Google and Microsoft's Chatbot War, How AI Changes Hollywood, Disney In Crisis

The Wrap founder and CEO Sharon Waxman joins Ranjan Roy and Alex Kantrowitz for our weekly news recap show. We cover 1) Google and Microsoft's new chatbots. 2) How AI changes the entertainment industry 3) Yes, screenwriters are using AI too 4) Who's in better shape after this week: Google or Microsoft? 5) Why Disney is in crisis 6) How Disney stacks up against Netflix Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

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• 0:45Alex Kantrowitz?

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• 1:10Alex Kantrowitz?

  Welcome to Big Technology Podcast, a show for cool-headed nuanced conversation of the tech world and beyond. We are back at it with our Friday show recapping the week's news. There has been a lot of big news, big stories this week. We have Microsoft and Google both coming out with their chatbots, and then the streaming wars are heating up. Disney is going to lay off 7,000 people while cutting billions of dollars in expenses. Joining us today, we have Ranjan Roy. As always, welcome back, Ranjan. Hello. And a special guest is here with us. Sharon Waxman, the CEO and founder of The Wrap is here. Sharon, thanks so much for joining.

• 1:49Speaker 01

  Thank you. I sneezed just in time for you to introduce me.

• 1:52Alex Kantrowitz?

  Perfect.

• 1:53Speaker 01

  Ignore me.

• 1:54Alex Kantrowitz?

  Let's start with our big story of the week. Google and Microsoft both are unveiling new chatbots. There is a totally different reaction to both of them, right? Microsoft unveiled their version of Bing ChatGPT, whatever they call it. And it's actually pretty impressive. And people started to say, okay, this is the future of search. And Google released its own very similar version called Bard. And it got a question wrong. The market cap dropped $100 billion almost instantly. And now people are saying,

• 2:28Alex Kantrowitz?

  Bing is the new king and Google is dead. Ron, John, let's just start with your reaction to what happened this week. Is it fair that Google got as hammered as it did? And when you look at Google versus Microsoft, which one are you more optimistic about?

• 2:45Speaker 02

  Bing is the new king. I had not heard that one, but that one's going to stick in my head. I think I think we need to kind of separate into a few different pieces and we'll definitely get to Google's Bard mishap. At the high level, I'm very happy about all of this because search does need competition. Google search has progressively been getting worse and worse and they seem to have been okay with it. So I think Microsoft entering the fray and bringing Bing back, I think is a very good thing. However, as a counterpoint, have you Binged anything this week?

• 3:21Alex Kantrowitz?

  I personally, I went to Bing just to see if that new chatbot is live and it wasn't for me. Now they're rolling it out selectively. So personally, I was again disappointed to be visiting Bing.com. It had been a long time since I typed that in. But I am looking forward to actually being able to use it when this new feature and you could call it a new way to search rolls out. Sharon?

• 3:48Speaker 01

  I mean, it's hard to, it's hard to break habits, right? Like those of us who started using ChatGPT, like we like it, that's a new enough behavior for me. Then I got, I didn't actually go to Bing because I'm super busy and it didn't feel like a compelling way to spend 60 seconds of my life. So I mean, like I'm waiting really for other people to say, you need to do this. I mean, that's really like folks who are, who have habits. It is so, so hard to shift entrenched habits, which I think was part of Bing's problem to begin with. We were also used to using Google search and it worked for us. There wasn't a problem that needed solving that made us go to Bing. Now there's actually a very, very different set of offerings there for, for all of us

• 4:32Speaker 01

  who are, you know, using ChatGPT. So I think that first mover status is always going to be really important.

• 4:41Speaker 01

  So why is it better? I don't know.

• 4:43Alex Kantrowitz?

  The thing that's interesting here is that Bing and Google ostensibly will connect to the internet while ChatGPT says its training stops in 2021. And you can take a look at some of the examples that they put out there. Have Bing's new chatbot plan a vacation and look at what's current and what's not. Obviously, at this point, it's not going to be as good as it can be. But I think as you start to think about opening hours and starting to put this chat interface on top of a search engine, you do start to say maybe some of this hype is well placed. Like, maybe this is actually something unlike Web 3 that is going to make a change in people's lives.

• 5:27Speaker 02

  Well, I freaked out my entire team because on a Google Meet screen share, I pulled up Bing.com and started typing in something which caused the weirdest stares from everyone. Because people who weren't aware of the Microsoft news looked at me like I was a complete weirdo. But the results are not that interesting yet. And I've seen, I have had the rolled out version. And it's kind of messy. Like, I right now typed in to Bing, what is the future of Microsoft? They pull out and extract all this weird Wikipedia-style data to the right. They have some videos, but in reality, there's no real answer that, you know, is different.

• 6:09Speaker 02

  It's not actually directly incorporating the ChatGPT functionality or, you know, kind of the, you can have follow-up prompts that actually build a conversation with it. So they're definitely still, you know, have a long way to go. Another thing that reminds me that as a business problem, Microsoft has a lot of work to do. If you go to Bing.com, it actually looks like Yahoo.com. There's all these kind of like weird news feeds in there, some sports scores. I don't know how they're targeting me. And Microsoft internally, probably that's where a lot of the Bing revenues shows up. They show ads just as the default Bing.com. So going from this messy Yahoo-style search engine to this perfectly clean, interactive, beautiful tool,

• 6:54Speaker 02

  I think there's a lot of work they're going to have to do. And again, like, what? But I do like the fact that it's opening up the question of what should search be because it hasn't really evolved in the last 10, 15 years. And I think if nothing else, it's very good that they've sparked that conversation.

• 7:12Speaker 01

  Well, I can tell you that, you know, we're looking at it over at The Wrap in from a very different lens. And it's interesting to hear Rajan, what was the response to in your staff meeting because we as soon as this this thing kind of launched and got some scale after a couple of weeks, we scrambled a big edit meeting and just threw on the table like, what do we think the implications are can be for the areas that we're in, which is entertainment and media. And it was amazing like the very long silences in a room of about 10 people as everybody's

• 7:53Speaker 01

  minds were like, like going at a furious pace to kind of figure out like, oh shit, oh, this could be really bad. And I think that I'm trying to steer our team and we're working on a series right now that we're going to start rolling out like as they come in the the articles that were, you know, to try to move away from apocalyptic predictions for the industry of entertainment, which is a lot about writing, or how you replace actors, or directors, or production design, everything. And then media journalism, how, you know, we've already heard from some publishers like BuzzFeed that they're starting to layer in some AI bots, I guess,

• 8:35Speaker 01

  to writing some stories. You know, we've done very little experimentation. The whole point of my creating The Wrap was to create a place for journalists to learn how to do professional journalism. So the idea of having chatbots would be kind of antithetical to what we do. But at the same time, I you you know that's where stuff's gonna go. So I but I think that that already as using people are finding ways to use it as a tool rather than oh, this is replacing my job. But I think that's where like in where I'm coming from publishers and people in entertainment are immediately kind of going there. And we are finding already screenwriters who've been using it for for months.

• 9:15Alex Kantrowitz?

  So Sharon, I I'm so thrilled that you're here because this is like exactly the perspective, I think, that we need to hear. You know, there are so many different angles. There's a technology angle, which we've covered. But also, this is how how this is going to shake up publishing, how this is going to shake up the entertainment industry. So can you want I mean, can you unpack that a little bit? So you obviously have screenwriters that are that are starting to use these bots. When you say this is also, I would love to hear from your perspective, how this is going to be used in the entertainment industry, and whether it threatens any of the incumbents or any of the entrenched power. And then also, just from putting your publisher hat on, if this is the way that it's going to go, when you think, obviously, this is so early on, but it's not a stretch to think

• 9:57Alex Kantrowitz?

  this is the way it's going to go. We've already have publications that are jumping into it. Ranjan and I clearly believe that this is going to be the path that many will go on. What is that future like for news publishers? What does the future look like?

• 10:08Speaker 01

  Yeah, so that's I'll take the first part first. So in entertainment, we're just we're just starting to I'm not going to pretend to say that we have answers or clarity on how AI is going to affect the entertainment industry. So and we're just starting to do the reporting, which is kind of in real time as people are testing and trying stuff. So we have already identified screenwriters, hither and yon, who are figuring out ways to use chat GPT to kind of like either frame out their out their screenplays. You know, you have to give them the ideas. You have to give it them. Who's them? You have to

• 10:47Speaker 01

  give it the plot points. But as we've sat sat down to try to think through as we're attacking just the thought process of what where this might take entertainment, it really does appear to be something that will impact every single aspect of entertainment. I so I don't just mean screenwriting, which is the easy, low hanging fruit stuff. And it's really not that good at it. Like, we've seen some acceptable, like, short, we've asked it to write it a scene, and we've other people are using it. Um, but for example, actors casting. So ChatGPT can pull

• 11:32Speaker 01

  all the information on the internet about actors and feed it into an algorithm that can produce um, scores. Now, we Hollywood already does that. Hollywood already looks as they're trying to cast a project, for example. You know, there are all kinds of ways they look at they'd synthesize like, what was their box office number? What's their social media following? They do all of that stuff, but ChatGPT doesn't like really instantaneously and in a way that pulls so many more data points than we ever than they ever could during using the conventional thing. So I think it impacts casting, therefore it impacts acting careers. I I I think that we we're talking to all the guilds about how like the Directors Guild, the Producers Guild, the Actors, the Screen Actors Guild, all the different guilds and wondering like, how scared are you?

• 12:18Speaker 01

  And, you know, how are you dealing with this? Because then there's another whole area which we have not scratched the surface of, which is copyright. Who owns the ideas that are being generated in a screenplay or other? Um, by the way, also another huge category, animation, already being transformed, Dolly, um, and whatever else is rolling out is already being used to like, you can speed up the the velocity of animating something by, I don't know what the factor is, but it's it it is by a transformative number is what I'm trying to say. So.

• 12:55Speaker 02

  Have you found that people are receptive? Like, is it is the typical emotion fear? Or excitement? I mean, maybe a little of both, but what's the prevailing emotion around this?

• 13:09Speaker 01

  I I would just say, like, judging just by my newsroom, uh, there's a lot of fear. I really, there's a lot of fear that this thing is coming for your job. Um, and then I think. I think it might be.

• 13:23Speaker 02

  Hmm.

• 13:23Speaker 01

  I I mean, I really hope not. I it's possible. What we're saying is. We've spent the first, the last 50 years automating our way out of most of the manufacturing jobs, or the first part of the 20th century. And then we've, now we've automated our way out of the service jobs. You don't have cashiers and people at airline ticket counters anymore. So that's now been shrunk down. And now they're coming for the white collar jobs. Well, that's journalism, screenwriting, like, you know, I don't know about lawyers and

• 13:54Speaker 02

  Probably lawyers, probably lawyers.

• 13:57Speaker 01

  First, at first they come for the lawyers.

• 13:59Speaker 02

  First they come for the lawyers. I think

• 14:01Speaker 01

  Legal Zoom has already come for the lawyers, but yeah.

• 14:04Speaker 02

  I think, I saw someone had commented around, like, a Marvel script should be the first thing to be automated because they're often already, they're as formulaic as possible. But I think also, what I'd read, I think it was Kyle Chayka, was, he was talking about how all average content is going to essentially be like algorithmically, you know, generated away. And there is going to be a huge bifurcation between original and good things, because that can't be generated by an AI, because there's no training data, and things that are as formulaic as possible. So I think, hopefully, it's bullish for consumers or the average person watching or reading something, but definitely from the job's perspective.

• 14:49Speaker 02

  It's going to change everything, I think.

• 14:53Speaker 01

  So I think that, that alone, that statement is fear inducing to most people, because change is scary.

• 15:03Alex Kantrowitz?

  So Sharon, how are you, when you think about the ways that you might implement this as a publisher, what have you thought about so far? And are there, there's been some talk about disclosures. Obviously, I've been plagiarized already by this stuff, not saying that.

• 15:17Speaker 01

  Yeah.

• 15:17Alex Kantrowitz?

  I mean, I'm, I'm a proud partner with the rap, so there wouldn't be any need to do that. But I'm kind of curious, like, how this might look like, what this might look like in production in the newsroom.

• 15:29Speaker 01

  We haven't really gone there yet. We, I don't have a, I, I do have a product development team, but that's not what they're pointed at at the moment. So it's really most of us in our spare time fiddling around with it and seeing where it might go. But it seems that, and again, I'm really speaking speculatively, but it seems like there might be aspects of coverage, whether it's like weather reporting or basic sports scores, basic stock market numbers stories that could potentially be automated. You could take a press release and that would save my having to employ

• 16:12Speaker 01

  a reporter to do that. What I would hope if that ever was the case, and it might be a year from now, it might be never, it's not a priority for me to, to move in that direction, right? I don't have the pressures on our organization, thank goodness, that BuzzFeed does. And as I've said at the outset, actually doing journalism is a core reason for the RAP's existence. So I'm not looking for ways to shortcut that, except I, I, I just think that if it becomes

• 16:51Speaker 01

  the, the standard for newsrooms, there's, it's, it's seems a natural conclusion that that, that we will be part of that shift. And I'd be, I'd flip the question back at you as well. But they're not, not for any of the reporting where it, what I would say that really matters. Here, we get, here's this kind of story we write all the time. A trailer comes out and we write up the trailer. If ChatGPT can watch the trailer, I guess they can, and write up a summary, then I would not have a reporter spend their time on that. I'd rather them go try to uncover the next Harvey Weinstein or whatever, you know? So there, there might be efficiencies to be had there, but I, I would,

• 17:35Speaker 01

  myself, I would tread very carefully.

• 17:39Speaker 03

  Absolutely.

• 17:39Speaker 01

  But I want to ask you, like, how, how would, might you as an independent individual, building a following, use, use it?

• 17:48Alex Kantrowitz?

  Look, I've always thought that AI is, and the more you look into it, the more you understand this, that AI is augmentative and it's not replacing in most cases. If you're doing it right, if you're running a business, use AI to do the things that will augment what you're already doing. So for me, to have AI, if we get to a place where AI can, I can drop in a few links of stories, it can read them and summarize them accurately, and that becomes another edition of the newsletter on Friday, being like, hey, here's a tech roundup, then, man, like, that Friday newsletter is gonna get written. And of course, like, I would go ahead and take a look at what's gonna happen, but that's another space where you can sell advertising. And it's obviously, and it's honestly a service to the readers who are

• 18:33Alex Kantrowitz?

  also gonna be like, we just had a comment this week of someone who was like, I'd like to be updated on the latest tech news. You write this one story a week, what else is going on? And so if I could use AI to do that, that would be great.

• 18:46Speaker 02

  That's what this podcast is for, Alex.

• 18:48Alex Kantrowitz?

  Exactly. Well, I think, so I think hopefully it will be a little bit longer until something like this can be replaced by artificial intelligence. But I'm much more worried about the human competition on the podcast front than I am about the bots. But there's another thing that I think we should touch on, and I definitely want to get back to the question of who is gonna be in a better position, Microsoft or Google? And then we're gonna move on to the second half. But I think this is important to touch, to touch on. So we have Microsoft, of course, and we've talked about this on the show, investing in OpenAI, and part of that investment is coming with, coming in the form of Azure credits, credits for computing that the AI needs in order to be able to function. We also have Google

• 19:31Alex Kantrowitz?

  right now, who's doing a $300 million investment in another company that requires them to use that money in Google's cloud service to be able to run their AI models. Now, it sounds a little bit like, you know, Palantir, which had gone, made these investments, and then it had these startups run their business on its software and booked that as revenue, and it inflated what the business was actually doing. So obviously, this is gonna be a little bit different, although you could ask, you know, is that Google startup gonna end up? Being is that Google startup can end up counting its revenue, gonna end up putting the money towards Google's bottom line that ends up showing up in earnings reports. Is that ethical?

• 20:15Alex Kantrowitz?

  But there's also this advantage that companies with a lot of computing power, with servers, with cloud computing operations have that they can deploy when they invest in these companies that nobody else can. And Rajan, I'd love to hear your perspective just on the financial aspect of what's going on here between Google and Microsoft. And is this gonna be a bigger story than we appreciate right now?

• 20:35Speaker 02

  Yeah, I think especially as we start trying to break down their earnings and their actual revenue composition. So again, what they're doing in Microsoft was kind of the invented this model with OpenAI brilliantly to their credit. They said it was a $1 billion investment, but a huge chunk of that was essentially free Azure credits. So then OpenAI uses them and then this new $10 billion investment also is broken down like this. But Microsoft can then claim that as revenue. So it's essentially they're getting the upside of a potentially huge investment and they're getting revenue generated based on them giving away those cloud credits. And Bill Gurley had a tweet on this, and I think this is gonna be a big thing for anyone

• 21:18Speaker 02

  analyzing these companies because, one, it gives them a huge amount of leverage and power over the startup community because they have the cloud and AI infrastructure to do it. But then, second, it really starts to paint a distorted picture of their businesses. It starts to show that if you're giving away all of your Azure credits and investment and then generating or counting billions of dollars of that usage as revenue, obviously that paints the potentially wrong picture of the business.

• 21:47Alex Kantrowitz?

  That's a nice way of saying it. It sounds corrupt to me, but go ahead.

• 21:51Speaker 02

  It certainly sounds corrupt.

• 21:53Speaker 01

  People use accounting, do smart accounting stuff all the time. That's not corrupt. I would, why do you say corrupt? That's a.

• 22:01Alex Kantrowitz?

  Loaded. I know it's a big allegation. Loaded. I know it is. Okay, maybe. Well, I'm not even gonna walk it back. It does. It feels like you're going to Wall Street, you're saying, we made this much revenue. And meanwhile. And you didn't really. Wall Street wants to see your revenue grow. And meanwhile, yeah, your revenue is actually, you're just, if you go to Wall Street and say, like, I booked a dollar and you spent that dollar on somebody to give you that dollar back. It seems to me like you need to be honest with them. And Palantir has already been through this and done it already. And, and has apologized. And, but I think, and so that, so that's why I kind of say it feels corrupt. I don't know if it actually is or not in the legal sense, but it feels like that way to me.

• 22:42Alex Kantrowitz?

  But the, the real question is, Ron, I'm definitely go ahead, but I think the real question is, how do these companies get, get ahead? Like, and not, not just the financial side, but the fact that they're able to invest with money and their computing. It seems like it will just consolidate power in this really important sector of the technology industry. Because of the infrastructure that they have. But yeah, Ron.

• 23:04Speaker 02

  Oh, it's definitely gonna consolidate power. I think, uh, there's almost no question. And almost the, the dangerous part of it is, they're both consolidating power on the infrastructure side and the consumer product side. Bing.com is the front end. ChatGPT is the front end. All these actual consumer experiences, they're gonna own more and more of. And they're gonna own the infrastructure side. So I do think this is something that needs to be watched closely. It hasn't really been discussed that much. And then on the accounting side, I think this is something where analysts are gonna have to really push these companies on how much of this money was invested. Cause again, what composition of that billion dollar investment was Azure credits to OpenAI in 2019?

• 23:48Speaker 02

  Didn't come out till this year, until they started making the new investment. So I think it's up to everyone to keep a watchful eye on this stuff.

• 23:57Alex Kantrowitz?

  Great. Let's end this segment with this question, which again, I want to come back to. We've seen Google and Microsoft this week unveil their versions of chat in search, AI-powered chat in search.

• 24:11Alex Kantrowitz?

  We don't know exactly where it's gonna go off, but we have where it's gonna go, but we have an idea of where the trajectory is. Who starts this week stronger, uh, who, sorry, who ends this week stronger and who ends this week uh, weaker after what we have just witnessed?

• 24:28Speaker 02

  I think we do. I think us, the consumer, again, competition is good. If no, I mean, obviously there's concerns about consolidation we just talked about, but search has gotten terrible because Google had no competition. So if nothing else, everyone is being forced to rethink and ask themselves, how do we make a better product? And I mean, maybe Yahoo is gonna come out of nowhere on this one, or I don't know. All right, fair.

• 24:55Alex Kantrowitz?

  Okay, I agree with you. We're all gonna come out better. Pick, come on, pick a company, Ron, John. Who's in better shape than they were at the beginning of the week?

• 25:02Speaker 02

  I mean, as of this week, uh, Microsoft definitely because very quickly, the mistake Alex had referred to, Google, this was, this was amazing to me, especially someone who's done a lot of corporate marketing work. In Sundar Pichai, like in his tweet, they had a little video ad and they type in the question, what new discoveries from the James Webb telescope can I tell my nine-year-old about? First of all, who asks that actually? It's just a reminder that Google is so detached from basic people. But then, but then, who's gonna ask that? But then the second thing, it got it wrong. It says the very first pictures of an exoplanet outside our solar system were taken by the JWST.

• 25:47Speaker 02

  When that's just wrong. It was a European Southern Observatory's very large telescope in 2004. So the agency or whoever put that ad together.

• 25:56Speaker 01

  Okay, I have to leave this conversation. I'm sorry. This is like, this is way, way too nerdy for me.

• 26:04Speaker 01

  You've got to be kidding me.

• 26:05Speaker 02

  I feel I I feel bad and I don't feel bad for whoever put that together and took the heat on that one.

• 26:11Speaker 01

  They deserve it.

• 26:12Speaker 02

  They do deserve it.

• 26:13Alex Kantrowitz?

  When your ad agency introduces an error in the ad, when errors and hallucination are the biggest concern.

• 26:21Speaker 01

  They say it was the ad agency who did it?

• 26:22Speaker 02

  No, no, no.

• 26:23Alex Kantrowitz?

  Whoever it is, maybe it was.

• 26:24Speaker 02

  They've they've stayed properly quiet on the error itself, but the market certainly didn't.

• 26:30Alex Kantrowitz?

  Okay, Sharon, do you have a pick in terms of who you think?

• 26:33Speaker 01

  No, what do I know about this stuff? I have no idea. I'm going to go with Microsoft too, since obviously Google screwed up, even though I would never have known in a million bazillion years that they've gotten the wrong answer to a question like that. But it is, it does seem like so, you know.

• 26:50Alex Kantrowitz?

  Basic.

• 26:50Speaker 01

  So, no, no, that, that, that too, as a journalist, obviously getting the answer right to a question is, is basic. But I I just basically more the cluelessness of asking such a, an obscure question that's going to appeal to a point, you know, 1% of the people who see it is like, you, you could really more properly ask who played, you know, uh, who played, uh, who, who played the sidekick to Tom Cruise in Top Gun one? That would be more of a question that I think you'd want to ask, but you know, that's just me.

• 27:23Speaker 02

  That's what I would want to ask.

• 27:24Alex Kantrowitz?

  This has always been.

• 27:25Speaker 01

  Anthony Edwards is the answer. Okay.

• 27:27Alex Kantrowitz?

  This has always been the thing with Google, right? Great technological sense, poor social sense. And that's why their chat, their chat apps have always failed. So it is kind of interesting. You have a, a company who can't build a chat app now wants to build a chatbot. I'll just end the segment saying, I think that Microsoft is also ending the week stronger than Google, uh, did at the beginning. Then, yeah, then Google was before this all started. I don't think that this is an existential threat to Google. I think that that's overblown. The threat to Google is way overblown. Who was obviously going to develop this stuff and release it? But it's got, it's got people's interest, you know, peaked on, on the Bing thing.

• 28:07Alex Kantrowitz?

  Ron John's using Bing in meetings and search is such a big market that if you peel off even 5%, you're talking about an, an extremely large number of, of revenue. And by the way, that's a question we should get to in a future episode. How are people going to actually, how are companies going to make money off of these things? We're here on Big Technology Podcast Friday Edition, streaming live on LinkedIn and YouTube. We're getting questions. This is awesome. Thanks, everybody, for participating. If you're listening on the feed, we do these every Friday at 11:00 a.m. Pacific, 2:00 p.m. Eastern, and then we drop them on the feed right after. Thank you again for being part of this. We're here with Sharon Waxman, CEO and founder of The Wrap, Ron John Roy of Margins. We'll be back right after this.

• 28:52Alex Kantrowitz?

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• 29:31Alex Kantrowitz?

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• 30:53Alex Kantrowitz?

  And we're back here for the second half of the Big Technology Podcast. We're joined by Sharon Waxman, CEO and founder of The Wrap and Ron John Roy of margins. Let's talk Disney, shall we? So Sharon, I had no idea when I reached out that we were going to have a week where Disney was going to say it was going to cut $5 billion of expenses and lay off 7,000 employees. That broke a couple of days afterwards, but it seemed like it would be an opportune time to speak about Disney because the company seems like it's in chaos. And now, maybe you can bring the more nuanced view of it than I have from someone who's not watching it as closely as the entertainment, you know, as someone who's reporting on the entertainment industry. But you have Bob Iger,

• 31:38Alex Kantrowitz?

  who was the old CEO, but put a successor in place, Bob Chapek. Then he came back, says he's going to be there for two years. You have this massive cost cutting. You had an activist investor that came in, drove by, made a bunch of demands, is now apparently satisfied. You have major losses in streaming. And then, of course, you're going up against Netflix, not only Netflix, but now Amazon and others. So

• 32:02Alex Kantrowitz?

  why don't we just start with this? What is going on?

• 32:06Alex Kantrowitz?

  Why does it feel like such a mess?

• 32:08Speaker 01

  I could, yeah, I could add a whole bunch of things to that list, too, by the way, which is that they've they've lost a lot of important executive talent. They they've lost a lot of time because Bob Chapek reorganized the company a certain way. And now Bob Iger is in the process of undoing that reorganization. So that's that's another piece of it. But at the same time, the creative output is still very strong. So Disney is a very, very strong company at its core. It's a phenomenal content flywheel in terms of how it manages to create. Successful content that people want to see and then monetize it through all of its

• 32:53Speaker 01

  different distribution platforms and then create live experiences that people want to see at their theme parks and sell them merchandise and you know, nobody did that better and Bob Iger created that machine. So I would just say that he's coming in and it does feel like holy chaos right now, but I think that the reason why the stock went up sharply after earnings is that there is a feeling that there is a grown up at the helm who knows what to do and he's taking measures that needed to be taken. So that includes putting control, financial control back in the hands of the top creatives at the company, Dana Walden, Alan Bergman, who are now running

• 33:38Speaker 01

  all entertainment, undoing the whole, what was the dreaded DMED is what it was called. Sounds like it might be like a medical unit, but in fact, it was where all of the financial decisions and budgeting decisions were siloed and that was very much disliked across the company, even though everybody smiled and nodded and said, this is a really great idea. And you know, the cost cutting part, it has to do with the losses that you referred to in Disney Plus, which I think that really was what spelled the end for Bob Chapek was the earnings, not this quarter, but the last quarter where he really seemed to be okay in his tone of voice and his affect and the discussion with the CFO, with investors about

• 34:23Speaker 01

  the losses, these massive losses that Disney Plus was racking up and that had to be dealt with too. So I think that you're, if it does seem chaotic, it's because you're in the middle of a whole bunch of moves that Bob Iger is making and it's going to take some months for that to play out. But it's not, it's not like it's, it's a chaos in the sense that there's no plan or strategy. I think that there is a plan and a strategy now.

• 34:47Speaker 02

  Well, as the parent of a three and a six year old, I can tell you, Alex, that Disney is not in chaos, that my children say the brand Disney Plus every single day and we had to go to Disney World last year and they took a good amount of my money. But I'm wondering on the streaming side, Sharon, like. Why did Bob Chapek get blamed when Paramount lost like 1.8 billion? HBO Max is losing a ton of money. When everyone has made this big bet, streaming is the future, so we're going to try to get a foothold and, you know, invest heavily upfront. Why did he get the blame for Disney's performance?

• 35:28Speaker 01

  Well, it's because he's the CEO and he makes those decisions. And I don't think he's being compared to HBO and Warner Discovery. I think he's being compared to Netflix. So I think that's the comp. And also, he was putting these huge numbers out there in terms of, we're going to hit X number of millions of new subs, which they were not hitting. In fact, they lost subs this quarter. And so I think there has to be some, A, a content strategy that works because what you're finding is you have so much more competition for the streaming dollar that you have to have a content strategy, which I do believe Netflix does,

• 36:11Speaker 01

  where you're putting out a must-watch show all the time, or a movie, all the time. Because otherwise, people hop around and they subscribe and they unsubscribe and they subscribe and they unsubscribe because they're like, I don't really want to be subscribing to six streaming services. I think you're exceptional and you're a very big pot of exception because you have young children and people who have young children are never going to unsubscribe

• 36:35Speaker 02

  Never.

• 36:35Speaker 01

  from Disney Plus. I understand that. I'm an example of somebody who doesn't feel the need to subscribe to Disney Plus unless there's something I really need to watch, like a live show of Hamilton or whatever it might be. If I'm a Marvel, if I'm a core like Star Wars nerd or a Marvel nerd, yes, you have my money and you'll have it every month. But they need everybody to make the scale, to keep the scale.

• 36:58Speaker 02

  On the content strategy side, so I had been reading and you mentioned it that kind of Bob Iger trusts the creatives. Can you, can you expand a little bit on that? Because as an outsider, it's almost, I never associate giving power to the creatives in a company with kind of the right financial disciplinary move. Usually it's the opposite. Can you expand a little bit more on that?

• 37:20Speaker 01

  Well, it's not, yeah, because they're not, I mean, they're not like, oh, I'm a creative person. I mean, the executives who are running ABC and the Walt Disney Company, you know, the Motion Picture Group, they are, they are hardcore business people and they work, the difference is, is that they had in their unit and all of the business and creative teams to make decisions about what, at what budget you're going to greenlight this show. Whereas it doesn't really, it feels super awkward to me if you're, if you're actually in charge of the content to not have A, the responsibility, but B, the authority around making financial decisions. You're kind of like treated not like a responsible adult

• 38:04Speaker 01

  and like a responsible executive. You have to own your P and L and you have to own the balance sheet of your division, whether that's Disney Plus or all of the television networks or the, the Motion Picture Group. And that seems, that's the way it had always worked, actually. And it makes sense. As somebody who was like Peter Rice or Dana Walden, who Peter Rice, who was bounced last year, but who, you know, is, you, you need both. And actually, that really was Bob Iger's unique ability that he never really found a successor who had it. Which by the way, we can talk about that because that's the next, the real job he has to do is not just get Disney back on the rails and get the stock back up, which

• 38:49Speaker 01

  has dropped like 40%, but he has to find somebody who is actually going to be able to do that thing. But the thing Bob Iger has is the ability to assemble an unbelievable business team like he had in Kevin Mayer and Tom Staggs and the people who were there before, and also have the relationships and the credibility in the creative, on the creative side, whether that's the Imagineers and the theme parks, or that's Um, the, the Pixar, the, the crazy, wonderful innovation on the creative side that Pixar does, and that drove billions and billions and billions of dollars. Just think about it like on, uh, on however many frigging, you know, plush dolls they sold or, you know, for, um,

• 39:30Speaker 01

  whatever it might be, right? So that is the balance, I think, that Bob Iger had that was so hard to recreate in a new, in a new CEO is the mix of that right brain, left brain, creative side and business side. And, um, I, I think that most studios do ask that of their division heads.

• 39:50Alex Kantrowitz?

  One of my favorite, speaking of the experience, one of my favorite things that I've heard about Disney is that in the parks, if you have a good moment, they refer to it internally as a magic moment. And if you have a bad moment, they refer to it internally as a tragic moment. And they've done the math. It takes like 30 magic moments to make up for one tragic moment. 30.2 magic moments.

• 40:12Speaker 02

  Optimizing for magic moments.

• 40:14Alex Kantrowitz?

  Exactly.

• 40:15Speaker 01

  That's fantastic. That's a fantastic anecdote. Wow.

• 40:18Speaker 02

  My, my next trip, I'm going to track very carefully my magic versus tragic ratio.

• 40:24Alex Kantrowitz?

  So I, I do want to ask about, about the streaming thing again. I just want to get your perspective, Sharon, on why this has been so difficult for so many companies. We're talking about Disney losing a tremendous money, amount of money and not meeting the targets that J-Pix set. We'll see if Iger can do it. We're, we, we talk about Netflix.

• 40:41Speaker 01

  Well, he lowered the target, so it'll be a lot easier.

• 40:44Alex Kantrowitz?

  Maybe it is expectation management, but we also talk about, we talk about Netflix almost every quarter about they, they contracted subscribers in a couple of quarters last, last year and this year they're, they're coming out the gate and they're still struggling. And, uh, well, Amazon, Amazon for a long time couldn't really figure it out. I think that they're, they're actually churning out some nice content and it makes money. It makes a lot of sense for them to keep spending. So, but, but I'm curious to hear your perspective on why this is so difficult for all these companies. And then can you give us some perspective on, on why Disney's doing this and, and how important this transition to streaming is for its business?

• 41:25Speaker 01

  Well, on the former, I would say that you have to take the measure of the reality that about four or five major streaming companies came online within the space of 12 months.

• 41:36Speaker 02

  Hmm.

• 41:37Speaker 01

  So Peacock.

• 41:38Speaker 02

  Yeah.

• 41:38Speaker 01

  And Paramount Plus and, um, you know, whatever changes are happening at HBO Max and HBO and Discovery Plus and whatever happens there, um, that's like about a year after Disney Plus launched or so, I think that's right. So the amount of competition that has been in the marketplace means you have to spend and every and the cost of everything goes up because the cost of talent, talent, talent meaning like showrunners and people who or or spec scripts that are good, um, become more, it becomes more competitive to own those.

• 42:19Speaker 01

  And so that's why you had Netflix spending those huge sums of money to do deals with with Kenya Barris and Ryan Murphy and people like that who have a track record and a brand. So I, I, in some ways, you could say that that is the model. I mean, tech is the, you know, apotheosis of that of spending to get your product out there and get enough adoption that you can get to scale. And then you worry about making money later. Didn't we all learn that from tech?

• 42:51Speaker 02

  That's actually, that's very interesting how you put that because the Ubers of the world were kind of like the poster child for promising winner takes all markets and everyone tried to follow on the Google or Facebook, Google owns search, Facebook's own social. But, but in streaming, is that, do, does anyone really think that's still the case? That spend, get someone kind of hooked to your service and then they won't go elsewhere? Because everyone, I feel everyone is, yeah.

• 43:20Speaker 01

  I don't think so, but I think that there is a belief that there isn't room in the marketplace for 10 streaming services and they're not all going to survive and they want to be one of the survivors.

• 43:28Speaker 02

  Ah, okay. Cause I was gonna ask, like, aren't they all kind of shooting themselves in the foot by this spending arms race? But I guess, so you're saying the thesis is...

• 43:37Speaker 01

  No, that's a survival, that, yeah, that's a, that's, that's to survive. That's to make it through whatever the, you know, um...

• 43:46Speaker 01

  Gauntlet is right now of figuring out what who which are going to be the And by the way, Paramount is doing really is doing interesting work and Peacock is doing better than expected too. So I wouldn't have necessarily bet on Peacock, for example, but there is a great desire to watch a lot of what's in that library. And I don't know yet if David Zaslove has figured out really what his strategy is going to be. He's got lots of problems over there at Warner Brothers Discovery.

• 44:19Speaker 02

  This is why they're all

• 44:20Speaker 01

  I think that's what it is.

• 44:21Speaker 02

  This is why they're all investing in AI, right? Or thinking about how they can use AI. They don't want to spend the money on the content anymore.

• 44:27Speaker 01

  Yeah, no, they're going to have to continue spending on the content. That's that's for sure. I don't see that being anything in the horizon that we could that's predictable. But, you know, but honestly, that's really what it is. They need to stay in the game and they need to show big enough numbers. And, you know, you've got these smaller, smaller things like stars, for example, who are trying to define a certain lane. And if they're if they're if they're must have enough in that niche, does that make them valuable enough? They're trying to sell, you know, Lions gets trying to sell stars, for example. And where would that go? Would that tuck into another streaming? That's sort of the strategic thinking.

• 45:06Speaker 02

  I would ask both of you, are you does this make you a happier consumer? Because normally in these kind of spending arms races, the people who benefit are us, the consumer. We get our $3 Uber rides that now are $30. But I guess I go back and forth because on one side, the prices keep raising. You just notice you get an email saying Disney Plus is now $2 more a month. And it's a little annoying. But I guess on the other side, the amount of good content out there almost feels like like it's saturation of like 100% Rotten Tomatoes type shows and you can't keep up.

• 45:41Speaker 01

  Raja, do you have cable? Or do you just are you just over the top?

• 45:44Speaker 02

  Long gone. But but but I'm back to I have Paramount Plus, Peacock, Disney Plus, Netflix, I don't even know what the bill is every month, but got them all.

• 45:55Speaker 01

  But you and I is probably at this point, not less than you were paying before for the cable bundle.

• 46:00Speaker 02

  Oh, easily, easily. It's the same.

• 46:02Speaker 01

  About the same. Yeah.

• 46:03Speaker 02

  I don't think so. Yeah. Yeah. When you throw on your

• 46:06Speaker 01

  You could have the tennis channel and you gave it up.

• 46:08Speaker 02

  Could have the tennis channel.

• 46:12Speaker 02

  But I guess, yeah, so where does this end? Do we think, is it like in the next few years?

• 46:19Speaker 01

  Consolidation. I think it's consolidation. And when does this end or where does this end? I mean, yeah, I don't know when it ends. We're still in the middle of a huge spend on content. But the thing is, Wall Street has now really clearly signaled in the past year that they want to see more financial discipline exercised by these companies. And they want to see a profit or at least a horizon to a profit. I don't see, for example, it's interesting when you have competitors in the space like Amazon and Apple who really have unlimited amounts of cash that they can spend and unlimited amounts of losses that they can take other content play.

• 47:01Speaker 01

  Because it's immaterial to the bottom line of their business. And it's quite material to the brand halo that it brings.

• 47:13Speaker 02

  On that, why are Amazon, Apple in the business? And Google, I think, just got NFL Sunday Ticket and spent some number of billions of dollars. Like, I feel the argument was there for a long time, brand halo, as you said, or, you know, peripheral, they start on Apple TV and then we'll subscribe to Apple Music. But is that, that having to compete against the traditional entertainment and media companies who it's existential for them, like, why are Amazon and them in this market?

• 47:47Speaker 01

  I mean, I think Amazon is in it because they want you to buy more toilet paper. I mean, it's, it's.

• 47:53Alex Kantrowitz?

  That's the right answer. That is why. That's the right answer. Yeah, more people sign up for Prime when they watch Amazon Prime Video.

• 48:00Speaker 02

  Actually, that's fair. Okay, Amazon's the most clear one, I guess, yeah. Yeah, because it's almost like it makes Amazon Prime as a membership just too good to be true. But Google confuses me a bit on the entertainment side. Or I guess it's a YouTube TV play.

• 48:14Speaker 01

  Google's not in the business. I mean, they're not in the business in any significant way. They have YouTube and they get billions of dollars of revenue off of YouTube, but they don't have, they're not in the premium content business at all. You could ask, and Apple obviously needs a reason for you to, for their products to stay relevant, for you to be in their system.

• 48:41Speaker 01

  The smallest of the tech, you know, investors in, I mean, Apple, if anything else, if nothing else, like I always thought Apple and Disney should find some way to work together, but it seemed logical because Bob Iger and Steve Jobs were very close. I'm going back some years now. And Pixar, you know, they were involved in that together. So, you know, I don't, I thought if they were going to get into the content business, they would do it that way. And that's not what ended up happening. So I think, I don't know that Apple knows exactly why it's in that business. It might be that Tim Cook likes to go to the Oscars because I always see him.

• 49:23Alex Kantrowitz?

  I think that's, that's a pretty spot on perspective as well. That sounds right to me. And I mean, they're also, they worked on, Apple worked on the service business in a moment where we were in zero interest rates, to go back to one of Rajan's favorite topics. And that service revenue looks a lot better than, back then than it does now. So when it's discounted a little bit more. And, you know, back when they wanted to look like they were doing business beyond hardware, which they are, but it's worth a little bit less now. Sean, can I ask one last question for you, to you before we wrap? When we think about Disney's business and the health of Disney?

• 49:59Speaker 01

  Wrap?

• 49:59Alex Kantrowitz?

  Yes, we wrap. Oh, there we go. So when we think about Disney's business in terms of, okay, it has this streaming component, it has the parks, it owns ESPN and has partnership with Hulu, and of course, it's spending a lot. I'm probably missing a bunch. What do you think is the most important thing to be looking at when it comes to Disney's business? Is it vision? Is it expense management? Is it successor for Iger? I mean, when you think about what Disney needs to be doing well in, what is it?

• 50:34Speaker 01

  I think it has the best collection of content brands of any entertainment company. And they need to manage the stewardship of those brands so that they don't wear them out and wring them dry for consumers by overworking those brands. And yet, they also have to be creating content that is culturally defining and that everyone needs to see. So, they did that with Avatar, which it's been 20 years since the last Avatar.

• 51:14Speaker 01

  And that is an example of how you wait, if you're Jim Cameron, to do something that is so extraordinarily different that it catapults you off your couch, out the door, and to the theater to spend three-plus hours hanging out with the world that lives between Jim Cameron's ears. And that, they have done successfully. You can't do that once every 20 years, but you also can't expect people to show up twice a year for an Avatar remake. So, what's the balance of leveraging the incredible, incredibly powerful brands? So, in other words, if you tell me it's Marvel, I know it's gonna be between an eight to a 10 in terms of quality.

• 51:59Speaker 01

  It has to stay there, but you also can't offer me that every six weeks because it will wear it out. That's the balance for me. And it's always, you're asking somebody who's not, who's more like on the creative side of the entertainment thing, while also understanding the business. But I think that is what Bob Iger understands when he talks about giving control back to the creatives and motivating the creatives and saying, "Everybody, get your asses back to the office because this is a creative business where people need to exchange ideas and interact and bump into each other at the lunch counter and come up with an idea that'll be the next Pixar movie." That is the core of it. So, controlling the spend and all of that and understanding the balance of your different distribution outlets, whether it's streaming, whether it's film, whether it's broadcast

• 52:44Speaker 01

  television, all of that stuff is a balancing act that everybody has to do. And that's essentially the current challenge. But the core challenge is the stewardship of the creative brands that Disney has.

• 53:00Alex Kantrowitz?

  Yeah, and it sort of makes sense now that Iger's back and taking it, taking them out. I mean, he did pick Chapek as a successor. We've had some comments on that. And Chapek was looking a lot at the money, raising prices all over the place. But it is interesting that some of those are being rolled back. And now you have someone who puts creative at the center. The question is, Bob Iger isn't going to be around forever, so we'll see.

• 53:21Speaker 01

  Bob Iger's going to be around for exactly a year and a half longer. That's it.

• 53:25Alex Kantrowitz?

  You don't think he's staying a day longer than a year and a half?

• 53:30Speaker 01

  I think that would be very tough.

• 53:31Alex Kantrowitz?

  Yeah, yeah. Okay, well, it's going to be a wild story and we'll be following it for sure. I feel like we just touched the tip of the iceberg here today. And there's plenty more to discuss on the Disney side, so stay tuned for that. Thank you so much, Sharon. It's so great to have you on the show.

• 53:47Speaker 01

  Oh, thank you. I didn't know that I knew that much about Disney. Thanks for asking such good questions.

• 53:53Alex Kantrowitz?

  Absolutely. Sharon Waxman of The Wrap. Ranjan Roy, thanks again for being here. Great to have you again.

• 54:00Speaker 02

  Have a good weekend.

• 54:01Speaker 01

  You too.

• 54:01Alex Kantrowitz?

  And thanks to all of you, the listeners. Thanks to everybody who showed up live. Great to see you. We'll be back again on Wednesday. My interview with Dave Friedberg, talking about his new SPAC is going to be pretty, pretty wild coming up this upcoming Wednesday. And then Ranjan and I will be back on Friday next week, talking again about the week's tech news. Thanks again for listening and we will see you next time on Big Technology Podcast.

• 54:38Speaker 03

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