Welcome back to What I’m Hearing, happy Easter weekend and MLB opening day to those who celebrate. I’m mostly off this week at an undisclosed (and snowy) location, so today WIH+ author Julia Alexander is in charge, with help from me and our partners Bill Cohan (on the latest in the Paramount deal heat) and John Ourand (on Netflix’s new NBA interest). Sunday’s email will come on Monday instead.

🍿🍿 Headed to the CinemaCon theater convention in Vegas? Come see me moderate the “Industry Think Tank” program April 10 at Caesars, with a great group: AMC chairman and C.E.O. Adam Aron (yep!); Bill Kramer, C.E.O. of the film academy; and Cathleen Taff, president of distribution, franchise & audience insights at Disney Studios.

As always, if you were forwarded this email or are new to the WIH community, click here to become a Puck member.

Let’s begin…

• At least he made The Godfather...: I think most people in town want Megalopolis, Francis Ford Coppola’s $120 million, self-funded, years-in-the-making, apocalyptic career-capper, to be good. But man, the feedback I’m hearing from today’s Universal City screening for about 300 studio executives and friends of the 84-year-old filmmaker/wine mogul, is… not good. Polite, respectful applause at the end, but lots of wide eyes and shaking heads outside the theater. “There are zero commercial prospects and good for him,” one top attendee told me this afternoon, saying it’s a bizarre mix of Ayn Rand, Metropolis, and Caligula. “It’s unflinching in how batshit crazy it is.” Here’s a more detailed summary from the screening, and yes, at one point the movie “came alive” with an actor standing in front of the screen. I won’t ruin the climactic sequence with Jon Voight and Aubrey Plaza, but two separate sources told me unprompted it was one of the most baffling they’ve ever seen. It’s a bummer, but that doesn’t mean Megalopolis won’t find a distributor—or even fans. Neon picked up U.S. rights to Michael Mann’s nine-figure Ferrari for pretty cheap when others passed, or maybe David Zaslav will make Warner Bros. release it so he can dine with Coppola at the Polo Lounge. But everyone I talked to agreed this is gonna be a tough sell.
• Shari’s silver lining: Sometimes it’s better to be lucky than good. On Wednesday, S&P Global, the rating agency, downgraded Paramount Global’s already low-grade investment debt to BB+, or junk status. Normally this would be rough news, if for no other reason than it increases, often dramatically, a company’s cost of borrowing money. But this downgrade may actually work out to owner Shari Redstone’s benefit.

  Faithful readers of Puck know that I’ve been harping on the “change of control” provision in Paramount’s $11.2 billion of senior notes. It’s potentially a serious impediment to David Ellison’s fledgling effort to acquire control of the company on the cheap by buying Redstone’s National Amusements, Inc., which controls nearly 80 percent of Paramount. That change of control provision would likely force Ellison, RedBird Capital, and KKR to repay or refinance the $11.2 billion of debt if they were to buy NAI and the three major credit ratings agencies then downgraded Paramount’s debt.

  But now that provision in the Paramount senior notes may be moot because only two of the ratings agencies are left to downgrade the debt, not three. So even though the move was a negative event for Paramount, it may now work to the advantage of David and Shari getting a deal done because that major impediment may no longer be in play. If that $11.2 billion landmine has been neutralized, the Ellison/NAI deal has much better prospects for success than it did a day ago, assuming that David and Shari can ever agree on what NAI is worth… a big if. —William D. Cohan

• Thankfully, Ronna won’t have to pay her agents: CAA dropped former R.N.C. chair and seditionist Ronna McDaniel as a client amid the uproar over her hiring and then firing by NBC News. But McDaniel will almost certainly be paid out the $600,000 owed to her for the two years of her $300,000-a-year contract. Agents typically commission settlements on deals they negotiate, meaning CAA would be entitled to its 10 percent, probably about $60,000. But I’m told the agency will not be commissioning this deal. (CAA declined to comment.)
• Netflix hangs around the NBA hoop: As the NBA begins its highly enigmatic national rights auction process, Netflix reps have told league executives that they are not interested in a main package. They’ll leave it to Amazon, Disney (ABC and ESPN), Comcast (NBC), and Warner Bros. Discovery (TNT and maybe TruTV), among others, to duke it out. But Netflix has expressed interest in a smaller package of games, akin to the new In-Season Tournament or the play-in games that commence the playoffs. (No formal negotiations yet; the exclusive window with current partners Disney and WBD runs through April 22.)

  Netflix is particularly interested because it can acquire worldwide rights to these contests. The NBA synced all of its international deals to end at the same time, at the end of next season, when its domestic deals elapse. I expect a Netflix deal would look similar to the one it cut with WWE for Raw, which includes both domestic and international rights. It may still be a longshot, but this is the most positive I’ve ever been on a potential Netflix-NBA deal. I’d give the streaming giant much better odds than Google or Apple. —John Ourand

• Box office over/under: Godzilla x Kong: They’re Friends Now should deliver a lucrative farewell kiss from Legendary as its film output deal moves to Sony from Warner Bros. (with exceptions, including Dune 3 and the inevitable Godzilla v Kong: They Hate Each Other Again). Tracking is about $55 million domestic, higher than the $48 million over five days in Covid-and-HBO Max-plagued 2021. Still, I’ll take the under because pre-sales have it around $50 million.

But the direct-to-consumer revolution isn’t just about premium platforms, or even their tech industry rivals, like Apple TV+ and Amazon Prime Video. Free, ad-supported television (FAST), in particular, has risen in prominence as advertising budgets migrate from linear to streaming. Tubi, which Fox acquired in 2020 for $440 million, has grown its viewership share in the U.S. during the past year from 1.3 percent to 1.7 percent, a sizable bump that actually put it ahead of Peacock (1.4 percent) and Max (1.3 percent) in February, according to Nielsen. Tubi is also gaining stronger traction than FAST competitors Pluto TV, Freevee, and The Roku Channel, which have hovered around one percent of total audience share.

The jury is still out on the durability of FAST services as the biggest players focus on consolidation and ad tiers. On the surface, Tubi’s content library doesn’t appear much different from what’s offered across Netflix, Hulu, or even YouTube. For example, Shonda Rhimes’ hit ABC show Scandal is available on Tubi… and Hulu. In fact, there is a 60 percent overlap of content across major FAST platforms in the U.S. and SVODs, according to Parrot Analytics’ supply data.

Tubi C.E.O. Anjali Sud, the former Vimeo executive who took over for founder Farhad Massoudi last year, also has a few strategic advantages. First, and most obviously, the service is free. It’s catering to audiences that may feel underserved on other paid services, like Black audiences (a group that Starz also focuses on serving). Unlike Pluto TV, Tubi also boasts original content, and is working on ordering new originals that target Gen Z specifically. But Tubi is also taking on some of the industry’s most discussed sore spots. To wit: Instead of focusing on endless rows of titles, Tubi’s team is thinking about how scrolling on a mobile phone creates a form of tunnel vision, which leads to streaming’s object permanence issue. Even changing the colors, from a dull black to a vibrant purple (akin to Max’s purple) feels warmer and more inviting for younger audiences.

The Gen Z-orientated focus is clever: Close to 48 percent of Tubi’s audience is between the ages of 13 and 30, according to Parrot Analytics, where I work as VP of strategy. That’s slightly higher than Pluto TV (45 percent of the audience is between 13 and 30), and Freevee (roughly 42 percent of the audience). It also helps to explain why Tubi has such a diversity of content, offering everything from originals to niche channels based on digital communities, like YouTube’s MrBeast.

That unique value proposition has helped Tubi to quietly add viewership as the streaming wars have stalled. Yes, part of that is price: According to an influential study from Deloitte, the number of streaming platforms per household has come down from five to three in just the past few years, as inflation surged. Younger audiences in particular are increasingly price conscious, and prone to churn. But the other piece of the puzzle is the work Tubi is doing at the product and programming level to determine precisely what engages its consumers, turning an app into a bonafide destination.

Many armchair analysts have tried to diagnose why younger audiences are drawn to these types of series, like Suits or Young Sheldon or Sex and the City, which lands on Netflix next month. Do audiences want longer-run shows? Maybe. The average episode count for a scripted series in the US declined from 15.4 episodes to 10.2 across network titles, and from 11.1 to 9.6 episodes across streaming titles between 2017 and 2023, according to Parrot. But episode lengths haven’t necessarily gotten shorter, and attention spans have been reduced by more than 65 percent since 2004, according to the American Psychological Association. (The average attention span for a single activity on a screen was 150 seconds in 2004; by 2023, it was around 47 seconds.)

One clue may lie in how this younger generation values its content. More than 74 percent of adults in the U.S. use their phone while watching TV, according to Insider Intelligence. The dual screen experience (or multi-screen experience as anyone with teenagers will tell you) has redefined the value proposition of content on a fundamental level, and really helps explain the rise of FAST services like Tubi. If younger audiences are seeking something to throw on in the background as they scroll TikTok or play Fortnite, they’re increasingly likely to opt for a free platform and digestible licensed offering, like procedurals and sitcoms.

Streaming services have been created, in part, to cater to the tastes and habits of consumers who grew up with traditional linear television. But the Deloitte study indicates just how different the next generation’s expectations might be. According to the survey, nearly 60 percent of Gen Z customers prefer watching videos on user generated content platforms because they don’t want to spend time looking for something to watch, and nearly 50 percent of Gen Z audiences have canceled a service within the past month.

Discovery is a two-pronged issue: there’s discovery within an app, like Netflix, and discovery across all available apps, like Fire TV or Roku devices. Tubi is investing time and resources on the latter, and its success will define its staying power with this emerging cohort of viewers. Tubi’a pitch is that it’s easy to use and reflects the content value that consumers expect. It has the advantage of older procedurals and sitcoms, A24 movies like The Lighthouse, blockbusters like Hobbs & Shaw and The Girl with the Dragon Tattoo, Oscar darlings like The Imitation Game, fan-fave series like Hannibal, and tens of thousands of specific genre fare for different audience demos that don’t necessarily pop up on services like Hulu.

And because the service is free, the “premium” (read: well-known) content feels like even more of a bargain, while the lesser known titles have a chance to find the right audience because of Tubi’s personalization. I mentioned earlier that Scandal is on Hulu and Tubi, but if you want to watch Scandal, and you don’t have Hulu, a free option is great. It’s a hook to get people inside the app; the other 240,000+ titles are there to keep those cord-never audiences engaged every day.

And so while much of the conversation focuses on the headline-grabbing prestige players, there is a tremendous opportunity to arbitrage the middle ground between Netflix and YouTube. Not all FAST platforms are going to exist forever, but Tubi sure seems to have the lead as the habit-forming locus in a world with unlimited options.

Matt

Got a question, comment, complaint, or odds on whether Euphoria Season 3 ever happens? Email me at Matt@puck.news or call/text me at 310-804-3198.