Chief Executive Officer, Lionsgate Studios Corp.
Jon Feltheimer: 2009 NATPE Keynote Address
The keynote address at the 2009 NATPE Market & Conference, January 26-29, delivered by Jon Feltheimer, Co-Chairman and Chief Executive Officer of Lionsgate.
About Jon Feltheimer
Jon Feltheimer, CEO of Lionsgate, has emphasized the enduring value of the company's content library, describing it as having "incredible value" that increases over time. During a 2020 earnings call, he noted that the COVID-19 pandemic demonstrated the existence of an at-home audience for movies and suggested that distribution models could change, while reaffirming the company's commitment to theatrical exhibition. He also stated that the company was "pretty well positioned for this new world" and was continuing to explore potential transactions that would leverage the library and unlock value. Feltheimer has long advocated for a disciplined, entrepreneurial approach to the media business. In earlier remarks, he described the industry as "vibrant and ripe with opportunity" and argued that new digital windows, such as the Netflix deal, carry "tremendous value" for content creators. He has stressed the importance of keeping overhead low—noting Lionsgate's overhead was less than nine percent of revenue—and of mitigating risk through cost discipline rather than relying solely on financial partners. Feltheimer has also said that the key to success is allowing talented people to make decisions and learn from mistakes, stating that "the magic comes from entrepreneurial people who really can take ideas that other people haven't thought of."
Transcript (123 segments)
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Rick Feldman0:01
But first, please welcome NATPE President and CEO Rick Feldman.
Good morning, everyone. Before we begin, I want to remind you that at the end of my portion, we're going to be drawing a business card out for a 42-inch LG HDTV. So if you haven't put your card in the bowl yet, you may want to do that. Throwing that out in about five minutes.
Okay, so good morning and welcome to NATPE number 46: Content Commerce Connections. It's our message and we're sticking to it, once again despite tough times, delivering to you an informed, relevant, and forward-thinking market and the only US event, in fact, built around the monetization of worldwide professional video content, connecting producers, distributors, and advertisers.
NATPE aims to celebrate the culture of creativity that is the basis for a business that was supported by ad spending of $60 billion in 2008. For sure, our business, now even harder to define, is at a crossroads. We've moved from a world of control to one of choice, basically trying to organize and get paid for it. Technology has forced all of us to reconsider the way we think about our business and will force programmers to change how programs are produced.
Programmers and advertisers are adapting to a world of engagement rather than disruption, and brands want to engage with the customer directly, and program services want customers, not just viewers. But in this multi-channel revolution of choice over control, it must be remembered that what comes first is the idea, followed by the context. In other words, a story worth telling and well told, whether scripted or unscripted, is first and foremost.
So let's find the next generation of stories, execute them, and find the proper platforms. And once that's done, reaggregating audiences in forms conducive to monetization is next. Audiences will view on small screens and large, in home and out, and in one way or another need to pay for that privilege. Big changes are on the horizon as the switch to digital happens in a couple of months, and where that leads, no one knows.
We do know, however, that video is the preeminent media format to make an impression on the consumer. Nothing packs the same emotional punch as video, and that's why brands have always been drawn to TV advertising. Now online video is to some a challenge to the legacy businesses, but already it's begun to become a bright spot for many established content providers whose transitional businesses are under pressure, and it opens up new opportunities for new ad-supported entrants.
Our TV business will not disappear, but it must adapt. It will experience some shakeout and consolidation, but those that remain will evolve and prosper and will continue to need a yearly forum for buying and selling content and ideas. And yes, that would be NATPE.
Even 20 years ago, articles in the trades questioned this organization's ability to change with the times. In fact, Luke Klein gave me yesterday this—from February 28, 1988, TV Radio Age—you all remember it well—'NATPE at 25: Is This Bizarre Really Necessary?' And you go and read the article, and it's amazing how many of the challenges we were dealing with back in 1988, 20 years ago, are prevalent today. But we do change.
During my year of conversations with many of you, you reinforced the desire and need for a US-based, multi-platform, digital distribution marketing conference, which is what NATPE has become. The need to get together, assuming an acceptable ROI, is still very strong. It's a business where face-to-face contact and building relationships still count.
So you will find here this week original content provided by the legacy studios and new online studios. You'll find producers from over 60 countries in the world producing for multiplatform exploitation, supported both by advertising and subscription. And you will be informed and enlightened by over 200 speakers chosen because they have something to offer, the willingness to share, and because they understand and appreciate the value and importance of this event.
We've added a theater on the floor for digital briefings. We have a series of tech demos featuring new ways for content to reach the consumer and some gadgets you may not have even seen before. In addition, we've improved the C3 Lounge on the floor, and we have now a restaurant on the floor for you to go out and make reservations for today and tomorrow, right on the floor, and an afternoon martini bar—hopefully will enhance the opportunities for networking.
Those who did not make it this year will not know what they missed, but perhaps you can tell them. Regardless of how this year shapes up, it is obvious that everyone in this room is under pressure to maximize their time and their money. NATPE intends to serve your needs and continue to create environments that pass the value test.
In that regard, here at the Mandalay Bay Hotel this week, next year we will be back, and we will provide all exhibitors with access to suites at the hotel. We will also make other low-cost options available for those in the new media world and others who wish to exhibit in ballroom locations at the Mandalay Bay. We will continue to create new and interesting ways for people to meet and sample new technology, and we will continue to provide a rich conference experience.
We will work to create the best environment for all exhibitors, and the changes will enhance buyer productivity. NATPE is a mirror of our business, and we intend to stay relevant and valuable by staying in close touch with you.
Also, we hope that in addition to NATPE here today, the DISAB Dara in Budapest following NATPE and the LA TV Festival in Los Angeles this July will be important dates in your calendar. I'd like to thank our staff and our board, and especially Luke Klein and our co-chairs, Ro and Kevin Beggs. Kevin will continue as chair for 2010, and he will be introducing our keynote this morning, Jon Feltheimer.
I hope all of you have a truly valuable and interesting week at NATPE. I look forward to hearing from you when it's over so we can all work together to discover what the future will bring. So thank you very much, and can we please have the bowl so we can draw out the business card. Thank you very much, everyone.
Okay. First of all, we will contact this person about sending you the television. And the winner is Annie Crawley from Drive Your Imagination TV. So Annie, wherever you are—okay. Thank you. And I want to thank John Taylor who's here today from LG for the 42-inch LG TV. We appreciate it. You'll see LG signs and LG monitors everywhere, and obviously we rely on the help of friends and strangers, and so we're glad to have LG in the fold.
Just two more notes before I bring on Kevin. I want to remind those of you that are interested about the Mad Men review that is tonight at the MGM Hotel at 10:30—it's the live Mad Men review—and also about the restaurant on the floor, which we hope you avail yourselves and have a great time. So with no further ado, I want to say thank you for all of you for coming and I appreciate it. And let's introduce Mr. Kevin Beggs. Thank you very much.
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Kevin Beggs8:51
Good morning, Rick. Thank you. It's been a great year at NATPE. When selecting our keynote speaker for NATPE, economic storm clouds were on the horizon. We sought a speaker with a breadth of television experience distinguished by entrepreneurial excellence who could offer unique insight into the television businesses of 2009 and beyond.
Jon Feltheimer—or the Felts, as his friends call him—was our unanimous choice, given his independent roots at New World Television, his ten-year tenure as the head of Sony Pictures Television in the '90s, and his most recent role as co-chairman of Lionsgate. Throughout John's career as developer, studio president, and corporate CEO, John has been associated with terrific series like The Wonder Years, Mad About You, The Nanny, Dawson's Creek, The King of Queens, Weeds, and most recently Mad Men.
In his role as feature film executive, he has greenlighted feature films like 3:10 to Yuma, Crash, Monsters Ball, Diary of a Mad Black Woman, and Fracture, among scores of others. John has consistently blended creative excellence with profitable business savvy—a combination that is hard to find anywhere these days.
Given John's track record, when I was first summoned to meet him after he came to Lionsgate, I was pretty intimidated. But the Jon Feltheimer that I met in 1999 looked beyond our Lionsgate television business in its then-current state and past my relative inexperience as a television executive. Instead, he imagined what it could be, and he did the same for the entire company.
Lionsgate today is a major player in every piece of the film content and distribution business chain and continues to expand amidst an economic downturn. Books may be written about how John accomplished this, but I submit to you that the most powerful tool John employed at Lionsgate is the strength of his character.
John has integrity. He is lightning honest and earns the respect of friends and competitors alike. He is fair in life and in dealmaking. He reveres the creative process. He encourages dissent. He demands excellence, and he generously recognizes excellence around him. John is relentlessly curious. He also loves and honors family and encourages his employees to do the same.
John has crafted a culture of synergy at the company. John takes risks—calculated risks, as he is wont to describe them—but nonetheless risks. John hires and acquires brilliantly. He has attracted the best and the brightest to Lionsgate, and he rarely lets them go.
And perhaps most importantly, John is a dreamer. He also empowers those around him to dream just as big. Those dreams have propelled Lionsgate to heights unimaginable eight years ago, and they show no sign of slowing. Please join me in welcoming Mr. Jon Feltheimer.
J
Jon Feltheimer12:15
Thank you very much. Some introduction—I was starting to wonder who he was talking about. But Kevin is great. Thank you, Rick. Thank you very much, Kevin. You know, Kev is the kind of executive who should make us all feel good about the future of our business. I can always count on him for a good idea, a new strategy, or an innovative approach any time of the day—but unfortunately for me, any time of the night as well.
And any credit he gives me for our television operations, I give right back to him and to his partner Sandra Stern, who has put up with me for over 20 years. Thank you all very much for being here today, and I'm pleased to see so many of my good friends here in the audience. You've always been my biggest supporters, but you've also been my biggest critics. So if I see any of you starting to take off your shoes—
Speaking of critics, everywhere you turn, people are talking about how bad things are. Self-appointed experts proclaiming the death of broadcast, the demise of packaged media, and the end of the box office. They have their charts, bar graphs, and spreadsheets full of stats to support their case. I guess the rationale is that if they say the end is near for long enough, sooner or later the warnings will finally come true.
But let me ask you: Can things be so bad when a simple idea for a Disney Channel TV movie like High School Musical can become a two-billion-dollar franchise? Or an eight-million-dollar film shot in the slums of Mumbai can become a runaway hit and an Oscar favorite? And I wonder, can things be so bad when a film like Dark Knight captures the second-highest box office gross on record and then helps usher in a brand-new technology by selling four million Blu-ray discs in its first month?
Can things be so bad when new shows like Mad Men, Damages, Dexter, and The Tudors are coming out of a cable television environment that has tripled in size in the past 10 years? The answer is a resounding no. Our media and entertainment industry remains vibrant and ripe with opportunity—you just have to look in the right places.
In fact, let me say this upfront: Television has never been better, the audience has never been bigger, programming has never been more diverse, or distribution more available. And as a result, our industry has never had greater potential for growth.
Like many other businesses, we do need to rethink the way we make, market, and distribute our product in a world driven by the powerful twin forces of digitization and globalization. We do need to remain relevant and vital to the new armies of buyers entering the digital marketplace of the 21st century. And most of all, we do need confidence in our ability to connect one of the most exciting products in the market today—television programming—with billions of consumers around the world who are hungrier for content than ever before.
But I'm not talking about any dynamic at work here other than good old-fashioned change. What we're witnessing are simple commercial rites of passage—the passing of one era that is essential to the birth of another. Old models don't die a sudden death; they simply transition to new ones.
For example, you wouldn't have said that the first golden era of television was dead when the live dramas of Playhouse 90 gave way to great scripted series like I Love Lucy, The Honeymooners, and The Dick Van Dyke Show. You wouldn't have said that the great variety shows like Ed Sullivan, The Smothers Brothers, and Laugh-In were dead when, in fact, they were paving the way for new incubators of popular culture like Saturday Night Live. And we wouldn't have said that Hill Street Blues is dead when, in fact, it led the way to NYPD Blue, which in turn opened the door for CSI.
Television is a living, breathing, fluid, and dynamic medium, and the passing of old models is a positive development, giving rise to the birth of new ones.
The emergence of Fox and The CW gave breath to our content and enlarged the broadcast television landscape. Shows like The Sopranos, Sex and the City, Weeds, Six Feet Under, and John Adams wouldn't have existed without the willingness of the new pay-television networks—HBO, Showtime, Starz, and soon our new premium channel, Epix—to create bold original content.
The growth in ratings and market share of branded cable networks like AMC, Bravo, FX, Spike, and VH1 are driving new types of content, additional sources of revenue, and a new paradigm of buyers for our industry. The growth of new international markets and new digital platforms is part of the same evolutionary continuum.
Those ingrained in the old ways of doing business fear this transition, but their anxiety misses the dynamic potential for overall growth afforded by new markets, new voices, and new technologies. And in any event, nothing we can do will stop these changes—their trajectory has been set in place by forces far greater than any of us can alter.
The challenge and the responsibility for today's television executive is to harness them in ways that are the most profitable for each of our respective businesses and, hopefully, for our industry as a whole. I guess that's what it all comes down to: leadership.
Call them optimists, pragmatists, realists, even visionaries—the executives who will lead our industry forward have faith in the vitality of our product and the vibrancy of the technology we're harnessing to distribute it. Our conviction is always challenged by the skeptics. I hear a lot lately: 'Broadcast is dead.' Well, of course it's dead—but only in the way we used to know it.
The old broadcast model of three or four networks dominating the television landscape 24/7 is as dead as the habit of getting up to change the dial on your television. But broadcast still remains a vital, if less dominant, force in today's landscape. And the visionary, the industry leader, recognizes the natural evolution of broadcast networks towards new viewing patterns that better fit today's consumer, who wants portable and transportable programming to fit his own schedule.
If that visionary is Ben Silverman at NBC, he's already exploring game-changing prime-time strategies like moving Jay Leno to 10 o'clock. If he's Jeff Zucker or Peter Chernin, he's starting Hulu for the next generation of TV viewers. Or if he's Les Moonves at CBS, he's teeing up TV.com as a competitor to Hulu.
If he's a producer like Mark Burnett, he's continuing to explore the world marketplace for winning formats that can be successfully adapted and then financing them with a branded integration model critical to the success of shows like The Apprentice. If she's a cable executive like Comedy Central's Lauren Correo, she's adapting webisodes like Fremantle's Secret Girlfriend, a hit on Atomic Wedgie.com, bucking the usual flow of programming by migrating to and not from a traditional media outlet.
Or these visionaries could be like Tyler Perry, an artist and entrepreneur who self-financed ten episodes of House of Payne on the way to an unheard-of 100-episode order through the distribution prowess of Debmar-Mercury. It's now playing in a dual window of Turner basic cable and Fox station group broadcast syndication.
Those who adapt best to the changing dynamics of the television landscape will be those who realize there are more television viewers today than ever before, scattered across more viewing platforms, more dayparts, and more territories around the world. While the ratings for the individual slices of the pie may have diminished, the slices actually add up to a much bigger pie.
And though the broadcast slice of this pie may have lost its dominance, it remains important. Just as I watched The Beatles on Ed Sullivan with my parents thirty years ago—maybe it's been more than thirty years—my entire family watches American Idol and Dancing with the Stars on broadcast together. That hasn't changed.
But then afterwards, my two-year-old turns to Barney on PBS Kids, my seven-year-old son watches SpongeBob on Nickelodeon, my nine-year-old daughter downloads Hannah Montana on her iPod—legally, I might add—and my sixteen-year-old converses with her friends on Facebook while watching full episodes of Gossip Girl and One Tree Hill from The CW.
My wife turns to a time-shifted Desperate Housewives and streaming HD on abc.com, while I beg for a few glimpses of ESPN in between everyone else's choices. And for all the fragmentation, time-shifting, and place-shifting, more eyeballs got counted and more impressions were made than ever before, simply over a wider spectrum of choices and devices.
The broadcast experience hasn't changed, but the larger context in which we view it has. You'd be hard-pressed to convince NBC that broadcast is dead when this year's Beijing Olympics drew nearly five billion viewers worldwide. You'd be equally hard-pressed to convince Fox that broadcast is dead when fifteen times a season American Idol draws over thirty million viewers—numbers that still rival the great television series of all time.
And you'd be hard-pressed to convince any of the networks that broadcast is dead when the two political conventions this year each drew nearly forty million viewers. Broadcast is no longer the only game in town, but when it's on its game, nobody does it better.
The experts with their charts and graphs also say analog is dead. Well, of course it's dead—but only in the exclusive form we've always known it. Death will be officially claimed on the day our television sets turn to digital, February 17th, or June, sometime this year.
Once a consumer has seen a sporting event on high-definition television or enjoyed the interactivity of an online game or social network, it's hard to imagine him ever returning to a solely analog universe. More than half of our children, the next generation of consumers, watch some of their TV online from Hulu and Joost and other online platforms. And these online platforms are beginning to reshape the face of our television business to meet consumers' desire for more on-demand entertainment.
This isn't an either-or proposition; it's more of a win-win in which television viewing and internet use are complementary, because the next generation of consumer revels in his ability to choose and his proficiency at multitasking. And although one-third of all internet activity at home takes place while the user is watching television—lending itself to the easy joke that some television is best viewed while distracted—the story these numbers are really telling is that the new digital marketplace offers a world of choice to forward-looking executives as well as consumers.
These executives are already looking at innovations to capitalize on digital technology, like Turner Sports and the NBA broadcasting TNT's coverage of the All-Star Game in live 3D next month. Already looking at ways in which online social networking can drive viewership through innovative concepts like the widget channel recently announced by MySpace, Yahoo, and Intel.
They're looking at partnerships like CNN and Facebook teaming up for last week's presidential inauguration, allowing fourteen million viewers to communicate on Facebook while watching the event and streaming video. There is a natural, methodical order in this progression from analog to digital, and the two will cohabit the market—however uneasily—for many years.
But this new partnership will provide fresh opportunities for those astute enough to seize them. Now, it may be difficult for some of you to think about opportunity in the worst economy since the Great Depression, but let's all reflect for a moment on our trip to Las Vegas this week.
Yes, hotel occupancy is down and so are profits, but some of the best shows in town—like Bette Midler, Zumanity, and the original Cirque—are still sold out. I'm making a point beyond the obvious one that commerce continues and the show will go on. Consumers are still spending, but like each of us, they're rationing their dollars a little more carefully, becoming a little more selective in their purchases, and like each of us, they're exercising the most awesome and dreaded weapon in their arsenal: the power of choice.
You're wielding it not like a club but like a laser to target the best, the most familiar, the most recognizable, and the most appropriate to their lifestyle, taste, and peer group. Now, think about that for a moment, because it has profound implications for what is produced, delivered to, and consumed by the world marketplace.
The message is clear: a bad economy is the best critic on the planet. Call it premium, premiere, or branded content—the winners in today's marketplace will be the shows that cut through the clutter by being different from the rest: recognizable, identifiable, relatable, and above all, renewable.
The Sopranos, Sex and the City, and Weeds will always have a place on our TVs and PCs in good times and bad. The Simpsons, American Idol, and The Hills will always find a home. Law and Order, Mad Men, and South Park will capture the popular zeitgeist from whatever media platform they're shown.
So then, what won't work? It's the big soggy star vehicle with no discernible storyline, the cynical knockoffs and remakes of a great idea done better before, or the sitcom written by a team of market researchers and designed for whatever audience doesn't have anything more productive to do with its time. Because I have a secret to share with you: today's audience always has something better to do with its time.
In the '80s, I worked for an independent, New World, and then for the next decade I worked for Sony. And I can tell you, I got paid a lot more at Sony. But that was a business era when size mattered—it belonged to the global media conglomerate and their truly unparalleled ability to aggregate eyeballs with destination programming propelled by powerhouse marketing.
Today, these conglomerates are, by their own admission, searching for ways to remain relevant in a world of fragmented audiences, market niches, and declining ad revenues. While these conglomerates look for their own new models to re-energize themselves, the future must be shared with others—smaller, nimbler, more entrepreneurial companies structured to profit from smaller audiences, able to perform and succeed on a smaller scale.
Size still matters, but in today's digital marketplace, the winners will also be those who master the art of thinking small in order to unlock profitable market niches. The winners will include those who have the greatest vision in planning for a time-shifted universe and who can profitably exploit this growing pie of anytime viewers by recognizing that it's the consumer making all of the appointments in this inversion of appointment television.
The ubiquity and transportability of content in the digital world is also eroding national and cultural boundaries almost as seamlessly as it's eliminating the barriers between the television set, the computer, and the handheld device.
Billions of dollars are being spent around the world creating satellite, digital, and mobile platforms to reach new and expanding audiences. The promise of creating television shows that appeal to international audiences has never been greater, and the opportunities to exploit the best product from around the world here in America have never been more clear.
The winners in the global marketplace of the future may be those companies that master the business of replicating formats for consumption in local territories around the world—as we're doing with Paris Hilton's new MTV series from Bunim/Murray Entertainment. Our unique twist on format sales in this case is that Paris is launching the format in a number of territories by starring in several of the first-season episodes.
Where the winners may also be companies astute enough to keep track of and adapt the best local content produced around the world. We've seen new shows emerge from relatively small territories, like ABC's hit series Ugly Betty, based on Colombia's popular telenovela Yo soy Betty, la fea, which has opened the door to a whole new wave of shows based on international formats—like Israel's own Betty, Betty la Fea, plus In Treatment, The Riches, Secret Millionaire, Life on Mars, Kath & Kim, The X Factor, and Absolutely Fabulous.
However, there is one fundamental concept that no level of digital sophistication and no scale of international growth will ever change: if we remember that our job is simply to engage the voice of the artist with the mind of the consumer—no more, no less—we are less likely to go astray.
It's hardly a leap of faith to have confidence that television programming—one of the greatest products in the world today—propelled by an expanding array of traditional, broadband, and mobile platforms, harnessing the power of new digital technologies, connected to a growing audience of billions of consumers, can be a successful and profitable enterprise for those who approach it with boldness and vision.
Our content is like no other. Unlike oil and gas, which have finite reserves, or electronic goods, which start aging the moment they appear on the store shelf, entertainment is a rare, renewable—
The more vital a content resource is, the more vitality it has with each passing year. A 10-year-old TV show is not the same as a 10-year-old TV set. Episodes of I Love Lucy, The Wonder Years, and Seinfeld are as capable of generating fresh revenues 20 years after they were made as the day they were first created. The very best shows don't age. They have no half-life of predictable declining value. Instead, their value is reenergized every time they're touched by the spark of a new market technology or platform. Take the TV-to-DVD market, a three-and-a-half-billion-dollar industry that didn't exist a few years ago, or the more than two million downloads of Weeds and Mad Men in the past year alone. Packaged media and digital sales are not only huge financial contributors to these shows but significantly enhance their cross-promotional opportunities and introduce them to new audiences.
For example, two years after it premiered, I was introduced to Entourage by watching the first 12 hours of DVDs on my laptop during a flight home from Italy. And now today, Entourage is appointment television in my house. That's right. Combine the timeless, evergreen value of this renewable resource with the immediacy of an impulse buy, and you've got an unbeatable one-two combination of the most powerful consumer sentiments on the planet.
Look at our Dirty Dancing franchise. It's remarkable enough that this simple story set in the Catskills of the '60s still sells nearly one million DVDs each year. This single piece of entertainment has now been seen by more than 50 million moviegoers in 150 countries, has sold 30 million DVDs, a combined 32 million soundtrack CDs, launched a stage play 20 years after its initial release, selling out theaters in seven cities in six countries spanning four continents, totaling 3,800 shows and more than four million theatergoers, and is one of the most popular clips on YouTube, where it has generated 430,000 separate pieces of content being a total of 20 million separate views.
I think you get my point. Nobody puts Baby in a corner, but Baby has put in every corner of the world marketplace and every nook, cranny, portal, platform, and SKU of the media landscape. Because of its unique properties, television content has tremendous appeal not only as a product but as an investment.
The late Walter Wriston, the legendary chairman of Citicorp, who would be rolling over in his grave if he could see what was going on right now, once said, 'Capital flows where it's treated well.' And I say there is no place that capital will be treated better than invested in television programming at its best.
And best is no longer the exclusive province of the enduringly popular series on the broadcast networks or the must-see critical darlings on HBO and Showtime. The best television can also be found in the greatest gardeners of the Garden Channel, the most exciting battles on the History Channel, the best bargains on Home Shopping Network, the coolest takedowns on P, the best interactive games from the Game Show Network, and the best sushi recipes from the Food Network. Laugh if you want, but Storm Stories on the Weather Channel has attracted millions of loyal viewers, and the channel was recently sold for $3.5 billion.
Not only am I unpersuaded by those who predict the decline of our industry, but I believe that we're poised on the cusp of the next golden age of television. It will be driven by growing demand from audiences worldwide, an ever-expanding spectrum of current and potential buyers, new and emerging markets, and new and improved technologies. It won't only be measured by the number of television sets in use. Instead, it will be determined by a far more complex calculus of iPods, BlackBerries, PCs, PDAs, and other mobile and multi-purpose electronic devices that are becoming the new nerve centers of the digital marketplace.
This golden age of television won't be dependent on nostalgia for the popular shows of the past, comfort with the business models of a generation ago, or corporate cultures renowned only for their size rather than their speed. It will be defined not only by the quality of the programming we deliver but also the breadth of our reach, the extent of our penetration, and the number of lives we're able to touch. And it will be driven by the leadership of every executive in this room today—the leadership needed to grow our industry out of the current recession, realize its international potential, and capitalize on its technological promise.
And this will be a golden age rich with opportunity because we have the boldness and vision to be the architects rather than the victims of change. I know we do. I know we can. And I know we will. Or as my two-and-a-half-year-old would say, quoting the great sage Bob the Builder: can we build it? Yes, we can. Thank you all very much.
P
Peter Guber37:15
Thank you, Jon. And ladies and gentlemen, please welcome Mr. Peter Guber.
Hello. That was a terrific talk, Jon. It's always a delight to be with you, and it's a hard act to follow. Being the moderator for questions, I'm going to ask the group to think of some questions that would inspire the rest of you and that you're really curious about. In a couple of moments, step to the microphone, state your professional name, and ready, aim, and fire in that order.
It's interesting, Jon, because you talked about curiosity and passion. Freeman Dyson, Nobel laureate from Princeton, said that's the key to real success—to not exert your superiority over the questioner, but instead of answering the question, just answering the question, ask: what is that question telling me? And I've always, in working with you and being around you, watched your curiosity about that. You pondered, you thought, you didn't just immediately respond. And when I wrote up some questions to ask you, unfortunately you, in your speech, answered most of them before I had a chance to ask. So I guess we're good. But a couple to prime the pump, and then I'll ask everybody who wants to step to the microphone.
You used to be at the top of the food chain creatively—all the formats, all the programs we made were formatted, sent around the world. You see so much television now being imported from formats overseas. Have the creative forces lost their energy in America, lost their way?
J
Jon Feltheimer39:03
God, I hope not. I hope not. When you look at executives like Kevin Beggs and great creators like Tyler Perry—who could be more creative? And by the way, I don't know how many of you were there last night, it was a wonderful evening, really fantastic show—but I can tell you that Tyler's version of the story, of his scripts, I'm sure is the right version, because I can guarantee you he has never taken a note from me. I think that was a pretty good joke. They don't all play.
I think this is perhaps the most creative place on the planet. But I think what's great about what's starting to happen is that we're open to things that are going on all around the world, and that we understand that we are a small part of the world audience. I had a lot of fun at Sundance—we did programming in, I think, eight or nine different languages. I think we're going to remain an unbelievably productive and creative country. Again, I think it's great that we're open and flexible and understanding of what's going on around the world, and we can take formats and adapt them accordingly.
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Peter Guber40:35
On another subject: you're in a public company, and the pressure of quarter-to-quarter earnings and advance notices—they make people risk-averse. It really vampirizes innovation. What do you do to balance those two energies—the energy to perform for your shareholders and the media who reports it, and the idea that taking risk and really looking past that quarter is the only way to really be nimble and smart?
J
Jon Feltheimer40:59
We're actually really fortunate. We have about 30 very significant shareholders, really great investment companies, and almost all of them have been with us long-term. I think they're all long-term thinkers. Fortunately for us, they're mostly companies that haven't had lots of redemptions lately. It's a hard thing to do for any public company, but I think for all of us, if you think long-term, then I think that's the only way you can really build value for a company and for your investors.
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Peter Guber41:34
Talking about building and buying value, you just bought the TV Guide channel and TVGuide.com, part of it. How do you plan to integrate or utilize that, considering that the rollup is going to disappear in two or three years from all of the carriers?
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Jon Feltheimer41:49
Well, we spent about $420, $430 million over the last two or three years buying a number of companies, trying to expand our business. I think clearly we touch so much content that the idea of expanding into on-demand—Fearnet, Break.com, as well as Epix, which we're announcing the name today, but I guess I already did—and now TVGuide.com, it's part of the same evolution of our company from just creating lots of content to being able to own the platforms that it's on, multiple platforms. We expect to expand around the world as well. We're going to start two new channels in Asia. We're looking at a number of other opportunities. I think it's again part of the same evolutionary continuum of our business.
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Peter Guber42:38
Well, with evolution, is that going to take the mini-major and aim it to become a major major? In other words, is the nimbleness of the mini-major, working your way up the food chain, going to be subsumed into becoming the incumbent? Is it buying MGM, which has been rumored, or other kinds of acquisitions that might make that exponential leap for you?
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Jon Feltheimer43:05
Well, I did say size still matters. I think that we, hopefully, will remain nimble and entrepreneurial while we grow, but you can't obviously stop growing. What I do hope is that we've been very focused—in our feature film business and our television business—trying to find the branded audiences, the niche audiences that perhaps were underserved. No better example than Tyler Perry, who it's incredible that there is no piece of product that Tyler can touch that doesn't speak to his audience, and that audience is getting bigger and bigger when people realize all of the amazing things that he's doing. Finding more branded audiences, dealing with the cable networks as opposed mostly to the broadcasters, has been our way of looking at where the business is going and where we could win as opposed to perhaps where the major studios could win.
But it's pretty obvious, isn't it, that that's how people are watching entertainment these days? We're not all watching together with our families like we used to. Mostly people are watching in these large niche audiences. And so I think if we can maintain, as we grow, the idea that we're being a little more in focus, a little more pinpointed on those large audiences, deal with the buyers who really understand those brands, and reach that audience, I think we can remain flexible and entrepreneurial while we grow.
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Peter Guber44:39
One last question for me. You built your company really with state-of-the-heart technology as much as state-of-the-arc technology. You hire really interesting people. What's the secret sauce when a potential executive comes to you—what is the element that is most paramount in your mind that you look at when you speak with them as a possible incumbent in your team?
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Jon Feltheimer45:06
Character, personality, the willingness to argue with me and tell me I don't know what I'm talking about and not be scared. The willingness to take risk—that's one of them—but the willingness to take risk and be entrepreneurial and try to think outside of the box. That's an overused expression; I actually took it out of my speech because it's used so much. Really, the truth is, what greater quality could anybody have than thinking of innovative and different ways to approach anything—the creation of content, the running of a business, almost anything?
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Ray Gar45:40
Hello, Jon, thank you. My name is Ray Gar, Las Vegas Studios. You spoke several times on TV. In the past, TV shows like Ricky Ar, Desi Arnaz's Lucille Ball, I Love Lucy in Orlando, and Don, George Lopez, Up Betty—the Hispanic market back then was proving to have ratings, even more so now with the market being 40 million plus, the market trillion-dollar purchasing power per year, not to mention hundreds of millions of Latins all over the world. Is it possible—I'm going to be selfish asking you this—to schedule a meeting with you to show you that we've got content for film and for television regarding the Hispanic market? Because the Hispanic market is the largest minority now and there's a missed opportunity, especially if you have great content. So if I could get maybe who to set up the meeting with, I'd love to talk to you.
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Jon Feltheimer46:37
I don't think you'd respect me, Ray, if I made it too easy for you. But I appreciate, again, your risk-taking. So, head. Thank you so much.
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Peter Guber46:48
You guys are well—are you still on the Gong Show? We would have gonged you halfway through that. Questions, not speeches. Next.
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Joe Sherman47:00
Thank you. I am Joe Sherman. I'm here with the International Documentary Association. I run a company called Dreamcatcher Productions. Two questions for you: when you were a kid, what did you dream about growing up to be? And second question, if I could grant that wish, could we take you back?
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Jon Feltheimer47:15
I was either going to be a baseball player or a rock and roll recording artist. Like baseball player. No, because I got a bad wing, and I got the recording thing out of my head. So thank you.
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Peter Guber47:43
But he's still a kid, and that's what really propels him. He has the passion of a kid and the curiosity of a kid and the wonderment of a kid. And all the years that I worked with Jon and saw Jon and had him as a friend, that was one of the most marvelous traits. Jon, it was you—you had a joy that a kid has, and I think you see things through that youthful eyes as if for the first time. Not, 'Oh, it's like it's this, it's that'—look at things that way. And I think that's part of your success.
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Terry Wolf48:10
Hello, I'm Terry Wolf, Vancouver, BC.
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Peter Guber48:15
Hi, Terry. I still got a mailbox there.
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Terry Wolf48:19
I understand you moved uptown. I have practiced law for 40 years. I made a feature film last year, and I have in my hand a script, some pages. I don't want to store them, but I would like some advice for people here in the audience who are in the same position as I. How do you get to people like you to look at a script?
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Jon Feltheimer48:45
Well, here's how Tyler Perry did it. He came in and said, 'I'll pay for half myself.' So, same answer, Heather. Talk to Heather.
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Peter Guber49:05
Hey listen, is there anyone who has a question that doesn't have anything to do with self-interest? I'm just curious.
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Audience Member49:11
It's funny what you just said—that led right into what I was curious about. By the way, thank you for a great introduction to NAB. The new model you're speaking of, where you said Tyler Perry offered to pay half—that's kind of the model I came in here with, with no knowledge of this change that's going on. So I'm very relieved. At the first meeting that I've been to, self-financing—is that reducing the quality of some of the programming that's being put on television today because they're offering that? All the money available from slate deals and all of those kinds of things—they come in offering to the networks to pick up shows that have some finance built in versus maybe a project that doesn't?
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Jon Feltheimer50:00
I'd like to think that quality of programming is what's going to dictate what gets on any network, online, wherever it is. But of course there's financial reality. So if it's a good show that's on the fence and you come in with financing, I think that would be helpful.
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Darielle Mik50:34
I'm Darielle Mik, an independent writer-producer from Santa Fe, New Mexico. My question has to do with this concept of pilots, features, programming for television, international co-partnerships. In this market, I hear the voice speaking risk. I hear the corporations saying take risk, but is that a triple-down sitting in the pitch offices? Because it seems like the old model is still the one that's existing because of the scare of what's happening financially. When you're creating new content as an independent producer, creating partnerships for television—is the model of the pilot still in place to lead? Or do you think, as somebody who's been leading the networks for many years, that we're now pitching a different format to go right into series? Do we have to do features? I'm finding all of these possibilities exist.
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Jon Feltheimer51:59
I'm not sure what the question is, but if I get the essence of it, I honestly think that the world has changed. I think it's very obvious. I think it's obvious when you look at what's being created for the web. I think it's obvious when you look at what's being created for cable, branded networks. I think it's changed when you look at what's going on with the networks. And I think that change is coming, because the ways of creating those shows—it's every way. It's through the pilot process, it's direct. We've had some series that have gone straight to air—Weeds crashed, went straight to air without a pilot. Everything is different. And I think the key thing, again, is for the buyers to remain open-minded and for the sellers to remain creative. I think that's the bottom line. And that anything can happen. Without a pilot, a film won the Oscar—what was that? Good point.
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Edward Welch52:59
I'm Edward Welch from Grambling State University. I'm wondering how much freedom do you feel you have when you pitch a program or go into China, like you said you were going to do. My question is based on the fact that when Google wanted to go into China, they had to get rid of that image we saw of a person facing down a tank. How much freedom do you have with your programming ideas?
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Jon Feltheimer53:24
Well, every country is different. China is obviously a very difficult market, although I think they're finally coming up with a rating system, which I think is kind of neat. I think it'll ultimately be an incredible market. But every market is different. I've created a lot of programming in China and India and all over the Asian region, and we've had a lot of success doing it. But there are different government regulations and different kinds of monopolies in every territory.
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Keith G54:01
Hi, my name is Keith G. I'm also down from Vancouver, Canada. Every time I come to these events and I've spoken with other people as well, we all hear the same thing every time: looking for fresh, new ideas. Is this just something that all of you folks are saying, or how do we get to the people that aren't too scared to take a risk?
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Jon Feltheimer54:20
Well, it's really hard. It really is hard, and for a good reason. I always tell every one of my executives: you never know where the next great hit's going to come from. But the problem is, of course, that a lot of people have earned their access, and that's fair when you think about it. People who have been in this room have been in the business for 10, 15, 20 more years—they've earned the access, they've succeeded, they've delivered, they have credibility. While it would be great if we could hear every idea, the fact of the matter is there is a filtering process—sometimes effective, sometimes not that effective. So I've got no easy answer for you. Can I call Heather later as well?
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Christopher Allen55:16
My name is Christopher Allen. I'm an independent development producer. I'm also an iPhone consultant. You mentioned 2.5 million downloads of Weeds and Mad Men. How do you see, five years from now, the market changing—where the revenues come from? Right now, predominantly advertising revenues are what's feeding the entire system. How much do you think it'll become more of a direct consumer pay in the form of things like iTunes downloads, DVDs, things where consumers pay for individual products?
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Jon Feltheimer55:47
We're super excited about every form of digital technology progressing. As a smaller company, the idea that you have more access to the consumer, more direct access through digital distribution, is really exciting. And yes, of course there's piracy, there's shrinkage in every business. But we're really excited about that. On the other hand, I will quote Alvin Toffler, who talks about 'high tech, high touch'—meaning that as technology becomes more and more sophisticated, people still crave the interaction, the human interaction, the touch of things. And I think that's never going to change. The communal experience of going to the movies together—I don't think it's going to change. The desire to own something you can feel, like a DVD—I don't think it's going to change. Whether we all keep coming to NAB to see each other as opposed to doing this all in one huge video conference. I think the progression of technology is fantastic, but I don't think it's a replacement technology. I think it's a complementary technology.
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Peter Guber57:01
But what do you think, Jon? With the pervasiveness of digital format and the idea that we've seen what happened in the music business—completely melting down through piracy. It habituated a young audience with the free, and the web is a free modality. Do you think that television and movies could come under the knife of that, with faster downloads?
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Jon Feltheimer57:26
I don't. I think the music business wasn't ready for it. Their files were smaller. They weren't ready for it. I think we've seen that. I mean, it's really not happening. And I think sometimes what's going on with digital is that it's not only not a replacement, but that people will download something, they'll download it to their mobile device, they'll watch it on their computer, and they're promoting their own product—they're paying to promote their own product. They then will go out and buy the DVD. Clearly the box office has been fantastic last month. And again, I think that's going to keep going on.
Now it is kind of interesting. I think clearly we have to play with—given both piracy and what you're talking about—I think we do have to play with different windows and different pricing models. For example, we had a number of titles out on Apple, amongst others—that's certainly the granddaddy and the market leader right now—and we were selling them for $10, as most people do for their library titles. Apple came to us and said, 'Let's do a big promotion. We'd like to lower the price and we'll promote it like crazy.' So there were about five titles that we had up in a package, and the week before we did this promotion, we sold 190 downloads. And when we lowered the price and did a PR push, that very next week we sold 18,000. Same product, nothing new—just promoted, perhaps properly priced, or at least properly priced as a promotion. And what that said to me is there's an incredibly elastic consumer out there that's looking for value that does pay attention when you promote to them. So I think clearly we're going to have to play with different kinds of models and pricing and windows to make it work. But no, I think again it's quite complementary, and really the margins obviously come way down—infinite shelf space, if you will, the long tail. So I think it's an incredibly exciting development in our business.
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Alter Juras59:42
Hi, my name is Alter Juras from Media Theaters in Berlin, Germany. I just recently returned to Germany after 12 years in Silicon Valley, from the computer security side. This is my first NAB and my first introduction to the media business. I'd like to find out how the media industry wants to be innovative. Like in Silicon Valley, it's a venture model—you have lots of foreign kids coming to Silicon Valley, and there's this infrastructure that promotes innovation and destroys the old to create the new. How does the media business expect to be innovative? What are some of the new ways they want to be innovative?
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Jon Feltheimer1:00:39
I mean, I think it's all the ways that we've been talking about. The investors that are coming into our business or continuing in our business are looking at every kind of model. They're doing slate financing deals that are different every time out. We learn every time we do anything. I think that's the great thing about our business—we learn. And there'll be like copycats of Slumdog Millionaire. I've already heard seven pitches—Slumdog Millionaire, Slumdog Millionaire. But the fact is, what's great about our business, from the finance side to the content side to the distribution side, I honestly think that we learn every time we do something. I think that's great. It's another great quality of a good executive, isn't it? To admit your mistakes, to grow from your mistakes. And I think that's what our business is doing. So I think the models are changing every day. Every day I see something unique, and the only time I'm irritated is when somebody else has done it first.