Sean O’Reilly: A couple of your picks are, in ways, a little bit slightly connected,
but a few picks are involved in the future of entertainment, which I want to talk about,
which is Starz, Take-Two, and Walt Disney. Whatever you want to talk about, but I'd love
to get your thoughts on these.
David Gardner: It's a conversation. I'll say a few things. First of all, I really like
content companies. There's a great false argument that goes on about, which is king: content
or distribution? And the truth is, you need to have both. Both are always going to be
there, and if the scale ever tilts too far and everyone's saying, "Distribution is all
that matters," I'm going to start saying, "No, content matters a lot." Sometimes, people
go the other way, and say just having great content is all that matters. But you have
to be on Netflix. You need Netflix if you want to have a lot of viewers.
The good thing about Netflix, which we're not talking about today, is that it has both.
Companies that do both are really powerful […] But yeah, Starz, Take-Two, and Disney.
Of those three, Disney is, of course, the largest and most successful with both content
and distribution. And so many channels to take those entertainment properties, whether
it's a lunch box or a--
O'Reilly: Can you believe the success of Star Wars? The speed!
Gardner: I could believe it, Sean, in the sense that ... maybe we talked about this
before it came out, but I mean, a lot of people expected it to be the biggest movie of all
time, which, it has been. But I have to admit, I haven't actually really kept up with the
numbers. What's blowing you away?
O'Reilly: The speed. It got to $750M domestically in less than two weeks. Crazy numbers. It
took Avatar ... Avatar was crazy, but it didn't have any competition, it was a summer movie,
all this stuff. I just couldn't believe the speed, because--
Gardner: I know we took out a theater for some employees here at The Motley Fool right
nearby. Did either of you guys attend that?
O'Reilly: We both did, thank you very much.
Shen: I could never turn down that opportunity.
O'Reilly: I think we told our listeners about it, right? Because it was on a Friday?
Shen: Yeah. It broke a record for me, too, personally. It's the first movie I've seen
three times in theaters.
O'Reilly: Wow!
Gardner: Nice, Vince.
O'Reilly: You have a problem.
Shen: Contributing as much as I can to those record-breaking box office numbers.
O'Reilly: Disney thanks you.
Gardner: What's funny is, that shows a bit of a generation gap here at the table, because,
having grown up myself in an age where they weren't even VCRs yet, when you went to the
movie theater, that was your one shot to see that movie. You usually would go, for me,
at least three times to the original Star Wars, because you didn't know that it would
ever come back. It would be on TV five years later, maybe. You would see it once here or there.
So, the idea that you'll eventually have a DVD that you can buy and watch at anytime
you want would have been magic to me at the age of 10. So, for that reason, I think I've
only seen it once, because I'm expecting to see it many time afterwards. But to go to
the theater that many times is outstanding. I would say it was almost de rigueur in 1975.
But yeah, it was a fine movie. I thought it was very derivative of the first Star Wars,
the new hope--
O'Reilly: It definitely structured itself a lot after that movie, yeah.
Gardner: No spoilers! For those few who possibly haven't seen it yet who want to see it. But
I do feel like it was a very safe approach to the reboot. I thought it was powerful and
important, obviously, to Disney. But getting back to all three of these companies, they
all have content. I think in a world where distribution is getting easier and cheaper
and more global all the time, you just pin something up on a website and anybody can
watch it or re-watch it multiple times. We hope that website is a legal website. In fact,
piracy is largely going away because of the cheapness and accessibility of so much of
this content.
Anyways, I like all of these companies. Starz and Take-Two are much edgier and nice compared
to Disney and its content. Another company we have, Lionsgate is also another example,
Hunger Games, where they're not going for Winnie the Pooh -- which, by the way, I'm
a huge Winnie the Pooh fan. But, they're going for usually sci-fi. Or, Starz, with Outlander.
These are companies that know their audience and are creating content that lives in libraries
for a long, long time, and just keeps creating recurring cash flows for the companies that
create good content. So, yes, I like all of these. I realize I'm rambling, so we need
to keep moving--
I mean, I really love video games. And why do I love video games? Not only because
I'm a gamer, but because I love interactive content. I think that's one of the great developments
of my lifetime, is content going interactive, being able to be a character or tell your
own story, and do it, maybe, socially with other people online. It's very different from
just sitting there, looking at a screen, a carefully-curated and directed non-interactive
bit of fiction that we all grew up with and still enjoy today, movies and TV. So, I really
love interactive content. And as things proceed into virtual reality, the next big medium
and channel, that's going to be even more valuable. So, a company like Take-Two, of
course, I have a special feeling for.
O'Reilly: Vince, in your research, did you come across any particular games or trends
towards virtual reality from Take-Two?
Shen: The interesting thing, in terms of gaming overall, from my personal experience is, I've
played games for a long time, high school, college, and then I stopped for some time.
Gardner: Vince! What happened?!
Shen: There was about five years where I just didn't have time, I kind of lost interest
The last six months, I've gotten into PC gaming again--
O'Reilly: Have you lost the touch?
Shen: I've noticed, in that five years, there has been a town of changes in the way that it's
delivered. David mentioned piracy. They've reduced piracy with games a lot by making
it so easy and seamless for you to get that game. People are willing to pay that price
because the delivery is so simple now. You can have that game in two hours, downloaded.
You don't have to go to the store or worry about anything like that.
Also, what's really interesting is, before, you'd have a new release, you'd have a ton
of sales in the month or two after, and then it would bottom out. But now, they have this
longer tail because there's all these DLC packages, expansions, for one title, you can
really extend the revenue it generates. And I've gotten hooked into that as well with
some of the games I like. If I spend a lot of time on it but I get tired of certain maps
or gameplay styles, I'll download and purchase some of the newer ones, and it's really interesting
to see how that's allowed ... Take-Two, they have their mega-titles like Grand Theft Auto.
But there's other ones as well, like they've introduced an online currency into their NBA
games, which has really been successful for them. When I was playing games in 2010, sure,
there was online multiplayer and things like that. But having that sophistication--
O'Reilly: Now there are free agents, what's going on? (laughs)
Gardner: Exactly. It's fun. Very well put, Vince. I agree. You think about this company,
its ability through downloadable content, DLC, to extend the value of just brands and
franchises that it has, it kind of reminds me a little bit about what's happened with
television, and why I think we are living in the so-called "Golden Age" of television.
If you are a busy professional, let's give you a spouse and maybe a child or two, and
you only have 45 minutes of entertainment for the night, you're much more likely to
select characters that you know, a continuing story that you appreciate, and a bite-sized
chunk of 45 minutes than you are a traditional 2-hour movie.
O'Reilly: Possibly commercial-free, on Netflix.
Gardner: Possibly commercial-free, indeed. So, that's such a compelling value proposition.
You have television just blooming with that. And it's kind of the same a little bit with
video games in that, if you already have the character in the game, now you can extend
it and keep playing it with new content, as opposed to buying the next video game. So,
we're essentially seeing the extension of valuable franchises into deeper value for
the company that only characters and these stories. So, yeah, Grand Theft Auto is obviously
a prime example within the world of video game. But as Vince mentioned, Take-Two has
a lot of other games besides.
Borderlands is a really fun game for people, a cartoonish role-playing game shooter, a
real-mash up. Really, that's a fun game. The NBA game is a big success for them. We should
probably keep moving guys, because I could talk too long about video games.
O'Reilly: Oh no, that's fine.
Gardner: I'm really glad that Vince has come back. He came home! He had five years off
from the medium.
O'Reilly: Well, I stopped playing for a couple years. I played the second or third Halo when
I was in college then stopped and came back and these 12 year-old kids were destroying
me on Xbox Live. It was a very humbling experience.
Gardner: That's one fun things about playing games on the internet. First of all, basically,
you don't know who you're playing. But, you're playing really the best players in the world,
potentially. Unlike the NFL, where I would never be able to get down in the field with
any NFL player. But online, multiplayer, you're playing people who are unbelievably great
at these games. Of course, good systems match you up at appropriate levels. But that's one
of the fun things, I think, about playing online video games. You can play people who
are way too good.