Hollywood Torrent: YouTube’s new king, Five questions with Netflix’s CEO and Facebook’s terrible week

Good morning from Hong Kong, wherever you may be.

Indian media mogul Bhushan Kumar was in a Paris nightclub earlier this year when he heard the DJ play one of his record label’s songs. He smiled.

Kumar’s father built the family business, T-Series, into a conglomerate that specialized in manufacturing, selling and exporting cassettes. At its peak, T-Series sold 500,000 units a day, earning Gulshan Kumar the title of India’s ``Cassette King.’’

Bhushan took over the company in 1997 after his father was murdered by an infamous Indian mafioso. Just 19 years old at the time, he inherited one of India’s leading record labels, and a budding movie studio.

While T-Series was a famous company in India, it was virtually unknown outside of the country (unless you were part of the diaspora of Hindis and Punjabis). Until now.

Later this month, T-Series will surpass PewDiePie as the YouTube channel with the most subscribers in the world. At the beginning of the year, the company had 30 million fans, less than half the size of the following for №1 PewDiePie, the Swedish video-game jokester whose real name is Felix Kjellberg. But T-Series has been adding 3 million subscribers a month.

While claiming the most subscribers on YouTube is largely a symbolic achievement — and T-Series already has the most monthly views — the end of PewDiePie’s five-year reign is a watershed moment in Internet culture.

T-Series is the first channel in a language other than English to claim the YouTube crown. It will not be the last. More than half of the 10 most popular channels on YouTube in terms of monthly views are from outside the U.S.

The center of power in pop culture, as in economics, is slowly shifting eastward. Korean boy band BTS was the most popular musical artist in the world, at least as measured by social media. ``Crazy Rich Asians’’ was one of the summer’s biggest box office hits, and the movie’s star, Henry Golding, was just named one of GQ’s Men of the Year.

T-Series’ imminent defenestration of PewDiePie has angered a subset of YouTube channels, most of whom started when the site was ruled by Western male comedians like Ray William Johnson and Lucas Cruikshank (aka ``Fred’’). PewDiePie’s supporters posted some predictably crass videos that said T-Series was only doing well because of India’s size.

T-Series has benefited from the rapid growth of mobile broadband and cheap data in India, the world’s second most populous country. But that isn’t the only reason for T-Series’ success.

It’s also thrived by taking advantage of large, diverse populations all over the world. T-Series operates 29 channels that offer videos in different languages and music genres. About 40 percent of its viewers don’t live in India.

The growing clout of international markets on U.S. online services is not all good news. Companies will censor videos to placate international regimes, and dictators may use the platforms to repress their people. But the spread of global online entertainment services is also promoting a rapid cultural exchange unlike anything we’ve seen before. — Lucas Shaw

You received this message because you are subscribed to the Bloomberg newsletter Hollywood Torrent. You can tell your friends to sign up here.

A few questions with Netflix CEO Reed Hastings

Reed Hastings was in Singapore recently for Netflix’s first big showcase in Asia. While there, he sat down for a brief interview, and I wanted to share a few snippets I thought you’d enjoy. (I’ve also annotated them with some context.)

The company is approaching the three-year mark in Asia, which is about the point your business started taking off in Latin America. How would you compare where you are in Asia to Latin America in 2014?

It’s pretty similar. The region has some of the same issues, like payments. We have to both generate demand, and then be able to collect on it.

We were held back in Brazil because Globo wouldn’t license us content. ``House of Cards’’ didn’t mean anything to them. Here it’s not any one firm that monopolizes, but we haven’t yet developed enough. It’s coming along.

It’s a parallel we tell ourselves because that helps us stomach the investment, which is substantial.

Most experts and competitors in the region say pricing will hold you back. You guys teased lower prices on your earnings call last month. Are you going to sell cheaper plans?

We were trying to be proactive. There will be stories out of some smaller countries. You saw one of these in Italy, testing a higher price plan. We’re often doing price testing in smaller countries.

[A few days later, we reported Netflix would test lower-priced plans, and then reports surfaced of the test of a $4 mobile-only plan in Malaysia.]

You’ve been running this company for 21 years. At this point a lot of executives would get bored and leave. You have a lot of other passions. Are you starting to think about what’s next? Why stick around?

I love competing. If I can help Netflix continue to grow for the next decade and write bigger checks for education, I’ll be happy at that level. This is the fun part, and that’s the satisfying part. When I think about Netflix as a stock and how do I get it bigger, my motivation is not a better grade of caviar.

[Hastings served on the California State Board of Education, and is an advocate for charter schools. He donated millions of dollars to campaigns in the most recent election.]

How’d you do in the election?

On balance, I got wiped out. There are some races I donated to that won, but not many. I try to take a long perspective.

Three of your top executives have left in the past couple years. The most recent being your CFO, David Wells. I heard it was because he wouldn’t move to LA. Is that right?

Yeah, I said look David you gotta go to LA to become a great content CFO. You have the skills. We need the best content CFO in the world. He’s a great e-commerce and general CFO, but not yet content and production. He thought about it, but he’s done super well financially. He just moved his family back from Amsterdam. He said let me help you get someone else.

A lot of people at your company say Netflix has evolved from a tech company to an entertainment company. Has that created tension?

The metaphor I use is we used to be a single engine plane driven by technology. Now we’re a dual engine plane between technology and content. It’s more safe and reliable. We get to go faster. But if you used to be at center, you’re like ``whoa, what am I doing at the wing?’’ It’s disorienting.

Apple combined tech and fashion, and figured out how to sell tech as fashion and success. No tech company can touch them, and no fashion companies could figure out tech. We need to be better at tech than Disney and AT&T, and better at entertainment than Apple and Amazon.

Three years ago, there was more tension. Then we started international expansion. That reframing has brought the California part together. There are so many challenges of figuring out great content in India, great marketing in Japan.

In your public speeches, you seem to identify YouTube as your biggest competition in online video. But YouTube is free. Of the four companies you just mentioned — Apple, Amazon, Disney and AT&T — which scares you the most?

HBO has such a strong content brand. AT&T could use that and broaden its content to pull off a big, global brand. Disney has all that amazing content. I would say those because I’m a tech guy so I understand the tech. Ted [Sarandos] is the opposite. Hey says no way I’m going to get beat by HBO and Disney, but could my tech be overwhelmed.

We’ll have some percent share [of the market]. There’s no dynamic of network effect. We won’t get wiped out, and we won’t get the whole thing. It’s a debate on execution. The only thing we can do is do the best job pleasing customer.

China is the one big hole in your international expansion. Have you completely given up? Is there a secret Netflix program to get back in?

The government is blocking us, as it’s blocking all the others. China shut down Apple’s movie service, and Disney’s movie service. Those guys are great at government relations in China, so we don’t have a prayer. There is so much work to do on all the other countries.

Facebook under siege

The story of the week goes to the New York Times, which published an in-depth look at how Facebook’s top executives have tried to escape blame for the company’s myriad problems. The headline: ``Delay, Deny and Deflect: How Facebook’s Leaders Fought Through Crisis.’’

The piece is particularly damning for COO Sheryl Sandberg, who has taken far less criticism over the past couple years than CEO Mark Zuckerberg. The story claims operatives hired by Sandberg’s deputies promoted bad stories about Facebook’s rivals to distract the media.

``The employees were used to the public microscope. But this time was different,’’ writes Bloomberg’s Sarah Frier. ``The story brought readers into boardrooms and the halls of Congress where their top executives were making questionable decisions.’’

Zuckerberg and Sandberg responded, as the story predicted, by deflecting. They didn’t know about a lot of what was reported in the story, and many of the criticisms are unfair.

For the leaders of one of the world’s most powerful companies, they sure seem to be in the dark about a lot of things. Plausible deniability doesn’t work for Zuckerberg, who is both CEO and controlling shareholder. Nothing happens at the company without his approval. If he isn’t keeping his company in check, and no one is keeping him in check… where does that leave the rest of us?

A gloomy outlook for movie theaters

Movie theater chains should be celebrating. U.S. box office revenue is on pace to set a record in 2018, and next year’s schedule is loaded with likely hits. So why are so many investors concerned? Anousha Sakoui identified two culprits a look in the latest Businessweek.

MoviePass has forced theaters to reconsider pricing, and offer subscriptions plans that save the consumer money. The industry has grown in recent years by raising prices more than boosting attendance.

And Disney’s acquisition of Fox will give Hollywood’s most powerful studio even more power in talks with theaters, allowing the company to extract better terms.

Kids’ TV viewing plunges

The number of people aged 18 to 34 who use TV has dropped 36 percent since 2014, according to data from Nielsen and published by USA Today.

On the one hand, this isn’t surprising. Young people increasingly live on the Internet, and they get their music, TV and movies from YouTube, Spotify and Netflix. Yet the rate of decline is still notable. The viewership of the top kids’ TV networks has been dropping by more than 20 percent for a full year.

The #1 movie in the world is… ``Fantastic Beasts and Where to Find Them.’’ The Harry Potter spin-off grossed more than $250 million worldwide this weekend, despite a softer U.S. opening than its predecessor.

Also notable: ``Venom’’ opened to more than $100 million in China. The ``Spider-Man’’ spin-off scored the best opening ever for Sony in the country, and one of the best openings of the year. (One reason why it may have done well: Chinese Internet giant Tencent has a 25 percent stake in the film.)

The #1 song in the U.S. is… Ariana Grande’s ``thank u, next.’’ This is the first #1 single for the pint-sized popstar. Grande’s song generated 100 million streams on Spotify faster than any song, a somewhat meaningless stat since Spotify gets bigger every day.

For a moment, it looked as though Chinese-Canadian pop star Kris Wu would claim the top spot. But Nielsen and Billboard decided Wu’s supporters had acted fraudulently.

The week that was

1. Chinese internet giant Tencent reported strong earnings, placating anxious investors. The company has lost more than $200 billion in value this year because of regulations concerning the Chinese gaming market.

2. One of YouTube’s biggest stars is taking a break. Lilly Singh, aka ||Superwoman|| announced she is taking a break to protect her mental health. `` Loving yourself is a priority. I’m taking a break from YouTube but I promise I’ll be back happier and healthier,’’ Singh said.

Singh has been one of the site’s most visible stars, appearing at events to pitch major advertisers, and starring in one of YouTube’s original productions.

YouTube has always relied on cheap labor. Amateurs who post videos that cost YouTube very little, but generate billions of views (and millions of dollars). YouTube’s algorithm rewards those who post often, and consistently. Some reports say recent changes to YouTube’s algorithm have pushed creators to work even more.

3. CNN beat the White House. A judge supported the cable news network’s claims that the Trump administration acted improperly in stripping correspondent Jim Acosta of his credentials. More than a dozen other news organizations, including Bloomberg, the New York Times and Fox News, supported the suit.

This was not a big victory for the First Amendment, however. The judge said the Trump administration had not given sufficient warning or explanation. The White House could move against Acosta again.

4. One of India’s largest media companies is on the block. Essel Group, the investment firm of media tycoon Subhash Chandra, is shopping up to 50 percent of its stake in Zee Entertainment, which owns dozens of TV channels, a film studio and one of India’s largest record labels.

Essel owns 42 percent of the company, which would fetch more than $1 billion in the sale.

5. The ``Moonlight’’ studio will make movies for Apple. A24 is every film journalist’s favorite indie film studio. It makes artistically daring work with talented filmmakers, earning awards nominations and sterling reviews along the way. (Few of its movies make much money, a point that most cinephiles reject as immaterial.)

So what will these movies look like? It’s not clear. We already knew Apple was making movies, and A24 already makes movies for TV.

6. Netflix is now splurging on Hollywood real estate. The streaming service signed a lease for 355,000 square feet at a new Hollywood office building, bringing its overall footprint in the area to more than 1 million square feet.

7. The World Series will be on Fox for another decade. Major League Baseball renewed its deal with Fox three years early because the ``new,’’ post-Disney Fox is all about live sports and news.

Also this week: Fox held its final shareholder meeting before being acquired by Disney. The event felt a bit like a eulogy for the storied career of Rupert Murdoch, as Meg James reports.

8. Amazon announced new offices in New York and a Washington D.C. suburb. The tech company had claimed it was picking a second headquarters, which led to an insane amount of media coverage.

The whole story was overblown, and the best pieces dissected how Amazon took advantages of cities’ eagerness to gain jobs. While cities hoped the company was interested in urban renewal, the company collected all sorts of data on different markets.

9. Paywalls galore. Business new site Quartz, Yahoo and New York Magazine all announced they were going to start selling online subscriptions. The success of the New York Times, Wall Street Journal and Washington Post has convinced lots of media companies that subscriptions are their salvation from the cratering market for advertising. (Unless you are Google or Facebook that is.)

10. Channing Dungey, the first black woman to oversee entertainment at a U.S. broadcast network, is leaving Disney.

Weekly playlist

  • ``Adjacent Heart,’’ Obongjayar
  • ``Don’t You Forget About Me,’’ Totally Enormous Extinct Dinosaurs
  • ``To the Boys,’’ Molly Burch
  • ``Money,’’ LEISURE
  • ``The Way That You Move,’’ Kwaku Asante
  • ``IDOL,’’ BTS
  • ``Cool It,’’ Bastien Keb