Speaker 1today the problem with netflix is a problem for everyone in media netflix is having a bad year the stock is down nearly 50 the company's laid off more than a thousand people this year including its chief content officer and its head of film it recently reported its slowest revenue growth in years and all of this comes after a failed bid to buy warner brothers discovery at the same time netflix has had an incredible decade one-third of a billion people now paid the company to watch tv there are roughly as many paying netflix subscribers as there are american citizens and the company is crushing its competition it's much bigger than disney or skydance the new company created by the merger of paramount and warner brothers discovery netflix has roundly defeated every ultimate boss from 20th century entertainment every major film studio and tv network only to find itself struggling to hold on to engagement as it faces the ultimate bosses of the 21st century the infinite feeds on tiktok and instagram and youtube and that's why i think the struggles at netflix are so interesting this is not just a story about one company this is a story about the future of netflix of media and entertainment itself last year i wrote an essay called everything is television the thesis of everything is television was that no matter what your industry started as it seemed destined to evolve into television namely short form video radio became podcasts podcasts became video shows on spotify and youtube social media was supposed to be an online yearbook or maybe like bulletin boards for friends to leave messages to each other but according to the company meta itself more than 90 percent of time spent on instagram is now spent watching videos and stories of people we don't know what's another word for watching people you don't know personally on camera i'd call that television netflix began as a blockbuster competitor it was a movie rental company but it seems like whether you start in movie rentals or radio or yearbooks the final attractor state of your business is streaming video preferably short today's guest is matt bellany the host of the town podcast and a newsletter writer at puck we talk about what's eating netflix why everything is becoming short form video and why netflix's troubles reflect broader worries about the future of media i'm derek thompson this is plain english this episode is brought to you by jpeg this episode is brought to you by jpeg jp morgan chase in today's unpredictable world geopolitics isn't just a backdrop it's shaping markets business strategy and risk the jp morgan chase center for geopolitics brings together former senior policymakers and seasoned practitioners to translate fast moving global events into clear decision-ready insights from conflict and great power competition to energy and supply chain disruption the center helps clients anticipate what comes next read the latest insights at jpmorganchase.com slash center for geopolitics this episode of plain english is presented by comcast business did you know comcast business detected 79.3 billion cyber threats last year that's why they're introducing security edge preferred it's big business cyber security designed for small business get started with comcast business internet for 50 a month for one year on a qualifying internet package and find out how to get one month of security edge preferred on them plus ask about a 500 prepaid card limited time offer restriction supply requires 300 megabits per second internet security edge security edge preferred and wireless connect call today great to see you again yeah you too i'm a fan so we have about an hour but let's say we only had two minutes and we were like a cocktail party or something and you really wanted to scurry away to get a shrimp or a you know rye cocktail and i said just give it to me give me two minutes what's the matter with netflix what's your answer uh
Speaker 2well the short answer is that not much is actually the matter if you look at their financials because they're going to have 15 billion dollars in profit this year they won the streaming wars when you look at the the broader picture through hollywood they came disrupted kicked everybody's butt and remade the industry in their own image but dot dot dot they have a problem with wall street they were the darling of the media industry because they were not a media company they were a tech company and the growth trajectory of netflix was based on engagement numbers that's their fancy word for viewership that kept going up up up and the engagement on netflix has slowed down why has it slowed down that is the billions and billions dollar question because if you ask a lot of people at netflix especially those who work in the la operation the content people they would say that it's the silicon valley people fault the user interface got too cluttered it was hard to find what you wanted the they have 100 belief in the algorithm to match the content you want to watch with the content that the netflix people are making and licensing and that there were there are serious problems on the tech side what the co ceo of the company ted sarandos believes is that the content is not good enough especially in the u.s and canada which is what generates about seventy percent of the viewership the content that is made in english language primarily for the u.s and canada has become cluttered they have lost their way and that's why they completely remade their executive suite this past week with a new head of content and they're going to bring in a new head of film and they believe they have to get better at the content that they produce that's the short answer and see
Speaker 1this is why you're the best because i think if i brought on like 10 people nine of them would have said oh the company's broken something deeply deeply is rotting inside of the company if you just look at the numbers if you're just a boring ass accountant and you look at the numbers netflix has a higher operating margin than it's ever had it has the lowest churn number of any of the streamers it's obviously bigger than all of its streaming competitors it's obviously won the streaming wars a netflix premium customer has a a lifetime value that is significantly more than the next best offering from hbo or paramount it is the industry leader in practically every single metric you could possibly name but then there's this word that you used engagement what is the number here what is the number that is stagnating or going down that is causing wall street and even causing some people inside the company to freak out if all of these other numbers revenue profit operating margin are all going up
Speaker 2we know from the first half of the year that engagement was up two percent which not down it's still growing just quickly what
Speaker 1does that mean what is it that
Speaker 2means that the hours watched on netflix were up two percent from the previous year in the first half of the year and that's fine but it's not good enough it's not what they have been used to and most importantly it's not what wall street is used to because the netflix stock price is a real factor here of what's driving all the change netflix has lost about 40 percent of its value in the past year and the reason is like i said the tech moniker over netflix that halo that allowed them to be valued like a tech company and not a media company people are waking up and they are realizing that netflix is basically a fancy media company they are not diversified they don't use content to sell baby formula like amazon they don't do pursue content just for the heck of it and they're marketing halo like apple they are not user generated and a passive um utility like you tube they are a media company that depends on the frequency and quality of the product that they are creating and that's a real fact here now the fact that they also tried to buy warner brothers last year i think was the big wake-up moment for a lot of investors when netflix decided now this is a company that for 20 years has said we are a grower we're not a buyer we don't need to buy anything because we are growing growing growing when they announced to the world that they thought they needed to buy warner brothers and hbo and all of the ip you know like property that comes along with that studio people said wait a minute they know something we don't and in fact there's some reporting that's come out via bloomberg in the past week or two that says that internally they're looking at metrics that show fewer people are opening the app and when they are there they are spending less time and to netflix that is that can't happen they need to be more people need to be opening the app and they need to figure out how to do that
Speaker 1So here's a story. Here's a scenario. Let's say I tell you, you know, soon after Netflix stock peaked, it began a freefall and investors stopped believing in the growth story. Growth disappointed along a variety of variables in an era of elevated inflation and high interest rates. The stock falls more than 40%. All of this describes 2026. All of this describes 2022. We've already seen this movie or this episode of the television show. I gave it a name.
Speaker 2The Great Netflix Correction. We talked about an ad nauseum on the town and everybody declared Netflix to be over.
Speaker 1That was 2022. Between 2023 and 2025, the company recovered. The stock rose by a factor of six. The narrative around the business entirely changed. What's different now? And why can't Netflix just press the same buttons that it pressed in 2022?
Speaker 2So a couple of reasons. Netflix did have an existential moment in 2022 and really looked at the business and said, OK, Wall Street is now requiring different things from us. It was growth, growth, growth and subscriber numbers, subscriber numbers, subscriber numbers for many years. And all of a sudden it wasn't. They wanted these companies to show profit. And Netflix was not as profitable. Certainly not as it is today. What they did is they looked at it and they said, you know what? We have been a company that has been absolutely opposed to advertising on the platform. We are a subscription video service. And they said, you know what? That's a pretty good revenue stream. Media companies have thrived for 100 years off of selling ads based on their audience. We go up against Amazon, which is a pretty powerful advertising platform. So we're just going to sell ads now. And this is something that Reed hates. Hastings the co-founder has had been diametrically opposed to and they changed and they said you know we're going to do it they also launched their very aggressive password sharing crackdown and remember this is a company that once tweeted love is sharing a password and all of a sudden they were sending you notifications hey if you've got five kids all on the same Netflix account they're gonna have to start paying for that grandma your aunt Hilda they're all gonna have to start paying for their Netflix account and it worked it helped you subscribers and revenue so they were willing to change and over and over Netflix has shown that it's willing to change the problem now is that it's not readily apparent how many levers they have to pull to juice growth we saw them go after Warner Brothers they thought that was a way to juice growth we don't know exactly what is going to be the answer here we've seen what they want they're now doing podcasts they're now doing uh not user-generated content but they're getting into business with popular YouTubers like Mark Rober Miss Rachel a number of others they are I don't want to say cheapening but they are opening the gates of Netflix to content that they would not have been open to because it's like a I make the baseball analogy it's an inning eater you put on a three-pointer and you're like oh my god I'm gonna watch a three-hour podcast and it eats up innings for Netflix and juices engagement at a time when Netflix needs that engagement during the day YouTube dominates during the day and Netflix has dominated at night but as more and more video consumers open their social media apps on their televisions Netflix sees that competition particularly in the daytime and they want to be the app that you turn on while you're doing laundry or while you're working and you're working in the working and it just stays on all day and they feel that is a lever that they can pull but it's still not clear what's going to be the one that works for them one way
Speaker 1that I think about it is that in 2022 the doubt was about the strength of the business behind the content so they had the crackdown on passwords and they had the introduction of the ad tier and they had raising prices again and again and again that's all the business behind the content and now it seems like they're more interested in changing the content itself so they've fired their chief content officer they've let go of their head of film they're trying to reinvent the actual thing that people are seeing on the screen and that's why I want to talk to you a little bit about this question of hits for lack of a better word according to Netflix the most popular shows the most popular seasons of television in its history are actually what do you do you know it's number one I believe it's stranger things correct it is Wednesday season one according to Wednesday season one adolescence then stranger things seasons four and five I will find you Dahmer Bridgerton seasons one and three and the Queen's Gambit a lot of these television shows stranger things came out in 2016 uh Wednesday came out in 2022 same with Dahmer 2022 Bridgerton debuted in the year 2020 along with the Queen's Gambit a lot of these shows are between four and or unfair that netflix has a hit problem does netflix have a hit problem i
Speaker 2think 100 they do certainly this year we just anecdotally you can look at the data and those are seasons of shows that when you look at the top 10 list it it doesn't compare to what was released this year they just haven't had that water cooler global moment that they are used to having if you look last year on the film side they had k-pop demon hunters which was that the runaway hit if you look at audiences for 2025 forget what was in theaters but they haven't had something equivalent to that they they haven't even had a happy gilmore 2 this year and that was also very big for them so that's why they're focusing on the content here it doesn't mean there aren't hits you at netflix there are a lot of hits and if you talk to their content people they will say you know it's a uh it's a hit you know hit and miss business you're gonna go a couple months without a big splashy hit but then all of a sudden three of them will appear at once and maybe but they've taken a number of swings on shows that they thought would be big they bought this little house on the prairie reboot and you know amazingly if you look at the original it still generates a lot of viewing time on free platforms and it didn't work they had a very pricey will ferrell comedy called the hawk that was a golf show i watched it it was terrible and the the problem that they're having is that people are are starting to not trust netflix it used to be netflix and chill you'd come home and there'd be something great for you and at least with inside netflix they are starting to feel like people are they they don't have that same relationship with the customer where they they know there's going to be something great for them and the numbers suggest that all these kind of subpar direct-to-video movies that they make and put on the service the kevin hart comedies and the you know the chris hemsworth yada yada that people do watch those but they don't break out and when they want to go for awards you know ted sarandos really wants to win the best picture oscar and they've tried for a decade now to do it and when they do that they have to buy the movies they aren't making those oscar caliber movies they got to go to sundance or can and buy the movie they did it this year with a spanish film called la bola negra that is their big oscar movie they did it with amelia perez they did it with train dreams last year they bought that at sundance and that's not you don't want to have to rely on going to the market and you don't want to have to go to the market and you don't want to have to go to the market and just overpaying for finished films you want movies with top directors they've worked with top filmmakers and haven't been able to push them over the line and that gets into a whole separate conversation about the netflix movie operation and whether sarandos has kneecapped it by not allowing these movies to play in theaters like traditional studios with their movies in theaters i think he's coming around on that and they are giving more movies to the audience more time in theaters but from my perspective my opinion is that netflix is not going to be able to work with the top movie directors until they consistently put their movies in theaters for a long period of time and sarandos has been completely opposed to that and we'll see what a new content head does he comes from disney and fox where they do give their creators a lot of time in theaters and we'll see if he took that job knowing they're going to change or whether it's going to be a clash again but that's another problem is that they want to work with the top filmmakers and yet they don't offer the same things that a warner brothers or a universal or a paramount does
Speaker 1there's something interesting about the last thing that you said you know netflix is famous initially for disrupting cinemas but now it's putting more of its movies in movie theaters they lost for disrupting that argument famous for disrupting the cable bundle yeah and now what are they doing they're buying more live sports it's interesting that as netflix grows they all in many cases they have to become in part the industry that they're disrupting maybe that's a sign of them losing a differentiated identity or maybe it's just a sign of when you grow you have to do everything i want to follow up though on this concept
Speaker 2let me just say one thing they're in a they're in a highly regulated and unionized industry netflix knew that they couldn't just come in drop a bomb and expect everybody to play ball with them all of the talent unions need to be able to work with netflix like they work with the others so they can come in and they had to adopt some of the tropes of traditional hollywood and some ways they completely upended it used to be that you were paid for what you do in hollywood in success you had a piece of a show or a movie financially and if it was a hit you and the studio would benefit netflix changed that by paying everybody up front for what they do and taking away the upside and hollywood went along with that and they had to adopt some of the tropes of traditional hollywood because they were quote unquote overpaying people they were saying what's your quote you want to make a show for us your quote is x we'll give you x plus 10 and the agents went we love that i'm going to make my numbers this year but 10 years later that guy who did a show 10 years ago is not being paid on that show even though it's a gigantic hit for netflix that's a separate issue but they disrupted in that way they couldn't disrupt all of what they were doing and they didn't do what hollywood did they had to play along with the unions and that's sort of the way the path to them kind of adopting more and more of the uh signifiers of traditional media companies
Speaker 1i want to go back to the question of hits because i do think that there is an external sense an external attitude outside the company that there's just a lot of wallpaper that netflix produces a lot of slop but you're also suggesting that that is a sentiment that is shared by some people inside the company maybe they're not calling their own material and they're not calling their own material they don't call it flop but they're going to say you know our programming is is missing some kind of they call it quadrant what is they what do they call it they call it broad
Speaker 2they say we are everything for everybody and that's what people on the outside don't realize because all they see is what the algorithm curates for the individual viewer you don't see little house on the prairie i'm guessing because you are not the kind of person who would watch little house on the prairie and what they are trying to do for the first time in history they are trying to program a service that is the entire cable bundle that is all the channels and not just in this country all over the world and what the previous content head bella bajaria did is she very effectively started the content units in all of these countries that are now producing shows and movies in local language for these countries and they're doing by most accounts a pretty good job of it they are growing overseas it's in this country where they've slipped a little and the feeling is internally and externally that they need a creative
Speaker 1recharge but how do you do that how do you fix a problem like we're not creating enough hits that create water cooler conversations among people who read the new york times it's not like there's a button in on ted's desk that's like make the slop or make the hits and he's just insisting on hitting the slop button that's not what's happening it's really really hard to make something that breaks through at the level of stranger things or wednesday how do you even begin to rethink the underlying mechanistic bureaucratic process of making these
Speaker 2things you are getting to the mystery of hollywood that has endured for 100 years the just make the hits manifesto they've been trying to do that since the silent movie days and nobody knows and that's the problem and what i think they are saying internally is that they need to take more risks they know a formula that has worked for them true crime documentaries and you know certain types of shows that hit a broad audience um crime and broad comedy and big stars and these youtube shows that they've started putting on that have built-in audiences and what they're saying internally is they need to get back to the ethos that they had maybe 10 years ago when they were trying to compete with hbo and they were making quirkier things that were not necessarily formulaic and and a straight down the middle shoot for the you know the the the bowling analogy shoot for the strike you're trying to do things like queen's gambit which nobody thought would be a huge hit it's about chess squid game a south korean drama that nobody thought would be what it was those came out of nowhere k-pop demon hunters nobody thought that would be a worldwide phenomenon and i think that's a huge hit and i think that's a huge hit and i think they're coming on they came out of nowhere and hit because they were different and surprised people and that's why everyone in hollywood is crazy because nobody knows where the next hit is coming from and everybody thinks they've got the next k-pop demon hunters and they need these services to support them and i think what they're saying now is we need to get back to our roots of doing interesting and surprising shows and movies and maybe that will be the end
Speaker 1i think a lot of things are happening here at once i think one thing that might be happening here and this is a very lightly held theory is that the era of entertainment that defined the 2010s from a genre perspective is either coming to an end or at least changing in some regard comic book movies used to always make 500 million to a billion dollars or something like that and now you have to make a really good comic book movie in order to make the best comic book movie that kind of money you can't just put out something that has you know a marvel comic character and the number three on it and expect that you're going to make a profit and so that is an assumption of the last decade plus that's beginning to change on netflix it kind of sometimes feels like all the murders and disappearances have like just been done like we literally finished it like we we made a movie about everyone that had ever been murdered or disappeared in some mildly interesting way and we're just
Speaker 2spoiler the husband probably
Speaker 1did it spoiler the look inside the family and likely get a male um and so i do wonder if there's if if what's happening at on the theatrical release side is similar to what netflix is feeling on the television side which is that a bunch of assumptions that basically worked for 10 to 15 years have just essentially exhausted themselves in a way is is is there a sense talking to people on the inside that there's a there's there were a handful of levers that could be successfully pulled for a number of years that just aren't the same payout that they used to pay i
Speaker 2think that's true especially in the film context but i think what you're describing is a fancy way of saying more competition there's just more out there now when netflix got into this game they were the only game in town when it came to streaming they were the first professionally produced original home for these kinds of shows and now if you look around it's not just the traditional we call them traditional now legacy streamers it's youtube it's instagram is now announcing 90 minute videos that are going to be available through the app it's to be you're now competing with the entire history of professionally produced content that is at the beck and call of every single video viewer all the time and that has had a profound impact on what is made because it's got to be noisier or in netflix's case it had to just be bulk they had 330 million subscribers around the world so to this day if you make a ben affleck movie and you put it on netflix a lot of people are going to watch it doesn't have to be good doesn't have to be noisy it just has to be a ben affleck movie that you put on netflix and it'll be number one and and people will watch but what netflix is saying now is that's not enough they need it to be better and noisier so that it's number one for five weeks not two weeks and it's number one at the end of the year and it causes you and i to talk about the ben affleck movie as if it's something that you are out of the cultural conversation if you have not seen the ben affleck movie not something that you put on at 10 30 and likely fall asleep to and forget you ever watched it two days later
Speaker 1you said people are spending less time on the platform engaging is declining it'd be one thing if the explanation was that people were just spending less time on screens and more time in the face-to-face world and that was why netflix was losing attention but what seems to be happening as you just described is that people are spending just as much or more time on their screens but that attention is flowing to the infinite feed on youtube tiktok instagram reels how is netflix navigating what seems to me to be a pretty existential decision on one path is let's become more like youtube let's put podcasts on our platform let's have individual relationships with former youtube And get an exclusive relationship for Netflix. But there's another path that they could theoretically choose, which is to differentiate. Don't spend money on podcasts. Don't chase 19-year-old YouTube creators who are popular on that platform because people go to YouTube to see YouTubers. We're a TV company. We're a movie company. Let's just make better television and film. Like, that is another, and to a certain extent, zero-sum decision because a dollar can only go toward YouTubers or toward, you know, the next Cuaron project. How are they navigating that existential choice?
Speaker 2Well, the decision or the choice for 2026 has been, we're going to do both. And if we are the everything service, we can expand. We can expand into these other genres while also keeping the audience for the Cuaron movies. And I think what the recent shakeup has shown is that you kind of can't be both. And the comments from Sarandos and the co-CEO Greg Peters on their earnings call have a back-to-basics feel to them, that they are going to pull back from them. By the way, we should say The Ringer, which produces our shows, has a deal with Netflix to put their podcasts on there. You and I are not.
Speaker 1Very responsible. Yes, that's right.
Speaker 2You and I are not part of that deal. But those are the kinds of deals that Netflix did to bring established shows over to the platform. And I believe they are going to pull back. They're not going to get rid of them. And they still want to mine these content fields for the cream of the crop and people that can really generate engagement on the platform. But I think that the change-up is going to. Lean more heavily into what has worked traditionally for Netflix, which is noisy film and television, and not the user-generated or podcast or creator stuff. That is my opinion about that subject.
Speaker 1I hope this next point doesn't come across too media theorist, but I wonder if Netflix's job is inherently harder than YouTube or TikTok's job.
Speaker 2Oh, it's way harder. I don't know why you think it's harder.
Speaker 1Let me tell you one reason why I think it's harder, but you might have 10 more reasons that are smarter. Podcasts and YouTube channels and newsletters create an ongoing relationship between the audience and the creator. And it seems like younger viewers are migrating toward these ongoing iterative relationships. With real people, real creators, real streamers, the Mr. Beasts and Matt Bellenys of the world. When you're making a television show, when you're making a movie, that's a startup. That's a bunch of people who have never worked together, in many cases don't know each other, maybe sometimes they've worked together, creating something that didn't exist, a fictional story that then ends. They all go home, they all go on to a different project. And this isn't like 1992, 1993, when you had, I don't know, Law & Order in its fifth season and ER in its fourth season. When you have to keep coming up with novel fictional stories, novel fictional stories, that's just really different than people subscribing to a podcast and listening to the Friday episode because they listened to the Tuesday episode. And so while Netflix is in a way like a franchise, people turn it on because it's there, because there's trust in it, the individual shows themselves are novel in a way that our relationship with creators is not. It's based on familiarity. And I wonder how you or they think about this challenge of competing. Competing with ongoing familiar relationships when everything they have to create hasn't existed before and therefore has no pre-awareness. Audiences can't trust it. They don't know exactly what they're clicking into.
Speaker 2Yeah, well, they would argue that that's actually the feature of Netflix, is that they are giving you something that is not elsewhere. And if you look at the numbers on engagement and what people actually watch, there are a lot of things on Netflix that do feel more like an ongoing relationship. I mean, we saw where. Kids were watching Friends, and they're watching 300 episodes of Friends. That is an ongoing relationship that people have. And Netflix has shown over and over again that when they bring a couple hundred episodes of a show that maybe was popular in the 90s and is on Netflix, people will watch it as if they are starting a story and then keeping on with it for 100 hours, 200 hours, 300 hours. So people do that. That behavior is on Netflix. But I see what you're saying, where there's this fundamental difference between what is in the creator community and what is on Netflix. And the question is how far Netflix wants to lean into that to capture it, because they are obsessed with YouTube. And YouTube, I mean, no disrespect, but it is the easiest media business in the world. They had a video player attached to the world's largest search engine. And for some reason, the government allowed this to happen. I mean, if you look at Netflix, it is the easiest media business in the world. I mean, I'm not saying Netflix is the easiest media business in the world, but I'm saying Netflix is the easiest media business in the world. 15.8% of all TV viewing in August was on YouTube. That is more than double what is on Netflix. That is more than any other media company. And it's because they don't produce their own content. They end up paying for it, but they only pay in success. If you put a YouTube video up, you get nothing. If it generates billions and billions of views, you get paid. It's a much better model for them because there's no risk. And every time Netflix greenlights a show, that's a risk.
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Speaker 1Every five years, the screen watching audience has fewer people born before the Internet and more people born in the Internet age. The iPhone came out in 2007, which means it's someone born. The day after the iPhone came out is now 19 years old. What do you think Netflix needs to do to drive engagement broadly with Gen Z itself, given that, as you just said, Gen Z is growing up in a world where they've got YouTube, TikTok and Instagram reels just carouseling in front of their face. all the time and that's filling many of the hours that might have in previous generations gone toward watching og linear television or new generation
Speaker 2netflix i think ultimately the differentiator here and it's something netflix knows and they will likely go after another studio it's known intellectual property a differentiator amongst the scroll things that you know and not i'm not talking about superheroes or movies from the 90s that i know i'm talking about intellectual property that is meaningful to that generation that grew up in the 2000s and that's what we're seeing is in a broader shift in hollywood is this shift from the superheroes and the remakes of the 80s stuff to things like minecraft movie and video game adaptations and coco melon and all of these other things that are intellectual property but more meaningful to a younger generation that i think is the sweet spot for growth and for uh for creating that attachment to young people and netflix is trying they'll do anything if it's got ip attached to it they're doing narnia right now with gretta gerwig they bought the wonka or they licensed the wonka uh properties roll doll they have a they they bought the roll doll library they want to do more they were trying to do a big deal with xbox to adapt all of the xbox titles and that sort of went away for now but that's the type of growth area that i think they should really be pursuing is it because it's a differentiator if you go to any of these other streamers disney is the obvious one but even hbo max peacock paramount the stuff that stands out is the known ip if you want to watch minions as my kid does you got to go to peacock and then netflix will license it later but meaningful ip and creating meaningful ip for young generations is the answer
Speaker 1we both write subscription newsletters uh everyone should subscribe to both naturally um but it's notable to me that you've got puck you've got instagram you've got all these tv subscriptions at some point subscription fatigue has to hit in i don't know if it's hitting in now or if it hits in in 10 years or if it hits in in the 2090s but eventually americans cannot subscribe indefinitely toward more and more and more things are you hearing either in the media industry in the you know i mean the puck newsletter industry or in the tv industry that some households are reaching subscription fatigue they're like i used to buy one newspaper and pay for one ko bundle and now i'm buying you know three newsletters and peacock and netflix and hbo is is subscription fatigue an element here that you're hearing
Speaker 2about i i think we're seeing the reaction to that in the tv universe the streaming universe already where the push for consolidation is in some ways an acknowledgement that there are only going to be three maybe four large global streaming services that people are willing to pay for we are now seeing the combination of hbo max and paramount plus which will become one service we're seeing the consolidation of disney plus and hulu which will become one service and interestingly enough even though they are two separate services right now in this country disney is bundling them in a way that you pay one price for disney plus and an extraordinarily high price for hulu separately but it's basically the same price as disney plus if you bundle them which is very telling because they are pushing people to bundles and we're going to see a re-bundling of a lot of these services for a discount to address the concern that you have just said people don't like having to subscribe to multiple services for all the drawbacks of the cable bundle it was so convenient you got everything that you could ever want for one price and yeah you paid for a lot of garbage you didn't like and if you're not a sports fan you're still paying 10 12 a month for espn and you can't at least and you couldn't fix that but there will be greater choice and bundling to address the subscription fatigue and i think we're seeing it on the price level too part of the reason why netflix is grasping right now is because they realize that there's only so many price hikes you can do if you look at the streamflation that has happened over the past three years and you can't fix that you can't fix that you can't fix that you can't fix that all of these services have increased their prices because they know that is the easiest way to juice their numbers and that wall street wants them to be more profitable and in the case of disney disney has dramatically pulled back the amount of content they have put on disney plus over the past three years while simultaneously increasing the price they can do that because they have the best brand in entertainment people who have children subscribe to their disney plus whether there's four star wars shows a year or one but the others have a bigger problem there and i do think that that this is going to be a reckoning of sorts that we're already seeing frankly the newsletter thing i think is is similar but different i think we're going to see more bundling of newsletters obviously my company puck that's our entire premise is that you pay one subscription price for puck and you get access to a dozen of them and you get access to a dozen of different authors in different areas of coverage all of which are branded together and available to you and you can pick and choose what you want and i think we're going to see more of that in the substack beehive world where they will start bundling for a price and other media companies that now you know every company is a me is a newsletter company so they're going to start bundling and that's sort of the answer i think to this this uh fatigue people have
Speaker 1i absolutely agree with you on the newsletter point and to a certain extent i suppose it's the same point with um tv subscriptions i think in written media newsletter media we're sort of in the age of the greek city-state moving toward the age of the roman empire and just a lot of these individual statelets are just going to be bundled up and eventually it's going to be like i subscribe to a federation called puck and i get access to 25 different former substacks or current puck writers i think you're going to see a lot of both puck growth and puck imitators out there as um as individual writers feel like their growth is is
Speaker 2peaking will there be there will be companies that are between substack and the free wild west internet twitter x world and those aggregators need to have i think very identifiable audiences and ethos around them and branding around them if i am a a sports person of a certain statue stature i need to subscribe to this bundle because it has the writers that appeal to me as a intelligent sports fan if i'm a sports fan that is you know a barstool person and i want to people shit talking the lakers there's a bundle for me of those types of writers like that kind of thing
Speaker 1are you a little surprised that there aren't more of those i'm trying to think right now whether this is a really really bad question like do they exist or like like what is the obviously the athletic exists but like what's the puck for sports well isn't the
Speaker 2ringer trying to do that right now i mean all of their authors are called the launching substacks right and the ringer i think the ringer owns those yeah so eventually maybe there will be a ringer subscription that you get access to sean fantasy and brian curtis and zach and all those guys for one price maybe i i have no inside information but that would seem to be
Speaker 1smart could be smart um last question i just want to end at the level of sort of 21st century culture um you know as i pointed out maybe a couple minutes ago netflix's most acclaimed shows their most popular shows the one that most people can name a lot of them premiered five ten years ago one interpretation is that that's a netflix failure another interpretation is that it's a cultural inevitability that if your only theory about culture was that we were reaching an end of anything that could be considered monocultural that this is just the end of the monoculture in the 21st century then you would think well in the 2000s is probably pretty hard to create a breakout show in the 2010s it's going to be even harder to create a breakout show and by the 2020s it's going to be basically impossible to invent a new breakout show is there a way in which the netflix goal to create original breakouts every single year hopefully i'm sure from their perspective every single quarter this is just objectively a job that's getting harder year
Speaker 2after year i think that's 100 true as the proliferation of services and options continue to increase one interesting thing from the recent netflix earnings call is a strategy to combat that they now say that they are going to put their thumb on the algorithm and they are going to push certain shows and movies to people that maybe didn't want them or that their viewing history suggests they may not like them. So you, Derek Thompson, will start to get Little House on the Prairie in your feed. And maybe one night when you're feeling like you want to escape to rural Kansas or wherever that show is set.
Speaker 1Not in your life, Matt.
Speaker 2Okay, but maybe you have that feeling some night and it's there and you watch it. And the reason I say that is because it's an element of curation and a push alert, so to speak, for certain types of content that Netflix prioritizes. And that's a way for them to try to juice the hit-making ability of the service and not just rely on the data to do it for them. And it'll be interesting to see how it works. I think what's going to end up happening is a lot of the favored creators, like the Ryan Murphys and Shonda Rhimes, they are going to have their stuff pushed. They're going to have their stuff pushed to people because they have relationships and stuff and they want to make those people happy. I'm not convinced it wasn't happening in the past. I kept getting Ryan Murphy shows pushed to me, even though I detest those shows. But I think that's a way for them to kind of try to curate. The equivalent of putting a new show on Thursday night after Seinfeld or Friends in the 90s or 2000. That was an indication that NBC cared about the show. I thought it was good and thought that it should be a hit.
Speaker 1So the central thesis of my 2016-2017 book Hitmakers was basically most people think that what they like is novelty and they're wrong. What people like is familiarity. And when I wrote that in 2017, it might have seemed, you know, mildly surprising. Now I don't think it's surprising at all. I think the fact that familiarity has overtaken Hollywood is just about as obvious as anything. But as a matter of strategy, it suggests that one thing Netflix might be shocked by for now is, as you said earlier, more familiar IP. They tried to buy Warner Brothers Discovery, didn't work out. What's the next arrow in the quiver when it comes to a merger or acquisition either of an entire company or an IP out there? What do you think they're going to go hunting for next?
Speaker 2I think NBC Universal is going to be the next target because they are splitting that company. That's home of the NBC Broadcast Network, a bunch of cable channels that were spun off this past year to Versant. A spin-off company, but they kept things like Bravo. It's the Universal Movie Studio, which has all the monster movies. It has Blumhouse, The Minions, and they are being split from Comcast next year. Importantly, NBC Universal also owns theme parks, which I think could be a really interesting growth area for Netflix. They certainly have Disney envy on that front. And they've launched these Netflix houses, and sort of marketing places where people can go and experience Netflix shows. What if they owned the Universal theme parks and started incorporating the Netflix IP into those theme parks and vice versa? All of a sudden, Netflix had access to all the Blumhouse movies and they could make the Minions movies premiere in theaters and then go directly to Netflix. To me, they've got to look at it. Now they've opened that Pandora's box of being a medium, media company, they have to look at Universal. -
Speaker 1Yeah. I think consolidation is both inevitable and also I feel for the people who are in Hollywood on the labor side because it's not a good moment now. And as you've reported again and again and again, consolidation typically doesn't work out very well for growing the number of jobs. In fact, pretty much the only reason to do it on the capital side, on the earning side, is to say there are redundancies between these two companies and we can get higher operating margins if we, combine them and therefore find some, what is colloquially known as redundancies and commonly known as people that we can fire. So I do think that as interesting as this is in the big picture sense, I do think that a lot of the solutions are gonna end up hurting folks in Los Angeles and throughout the national film entertainment world. But maybe that's another conversation for us to have next year. Matt Bellany. - For sure. - Thank you very much. -
Speaker 2Thanks for having me. -
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