CNBC Evolve: Spotify's Dawn Ostroff, The Black List's Franklin Leonard & Blumhouse's Jason Blum

Welcome to CNBC Evolve, where best-in-class CEOs and innovators from iconic global companies share strategies for competing in an age of disruption and transforming to shape the future. CNBC's Evolve live stream is sponsored.

Cinemas to the sale of first-run movies in your living room. The pandemic can certainly change the way we interact with and consume all sorts of media, but are these changes permanent? And if so, do media companies have to rethink their entire business models going forward? For the next hour, we're going to take a close look at the evolving media landscape and speak to some of the most innovative names in the industry who are leading the charge: Dawn Ostroff, Spotify's Chief Content and Advertising Officer, and Franklin Leonard, founder and CEO of the Blacklist. But first, my colleague Carl Quintanilla kicks things off with film and television producer and CEO of Blumhouse, Jason Blum.

Julia, thanks. It has been a remarkable year of disruption and change in the world of... years at CNBC. Jason, it's great to see you again. Thanks so much for sharing the time.

Good to see you too. Thanks for having me.

I was struck by your comments in the New York Times just a few days ago talking about how much change has come to Hollywood because of COVID this year. You said it's shaken the movie business to its bones, and that can mean so many things. I just wonder, when you say that, what specifically are you thinking about?

I'm thinking about the fact that what COVID did is make what was happening over the course of five or eight years happen in 10 months. I don't think movie theaters are going anywhere, and I think we're going to run back to the movie theaters when we can. I know I am. But I think what we see in theaters, how we see it, how long things play in theaters, I think all that's definitely going to change.

So you should let people know right away, you've been disrupting Hollywood for years. You did it with the overall business model, you did it with how budgets could be done, you did it how you could cast, you did it how you could promote. But when you think about that window, what is the ideal world for you right now? Do you mind if people see it on streaming the day they could see it in theaters? You've had some experience with this on a couple of films this year.

Yeah, we have. We had at the top of the... original movies we did on streaming, and a couple weeks ago on Friday the 13th of November, we released a film in theaters called Freaky. Now that film comes out on Peacock this Friday, December 4th. And that's part of what I'm talking about, which is there's a new theatrical model which Universal has embraced. I'm hoping the other studios will embrace it. The only hope, in my view, of how the traditional studios can compete with the streamers is through using this new theatrical window, which is essentially a movie plays exclusively in a theater for a minimum of three weeks, could go longer, and then moves to your home. I think if more studios adapt that, you'll have eight different movies playing every weekend. The only thing is they won't last as long. Every weekend there'll be a new set of a bunch of different movies, but your ability to go to the theater and see things that are not just horror movies like we make or superhero movies, I think will increase. I think we've seen until now the drama has really migrated to television, and there are very few dramatic movies that are released theatrically. I think when windows are shorter, we'll see dramas come back and a bunch of genres that migrated to streaming, romantic comedy for instance, we may see more of those in movie theaters with a shorter window.

That's interesting. I'm thinking about earlier in the pandemic, people were like, well, Soul happened. Do you think that's just about the pandemic? I mean, ordinarily, what's the calculus for what gets a prize showcase in a theater, even if it's just for a few weeks?

Well, there are very few. I mean, save for maybe Netflix, you can't continually make movies at $150 million, $200 million plus and put them on just streaming. It's financially impossible to do. It's not a sustainable model. So if theaters go away, certainly the number of tentpole movies that we have are going away. You just can't monetize them on a streaming service. So for one-offs, like you said because of the pandemic, we've seen a couple of big movies that play straight to streaming.

Right. I've got a couple questions about how artistic choices, storytelling choices have changed because of the streaming phenomenon. For example, is it any different today when you are shopping a script? Do you shop it differently to a Netflix than you would to a Paramount? How is that different? And secondly, we all know the experience of you're looking for one thing to watch, you basically are giving something five minutes, maybe 10 minutes before you decide, do we stick with it or do we switch to something else? I wonder creatively how much more you're having to front load the story, how much character exposition gets sacrificed because you gotta hook them.

Yeah, I was going to say, just to stick with it, it seems like the time allowed to hook a viewer has gotten compressed. Let me first answer your question. The movies that we almost never take a movie to studios and to streamers to just make it to prove your point, which is that movies that we take to streamers and movies that we take to studios are completely different for a variety of reasons. Probably the biggest reason is that still to this date, and I think eventually this is going to change, but right now producers, directors, writers, artists, actors, when they do a streaming movie, they get paid up front. The opposite: you get paid some upfront, but really where you make your money is how many people see it. When you make a movie for a studio, you participate in how many people see that film. So that would lead any producer, if you have something that's lower budgeted and extremely commercial, you should take that to a studio. If you have something that's in your budget and slightly left of center, you might take that to a streamer. Now we don't follow what I just said exactly to the letter, but to a large degree we do. It's why I think, and there are good and bad things about that. One of the good things is what the consumer sees on streaming is much more varied than currently what the consumer, or I should say once the pandemic is over, what they see for theatrical. And like I said, we never take movies to one or the other. We either go to all the streamers or we go to all the studios. Now in terms of getting the beginning front loaded to keep people on the screen, honestly I think you have to do that in a theatrical movie too. I think if you're a theatrical movie, I argue the bar is even higher. If the opening of the movie isn't any good, people will walk out of that movie. So we don't change the beginnings of our movie, but we definitely handle the types of stories for streaming and the types of stories for movie studios very differently.

Is there, would you say in Hollywood right now, I mean the influx of money from, we'll call it big tech, there's a chasm in between where you're not sure you trust these guys creatively?

I think there's a love-hate for sure. There are things that are terrific about it, there are things that traditional Hollywood people like myself bristle against. I think one of the... I think it's declined, the contentiousness between the two. The reason it's declined is because when tech companies started in Hollywood, they just said, we can do this ourselves and we can do this better than the people in Hollywood. But tech companies have come to understand that they do need Hollywood people at very, very senior levels. And I shouldn't say this, but it's different than doing other things and not terribly simple. So I think when they started taking senior DNA inside the tent with them, I think the kind of friction got to be a lot less. But they're still, you know, I hate this idea that shows are made because of data. I don't subscribe to that. I think data turns out... if we relied on data, we made a movie called Get Out. That movie never would have happened. And I would say 80% of the movies that we made, Whiplash, Black Klansman, none of those movies would have... we have a show on Showtime right now called The Good Lord Bird. That show would not have been made if we were looking at the data.

Wow. Yeah, those all of those movies... so make more paintings like this. It's crazy.

Yeah.

I have talked though to some, for example, some comedians who have a special on Netflix, and they're grateful to have the special on Netflix, but they're not sure that they trust the algorithm. They don't believe necessarily that they're getting placed in front of the right viewers relative to what they had envisioned for their comedy. I wonder, do you trust the curation process that is data driven?

Well, look, that is where the contentiousness still lies. It's a farce to suggest the only data they provide is success. So they say 60 million people saw our... until there's transparency with who's watching and how many people, or at least how many people are completing the shows, there's no... we as producers have no hope of having any ability to help get our shows in front of the audience that we think we should be reaching. So a hundred percent, not only is it... I mean, the algorithm is a long way away. The first step is getting the streamers simply to share how many people are watching our movie or our TV show from beginning to end. It has to start there, and we're not even close to that.

But you think it's headed that direction?

I think it has to be. In order to be paid for a person, you have to be able to know how many people it was, and then know you're going to get a nickel a person or whoever saw it. At some point, some streamer in my opinion is going to have to start doing that.

Wow, that would be a sea change. I remember you and I talked a few years ago here in New York, and at the time you said it was a given that a movie would be shot on an iPhone, and eventually that happened. You said, I remember you told me that you thought one day a movie would be shot in portrait mode on a phone, and maybe that has happened, I don't know. I just wonder, what innovations have actually surprised you, whether it's been the technology?

Better and better and better. The technology with cameras is such that you need far fewer lights and far fewer people to tell these great stories. And it's not great for employment obviously, but it's great to... if you can reduce the cost of making television shows and movies, in my opinion the television shows and movies get more interesting. The more the things cost, the less risk people take with the storytelling. But the less expensive things are, I think the more interesting things become. And technology has allowed the actual cost of production, aside from COVID, COVID makes it expensive. COVID is going to be over, we're all going to have a vaccine, and when we go back to life and normal, production is less expensive. And that's ultimately a great thing for the movie business.

It's possible to get anything done once those COVID limitations came into view, right?

Yeah, I think that's a great point. I think if COVID happened 10 or 15 years ago, we couldn't have made anything. I don't think we could have. I think production just would have ground to a halt completely. I think technology has allowed for it. Production is not up to the levels it would be without COVID, but even it's... I don't think it's 50 or 60 percent, which is a lot higher than it would have been without all the innovations of even the last 10 years.

Yeah, I mean, I'm looking like this week for example, there's a bunch of behind-the-scenes footage of the Mission: Impossible shoot, and sometimes you look at that and you're like, how are they even doing this, knowing the amount of crew and planning and sidewalk permits that it adds?

It adds 10 to 20 percent of the cost, an additional cost to put the COVID all the rules that you have to put in place to shoot at least relatively safe as safely as you possibly can. But more than that, it affects the creative. And we're in this position now, we have a handful of projects that are just about to go, and I'm inclined to wait three more months and hopefully at that point offer a vaccine to our crews. It has to be voluntary of course, but the hope is that most of them would take it and you could resume normal production, because the creative product, the film or TV show that you're shooting, it just can't be... making movies is about 150 people getting together and huddling together and doing this very intimate thing where you're very close together. And if you break that apart, you could do it, it's just never as good.

Yeah, that's fascinating. I guess circling back as we wrap up here in the next few minutes to that Times piece, it did kind of grapple with the existential questions that Hollywood has always asked itself when the Japanese took it over, when television came along, all kinds of things. But it sounds like your general view is movie theaters aren't dead, COVID's going to bring relief on production, big tech is...

Yeah, look, I have a very... we need human beings. We need stories like we need air. We need stories to live. And people are now, they're not watching them in movie theaters, but they're spending more time consuming stories than they ever have before. That's partially because of the circumstances. I think our inherent desire to be told, watch, hear stories is never going away. And one of people's favorite delivery systems is being in a dark room with a 60-foot screen. And I don't see that experience, like I said at the top of the interview, I see it changing.

One of the weird one-offs of the pandemic, do you think they end up lasting longer beyond? For example, when the Academy says you don't have to have had theatrical distribution to be considered for Best Picture, I wonder some people wonder if that sticks around or goes away.

Yeah, I don't know. I think the theatrical windows are going to get shortened, so I think the way that they define the theatrical release is definitely going to change. I read in the story Ava saying they thought they would leave it as a... I don't think the Academy is ever going to... I think they're going to go back. A movie has to... but it's shifting. The biggest way I think it's shifting is, like I said, I think the movie business will be much healthier as long as exhibition is included and taken care of in the deal. But if there's a fair deal made with exhibition to allow movies to play for a much shorter time, like I said, I think that's how we compete with streamers.

No one puts this stuff better than you, Jason. It's always a joy to sit down with you. It's great to see you again. Thanks so much.

Great to see you too. Thanks for having me. I appreciate it.

Jason Blum, Julia. Thank you, Carl. Joining me now is a woman who has been transforming media for her entire career. First the cable TV... chief advertising business officer at Spotify, and she's the reason that the likes of Michelle Obama and Joe Rogan are now part of the Spotify universe. Dawn, thank you so much for spending some time with us today.

So Dawn, I want to start off talking about what everyone is talking about on social media, which is Wrapped 2020. I remember when the pandemic started, there were a lot of questions about whether people would be spending less time listening to music and listening to podcasts because they weren't commuting to the office. But now I feel like my social media feeds, whether it's Twitter or Instagram and Facebook, they are dominated by people talking about what they listen to this year. What's your reaction to this?

Now Dawn, you've been credited with sparking an arms race in podcast content. The likes of Kim Kardashian, you know, making these mega podcast deals with these big names, but also making a number of acquisitions. How did you approach the idea of building a podcast business that was really going to be a destination and get people to switch formats and become subscribers?

Yeah, and the quantity has been a story in and of itself because the quantity now, we look at our library or the content that we have on the platform, we have over 2 million podcasts now on the platform. So it's not just a matter of how many people we have listening to the podcast, but the assortment of podcasts that we can offer our users. As a global platform, we need to have podcasts that not only span all different regions and languages, but also you think about the breadth and the depth of the type of podcasts that we have.

You've been credited, Dawn, with sparking an arms race in podcast content, which I think is quite a compliment. The idea that you've gone after such big names that everyone else has had to jump in the pool. My question for you is, when you look at some of these big names that you've drawn, whether it's the Obamas or Kim Kardashian or Joe Rogan, which was a controversial deal, how do you decide that this is someone who has the right kind of followers, the right kind of profile that we want to be associated with?