Lucas Shaw
Jul 10, 2017 · 8 min read

Hollywood Torrent: Giving away the golden goose

Good afternoon from Los Angeles, wherever you may be. With Major League Baseball at its mid-season break, the Dodgers have the best record in the league. Pinch me.

The majority of Angelenos can’t watch the team play because of a stand-off between Time Warner Cable (now Spectrum/Charter) and all the other pay-TV operators. The dispute has dragged on for years, and even the most ardent baseball fans have been forced to accept that they may not be able to watch the Dodgers without going to the park.

It’s unclear how much the dispute has damaged the Dodgers’ appeal to young fans, who may or may not want to watch baseball in the first place. But if media companies’ recent behavior is any indication, they don’t think young people watch TV.

Companies that own TV networks are granting companies that own social networks rights to their most valuable programming (live sports). Facebook has acquired the rights to show soccer matches from Univision and Fox. Snapchat was the best place to watch highlights of the Olympics thanks to Buzzfeed and Comcast. And Twitter offered CBS and NBC’s coverage of the NFL. (Amazon will have that right this year.)

Just this past week, I wrote a story about how those three companies have all approached Fox about buying the rights to highlights from next year’s World Cup.

The logic is simple. Facebook will pay these companies millions of dollars to show games they weren’t going to put on TV or highlights for events they’ve already aired. Facebook reaches a massive audience that is younger than that of most TV networks. So media companies get paidand get to market their very expensive sporting events to more viewers.

The social media companies then use that video to sell more ads, and charge advertisers higher rates. Win-win, right?

There’s just one problem. This is the same logic media companies used when they licensed their shows to Netflix. Netflix wrote big checks, and convinced the networks/studios that its audience was different. By offering their shows on Netflix, they could drive more viewers to their own networks!

This worked in the case of Breaking Bad, but for the most part hastened the decline of the traditional TV business. Netflix paid a fortune for the rights to re-runs, but it used those re-runs to siphon viewers away from the TV networks on which the shows originally aired. Media companies were too focused on short-term profits to care about this until it was too late.

This all sounds kind of like Facebook and sports rights, no? And sports rights are even more important to many of these TV networks than most comedies or dramas.

The comparison between social media companies and Netflix is imperfect. Snapchat isn’t buying the rights to full games. Twitter’s NFL experiment was a qualified success at best. Facebook hasn’t demonstrated it’s willing to pay billions for live sports. Social media companies are paying for marginal content. That is a very important distinction.

However, the tech companies aren’t stupid. They are testing the popularity of different sports and viewing experiences, and showing advertisers that they offer premium video. They are, like Netflix, playing the long game. They find out what works, and slowly increase their advertising rates.

In the process, they are hastening the decline of cable sports networks by buying highlight rights. Cable sports networks spend most of their hours airing programs that provide analysis and commentary on sports, often employing highlights in the process.

SportsCenter is the most common show on ESPN. Argumentative talking heads are the most common programming on Fox Sports 1. While ESPN and its competitors draw the largest audiences for the big events, they keep viewers around with Pardon the Interruption and SportsCenter.

The proliferation of scores, recaps and clips on YouTube and other online sites has already damaged these kinds of shows (especially SportsCenter). But by giving Facebook, Snapchat and others a full boat of rights to highlights, these companies are inviting Facebook and Twitter to render most TV highlight shows obsolete.

If we go further down this path, sports fans will have little reason to watch those networks beyond live sports. And Facebook, Amazon and a few other companies have the money to outbid traditional media companies…if they want to. If they do, they steal the most valuable property in TV. If they don’t, it’s still not a pretty picture.

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Spider-Man swings back in black

The latest Spider-Man movie grossed $117 million in North America this weekend, and tallied $257 million worldwide. A rare co-production between Sony and Disney, the latest effort to reboot the comic book franchise has received stellar reviews.

Sony needed the hit. It suffered a horrendous year in 2016, and its two biggest movies this year had been ``Smurfs: The Lost Village’’ and ``Resident Evil: The Final Chapter.’’ Both of those movie franchises are running on fumes.

Baby Driver, another Sony movie, is a big hit on a smaller scale. The film has grossed $57 million in North America, and dropped just 38 percent from its opening weekend thanks to strong reviews.

Spider-Man’s staying power will be tested next week with the opening of War for the Planet of the Apes, the third film in the latest installment of that franchise. How many times have I typed the words installment and franchise and reboot? I’ve lost track.

Before Spider-Man’s opening, movie reporters were writing about franchise fatigue. Viewers have rejected many retreads and reboots this summer. It could be that they are tired of franchises. But I’d bet on something simpler. They don’t want to see crappy movies.

Also read

1. Chinese billionaire Wang Jianlin went on a buying spree in Hollywood, acquiring AMC Theaters, Legendary Entertainment and (he hoped) Dick Clark Productions. That latter deal unraveled, and his foray into Hollywood has been humbling.

Related: Wanda sold its theme parks and hotels for $9.3 billion. Just last fall, Wanda’s CEO said its ``pack of wolves’’ would defeat the Disney tiger.

2. Growth in ticket sales in China slowed to 3.7 percent in the first half of this year.PricewaterhouseCoopers changed its forecast for when the Chinese box office will overtake the U.S., pushing it back from this year to 2021.

3. Curb Your Enthusiasm returns October 1. Watch the teaser.

4. News organizations are requesting an anti-trust exemption to collectively bargain against Google and Facebook.

Donald Trump has given national papers like the New York Times a big lift, but local papers are still struggling mightily, says Gerry Smith.

5. Spotify is denying a report that it has paid producers to make songs under fake names in order to reduce payments to rights holders. The original story, in Vulture, is quite juicy.

What’s Out

> New albums from rock trio Haim, Broken Social Scene, Toro y Moi and Seattle rappers Shabazz Palaces. Recommended: you can listen to the Haim sisters discuss their new album on NPR, and read about Shabazz Palaces’ return in Rolling Stone.

> The first episode of HBO’s four-part documentary series on Jimmy Iovine and Dr. Dre premiered last night. You should read Matt Garrahan’s interview with Iovine, and Tim Goodman’s glowing review.

HBO’s mockumentary about cyclists and their love of performance-enhancing drugs starringDaved Diggs, Andy Samberg and Freddie Highmore appeared over the weekend as well.

> Netflix released three new kids’ series (Dawn of the Croods, Degrassi and Castlevania) and Erik Griffin has a new stand-up special on Showtime (yes, other networks have stand-up).

What’s in development

> Moonlight director Barry Jenkins will adapt James Baldwin’s If Beale Street Could Talk for Megan Ellison and Brad Pitt.

> Jay-Z is going on tour later this year.

The reinvention of Fender

In the 71 years since Leo Fender starting making guitars in a radio repair shop, Fender has sold Stratocasters to Eric Clapton, John Mayer and Jimi Hendrix, gone through several ownership changes and weathered a few recessions. Today it’s controlled by the Growth unit of TPG Capital and Servo Pacific Inc. But the number of guitars sold in the U.S. is stagnant, and few of the top music acts in the world today play guitar. They sing, DJ and rap.

With industry sales slack, the world’s biggest guitar maker has created learning apps to boost revenue. By charging for instruction, the company can keep making money after wannabe players leave the store. If more people stick with their guitars, they’ll ultimately buy nicer ones and additional equipment.

The most significant of these apps is Fender Play, which costs $19.99 a month. The course work — five levels with 10 to 12 courses each — is designed to let new students play something they recognize in half an hour, whether it’s rock, pop, blues, country or folk. With most new players giving up in the first year, instant gratification is key. But it should also appeal to former players looking to hone their skills or even an expert, according to Ethan Kaplan, Fender Digital’s general manager.

“There are a lot of people who have guitars under their beds,” Kaplan said in an interview. “If we could give them a quick path to feeling accomplished, we could re-activate this existing base of players. For every guitar we sell, there are a bunch we’ve sold that are just a piece of wood.”

Soundcloud stumbles

Soundcloud fired 173 people last week, or about 40 percent of its global work force. The music service closed offices in San Francisco and London, consolidating operations in Berlin and New York.

The company has had a hard time converting its tens of millions of users into paying customers (or advertising dollars), as covered by Adam Satariano and myself in Businessweek earlier this year. The story hasn’t gotten any better. Spotify is growing. Apple Music is trudging along. And everyone else (Pandora, Deezer, Tidal, Soundcloud, etc) is, to use the professional term, in deep doo doo.

Soundcloud has explored selling itself a few times, and sources say they are back on the market now. They may even been close to a deal.

Also read

1. The most-streamed song of the year is Ed Sheeran’s Shape of You. The best-selling album of the half-year is Kendrick Lamar’s DAMN, if you include streaming.

2. Jay-Z and Kanye West are feuding over money.

3. Billionaire John Malone’s Liberty Interactive Corp. acquired full control of The Home Shopping Network for $1.3 billion in stock, consolidating its hold on home-shopping services as the retail and television industries undergo seismic changes. Liberty also owns the QVC network.

4. TV networks are disguising their bad ratings by misspelling the names of different TV shows. A great read from Joe Flint.

5. Facebook is making a TV show with the Ball family.

What’s up this week

Tuesday: The MLB All-Star Game (on Fox).

Wednesday: The ESPYs (on ESPN).

Thursday: Emmy nominations are announced. We will find out if all that campaigning money was well-spent.

Friday: The next Planet of the Apes opens.

Sunday: New Game of Thrones.

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