Les Moonves on CBS staying number one, the NFL, and why he's glad he didn't do a deal with Hulu
At Business Insider's IGNITION 2015 conference, CBS's President and CEO Leslie Moonves joined Jim Lazone, who heads CBS Interactive, to talk about the future of media.
They talked with CNN's senior media correspondent, Brian Stelter.
Edited for length and clarity.
Brian Stelter: Since we have two of the greatest minds in media up here, I wanted to start by asking both of you what you think is the biggest misconception about the business of television right now?
Leslie Mooves: I think that broadcast television is "dying," as opposed to being repurposed.
Stelter: So you're saying it's still not dying? Because I think I wrote that story for The New York Times like six years ago, and it hasn't died yet.
Moonves: I've been reading it for 30 years, that network television is dying. There are still 20 million people a week watching "The Big Bang Theory" and "NCIS"; they're just watching it differently. A great number of them are still watching it on the air in the time period, but yet, the content is available all over the place, and it's getting measured all over the place, and we're beginning to get paid for it all over the place, so the ecosystem is very good, but yet, the basis for the content still comes from the networks and the premium cable and the basic cable system.
Stelter: Jim, in your world, what's the biggest misunderstanding right now about the digital side of the business?
Jim Lanzone: Maybe that as a traditional company we're sitting on our hands, not embracing the digital world. So overall, we're the number seven internet property in the US. That combines CBS.com, CBS Sports, CBS News, CNET, Gamespot and all that. We've moved fully into mobile with 20 million mobile downloads. But on the other side of it, I can sit in Silicon Valley and see both sides of this. You know, television is still five and a half hours per day for the average viewer, and it's an hour and 20 minutes, I believe, for total for online video, and that includes Netflix, it includes YouTube, it includes us, in that hour and 20.
Stelter: What does that number tell you about where things are going?
Lanzone: Well, I mean, obviously the digital part is growing, which is why we're embracing it so much.
Moonves: What we like to say is: the status quo right now is your hundred-channel universe sitting at home. Then you move the next step over to the skinny bundle where it's 12-20 channels and people are watching it, and then it moves to the streaming services like CBS All Access, so as slowly or as quickly as it moves, and we don't know that, we're there. We're in all places. Obviously the digital part is going to grow the fastest, and economically we're very pleased with that because we're still going to get paid for our content, and we're aware, however you want to watch it, from the time you're five years old to the time you're 80, you can get CBS in the way that you want. And obviously more and more of it is shifting digitally, and we have a phenomenal group of people at CBS Interactive who know how to handle it and know how to promote it, and we're doing a great job.
Moonves: I can't believe that will ever happen, and I'll tell you why. There is something for everybody. Among those younger viewers, they're either watching the NFL, they're watching Stephen Colbert, they're watching "The Big Bang Theory," they're watching the NCAA basketball tournament - whatever their taste is, they're watching the news, whatever it is, there is somebody out there who needs our content and needs it badly.
Stelter: So as long as you hold on to the NFLs and the NCAAs of the world and the Colberts, you're saying you're covered?
Moonves: Well, we have the NCAAs for another 15 years, we have the NFL for another nine years, we have "Big Bang Theory" for as long as that will go, so the answer is as long as we can continue to create or acquire great content, which is what we do and what we've done forever, we're going to be fine. There are going to be people who want to watch us, no matter what age group.
Stelter: Since this is the "Kings of Content" session, let's talk about a few examples. Thursday Night Football, the deal is up next fall. Right now you have it with the NFL Network. Will you be able to hold on to that package of games?
Moonves: I don't know. We've had two one-year deals with the NFL for Thursday night. We've been very pleased with it. We were more pleased this year cause we had better games and they were closer games and the numbers have gone up considerably. Obviously the NFL is experimenting with digital. We have streamed - how many did you say? Seven games this year?
Lanzone: We will, through the Super Bowl. We'll stream seven NFL games this year.
BIMoonves: And then the NFL put the one game on Yahoo and clearly that will be part of it. We like having Thursday Night Football because it allows us to spread out original content better through the rest of the year. If the price gets way out of line, we may not be there. We hope we are, but however it goes, I think digital will be a big part of that package, however you look at it.
Stelter: Is that deal imminent? Is the NFL figuring out who it's going to partner with? Is that imminent?
Moonves: We don't know yet. We didn't know last year until right after the Super Bowl, and I guess they're on the same timetable.
Stelter: This is Super Bowl 50, and you all have the rights, so Jim, are you already having night sweats about having to deliver the livestream to millions of people?
Lanzone: No, it's part of being able to do this across all these different properties, so when we launched All Access, that was actually on our own platform. We're not outsourcing the streaming of that. That's our own internal video streaming technology, and it's the same thing for all the NFL games we're streaming. We did the Super Bowl in 2013 already as well and didn't have any trouble there, so I mean, it's a big deal for us, but all these events are. If you go to the Masters, you'll see eight trucks there just for digital. It'll be the same thing, you know, for the Super Bowl.
Stelter: Eight trucks? What are they doing?
Lanzone: We're doing our version of the streaming, taking the broadcast…it's basically the same thing that Yahoo needed to do. That was our broadcast.
Stelter: Their livestream around the world last month?
Lanzone: Yeah, that was the CBS broadcast taken by Yahoo to put online, and that's what we do for the different sporting events. We do it for SEC football and college football. We do it for March Madness.
Moonves: What's significant, and I'll praise him 'cause he works for me, but the CBS Interactive Group, the reason it works so well is they honor and respect the traditional media saying, 'Okay, they're delivering some great content, and we're going to take it to a whole new world. We're going to take sports, news, entertainment content, stream it, put it online, slice it, dice it, present it to the world in an entirely different way,' but without saying, 'Gee, CBS is old-school,' you know? This is great content. This is great content that's presented in a phenomenal way by our interactive group, and that's why the company is working so well.
Lanzone: It is a bit of a different audience, so the rankings of the shows on CBS.com are different.
Certain shows, "Supergirl" used to be "How I Met Your Mother," those things are usually higher than broadcast. And for All Access, it's 10 years younger, the average viewer. CBSN, which is our new 24-hour digital streaming service, 70 percent of that audience is 18 to 49, so it is a different demographic of it as well online.
Stelter: What are the biggest single shows for you online when it comes to CBS?
Lanzone: It's more or less the usual. It's "NCIS." "The Good Wife" is a good example of one that does a much bigger audience, in terms of the rankings, online than it does on broadcast.
Stelter: And since you mentioned Yahoo and the stream last month, what did you learn from it? What was your takeaway from that experiment, given that people are expecting the NFL to want to stream more games in the future, whether within a broadcast deal or without?
Lanzone: I just think overall, if you take CBS as an overall digital strategy, it's the one that's kind of obvious by now, but it's "best screen available," right? Being multi-platform and being on all devices because you stream the Super Bowl, it's a national game, right? It's on [small screens and massive screens]. You'll watch it in that environment. The Yahoo game was not a national game. It was actually only broadcast in Buffalo and Jacksonville or online. So I think what that may have proved is that it could find an audience online if it's not broadcast on the best screen available, but I think our strategy going forward would be to be on all these screens for all of our programming.
Stelter: But does "best screen available" still mean the television set? Or are you finding cases now where people are actually preferring to watch on their phones and on their tablets?
Lanzone: Depends.
Stelter: Depends on what? The kind of content?
Moonves: If you're watching the Super Bowl, if you have an 80-inch television, you're not going to want to watch it on your tablet, unless you're going to the bathroom, I would assume....
Stelter: Which actually is a case study. That's a youth study.
Moonves: By the way, if you're going to the grocery store or sitting in your car, you're going to watch it on a tablet, but…
Lanzone: I'd rather watch "Star Wars" on [a big screen].
Stelter: You say that, but I find myself watching Hulu all the time now on my phone, so that's why I'm wondering if for younger people, "best screen available" might mean the most personal screen, as opposed to the TV screen.
Lanzone: It's both. But go back to CBSN again as a good example.
Stelter: And this is the one-year-old streaming news channel you have.
Lanzone: Right. So 16 hours a day, five days a week, so Sunday through Thursday, and you know, the average streaming duration is 77 minutes when it's on OTT devices, which is actually the most popular version of it by minutes spent, so 77 minutes. On mobile it's 24 minutes, so they're both really long. I think that it shows the success of the product, but 77 on OTT on the biggest screen available.
Moonves: And let's go back to the significance of what Jim said before, and I want to underline it. The average age of the nightly news viewer is 61 years old. The average age of the cable news viewer, except for your show, is almost 70.
Stelter: Yes, I was going to say, it's higher than 61.
Moonves: It's almost 70. On CBSN, it's 40. I mean, that's a new news audience that wasn't being captured before, and that's a pretty significant thing.
Stelter: So is that why you greenlit CBSN and told Jim's team and the CBS News team to go out and do this streaming news service? Because it must be costing quite a bit of money.
Moonves: They've made it cost-effective. They're selling ads against it. It's losing a little bit of money, but not an appreciable amount, and it is building; it's growing in leaps and bounds. Obviously when major news events happen, like those unfortunate incidents in Paris and San Bernardino, the numbers were incredibly high. People are getting used to doing that.
Stelter: I do wonder if, Jim, does CBSN need a breakout moment? For CNN it was a baby down a well, for Fox News, for MSNBC, they've had these breakout moments. Does CBSN need one or has it already had one?
Lanzone: I think we just had one. I think the weekend of the Paris tragedy and the Democratic debate, which CBSN was a big part of, which was on CBS broadcast but also online, that weekend we did five million streams, and it was really the jumping off moment for that product. And then when San Bernardino happened, it turned out that that audience had stuck, so that number kept going up over six million for that weekend, which, again, when the average length is 77 minutes on OTT and 30 to 45 minutes on desktop and mobile, it's substantial. So I think we just had that, and everything up until that, in some ways, was the dress rehearsal for that moment.
Stelter: Is advertising enough on its own to keep CBSN going?
Lanzone: I mean, we have different options. That's why we have the subscription product that we've launched with All Access. We still have the free product on CBS.com. If you look at sports, obviously it's free to use CBSSports.com to get scores, we'll stream the SEC football games, we'll stream the Super Bowl, but also, you can subscribe for fantasy football. We're one of the top three platforms for fantasy. We have sportsline.com, which was relaunched as a $100-a-year subscription product for data analysis and projections. There's a spectrum for these things, and I think news, we're still trying to figure out where that fits in there, but overall advertising for our digital news divisions is up 50 percent, so it's all part of one good flywheel for it.
Stelter: You mention CBS All Access, so in a nutshell, what is CBS All Access?
Lanzone: It's the six-dollar-a-month, high-end subscription service for the superfan of CBS. So on CBS.com, you'll get the trailing five episodes for most of these shows. If you subscribe to CBS All Access, you'll get full-stacking, meaning all seasons of 24 current series. You'll be able to actually live stream your local market's television station, so the local CBS station in over 75 percent of the markets. It's 115 markets in the US. You have a lower ad load and things like that. There's a long list of things you get with a subscription.
Stelter: I'm guessing you have 500,000 subscribers. Am I high or low?
Moonves: We're not giving out that number.
Steleter: I tried. That's one of those ways that I was going to try. Why not give out the number? If it was doing really well, you'd want to brag about it, right?
Moonves: It's doing really well. We're bragging about it.
Stelter: But you're not bragging about it. Hulu has something like 10 million, Netflix has lord knows how many.
Moonves: As I said, as soon as they tell us how many people are really watching "House of Cards," then we'll consider telling how many people are on All Access. Simple as that, right? Netflix gets away with it. Why can't we?
Stelter: The CBS All Access arrangement is direct-to-consumer. People wondered why CBS All Access was not in the Amazon announcement this morning, Amazon's streaming partners program where you can sign up for Showtime, but not CBS All Access. Why?
Moonves: Well, Showtime, number one, generally goes through MVPDs, and we wanted to keep that system alive.
Stelter: You're thinking Amazon and Hulu as the new version of the MVPD?
Moonves: No question about it. All Access is a better direct-to-consumer product, you know. One day will we go through broadband companies? Possibly. Will Showtime go direct-to-consumer? Absolutely, that's a possibility. But at the moment, this works better for both services.
Lanzone: Yeah, I mean, and we're going to be on most of these devices if we can get the right deals worked out. We're on Roku, we're on Apple TV, we're on Chromecast, PlayStation, so down the line, we are being distributed in these places. We're on Amazon on different versions of their products, so we'll be there. I just think it's about working them out. Showtime got there first.
Stelter: For a king of content, what is the hard part about getting on all the devices, getting on all the screens? Is it just the amount of negotiating that goes into every one of these deals? What is it?
Lanzone: [Les Moonves] is the king. I'm just the little buddy.
Moonves: The answer to that question, yes. Each deal does take a new negotiation. And by the way, there are so many different systems and services and rules and regulations that go into it but....
Stelter: It keeps so many lawyers employed, right?
Moonves: Absolutely. But we've had fairly large success rate. As we've said, All Access is now in almost the entire country, and we've negotiated all of those deals with our affiliates, and Showtime has made deals with our different partners, and they've done Amazon. We have Hulu done, we have Roku done, we have a number of them done, and it'll continue. I think it gets easier as time goes on, as people get used to it.
Stelter: Jim, who else do you think will try the Hulu and Amazon model of being a hub for all of these niche streaming services? Will anybody else try?
Lanzone: I don't know. I think right now there's a difference for us between being a virtual MVPD, which some of these guys are trying to be, and what we focus on, which is being the digital hub for CBS. I think going back to before my time, when Les and his team didn't do Hulu and decided that it was a better idea to keep 100 percent...keep it 100 percent their platform, decide where it was distributed, have it be distributed with their logo when it was distributed, keep all the ad revenue. It's paid off for me and my team when we've come in, because that's why we have CBS.com being as healthy as it is, why we're able to launch All Access and those things, and yet, it still fits in the overall ecosystem, right? That's just our version on digital platform, so I don't know. I think in some ways we're setting the pace for some of that stuff and people are seeing how it's going for us.
Stelter: Well Les, you did just see Mike Hopkins backstage. Any chance of a Hulu deal someday?
Moonves: You know what, we sell a lot of product to Hulu. We didn't join initially, and we're sort of glad we didn't, as Jim said. We have CBS.com and the ability to do CBS All Access. There were a few things that went into it. One, having control of our own content. Two, not being in business with your competitors directly. Three, keeping 100 percent of the ad revenue, so being on our own. By the way, Hulu has done great, and it's a very great service, and as I've said, we've made a number of deals with them. We hope they succeed, but we like being on our own, and it's worked very effectively for us.
Stelter: Hulu sells an ad-free version for four bucks a month. Would you consider that for CBS All Access?
Moonves: Absolutely. We're talking about it and right now we have a $5.99 offering. There could very well be a $9.99, no advertising product, that's out there.
Stelter: What's the value in that? Why offer customers that option?
Moonves: Right now, and this goes back, way back, the deals with the networks were you had to watch our ad to watch the show, and ironically, the average viewer is worth $4 to us, so it's sort of an equal trade to put it for $5.99 with advertising or $9.99 without it.
And we think it's a good offering. If you want to pay the extra money, that's fine. If you don't, we're happy to give it to you that way.
Stelter: So the average viewer is worth $4 meaning per the amount they tend to stream per month?
Moonves: Being the amount of advertising that we're getting paid per viewer on All Access would equal $4, so…
Stelter: 'Cause I'm thinking I'm worth more to you on broadcast TV. Aren't I worth more than $4 a month on broadcast?
Moonves: It's hard; it's apples to oranges. CPMs are very different online. As I said, we want you wherever we can get you.
Stelter: It is as simple as that.
Moonves: Simple as that.
Stelter: And yet as difficult as that.
Moonves: Well, look, we've been the number one network 12 of the last 13 years. We intend to continue that, but by that I mean there are going to be more people watching us hopefully 10 years from now, and you know for sure it's not just going to be on the network in a linear way.
Stelter: What do you think the YouTube folks and the other folks that are all out trying to be able to brag about being the kings of content? What do you think they could learn or should learn or maybe shouldn't learn from you?
Moonves: Well, for years, there's been an odd relationship between Silicon Valley and Hollywood and the content makers. I think they're getting closer and closer, and obviously Netflix is doing some good stuff and Amazon is doing some stuff. Look, putting on good content is not lucky. It's really hard. It's really hard to do. When Netflix did hit with "House of Cards" early on, I said to Ted Sarandos, "You don't understand how hard it was to hit a homerun your first time at the plate." And they really did a fabulous job. It's a lot harder than that. We come from an experience of being product creators. We've been creating product for a long, long, time, whether it's news, sports, entertainment, across to Showtime, down to CW, first-run syndication - there is a skill set that comes with that. When you're YouTube, it takes a while to get there.
Stelter: It is really hard. Has anything really disappointed you this season so far?
Moonves: Well, we had four new shows on. They've all been picked up, so, so far so good.
Stelter: Anything surprise you then about what's done well?
Moonves: No, not really. You know what's different? There are no grand slam home runs out of the box. I was around...I put on "ER," and it did a 40 share the first week. I did "CSI," and that did a huge number, and "Survivor" went through the roof. There are not those kinds of hits, and the reason for that is is the audience is more spread out. They may have the same audience base, but it takes a while to count them, to aggregate them. It's a different game. You can't expect those kinds of ratings anymore, and what are acceptable ratings today would have been cancelable shows as recently as five years ago. You see shows renewed today, and it's sort of stunning.
That's why we say, "You know what? Overnight ratings really are insignificant. You shouldn't even look at them," although I do every day. But it really only matters for the very high rated shows or the very low rated shows. The rest...you know, we give the example of "Limitless." "Limitless" is a new show that is absolutely a hit. The first viewing was watched in the overnights, same day, by nine million people. Within two weeks when we counted everybody else, that number doubled. It had been watched by 18 million people. That's a hit. That's a significant number, but you have to treat it differently. You have to look at it differently, you have to add different things, and it's still about the content.
Stelter: I would venture to guess that even though "ER" had George Clooney, I bet I'm more obsessed with "The Affair" on Showtime than anyone ever was about "ER." There's more passion now for shows, even though they might not have as big an audience in sheer volume, right? There's more passion?
Moonves: By the way, "The Affair" is our show and I love it, so it's one of my children. "ER" had 40 million people watching it. Forty million people. There's something to be said for numbers like that, you know? People were dying to see "ER" every single week just like they're dying to see "The Affair," but "The Affair," is only watched by six million people every week, so…
Stelter: I guess I'm going to add the idea that it's about passion now, maybe, and less about passive viewership. But maybe you don't totally agree?
Moonves: Well, you're talking about a show called "The Affair," of course it's about passion. But there were a lot of women passionate about George Clooney back in the day and Julianna Margulies and Noah Wyle.
Stelter: I'll defer to you on that, Mr. Moonves.
Lanzone: There's also more ways to be passionate socially. We have 300 million followers on Facebook alone of our different programs. People have ways to participate with the shows now that they didn't have back then.
Moonves: I think your point is it's more personalized now.
Stelter: Definitely.
Moonves: You can get what you want when you want it, and it becomes a much more personal experience, yet there's still something great about watching it and knowing that 39 million people are watching it with you at the same time.
Stelter: I'm with you on that, and I wish technology would help us do that. My set-top knows that a million other people are watching when I am. I wish it would almost let me be in the same room with them, but we'll get there, I assume.
Moonves: Well, that's why live events are great 'cause there is a dialogue going on during the Grammy Awards or during a football game, during a debate, about what's happening 'cause everyone is experiencing it simultaneously. There's a lot less of that going on now because of the way people are watching television.
Stelter: Yesterday, I get the sense from you at UBS that maybe Apple is cooling on a streaming service, the idea that they would get all the networks, they'd get all the content, they'd stream a version of cable to us through Apple, through the app store. Is that right? Apple has cooled on that? What's going on?
Moonves: I don't even know if they're cooling on it. They had conversations on it, and I think they pressed the hold button. They were looking for a service, and this will happen, that has four major networks and 10 cable networks, let's say, and the price point will be in the 30s - $30, $35, $40, maybe - and people will not be spending money on channels they don't want to watch. There's a lot of people paying for sports channels - and I won't mention one that has four initials - that cost a lot of money that never watch it, that never watch it. People want to pay for what they're watching, and that's why the idea of a skinny bundle or the idea that Apple is putting forward is a good one. It makes sense. You pay less than half, and you get the 12 or 14 channels you really watch every week.
Stelter: Jim, what do you want Apple to do? Do you have something you'd like to see them do? A way you'd like to see them change the game?
Lanzone: Well, I think, for us it's about having multiple players like that.
Stelter: A competitive market.
Lanzone: And to Les's point, our job is to make sure that we're one of the ones selected for that bundle, and so being number one makes it very easy to have all the content that Les and his team are creating. It makes our job easier that way. But yeah, we like the idea of having multiple strong players that way, and really, it's about getting out to our consumers on these different platforms and things are fragmented across different systems. So we want to be on all of them.
Lanzone: I don't know. I think YouTube is very different right now. YouTube Red was not created yet, at least, for that purpose. Obviously it's shortform video. It's video for a younger demographic and music video especially, but certainly they're deep-pocketed and they're definitely going to be a big player in the market. And we're partners with them on every single one of our shows, and now with Colbert and Corden, we actually have a late night slate that does extremely well on there, and it's been a big boost for us as well.
Stelter: You were telling me you're up 2000 percent when it comes to video views for late night.
Lanzone: Yes, David Letterman - he was great on television - but he didn't do a lot online. He just didn't produce a lot of online video, so Colbert was huge right out of the gate, and differently than Fallon, where it's a lot of short form stuff. His full episodes are our number one full episode show so far. James Corden does great too. It's been over a quarter of a billion people have streamed his videos online, so we have a new set of great content there.
Stelter: It sounded to me like [Verizon will] maybe pursue a skinny bundle.
Moonves: Well, they already have a product that's out there that they're refining, and I think Verizon was ahead of the curve in terms of doing that, in making one bundle and then for $5 more you can get the sports channel.
And for $5 more you can get the kids channels. And I think it's very smart. I don't know how well it's working yet, but I think the concept of what they're doing, and Lowell [McAdam] and his team have been ahead of the game in terms of thinking like that, and we made a deal with them very quickly, and we were one of the first ones to be part of that, and we think that's how the world's going.
Stelter: If you could wave a magic wand, what would you change about the business right now in order to make more of this innovation happen to get where you all want to be? What would you change if you could change anything?
Moonves: What would I change?
Stelter: Maybe we should make Jim go first.
Moonves: Yeah, Jim, you go first.
Lanzone: Well the thing I'm most excited about-now I'm getting fired before I get out-I have two minutes and 17 seconds to make it…
Stelter: It's easy, Jim. Kill the set-top box, right?
Lanzone: The most exciting thing for us, recently, has been the greenlighting of "Star Trek" to be the first original series that we'll have online, on digital, and so I think other companies are being rewarded for doing more direct-to-digital content, and certainly we have the best content creation team in the world, and so I'm excited about that path for us.
Moonves: You know what, Brian? I can't answer that question. Things have changed so rapidly over the last three or four years. I can't think of one thing that I would want to change to make things different. I am extraordinarily pleased that between CBS All Access, Showtime Over-the-Top and CBSN, we're streaming ahead of just about everybody else in virtually every way we produce content, so no matter what comes our way, we're ready to do it. As Jim just said, we got offered a lot of money to have "Star Trek" on one of the other services. To be able to put it on our own service in the beginning of '17 was something that gave us a lot of pride. We said, 'all right, we're investing in our future like this with content,' and content is always the key to doing that.
Stelter: How do both of you watch TV, by the way? Is it on the phone? Is it on the big screen? All of the above?
Moonves: All of the above.
Stelter: All the above?
Moonves: All of the above. I travel a lot. I'm watching on the phone, I'm watching on the big screen, I'm watching on the iPad. I have to watch a lot of television. I enjoy watching a lot of television. I watch whenever I can.
Stelter: Do children's media habits scare you? Like when they walk up to a TV and they try to swipe the TV on?
Moonves: I have a six-year-old that is on his iPad and iPhone all day long, so I'm trying to figure out what he's thinking, but all I know is he's a lot more competent than I am in doing that.