Ignore "The Slap", Here's How Last Night Changed the Business of Streaming

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tonight after the academy awards everyone's talking about that one thing that happened but if you're an investor there's something much more important that happened in hollywood last night motley full money starts now [Music] i'm chris hill joined by motley full senior analyst tim byers thanks for being here thanks for having me good to be here let's talk about the academy awards why not because this is a show about investing uh all the other shows we'll be talking about the slap heard around the world will smith going up on stage and slapping chris rock and i get it i was watching it live i was fascinated by it i'm happy to talk socially about that but this is a business show and i think the slapping overshadows a much bigger story which is that apple wins best picture for coda they become the first streaming service to win best picture and i think this has altered the streaming landscape as we know it because if you don't think netflix in particular amazon prime but netflix is furious that they are not the ones winning they're not the first streamer to win best picture you're out of your mind i think this there are several big ripple effects here but let's start with that do you do you agree with me or you're like chris you're you've had too much coffee no i do kind of agree with you i would say this i do not want i'm thankful that i am not in a meeting with ted sarandos this morning that's good i would i would be i would be um i would imagine that that's there's a lot of unhappy people in meetings with the netflix co-ceo and chief creative officer however i would say does this really mean game changing results for apple probably not does it alter the dna of streaming as far as netflix's business goes probably not where i will agree with you on this chris is you're gonna have everybody at the major studios thinking about how do we amp up our streaming capabilities how do we rethink distribution throughout the world because the economics of our business are crumbling and we do know that to be true i'll give you just a couple of quick numbers here um chris this is from the 2021 report from the motion picture association so their annual theme report combined ticket sales worldwide were 21.3 billion so this is you think of these as basically box office sales that's 21.3 billion dollars worldwide um that was massive a massive improvement over 2020 because 2020 but that's 50 lower than the high of 42.3 billion in 2019 in other words the box office is getting disrupted however um combined global theatrical and home mobile entertainment revenue reached 99.7 billion

in 2021. that was up 24 so this in a way chris i think what your assertion that this changes the dynamics of the business i think what it does maybe it doesn't change it but it certainly validates the idea that if you are not thinking about a streaming first strategy what are you doing here are the two things i think are different as a result of apple winning best picture the first is i think this really what's their appetite for this type of success even when they launched apple tv most people watching what apple was doing said and rightly so this is interesting given the amount of cash they have they're allocating some money here this is not a priority for apple as a business yep this is nowhere near the priority that even other parts of the services business are yep this isn't a priority i think this changes that i think it becomes more of a priority and i'll get to the money they're spending in a second two something you hinted at i think the overall spending the combined spending on content acquisition from apple netflix disney amazon everybody yeah that number was going up anyway i think this bumps it up even more i think this is i think the meetings happening today at netflix and amazon and elsewhere are we need to beat the bushes to find this type of content because remember apple bought coda at the sun out of the sundance film festival over a year ago right it was early 2021 for 25 million and then six months later i may not be right on the exact time frame but at some point in 2021 they went out and spent five times as much to get uh the rights to a film coming later this year called emancipation which is directed by antoine fuqua and which stars wait for it will smith so so again that's that's you know more interesting as a result of what happened last night between will smith and chris rock but to me from a business standpoint it's the amount of money they're spending and they can spend it because they're a three trillion dollar company yeah and the economics where this is going to get interesting and one of the reasons i okay let me backtrack to where i think this is probably not as big a deal and i'll i'll say this the reason i think it's not as huge a deal even though i agree with everything you just said the there's going to be people who are tempted to say this changes everything for netflix they're going to have to overspend and they're already spending too much i fundamentally disagree with that netflix has a very good budget and they commission a lot of content please understand that the difference between netflix and everybody else is not that they are funding all of the big budget stuff they're funding all of the things they have so much stuff that they're funding so it's a volume game for netflix because they're trying to appeal to a very wide audience and and get into the niches of that wide audience and there have been disappointments for netflix before i do think sarandos is probably really unhappy this morning because power of the dog was on that list that's another netflix original that had a chance to win best picture and didn't so i think there's real disappointment there and i think you're right about that chris however they have lost out before in big categories and they've won before and it hasn't changed their strategy so i don't expect them to change now the economics though are very different can you imagine how apple is thinking about the payback period for coda and emancipation is like well how many people are we going to get into our ecosystem because we're not going to make it back on apple tv plus subscriptions at 4.99 a month there's no way that's happening so it's just it's different it's a it's very much an amazon like model where amazon is not funding originals to get people um to spend a lot more on prime they're getting them they're getting those originals on prime and bringing in programming so that you just think about amazon for more stuff no that's true and and obviously amazon and apple have the ability to um sell or rent these movies in a one-off way where netflix does not right either you're a netflix subscriber or not you don't have to be an amazon prime member to watch stuff on prime you can just say well i'm just going to rent this movie for 4.99 the other thing and this goes

back to how things must be going at netflix hq today um and this is something that um for folks who might have missed it over the weekend we did an episode on saturday about uh among other things the business of the academy awards and in the opening segment maria gallagher does a wonderful job of laying out how netflix is really the company that forced the academy awards to change the way that they enable films to be eligible right and so it's just one more reason this thing apple didn't do that legwork apple didn't spend years cajoling and trying to convince academy members to make streaming services eligible they just waltzed in this year and picked up the biggest statue of all right and and it's fascinating i do think so here's the other thing if you think that ted sarandos is upset how much more upset do you think the distribution and production executives at walt disney studios buena vista pictures how upset is that group and the reason not because of the awards but because of all the economics that you were just talking about chris this has changed the game for disney in such a fundamental way and and please i'm a disney shareholder so i'm not saying that this is horrible for disney but i will bet you a dollar chris that right now disney is talking to executives saying we need to renegotiate distribution agreements everywhere we've got them we need to rethink pricing and tiering around disney plus and we need to start going out and getting scripts do it now because this is going to hurt us materially if we don't do something about it because they have an anchor in terms of a legacy distribution business that neither apple has amazon doesn't have netflix doesn't have disney's got that anchor and they've got disney plus you better believe they're thinking about it right now they also own abc and a tiny silver lining for disney is that the ad rates for next year's academy awards just went up dramatically because way of this unscripted moment from last night um before i let you go i uh help me understand what is happening with tesla shares of tesla are up about five percent because tesla said they want to split their stock but not in the way if i'm understanding it correctly not in the way that and not for the reasons that alphabet and amazon recently announced their splits tesla wants to pay a stock dividend to shareholders um so and i'm just quoting from the sec filing they're going to ask at their shareholder meeting quote for an increase in the number of authorized shares of common stock in order to enable a stock split of the company's common stock in the form of a stock dividend that look i'm an unabashed fan of stock splits how does this change thing things for tesla shareholders because when i hear dividend i think okay well that's going to be some amount of cash and i'm going to pay taxes on that is this is this different like are people going to be taxed as a result of this i have no idea the only thing i can think of chris if if this is so this is either just pure spin it's it's just an absolute positioning statement meant to make tesla sound good which is entirely possible mathematically one way it could actually be a dividend and i don't even know if this is possible but let's just let's just play the game and say this is possible that if you are a tesla shareholder of record on x date then you're gonna get an extra share and so it's not a split of all of the shares outstanding meant to increase the pool and so you create liquidity it is if you've got a share now you've got another share i guess i mean okay so it so it's not going to be so the last time they split their stock was august of 2020 that was five for one right and it sounds like what you're saying is this is not going to be a insert number four one stock split this is going to be members get a little bit extra that's what it sounds like so a can they do that answer i have no idea and b you know will the sec approve this because it's wonky i have no idea and am i even right or is this actually like a two for one stock split and we're just calling it a stock dividend which is also entirely possible like there are so many variables here chris but what i will say is even though tesla is a much more profitable and cash generating company today one thing that has been true for a long period of time with tesla is that it has used its equity as capital very very aggressively so if they are trying to increase the value of the company and increase the value of their equity by doing positioning statements that should surprise exactly no one tim byers always great talking to you thanks so much for being here thanks chris [Music] [Applause] [Music] remember years ago when amazon and uber announced plans for widespread drone delivery haven't really heard much from them on that topic lately have we jacob goldstein has been investigating how one company is making drone delivery work outside the u.s formerly the co-host of planet money he's hosting a new podcast called what's your problem ricky mulvey caught up with goldstein to talk about the future challenges that entrepreneurs are trying to solve right now [Music] i think some of the most interesting problems you tackle involve transportation and one of which is drone delivery because i feel like there have been a lot of promises around drone delivery specifically with like uber and amazon but in your show you didn't go to them you went to a smaller startup operating in rwanda in ghana called zipline i mean why why go to that small startup instead of these massive companies that you would think have more resources to solve this major problem i went to zipline because they are actually running a big drone delivery business now as you said it's in rwanda and ghana not in the u.s but it's hundreds of flights a day every day across most of those two countries so you know amazon you know jeff bezos was on 60 minutes years ago promising drone delivery but we haven't seen it yet and one of the things i want to do on this show is talk to people who are actually doing the thing and zipline is really doing drone delivery it still seems to be difficult that outside of you know medicines and blood transfusions that sort of thing it's difficult to do drone delivery for that consumer product or justify that i think that's right i mean in a way you know if you think of the classic adoption curve for technology uh you start out with this sort of high value high need use case right and like their very first use case was was blood in rwanda and that has like this very specific set of of of of attributes that make it perfect for drone delivery like you need the right kind of blood you need it when you need it blood doesn't store for very long and you know drone delivery you can keep the blood at a centralized place and get it out all around the country very quickly in a matter of a few minutes and so it's sort of the perfect use case and then you know what typically happens with an adoption curve is you start with the with the most necessary thing and as you get your business uh to be more efficient in this case as drone delivery becomes more efficient then there are other use cases where it makes more sense to spread to and that seems like what's happening here and it seems like drone delivery versus autonomous driving the technology is there but the issue is regulation which is something that the ceo of zipline keenan wyrobeck addressed on your show our airspace is very old-fashioned we have a philosophy here in the us in the airspace where we kind of grandfather everything in okay so not not not absolutely everything but mostly everything a lot of things you could do in the 40s you can still do in the airspace today and that makes things very complicated most other countries basically the way they talk about it say we have modernized our airspace we've required things like transponders so all planes can tell by radio where all the other planes are we don't require that here so you're telling me there's some device that you can put in a plane that allows all other planes to know that plane is there and in the us you don't have to have that in your plane that is correct you know was that surprising to you that that the problems with drone delivery in the united states have more to do with regulation than the technical aspects of weather and um essentially tracking these planes from distribution point to delivery point yes yes that was truly surprising to me and and in particular because as it turns out the aerospace regulation in rwanda and ghana seems to be more modernized than the airspace regulation in the united states right and the fundamental problem with getting drone delivery to work in the u.s is is essentially a regulatory problem they're already doing it successfully and safely in rwanda and ghana i wonder if the problem is essentially the lack of lobbyists on one side or lobbyists on another side because unless you're trying to like smuggle something within a plane i don't understand why you wouldn't want other planes to know that you're in the sky yes well i mean one of the things that's interesting to me and keenan and i get into this in the conversation on the show is is uh path dependence basically right like these other countries are sort of creating their airspace regulation now they're more open to modernizing it they want to think of themselves as sort of modern forward-looking countries and in certain respects in the us we are more oriented towards sort of preserving traditional ways we have done things right and there is this tradition that you can you know be a be a solo pilot flying in your plane and in many settings you know not have to tell everybody where you are and that turns out to be a stronger force than than i would have thought so you wipe out the regulatory problems do you think a company like zipline is technically there where they could have widespread drone delivery um if you if you ignore that part i do as evidenced by the fact that they are there in other countries now where they don't have the problems and i'll say i mean another thing another thing keenan was telling me about was they are trying to develop a technical solution to the regulatory problem in the u.s right so basically because

planes in the u.s are not always required to have transponders the drone has to be better at figuring out okay is there a plane without a transponder anywhere that might be relevant and you know you can't just use radar you can't just use cameras essentially because it's too heavy you need too much radar too many cameras on this little drone but he said they are working on a technological solution to that you also spoke to aisha evans she's the ceo of zoox that's an autonomous car company sold to amazon for 1.3 billion dollars um zuk seems to have it's a different set of problems which is maybe the regulation is there but technically it seems to me that they're solving for an impossible problem which is we need to have a computer interact perfectly with human behavior on the road it's 2052. this is something they talk we've talked about on another motley fool podcast and and there's two ways of spinning this it's 2052 and autonomous vehicles are not on the road what do you think happened well i guess the same thing that's been happening for the last 10 years right like uh it turned out to be a way harder technical problem than we thought it is striking with autonomous cars it does seem like if you go back oh i don't know five or ten years autonomous cars felt closer than than they feel now right it felt like five ten years ago was like oh we're almost there and now we feel like less almost there than we did and you know one of the things that was really interesting to me in in that conversation with aisha is is what is hard what is the technical problem that they can't solve right and and it turns out like uh ai is really good at driving when it doesn't have to figure out human beings right if there were no people that were all ai cars you could do it now and the really hard problem for ai is human behavior what what's that other person that human driver who just pulled up you know at the other side of the four-way stop to me what are they going to do what are they acting like and that is the piece that humans are really good at figuring out right you can look at a glance at a person in another car and get a whole vibe are they aggressive are they going to want to go first and a computer can't do that so i think if there are still not autonomous vehicles in 2052 it'll be because that problem is so hard to solve and then vice versa it's 2052 and we do have autonomous vehicles do you think it's because we found the technical solution that the computers are good enough and quick enough within these autonomous vehicles that they can measure human behavior and still deliver people safely or do you think it's because we've made a trade-off that these drivers these autonomous drivers are generally safer than humans despite the fact that there will inevitably be some accidents when you have people in computers interacting on the road like that i mean i think it would have to be the second of those right like you could have uh autonomous cars that are way safer than humans but still not perfect right and so there is this interesting kind of emotional slash political question which is how safe do they have to be right if we were purely rational then a little bit safer than people would be great 10 safer than people would save thousands of lives right but clearly something about us and this in a way goes back to the the drones thing right like we're very wary of change i think as human beings in many ways and like there's reasonable reasons for that but but clearly uh uh you know autonomous cars are gonna have to be way better than people to to be widely accepted but i don't think they're gonna have to be perfect i think one of the things that scares me about a lot of the autonomous cars zuke's included is there is like well i'll give you the exciting angle and then i'll give the thing i'm concerned about the exciting angle is it solves so many problems uh you can imagine someone with disabilities being able to go where they want to go because autonomous vehicles they have a subscription they can have a car pick them up they sit on the benches there's no space for a driver and then they can be dropped off the thing that i'm concerned about is the the move to subscription is everything and what that means like is is i'd like that i own a car and that i i own that car and i can take it wherever i want to go is that across the board in autonomous vehicles that they want to keep the technology in-house and preserve the ownership of the thing uh it's not across the board right so yeah just to be clear the zoox model is like they call it a robo taxi right so it's basically like a driverless uber and you know one of the reasons i wanted to talk to to aisha to zuke's on the show is they are like the self-driving car maximalists right like if you start not with okay what's a car today and how do we sort of tweak it so that you know you don't have to drive as much they're not that they're like okay let's just start from scratch build something from the ground up it doesn't even look like a car nobody's gonna own it and in a certain sort of purely theoretical way it makes sense in that world that you wouldn't own it right because it can just drop you off and drive away and i actually thought their vision was going to be the world where nobody owns a car right because in a truly self-driving car world why would you have a car just sitting there in your driveway when it could like go drive somebody else around and they could pay you for that you know um but surprisingly to me aisha didn't talk about that world she was like look you know maybe we could get to a world where the typical household owns in the us owns one car instead of whatever it is now more than one car one and a half two cars uh that would be a nice world so you know i don't know like certainly lots of other if you think of tesla which is maybe the most salient you know self-driving car car like that's clearly a car you can buy and they're just trying to figure out how to get it to drive itself it does seem to me i don't know if it's 2052 or 2100 it does seem to me that when cars really drive themselves and i do think it'll happen it won't make sense to have a car just sitting there 90 of the time depreciating getting older when it could be driving around giving people rides like it would be a huge luxury it would be like a private plane or something just sitting there on the runway waiting for you to go get in it i think it depends on place too like in a you have a densely populated area like manhattan okay that makes a lot of sense to have cars on demand but i think in a lot of you know a lot of the the midwest and you know places like loveland ohio and bemidji minnesota these smaller areas people like having a couple of cars in the driveway they don't want to wait even if it comes in an instant they don't want to they don't want to offload that i'll call it the privilege of being able to just hop in your car and go with that freedom well it seems like as long as there's a market people will be able to buy cars right and then you know you've been doing a lot you've been looking at a lot of problems ways that people have been solving them uh within the next like five to ten years what's one that you think has a high probability of being solved and that you're excited about oh that's a fun one okay so let's see let me think through the shows not self-driving cars um i mean you know a keenan the guy from zipline was a little bit coy about their technological solution but like drone delivery does seem uh doable right like clearly they have solved it technologically elsewhere it has become a routine thing elsewhere and it does seem like one of the ones that would be one of those changes that on the one hand feels like big and weird like oh a drone is flying over and dropping off a package in a parachute in my backyard but i could actually imagine that being pretty common in five years jacob goldstein is the host of what's your problem i'm not going to tell you where you can find a podcast you're already listening to a podcast so you could you could figure it out from there and find it right here wherever you're listening to this wherever you are it's jacob goldstein thank you so much oh it's really fun thanks for watching [Music] as always people on the program may have interest in the stocks they talk about and the motley fool may have formal recommendations for or against so don't buy or sell stocks based solely on what you hear i'm chris hill thanks for listening we'll see you tomorrow [Music] you

2022-04-04 00:42

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