry from trying this kind of short form app based made for mobile, youth skewing content companies to the point where five years later now, there's a new startup, this Lloyd Braun thing that doesn't have a name.

15:28And talking to people last week, people were like, oh, good luck. You know, seems cute. They're doing micro dramas. But like, this should have been a thing a long time ago. It's just people were scared because they didn't want to go down the road of Quibi. I'm going to zag a little bit here. I think the failure of Quibi was a good thing. Oh, you do? Apologies to your friend, Jeffrey Katzenberg. Oh, my my best friend. Quibi from the inception was a bad idea. It was a misguided strategy by people who didn't understand. And look, Jeff Katzenberg is smarter than me. He has had way more business success.

15:59And he bought Awesomeness, which was not a bad deal of all the YouTube MCN deals. But this notion that YouTube is poor quality and people wanted to come for short-form video on Hollywood-style budgets was wrong. The great innovation of YouTube is not short-form video. the great innovation of YouTube is user-generated programming. And people gravitated towards that and the platform, which is why now the biggest YouTube stars are actually making TV-length videos often. They are, but they're not making it at those prices. The problem with Quibi was the price of the content. They were spending hundreds of thousands of dollars per show.

16:37It was trying to compete with YouTube, and every company that has tried to compete with YouTube slash Google has totally failed. And so I think it was good for Hollywood to get a little bit of a reality check about what was happening in the media business and recognizing that they weren't going to compete head-to-head with YouTube, that they had to lean into YouTube a little bit more or figure out a way to coexist with it, but that trying to create some Hollywood version of YouTube was a fantasy. You don't think this Lloyd Braun thing is going to work? These are the micro-dramas that are really popular in China that some people...

17:08And cost peanuts to make. Some people would say are kind of softcore porn for women. If you look at the titles of some of the popular ones, I'm just putting that out there. I left my husband for my gardener. I think Jeffrey got right was that Hollywood companies needed to engage in mobile-first short-term programming. What he got wrong was that they should build a platform. What they should have been doing was making shows for YouTube or making shows in short-form fun for their own platforms, however they want to go about it. And so I think if this Lloyd Broden thing is trying to produce shows for platforms that already exist.

17:44It could work. If they're trying to compete as a platform, I think given the respective background of the people involved, I would bet against it. Yeah, it seems like employment opportunities for former Hollywood people that want to reinvent themselves as a digital-first company. And typically, that has not worked. There's Susan Rovner who worked in NBC. Jana Winograde who worked in Showtime. there's uh chris mcgurk who has a movie distribution company these people are hollywood people and it seems to me like what they're going to create is a hollywood style app or production company that can make this kind of content and maybe maybe make it better than the chinese softcore and porn that's successful there but will it be successful on at scale I don't know.

18:38Or does it just become a production company for this kind of content to be on YouTube? That doesn't seem like their ambition here. They've got financial backers. It seems like they want to create a platform. Right. I agree. Good luck to them. Okay. Let's go to number three. My three was the Netflix thing. So what's your three? John Carter from Mars. Good one. I forgot about that one. So I was trying to think about the movie business and like the moment. And this was at the beginning of my career. And you had in, I think, 2011 and then again in 2012, a parade of blockbusters that just completely failed.

19:13And John Carter was a big original swing from Disney. It was in a summer where I think that and The Lone Ranger both tanked. The head of the studio, Rich Ross, gets fired. and I just feel like Hollywood had been trending towards only going with sort of IP and bankable stuff for a while but if I had to pick a moment where they just basically gave up on originality altogether it was that moment especially because Disney was became sort of the emblem and the architect of this strategy of like a few movies only IP zero risk and we're just gonna like mine the archives basically yeah Bob Iger is basically admitting just like play the hits like what are we doing here john they started to reboot their old animated movies as live action like why are we trying to do anything new yeah and i think others followed i mean we saw that there were some others that were big flops for universal had 47 ronin i remember there was a battleship that universal tried to make up a board game there were some very high profile flops that led to a retrenchment and back to the safe confines of ip that was proven and that they new would be hits.

20:21And then now it seems like we're pivoting a little bit to more filmmaker focused movie blockbusters. Hopefully that'll be a trend, but for the most part, it's just play the hits.

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21:21Awards Watch Raves Remarkably Bright Creatures is a beautiful tale about loss, connection, and the power of family. Sally Field remains a force of nature. My number four is the 2021 NFL deals with its broadcast partners. Ooh, why? Which represented massive gains. The deals run from 2023 to 2033, collectively worth$110 billion over 11 years. And it's a reflection, obviously, of the fact that sports content is the only thing that works in linear still. But I think these deals have been massively bad for Hollywood because they're so expensive. They are so expensive that these linear businesses really can't become profitable with these sports rights.

22:14And it's impossible to make the math work when you're trying to transition your business over to streaming. And the content itself is so expensive. Not to mention the fact that it doesn't leave very much money left over to do the actual Hollywood content that this industry runs on. So while the NFL is the juggernaut and the engine of viewership and value for these companies, I think ultimately for the greater Hollywood ecosystem, the rise of sports rights and the onerous nature of these deals has overall been pretty bad. This is not a circumstance, I guess you can say, where... Is your contention that the network should have just said, we don't want it?

23:00Or that the league should have recognized that it was asking for so much that its partners were actually going to suffer? I think the latter. I mean, I don't have an answer here. This is not a situation where I'm like, they should have done XYZ. Everybody is acting in their self-interest here. The leagues want more money. The networks need this content. everyone's doing what they arguably should have been doing. But the outcome here has been pretty bad for the entertainment business because the albatross nature of these contracts, because they put so much pressure on all the other things that go along with having a functioning TV or digital business.

23:41And you think that NFL deals are singularly bad relative to college football or NBA or just symbolic? I'm saying that this was the beginning. The 2021 deal with the NFL reset the market, and all the deals that have come after that have been outsized. I mean, we saw what the NBA got last year in their deals, which most people believe were just outrageously priced given the falling viewership. And we'll see. But how long can this go on? How long can the rights fees keep going up, up, up when the linear business is going down, down, down, and the digital business has not proven itself to be sustainable?

24:18How long can that happen? Great question. Until the tech companies come in and take all the rights. Yeah, I mean, this was obviously the 2021 deal was also the first time that the NFL did a digital exclusive with a partner. They did the Amazon Thursday Night Football deal. That opened the door to what we have now where they're trying to carve out various packages for the different streamers to get in business with these players that they know are the future of television without totally abandoning their existing partners. so that's also another way that this was bad for hollywood because it brought the tech companies into the nfl well that was going to happen anyways but yes it was going to happen but that was that was the turning point yeah um you don't have you don't have the answer here you don't have no no i think i i honestly hadn't thought i didn't really touch on sports i didn't think about it that way i'm not like it's a tricky one because on the one hand i think the point you're making is a really interesting one, which is that if they hadn't spent so much on sports, the rest of their business might be a little bit healthier on the other.

25:21Yeah, I don't see how you avoid it when the NFL is so popular and the market is what the market is. Yeah, it would have taken the NFL recognizing where this is all going and saying, okay, there's no way they're going to fucking do that. No, never. NFL take less money? No. And the others, it's just not going to happen. They're going to get as much as they can right when they can get it. And these rights deals don't come up very often. And so, you know, this is how the commissioners stay in their jobs. So, again, I'm not suggesting some kind of solution. I'm just saying that the way the value proposition of sports has evolved, it has hurt the rest of the Hollywood ecosystem.

25:57Right. I guess I could have gone if we wanted to keep it parochial. I could have gone with the Dodgers Time Warner cable deal as the beginning of the end of the regional sports network business. That's a good one. Yeah. And now they're going to have to try to figure out how to get the Dodgers to unwind that deal and be part of some national MLB digital thing that they're not going to want to be a part of. Yeah. All right. What's your next one? Well, my fourth one was Time Warner deal, which we covered. And then after that, I've got a couple where I sort of like know the topic, but I don't have the right moment.

26:28Okay. One of which that I was fiddling around with was sort of the companies learning the wrong lesson for how to go about streaming. And so I was almost going to say Disney's investor, the Disney Plus Investor Roadshow, which ended up working out well for Disney, but then like inspired every other company to copy Disney instead of doing their own thing. Which roadshow are you referring to? Before Disney introduced Disney Plus, it did like this whole investor, you know, it had their presentation and the roadshow and they got everyone so excited and Disney was benefiting. And so then everyone else just copied Disney with the same exact strategy instead of being an original thinker.