Business Breakdowns
· Matt Reustle, Blake Saunders
[00:00:00] S0: And just to hammer on that point: this list of potential buyers—are they actively seeking to find solutions to whatever problems they're having, like what you mentioned? Or is it coming in the opposite direction where sellers are looking to strategically place themselves with buyers and you need to pitch the buyer on the reasoning? [00:00:00] S1: I think it's both. Every company is really different. The way that you navigate it is different. Some of them, when they have family ownership, are still led from the top. So someone will say, go buy this and I really don't care what we pay for it. So they have a corporate development team that's good in negotiating pricing, but they're not price sensitive. But it's a mix because there are a lot of people coming to market. In podcasts, yes, assets are for sale, but typically I think some of the best deals are born out of longer-term. Think about the Free Press. That relationship is not something that I guess they started at the Allen & Co. Conference, but I don't think Bari was for sale technically. [00:00:00] S0: On the point around media always seems to hammer on the importance of content: is that still the holy grail in your view?
· Blake Saunders
[00:00:00] S1: There's a nuance to that, and what I mean by that is Facebook and Snapchat and TikTok, they're oriented to ensure that UGC content is the most addictive because they don't have to pay for that. Instagram is a lot like a media company, but they don't pay for any of the content. One of the reasons why I have very strong views on how to fix Substack is because I want places where premium content can fully monetize to continue to exist. It's like the American diet, and I think this happens to everybody. You go to Europe, you lose weight and you're like, I'm going to come home and I'm going to eat healthy or I'm going to try to eat that way. And you go to the farmer's market and you read the packaging for a couple weeks and then you go back to eating at McDonald's. The unfortunate thing is premium IP matters, and we can talk about that in a second with Paramount, but the platforms have made shitty content highly addictive. That goes back to why certain YouTube channels will be less valuable or more valuable in the hands of a media company. But I think it's because they're creating premium-like content, maybe not using the budget of premium content, but creating premium content that users, using the analogy of food, are getting real value from. An interesting thing with Paramount: they spent a lot of money on South Park, spent a lot of money on the UFC, and I think what their strategy, because they have the budget to buy stuff, is instead of worrying about where the stuff is going to live, ultimately they want it to live in Paramount+ and people to subscribe. But I think their positioning is they used to have the zeitgeist with MTV and all these cable channels—that's gone. And so it's how do we turn that back on instead of worrying about where it lives? Today, I think they're most focused on: let's go figure out our target customer and what are they watching that we can actually go easily get. The two things I just referenced, those are major draws. South Park, even it's whatever 22nd season or 21st season, still is funny and still is relevant and still is making news. The UFC, I think, is one of the most watched sports. They did a good job during COVID basically turning themselves back on really quickly.
· Blake Saunders, Matt Reustle
They're bringing it in the form where you're not going to do the pay-per-view, but I think it'll still feel like a premium product that you can only watch on Paramount. [00:00:00] S0: Yeah, it's interesting for both of those properties. You seem to hit a specific demographic as well and you have this die-hard audience, for lack of a better term, where you can feel more comfortable that they're going to port over with you versus there's many other large audiences where if it went behind a paywall—I always referenced The Economist had an 85% drop in its podcast listenership after they brought their podcast behind a paywall, which there's, I'm sure, other things going on in the numbers. But it's interesting to me where there's a test of when something is free versus when something moves and you see that same audience go with them. So it's interesting just to hear the dynamics of what they targeted. How many assets do you think are out there that are that particularly powerful in terms of they have the scale, but they also have this engagement which feels stronger than you would find? Top decile is what I would say easily.
· Blake Saunders
[00:00:00] S1: The interesting thing in media is that it's ever changing. New shows come along. One thing I heard from a producer is the unfortunate dynamic of all these numbers and all these statistics is a lot of shows are not getting a chance to breathe. And so most of the good content that we look back and say that was a really good fucking show, it took them two or three seasons and now they get cut after one if they don't show the right metrics. A lot of the best shows, when Netflix first came out, they were basically green-lighting their own content. So much of it was built in a way to have you binge. A lot of new content that's being created is more addictive but is not as good. So I don't know if it will have the underlying IP and asset value. I think the way to think about it is: what do you watch? I don't watch TV, so I have a hard time saying what's valuable. I think there's probably some really good podcasts. The next iteration is some of these podcasts can have the same amount of advertising weight as a good TV show. And you've seen SiriusXM do a really good job of partnering because they have an insane audio sales team. The best, and that's why they do these deals is because they know that they're going to get the deepest penetration with the right advertisers, get good CPMs. Again, I don't watch TV, so I don't know any other valuable IP that's the same weight as South Park because that's a lot of money.
· Matt Reustle, Blake Saunders
[00:00:00] S0: And there’s very few appointment viewing things. I think that's why you've seen this flock towards live sports. It is truly appointment viewing. UFC I would put into that category. South Park, one of the last things that I'm sure their audience would still view as appointment viewing. Maybe not as strong as it once was. [00:00:00] S1: Sports is probably a big miss on my part. So sports is probably the easiest, the heaviest weighted thing where you're going to see a different adjudication of who owns the rights, how they're able to be used, because there's been sort of a shakeup because the rights are controlled at a couple different levels—in market versus national broadcast. And it was a way to basically put more value back to the teams. When Sinclair acquired a bunch of the RSNs and then ended up having to restructure those businesses, a lot of those rights got put back into different areas. They just changed. Those were really valuable for the sports teams. It was driving a lot of the value. So probably sports is the place where you're going to see billion-dollar-plus M&A type deals or rights deals. I was having a hard time thinking about specific content. [00:00:00] S0: It's incredibly rare to have that type of you want to be there in the moment because now things you might want to watch, they just pile up. You're just getting fed with so much content. So I have books, TV shows, things that have just been on my list for a while, which is a lot different than it used to be.
· Matt Reustle, Blake Saunders
[00:00:00] S0: It's incredibly rare to have that type of you want to be there in the moment because now things you might want to watch, they just pile up. You're just getting fed with so much content. So I have books, TV shows, things that have just been on my list for a while, which is a lot different than it used to be. [00:00:00] S1: One of the things that's always been misjudged is the value of IP libraries, meaning people misperceive them as being more valuable because there's just a ton of degradation in most content formats. The first 30 to 60 days is where all the value is. And then it degrades exceptionally quickly with technology now. I think there's going to be unique opportunities with these libraries of IP: music, TV shows, scripts, books, all this stuff, because you can reimagine it in a much quicker way. I'm sure there's some crazy esoteric union rules about what you can and can't do and how you can use the actors, but it is something interesting to think about. Good stories and narratives can be reimagined in a lot of different ways. I think there's going to be opportunities to use these libraries to reimagine content in the future. And imagine if instead of having to hire actors and stuff, it was just a kid behind a keyboard. When Disney recolored some of the movies, it's that quick with obviously new content, better content, things like that.