Media deals: Netflix, WBD, Paramount, ITV, Sky and agency business models/Q4 results

Speaker 0 · 0:04

Hello. Welcome, everyone, to the Media Unfiltered podcast. We had a week break here, but I'm back with my trusty and well informed partner, Ian Whittaker. Today, we'll be talking about some of the deals happening in the media industry with the latest love triangle between Netflix, Warner, and Paramount. We're gonna see if there's any news from the Sky ITV deal, which has gone relatively quiet, and then we're going to reflect on some results and market reactions to broadcasters and agencies while also reflecting on the music industry. There's some interesting news and analysis from Sony Music Group and others, which perhaps the traditional market can have a look at for some hope and optimism around their transformation into the digital world. And then finally, looking at some future considerations, diversification for TV companies and other businesses who are looking to make money from the market outside of advertising. So with that in mind, Ian, I think we should start with the Netflix, Warner, and Paramount deal. What is happening now, and where do you think this is all going? Well, it's interesting. I mean, Warner now has started talks with

Speaker 1 · 1:12

Paramount. This was following Paramount's renewed offer, which didn't actually raise the cash offer, but what it did was put the number of sweepers. So we're saying that Paramount will cover the Netflix's termination fee and also as well a couple of other things in there with such as the ticking fee. So the my read on this is that the Warner management would still prefer to do the deal with Netflix. I don't think there's any doubt about that. However, their issue is this. They're obviously getting pressure for for WBD shareholders to actually talk to Paramount because there is a difference here between the Netflix and Paramount offers. And where the what it really boils down to is how much you value the legacy WBD assets. And I think what some of those shareholders have made clear is that, look, if we don't feel as though you've seriously considered the Paramount deal enough, then what we will do is we will launch legal action. And bear in mind that in The US, board of directors has a seduced duty to extract the best value for shareholders. So this is not an idle threat. This is something which if the shareholders were serious about and also as well Paramount wants to push things further, could tie up this deal for a number of years in terms of legal legal ramifications. And then, of course, on top of that, you've got what happens from the wider regulatory front because certainly from a Trump administration standpoint, the signs are pretty clear that they would prefer Paramount to actually win the battle rather than Netflix. So the way that I would would sort of looking at this at the moment is, you know, the pendulum has somewhat shifted back to Paramount with this. I think for for Warner, what you've got here is there's a situation in in chess, and I'm gonna pronounce this wrongly, which is called Zugzwang, which essentially says whatever next move you make will make your position worse and or lead to the loss of a piece. And I think this is the position that Netflix finds itself in now. If it comes back with an increased bid, then the stock markets are gonna be very unhappy. Netflix's share price is down 40% plus from its peak because of concerns over the WBD acquisition. Comes back with a raised offer, that's only gonna exacerbate because shareholders will be concerned it's getting into a bidding war. If it doesn't do anything, then what could happen, of course, is that, you know, Paramount may win. They may reach an agreement with WBD. And, you know, that raises question marks about Netflix's strategy moving forward. They could also walk away from the deal. I don't think they're gonna do that at this stage. I think they will wait and see to what happens with the Paramount WBD talks. But I think this move has certainly thrown the cat amongst the pigeons. For deal, though, I think the consensus, although this wasn't my opinion, but the consensus viewed it as really sort of, Netflix and WBB BD coming together. That's that's true. Who do you think needs the deal more? It's a really interesting question. I think you would say you would say probably shorter term, Paramount. It doesn't necessarily have scale. It's always been a laggard when it comes to the streaming wars. Given it, WBD, the entire company, would obviously both boost its cash flow and also as well the range of assets that it has. I think for the longer term, I would argue Netflix. I mean, the thing with Netflix is even though the share prices can come considerably down, this is still a stock that is highly valued by the market. So that it's on a very, very high multiple, certainly a multiple of of what the existing broadcasters face. And when investors put a stock on a very high multiple, what they're essentially saying is we have great confidence in what the future earnings will be. But if you think about the position that Netflix faces in at the moment, it's an excellent product. You know, they they've done fantastically well. But there was no doubt that penetration levels, at least in the major western markets, are probably at saturation levels. So your growth really now is coming from mixture of price increases, advertising growth where they've done very well, and whatever secondary products that you could you can sell. There's also a question mark here I think about it its model. I mean, on streaming services, you still tend to get lot of viewing, which is essentially legacy programming. And if you're Netflix and you you're relying on other broadcasters who also have streaming assets to provide you that content, that makes you vulnerable to a form of economic warfare if those companies at some point decide to actually block selling you their content. The other thing also as well, I think, for Netflix, which is a consideration is, let's say Paramount does get it, and this is linking into the last point I made. Paramount gets gets WBD, then it's very likely that Paramount would say, we want to keep the WBD content within our own parameters. And that obviously then would also have ramifications for Netflix. So I think both parties need it. I would say from a longer term strategic standpoint, probably Netflix is the one that has the greater need. Because for Paramount, even if the deal doesn't sort of it doesn't happen here, there's likely to be some consolidation that goes on in the streaming space moving forward, and its position

Speaker 0 · 6:22

would mean that it's likely to be as suited to somebody else. It is interesting when you look at growth for all these companies. So Netflix became a top 20 seller globally of advertising with that's due to grow. Probably be able to double that in a year. And vast majority of that is from the from The US market, but they are lighting up markets, as we speak. You can see that to be 3,000,000,000, maybe 3,500,000,000 by the end of the year, perhaps. But when you look at viewership, it's quite interesting. Viewership is pretty stable amongst, broadcasters and streamers, you know, sort of long form professional produced content. So growth is interesting. It's not gonna come from more viewing. If you have a look at the last ten years, it's kind of flat. So these sort of acquisitions are are a must have if Netflix plan to grow. They can obviously grow through advertising revenue as well. And it's very interesting when you talk about content and the fact that we watch a lot of old content still on these streaming platforms. A lot of the new stuff, let's be honest, like, there's not a lot of really good new stuff that's that's coming out that I find. Even me and the missus, we go back and watch a lot of the, old stuff too. And you can see that in the stats, how much still things like friends and other stuff is being consumed. Now moving to domestic matters in The UK, have you heard much on the streets between Sky and ITV? What is happening? What's not happening?

Speaker 1 · 7:39

What are the implications of that? No. That's that's all gone quiet with that. And let let me just, before that, just come back to something that you actually said just in in terms of Netflix and the ad revenues. I think there are two things here just to consider on this as well, and they've also got implications for the deal. One is to bear in mind for streamers, advertising revenue is very high margin. So it has a disproportionate impact on margin. This was the effect that Sky had when it was listed. Advertisements was probably less than 10% of revenues, but probably made up 8% plus profits because it was very, very high margin. The second thing I was as well, and it's something that that actually spoke about sort of if you can remember back that long, December 2024 at the Future TV conference. I know that's a long, long time back. But the one thing to look at in terms of this content as well is that it's not just people watching sort of, legacy content that's still popular. It's what you can do with that legacy content as well. You think about what people like Disney are moving into, and it's something that when I gave that presentation back then, I said this is something that broadcasters really need to consider. Their long form content is also ideal for actually producing other forms of content such as short form video, such as, for example, things that they can use on YouTube, etcetera, etcetera. I eat, you can monetize that content in a lot more different ways You're right. Under the phone environment, and AI is only going to exaggerate that effect. So this also as well is essentially another important part of this bit. The legacy content that you have is a lot more valuable now, particularly with AI, than it was actually, let's say, even eighteen months ago. And that's another consideration

Speaker 0 · 9:22

that we have here. Now sorry for that for that sort of detour on your question. No. No. That's that's that's actually a good point because just think what Netflix can do to the Harry Potter series, for example. Plenty of other examples of that. I'm sure they'll they'll they'll do a fantastic job of monetizing their existing catalog. Like, look at Wednesday from the Adams family is a really good example. So I'm pretty sure that they have plans around that too.

Speaker 1 · 9:47

Yeah. Absolutely. And, yeah, I'm sure they'll do an absolutely fantastic job of that. Now on the the Sky ITV, coming back to that, I mean, it's true. Things have gone very quiet on that. I mean, we had the news before Christmas. Sky was bidding for the ITV broadcast assets. We don't have any further news. I mean, ITV results coming up, so they will undoubtedly be asked about that. However, what they are likely to say, their lives are high behind the legal and regulatory framework and say, because this is an ongoing discussion, we really can't say that much. So I wouldn't expect too much to come out there. But here's my take on it, sort of rightly or wrongly, is I so I think you do have a situation here where both sides do want to do this deal. Yeah. I think for Sky, it's obviously would be a transformational deal in the sense of what it would give it in scale in the advertising market, but also as well enhance its streaming offering. I think for ITV, you've got to look at things from the fact that Carolyn McCall, the management team there, Carolyn McCall and Chris Kennedy have been there for a number of years. During their tenure, the share price has fallen down pretty significantly. And, you know, maybe been a bit controversial, but ITV predispheres was something of a zombie stock where quite frankly, there wasn't much new interest in in the name. And the acquisition is really sort of, heightened interest. So there's definite interest on the on the part of both parties. Now what I think is stalling things, I don't think it is the regulatory angle around the market share. I mean, this would have been an obvious issue from the start. I mean, the new entity probably would control 70% plus of The UK TV advertising market. That would have been obvious to anyone. And my take on it is these are conversations that they would have had whether informally, formally, or whatever with both politicians and regulators beforehand to discuss the likelihood of this deal going through. I think what's happened here is that it's really to boil down to the details of the contractual agreements between ITV broadcast and ITV studios. And when I was an analyst covering ITV, you know, for me as a expertise research analyst, this question about separating the broadcast and the studios assets always came up. And the answer that came from management was always, we've looked at this multiple times, but it is quite frankly too complex to the, sort of a agreement between the two sides to really unbundle the two. Now I suspect that what's happened here is that as Sky has gotten to details of this transaction, it's realized that, again, things are a little bit more complex than what they thought. The obvious sort of answer to that would be, well, why is it that Sky doesn't buy all of ITV? I mean, surely that would settle the issue. You'd have also as well the studio studios on and all the content with it. And that really goes back to investor sentiment towards Comcast, who is Sky's owner. Because it is one thing Comcast going to US shareholders and saying, we're paying $2,000,000,000 for The UK's leading free to add broadcaster. But in the scheme of things, it's not really a big deal, and these are the benefits it gives us in terms of synergies and also as well scale. Probably US investors will be quite, you know, will be quite chilled at that. But if they went back and said, actually, we're gonna spend $6,000,000,000 plus on buying the whole of ITV, then I think a lot of investors will actually bought. Because for many investors, they see Comcast or what they should primarily be doing is really a broadband play. Broadband and the cable play in The US. What they don't necessarily want is for it to significantly increase its exposure to what are deemed to be legacy assets, particularly at a time when AI is raising question marks about the business model and also particularly because The UK is quite sensitive for Comcast because investors see it as having overpaid for Sky originally. And so, you know, what I think here is that my overall view is this deal eventually gets done. But I think, actually, the complications with it are more than what some people would have expected in the market. Yeah. And I think they from an from an ads perspective and with commercial broadcasting perspective, Comcast, if this acquisition goes through, will have a pretty strong position, a dominant position on the commercial ad market

Speaker 0 · 14:08

in television in The UK if if indeed the acquisition goes through. And I think that's the attractive element of it. They'll have a lot of control from the tech side of things right through to the to the execution, and I think those synergies will be really important to ensure a strong ad funded market in The UK as well. So I think that that would appeal

Speaker 1 · 14:30

surely to, to shareholders in The US, don't you think? I I certainly for the broadcasting side, yes. I mean, there there's a, you know, there's a very strong message here. And also as well, you know, The UK when Comcast bought Sky, yeah, The UK was a test set, yeah, in a way for Comcast. Many of both the technology, you know, much of the technology and also as well the ways of of interacting with customers. Comcast actually imported a lot of that from Sky in The UK. And I think there's an argument for saying that similarly, you know, that you could get sort of of Comcast probably less so. But still learning quite a bit from ITV and its approach. But as I say, you know, $2,000,000,000 is way different sort of deal from $6,000,000,000 plus to the of on here. And, again, people now are questioning the content model and you're in an age of AI when you could use content at a fraction at a cost. Does that mean that the original content model is there? I don't think it does. You know? And I don't think suddenly the certainly the Western world is gonna be inundated with short form dramas, etcetera. But for shareholders, it's a crystal point. I think it's gonna be years to say. My feeling is is that the deal eventually goes through, but I I think it'll take longer. And could, you know, could Sky come back for the whole of ITV? I think that would be a nuclear option. I think Comcast would be wary of doing that. It's interesting that you mentioned margins there as well. Like, obviously, the attractive part of Sky was the subscription based business, which is obviously consistent income. But then Sky Media business is actually huge margin. The vast majority of their ad revenue is,

Speaker 0 · 16:06

is all profit. Not all of it, but, you know, 89%. So that that was actually a really attractive arm of the of the business too. Now let's reflect on agency land. They get a lot of column engines these days, lots of q four results. How's the market viewing now? I think Omnicom as well came out with their q four figures. They looked at, synergies between their acquisition of IPG. They actually they didn't misreport, but they came out and said that some of their synergies will amount to around 1,500,000,000 rather than the 750,000,000 that they reported earlier. So how's the market viewing that acquisition and the over the agency business overall?

Speaker 1 · 16:46

Well, it's very interesting. You know, again, it's another interesting space, and I think we talked about it last time with with publicists. Even though publicists had very good results, the stock was down nearly 10% on the day because of concerns about what AI would do to the the agency model. Now if you look at what happened with Omnicom share price, Omnicom's results were were okay. But actually, if you look at the share price, the share price reaction was positive. That that may seem may seem a bit of a contradiction. But what Omnicom has, I think, the well, obviously, deliberately decide to do is go for more shareholder friendly approach. So as you say, they doubled the amount of synergies that they expect from the IPG transaction. Most people were assuming when a company gives a synergy target, the underlying assumption from the markets is it's a conservative one and there will be further synergies that will be gained. I mean, that's an actual course of events. Okay. But not to this extent. Not to extent of saying we're gonna find suddenly another $750,000,000 of synergies. The other thing also as well is that they announced that to a $5,000,000,000 share buyback program, which part of that is gonna be funded by the disposal of low growth, low margin businesses, which they hope to raise up to $2,500,000,000 for. What that approach shows, that effectively is Omnicom saying, we're trying to be a shareholder friendly as possible. So we're gonna give you this huge amount of share buyback, which sends the signal that we think the stock is is underpriced. We're gonna make huge amount of synergies within the the integrated businesses and also as well, we're gonna get rid of the low growth, low margin low margin businesses. All of that is very shareholder friendly. There's an obvious question, of course, of what it means for the business longer term, but if they can actually deliver on both the financial returns and also as well make sure the operational and the executional side doesn't come off, then the markets are gonna reward it very, very well. And I think what this sort of what the reaction with Omnicom and Publicis shows is that quite frankly for the for the markets, it's not really a question now about agency performance. It's really becoming one about capital allocation and how those agencies actually deal with it. In the case of Publicis, the way the markets reacted was to say, okay. You're doing extremely well with this. You're generating great cash flow, but we still have doubts about the business, and therefore, we're gonna actually knock down your shares. With Omnicom, you know, the reaction was we've got doubts about the fundamental business model, but at the same time, you're actually giving us a very big sweetener. And in terms of the stock itself, that looks attractive. And we like your capital allocation story in a way that maybe wasn't there with Publicis. And I think that's the big underlying message to come from those two sets of results. I mean, we've also as well have some of the the sort of smaller groups also, smaller hold codes reporting. Then soon, Japanese operations went very well, but, again, they still have an issue with their international arm, and that's that remains a question for them. Havas actually did did okay. The really interesting one's gonna be what happens with WPP, and that's what the market's waiting for because its share price has seen a precipitous fall. You've got strategy update, which is on the way. You WP has made a major announcement with Google and so on. But the markets are really gonna wait and see what Sydney Rose says. And and I think a lot of what WP says will influence

Speaker 0 · 20:10

the general sentiment mood towards the rest of the agency space. You said about the low margin business. Are you talking about the PR businesses and creative businesses? Because I've I've talked about this a lot with with various people, usually in private settings, that the media part of arm of their businesses is obviously their area of growth and their focus. You know, Publicis is 75% of their earnings, if you like, are focused on their media business, and that's why they're doing as well as they are. Do you see all media companies basically re engineering their businesses to focus on media? And is it the creative and PR arms that you're considering their sort of low growth or nonprofitable or even, like, the cost base to them that they're they're sort of moving away from? Well, look. This has been a question that has been going on for, like,

Speaker 1 · 20:57

you you could argue twenty five years. I remember as a sort of, when I was sort of covering the agency groups, and the CEO of one of the major agency, HoldCo, is at the time was talking about how media was such as a great growth asset, high margin, high growth. But quite frankly, the implication given was that if they could they could have got rid of creative, they would do. But the point being is that they need creative. But actually, my view on creative is that's really where it's the core differential

Speaker 0 · 21:27

for the agencies. This is the

Speaker 1 · 21:29

USP. Yeah. Exactly. This is the USP because more now than ever, given what we've seen over the past couple of years with price increases coming through, the brand has supported that, but consumers across the across the Western world, in fact, across the whole globe, are increasingly annoyed with with the level of inflation. Creative actually has the opportunity to be a real sort of golden egg for the agencies. The question is how they monetize it, especially given for the past twenty five plus years, it's been treated as a commodity. The thing with with media is if you look at it is and again, it comes back to a point before. Media is the ultimate sort of efficiency machine. The greater the scale you have, the more margins you can extract, the better pricing you can also extract from from the the platforms and and both traditional and online. But what does an a media plan or what's the media business look in an AI world? It's a cost plus model. The revenues have always been based on hours build. How do you move that forward? Does it mean s four, for example, was talking about moving more to subscription model? Does that really work for for the media side? And so my feeling is is that there's really two things here that the agencies need to do. One is obviously on the reimagine their business model and how they make revenues. The cost plus model just doesn't work in an AI world. And again, I think they've actually got to extract more out of the creative side as well. The other side, I think though as well, is that the agencies also have to change their mindset. And this is something I've talked about sort of a lot. They need to start speaking and thinking the language of the board and the CFO. And the important point being with that is the agencies are, I think, get fixated on growth. Yeah. They talk about the and and that's very important for clients, by the way. Don't get me wrong. The clients want growth. They want to see revenue growth. But, really, the priority of boards at the end of the day is actually risk mitigation. What they don't want is to actually see their products crater. Because when you get something like that, then it's catastrophic for the company and it's catastrophic for for the management itself. I mean, look at Heineken, for example, just recently. You've seen this with Diageo as well. You know, changes of CEO because they haven't been able to deliver on the promises that they gave to the market. And this, I think, is really where agencies can come into their own, particularly on the creative side, really around that risk mitigation standpoint. But what that will require is an entirely different change in terms of its mindset,

Speaker 0 · 24:06

and that's what we have to to see whether they can execute. I think the mindset, though, needs to be changed for for clients as well because ever since the CFO has been involved in media decisions, we've moved to this efficiency model and looking at media as a cost center, which is which is a real problem because then that forces the agency to do everything cheaper and then make money in other areas, which has led them to do things that are a little bit uncomfortable in the media industry in order to make those margins. And then what I find really interesting about this is that I think there's more need for an agency of media today than there were than than ten, fifteen years ago. It's such a fragmented landscape where so much media is traded in non transparent areas, and it's it's complicated and difficult and we need trusted agents in the middle in order for brands to put their money into into trusted frameworks, and environments. But their least the the the trust is gone between the agencies and brands when it needs to be there more importantly. And then finally, on the, creative part, I get what you're saying. They don't make money from them. The the city don't value that part of the business because there's lack of growth there and it's project work essentially. Right? It's not like a nice fancy SaaS model or, you know, a growth model on top of a media spend. Yet when you look at campaign effectiveness, media creative, sorry, is is where you get it. Yet, that's the least important part of these agency businesses. So you're right. It would be interesting to see if they can turn that around because I think that will help brands grow, and I think it will help them grow too. So it'd be nice to see a change from the media agencies to focus on the areas that actually look to campaign effectiveness and what would matter to to to brands the most. But I think it takes a change from both of them, from the brands themselves and from agencies for them to to change their their business models. Well, I

Speaker 1 · 26:05

Hold on. I'm gonna pull you up on that one. I think that Go on then. In terms of CFO. And CFOs get it. They get the importance of brand. Right? You you go back know if they do. I I don't know on a wholesale. I don't know if they do. No. They do. Okay. You go back to the height of inflation in '22, 2023. It's a point I've made before. All consumer facing companies were panicking because they were looking at the sudden surge of inflation in terms of their their costs and wondering how the hell they could pass that through to the consumer. And, yeah, their models were their sort of the models will tell them, you'll never get these price increases through without actually seeing significant impact on volume. In the end, they got those price increases through and more sort of without the impact on volume. And if you look at this sort of longer term effect that's having corporate margins, yeah, it was substantial. The Federal Reserve, I think of of St. Louis published that if you look I mean, this was after a dip to do with COVID, but US corporate profits doubled from 2020 late twenty twenty to 2024 from 2,000,000,000,000 to $4,000,000,000,000. Bigger increase than the actual from 2000 to 2020. The biggest single driver of that was price increases. And if you listen to the company conference calls Mhmm. CEOs and CFOs were saying the reason we got those price increases through was the strength of our brand. So they do get it. The problem is is that the agency world and I'm not saying that companies, CFOs are not sort of, have not got some blame in this. But the problem is is that the agency world for so many years fed the line to the to managements that essentially, what we are here for is to reduce your costs. Do you know? And they treated the creative side as a commodity. And also as well, what that also did was it did a lot of the work for the tech platforms. Because when it comes to essentially then, who is the greatest sort of

Speaker 0 · 28:09

proponent of efficiency in an advertising world, it's a meta or Google who says, if you spend x on it on us, you will get blind reserve. Yeah. So during COVID as well, you have to remember governments were lining the pockets of individuals. We were tapping into savings as well. We had a lot of money to spend, and we had no choice in the inflationary times as well. So part of those profits were because of that, but then, again, I get it. The, companies with strong brands definitely had better price elasticity, and they they could charge those extra amounts for their products and still sell them. But also, consumers had no choice. Plus, we had tons of money flying around. So But they did have little bit of a misnomer that choice. They didn't they could have bought own label brands. They did have choice. They could have price shop. They didn't.

Speaker 1 · 28:54

Mhmm. You know, we're talking about a world in which, you know, we we had ecommerce that were that was rampant.

Speaker 0 · 29:00

You had sort of, it wasn't as though the only products on the shelf were those from branded labels. The consumer There was a lack of supplies. There was a lack of supplies too. Like, you couldn't buy the cars that you wanted to buy and loads of other things like that because of chipsets and all sorts of delivery issues. So there were there were elements of that where you had no choice. In some areas, but not I accept what you're saying, and I and I and I and I hope you're right. And I hope you're right. But things do need to change from both sides. The point the point I'm trying to make from brands to to agencies, and if you look at IPA stuff, they do actually come out that a lot of profit is left on the table because of our obsession with short term and short term metrics and short term marketing execution. And you can see it in the media that we're buying, and it is having an impact on the agency business model. And one thing I do not understand about agencies as well is that their overreliance and the amount of money that they're spending with the platforms, while at the same time, the platforms are disintermediating them, and they're taking away their business, ultimately. And yet, they're still spending huge sums of money with them. So I think that needs to rebalance too in order for their particular balance sheets to to look a lot better. Now let's look at another market that, we can reflect on this, the music industry. I think you had some results from Sony Music Group. Now can can other media look at what happened within the music industry and think, you know what? We're going through this sort of digital transformation. Look what happened in music. There's a, there's a lovely sunset on the horizon. Not sunset on the horizon. I shouldn't say that. That doesn't sound right. But there's a there's there's light at the end of the tunnel based on what happened in that industry.

Speaker 1 · 30:37

Oh, I I mean, absolutely. I mean, you look at the results for music. I mean, if you look at what's happening in the music world generally, I mean, it's a very, very healthy world at the moment. Sony Music, you know, gave strong numbers for North as well, highest single digit sort of growth on a constant currency basis as well. The music industry is benefiting from from streaming. That is still growing. You can see that also as well with what happened with Spotify results as well. And also bear in mind that music is a very important component of YouTube. But I think the the biggest sort of learn across here for other sectors is how the music industry is handling the transition to AI because it is an industry that that faces its own problem whether around copyright, but also as well AI produced music. It is it is a big thing. But so far, it's handling it well. And I think one of the things that is helping the music industry with AI is it faced its own near death crisis more than twenty years ago when you have streaming come on board. If you remember the days of Napster, you know, what was happening in terms of of Apple launching its product, That collapsed the music industry that had been very reliant on highly priced CDs and quite frankly was quite inefficient as well with with things. And it forced the whole industry to reimagine their business models. Now it took years to actually come through. Again, covering the music sector as an analyst in the thousands, it was not a clear cheerful sight. But if you look at what's happened over the past certainly seven, eight years for the music industry, It's now got back to an industry that has been high single digit, double digit growth. It's also expanded the stream of revenues that it gets. This is not just about what happens with streaming revenues. It's what's happening in live events. It's what's happening in merchandise. There's the rise of the super fans. Yeah. The music industry is really moving forwards Mhmm. With how it's monetized as its customers and also as well how it deals with AI. And again, you look at some of the developments, there's a carrot and stick here. There is on one hand realizing, look, AI is here to stay. We've got to deal with it. But on the other hand as well, been very proactive at protecting their copyright. Sony came out, sort of remember saying that in the music, well, they have developed tool that can detect whether a music track has actually benefited from AI and can flag that. So I think the music industry has got a lot to tell other sectors that haven't gone through the same sort of near death experience before. I think particularly for the I'd say the broadcasting in the agency space. I'd say particularly with the broadcasters in particular, it's probably the one that's got the closest the the read across here. But music, yeah, it is you know, fingers crossed, it's doing very, very well. And you can also see that in the transactions that have been coming through. You've got increased interest, you know, Taylor. Sorry, Britney Spears. She sold sort of her her back catalog for around $200,000,000 in terms of the rights there. You've got you're buying up assets as well. You've got, again, sort of, deals in the music publishing space. This is a very, very healthy space at the moment, and it's also as well a space that has attracted a lot of interest from investors. But and this is where, you know, again, agencies, broadcasters should look with a way of hope. It's also a sector that twenty years ago was considered to be, yeah, in as dire, if not worse state than what broadcasters and agencies are seen today. Absolutely. And,

Speaker 0 · 34:14

I've had a couple of conversations this week with some some broadcasting CEOs. What I'm seeing is, a focus on diversification of revenue for those businesses. The vast majority of commercial broadcasters, you could go 80 to 95% of their income is from advertising. They realize that is not a good position to be in, which I something I completely agree with. But they're also, doing some interesting things, buying out of home businesses. Channel nine Australia did that. Channel seven invested in radio. They're looking at subscription as well, so less reliant on, on advertising. And NBCU are leveraging their brands to make make money from events and other things, sort of mirroring almost like how the New York Times has sort of moved away also from from advertising and subscription and making money from a lot of other things too. So that that's a as a key focus for the for the TV broadcast industry. And I think we're gonna see a lot more of that, aren't we? That diversification

Speaker 1 · 35:10

from those companies, don't you think? I think we are. And to a degree, it makes sense. I think what these companies have to be careful of though is they don't neglect what's in broadcasting. Yet broadcasting has the opportunity. I I've said it before. I think with AI, particularly around content Mhmm. Broadcasting has actually an opportunity to be seen bizarrely enough as one of the winners. It's not just what they could do with their content. It's also the question of trust as well. So Yeah. Diversification is good, but it can't let the broadcasters if they shouldn't escape to diversification. It's great when you can monetize your customers more. That's perfect. But just thinking that the solution is to say, if I'm in the broadcasting space, what I need to do is jump into out of home. Yes. There's a strategic rationale there. Yes. It does make sense, but don't think that that's you're essentially fleeing a sinking ship. Broadcast has more life than them. I I agree with that, and I don't want diversification

Speaker 0 · 36:09

also to be a means of of not working together and figuring out the the ad model. The ad model is still incredibly important, not just for them, but for the local economy, having a strong local media industry outside of the platforms. And, couple of the worrying conversations I've had is like, oh, because we've got these extra elements, these we're diversifying away. Perhaps we don't need to work together quite in the same way as we did, you know, six to twelve months ago. That's the wrong attitude to take. I still think that they can they can grow and thrive in an ads world, but I do think in order to when you're looking further down the line, diversification and less reliant on advertising is definitely important for their future growth. Yeah. Absolutely. So, we better wrap this up because our audience love a thirty minute pod and no more. Would you like to know that, we have a guest next week? Do you know who it is? Yeah. We're gonna look I well, I do. I know who it is, but go on. Why don't you? Why don't you Well, I was doing that I was doing that for the suspense of the, the listeners. But Alright. Leave the suspense. Yeah. You you you ruined it, but that's fine. We're gonna look at the future of jigs and measurement. Justin Sampson will be joining us. He's been, a trailblazer getting, you know, reporting in the Feet and columns all over the place. So we're gonna listen to him. He's, the outgoing CEO of Barb, and he's got some very interesting views on on what transparency means and and what it means to have a single view of measurement and currency and insights within a market and and how that stabilizes thing in, things in a very fragmented and complex world. So that'll be interesting. That'll be that'll be next week. I look forward to recording that. And, listeners, thank you very much for for listening. Do you wanna sign off in our usual way, Ian? Yeah. Indeed. As usual, this is not investment advice. Thanks, mate. See you. No problem at all. Take care, everyone. Bye.