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Discussed in this issue: Jeff Sagansky, Melissa McCarthy, Dana Walden, Tosca Musk, Kevin Mayer, Bob Chapek, Jessica Reif Ehrlich, Kevin Beggs, Rick Caruso, and a Scientology E-Meter.

But first…

Runner up: Rich Gelfond, the IMAX C.E.O., for capturing $62.7 million of the Top Gun gross, and about 13 percent of all domestic box office for the film so far ($40 million).

Runner up: “We have never had this level of information and data since the media business was started. So is it remotely equitable that the producer gets bought out in perpetuity only because these streamers/studios have colluded to prevent you from enjoying the backend?” –Also Sagansky, in the same speech.

Second runner up: “The creative community—the producers, writers, actors and directors, and dare I say the talent agencies—have to go to the Justice Department and Congress to argue against this anti-competitive behavior.”
–Still Sagansky, imploring a push for federal intervention.

A little more on this…

As someone who has written about the value shift from creators to distributors in the streaming age, I find it kinda hilarious to see people up in arms after Sagansky’s speech. It hasn’t exactly been a secret. Netflix, and then the other companies, successfully convinced the agencies that the “cost plus” model was great for talent because they get more money up front, so why risk a potentially unsuccessful project? Plus, bigger buyout deals mean bigger agency bonuses this year, and guilds that could say their members were increasing their take-home pay this year.

But, as Sagansky noted, those creators “get paid just once upfront—10 or 20 percent more than your usual producer fee, and would never again get paid for all those billions of views, all that relicensing revenue, all that advertising revenue that was embedded.” The brass ring of ownership—the Norman Lear money, the Aaron Spelling 123-room-house money, the Tom Werner buy-the-Red Sox money—that’s almost impossible to achieve in the current TV business. No wonder agency phones were ringing so much after Sagansky’s comments.

For those interested in the benefits of profit participation vs. buyouts, I’ve discussed it here and here and here. Last year, I even suggested a return to some version of the fin-syn rules that prevented networks from owning production studios. But I knew then, just as I know now, that that’s never going to happen, at least not in the current political and regulatory environment. Could you imagine the Capitol Hill reaction if Hollywood people started asking for financial relief?

If you think about it, the agencies were actually out front on this issue with their owned-and-operated studios, which were shut down by the Writers Guild—well, not shut down, but a forced divestiture of all but a passive 20 percent stake—due to conflicts of interest. The goal of Endeavor Content and CAA’s Wiip was to wrap production infrastructure around talent to turn them into studios that could own their shows. It was a work-around to combat the trend toward fully-integrated global streamers owning everything—with the agencies sharing in that windfall, of course. Those companies are still out there, and, as we discuss in the conversation below, there will always be a need for high-quality content. You just need a ton of leverage these days to get paid fairly.

Plus, the consumption of TV also isn’t quite the same today as during the heyday that Sagansky remembers. Series don’t generally last for more than a few seasons, the cost of production is astronomically higher, shows don’t repeat as well (with exceptions), and the business these days generally rewards the higher-quality content, rather than the mass producers for the masses.

So yes, the distributors (Netflix, Apple, Amazon, Disney) are becoming more self-contained and global, and that’s a bad thing for talent. What’s not as clear is how to fight back. I’m not sure I totally agree with Sagansky’s run-to-the-Feds argument.

Kevin Mayer: There are synergies. We’re going to keep the creative energies and the distinct creative approaches separate. But just like at Disney, you buy brands, and the monetization can be centralized—distribution, sales, some of the production facilities and production financing, H.R., all the back office stuff. But [creatively] there is some synergy between the two groups. Reese Witherspoon has a great idea for a kids book called Busy Betty. We're going to make that into a series and she's working directly with Moonbug to bring it out on YouTube. There is a tight integration between these companies.

Belloni: The market is really starting to question the trajectory of these global streaming companies. Kevin Beggs, would you say that’s a vindication of the arms dealer strategy? Lionsgate is spinning off Starz, and that will leave you a pure arms dealer. You think the current market is an opportunity for that approach or is this just a blip?

Kevin Beggs: I think it's a little bit of a blip, in some ways. The pure arms dealer approach is proving to be really smart. Sony is sitting atop the smart list right now. We've had the best of both worlds with Starz as a partner and first mover, but we’re not obligated to only work there. We have shows on 25 different platforms.

But our job is to find hits. There's a lot of conversations about the walled garden. They go up around these big companies, and, in general, they would prefer to keep everything in-house if they can. But the hits aren't always there, despite 200 overall deals. We have Ghosts with CBS and it's a fantastic, successful comedy coming from our partnership with the BBC, and underlining the importance of I.P.

Belloni: But the point of vertically integrated media companies is to not have to buy from studios like yours. Yet they do. Is it just talent, or what is it that a content studio can bring to the table that's going to put it over the top?

Beggs: It’s talent, it’s timing. It’s no different than the broadcast world was, or the larger cable world was. Somebody’s winning, somebody's struggling, somebody is trying to come back. We're most interested in the challenger brands that are in comeback mode. They have huge needs. When we placed Weeds with Showtime, nobody would work at Showtime, including Paramount, which owned Showtime. That was an opportunity for little Lionsgate. I'm sure I was not the first call on that agent’s list. And I didn't take his call for like three days because all I remember from that particular agent was that he yelled all the time. But it worked out because at that moment, they needed us.

Mayer: Walled gardens aren't so much that the streaming services don’t buy outside of that ecosystem, it means they won't sell outside. It guarantees access to the parent company's product. It’s not sufficient, typically, to fill out the entire streaming service. Hulu was part of the portfolio that I ran at Disney. That was majority-licensed content; even Disney+ licenses content from third parties. That's why independents are so valuable. It's the only source to buy great product, because the big guys aren't licensing. And that's part of our thesis.

Belloni: Jessica, what are you hearing about the investor appetite for streaming businesses? There’s so much doom and gloom right now.

Jessica Reif Ehrlich: We know what's happened. Netflix came down from $700 [per share] to under $200. Disney's down about 40 percent. The one that’s down the least of all the traditional media companies is Fox because they don't have a streaming platform.

Belloni: How dare you! Fox Nation!

Ehrlich: They're not losing billions of dollars in streaming, like the others are. The focus now is What’s the business of streaming? What are the margins going to be? It’s not just about subs at any cost. There’s no credit anymore, there’s no ‘sum of the parts,’ that’s just gone. And in that regard, Netflix is really at a disadvantage versus the traditional studios, because think about what the studios have: I.P. that consumers know; the platforms… so they can not only cross promote, but they can use the content in different places, which is amazing. They have advertising businesses. So it's very easy for them to do either SVOD or AVOD. I don’t want to pick on Netflix—you could say the same for Amazon or Apple—but each show is a new shot. Each show has to be marketed. And I can't think of a film on Netflix.

Belloni: Right, everyone in town always says, try to name three Netflix movies.

Beggs: Bird Cage. Red Notice.

Belloni: It was Bird Box. [Laughs.] You get my point. This issue of the total addressable market for streaming keeps coming up because the Netflix thesis depended upon these 700, 800 million, maybe a billion people out there that were going to subscribe to premium subscription services. What is the current thinking on TAM?

Ehrlich: It's not a number. The ARPU [average revenue per user] in each country is so different. Like India, with 50 cents ARPU, the economics of that vs. the U.S. is so different.

Belloni: But the Street didn’t think so. The Street wanted a global sub number.

Ehrlich: But that was so backward looking.

Belloni: And now the correction. These services are talking about not winning the spending war. We're not going to spend like Netflix has spent. Does that worry you guys as content creators?

Beggs: It does. First of all. I think what you're seeing with some of the pruning, if you will, at Netflix, it’s things that don't have the utility.

Belloni: Like, maybe, Harry and Meghan as creators?

Beggs: I won’t comment on that. But the things that matter, they are going to continue to spend on. Netflix is the incumbent, everyone is coming after them. I don't see a slowdown in the spend. It will be judicious. Fewer things will just be vanity.

Belloni: But are we gonna see fewer bidding wars?

Mayer: I don’t think so. You need to have very of-the-moment content to acquire subscribers, and then you need to have a lot of content to keep subscribers. Moonbug, for instance, is massive retention programming. Kids watch and watch and watch. So for the good stuff that really drives and keeps subscribers, that is going to become more and more valuable over time. At Disney, we were always a believer in doing fewer things better. That's a good mantra for all of us.

Belloni: What should Disney do in India? Bob Chapek keeps saying Disney will get to 230 to 260 million subscribers in two years, yet about a third of the current 138 million subs come from India, where they pay almost nothing, mostly to watch cricket. Do you think Disney should spend big to renew cricket or be realistic about getting to that sub number without it?

Ehrlich: There’s a set of games before the championship, and then there’s the championship. They want to get one of those packages, and there’s a lot of competition. But I don’t see Disney paying at any price. It just doesn’t make sense.

Belloni: They’ve telegraphed that, but Chapek isn’t backing away from that 260 number, which will probably be impossible if they don’t have those rights.

Ehrlich: You may be correct on that. If they have to back away from that number, great, so what? We’ll see how that market develops. Look at Warner Bros. Discovery. They still haven’t rolled out globally. They are spending rationally. They have great content, great I.P., some of it’s never been developed. If they really focus on the brands and develop their key properties, this could be explosive.

Belloni: I think [W.B.D. C.E.O.] David Zaslav agrees with you.

Ehrlich: But he has to execute.

Belloni: We've seen over the past five years, an incredible level of investment by private equity in the content business. A lot of that was dry powder sitting around. But now, in this new environment, do you guys see the same appetite for outside investors?

Mayer: If our case is any indication, I guess the answer would be yes.

Belloni: Blackstone would do that deal now?

Mayer: Yeah, I'm sure they would. They are very thesis-driven investors. One of the things that we saw eye-to-eye on is the underlying growth in content and the profitability. We’re still out there looking for great deals. Probably a bit of a repricing, given the marketplace.

Belloni: How so?

Mayer: Well, the market has come down. So the public comps and multiples, which you can point to in a private deal, have moderated. As a buyer, that's a good thing. We still have a lot of dry powder.

Beggs: The content business historically has always been really sexy, and there's been waves of investors. There's some smart money and then there's sometimes some dumb money.

Belloni: There’s so much debate over whether companies should offer one global, unified streaming service or continue to offer multiple brands, like combining Disney+, Hulu and ESPN+ in the U.S. Which is the right approach?

Mayer: At Disney, we always thought brands matter. The old bundling [via cable and satellite] is, you have to buy everything. I think that’s done, and thankfully so. But the new bundling, where you offer people the opportunity for a lower price or convenience to take different brands, at their choosing, there’s a lot of wisdom in that approach, and I think it’s worked well for Disney. I don’t think there’s any overriding need to take those services and make them into one.

Belloni: This is all heading toward a re-bundling, right? Apple or Amazon will say, Give us a hundred bucks and you get everything.

Mayer: At your option, yes. It’s not a forced bundle, it’s an optional bundle. There has to be a difference between what cable was.

Belloni: Seems like we're headed for a recession. How do you think that will play out across the content universe?

Ehrlich: Usually there's an opportunity in a recession for those who can be a little bit more aggressive, but this is an unusual economic period because you have so much pent up demand. Disney's per capita [revenue in the parks] is up 40 percent. I haven’t seen that in my decades following the company. And they’re going to raise prices. The demand is insane.

Belloni: The traditional thinking on how recessions impact Hollywood is that people still need to entertain themselves. But these companies have become so wrapped up in streaming, and inflation or a recession might hit the number of subscriptions people have and their price sensitivity. So is this recession perhaps different?

Ehrlich: We’re seeing [subscriber] churn pick up, so whether it's HBO or Disney, the strategy of releasing one [episode] per week, I think that’s really smart. It keeps consumers engaged and on the platform. There will be a handful of streaming services that people will subscribe to, and now we have the onslaught of AVOD and FAST [free, ad-supported, streaming TV] services.

Mayer: In recessions, we didn’t see a massive decrease in subscribers to pay TV. So I expect it to be a moderate effect. It will be noticeable, but will pass.

Fuel for the ongoing is-our-content-woke-enough-or-too-woke debate: A.O. Scott ponders TGM and whether Hollywood’s output is really all that liberal. [NYT]

Most outlets did the will-Johnny-or-Amber-work-again story, and Spotted Media piled on with a survey saying that 86 percent of people who were aware of the case don’t want Depp to be dropped from future productions, while two-thirds said Heard should be dropped. [LAT]

Not mentioned in this interview with Melissa McCarthy and her husband/unfortunately frequent collaborator Ben Falcone: Their new Netflix sitcom—starring, created by, and written entirely by Falcone—was “temporarily” shut down halfway through the 16 planned episodes and never resumed. So, canceled while it shot. [THR]

Netflix tweaked its measurement metric, and the result will push Stranger Things even higher on its charts. I’m starting to think it’s unwise to trust streaming services when they release their own consumption data. [CNET]

Elon Musk’s sister, Tosca, has raised $22 million for Passionflix, a “sexy Hallmark Channel” streaming service for romance and erotic shows. I guess that makes more sense than buying Twitter. [NYT]

The libertarians at Reason dive deep into Disney’s Reedy Creek Improvement District, which “has offered a glimpse of what's possible when land development is governed by a private company with a long-term stake rather than the political whims and interests of elected officials.” [Reason]

Hold on to your E-meter: Scientology is fundraising off the success of Top Gun: Maverick. [Tony Ortega]

My Puck colleague (and unofficial Venice Beach mayor) Peter Hamby goes for a stroll on the boardwalk with Rick Caruso for this column on the L.A. race that is pitting Ted Sarandos, Dana Walden and Jay Sures against Jeffrey Katzenberg, Ari Emanuel and Matt Johnson. [Puck]

“Mike De Luca and Pam Abdy are high if they think David Zaslav will tolerate overpaying CAA directors to make bloated festival movies at Warner Bros. There should be a trap door in the executive building in Burbank that is triggered the first time Paul Thomas Anderson or Joe Wright gets a call.” –An executive

“I think Zaslav sees in [De Luca and Abdy] a direct connection to fancy filmmakers because he wants… to be considered an old school Hollywood mogul, a patron of the art of cinema, who can get all the A list stars to come over when he moves into Bob Evans’ old house. That’s more fun than making Discovery shows, and he thinks he won’t be taken seriously as the Discovery guy. Also, he can’t get credit for HBO because Casey Bloys is already doing a good job. But changing Warners lets him rebrand himself and get invited to the Met Ball and Vanity Fair party, and of course being thanked at the Oscars. That’s less of a business plan than a perk of the job. Mike and Pam are charming, and charmed him, and he thinks they are the maître d’s who can give him the best table in the Hollywood hierarchy.” –A producer

“Nobody is talking about the fact that DC just fundamentally can't be run the same as Marvel. Disney owns all of Marvel with no partners. Warner Bros. has producers and other entities attached to different parts of its I.P. They can't make whatever they want. Disney literally can put together a 15-year plan and nobody can say a thing.” –Another executive

“Most of the producers and executives who are laughing at Zaslav wanting DC to become Marvel were the same assholes who were predicting Marvel would lose all of its collateralized characters to the bank because no one was interested in seeing Thor, Captain America, and Iron Man.” –Another producer

Got a question, comment, complaint, or a prediction of the dino-kill count in the new Jurassic World? Email me at Matt@puck.news or call/text me at 310-804-3198.