Episode 35, The Atomic Number of brooming you can run for president in the US at age 35, it's also clear you can run for president at the age of 140. Fucking five. Jesus Christ. Enough already.
Pop, Pop, we have a new president. I don't like to be political, but have we the opportunity do we have the opportunity to embrace empathy, science and Jesus?
And why would I talk about Jesus as an atheist? Because Jesus started and finished with love the poor. What do I say to Jesus? Empathy and science.
Go, go and go.
Welcome to the thirty fifth episode of the show and today's episode, we speak with Tom Rogers, the former president of NBC Cable and the current executive chairman of Engine Media. He is also the founder of CNBC and former CEO of TiVo and an incredibly blue flame thinker around media. Tom and I discuss all sorts of things surrounding the state of play concerning media consumption and social media.
So, OK, what's happening after days of nonstop news consumption? Joe Biden was declared the president elect of the United States over the weekend.
Senator Kamala Harris will become the first woman Madam Vice President. That is a nice ring to a dozen and women of color to hold the vice president position.
And a more than 74 million votes. Joe Biden received the most votes in any presidential election, while Donald Trump became the first president to lose the popular vote twice and the first one term president since George H.W. Bush in 1993.
What happened here? What are some of the takeaways? 60 cents, 60 cents cost the president re-election. What cost 60 cents. That's how much cloth there is in a mask.
Simply put, covid-19 delivered the presidency to who I believe is the weakest candidate in 50 years. I think Joe Biden is a wonderful man. I think is a decent man. Voted for him, word for him, a terrible candidate. We shouldn't have people in their late 70s running for president. Buyology is not politically correct. The Republicans believe that the novel coronavirus listens to them, that if they say it's disappearing or if they show leadership in Moscow that the virus gets the memo.
No, it doesn't. And just as bad, just as bad. We on the Democratic side have decided that biology doesn't get the memo and we should run seniors for leadership positions.
Democrats felt that trying to get to November 3rd was like rushing or driving to an election with a blinking red check engine light. We were nervous, finally got here. Congratulations to everyone. Some other observations. A woman of color played a critical role in Biden's selection. And no, it wasn't Senator Harris. It was Stacey Abrams, also Representative Jim Clyburn, who basically delivered South Carolina to Biden. Keep in mind, after the first debate, the odds of Joe Biden winning presidency, according to betting houses in the UK, was a 800 to one.
And then it became very late, very, very early. What do we take away from this election? What is the mandate? There is no mandate. Republicans picked up seats in the House. Democrats basically repudiated or there was clearly a mandate to get orange Hitler out of office.
But there really wasn't a mandate. If there was a mandate, it was a green mandate and it wasn't around the Green New Deal. It was around marijuana, which won ballots kind of across the nation. Look for those stocks probably to have some sort of renaissance after taking a beating in 2010 and 2000 and twenty.
But let's hope that we all heal.
Let's hope that we all come together. Thought that there was a level of criminality in this White House that should absolutely be prosecuted. I'm not suggesting we prosecute the president for crimes committed during the office. I think that has opened up a whole ball of wax around political retribution. But no doubt the Southern District of New York is coming for the mob family. That is the Trumps anyways.
Hopefully, hopefully, hopefully we get a massive mandate and hopefully we get our arms around this pandemic. Speaking of arms around the pandemic, what else is going on? covid-19 vaccine is supposedly on the way. Pfizer announced its vaccine is 90 percent effective, though the study is still ongoing and hasn't been peer reviewed. The FDA needs at least two months of follow up data to make sure there are no harmful side effects. And Pfizer expects to have that data by next week.
Not only is this study still ongoing, but it's unclear how Pfizer's vaccine is working for different age groups and whether it is effective in preventing severe cases of the virus. Did the markets react prematurely? Look at what's happening here. Everything related to travel, basically everything that got hit hard in covid Cruises. Disney is skyrocketing, right? AMC Theaters was up, I think, 60 percent in a day. Why? Because we think that with a vaccine, we'll take to the roads again and we'll actually travel or actually go out and do stuff again, but not so fast.
This vaccine is not very stable. It requires refrigeration. It's a two dose vaccine. It's going to take a while.
The distribution and logistics here are not are not simple.
Despite that, hotels, cruise lines, movie theaters all soared while the tech stocks that benefited from stay at home orders, including Amazon, Netflix, Zoom and Peloton all dropped her. Pfizer's vaccine announcement, of course. Of course. Mike Pence, Vice President Pence tried to grab the mic and claim that it was warp speed that did it. Operation warp speed. No, no. Pfizer had nothing to do with operation warp speed. They took no money.
This was. An example of global cooperation, a company headquartered in some tax haven, the Isle of Man or some such, that's an American company technically, but collaborating with German scientists came up with this vaccine. You think that we would take a lesson from what is one of the greatest gifts to mankind, vaccines, and how we may have developed this vaccine to take our heads out of our asses and realize that we should be coordinating with, I don't know, Taiwan.
That has figured out a way to address the pandemic with about 60 deaths in a nation that's the population of New York where we've lost twenty odd thousand American souls, you think that that would set an example that science and cooperation and coordination are the gangster move? Let's play to our superpowers of species here.
We're good at this shit. We're good at that. OK, enough of that. We're busting into a partnership that piqued the dog's interest. Shopify and tick tock. Let's back up for a minute. Remember back in August when Trump signed an executive order that was supposed to ban ticktock from the US if its parent company by dance didn't sell to a U.S. company? And of all the companies to step forward, Oracle and Wal-Mart made a deal to own 20 percent of Tick-Tock Global.
We'll fast forward to now the band that was supposed to take place on November 12th was blocked yet again by a federal judge in Pennsylvania. The Verdure reported that this ruling came from a lawsuit in which three Tic-Tac content creators claimed that the ban would prevent them from earning a living.
Huh? Huh. Who would have thunk it?
These creators, with their millions of followers can earn anywhere between 5000 and 10000 dollars per video.
With my mouz, I would easily make between five and 10 cents a video for people would pay me not to see that thing called rythm.
You know who thinks I have rythm vodka? I love that joke. Get used to it. I'm going to use it a lot more. The judge ruled that the three tier talkers would likely suffer irreparable harm, irreparable harm if the ban went into effect.
Thus, Tock lives on. So why does it tick tock? Shopify partnership makes perfect sense. Why is this just so gangster with a capital G? We're talking sopranos like gangster, just like the dog. Thought Wal-Mart could leapfrog Amazon with Tic Tacs algorithm. A tick tock Shopify combination mating peanut butter and chocolate is set up for success.
Shopify helps Tic TAC expand its e-commerce ability while tic helps Shopify merchants reach new audiences. That is customers. Tic-Tac has over 700 million users across the globe and over one hundred million in the U.S. alone.
Fifty million of those U.S. users use it daily and the average person, the average Tic-Tac user, spends fifty two minutes per day on the app. That's what you call a big fucking asteroid. In our attention graph, Shopify reported its Q3 earnings earlier this month and revenue reached seven hundred and sixty seven million, which is up ninety six percent from twenty nineteen. Basically, they doubled the revenue. Wow. Analysts were expecting the company to only bring it around six hundred fifty eight million.
OK, seven hundred and sixty seven versus expecting six fifty eight. Hello Shopify. Shopify has a market cap of around a hundred and ten billion dollars mind blown. Do you know how much money that is.
That's the value of FedEx, Simon Properties and I don't know, throw in all of specialty retail.
That's just nuts. And other Shopify news. The company recently announced that merchants can now sell subscription products and offer post purchase up sales directly in Shopify checkout. Shopify is becoming like the e-commerce cloud. And where is e-commerce going? Potentially with Shopify and ticktock e-commerce. E-commerce.
They could figure out an algorithm that curates merchandises and presents cool little videos highlighting highlighting great products and small and medium size retailers on the Shopify platform. Can you imagine something you turn on? Well, yeah, I want shipping. Yeah, I want return Shopify. I figure that out for me. Yeah, I want you to, I don't know, buy my keywords for me. What else you can do on Shopify and.
Oh by the way, click this button, turn this on and in a I driven algorithm is going to figure out videos to highlight my products across the Tick-Tock user base.
Oh my God. Mind blown. Mind blown. The subscription ecommerce market is expected to reach a half a trillion dollars by twenty twenty five.
Think about this. This is so, so exciting. This is, this is this is what Wal-Mart Tick-Tock could be. But it makes more sense to be Shopify. Tick tock. If Shopify wasn't so goddamn expensive, I'd go buy some stock. That's one of those things. I hate myself for not buying that stock. I'm talking about Shopify for a long time anyway.
Anyway, congratulations to Shopify and Tic-Tac e-commerce ARCOM ARCOM for the dog.
Stay with us. We'll be right back for a conversation with Tom Rogers. Now is the time to figure out where you're giving your employees, clients, colleagues for the holidays, I'm going to make it simple for you. Wine access there. World-Class Wine makes for a gift they'll love.
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Welcome back. Here's our conversation with Tom Rogers, the executive chairman of Engine Media and the former president of NBC Cable.
Tom, where does this pod find you? I'm in Westchester County, outside of New York, nice sheltering in place.
So, Tom, we've known each other for a while and you're one of the kind of blue is clear blue flame thinkers in the world of media, having started very successful media companies and continue to be sort of a, you know, I thought leader around these issues. Give me a sense of cable, which is sort of your, you know, your end zone or your home home field. I spend way too much time watching cable TV. Last week I was expecting I felt like I was taking a three hour Saturday and then someone showed up.
So just kidding. It's going to be a four day. You know, you're used to elections where you kind of start watching eight or nine p.m. and by midnight, you kind of know what's happened. And this went for days or it felt like it just wouldn't. And I think I watch more CNN in the last four days and I've watched in the last four months sniping back between CNN, MSNBC, Fox, and then I would pull up The New York Times up.
And I thought CNN won the week. I thought they won the election. I thought maybe it's because I'm biased. I just like their anchors. But I thought their anchors were sharper. I thought the writing was more deft. I thought the graphics were cleaner. I think John King makes better love to a TV screen than Kornacki or Hemer over at Fox. I just I thought CNN has really had a moment, or at least I thought they had a moment.
And where I'm headed with this is the following news and politics are the only content, scripted television or not script I'm sorry, not scripted television, only television content that hasn't gone behind a wall. Do you see an opportunity? I guess business news has an either. Do you see an opportunity for let's broaden the scope, CNN or CNBC behind a paywall because it just feels like we have a melting ice cube here. Don't they have to do something?
Well, it's a it's a it's a great point. I do think to your first point that it went on for several days. One thing all media did well is condition people that we weren't going to have an answer on election night. The issue of media behind a paywall. In some respects, cable is behind a paywall. You can only get it by buying a bundle, which at the low end pretty much cost people fifty dollars a month, which in a world of ala carte television where you can get great packages of content for six dollars a month, it seems like a pretty steep paywall.
I think the issue for new is a great point.
I never really thought of it. That's the most expensive streaming video platform in the world as cable television.
And the point is that as the world goes to streaming services where all good entertainment program goes and people disconnect the cable bundle, we're going to be down from one hundred million satellite and cable subs probably in the next few years to half that. And, you know, there's a lot of implications for live television, both sports and news. But, you know, the view of sports is, well, you know, there are tech companies waiting to figure out how they can become bidders on sports product that the traditional players may no longer have.
The subscriber revenue coming in from cable and satellite to support and professional sports will just find a way to adapt to that, where viewers may find sports on different outlets than it currently is. But sports will continue on its merry way. But on news, those same subscribers, you know, that are discontinuing the bundle and news is going to have half of the subscriber base that it had. And the question is, what is that model going forward? Because it's a lot less clear how they rebalance their revenue streams when half the cable and satellite world or more disappears on.
So I'm fascinated with what I would call this failed synergy that wasn't realized between the telcos and content. I think AT&T put the sword and tell me where where I got wrong. AT&T acquisition of Time Warner is a failure. They'll end up writing it off. I think they should spin it again. But I think it was a failure. I think that I don't think anyone signing up for AT&T to get Sex in the City or, you know, Bill Maher on their phone, I don't see the synergy, just as I don't see the synergy between Verizon and Yahoo!
AOL. I think this was a mistake would with AT&T. Well, first off, do you think it was a failure? And would AT&T ever consider spinning Time Warner again? And is there a moment is there an opportunity? I look at CNN tied to the clock. A third of their anchors are outstanding, are third or great. Third are they are just to fill the whatever the six hours of, you know, to stay tied to the clock.
I think the clock is the worst thing about or the second worst thing about the cable bundle. And the worst thing is I can't get over because I'm largely immune or shielded from ads. How bad the advertising is on the cable bundle, which says to me, when I watch cable advertising, it's clear that the only people watching this are old people who are sick. It's just it's basically a running commercial, nine minutes of every 30 minutes on how much it sucks to be old.
And I got to think and then I look at the economics, I look at it and say, OK, they're getting somewhere between 30 and 60 Minutes to help me with ads on opioid induced constipation remedies are telling me that my legs are restless. And I think, OK, technology is stepped in. And give us give us the ability to say, OK, here, boss, here's a box and you keep 50 cents and I get 50 cents.
I get nine minutes back. It just feels like the timing is right. What do you think of AT&T potentially spending Time Warner? And I don't know if they do an auction of HBO because I think Amazon and Apple would pay just a shit ton of money for HBO and then put CNN behind a wall. It feels like there's just some short and violent reshuffling of these assets or prying them away from the telco. So Verizon, AT&T and their ventures in media, what do you what are your thoughts, AT&T?
I agree with you. That was a disastrous acquisition. Just to put that in some perspective, that in stock they paid about one hundred and twenty billion dollars for those assets. Compare that to Comcast acquisition a few years earlier of NBC Universal, which all in a couple of phases was twenty five billion dollars or about one fifth the cost. And what Comcast got was essentially an equivalent cable bundle of linear cable channels and a movie studio like Time Warner did.
But Comcast also got a broadcast network, not part of what AT&T acquired and a huge theme park. Also what AT&T didn't acquire. So five times more without those two core assets. And I remember talking to a number of directors of AT&T at the time who said to me when I questioned the price of the acquisition Oton, you don't understand. We're going to be able to package AT&T with HBO. And I said, but T-Mobile is doing that with Netflix without one hundred and twenty billion dollar acquisition packaging.
Those two things together have to do with having to make an acquisition like that. And, you know, obviously what's going on is you've got a whole bunch of people who are now getting HBO max through AT&T for free. Not a whole lot of value creation there. And only about 15 or 20 percent of the people, HBO being the key major asset, you know, company redefining element of the media strategy and this whole HBO max launch. I think maybe 20 percent of the people who have HBO and have the are entitled to turn on HBO Max as part of their subscription and get the broader offering.
Only about 20 percent have done it. And so you got to wonder what is going on there in terms of the thought process that led them down this path. And, you know, the amount of money that I think they'd have to spend on programming to really drive that into a major global force that would be transformative as a media property in some way. Forget about the synergies with the phone side. AT&T runs into a bunch of liquidity problems, which begins to question the dividend.
And once the dividend on AT&T is put into any kind of question, not that they're there yet, but if it does at some point. And then there cook, that's the one thing that's holding up their their stock price. I wonder if at some point a man gets twenty seven or twenty bucks, they've already lost the value of the acquisition. Investors have basically written off the acquisition for them, the stock since since they acquired it, the stock.
I think it's down by the amount of the acquisition. And, you know, when Rupert Murdoch and Jeff Bewkes both decide to sell an asset class in the same quarter, that means you want out of that asset class. I mean, those guys, you don't want the other side of a trade for the those from those two minds. Let me give you a sense of what I see going on. Tell me where I'm wrong and tell me if you were advising Comcast or if you were advising a recently spun Time Warner what you would do or you were in charge of HBO.
I see that big tech. Let me use your analogy. The Germans had at the end of the war or towards the end of World War Two, they had better soldiers, better machine guns, better planes, better morale, better officers. But we were producing thirty eight gallons of gasoline because we cut off the supply routes. We had thirty eight gallons of gasoline for every one that we overwhelm them with gasoline. We could fly with our we would tell our Bradley, our shitty Bradley tanks to just get near the Panzer tanks but not close and just harass them until they ran out of gas.
We just overwhelm them with logistics and supplies and cheap gas and I see Amazon and I see Apple coming into the space and the entire media ecosystem. This unbelievable business, unbelievable business fueled Southern California has been a 24 hour non-stop commercial for Western values. Good or bad, an unbelievable business is being feature rise because it's being overrun with cheap gasoline out of Cupertino and Seattle. That it is almost I must say, it's impossible, but it's going to be a shitty place to work or invest for anyone in media.
That's not a big tech. I just feel as if the whole thing is being this enormous industry is being feature ised to sell more handsets or more paper towels and that the traditional guys can't compete because they're not monetizing the Big Bang Theory by selling more paper towels or more or more handsets. Is this industry just kind of cooked?
That is the first time I have heard the World War Two analogy as applied to the cable industry. And that's great.
And that's how old I was, really. I love World War two, and you're younger than I am, and I would never have thought of it.
I think you make a great point. First, let me say, I think the cable industry blew it, really blew it when they had an opportunity to take linear traditional channels and take On-Demand programming and put it together with nascent streaming services at the time, like Netflix and Amazon and in Wild Wild West of video and put it together under one roof with one interface and distinguish themselves as the closest video could get to what the music industry ended up being. The music industry was run over by digital well before video was, and what emerged from that was the best possible consumer model that could possibly have emerged where you can get every piece of music ever produced in the world under one roof, where you can personalize it and customize it to your own taste, carry around in your pocket and you have the entirety for a very reasonable monthly sum, the best possible consumer experience.
And cable and video saw that happen. And they basically said that's not going to happen to us. We're not we're going to be in a position where one centralizing force like Spotify is going to be able to license all content and put it together under one roof. So they now have set down this path of we have a bundle, we have streaming services, we have different devices in the home. You've got a, you know, cable box that get some of that.
You need a streaming box to get the rest of it. And we still have something that is so far less elegant than the music world has been able to put together. And now it's going to be up to the consumer to figure out how are they going to vote for a better experience. Now, a couple of things need to happen to your point on Cupertino. I don't really think that Apple, at least based on what they're doing so far, is going to be a transformative video company in terms of the content it puts forward.
They are not showing either the amount of money. They certainly haven't created a price value. Reception where people are really stepping up and wanting to pay for Apple TV, most people still get it for free, packaged into an Apple device. But if you were thinking of somebody who had leverage through device and other resources to assert enough power over an industry, to be the ones that create that elegant interface that Spotify of the video world experience, that way you don't have to figure out what's on what when, that you could personalize and customize television in the way Spotify does it for music.
If I were Apple, that's where I would aim. And if I were Apple and I did that, the power that would flow to you as the holder of that interface experience would be great. You know, Netflix has a wonderful interface, but it's just within the Netflix world. Amazon has a pretty good one. It's just within that world. HBO, Max does not have a very good one, but still it's just within their their walled garden.
Somebody's putting that together into a wonderful experience would really do it. Apple's begun to do that. Some Amazon has begun to do that. Nobody in the tech world yet looks to me as if they're really putting the shoulder behind that, that I think some form of real dominance would flow to if they did. The player that you didn't mention between Seattle and Cupertino that I think becomes by far the most envious media company, the one that is going to be beyond anybody's ability to catch is Netflix.
And I know many look at it and say, well, you know, Disney has a shot at that. And, you know, Disney has a global brand and Disney has great content. Nobody is going to be able to put together the model for a media company in the future like Netflix. There's so much they're so. If you think about I mean, let's look, I love the analogy of music because I think about the real innovation, the cost, the cost the industry in the short run, but may have been the right thing in the long run.
Was it said, all right, if I'm going to be born in the USA, I don't want to pay 15 bucks for the album and the CD. I want to pay three bucks for the two or three songs. They let me disarticulated and get to the white meat that they gave me 90 percent of the value for 30 percent of the price. I mean, was just an unbelievable value accretion to the consumer because there are so few albums, you know, backs Morningside.
Every track is great. That's one in a thousand. Even the best albums. I've got a two or three hits. Right. And they let you they let the consumer take back that surplus tax. They they unbridled the technology steps in the entire world in one place. And I think that you said it struck me is the tax that is now being levied on households with video and all of these different streaming systems. Now, it's just it's a shit show.
It gets very complicated, very fast with passwords and everything. And it feels like someone needs to come in and be the aggregator. I love the idea of Netflix. I always thought Netflix should buy Spotify the ultimate subscription bundle, and they just kind of run away with it. It seems to me they have the cheap capital or the cheap gasoline that Amazon has. Netflix, you're bullish why?
Netflix is spending 16, 17 billion a year on content and probably on its way to 20 billion in the next few years. And it's the only player, I think, that has clearly developed pricing power based on the level of engagement it gets. Everybody's focused in the subaccount. No Disney plus. And it's OK. Yes, it did a nice job with launch. It's getting subs, but subs alone is really a small part of it. What you've got to do is get engagement.
What has two thirds of those streaming engagement put together? Netflix, YouTube and Amazon. You get down to Disney, plus you get down to HBO MACT, you got less than five percent of the engagement across streaming. And until you really are powerful engagement force, where that perception of price value then really begins to take off and give you pricing power. So if you're spending 20 billion on programming with pricing power and you know there are two hundred million global subs on their way in the next few years to three hundred million, what is three hundred million?
That's subs. When you think of the families in terms of the number of viewers they have at three hundred million subs, over a billion people watching Netflix on the planet, then you're a Facebook type proportions. In terms of your touch point of viewership, it's going to be very hard for anybody to get the programming power, perception of value, pricing power and the number of touch points that that they bring forward. So they're in a category by themselves.
So I want to I'm going to ask you about Disney plus, but I want to outline a vision. I don't think anyone can go toe to toe with Netflix just based on content content to value that ratio. And you're right, Max Disney plus or not as much Disney plus, but Apple, no one's really paying for it. I mean, they're announcing numbers that don't really mean anything. Right. Are very few people are paying for it. Is the opportunity for Disney.
I look at Disney and and trades it it's gotten the stocks gotten hit pretty hard because of covid in the parks. But could Disney move to what I call a recurring revenue bundle where they say, OK, we're going to give you a Mandalorian, which in my household is a is a must. We spent three hours setting up Disney. Plus, it wasn't easy because we had to see the Mandalorian. If you have boys at home, you have to you have to have Disney plus and they roll in exclusive access to their theme parks on specific days, exclusive tours of galaxies edge at the at the park, exclusive access to Star Wars themed cruises.
And because we know you're watching the Mandalorian over and over, we we send you the Yoda doll before you even know you want it. And we charge you any family, Disney prime, if you will, fifty bucks a month and start leveraging their terrestrial assets, which Netflix doesn't have, which Time Warner doesn't have, and basically force every family over a certain income level in Western Europe, in the United States to sign up for a much, much bigger bundle and then take Black Widow out of the ecosystem and forego that half a billion dollars in domestic box office.
They're are hoping to get in in China and put it on Disney plus and start really pulsing. The value around this bundle is I think Disney could be the one that strikes back. I think Disney has the assets. They just have to string them all together and cross the chasm into sort of an Amazon Prime like mega bundle. Do you think? Do you. I think that works. And do you think they'll do it? One, I think they're much better off if they pursue a bundle strategy.
You know, when they announce Disney Plus and then Hulu and ESPN Plus, all those separate packages, they said the right thing. Consumers to choose. The whole breakdown in cable was that it was a bundle and people couldn't buy things all apart. So we're not going to recreate that issue for people who just want Disney plus and have kids in a household and don't want Hulu and ESPN Plus, I think that's fine as a consumer philosophy, but as a business proposition in terms of maximizing value for Disney shareholders.
Just just on the television side, before you get to the bigger bundle you're talking about, they are putting very little shoulder behind Disney Plus, Hulu and ESPN Plus as a bundle that people should really be focused on as compared to the other streaming packages out there other than Netflix, a good price for a bundle at 12, 13 dollars. And it's just not being pushed in the way you would think it would be. Part of that is the incentives within the Disney management structure.
You know, they made a big deal about a reorganization where they ended up with this reorganization that got ballyhooed as a whole bunch of new focus on driving streaming future ended up with the programming people making decisions as to what platform the their content would go on, divorcing from the people with the personal responsibility, from streaming the very content decisions that they need in terms of how to maximize the value of streaming. So, you know, it just sounded like an incredibly awkward reorganization if your real goal was to make sure the entire company was focused on building future value, which I think goes to your point on the bigger bundle where you've got to do to focus management incentives in a direction that would drive toward that is totally different than anything that the company is currently organized to accomplish.
And I think that's the problem. And it's it's it's why Netflix will continue to fly in its own airspace, because it wakes up in the morning doing one thing. How do we please consumer with a streaming service that puts together as much programming as possible to drive price value proposition that is going to continue to fulfill our mission with a Disney and the traditional side and the news side and conflict in terms of resources, conflict in terms of management organization. It's incredibly hard to compete against a pure play when all those dynamics hit you every day.
And I am sure Tepic and is is sitting there having to resolve disputes on a constant basis of who does what to whom, when and who's gets a call on what. And under that, if you don't take away the incentive for the big theatricals to be released to movie theaters and continue to drive that business, if those incentives still are sitting there for management to have their big near-term paydays as opposed to long term growth of a streaming asset, you're never going to course correct.
On that point, I feel as if they're kind of coerced. It's a shareholder problem. I think one of the better things that's happened to Disney is Dan Loeb, who he's got in there and said canceled the dividend and double down on content and move towards streaming and try and move towards this bundle that that you've got to figure out a way. I believe Disney could register a decline in revenues of 10 to 20 percent. And they would by taking all their content out of typical distribution and double their share price if they could come out with the most expensive bundle that included all these digital and non digital assets, which I think is their point of differentiation and what is arguably the best library out there.
I think the stock would scream if they were announcing, yeah, people are actually paying twenty five bucks a month, not not pretending to pay five nine ninety nine a month, but actually paying twenty five bucks a month and are signing up hundreds of thousands more now. So I think the stock would take off. But the incentive structure right now, is there some guy or gal running Warner that's going to get a three or five or ten million dollar bonus based on how well Black Widow does in China in theaters.
And it really feels as if the compensation schematic and the shareholders are getting getting in the way.
So you have you have probably a better nose for what's next in media. You're credited with the founding of CNBC, MSNBC. What media company would you start now?
What would it look like? Well, it's a that's a great question. And just to your point on programming, before I go to that and Loeb, I think. All right, in terms of they need to put more money into programming, I think right now the budget growth that Disney is looking at will get one new show a week on Disney. Plus in the next four years or so. That's the pace they'll be doing at Netflix with their programming budget will be introducing a new movie or series every day.
And that that's the difference between what they took from Netflix and instead, you know, does Disney have the resource to course correct on that? Yes, but just one other thing on Disney with to just kind of put a point in some of my skepticism before Disney Plus launched, there was the Disney Channel and the Disney Channel had Disney programming for kids. And that Disney Channel, just like Nickelodeon, was losing audience at a 20 percent or so year over year clip for a couple of years.
So before that plot emerged, you had this issue of where kids really voting for Disney programming being so unique that they would flock to it wherever it was. No kids were finding it on YouTube. They're finding it on Netflix, they were finding it elsewhere. And so there is something unique about these big blockbuster, major animation, major Disney films that they produce eight or nine of the year. That does not make for the future of massive valuation that people are expecting at Disney from a transformative digital strategy.
And people have to come to terms with that, as opposed to getting lost in the magic of the Disney brand, being in itself, being able to point to a different distribution outlet and saying that in itself makes massive new value. Onto your onto your other question. Rogers Media, what is it? Well, I've always been partial to news, not that I don't watch my share of entertainment programming, but I've always been partial news and news is going to need a new model to your earlier point about where does it go?
And I think there is an opportunity to do for news what Spotify did for music and what Netflix did for entertainment, and that is to create something which is an all encompassing approach to being able to access news and information content and not just the the the live channels, which somehow are going to you know, it's still a crazy thing here that we're in a world of la carte distribution of you can buy Netflix for twelve dollars and you can buy Disney for six dollars.
Go out and say you want to get a new bundle of channels. You can't do it still. I mean, the bundles breaking down. And if I said, you know what, I'm a news consumer and I want CNN and MSNBC and Fox and Bloomberg, I can't get that yet. And T-Mobile just came out with their new fangled package and brought it down to sports and news you can buy. That was the first just to be able to buy sports and news in one place, live television.
So we got a long way to go on a couple.
Bloomberg's announcer taken, which is obviously a very niche product, but they said they're going to go behind a wall and also as Apple trying to do that with their news product.
Well, yes and no. I mean. The sorry history of the magazine business, which I spent four years in trying to come up with new models for how a magazine industry, which was clearly going to face a world of pain as digital emerged and trying to get the industry to do something about that. And they finally, after a number of years, put together an industry wide consortium of magazines so you could buy the entire bundle of a couple of hundred magazines for like you were buying a cable bundle of channels.
But they marketed it in a way that every all of them were scared that their own magazine was going to get cannibalized. So the thing most people in the magazine industry didn't even know it existed. And then they sold it to Apple. And I thought, OK, Apple's the one who has the ability to step back and create a industry wide news bundle that would really make it easy to take glossy information sources and create a Spotify of news to access.
And it's a very underdeveloped product given the potential here. And it's mostly focused on textual information without what I'm talking about, which is a video bundle for news. You think of all the podcasts that are out there. Think of if somebody was interested in the future of media and did a search today to find the future of media. You know, this podcast wouldn't come up. There would be no basis for being able to do it.
Here's Google the you know, this one word, this one where if somebody was knowledgeable enough to know you and I appeared discussing this, they could find. But if you tried to find the element within a podcast that discusses can't search, you can search or not search video. You cannot search audio, you don't there is no composited way to really offer the Netflix of news business news podcast information searchable at a micro level to really be able to retrieve in a personalized way exactly what you want from the information universe.
If I was going to create something that was truly about the future of news information media, that's where I would go. Would it be ad supported or would it be subscription? I think it would be subscription or, you know, there's nothing wrong with lowering your subscription price and allowing people who don't aren't bothered by ads. And you and I are bothered by ads. So it's not for us. But I got no problem in a world of shrinking advertising inventory to people who have hybrid models that have that or, you know, multiple ways to view.
So it could be could be both. It just it feels as if this industry there has never been an industry that has so many examples of the innovator's dilemma, where you have an industry that says we got to hold on to our current compensation schematic, we have to hold on to our current business model. We have to hold on to our current revenues, even if even if it means in two, three, five years we're going to be worth a lot more.
We can't pull Black Widow out of theaters in China. We can't take a dip in revenues by going to subscription. We can reduce the content to 20 minutes instead of 60 minutes on a slow business day because it reduces the ads, even though that's what really what the consumer wants. The consumer wants non-linear content as much. It just feels as if every example is how do we hold on to our legacy assets versus embracing the future. And it was Tom, last question.
I was asked this of a very successful people. I know you. I don't know you well, but my sense is you are kind of living your best life. You you, you know, have a lot of influence. I think you make a very good living and you seem by all exterior measures to seem pretty happy. What advice would you give to your 25 year old self?
Take the risk. My my take the risk strategy, which in the scheme of things wasn't so much taking a risk, but it's the thing I always point to. Came out of law school, went to a Wall Street law firm for a couple of years, and I said, you know what, I got to be where the action is. I don't want to be a junior associate looking up at a hierarchy where my influence in the world is is minimal.
I wanted to get the Capital Hill. I wanted to be, you know, at 26 or 27, somebody writing laws, having people from FCC chairman to CEOs of networks, having to sit down with me about things they were interested in. And it was the smartest thing I ever did because at a young age, gave you authority, gave you responsibility and anything that gives you an ability to, at a young age, sacrifice, pay, sacrifice, prestige, go where you can make impact, where your influence at a young age is is felt.
That is what is going to give you the best possible opportunity to figure out a path that you're going to be most happy with if you're a gnome within a big organization, even if it's a big one with a great name. And it's fun to tell people you work at X, Y, Z company because everybody's heard of it. Make sure that you're thinking about how you are going to create your own path by having created a focal point for your influence as early as you possibly can.
Tom Rogers is the executive chairman of Engine Media and the first president of NBC Cable. He's also the founder of CNBC and the former president and CEO of TiVo. He joins us from West Chester. Tom, thanks for your time and be sure.
Thanks for having me, Scott. Always a pleasure to listen to you.
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It's time for officers as part of the show where I answer your questions about the business world, big tech, higher education and whatever else is on your mind, if you'd like to submit a question, please email a voice recording to officers at Section four dot com.
First question by proxy, Ruben Halper here. I'm an American expat living in Auckland, New Zealand. I know you love Australia and Sydney, but I got to say, you've got to come check out New Zealand once the borders reopen. So my question is around Apple potentially getting into search? According to a number of sources, Google pays Apple up to 12 billion a year to be the default search engine on iOS. If that's true, that represents about 20 percent of the net income of Apple in 2019.
Getting into the search game would be a double whammy in that they'd be forgoing a significant revenue stream while also increasing OpEx and CapEx in terms of engineering costs, data center upgrades, et cetera. So my question is whether you see Apple getting to search as purely a defensive move with potential government regulation on the horizon, or you do believe that users will essentially pay more for a privacy centric, presumably ad free Apple version of search.
Thanks, Ruben from Auckland, New Zealand. And congratulations on your great judgment. I know I have this kind of cohort of friends who are very successful and they have their sort of ultimate go bag, and that is they have been buying places in New Zealand for the last decade and spent a lot of time down there. And basically, in addition to the fact that supposedly the last radiation cloud gets to New Zealand, in addition to being sort of a little bit of a weirdo survivalist mentality for billionaires, it is supposed to be just a fantastic place to live.
So Apple and its search engine, let's talk about the downside. They lose 12 billion dollars. That's real Kabbage. That's real Kabbage. But but we're talking about a company with a market valuation of two trillion dollars. And here's the lesson here. Think about your value as opposed to your revenues. Revenues is a key driver value. It's a key driver. But what is also a key driver of value right now, the percentage of revenue you're getting from subscriptions, specifically, Apple has doubled its stock price in the face of meddling, earnings growth and no revenue growth.
Why? Because they've gone from eight percent of revenue down through subscription to 24 percent. And what's the other gangster move and their move to subscription verticals specifically? Specifically, their brand positioning is all around privacy.
And what happens what happens in a mature technology sector, which is search. In other words, it really hasn't innovated a hell of a lot in the last three to five years. As Tom Rogers pointed out, they can probably get 80 percent of Google's search for 10 percent of the price. And then what are they going to do? They're going to say, we're going to take you to the best place, the best source of information based on your query, not to another play or ad or another page that we Google can further monetize because we have a ninety three percent monopoly.
And what's going to happen? More people are going to turn to iOS, more people are going to sign up for the Apple bundle, which will include which will include an iPhone and air pods and an iPad. And yeah, the revenue may go down three five eight dollars billion, but guess what?
Their stock price is going to go up. This reflects this reflects where the business world is headed, and that is into recurring revenue bundles, vertical and for technology. The two greatest brand moves in the last 20 years all came from the same company. The first was in 2002, and Apple decided to zig while everyone else was zagging. And they went into this dying medium called stores because point of purchase.
There is a lot of branding going on where you actually have physical contact with the brand is important, is important, and people are having physical contact with phones and shitty distribution to AT&T and Verizon stores with a guy named Roy with a t shirt, logo, t shirt and bad carpeting.
And instead they go into these beautiful temples to the brand called Apple. That was the gangster brand over the last twenty years, recognizing branding was moving from pre purchase to purchase the second gangster who was positioning Facebook and Google by doubling down on privacy. Why was that so genius? Because if you survey people at Apple and say, what is this store? What is the label we want to stand on in terms of our brand, they'd say design or creativity or think different.
No, fuck that. We're going to go for privacy because it deposition's our competition genius. And what's the next leg in that privacy stool? They're going have a search engine. They're going to be more vertical. It's going to be privacy. You're going to it's not going to pull data points. It's not going to let your data. It's not going to give you search returns. It's clear that it's looking at you from every which way and trying to get more money and take you by the heels and shake you upside down like Android does.
This is a great move.
Apple added added the value of Airbus when they announced that they were thinking about their search engine, despite the fact that they would forego that 12 billion dollars. New Zealand all my brother Reuben. Well done. I will absolutely look you up when I'm in New Zealand. I got to get down there. I got to get back down there. Anyways, congratulations and thanks for the question. Next question.
Hey, it's Ali calling from the UK. We hear all the time that Facebook mistreats. Its uses, but that's the result of a business model where you have to sell your users to advertisers, nobody ever provides a solution. Facebook could. Realistically, I have thought about other business models, both in terms of Facebook already makes roughly 20 dollars per user a year. I don't think a subscription model is the answer. If you were speaking directly to Mark, what business model would you suggest that would allow him to maintain Facebook's scale and dominance without screwing his users?
Thanks very much, Ali. So I can't think of an individual who's less likely to listen to me than Mark Zuckerberg. I think Mark Zuckerberg is the most dangerous person on the planet, I think is a sociopath. And I think it brings to bear all the dangers of technology where you have an individual in his 30s. His upbringing was privileged, dropped out of Harvard. His first professional venture was evaluating women based on their physical appearance, who screwed over his close friends in college and then royally fucked over his best friend just out of college and has a platform that is circulating content that results in.
People being pulled out of cars in India and hanged on the spot has absolutely delegitimized the sanctity of our elections and lets hate spread like there is no tomorrow. So congratulations, Mark Zuckerberg. I know it's difficult for me to imagine how this guy sleeps tonight, and yet I'm pretty certain he sleeps really, really well. So I don't think he's going to listen to me.
What's the business model from a shareholder standpoint? You bring up Facebook and shareholders benefit WhatsApp. Incredible. They haven't innovated, in my opinion, around that. I think Instagram is the fastest growing visual platform in the world. I think that would trade strong. And then Facebook is for all the old people who are on social media. I think this company has three separate companies would be worth more. That would be my business strategy or advice. The rest.
The rest, I don't know. I don't think I don't think he's going to listen to me. I think this is an individual who is broken. By the way, anyone heard from Sheryl Sandberg? She's clearly off trying to manicure her image.
I think she's figured out, OK, everyone realizes that I was lying and taking billions of dollars to basically serve as lipstick on cancer.
Anyways, let's let's try to bring the pace up here a little bit. Ali, thank you for your question. Love. The United Kingdom parents, British and Scottish, and I'm thinking about moving to London in eighteen months. So let's let's get together for a pint anyway. Thanks. Thanks for the question. Next question.
Hey, Prof. Gee, this is Chase from Austin, Texas. I'm 34 years old with a wife and a two year old. I would love to be an entrepreneur once I find a good idea with a strong product market fit, but I worry that I won't be able to put in the grind. You suggest people do in their 20s, as I'm the breadwinner of the family, I don't want to miss my child's life as it goes by. Are the walls closing in on me here at thirty four, or do you think there's a way I can still achieve entrepreneurial success?
Chase, thanks for the thoughtful question and congratulations on your wife and two year old. This is a stressful time in your life and it's a time that you and your wife will look back on in twenty years and treasure. And my first piece of advice is take a ton of pictures. I have these videos of my oldest running on the beach when he was two, and I bring these things up and it just it gives me just so much comfort.
And I just thank God that I took these videos. They're literally the most important thing in my life is these videos I have of my two year old son and then his younger brother running on the beach together. It just I don't know. It's kind of the first time in my life I ever thought, OK, I get sort of get why I'm here. But that's not why you dialed in entrepreneurship.
A lot of it's situational and a lot of it comes down to economics. And I don't want to be and I'm not going to be the Hallmark Channel luncheon speaker at business school telling you to follow your dream and to take risks. And Tom said, you know, he took a series of non-fatal risks.
I think you have to be I think it's healthy to take economic responsibility for the household. And that is a series of trade offs and discipline. It's trade offs around having a discipline to work really hard and maybe spend less time with your family than you otherwise would like. And I don't think there is a I think balance is a bit of a myth if you want to be successful.
And also, I think you have to be very sober about the risks involved in starting a business. You can be a good person with a great idea and lose it all.
And it is incredibly stressful. One of the reasons I was able to start a business out of business school is my partner had a full time job and could pay the rent while I went off and played in traffic.
And if you don't have that and you're the sole breadwinner, just ask yourself, what would it mean if the business, like most businesses, small businesses, didn't work out, could you endure that sort of stress?
Could you endure that sort of economic strain? And if the answer is, yeah, you have some shock absorbers, you have some other sources of income in your life or you have some. Money saved and you wouldn't be devastated emotionally or financially if the business failed, then fine, go for it. I'm an entrepreneur. It's been great for me, but there are some difficult moments when you are responsible for others. And I think all men should take economic responsibility for their household.
And it sounds to me like you've done that. And that means making sober, honest decisions that involve tradeoffs. And I don't know your situation, but be clear, starting a business is risky and decide if you can really endure that stress or if you have a good job as a breadwinner and you want to double down on that and maybe wait till you have a little bit more money saved up. I know that's not easy, but I think it's situational.
And I hate these knee jerk reactions, I should say. Where? Oh, yeah, start a business. Take a risk. Life is more complicated than that. Your first job, your first job is to create economic security for you and your family.
Thanks for the question. Odds are of happiness, so covid-19 cost the president the election, and it just seemed as if this total lack of regard for the virus, lack of respect for the virus of the administration, only hammered home just how incompetent and strange these people are and what science deniers they are.
Hey, yeah, we don't need a mask. What do you know? I get Kobe. Can you imagine how much President Trump's covid-19 adventures in covid cost the nation?
Can you imagine what kind of what kind of stress Herman Cain's wife and family feel now that he's dead after catching covid-19 at a Trump rally? Oh, yeah, that was worth it. Or Mark Meadows, the chief of staff, or Ben Carson or Hope Hicks. I mean, what village fucking idiots?
Some people can't avoid covid-19. Some people have to get in a goddamn Uber car with their Diet Cokes and their diabetes medication and drive people around. Some people have to head to work as some people have to be essential work or some people have to be on the front lines and hope that their PPE equipment staves off or protects them from the virus.
But if you have the luxury, if you have the luxury of taking certain precautions and for God's sakes, you're being a poor citizen, in my view, when you don't, it's not the fear.
It's not that you should be afraid of contracting covid-19.
You should be afraid of contracting it and passing it to someone who is vulnerable to be a node of despair, a note of despair. We all need to be good citizens and not be nodes on the geometric spread. Well, we need to be is nodes of hope, nodes of repair.
What does that mean? I think a lot of us are gaining a lot of traction and covid whether it's we've readjusted our lives, we've reconfigured our commuting, we've made progress professionally.
There's some people out there right now who are winning. There's some people who have made progress in their professional life.
You need to be a node of prosperity. You need to be a node of empathy.
How can you take if you look at your professional life, if you look at your personal life, if you look at your economic situation, if you look at your currency and the marketplace, we don't like to say this out loud, but there's a lot of people out there who have accelerated through the pandemic will become a node of prosperity, share some of that upside, give people bigger bonuses, help people make a connection.
Do you know someone looking for a job?
Take some time, express affection and admiration and be a node or prosperity, be a node of joy.
Super spreaders arm people. Their events, joy and prosperity are people. Their actions take to action. Move to action. Our producers are Caroline Shagan, Andrew Burrows, if you like what you heard, please follow, download and subscribe. Thank you for listening. We'll catch you next week with another episode of the program from Section four and the Westwood One podcast network.