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AMC Networks boss Josh Sapan wants the people who make TV to look at the data — but not too much.

Design within tech companies is often data-driven: People click this button 50% more when it’s red than when it’s blue, so it should be red. TV companies like AMC Networks are looking at data about what viewers like, too — but there’s a still a fuzzy side of making good TV that can never be reduced to a number, says AMC CEO Josh Sapan.

“I don’t think that you can be either enlightened or reductive to the point where you make final decisions [about greenlighting a show], because you really will, one will, eliminate the possibility of surprise and touching people with great stories and characters,” Sapan said on the latest episode of Recode Media “So I don’t think that if you allow yourself, for data to become all-encompassing and singular and monolithic that you’ll end up in a good place.”

Shows that AMC Networks has produced, such as BBC America’s hit Killing Eve or AMC’s Better Call Saul, are a reflection of the value that “the first screen is creative,” Sapan explained. In other words, those programs were greenlit based on their stories and characters, not surveys showing demand in the market for shows about female assassins. But at the same time, he said data can be incredibly useful as a show progresses.

“The data will provide the best guideposts there absolutely are, and one’s judgment, I think, needs to submit, ultimately, to what the data tells you,” he said. “Which is not to say it doesn’t have a seat at the table. And I work with people whose instincts and wherewithal is spectacular, and so they are a factor in what we do, but denying the data is a silly exercise.”

This episode also features a bonus mini-interview with Vulture’s Joe Adalian about Disney+ and the future of TV. 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 Josh.


Peter Kafka: This is Recode Media with Peter Kafka. That person laughing, I’m just gonna tell you now, is Josh Sapan. He is CEO of AMC Networks. I’m part of the Vox Media Podcast Network. I’m here in New York City with Josh, who I’ve been looking forward to speaking to for a long time. In part because he’s funny, also because he runs a big TV network. Is that the right way to describe it, a TV network? Do you want to call it something else at this point?

Josh Sapan: Content company, TV networks, anything you like is good.

You have a really cool job because you get to bring people like me shows like Breaking Bad and Mad Men. You bring a lot of people The Walking Dead; Killing Eve is running now as we speak.

Yes, it is.

I like McMafia. I think you met a smaller group there. And then you do cool stuff on IFC and Sundance and all that. So that all sounds great. You get paid a lot of money, you get to do cool stuff. But whenever I see you being interviewed or listen to you being interviewed, everyone is pretty concerned about your well-being. And the concern is, “Hey, Josh, how’s it going? It seems like you’re in trouble here. Your company is too small or there’s a problem with TV.” And you seem pretty chill about it. So we’ll talk about all those.

Sure, good, good.

That’s a long, extended welcome.

Okay, good. Well, thank you for having me. It’s a real pleasure. I mean it.

I appreciate it. The last time we talked in public was fall of 2015. It was right after Bob Iger had done an earnings call and said, “We lost a couple subs at ESPN this last quarter, but it’s nothing to worry about.” And then everyone freaked out and all the cable stocks tanked. I think they’ve come back since then, right?

Yeah, I think so. Yes, they definitely have.

So this is kind of an extension of that conversation. Because everyone was freaked out about the future of TV in 2015 and I think even more so now? The landscape has changed, but the tech guys have finally showed up or are about to show up. There’s still a concern about cord-cutting and audience and all of that. You’re still here, you’re still making cool TV. That’s good.

Yeah, yeah.

What is your average day like?

Oh, average day is, it’s Upfront season. So I’m going to an Upfront event tonight.

Where you’re gonna show off stuff that you want advertisers to buy?

We will, indeed. And we’ll spend some time with them. Which is not an average day, but it’s an important day.

We’ve been talking about Upfronts on this show a bit because I went to what was basically the Apple Upfront last year or last week, two weeks ago? But they didn’t show the shows. But we’ve been referencing the traditional TV Upfronts. Do you wanna explain what goes into an Upfront?

Oh, sure. It’s the time of the year, for those who are unexposed to that particular ecosystem, when those who sell advertising in media come to the media-buying community and essentially present their wares or opportunities. It’s a long-standing tradition. And it’s the part of the market where buys are made in advance of the coming year.

“Here’s what we’ve got. You know some of our shows are coming back, here’s some new shows you haven’t seen before, here are clips of them. Here’s some talent, here’s some alcohol, here’s some food.”

Yeah. But most importantly, it’s a chance for the media-buying community to make determinations, and it’s a market, it is a market about what they want to lock in for the coming 12-month period, essentially. And so those prices get established. And at least the history of television advertising is that that’s where the substantial amount of commerce occurs.

And then there’s what’s called the scatter market. For those who are not familiar with it, that market it a sort of day-by-day or moment-by-moment market that goes along with the Upfront that has established the bulk, generally, the bulk of commerce for traditional TV networks.

Now, the entire world is changing, but you do have this sort of nomenclature, right, and the feeling. So we were privileged last night at our Upfront, which was a smaller venue, to have Jodie Comer and to have Sandra Oh and to have Fiona Shaw from Killing Eve. To have Colman Domingo from The Walking Dead, to have a bunch of people from our We TV shows. To have Seth Meyers from Documentary Now. So they get to meet talent, and they get a sort of feeling of texture about what the shows are. They know them, but it does give them an opportunity to really understand better what we’re doing.

And this is a high-stakes thing for you, right? Because you’re gonna determine, to some degree, how much revenue you’re gonna have for the coming year. Sort of kicking off last night and then you’ll have a negotiation with the buyer in the next couple of months. And that, in large part, is gonna sort of determine what your year is.

Yeah. It has a very significant effect. Not the only effect, but it establishes, to some degree, price, and to some degree establishes volume. And very happily, notwithstanding your earlier comments about some of the issues surrounding television, our pricing has been going up very strongly as television advertising is actually increasingly more precious.

And I don’t mean to pitch our book, it’s quite so that dramas, immersive dramas, on television, if you’re an advertiser, are increasingly challenging to find. I really mean this. It is part of what we say that is appealing about us, our so-called pitch. It’s also quite true, which is, if you wanna advertise on Game of Thrones, you can’t. If you want to advertise on Billions, you can’t. If you want to advertise on Outlander, you can’t.

Or a Netflix show.

Or the Kominsky Method, you can’t. So there are really two, I think, places on television that would be known to have quality dramas and comedies where you can advertise: AMC and FX, or the AMC Networks and FX, I should say. And so it’s not lost on the smart people who are buying media, who are selling their products, that that type of experience tends to move products. Because people are paying an awful lot of attention when they’re watching.

This is a very persuasive pitch. If I was buying advertising, I would buy it.

I am someone who buys advertising. And so you don’t do it casually, you do it carefully. You do it with all the data available to you. And you watch what your sales are, you’re not sitting around just making random judgements. You have to move product off the shelf or subscriptions or financial services or people into fast-food establishments. So you know what works over time and your job is dependent upon that. And television is a very important piece of that. And immersive drama and comedies are truly increasingly hard to find because of the proliferation of non-commercial streaming services.

Make the case for the idea of the Upfronts period. Because every year there’s a discussion like, “This seems like a really anachronous way to sell advertising. This is all based on a fall TV schedule when TV really should be a 12-month-a-year thing. On top of that, you’re showing off stuff that a lot of these shows will only be on air for a few months. This seems like we should get rid of this process because they’re expensive. You gotta fly the talent in, you gotta rent out stuff.” But we keep having them. And in fact, the digital companies are all doing them now.

Yeah. I think that, to my evaluation, markets work in different ways for multiple reasons. The way people trade anything, and I’m not an economist, but the way people trade anything has to do with the clarity, specificity, and, if you will, perfection of pricing in markets. And it also has to do with other conditions. How much time you can spend, whether you want to lock in prices, whether you want to lock in partial prices, how much of your market dynamic you want to be volatile versus fixed.

So all of those influences go into the sale of advertising. In all markets, which as you said, so-called digital companies are doing Upfronts.

Yeah. I got my invitation to the Hulu one, the YouTube one.

But your point is well taken, I think. And I think the reason conjecture is fairly frequently raised around, “Why Upfronts, if there’s a better way to do it?” is a very fair and good question. And if I may, it’s something that we have a fair amount of focus on and interest in, in the broader sense. And it is because the system surrounding the calculation and so-called counting of television eyeballs and then advertising, is imperfect. It is based on samples and it is based on projections of samples. It’s not based on true, granular, individual data.

So guessing how many people are watching.

Yeah, it’s a projection.

But the thing that’s meaningful for us, if I may, which I think is an important notion about the future health of AMC Networks, is that we have a lot of viewing consumption. People spending the time watching it that is not adequately monetized because the system surrounding it is somewhat anachronistic. Now, there’s new systems being set up that to say it in the most simple terms, count more effectively, they count more properly. And they allow the advertising to be placed with greater proximity and with greater specificity. Meaning, there are now ads going out on cable television, not to quote everyone, but to people whose car leases are expiring and who may be interested in cars, so-called addressable advertising.

All of that is something that the digital companies, in fact, came by birth. It was native to the manner in which they inhabited the globe. And was not native to those who began their television enterprise through distribution medium or media some time ago. That will catch up. When that catches up, the pricing or the CPMs will escalate for television.

You think better measurement increases your pricing on TV? Because in digital, it’s a race to the bottom. In the digital world, we have a very good sense of who is watching, who is consuming something. I can look at Chartbeat right now and tell you how many seconds the average person has spent on my story and pricing. And the better we get at counting, the lower pricing goes.

The better counting television gets, the higher pricing goes, the more addressable the ad is, the higher the pricing will go because there is, today, some degree of waste in your buy. And you’re mindful that there’s some degree of waste in your buy, so you’re calculating that into your price.

This is the ad tech pitch on the digital side, too. “Oh, we’re gonna find inefficiencies. And it turns out that you had more eyeballs there. And also we can track conversions and all of that.” But the price keeps coming down, down, down, down, down.

But television price keeps going up, up, up, because each year over year, and particularly with the shows that are commanding, because the experience of being deeply, deeply engaged in something is, for an advertiser, very important and very hard to find. It simply works better than having something adjacent on a screen that your eye may wander to or not. And it has its own place in life.

But I really do believe that the experience of immersive television, it has already been increasing, even with its historical, if you will, imperfections. And I think the pricing will increase as those imperfections are overcome and more specificity and addressibilty allows you to buy more with greater effectiveness and efficiency.

I’m assuming that, for a bunch of different reasons, some of which we’ll discuss, your business, the focus on ads has changed for you over time. That maybe they are less important to you than other forms of revenue, or you’re adding new revenue streams in part to supplement advertising. Is that fair?

I think it’s fair to say that we have been diversifying our overall business. So we separated, just a little historical map, AMC Network separated from Cablevision some eight years ago.

Cablevision is the smallish, or used to be the smallish New York-based cable provider, now is …

That’s exactly right. Thank you very much.

Yup.

And so we’ve been publicly traded under our own name for eight years. And during that period of time, we mindfully went out to diversify our business. We mindfully went out to become what probably was fairly described as a group of cable TV channels, to become, over time, a content company that — impolite word — exploits its content in a number of different media and finds value in different geographies and in different platforms.

So that’s been a very important initiative for our company. So today, to your point, advertising represents somewhere around 25 percent or so of our overall revenue, what is commonly referred to as studio business. Which is our ownership of shows.

Making the shows that you run, and I guess in theory could run on someone else’s network, but primarily you’re making stuff for your own consumption.

We make them for our own consumption and then we sell ancillary rights or subsequent rights, or different geographical rights to Amazon and foreign territory that we don’t operate a cable channel in. And that’s become, perhaps, 15 or so plus percent, round numbers, of our business. So we’ve become a studio, to use that word, doesn’t mean we have a commissary, it simply means that we manufacture and own material. And we have distribution revenues and then we have license and commercial revenue. So yes, we’ve actually, significantly, diversified the nature of our revenue.

How does the fact that when you’re thinking about making a show and putting a show on air, the fact that you are also now thinking that you are gonna sell that now to an Amazon or Netflix or somewhere outside of the US, how does that affect sort of what you might purchase and also how long you might air it? I have this notion in my head that you guys and other networks are keeping stuff on longer when I don’t know, five, six years ago you might have pulled it because the ratings weren’t great, but you’re thinking, “This is gonna have value when we sell it somewhere else.”

Yeah, I think it’s a fair point. So we first and foremost have a vigilant creative screen because we have believed from early on and continue to believe that there would be many new entrances moving in to television, which there have, many more opportunities for people to find what they want and to stand out and to be distinguished, you’re gonna have to be not okay, not good, but great to whatever group of people finds you.

You’re gonna opt in to watch this, “I choose to watch this.”

You’ve got to really make your way to go find it.

I’m not flipping through the dial.

You’re not. And so I will say it’s so important, you mentioned Killing Eve, and thank you for doing that, because I think there are a number of entities that are sort of pressing the green light button with great speed today, and they’re moving to do very high volume because it suits their business model.

This is the main conventional TV criticism of Netflix and then the others guys, but it’s mostly been …

I would call it an observation.

They’re making too much stuff.

No, I’m just calling it an observation. So I don’t think that we would find our way to Killing Eve if we were pressing a button that said, “A show about a female assassin and a so-called cop in pursuit of one another” is necessarily going to be the winning formula that will rule the world, it was in the nuance of the script that made Killing Eve Killing Eve. Similarly, I think Better Call Saul would not have been … we wouldn’t have made it just so-called “for the money.” We’re mindful of ROIs, of course, we’re in business, but first screen is creative. Will it be a great show? Will it tell a great story? Will the characters live in your skull in a way that you actually adore?

And is it compelling? But what I was asking about, what was something that might have modest ratings that you’re more likely to keep it on air because you want to be able to have multiple seasons to sell in a couple years? Is that a fair way to characterize how your business has changed?

I think the answer is, by degree, yes. And it is because we’re … I mentioned the multiple means of exploitation. If we’re getting money from subsequent sales in the US and from foreign sales and other means of distribution, then the economic return of that show has different genetics. And the immediate rating used perhaps was paramount earlier and it’s now a piece of what we …

Got it. So I’ve mentioned Netflix several times, I don’t think you’ve mentioned them by name, but you work with Netflix.

Yeah.

The Netflix narrative in the olden days used to be, they have got a bunch of junk, and then for a while it was, they’re helping people. And you guys were often the prime example, they helped build an audience for shows like Mad Men because people who didn’t see it when it aired have been watching it, have been binging on it for seasons and now they’re watching it live. And now the conventional wisdom from the TV guys is, “Netflix is a mortal threat and we need to muster all the defenses we have and/or offense and take them on.” Has your view of Netflix changed over the years?

You know, I think that rolling sequence could fairly be described as common wisdom, for okay reasons. I think it is, however, not quite as clear in your sequence …

That’s why we’re here, to talk about it.

… of the pieces as those chapters might describe. If you look at the history of the United States of America, you can say there was this and then there was this and then there was that. But if you’re looking through it in real time, the Revolution and the Civil War are indeed central events, as is World War II, but if you’ve lived through the 1950s and ’60s and ’70s and ’80s …

Some stuff happened there, too.

… some things occur in a slightly more evolutionary manner. So I think, if I may, if you’ll indulge that analogy, I think that the material influences it an awful lot. Certain shows benefit from very wide exposure on an SVOD platform and subsequent sequences, and you see ratings bumps. We just saw it on Killing Eve, when something returns to linear. I think other shows might be, if they’re less important, they might see a sort of decline because of their availability and lack of urgency. So, the sort of chemistry or the recipe has more than one ingredient and one variable, and I think those all go into the mix.

Does that change your thinking about how you decide to license an individual show? Like, “This thing, I think if we sell it to Netflix it’s probably not going to help our business beyond whatever check Netflix gives us.” Show two, Better Call Saul, “This is going to help us.”

Yeah, you know, I think it does influence our thinking. We’re happily in charge of that choice and we make decisions selectively about whether we think it will aid us or whether it will work against us. And of course, because we’re in business, where there is the best return. And just the one last thing, which I just find personally rather curious, which is there has of course been a huge increase in people watching, and I’ll use the word on-demand very broadly, it could be cable on-demand, it could be purchasing via iTunes or another transactional platform, or watching on a subscription video-on-demand service. There’s also an interesting increase, I think, in appetite for people viewing together because it’s become a less common experience. You see it to some degree of course in sports and news, but it also occurs around natural history.

So when we put on material like Planet Earth, Blue Planet Two, Dynasties from the BBC, we see the phenomenon of people and their families wanting to watch together, it’s a curious phenomenon. And so BBC America in the not too distant future will have a micro net, if you want to call it that, of natural history programming on weekends, so that people can experience it with the television on all the time. And we’ll see how that initiative goes, but my instinct is it will be very welcomed.

So, even though this is stuff that presumably lives on multiple on-demand platforms, you think … And by the way, you’re not the … I mean, they’ve had marathons of stuff for a very long time.

Yeah, of course.

That’s a standard thing, but you think in particular that programming will attract an audience that couldn’t find it somewhere else, but since they’re there, they’re going to watch it together?

Yeah, this is a minor anecdote, I say it only to sort of illustrate the point if you don’t mind, which is, this Christmastime we did something called Best Christmas Ever in which there was basically just a linear schedule of Christmas-oriented movies, and our ratings doubled or tripled versus prime average, and people were flipping on the television set and keeping Christmas movies on. I don’t know if they were avoiding relatives that they were hostage with inside of a cold environment.

Probably.

Or they wanted the Christmas spirit to live deeply inside themselves, but there are multiple things occurring — not to say that on-demand and subscription video-on-demand are not very appealing mousetraps, we’re in that business ourselves.

So my personal anecdote that runs counter to that is, I’ve watched three seasons of Better Call Saul, love the show, had Michael McKean on, he’s great. Fourth season concluded a little while ago, and I mostly intentionally did not watch it because I said, “You know what? I’m behind, I had other stuff to do, I’m going to watch it when it’s on Netflix and it’ll be ad-free and I won’t have to worry about whether it’s on my DVR or whether the on-demand thing that I’m watching it on allows me to fast forward, any of that, and I’ll just wait for Netflix to tell me when I can watch it.” And that it seems like is less good for you.

Yeah that would be less good, I just put … And I don’t do this, this is my personal life, I’ll compliment FX, I just recorded the first two episodes of Verdon/Fosse, do I have it right? Or Fosse/Verdon, the FX show.

I think it’s Fosse/Verdon, but yeah, yeah.

Fosse/Verdon or Verdon/Fosse, and it’s on my DVR because I like to organize my own personal viewing via DVR and I’m immensely curious now — by the way, because I have the wearwithal, I backed it up by purchasing it on iTunes, and also putting it …

You are a big Bob Fosse fan, right?

Well, I’m curious about the subject, I want to see how it was rendered, so I’m anxious to see it, so it’s on my iPad and it’s on my DVR, and I don’t feel like waiting. By the way, it’s not our show, it really is on my iPad, it really is on my DVR and I’m quite anxious to see it.

Fosse/Verdon is very on-brand for you.

Well, I’m just curious about it, yeah.

It also makes me really want to go back and watch All That Jazz again, which I haven’t seen in a long time.

Yeah, I also of course, if I talk about podcasts, I was provoked by listening to a podcast with the participants — Verdon — and I have some other personal connection to it, believe it or not, through someone I know who’s a dancer. So I have excessive interest, but, it’s not the only time that I engage in that behavior, and sometimes I’ll wait for something on Netflix.

To broaden it out, as you well know, this is the year where Disney said — well, Disney said it last year, a couple years ago — “We’re going to stop selling stuff to Netflix and we’re going to make our own version of Netflix.” They don’t call it that, but that’s the premise. Time Warner/AT&T is doing a version of this, and again, they’re not explicitly saying they’re pulling stuff from Netflix in some cases, but they are. Other folks are having this debate about whether they are essentially their competitors or not. I assume you guys are talking about this internally all the time, “Do we sell our stuff to someone else who’s eventually going to erode our business, or is it still worth our while to keep doing this?” Sounds like it’s still worth your while to keep doing it.

Yeah, and those are all valid conversations and valid conclusions for any one entity, and I really mean, forgive me if I’m trying to put this in a larger perspective, but I do, in the sort of historical media plot, if you don’t mind, when cable TV came into being, the broadcast networks chose either to join it or they said, “They’re molecular ratings, I don’t need to bother with a cable channel.” Different companies chose to enter the 24-hour news business, some didn’t. They saw it as incidental, whether they had incumbency and news views.

Yes, there was a time when 24-hour news was not a thing.

It was not a thing, and then there was a time when broadcast networks were seen as beleaguered and completely bereft and now that’s not true, as a consequence of a number of factors, and we’re seeing an evolution now in subscription video-on-demand, particularly and for very good reasons, and so we have set up four-plus of our own subscription video-on-demand services, and we’re now in that business.

And we can select and make a choice about whether to take our original shows and put them on those services or not, we can choose to put them on those services first or second, we can choose to share them. And I think over time we’ll find ourselves, excuse the expression, running multiple playbooks, and we’ll find out what happens when we run various different playbooks. That is not to invalidate or question the plot of any of the companies who have said, “No, I’m going to do it this way only.”

I was going to ask about this later, but you’ve provided a segue, you do have your own SVOD services, you are selling your own stuff direct to consumers, this is what many people say they wanted, you have done it and for whatever reason haven’t generated that much attention from people like me, at least. But you’ve been doing it. The one I can name off the top of my head is Shudder, right? I want to make sure I got it right.

Yes, you did.

That’s horror films, there’s three others?

Yeah, so you may not be a fan of British mysteries, you don’t look like you are, and so …

I find that judgemental, but it’s correct.

It was actually done on pure demographic basis, it tends to skew a little bit older.

My parents, yeah.

It tends to skew a little bit older, so you didn’t seem like you were in the right demo, because I’m familiar with the demographics, and so I made that harsh, cruel judgment. And so, it tends to skew older, and we purchased that business last year, we’re in partnership where we own 80+ percent of it with Bob Johnson. And it’s growing extremely well, it’s called Acorn.

Right.

And along with that came I think a brilliant service called Urban Move channel, or UMC, that is the first dedicated service to urban audiences in the US, and then worldwide, that is free to really try and connect the creative community with people, that’s the ambition, and it too is growing. And then we have another one called Sundance Now, which is trading on, I think, thoughtful documentaries and some interesting crime dramas, but not salacious crime dramas, ones that are really about the human condition, and they’re all going well and they’re all growing.

So you’ve been running these … I have Disney on the brain right now just because they’re going to announce their thing tomorrow as we’re recording this, but so everyone is wondering how the TV guys are going to do at selling stuff direct to consumers over the internet. You’re doing it, you’re in it, what have you learned? What did you get right? What did you have to go back on the drawing board?

Yeah, so I think a few things. We’ve now had it for four to five years, so it’s not new to us, we got in on the earlier side, but we determined that we wanted to get in for a series of reasons, with more dedicated, highly specific audiences as opposed to general interest entertainment.

”You like horror films, you should subscribe to Shudder.”

It is the one, it’s the one, and one, and one. And if you look at the ratings, people love it, they stand up in applause, they think it’s the thing that speaks to them, the coolest thing in town if you like that. And we think that …

Have you guys put out numbers for this?

We have not, so because there’s resilience and predictability, and less churn if you have someone who’s enthusiastic truly about a genre, it’s very meaningful, because otherwise, you tend to be subject just to get to one piece of it … The answers are, what matter are, churn rates, disconnect rates, the tech stack, and getting the tech stack right so your interface is seamless on multiple devices, your cost per acquisition, or how you sell, and you could engage in and have available all sorts of metrics that are not standard to historical television rendered through a remote distributor, if you want to call it that. And then of course content, which is similar, but once again you have much more data available, so that is a bit of new muscles, and now we’ve gotten some of those muscles by training ourselves and by borrowing and recruiting, if you will.

Of those four things you listed, what was the most difficult thing for you as an old-school linear programmer/cable network to figure out?

Yeah, you know, the real answer is going to be the least simplest, it really is the confluence of the four and where the leverage points are.

The content, you knew about.

We were pretty familiar with content. The tech stack admittedly, for someone like me, was new to understanding because we didn’t build it ourselves, and so we built it once and then built it a second time.

It does seem like something you can go out and either find smart people and they can make this thing for you, or you can buy it. It seems like that’s less challenging than maybe people thought.

You know, it is. The only thing I might offer — and I say this as a non-engineer — is that the interplay of the tech with what’s commonly referred to as product or consumer experience is really profound. And I’ll say it just anecdotally, which is, if you press the button and love it and are delighted, it matters a lot. If you press the button and are even momentarily frustrated, and you’re asked to resubmit credentials, or you timeout or your credit card is expired, or something else happens, it is not a happy day.

It’s not a happy day, and if you’re going to be buying, you’re probably not going to be buying.

Right.

Credit card goes back in the wallet.

So if there’s any one piece of it that for me was eye-opening, it was the tech, the product experience, the interface, and the complete nuance of whether it was spectacular, good, okay, or subpar, could almost be called equivalent to a script that’s predictable and average versus one that’s spectacular and unpredictable. I think it matters profoundly.

Yeah. And then the customer acquisition, I mean, anyone who’s selling stuff sort of has a sense of how that’s important. I assume you guys knew it was important.

And then what is the experience like of selling the stuff directly to consumers and getting real-time feedback and really granular information on what they’re consuming versus what you’ve been doing all your life up until now, which is putting it out and getting maybe at best a guess about how many people are watching something or enjoying it?

It’s profound. It’s really profound. Because if you take advantage of all that data and all those responses, you have insights that are … frankly, they’re deeper and richer and broader than that which is available through old ways of …

How does that square up for someone like you who has been successful at this, who has a gut and has taste and you have a sensibility, right? We were just talking about your love of Fosse/Verdon. Even if I watch your network, that sort of seeps through, right? You hire really good programmers to put that stuff there, but if reflects your taste and stuff to some degree. As you’re getting data points back that say, you know, “X percent of Shudder users like this,” and maybe you find that stuff repellent or you just don’t like it or whatever it is, how do you square sort of what the data tells you versus what your gut or brain or sense of taste …

Yeah. Well, I think that I can answer quickly, which is the data will provide the best guideposts there absolutely are, and one’s judgment, I think, needs to submit, ultimately, to what the data tells you. Which is not to say it doesn’t have a seat at the table. And I work with people whose instincts and wherewithal is spectacular, and so they are a factor in what we do, but denying the data is a silly exercise. But also extinguishing judgment and so-called notes on scripts and participation and making a story great is also, there’s no point in not doing that. It can be something that contributes significantly to a better TV show.

So if you flipped that around, right, so where in conventional TV where you still are just guessing at what people will like …

Well, there’s a fair amount of data that …

There’s a fair amount of data but you’re still guessing, right?

Yeah.

So, I mentioned McMafia, I liked that show, I told someone else on Twitter about that show, so that’s two people who watched it. From what I can tell, it’s a pretty small audience for a significant percentage of that show. I think it was very successful in the UK …

I could introduce you to some people who also were big fans of McMafia.

Okay. We’d all fit in one room.

And you could have a support group. Yeah.

So is that something where, had you had a better sense and better data, that you actually don’t go forward with that show? Or do you go, “No, no, we still have to gamble on stuff like this and even if we get it wrong, it’s still a worthwhile …” Or are we getting to a place where you’re going to extinguish the McMafias of the world because you’re just going to get better data and you’ll know there’s no way we’re putting that out?

No, I don’t think that you can be either enlightened or reductive to the point where you make final decisions, because you really will, one will, eliminate the possibility of surprise and touching people with great stories and characters. So I don’t think that if you allow yourself, for data to become all-encompassing and singular and monolithic that you’ll end up in a good place.

And I think it’s something that should be applied appropriately. By the way, I think its application is probably first and foremost to marketing as opposed to content development. Because I think in marketing, when it relates to cost per acquisition …

Let’s figure out where this audience for this thing is.

Yeah, you can market just with so much better efficiency.

And figure out how to do so effectively.

So it’s irresistible. But I think on the creative side, I don’t think there’s any — yet — algorithm that can tell you whether the story development or the character that’s being shaped, like the medicine dude in McMafia, who is just heartless and would like to kill everybody, or the old guy who is trying to sort of get redemption for his son, you’re probably not going to data your way into figuring out whether those characters are going to be appealing to viewers.

That was part of the pitch when Netflix first got into this. They were kind of back, they went back and forth on how they were going to use data or not to … And since then they’ve been quite clear and say, “No, no, you make whatever you want, and then we’ll tell you if it worked or not and order more. And that will affect our buying, but you, the artist, go ahead and make it.” I still think there’s a desire from some people to say, “If we could just figure out that this script and this idea and this character and this actor, if we put them together, we will have an audience of X or Y.” I just don’t think we’re going to get that for a very long time. If ever.

To my mind, that is akin to emulating the behavior of someone you admire or like and think you’ll be them if you imitate their behavior.

Well, that explains many, many assholes in Silicon Valley saying, “It worked for Steve Jobs.” I don’t want to let us go before we talk about the tech guys getting into your business. You mentioned Netflix.

Yes.

Again, this is the year where Apple is doing something, still confusing, Amazon is taking sort of a second stab at this. I guess those are really the two big guys, right? So one thing I know is that Netflix and Amazon and Apple have made it much more difficult for you to do your job because they’re bidding up the price of talent. How else are they affecting what you do day to day and then more broadly strategically?

Yeah, you know I just may, if I may, I’ll sort of take not quite exception but maybe just slightly refined definition to bidding up cost of talent. We are not filling a Walmart with TV shows. We are selectively programming for AMC, for IFC, for BBC America, for Sundance TV, for We TV, we’re selectively doing that. And so we really don’t have huge aisles to fill. We have selective content to make and we have a development process that we take very seriously and do with great care.

And so there may be the occasional packaged show, that so-called “comes to market” that gets bid up, but our development process yields, I’d like to think, wonderful material that we work on and with. So the common wisdom that the market’s been bid up as if there’s a paucity of material a la in sports rights, there’s one NFL and if you don’t get it, you gotta pay more. If you want these rights you gotta pay more. Well, some people are completely come from nowhere to do spectacular work. Some have projects that others are not buying because they don’t see the wisdom or wit or beauty in them. And so while there is that element occurring, it is not sort of a simple game of limited …

I get that you guys are, again, make cool stuff and you do less of it, and you probably have a better hit rate, but I’m sure that you are often in a room with a Sandra Oh or Phoebe Waller-Bridge, name the talent, and you would like them to work with you and they are also either explicitly or at least in the back of their head thinking, “I bet I can get a lot more money on Netflix.”

I think, sure, there’s some degree of that sometimes. I think we’re also, and I think it’s true, starting to see some of a phenomenon in which some of the creative people think that their project may get slightly lost.

This is part of the … this is what the TV guys like you say about the Netflixes.

It’s true, because if we do have limited shelves and if we have limited street front, shop window, and we make something heroic, it’s really heroic. And we are far from indifferent about its success, and I think that both by virtue of the number of things that we do and the manner in which our business operates …

You’re going to market it, you’re going to showcase it, you’re really going to push it.

Yeah, I think it’s a different shot, to tell you the truth, I really do.

I mean it’s not as if … Chris Rock had a comedy special on Netflix last year, and I watched it and I never heard anyone say a thing about it.

Right. And I’m not knocking anything, it’s just different models that occur differently, they have different … over time they have very different consequences. So anything that’s true for a period of time is only true for that period of time.

So I imagine your pitch as something like, “Sure you could go to McDonald’s or Walmart or whomever, but we have this cool bistro, it’s in Brooklyn, it’s in a harder-to-get part of Brooklyn, it’s cool, you’re going to like it there, we’re going to take really good care of you and you should come work with us, you should come eat at our bistro.”

Well, you know, we have a history to point to of what we’ve done, and the way those things have worked — and Killing Eve is just an interesting example that was on a channel called BBC America, which is not the biggest cable TV channel in America and it’s not Netflix or Amazon. And so I would ask rhetorically, how did it become, if not the show of the moment certainly a show of the moment? Maybe the show of this moment on BBC America. And the answer is, not accidentally. Because of its quality, because of the writing of Phoebe Waller-Bridge, because of the actors and because of the manner in which we brought it to market.

And then there’s a similar sort of size/scale question just about your business, period, which is, we just republished this chart, it’s our media landscape that says everyone’s size by market capital, it looks like a constellation of the universe. People really like this chart. You guys are on there, you’re very small compared to the behemoths, the Disney/Fox thing just got much bigger than it did last year.

And so the inevitable question is, for all the little dots, the assumption is they’re going to have to be consumed. They’re going to be bought by someone, somewhere. How often are you talking about whether or not someone is … makes sense to sell the company? I get that you’re running a public company, you’re constrained about what you can actually talk about in regards to M&A, but I’m sure it’s top of mind all the time.

Yeah, you know, yes and no. It’s … we’re a $3-plus billion company which relatively has become smaller in your chart, but that’s its absolute worth.

I’d like to work at a $3 billion company.

Well, it’s just, that’s the size of it. So we have a couple thousand employees, $3 billion … our numbers are public, last year we had half a billion dollars of free cash flow. So I think we have adequate resources to do what we do, and we’ve been growing and expanding it now for many years in a row. And I don’t want to say something radical just for the sake of it, but there have been acquisitions in the media world in the past that have not necessarily worked out perfectly. There’s been some misalignment, and some expectations that have been perfect. So there’s certainly a rush to, in some cases, for companies to …

Bulk up.

Bulk up with some clear and I think some less clear notions of what the absolute benefits will be.

Yeah, I guess the counter is that there actually hasn’t been this bulking up. After the Time Warner deal got cleared by the Supreme Court last year, we all, many of us including me, said, “This is it, everyone’s going to get bought, all the buying is going to happen.” It’s a year-plus later, hasn’t happened.

Yeah. And I also think, I would ask it rhetorically unless you want to answer, do you think that — and this is not meant to be defensive, it’s a subject that of course crosses our minds. We do think we’ve operated successfully now for some fairly long period of time. We’ve asked ourselves and been asked questions about consolidation that occurred in the last 10 years in the cable distribution side of the world, whether that would be threatening. It turned out to be very beneficial to us because we were selling to companies that had more smarts, wherewithal, and capability.

The fact that Comcast and Charter bought everyone turned out to be fine for you.

It turned out to be excellent for us. I think our business, if you look at the numbers, our distribution actually increased, our distribution revenue increased, and we prospered in a regime in which at least the immediate skeptical response was “it will not be good for you.” So I think some trends, when they’re in the moment, don’t turn out exactly as people think the story will be written. Sometimes they do, but they’re not all linear.

I think this is a recurring theme of this discussion, it’s good. I’m going to go back and see how many times we talked where you said “your plot or your summary of the plot is incorrect.” I think a bunch.

I hope I didn’t say it too many times.

No, it’s good. I like push-back. I liked having you on. I would like to do this at a longer length, but there’s people out there …

By all means. Yeah, yeah, yeah.

Who want to take the studio back from us. Thank you for coming on, Josh.

Thanks so much for having me.

It’s great to have you.

It’s a pleasure.

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