AYNE 828 - Citizen AYNE: Davide Tesoro-Tess

Welcome to Citizen Aine, the podcast where the industries of sport and media intersect. Never before has it been so necessary to understand this symbiotic partnership as the entire content and entertainment sector has disrupted pace led by ever more ambitious moguls. The reference to the Orson-Worlds masterpiece is therefore no coincidence. The show is brought to you by our friends at 54 themselves at the forefront of change in so many sport formats and models. 54 brings a unique and proven capability to align capital, strategy and execution capabilities for investors, most recently in golf, polo and paddle. 54 and Citizen Aine, the perfect match. You know, Mr Bernstein, if I hadn't been very rich, I might have been a really great man. Don't you think you are? I think I did pretty well under the circumstances. I'm Roger Mitchell and this is of course Citizen Aine. I'm here again today with the legendary Mark Oliver and there is just so much to talk about and so many things happening between the episodes of Citizen Aine in the sector and I just want to start Mark by saying, are you still managing to follow all of this with everything you do and what is it that you think is the most interesting development since we last spoke? Well, yes, I've just about keeping up with all the various developments in the media world. Consolidation seems to be the name of the game, although it's also separation in preparation for consolidation. So a lot of guests work about what's going to happen next as people divide up their operations into various parts of their business. What's going to happen next? Will there be more consolidation? Almost certainly. And some of these separations I'm preparation for that. So I'm trying to think through what the next step might be as they say, the second shoe has to drop so we're waiting for that. But I've been slightly distracted by the fact that I've been getting expert testimony about Indian cricket rights, which has trapped me in a tribunal room for three days, but far from that has been fine. Good, good. So listen, we have got somebody today who I think is going to help us and help the listeners understand all the core productivity is going around why these organisations are doing what they're doing, what they're trying to achieve, what they're trying to defend. We've got today, somebody who is, I have to be honest, informed a lot of my thinking quite significantly in the last five years. I've stolen a lot of his IP unashamedly. I'm here to recognise that. It's Davide Tisoro Tess, who was the executive vice president of Skaya Tilei for over 10 years through news call and 20 century Fox, Comcast, Universal NBC. He's the guy that I would say was the thinker about exactly all of this stuff. What do we need to be doing? What do we need to have? What do we not need to have? What's the vertical integration? What's the distribution? Davide is a tremendous communicator as well as a great strategist. He now works on his own for what you would expect, the investment funds, consultancies, rights holders, broadcasters. Davide Tisoro Tess, welcome to Citizenane. Thank you, Roger and thank you Mark. Great to be here and looking for us this conversation. Let's kick off, Shiroly. I'll kick off. So in terms of stories at the moment, Comcast, obviously you've been part of that empire for a while. So first of all, it splits out Versaunt, which is supposed to be the boring cash generative dying businesses in a TV part. Obviously get Skides, Rolf Loads, Skides Germany. It's now going to split its cable company, the connectivity bit from the content bit, whereas the whole rationale for Comcast moving to content was that connectivity and content were well together. What's your take on all this? So I think we shouldn't be conflating the European lens of this with the sky, with the American lens of this. And as a matter of fact, Skye remains a vertical integrated business within the NBC U side of the equation in the proposed split, whereas it was a Comcast conference separate. So I think those two places to work is quite different. You should observe that in the US, Comcast and NBCU were never really as vertically integrated operationally as Skye has been between its content business and its platform and distribution business as well. So with that backdrop, I think that the case for should platform's own content or not has been going on and off both ways several times. And I remember when Comcast bought Skye, we had lengthy debates around, also they were not as integrated or Comcast and NBC were not as integrated as we at Skye had been. And so what was the right level of integration and how did you play that was a big debate. And Skye has obviously successfully made the argument to this day that it should stay where it's integrated rather than being split itself, you know, once Comcast with its business. So I don't think that there is as much industrial or business logic as some observers or some analysts that have read in the last week or two. I mean, logic to the initial bringing together with logic of the separation. The logic of the separation. So I've read a lot about all the signatures were not there anymore and there should be separate businesses. And I said, I mean, Comcast and NBCU were never quite as integrated as the Skye business as it were. So I'm not sure I would read too much of a business synergies or disenergies in the choice. What I do read and then they said it very clearly themselves is they're separating the capital allocation decisions. So once you have a single pot of funding and you need to allocate that capital between obviously one side is travel remuneration is paying down debt and business investments. And the business investments you need to think about should I build a new park in Bedfordshire as they're doing or do I upgrade my doxies to doxies 7.0 in the US or do I build out a new place somewhere in some American state or do I buy another business. That is a very comb it's very articulated business and capital allocation decision. So I think with splitting the tool they're clearing up their minds and thinking, okay, there's one business that needs to fund its own content choices and and nothing, NBCU or distribution choices. And the other business we need to fund its network choices and its footprint choices. So I think that is the main choice for the main reason. The other one which I would observe and I haven't read too much about this but I suspect has also played a role and it ties to what you were saying mark around sort of separation for consolidation. If you look at the if you look at NBCU and its peers the multiples in the market for those peers are roughly twice the multiples that Comga straights that today. Bingo. So there's not much business there but it's simple observation, just thinking content and experiences in terms of the reporting unit that broadly coincides with NBCU and we don't know how they're going to split it but let's take that as a starting point. You know they do like it's like six billion a bit higher market multiples of you know the Disney's the Sony's the one of discoveries kind of put a discount on that because there's obviously M&A it's kind of ten times so you put like a 60 billion enterprise value to MCU roughly. And that is a third of what Comcast currently trades at in terms of their combined group. Does fight NBCU only being about 15% to be bid up so I think there's about there's an element of unlocking market multiples that share will devalue or not because of some you know it's marked industrial strategic thinking but just re-reading of the stock as well. What about the other side of the equation the the money is very soon Comcast will try and merge with charter in the States and they don't want a messy network ownership issue or content issues to get in the way. So you know yeah so I'm referring to capital locations before in terms of flipping the tool and having clear choices to from a capital location perspective of course that cleaner choices are not just on capital location you know there's been talks about is M&A so you're going to be up for sale now Brian Orgworth very adamantly I would say almost emotionally rule that out in the call when they announce the the separation. So obviously both sides being in play are much cleaner choices for emanating sense as well. Now whether they're buyers, they're sellers or whatever they may be, we don't know of course yet. But yes, of course that's also a factor, yes. And do you think in retrospect the whole verse and separation looks a bit irrelevant? I would love to ask that question to Brian and Mike and say, would you have spun off verse center a year ago if you had known that you were going to split NBCU from Comcast a year later? And I don't know what the other thing is. I mean, I see a lot of logic for NBCU to include verse and that point in a clean sort of content business. On the other hand, I also see the logic of them being separate businesses. Verse and is a very domestic US business in the same way as ITV for example would be in the way they're not the same, but in terms of domestic, of geographical footprint and focus, verse and looks a lot more like ITV or like a media sitting Italy or like a define France, then to a content powerhouse like NBCU. So I can see the logic of them staying separate and should stay separate even in the new world. But I don't know if they would have done that choice with hindsight. What about compression? The first acquisition seems to be by a golf simulator company. So that's I found that very interesting and I have had this conviction for a while now, which I have done actually some work on in the last year or two, which is about, forget for a second, all this jargon that in us in the media world are used to about, you know, pay TV and advertising and streaming and broadcasting and on demand and linear and all of that. I mean, all of that is kind of technology and it's kind of jargon for the industry. I think what consumers really care and there's a story with a much broader way about the broader media is the digital television. It's, you know, ultimately there's brand people recognize and value for a particular thing, whether it's a sports brand, primarily whether it's a broadcast of brand sky or whatever it is or NBC or whatever. And then the brand stands for something and that brand unlocks and is what people look for when they want to watch a particular kind of content if you speak out to the media space and the TV space, you know, you go and see news or write to be news or screen news for news, right? And you choose your brand first, whether you're on YouTube and click a channel, whether you're on TV set and press a channel number or whatever it is. And then there's going to be content that supports that brand and then there's what I would argue is a community or an audience, right? And then the brand and the product is all about monetizing the audience in a way they're exempt, whether it's subscriptions or affiliate fees or whatever it is. Now if that's however some things of itself today, then it makes an entire sense. They're going to golf channel, which is very profitable. You know, you've got your arguments niche and it is niche in the US, yes, the world. But if you look at the economics of the golf channel in the US, I mean, it will be a big media company in Europe, anywhere in Europe, right? So certainly what do you do with it and then you build stuff around it? So you have a brand, I have a community of my audience, I have content, shall I buy other things around it where I can monetize my brand and my community in other ways. So it makes total sense to me. We've seen this before, WBD tried to do, they built, they built golf digest, their presentations went on about passion verticals, but suddenly it disappeared as the economic started to deteriorate. That's right. So that is absolutely right. Now I've argued to do something like that and then not to do something like that of myself over the years. I do think over the years, I think there's the one thing that I have seen myself has not worked is that when you do this in a big company, be that sky or where no brothers you are, discover the discovery or even indeed sort of conquer the MCU, whatever you can do on that level always becomes priority number 15, whether it's capital allocation, decision making, management focus, so the execution quality, now enter a good idea was the execution quality and the resources you put behind it are always less than what you'd initially thought and wanted to deploy properly and therefore you lose appetite or it doesn't work. We've got big things to do. Let's drop that. Now you could argue and I'd be a close observer of this that the designers are much more a smaller business, much more focused business and a business for which making it work. I want to say it's existential, but it's actually very important in terms of building its future. Should put the resources both focus and financial that are required to make it work. Now can they do it or not? We'll see, but I can see this having much bigger chances and metatrust of working than all the other experiments we've done in the industry in the last 10 or 20 years. I make an observation about the read across from studio groups, studio groups understand brands that drive passions that Harry Potter is a film. There's a venue to go to. There's all kinds of spin-offs. They apply it to sport because they think sport is another passion area. They seem to have been very successful. I can't think of one example of a media company taking a sport and making it into a passion bird school. They believe it, but I don't know about the execution. I get your point about a smaller company, but a better chance. But I think it's kind of read across the worst studio. We know how to build brands. We know how to get three 60s degree revenue from these things. It's just another brand sport and a passion. We can execute that just like we do a film brand, etc. But I don't think I've seen any example of a studio group actually successfully doing that and this you can think of one. No, no, I think that's right. I think there's certain sports I think are beginning to do that pretty well. I think PTO Virtual Trot Floor is a great example. I know you guys know them. People like them are doing in the early days of proving that broader monetization of a sport can work. All the emerging leagues you're trying to do that in some sort of way. I think the jury's out whether that will work well or not so well and whether it's the same sport. But I think that is analogous if you're a sports organization that is analogy I think to the studio in terms of only I own the AP and I monetize my AP and my brand broadly. I think as a media company where you're a broadcast or a streamer it's a lot harder because you don't really own the sport. I mean you're licensing the rights for a while. And so trying to build IP and long term IP on the back of a right that you're renting for a few years is really hard because when you're in the first year of your rights cycle you're all in or you're like monetize this broadly. I've looked at what you're talking about football we've looked at ticketing obviously it's kind of the UK in the early days that betting clearly as a buy product of sports right then it's all that to buy a Skade or Schlein and Skade Dahlia and I'm going to look at ticketing we're looking at all sorts of things. In the first year of your rights cycle you're all in yeah that's monetize this broadly then in the second year and you're trying to reach a level that you may like or not until you know whether you're going to retain those rights in the next cycle or not you know they're investing anymore you're going to sort of spools right so and as rights holders have many rights holders not all of them have tended to push rights auction later and later closer and closer to the deadline. They're quite realizing that they are stopping a lot of broadcaster from investing in the next time. But isn't the arts so then is a media company should think about buying the sports not the rights? Ah I love the idea it's I think it's really hard to do. I was in big flagship sports are not really for sale unless you think CBC is bought a sport I mean, it's a bit more than a one. We always find the exception so anything we're going to say now somebody will be able to find an exception to the rule but by large it's really hard to buy an established for it which is what big media companies would love because it is you know a reasonably known risk profile a reasonably non-valuation so that the risk profile is consistent with a big public company that wants reasonably stable or or recurring or predictable returns those are really hard arguably very free for sale again from the one not to be probably the hasn't the CBC model said is a different way of buying a sport effectively you're you're swapping your role you you stop being on the buying side of the rights equation and you start being on the selling side as a commercial JV and you have a responsibility for all the commercial operations now I can see there might be some conflicts there if you're so in fact it might suggest to a media company should buy a sport it doesn't have the rights off rather than buying a sport it does have the rights off because if you do that if you do the latter you confuse your strategy do we want this sport for the rights or do we want it for the sports economics so you might can to can to a conclusion that media comes to think about buying sports they don't have any rights interest in to see if they can make the passion vertical business work rather than confusing the buying of rights with the exploitation of sport because they at some point as you said they can conflict because the rights acquisition timeline dominates the view of the sport So, the easy way to do that is to buy a sport you don't actually have the rights. What do you think that the investment will be extremely confused by that? So, it's a history that goes back 30 years. I would argue the first one to make that core. Well, from a media perspective was Rupert Murdoch with Sky wanting to buy Manchester United. And then probably on the Premier League, 30 years ago. Now, you could argue that somebody did the same thing, we look at it a different way. It was actually Berlusconi, owning a C-Milane before he even launched his first media channel in the 80s. And actually, then using a C-Milane to put sports on television when nobody could put sports on television except for the BBC's or the eyes of this world. So, I think there's a long history of that. I think it's really hard to do because it theoryates a great thing on paper. It's really hard to pull off because the sports ecosystems are always, I've always have multiple stakeholders. And if you own a part of that, everybody else in your competition or in your peer group, when I talk to you, say you own the Premier League, we went out and citizen came vote the Premier League. When you then hold somebody from the Bundesliga, are you citizen came in the podcast where I am a guest as Bundesliga or am I talking to the Premier League? So, and that's throughout a league level, at a club level, at all sorts of levels. So, you simply get yourself in a very strange situation where nobody in your ecosystem knows who they're talking to when they talk to you. And given that the all-week commercial relationships between media and sports and very stakeholders within sports can become very fractious. And if they break, as we have seen in many cases, they are terrible for the sport and/or for the media companies themselves. You probably don't want to go there in a big way. You may want to do that on a sport, I think that's where we're interesting. That's where the interesting things lie. And you can see a lot of examples there where not of a lot of acquisitions, but of broadcasters or media companies going in with a tier two or tier three sport. And putting money and especially promotion behind it. And building out that sport to levels that the sport on its own would never have reached. I would argue something I know you and me definitely Rodgers wrote about extensively has been women's football. Women's football was born for whatever it was born and Rodger may want to comment on that. He's not talking about that. So, you've done that. We can read that on your LinkedIn or sub-stacks. But in the early days, it was born. It did have the club brands because most clubs were actually primarily or city act labs doing their women's side of things. And they all came to the incumbent broadcasters, me it's Kylie Kay or Sky Italy saying, can you please broadcasters? Who do you want to broadcasters? And we all happily said, yes, we'll happily broadcasters. And we're also happy to pair on production costs. We don't charge anything for production or that. We'll produce it to the level that you require and we'll promote it. As long as you put it in a different time slot to men's football. Right? And then we're happy to broadcasters with the garful book customers who are money-nited fans or Liverpool fans or eventist fans and will put eventist women or money-nitril women or whatever it is. And that's something for them which fits the schedule and it's less than half. And you look at ratings for women's football in those early days. The garful book is very quickly. Now, what they're in people in many sports and Premier League of the City I've been very different here. So I'm not going to generalize. But suddenly people thought, "Oh fantastic. Women's sports is now a has value in itself. And therefore we're going to auction rights and we demand money here." And when further and said it should be equal to proportional, whatever, to men's sport. And they just didn't recognize that all the value was really created, not all of it, but large chunk of the value was really created by the promotion of the broadcaster. It was a genuine stand-alone interest in that sport. So that's the example of, I think, to your point, around how a media company can grow the value of a sport it owns to some degree. But what sport do you buy to replicate that? Because women's sport didn't work because when the rights have to buy the rights, what sport would you buy as a broadcaster, as a media company to do that? And there's not that many that are big enough to be worthwhile for a big media group. But are also sort of small enough to be that you can manage significantly. Yeah. David, I love the idea. David, I want to, in this podcast, let people understand a little bit about the question I asked you that was a bit of an eye-opener for me, that I think is still purely misunderstood in the intersection of sport and media and rights. Seria, you probably decided that you are not going to go for Seria at Sky. I'm paraphrasing here and I'm saying this so you can contradict me if I get this wrong. But basically, you came up with the thinking that you already had that audience in significant numbers with the English Premier League and with the Champions League. And you weren't so worried about the churn from not having Seria because you also had the stickiness of your entertainment products as well. So my question is to you, if that is correct, do sports really understand what broadcasters go through in a thought process before bidding for the rights? So from the end, sports, most sports entities, fast for drugs of them, really don't understand how broadcasters and media companies buy rights. And that's why they're surprised even when somebody shows up unexpectedly or when somebody doesn't show up or doesn't bid. And they're always surprised because they don't quite understand that. I would have ever have to sort of correct a bit of your premise there. By the way, I think Sky and I think, no, Canon Plus or Telefonica are not very different at all from what I see from the outside. I am talking about the incumbents here. So we can then talk about the challengers or the zones of the BTs or the whoever else. Look at them paramounts or paramounts in a second. But as the incumbents, because that's what Sky was on Seria and is large in many cases, I have always argued that they were going to go through a very disciplined approach to the rights bidding. And nobody believed them. Everybody says, "We're going to be disciplined." And nobody says they're going to be undisciplined. And nobody quite believed them. They make both Sky and Italy with Seria and Canon Plus in France with Liga. I would argue in Sky UK with the Champions League or an Anzacai Tali itself with the Champions League prior to Seria have proved that right. I mean, have proved that they do that. Now clearly, taking into the domestic league is a different level about discipline bidding than dropping or losing something at whatever else. So I think what happened there is quite simple. I'll just take you through bringing to life what being disciplined means when you're in the room on the phone with Brian Roberts and Mike Cavillog and Dana Strong. And in the room in a place where you didn't need to go out and put a number on a piece of paper that you've got to get approval for or all that bit. So remember one thing though, which is very specific to Sky in 2021. Sky was precluded from by the explosive rights because of at a trust ruling from two years before. So, and that was very clear. So we were effectively bidding with a hand to hand her back. You know, the zone could buy exclusive rights to Seria and we had to beat that bid for non by non exclusive rights. So it was so the business case is very hard to pull off in any shape before. So that's that's the reminder. Second thing is we did through go went through all the customer insights analysis and there's a wide range of uncertainty there despite having all the understanding and all the knowledge of single customers turn how many customers turn when we lost three matches because we had all of it but we gain this was immediately how many customers turn when we lost Champions League and we and more importantly we had all the market research about all these cases of winning or losing rights. And then we had actually happened so we could calibrate market research. To pinpoint like how how wrong is and market research believe me is always very wrong in these cases always very wrong. Now there's one data point which I can share because it is it is it predictably wrong is there a ratio. Oh yeah, absolutely once you once you go through winning or losing something two or three times then you can pinpoint quite precisely how you think things are going to actually end up and I was there I was there when we lost Champions League to what happened with that and the the modeling assumption that we used for choices of what level to go up to for Champions League in 2015 and for 2021 compared how many customers would lose and the discounting we need to provide to retain the customers and it does very granular some of our customers rules is what retention to put in place what promotion to put in place you know what the content choices you make to retain something. And in both cases we were definitely less than 10% out of the actual result and I would argue we're probably close to like 5% which is pretty good if you think about it but that is on the back of but that is on the back of 10 years of history of winning and losing and comparing the cases not just because he wasn't me being smart or my team arguing I do that as my team was really good at doing that. So we did all of that. And we got to a point where it makes sense. Let me share one data point, which people who are interested can dig out 'cause it is not proprietary sky information, but it is ratings information. If you look at the people who have sky culture, which is the sky-tile effect with Celia in 2021, and you look at the ratings numbers for the whole season. And you look at on a household level, how many people watched, like, at more than two matches a month? How many people watched between one and two matches a month? 'Cause you could either talk more than two ways avid fans, people are gonna make a point of being at a home and the football starts, month in month out. The one to two average is people who are care about it, but also have other interests. They may go out for a picnic and not watch a match, and then they'll be home when it rains and they'll watch a match. Still people who consciously want to watch that football, but not quite as attached. And then those people that watch less than once a month. Now less than once a month, I would argue, is people that in most cases don't really care. I mean, they obviously care about subscribing to a football product at some point. But if you lose that football product from your right foot folio, they won't notice. And they may notice on the newspaper, but not on the TV screen. So those people, and those people, were roughly a third of Skyculture customers. Now who were they and what role does that insight, or of the many insights that Roger mentioned before, about entertainment tax and other sports, back and so on? What does that lead to? That leads to two things. One is those are customers that made a conscious choice of subscribing to a sports pack at some point in their customer life cycle with Sky. People like to use an English film for audience, you know, it's less than really well with an 80 back in the days. And you're a lifter fan, went to watch it at the stadium, never subscribed to Sky Sports or now sports. But less than doing so well, you actually want to watch it, the week in, week out, because it's so close to winning the Premier League. And then you subscribe. And then you kind of forget that you subscribe. You keep paying for the Premier League or Sky Sports. And occasionally watch it. Now you just keep it, because it's easier to keep than going through the hassle of calling in and taking the pack out and so on and so forth. But Sky lost the Premier League, that customer wouldn't point notice. Not or at least not at the time, the rice or roast, the main notice at some point. So those customers there are a testament of the value that a broadcaster, our media company builds over time and compounds over time to his sports rate, because we put that value in the valuation. That the value of that customer is part of the value of city out of Sky or was part of the value of city out of Sky. But anybody else who wins the rides, who thinks they can get that customer on the first year is doing a big mistake. 'Cause that customer, the lesser fine will only turn to the zone or to whoever, when lesser eventually compete for the league again, whenever that may be. Yeah. On the other side, that customer won't turn. And they haven't turned. 'Cause they haven't noticed, right? And that's what part of the zone, and people don't really see that. Viewer, sports people think, all are all the Sky Sports customers or the Canal Flues customers on sports are super fans of our product. 'Cause they're super fans of their own sport. And they think every fan is like themselves. But the world of fans is so much more segmented than they believe. And that is what people get wrong of the many things. That's really insightful. Davideen, as I say, was an eye opener for me in terms of how you look at things that are in some ways competing options for the same audience, City at Champions League. And I think that's gonna become a big theme in sport and you're a peanut football, we've discussed that before. The question I've got, really, and I think I'm thinking of it this as much as anybody. Discipline, you talk about discipline here and you talk about how deep and granular and words let this and data and everything like that. And you walk away, you did walk away. All of that. How do you square that? How do you square that with some things like NBC and NBA? That's one example. But more interestingly, a really recent one. How can you square the word discipline with what Dizzone, Fox, Tell just did in Australia last week? How can you square that? - I mean, I don't know if anything specific or from the inside or even close to the Fox in Dizzone with rugby in Australia and all of that. But I would put those from the outside in the same box as Sky UK raising its bid for Premier League to over a billion a year when BT came in. Right? And because that was also like an eye opener for the whole industry of an argument that has made just competitive tension. - Yes, but now Sky UK at the time was actually disciplined. Now the number was amazing. It was completely unexpected to anybody in the industry and that includes people at Sky like myself. 'Cause I wasn't obviously in the room for the Sky. I was part of the group that helped the Sky UK team think through the valuation of Premier League. But then I'm not in the room when it's them bidding for the right in the room or writing the number in, right? But I do know that the day that the first round came in, the first time that BT came in, not the second time, they were like, whoa, who is this? No, what's going on? What level do we need to go? But they had prepared plans, discipline plans, of how high should we go to retain the rights and why? And if you pay more than X, what choices do we make? In the same way as if you lose the right, what are the hard choices they need to make? What we need to drop, what content we need to buy in, what other things we need to do? There's hard choices to be made if you win at a much bigger value or cost than you'd forecast it. And as long as you can justify that with hard choices, then that's a disciplined thing to do. So that is the way, from a mindset perspective, that I would explain that. Again, I'm not explaining specifically the NBA case or the false case, but that's how you combine a disciplined approach to bidding to bid that from the outside or from private service, but it sounds straight. I would add one other thing though, which is what is different now, and I would argue that applies, I also didn't apply it to the skyukane 10 years ago, but doesn't apply today, is you got streamers coming in. Or the Paramount, so the Anasins in there. And what they tend to do, now Paramount is probably a good extension now, in its behavior, with the Champions League rights, the last auctions. But by large, Anasin is a good example. They value a relatively small number of real high profile events, rather than owning a championship or owning a competition, which is very different from the old broadcast for PTA model. Now, if you own a competition, losing a small chunk of it, like if you own Champions League, you lose one match to Anasin, that is okay. But for our league, to lose, and this is a good example is sky losing three matches to the zone in 2018. Sky owned all of it, non-exfluxive, it's only went from 10 matches to 10, I'll buy it all those seven full exclusive. That is actually quite painful for your customer. Your customer, your existing customer doesn't care that you're not exclusive, 'cause there were some scrabber to you anyway. Well, the do carry is, you had all matches and you all lost some. That is a pain. The first thing I've noticed is that I have no other else to go to watch it compounds the pain. And it's like, hold on, you've lost something, and I can't turn and go somewhere else to watch the whole thing anymore. I'm stuck with you who haven't mistreated me. And I assume that that was part of the thinking of the Foxdale thinking, I mean, how do we need to go to anything, all of it? And I assume some of that thinking may have had to do with that as well. I was in the other room with BT at the same time, trying to guess how high sky would go in response once it found out it was BT. But as you know, that whole battle was about, partly about BT's problems in the ball bear market and defending his position, which brought in a whole new revenue pool into the bidding. As skyed into the ball bear market. So you mentioned Italy, can we come back to Italy? You mentioned two points, Mr. Berlusconi, Junior now, come on to that about free-to-air broadcasting and cross-border mergers versus in-market mergers. But also, you know, sky has got rid of sky Germany, it hasn't got rid of sky-fally. Now, it's part of that because there's a ball bear opportunity in Italy that didn't really exist in Germany because of the issues around German cable and ball-bending, the complexes of that. Do you think that's one of the reasons I haven't got rid of it? Or do you think just the fundamentals of pay TV in Italy are better than pay TV in Germany? I think both are true, but the former is the main reason. I mean, pay TV in Germany has historically been always very challenging since the premier of days, the key of days in the early 2000s, then premiered at the then sky-doishland. I mean, pay TV in Germany has always been so much harder than everybody else that everybody has bought these assets over time. It's a word-ox and then it's sky and then it's concussed, thinking, oh, this is huge market. G, how do you do for capital? Low-pitched penetration. I'll come in with my successful playbook that I've applied in Italy or in the UK or in the US or wherever it is. And I'll rant to start and make it work. Only then to realize that it wasn't the ones before you who were incompetent. It was just a market that was really hard. So that's, I think that's that's definitely true. Right. And Sky Germany's executive that once about the German consumer and its same with any interruptions I think. want a history lesson. I want to know how to get it right and I say well you need to know history. Yeah, there's also some anecdotes on the skydutch that was first bought by by newscorp and it was really part of newscorp's plan to then buy this KB. This is a failed bid in 2010 or whenever it was. So it's started off. So it most of skydutch land in its skydutch land reincarnation of Femierde was actually a group of Italian managers from Skatalia who had managed to turn around Skatalia from being too lost making PTV into a profitable successful PTV business in 2008 to the 1910. Like oh we'll apply the playbook to Skat Germany. So and then Skatia came in and tried the same six years later and so on and so forth. So bring that aside because that is true and that it's kind of structural. I think the decision to eventually sell it had as much to do with not more to do with you know the market is what it is and it is challenging. What can we do with the business given the market is and the consumers where it is sale and the father you could not do broadband. Well the fact you could not do broadband and it would be really really hard if not impossible or arguably impossible to do free to wear unless you bought an existing RTA which is another set of challenges and concerns. So yeah what do we do with it and where do we take the business and there was really no obvious play that you could take the business beyond PTV whereas Skatalia it was as big despite being a smaller market. It was and it did have broadband already and it could launch mobile. So so the PTV was more successful in Italy than it was in Germany and there's more things you could do with it if you're like replicating the Skat UK playbook. That's a bit of a lazy analogy and there's also some differences that we should be aware of but I think it holds at a sort of general level and then you can do lots of things with Skatalia you can not do with Germany and therefore let's let's sell it. So back to Mr. Burduskole, Jr. and the MFE Empire, Italy, Spain, Germany. That's the cost-border argument of consolidation in free trade broadcast. Consolidate all the backroom, consolidate the advertising, keep the content local, had buying power with the studios and the states etc. Thus is the ITB Sky and the RTO Sky Doge Lab which is this is about in market consolidation you need to be a more powerful player. Where do you stand on that in your experience? So it's a fantastic question and it's really fascinating to see how all these things play out on the next kind of two to five years. I think two years is going to be enough to see what proof points you have and then it's going to take probably three to five years to then validate whatever hypothesis or primitive conclusion you come up to. So a couple of observations. First observation is I have genuine admiration for what Burduskole Jr. and Middice had have been doing and this is the start, it's pre-COVID-19. It's long in the making. It's a lot of making up on the morning and trying to do something. And the reason I'm genuine admire them is of all your large European media groups. For a long time Middice it was seen as the one defending the turf using politics and the father to defend its turf and have also regulatory shields and that was the perception. I'm not saying whether it was true or not, I'm not going to add. I'm just saying that was the perception and everybody in Europe and I was talking a lot with my colleagues at Sky and Germany at the UK at the time. It's like, oh yeah, I mean they're clearly kind of defending the fortress but at some point in the walls will crumble and it will collapse and there's going to be a fantastic opportunity for Sky as well as bunch of other people that can kind of go and there and do that. So my admiration lies in they're not trying to do the boldest thing and most ambitious thing in European broadcasting. I mean it is much safer for RTL to buy Sky Deutschland than it is for RTL to buy MFE or some free to RT or some for antennas, mother player in Spain or anywhere else. So it's much bolder. Now I think they would argue that their choice like the RTL choice in Germany stands from the same observation that the business that you have and I would argue it's similar to Versaunt in the US in a way. The existing business on its own on its own trajectory doesn't go anywhere particularly exciting. So you're going to do something about it given that the whole ecosystem has changed. No, we talked about before about Versaunt they decided to go on verticals and monetizing different places and adjacencies and all of that. Obviously RTL said let's do in market integration with Sky and arguably Sky and UK is doing the same the other way around just buying ITV. Made it into Italy, it can't really do that. I mean there is no other fritter broad cost-rat scale. So the regulatory hurdles in Italy are in market are unsurmountable for middle school. They're so successful at building them up a market position in free to air and at defending that position over time that they're now so big in Italy that they can't really do a market consolidation. So in a way it's like well what can we do? Now from that is the only thing we can do or to let's go on and deploy large amounts of capital and large amount of manager resources to do executing this in game and it's to work. I think is admirable. They clearly are very bullish about it. All their comms every quarter are we're ahead of plan. Now everybody says that but it's quite easy in their accounts and in their results then spot is that sure not. They're not a big conglomerate that can kind of hide things in a big pin-out. So far you'd argue they've done that. So I think the jury's out. I think their game, the cost side is pretty easy especially because they haven't been overly ambitious on that. I mean at Sky we'll pull the skies together we thought we generally believe that we could pull more costs out of synergies and when you go into the detail there's not as many. There's a very substantial amount but not quite as many as you'd hoped. I think they've been conservative on suitably and reasonably conservative on that. I think that's not really what they're doing. The cost energy will buy you the first year or two of EBIT boost. But the strategic thing is about can I build an advertising player that is a genuine alternative or complement at the levels of the Googles and the amazin the net fixes when it comes to European investors. I don't know what I mean we tried to do that. Obviously at Sky when we pull the skies together now obviously it was a different advertising market. There was no such thing. Netflix was a new advertising. So we're trying to build a market that might exist. And arguably Sky is not arguably Sky was and still is a much smaller footprint in terms of an advertising inventory perspective than made it. So we struggled a little bit to get traction on that and plus we had so many other things to do that wasn't existential for us. It's a market that is more well-disposed that I think today from an advertiser and agency perspective. They have very powerful and very strong relationship with advertisers and agencies at a pan-European level. They have a large amount of valuable inventory and it is I'm not very existential maybe existential is a bit too harsh but it's it's it's probably close to existential than strategic and strategic is a pretty far already. So they're all the resources and talent in there and let's see what they do. What about the what about the flip side which is obviously Sky, Deutschland and RTL is free-to-wear pay TV merger. Sky UK and ITV is a free-to-wear pay TV. Arguably Burst, Burlis-Gerry did that. He had pay TV in free-to-wear obviously for different reasons in terms of the football etc. But the reason that's happening is because it's perceived that regulators weren't allowed free-to-wear mergers in those countries. Obviously media set is the dominant. It's almost a no-deal in media set. It's the only commercial ballcast on scale. You can't consider that if anybody apart from Rye and it couldn't do that government owned. But in Germany, a pro-Cybering satellite in San RTL could get together and it could persuade the competition authorities. RTL tried to do it in Holland and then had to sell to a different media company. ITV could get together with Channel 4. It is of course getting given with Sky Media so that's the issue. But a lot of this is about pay TV in free-to-wear can work, through windowing and content, through different tiers of access etc. What do you think about that argument? I think both the RTL, Sky Dogeland and the Sky UK, ITV combinations are very powerful combinations. And that should come as no surprise because obviously Sky UK tried to buy it TV 20 years ago or almost. That didn't work for a full-time reason at the time. But it's something new that we're saying here. Sky made it built or tried to build a pay TV business in it to me. Sky Dogeland bought not quite as big but a meaningful, I guess, I'd guess, to Channel 5 probably in the UK with Channel 8 from Bioquam in 2016. So the whole pay TV and free-to-wear combination is really nothing new. I think what is new is the scale at which this is happening now that wasn't allowed to happen or couldn't happen for all sorts of reasons in the past. So I think when you look at it from a sports rights perspective and monetization perspective, I'm not sure. sure it is such a game changer as some of the things I've read in the last few weeks and months commenting on Sky TV and RTL Sky do it, Lindt. I think a lot of that monetization could be achieved without full blown mergers. You know, ITV has licensed free to air and Channel 4 doesn't free to air from Sky for a long time and ITV studios were selling content to both ITV and Sky as well. So now clearly you're removing friction. So there is a bigger level and a broader level and a deeper level of monetization that you can achieve. But I would call that it's not quite incremental but it's not a game changer. It's not like suddenly the world has changed and Sky TV will be able to do things that Sky and its own would not even conceive. That I don't think that is true. But then I think that is that is not the lens that I see it through. I see through the lens of something we mentioned earlier which is forget for a second all these little complexities are the regulators and free to air mergers and ITV and satellites and streaming and all that stuff and within before it's kind of it's very important and and filter miles in the media ecosystem. But in the grand scheme of things how do we see the world the media space in kind of five to ten years time. Now I don't think anybody knows and if you did if you didn't know it become very wealthy on the stock market but I would make a case that there are going to be I don't know three, four maybe global streamers. I think Netflix and Amazon and YouTuber clear is there and they're going to be there in five to ten years and they're current you know in an evolved shape or form but largely a grown out of what they're today. You know you could add Disney probably can be one of them if it adapts and evolves. I think pretty everybody else either sort of merges or consolidates to your point Oliver about more your separation for consolidation. I think that's one place where this will show up. Sky showtime you know Paramount having jv's with concast in Europe all that I mean that is all a messy thing that will eventually play itself out in some shape and form. So there'll be like three four maybe five global streamers. Yeah listen all of this is very complex and a lot of people like yourself like Mark Oliver are thinking about it but I'm at the end of the day abhoring accountant and I come back to a product that sells or doesn't sell. Pay TV free to air ads how much Davide how much Davide is what I can clearly see in my little world as a return of the ad funded thinking how much of it that is down to the fact that young kids will never buy a sub. What are you saying to your clients about as you say in five ten years time in this industry who the hell is buying a sub? Yeah so so it ties in actually in finishing off all of the second four because it ties actually exactly to what you're coming at yeah so you've got left to the four five big streamers what you then have is in every country or or social cultural market you know you can argue German speaking is probably a more relevant market than Germany or Austria for example. We have two three or four big local media companies that champion local content, local talent something that the net fixes on the YouTube's won't care about or will see or won't be to care about and then you have local niches whether it's creators whether it's sports who are relevant at a lower level that they don't come into the raider screen of the global streamers or of the now YouTube is a bit of a bit of a different animal here but they don't come into the play of all the Amazon's and the net fixes they don't come into play of the big sky TV combination or the RTL skydotion combination and those guys go on YouTube or other creator economy outlets so as a seller I think what you have is I guess it depends on whether you are and split that between a top tier or Premier League Bundesliga champions league is a different level and a different thinking and different trade-offs to a tier two or tier three sport obviously so at the top level I think there's a one trade-off. Ju stick with the with an evolved better version of the incumbent take in the UK sky TV combination who keeps evolving keeps innovating canning find new ways of monetizing or better monetizing their rights say the ad funded model complementing ptb in the UK for example so I will get if I get the competitive tension in the auction working well I still get full value and I also get the peace of mind of I get my bills but my rights fee being paid on time I get my my my fans are there already and they'll keep getting my product and my preferred broadcaster or media company will keep promoting my flashy competition as well as being for the last 20 years and that's a very nice place to be and arguably what Bundesliga has pretty much engineered the last auction with sky versus dissolve is you know I want to think this I don't end up like a league or or say they are in which in different ways have this dropped in the final experience have this drops with broadcaster experience and our child know both of them in different ways worried now league is more than worried I guess but city I is worried about you know is is this all going to pay the bills for the full cycle and it's going to be around next cycle mean who knows right so that's one level now the flip side of that is you you yourself is dropped your licensing arrangements like league hours of italian or sorry over over city and you're not going to try the territory on on two fronts one is are they going to pay my bills the other one is aren't I'm going to get the level of promotion of my competition that benefits we even though it's intangible I thought in the in the license fee I do get that and I think the case there is pretty strong to say with the incumbent as long as the incumbent can evolve and innovate and and and demonstrate cycle over cycle that they are the best gaming town I think when you say one level down it's so much harder once the incumbent is more conscious about cost you will start dropping non-core sports and this has been happening ready for the last five years all over the place right as I'm not saying anything new here it's it's in there right I'm always going to become much more aggressive on I'm only going to be prepared to pay x rather than y and so at that point what you do you can see a premiership rugby and you know sorry not the premiership rugby ePCR we're not going to your pin rugby in the UK moving from TNT to premise sports you know what happened they maximize what they could get from a rights fee perspective I think because obviously they lost all of reach and where do I get the reach as a promotion if I don't get the rights fee and where do I get the customers and who's going to pay for it so I think as an emerging sport I think that whereas in the old days as a sport you could assume a certain level of meteorites revenue now you can get that level wrong but there was a level there that you could assume and that level of meteorites came with promotion and then you cared about sponsorships and ticketing I think you can't do that anymore I think meteorites you cannot assume meteorites are exist anymore they will exist at some level in some shape and form but if you have to do a business plan of pto or still gp or whatever now we can do it in the european if you like if you you take it to the extreme can you assume as from the level of meteorites I really don't think you can because to get some the maximum level of meteorites you are for going reach and promotion and if you do that you're not really doing it for the long term now if you go if you accept the level of meteorites which at an extreme is going on youtube the other extreme that gives you reach but then you know then you're going to promote it and you're going to for going revenue but you get reach so it's very hard it's very hard and I don't think any large or established sports organization has actually thought this through properly with all the consequences well you know we in this podcast and now you know in tautine in general try to get them to think about that for eight years now and I don't think we've succeeded all of this talk which has been absolutely amazing for the last period I'd like to finish in the last ten minutes with with something else because you know when you stand back and I like to stand back you see big conglomerates like comcast getting rid of what they call linear channels spin them off because they're rubbish get rid of this get rid of that and then they talk about you know we'll do this we'll we'll buy the golf simulator thing because that's a at the end of the day here's the real question which is a follow-on from the last one is there still a business in a pure play subscription model and I'm going to ask you to answer that in the context of the only one that I can really think of just now which is the zone everybody gives the good body language the designs get into profitability we're going to be there we've stopped all the lost making markets and it's at least the next one that's on the chopping block even so let's give them the benefit of the doubt and believe them there's no profitability in that business is there you can build a business just on subs anymore I would argue that you could never build or you maybe could build a business a pay sports business that will be profitable on a standalone level only in the only the 1990s where the only competition was some free to wear. I think I only know, I'm sure there was more which I don't know about, but the only example I know about there was a profitable standalone standalone, and that's the key word there, a paid sports business was Sky Sports in the UK in the 1990s and early 2000s. Then and I would include Sky or a car out loose, I mean that's definitely for the right for Sky, but I'm pretty confident it's the same twice for car out loose and all of that is sports for Sky or the PDV subscription business was only profitable if you used the people coming in for sports to then sell them other things that would provide incremental margin at lower sack. And arguably you could only monetize this and you could only monetize the sport properly. If you had other people coming in for other reasons that would be willing and happy to pay a comparatively small amount to add sport to their subscription. This is what bundling was all about. This is what what people didn't understand in sports spaces. P basic wasn't a tax that you need to pay to access football. It was a very smart way and still is a very smart way. So the football fan pays whatever it is 30, 40, 50 pounds to get access to the sport and gets all these other things for free. But the other element is people who come in for other reasons can then add sports for only 20 quid. Right? So I look Amazon is doing the same. You know in a different way in a different industry selling them other things, but you could argue Amazon buying private champions league live events effect was less than that. It's really ten pull people will come in for that and then they'll get them in on prime and sell most often get them to buy e-commerce and also some other things. But stand alone pays sports in the last 20 years. I don't think as in Europe at least has never really been a stand alone profitable business. So I think there's one has made that point as well. Now whether you can debate whether they've executed whether they believe that but they made a point you know when shy joins from a betting company that is that's where he came from. It was all about we'll do betting, we'll do ticketing. So he was very convincingly saying that having the ten pull sports right was a way to get customers and then to get to profitability and skill the business you need to build an ecosystem around it. Of all things that people would buy. Now it got the other way which is by a pay TV platform in Australia which is which brings all the content that basically reinventing the old one you cross sell other services and they seem to be on the hunt for other second tier pay TV businesses around you. So so that you're trying more pop sub scale pay TV businesses in the world who convert themselves into a pay TV business not a sports business which is which and at the same time say we can make more money out of the sport. Does that all wait up or not? Well I think you can have asked that question right there. The question comes to self-suffrage the answer about that. I would just note one thing from my experience. Now the the first ever broadcast channel I'm on streaming that the zone did ever was the summer launch in the summer of 2019 on Skytalia. And this is after the zone on the right to three city I'm at just in 2018 and this was literally a month before the end of the cycle so they literally created a business and a product and a pricing and a marketing six weeks which is admirable. That time it could debate why that was a case but so many people had so many issues with streaming life sports at scale. And at Sky something I mentioned before the one thing we underestimated is how many people were pissed off that they lost three matches and they've always had on the platform. And we had we had the zone at on Q so it's like oh that's easy and we could give that away for free. It was part of the carriage the others we could we had a certain amount of free zone months that we could give to customers in retention and stuff like that but that would have quite work because the whole infrastructure would work. So the following year we sort of improved the partnership between Sky and the zone and as part of that partnership we got the zone channel on satellite that was only available to Sky customers who subscribe to the zone via Sky right. So it's worthwhile the zone got offloaded its network and got better quality and Sky got to its customers you can see all the way again on your satellite or linear feeds with however these feeds come to your box. Now that deal took so much longer to negotiate with the zone at the time not because of those one commercial terms but one of the things that the zone took so long to get common with is oh we don't we don't do linear channels. If we then the one I was hearing from the way is if we do linear channels we then look like Eurosport we are not Eurosport and I'm like well you don't become Eurosport by having a linear channel on the sky. I mean Eurosport is a different thing you know you are the zone and you're a streaming product you just offloading some of your live events on a more cost efficient and reliable platform. So for a sense of customers that is used to that particular platform so take it take as a stepping stone to a future streaming world. Now so what I find interesting and I'll stop there is that was their thoughts in 2019 look how much they've evolved in the thinking that in 2026 or 2025 in the Ditions action that's only oh well happily buy not just a PCB or linear business will buy a whole PCB satellite business in its entirety because that fits a strategy. I'd like to ask the sponsor question now from a friend's at 54 but it's going to be what I like to call a Bouncer if I can use a cricket metaphor but it's a friendly Bouncer and I know you like these things. I did one of my my most recent column is on Italian football which is obviously a passion of both of ours. Whichever way you cut it Italian football is kind of dependent not going to say it's sort of damacles but it's pretty damn close to how Shai Segev wants to approach those rights and negotiations. I'm going to ask you is there a prediction just for a laugh how does Sky Italia approach the next tender for Syria and how does the zone approach it and what is the final number. So I can answer the first two words the last one is going to be interesting I'll have to think about that so I think Sky and the zone will approach it in in I can't say the reason why they weren't approach it in the same way as they've approached the previous tender in the one before. You know Sky will look at the window incremental customers and advertising and lower turn and all that. I think the number that Sky comes up with is invariably going to be much smaller than the number used to come up with but that was through the last auction already it wasn't so I'm just saying if you're sitting out rule out that Sky is ever going to be a 780 million which is the last thing that Sky paid ever again but that is never going to happen again right. So but with that caveat I think they're going to think the same way I think the zone is going to think it in a similar way is you know presumably they think they've reached their crows not quite there you always have a bit more to go you always have more ideas coming up but you're reaching like the level monetization that is kind of a ceiling for anything different on pirates or other things and then I feel like okay how much can we afford to bid and and and arguably that number can easily be bigger than the Sky number because as the incumbent you've all much bigger. How much bigger. Now there were anyway that's significantly now the 21 number was vastly inflated by the team contribution which costs the team CEO at the time his job. Not just that but one of the contributing factors to that and team scaled it down massively at this point I'm assuming team is now happy with what they've got. So the question is kind of zone keep the number where it is I think Sky is probably happy with the numbers what today I think I think it's behaving last auction was quite disciplined in terms of will increase our number a little bit to get bars and hotels and get that's the big thing they got and slightly better picks which comes with advertising improvements and all that so I think that they're reasonably happy with that. The question is the zone happening what they got you know what you're hearing is that they they are not yet profitable does it mean they become profitable but I think that is what drives the zone number. So the next summer for Syria would seem to be continuing from the last couple of cycles will be a lower number than cart number somewhat lower now massively lower a little bit lower depends on what the zone believes when the time comes and and and and that's where it very stays. 600 million. Yeah wow and I think now the I think now they're much higher than that I think it I think it could start with a seven I think it could start with a seven I wouldn't like look if I was Syria I wouldn't assume it will start with a seven I would kind of plan for it to start with a six and then be happy or if the outcome is better and push for the outcome to start with a seven we start dropping towards of 600s. Does it get tempting for some third party to come in and that's it for someone? The number becomes approachable. Yes. I think anybody wanting to come in should really think about what are we going to do differently to what the zone has done and how long is it going to take us to achieve that? We're going to add sport to our non-sport platform. Netflix is becoming increasingly an aggregator of content and we're going to take on, we're going to take skies business away. But Mark, let's remember what we said earlier about Amazon and Netflix. They're only interested in the big events. They're not interested in Lazio versus Torino. I just can't see that being on a Netflix platform or on an Amazon platform. Maybe Paramount and because nobody I can understand what their strategy is just now, but I can't see Netflix or Amazon saving series baking. I just can't. I agree. I agree about Amazon. I agree with Amazon. I don't actually agree about Disney or Netflix. So, to your point Mark, let's say Disney or Netflix are Paramount and you're arguing, which I think is a valid argument, which is they have a broader business than the zone and therefore they could do more things, different things than the zone is doing. Now, how do you what they would do starts to become invariably similar to what sky would do if it won all city I get? So, whatever number sky can come up to and remember sky still has vast majority of those customers, right? Either on the cultural pack or on some other pack or now. So, I would argue that it is if the zone drops so much that its position and its role becomes, you know, an interest for somebody else, sky should have a much better chance of winning those rides than the Paramounts or the Disney's unless the Paramounts or the Disney's have appetite to lose money for some central number of years. Amen. Listen, and this is, you know, from the sporting side, from the footballing side, this is what's facing Syria and I'm just not, I just don't see, as always, the clubs understanding that. It will be interesting to see how it plays out, Davide. Listen, this has been everything that I hope to be. It's the level of intellectual conversation that you and Mark can have that I think is needed. As we said halfway through the show, I don't think sports hears this conversation enough, Davide. I want to thank you for everything you've given me over the last five years in terms of insight and that of stolen. And I want to say I'm delighted you come on Citizen A. Thank you, Davide. Thank you so much for having me, Roger and Mark, and good to see you Mark. And of course thanks to the people that make this possible, our wonderful friends at 54. Thank you very much. [BLANK_AUDIO]