June 19, 2019, 22:58


Why Amazon is going to be one of the winners of the streaming video wars

Why Amazon is going to be one of the winners of the streaming video wars

Uncovering and explaining how our digital world is changing — and changing us.

Every pay-to-stream video company is fighting a “battle royale” for your attention, and not all of them will make it. Former Amazon Studios strategist Matthew Ball says Netflix and Disney are safe bets to land on the winners list, but now as an outsider looking in, he thinks there’s a strong argument that Amazon will be up there, too.

On the latest episode of Recode Media with Peter Kafka, Ball said Amazon has successfully synergized its media offerings to catch up with the once-dominant Apple. Amazon says its Fire TV box has 34 million users worldwide, which gives it the power to own the streaming video relationship with consumers the way Apple does with its media box, the Apple TV.

“To some extent, it doesn’t matter how much an audience member knows what’s what or where it’s coming from in the same way an Amazon customer doesn’t care if it’s fulfilled by Amazon, shipped by Amazon, or an Amazon Basics,” Ball said. “The goal with everything that Amazon does is to satisfy customers and to give them the fullest range of possible options.”

He also said it’s no accident that Amazon Prime Video’s original content offerings have changed over the years. The company’s first big hits were shows like Transparent, which Ball described as “coastal, upper-income programming” aimed at early adopters of Amazon Prime. More recently, it has announced plans to make shows based on the Lord of the Rings and Wheel of Time books.

“No one ever programs for the audience they don’t have,” Ball said. “… Marvelous Mrs. Maisel is a marvelous show. It is not going to drive first-time Prime subscribers in Malaysia, in India, in Brazil.

“In Japan, people do not pay for video,” he added. “In India, people do not pay for video. You need so many different things in programming. And going for the second-best-selling novel of all time and trying to do something new and ambitious is an incredible pathway to that.”

Correction: A previous version of this article misstated the number of Fire TV users.

You can listen to Recode Media wherever you get your podcasts — including Apple Podcasts, Spotify, Google Podcasts, Pocket Casts, and Overcast.

Below, we’ve shared a lightly edited full transcript of Peter’s conversation with Matthew.

Peter Kafka: This is Recode Media. I’m Peter Kafka, that’s me. I’m talking to you from Vox Media headquarters in New York City. If I sound intimidated, if I sound nervous, it’s because I’m talking to the Matthew Ball, a man some of you know as “that guy on Twitter.” Some of you know him as the guy who writes really long pieces in Media Redef. I know him as the guy I’ve been asking to come on this podcast for how long, Matt?

Matthew Ball: At least two years.

At least two years. You made it. Thank you.

I did.

Thank you for coming. I want to explain to the readers who don’t know who you are who you are. I think a good way to do it is by reading a transcript from a different podcast I did with Jason Hirschhorn, who you all know. Jason talks about going to lunch with Kevin Mayer, a big-deal Disney executive, and Bob Iger, the biggest-deal Disney executive, and this is what Jason says about you: “We’re having lunch at Disney and Iger says, ‘You know you’re an idiot,’ and I’m like, ‘Why is that, Bob?’ And he goes, ‘You give away for free what we pay tens of millions of dollars a year for from management consultants.’”

What Jason is talking about is the stuff that you wrote for him and still write for him is the stuff that Bob Iger, the CEO of Disney, finds incredibly valuable. It’s stuff that he would pay millions of dollars a year for, but he can get for free. We can all get for free thanks to your writing, so thank you for joining us.

It’s a pleasure to be here.

We’re going to charge a lot of money for this podcast.

That’s good to hear.

What should we charge to untap Matt Ball’s brain?

Well, as you just heard, I’m not the best judge of how to monetize my own work, and certainly, as the CEO of Disney and owner of ESPN, Bob knows quite well, so maybe you should go with him.

Let’s start with that, because I do want to ask you about Disney and Apple and Amazon and all those things and how you got to what you’re doing, but what are you doing today? What is paying your rent or mortgage or associated bills?

Right now, I’m raising a venture fund …

Oh, of course, welcome.

And the goal is to go after and invest in many of the topics that I’ve written about and many of the theses that I’ve had for a few years.

You want to put your money/other people’s money where your mouth is?

Correct.

“I think I can spot value in I’m assuming media and technology.”

Pretty much.

Yeah, how’s that going?

It’s going well.

Are we soliciting money for a fund right now? I think that might not be allowed.

That’s not the goal of this podcast.

Okay, good, you’re not soliciting money for a fund?

No.

Okay, good. Do not give Matt Ball your money. And then I’m confused, because you wrote for Jason, you still write for Jason, even though you won’t write for me, bothersome. You worked at Amazon, we’ll talk about that, and then for a period you were working … You tell me. You had something to do with NBCUniversal/Comcast. You had your own company. They bought it. You tell me what happened.

It’s very simple. I’d been working with the company Illumination Entertainment. They’re a famous studio behind films such as Despicable Me, Minions, Secret Life of Pets comes out shortly.

Yeah.

Had been working with them quite a bit over the past year. They have some interesting concepts under the founder, Chris Meledandri, of how to go after interactivity digital media of many of the themes that I’m very passionate about. And so I’ve been helping them as they start to think through those products. There’s not too much I can talk about there, but that’s the gist.

Okay, so you’re consulting for them, have been consulting for them?

Yeah, working part-time.

They’re using your brain as well.

Correct. Yes.

And we get it for free, awesome. Yeah, I can see lots of things you could do with Despicable Me 1, 2, 3, and all of those.

Yeah, they’re phenomenal characters. I think in general, when you take a look at what’s the type of media that goes from one world to another world, you have some of the players in the market. Pixar is a phenomenal storytelling company. I don’t know how many people sit back and they watch Coco or they watch Up and they say, “I want to live in this world, I want to take this character in my pocket elsewhere, I want to do a video game or interactive experience.” Illumination in particular is so oriented around character-first storytelling that when you start to take a look at what are the opportunities in interactive, in digital, that’s an incredibly fertile storytelling …

Yeah, and you’re speaking to someone who just spent a lot of money to take one of their kids around Universal. We spent a lot of time in the Despicable Me corner of the world.

It’s very popular.

Yeah. I’ve got a lot of minion products at our house.

I can imagine.

Okay, so let’s start talking about how you view the world and then we can work backwards a little bit. We’re speaking a day after Apple’s WWDC conference. A lot of stuff that most regular people don’t care about. Along the way they dropped a three-minute preview of one of their Apple+ TV shows.

Right.

And sure enough, there’s Matt Ball commentary on Twitter about it. Your thought about them displaying that video at WWDC was?

I found it pretty surprising that their first opportunity to really show off with their video product was a few months ago at their video-centric release.

You would think you would do that there.

You would think so, and the company does have a strange history of when and how they, of course, present their video content.

Yeah, you mentioned me indirectly.

Yeah, so when they first came out with their trailer for Planet of the Apps, the short-lived TV series that I think came back out in 2017. Their first foray into video, they did that at a $3,000/ticket Code Media conference.

A very successful conference.

I believe there was a livecast, but those of us listening at home not attending in person couldn’t see the trailer.

Yeah, that’s sort of standard for that sort of thing. They show something in the room, but they can’t stream — which, by the way, Disney just did for their investor day.

Disney did too, but it’s very strange to have a secretive video program that no one knows about that everyone up into the talent that’s shooting the show, that’s starring in the show, knows very little, and we know nothing about it until they start doing the private behind-the-scenes displays of that trailer.

Yeah, so let’s just talk about what you think about Apple’s plans as far as we know, what they’re gonna do. Right, where they’ve said this is a subscription product, which could or couldn’t mean you do or don’t pay money for it. It’s coming out in the fall. They’re paying a lot of people with well-known names, Steven Spielberg, Jennifer Aniston, etc., to make content. What do you think they’re trying to do?

In the simplest way, I think what they’re trying to do is replicate what Amazon has been doing for several years. If you take a step back and you take a look at the rise of D2C [direct to consumer] services, such as HBO Now or Showtime, those services all launched first and foremost on iOS. I believe HBO had a six- or nine-month first window exclusive to the iOS devices. Despite that fact, Amazon, which has a very strong anchor asset in Prime Video, seems to have by most third-party estimates really driven share gains in that share of direct-to-consumer subscriptions. Which is to say, the majority of customers who are signing up for Starz or HBO or Showtime, despite the fact that they tend to have iPhones, they tend to have Apple TVs and iPads, are choosing to subscribe to those services through Amazon.

Apple is cognizant of that and is trying to understand, what can they do to drive more usage of their ecosystem to make them the primary destination for video services, and it looks like Prime Video is a solution to that. My guess would be that their goal is to come out at a modest monthly price or a free price to broadcast to consumers, “Use us as your core destination for video,” subscribe to HBO through Apple and consolidate all of that usage of iTunes up and down.

This is weird. This sounds like something I wrote.

That wouldn’t surprise me.

And so broadly, right, the idea is Amazon sells subscriptions to other people’s stuff through Amazon. That has been a good business for Amazon. Apple would like to do the same thing. They already do that.

Right.

By the way, you can already buy HBO and Showtime, etc., and the thought is we’re going to spend maybe billions of dollars to create content that we’re either going to give away or give away for a very little fee in order to get people to hang out and buy more stuff.

Correct.

Facebook, I think, is still exploring this idea.

Mm-hmm.

Basically, we’re just going back to the old TV guide world, except it’s TV guide plus buying other services, right? Everyone wants to own that sort of dominant home screen, whatever that right metaphor is for video viewing. Right?

Yeah.

It’s sort of obvious?

I think that’s right. When you take a look at what’s distinctive at video versus music through licensing agreements for the fragmentation of the industry, services such as Apple and Spotify are able to effectively get all of the content in existence and offer it to subscribers.

You can’t do that in video for a number of different reasons, which means that at the end of the day, as long as you believe consumers will want some video that you can’t produce or you can’t acquire, you have to find opportunities to bring that all together. We know from the era of traditional television, that aggregated experience, the pay-TV bundle, adds value to it.

Adds value to who?

The consumer.

Yeah.

Just imagine if you needed to hook up a different input on your TV to watch HBO versus Showtime. You needed a different line into your house to watch ABC versus ESPN. That’s a terrible experience. No one wants that. There’s friction. My parents can still barely understand how to change their inputs from one to another.

It’s the same reason when the music companies first try to do digital music, they actually did break up labels and there was like a Universal and BMG label, and one that was Warner and EMI, whatever it was. So that doesn’t work. We could talk about the merits of the bundle, but it’s clear that Apple wants to get into this sort of creating their own bundle, selling versions of the bundle. Do you think that they need to spend billions of dollars to create video to make this work?

I don’t know whether or not they do or don’t to make it work. I think what they are seeing is that they’re struggling to compete with Amazon in that video space, despite some of the aforementioned advantages, and they’re trying to figure out ways to improve that offering.

And they know that people are particularly passionate about video. They know that their brand can attract top-tier creators, and so the idea that they can take some of their cash reserves, put out about a dozen or a half-dozen TV shows per year, and use that to become an anchor asset around that video content, is a very plausible strategy.

Plausible?

Plausible.

And you’re … We’ll talk about this more, but you’re pretty fierce at least writing-wise, right? You’re a big fan of Netflix. I think you’re pro-Disney, we can talk about this. I think you’re quite skeptical with Time Warner, so when you say Apple’s plan is plausible that counts as a compliment, right?

It does count as a compliment. I think it’s one bolstered by the massive reach they have, and with all these tech companies, to some extent, it comes down to a question of how long and how deep do you want to play for this? They have the opportunity to take a third pass at video. If you count Planet of the Apps and Carpool Karaoke as the first. They also have the time to spend 10 years trying to get this right. Video isn’t going anywhere, attention isn’t going anywhere, nor are their systemic hardware advantages.

Right, so if Apple gets this wrong, right, let’s say they just completely boff this. They can still recover, they can still have … Their iPhone business isn’t going away, right? They’re trying to build up additional businesses?

Right.

Let’s go through some of the other big media companies. So you are a big Netflix fan.

I am.

You’ve written about them multiple times. Usually, along … and it’s great. You have a … You do these tweetstorms and then you also do actual written copy. The tweetstorms get longer and longer, and then you retweet yourself, periodically. It’s kind of fun to watch the recursive …

It’s a good format.

Yeah, for you. What is the thing … And you’re always telling people what they don’t understand about Netflix. What is the big thing most people don’t understand about Netflix?

I think the biggest thing that’s misunderstood about Netflix is really what their objective is. If you take a look at the company overall, the primary competitors that are identified are the HBOs, are the Amazons, are the Hulus. What’s different is, Netflix overall is going after what we would today consider pay TV. An aggregated bundle of all genres, all styles, that is intended to deliver to audiences for multiple hours per day of usage. You take away …

Right, they are the bundle.

Correct.

In their minds.

The difference is they are bundling all of those genres — what we used to consider different styles of content or networks — all within one, and so the difference there is, when you take a look at what Netflix is doing, as an example, there’s a lot of criticism as to the average quality that they put out. The fact that HBO’s average quality of programming is very different, it’s higher, it’s more elevated, it’s more aspirational.

Yeah. You hear this a lot from people who work in media.

You do, but I think the difference is many of those people in media also produce content that you would consider easier going, more “low-brow” if you want to use a loaded term, but the reality is audiences watch five-and-a-half hours per day of video.

And they’re not all watching Downtown Abbey, though.

They’re not.

Downton. It’s not Downtown Abbey. I’ve never watched it anyway.

But that’s the point. Some of that time per day is highly intentional prioritized time. The lights are off, your screens are off, you’re not whispering to your partner.

And if there’s something I want to watch that’s specific, I’m choosing it.

Right. The reason why you have five-and-a-half hours a day of video — which seems impossible — is the fact that much of that is multitasking. You are cleaning up after your kids, you’re cooking dinner, you’re relaxing, you got off work. You don’t really want to pay attention, you just want to listen. You want to be idly entertained. Netflix is going after the entirety of that consumption. That means programming differently, that means spending differently, that means building a service arranged around different principles, and so when companies look at Netflix and they say, look at what they’re acquiring, look at what they’re not acquiring, look at the volume of spend, it’s all oriented around that massive pie of video.

Now, when … In the past, when Reed Hastings would talk about competition he’d mention Verizon or Amazon and he still will, and a lot of times there’s a lot of focus on HBO, for a while now he’s been saying things like “our major competitor is Fortnite” or “our major competitor is sleep,” and it’s kind of a wink and a nudge, but you take it very seriously.

I do take it seriously, and I think to some extent, that focus does explain why the company has been so resilient. So you take a look at the past six years, Netflix has effectively grown its pricing by 60 percent. Their catalog is believed to have shrunk by anywhere from 40 percent to 60 percent.

Because the networks are pulling stuff back, and/or they’re saying we don’t want to pay network X for this stuff.

Correct. They’ve had to go from 15 percent penetration — the early adopters who usually have lower standards are more willing to try things — to an excess of 50 percent penetration in the US. Those customers who are late adopters, they’re typically harder to get. Despite having their price go up, their offering go down, reaching harder-to-reach customers, the company continues to grow as quickly as possible.

The answer to that is twofold. One is the company is excelling in the space they’re operating. That’s digital video, direct-to-consumer video, and the traditional ecosystem of pay TV is rapidly eroding. They don’t need to monopolize much of that share shift to still grow. What’s important there is implicit in what Reed is saying is they know that when 10 minutes are taken from the old system they’re going to win two to three to four or at least one of those minutes.

What he also knows, however, is sometimes that decision is earlier. It is not, “I’m going to watch video online,” it’s not, “I’m not going to watch paid TV, I’m going to watch Netflix.” It’s customers saying, “I want to spend time doing something, what am I going to do? Actually, I think I’m going to do video gaming. Actually, I think I’m going to play Fortnite.” That’s an earlier-stage decision, and what he’s reflecting on is the fact that they’re increasingly losing that choice and they can’t compete there.

And so when he talks about, like they … If you go visit Netflix in the last few months, they play up this interactive stuff they’re playing, right? I’m going to call it choose your adventure. They call it something branched storytelling. It’s choose your adventure video.

Right. I believe there’s a trademark issue.

Yeah, and sometimes they get offended by it, too. Or Steven Soderbergh did. “Branching narratives.”

Right.

That’s the term. To choose your adventure. But there’s not sort of a linear path, right? Where you say, “well, if we make our stuff more interactive, thus we’ll compete more with Netflix.” That’s just saying one of the things our customers might want to do is interact with our video. If they want to do that, and that makes them more likely to hang out with us than do something else, great. But it’s not a direct sort of, “We’re going to compete with Fortnite by doing X.”

I think the more important way to think about it is really in this idea that what we traditionally think of as video games and what we traditionally think of as video is converging. We saw that a few years ago with Twitch, with more communal cheer-based, text-based, live experiences. That delineation between those two on extremes is continuing to meld.

So, you think my thought that video games are something you do in one part of the house around one screen or one device or watching TV is something you do, it’s a distinct thing, that’s an old fuddy-duddy way of looking at it, and everyone is … younger folks are going to increasingly converge?

Yeah, I think so, and we’ve already seen numerous examples of that. So to take a step back, if you take a look at video gaming as a category, video gaming’s primary limitation today is the fact that the skill requirements are very high, the degree of immersion is very high. So if you take a look at that idea of how is it that 300 million Americans spend five-and-a-half hours a day watching video, it’s because it reflects, it allows, that full range of engagement. The challenge for video games is trying to find opportunities to allow for more passive play, to reduce the skill.

If you pick up Fortnite for the first time …

It’s intimidating.

Especially if you’re old.

Yeah. Well, and frankly, the very premise of Fortnite is how quickly it adapts. To some extent, and I talk about this with a friend of mine who you know, if you stop playing for a month, even that time can be daunting. So, what you’re seeing is whether that’s coming from the traditional game makers or the mobile game makers trying to make more of a leaned-back passive gaming experience or you see the video-related companies — and again, Soderbergh made Mosaic with HBO a year ago. Bandersnatch, that’s coming from the other angle. That’s bringing some interactivity and some involvement to video.

So you don’t have any spidey-sense, like when we saw 3-D a few years ago, and everyone said, “Oh, 3-D is the thing, we’re going to invest heavily in it,” and then they went to VR, “That’s the thing and we’re going to invest heavily in it,” and everyone sort of moved at once. And then we hit the valley, and everyone said, “Actually, consumers don’t actually want this.” You’re pretty confident consumers do want this. You point to things like Fortnite as an argument that, yeah, they’re doing it. You don’t have to worry about this being theoretical.

Yeah, I think that’s right. I mean, if we were to take apart why 3-D worked, why VR didn’t work, and when and if those might come around, there are distinct reasons for that.

Yeah.

I think the difference here is we have seen interactivity building for quite some time.

It’s hard for me to gauge because, again, I’m way out of the demo, but ESPN did this thing at game two of the NBA Finals on Sunday where they said we’re going to have an alternate feed, which they’ve been doing for awhile. The alternate feed makes sense to me, but we’re going to do one aimed specifically at teens, and what we’re going to do is we’re going to get Katie Nolan, our sort of millennial-ish host, put here with three other people and they’re going to talk while the game is going on. We’re going to flash up graphics, like you’d see if you were playing an EA game, and they’re just going to chat.

And I watched it, in and out, and again way out of the demo, it seemed terrible to me. And I can’t tell whether the idea is terrible or if it’s an execution thing, and/or if this is the kind of thing that an ESPN no matter how diligently they try, won’t be able to solve. If someone’s going to solve interactive sports it’s going to be a nontraditional company.

Or the answer is you’re just too far out of the demo.

Yeah.

It may just be that.

Yeah. Did you watch that?

I haven’t watched it.

Okay. You take a look. It has … As I said, I describe it as being the Steve Buscemi gif, right? The, “Hey, kids.” It just seemed like I got … It looked like, as I said, if you looked at Twitch for the first time and said, “Oh, well, how could we do this?” You’d end up with something that looks like this, except if you look … I think the lesson here, I’m guessing, is it’s very hard for the incumbent company to figure out how to do a different version of itself.

You cautioned me on giving long answers.

Yeah.

I’ll give you the longer answer, or rather the shorter version of said long answer. I think the key thing to keep in mind is what’s always interesting when you have a delivery change or a technology and distribution change is not so much how that content moves from one device to another device, but what new content is created, to begin with.

There are numerous examples of that. So to take an example, I was speaking recently to the former CEO of Square Enix, Wada-san, and he was talking about the fact that the original console or rather … Let me step back. The gaming companies that led in the arcade era struggled to move over to the console era. That’s your Super Nintendo, that’s your PlayStation.

Yeah.

For very fundamental reasons, when you played an arcade game, that experience was tapped out at 30 minutes. You couldn’t save, you don’t have multiple people playing. The skill set required to develop games there were very different than at home, where you could have a 20-hour story.

So even though it’s video games, it’s a whole different idea.

Right. You’re trained to a different feedback loop. You hire different creators. You think creatively in a different way. Then you have the advent of mobile games. Very different format, very different monetization. We don’t see any of those classic companies. Even when we look at online games, the gaming companies that primarily thrived in the ’90s and the early 2000s are very different than those that really struggled in the online world or rather thrived in the online world

And then even we have an example today of Fortnite, which is a very different conception of an online game that frankly the Activision Blizzards of the world — themselves leaders in early online gaming — are struggling to replicate. That whole premise is important when you think about how interactivity comes from.

The question is not necessarily, “Is this going to be engaging, is the technology too early, is it just hitting the right demo?” It’s going to take some time for the new creatives to emerge, to want to play with these tools, to see whether Bandersnatch works, how it does, what the limitations are. And to some extent, for audiences to digest how those experiences work.

So this isn’t just a matter of ESPN saying, “Well look, if we’re going to do this, we’ve got to hire whoever works at Twitch,” or, “We’ve got to go hire the Fortnite team. However we’re going to make our stuff more interactive, we’ve got to go find those people.” It’s, “We also have to let people come to us, and say, ‘Here’s what we want to do with your product.’”

Yeah, I think a huge part of it is actually just going to be the younger audience members, who have sat there watching for five years, 10 years, frustrated by what they can’t do. It’s that anecdote that people give, where their 2-year-old picks up a hard-copy magazine, tries to swipe it and can’t.

Or yells at it.

Right.

That’s the new one.

And so I think the question is, as you have this new generation that is used to different interaction models, used to spending their leisure time differently, then watches traditional sports and has a want for something, or wants to take it in a different way, a different expression. Once that talent, to some extent, grows up, to another another extent moves into more traditional media, that convergence of gaming and media occurs, that’s where you’ll start to see the innovation.

That answer was not too long, that’s a great answer.

I can make it longer.

No, no. This is great. I want to go through a few more media companies and then I want to talk more about you.

You’re a big Netflix fan, but you’re also a Disney fan. You like what Disney announced. There’s a shorthand for all this stuff, that sloppy thinkers like me do and they say, “Oh, this is a Netflix killer,” but that’s just a sloppy headline. You like both what Netflix is doing and you also think what Disney has lined up is also going to be a successful product.

Right.

Because?

I think at the end of the day, the interesting thing about taking a look at the future of SVOD, or these subscription video on demand services is, as is always with technology and companies in the media space, we get into this very Manichean narrative that basically says “distribution is king” or “content is king.”

Both of these companies are likely to survive, for very different oppositional reasons. We know that Disney’s huge advantage here is their IP is so stellar. Frankly it’s actually so strong you are likely to underestimate how popular it is, not overestimate it or even value it appropriately. They may be coming late to market, but they are coming out with such a high volume of outstanding quality. And if we want to talk about Warner later a little bit, we can talk about that, a brand that consumers already know and love, that they’re …

Multiple brands, right? Disney means a lot to a lot of people, but so does Marvel, so does Pixar.

Right. And crucially, this is also content that audiences in the States alone are still spending in excess of $3 billion a year for home video for, for rental and DVDs, for just Disney. So, they’re bringing a fundamentally better consumer value proposition to a market that will bundle all the best content in the world, and is fundamentally about asking audiences to take existing spend, and not make room in their lives for more spend, for another video service, but instead to just change the channel, from Walmart to Best Buy, or iOS or Disney. That, I think, is going to be fundamentally successful.

It’s funny, I’ve literally talked to my kids about the fact that we generally sort of buy/rent, we buy a movie a month, give or take. I said, “Well we’re going to stop doing that, because we’re going to be adding this Disney service.” And they said, “Oh,” and they thought through it, “Okay, fine.” Good, done.

Right, and there’s actually significant upside to Disney, because if you think about that $3.2 billion in consumer spend, half of that is markup that goes to the retailer. Half of that is captured by Best Buy or Walmart, it’s not going to Disney. Disney is likely to capture the entirety of that, or go after the entirety of that, with their SVOD service. So I think the point is, Disney is so strong in content, that to some extent …

It can show up late.

It doesn’t matter whether it was this year or last year or even 2021. That content is still going to resonate. There’s still going to be demand for it. The fact that that is launching within a much broader Disney ecosystem … There are still 30 million people who go to a Disney Park a year, the opportunity to give that as a free trial, to push it, to give a family that spends $5,000 on a cruise line a year-long subscription … all of those augment their opportunity to get it.

But what’s critical about that is, even when you think about Disney’s advantage, if you say that Disney is this example of “content is king,” many of the advantages that I just mentioned aren’t really about content. It’s about access. It is about cannibalization opportunity. It is about how you package or go to market.

So the big story, and then if you look at Netflix, is really about distribution. But how do they do that? They’ve got it by buying the best content on Earth, in high volumes, typically at prices they shouldn’t have ever gotten.

This is Netflix we’re talking about?

Netflix.

Yeah. They took everyone’s great content, and even mediocre content, and said, “We’re going to make something new with this.”

Right. And so I think when you take a look at this apparent strangeness of being bullish on both, that’s because the market says it’s distribution, it’s content. Neither is really a pure play on either, that’s why the media industry is so interesting, why the technology shifts happen so often. There’s nothing oppositional about that.

Separate to that is when you say, “What is it that Netflix is scared of Disney doing?” Disney is not going after that five-and-a-half hours per day of video consumption. They don’t produce nearly enough of it. Their price point is low, but even if it were twice that, it’s not going to convince someone who’s watching, on average, 60 hours per month of Netflix, “You don’t need it anymore, because now you’re spending $8 on Disney.” They’re complementary.

The question is like any other. We have always had times in the history of video where you have a primary service that drives tremendous value, that is bulk viewing, high tonnage, low cost per hour watched, and audiences still make time in their lives to go after what’s most important to them.

So people have limited time, limited money …

Right.

But you think it’s a pretty good bet to think that they’re going to spend $10, $13, $15, $16 a month on Netflix, and watch a lot of stuff there, and for another $7 they’re going to watch less stuff from Disney, but stuff they really value.

Right. And frankly, HBO is the best hallmark of that. You had to spend $100 per month to get HBO, traditionally, and that means you were accessing untold thousands of TV shows per month, and audiences still said, “I’m going to spend an extra $15 to get HBO.”

Any reason to think that the fact that Disney has not been in the business of streaming, it doesn’t have that technical expertise that Netflix has been building for years and years and years and had to go out and buy it, via BAMTech, etc., that that will be an issue for them? Or is it actually once, you know, actually streaming the stuff over the internet’s not that complicated in 2019?

Yeah, I think there are a few different ways to unpack that. Firstly, the product and technology experience is highly critical. If you take a look at all of the advances that Netflix has made, that they’ve invested in, the supposed benefits that they’ve accrued from that, you have to put a lot of stock into that.

At the same time, there are three other elements there. One is, they have bought BAMTech, which is the market leader that has been in the business for 20 years, supporting most of the most-scaled transmissions globally. If you are buying expertise, they may have overpaid, they may have underpaid, they might have gotten a fair price, but they bought the best in the business. They also now own Hulu. Also has tremendous expertise in technology. And then finally, no matter how important product and technology is, like any technology, it is getting easier at the basics level each year.

We’ve gone over Disney, Netflix, Apple, I’m going to save Amazon for a second. I’m thinking you were more skeptical about the company we used to call Time Warner. Now we call it AT&T/WarnerMedia.

I think that’s fair to say, but one of the reasons why you have to do that is there are really two components here. One is, what’s the offering that’s going to come forward, and then the separate is, what’s the market context that’s already going to exist?

When you spoke a minute ago about the fact that audiences are going to pay $7 for Netflix, or rather …

$7 for Disney.

$7 for Disney and then $12 for Netflix, you have to look at it at a broader context. Amazon has said that Prime is in 100 million homes. That means 100 million homes have access to a very large catalog of Prime Video, for zero. We know that in the United States, there are 28 million homes that have Hulu. That’s a number growing by 6-8 million per year. If Apple comes out at a free price point, you’re now all of a sudden going to have 1 billion active iPhones that have access to that content.

Once you look at those default subscriptions, the free services like Apple, like Amazon, the effectively free services like a Netflix, the guaranteed services, or at least very compelling services like Netflix, you start to get into a world in which you are spending $20-30 getting a tremendous amount of content. The real question there is, we know that on digital, the feedback loops are very strong. You’re watching on Netflix, you’re less likely to plug out and plug in, you’re just going to keep watching. You know that there’s so much content, you’re never ever going to finish it anyway. It becomes very tough to say, “How are you going to go to market and, say, pay even another $5?”

So when we take a look at the WarnerMedia offering, and I don’t know any of the details there, the content can be really strong, but the value proposition is a little bit unclear.

Yeah, so there were two stories in the last couple days about this. Time said they’re trying to figure out how much to charge for this. They’re built in to their cable distribution deals, that HBO has to be $15 a month, so do you charge more by adding other stuff in there? Do you throw in other stuff and make that free? And then John Stankey did an interview with Bloomberg, within hours of that story coming out, and saying, basically it’s going to be $15, but whatever it is, it’s going to be some kind of … there’ll be HBO, and then they’ll add more stuff and they may or may not charge extra for it.

The standard AT&T argument has been, “We have HBO. They’re the best. We have all this other stuff we put out through Turner. We’re going to spend more money to make more stuff. We have Warner Bros., the actual movie studio. We’ve got a ton of stuff. People are going to love what we have.” You seem more skeptical, about the sheer tonnage argument/brand argument.

I think the truth of the matter is less around how I might adjudicate the quality or the volume of the Time Warner/WarnerMedia content, but the reality is, there are many different players in market who have sizable catalogs. NBCUniversal is making a very similar argument. Disney is making a similar argument. Sony has a large catalog. MGM has a large catalog. Some are being retained internally, some are still going to be sold on the open marketplace. The reality is, everyone has a large library. They’ve been in this business for quite some time.

That’s different from saying two things. One is that consumers today are going to value that in an à la carte experience. The second is that you are going to be able to build a large, viable business. And then again, you put that within the market context of where we are.

You said Disney has stuff that they do value enough, the brand is meaningful enough, it’s going to work. Everyone else, question mark.

Yeah, and part of that is really just a question of brand. I think there are a number of people in the marketplace who have said that Disney would be better off just selling their content to Netflix, and of course there are going to be many consumers who sit back and they say, “I kind of preferred when I could see Black Panther on Netflix and now you’re saying I have to go pay for it on Disney.”

At the same time, I think that there is a very valid argument that consumers, that families and parents, would prefer a dedicated Disney-branded service. They know what Disney stands for, they know what’s in Disney, they know what Disney’s going to do and what Disney’s never going to do.

Not going to find weird shit there.

Right. The idea I think of assembling a WarnerMedia offering is just more challenging because that connection between the brands, what that brand means, is just a lot more opaque.

Right. My kids know what DC means.

They know what DC is, and we’ve seen AT&T has been trying to build, or rather WarnerMedia was, back when it was Time Warner, a DC-centric offering. This is not altogether dissimilar from one of the advantages that Fox News has, that may be vestigial, may not be, but the fact is Fox has always branded very strongly, Fox Business Network, Fox Broadcast Company, Fox Sports. They’re all these strange inheritances that we’ve gotten from the old world, that do or do not position you well.

To some extent, no one knew, when HBO came out in the ’70s, that all of a sudden in the late 2000s, pay TV would erode.

Just boxing and soft-core porn.

Right, but not even from a content perspective. It just so happened that if the new thing is SVOD, having an à la carte premium cable network positioned you phenomenally well.

I do want to ask you about bundles and re-bundling. At the beginning of this, you were explaining how the bundles have great value to customers, lots of people have argued that persuasively, it seems pretty clear that, like, you’re better off paying one small fee.

I think the real point is, aggregation has value.

Okay. Frequently when someone writes about … Oh, everyone’s … There’s a Disney service and a Warner service and Amazon, etc. By the way, these things are splitting up even more, right? So the Netflix stuff is going to disperse to different services. The Hulu stuff is going to … The NBCUniversal stuff is going to come off Hulu, go to somewhere else. Inevitably, someone says, “Boy, it seems like someone’s going to have to create a service that takes all these channels and bundles them together. We can call it cable TV, ha ha ha.”

And then the non-joke version is, paying for all this stuff is going to be too much and we should just go back to the old cable TV days. I have a counter to that, but I want to hear yours. Or I want to hear what you think of that argument.

There are two things that are important there. One is, there has been a lot of disruption, as I mentioned earlier, about how we access and who we pay to access content, but the reality is that content hasn’t been disrupted. Content today is no cheaper to produce than it was five-10 years ago. Anything that consumers want to consume in massive volumes is going to just, through tonnage, be expensive. That’s the same with gas.

What about all the stuff on YouTube that is free/nearly free?

But again, there are not 300 million Americans saying, “I want to watch five-and-a-half hours of YouTube.”

But there are a lot of Americans watching a lot of it, right? So isn’t some of it just demographic? I mean, again, not everything is my kids, but my kids will watch unlimited amounts of people playing Fortnite on YouTube.

Yeah, that’s true. And we’ll see how that shakes out, but I think the core is, there is still demand for massive amounts of content that has not gotten cheaper, and in fact most of the new entrants, Amazon, Apple, and so forth …

Right, it’s more expensive now.

Are coming in with more. At Amazon, we took a British series, Top Gear. We reinterpret it as The Grand Tour. The budgets reportedly went up by several fold. The reality is, most of these companies are actually saying, “We’re going to give you bigger, better, more expensive content.” That money has to go somewhere, whether there’s a bundle or whether there’s not.

But it doesn’t have to go to TV, right?

It doesn’t have to. But the audience is choosing that they still want it there.

And then the second component is just, until audiences say, “We either want to reduce how much we watch, or we just want to take what Netflix has,” you’re not going to see a reduction. As long as no one can corner the market in video, and as long as audiences are still going to say, “I want some of that, I want some of that, I want some of that,” it’s going to be expensive. The bundle needs to exist.

But they haven’t had the choice to live in an unbundled world, up until now. Now they’re getting there, and now they’re getting to the point where they’re saying, “You know what I really value? I really value Netflix, and whatever is there. I really value Disney. Maybe I value one or two other things, maybe I think Quibi’s great, maybe I think the WarnerMedia thing is great.” Whatever it is. “Maybe I’m going to pay for some version of ESPN, or something in sports.”

The point is, what I’m going to pay is finite, especially now that I have the actual choice. I think that it’s going to be very difficult for a lot of these services to survive because people aren’t going to say, “I want this and this and this and this.” They’ll say, “I want these two things, and the rest of it I can live without.”

Yeah, I certainly agree with that, and as I mentioned earlier, one of the big challenges is, we ask this existential question which is, “How many services is it going to be?” John Stankey has said that he believes this — this is the CEO of WarnerMedia. He doesn’t think it’s going to be as many as 10, he thinks it’s going to be more than four. There’s this really critical question, if you’re a participant in this space, “Is it five or is it seven?” That’s a massive difference. The real challenge to me is not so much “are there going to be five or are there seven?” but how many of those five or seven are the free services that are just going to squeeze everyone out?

People take for granted now that Prime Video is going to be one of those. They say that that’s because Prime Video is spending more than anyone else, save for Netflix. That may or may not be true, but at the end of the day when it’s being given away for free to 100 million households, that’s a guaranteed slot. If Apple does the same thing, it’s a guaranteed slot. Then you have those who have been first to market, such as Netflix. Then you have those like Disney, who are just need-to-haves. That makes it very ruthless for those who are left, and if you believe that it’s not going to get to 10, it’s very hard to see how many people are going to win.

So if you’re AT&T, you should be … nervous?

I think you can see that they’re nervous, and you can see that because they have multiple different video products in market. They have been very aggressive in launching new ones, and also very aggressive in cutting back those who don’t work. They also have a product like DirecTV Now, which they have continuously re-keyed, re-bundled, changed the programming cost structure for, cut the price for, raised the price for. It’s a company that is trying.

So it’s a company that spent $85-100 billion dollars on this thing, and you might consider them underdogs in this race?

I think the question of how they’re an underdog really depends on to what extent you’re looking at HBO. As said before, if you wanted to be a late entrant, there is no better gateway asset than HBO on earth, and the reality is, no matter how good Disney is, Disney’s still starting from zero. HBO in the United States has 36-38 million subscribers. They’ve got another 90 or 100 million globally. They have a stunning brand.

How you use that asset is challenged by its price point, by it’s most-favored nations clauses for current distribution, the fact that it is not an ad-supported system, the protection of the brand, those are all challenges, but if you said that you were an underdog and you got to use HBO, people would laugh.

Yeah, all right. That’s a good laugh. I wanted to see what you said anyway.

Now we’re going to discuss who Matthew Ball is. You first started coming to my attention under someone else’s name. You were not Matthew Ball at that point, you were writing for Jason Hirschhorn under a pseudonym.

I was.

What was the pseudonym?

Liam Boluk.

Why Liam Boluk?

Liam is my middle name, Boluk is my mother’s maiden name, and it has this brilliant aftereffect of being incredibly SEO-optimized. Any time that I was picked up or covered … It has been nine years and I guarantee you you’re not getting false hits. There’s a ballerina who shares my name who constantly destroys my search relevance, and yet Liam persists.

You’re a handsome man, you do not look like a ballerina. But maybe you do, who knows. I don’t want to judge. I don’t want to pre-judge. I don’t want to keep talking about ballerinas. What were you doing prior to writing for Jason Hirschhorn?

Prior to that, I was a management consultant at Accenture. I focused on corporate strategy, primarily for media and entertainment.

Was that a first job out of school type of thing?

Yeah.

Yeah.

Well, first job out of B school, which is … I’m Canadian. In Canada, is an undergraduate job.

I detected this. Yeah. Okay, so you do the standard, “I’m going to be a consultant”?

Yeah, so the story of me connecting with Jason is a funny one, and a really lucky one on my part, which is … I entered management consulting with this perception of the halcyon days that probably ended in ’97, where you do two years of management consulting and everyone wants to hire you. They’re desperate to, you’re the best, you’re the brightest.

I then found, out once I got there, that that was subsequently actually investment banking, and then the time period I was in, it was actually going to tech. It was going to Google in 2004. It wasn’t …

Yeah, plus also consulting got blown up, sort of post-Enron.

Got blown up 500 times bigger, and so forth. And so, at the same time, I had been writing, just out of general interest with the stuff that I had been learning, that I had disagreed with, that I wanted to talk about, and I started writing under my own name, and it ended up pretty popular. Felix Salmon wrote a big piece. He disagreed with me about Netflix, as an example, and that started to make some of the partners …

You were just writing on a blog?

Yeah, out of my old B school publication.

And what’s that impulse to write? Right? Because I know a lot of writers.

Mm-hmm.

They generally aren’t people who want to be management consultants. Usually these two things are pretty split.

Yeah. The impulse kind of comes from one of three areas. One is, as with the Netflix pieces, it’s a frustration with a narrative that I think is wrong and I have the selfishness to want to correct it. The second is …

Some people say everyone’s wrong, and then they go, “I’m going to profit from it, but I don’t need to write about it.”

Yeah. But you have to put it in the perspective too, to some extent, it’s a relatively unnoticed 24-year-old kid who is like, I’m just going to explore, have conversations, see what people think about this. And so, I just started doing that. The partners did not like that. The notability was a little bit too high. It was one of those catch-22s where if it’s bad, no one cares and it doesn’t help you. But if it’s great, then all of a sudden you’re flying a little too high.

“Hey, we’ve got to talk about this,” yeah.

So, I was told very clearly, “You have to stop this. If you do it again, you’ll be fired.” And I made the very natural decision to just change it to a weird name. And I kept doing that. And Jason had discovered the blog at one point and curated it in his Media Redef newsletter. And then, a few weeks passed and I think he had rediscovered the blog and I had written another eight pieces. And he just fastidiously combed through it and published all of them in one day.

“Here’s this random guy.”

Right.

It was Liam at the time, right?

Yeah, it was under Liam at that point.

“I found all his stuff. I’m going to share it with you.”

Right.

Okay.

And so, Jason gave an incredible promotional opportunity. And I started hearing from people. And, at the same time, again, this is from the perspective of, I don’t know what the next job I’m going to do is. I don’t know the gateway there. I don’t have connections. I’m Canadian. I had recently moved to the United States. And, at the bottom of that Redef newsletter, it said where his address was. It said, I think, 25 Morton Street. He’s not there anymore.

And I decided that I’d just walk in and try to introduce myself. It was really strange because, of course, I’m still young, I put on a suit, I had a tie, which is not the way to do it with Jason when he doesn’t know you.

You go down to Tribeca, knock on his penthouse door.

In West Village.

Okay.

At the office. And I showed up and it was a very strange situation because I basically had to say to the attendant who didn’t even work for him, it’s a startup space, I was like, “My name is Liam Boluk.” And she says, “Can I see your ID?” And, of course, I have to say, “Well, it says Matthew Ball.” And so, she has to pass this weird note to Jason that says, “This guy Liam …”

Had you said you were coming? Or you were just door-knocking?

No. I just showed up.

Yeah.

But so, Jason doesn’t know the names of this random blogger, let alone this double hyphenated, weird name. And so, I think I waited for 20 or 30 minutes and he finally comes out and is like, “What is going on here?” And I just said, “Hey, you seem to like my work. Can you help me find a job?” And he had a very reasonable response that should have been the one that I went in with at the time, but I was too young and naïve. And he said, “Why don’t you write for me? Keep doing what you’re doing, but I’ll work with you to make the pieces better. We’ll plan them, I’ll connect you with those who have the information to make them even better than we can just together, and we’ll see where that goes.”

And so, I spent about a year prepping pieces so that they could come out in rapid succession, working with Jason. And, as part of that, I started connecting with a guy, Jesse Jacobs, who was the president of Peter Chernin’s company, the Chernin Group. I sat down with him at Eight and a Half over, I think, like a Hanukkah dinner, and started talking to him.

And it was a great example of, I worked with Jason, I got smarter, I was still writing under a pseudonym, but he also was able to act as an intermediary to go to a guy like Jesse and say, “Meet this guy. You’ve read his stuff, he isn’t who he seems to be, you should talk to him.”

And then, a few months later, I went to work for The Chernin Group, specifically at Otter Media under Sarah Hardin. And that was really the big opportunity where I started getting out of the old path, into the new one.

So, you were still consulting when you went to work for Jason? Or had you stopped already?

I never worked for Jason. I just wrote for him.

I was going to ask you if he paid you living wages.

No. Look, it is probably not the best use of time, at least not where my relative specialty is. I think I’m …

But he opened up a world for you, or helped you open up a world.

Yeah.

Yeah. And so, you go work for Chernin.

Right.

And then, you do that for X amount of time. And then, at some point, you end up at Amazon.

Yeah. So, I mean look, this is really the story of the same opportunity. I connected with a guy, Ted Hope, who now runs original movie production at Amazon.

Sort of one of the ’80s, ’90s indie producers of note.

Yeah. We’ll say 2000s and 2010s of note, too.

Okay, good.

And Manchester by the Sea, Big Sick, big movies. And I connected with him and that was prior to me going to the Chernin Group. He had connected me with the then head of Amazon Studios. I almost went there instead of going to Chernin, decided to go to Chernin. And then, Amazon had come and said that they were starting a new group, the strategy and planning group.

Within movies? Or within video?

No, within Amazon Studios.

Okay.

And this was really, as part of a big process at Amazon — which at the time was still very small, I think they had 100 employees at the studio, they were only in four countries. By the end of the year, they went to 200 countries and territories. And they needed to start building up that managerial level. How do we make sure that we’re making the right decisions, that we’ve learned from the prior decisions, that our data, which was originally hypothesis-driven and oriented around first seasons, is now being data-driven around multiple seasons? And so, I went to run that.

So, they hire you to be sort a brain at Amazon.

Right.

And what was that experience like working there for you at that time?

It was the perfect example of a company that has strong convictions, incredible assets, but is new to the space. And I don’t mean that in a pejorative way. I mean that in the sense of, when you go to a media company to consult, they talk about there’s 20 years of hierarchy, there’s …

“This is how we do it.”

There’s process. It’s not just how we do it, it’s just things happen. Right? At Amazon, there was a need to carve out, well, how are we going to do this? Why are we going to do this? There was a general rigor towards reevaluating prior decisions that were being made. And, to some extent, the street analysis said, Amazon keeps pivoting and moving, and what does that mean about the last strategy? And the answer is, the company is always organized to do the thing that works then, and then move to the new thing.

And so, when you talk about someone like me who had written first about what I think the digital opportunity looks like, Chernin was focused on going after, with real rigor, emerging but generally overlooked small to modest opportunities like Crunchyroll, and then going to Amazon, which is saying, “We’re going for it. We want to be the dominant destination for video. We think we can be the seller of everyone else. And we have the capital, we have the talent, the tech, and the reach.” That was an incredibly large purview and that’s just exciting.

Was there anything where they said, “We think we’re going to go this way,” and you said, “I looked at it, let’s try this instead.” And they actually listened?

I mean, the fundamental anchoring of that company was rigorous decision-making. I think no one would be successful at any level in that company if they couldn’t say that they affected a decision one way or another. The great thing about the way that they make decisions — and of course, there are downsides with every process, tech looks at content differently — is that doc-based decision-making process meant that the entire company, from marketing, to production, to development, to post-production, to finance and research, comes together and decides whether or not they think that this is the right decision. And my job was basically to chaperone, guide, and help that process as it went up to the studio heads to make a decision.

So, you were there under the Roy Price era. He has since left. You left after he left.

Mm-hmm.

So, now you’re on the outside. What’s your sense of how they’re operating differently now than they did under your tenure?

I don’t think that there’s anything fundamentally different about how they operate internally. I think the more interesting question is, how, as with anything at Amazon, the complexity shifts. So, I’ll give you a good example of that, which was, when I was there, one of the first decisions was what to do with an HBO renewal. We had renewed for X million dollars per year.

Through an Amazon Prime sub, you could watch Girls and other older HBO shows.

Yeah. You could basically watch, with some exceptions, like Game of Thrones, you could watch a show …

You could watch The Sopranos, yep.

An HBO original with a three-year holdback. So, when Veep season six comes out, you’ve got seasons one to three on Amazon. This is all a long-winded and very typical way of me answering a short question.

The point is, we were looking at do we renew this? But then, that was right around the time in which we started selling HBO. And so, now we were going to customers and saying, “We will give you a better experience, with more content, with a direct access to the HBO content you like.” And, by the way, internally, we’re now no longer paying for that, right? We’re actually pocketing a few bucks per month. That changes what content you do acquire, how much you invest, what the business rationale is. Fire TV is another business that didn’t exist in the early days of Prime Video. It does today.

But wait, the answer was “renew,” right? Because I just watched The Sopranos over the last few months through my Amazon Prime sub.

I mean, that depends on the term, but …

But they did. It’s still there.

My point is more, the whole question of how are they doing and what’s different is really a reflection of how that business has become more sophisticated. Four or five years ago, the marketplace was constantly looking at Amazon and saying, “Well, this is it. Netflix is over. It’s the existential threat. There’s a company with more cash with a longer time horizon.”

I mean, Netflix would say, “We take Amazon very seriously.”

They will. But I think the whole point is, those businesses look very similar because they’re going after the same consumers with equivalent projects. The monetization is very different and the strategy around it is very different.

There’s always this question of, what is Amazon going to do with live sports? And I think one of the interesting questions is actually not just, are they going to add live sports, it’s how does Prime Video change if live sports exists? Do you still license catalog content? Do you just make Game of Thrones, or rather Lord of the Rings-style content?

Yeah. Let’s talk about Lord of the Rings, right? So, Amazon gets into video, there’s an initial idea that says, “We’re going to do this, we’re going to disrupt Hollywood, we’re going to change the way scripts are vetted.” They come out with some shows that no one remembers. You do and I do because I went to one of the premieres. But no one remembers … what was the DC one called? There was one with like John Goodman, bunch of Senators live in the same house.

Betas.

There you go.

Beta House.

Beta House. That goes away. Then they do …

Nope. Alpha House. Betas was a show. Alpha House was another show. It was very strange to have two of our first three shows be Greek letters.

Okay, so you worked there and you still can’t remember the name. Point taken.

They were gone by the time I got there.

Okay. Then we get to Transparent. All of a sudden, they’re winning awards. We have Jeff Bezos onstage. He explains that the reason it’s good for Amazon to do this is because we win an award and people buy that many more shoes or stick around in Amazon Prime. It’s better. Now, from the outside, it looks like that era is over and what they want to do is big swings, a Lord of the Rings prequel, everything has to be bigger, bigger, bigger, bigger audiences. What changed?

Again, I think this is a question of how did the business evolve. One of the weird things to frame the business is just the idea of where Prime was in 2012 versus where it is in 2019, right? There’s this thing where people will talk about the fact that Amazon was doing Silver Lake programming.

If you’re not hanging out in LA, it’s the Brooklyn of LA.

Right? It’s this idea that it was primarily coastal, upper-income programming.

Yep.

And I think one of the things that’s important about that is, back in 2012, that is what the Prime subscriber base looked like. No one ever programs for the audience they don’t have.

And, by the way, Netflix, when they were doing originals, started off doing that kind of programming. Right?

Right.

They weren’t doing Ashton Kutcher shows until well after that.

No. They were doing a Washington-based power broker show. That’s House of Cards.

With David Fincher and Kevin Spacey and it looks like it could be an HBO show.

Right. Whenever you have a service that wants to grow, become scaled and more mass, you start by growing up from concentric circles. Look, I mean it’s not altogether … when we talked about Alpha House, that was another show about Congress staffers living together.

Yeah.

That’s a reflection of the base. And so, I think the real question is, as that business starts to expand, as your audience expands, and to some extent, Prime itself grew so much more than most of the Wall Street estimates believed it was going to, that you have to start growing your base. The decision then to go from one market to 200 countries and markets globally also changes that show. Marvelous Mrs. Maisel is a marvelous show. It is not going to drive first-time Prime subscribers, not Prime Video, but first-time Prime subscribers in Malaysia, in India, in Brazil.

When you start to look at what types of shows really break out, really differentiate, and most importantly, are going to change people’s perception about paying for video in the first place. In Japan, people do not pay for video. In India, people do not pay for video. You need so many different things in programming. And going for the second-best-selling novel of all time and trying to do something new and ambitious is an incredible pathway to that.

Amazon is bigger. Prime is bigger. If we want to use video to either subscribe to Prime or stick around to Prime, we have to reach many people with that video.

Right.

That’s the short version. For a long time, I’ve assumed that the people who work at Amazon, Jeff Bezos on down, know what they’re doing. And the fact that they are spending billions of dollars on video, yet when I go to Amazon.com, I don’t see any evidence of the fact that there’s video there, there has to be a method to that madness. But now I’m sort of questioning it. And occasionally they’ll send me an envelope with a stamp and it’ll say, “You should watch whatever our show is.”

I haven’t checked your mail in years.

It seems to me they’ve got this weird ask they’re spending billions of dollars on, and yet still not spending a lot of time telling people about. It’s hard for me to imagine most people even know Amazon Prime Video exists.

Is that a question?

It is a question. What am I missing? That’s the question.

First of all, there is a video tab on the homepage.

Yes.

That, if you were watching something, right below the search bar will say, “Finish watching Man in the High Castle,” or rather, “Go watch Patriot. It’s phenomenal.”

Mm-hmm.

I think the point is, one of the interesting elements about how you look at video — and I think this explains a lot of what Apple is doing and why — is, Jeff, in the early years talked a lot about the Amazon flywheel, the Prime flywheel. I think that’s really profound.

I think what Apple is looking to do is replicate the Amazon video flywheel. Which is to say, the Fire TV is now in, I think they said 36 million homes in the United States. Well, guess what? Now it doesn’t really matter as much if you’re getting it direct mail, if you’re getting an Amazon.com reminder. If you’re one of those one-in-four homes in the United States with a Fire TV, you know about Amazon programming. That’s part of what you do.

You also have the fact that Gartner has said that Amazon Video is now essentially neck and neck with iTunes, both domestically and abroad, in digital video downloads. Five years ago, iTunes was so laughably dominant in that space. Then you have the channels program, which is the primary seller of HBO, Showtime, and Starz, and so forth.

Yep.

I think the whole point is that flywheel, devices, channels, digital downloads, and Amazon content is all synergistic. And, to some extent, it doesn’t matter how much an audience member knows what’s what or where it’s coming from in the same way an Amazon customer doesn’t care if it’s fulfilled by Amazon, shipped by Amazon, or an Amazon Basics. The goal with everything that Amazon does is to satisfy customers and to give them the fullest range of possible options.

How do we think Amazon is going to do in this battle royale we’ve been discussing for the last hour?

I mean, I think it’s guaranteed to be one of those enduring platforms.

You think they’re in. It’s done. It’s a done deal.

As long as they stay committed to it, they will. And that’s one of the great advantages, as I mentioned, with tech, because they have the money and the reach and the time, which is not at all to say that the programming isn’t up to snuff. It absolutely is. We’ve seen that with Emmys and Golden Globes year in and year out. And the forward plan, Lord of the Rings inclusive, Wheel of Time, suggests that they have properties that audiences will love too.

Matthew Ball. This was two years in the making?

We’ll say so.

Was it worthwhile?

It was.

Was it good for you?

Mm-hmm. I got through it.

Thank you for coming. You may come back again, because I’ve got more questions for you.

That’s good to hear.

You’re not feeling awesome. So, extra credit for you for showing up.

Thank you.

Recode and Vox have joined forces to uncover and explain how our digital world is changing — and changing us. Subscribe to Recode podcasts to hear Kara Swisher and Peter Kafka lead the tough conversations the technology industry needs today.

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