Hollywood Torrent: Netflix splurges, Discovery merges
Good evening from Los Angeles, wherever you may be. Music industry executives often ask me about my first concert; I have two answers: Eric Clapton at Staples Center, and Erykah Badu at the Greek Theater. I have never seen Clapton again, but I saw Badu for the third time last night.
She’s as good as ever — regal, emotive and calm. She’s the queen of neo-soul. If she comes to your town, fork over what you can afford and check her out. You can also get a taste on YouTube.
Now for the news… In the next couple of weeks, we may see the announcement of a big merger in the media business: Discovery buying Scripps, the owner of HGTV and Food Network. News of the potential deal broke this past week in the Wall Street Journal, and my colleague Alex Sherman says a deal could be announced by the end of the month.
Analysts and investors have been talking about smaller media companies merging for years. Mind you, small is a relative term. Scripps is the smaller player in the deal, and has a market capitalization of $10 billion. But both companies are small relative to giants like Comcast, Disney and AT&T (all worth more than $150 billion).
Scripps and Discovery are cut from the same cloth as Viacom, another company reportedly sniffing around Scripps. They all own a bunch of cable networks, which was a great place to be 10 to 15 years ago. But not a great place to be now.
Viewership of live TV is falling, especially among young people who associate TV with Netflix and Amazon. Pay-TV providers Comcast and AT&T are using their heft to obtain more favorable deals from owners of smaller channels, and new online pay-TV packages are omitting channels that aren’t `must-have.’
CBS still has clout since its main channel is the most-watched on TV. ESPN, for all its problems, has clout because of its sporting events. But smaller cable networks are feeling the squeeze.
So it would make sense that these companies would want to do something. But their response is to double down on the old model. Threatened by the rise of YouTube and Netflix — by TV’s move online — `old’ media companies are choosing to buy companies that do the same thing they do.
Sure, Discovery may create a $3 or $4 online service with shows from Discovery and Scripps, as my colleague Gerry Smith scooped this week. But these media companies are doing everything they can to keep existing pay-tv ecosystem alive and well.
You can’t blame them… Netflix just obliterated forecasts for growth this past quarter, adding more than five million customers (four million of whom reside outside the US).
The company’s stock leapt to new heights, and Netflix is now worth more than $80 billion (about double Discovery, Scripps and Viacom combined). Netflix will use the money from its new customers to fund additional TV shows and movies because it believes the future of TV is online.
As you spend more time on online, Netflix is investing to ensure more of that time is spent streaming TV and movies. Investors approve. They are not demanding profits, dividends or buy backs.

Mind you, not all analysts think this makes sense. Netflix’s quarter elicited the full spectrum of reactions.
While most think the gravy train will continue, Michael Nathanson compared Netflix to AOL (ouch): ``We just don’t believe that Netflix is building an impenetrable moat that justifies its $80 billion in market cap. Yes, it’s a massively disruptive force, but broadcast, premium and cable networks will continue to pump out their own content, just at lower profits.’’
TV companies gripe they can’t get away with Netflix’s strategy. Investors would never allow them to make long-term investments that would dent short-term profits. But with the way things are going… what’s the alternative?
While Netflix borrows money to fund shows for an online service — and attract new customers — media companies are borrowing money to buy companies whose TV networks are losing audience.
Christopher Nolan returns
The director of Inception, Interstellar and three Batman movies has another hit on his hands. Dunkirk, about the rescue of British solders trapped on a beach in France, grossed $50.5 million in North America this weekend.
That’s not much for your average $150 million movie (the studio is now saying $100 million), but superb reviews should sustain Dunkirk at the box office over the next few weeks. Some exuberant critics have already handed the film a nomination for best picture. Nolan’s last three non-Batman movies all dropped 40 percent or less in their second weekend.
Dunkirk is Nolan’s first movie based on real-life events, and it’s not an obvious summer movie. But Nolan opted to unleash the movie against all the men in tights to prove an earnest, original drama could fare just as well as sequels, reboots and comic book fare.
Meanwhile, Valerian bombed. The movie is the result of a lifelong obsession of Luc Besson, the director of The Fifth Element and Lucy:
``With a budget of $180 million — though it’s technically only $150 million after French subsidies — Valerian isn’t only the costliest project in Besson’s three-decade-long directorial career, it’s also the most expensive movie produced in Europe and the most expensive independent feature film made anywhere.
Although Besson has used equity financing and foreign sales to minimize the financial exposure for EuropaCorp, his production company, which funded most of the project, he’s still wagering its reputation and his own to test the heady notion that a Hollywood blockbuster can be an import, not export, product.’’
Comic Con
The hordes descended on San Diego this weekend. I haven’t attended Comic-Con for a couple years now, and I almost miss it. But you can catch up with most of the highlights — aka the trailers — online. But first, read Jen Yamato on Hall H (the most important room in Hollywood).
- Trailers for new seasons of Stranger Things and Westworld.
- New footage from comic book movies Aquaman, Justice League and Thor.
- Footage from Star Trek: Discovery.
- The Black Panther footage won’t be shown online, so read this → The creator of the Simpsons said Fox asked him to down tone critiques of Fox News.
Out now
Girls Trip. While Nolan will suck all the air out of the room, another movie merits your attention: Girls’ Trip. The movie grossed $30.5 million, the most of any live action comedy this year. Made for just $20 million and directed by Malcom D. Lee, the filmmaker of The Best Man movie franchise, Girls’ Trip stars Regina Hall, Queen Latfiah, Tiffany Haddish and Jada Pinkett Smith. Another movie with a black cast and black director `surprised.’
None of these modest hits seem to change Hollywood’s opinion about minority filmmakers and casts, but Hollywood is about to more enticement to diversify. Ava Duvernay’s take on A Wrinkle in Time looks beautiful, and the new Black Panther brought down the house at Comic-Con (more on that later).
Insecure. The second season of Issa Rae’s comedy debuts tonight on HBO. The show, about a single woman who lives in South Los Angeles, has received raves from critics. Tim Goodman says the show compares favorably with Atlanta and Master of None, two shows from minority creators that have received far more attention.
In development
The creators of Game of Thrones are making their next show for HBO. It’s set in an alternate reality where the South won the Civil War. (The new Game of Thrones earned its best ratings yetby the by.)
Many actors, critics and online commenters assailed HBO for commissioning two white men to tell this story. The show’s four producers (two of whom are black) spoke to Joe Adalian about the immediate backlash.
Amazon is turning the podcast Homecoming into a TV show starring Julia Roberts.
Chris Hardwick’s @midnight is calling it quits after four years on Comedy Central.
Words with Friends is being developed as a TV show.
The Week That Was
1. The Craziest Story of all: R. Kelly maintains a harem of young women who he has brainwashed into doing whatever he wants, per a Buzzfeed investigation that is so disturbing you have to read it.
2. Vice laid off 60 employees, or 2 percent of staff. The media company, likely to go public in the next couple years, eliminated Vice Sports and Thump, which covered electronic music.
3. NBC News will start producing a daily news show for Snapchat. ``Stay Tuned’’ will appear in Snapchat’s Discover section every morning and evening, and run between two and three minutes.
4. Fox CEO James Murdoch joined the board of Tesla.
5. A deal between Sony and LStar Capital, a movie financier, has lapsed. Movie studios lean on outside companies to help fund their films, and Sony’s struggles meant most of LStar’s money supported flops like ``Pixels,’’ ``Passengers’’ and ``The Brothers Grimsby.’’
6. T-Mobile will add as many as 3.6 million customers this year, the latest sign that its promotions and price cuts are eating away at its rivals. The company also raised its profit outlook, so the price war isn’t hurting its bottom line.
7. China will cut off funding for Dalian Wanda, the Chinese owner of AMC movie theaters and Legendary Entertainment. Wanda is run by Wang Jianlin, China’s second-richest man.
China is reviewing loans made to several top companies to limit the flow of money out of the country. Wanda has already agreed to sell hotels and theme parks to another company to ease its debt burden and ensure some of its pending deals close.
8. Warner Bros may replace Ben Affleck as batman, per Kim Masters. Affleck denied the report at Comic-Con.
9. Malaysia banned Despacito, the irresistible reggaeton-pop mash-up that is the most-streamed song in history. Expect that record to fall in the next few months.
10. The leaders of WME IMG’s e-sports division left the company. The company plans to reassign staff to keep the division going.
