0:02

Hey, Sean, fantasy.

We’ve got something special cooking on the prestige TV podcast.

I’ll be recapping one of my favorite shows.

HBO’s bury every Sunday night with the writer/director star of the show.

The Great Bill Hader will talk about the show’s, wild twists and turns its special brand of dark comedy, and how it all came together.

0:18

So, on Sunday nights immediately after a new episode airs, you can hear bill and I break it all down on the prestige TV pod, subscribe on Spotify or wherever you get your podcasts.

Today’s episode is a trio of entertainment crises and a month from hell for some Hollywood.

0:36

Giants.

First Netflix company stocks slumped after an earnings report revealed.

Last week that it’s subscriber growth has suddenly and rather shockingly, reversed.

Netflix was supposed to add a little more than 1 million subscribers last quarter.

0:52

Instead.

It’s now projected to lose more than 2 million subscribers.

In the first half of this year.

These sort of Misses are pretty rare for.

But he’s a successful and well run as Netflix and it raises some really big and interesting questions about the future of the entire streaming business.

1:09

And by extension the future of Hollywood company.

Number two is CN n plus c, n?

N plus was a standalone streaming news product for about 13 seconds.

CNN poured three hundred million dollars into this company in production and marketing the service existed for technically about 30, 32 days.

1:26

But in the last week, we heard to hear a little drip drip drip about how the company was struggling to.

To add subscribers.

There was news about how for example, at any given time, only 10,000 people were tuning in to CN n plus that’s not very many and after its parent company moved from AT&T to Discovery and a merger, the head honchos at Discovery shutter the service essentially torching that 300 million dollar investment.

1:49

And this move also raises some very big questions.

Not only that CNN Discovery streaming but really the future of all news media crisis.

Number three is Disney witch.

Finds itself in a very bizarre war with Florida, Republicans over the legal status of Disney World.

2:07

We’re going to talk to a local reporter in Orlando about what the national news media is missing in covering the showdown between Disney and an emerging Republican star in the state, Florida, Governor Ron DeSantis, but first we welcome return.

Guest, Rich, Greenfield media analyst, extraordinaire and general partner at light shed.

2:26

Ventures for years.

When I’ve had a question about media streaming television, I’ve Gone to Rich.

He has been bullish and streaming for a long, long time.

And that makes today’s episode.

I think all the more interesting because today he Rings the warning Bell.

Not just for Netflix, but for this entire industry, I’m Derek Thompson.

2:46

This is plain English.

3:09

Rich Greenfield, welcome back to podcast.

Thanks for having me, Rich.

So, I’ve interviewed you a few times in the last few years.

And typically it’s been about how streaming was eating the world and traditional TV was inconsistent Decline.

And now, the worm has turned a little bit.

Netflix is losing, subscribers says, it will lose more next quarter.

3:26

The stock is way down my big, first question for you is Is this about Netflix or is it about streaming?

Like did Netflix mess up in ways and we’ll talk about all the various ways.

It might have or is the big picture here that we’re just in, a new chapter of streaming where these big goliaths are fighting over a relatively 0.

3:45

Some pie.

I think that’s sort of is the multi trillion dollar question.

So I do agree with the premise that like this has always been about sort of the transition from linear TV to streaming TV, and it looked like there.

It was huge long-term opportunity.

4:03

I mean, you had guys like Jason kilar from Pulu and then most recently from, you know, Warner media within AT&T talking about, you know, a billion subscribers potentially and Reed Hastings talking about seven, 800 million and how the next hundred million Subs will come from India.

4:20

And here we are, and you know, growth overall, for the sector is slowing pretty dramatically.

I mean, everyone is sort of talking about sort of a slow.

Down and subscriber growth.

This is not just Netflix.

I mean Netflix is obviously the there the Giant in the category and so them seeing sort of, you know, - subscriber growth in Q2 talking about, you know, some level of growth for the year, but certainly nothing near what people were expecting has.

4:50

Certainly made everyone sort of step back and go.

Is is streaming over like, is it mature?

Is it just timing meaning, the pace of growth to get to 700 a billion subscribers is going to be much much more extended than expected, maybe part of that was covid.

5:10

Accelerating and we just we overshot and now it’s going to take a couple years to work, its way out.

Maybe that’s part of the answer.

I mean, obviously there was incredible sub growth and I remember just as a lot of these Services were just Launching during the pandemic.

So, you know, sort of turbocharged, some of these services, so, huh?

5:28

Maybe that’s all played into it.

You know, the economy is weakening.

Obviously, we’ve got you know, inflation rearing, its head, Europe, sort of teetering on recession recession talks about the US.

Like there’s a lot of factors.

We’ve still got supply chain issues for connected TVs overseas.

5:45

And so and then, look on top of it, certainly companies like Netflix.

It calling them out, specifically, I think has been Less iconic programming.

Let’s break through programming, then then they had hoped for or had they’ve done in Prior years.

6:03

I think they just haven’t had as many sort of iconic big hits that have really worked relative to what they’re spending.

So I don’t know if there’s like one specific answer, but I will say that I do think that it does feel like that the the story of wild up into the right growth.

6:23

Streaming does feel very much dampened.

And the question that everyone should be asking is, well, linear TVs dying if streaming TV is a smaller business or not as profitable with business.

6:40

Then what what are these companies supposed?

Like, what is plans?

See, like if a and b are not, you know, what is C and I don’t have that yet.

I don’t actually know what these companies and I think that’s what you know, what all these.

Management teams need to be thinking about is like, well, they were all chasing Netflix.

6:57

So, if Netflix isn’t as sexy to chase, what do you do now, right?

Yeah, it planned a that, linear television, that’s in structural decline.

Plan, B streaming, seems to be flatlining.

What’s plan C?

I had some ideas about what plans he might be.

But that’s, that’s a question for a few minutes.

7:13

From now.

I have a hot take that occurred to me.

Just before we got on that.

I wanted to throw at you and you in a way you sort of presaged it.

My heart take is at the pan.

Mac binged Netflix, I think about what happens when you binge a show.

You consume it at an accelerated pace and then before, you know it there’s nothing left and in a way that’s kind of like what covid did to Netflix and but did to maybe other companies to Peloton.

7:37

You could argue depends emic binge Netflix and accelerated subscriber growth in 2020 and 2021 exhausting the set of marginal subscriber growth.

It pulled forward a lot of subscribers, but more importantly, it also pulled forward competition from other streamers.

Like I just watched T’, the Batman with Robert Pattinson, this weekend on, my television, on HBO, Max just a few weeks after debuting in theatres that never would have happened without covid.

8:02

It never would have happened without the pandemic.

Warner totally changed its attitude toward the film industry because of covid and that is made HP.

Oh, Max more competitive and it’s made other streamers more competitive as they have moved a shrunk, these windows between debuting in theatres nib Ewing on your flat screen.

8:20

So, I see that as a double whammy that Netflix has to Aware that the pandemic accelerated its subscriber growth and accelerated the competition so that right now we kind of were like thrust into the future.

The pandemic binged streaming.

How do you kind of feel about that?

Take a look?

8:35

I think the reality is all of these media companies technology companies.

They all sort of realize that the But they needed to go, maybe not all and they still have a lot of linear TV assets, but they certainly did.

He took a far more aggressive approach to programming streaming, you know, you can certainly look at Disney putting, you know, you know, what is it little their recent movie Finding red on to Disney directed Disney plus and Encanto was on Disney plus 30 days after launch in time for Christmas and more.

9:08

And more content is getting to streaming faster.

Or even shifting over, right?

Like, you know, look at Paramount plus Halo was supposed to be on Showtime, They decided to move it off of showtime and put it right onto Paramount.

Plus, regardless of, whether it’s an amazing show or not.

9:26

The point is, is that they’re all taking more of their quote, unquote, high profile content, and figuring out how they can Advantage their streaming platforms, which is giving you more to watch on streaming.

And I think to the, to the Netflix challenge meat making It so that as Simply Having good enough content is no longer enough having great, iconic must watch, programming becomes that much more critical.

9:53

And so I think sort of what they’ve relied on his out producing everybody else with good but not great content.

All of the time that was good enough before my guess is now looking at what’s just happened?

Given more and more things to do elsewhere that it’s raise the Our that Netflix has to jump over, and they have not achieved that, I think that’s sort of the challenge they’re facing is that it’s just, it’s raising the bar of what they need to do.

10:22

The fact that you can watch the Batman, 45 days, after means their movies have to be that much better.

Because there’s just lots of competitive content out there and this gets to not the macro picture, but the micro picture, the Netflix specific analysis, which is that maybe Netflix just has a hits problem 17 billion dollars.

10:42

I’ve spent a year on content.

They don’t have a Pixar Marvel Star Wars.

They don’t have Game of Thrones.

They don’t have a Warner media Studio.

They don’t have the bond series that Amazon Prime just acquired they bought for like a billion dollars, the right?

10:59

It’s to I believe Roald Dahl’s entire Library, not a battle of much smaller than that.

But yeah, let’s go another.

Okay, that’s fine.

But you’re right look franchises matter and I would argue that while they’ve done a good job.

Of getting hits, you know, things that actually matter things, that will be living and breathing forever, or four generations is not clear that they’ve achieved that yet, you know, stranger things has been very successful, but stranger things going to be around in 10 years or 15 years.

11:31

It’s not clear.

I mean, and look, creating franchises is not easy.

I mean, you know, HBO like Game of Thrones was, you know, it’s not like HBO.

Does it every single week, you know, But the reality is, when you create franchises, they have massive long-term value.

11:48

And I think, if you’re, if you’re sitting there looking at Netflix and going for 17 billion dollars of content spend, should they be more successful?

Should the movies that they’ve created a probably spending 45 billion dollars a year on movies?

Should some of these movies be more memorable?

12:04

You the answers.

Yes.

There’s no doubt that I’m sure they would.

I think if you ask Netflix to sort of grade themselves, they would say.

It’s a bit uneven some stuff work, some stuff doesn’t, but I think again given the competition that’s out there and given sort of the state of the consumer and the economy.

12:22

They need to be, they need to perform at a higher level.

So I wrote a book a few years ago called Hit makers which try to synthesize a lot of psychological and sociological research to answer the question.

Like, what’s the formula for hits how-to hits happen.

So long book, everybody in the world should buy multiple copies, but tldr to the extent that it formulas exist in the world.

12:42

And there is no literal formula.

It’s this isn’t salt or mass.

It’s human nature.

But the closest thing you have to a formula that I could find was what I called.

Familiar surprises.

People love new products that extend and Echo old products.

This is true about movies.

It’s your about TV.

It’s about music, you look at the film industry, every year, the century, a majority of the top ten films in America have been sequels out of tations and reboots.

13:04

You look at 2021 the top ten films in 2021.

It is two sequels, one reboot, one Bond franchise extension and five comic book, IP movies.

Free guy, which is literally the only original movie.

So, people sometimes say, like Hollywood doesn’t make original stories anymore.

13:19

That’s wrong Hollywood makes more original TV shows than it ever has Morrisville.

TV shows.

Did you’d last year since the, than any year that since the invention of TV.

But audiences, love familiarity.

They love sequels adaptations in reboots.

This brings me to my point.

Why hasn’t Netflix acquired more IP.

13:39

Why didn’t Netflix by James Bond?

Why is it?

Netflix trying to buy these Studios, why isn’t it?

But why didn’t it by the, the Tolkien writes, that Amazon acquired?

It seems to me that Netflix is doing a really good job at producing original stories that people want to watch.

13:57

But it just turns out that people want to watch even more iterations of familiar.

IP, and Netflix’s Library, just seems a little bit Bearer on that count.

So I wonder how you think about about that interpretation.

First of all, simply buying MGM actually doesn’t even mean that Amazon gets the to make new Bond films.

14:18

That’s something the broccoli Family actually gets to decide.

So it’s not even clear exactly what that Amazon purchase will mean for Bond.

Even after spending eight and a half billion dollars on MGM.

So I think that’s an important.

I think if it was very clear that you could create the world of James Bond.

14:35

I think you would have had a lot more bidders than just Amazon trying to buy that, but, you know, outside, Side of bond, you know, stepping away.

It’s not like most of these franchises per se or for sale.

It gets, you know, Disney owns.

14:50

There’s you can’t go out and get the Despicable Me minions franchise, which is embedded inside of Illumination, which is embedded inside of the Universal Pictures.

Like, it’s just not so easy to go out and do that, you know, even with the capital Netflix has and to be fair, you know, they’ve certainly created content with massive appeal.

15:11

Without having to go out and acquire Studios.

So, you know, mean look, no further than mean squid game is probably the most watched television series in the history of Television.

So now is it a living breathing franchise where for Generations?

15:28

People will talk about squid game or is it more disposable in nature, where it was one and done?

It probably means it’ll be, I’m sure they’ll be a squid Games season 2, but it does feel more disposable in nature than an ongoing franchise.

Where you To be a Netflix subscriber so that you can get to season two.

15:45

I think that’s a fair criticism.

That Netflix has not created.

Those multi-year must watch series, you know, the crown is probably a good example of one.

I don’t know if there’s as much passion as their needs to be, but it’s along those lines of they’ve created something where people have to keep coming back, but do they need to figure out how they create more of these franchise ongoing?

16:10

Absolutely.

There’s No doubt that when you think about subscriber acquisition and especially retention having pieces of content that year in and year out, people are coming back for is critical.

One.

Other thing that I wondered is that this is might be sort of my, my last hot take to throw at you.

16:26

And maybe my most avant-garde theory about what’s happening with Netflix.

So one thought, is that if Netflix subscriber growth is, like, the dead body in the sanctuary, Professor Plum with the Candlestick is Apple for a couple reasons.

Number one, death.

Stock plunge is well, apples film coated winning best picture.

16:45

Actually, that’s, that’s the least of it.

You mentioned.

That apple is plowing money into TV and film the last time that we talked, that’s a part of it too.

But here’s part number three, that I think not enough people are talking about.

This is, this is like the Candlestick.

Apple sweeping privacy changes have made advertising and customer acquisition, much more expensive.

17:01

How do we know this?

Well, we saw it with Facebook’s earnings.

Facebook said we’re finding it harder to Target users, with ads after apples rules changed.

Now, look at Netflix, the company spent six.

A hundred million dollars last quarter in cat customer acquisition.

You take out Russia.

They miss projections by 1 million next quarter.

17:17

They say it’s an even worse.

Two million declining.

What does that tell me?

Well, I think I think actually the VCH moth poly a PDF made this point.

Online advertising is getting less efficient.

Customer acquisition is getting more expensive and so apple is kind of like strangling from both ends and not only represents a strong competitor in streaming but also its new rules on iPhones are reducing advertising efficiency and making it more Pensive for Netflix to acquire new customers.

17:44

How do you feel about this Theory?

You know, the funny thing is, is that I always thought that the best way to acquire customers in the streaming world was your content, right?

I mean, if you have must see content, you don’t need to do nearly as much marketing and, you know, I always thought that it’s better off to spend your money on programming than it, is on your marketing budget and I still feel that way.

18:13

I mean, I think that that is the you know, from a A point of of Netflix.

Do you have to go out and Market?

Hey, Netflix’s over here, or do you have to go?

Hey, the only place you can watch stranger things or the crown or squid games is on Netflix that seems to be the pole.

18:31

And so, you know, I don’t I don’t look at sort of apples changes as overly problematic from a Netflix is nowhere, near spending sort of like what traditional media companies spend on marketing.

18:46

Getting, I think the bigger issue is, is companies like apple as you started off is, you know, companies like apple and Amazon are looking at Netflix, sort of, being a little wounded right now.

And I certainly keep thinking this is sort of their opportunity to spend more.

19:04

Like, if I was sitting at Apple right now and seeing Netflix is cutting costs, looking to cut back some projects being more selective.

Apple has a three trillion dollar market cap unlimited balance sheet.

Effectively.

Like, why wouldn’t you be saying to everyone in town?

19:22

Come here?

We got you.

We will pay more.

We will pay anything like the danger right now is that you’ve got two companies in apple and Amazon that are not dependent on streaming video for their successes companies.

You know, certainly certainly Disney’s future relies on it certainly Paramount certain like but let’s be clear apple and Amazon future.

19:46

Could they be better off with streaming success?

Sure, but they are not reliant on streaming video to be successful and that makes them very dangerous.

When the industry leader is shaken and look at not even just the industry leader.

Right?

20:01

Like Netflix is said they’re going to go and Brace advertising to sort of reinvigorate growth Disney came out two months ago.

The same thing, right?

Like hey in order to get to you know to hit our expectations were going to do adds to like so you’ve got two players saying we’re going to degrade our product to grow the base and then you’ve got two other players that don’t care about the subscription video business in and of itself who don’t need to do advertising in their core product, and you have Limitless Capital to throw at this.

20:30

That is actually the scariest part of looking at the landscape right now.

And it look, it may not happen.

You may Not see some massive acceleration from Apple, but I got to believe there’s plenty of people looking at this going.

Here’s our opportunity like the, you know, we’ve shaken the industry leaders.

20:48

Do we have an opportunity to sort of accelerate and really grab some market share over the next couple of years.

Yeah.

The iPhone is basically the closest thing.

The private sector has to like the Federal Reserve like, it basically creates money.

It creates what I’m doing, but it’s a printing press every day.

Is it printing press much like research does, right?

21:05

Like in these are daily printing presses and On e-commerce.

Yes.

And so, if you were looking at those printing presses and going, hey, there’s a category that’s important to us.

That creates a nice brand Halo.

Do we have an opportunity to take meaningful market share?

And I think, to me, that might be the scariest part of this whole Netflix debate.

21:23

Right now is, how does the competition react to their news?

Last question, about Netflix, before we move on to CNN plus, I’m hearing a lot of people talk about including Netflix, moving on to add inserting ads.

Into the television shows and maybe even movies the talking about pressing that panic button.

21:42

And I’m also hearing a lot of people say again, sometimes, including Netflix, that they’re going to move from the binge model, everything all at once to something more, like the chunk model, not Episode, by episode week by week.

But, you know, week one, here’s three episodes quarter to here’s 10 more episodes, something like that.

21:58

What concerns me about that is like, what is Netflix?

What is its differentiator Netflix equals binging without heads?

So if you take away the binging and you take a hint and you add the ads, what is it?

The sort of the scariest thing is, is if the future of TV is TV is sort of very uninspiring, right?

22:18

Like, that’s why I sort of go back to witch and just say, quickly what you mean by that, the future of TV is the future of TV is sort of whether it’s multiple episodes or weekly, like, if it is, you know, sort of not being able to watch the whole series at once and having to sit through untargeted repetitive.

22:37

Sizing that sort of feels like the experience that most of us get with linear TV, it at night.

So 97 again.

Yeah.

So like, if the future of TV is what we’ve already been through that goes full circle to the beginning of this conversation.

Derek of like, well wait, hey isn’t working be isn’t working.

22:56

Is there a plan C or is this whole industry?

Just in deep trouble?

You know, should they revert?

She should?

You can see its content with other people while or no, or maybe it’s just hey, maybe we shouldn’t be doing.

Streaming service, like maybe if you’re sitting at Comcast, why are you doing peacock?

23:12

Like you really think peacock has a shot, or should you just turn around and sell to all these others and just call it a day and not try to compete in streaming video.

Yeah.

This is this is why I think, and I think we’re in agreement here that there’s going to be a lot of consolidation over the next few years.

This is like the great power struggle era of streaming television is upon us, that Netflix understands that it needs to be more focused about creating.

23:37

Franchisable hits.

You’re looking at Discovery.

I will get to that right now.

I suppose, you know, zaz Lavin Discovery with Warner media saying, we want to have one giant Death Star, to take on Netflix apples coming in.

They got a printing, press with the iPhone Amazon’s coming in there, throwing off Cash Flow by the gazillions.

23:55

Let’s go to CN n plus, keeping with the sort of clue theme.

I wanted to start by having you point to the killer here, who killed CN?

N plus like three suspects.

Suspect number one is CN n.

Self the product just didn’t work.

It didn’t connect with audiences suspect.

24:11

Number two is Jeff Zucker.

The former president of CNN was recently fired.

He was captain of the ship and when the captain went down the ship itself is vulnerable.

And then suspect number three is Discovery, CEO, David’s, s, love Discovery merges with.

I think this is, this is door number three.

I mean, this is okay.

24:27

The discovery has a focus on Cost-saving synergies bringing down leverage, their number one.

Focus is HBO Max, I think distractions, especially expensive distractions, like look, we could debate, you know, could see an N Plus have turned into New York Times.

24:48

It’s possible, but the reality is like, people had a habit of paying for the New York Times in print, they shifted that to streaming.

I’m not sure that paying for something that mean CNN.com is still free.

Many people get CNN on their cable system and I don’t think they think about paying incrementally like paying for an add-on content service called CN n plus felt like a stretch to begin with and in a company that is trying to figure out how they add more breadth of content to HBO Max to make that the center of the world.

25:24

Like Discovery plus is not going to exist either.

Like Discovery plus is going to basically be rolled into Discovery.

Plus, they’re going to be a man.

Yo Max He’s in a world where there’s a view from the top of.

Let’s have a let’s have a diversified service with lots of different content.

25:42

I think that was and I think I’ve got is as loud as view the moment you have that view is the moment CN n plus died because why do you want to have a separate marketing campaign?

Why do you want to have it?

Like just why do you want to have all of the separate versus you may keep the content actually?

26:01

Pretty good.

My guess is the a lot of the content will still live.

It just will live in a different form, right and discover.

Anything specifically was predisposed to come to this conclusion like zaz love had if I’m not wrong, they experimented with single topic streaming services.

Like they had I think they are serving overseas, but I would not overthink that like, you know, trying car services or individual sport services in Europe is very different than trying to launch a new service in the u.s.

26:29

So I don’t want to conflate those two.

To.

I do think though the larger issue is they have cost savings targets.

They have one Focus, which is HBO Max.

This was not the losses and the challenge of trying to get CNN.

Plus it’s just not something they were ready to deal with or prepare to deal with and so easier to just rip the Band-Aid off immediately and put it into cost savings tied to the transaction.

26:56

Then try to fight to keep it alive.

Yeah, the way I was thinking about this.

It’s like going back to the great power.

Metaphor the way you defeat an Empire is not by building a bunch of different cities states that try to surround it the way.

It’s to build your own Empire, and the Empire that he wants to build is HBO Max and so you want to fold everything, you possibly can into into HBO.

27:14

Max bring Discovery Plus in there, bring CNN Plus in there.

Make it this incredible One-Stop portal for the irony of All.

But the irony of all of this is if you’re trying to chase Netflix, and I guess the big question is, are you still trying to you know, the question for us as lovers.

27:30

Are you still trying to chase?

Is Netflix because maybe that chasing is not nearly as attractive as you once thought.

So, you know, maybe there’s a school of thought of maybe you shouldn’t be throwing as much and they’re maybe you should be more, you know, maybe Disney should just a Disney, maybe HBO should just age feel like maybe this goal of being everything to compete with Netflix.

27:51

Maybe that’s the mistake.

I mean II again, I’m not sure, we’re there yet.

But I’m just noodling out loud of like, if streaming isn’t what we thought, or if this little bit of everything, isn’t what we thought.

I thought maybe she hit.

Maybe strategies will change.

Hmm.

She was saying, you know, there was this thought, maybe a year to a couple years ago that the total addressable Market of streaming was like a billion people around the world that might pay more and more, and more for streaming.

28:17

And if the speaker was loyal bigger and was way bigger than this cable network broadcast TV at all.

And so there was so much more value to be created and if that’s not true, the ceiling is lower.

The average revenue per user is lower the It ability is lower.

28:33

Wait a second.

Why are we pushing this hard to throw everything together?

Maybe we shouldn’t be doing that.

Very last question for you. 11 years ago?

Netflix had this experiment called quick stir.

They try to split their business between streaming and dvd-by-mail service.

Has net ladder business.

28:49

They called quick stir.

Everyone had a conniption Reed Hastings, pivoted Consolidated, the company while still prioritizing streaming and yada yada yada Netflix, became Netflix.

Is it possible that this is a quick stir moment.

Netflix looks at the lower than expected ceiling for streaming TV.

29:06

And says, this is our opportunity to emphasize some other business model.

Specifically, video games and the ten years from now, Netflix will be a streaming video game company with an also very large streaming TV Enterprise.

29:24

I don’t know.

It’s obviously their entry into games is very early.

It’s very hard to tell.

I think, you know, look, they were Smart to recognize that they’re not just competing against Disney plus an Apple TV.

Plus they’re competing against Fortnight and gaming so that is a an appropriate conclusion that I’m glad they, you know, very few management team sort of are willing to admit their risks to their business.

29:48

And so I think it was smart that they started spending time there and investing there is that truly the future.

I don’t know, you know, it like I sort of always thought Netflix would get to the point of having so much global scale.

Five six.

Nine subscribers that they would turn to things like sports and try to actually license or own sports.

30:07

I thought that was sort of going to be the next major thing that they did.

I don’t know.

Now.

I think that’s a great question.

Gaming is very competitive, you know, certainly Mobile gaming is certainly not creating those like, you know, I’m not sure.

Mobile games is sort of creating those franchises that you’re talking about on the video side, but will say, I think the the great conundrum of the last week is this is sort of shaken.

30:35

The trajectory of this industry and nobody based on all the conversations.

I’ve had over the last week because that gives I don’t think anyone’s sure what’s going on right now.

That’s a fast hitting Rich Greenfield.

Thanks so much for joining.

Thank you.

Many thanks to Rich Green Field now on to Disney.

30:54

Let me set us up with a little, long story short here, last month, Florida passed a parental rights in education law, which most opponents labeled, don’t say gay, Disney leadership, initially, resisted commenting on the law CEO about jpeg, didn’t want to get in meshed in a political to and fro.

31:14

But then an outcry within the company forced Disney’s hand Disney makes an announcement.

Going to read directly from their announcement.

They say, quote Florida’s HB, 1557 also known as the don’t say.

Gay bill should never have passed and should never have been signed into law.

31:33

Our goal as a company, is for this law to be repealed and quote, Ron DeSantis and state.

Republicans did not like this message very much.

They retaliated against the company by revoking, the special improvement district rules that govern Disney World.

31:49

What the hell?

L is a special improvement district.

We’re going to answer that.

Question in a second TL.

DR.

Is kind of like a Vatican City amusement park within the Metro of Orlando, a city within a city.

Now here’s something that’s very normal in corporate political Affairs, companies talk to governments and get rewards that’s called lobbying.

32:13

Here’s something that’s not so normal companies, criticizing governments and getting punished for talking.

It’s like it’s Bizarro lobbying anti lobbying government punishing, corporate speech is very curious.

32:31

So to talk about Disney DeSantis and the surprising collateral damage of Florida’s war on Disney.

My next guest is Nick pop Antonis reporter for WFTV covering the city of Orlando.

Nick, welcome to the podcast.

Thank you so much for having me.

32:47

Derek, Nick set the scene for us.

How did we get to a point where the Republican legislature of Florida is trying to punish its largest private sector employer.

Not just largest but also arguably the most influential employer in the state as well.

33:03

This started back during the legislative session in January, the government’s one of their biggest priorities was the law that we call the parental rights and education law and Listeners might conquer commonly know.

It is the don’t say gay bill or the don’t say gay law.

33:19

This was something that limits the instruction of gay trans gender, sexuality issues in classrooms and Florida primarily in the younger grades, but it does extend to all of them.

And this is something that Disney tried to stay out of as it was a very nasty political fight.

33:36

They tried to not take any positions and their own employees after past, got very angry that Disney didn’t throw its weight behind the opposite.

Ocean, so the executives of Disney changed course, they came out against the law.

They called for it to not exist.

Essentially and that irritated the Republican legislature and in particular, the governor Ron DeSantis, right?

33:59

I heard Governor running Santa’s, and also members of the Florida, Republican legislators say that, essentially, they kick The Hornet’s Nest and that this is a kind of retaliation.

So the Florida House of Representatives on Thursday passed this bill.

That would dissolve Disney’s special.

Mint district for the majority of people listening.

34:18

I imagine who don’t know exactly what a special improvement district is.

What is Disney’s Reedy Creek improvement district.

The best way to think about the Reedy Creek, district is like the town that you may live in.

It’s an extra layer of government.

In a sense that doesn’t exist in the unincorporated areas of the county.

34:38

What makes this different from the town.

You live in though, is unlike a town, which has elected politicians.

And representatives that you get to vote on Disney controls Reedy Creek.

So it’s an extension of the big company.

What this does, the benefits of it is allows Disney to ask itself for permission to do a lot of the things that businesses would normally have to go to the county for, if they want to build a road.

35:02

They build a road.

If they want to adjust their comprehensive plan.

They adjust their comprehensive plan.

In return, Reedy Creek, taxes Disney for the services that it provides.

So the sewer plant the fire.

Make the planning department again, just an extra layer of government.

35:19

So essentially, it’s kind of like, Vatican City with in Rome.

It’s a little bit like a government within a government.

Disney, essentially at Disney world has control over its own kingdom.

It has control over its own kingdom as if it’s a kind of City, they have taxing power and really importantly, they have regulatory power, like, Disney builds a lot and amusement park has a bunch of stuff.

35:38

It has rides.

It has signs.

It has roads.

It has hotels.

It’s got pools and you.

You can’t go begging every single time.

You’re building.

Something to the local authority to Orlando and say, hey, can we like fix the pool in this way?

That might not technically like matchup to zoning law.

X, Y, KZ, 2, 1, 2 3.

35:54

So this is just an easy way for Disney to build What It Wants within the property of Disney World.

What would happen if the special improvement district went away?

So what’s scheduled to happen?

Is that on June 1st or 2023?

36:10

As you said, Reedy Creek, District disappears.

It’s like a town.

Solving, so all of the assets and all of the debt of this town of Reedy Creek, also get transferred to the county, which is now, responsible for everything.

So Reedy Creek, currently collects about 160 million dollars a year in taxes, 100 million of that for services about 58 60 million dollars of that to pay off the debt that it has from building things that text layer disappears.

36:39

However, the county is now responsible for all of the services, so that Fire department, the planning department, and so on and so forth.

The state will now be responsible for fixing the roads filling the potholes that might form and it doesn’t have that tax revenue to do that to pay for that or to pay off the debt that Reedy Creek has accumulated.

37:00

Over time about, we’re still not sure of the exact number but it’s bit the billion dollar figures been thrown around a lot.

No, shake.

Keep I mean, it sounds like Disney loose control over its property.

It loses the ability to do what I said, you know.

What you want when you want without having to wait, six months to years, to ask when for permission.

37:20

But something else happens.

I think a lot of people aren’t necessarily paying attention to which is that the debt that it has accumulated gets passed on to other Floridians and suddenly taxpayers around this special district with in Orlando, suddenly are responsible for taxes that Disney as a corporation have been paying.

37:40

Is that right?

Yeah.

So Disney again, loses that control and it’s not the end of the world for the company.

It is an inconvenience.

Let’s be real about something.

They’re still going to get pretty much everything.

They want.

Is just going to be, they can’t call a meeting on Friday.

They’re going to have to wait till the next one on Tuesday for the County’s though.

37:57

It’s a lot more damaging.

This is 160 million dollars a year of Taxation that vanishes and so orange and Osceola counties, where this district is located in.

Now, have to find a way to come up with that Revenue.

38:12

It doesn’t get passed on all.

It’s just these two counties and it’s about 20% of the property taxes that Orange County currently collects.

It’s on top of that.

So what does the county do?

They can’t raise the sales tax?

They can’t raise impact fees.

38:27

They can’t raise the tourism tax enough to cover this and the county secretly.

Why what why is it that they can’t raise those taxes?

Specifically, does it have to do with Florida?

Because in other states I imagine, you know, raising those kind of taxes might be the first thing that you do a lot of States limit, the Ability for a certain area to raise those kinds of taxes.

38:48

It’s not just limited to Florida.

But in this case, the Florida legislature has told the County’s.

Hey, you can’t go raising to every single tax as much as you want.

If we have that, there’s a chance that the county here would just tax tourist to Oblivion, and that would be bad for Florida’s reputation.

39:05

So what’s left is really property taxes.

That’s the only thing that County officials say they can touch at this.

Property taxes.

It said, orange counts at accounts for about 600 million dollars a year.

You have to get much higher than that.

39:20

And so, and you can’t just tax one area of the county more than others.

They can’t slap a property tax on Reedy Creek and say.

All right, we’re good here.

Here’s that 160 million.

They’re going to have to raise taxes, equally across the board for every property owner.

39:37

And so the tax collector is saying his estimation right now is that we’re going to have to raise taxes in Orange County. 20 to 25%, to cover the loss.

I should make sure.

I understand this.

It just to scope up a bit in the big picture here.

Ron DeSantis wants to punish Disney.

39:57

It seems to me once to discourage both Disney and maybe other companies from voicing strong, political opinions, about Florida laws, the same way that Bob shape.

Ecstasy.

You have Disney voiced, his opinion about the don’t say, gay parental rights act.

40:14

But theoretically in order to punish a company, you really want the sort of the force of that punishment to land on the company.

And what’s so interesting about your reporting, is that it seems to say that.

Yes, Disney will lose some control that is punishment.

40:30

But the actual Financial punishment is going to fall on the taxpayers that live outside of Disney special improvement district.

It’s going to raise the property taxes and it might further raise costs because the debt that is owned by Disney.

Will suddenly be transferred in a certain way to taxpayers around Disney World.

40:50

Like is that it is that a fair summary of what you’re saying that essentially, you know, the spillover effect.

The collateral damage will be felt by ordinary Floridians from a financial standpoint.

Not just Disney itself.

There was misinformation at first that all of the tax revenue, that Reedy Creek collects will get transferred to the counties and this will be a boon for them.

41:11

This will be something that they’re going to welcome.

Because hey, Here’s twenty percent more, tax revenue come to find out.

What’s that dust settled?

Everybody figured out, no, really quick stack singing abilities, just go away and now the counties have to figure it out.

So thereís been some interesting language coming out of politicians in the last couple of days, framing it more.

41:33

As this is giving us an ability to look at the oversight that we have and don’t have right now.

Over Disney.

There are some very legitimate reasons.

Why the Reedy Creek District might.

Need some adjusting.

The this was built.

This was designed when Disney was trying to build up cot as this city of tomorrow, with all of this advanced technology that other cities didn’t have especially Central Florida 1960s.

41:57

So they currently have the ability to build a nuclear plant by asking themselves permission to build a nuclear plant.

That’s the big one that’s been thrown around.

They have some eminent domain Powers people think people seem to think it’s outside of their District or bordering their District, based on what I read.

It’s just within their District, but that’s all.

42:14

Something that’s come up where they can just take over properties on their own property.

It seems like, so there’s going to be certain things that they’re politicians.

Now, saying the politicians are now saying they would like to look into reform.

Its that’s why the prevailing Theory, especially from Attorneys at the moment is that Disney is not going to sue over this one?

42:34

Be clear.

We don’t know what the company is going to do and not going to do.

They have not said anything yet.

They could sue.

That’s another set of questions.

Will they the attorneys that specialize?

She lies in this area.

Think know they’re going to use their lobbying power in the next regular session.

In January.

42:49

Come back workout, a new agreement.

A modified Reedy Creek, that gets rid of some of the powers that does Disney never actually needed and maintains the ones.

The company currently has in cares about your really solid down the line, objective reporter.

43:05

So, I don’t want to ask you anything that’s like, overtly political here, but I’m just interested in what you’re hearing on the ground because it seems to me pretty Clear that from a political standpoint DeSantis wants to punish Disney and also help the average Floridian.

43:21

Right?

As you said, the initial narrative coming out of this was that as the special benefits to Disney go down, the benefits to Floridians, living around Disney go up, and it turns out that’s totally wrong.

In fact, it’s the benefits to Disney go down.

In this case.

The pain is spread throughout Orlando and throughout the neighboring counties that they’ll have to pick up.

43:41

A lot of the bill.

Are you hearing?

Anybody talk about how this analysis of the economic Fallout of DeSantis is war against Disney could hurt to Santa’s because a lot of people living around Disney or thinking.

43:57

Well, he’s doing this to help us.

It’s it’s he’s our champion.

He’s fighting the woke Corporation, but instead, it turns out that 12-18 months later.

They look at their property taxes and they owe a thousand, two thousand dollars more than they expected.

Because of this law.

44:12

Are you hearing anything about the Possibility of a political blow back here.

That’s a question that’s been asked a lot, especially in the last 24 hours or so.

What I can say is that from the beginning?

This put Florida Republican representatives in between a rock and a hard place because they’re going between the most influential company in Florida.

44:33

And the governor who is the most powerful politician in Florida and it’s a very tough line to go down, especially when everyone has term limits here.

And they They have a lot less influence than maybe a politician has been there. 30 years that knows they’re going to get reelected.

44:50

No matter.

Once it’s very hard to go up against that bully pulpit in terms of the Fallout from it.

It’s a little early.

I think the dust is kind of settling in terms of where people are shifting their Canyons people are interested in hearing whether it’s going to affect the November election for governor.

45:09

What I can say is that Orange County in particular, is a very blue.

Area of the state.

So, we are a swing area in terms of the national politics.

The Way Orlando goes, usually use the way that Florida goes.

But for governor for the state races, most of our Representatives here are Democrats, and there is currently very little love between those representatives and the administration in Tallahassee things.

45:37

Delicately.

Yes, it seems so absurd to me that the governor would Up to punish Disney and do.

So in a way that was transparently going to raise property taxes for Orlando, residents in Orlando, homeowners who have nothing to do with the Walt Disney Corporation.

45:53

Is there any way that, as that knowledge becomes more transparent?

This just doesn’t happen.

What’s appearing to kind of take shape right now is that they’re going to come back in January, the little toy makers.

46:08

The Disney lobbyists will sit down at the table, look at the Reedy Creek, Charter and say, Okay, we’re good with this.

We’re not good with this and they’re going to come to an agreement.

That makes more or less everybody.

Happy Reedy Creek is such a giant of an entity that we’re all finding out how hard it will be to dismantle.

46:30

Its got a lot more consequences Than People expected. 72 hours ago.

Kind of sounds like the law, the Rhonda Santa’s might sign this week is a hammer, but the law that might actually be worked on.

In January, will be more like a scalpel.

46:46

So that the Reedy Creek improvement, district will not be smashed to Smithereens.

It will be edited.

It will be chiseled.

This will be carved out.

This will be preserved and will end up in a situation.

That’s more like the 2022 status quo.

Then the sort of host 2022 World in which Disney World loses entirely.

47:04

It’s a bit.

Its ability to govern itself.

Exactly.

I have one last question for you before I let you go and that is I think Republicans have been, it’s interesting to me watching Republicans talk about this and see, NBC and Fox News, because the one hand, they say that Disney Kick The Hornet’s Nest.

47:23

And then we looked into the special improvement district.

And we decided to revoke these special privileges.

And on the other hand.

They don’t want to say explicitly that this is retaliation for free.

Speech.

How do you see Republicans, trying to square that?

47:39

Again?

I don’t want to ask me overtly.

I want to force you to an overtly political answer here.

But like how do you see them trying to square?

That it doesn’t seem to me, particularly Square oval.

But what are they?

How are they simultaneously trying to argue.

This isn’t about Free Speech, but also cause and effect.

47:56

They said these things, they kick The Hornet’s Nest and then we looked into the special improvement, district, president of the Florida.

Senate gave a press conference after the Senate portion passed their bill.

And he was asked about all those questions and he didn’t exactly Answer it directly in that way.

48:14

But he also didn’t try to hide where this came from.

He said that Disney stuck its neck out a little bit farther than they should have.

And as a result legislature legislators got into looking at Reedy Creek, what it means and what it gives Disney.

48:31

And they decided at that time.

Hey, this is something that we should probably look at again.

They have an argument and that certain parts of Reedy Creek.

Are possibly problem problematic and not in the times of 2022 or 2023 but that is that is where he’s also saying this.

48:50

Now gives us a chance to look at what Reedy Creek is what it gives Disney and update the code for the 21st century.

It’s always have asked you to me to watch how the political Domino show goes.

Like Disney employees, react.

49:09

Lovely and emotionally to a Florida education, Bill a butterfly flaps, its wings and Orlando homeowners pay 25% higher property taxes.

Like that’s the beginning in the end of the Domino set to me, right?

49:25

It’s it’s what began seemingly as as a culture War Showdown is going to cash out.

Literally as just higher property, taxes for everyone who owns property in Orlando.

Utterly fascinating stuff.

49:41

Nick.

Thank you so much for joining.

Thank you for your time as well planning this with Derek.

Thompson is produced by Devin.

Manzi.

Thank you so much for listening this show.

If you like us, follow us on Spotify rate and review on Apple podcast.

We will be back on Friday.

49:57

We will see you then.