Michael Eisner on how to make a billion dollars on content, and why this is the 'golden age of television'

 

It's been a decade since Michael Eisner stepped down as CEO of the Walt Disney Company.

Today, with his privately held Tornante Company, he's fully immersed in new media, and has a lot to say about what makes quality content and why he wants to be the one to own it.

Henry Blodget: It's been a while since Disney. What have you been up to?

Michael Eisner: Oh my god - everything. I decided that when I left Disney I would really leave. It's a little bit like when you have a house and you say, "I can't leave, and I could never sell it," and then you sell it and you decide that's that.

I'm happy with how well Disney's done, and how well Bob Iger has done. I'm a big investor, so that all worked out well, and I'm connected with them and talk to them, but I really decided I would move on.

I decided the same thing when I left Paramount, I decided the same thing when I left ABC, I decided the same thing when I left New York.

With Tornante, we have a lot of investments in hopefully not bubble-related internet companies, but real internet companies. We have some television shows. We have one - "BoJack Horseman" - that's doing incredibly well and is well-reviewed on Netflix.

Blodget: People have been predicting the death of television for 20 years now, and so far it's been entirely wrong. But it does seem viewership habits are starting to change. Netflix has come out of nowhere, and is now this incredible business that nobody could have fathomed 10 years ago. Talk about that change, and where we're headed.

Eisner: Well, there is no death in content. It's one of the few immortal things around. There's change. There's always been change.

There were 80 million people who went to the movies in the 1930s, when the country was only 120 million people strong, and then when television came in, everybody thought that was the end of the movie business, which was not and is not.

When video came in, everybody thought that was another end, and then digital came in, and we had another end with Blu-ray or whatever. What happens is one and one adds up - in my opinion - to more than two.

Now, without content there is no platform. The content defines the platform, so whereas when I was working at ABC from '66 to '76, people said it was the "great wasteland." It was the least-objectionable program that succeeded. It was, if you could get behind "All in the Family," you were successful.

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Michael Eisner tells Henry Blodget about being an NBC page and his favorite moments from his early career.

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There were three networks at that point that could say you could never work in this town again, and mean it. Then distribution became prevalent for cable, and then those guys could say you could never work in this town again and mean it. Arrogance follows distribution strength.

Arrogance follows distribution strength.

Distributors always go away, always have problems. They come back, they become nice, they try to acquire content. They do acquire content sometimes, so it's just changing.

Now it's great. I decided - so I could own it - to make a pilot of "BoJack Horseman." I do own 100% of it. It is on Netflix. We sent it around to everybody. Television is like the movie business. It's not the least-objectionable program - it's the best program that gets positioned. Same in the movie business. It's not just everything automatically gets done by the "in" crowd.

Netflix has been fantastic, and the show would not have been on traditional network, probably. I mean, it may have gotten on Fox if Fox owned it and it came out of that group, but it was hard. So it's great. This is the golden age of television. Television is not hurting. Television is in fantastic shape. It's just a golden age for other people.

Blodget: So what is it like working with Netflix as opposed to a traditional network?

Eisner: It's no different in that if you have a hit, they are very, very nice, and I have not had a failure, so I don't know how un-nice they get. They're very supportive, because we've delivered. They may have been very supportive anyway.

Reed Hastings got very lucky in that he had Ted Sarandos - who knew that he had one of those golden guts - that he saw "House of Cards" had potential and took a big bet on that. I'd like to say he saw that "BoJack" had potential and "Orange Is the New Black" and so forth. So a lot things are the confluence of the right platform, but Netflix without their creative acquirers would be an ancillary market for content.

Blodget: With "BoJack," you made the pilot first and then showed it to Netflix.

Eisner: We made a 12-minute pilot. We wrote two scripts, and then we combined them to make a 12-minute pilot, and then we sent it out. We said, "Look, if you have to own it, don't look at it, but if you're willing to let us own it, we'd love to be in business." We're owning things. The only way for us to have any place at the table as a content player is to actually finance the content ourselves. Otherwise, most of the distributors recognize the value of content, and they want to own it.

Blodget: You talked about how content never dies, more is better, distribution is broken down. We've now got into a situation where lots of people are saying there are only 24 hours in a day, there are screens with us 18 hours a day - there is going to be a limit with the number of high-quality shows that can be produced because they are expensive to do. Are we reaching that limit?

Eisner: Do you think Sophocles and Aristotle had this conversation that too much good is a bad thing? I think that argument is insane. First of all, it's very hard to be good. It is self-destructive thinking to think that there is too much good. There's too much bad. The worst is mediocre. Bad is easy. There's high quality, there's pornography, and then there's bad. Pornography works to a degree, high quality works, bad is obvious. Nobody goes for bad. The terrible middle ground is the mediocre. That was kind of the essence, in a way, of broadcast television when there were only three channels.

But mediocre is there today and doesn't survive, which is fantastic - just maybe not for the people who have invested in it. So the good raises the cream to the top - I guess cream doesn't rise to the top anymore, but when it did, cream raised to the top - so I don't think there is too much good. There's not enough good.

Blodget: You talked about making a 12-minute pilot. TV has always been regulated by half-hours and hours. In digital distribution, you have the ability to run any length of time. Will the shows stay in the format we are used to? The 22 minutes per half-hour, approximately hour-long documentaries? Or do you think a new length will evolve?

Eisner: I made a 12-minute pilot because I didn't want to pay for a 22-minute pilot. I could show what it was in 12 minutes at half the cost. Otherwise I would have made a 22-minute pilot. There is a tradition of length that will survive.

Blodget: What do the economics look like when you own versus when Netflix owns or when Fox owns? Why is it important?

Eisner: I don't know. Some people have made a fortune by being employed. Jerry Bruckheimer does not own his content. Warner Bros. owns his shows. They are on CBS, and he makes a fortune. That's one way to go for an individual talent. There's nothing wrong with that. I'm of that view, having seen the enormous value of libraries that I've been involved with building at Paramount or at Disney.

When cable came in, I saw the value to our library at Paramount, because when that happened, it was unbelievable - selling packages to Germany and Italy and all over the world. When the DVD market or the Blu-ray market came in, the library yet again became valuable, because every distributor needs these libraries. To me, owning is better than not owning.

This sounds crazy, I know, but you can make a billion dollars - very few people do - but you can make a billion dollars on a product. It can be "Lion King," it can be "Simpsons," it can be "Family Guy," who knows what it is. Or you can make zero. But you can't make a billion dollars if you don't own it.

But you can't make a billion dollars if you don't own it.

But you can't own it unless you invest, and most individuals can't invest, so I'm investing. I will never make a billion dollars on a show, unless "BoJack," for instance, becomes a cultural phenomenon, and maybe it will. Maybe this very conversation will take it over the top.

Blodget: The other distribution piece of television is the network and as we look at how content is consumed now, ultimately it's show by show. It's not that folks are tuning into a particular network and just watching what's there all the time. Do networks come under pressure too?

Eisner: They do. They have an advantage of live sports, which is very important, and news - which, by the way, is less important, exemplified by what you're doing. People don't have to go to cable news or network news. Live sports is the one of many things that's kind of community television. There are a lot of people who still tune in to "Sunday Night Football" or "Thursday Night Football" the way they did before.

I think the water cooler is more important than ever. "Oh, did you hear that 'Inside Amy Schumer' is fabulous?" Where do you find it? It's on Netflix, it's on iTunes, it's on places nobody ever heard of five years ago. Pretty exciting.

You can actually survive, bubble up. In the era of networks only, I cannot tell you the number of shows that we don't know about that did not survive. They got canceled. But there are a few that survived by accident, because they didn't have anything else to do, and they stayed with it. "MASH" started off as a failure, Jerry Seinfeld started off as a failure, "Family Guy" started off as a failure, and they stayed with them long enough to succeed.

Now almost any show that has reviewers behind it, Rotten Tomatoes behind it, will find a way to survive, which is why this fall there was the longest lag in canceling shows in a long time. They're afraid that somebody in the over-the-top world is going to find it, put it on, and they're going to be embarrassed. So it's a totally new ball game.

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Blodget asks Eisner: What's the key to excellent content? Are there just a few people who have the magic?

 
Blodget:
Why are there no more Netflix-like companies? Once Netflix proved that the model works, how is it that there's one $60 billion global company? Hulu is now growing nicely, but still small.

Eisner: There are more. But nobody believed that Netflix, something that could send video through the mail, was actually going to succeed in something else. Nobody thought that this group that was buying libraries would actually have an original program. Everybody thought paying $100 million for "House of Cards" was insane. So Amazon is there.

I didn't like a lot of their first shows. They did pilots and put them up and had the audience vote. I never thought that was the way to pick a show. And then they came out with "Transparent." It's a very funny, good show, and I think they're going to make it. Hulu didn't know what they were doing, because they had too many partners and nobody agreed, and now they see the light and now they're progressing in a lot of countries. Netflix is not going to be the only distributor.

Blodget: And do you think that some of the traditional networks will make the transition?

Eisner: Have to. Have to. That doesn't mean they're going to throw the baby out with the bathwater, but I think I read that all of them are talking about going into some sort of digital over-the-top. Easier for Netflix, which had nothing to lose. You know, they didn't have a business. They weren't protecting their video business. They weren't protecting their theme parks, they weren't protecting their movies. They just were what they are, which is usually the way it happens. Same thing with HBO. Jerry Levin figured out that you could distribute by satellite all over the country. Before that you had to distribute by truck. It changed the world.

Blodget: And will HBO successfully become just another over-the-top provider?

Eisner: I don't know. HBO Now seems to be working. What they have at HBO and at Showtime and at the networks is a sophisticated development arrangement. They do see the creative, so they have a leg up, and they read and listen to blogs like this, and they know what's happening and they see their cable numbers decreasing. They're not going away. This is not the end of the wired world as we know it.

Business Insider's Dan Bobkoff joined the conversation with a few questions.

Dan Bobkoff: There are cable channels that started - if you're cynical - basically to get cable-subscriber fees, and they have very small audiences. Do you think there's going to be a reckoning of all these channels, like MTV Hits and Palladia that get a few cents per subscriber, but they're not putting out good content. Are we going to see the end of the 500-channel world?

Eisner: I hope so. I'm a little conflicted here, because I like ESPN being in 100 million homes. And I don't think you're really talking about ESPN, but if I were a Comcast shareholder I would feel, "God, why am I paying all this money for these channels that nobody watches?" So I do think as they get there, competing it with all these new forms, they are going to have to come to grips with this. There's always somebody who loves every one of these channels so somebody's going to be carrying a placard saying "I need my MTV Hits." But I think there's a slow atrophy going on.

Bobkoff: How slow?

Eisner: I don't know, because some things go slow forever. Some things go slow, slow, slow, and then - wham! - they're over. So I just don't know. 

Some things go slow, slow, slow, and then - wham! - they're over.

Bobkoff: You're much more under the radar post-Disney. Do you prefer that?

Eisner: Oh God, yes. I was there 21 years. I think all but one year the stock went up, and the first 18 years we went up a ridiculous amount. So everybody was nice to me. But as soon as - I think it was after 9/11 or around then - when we were flat, a little bit down, it was as though I had murdered 700 people. You get much, much too much credit for things you have nothing to do with, and you have much too much blame for things you only have a little bit to do with. That's just the nature of what it is.

I was in a public company for 40 years of my life. Everything I have now is a private company. And even though a public company's a great thing, it's great for financing and all of the stuff you need to do. I'm not answering to anybody but my wife and my children and the people who work for me, and my partners. And the difference is, is I simply don't care. I shouldn't even say this, because my partners would not be happy: I don't care about quarter to quarter. I just don't care. I don't care if we put money in if I can see five years down the road it's going to work. That's refreshing.