Hollywood's Big Challenge: Resuming Production in a Pandemic

the head of business Affairs at Paramount Television. Welcome back to Strictly Business. Ken. Thanks Andy, it's really fun to be back. Yeah. I went back and checked and you were on the podcast almost exactly two years ago, July one, And it's only been two years, but honestly it feels like two hundred. Yeah, you know, I think it's it's been an exciting decade since I last spoke to you. I think we've all lived many lifetimes in journeys since then.

So yeah, you know, no interesting updates, right, we can make a quick short one of this. I'm sure it should be pretty simple. Yeah. When we last talked, peak TV was topic a and it seemed like the industry's worst problem was there's too many TV shows. Fast forward to now and there's barely any shows in production due to the pandemic. And I'd imagine that means deal making is going quite differently for you these days. Definitely, I mean,

certainly in the simplest terms. The focus is on development right now because that's what we're in a position to do. And uh, you know, Paramount, like every company, has been thinking hard about how we can continue to do the most business in the best way with the circumstances that

are in front of us. And so we know that, you know, there's a lot of work to do to manage the pandemic right now, but that there will be another side of it, and so we're preparing ourselves with a lot of new project generation, still working extensively with writers and producers, trying to be very thoughtful about how we put projects together and when we take them to market to make sure that they get the best opportunity to succeed and don't get swallowed up. Uh, within the

moment that we're in. But business is absolutely moving forward. If you had asked me in March, what would I be doing if lockdown was still going in late July, I would have answered, probably a lot of yoga and building legos. But as it is, I'm as busy as I was on the first day of the lockdown, which is as busy as I was a week before it began. Well,

let's put development aside for a second. Is there any activity with regard to production resuming at some point for shows that have obviously already made it through development and are ready to go and all the things that go into creating a safe environment for production. Should it happen again anytime soon. Absolutely, And there's a couple of wings

in which that's taking place. One is just extensive dealmaking is is one of the right words, but really just coordination and collaboration between you know, studios and networks in the environment, working together to come up with plans for how we return and working to figure out what are the sort of economic consequences of the moment and how those are going to be borne by the various parties

involved with the show. Um, you know, I think every large company is undertaking its own process to come up with return to work rules, the new procedures that we want in place to assure the safety and security of cast and crew, but our network partners have opinions about that sort of thing as well, and so part of the process is, uh, you know, coming up with joint plans that incorporate the priorities and needs and concerns of

both the networks and the studios. And in a sense, uh, you know, those are only two of the voices of the room. We're also incorporating the opinions and requirements of government, where in extensive negotiations with the unions, all of them over return to work rules, um, which involves you know, a lot of commitments to them about how to keep their members safe and all the while, you know, all

of these things come with costs. So we are you know, in constant dialogue with the networks about what's the appropriate allocation of those burdens in a way that is both fair and also frankly allows these things to continue. I don't think it's anybody's desire or really that anybody would be well served by completely disclaiming responsibility for for any

aspect of what's going on. One of the lessons certainly I'm taking, and I hope others are taking of this pandemic moment is we live in a complex, interconnected ecosystem

where we all rely on each other. I mean, really, we should have all known this all along, and so we're trying to bring that attitude and perspective into coming up with solutions for what we're dealing with right now, because as there is economic pain to go around, and um, you know, we ultimately want this to be sustainable and survivable for ourselves and the parties that we work with

every day. In addition, as we're now a few months in, we are starting to look ahead to deal making four returns to production and that's a you know, tentative process and it's a very i think custom process on our project by project basis, because the situation isn't different everywhere, excuse me, isn't identical everywhere in the world, and so are sort of preparedness and anticipated timetables for going back to production in Vancouver may be very different from those

in Los Angeles, may be very different from those in Australia, depending on conditions on the ground. But we are also starting the process of making deals with you know, line producers, with casting directors and with other sort of key contributors to the production of a series in anticipation of coming back, but doing our best to prepare ourselves if those uh, you know, optimistic hopes are an't always born out and

we have to push back even further. This all sounds horrifically complex, and I know, even in the best of circumstances, UH can be quite contentious. So what is the culture of deal making right now? Because everyone's got to you know, row the yours in the same direction to make it work. Yeah,

and I think there's a recognition of that. And I uh, certainly one thing that I've observed and marveled at with others who do what I do is, for the most part, the culture of deal making right now has been very positive and collaborative. I think there's a sense both that on a professional and industrial level it is incumbent upon all of us to figure this out so all of us can continue to you know, earn revenue, run our companies,

make projects. And at the same time, I think there's a recognition among everybody who's you know, bouncing a kid on their knee during their work zoom meetings or otherwise trying to reconcile uh, their their parental responsibilities of professional responsibilities and maybe just a tiny corner of personal sanity that everybody on the other side of the phone or the other side of the zoom is going through much

the same thing. And so I think, um, it's really been a healthy environment where people have kind of brought their best selves to the negotiations, um, and and try to approach things in a way that's solution oriented rather than adversarial in a negotiating climate that is sometimes you know, particularly adversarial among many industries, I think as Hollywood has a reputation for I'd say if in deal making, one clause I've heard more about in the last four months

than possibly the last ten years is forced masure, which I can only imagine how different those clauses are in terms of how they're structured going forward. Yeah, So, first of all, I mean the biggest difference is that as you say that, it's it's a pair of words on everybody's lips, because traditionally deal making, uh, you know, force masure, uh.

And just to kind of define terms for for those that it is you know, second nature to your force masure is a concept under basic contract law about excusing performance if there is a sort of major, unexpected third party event that interferes with parties doing business under contract. And so the classic examples of force masu are war um uh. Labor strikes can be considered force masures uh. Floods, fires, big sort of natural disasters, earthquakes, acts of God is

a sort of synonym that sometimes used. And in traditional Hollywood deal making, you always knew that the force masure was kind of a background aspect of virtually any agreement that you entered into, but it was something you virtually never talked about. It was routine. Um. It was something that never came up the deal making phase where people are focused on substantive terms. It was something that you worked out in the paperwork once you got past that

first step. Now, especially with an eye towards productions coming back, uh, you know, people are aware that the that force masure plays an important role in what we're doing right now. And really, for the first time in my career, force masur is being introduced as a deal point in the initial deal making phases. Uh. And one of the things that's interesting about it is there is no sort of

disparity of information out there. Everybody's negotiating these points kind of you know, looking at the world and having the same observations and experiences, and so Talent are looking for protections that if there's a resurgence of COVID that you know, shuts production back down again after it resumes that they will be protected in their compensation or at least, um you protected in their flexibility if they don't want to

wait around indefinitely. And studios are as finally attuned as ever to the importance of these clauses in protecting ourselves because while we're not looking to s to manipulate any situation with Talent, if we are forced to shut down production, we need to be able to mitigate the expense of that and um, you know, protect our ability to keep

key cast and crew together. So uh, you know, something that became that spent many years as an afterthought has become a central deal point, which you know, again brand new to all of us in this game. Another aspect that I would imagine is changing much for you is how you're dealing with the AMPTP these days, given that there's also the backdrop of all this pandemic issues playing out. While tensions with the guilds are obviously front and center. Uh,

what has that been like? Sure? So Uh, look, was going to be a big year for the AMPTP no matter what, because is on the every three year cycle where we're negotiating the d g A, w g A and SAG after agreements anyhow, uh and so uh, you know, no surprise that there was a role for them this year. But you know, the pandemic, maybe more than anything that I've encountered in my career, is a true hand industry issue, um, something that is affecting every producer more or less equally.

I've never seen a situation where all production everywhere in the world ground to halt all at once. And so when you're facing a challenge that truly touches on every part of the industry and affects everybody, there's an important role for a trade group like the AMPTP so that we can make smart decisions because you know, ultimately, UM, I think Hollywood gets through this by recognizing our our shared uh interests and are shared fate, and the AMPTP

becomes a vehicle for that. So uh, just as the AMPTP is the central body through we we organized art collective margeting, as we're now dealing more extensively with the unions, on return to work rules. The A m B t P is the vehicle through which we're having those conversations, so every company doesn't have to negotiate independently with the unions. The AMPTP has also had an important role in kind of being the touch point for the industry with the

state and federal government officials. Again, we are submitting plans and white papers to the governor in California and in New York articulating the industry's vision for when and how

production should resume. The AMPTP has allowed us to speak more or less with one voice so that we can have that conversation most effectively, um ultimately, As I said, you know, this is an area where I'm sort of when I look at the challenge in front of us, I'm reminded of kind of other similarly structural challenges to television or film or entertainment where maybe the industry wasn't always as smart about looking at itself as a unitary whole.

And sometimes I think about the rise of home taping in the early eighties, where the music industry and the film and television industry viewed themselves as separate and competitive

and did not work together. To come up with legislative solutions or regulatory solutions to protect themselves from piracy, and as a result, I think suffered a lot more from initially home taping piracy in the eighties leading to internet piracy in the two thousands because they did not approach things as a group, um and as an industry with

common goals. Uh. Here, I think that the industry has been much more intelligent about saying that, you know what, there isn't a division between producers and platforms, or studios and networks here, or talent and studios, um. Ultimately we all get back to work together. And so I think the AMPTP again has been a very useful vehicle for taking that collective approach, got it? Uh? And if as we talk here, I feel like we're adding layer upon

layer of complexity. So let me just throw yet another thing on the stack here, which is the diversity issue, which is obviously a huge subject in the wake of the Black Lives Matter movement. And you know, I'm curious, does that is that something that is already sort of permeating deal making, permeating even the culture of companies like Paramount right now, given there's so much to reckon with their Yeah, I mean, I think it's it's it operates

independently of the pandemic. I think it's it's an issue in a conversation that predates the pandemic. But as you know, twenty isn't hurting for big news stories and big challenges to society, and we are all being forced to sort of reckon with racial engage us as an inequity on a social level in a really meaningful way and and and more forcefully than has been the case of the past.

So I think the industry has talked the talk about taking diversity and inclusion seriously for some time, but uh, you know, the events of the Black Lives Matter protests, you know, the murders of of George Floyd and mad Aarberry and others have, um, you know, encouraged everybody to start walking the walk in a bigger way and to really commit themselves to these these issues in in more tangible ways. I think a lot of companies are looking

at their own numbers. I think Paramount has a good track record organically over the last few years of seeking out diverse storytellers and diverse stories. But yeah, I mean, I think the moment demands real action and not just platitudes. And so every company is going through a period of introspection about where it's truly at and how it gets to a better place. And I'm sure that's also working itself into where we started the conversation in terms of

your your focus now on the development front. I understand that that sort of proceeds apace. But given you don't really know when a lot of what you're talking about in development will actually be put in production, how does that impact the usual development deal making? Well, Um, for one, it requires a lot of communication between the studio and the talent and the representatives about what's the plan and

what's the process. You know, deal making is all well and good, but deal making is really designed to the way that I think about it as kind of getting getting every uh documenting everybody being on the same page and what our understandings and what the rules will be will be. But the sort of you know, root of that, like another step up, is just actually understanding each other and having a plan. So we're having transparent conversations with our with the writers and producers that we work with

about what we think the timetable should be. UM Paramount has always invested heavily in internal development. You know, there are studios that focus more on ifcom arrangements, put together a quick package, take a pitch out, take it to market, versus blinds, firm script deals, long internal development and packaging processes.

Paramount has always done a bit of both, and certainly we're extra focused on internal development right now because we do not want to again take projects out into a marketplace where our buyers are maybe feeling really financially stressed or kind of you know, struggling with their budgets for the year, and so we're taking our time UM working

on second scripts, bibles and formats. UM. We are being you know, we we want to give our projects the best opportunity to succeed, and sometimes that means waiting a minute so that they kind of reach the most receptive audience. And then part of you know, the next planning aspect of that is how you cannibalize yourself and you don't rush to take everything to market all at once and

to spread things out in a certain way. It's also a task of how you manage kind of pre existing development and projects that were already well along the way uh to production UM, where maybe the network and the studio agree that creatively, this is where we want it. And you know, in a normal world this would be ready to go, but we can't perceive right now. So

what do we do? And you know, we're talking to network partners about conditional orders where you know, they're making a commitment to the series moving forward, subject to you know, answering those last questions about what's the cost and what's the production plan in a COVID production environment, because we're

still in the process of quantifying that experience. UM. We're also you know, uh, within our network development generating more material and more scripts, uh, something that has I think already been a trend of development where you're putting together more written material before you get into production, so that when production does resume, there's the hope of actually smoother and easier production because there's more written material and the

traditional system of kind of rolling the writing and the production process doesn't have to take place the same way. You can walk into the first day of production with more scripts ready. You can have you know, your scripts done at an earlier phase in the production process. UM, And it's a way to both kind of productively use the time we can doing the work we can and putting ourselves in a position to have the best production experience when that's back on the table. So you've got

the development pipeline humming. Uh, I'm curious what this means in terms of, you know, have you revised your expectations in terms of the peak TV trend? Is this? Is this still something that's gonna be a hockey stick curve flying off to the top right of the chart, or are we seeing some disruption of that now? I think we are seeing some disruption and of that. Um. I think that you know, the peak TV curve, even if it was a hockey stick, it was never going to

be a perpetual hockey stick. There was always going to be a plateau on the other end of it. And uh, you know, I do think that this moment may accelerate the arrival of that plateau. I mean the streaming wars as as you know, people like that term. They're very competitive, difficult wars. And I think there's broadly been a perception that with the proliferation of all these new streaming services, uh,

not all will be able to survive forever. Uh. There's a assumption that you know, households will tolerate a certain number of subscriptions. I believe the average household in the research I most recently saw in the US has if it is a streaming household, has two point seven streaming subscriptions. How much higher can that go? Especially in a time when you know, put aside the economic stress on the industry and the companies in the industry, there's economic stress

on the public, on everybody. People are looking at their budgets. Um, you know, they're they're feeling economically insecure, even if their jobs are still in place for now, and I'm probably asking them tell their hard conunptions of do I need four or five subscription services. One of the trope phrases that I've been using for a while is, you know, this time a year and a half ago there were

three premious subscription services. This time next year there will be eight, and this time four years from now there will be four. Maybe I need to revise that to this time three years from now there will be four, um, because ultimately, you know, I think the business plan for all of these companies contemplated being able to tolerate a certain period of time of pain, a certain period of time of operating at a loss to acquire the subscriber base that it needs to kind of advance to the

next stage of the industry. And right now, all of these new entrants into the market are going to have a Harvard time to what have otherwise been the case

building up their original content offerings. So putting together that really appealing package to the consumer to justify the initial subscription is a little bit more challenging if you can't load up your number of new shows, and uh, the sort of macro economic pressure that everybody is under may make it harder for these companies to be willing to operate these services at significant losses for two, three or four years at a time to make it to that

phase of profitability. So I do think there's a risk that, um, you know that the pandemic is going to accelerate the contraction in the number of platforms that are active in the marketplace, which probably comes with a contraction in the overall volume of production that's in the marketplace. Uh. So you know, it's not the end of peak TV right now, but I do wonder if you know peak TV as

we understand it. I think when we last spoke, I predicted a you know further five year runway to peak TV before things we're going to start really tightening up. I think there's a good chance that that five year runway may look more like a three year runway. I hear you. I follow the logic, but I would also be remiss in not noting that your parent company, Viacom CBS seems intent on entering this marketplace and a lot later than many of the other players. So how does

that bode for your company's effort on this front. Well, look, I think I think we have to be clear eyed about the challenge in front of us. I think for Viacom CBS, the focus is on marshaling the combined resources of the recently merged company and sort of um uh bringing to bear for the company, UH quality assets that we've kind of kept in our back pockets. Where we at Paramount are extensive conversations with CBS all access about

Paramount titles that are a good fit for for the service. UH. Paramounts Library has always been sort of are big kind of entered market advantage as an independent studio of A big reason why we've been able to establish ourselves as quickly as we have is by accessing the resources of the great i P that we've got, and and sort of more that has been brought back into the fold because of the combination CBS, and some of that i P was sort of split up between the companies when

they divided back in two thousand six. There's a lot that has been sort of held in reserve, UM that we can now deploy for CBS all access some kind of crown jewel ideas. UM. I can't say a lot more than that at this phase, other than to say that there's still fuel in the tank, UM, and and we're going to have to strike that balance between remaining active in the ecosystem and maintaining our relationships with outside companies while supporting the big strategic endeavor of ICOM CBS

as a whole. Yeah. I mean that to me would be the big question. You know, you're gonna need a lot of fuel in that tank to you know, fuel up other rival companies with your content, but at the same time, uh, fueling your own effort. And I know it's early days and it's not clear what what Viacom CBS is exactly doing, UM, but you know that also begs another question, which is last time we talked Vicom CBS did not exist. Uh, you guys were off separately

with Viacom. So you know, sort of layer five in our you know, complicated stack of of what's making your life tough these days. Does that change the nature of deal making having a new parent company, Yeah, I mean certainly there are lines of of business that there's a natural expectation that everybody's going to take advantage of. We as as Paramount, already had had relationships with UM, you know, showtime and CPS all access prior to the merger, but

those have deepened tremendously. We still operate on an arms length basis. We have obligations to participants. Uh, you know, we're trying to maintain our own business, but it's also a deal making context in which you know, everybody understands it's got to get done. UM. Not figuring it out

is not an acceptable result. But the good news is I think everybody is a real professional, and the experiences that we've had since the merger UM have actually been really, really uniformly positive in terms of I think that one thing that I've encountered in large companies UM, and I've worked in large companies over my career is when different parts of companies are working, you know, into company, there's often an expectation on both sides that each is owed

a sweetheart deal. And it actually increases the friction rather than decreases it, because everybody thinks they should be on the good end of the favor. Essentially, Um, it's counterproductive and UM and it you know, I think it leads to bad results. The attitude that I've found within the vi Com CBS merger is nobody's expecting anybody to do

them tremendous favors. We're expecting each other to work with each other reasonably, uh, to kind of cut the nonsense and find the real business solutions and to um, you know, operate fairly. And there are real professionals on all sides to understand the marketplace. And so those have been I think really productive and for the most part, smooth conversations. Um, it's been I don't want to say a pleasant surprise because I don't want to. I wasn't necessarily so dower

on in advance. But I think it's gone really well. That's good. And we've talked a lot about streaming. But you know, I remember last time we spoke about you had particular takes on the future of broadcast and cable television in this landscape. Have those changed at all? Do they still have seats at the table for who knows

how long? Yeah? I mean so, I think I think a lot of my production predictions from our last session umor have have been borne out to an extent and maybe supported by recent events, and some uh, you know,

require some further thought. When we talked about broadcasters, my going theory was that the best approach for broadcasters would be to refocus on the content that was traditionally successful in their platforms that hadn't been as popular in streaming, so things like reality, multi camera comedies, excuse me, procedural dramas, classic broadcast television. Um. I think that's still true, and

I think that's more true than ever. Uh. And I also I think it's worth noting that as as companies are thinking about what kinds of productions can come back into uh, what kinds of shows can go back into production, as soon as those are the shows that are going

to find the easiest time to come back. Reality shows with controlled stage environment, especially if you reduce the presence of the audience, multi camera comedy, same logic versus some of the bigger, complex, location oriented, large numbers of extras, massive crew shows that are characteristic of quote unquote premium television or streaming style television that I think are going to take longer to really get back up to speed. UM. So I think that sort of prescription for broadcast hold.

And I think that as we look ahead to how they're going to actually program their two seasons, we're going to see a lot of programming of that type. Uh. Cable certainly is um it remains stressed. UM. I think that uh, you know, when we spoke last there was a contraction underway in the number of networks that we're going to that we're investing in scripted programming UM, and

again particularly quoe unquote premium scripted programming. I think that trend is continuing, and we are going to find that some of the networks that you know, we have gotten used to seeing scripted programming on are going to be turning away from that, uh that content. In part that's

related to the rise of streaming. The all of these major news streaming players are associated with traditional legacy media companies, and so I think there's there's a little question that HBO Max is really the focal point of the new A T and T Warner brother environment. Peacock is really the focal point of the new the Comcast NBC universal environment, in the same way that by Coom CBS is streaming is likely to be a significant focal point of the

Vicom CBS strategy going forward. And uh, as as you know, companies are looking how to serve their digital offerings and their cable offerings. You know, streaming is sucking up a lot of the con tent and it's going to affect

the programming strategies for cable. Um. I think there will always be a place for scripted on cable, but I think scripted is going to become progressively less common on cable and there will be a focus on specials on unscripted um with a lot of the kind of traditional dramas that we've gotten used to seeing being pushed more towards the streaming side of the business. For streaming, it's

really about how do you take maximum advantage of this moment? Uh. You know, Netflix's stock has been having quite the time over the last few months. Um. Uh, you know, as people are home, it's very obvious that they are looking for ways to pass the time, and streaming is an

important part of that equation. So I think for every streaming player it's about how do you sort of use this opportunity to build the relationship with your customer and make sure that it persists so that they remain interested in your brand and your service once they're allowed to go back out side again. Well, in keeping with our every two year podcast schedule, I'm gonna ask you to set your calendar for July. It'll be interesting to see how much has changed when we do this again. Thanks

for coming on the podcast, Ken, Thank you Andy. Always a pleasure. This has been another episode of Strictly Business. Tune in next week for another helping of scintillating conversation with media movers and shakers, and please make sure you subscribe to the podcast to hear future episodes. Also, leave a review in Apple Podcast let us know how we're doing.