← The Town with Matthew Belloni
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- [00:00]
A
Foreign. This episode is presented by AMC Network. A new chapter in Anne Rice's immortal universe begins with AMC's the Vampire Lestat. Get a backstage pass to the iconic frontman who Pace Magazine calls a Bowie inspired rocker that will have fans screaming. Don't miss the legendary vampire Lestat de Liancourt in his own electrifying rock saga. Experience the glory and darkness. Binge the Vampire Lestat. Only on amc. Learn more at amc.
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B
This episode is brought to you by Adobe Firefly, the all in one creative studio with AI powered image and video generation built for today's creative process, Firefly helps you generate, edit and experiment fast because the asks aren't getting smaller and the timelines Woo. Yeah, still tight. With all the best creative AI models in one place, Firefly brings your ideas to life. Learn more@adobe.com Firefly Com it is Tuesday,
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A
July 21st if you're a big creator on YouTube with millions of followers, chances are the nice people at Netflix have reached out recently. As listeners of this show know, Netflix has been making a big push into digital creator content. It's not just podcasts like the Slate from Iheart or the Ringer. It's Also big name YouTubers Nick DiGiovanni, Rhett and Link Hot Ones. Most of these creators aren't leaving YouTube. They're just making their videos available to Netflix to make extra money, or packaging up their videos in shows like Ms. Rachel. Or in some cases, they're creating entirely original versions of their shows like the Hot Ones Extension or what Mark Rober the Science Guy is doing. Is it working? Well, it's early, and Netflix conspicuously refused to include podcasts in its latest engagement report. But on the creator front, Ms. Rachel is now a top 10 show on Netflix and compilations from Danny Go and Salish and Jordan. They were top 30 and at a fraction of the cost of traditional programming. Other platforms are jumping in too, with Disney and Paramount also courting digital creator channels. So does YouTube even care about this? It's unclear. No one creator or five creators or 500 creators actually matters all that much to YouTube. So it's not that big a deal if they're also posting on Netflix. Or is it? YouTube hasn't exactly been offering big deals to remain exclusive, but obviously YouTube CEO Neal Mohan, he loves that it's the leader in streaming viewership month after month, and any momentum shift to Netflix could be problematic. Lucas Shaw, our Monday guy who's on Tuesday this week, he wrote a whole column about this for Bloomberg this weekend and today we're going to Debate it. Netflix virtual versus YouTube. What's at stake? Who's got the most to win and lose, and who ultimately benefits the most from this push towards creators? From the Ringer and Puck, I'm Matt Bellamy, and this is the town. Okay. We are here with Lucas Shaw from Bloomberg, our Monday guy, coming at you on a very special Tuesday episode. Welcome, Lucas. I'm very happy for you. You got to meet Mike Bloomberg finally.
- [03:08]
C
I had met him, actually, 12 years earlier in my first. I think in the first six months on the job. He came by the office, did the photo line, gave us an update on the business.
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A
Nice. But this time you got a photo.
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C
We got. I got a photo last time, too. I just. I don't think I posted the last one. Now I can have my before and after. You know, Lucas. Lucas in his mid-20s now. Lucas in his mid to late 30s.
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A
Yes. Well, I'm. Regardless, I'm still happy for you. All right, let's move on to the main topic today. Netflix versus YouTube. You wrote an interesting column for your newsletter about the poaching. I haven't checked my inbox in the last hour, but I assume there has been some. We didn't get another one.
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C
We didn't get another one Monday morning. I don't know if we're gonna get enough. No, but Netflix has issued, what, six press releases in the last two or three weeks about different YouTube talent they've brought on?
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A
Yeah, it's fun for me because I get to learn who these influencers are via the press release announcing that they're moving to Netflix.
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C
You didn't know Nick Giovanni, the Chef?
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A
I did not.
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C
No. Did you know Alan Chicken Chow?
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A
That name I learned in your newsletter.
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C
Okay.
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A
I know Hot Ones. Of course you knew Hot Ones.
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C
Did you know. Did you know the mythical guys, Rhett and Link? Good mythical morning.
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A
I know Rhett and Link. I know those guys. Yes. But this is not about me. This is about the Netflix strategy here to essentially boost engagement by going after YouTube talent. We've talked about it from a business perspective.
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C
They're skimming off the very, very top layer of YouTube talent. As one person put it, if you're like a top 25 or 50 YouTube channel, especially focused on kids and family, Netflix has made you an offer.
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A
Right. And I want to focus on this both from the creator perspective, because obviously, this is great for these creators. They're potentially getting paid extra for not doing anything extra, just putting their videos on another platform, which they likely would have done for free if it would give them More reach for advertising. And now they are in a kind of talent war with YouTube. Or is this a talent war? Does YouTube actually care about this?
- [05:13]
C
Well, that was the question that I tried to address and raise in my newsletter because as Netflix kept doing, like, initially when Netflix did the deal, I don't. Did a couple deals. I don't think YouTube cared. Right. Okay, like go and take a couple. Or like when Amazon did a show with Mr. Beast, I don't think Neil Mohan, the CEO of YouTube, loved it, but okay, it's fine. Like Jimmy Golf clap. He loves YouTube so much, he's not going anywhere.
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A
Yeah.
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C
There had now been enough deals over the last couple months that the kind of creators and their representatives and the people who run their businesses were definitely starting to Hear murmurs from YouTube that they weren't thrilled about it. And I both talked to some of those people. I talked to some people at YouTube. I talked to some people who know the leadership well. And the sense I get is that YouTube is kind of torn on this. On the one hand, none of this stuff is really hurting their primary business. Right. YouTube's revenue's growing, usage is growing. You look at it. And YouTube is sort of the bell of the media ball right now.
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A
So. So it's not a financial issue. It's not like, holy shit, we're losing engagement because of this.
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C
Not that their policy has been, look, if you go and put your. Advertise your show somewhere else, do stuff somewhere else, it drives people back to YouTube because that's your main channel. Right. And maybe there will be some damage to us in like three years, but certainly no business they're seeing in the short term.
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A
Yeah. That's how they approach backrooms and obsession. They're like, great, if you can have a movie based on something you do on YouTube, more power to you.
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C
But then there is the kind of the optics and the ego of it all, Right. Which is that nobody wants it to seem, you know, YouTube has spent a decade now pitching themselves as a peer to television.
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A
Yeah. The new tv.
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C
And if your biggest star is, when they want to do a bigger project or a more ambitious project, feel they need to essentially graduate to Netflix or Amazon or Hulu or one of these other services. It doesn't help. It doesn't sort of bolster your case, your equivalent to tv. And it bruises the ego a little bit. And if enough people do it, then it starts to create sort of a perception problem for you. Right. It's not the same as, but similar to when TikTok came around and started becoming the place that people went viral. YouTube felt like it had to respond with Shorts because YouTube needed to be seen as the place where sort of new talent was incubated.
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A
But that's also an engagement issue. TikTok was a scaled player that was taking enough of this kind of content that it I think did actually hurt YouTube or they saw a projection where it hurts YouTube. It's also a free platform. Netflix is not free.
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C
No, totally. It is different. That's why it's not the same. But YouTube then. So there is this question of do we feel that this is ultimately a problem and if so, what do we do about it?
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A
Yeah, and it's interesting because I don't see it as a real problem for them. If these people are cross posting and getting some extra money from Netflix, is it going to change consumer behavior? Are there enough of these people on Netflix to really change or reduce YouTube as the place you go to watch videos? Because all these people are still there.
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D
It's.
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A
If they were going exclusive to Netflix, that would be another thing.
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C
I don't think so. And also it just. YouTube is one of these platforms and Netflix is like this to some extent too, in a different way where it just like it's sort of too big for a lot of this to matter, that people are just going to go to YouTube no matter what.
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A
Yeah, it's a utility.
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C
You could see the top 10, 20 creators, like stop posting to YouTube. And I don't think it would really damage the YouTube business that much. There would be a PR problem which could become a business problem, but it would not immediately be a business problem because Mr. Beast, the biggest YouTube creator in the world, accounts for such a tiny fraction of viewership on YouTube.
- [09:16]
A
Yeah. And we would know if they really cared because they would be offering them money to stay. And they're not.
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C
Well, yes and no. They are doing their quote unquote shows where they're not. They're sort of indirectly funding programming.
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A
Yeah. Like Sean Evans gets treated differently, Brittany Broski gets treated differently than your average YouTuber. They get advertising directed towards them. Explain how that works.
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C
They get featured at events and they'll, you know, YouTube will allot certain portions of brand dollars for certain initiatives.
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A
They did a whole Emmy campaign for Hot Ones. I was part of it. I did that whole thing I did on stage was paid for by YouTube to promote him for Emmys.
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C
Now YouTube could argue that this is not responding to Netflix. It's just sort of continuing to elevate what they offer on the platform. Much in the same way that them going after NFL Sunday Ticket and the Oscars is all about bringing certain premium live programming there that obviously sponsors who are one of their three primary constituencies really want. And YouTube has a very checkered history with funding original programming. It hasn't really worked. The most successful program they had ended up only being a hit for Netflix, not for them, which was Cobra Kai. But is it possible that they choose to do stuff in the future? I think it's possible.
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A
Meaning bring on a slate of originals that they pay extra to to be exclusive. I think it's.
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C
Yeah, I think it's more likely that they do more of these shows thing where they sort of incentivize people to take big swings there and make it possible than directly fund. Because directly funding, it's just. It's a hornet's nest for them.
- [11:01]
A
Well, they could also give a greater share of advertising. They currently give about what, 55% of ads go to these shows. What if they upped it to 75 for certain people?
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C
There's no way that's going to happen. Bad chance.
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A
Yeah. Once the agencies learned about that, Everybody would have 75.
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C
Especially because their peers in sort of social and shorter form video don't do shit. YouTube is the most generous with that respect. With respect to that, like Instagram. Instagram's not giving people a 55% revenue share. TikTok not giving people a 55% revenue share.
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A
That's. We talked to Kareem from Subway Takes about this. This is why he's doing more stuff for YouTube now than for TikTok. Because he can monetize better. Yeah.
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C
And YouTube's also, in a moment, where you look at it in the number of famous people and like former newscasters and athletes and whomever who just being like, I'll start a YouTube channel. Like, I don't know that they feel particularly threatened right now. They still feel like they're operating from a position of power.
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A
Yeah, you got to have it. I mean, in this media landscape, you kind of got to have a YouTube page if you are in the video business or if you're being paid by another platform like these podcasters are. I mean, that's the interesting element here is that Netflix is doing exclusive deals with podcasters. We should also disclose one of those is the ringer which produces this show, although not this show. But are those working? You seem to think that this creator initiative is working for Netflix. I'm not so sure.
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C
I think that there's a difference between the YouTube creators and the Podcasters. I don't think the podcasting thing is working well.
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A
We know what they're disclosing and they chose not to disclose the viewership number of the podcast.
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C
I don't think it's that they chose not to disclose it. I think that the viewership is so small that it doesn't register well.
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A
They could disclose, they put it in the dumps at the end, all the stuff that doesn't get to a certain level. So they could just throw it all in there and we would see. But they're not doing that.
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C
If you look at the viewership for Ms. Rachel, what they, what they have gotten historically for Cocomelon, what they are getting with this with Salish and matter, what they're doing with Mark Rober, I think it's pretty undeniable that that stuff is working well.
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A
The Mark Rober show has not debuted yet.
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C
No, no, no. But they have. They also have compilations of past videos.
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A
Okay.
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C
And all those are doing well and don't cost that much. So to me, that sort of is indisputable that it's working. The other thing I'd say, but what
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A
percentage of those of the total number are those five hits you just mentioned?
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C
Well, they haven't done that. Most, they haven't done that many. Most of these new deals that they've announced, they've just announced they're not on the platform.
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A
I'm just wondering if, if we can say definitively this is working.
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C
Well, I think the initial deals that
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A
they've done Ms. Rachel clearly working.
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C
The initial deals that they've done have worked. Now there is concern, question that as they do more, that those new shows won't see the same boost because they won't be sort of first in the door. But if you add, if you add two or three of these top creators and people watch the shows, Netflix is doing what it always does. They just pour, try to pour fuel on the fire and they do like 20 other deals. So let. I would say the initial wave has been a success. The question will be is it something that they can build on? Can they take a lot of the fans of these creators and have them come into Netflix more often? That's obviously the goal here.
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D
Lucas, I noticed that the Ringer fantasy football show did not chart. What are your thoughts on that?
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A
Yeah, give us a chance.
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C
I'm going to rely on you as we approach the my next fantasy football draft. I finished second in my league last year with a big help from you guys.
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D
So I was upset they didn't Include the pods because I thought we'd be top 10, but we were not.
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A
Yeah, no, that will be a big telling moment because, Craig, I'm going to boost you guys here. You guys surge during August, usually when people are stressing about their fantasy team. So we will see if the fantasy show ends up charting during that time
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D
next to the hawk.
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A
Yeah, no pressure.
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C
Do you think that it is easier for Netflix to onboard the kind of different YouTube and creator programming and sort of lean into that or easier for YouTube to become premium?
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A
I mean, arguably YouTube is already premium because they have Sunday Ticket, which is arguably the most premium product in all of television. They have YouTube TV, which serves up the cable channels. That is premium. I think what you're asking is, is it easier for Netflix to air Dave Portnoy than It is for YouTube to air the Diplomat and premium shows like that.
- [15:51]
C
What is more likely to happen? That Netflix becomes the primary place that people watch barstool or that YouTube becomes a place that, you know, a major filmmaker wants to release a movie?
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A
I think the former rather than the latter because of the branding of YouTube and the egalit, the sort of populous nature of the platform, the brand is just not curated at all. That's kind of the problem I've had with the Oscars going there is that you're putting the pinnacle of creative excellence in filmmaking on a platform that literally will accept a video of your dog peeing outside. So, like, what is, what is. There's a brand fit problem there. And obviously the algorithm does a lot of this and they're going to, you know, do marketing for the Oscars that's going to present it as premium. But that's the issue I've had there. And on Netflix it's much easier to. The brand can be a little bit more elastic and bring on this curated set. Now, don't get me wrong, and I talked about this with Michael Morris on Friday. Like there are brand issues with Netflix trying to be YouTube and if they go too far into this, I think it does hurt the brand a little.
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C
But yeah, they have to be very selective. About what? Like variety, actors on actors. Sure, that makes sense. On Netflix I could see people watching it.
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A
Yeah, those are pop up videos that come on when you click on an article. That's not premium, that's just celebrity. So this is like you can do that, but you can't.
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D
You.
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A
You can't do too much of that where it completely changes the brand.
- [17:28]
C
Sure.
- [17:30]
A
This episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com this episode is brought to you by Holiday Inn by IHG Everyone knows Holiday Inn, right? Or they think they do because though they have the same name, they've got a whole new energy. They kept the global icon status and upgraded pretty much everything else. We're talking modern rooms with real reset mode vibes, spaces that feel like your living room. Just a little more low key chic and dining done right from breakfast to dinner and drinks. Whether you're traveling for work or getting away for a minute, it's comfort that hits different. So yeah, Holiday Inn, it's a new day and a new stay. Book your next day@holidayin.com this episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com Spotify.com
- [19:11]
C
Spotify Related because you and I have both written talked about this. So much of the discussion in sort of streaming and TV right now, in part because we do get these kind of these Nielsen updates, is like basically the war for engagement, right? That's the big reason we're having these conversations. Netflix's engagement is growing, but not as much as they'd like. So they're broadening into other areas. YouTube has become sort of the king of engagement. I think you and I both agree that there is no way that Netflix or any traditional Hollywood company can compete with YouTube on engagement, right?
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A
Totally agree. So, so what are they doing?
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C
What do they do? And other than like, you know, getting us to just talk about revenue and profit, like how should we think, is there a different way we should be thinking or talking about engagement as sort of YouTube and free eat more and more of that pie?
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A
I think it's honestly what they're teasing in their earnings report. They're teasing this not all hours are created equal. I mean, if you talk to the Netflix people, they point out that a lot of the YouTube engagement is coming from music or ambient videos, the yoga
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C
video that I use twice a week or whatever. Yeah.
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A
And Netflix could all of a sudden, Netflix could put, you know, Netflix and chill, fall asleep with Netflix, where it's just a video of pleasant sights and pleasant sounds that you have on all night while you sleep. They could do that. But then they're, then they're just going full YouTube. So there is a better argument to make that this is not all created equal and they should be hammering that home. It's sort of ironically similar to the argument that the broadcasting cable networks used to make when Netflix and all these others came about. It's like, well, we're a safe environment here. You know, you put your ads on YouTube, you never know what Nazi you're going to be up against right here. You know, we have no Nazis, or at least we used to not have any Nazis.
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C
Right. They could go really hardball with the marketing. Yeah, I, I mean, Netflix has been making that argument. And I, in, in, in fairness to them, when Ted, Ted Sarandos had those comments, like, I forget if it was earlier this year, late last year, the media response was generally like, oh, you're just jealous of these guys. Stop trashing them.
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A
So, yeah, okay, but that can be true. And also, like, he can be justified in doing it.
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C
Yeah. Well, obviously they want advertisers to pay a higher rate for advertising on Netflix than anyone would pay on YouTube. And they need to drive home the reason why that Netflix costs what it does and YouTube doesn't. Right.
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A
Yeah.
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C
So that is certainly the case that they're making.
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A
Yeah. And that's what goes away if they launch a free tier also.
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C
Well, they are not going to launch free tier in the US you don't think so? No, that would. If you, if you listen to what they're saying.
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A
Yeah, we talked about this on Friday. They're saying it makes more sense in other markets where they're not as known,
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C
where they're not as known, where there is not a lot of disposable income. If you look at places where some of YouTube's biggest markets, in terms of users, not necessarily in terms of revenue, India, the Philippines, Indonesia. These are places with, you know, hundreds of millions of people, in India's case, more than a billion people, most of them don't have very much money. And they're not going to pay for a video service.
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A
They're just not used to paying for content.
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C
Right. Or they, you know, they, they don't have credit cards. It just is. Is complicated. And YouTube is very easy to sign up for and use. Is there a way for Netflix to do that? And Netflix to. For exposure. And Netflix has to do it in a way where they cannot, they, they're, they're not cannibalizing their ad tier. Right. If they did it here, a lot of those low cost people on the ad tier might just shift to the free. And, and that would cost Netflix money because there's just no way they're going to make as much money from a free tier.
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A
I agree, I agree with that. But they could also see it as a way to bring in a bunch of new people that can then be upsold once they get a taste of the content.
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C
They could. But if you're already at like 85% penetration in the U.S. as they say, there's just not that much room to grow. But if there's a market where you have like 1% penetration or 5% penetration, there's very, there's far less harm.
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A
The ad tier is where it's at for them right now. They want to increase the percentage of revenue that comes in through the ad tier. And having that front door where you can monetize people might do that.
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C
It's also why it feels inevitable that they have to go for something bigger
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A
in sports, including NBCUniversal.
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C
Well, that's a whole other problem that would be big. I was thinking more like how seriously did they look at the World Cup?
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A
But yeah, yeah, for next time. But that's four years from now.
- [23:57]
C
Yeah.
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A
What about Sunday Night Football? That's coming up next year probably.
- [24:01]
C
You know, if they can. I still think there's probably an arrangement for them to make with NBC where NBC gives up some games to Netflix. But I don't know, you know, I don't know what that, how that shakes out.
- [24:13]
A
Yeah. Or Peacock. The games on Peacock are available on Netflix. Something like that.
- [24:17]
C
Or Peacock is distributed on Netflix. Sure.
- [24:20]
A
You.
- [24:20]
C
Yes.
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A
Which we know is an option. All right. To bring it back to YouTube here. What do you think? Do you think, and I know you don't like this comparison, but do you think that Netflix is more likely to be YouTube before YouTube is Netflix?
- [24:33]
C
Oh, the question I asked you.
- [24:35]
A
Yeah.
- [24:37]
C
I think it is easier for Netflix to ingest top YouTube creators than it is for YouTube to get top film filmmakers.
- [24:47]
A
Yeah. The economics just isn't there.
- [24:49]
C
But I also, But I think it is easier for YouTube to become a home for premium programming than it is for Netflix to become like a totally, like a, a UGC platform.
- [25:03]
A
Right, right. If there all of a sudden tomorrow were a tile on Netflix that is, you know, YouTube shows or YouTube premium
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C
or whatever, or you can, anyone can upload here. That's not gonna happen. I just don't think it will. I think the odds of like, you know, YouTube taking the rights to a hundred million dollar drama are higher than that. At a certain point.
- [25:23]
A
You do.
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C
I don't think either is gonna happen. I think that they're both sort of like nibbling at the margins and I think that they both can thrive if they sort of stay in their own lanes. But like YouTube just wants to get seen as a little more premium and Netflix just wants to boost engagement at some other times of day. And I think these are sort of can be addressed incrementally rather than having to fundamentally change who they are. But that's my two cents.
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A
So. So you think that they will not go after more of the big ticket items like the Oscars and NFL YouTube at YouTube.
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C
No, I think that they probably. If we're talking about live programming, they're clearly interested in it and I think they will go for more. But there are clearly limits. Right? Like, people were surprised that, you know, you know, they, they didn't end up getting an NBA package. It doesn't. It seems like they might not end up with any, you know, they. Netflix got more NFL games, not YouTube. Amazon remains the only tech company that has like really gone all in on sports. And so do I think YouTube will try to get more? Probably, but I don't know what that is. Like, if you could sell the. If, if FIFA sold the global rights to the World Cup, YouTube. If I were YouTube, I would spend literally any amount of money to get that.
- [26:43]
A
Yeah, you start whining and dining. Just pure bribes to FIFA.
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C
YouTube as the home of the World Cup. It's like 50 million. $50 billion. Sure. Like we'll make sure that's.
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A
That's like a drop in the bucket for them. Yeah, well, but that probably won't happen.
- [27:00]
C
No, I don't think so.
- [27:01]
D
Did we answer whether or not. I feel like you guys are talking about what. Not to quote Jurassic park, but we've been talk. We've been preoccupied with what these companies could do and not what they should do. Like, do you think Netflix should be doing this and YouTube should be doing this, or do you think they should just not be doing any of it?
- [27:15]
C
The creator stuff to me makes sense for Netflix. If they are selective about it. Like the only the problem sometimes with Netflix and they're doing it within the pods too is like they struggle sometimes to figure out like what is the appropriate scale and to create sort of critical mass in an area. They end up doing a lot of
- [27:34]
A
deals and it should feel special that you're on Netflix. And increasingly with these pod deals and these creator deals, it's feeling less special.
- [27:44]
C
Yeah, I think that they should try to do ones where they both bring on the videos they've already put up, but sort of try to come up with a new spin on it. The need to kind of embrace some of these creators with large followings is sort of a no brainer for Netflix for YouTube. I think what they're doing for now also makes sense. Like big live events people will go to YouTube for. I don't think it's going to make sense for them to try to make the Diplomat.
- [28:12]
A
Yeah, the economics just don't work. I mean Craig and I were talking about this last week about how there's this feeling that sports documentary program is going to go over to Netflix because you can get a brand to put up the money to create the programming and then you put it on YouTube and monetize it.
- [28:30]
C
There's.
- [28:31]
A
But a brand is not going to pay for $100 million 10 episode drama series starring Keri Russell. It's just not going to do that. And the guilds are not going to let people spend less money just because the platform is YouTube and not Netflix. So these shows are going to be prohibitively expensive right now under the current models to put on Netflix. Maybe someday, but right now it just doesn't make sense to do this kind of thing.
- [28:57]
C
Yeah, I mean YouTube swallowed. Has swallowed certain aspects of television. Right. It's, you know, it's kind of YouTube slash podcasting is. They've swallowed the late night show. They've sort of swallowed daytime day. A lot of daytime. A lot of that stuff is there. And Netflix has, has kind of swallowed primetime. Right. And now they're both kind of like nibbling into the other's lane.
- [29:19]
A
YouTube has swallowed the people falling down genre
- [29:24]
C
and a lot of music consumption.
- [29:26]
A
Yes. All right, thank you. We are back with the call sheet. Craig, just as quickly as we posted our interview yesterday with the Paramount top lawyer, we have a ruling on the issue of whether to grant a temporary restraining order. The judge said she is indeed granting the TRO in the Paramount vs California case.
- [29:52]
D
But you thought this was possible, if not likely that there would be an initial 14 day pause.
- [29:59]
A
Yes, and that's exactly what we have, 14 days. She can extend it by another 14. And the interesting thing is that she has set a Aug. 3 date for the hearing on the preliminary injunction. Now that is the much more serious and interesting hearing because if that is granted, it means the judge believes there's a likelihood of success on the merits of the case. And the injunction would be in place for the duration of the litigation, which would be very bad for Paramount because obviously they want to close this deal before the ticking fee kicks in in October, which would cost them $650 million per quarter.
- [30:42]
D
And that money goes back to who? The, the shareholders.
- [30:45]
A
The shareholders of Warner Discovery because it was part of the negotiation. And you know, as we talked about with Macon, they're arguing that that would be irreparable harm to them. And the judge doesn't seem to be into that. Interesting. There was a 14 page ruling with this TRO decision. And my interpretation of it is it's not great for Paramount. I mean, it's still early and she is inviting argument on all of the issues. She does say that there has been a, quote, strong showing, specifically on the issue of wide release film distribution, which I actually thought was among the weaker arguments in the state's case. You know, remember there were three markets where the states claim that there is market inappropriate market dominance. It's television distribution, wide releases of films and the so called blockbuster releases of films. She's only focusing on one tier, the wide release of films, because that's all it takes is one to get yourself a trl.
- [31:48]
D
And do you think she is just basing this off of past mega mergers like Disney, Fox and is that data just too strong?
- [31:55]
A
She doesn't really tip her hand here. She's just saying that the presumption here of illegality under the Philadelphia National Bank Standard is there where the combination of these two entities would give them a. I think it's high 20s, perhaps even 30% of a market. So she's just saying, listen, based on what I'm seeing here, this invokes the Philadelphia national bank standard and we've got to deal with it. So I'm granting the tro.
- [32:23]
D
Well, so it felt like you thought this was going to happen. So now that it has, does this change your opinion at all on what you think? How do you think this will end up?
- [32:31]
A
It does actually, in my prediction. I'm not gonna predict who's gonna win because we have not seen all the evidence, we've not seen the arguments. That's what this preliminary injunction hearing is for. But I do think that the states enter this hearing at an advantage. They now see what this judge is looking for. And there's a very interesting footnote in the case of where she specifically says that the whole argument about market efficiencies based on streaming, you know, this entire market of television is now moving towards streaming. And this merger is pro competition when it comes to streaming. She is rejecting that argument, essentially saying, you can't make a argument about another market, the market for streaming. We're dealing with the market for these specific three markets that have been alleged and streaming is not part of them. Right.
- [33:28]
D
That's what Bonte said. He's like, we're not. That's not an issue we're focused on.
- [33:31]
A
Yeah, exactly. And it's a little bit more nuanced than that because it's basically just saying you can't argue that another market is efficient when we're litigating the efficiency of the market at issue. But it doesn't mean that streaming will not come into the discussion of what the market for television distribution is. If we get to that. I'm surprised because obviously Paramount went hard on this and the whole notion that streaming is hovering over all of this. Interesting that she would make that ruling that she doesn't want to talk about streaming.
- [34:02]
D
Could this just lead to a minimum guarantee of wide releases and blockbusters per year that parent Warner Mount needs to make?
- [34:09]
A
Well, yeah, you're getting towards the remedies and the potential settlement here, but we're not there yet. I think the Paramount side may have a little bit more fire under them to. To settle this now. But, you know, if you're Rob Bonta, maybe you are excited about that preliminary injunction hearing. Cause if you get that, then you have super big leverage over Paramount.
- [34:31]
D
And what do you think the odds are of that happening, the injunction?
- [34:34]
A
I don't know. I mean, I think they go into it with an advantage. That's all I'm going to predict. I'm not going to say whether who's going to win here. Hopefully when you're obviously you are at. You are not in your regular spot. You are off at the airport.
- [34:47]
D
I'm at a Matt Bellamy undisclosed location.
- [34:49]
A
Yeah, you are getting. You're off for some medical tourism for a week, but when we come back and it's August 3rd, we will have this to deal with and perhaps then we'll have a clearer picture. All right, that's the show for today. I want to thank my guest, Lucas Shaw, producer Craig Horbeck, our editors, Jesse Lopez and Stefano Sanchez and I want to thank you. We'll see you one more time this week.