These large entertainment companies can no longer actually afford the economics
to compete against Amazon and Apple, which never, ever need to make money
from actually content creation because they have like a new device called like
Vision Pro over at Apple. Great example where they need content in
order to drive adoption of a device that's brand new so that content is
worth more to them, especially if they can do exclusive content for that.
Those new goggles that that Apple is trying to drive adoption for worth a lot
more and you never need to make money from content as we know from these
standalone content companies they're all losing money thanks to streaming.
So the economics have really gotten compressed in content.
So we think they need to be purchased by larger companies that have sister
subsidiaries that can fund them. Now, is this so?
Laura Paul Sweeney tells me you're his favorite analyst, so you must know a lot
more about this industry than even he does.
But when I hear about a device company looking to buy content for exclusivity,
I think instantly about Microsoft and its attempt to buy Activision, which
right now looks pretty good. But it didn't look that great for a
while and it still would be a problem if they wanted Call of Duty exclusively on
the Xbox. Won't this be, you know,
an issue for the FTC and for other regulators if if for example an Apple
tried to buy a Disney? Yeah.
So good question On the regulatory front, first of all, as you know, these
kinds of things take multiple years. So let's see who's in the presidency
because that person appoints the head of the FTC, the DOJ.
So if we end up with a Republican president, then suddenly, like all bets
are off in terms of allowing consolidation, even if we stay with the
democratic regime. I think one of the differences remember
when Comcast was allowed to buy NBC, they said, look, you can have no
exclusive content on Comcast rails, meaning those the the video like the
wires for seven years. And after that you can.
So that's they they have a way to make behavioral changes to make sure they can
just force Apple to sell Disney content to everybody at the same price.
But as you know, if Apple buys Disney's content, it's a transfer price.
So they can double the price of Disney content.
And by the way, the way you make money in content to sell it to everybody.
So Apple really isn't incented to not sell it for a price to everybody.
It's just that if I was Apple, I would have those fabulous storytellers at
Pixar make three minute shorts that are only available on and probably could
offer to anybody else. But who else is buying a three minute
short from Pixar? Probably nobody except for putting it on
the goggles. I would guess that's also that's legit.
What goes around comes around, right? Because yeah, Pixar.
Steve Jobs sold Pixar to Disney. Right?
And it would be hilarious if Tim Cook then bought it back.
Right. Yeah, totally.
I saw. Agree with that.
Well, and part of it, you know, and so much of that happened because of Iger's
relationship with Steve Jobs. Right.
And I do think about Iger and his relationships with lots of folks.
Having said that, one thing that Disney lore, you know, is so well known for
buying some kind of content and putting it at the theme parks and making movies
and selling stuff and blah, blah, blah. Is that a good strategy for Disney
or Disney or for Apple? Well, for Disney, like it like, does it
still continue to be a good strategy in terms of how they do it?
Look, I think the big fundamental the biggest question for Disney is how do
you invest in this company today when you do not have a permanent CEO and you
do not have a permanent CFO? And as we know from the failed attempt
of a Disney trying to replace Iger for a decade and then picking a guy that
didn't last two years, this issue of succession at the Walt Disney Company is
a really hard problem to solve. It becomes an easier problem to solve if
it's a division of a larger company, because now you just need a division
head. You don't need a like, world class
politician, which is what Disney requires at the top level.
So I think it solves one of the big problems, which is it gives Disney a
more permanent management structure and a clear sense of strategic vision of its
part of something larger. Right now, you have no idea what you're
buying because you don't know who's in charge.
Do you think Bob was brought back to sell the company?
To sell it? No, I think it was brought back because
the guy in the seat, Bob Chapek, was destroying value at the speed of light,
and Wall Street had lost all confidence in him.
Is there any way to make money if they stay in this business?
I mean, is this dreaming? Business cannot be profitable.
I always think about ESPN like I would pay so much money if I could stream all
of ESPN's content without happening, having to buy a cable TV package.
So maybe. But the problem is, as you know, bundled
bundle media bundles, double economics. So when you unbundle ESPN, you know,
that destroys value because now they're not getting paid $12 a month for every
cable subscriber, whether or not they use it or not, the minute you unbundle
it, you've got to take that price up to three x.
So suddenly you may say today you'd be willing to buy it.
But if the price point was $100 a month, you might not be.
And I'd rather get the cable. Yeah, exactly.
Yeah, exactly. So I think the answer is capitalism writ
large has a lot of trouble funding negative growth businesses.
And right now, that linear TV ecosystem is really weighing on the revenue growth
line of these big conglomerates like Warner Brothers and Disney and
Paramount. And if you can put capital to work in
something that's clearly growing, that's worth a lot more than something that has
these declining, you know, it has declining revenue or
just single growth. So, Laura, so do you anticipate
something coming out of Sun Valley or what are you watching for it to come out
about Disney all get bought? I hope they all merge and they all get
redstone cells because she's a smart guy.
I hope they all get purchased. And I think the good news is there's a
serious brain trust. Like, you know, John Malone sits is a
large person shareholder of Warner Brothers and I think all these guys are
deal guys, Right. What's the deal?
It's a game. It's a bunch of deals.
It's a bunch of contract. So they're all deal guys at some level.
And so I hope they all understand that they've got to get bigger to save costs
or they've got to sell out to somebody that doesn't need to make money in the
content business. But they are not I do not think these
are standalone companies for the next three years.
I do not think they can be including and including Netflix.
Netflix has to get bought to. Who do you know?
Who's the taker for that? Well, you know, I could just merge with
Warner Brothers or could buy Paramount and actually have a library of IP rather
than always renting other people's IP. All of these companies make more money
together than they do separately. Hey, you know, last year, the boy that
everybody by talked about was Elon Musk. Right.
And Twitter. Boy, I can imagine if it were reversed.
You idea. Okay.
Hey, we women have dealt with a lot for years and decades and it's fair enough.
Having said that, now we're all like talking about meta and threads.
What what's your take on that, Laura? So as you know, we have wrongly we have
an underperform on matter because we're saying, look, we don't think it's
social. Network business has a terminal value
because we think Ticktalk is going to win.
And but I got to say, I sort of think Elon Musk, in blowing up Twitter in a
series of bad execution moves, actually has left a huge hole in the market where
there was clearly a consumer demand for a platform that met that.
But it couldn't generate ad revenue because of the fact that he sort of let
in the crazies once he got in and didn't allow content moderation.
So advertisers abandon ship. So there is a need by advertisers to
meet that need. And guess what?
Facebook is best in class. It's sort of guaranteeing walled garden
access to premium advertisers. You know, he has a million advertisers,
so she's got brands all the way down the long tail.
I think Metta does that really well. So and we know they're good at ripping
off other people's ideas because they did it with SNAP and Instagram.
So there and with Facebook, that was Friendster.
That's fair. Yeah.
Okay, great. So that's the core skill that's
following and improving on somebody else's idea.
So I think Elon Musk might have just lost all of his financiers, $40 billion.