James Kotecki (00:08):
This is CES Tech Talk. I'm James Kotecki, bringing you an interview that I recorded live at the C Space Studio at CES 2023. Enjoy. Hey, welcome back. You're in the C Space Studio at CES 2023 with me, James Kotecki and my guest Andrew Wallenstein, who is Variety Intelligence Platforms President and Chief Media Analyst. Obviously this is part of the Variety empire, Andrew, welcome to the show.
Andrew Wallenstein (00:35):
Good to be here with you.
James Kotecki (00:37):
Andrew, I believe, correct me if I'm wrong, you were once the co-editor and chief of Variety-
Andrew Wallenstein (00:42):
James Kotecki (00:42):
... itself. So tell me about your current role, what appeals to you about this, and how it differs from things you've done in the past.
Andrew Wallenstein (00:48):
Sure. Well, so Variety Intelligence Platform has been around now for a few years. It's basically a subscription extension to that core Variety business where people who come to the variety.com website, we're interested in digging deeper beyond the headlines, really into the issues that matter most to those in the media business. Get a really deep mix of analysis and data like you really can't get anywhere else, and we touch on a lot of the issues that people are here at CES talking about.
James Kotecki (01:19):
And so how long has Variety Intelligence Platform existed?
Andrew Wallenstein (01:22):
We're going to go into our third year in 2023. We started exactly when the pandemic began, and we've weathered that storm, and-
James Kotecki (01:31):
Andrew Wallenstein (01:31):
Thank you.
James Kotecki (01:33):
... I'm not going to say on the other side of it, but hopefully on the other side of it. And so this is not unlike maybe other kind of news businesses and newsrooms that have added that kind of plus element or that subscription element.
Andrew Wallenstein (01:44):
James Kotecki (01:44):
Political newsrooms, for example, will have subscription based services where you can, when the under deputy secretary of whatever sneezes, you can get an alert about it on your phone, for those people who need to know. So this is kind of like that idea, but for your industry.
Andrew Wallenstein (01:55):
James Kotecki (01:55):
Okay. And how's it going? What are you learning about how this kind of business... What have you learned throughout the pandemic and now in terms of how this business is operating?
Andrew Wallenstein (02:03):
Well, what we focus on, obviously CES is very broad in technology. What Variety Intelligence Platform and Variety itself focuses on is the media business, content, particularly in terms of how it intersects with the technology business. And this is a time of profound change, profound anxiety, frankly, because especially given the economic backdrop right now, it's a tough business to be in no matter what piece of it that you are in. And so the changes, the adaptation, the forced innovation, all of that across film, streaming, TV, music, publishing, that's what Variety Intelligence is about.
James Kotecki (02:46):
I feel like there's so much that we could dig into, but from you, what are you most curious about or interested in among all those different changes that are happening? What are some of the things maybe for your readers that are really top of mind right now?
Andrew Wallenstein (02:58):
Well, I think the streaming business is really where the attention's been now for several years. Netflix has found itself surrounded by a fleet of competitors, and the competition there is fascinating. I think the big question going into 2023 is, will the same number of market entrants still be standing by the time we get to 2024? Particularly given that this business is getting harder, it's getting more expensive, it's just brutally competitive. And I for one, don't think that the same set of companies that began several years ago are going to be standing after another year this difficult.
James Kotecki (03:39):
I won't hold your feet to the fire, but are you willing to name any names of businesses that you think are existing right now that may not exist in the same form at the end of the year?
Andrew Wallenstein (03:46):
I'm not going to single out one, but I'm going to say, I think there's a clear sort of second rung of streaming players, whether it's Paramount, whether it's Peacock, the NBC Universal Streaming services; I just don't see how they're going to be able to compete at the level of say, Netflix, Disney Plus.
James Kotecki (04:05):
Andrew Wallenstein (04:06):
HBO Max is going to be at a critical year as they merge with Discovery. I think we're going to see a lot of this kind of, not necessarily merger activity, but partnerships, bundling, I think that's going to happen big in 2023.
James Kotecki (04:19):
The addition of ad-based tiers to platforms like Netflix is obviously happening. What's the sentiment in the industry around that? Is it, this is a last ditch effort to try and figure this out? Is there a lot of confidence or hope going into it? What's the feeling around that?
Andrew Wallenstein (04:32):
It really is one of the big questions in streaming right now because, it was unthinkable just a few short years ago that Netflix, for instance, would be in this business, but they've kind of gotten dragged there by the fact that so many others, including Disney, are playing in that world. I think the thing that's going to be most interesting, particularly for Netflix is, will this new influx of subscribers cannibalize the existing subscriber base? Will we see people who are paying say, I don't know, $14 for whatever the core Netflix product is, trade down several dollars and accept some advertising? That's not necessarily a loss for Netflix, they could start to make a lot of money on the ad sale side, but I think it's going to take a while. The early going has been tough, and I think it's going to be a learning process for all the companies in this space.
James Kotecki (05:22):
We've seen different streaming platforms removing content, canceling different shows that were happening, and certain fans get upset about that. But how does all of this shape up from the business perspective in terms of how it influences the kinds of content that gets green lit, that stays on the site, that gets renewed for different seasons, or even the way that people think about creating content in the first place if it's going to be ad-supported?
Andrew Wallenstein (05:45):
Well, I would point to the fact that in recent years we have seen this incredible surge in the sheer volume of content out there. As you know, it's been called sort of the peak TV phenomenon. At Variety Intelligence we've actually put out a lot of data showing just, like I think at this point it's across scripted and unscripted, we're really approaching about 2000 different shows being in circulation. And I think this is the year we start to see a ceiling get hit, and the number will start to come down as all these services get a little more discerning, as they get a little more careful with how they spend their dollars. You look at a company like Netflix, they still say they're going to be spending like $17 billion, but I think how that money gets spread around will probably over a fewer set of shows that they want to bet on. Because also a lot of these services are getting a lot of data, and they're seeing with a really granular sense of what is working and what isn't, and that's going to inform further choices.
James Kotecki (06:49):
Staying on Netflix for a moment, we saw Netflix put a film like Glass Onion in movie theaters just for a little bit of time maybe to get some interest, and then obviously mostly it's streaming. So as we're talking about the rise of these streaming platforms and their increasing dominance in our lives, what's the role of the movie theater business? What's your intelligence platform telling you?
Andrew Wallenstein (07:08):
Well, what we have studied at VIP as we call it, is how movies are going to be impacted. Clearly in 2022, we saw that the movie business is certainly reduced from where it was say, 2019 pre-pandemic. Despite the fact you've got humongous movies like Avatar, Top Gun, as successful as those big movies are, the sheer volume of movies is nowhere near what it used to be.
2023 will be an interesting test because we'll see the volume come back up, but I got to tell you, as we look at the numbers, I don't think the movie business is ever going to go back to what it once was. I think we are seeing, not it's eradication, I don't think it's going anywhere. I think it's going to get smaller and smaller, particularly with regard to the theatrical business. I think the sheer volume of theaters in the US and worldwide is going to start to come down a bit, and I think it's going to be a reflection of the fact that a lot of movies are going to find their home on streaming, because really I think you're going to see that just the biggest blockbusters, and maybe horror and some other few genres that play particularly well will keep a reduced footprint of the theater business open, but otherwise I think it's going to be a different mix.
James Kotecki (08:28):
In those movies you mentioned that might still be successful in theaters, it seems to be based on the experience of the audience needing to have that big screen, or wanting to have that big screen experience for a giant movie like Avatar or Top Gun, or a horror movie I guess the experience is being with other people and hearing those screams.
Andrew Wallenstein (08:42):
James Kotecki (08:43):
But for a thought-provoking indie film, it sounds like what you're saying, maybe it just makes less sense for that to ever be in a theater.
Andrew Wallenstein (08:50):
Yeah, we're seeing that right now, by the way. The awards season is upon us, lots of movies that are gunning for Oscar nominations, and kind of the indie show, indie movies, art house movies that you're talking about, box office has not been pretty, and I think it's a reflection of exactly what you're talking about.
James Kotecki (09:08):
So much we could talk about here. I want to see, do you have a prediction for your industry that maybe others don't agree with that seems maybe a little bit crazy, but you think could actually happen in the next few years?
Andrew Wallenstein (09:19):
Well, another thing that we've focused on this year at VIP in a big way was the Metaverse, which is of course everyone's been talking about in a big way. I think I am not as bearish as I think most people are in terms of how Meta and Mark Zuckerberg, who's betting pretty much the future of the company on the Metaverse. I'm very bearish in the short term about how the billions and billions that they and other players are sinking into that business is going to pan out, but I think it's not crazy in the long term. When I say long, I mean 5 to 10 years at the very least, that we do see the pieces of the Metaverse puzzle come together.
I think when you look at even the virtual reality business, which has been rough going, it's certainly nothing that's kind of at the precipice of major expansion; I still think when I see how teen audiences are playing with that equipment, that over time and a lot of the evolution and innovation and yes, a lot of failure, we're going to get to a place eventually where it's going to work.
James Kotecki (10:27):
And what would be the tipping point? Is there a specific thing that would happen or that you would see in your data that would make you say, okay, the Metaverse has arrived?
Andrew Wallenstein (10:35):
Well, look, the Metaverse is certainly broader than just the entertainment business. I think you're going to see more targeted applications work, say in education or otherwise, that will probably bring the metaverse awareness up a bit.
For the entertainment slice of the Metaverse, I think it's going to be akin to what has always been the case of media, which is a medium doesn't truly arrive until there's a hit piece of content that raises awareness. And so I think we may see the equivalent of, and this is a very loose metaphor, and just the way I Love Lucy sort of broke television big in the 1950s, who's to say we won't see some sort of equivalent experience develop in the Metaverse? I mean, you could argue that what Fortnite has done with content may be the very thing that I'm talking about. But in terms of what Mark Zuckerberg wants the metaverse to be, immersive, three dimensional, I think we're a ways away from seeing the true killer app that will help that.
James Kotecki (11:39):
Well, Andrew Wallenstein, Variety Intelligence Platform. Thank you so much for sharing your time with us today.
Andrew Wallenstein (11:44):
James Kotecki (11:46):
Well, I hope you enjoyed that live conversation from CES 2023. Look up the CES C Space Studio for more conversations like that, and get even more CES at ces.tech. That's C-E-S.T-E-C-H. And of course, please subscribe to this podcast so you don't miss a moment. I'm James Kotecki, talking tech on CES Tech Talk.