Acquired
03:27:43 · David Rosenthal, Ben Gilbert
[03:27:43] S1: Right. [03:27:44] S0: Right. Or the traditional networks business. You know what's interesting? I sort [03:27:47] S1: of expected going into this research to hear over and over that, NBC realized their great mistake in not owning any of the back end of Seinfeld, and they let so much value walk, and it was this bitter lesson that... Especially once Finson was repealed, they never allowed something like that to happen again. That's the fact pattern. But actually, back in the day, the executives were fine with it. They were happy with the arrangement of, [03:28:16] S0: yeah Totally. [03:28:17] S1: You production companies, you're essentially the VCs. You take the risk. You make money on the back end. We get this great stuff that we can put on our network. We have a [03:28:25] S0: one year payback period on a multiple of our invested capital. [03:28:29] S1: Sell ad units. We're super happy. That works great. [03:28:33] S0: Yeah. I think it comes down to tech companies are trained to seek operating leverage and attract investors that want operating leverage, and that was not a thing when media was distributed by networks. But now that's the ultimate end state of the media distributors beating tech companies. [03:28:54] S1: And back in the day, they were they were the only game in town. Right? Like, you're gonna tune into NBC, ABC, or CBS, and then eventually Fox too. That was it.
03:28:54 · David Rosenthal, Ben Gilbert
[03:28:54] S1: And back in the day, they were they were the only game in town. Right? Like, you're gonna tune into NBC, ABC, or CBS, and then eventually Fox too. That was it. [03:29:04] S0: Yep. One other little piece of analysis before we get to seven powers. There's a very real argument here that Finsin being repealed is one of the worst things to happen to the industry in the last several decades. Yep. The networks start saying, we're gonna pick from the in house things that we've sort of come up with to hit the airwaves. It just means that you get bad stuff out there. Whereas if you have this, like, thriving free market of a whole bunch of independently funded small studios coming up with things and you can buy from any of those, that's a much better world for content. [03:29:43] S1: Totally agree. And we heard that universally in the research. Like, yep. Those were the good days. Vincent being repealed [03:29:49] S0: ended that. Yep. And consolidated where content could come from. [03:29:52] S1: Yep. [03:29:53] S0: Fortunately, the Internet changed that, and we have, you know, YouTube and the explosion of creator diaspora now. [03:30:00] S1: Yep. Powers. This is actually gonna be really fun. [03:30:04] S0: So let's see. Normally, the way we do this exercise is seven powers are the seven things that could give a company persistent differential returns or the ability to be more profitable than their nearest competitor on a sustainable basis. Who's the entity here? The Seinfeld cap table? [03:30:25] S1: Yeah. I think we should talk about it
03:30:25 · David Rosenthal, Ben Gilbert
[03:30:25] S1: Yeah. I think we should talk about it [03:30:27] S0: from the cap table's perspective. And it's what lets Seinfeld the asset of the show, even when it was being produced and today, be more valuable than anything that competes with it? Other shows? [03:30:41] S1: Yep. Yep. Okay. I think counter positioning today might be the biggest one, because it's the last of these huge retention tools left that is not captively owned by a streamer. So it can come to market in a way that Friends in the Office can't. [03:30:57] S0: And you think that's counter positioning? [03:31:00] S1: Well, if you were to say Friends in the Office are its competitors, they are structurally hamstrung Right. By their ownership situations now. [03:31:09] S0: If they did compete with Seinfeld to go to the free market and be able to go anywhere, it would hamstring their their parent company. [03:31:15] S1: Their parent companies would be making value destructive decisions to do that? [03:31:19] S0: Yep. At least based on their chosen current strategy of needing to have owned and operated streaming services. Yep. Scale economies all all over the place. I mean, the fact that the world has an installed base of a 100,000,000 plus Seinfeld fans. [03:31:35] S1: Oh, I agree, but I I would say this is network economies, not scale economies. [03:31:39] S0: Oh, that we're all [03:31:40] S1: The fact that you know all the memes from Seinfeld is extremely valuable to me.
03:31:40 · David Rosenthal, Ben Gilbert
[03:31:40] S1: The fact that you know all the memes from Seinfeld is extremely valuable to me. [03:31:45] S0: You're right. I don't think there's scale economies, because the definition of scale economy is when I can do something that is more profitable to me for the same input than one of my competitors can do because I have more scale. But this asset doesn't actually make any decisions or or or do anything. [03:32:07] S1: Yeah. I mean, like, the only activity [03:32:08] S0: is economies. When Netflix decides to pay $500,000,000, it can make better use of the Seinfeld content and be more profitable on that acquisition than smaller streaming services. Yep. But... Yeah. Branding? [03:32:22] S1: Maybe? Depends what you consider branding. [03:32:26] S0: Right. Is the whole tenor of the show branding? Is it just the logo? Is the... Like, I'd much rather watch Seinfeld than Big Bang Theory, but that's not because it's called Seinfeld, and I trust Seinfeld more. It's because I think the intrinsic quality of the show is higher. [03:32:38] S1: Yep. Yep. I don't think there's any switching costs here. No. Can't even think of what that would be in this case. Cornered resource, obviously, they have the rights to Seinfeld. [03:32:50] S0: And may... Maybe that is the power. That might... It might just all be cornered resource. [03:32:53] S1: Cornered resource. [03:32:54] S0: We have a thing that we can sell that other people can't sell and make a lot of money on it. [03:32:57] S1: Yep. And then the last one, process power.
03:32:57 · David Rosenthal, Ben Gilbert
[03:32:57] S1: Yep. And then the last one, process power. [03:33:00] S0: Not today, but there was... If you change this exercise to what did Seinfeld have when it was being produced that other shows didn't have. It's absolutely process power in the way they were making it. It's absolutely cornered resource in Jerry and Larry and some of the other writers that they had too. I think [03:33:20] S1: there was process power clearly just to the act of making the show. I don't think Jerry or Larry individually, or if they were to come together again now, could repeat it. It was a magic moment. And and in fact, the evidence is right there in in Curb. Right? Like, Larry had to run Curb differently than Seinfeld. He he couldn't do again what he did at Seinfeld. Curb was improv. Larry couldn't create the the scripts and and all of the intense effort and alchemy and magic that went into every week of Seinfeld in the same way. You just couldn't do it. [03:34:00] S0: Alright. Should we bring this baby home and do quintessence? [03:34:03] S1: Let's do it. I know where you're headed.
03:34:03 · David Rosenthal, Ben Gilbert
[03:34:03] S1: Let's do it. I know where you're headed. [03:34:05] S0: So, listeners, the way that we decided that we wanna do our quintessence this time is to answer the question, what made Seinfeld such a ludicrously good TV asset to own? Yep. What made it durable? What made it continue to get renewed for these really high rates three decades later? And, yes, there are comps in The Office, which actually is my preferred thing to watch all... Like, nightly. I grew up when it was on, and so it's, like, more for me. And it feels more modern and blah blah blah. Friends is arguably more valuable, but is held captive. So Seinfeld is like the one free agent in the top tier that actually can go and trade on the free market. [03:34:46] S1: Yep. And look, of course, there's a whole list of these, most of which we talked about earlier in analysis. But I think if you were to ask Jerry, at least, they went out on top. [03:34:58] S0: I think the driver is viewership begets viewership. So Seinfeld has been everywhere for the last three decades on a bunch of channels and streaming service. And because it has been omnipresent, there's so much demand today to watch it because we're so familiar. It is today's comfort food even though when it launched, it was very uncomfortable. [03:35:26] S1: Mhmm. [03:35:27] S0: I mean, during my childhood, teenage years, college, adulthood, it was everywhere, and I have all the jokes memorized. [03:35:32] S1: Mhmm. Always on every channel every night. Yep.