Acquired
03:17:35 · David Rosenthal, Ben Gilbert
[03:17:35] S1: Alright. Should we transition to analysis? [03:17:38] S0: Yes. So one big thing I wanted to talk about is why is Netflix buying this? Like, why is this particular asset and this category of assets, Seinfeld, The Office Friend, so valuable to a streaming service? Well, streamers need content to do two jobs. One is acquisition, and the other is retention. [03:18:01] S1: Yep. These are awesome retention vehicles.
03:18:05 · Ben Gilbert
[03:18:05] S0: Yes. So acquisition is a totally different thing. That's what the new content is for. That's the, like, super high polish thing you can market to get people to sign up for your service. And I think... I'd be curious to get feedback from people in the entertainment industry. I think the reason why every show is, like, eight episodes now instead of 22 to 24 is because in broadcast, it was an ad based business model. So you needed something on the air always, and then you needed to sell ads for eight minutes of every half hour. And so you'd take 22, you'd take 24, you'd take 30 episodes if someone could make you 30 if it was a good show because it suits your business model. On streaming, the point of a new show is to get people to sign up for your service. And I'd be willing to bet that there's not a big difference between a great show with eight episodes and a great show with 20 episodes, how likely it is to get someone to sign up. And these things are expensive now. It's, you know, $810,000,000 per episode for some of these high polished ones. There's no way that the $10,000,000 you spend on the fourteenth episode of a season is justified versus sinking it into the sixth episode of another show that you could do instead. Once you kinda, like, wrap your mind around, oh, shows are now acquisition vehicles rather than ad inventory carriers, you sorta understand why shows are so different now than they used to be. Yep. And the other thing, in addition to the fact that these seasons are really short, they're mostly not comedies. Yes. It's really weird. Like, everything is a drama or Spectacle. Or a sci fi. And and I was really grappling, like, why don't we see more Seinfelds now? Why are there so few things that look like this? Part of it is I think that comedy doesn't travel internationally. And these businesses now, these streaming businesses are all scale economies businesses. So whatever you make, you wanna expose it to the broadest number of people to justify its cost. And so it's really hard to green light something where, like, you know, British humor doesn't translate. When they brought BBC's The Office over to The US, it bombed, and they had to completely remake the show in order to make it appeal to an American audience. So I think that's part of why you get white lotuses, but you don't get Seinfeld's anymore.
03:20:39 · David Rosenthal, Ben Gilbert
[03:20:39] S1: It might also be kinda as you see in the Seinfeld story when you... You're just doing comedy, it takes a while to get the audience hooked. You can't just, like, hook somebody right away with an incredible drama or a flashy sci fi or something like that. Like, it's a slow burn, and that just doesn't make sense in the acquisition side of the business model for streamers. [03:21:03] S0: Right. It's not even obvious that I would sign up for a streaming service to get access to a new comedy. Like, I watched Tires because I was already a Netflix subscriber, and it was awesome. But would I have gone to sign up for Netflix on my own just to watch Tires? I would've needed a pretty strong endorsement, and people endorse comedies differently than they endorse dramas. Because you're, like, less, to your point, sucked into the story. Yep. Now flipping over to the other side, retention. That is Seinfeld's job these days. It is like the single perfect retention vehicle. I'm happy to subscribe to a service where worst case, if I'm surfing around and I can't find something, there's always Seinfeld. [03:21:45] S1: That's sweet, warm Seinfeld. It's comfort food. Yes. Exactly. [03:21:51] S0: It's really weird because it started as this, like, jarring, crazy, daring show, and now it's comfort food. [03:21:59] S1: It's the chicken pot pie of Netflix. [03:22:01] S0: And it's like a churn reducer in two ways. One, maybe I signed up for k pop demon hunters. Yeah. And then I realized Seinfeld's on there. [03:22:11] S1: Okay.
03:22:11 · David Rosenthal, Ben Gilbert
[03:22:11] S1: Okay. [03:22:12] S0: Actually, I got hooked on Seinfeld, and I'm gonna watch every episode of that while I fall asleep at night. So that's, like, one thing. But two, now that I know it's there, I'm just not gonna cancel. I don't wanna lose access to something that I think I theoretically at any given time might want and decide to watch. Yep. So, yeah, that that is why it's so valuable [03:22:32] S1: to streaming services. Incredible retention tool for streamers. [03:22:36] S0: So while we are on the topic of the weird incentives that fall out of subscription based streaming versus advertising based TV networks. This is a a bit of a brain buster. Tell me if you agree with it or not. K. NBC's nineties advertising business model incentivized attracting a more educated audience than streaming. [03:23:06] S1: Yep. I buy that. Because advertisers are willing to pay for audience demographics, whereas in the streaming world, everybody pays the same $12.99 or whatever it is a month. It doesn't matter who you are. [03:23:17] S0: Right. In the streaming world, you're just a vehicle for your $12.99. Mhmm. There are lots of counter arguments to this that I'm open to, but it is sort of a interesting brain puzzle that streaming doesn't incentivize you to get the most valuable viewers. [03:23:34] S1: Well, you're you're happy to take the highest quality viewers. You just need viewers. You you want everyone to differentiate. And, you know, look, streaming is historically subscription based, but they're adding ad tiers now. Netflix is adding an ad tier.
03:23:34 · David Rosenthal, Ben Gilbert
[03:23:34] S1: Well, you're you're happy to take the highest quality viewers. You just need viewers. You you want everyone to differentiate. And, you know, look, streaming is historically subscription based, but they're adding ad tiers now. Netflix is adding an ad tier. [03:23:47] S0: Right. And those advertisers will care who the subscribers are. Yep. Okay. So my my big question for you in analysis before we get to powers and quintessence, we opened the episode by saying this couldn't happen again today. That this was so anomalous, it needed to happen at the exact time that it happened with the exact people who who made it. I have a list of things that I think couldn't happen today, and I'm curious your thoughts on them. [03:24:15] S1: Great. I've got a list too. You wanna trade back and forth? [03:24:18] S0: Yeah. Let's do it. So my first one, arguably the whole show, it was so creator led with essentially no design by committee. I bet that's pretty hard to find today. [03:24:29] S1: Well, it's easy to find on YouTube or [03:24:34] S0: Yes. [03:24:34] S1: Podcasts or, you [03:24:35] S0: know, creator outside the system.
03:24:35 · Ben Gilbert, David Rosenthal
[03:24:35] S0: know, creator outside the system. [03:24:36] S1: Completely outside the system. And it is almost impossible to find inside the system because the stakes are too high now. Somebody... Executives at some organization are involved, whether it's the streamer or the production company or the studio. Right? Like, the budgets are so big. That was my point about the stakes are too Right. Like, you wanna make a TV show these days, you need a lot of freaking money. There's no way that something could start like Seinfeld back in the day with that budget, that, you know, set of episodes. Right. [03:25:06] S0: I think always sunny did, but that's now twenty three years old or something. Tires, I think, did. Tires was pretty low budget when it started. [03:25:13] S1: And it was, like, creator led independent. So, yeah, yeah, I guess it can happen out there. But by and large, you wanna make a TV show, you need a lot of money, which means you're gonna have suits weighing in on what's going on, which [03:25:24] S0: is just gonna make everything worse, [03:25:26] S1: those damn suits. [03:25:28] S0: Yep. Alright. Next for you. [03:25:31] S1: No doubt the independent cap table and incentives associated with Seinfeld made it what it is today. The fact that Jerry and Larry, as creators, got this incredible deal and sort of set of circumstances that let them get huge back end from the production company. And then they made the show artistically what they wanted, but they were incentivized for the long run always. Yes. Made all the difference in the world.