01:05:55 · Ed Elson
[01:05:55] S4: I think this is the perfect encapsulation of what the problem is for a company like Netflix, because it says a lot that we are immediately down to do this. It tells you something about the way the media ecosystem works today, which is that it's not about contracts. We're not inking deals with with Netflix or even YouTube. We're just trying to get our stuff out there. Wherever there are eyeballs, wherever there's attention, that's where we're trying to go. And and we're not alone in that. That is the way most of this works. And so to me, this is an indictment of the traditional production budget model and the... Honestly, the traditional streaming model. And this is... This shows you where things are headed, which is that it's all going into a user generated content direction. Like, you've got Netflix's production budget of $20,000,000,000. Compare that to Meta's production budget of literally zero because it's the users that are making the content. And I think that, you know, that that might sound counterintuitive, like, why... I mean, Meta doesn't pay its creators. That's a striking thing. How is it that there is literally billions of hours of content that is being produced every day on that platform despite the fact that Meta isn't paying them? The reason that that is happening is because people think of media differently, and the reality is people on Instagram, people on reels, people on people on TikTok too, they wanna get famous, and they wanna get followers, and they wanna get likes. And that in and of itself is a market. That is an ecosystem that drives more production, more user generated content, and it's something that Meta has been able to exploit. In addition, they're basically telling people like us, you guys figure out how to make money yourselves. We're not gonna pay you an ad ad share program. You guys go figure it out, figure out your third party agreements. You can negotiate your own deals by yourself. You guys are adults. Handle it yourself. That's exactly what we are doing. It's what we've done with our YouTube model as well. I And think it's what a lot of other creators are gonna be doing as well. And all of this means that that that viewing time number for Netflix specifically, which has been falling quite precipitously over the past several years.
01:08:20 · Ed Elson
Average viewing time per member on Netflix has fallen 26% in the past three three years. That's gonna keep going down. And I think it's really, really tough considering that Netflix stock is already down 44% in the past year. We know that they're getting killed by YouTube in terms of TV viewing time. And I think this really begs a very important question for Netflix, which is what are you going to do about this? What is your plan? Because you're living in a very, very different world from what the world was five years ago. You you used to be competing with HBO Max. You're competing with Meta, TikTok, YouTube. This is a very, very different media ecosystem. And I... I'm not totally sure what the answer is. I I have been noodling on some ideas. But, you know, if you're on the Netflix board and you see this headline, what do you think, and what do you do?
01:09:14 · Scott Galloway
[01:09:14] S0: Netflix faces an existential crisis of being lumped into media companies that are struggling, like Disney that pays... That gets... Commenced two times sales in the marketplace versus it's at five now, and it used to be at eight or 10 because it was considered a tech company. They have to find either acquire... You know, I initially thought, why wouldn't they merge with NBCUniversal? They can go into Parks. And I thought, don't wanna be in the media business. They wanna be seen as a tech company with a media platform. I think it's gotta be something around trying to, as you put it, start to own or get into the clip economy, and that a short form video that plays well to a phone. You know, my idea was open source kind of TikTok with their 99% long tail content. But they're they're in a difficult spot. I think that they're basically saying we need better content, that we haven't had our k pop demon hunters. I actually think the content's really strong. I'm I'm watching Yusavina. Think it's fantastic. They're saying... When they when they fired Bela Bajaria, they're saying we have the wrong cook, and no one's eating at a buffet. And my knowledge is I wonder if everyone's gone vegan, and that is just fewer and fewer people are willing to sit down. I won't watch any... I won't invest an hour in anything that doesn't have 90 plus percent on Rotten Tomatoes. I mean, the the bar is just becoming so high for what you're actually willing to spend that time on. Also, and this is just anecdotal, but I think it does show up in the earnings of Meta. I find that the best use of AI to date, that people aren't really talking about is one that's invisible behind the curtain, and that is I believe Instagram Reels literally deploys AI to turn your brain inside out. It's as if it knows what I want before I want it, and I'm just... I can't get over. Like, I felt that way five or seven years ago the first time I was on TikTok. I'm like, how did it figure out I like Great Danes? Like, how did it how did it find some weird economist in South Africa talking about income inequality that I would be interested in? Like, how did it pick up on this? I believe the algorithm... Everyone said, oh, TikTok, it's about the algo. Right? I believe the in... The algorithm now at Instagram, courtesy of of the CapEx and AI, is dangerously addictive.
01:11:36 · Scott Galloway
I think it is I think it is so good right now. And when they apply that to content that competes against YouTube, wow. I just... I'm I'm really curious to see how these wars play out. But Netflix, I was actually looking at Netflix as a buy because I think the management team is so strong and a built in user base, but they don't wanna consolidate with another media company because it just cements them as having the same problems as everybody else. They have to serve up a different type of food here. They have to get into short form that is really mobile friendly. Because the other thing that's just hard to ignore is that things are going really well in the sense that the the the flow of capital has been pretty much one way, and that is it's been from a bigger screen to a smaller screen to the smaller screen. Right? In general, I know movies will pass $10,000,000,000 for the first time. Fine. It's a dead cat bounce. Movies is a shitty business. Television, still a huge business. Maybe not growing, flat, fine, whatever. Any great content on a phone, champagne and cocaine. Right? What's interesting is the biggest screen is actually doing really well right now, and that is the screen of IRL. Right? Going out, concerts, meeting people in real life, that's actually picking up, which is a really encouraging sign. But I just... This ecosystem, I think that I think that... I'm summarizing, but I think Meta Meta doesn't even look at Netflix. Meta's gonna go after YouTube. And in general, just what this is showing is that our brains, we are evolving a new species of people who just don't have the attention for... To justify, to create the consumption, to justify the cap or the amount of money that's gone into content. We were saying this two or three years ago. Like, how can they sustain this investment in content and original content? And the answer is they can't. So I think it's only a matter of time before Netflix, one, announces, you know, innovation, acquisitions, developments of new things that, give people a different type of food. Also, I think what's coming, they're gonna announce they're gonna reduce their content budget. They just can't. They're they're in the arms race, and they've they've probably gone out too far. $20,000,000,000? Anyways, I don't...
01:13:55 · Scott Galloway
So the answer is I don't know what they do other than trying to get into short form content and start to cut the content budget.
01:14:03 · Ed Elson
[01:14:03] S4: You said something which I think is really interesting where it's just like Netflix has always wanted to be seen as a tech company, and I think they have been successful in presenting themselves that way up until lately, where it's become clear that actually, no, you're basically, like, very similar to NBCUniversal, very similar to Warner Brothers Discovery, Disney. You're not really a tech company. And I think what this comes down to, they are at this very important fork in the road, which is like, what actually are you? Like, what... Like, are you are you a media company, or are you a tech company? And I think they're struggling because I don't think they know what they are. I don't think they've figured that out. I think that they're sort of dabbling with this idea of let's get into short form. Let's get into having clips and being more of a sort of a... An aggregator of existing generated content, something similar to a YouTube. But then also they're saying, no. We're gonna also spend $20,000,000,000 on on production, and we're gonna have high quality premium content. We're gonna become the sort of the luxury product of streaming. But then also there's... They... They're doing the ads as well, which was a new introduction a couple years ago. So it's it's almost like they haven't figured out what it is that they actually are, and it makes me think of Aswath Damodaran who's like, you know, you're dealing with a bit of an identity crisis as a company right now. And I think for me, what do they have to do? They have to decide what they are. Because currently, Wall Street is not buying this. This idea that, oh, we're both at the same time. We're kind of interested in TVs, but also we're interested in the phones. We're interested in everything altogether. That's not working from from both a cosmetic perspective in terms of the perception, but also from a business business perspective. So in my view, it's like you need to decide. I'm... Honestly don't think that the tech company angle is going to work. I think it's gonna kinda look like old guy wants to be young. Like, oh, we're into the streaming. We're like YouTube. I I I think that that ship has sailed, and it was a mistake. They should have kept up like YouTube.