Convergence of Media and Technology in a Multi-Local World
Oh. I noticed. That we're three minutes behind schedule the Dean would not like this. Good, morning my name is Michael D'Mello I'm class of 91. 81. Sorry, boy. I just got 10 years there huh how, about that I wish. In. One fell swoop right oh, thank. You thank you I. Work. On it I. Was. Honored to be asked to introduce this session entitled. The convergence, of media and technology, in a multi local world I actually. I asked. To to. Introduce this I find the the theme very. Interesting. And challenging and. One. Of the reasons is my. Experience at Columbia Columbia was, has. Meant a great deal to me both professionally and and. Personally. I wouldn't, have been able to, achieve. What I did in my career in both banking, and in private equity, without. My Columbia. Business School and what, my Columbia undergraduate, degrees. I'm. Now delighted to, introduce to you Jonathan me with whom I had the pleasure of having dinner, last night. Michael, T fries professor, of professional, practice of media and technology and, co-director. Of the media and Technology program he. Will be moderating, this session. Professor. Nee teaches. A number of courses including, media mergers, and acquisitions, and strategic, management. Of media he. Also serves as a senior advisor at Evercore, and trial antic Capital Partners and previously. Held senior positions at, Morgan Stanley's Media, Group and in, the communications. Media and entertainment group at Goldman Sachs. Goldman. Sachs Morgan Stanley on, OK. His. Writing has appeared in The Wall Street Journal, the New York Times The. Washington Post the Los Angeles Times and the Atlantic, you. Can read more about him. In the event program that was distributed, as you walked in today and, I'll, turn over the floor to Professor, nee thank you very much. And. Amongst. Other things he was the author of the. Extraordinary. Wine last night so we owe him an incredible, debt of gratitude. So. I guess I'm gonna start the. Of. The program by introducing, you to the magic of the, median. Entertainment, world as we've, transformed, this panel. Into. A fireside. Chat so, some of you may have noticed that on the. On. The, original. Program this was going to be a panel and. Unfortunately. Two of our guests, Michael, fries and Tony. Muhuali at. The last minute had to had. To be, elsewhere, but, the good news is that, I am the Michael fries professor, so kind of Michael fries is here in spirit. And on a Tom apathy. Hello, Dominique, Mahadi about, to so. They are here in spirit but, in. The. Flesh we, have Bob, Backus who. Is the CEO of Viacom. At. A moment, in the. Media industry's history, and Viacom's, history, that, makes, the. Fact that we have him for the full hour just. One. On one with all of us an. Extraordinary gift to. All of us. Bob has been at Viacom. For, 21. Years and. He. Has done pretty much every, job at, Viacom, except I've never seen you working in the cafeteria but. Other than that. It's. A it's a tough it's a tough business anything is possible. So, we, are very lucky to have him here because, he is, incredibly. Well positioned to, answer. My questions, and your questions so start thinking about your questions because it's, gonna move swiftly, from. Our fireside, chat to your fireside chat. So. Welcome thank you for doing this I. Guess. What I'd like to start with is. The. Environment, we're in. Which. Is one of. Incredible. And. Apparently. Accelerating. Change, and from. A management perspective. Part. Of the challenge of that for, a global, media. Business, is that the, nature of that accelerating. Change is different, in different, markets. It accelerates, differently, it looks different. Whether it's regulation. Whether it's local, tastes, so. Talk. For a little bit about how. You optimize. The. Opportunity. When. You're in that kind of environment, both. As you, think about it on. A market by market basis, and when, focusing. On a market by market basis is the right answer as well. As a. Global. Basis, because obviously. If there's no scale why. Bother be being. Global, yeah. Sure, first, of all it's great to be here with all you in. Paris. I always love being in Paris and and I've, been a CEO of Viacom for, a little less than two years but for the preceding decade I ran our international. Networks business which means I ran, all the businesses outside the US, excluding. The the Paramount studio, so, this this notion of global. Is. Something. That. I spent a lot of time thinking about and in fact living and. If we, rewind the tape to. 2007. Which. Is when I took over what was then called MTV, Networks international. Over time became called, Viacom, international media, networks which, it still is today. You. Know in oh seven, that was a business that, actually. Wasn't really, growing, and. Was unprofitable. And I. Quickly came to found, or came, to call it, a.
Confederation. Of independent nations, and. It. Certainly. Had a. Focus. On being local, but. In many respects local, had, become a cancer, to the business. And so. So. On said a journey to. Create a multinational, media company out of it and. This notion of what I we came to call I didn't invent, the language it was invented at an ad sales. Meeting. For. The executives, glocal. Part Global part local and so. The answer to. The question really is you. Need to have an, overall view an overall plan. Part. Of the reason I got the CEO job actually think a big part of the reason is when I met, the new board they asked all the board may all the divisions to come in and present. As. A primer, this is back in 2016. And. We. Were the only group that came in not only with a primer where we were a little on where we had, come from but, most important where we were going we. Called that them in 2020, so as you think of a global, enterprise. And. Really kind of any enterprise you have to have a plan but, then when you get to the. Realities, of dealing. With the. World. You quickly realize you have to customize. That, plan and. The Associated, execution, to the local level because as Jonathan, said yeah. Differences, in regulation, you have differences, in culture you have differences in competition. You might have high GDP growth, you might have low GDP, growth you, might have a distribution environment. That is. Heavy. Free-to-air in, the case of media or very. High penetration pay, and all this stuff matters. So. And. I. Also believe by the way that. From. A cultural, standpoint that, yes. We. Are a US media company, you, know we've listed, in the new york stock exchange etc, headquartered. In new york. But. We have real local, footprints, all around the world unlike, most media companies we don't just have a sales forces outside the US we have operating, assets including. Right here in france where we operate a, range, of local french networks. But. We're really guests, in countries, you, know and so we do have to conform to culture, so. The short answer is you have to have it all playing and then you have to to. The degree you can't you you think. It makes sense and you have to make some judgment you have to customize at the local level all while. Looking to preserve the, benefits of scale where you can, certainly. The the, further you get from the screen the, more you want to be, kind. Of globe-spanning with. Respect to and. For example we have shared service, centers on the financial, side in. Budapest, and Hungary which, serve all of Europe we, do that because, it's a very well educated. Geography. A, lot, of multinationals. There it's a good labor force and relative. To say doing something here in Paris. Significant. Cheap significantly, cheaper, but. That's it it's a balance. So. Everybody. Is focused, more. Or less on over-the-top. And. Netflix, for. The obvious reasons. AT&T. Having. Closed. The, Time Warner deal has recently announced I think. A date for the launch of its Netflix. Competitor. Obviously. Disney. First. Buying BAM, tech to provide the infrastructure, to actually do, it which, time want to learn the hard way is something that you actually need before you announce you're, gonna provide.
An OTT. Product. And. Then brought. Box. To, have the content to do it so they won't be far behind. You. Are probably, you could probably be characterized, as the the. Own the last remaining independent media. Conglomerate. With the studio as you. Think. About. Longer. Term. Being. A global player. How. Essential. Do you think it will be to. Have your own. Proprietary. OTT. Platform. Or how, sustainable, is it to use. The fact that it sounds like there's going to be multiple. Competing. OTT, platforms, that, you can get to bid against each other for your stuff. Yeah look that's um, that. Question is kind of all the rage and and as you point out the most recent development in that regard was a tea and teas announcement, this week that there Dida see product, will launch. Presumably. In the u.s. in. Towards. The end of 2019. I. Think it's probably worth stepping, back a little bit from, the specific, of the question although we'll go to the specific question and the specific answer, just. To give it some context, because what's really going on here is we're. Moving from a world and again to the first question the, specific, at a country level will vary but the trendline so, you may be at a different, specific place, but the general notion is the same we're. Moving from a world where. Everyone. Got, access, to kind of the same product, and when I say everyone it might be 85 percent of the people in the u.s. it might be 50 percent of the people in France, etc but. Generally, there was very. Consistent. Availability. Of product, to, a world where, that. Is fragmenting. And it tends to be fragmenting, by price points, and the reason that's happening is consumers. Have more choice than, ever, so, if we use aus, example. That. World. Used to be big. Basic, you, know call, it $80 a month now actually, your bill is higher because other things are attached to it today, you know we have activity. At a forty dollar price point actually, that's more like forty five now, as price creeps up something. That I said would happened two years ago because the the current economics, at that forty dollar price point are unsustainable if you, care about making money and we could debate maybe there's some people that don't care about making money because they have other businesses wrapped around it and. Then you have lower end price points you got some stuff going on in the high teens and. Of course you have the, Netflix's, of the world at, like. 12 bucks and then you also have free also, known as a bond ad-supported video-on-demand, so. That's, that's, the big context, an OTT, is. Part of that because. Over. The top allows. Companies. And. Therefore consumers, to, have access, to different kind of bundles and it's probably worth noting, that at. Those different price points, we're, increasingly, seeing that even the product within those price points isn't consistent so, this notion of exclusivity. You, know and and again this is this, is a bit of a deviation from the past where it was more about ubiquity. Now, you're getting more into exclusivity, where people are either. Making or buying specific. Products for specific platforms. That are operating at specific, price points so that's the big picture that's going on we're going from a sort. Of a bit of a homogeneous world. To a much more fragmented, world I. Think by the way in that journey and, we're in the we're, probably still in the early innings of that journey nobody, really knows where penetration. In these tiers will level out etc. But, it still certainly has a ways to go bikes, by example, that the, majority. Of the world is still at the highest price point in any particular market, but. Obviously the the trend, lines on, things. Like what we call you ease you know the universe at different price points are showing, the, lower ends of the price points, growing, and the higher end of the price points, declining, again as a macro, statement, at varies by country. So. In the context, so that that's the kind of big setup and again. The, the. Sort of PR and. In some respects deal-making. Activity. Is all about companies. Vertically, integrating. And. Pursuing. And, again this is a generalization, but pursuing. The creation of Netflix likes products, because they see that all they see the valuation, of the company which continues, to be extraordinary, by most, financial. Metrics, and. And. They also see the fact that they have created a truly global network, now, that product. Within that global network has, a lot of local and one of the things they're doing today. Is more and more local programming, which has some economic, challenges, but. Nonetheless people, see that and say ok that's the future therefore that's where we must go and. You see as an example of that, the. The Fox does the. Transaction. You. See 80 Time, Warner, transaction. And. And, then a lot of other activity, about people, getting in.
The, OTT space in a more organic, way. When. We look at that I look, at sort, of the call it the Netflix place saying it's, very capital-intensive. Again. You could just look at the weather, what they're spending organically. Twelve billion dollars on content. Ruff. Plus or minus the, Disney, transaction. What they paid for Fox which by the way when. That when the dust really settles on that which will include, the divestiture, of the, regional sports networks, in. The United States. For. For some range of call eight twelve, twenty plus billion dollars that, transaction, will get even more expensive, because, those will clearly trade at a lower multiple, than, the multiple they played for all of Fox so it's very expensive. Game. It also looks if you draw any kind of trendline like it will be crowded and, so from Viacom perspective, we look at that and say that's. Not really the game we want to go play on. Some. Levels we don't have the balance sheet to do it anyway, but on a more practical level, we. Think there's actually great opportunity, in this world through, a different path and, that. Path is, informed by the fact that. Sitting. Here today more. Content, is consumed than video, content, is, consumed, than at. Any point in time in, history. The. Trend line of that continues, to go up, the. Opportunity. To see that continue is definitely, there as. The. Mobile infrastructure, really migrates, I mean 3G is actually sufficient but certain let me get to four and five there's. No question, that that you, have even, better appliances, for video consumption, and. You have inherent, consumer demand people like to be entertained we, used to say you. Know our product could only be used on the living-room couch then. It got to be in the kids room you, know second TV set now, it's really anywhere, so there's a, huge, and growing demand at, the consumer, level at. The call it platform, level there's more, and more entrants, I found, it somewhat. Amusing at. The beginning of this week that it was rumored in the US that Costco was going to develop an over-the-top product, what, subsequently, came out. Which makes much more sense is the. The what. They seem to be doing more is they, want to offer OTT, products, to some of the high ends of how their club members so that would be essentially. Licensing, or in some form subsidizing. That makes, much more sense than them starting, it from scratch themselves, we, could get into why if we want to but just take that as a given for a moment so, you see all this activity and as. All this activity is happening you also see vertical integration, happening, so you know, the Fox Disney, essentially, being taken off the market as a supplier, as they vertically, integrate and drive, presumably, one or more DC. Services.
The. Warner Brothers, Warner. Time Warner Company which, includes the Warner Brothers Studio and. And, the Turner networks probably. On some trend, line of vertical. Integration particularly. Building off of this announcement earlier, in, the week so let's assume Warner product is less and less available I, don't. Know exactly, what, Comcast, NBC, U is, going to do but. They you, know clearly could go down that path and at the same time you have Viacom, which. Is at, the core a, Content, company you know some of the red stones famous. Words, content. Is king which. Back, from the 80s. And. We're truly a global company in that we. Create content all around the world so, as. As, there's, more and more demand and less, availability, from. Historically. Trusted, high-quality suppliers we think that's a great opportunity as. An example of that our our, paramount, and for, those of you that don't know Viacom, we have a set of businesses, in what's. Known as the TV business or. Historically, known as a TV business which is around networks and original content brands, like Nickelodeon, and Comedy Central and MTV, and the like and. Then we also have one, of the iconic. Hollywood hundred, plus actual about a hundred and seven year old film, studios in Paramount, Pictures, so. In paramount. Some. Years ago when we used to be our. Company, in CBS, where one company, the. Companies were split this is in kind of Oh 506, timeframe and at the time. Paramount. Was in the film and television business, but, the television, production business, and associated, library went with the CBS company, because CBS had a u.s. broadcast network we, could get into a debate of whether that was a smart idea a dumb idea etc, it doesn't matter for this purpose because it happened and so. You had paramount, only making film product. And. In, recent history certain. In the you know 14 15 16 quite, unsuccessfully. That's a whole nother story, but. A couple years ago, for. Practical. Reasons and because we saw demand. Paramount, back in the television production business and in. This year which we just closed in 2018. It. Did. Just short of four hundred million dollars a business, in that category up from zero four years ago and, it. Not only did that but it made hits some of the hits you might be familiar with it's. 13 reasons why which we made for Netflix the alienist which we made for. The Turner networks, and and. More recently Jack Ryan which we've made for Amazon, that. Business. Had, we. We call it 9 series on air or online for. Four customers including, internal customers, in, in 18 we'll have 16. On. Air or online in, 19, and they'll do about six hundred million dollars a business. So very rapid, growth and. It's really been driven by this phenomenon, as. We get our international, assets we own the number one broadcaster, in Argentina, called tell FA which, has its own kind of mini Paramount lot and produces, about. 3,000 episodes of content in the year just outside of Buenos Aires that's. Now making between. 700, and a thousand hours in nineteen it depends on pickups, for. Kind of a Latin orbit us Hispanic, Latin America and people buying novellas, all around the world yeah that in and what we're doing our domestic friends that'll be a billion dollar business in a couple years and the, fundamental, reason it's that is all, this demand and for. Us we see that as a very, compelling, opportunity. We, also see some over the top product more in the niche we have a preschool product called noggin, second. Version of that will come out right after the holidays we're working on a third and I think the third version is more interesting. But. It really is it, was a tremendous, opportunity for, a truly global content, company and you don't have to play it all the same way so, as a recovering. Investment, banker that was, a disturbingly. Coherent. Description. Of the strategic, imperatives, because as as. A recovering. The rest banker we thrive, by, people doing in coherent, things. And. The first the, first ten years of, this. Century was. Mostly focused on. Companies. Separating. So Time. Warner spun off their, cable business because they realized it actually made no, particular, sense. The. Same thing happened at cable vision spinning. Off its content. Business and then, with. Comcast. Buying NBC you, that was the beginning of going, back and indeed, that is how bankers. Are. Able to send their children in for fees the private school they they, come together they go apart they come together. But. This, is actually. A moment, of. Extraordinary. Jewelry, for bankers because just. The overall quantum, of deals, which. I think, at the end of the day is probably most, associated. With fear, and desperation.
Bankers. Feed off of fear. But, it's not it's. An odd mixture, of vertical, horizontal. International. Conglomerate. When. You look, it. Sounds like you're a bit skeptical, of the of, the vertical phenomenon, but, when you look at the overall spectrum. Of deal activity, that's happening, what. Piece, of it do. You say well that actually is, interesting. And might. Make sense for us sure. So, let's, start with a little story. Back. In 1997. When. I just joined Viacom, I joined at the corporate level running. Planning development, and technology, so that included strategy, and M&A and at the time we. Owned, a company called. Simon and Schuster and at Simon. & Schuster was a. Full-line, publisher, both in the in. The consumer, the professional, and the, educational, business and at. The time you know we were thinking about what, we do with, this asset, how do we create value and, the. Thesis, we came up with was, taking. The educational, piece and you. Know moving it in a technology fuelled direction, and creating a new age education, company maybe, we did that with a tech partner, who knows, bunch, of bankers came in because. We were trying to figure out if we did it as a venture you know well what would it be worth. And. So. They started, showing, us comps, of educational. Publishing companies. And. And pretty, quickly we said wait a second are you saying Simon, Schuster is worth X and the, X had, a billions, attached, to it and. They said well actually your company's better than these companies should be worth more and we. Pretty quickly decided, because, the company by Viacom, at the time. Was. Highly levered something. Else we inherited in 16 but that's a different story we, said wait a second if we can sell the company for this much money and not have any execution, risk that's. A better play for us at that point in time because, candidly. Were more about the entertainment business than at an education. Business and there, are no synergies, that we can figure out that our material between, entertainment. And education, so, we divested, it, we. Sold to Pearson, we, saw there are very nice multiple, we were very happy life was good and then, about six months later one. Of our competitors, ran a full-page ad, in The Wall Street Journal, that said. X. Uniting. Education, and entertainment and. I looked at the ad and I, said there. Is absolutely, no basis, to do this they. Don't know what they're doing there are no there are no synergies, involved, something at, least in that space I continue to believe today. And I think it's fair to say that there I don't know adventure we're, in France how can you make fun of mr.. Messier he. That. That ad was taken out by a one. Of the few French. Media. Moguls for the brief period of time that he a media, mogul for. After. He bought Vivendi. Universal, I, believe yeah I'm not gonna comment on who's that it was I so sorry I I'm, gonna stick with the basis, of the point which is there, are no synergies, in that combination. So. You, know this notion of vertical integration which, is you point you know companies, get taken apart companies get put together it's kind of a cyclical thing it's.
Not A new phenomenon, although there are rare examples, and Never Say Never there are some productive, examples, I'm sure but. It's very rare that they're actual or synergies and even if you look at, Comcast. Today. Where. Comcast, bought NBC Universal. And I remember when that happened it was on a decade ago roughly, at. The time it happened we in the industry thought well that'll be that. Won't go well you know clash of culture etc but. To their credit that has gone very, well and in fact NBC, Universal, is a more successful company. Today than it was when. It was owned by the prior owners, but. I would assert to you that that has nothing to do with vertical integration that has to do with better management and. And. So, I think you got to really look at it and say what, are you trying to do now when we add vikon look at this, we. You know again we we have a pretty levered company, a circa, the end of 16. We. Were called investment, grade and we had an. Investment grade rating but, we didn't have an investment grade metrics, and we had a a. Glide, path to get there by actually. September of this, year that just passed and we. Were supposed to be add investment, grade metrics by that time or we would be downgraded by. S&P now I'm happy to say that, in. August, SP. Reaffirmed, our investment grade credit rate rating. And. That was on the back of paying down two, billion dollars in debt we'll pay another billion dollars in debt by the end of this calendar year, improvement. In operating metrics etc. But. If you had asked me in June and January. Of 2017 2018. Would, that happen I would say no I was, pretty sure we were gonna get downgraded but thanks to hard work and all that that didn't. So we've been I say all this to have you understand we've been constrained, in our ability to use our balance sheet to pursue. M&A and we haven't gone after any scale trans quote unquote scale transactions, instead, what we've been doing is looking. For ways to use transactions. To accelerate, our strategy, so these tend to be much smaller deals that have very specific purpose.
And We've done three of them, in. The last 12 months we, acquired first. A, branded. Content company, called who say for those of you that are less familiar with the space branded. Content is, kind. Of an integrated, piece, of content, with advertising. Messaging. In it, who. Say did that does. That, mostly. In the digital native space so making stuff and publishing, it on third-party, social, platforms, like YouTube, etc. And. Generating, revenues, and, cutting through for, advertisers, so, we acquired that and bolted it on to. Our company as a kind, of a lower end ad, solution, that we didn't have. But. That when, complemented, with our kind of pipeline into the largest agencies and advertisers in the world has, already proved quite successful, we then followed that up buying. A company called VidCon. Which. Is which runs the largest annual gathering, of social influencers, in, the world in. Anaheim, California, think of them as YouTube stars, and. So we now own, that company and it provides not only a business because doing that's a business but it also provides. A platform for relationships. With this type. Of talent and and and, we do use. That type, of talent. Both. For our traditional product, and for our digital native product so we thought that was a good idea and now we're just like in the case of who say we both did we we, sort of partnered it with our existing, sales force that give them product depth and different, selling capability, in the case of VidCon what, we're doing is we're globalizing, it so we'll have vidcon's. Event. Is in Anaheim California in, the summer we. Just had one in Australia and we're gonna have one in London, in. 2019. So again accelerating. This. The. Strategy, of building stronger. Relationships, in that space and, also an events business and. Then the third one we just acquired was a company called awesomeness, now, awesomeness, is interesting, in that prior. To acquiring the company we hired the creator of the company Brian Robbins, to, run. A label for, Paramount part. Of our strategy we, probably should have started there so you know big picture what we're trying to accomplish but, part. Of Icom strategy, is to leverage, the combined company a lot more so actually get some. Scale. Through assets we already own and part, of that is using our brands from our network space in the film business so think, films. Under the BT brand or Nickelodeon brand etc. The. First of those by the way I'll come out in two weeks it's a BT film by, Tyler. Perry who's probably, the most prolific african-american. Producer. Starring. Tiffany Haddish who's one of the hottest stars. Not just African American stars but X stars, just. Full. Stop called. Nobody's fool, anyway, we hired Brian to lead that because he had a unique combination of, historical. Expertise, so, he was in-house and then we created. Another division. To. More, aggressively, go after the digital native space become, digital, studios we hired another awesomeness, exact, the number two exact kellyday, to run that so we had two people. Who really knew the company in-house, and awesomeness. Had Gump Khan from an independent, company to, a three-way joint venture, whose, owners, were Comcast. NBC you, Hearst. And Verizon. Three, people that couldn't figure out what they wanted to do and so, became an encore asset, and we swooped, in and bought it for, five cents on the dollar relative to, the last, round when, two of the partners had bought in so, it was a great financial, transaction, but it was again, an example of an accelerant, because people look at that and say oh yeah that's a website company, and. They're not exactly right what it really is is, a content company and it. Makes, long-form. Content both, film. Length and and episodic, television length. Target. At a young female demographic, so, think teen. Girls. And does, it at very attractive, price points think $500,000. In Episode four scripted. Which is very low price point and. So that's. Part of our broadening, you know I talked about the incredible, demand for content. This, company, makes content, for Netflix makes content for who for for. Hulu and. For others and, we think fits very nicely in so, that's what we've been doing and in every case it is, in the case of who say it has. Accelerated what, we call our advanced, marketing solutions, our next-generation advertising. Strategy in the case of VidCon it, is accelerated. Both our event. Strategy, because there's a lot of time, spent and experiential, and our.
Digital. Native strategy with respect to talent relations and, in, the case of awesomeness, that is accelerated, our content, strategy as we ramp and. Create, more and more and we did all three for well nor well south of, 100 million dollars well, let that highlights. Why every. Banker you see has a huge smile. On their, face in the, current environment so, you. Bought awesomeness, for. Five cents on the buck they. Do long-form, content they, also do some short form video content. Most. Everybody, including, Google who has tried to make investments. In short form content has. Been lucky to get five cents on the dollar once. They did it and yet. At the same time. Jeffrey. Katzenberg, is able. To raise at. A billion, dollar valuation and. Take. Money from all kinds, of otherwise apparently. Successful, and intelligent, people and. To. From. A standing, start in the, face of all of this evidence that it will end badly, a, brand, new, company. I think actually called new TV. Correct. To to. Create, from. A standing start short form content and it's Jeffrey Katzenberg, and Meg, Whitman. And. A bunch of other, more. Or less famous people but no actual, underlying assets. But, a billion dollars evaluation. What are you - they got Cash, Money cash, money so, I guess it. Must be after. Post. Money more. Than a billion dollars. What. Do you make of that well. Look. Jeffrey has a. Very, compelling idea. And. He has a very strong track record his idea is, that. There's an opportunity. Fueled, by mobile, consumption and again a thesis that that's only going to continue to grow as. Devices. Get devices. And networks get. Higher and higher capabilities. His, thesis, and it's based on research that he's done is that, there's an opportunity to create high quality content. In, the roughly six minute duration space and the, research goes to average, length of tune in places etc, and. So. He. Believes, that there's an opportunity to create. A company, now. Called new TV to. Essentially. Create a, new, entertainment format, the six minute high-quality, video. Format. And. Create. An s5, subscription, video on-demand. Service. Around. That and, he. Actually originally, started out looking. To raise two billion dollars, and. Fell, back to 1 billion dollars, which big said probably, if not be certainly one of the best capitalized, startups. Of all time, and. I look he. Originally was going to get all the money from just the median entertainment, industry, we. Have now, we. Are as. An industry own some equity in it but. The bulk of the money didn't come from us came from more there, I say traditional, financial sources, you know investors. Look. I think it's a very interesting thesis.
For The record we are a small, minority a, very small minority owner, at, vikon, and. Andy, Jeffrey's not a guy you would bet against, having. Seen him and known him for some years so. I think it's interesting I think it's great for a company like Viacom, because. You. Know assume he can he is successful at creating a 6-minute, format, whether. It's paramount. Or its, MTV. Or, it's telophase, our international, our Latin American business, which operates under viz via combination Studios will. Be supplying it and in. Fact we're already working. In, that direction, as, to whether it'll be successful, or not we'll see but, it's certainly a. Grand, vision a, motivated. And successful, guy and. Tremendous, financial resources, to go after it although. From what I understand one of his challenges, is if you're joining as an employee now and you're getting equity, comp you're joining, at a billion dollar valuation, which. Is proved to be somewhat, of a challenge perhaps, they didn't expect, but. Nonetheless audacious. Plan and we, wish him great. Success alright I have one more question than all, of you start. Thinking about your questions. Bruce. Greenwald, who. Is. Speaking. As well and I wrote a book called curse, of the Mogul as you may recall and one of the main. Complaints. That, we had just sort of looking at the data of media, companies over time is the disdain. For. Efficient, operations. In. Favor of grand, strategic. Thinking. And. To. Be fair part of that, disdain, I think, is driven by what is. Now viewed as a truism. From. William, Golding book. That. In, entertainment, nobody knows anything and, if nobody knows anything. He. Might as well he, might as well just, focus on strategy, since trying to focus, on the. Actual nuts. And bolts of operations, is kind of a waste of time, that, said you've. Gotten a huge amount of credit in a relatively, short period of time from. Turning around. Paramount. Which was a basket, case and has. At, a series, of successful, films and you described. What. You've done with television, business which basically went from zero to a hundred in a, very short, period of time when. People hear, the word efficiency you. Immediately, go back to widgets and how, many widgets you can get out of a machine a certain amount of time. Does it even make sense to talk about efficiency, in the, context, of creative businesses, how do you think about it did, you just get lucky or, did you do something in particular to, turn around the, entertainment portions. Of those businesses. Oh. It's. A lot packed in there. So. I I do believe that I have been fortunate my life so I won't say we had no luck involved but look. My, playbook, is management, team plus strategy, plus execution, and, so if you look at at Paramount. Circa the end of 16 the. Studio had just come off a financial, year where it lost five, hundred million dollars on an operating level and consumed the billion - in cash which, is a pretty good trick when you have a library that throws off 300 plus million to the positive you, do the math and. You. Know the the the, the. And I had never been responsible for a Hollywood studio major, studio but it was pretty apparent to me that something was broken, and. So. We, you, know kind of thought about it. Developed. A new strategy which, fit in the context, of our Viacom strategy, overall, and. Went shopping for new management, because. At the end of the day people. Are responsible for running businesses. And, if business isn't running well one. Of the leverage you got to pull is management so put, a new strategy in place hired new management in this case in the form of Jim gianopolous who, had had a successful, run at Fox and. After. Doing screening, a lot of people and meeting less people far less people but spending time with people emerged, as my clear number one choice. And. Then under Jim's leadership, rebuilt. The management, team there. And, now Jim. Joined as an employee in.
Like. April, I think of, 17, so he's been there called a year a, little less than a year and a half. We, now have, had, basically. Three. Successive. Wins the first one was, a film called quiet, place which is this, low-budget. John Krasinski, thriller, but really they. Thought it was a horror film but it was really a family film if any of you have seen it you, know what I mean and if you haven't seen it I'd really encourage you to because it it's, a really compelling, film, made. That film for about seventeen, million dollars obviously, at the market it so he messed it far more in it and. Produced a very very, nice return. That, was followed, up by a small film called. Book club which actually, Jim, bought because. We didn't have any films to release in a particular window that. That film was. Intended. To skew older female. It's. Cast as older etc, it's. A great film turned out to do very well for us and then it's kind of interesting, that we're sitting here in Paris we. Then had the sixth installment of Mission Impossible. Starring. Tom Cruise and, people, were somewhat, skeptical how great a film is going to be although the other studio stayed away from us, on opening weekend as. They were right to do which. Went on to become not only a successful film but the biggest of all of, all the film's mission films to date which doesn't, usually happen for the sixth film and. That's true on a US domestic. Theatrical. Basis on an opening-weekend, basis and on a global basis, and the. Only one that you could say we had gravity, pulling in our direction it was global because China is bigger today than it wasn't for the fifth, installment of the fourth installment but but, opening weekend in u.s. you, can't make that. Claim. It really is a great film. And now those films were none of those well, mission wasn't greenlight, nor was quiet, place greenlit, by the current management team quiet. Place was greenlight three. Weeks before Jim started, but, they managed a production, and they were the guys who market, it among, other things he brought a new head of marketing who. Made who made it breakout from what could have been a niche film into a mass-market film. And the same thing with mission they kept that on budget, something, that paramount hadn't been good at and then the last number of years, got, the film down to a more reasonable length, something, also Pearman, hadn't been good at it still was too long but, and. And. Marketed it very effectively so there's, a case where through management, and a differentiated, strategy, and their strategy is really going to start, coming online in three weeks when on November second I think that's about three weeks maybe. A little bit more when, the first of our branded films come out I mean the beauty label, so I would. Say that's an example of of. Execution. Certainly, not certainly not M&A, now. Your point on efficiency, is an interesting one I. Do, believe there's a real role for efficiency. It won't cure all ills. For sure and. You can screw, things up by cutting money so you have to be careful where you cut money but there's no question that operating. Not only well but efficiently. Is something you should do in the media business, and. That goes to you, know we embarked on a cost, transformation. In our domestic business towards the beginning of this fiscal year in that. We dropped about a hundred, million a little art more than 100 million the bottom line this year and will drop. Over. 300 million as, we kind, of move forward and, that's, just doing things like. Sourcing. In. A much more, structured and. Dare, I say efficient, way, it's. Things like, opening. Shared, service centers like I mentioned on the financial, side in Budapest, where you move, transactional. Work at least initially transactional. Work to, lower cost locations, and benefit from factored costs. As. Well as looking at organization. And, you. Know finding. Ways, you could operate in. A in a leaner more nimble way which by the way can pay effectiveness, dividends in addition to efficiency, dividends, something. We've also seen so, it's. Certainly not a one-dimensional. Playbook and I wouldn't bet the ranch on just efficiencies, but you're quick I mean I would think it's irresponsible not, to look for ways, you could operate. More efficiently particularly. In a, business that's not growing 20 percent a years I mean if your business growing 20 percent a year I would. Argue don't worry about that right it's, more important to have more people running in parallel and grabbing, for market growth and.
Certainly Our media networks business had been doing that if you go back to kind of 90s, etc but, at some point as a business matures you it's. More it becomes more important, to, operate. Efficiently. And. That's certainly part, of our PlayBook will continue to be part of our playbook, great, why don't we. Sir. But. Why don't you wait for a a, mic. You'll. Be second go ahead okay thank you very much follow the mic I have two questions, one is we were only going to take one. The. Murdochs, get out at the top and what. Do you think of the next strategy I mean are they now ahead, of the curve of the. Curves we spoke, about out, you spoke about earlier. Well. Anyone that thinks they can call the top, shouldn't. Be running a media. Company should probably be strictly in the investment, business so I'm. Probably the wrong person to ask if. If. He got out at the top obviously. I. Think, everyone, certainly in the media business found, it interesting. That, that Rupert, was a seller he's not historically, been that as, you well know. Now. Arguably he's not getting any younger either, but. I think, he saw an opportunity and. Again it's really more of a question to him than to me but. He, got a very, high multiple, for. That asset and you, know, clearly was something he thought made sense to do I think. The sky transactions probably the more extreme version for, those of you that. Are less familiar, with this as. Part of Fox, selling to Disney it also puts sky which. Is a European, company, biggest. Presence in the UK but also in Germany and Italy and now Spain on more on the distribution side it. Basically put that in play because as Fox had a significant. Minority stake, I actually, had tried to buy the whole thing some, years ago and ran into problems with the. Among other things the British government but, that was NASA that also people, thought would never be available, for sale and if you look at the multiple Comcast just paid for that it's pretty extraordinary, so. On a sort. Of multiple continuum, basis he clearly, did. A nice deal. The. Deal. Action hasn't closed yet on, the Disney side, but. I, don't. Know what else was going through his head but you, know I think. That. Was a pretty. Impressive in terms of value. Recognition. For those assets. How. Much is the connected, car and autonomous, vehicles affecting, your future plans. Well. This, goes to what. We were talking about in the beginning which, is we are in, a world which I think this tread line will continue, and something, like a connected, car it's part of why it will continue, where. Demand for content. Will. Continue to go up I mean, think of being. Living, room now all of a sudden instead, of you driving your car you're. Gonna be driven essentially, and why. Wouldn't you want to get entertained, along the way so I, think. It's it's, a very good, assumption to. Operate that that'll be another opportunity, now. Will it be delivered. By. An, existing distribution. Player, you know to Sirius, XM, as an example who's in the, satellite. Radio business and. A big part of their business is based on people getting new cars that have, Sirius. Radios built in and, then benefiting, from that too they transition. And it's run by a guy named Mel Karmazin who. Actually used to be involved, with Viacom do.
They Go from audio to video maybe. And. I'm not saying anything cuz I that's, no insider, view of Sirius I'm just speculating, or. Does some. Other type of entrant, go and do that or does Ober try to do that as part of their app who the hell knows but. That, will happen for sure and, it goes back to really. Why I believe Viacom, is in such a great, place. Because. Go to the Fox Disney, transaction. Or the Warner transaction, both of those are the best things that could possibly happen to Viacom. People, how. Do you think that you know aren't you worried no they highlight, the value, of. The. Assets, we own in this case certainly of a Hollywood. Studio and. In fact the supply of those has diminished by two and. We own one of them so. That's a great great. Event, in terms of focusing on the value of the assets we own and secondarily, something. That we're still not really beginning, even to get credit for in. Terms of our equity and. Secondarily, they. Are part of this continuing, that's driving more and more demand for compelling. Content and you. Know we are I'd, say one of the few, companies. That not. Only produce content. Across formats, theatrical. Length episodic. Television length short form length but. Also do it on a global basis and have a track record of producing hits including, in 2018. So, I think that's a great thing and I think the connected. Car which who knows you know when it's going to be I've seen I was at CES not. Last year the year before and saw the Mercedes, one it looked pretty cool, but. It will definitely continue to create, demand for high quality content. And, it'll probably do that in, a way where you're. Able to put your ability, to produce in different lengths at different price points is important, and that's again why I love the, fact that we bought. Awesomeness. I love that we produce content, in Buenos Aires I mean one of the unfortunate. Things about. Being in Argentina, lately. Has been the. Destruction, of the Argentinian peso but. Before that happened. Doing. Something in Argentina cost 30 cents on the dollar versus, doing it in the US or certainly doing it in New York it now cost 15. So. It's an extraordinary, opportunity and. An, hour telophase, unit, produced. Four shows this year that, had over a forty five share, on television, which, is a staggering, high. In this case number so, you. Know at the core we are producing. Not. Only content, but hit content, across. Formats. We talked about the film example. Also. And. All, around the world and as connected, cars come online I think that'll be additive, and it certainly fits within the context of our strategy okay les to here and here so.
Will. Will make three. So. Neither of you. I've. Been man shamed so. Why. Don't we go, to a woman. Next. And then we'll do two. More, go. It can. You. Can use, pass back and I promise we'll get you and that will get Leon come on we got a fun with this right sorry. Pop. I was wondering if you could share a bit more as part of Viacom's. Transformation. How. You're, approaching data. And analytics, and. Building. That capability, into, your organization. Especially. As they're competing against the Netflix's, of the world. Sure. So I think at. A high level it fits into two areas it fits into internally. Making better decisions and. In terms, of externally. Evolving, our product line an example. Of the latter that. I mentioned, briefly is, you. Know we are we, have a multi-billion. Dollar advertising. Business where we essentially. Attach, messaging. To our, media assets, the benefit our clients in various shapes, and forms. In. The, last couple years we, have, looked. To evolve, that business, to. Benefit, from increased. Targeting. Essentially. And, use that to drive price. And yield that. Operates, under a banner we call advanced, marketing, solutions, and. Again there are various shapes and forms of it but in. The last two years as. We, have engaged. In a different way for example with, our distribution. Community. Folks like Comcast, and charter, and the like, part. Of our strategy there has been to broaden the conversation. And. Not just license them a set of linear feeds and on-demand product, but also. Provide. Other areas, where we can both benefit. And therefore, become, a more important, supplier to them in this changing world. And so part of that's advanced marketing solutions, and specifically. We. Now can, insert. Dynamically. Into. Ninety over 90 percent of VOD homes in the US which means I can deliver an ad to your set-top that's, different than the, gentleman next, to you. We do that through. Essentially. Access to the plant but, we also do that by buying, some data from the distributor, which allows for that targeting, so that's an example and we can also do that, increasingly. In. What we call the national feed, whereas. We can dynamically, insert, into, some of that inventory that'll, be a journey. Over time as more distributors, come out and we add we. Extend into the clock but, that's an example of data really. Being. Fused to an existing, business so that we evolve it and ultimately ensure, that we are competitive. With the fan guys and. In fact have all the benefits of our environment, which tends to be more. Secure not, suffer, from adjacencies. But also benefit, from targeting. And, other attributes. Associated, with, with tying it with data-driven, advertising. So that's, a. Kind. Of product. Example. And. By the way we'll, do about. Week, well I say we will now that fiscal year has closed so we did just short a 300 million dollars of advance, marketing solutions, business. And. That business is, on a very healthy. Growth trajectory, so it's. Important, not only with, respect to the evolution, of our product line and serving, the. Needs, of our clients but also in, the context, of returning our ad business to growth particularly. In the US the international everything everything varies by country but. And. Then internally. I'm. Gonna get in trouble cuz so, we're gonna go to the next one people go to Leon and. I'm. Just curious your, perspective, they. Originally, broke up, Viacom. Me to to company CBS, and Viacom, yes I think the motivation by some there at that time was. To focus. Or, create, visibility the, high growth of I come now, here it turns out that CBS was the winner if I come to know that well, now, the family, wants to put the two of them back together again so. What. Has changed in the industry, and what. Is the advantage of the shareholders, are putting Viacom. And CBS back together good. Yeah. So, the. First thing I'd say is we continue to see significant. Opportunities, in terms of organic, execution, and, actually. We're starting to get this goes to both the turnaround, of our company I gave the Paramount example, and also the evolution of our company and so AMS, fits into the evolution of it and, we're starting to get some credit on. The street for that so and there's if you, look at how 19, will tract out we'll continue to put points. On the board in fact I believe we'll put points on the board as, soon as our next earnings call well we'll talk about what's going on which will be mid-november.
And. That that is our focus today now. In the context, of putting. Companies together writ. Large, not. Vertical, integration but, more horizontal. Integration which. Viacom. CBS, would be an example, and you could create other examples. There. Are material. Synergies, associated, with things like that when. We were looking. At a potential deal, with CBS, some, time ago, because. There is no active, process, at, the moment, and. If. There were to be that would be more driven by our boards but at. The time I was publicly quoted saying there was a billion dollars of synergies there and those. Were mostly. On the cost side vast. Majority on the cost side there was some revenue, built-in and like, a billion dollars of earnings, you. Know not, that easy to create and so we. Thought there was some interesting opportunity. There and. I think that goes back to Jonathan's. Point earlier of why, there's. A lot of interest in transactions, in general you know in places where growth. Is challenged, that can be a way to create earnings, growth and evolve the positioning, of a company's sorry I think that's mostly, what that's about and, and, again it's not our. Focus, today. Our focus today continues, to be on organic, execution, but. There continues to be spec about that topic yes. What. And. And. He, but. He did he didn't he didn't decide to do that but it go ahead. Good. Morning describe the Netflix, strategy. The 12 billion spent, on content is capital intensive so I'm curious do, you think you'll get a return on that especially in the context, of the, sprawl of OTT, OTT. Offerings, happening. You have Disney HBO, etc, so just you. Seem to be thinking. Maybe it's did not gonna get a return on that's if you could just explain, Thanks well the short answer is we'll see I think if. You look at equity, valuations, the street certainly thinks they're gonna get a return on that so. If on them I'm gonna keep playing that direction until. Someone, changes, their mind and you. Know who knows that that'll happen or not but but, certainly, look. Quite at where credit is due they have created a. Definitive. Global. Network they were the first people to do it they have triple-digit. Million subs, and. They have you. Know good. Degree of. Consumer. Appeal. And. They're. Continuing, to invest in that and their valuation, is supporting that now clearly, other people, have seen that and they're either looking to defend traditional, businesses, you know I was in Europe in. June as an example meeting, with not. In France but in I was in France but these particular meetings weren't in France meeting. With some of our traditional clients, who also want to reinforce their. Position, in. Sort. Of the the video delivery, ecosystem. In their country, and are, looking for exclusive, product and that's triggered, a strategy, where we're. Putting, together an unwired network, of buyers all around the world and producing content for that network because none of them as they say to me in those meetings have 12 billion dollars to spend but. They. Need they, need they, believe they need exclusive, content, and by, buying just, a country specific and, us putting a slate of ten or twelve together per year it's a way to fit, that and so I think you will see competitive, responses, from traditional players you'll see other people. With. A more frontal, assault to develop a more equivalent, and clearly that's, the narrative where Disney's going that's the narrative where AT&T. Is going at least in the US Disney arguably more global and, we'll see how that all shakes out, last. Question, okay. Morning. When. We've been talking about the convergence. Media. From. A business point of view obviously. Because we're sitting in a business, conference but. I would like your honest answer I would, like to look at this topic in another. Way is, the media converging. Into the politics, of every, nation. Say. I mean is the media now trying to control the politics of every. In every, country because, because, we see. Presidents. Complaining, about it and Prime Minister's also, so. So is the media, manipulating. The politics, of a nation. Well. Let me first start, by saying that we're not in the news business admire in, the entertainment business so my. Comment, my. Comments, will be strictly, my own opinion, and have nothing to do with our business. Other. Media companies have, news businesses, as an example so. I'd. Say two things in response to your question one, is. Media. Businesses, at least a subset of the media businesses.
Revenue. And therefore earnings. And presumably, valuations, are based, on their ability, to get, consumers to spend time with them, and, so that that is a guiding. Premise that we certainly use when we make decisions of what shows to greenlight or films greenlight et cetera and. You, know I think more, broadly people. Make decisions. But. The second thing I'd say which. Is actually what I think is going on here is. It. Has nothing to do with. Traditional media per se sure. The news networks are playing into it but that's not what's going on here what's. Going on here and I. Think it's troubling, is. The. Impact of this on society, of social media, because. Social media theoretically. Gives everybody a voice, but. Practically, speaking only promotes, extreme, voices. So it's driving, polarization. Because only in extreme points, cut through the clutter and then, people subscribe, to things, that are fit their interest versus the old days of getting, a more balanced, view from, say a traditional news network, so, with the core of what's going on here is the. Societal, impact of social media and my, concern is the. Trend line says it's only going to continue to drive polarization. And and, and, essentially destabilize. And. I don't really know what you do about that. But. That's much more. About. What's going on here than what CNN or Fox News or you know pick your favorite, or at least favorite news brand is doing at, the core it's. Being driven by social media so. Speaking, of important. Societal. Trends I believe that based on your performance, today there will be a huge trend of panels. Becoming fireside, chats because of the quality, of what you deliver today. You.