Disney: The Renaissance and the Empire

August 10, 2026 4h 33m
Summary published by 1% Better, updated September 9, 2026.
Acquired
Key Takeaway

Before committing major time or money to a polished product, create the cheapest version that lets people experience the core story. Pixar used storyboards and story reels to test plot, dialogue, and character motivation—often through roughly eight iterations—before building expensive animation. Today, turn your next presentation, product feature, campaign, or creative project into a low-fidelity prototype; ask whether the underlying idea works without production polish, then revise the story before scaling execution.
Episode Overview

Acquired traces Disney’s revival from its 1980s crisis through the Eisner-era Renaissance, the transformative acquisitions of ABC/ESPN, Pixar, Marvel, and Lucasfilm, and its difficult transition to streaming. The episode argues that Disney’s enduring advantage is generational intellectual property that powers a flywheel across content, consumer products, and parks—while examining how streaming and cord-cutting have weakened the economics that once funded that flywheel.
Main Insights

Test the story before investing in the spectacle

Pixar’s creative process begins with thousands of storyboard drawings assembled into a story reel, allowing the team to experience a film before committing to costly 3D production. The team iterates repeatedly on plot, dialogue, and character motivation because animation, visual polish, and star power cannot rescue a weak core concept.
Build a flywheel around work people love

Disney’s best model starts with durable characters and universally relatable stories, then extends them into theaters, home video, consumer products, parks, and Broadway. The lesson is to identify the valuable core asset you create and deliberately design complementary experiences and distribution channels that reinforce demand for it.
Pair creative excellence with operational leverage

Disney’s Renaissance succeeded because leaders revived story-first creative work while using park price increases and outside film financing to generate cash for reinvestment. Sustainable turnarounds need both: a differentiated product engine and a practical funding mechanism that gives the team time to improve it.
Protect quality when incentives demand volume

Disney’s streaming strategy created pressure to produce a constant flow of new content to reduce churn, but that incentive conflicts with a brand built on scarce, exceptional releases. When output grows faster than quality control, each weak extension can erode trust in the franchise that made the business valuable.
Choose partners whose capabilities complete yours

Bob Iger’s Pixar acquisition worked because Disney brought global distribution, parks, and franchise infrastructure while Pixar supplied a superior creative process and leadership for animation. Rather than absorb Pixar’s culture, Disney preserved its independence and invited its leaders to repair Disney Animation—an integration designed around complementary strengths.
Frameworks or Models

Pixar’s Seven-Step Animation Process

1. Create storyboards as a blueprint for action and dialogue, then assemble them into an inexpensive story reel. 2. Build 3D models for characters, props, and sets in Pixar’s Marionette software. 3. Lay out each scene by assembling models and blocking action. 4. Animate key poses and performance, first through body movement and then facial expression. 5. Add shading for surface properties such as texture, color, metal, fabric, hair, and skin. 6. Light the scene digitally, as in stage lighting. 7. Render the finished image by computing every pixel from the model, animation, shading, and lighting data.
Bob Iger’s Three-Pillar Disney Strategy

1. Devote most time and capital to high-quality branded content, reviving the creative engine behind Disney’s flywheel. 2. Embrace technology both for creating content and distributing it, using change as an advantage rather than fighting it. 3. Expand global reach, especially in populous markets such as China and India, so great stories can reach more people.
Hamilton Helmer’s 7 Powers

Evaluate why a company can earn persistently higher profits than competitors through: scale economies, network economies, counter-positioning, switching costs, branding, cornered resources, and process power. In the episode, Disney’s durable IP is treated as a cornered resource and brand advantage, while Netflix’s streaming lead is explained primarily through scale economies.
Action Items

1
Create a story-reel version of your next project
Before designing, coding, filming, or buying tools, make a simple sequence of slides, sketches, or a narrated mock-up that shows the customer journey from beginning to end. Share it with 3-5 people, note where attention or understanding drops, and revise the narrative before adding polish.
2
Write your personal flywheel
List one core asset you create repeatedly—expertise, writing, relationships, a product, or a skill. Then identify three reinforcing outputs that can extend its value, such as a newsletter, portfolio, workshop, referral system, or reusable template; schedule one small action to activate a new loop this week.
3
Run a quality-versus-volume audit
Review your active commitments and mark which ones build durable trust versus merely maintain a publishing or activity cadence. Pause, reduce, or batch one low-value recurring output, and reinvest that time into making one high-leverage piece of work meaningfully better.
4
Separate creative critique from personal judgment
For your next draft or proposal review, ask collaborators to identify what is unclear, unconvincing, or emotionally flat—not whether they like you or the work. Capture the feedback, select the highest-impact issue, and run one focused revision cycle without defending the first version.
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Full Transcript
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All right. So, David, the real question All right. So, David, the real question is after this episode, it gets released. is after this episode, it gets released. is after this episode, it gets released. It becomes this durable IP that is part It becomes this durable IP that is part It becomes this durable IP that is part of a IP franchise. Will we turn this of a IP franchise. Will we turn this of a IP franchise. Will we turn this into a musical? into a musical? into a musical? &gt;&gt; Yes, absolutely. With masks, Dancing in &gt;&gt; Yes, absolutely. With masks, Dancing in &gt;&gt; Yes, absolutely. With masks, Dancing in the Aisles. the Aisles. the Aisles. &gt;&gt; And I'm thinking too, we uh we may as &gt;&gt; And I'm thinking too, we uh we may as &gt;&gt; And I'm thinking too, we uh we may as well do Acquired on Ice. well do Acquired on Ice. well do Acquired on Ice. &gt;&gt; Yeah. While we're at it, let's go. &gt;&gt; Yeah. While we're at it, let's go. &gt;&gt; Yeah. While we're at it, let's go. &gt;&gt; Yet another adaptation of it. &gt;&gt; Yet another adaptation of it. &gt;&gt; Yet another adaptation of it. &gt;&gt; Can we do Acquired in Space? Ooh. Uh, we &gt;&gt; Can we do Acquired in Space? Ooh. Uh, we &gt;&gt; Can we do Acquired in Space? Ooh. Uh, we know a few people who could make that know a few people who could make that know a few people who could make that happen. happen. happen. &gt;&gt; Yeah. Help make that happen. All right. &gt;&gt; Yeah. Help make that happen. All right. &gt;&gt; Yeah. Help make that happen. All right. &gt;&gt; All right. Let's do this. &gt;&gt; All right. Let's do this. &gt;&gt; All right. Let's do this. &gt;&gt; Who got the truth? &gt;&gt; Who got the truth? &gt;&gt; Who got the truth? &gt;&gt; Is it [music] you? Is it you? Is it you? &gt;&gt; Is it [music] you? Is it you? Is it you? &gt;&gt; Is it [music] you? Is it you? Is it you? Who got the truth? Now, Who got the truth? Now, Who got the truth? Now, is it you? [music] Is it you? Is it you? is it you? [music] Is it you? Is it you? is it you? [music] Is it you? Is it you? Sit me down. Say it straight. Another Sit me down. Say it straight. Another Sit me down. Say it straight. Another story on the way. [music] Who got the story on the way. [music] Who got the story on the way. [music] Who got the truth? Welcome to the fall 2026 season truth? Welcome to the fall 2026 season truth? Welcome to the fall 2026 season of Acquired, the podcast about great of Acquired, the podcast about great of Acquired, the podcast about great companies and the stories and playbooks companies and the stories and playbooks companies and the stories and playbooks behind them. I'm Ben Gilbert. behind them. I'm Ben Gilbert. behind them. I'm Ben Gilbert. &gt;&gt; I'm David Rosenthal. &gt;&gt; I'm David Rosenthal. &gt;&gt; I'm David Rosenthal. &gt;&gt; And we are your hosts. Disney is so much &gt;&gt; And we are your hosts. Disney is so much &gt;&gt; And we are your hosts. Disney is so much more than you think it is. It is Mickey more than you think it is. It is Mickey more than you think it is. It is Mickey and Minnie and Ariel and Simba and Elsa and Minnie and Ariel and Simba and Elsa and Minnie and Ariel and Simba and Elsa and Woody and Buzz and Nemo and all the and Woody and Buzz and Nemo and all the and Woody and Buzz and Nemo and all the Pixar characters. And of course, it's Pixar characters. And of course, it's Pixar characters. And of course, it's the Avengers and Luke Skywalker and the Avengers and Luke Skywalker and the Avengers and Luke Skywalker and Darth Vader and Winnie the Pooh and Darth Vader and Winnie the Pooh and Darth Vader and Winnie the Pooh and Disneyland and Disney World and Disney Disneyland and Disney World and Disney Disneyland and Disney World and Disney Cruises, Disney Hotels, but now it's Cruises, Disney Hotels, but now it's Cruises, Disney Hotels, but now it's also The Simpsons and Avatar and also The Simpsons and Avatar and also The Simpsons and Avatar and National Geographic, National Geographic, National Geographic, plus the entire studio of 20th Century plus the entire studio of 20th Century plus the entire studio of 20th Century Fox, Fox, Fox, a privatelyowned government inside the a privatelyowned government inside the a privatelyowned government inside the state of Florida, a private island in state of Florida, a private island in state of Florida, a private island in the Bahamas, Y the Bahamas, Y the Bahamas, Y &gt;&gt; 10 Broadway musicals, the special &gt;&gt; 10 Broadway musicals, the special &gt;&gt; 10 Broadway musicals, the special effects firm Industrial Light and Magic effects firm Industrial Light and Magic effects firm Industrial Light and Magic and Skywalker Sound, one of the four and Skywalker Sound, one of the four and Skywalker Sound, one of the four major US broadcast networks, ABC. It is major US broadcast networks, ABC. It is major US broadcast networks, ABC. It is of course ESPN. of course ESPN. of course ESPN. &gt;&gt; I was wondering when you were going to &gt;&gt; I was wondering when you were going to &gt;&gt; I was wondering when you were going to [laughter] get to the worldwide leader [laughter] get to the worldwide leader [laughter] get to the worldwide leader here. here. here. &gt;&gt; Unexpectedly, a giant amount of the &gt;&gt; Unexpectedly, a giant amount of the &gt;&gt; Unexpectedly, a giant amount of the profits of the whole company come from profits of the whole company come from profits of the whole company come from &gt;&gt; Absolutely. &gt;&gt; Absolutely. &gt;&gt; Absolutely. &gt;&gt; It is the SEC network. And for a period &gt;&gt; It is the SEC network. And for a period &gt;&gt; It is the SEC network. And for a period of time, David, they got even more of time, David, they got even more of time, David, they got even more exotic, owning the NHL team, the Mighty exotic, owning the NHL team, the Mighty exotic, owning the NHL team, the Mighty Ducks. Oh, yeah. The Anaheim Angels. Ducks. Oh, yeah. The Anaheim Angels. Ducks. Oh, yeah. The Anaheim Angels. &gt;&gt; Angels in the outfield, baby. [laughter] &gt;&gt; Angels in the outfield, baby. [laughter] &gt;&gt; Angels in the outfield, baby. [laughter] &gt;&gt; And the 1936 British ocean liner, the &gt;&gt; And the 1936 British ocean liner, the &gt;&gt; And the 1936 British ocean liner, the Queen Mary. Queen Mary. Queen Mary. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; Despite being one of America's most &gt;&gt; Despite being one of America's most &gt;&gt; Despite being one of America's most storied and stable brands, the company storied and stable brands, the company storied and stable brands, the company is going through a time of immense is going through a time of immense is going through a time of immense upheaval. They're in the midst of a upheaval. They're in the midst of a upheaval. They're in the midst of a transition to streaming with Disney Plus transition to streaming with Disney Plus transition to streaming with Disney Plus and Hulu and ESPN making giant and Hulu and ESPN making giant and Hulu and ESPN making giant technology and marketing investments to technology and marketing investments to technology and marketing investments to support that transition that lost support that transition that lost support that transition that lost billions for half a decade. And they're billions for half a decade. And they're billions for half a decade. And they're doing this while their old fantastically doing this while their old fantastically doing this while their old fantastically profitable businesses are fading. profitable businesses are fading. profitable businesses are fading. Consumers don't really go to the movies Consumers don't really go to the movies Consumers don't really go to the movies like they used to. They don't buy movies like they used to. They don't buy movies like they used to. They don't buy movies on VHS or DVD or Blu-ray. And of course, on VHS or DVD or Blu-ray. And of course, on VHS or DVD or Blu-ray. And of course, consumers are also cutting the cords to consumers are also cutting the cords to consumers are also cutting the cords to cancel their cable subscription. So cancel their cable subscription. So cancel their cable subscription. So those fat profits from cable channels those fat profits from cable channels those fat profits from cable channels like ESPN are shrinking every year. And like ESPN are shrinking every year. And like ESPN are shrinking every year. And Disney, despite being over a hundred Disney, despite being over a hundred Disney, despite being over a hundred years old, is at the very center of the years old, is at the very center of the years old, is at the very center of the most interesting business strategy most interesting business strategy most interesting business strategy questions that have ever been posed. Can questions that have ever been posed. Can questions that have ever been posed. Can we fight the innovator's dilemma and we fight the innovator's dilemma and we fight the innovator's dilemma and win? What exactly is enduring about our win? What exactly is enduring about our win? What exactly is enduring about our business as technology and trends business as technology and trends business as technology and trends change? And can our future be as bright change? And can our future be as bright change? And can our future be as bright as our past? Today, listeners, we tell as our past? Today, listeners, we tell as our past? Today, listeners, we tell the story of how Disney went from Walt's the story of how Disney went from Walt's the story of how Disney went from Walt's tidy, neat idea of an animation studio tidy, neat idea of an animation studio tidy, neat idea of an animation studio turned theme park operator into the turned theme park operator into the turned theme park operator into the global, sprawling, diversified behemoth global, sprawling, diversified behemoth global, sprawling, diversified behemoth that Disney acquired and expanded its that Disney acquired and expanded its that Disney acquired and expanded its way to today. And we'll answer that way to today. And we'll answer that way to today. And we'll answer that question. What does their future look question. What does their future look question. What does their future look like from here? Yes. All right. Well, like from here? Yes. All right. Well, like from here? Yes. All right. Well, big news from acquired headquarters. big news from acquired headquarters. big news from acquired headquarters. This episode has a companion PDF with This episode has a companion PDF with This episode has a companion PDF with visuals, charts, tables, and visuals, charts, tables, and visuals, charts, tables, and illustrations of the key concepts we illustrations of the key concepts we illustrations of the key concepts we discuss. You can get access and follow discuss. You can get access and follow discuss. You can get access and follow along by clicking the link in the show along by clicking the link in the show along by clicking the link in the show notes or going to library.acquired.fm. notes or going to library.acquired.fm. notes or going to library.acquired.fm. You can join the email list at You can join the email list at You can join the email list at acquired.fm/e. That's where we'll send acquired.fm/e. That's where we'll send acquired.fm/e. That's where we'll send out behindthe-scenes photos of research, out behindthe-scenes photos of research, out behindthe-scenes photos of research, past episode corrections, and it's where past episode corrections, and it's where past episode corrections, and it's where you can vote on future episode topics. you can vote on future episode topics. you can vote on future episode topics. Plus, we'll give away a little hint each Plus, we'll give away a little hint each Plus, we'll give away a little hint each time at what the next episode is about. time at what the next episode is about. time at what the next episode is about. That is acquired.fm/ fm/e. And if you That is acquired.fm/ fm/e. And if you That is acquired.fm/ fm/e. And if you are in the Bay Area on September 17th, are in the Bay Area on September 17th, are in the Bay Area on September 17th, you should join us for the official 2026 you should join us for the official 2026 you should join us for the official 2026 Acquired Meetup with our friends at Acquired Meetup with our friends at Acquired Meetup with our friends at Sentry. Details are at acquired.fm/meup. Sentry. Details are at acquired.fm/meup. Sentry. Details are at acquired.fm/meup. Boom. Before we dive in, we want to Boom. Before we dive in, we want to Boom. Before we dive in, we want to thank our brand spanking new presenting thank our brand spanking new presenting thank our brand spanking new presenting partner, Sierra. Yes, Sierra is not only partner, Sierra. Yes, Sierra is not only partner, Sierra. Yes, Sierra is not only the very best partner for agents in the the very best partner for agents in the the very best partner for agents in the enterprise, but also home to the enterprise, but also home to the enterprise, but also home to the self-proclaimed co-presidents of the self-proclaimed co-presidents of the self-proclaimed co-presidents of the acquired fan club, Clay Bavore and Brett acquired fan club, Clay Bavore and Brett acquired fan club, Clay Bavore and Brett Taylor. Taylor. Taylor. &gt;&gt; Yes, as uh Brett and Clay shared on &gt;&gt; Yes, as uh Brett and Clay shared on &gt;&gt; Yes, as uh Brett and Clay shared on stage with us a few weeks ago when we stage with us a few weeks ago when we stage with us a few weeks ago when we were in New York together. were in New York together. were in New York together. &gt;&gt; Yes, indeed. Thank you, Sierra. &gt;&gt; Yes, indeed. Thank you, Sierra. &gt;&gt; Yes, indeed. Thank you, Sierra. &gt;&gt; So, with that, listeners, this show is &gt;&gt; So, with that, listeners, this show is &gt;&gt; So, with that, listeners, this show is not investment advice. David and I may not investment advice. David and I may not investment advice. David and I may have investments in the companies we have investments in the companies we have investments in the companies we discuss and this show is forformational discuss and this show is forformational discuss and this show is forformational and entertainment purposes only. All and entertainment purposes only. All and entertainment purposes only. All right. Well, we start in 1984, the year right. Well, we start in 1984, the year right. Well, we start in 1984, the year I was born, all this was happening. I I was born, all this was happening. I I was born, all this was happening. I had no idea. [laughter] had no idea. [laughter] had no idea. [laughter] Disney is in chaos. In the 18 or so Disney is in chaos. In the 18 or so Disney is in chaos. In the 18 or so years since Walt died, Disney Star has years since Walt died, Disney Star has years since Walt died, Disney Star has faded so badly that it looks like no faded so badly that it looks like no faded so badly that it looks like no wish can save it. So Disney animation, wish can save it. So Disney animation, wish can save it. So Disney animation, once the shining pillar of the American once the shining pillar of the American once the shining pillar of the American can do spirit and the core of Disney's can do spirit and the core of Disney's can do spirit and the core of Disney's beautiful flywheel business model, has beautiful flywheel business model, has beautiful flywheel business model, has become a rotting carcass of its former become a rotting carcass of its former become a rotting carcass of its former self. That's the kindest way I could self. That's the kindest way I could self. That's the kindest way I could think to put it. Epcot has just launched think to put it. Epcot has just launched think to put it. Epcot has just launched in Florida, not as Walt Disney's utopian in Florida, not as Walt Disney's utopian in Florida, not as Walt Disney's utopian dream of a city of the future, but as a dream of a city of the future, but as a dream of a city of the future, but as a massively overbudget and underwhelming massively overbudget and underwhelming massively overbudget and underwhelming World's Fair knockoff that the company World's Fair knockoff that the company World's Fair knockoff that the company has sunk hundreds of millions of dollars has sunk hundreds of millions of dollars has sunk hundreds of millions of dollars deep into debt to build. Family drama deep into debt to build. Family drama deep into debt to build. Family drama among the Disneys runs rampant. Roy among the Disneys runs rampant. Roy among the Disneys runs rampant. Roy Disney's son, Roy E. Disney has resigned Disney's son, Roy E. Disney has resigned Disney's son, Roy E. Disney has resigned from the company and is scheming to from the company and is scheming to from the company and is scheming to launch a boardroom attack on Walt's once launch a boardroom attack on Walt's once launch a boardroom attack on Walt's once beloved son-in-law, Ron Miller, who is beloved son-in-law, Ron Miller, who is beloved son-in-law, Ron Miller, who is currently the CEO running the company. currently the CEO running the company. currently the CEO running the company. The stock is in the dumps. There have The stock is in the dumps. There have The stock is in the dumps. There have been multiple corporate raiders swirling been multiple corporate raiders swirling been multiple corporate raiders swirling their deals on the table to break up their deals on the table to break up their deals on the table to break up Disney, sell off the film library, Snow Disney, sell off the film library, Snow Disney, sell off the film library, Snow White, Cinderella, Sleeping Beauty, sell White, Cinderella, Sleeping Beauty, sell White, Cinderella, Sleeping Beauty, sell it all off to MGM, sell the theme parks it all off to MGM, sell the theme parks it all off to MGM, sell the theme parks off to hotel operators, maximize off to hotel operators, maximize off to hotel operators, maximize shareholder value here in the 1980s. And shareholder value here in the 1980s. And shareholder value here in the 1980s. And in the midst of all this, desperate to in the midst of all this, desperate to in the midst of all this, desperate to ward off these corporate raiders, ward off these corporate raiders, ward off these corporate raiders, management strikes a series of friendly management strikes a series of friendly management strikes a series of friendly deals with four oil and gas and real deals with four oil and gas and real deals with four oil and gas and real estate brothers in Fort Worth, Texas, estate brothers in Fort Worth, Texas, estate brothers in Fort Worth, Texas, the Bass family, and their famous the Bass family, and their famous the Bass family, and their famous investment manager, Richard Rainwater. investment manager, Richard Rainwater. investment manager, Richard Rainwater. That results in the Bass family owning That results in the Bass family owning That results in the Bass family owning about 25% about 25% about 25% of the Walt Disney Company and becoming of the Walt Disney Company and becoming of the Walt Disney Company and becoming Disney's largest shareholders. Yeah. How Disney's largest shareholders. Yeah. How Disney's largest shareholders. Yeah. How crazy is this? It's quite the crazy is this? It's quite the crazy is this? It's quite the introduction that the company was in introduction that the company was in introduction that the company was in such bad shape in 1983. Their stock such bad shape in 1983. Their stock such bad shape in 1983. Their stock dropped from $82 to $52 that the company dropped from $82 to $52 that the company dropped from $82 to $52 that the company was worth more if you sold it for parts was worth more if you sold it for parts was worth more if you sold it for parts than actually running it. And so the than actually running it. And so the than actually running it. And so the only defense that they have against only defense that they have against only defense that they have against these corporate raiders is to find a these corporate raiders is to find a these corporate raiders is to find a corporate raider of their own, corporate raider of their own, corporate raider of their own, &gt;&gt; right? &gt;&gt; right? &gt;&gt; right? &gt;&gt; Dilute shareholders so much that they're &gt;&gt; Dilute shareholders so much that they're &gt;&gt; Dilute shareholders so much that they're creating all these new shares to give to creating all these new shares to give to creating all these new shares to give to these new guys, these new guys, these new guys, &gt;&gt; these Texas guys, &gt;&gt; these Texas guys, &gt;&gt; these Texas guys, &gt;&gt; the Bass family. So they can own 25% &gt;&gt; the Bass family. So they can own 25% &gt;&gt; the Bass family. So they can own 25% which basically makes them, you know, which basically makes them, you know, which basically makes them, you know, pseudo controlling shareholders pseudo controlling shareholders pseudo controlling shareholders &gt;&gt; more than any of the remaining branches &gt;&gt; more than any of the remaining branches &gt;&gt; more than any of the remaining branches of the Disney family. of the Disney family. of the Disney family. &gt;&gt; Yes. And that is by far the best option &gt;&gt; Yes. And that is by far the best option &gt;&gt; Yes. And that is by far the best option to fend off these corporate raiders. to fend off these corporate raiders. to fend off these corporate raiders. Dark times. And David, things have Dark times. And David, things have Dark times. And David, things have gotten so bad in the creative core gotten so bad in the creative core gotten so bad in the creative core engine that nearly every dollar of engine that nearly every dollar of engine that nearly every dollar of profit is coming from the parks and profit is coming from the parks and profit is coming from the parks and licensing consumer products. At this licensing consumer products. At this licensing consumer products. At this point, films and TV, you know, the point, films and TV, you know, the point, films and TV, you know, the Disney that you know of, the content Disney that you know of, the content Disney that you know of, the content business is basically break even. In business is basically break even. In business is basically break even. In 1984, Disney generated a quarter billion 1984, Disney generated a quarter billion 1984, Disney generated a quarter billion dollars of profit from its parks and dollars of profit from its parks and dollars of profit from its parks and consumer products and a mere$2 million consumer products and a mere$2 million consumer products and a mere$2 million from film and TV. The core of the famous from film and TV. The core of the famous from film and TV. The core of the famous Disney flywheel is completely broken. Disney flywheel is completely broken. Disney flywheel is completely broken. But but there is a spark of hope. A But but there is a spark of hope. A But but there is a spark of hope. A group of young innovators who will group of young innovators who will group of young innovators who will ignite a whole revolution in the movie ignite a whole revolution in the movie ignite a whole revolution in the movie industry come in and save the company. industry come in and save the company. industry come in and save the company. I'm not talking about Michael Eisner, I'm not talking about Michael Eisner, I'm not talking about Michael Eisner, Frank Wells, and Jeffrey Katzenberg. Frank Wells, and Jeffrey Katzenberg. Frank Wells, and Jeffrey Katzenberg. &gt;&gt; Oh, I thought that's where you were. &gt;&gt; Oh, I thought that's where you were. &gt;&gt; Oh, I thought that's where you were. &gt;&gt; You would think that's where we're &gt;&gt; You would think that's where we're &gt;&gt; You would think that's where we're going. Rather, the group that I am going. Rather, the group that I am going. Rather, the group that I am talking about is a new hope for the core talking about is a new hope for the core talking about is a new hope for the core of Disney animation, the center of the of Disney animation, the center of the of Disney animation, the center of the flywheel. All right. So, Ben, what if I flywheel. All right. So, Ben, what if I flywheel. All right. So, Ben, what if I told you that during this very same time told you that during this very same time told you that during this very same time as everything that I just said, Disney as everything that I just said, Disney as everything that I just said, Disney animation is floundering. animation is floundering. animation is floundering. All of the following people are being All of the following people are being All of the following people are being taught the craft of Disney animation in taught the craft of Disney animation in taught the craft of Disney animation in a small basement room just a half hour's a small basement room just a half hour's a small basement room just a half hour's drive north of the Disney Burbank lot in drive north of the Disney Burbank lot in drive north of the Disney Burbank lot in another institution that Walt Disney another institution that Walt Disney another institution that Walt Disney himself had created, set up, and endowed himself had created, set up, and endowed himself had created, set up, and endowed in his will. Cal Arts, John Lacader, in his will. Cal Arts, John Lacader, in his will. Cal Arts, John Lacader, Brad Bird, Tim Burton, John Musker, who Brad Bird, Tim Burton, John Musker, who Brad Bird, Tim Burton, John Musker, who would do The Little Mermaid, Aladdin, would do The Little Mermaid, Aladdin, would do The Little Mermaid, Aladdin, and then uh many years later, Moana, and then uh many years later, Moana, and then uh many years later, Moana, &gt;&gt; and then later after them, Andrew &gt;&gt; and then later after them, Andrew &gt;&gt; and then later after them, Andrew Stanton, of course, writer and director Stanton, of course, writer and director Stanton, of course, writer and director of Finding Nemo, Wall-E, Toy Story 5, of Finding Nemo, Wall-E, Toy Story 5, of Finding Nemo, Wall-E, Toy Story 5, Brenda Chapman, head of story for The Brenda Chapman, head of story for The Brenda Chapman, head of story for The Lion King, and of course, Pete Doctor, Lion King, and of course, Pete Doctor, Lion King, and of course, Pete Doctor, who today is chief creative officer at who today is chief creative officer at who today is chief creative officer at Pixar. All of these people are in a Pixar. All of these people are in a Pixar. All of these people are in a basement classroom, classroom A113, basement classroom, classroom A113, basement classroom, classroom A113, home of the character animation program home of the character animation program home of the character animation program at the California Institute of the Arts at the California Institute of the Arts at the California Institute of the Arts or Cal Arts, or Cal Arts, or Cal Arts, &gt;&gt; which was basically created as a &gt;&gt; which was basically created as a &gt;&gt; which was basically created as a pipeline for Disney, right? pipeline for Disney, right? pipeline for Disney, right? &gt;&gt; Yes, exactly. That was why Walt created &gt;&gt; Yes, exactly. That was why Walt created &gt;&gt; Yes, exactly. That was why Walt created Cal Arts. He wanted it to be this Cal Arts. He wanted it to be this Cal Arts. He wanted it to be this institution that would keep the pipeline institution that would keep the pipeline institution that would keep the pipeline of new animation talent flowing into of new animation talent flowing into of new animation talent flowing into Disney long after he was gone. And Walt Disney long after he was gone. And Walt Disney long after he was gone. And Walt left like half of his estate to fund left like half of his estate to fund left like half of his estate to fund this institution. And it was that I mean this institution. And it was that I mean this institution. And it was that I mean so those people I mentioned John Lasser, so those people I mentioned John Lasser, so those people I mentioned John Lasser, Brad Bird, Tim Burton, John Musker, Brad Bird, Tim Burton, John Musker, Brad Bird, Tim Burton, John Musker, Brenda Chapman, all of them were hired Brenda Chapman, all of them were hired Brenda Chapman, all of them were hired directly by Disney in Disney animation directly by Disney in Disney animation directly by Disney in Disney animation right out of school and then Disney right out of school and then Disney right out of school and then Disney fired all of them, [laughter] fired all of them, [laughter] fired all of them, [laughter] [gasps] [gasps] [gasps] &gt;&gt; but they all end up back &gt;&gt; but they all end up back &gt;&gt; but they all end up back &gt;&gt; but you know they all end up back. So, &gt;&gt; but you know they all end up back. So, &gt;&gt; but you know they all end up back. So, there's this amazing story that one day there's this amazing story that one day there's this amazing story that one day while John Lacader is a student there in while John Lacader is a student there in while John Lacader is a student there in the late '7s, he and a bunch of these the late '7s, he and a bunch of these the late '7s, he and a bunch of these people, they drive down to go spend a people, they drive down to go spend a people, they drive down to go spend a day at Disneyland and uh John's day at Disneyland and uh John's day at Disneyland and uh John's girlfriend at the time comes along with girlfriend at the time comes along with girlfriend at the time comes along with them and she says to them, "Just think them and she says to them, "Just think them and she says to them, "Just think someday this park is going to be filled someday this park is going to be filled someday this park is going to be filled with the characters that you guys are with the characters that you guys are with the characters that you guys are going to create." And she had no idea going to create." And she had no idea going to create." And she had no idea both how right and how wrong she was. both how right and how wrong she was. both how right and how wrong she was. Yes. Yes. Yes. &gt;&gt; It would just take a few decades. &gt;&gt; It would just take a few decades. &gt;&gt; It would just take a few decades. &gt;&gt; Yes. Okay. So, how does this company &gt;&gt; Yes. Okay. So, how does this company &gt;&gt; Yes. Okay. So, how does this company turn around? Because I was looking at turn around? Because I was looking at turn around? Because I was looking at the financials and it looks like 1982 the financials and it looks like 1982 the financials and it looks like 1982 earnings are down 19% and you sort of earnings are down 19% and you sort of earnings are down 19% and you sort of expect, oh, maybe that's a hiccup. It'll expect, oh, maybe that's a hiccup. It'll expect, oh, maybe that's a hiccup. It'll come back. Then 1983, earnings are down come back. Then 1983, earnings are down come back. Then 1983, earnings are down another 7%. Yep. So, in the wake of all another 7%. Yep. So, in the wake of all another 7%. Yep. So, in the wake of all that, in [clears throat] 1984, Roy E. that, in [clears throat] 1984, Roy E. that, in [clears throat] 1984, Roy E. Disney decides enough is enough. Disney decides enough is enough. Disney decides enough is enough. Together with the Bass brothers, the new Together with the Bass brothers, the new Together with the Bass brothers, the new 25% shareholders, Roy and his business 25% shareholders, Roy and his business 25% shareholders, Roy and his business partner Stanley Gold, who's also on the partner Stanley Gold, who's also on the partner Stanley Gold, who's also on the Disney board with him, they gang up and Disney board with him, they gang up and Disney board with him, they gang up and they finally force out Ron Miller as they finally force out Ron Miller as they finally force out Ron Miller as CEO, who again is Royy's cousin by CEO, who again is Royy's cousin by CEO, who again is Royy's cousin by marriage, married to Walt's daughter. marriage, married to Walt's daughter. marriage, married to Walt's daughter. And they do this via dramatic boardroom And they do this via dramatic boardroom And they do this via dramatic boardroom coup that happens on September 7th, coup that happens on September 7th, coup that happens on September 7th, 1984. 1984. 1984. And then over a period of just 14 days And then over a period of just 14 days And then over a period of just 14 days because Disney now like is without a because Disney now like is without a because Disney now like is without a leader is [laughter] in double crisis leader is [laughter] in double crisis leader is [laughter] in double crisis here. They go out and they identify, here. They go out and they identify, here. They go out and they identify, recruit, sell, and hire recruit, sell, and hire recruit, sell, and hire arguably the greatest twoerson arguably the greatest twoerson arguably the greatest twoerson management team in media company management team in media company management team in media company history. Michael Eisner and Frank Wells. history. Michael Eisner and Frank Wells. history. Michael Eisner and Frank Wells. And then uh Michael quickly brings in And then uh Michael quickly brings in And then uh Michael quickly brings in his number two from Paramount, Jeffrey his number two from Paramount, Jeffrey his number two from Paramount, Jeffrey Katzenberg, to run the film studios. Katzenberg, to run the film studios. Katzenberg, to run the film studios. Yep. All right. So, who are these guys? Yep. All right. So, who are these guys? Yep. All right. So, who are these guys? So, first the board goes after Frank So, first the board goes after Frank So, first the board goes after Frank Wells. Frank had been the president of Wells. Frank had been the president of Wells. Frank had been the president of Warner Brothers and had since retired. Warner Brothers and had since retired. Warner Brothers and had since retired. But before that, earlier in his career, But before that, earlier in his career, But before that, earlier in his career, he was the mentor of Stanley Gold, Roy he was the mentor of Stanley Gold, Roy he was the mentor of Stanley Gold, Roy Disney's, you know, business partner and Disney's, you know, business partner and Disney's, you know, business partner and fellow Disney board member now back at fellow Disney board member now back at fellow Disney board member now back at their old law firm. So, Frank is their their old law firm. So, Frank is their their old law firm. So, Frank is their first call. They trust him deeply. He's first call. They trust him deeply. He's first call. They trust him deeply. He's eminently qualified. He's recently eminently qualified. He's recently eminently qualified. He's recently retired, so he's available. retired, so he's available. retired, so he's available. Frank says, "I'm interested, but I can't Frank says, "I'm interested, but I can't Frank says, "I'm interested, but I can't do this alone. There's somebody else you do this alone. There's somebody else you do this alone. There's somebody else you got to call. You got to call Michael got to call. You got to call Michael got to call. You got to call Michael Eisner." So, Michael, until recently, Eisner." So, Michael, until recently, Eisner." So, Michael, until recently, the timing is just crazy on this, had the timing is just crazy on this, had the timing is just crazy on this, had been probably the hottest Hollywood been probably the hottest Hollywood been probably the hottest Hollywood movie studio executive in town. He had movie studio executive in town. He had movie studio executive in town. He had been the number two executive at been the number two executive at been the number two executive at Paramount under Barry Diller and had Paramount under Barry Diller and had Paramount under Barry Diller and had architected one of the most legendary architected one of the most legendary architected one of the most legendary runs in Hollywood history. The two of runs in Hollywood history. The two of runs in Hollywood history. The two of them, Barry Diller and Michael, within a them, Barry Diller and Michael, within a them, Barry Diller and Michael, within a span of seven years, they made Indiana span of seven years, they made Indiana span of seven years, they made Indiana Jones, Star Trek, Saturday Night Fever, Jones, Star Trek, Saturday Night Fever, Jones, Star Trek, Saturday Night Fever, Greece, Foot Loose, Flash Dance, the Greece, Foot Loose, Flash Dance, the Greece, Foot Loose, Flash Dance, the list goes on and on. list goes on and on. list goes on and on. &gt;&gt; This is when Paramount was number one. &gt;&gt; This is when Paramount was number one. &gt;&gt; This is when Paramount was number one. &gt;&gt; Yeah. And the way they did it was this &gt;&gt; Yeah. And the way they did it was this &gt;&gt; Yeah. And the way they did it was this famous strategy that they called the famous strategy that they called the famous strategy that they called the singles and doubles strategy. The idea singles and doubles strategy. The idea singles and doubles strategy. The idea was they would keep their production was they would keep their production was they would keep their production costs low. They would generally not work costs low. They would generally not work costs low. They would generally not work with A-list stars and directors and with A-list stars and directors and with A-list stars and directors and instead they would focus on the quality instead they would focus on the quality instead they would focus on the quality of the scripts and the stories and let of the scripts and the stories and let of the scripts and the stories and let that be their guiding judgment as that be their guiding judgment as that be their guiding judgment as opposed to the typical Hollywood thing opposed to the typical Hollywood thing opposed to the typical Hollywood thing of who's attached to the project. Like of who's attached to the project. Like of who's attached to the project. Like do we have the stars? do we have the stars? do we have the stars? &gt;&gt; And the singles and doubles name &gt;&gt; And the singles and doubles name &gt;&gt; And the singles and doubles name appealed to shareholders. that didn't appealed to shareholders. that didn't appealed to shareholders. that didn't exactly appeal to talent. And so the way exactly appeal to talent. And so the way exactly appeal to talent. And so the way they build it the other direction was they build it the other direction was they build it the other direction was high concept. Exactly. high concept. Exactly. high concept. Exactly. &gt;&gt; Describing a unique idea whose &gt;&gt; Describing a unique idea whose &gt;&gt; Describing a unique idea whose originality can be conveyed briefly. originality can be conveyed briefly. originality can be conveyed briefly. &gt;&gt; Yep. So Michael writes a famous memo in &gt;&gt; Yep. So Michael writes a famous memo in &gt;&gt; Yep. So Michael writes a famous memo in Hollywood history that gets leaked and Hollywood history that gets leaked and Hollywood history that gets leaked and spread around the rest of Hollywood spread around the rest of Hollywood spread around the rest of Hollywood describing the strategy. And he writes, describing the strategy. And he writes, describing the strategy. And he writes, &gt;&gt; spoiler alert, no memo actually ever &gt;&gt; spoiler alert, no memo actually ever &gt;&gt; spoiler alert, no memo actually ever leaks in Hollywood. They're all leaks in Hollywood. They're all leaks in Hollywood. They're all intentionally leaked. intentionally leaked. intentionally leaked. &gt;&gt; Yes, they're written for publication. &gt;&gt; Yes, they're written for publication. &gt;&gt; Yes, they're written for publication. [laughter] Yeah, that's the way this [laughter] Yeah, that's the way this [laughter] Yeah, that's the way this town works. Oh, so Michael writes, "We town works. Oh, so Michael writes, "We town works. Oh, so Michael writes, "We have no obligation to make art. We have have no obligation to make art. We have have no obligation to make art. We have no obligation to make history. We have no obligation to make history. We have no obligation to make history. We have no obligation to make a statement. But no obligation to make a statement. But no obligation to make a statement. But to make money, it is often important to to make money, it is often important to to make money, it is often important to make history, to make art, or to make make history, to make art, or to make make history, to make art, or to make some significant statement. Not even the some significant statement. Not even the some significant statement. Not even the greatest screenwriter or actor or greatest screenwriter or actor or greatest screenwriter or actor or director can be counted on to save a director can be counted on to save a director can be counted on to save a film that lacks a strong underlying film that lacks a strong underlying film that lacks a strong underlying concept." There you go, Ben. High concept." There you go, Ben. High concept." There you go, Ben. High concept. concept. concept. &gt;&gt; That's right. And there was another memo &gt;&gt; That's right. And there was another memo &gt;&gt; That's right. And there was another memo leaked later by Jeffrey Katzenberg who, leaked later by Jeffrey Katzenberg who, leaked later by Jeffrey Katzenberg who, you know, speaking of the lieutenants, you know, speaking of the lieutenants, you know, speaking of the lieutenants, you got Barry Diller's lieutenant is you got Barry Diller's lieutenant is you got Barry Diller's lieutenant is Michael Eisner. Michael Eisner's Michael Eisner. Michael Eisner's Michael Eisner. Michael Eisner's lieutenant is Jeffrey Katzenberg. lieutenant is Jeffrey Katzenberg. lieutenant is Jeffrey Katzenberg. Jeffrey writes a memo later where he Jeffrey writes a memo later where he Jeffrey writes a memo later where he espouses this really great line that espouses this really great line that espouses this really great line that celebrity can open a film, but celebrity celebrity can open a film, but celebrity celebrity can open a film, but celebrity can't carry a film. So yes, you can pay can't carry a film. So yes, you can pay can't carry a film. So yes, you can pay up to attach these big names, but up to attach these big names, but up to attach these big names, but ultimately the audience does experience ultimately the audience does experience ultimately the audience does experience the quality of the story for itself, and the quality of the story for itself, and the quality of the story for itself, and you kind of need the the story and the you kind of need the the story and the you kind of need the the story and the characters and the emotion to take it characters and the emotion to take it characters and the emotion to take it from there. from there. from there. &gt;&gt; Yep. Yep. Now, on the one hand, this is &gt;&gt; Yep. Yep. Now, on the one hand, this is &gt;&gt; Yep. Yep. Now, on the one hand, this is crazy that these guys are coming in to crazy that these guys are coming in to crazy that these guys are coming in to run Disney. Disney is not a Hollywood run Disney. Disney is not a Hollywood run Disney. Disney is not a Hollywood company, company, company, &gt;&gt; right? It's a Warner Brothers retired &gt;&gt; right? It's a Warner Brothers retired &gt;&gt; right? It's a Warner Brothers retired executive and a hot shot Paramount executive and a hot shot Paramount executive and a hot shot Paramount executive. executive. executive. Michael from Paramount has not seen Michael from Paramount has not seen Michael from Paramount has not seen Disney movies. He was not raised on Disney movies. He was not raised on Disney movies. He was not raised on them. He had never seen Snow White or them. He had never seen Snow White or them. He had never seen Snow White or Sleeping Beauty. He wasn't really a Sleeping Beauty. He wasn't really a Sleeping Beauty. He wasn't really a Disney guy despite the fact that as soon Disney guy despite the fact that as soon Disney guy despite the fact that as soon as he later gets the job, he was never as he later gets the job, he was never as he later gets the job, he was never without his Mickey Mouse tie. without his Mickey Mouse tie. without his Mickey Mouse tie. &gt;&gt; Of course. Of course. But yeah, didn't &gt;&gt; Of course. Of course. But yeah, didn't &gt;&gt; Of course. Of course. But yeah, didn't know how to run a theme park, flywheel, know how to run a theme park, flywheel, know how to run a theme park, flywheel, anything. But when you think about it anything. But when you think about it anything. But when you think about it though, Michael's philosophy though, Michael's philosophy though, Michael's philosophy actually is pretty sympatico with the actually is pretty sympatico with the actually is pretty sympatico with the Disney philosophy. It's all about story. Disney philosophy. It's all about story. Disney philosophy. It's all about story. It's all about concept. And yes, Walt It's all about concept. And yes, Walt It's all about concept. And yes, Walt had a very different way of doing this. had a very different way of doing this. had a very different way of doing this. He was go big and invest tons in He was go big and invest tons in He was go big and invest tons in technology and animation. And Michael is technology and animation. And Michael is technology and animation. And Michael is like produce things cheap singles and like produce things cheap singles and like produce things cheap singles and doubles. doubles. doubles. &gt;&gt; But they're both story first. They're &gt;&gt; But they're both story first. They're &gt;&gt; But they're both story first. They're both obsessed with can we create both obsessed with can we create both obsessed with can we create characters that take you on these characters that take you on these characters that take you on these emotional journeys and tell compelling emotional journeys and tell compelling emotional journeys and tell compelling stories. stories. stories. &gt;&gt; And then the unthinkable happens. &gt;&gt; And then the unthinkable happens. &gt;&gt; And then the unthinkable happens. Michael gets forced out of Paramount at Michael gets forced out of Paramount at Michael gets forced out of Paramount at the peak of his success. the peak of his success. the peak of his success. &gt;&gt; Well, sort of. Uh Barry leaves as we &gt;&gt; Well, sort of. Uh Barry leaves as we &gt;&gt; Well, sort of. Uh Barry leaves as we talked to Barry about on stage at Radio talked to Barry about on stage at Radio talked to Barry about on stage at Radio City Music Hall City Music Hall City Music Hall &gt;&gt; to team up with Rupert Murdoch and &gt;&gt; to team up with Rupert Murdoch and &gt;&gt; to team up with Rupert Murdoch and launch Fox. launch Fox. launch Fox. &gt;&gt; Yes. Fox the TV network cuz Fox the film &gt;&gt; Yes. Fox the TV network cuz Fox the film &gt;&gt; Yes. Fox the TV network cuz Fox the film studio already existed. So Barry leaves. studio already existed. So Barry leaves. studio already existed. So Barry leaves. Michael is supposed to get the job that Michael is supposed to get the job that Michael is supposed to get the job that Barry had as chairman of the movie Barry had as chairman of the movie Barry had as chairman of the movie studio over at Paramount. And he doesn't studio over at Paramount. And he doesn't studio over at Paramount. And he doesn't get that job largely because of internal get that job largely because of internal get that job largely because of internal politics and who's making how much politics and who's making how much politics and who's making how much money, those sort of games. And Michael money, those sort of games. And Michael money, those sort of games. And Michael basically his contract says that he's basically his contract says that he's basically his contract says that he's owed a check if he does not get the job owed a check if he does not get the job owed a check if he does not get the job when Barry leaves. So Michael decides, when Barry leaves. So Michael decides, when Barry leaves. So Michael decides, you know what? I don't really want to you know what? I don't really want to you know what? I don't really want to stay here without Barry anyway. I'm stay here without Barry anyway. I'm stay here without Barry anyway. I'm going to start poking around for other going to start poking around for other going to start poking around for other things. He had been having these kind of things. He had been having these kind of things. He had been having these kind of background conversations. I'll take the background conversations. I'll take the background conversations. I'll take the check and get out of here. check and get out of here. check and get out of here. &gt;&gt; Yep. So all of a sudden, Michael's &gt;&gt; Yep. So all of a sudden, Michael's &gt;&gt; Yep. So all of a sudden, Michael's available right as all this drama is available right as all this drama is available right as all this drama is going on at Disney. He was on the board going on at Disney. He was on the board going on at Disney. He was on the board of Cal Arts with Roy E. Disney. So of Cal Arts with Roy E. Disney. So of Cal Arts with Roy E. Disney. So they've been talking for a while, but they've been talking for a while, but they've been talking for a while, but now it all comes together. So Frank is now it all comes together. So Frank is now it all comes together. So Frank is offered the top job and Michael's offered the top job and Michael's offered the top job and Michael's offered number two. offered number two. offered number two. Then there's a second iteration where Then there's a second iteration where Then there's a second iteration where they're sort of offered co-CEOs and they're sort of offered co-CEOs and they're sort of offered co-CEOs and Michael basically tells Frank, "Hey, Michael basically tells Frank, "Hey, Michael basically tells Frank, "Hey, look, if I'm going to do this, I'm CEO look, if I'm going to do this, I'm CEO look, if I'm going to do this, I'm CEO or I'm I'm chairman, I think, is even or I'm I'm chairman, I think, is even or I'm I'm chairman, I think, is even what he says, and you're number two what he says, and you're number two what he says, and you're number two because we need to send a signal to the because we need to send a signal to the because we need to send a signal to the world that Disney is run by a creative world that Disney is run by a creative world that Disney is run by a creative executive, of which he was at executive, of which he was at executive, of which he was at Paramount." And Frank had always sort of Paramount." And Frank had always sort of Paramount." And Frank had always sort of been more the numbers and legal and been more the numbers and legal and been more the numbers and legal and operations operations operations &gt;&gt; operational. You know, he was a legal &gt;&gt; operational. You know, he was a legal &gt;&gt; operational. You know, he was a legal background, background, background, &gt;&gt; right? So, if this is going to work, I &gt;&gt; right? So, if this is going to work, I &gt;&gt; right? So, if this is going to work, I have to be the top guy. And Frank, this have to be the top guy. And Frank, this have to be the top guy. And Frank, this tells you everything about who Frank is tells you everything about who Frank is tells you everything about who Frank is and sort of how how the company would and sort of how how the company would and sort of how how the company would work for the next decade. Frank says, work for the next decade. Frank says, work for the next decade. Frank says, "Okay, that's that makes sense to me. "Okay, that's that makes sense to me. "Okay, that's that makes sense to me. I'm I'm perfectly happy to do it. I'll I'm I'm perfectly happy to do it. I'll I'm I'm perfectly happy to do it. I'll be your number two as long as we both be your number two as long as we both be your number two as long as we both just report to the board. I'll be just report to the board. I'll be just report to the board. I'll be president. you you can be the chairman, president. you you can be the chairman, president. you you can be the chairman, but we both have our own relationship but we both have our own relationship but we both have our own relationship with the board. Michael says, "Works for with the board. Michael says, "Works for with the board. Michael says, "Works for me." me." me." &gt;&gt; Yep. So, on September 21st, 1984, &gt;&gt; Yep. So, on September 21st, 1984, &gt;&gt; Yep. So, on September 21st, 1984, Michael Eisner and Frank Wells are Michael Eisner and Frank Wells are Michael Eisner and Frank Wells are introduced as the new CEO and president introduced as the new CEO and president introduced as the new CEO and president of the Walt Disney Company. Can we just of the Walt Disney Company. Can we just of the Walt Disney Company. Can we just talk about what dire straits this talk about what dire straits this talk about what dire straits this company was in that they had to go and company was in that they had to go and company was in that they had to go and in a matter of weeks find two people who in a matter of weeks find two people who in a matter of weeks find two people who had zero relationship with the company had zero relationship with the company had zero relationship with the company had never worked there and bring them in had never worked there and bring them in had never worked there and bring them in and make one of them chairman of the and make one of them chairman of the and make one of them chairman of the board. Also, we should say there was a board. Also, we should say there was a board. Also, we should say there was a giant comp package if the studio did giant comp package if the studio did giant comp package if the studio did well. There was massive profit sharing. well. There was massive profit sharing. well. There was massive profit sharing. There was big stock options issued. It There was big stock options issued. It There was big stock options issued. It was like we need a complete reboot and was like we need a complete reboot and was like we need a complete reboot and we're bringing in these Hollywood guys we're bringing in these Hollywood guys we're bringing in these Hollywood guys from other studios to make it happen. from other studios to make it happen. from other studios to make it happen. &gt;&gt; Yep. Yep. Yep. They turn around quickly &gt;&gt; Yep. Yep. Yep. They turn around quickly &gt;&gt; Yep. Yep. Yep. They turn around quickly and bring in Jeffrey Katzenberg from and bring in Jeffrey Katzenberg from and bring in Jeffrey Katzenberg from Paramount as well to come in and run the Paramount as well to come in and run the Paramount as well to come in and run the studios under Michael at Disney. And the studios under Michael at Disney. And the studios under Michael at Disney. And the plan is Disney's going to become plan is Disney's going to become plan is Disney's going to become Paramount. [laughter] Actually, one of Paramount. [laughter] Actually, one of Paramount. [laughter] Actually, one of the first items on their agenda is they the first items on their agenda is they the first items on their agenda is they move the animation department out of the move the animation department out of the move the animation department out of the Burbank lot and basically exile Disney Burbank lot and basically exile Disney Burbank lot and basically exile Disney animation over to Glendale. They're animation over to Glendale. They're animation over to Glendale. They're like, "Hey, we got to make room for all like, "Hey, we got to make room for all like, "Hey, we got to make room for all the, you know, movie producers that the, you know, movie producers that the, you know, movie producers that we're going to bring in here and make we're going to bring in here and make we're going to bring in here and make liveaction films." liveaction films." liveaction films." &gt;&gt; If you're one of these animators who is &gt;&gt; If you're one of these animators who is &gt;&gt; If you're one of these animators who is looking at it from the perspective of looking at it from the perspective of looking at it from the perspective of what makes this place special, and the what makes this place special, and the what makes this place special, and the very first thing, let's, let's say you very first thing, let's, let's say you very first thing, let's, let's say you were optimistic about change that were optimistic about change that were optimistic about change that happens is they kick the animators out happens is they kick the animators out happens is they kick the animators out of the building that Walt's office was of the building that Walt's office was of the building that Walt's office was in. This is like the historic animation in. This is like the historic animation in. This is like the historic animation building. They clear them out and they building. They clear them out and they building. They clear them out and they say, "Go to Glendale in this like really say, "Go to Glendale in this like really say, "Go to Glendale in this like really rickety, rundown building instead." Not rickety, rundown building instead." Not rickety, rundown building instead." Not looking good for the core of the Disney looking good for the core of the Disney looking good for the core of the Disney flywheel here. And then Eisner and Wells flywheel here. And then Eisner and Wells flywheel here. And then Eisner and Wells turn their attention to the parks. And turn their attention to the parks. And turn their attention to the parks. And this is where some light bulbs start to this is where some light bulbs start to this is where some light bulbs start to go off. One of the first things they do go off. One of the first things they do go off. One of the first things they do that ends up, I think, really setting up that ends up, I think, really setting up that ends up, I think, really setting up all the following success that Eisner all the following success that Eisner all the following success that Eisner and Wells and Katsenberg have is they and Wells and Katsenberg have is they and Wells and Katsenberg have is they raise the ticket prices at Disneyland raise the ticket prices at Disneyland raise the ticket prices at Disneyland and Disney World. Ticket prices at the and Disney World. Ticket prices at the and Disney World. Ticket prices at the Disney parks have basically been flat Disney parks have basically been flat Disney parks have basically been flat since Walt died. like the spirit around since Walt died. like the spirit around since Walt died. like the spirit around the company and the ethos of management. the company and the ethos of management. the company and the ethos of management. It's like, well, Walt wanted this to be It's like, well, Walt wanted this to be It's like, well, Walt wanted this to be accessible to everybody and he set these accessible to everybody and he set these accessible to everybody and he set these prices, so like we shouldn't change prices, so like we shouldn't change prices, so like we shouldn't change them. Never mind that inflation was them. Never mind that inflation was them. Never mind that inflation was rampant during the 1970s. rampant during the 1970s. rampant during the 1970s. So, parking at Disney World and So, parking at Disney World and So, parking at Disney World and Disneyland when Eisner and Wells come in Disneyland when Eisner and Wells come in Disneyland when Eisner and Wells come in to run the company is still only a buck. to run the company is still only a buck. to run the company is still only a buck. So, they start raising ticket and So, they start raising ticket and So, they start raising ticket and parking prices at the parks. Not parking prices at the parks. Not parking prices at the parks. Not enormously, but like enormously, but like enormously, but like &gt;&gt; they had so much headroom here. I mean, &gt;&gt; they had so much headroom here. I mean, &gt;&gt; they had so much headroom here. I mean, you can criticize them all you want you can criticize them all you want you can criticize them all you want today for raising prices, but they had I today for raising prices, but they had I today for raising prices, but they had I don't know 5 to 10x of you can raise the don't know 5 to 10x of you can raise the don't know 5 to 10x of you can raise the price and it wouldn't impact demand for price and it wouldn't impact demand for price and it wouldn't impact demand for a second back then. a second back then. a second back then. &gt;&gt; I mean, you you can raise the price of &gt;&gt; I mean, you you can raise the price of &gt;&gt; I mean, you you can raise the price of parking from $1 to $5. So, nobody will parking from $1 to $5. So, nobody will parking from $1 to $5. So, nobody will care. But when you do that in an care. But when you do that in an care. But when you do that in an operational business like parks, all of operational business like parks, all of operational business like parks, all of that incremental profit falls right to that incremental profit falls right to that incremental profit falls right to the bottom line. This is pure the bottom line. This is pure the bottom line. This is pure incremental cash flow into the Walt incremental cash flow into the Walt incremental cash flow into the Walt Disney Company because they're not Disney Company because they're not Disney Company because they're not changing the operations at all. They're changing the operations at all. They're changing the operations at all. They're just making more money. So Eer and Wells just making more money. So Eer and Wells just making more money. So Eer and Wells turn around and they take all these turn around and they take all these turn around and they take all these quick profits from the parks and they quick profits from the parks and they quick profits from the parks and they start investing them into building the start investing them into building the start investing them into building the liveaction studios and running the liveaction studios and running the liveaction studios and running the Paramount Playbook. Paramount Playbook. Paramount Playbook. &gt;&gt; Sort of. That still didn't generate as &gt;&gt; Sort of. That still didn't generate as &gt;&gt; Sort of. That still didn't generate as much cash as they'd actually need to much cash as they'd actually need to much cash as they'd actually need to finance the full film slate. So for each finance the full film slate. So for each finance the full film slate. So for each of the films, all 75 films they would of the films, all 75 films they would of the films, all 75 films they would make over the next eight years, those make over the next eight years, those make over the next eight years, those were financed by uh a partner called were financed by uh a partner called were financed by uh a partner called Silver Screens. Silver Screens. Silver Screens. &gt;&gt; Ah, interesting. So Michael's singles &gt;&gt; Ah, interesting. So Michael's singles &gt;&gt; Ah, interesting. So Michael's singles and double strategy worked at Paramount. and double strategy worked at Paramount. and double strategy worked at Paramount. It works even better at Disney. They It works even better at Disney. They It works even better at Disney. They make Down and Out in Beverly Hills, make Down and Out in Beverly Hills, make Down and Out in Beverly Hills, Three Men and a Baby, Good Morning Three Men and a Baby, Good Morning Three Men and a Baby, Good Morning Vietnam, Dead Poet Society, Pretty Vietnam, Dead Poet Society, Pretty Vietnam, Dead Poet Society, Pretty Woman. These are all huge hits with, you Woman. These are all huge hits with, you Woman. These are all huge hits with, you know, singles and doublesized budgets. know, singles and doublesized budgets. know, singles and doublesized budgets. And they would get actors that would go And they would get actors that would go And they would get actors that would go on to be big big names. I mean, you name on to be big big names. I mean, you name on to be big big names. I mean, you name Robin Williams and B. Midler, Robin Williams and B. Midler, Robin Williams and B. Midler, &gt;&gt; Julia Roberts, &gt;&gt; Julia Roberts, &gt;&gt; Julia Roberts, &gt;&gt; and they were basically looking for ways &gt;&gt; and they were basically looking for ways &gt;&gt; and they were basically looking for ways to get deals on talent. So, a lot of to get deals on talent. So, a lot of to get deals on talent. So, a lot of times it was like actors that had been times it was like actors that had been times it was like actors that had been in rehab and were looking to make a in rehab and were looking to make a in rehab and were looking to make a comeback [laughter] comeback [laughter] comeback [laughter] or it was these upandcomers, but it was or it was these upandcomers, but it was or it was these upandcomers, but it was uh in many ways like a young Warren uh in many ways like a young Warren uh in many ways like a young Warren Buffett strategy of looking for cigar Buffett strategy of looking for cigar Buffett strategy of looking for cigar butts. Yes. That they they knew they butts. Yes. That they they knew they butts. Yes. That they they knew they could get a guaranteed return on. could get a guaranteed return on. could get a guaranteed return on. &gt;&gt; Uh, but it works, man. All told, 27 of &gt;&gt; Uh, but it works, man. All told, 27 of &gt;&gt; Uh, but it works, man. All told, 27 of their first 33 movies that they make are their first 33 movies that they make are their first 33 movies that they make are profitable, which in Hollywood to have a profitable, which in Hollywood to have a profitable, which in Hollywood to have a hit rate like that, that's like making hit rate like that, that's like making hit rate like that, that's like making 33 venture capital investments and only 33 venture capital investments and only 33 venture capital investments and only losing money on six of them, losing money on six of them, losing money on six of them, &gt;&gt; right? Films are like books or like &gt;&gt; right? Films are like books or like &gt;&gt; right? Films are like books or like startups, power law distributed startups, power law distributed startups, power law distributed normally. normally. normally. &gt;&gt; But of course, along the way, as we all &gt;&gt; But of course, along the way, as we all &gt;&gt; But of course, along the way, as we all know, they do quickly realize that, hey, know, they do quickly realize that, hey, know, they do quickly realize that, hey, there's some potential in this animation there's some potential in this animation there's some potential in this animation thing here, too. thing here, too. thing here, too. &gt;&gt; Well, this is a Roy E. Disney special. &gt;&gt; Well, this is a Roy E. Disney special. &gt;&gt; Well, this is a Roy E. Disney special. Roy views his job as the keeper of Roy views his job as the keeper of Roy views his job as the keeper of Walt's vision and the keeper of the Walt's vision and the keeper of the Walt's vision and the keeper of the thing that made the company special. And thing that made the company special. And thing that made the company special. And the thing that made the company special the thing that made the company special the thing that made the company special was this ridiculous flywheel, for lack was this ridiculous flywheel, for lack was this ridiculous flywheel, for lack of a better term, that they had where of a better term, that they had where of a better term, that they had where you make amazing, compelling characters you make amazing, compelling characters you make amazing, compelling characters on universally relatable stories, told on universally relatable stories, told on universally relatable stories, told through animation, drawn in a through animation, drawn in a through animation, drawn in a spectacular way that no other studio can spectacular way that no other studio can spectacular way that no other studio can do. And then you get to pump that into do. And then you get to pump that into do. And then you get to pump that into consumer products and parks and kids consumer products and parks and kids consumer products and parks and kids pass down to their kids and it's this pass down to their kids and it's this pass down to their kids and it's this like beautiful special business model. like beautiful special business model. like beautiful special business model. &gt;&gt; You re-release the classics in theaters &gt;&gt; You re-release the classics in theaters &gt;&gt; You re-release the classics in theaters from the Disney vault and you make cash from the Disney vault and you make cash from the Disney vault and you make cash flow on that. flow on that. flow on that. &gt;&gt; And Royy's sitting here looking at the &gt;&gt; And Royy's sitting here looking at the &gt;&gt; And Royy's sitting here looking at the current business of singles and doubles current business of singles and doubles current business of singles and doubles and live action and being like, "Hey, we and live action and being like, "Hey, we and live action and being like, "Hey, we got to do the Disney thing." got to do the Disney thing." got to do the Disney thing." &gt;&gt; Yep. So as part of the deal when they &gt;&gt; Yep. So as part of the deal when they &gt;&gt; Yep. So as part of the deal when they brought Eisner and Wells in, Roy had brought Eisner and Wells in, Roy had brought Eisner and Wells in, Roy had made them promise not to fully kill made them promise not to fully kill made them promise not to fully kill animation and then he had made them make animation and then he had made them make animation and then he had made them make him Roy chairman of the animation him Roy chairman of the animation him Roy chairman of the animation division under Katzenberg who's running division under Katzenberg who's running division under Katzenberg who's running all the studios. all the studios. all the studios. &gt;&gt; Okay. So flash back to the day that &gt;&gt; Okay. So flash back to the day that &gt;&gt; Okay. So flash back to the day that Michael and Frank take over. What had Michael and Frank take over. What had Michael and Frank take over. What had happened the 13 years up to that point? happened the 13 years up to that point? happened the 13 years up to that point? Disney Animation had only released three Disney Animation had only released three Disney Animation had only released three movies from 1971 to 1984 and they had a movies from 1971 to 1984 and they had a movies from 1971 to 1984 and they had a film called The Black Cauldron in film called The Black Cauldron in film called The Black Cauldron in development for nearly a decade. development for nearly a decade. development for nearly a decade. &gt;&gt; Yeah. Brutal. &gt;&gt; Yeah. Brutal. &gt;&gt; Yeah. Brutal. &gt;&gt; And morale is low. There's even a sense &gt;&gt; And morale is low. There's even a sense &gt;&gt; And morale is low. There's even a sense by the current animators on staff that by the current animators on staff that by the current animators on staff that they weren't making anything as good as they weren't making anything as good as they weren't making anything as good as what the company used to make. what the company used to make. what the company used to make. &gt;&gt; And this is when all that young talent &gt;&gt; And this is when all that young talent &gt;&gt; And this is when all that young talent that's coming in from Cal Arts, Disney's that's coming in from Cal Arts, Disney's that's coming in from Cal Arts, Disney's either firing or they're leaving because either firing or they're leaving because either firing or they're leaving because they're just like, "Hey, this place is they're just like, "Hey, this place is they're just like, "Hey, this place is cooked." cooked." cooked." &gt;&gt; Yes. Okay. So, we brought up Jeffrey &gt;&gt; Yes. Okay. So, we brought up Jeffrey &gt;&gt; Yes. Okay. So, we brought up Jeffrey Katzenberg. I was having breakfast with Katzenberg. I was having breakfast with Katzenberg. I was having breakfast with Jeffrey to prep for this episode and he Jeffrey to prep for this episode and he Jeffrey to prep for this episode and he told me this story where Michael calls told me this story where Michael calls told me this story where Michael calls Jeffrey into his office on his first day Jeffrey into his office on his first day Jeffrey into his office on his first day and this is before animation had been and this is before animation had been and this is before animation had been moved out to Glendale. So he's still moved out to Glendale. So he's still moved out to Glendale. So he's still pointing down at the original animation pointing down at the original animation pointing down at the original animation building and he points to that ink and building and he points to that ink and building and he points to that ink and paint door and Michael says to Jeffrey, paint door and Michael says to Jeffrey, paint door and Michael says to Jeffrey, "Do you know what they do down there?" "Do you know what they do down there?" "Do you know what they do down there?" And Jeffrey goes, "No." Cuz you know And Jeffrey goes, "No." Cuz you know And Jeffrey goes, "No." Cuz you know Jeffrey's background is live action Jeffrey's background is live action Jeffrey's background is live action Paramount stuff with Michael. Paramount stuff with Michael. Paramount stuff with Michael. &gt;&gt; And Michael says, "Neither do I." &gt;&gt; And Michael says, "Neither do I." &gt;&gt; And Michael says, "Neither do I." [laughter] [laughter] [laughter] He goes, "That's where they made the He goes, "That's where they made the He goes, "That's where they made the animated movies, and that's your animated movies, and that's your animated movies, and that's your problem." [laughter] problem." [laughter] problem." [laughter] And so Jeffrey, like Michael, doesn't And so Jeffrey, like Michael, doesn't And so Jeffrey, like Michael, doesn't know anything about animation. The know anything about animation. The know anything about animation. The animators, when he sort of gets in there animators, when he sort of gets in there animators, when he sort of gets in there and he says, "Okay, I'm uh I'm the boss and he says, "Okay, I'm uh I'm the boss and he says, "Okay, I'm uh I'm the boss now." Start looking at this invasion now." Start looking at this invasion now." Start looking at this invasion from Hollywood. I mean, Disney always from Hollywood. I mean, Disney always from Hollywood. I mean, Disney always existed outside the realm of Hollywood existed outside the realm of Hollywood existed outside the realm of Hollywood doing their own thing. And now you've doing their own thing. And now you've doing their own thing. And now you've got effectively the suits coming into a got effectively the suits coming into a got effectively the suits coming into a culture that is like a bunch of culture that is like a bunch of culture that is like a bunch of whackados. I mean it is like the most whackados. I mean it is like the most whackados. I mean it is like the most fun crazy place in animation. And this fun crazy place in animation. And this fun crazy place in animation. And this was quite the clash at first. was quite the clash at first. was quite the clash at first. &gt;&gt; Yep. But at some point and I don't know &gt;&gt; Yep. But at some point and I don't know &gt;&gt; Yep. But at some point and I don't know was it was it Katzenberg or was it was it was it Katzenberg or was it was it was it Katzenberg or was it Eisner and Wells who realized like hey Eisner and Wells who realized like hey Eisner and Wells who realized like hey there actually is an opportunity here. there actually is an opportunity here. there actually is an opportunity here. &gt;&gt; Well it was both of them and it would &gt;&gt; Well it was both of them and it would &gt;&gt; Well it was both of them and it would take a third guy and that guy is Peter take a third guy and that guy is Peter take a third guy and that guy is Peter Schneider. Schneider. Schneider. &gt;&gt; Yes. So his quote when when accepting &gt;&gt; Yes. So his quote when when accepting &gt;&gt; Yes. So his quote when when accepting the job is, "I knew I could do no worse the job is, "I knew I could do no worse the job is, "I knew I could do no worse than the Black Cauldron. You can't fall than the Black Cauldron. You can't fall than the Black Cauldron. You can't fall off the first floor." [laughter] off the first floor." [laughter] off the first floor." [laughter] &gt;&gt; That's great. &gt;&gt; That's great. &gt;&gt; That's great. &gt;&gt; So Peter and Jeffrey come in and and &gt;&gt; So Peter and Jeffrey come in and and &gt;&gt; So Peter and Jeffrey come in and and they start making changes and Peter had they start making changes and Peter had they start making changes and Peter had this license to like examine everything. this license to like examine everything. this license to like examine everything. They he was not afraid to break any They he was not afraid to break any They he was not afraid to break any process. So he he starts saying, "Why do process. So he he starts saying, "Why do process. So he he starts saying, "Why do we use this type of paint? Why do we we use this type of paint? Why do we we use this type of paint? Why do we make our own paint? Why do we use this make our own paint? Why do we use this make our own paint? Why do we use this style of animation pegs? Is there a style of animation pegs? Is there a style of animation pegs? Is there a better style? Why aren't we using better style? Why aren't we using better style? Why aren't we using computers? It seems like that could computers? It seems like that could computers? It seems like that could really help us. It sends a a cultural really help us. It sends a a cultural really help us. It sends a a cultural message here in ' 84, 85, 86 that things message here in ' 84, 85, 86 that things message here in ' 84, 85, 86 that things are really changing. And all the way are really changing. And all the way are really changing. And all the way from the top, we are trying to get from the top, we are trying to get from the top, we are trying to get better. We want to make something great. better. We want to make something great. better. We want to make something great. We want to make great films and we want We want to make great films and we want We want to make great films and we want to debate each other over how good of an to debate each other over how good of an to debate each other over how good of an idea things are. We want to iterate all idea things are. We want to iterate all idea things are. We want to iterate all in service of making a great film. But in service of making a great film. But in service of making a great film. But this is exactly what they needed. New this is exactly what they needed. New this is exactly what they needed. New blood, a complete shakeup. There was blood, a complete shakeup. There was blood, a complete shakeup. There was good talent there, but they were just good talent there, but they were just good talent there, but they were just sort of like wasting around, not being sort of like wasting around, not being sort of like wasting around, not being led at all. And there was this sort of led at all. And there was this sort of led at all. And there was this sort of dichotomy where the the old guard was dichotomy where the the old guard was dichotomy where the the old guard was stuck in their ways and the young people stuck in their ways and the young people stuck in their ways and the young people who came in with all these fresh ideas who came in with all these fresh ideas who came in with all these fresh ideas were falling on deaf ears and they'd were falling on deaf ears and they'd were falling on deaf ears and they'd never been part of anything successful. never been part of anything successful. never been part of anything successful. So, they sort of didn't know what So, they sort of didn't know what So, they sort of didn't know what success looked like or felt like. Y success looked like or felt like. Y success looked like or felt like. Y &gt;&gt; So, they slowly start to turn it around &gt;&gt; So, they slowly start to turn it around &gt;&gt; So, they slowly start to turn it around in animation. You know, at first with in animation. You know, at first with in animation. You know, at first with films like The Great Mouse Detective in films like The Great Mouse Detective in films like The Great Mouse Detective in 1986, nothing to write home about. They 1986, nothing to write home about. They 1986, nothing to write home about. They did Oliver and Company in 1988 that that did Oliver and Company in 1988 that that did Oliver and Company in 1988 that that gets a little bit more press. There's gets a little bit more press. There's gets a little bit more press. There's people sort of saying, "Hey, look, people sort of saying, "Hey, look, people sort of saying, "Hey, look, Disney animation can make good things Disney animation can make good things Disney animation can make good things that are commercially successful." But that are commercially successful." But that are commercially successful." But then the big idea, the crazy one that then the big idea, the crazy one that then the big idea, the crazy one that really worked was to refine the formula really worked was to refine the formula really worked was to refine the formula of the Disney animated movie and make of the Disney animated movie and make of the Disney animated movie and make them musicals. them musicals. them musicals. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; These are going to be Broadway musicals, &gt;&gt; These are going to be Broadway musicals, &gt;&gt; These are going to be Broadway musicals, but animated. but animated. but animated. &gt;&gt; Yes. We're going to turn these things &gt;&gt; Yes. We're going to turn these things &gt;&gt; Yes. We're going to turn these things from cartoons with music to musicals from cartoons with music to musicals from cartoons with music to musicals that are cartoons. And it makes all the that are cartoons. And it makes all the that are cartoons. And it makes all the difference in the world. difference in the world. difference in the world. &gt;&gt; From story arc to the type of music. I &gt;&gt; From story arc to the type of music. I &gt;&gt; From story arc to the type of music. I mean, Snow White had some really catchy mean, Snow White had some really catchy mean, Snow White had some really catchy tunes. Whistle While You Work, tunes. Whistle While You Work, tunes. Whistle While You Work, &gt;&gt; Hi Ho, blah blah. Yeah. Yeah. &gt;&gt; Hi Ho, blah blah. Yeah. Yeah. &gt;&gt; Hi Ho, blah blah. Yeah. Yeah. &gt;&gt; But they weren't musicals and they &gt;&gt; But they weren't musicals and they &gt;&gt; But they weren't musicals and they didn't follow the sort of musical didn't follow the sort of musical didn't follow the sort of musical stage performance story structure. So stage performance story structure. So stage performance story structure. So Jeffrey Katzenberg recruits a guy named Jeffrey Katzenberg recruits a guy named Jeffrey Katzenberg recruits a guy named Howard Ashman. Yes. Howard Ashman. Yes. Howard Ashman. Yes. &gt;&gt; Interestingly introduced by David. &gt;&gt; Interestingly introduced by David. &gt;&gt; Interestingly introduced by David. &gt;&gt; I was going to say, yeah, David Gin &gt;&gt; I was going to say, yeah, David Gin &gt;&gt; I was going to say, yeah, David Gin [laughter] connects them, right? [laughter] connects them, right? [laughter] connects them, right? &gt;&gt; Yes. Howard when he hears the word &gt;&gt; Yes. Howard when he hears the word &gt;&gt; Yes. Howard when he hears the word Disney instantly says, I want to work in Disney instantly says, I want to work in Disney instantly says, I want to work in animation. I feel there is a connection animation. I feel there is a connection animation. I feel there is a connection between animation and musical theater. between animation and musical theater. between animation and musical theater. And I don't think this was obvious to And I don't think this was obvious to And I don't think this was obvious to anyone else. This is like a unique anyone else. This is like a unique anyone else. This is like a unique Howard insight. So Howard brings along Howard insight. So Howard brings along Howard insight. So Howard brings along Alan Mein, Alan Mein, Alan Mein, &gt;&gt; composer Alan M. The two of them had &gt;&gt; composer Alan M. The two of them had &gt;&gt; composer Alan M. The two of them had done Little Shop of Horrors together and done Little Shop of Horrors together and done Little Shop of Horrors together and they hit the ground running. They come they hit the ground running. They come they hit the ground running. They come into Disney animation and the first film into Disney animation and the first film into Disney animation and the first film that they work on together is The Little that they work on together is The Little that they work on together is The Little Mermaid. Mermaid. Mermaid. &gt;&gt; Yeah, &gt;&gt; Yeah, &gt;&gt; Yeah, &gt;&gt; these guys are geniuses. When we really &gt;&gt; these guys are geniuses. When we really &gt;&gt; these guys are geniuses. When we really started to dig into the question of like started to dig into the question of like started to dig into the question of like the Disney Renaissance, who was the Disney Renaissance, who was the Disney Renaissance, who was responsible, who created these responsible, who created these responsible, who created these incredible movies and totally turned incredible movies and totally turned incredible movies and totally turned around Disney? It's these guys. around Disney? It's these guys. around Disney? It's these guys. &gt;&gt; Yeah. I They weren't the original story &gt;&gt; Yeah. I They weren't the original story &gt;&gt; Yeah. I They weren't the original story pitch. pitch. pitch. &gt;&gt; No. And they weren't the executives, but &gt;&gt; No. And they weren't the executives, but &gt;&gt; No. And they weren't the executives, but they they brought the magic. So Howard they they brought the magic. So Howard they they brought the magic. So Howard has this great quote where he says, has this great quote where he says, has this great quote where he says, "Well, in every great Broadway musical, "Well, in every great Broadway musical, "Well, in every great Broadway musical, the third song, the leading lady goes the third song, the leading lady goes the third song, the leading lady goes and she sits on something. Might be a and she sits on something. Might be a and she sits on something. Might be a rock, might be a trash can, and she rock, might be a trash can, and she rock, might be a trash can, and she sings a song to the world, telling the sings a song to the world, telling the sings a song to the world, telling the audience what she wants. If she could audience what she wants. If she could audience what she wants. If she could only have this thing in life, and then only have this thing in life, and then only have this thing in life, and then the whole rest of the film, we root for the whole rest of the film, we root for the whole rest of the film, we root for them. That is the entire crux of the them. That is the entire crux of the them. That is the entire crux of the play is what does the leading lady play is what does the leading lady play is what does the leading lady want?" And we we hope that she gets want?" And we we hope that she gets want?" And we we hope that she gets there. And he's like, "I just realized there. And he's like, "I just realized there. And he's like, "I just realized we could do that in Little Mermaid." So we could do that in Little Mermaid." So we could do that in Little Mermaid." So part of your world is just the setup part of your world is just the setup part of your world is just the setup song for Ariel sitting there explaining song for Ariel sitting there explaining song for Ariel sitting there explaining to everyone. I just want to, you know, to everyone. I just want to, you know, to everyone. I just want to, you know, go where the people are. I want to see go where the people are. I want to see go where the people are. I want to see them dancing, walking around on what do them dancing, walking around on what do them dancing, walking around on what do you call them? Oh, feet. And this you call them? Oh, feet. And this you call them? Oh, feet. And this amazing sort of like lyrical explanation amazing sort of like lyrical explanation amazing sort of like lyrical explanation of what she feels as a character that of what she feels as a character that of what she feels as a character that ends up kind of carrying the whole ends up kind of carrying the whole ends up kind of carrying the whole movie. Uh Howard is also the the one who movie. Uh Howard is also the the one who movie. Uh Howard is also the the one who says, "Hey, that little little crab, says, "Hey, that little little crab, says, "Hey, that little little crab, should we make him Jamaican?" should we make him Jamaican?" should we make him Jamaican?" &gt;&gt; Yep. [laughter] &gt;&gt; Yep. [laughter] &gt;&gt; Yep. [laughter] &gt;&gt; And that leads to the whole song under &gt;&gt; And that leads to the whole song under &gt;&gt; And that leads to the whole song under the sea. I mean, these are like the sea. I mean, these are like the sea. I mean, these are like formative formative formative songs that are in at least David, you songs that are in at least David, you songs that are in at least David, you and I, our generation's head forever and and I, our generation's head forever and and I, our generation's head forever and why we watch the films, I'm sure, a why we watch the films, I'm sure, a why we watch the films, I'm sure, a million times when we were kids. million times when we were kids. million times when we were kids. &gt;&gt; Yep. And why they survive. I mean, my &gt;&gt; Yep. And why they survive. I mean, my &gt;&gt; Yep. And why they survive. I mean, my girls are watching these movies today. girls are watching these movies today. girls are watching these movies today. So, Little Mermaid comes out in 1989. So, Little Mermaid comes out in 1989. So, Little Mermaid comes out in 1989. It's a classic, It's a classic, It's a classic, &gt;&gt; but it's not like it blew the doors off &gt;&gt; but it's not like it blew the doors off &gt;&gt; but it's not like it blew the doors off at the box office. And it had a pretty at the box office. And it had a pretty at the box office. And it had a pretty big budget. Animation grew its headcount big budget. Animation grew its headcount big budget. Animation grew its headcount from that low when it was left for dead from that low when it was left for dead from that low when it was left for dead of 150 people to 550 people. And here's of 150 people to 550 people. And here's of 150 people to 550 people. And here's a great quote from our friend Ben Cohen a great quote from our friend Ben Cohen a great quote from our friend Ben Cohen at the Wall Street Journal in a piece at the Wall Street Journal in a piece at the Wall Street Journal in a piece that he wrote. Once upon a time, Disney that he wrote. Once upon a time, Disney that he wrote. Once upon a time, Disney movies got beat at the box office by movies got beat at the box office by movies got beat at the box office by romcoms. The Little Mermaid made less romcoms. The Little Mermaid made less romcoms. The Little Mermaid made less money than when Harry Met Sally in 1989. money than when Harry Met Sally in 1989. money than when Harry Met Sally in 1989. Only when it came out on home video in Only when it came out on home video in Only when it came out on home video in 1990 and kids could watch VHS tapes of 1990 and kids could watch VHS tapes of 1990 and kids could watch VHS tapes of The Little Mermaid anytime they wanted The Little Mermaid anytime they wanted The Little Mermaid anytime they wanted did the iconic children's movie become did the iconic children's movie become did the iconic children's movie become truly massive. truly massive. truly massive. &gt;&gt; So if you're just looking at box office, &gt;&gt; So if you're just looking at box office, &gt;&gt; So if you're just looking at box office, you're kind of like, "Okay, I see green you're kind of like, "Okay, I see green you're kind of like, "Okay, I see green shoots here. We're really on to shoots here. We're really on to shoots here. We're really on to something. People love this, but it's something. People love this, but it's something. People love this, but it's not like it magically made the company. not like it magically made the company. not like it magically made the company. It's not like we just generated a bunch It's not like we just generated a bunch It's not like we just generated a bunch of profits, of profits, of profits, &gt;&gt; which you know, look, trust in Disney &gt;&gt; which you know, look, trust in Disney &gt;&gt; which you know, look, trust in Disney animation had eroded, right? like people animation had eroded, right? like people animation had eroded, right? like people were used to crap coming out of were used to crap coming out of were used to crap coming out of &gt;&gt; the studio. &gt;&gt; the studio. &gt;&gt; the studio. &gt;&gt; So, they do Rescuers Down Under in 1990. &gt;&gt; So, they do Rescuers Down Under in 1990. &gt;&gt; So, they do Rescuers Down Under in 1990. It's fine, but it's not like one of the It's fine, but it's not like one of the It's fine, but it's not like one of the great Disney Renaissance films the way great Disney Renaissance films the way great Disney Renaissance films the way that Little Mermaid and the one we're that Little Mermaid and the one we're that Little Mermaid and the one we're about to talk about. about to talk about. about to talk about. &gt;&gt; And then Beauty and the Beast. I know &gt;&gt; And then Beauty and the Beast. I know &gt;&gt; And then Beauty and the Beast. I know Lion King's bigger, but like Beauty and Lion King's bigger, but like Beauty and Lion King's bigger, but like Beauty and the Beast is my favorite of these the Beast is my favorite of these the Beast is my favorite of these movies. movies. movies. &gt;&gt; It was my first movie in theaters. &gt;&gt; It was my first movie in theaters. &gt;&gt; It was my first movie in theaters. &gt;&gt; Oh, wow. &gt;&gt; Oh, wow. &gt;&gt; Oh, wow. &gt;&gt; And this is another Howard Ashman &gt;&gt; And this is another Howard Ashman &gt;&gt; And this is another Howard Ashman special. special. special. &gt;&gt; Yep. Yep. It's so good. &gt;&gt; Yep. Yep. It's so good. &gt;&gt; Yep. Yep. It's so good. &gt;&gt; Yes. So, Beauty and the Beast builds on &gt;&gt; Yes. So, Beauty and the Beast builds on &gt;&gt; Yes. So, Beauty and the Beast builds on the momentum of the team that trusts the momentum of the team that trusts the momentum of the team that trusts each other, the new style of musicals as each other, the new style of musicals as each other, the new style of musicals as animation. This one actually lights up animation. This one actually lights up animation. This one actually lights up the box office. 330 million gross at the the box office. 330 million gross at the the box office. 330 million gross at the box office on a $25 million production box office on a $25 million production box office on a $25 million production budget. budget. budget. &gt;&gt; Man, [laughter] &gt;&gt; Man, [laughter] &gt;&gt; Man, [laughter] Disney animation is back. Disney animation is back. Disney animation is back. &gt;&gt; They do it again the next year. I'm &gt;&gt; They do it again the next year. I'm &gt;&gt; They do it again the next year. I'm telling you, year after year after year, telling you, year after year after year, telling you, year after year after year, 1992 with Aladdin box office, 1992 with Aladdin box office, 1992 with Aladdin box office, &gt;&gt; 500 million is what I saw. Right. &gt;&gt; 500 million is what I saw. Right. &gt;&gt; 500 million is what I saw. Right. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; Half a billion &gt;&gt; Half a billion &gt;&gt; Half a billion &gt;&gt; on a $28 million production budget. And &gt;&gt; on a $28 million production budget. And &gt;&gt; on a $28 million production budget. And they're pulling out the stops on sort of they're pulling out the stops on sort of they're pulling out the stops on sort of the Disney stars at this point. They're the Disney stars at this point. They're the Disney stars at this point. They're bringing in Robin Williams to be the bringing in Robin Williams to be the bringing in Robin Williams to be the genie genie genie &gt;&gt; from Good Morning Vietnam to the Genie. &gt;&gt; from Good Morning Vietnam to the Genie. &gt;&gt; from Good Morning Vietnam to the Genie. Yeah, [laughter] Yeah, [laughter] Yeah, [laughter] &gt;&gt; that's right. And then they do it again &gt;&gt; that's right. And then they do it again &gt;&gt; that's right. And then they do it again two years later with The Lion King, two years later with The Lion King, two years later with The Lion King, 1994. This time a little bit bigger 1994. This time a little bit bigger 1994. This time a little bit bigger production budget. It's $45 million. production budget. It's $45 million. production budget. It's $45 million. It's very sophisticated animation. You It's very sophisticated animation. You It's very sophisticated animation. You know, you've got James. know, you've got James. know, you've got James. &gt;&gt; How much money did this thing make? &gt;&gt; How much money did this thing make? &gt;&gt; How much money did this thing make? &gt;&gt; This brings in $750 million. &gt;&gt; This brings in $750 million. &gt;&gt; This brings in $750 million. &gt;&gt; Yeah. Unprecedented at the time. &gt;&gt; Yeah. Unprecedented at the time. &gt;&gt; Yeah. Unprecedented at the time. &gt;&gt; The most successful traditionally &gt;&gt; The most successful traditionally &gt;&gt; The most successful traditionally animated handdrawn film in history. animated handdrawn film in history. animated handdrawn film in history. &gt;&gt; In history. &gt;&gt; In history. &gt;&gt; In history. &gt;&gt; Michael Eisner actually announces then &gt;&gt; Michael Eisner actually announces then &gt;&gt; Michael Eisner actually announces then they are going to build a new animation they are going to build a new animation they are going to build a new animation building and bring all of the animators building and bring all of the animators building and bring all of the animators back onto the Disney lot. back onto the Disney lot. back onto the Disney lot. &gt;&gt; Yes. back to Burbank, [laughter] &gt;&gt; Yes. back to Burbank, [laughter] &gt;&gt; Yes. back to Burbank, [laughter] &gt;&gt; which uh as a fun little aside, &gt;&gt; which uh as a fun little aside, &gt;&gt; which uh as a fun little aside, Disneyland when it was originally Disneyland when it was originally Disneyland when it was originally supposed to be like a little 15 acre supposed to be like a little 15 acre supposed to be like a little 15 acre park or something right next to the park or something right next to the park or something right next to the Disney lot before it became a much Disney lot before it became a much Disney lot before it became a much bigger project. This is actually the bigger project. This is actually the bigger project. This is actually the plot of land plot of land plot of land &gt;&gt; where the new animation building is &gt;&gt; where the new animation building is &gt;&gt; where the new animation building is today. So great. So great. today. So great. So great. today. So great. So great. &gt;&gt; So that's the Disney Renaissance. &gt;&gt; So that's the Disney Renaissance. &gt;&gt; So that's the Disney Renaissance. &gt;&gt; So it's interesting, right? Little &gt;&gt; So it's interesting, right? Little &gt;&gt; So it's interesting, right? Little Mermaid cost $40 million to make and Mermaid cost $40 million to make and Mermaid cost $40 million to make and then Beauty and the Beast and Aladdin then Beauty and the Beast and Aladdin then Beauty and the Beast and Aladdin were cheaper and you said like, "Oh, were cheaper and you said like, "Oh, were cheaper and you said like, "Oh, production budgets ballooned back up production budgets ballooned back up production budgets ballooned back up with Lion King but only to 45 million." with Lion King but only to 45 million." with Lion King but only to 45 million." How are they making these so cheap? How are they making these so cheap? How are they making these so cheap? &gt;&gt; Yes. So, the process of actually doing &gt;&gt; Yes. So, the process of actually doing &gt;&gt; Yes. So, the process of actually doing the handdrawn animation, and it all was the handdrawn animation, and it all was the handdrawn animation, and it all was still handdrawn at this era, had still handdrawn at this era, had still handdrawn at this era, had progressed from the actual inking and progressed from the actual inking and progressed from the actual inking and painting to kind of skipping the inking painting to kind of skipping the inking painting to kind of skipping the inking step because they use zerography. So you step because they use zerography. So you step because they use zerography. So you could directly transfer the paper could directly transfer the paper could directly transfer the paper sketches onto the transparent celluloid sketches onto the transparent celluloid sketches onto the transparent celluloid for each frame so that you can for each frame so that you can for each frame so that you can photograph it. But the thing that Disney photograph it. But the thing that Disney photograph it. But the thing that Disney does here during the the Renaissance does here during the the Renaissance does here during the the Renaissance films is something called caps starting films is something called caps starting films is something called caps starting in 1990 the computer animated production in 1990 the computer animated production in 1990 the computer animated production system. This was really pushed by Roy E. system. This was really pushed by Roy E. system. This was really pushed by Roy E. Disney who felt this was a big part of Disney who felt this was a big part of Disney who felt this was a big part of his uncle Walt's legacy, kind of pushing his uncle Walt's legacy, kind of pushing his uncle Walt's legacy, kind of pushing the frontier of technology and how the frontier of technology and how the frontier of technology and how investing in new technology can push the investing in new technology can push the investing in new technology can push the state-of-the-art and storytelling. state-of-the-art and storytelling. state-of-the-art and storytelling. Computers had advanced a lot by 1990. Computers had advanced a lot by 1990. Computers had advanced a lot by 1990. And so they got to thinking, why are we And so they got to thinking, why are we And so they got to thinking, why are we still using physical paint to color in still using physical paint to color in still using physical paint to color in the lines on every single one of these the lines on every single one of these the lines on every single one of these handdrawn frames? Also, multiplane handdrawn frames? Also, multiplane handdrawn frames? Also, multiplane cameras were really, really expensive to cameras were really, really expensive to cameras were really, really expensive to operate. So they started cheaping out in operate. So they started cheaping out in operate. So they started cheaping out in the dark times where rather than the dark times where rather than the dark times where rather than photographing really complicated, you photographing really complicated, you photographing really complicated, you know, six plane animation, they would know, six plane animation, they would know, six plane animation, they would just kind of slap one animation cell just kind of slap one animation cell just kind of slap one animation cell down, put a background underneath it, down, put a background underneath it, down, put a background underneath it, photograph it, and move on to the next photograph it, and move on to the next photograph it, and move on to the next one. And so they invested $10 million in one. And so they invested $10 million in one. And so they invested $10 million in fixed costs into software that could do fixed costs into software that could do fixed costs into software that could do two things. two things. two things. One was effectively Microsoft Paint for One was effectively Microsoft Paint for One was effectively Microsoft Paint for 2D animation where you could look at all 2D animation where you could look at all 2D animation where you could look at all the lines on a computer. You could the lines on a computer. You could the lines on a computer. You could select a color. You could bring over select a color. You could bring over select a color. You could bring over your little paint tool and dump your your little paint tool and dump your your little paint tool and dump your bucket of color into an enclosed area. bucket of color into an enclosed area. bucket of color into an enclosed area. It sounds like I'm describing something It sounds like I'm describing something It sounds like I'm describing something that you're like, "Yes, we've all used that you're like, "Yes, we've all used that you're like, "Yes, we've all used MS Paint." But this was rocket science MS Paint." But this was rocket science MS Paint." But this was rocket science at the time. This was really cool and at the time. This was really cool and at the time. This was really cool and meant that not only do you not have to meant that not only do you not have to meant that not only do you not have to do inking anymore, you don't do painting do inking anymore, you don't do painting do inking anymore, you don't do painting either. And on top of that, what CAPS either. And on top of that, what CAPS either. And on top of that, what CAPS was was a super duper multiplane camera was was a super duper multiplane camera was was a super duper multiplane camera that could do an unlimited number of that could do an unlimited number of that could do an unlimited number of planes, not just limited to whatever you planes, not just limited to whatever you planes, not just limited to whatever you could actually do in in Walt's era. So could actually do in in Walt's era. So could actually do in in Walt's era. So you could do it faster and cheaper you could do it faster and cheaper you could do it faster and cheaper without actually operating the without actually operating the without actually operating the multiplane camera. So The Little multiplane camera. So The Little multiplane camera. So The Little Mermaid, which only had three multiplane Mermaid, which only had three multiplane Mermaid, which only had three multiplane shots cuz it was before caps, by the shots cuz it was before caps, by the shots cuz it was before caps, by the time you get to The Lion King, it had time you get to The Lion King, it had time you get to The Lion King, it had hundreds. So it's better, it's faster, hundreds. So it's better, it's faster, hundreds. So it's better, it's faster, and it keeps the budget down. and it keeps the budget down. and it keeps the budget down. &gt;&gt; Yeah. Seems odd that Disney, a you know &gt;&gt; Yeah. Seems odd that Disney, a you know &gt;&gt; Yeah. Seems odd that Disney, a you know media company, would develop this media company, would develop this media company, would develop this computer software technology inhouse. computer software technology inhouse. computer software technology inhouse. [laughter] [laughter] [laughter] &gt;&gt; Yes. They uh relied on a partner for &gt;&gt; Yes. They uh relied on a partner for &gt;&gt; Yes. They uh relied on a partner for that who was getting really really good that who was getting really really good that who was getting really really good at early computer graphics. Pixar. at early computer graphics. Pixar. at early computer graphics. Pixar. &gt;&gt; Yeah. Mhm. Well, put a pin in that. &gt;&gt; Yeah. Mhm. Well, put a pin in that. &gt;&gt; Yeah. Mhm. Well, put a pin in that. &gt;&gt; Yes. And one other just fun just because &gt;&gt; Yes. And one other just fun just because &gt;&gt; Yes. And one other just fun just because this is cool nerdy stuff. the scene in this is cool nerdy stuff. the scene in this is cool nerdy stuff. the scene in Beauty and the Beast that is the Beauty and the Beast that is the Beauty and the Beast that is the ballroom dancing scene that has this ballroom dancing scene that has this ballroom dancing scene that has this crazy cool camera pan. It's a quick crazy cool camera pan. It's a quick crazy cool camera pan. It's a quick shot, but it's one of the most memorable shot, but it's one of the most memorable shot, but it's one of the most memorable shots of the whole film. The background shots of the whole film. The background shots of the whole film. The background of that was actually 3D rendered using of that was actually 3D rendered using of that was actually 3D rendered using Pixar software. Pixar software. Pixar software. &gt;&gt; Oh, &gt;&gt; Oh, &gt;&gt; Oh, &gt;&gt; and then they composited using caps a 2D &gt;&gt; and then they composited using caps a 2D &gt;&gt; and then they composited using caps a 2D handdrawn Belle and the Beast dancing. handdrawn Belle and the Beast dancing. handdrawn Belle and the Beast dancing. And that is the first time they used any And that is the first time they used any And that is the first time they used any 3D animation in 3D animation in 3D animation in &gt;&gt; any Disney films. Oh, that's so cool. &gt;&gt; any Disney films. Oh, that's so cool. &gt;&gt; any Disney films. Oh, that's so cool. &gt;&gt; Yeah. And if you go back and watch it, &gt;&gt; Yeah. And if you go back and watch it, &gt;&gt; Yeah. And if you go back and watch it, you're like, "Whoa, yeah, the background you're like, "Whoa, yeah, the background you're like, "Whoa, yeah, the background is computerenerated." is computerenerated." is computerenerated." &gt;&gt; Yeah. Oh, that's awesome. Okay, so on &gt;&gt; Yeah. Oh, that's awesome. Okay, so on &gt;&gt; Yeah. Oh, that's awesome. Okay, so on the back of all these Disney Renaissance the back of all these Disney Renaissance the back of all these Disney Renaissance animated hits, the flywheel is soaring animated hits, the flywheel is soaring animated hits, the flywheel is soaring again at Disney. I mean, really, for the again at Disney. I mean, really, for the again at Disney. I mean, really, for the first time since Walt died, the core first time since Walt died, the core first time since Walt died, the core animated IP at the center of the company animated IP at the center of the company animated IP at the center of the company is back. It's inspiring new generations is back. It's inspiring new generations is back. It's inspiring new generations of children, their parents, and Eisner of children, their parents, and Eisner of children, their parents, and Eisner and Wells not only embrace all of it, and Wells not only embrace all of it, and Wells not only embrace all of it, they extend the flywheel even further. they extend the flywheel even further. they extend the flywheel even further. So, they add three new incredible So, they add three new incredible So, they add three new incredible extensions to the Disney business model, extensions to the Disney business model, extensions to the Disney business model, all based on these characters and all based on these characters and all based on these characters and stories and this this timeless IP that stories and this this timeless IP that stories and this this timeless IP that Disney animation is once again creating. Disney animation is once again creating. Disney animation is once again creating. So, the first home video, [gasps] So, the first home video, [gasps] So, the first home video, [gasps] man, this is a banger. So, the Disney man, this is a banger. So, the Disney man, this is a banger. So, the Disney Vault already existed. Disney would take Vault already existed. Disney would take Vault already existed. Disney would take their classic movies like Snow White or their classic movies like Snow White or their classic movies like Snow White or Cinderella and re-release them in Cinderella and re-release them in Cinderella and re-release them in theaters every seven years or so to, you theaters every seven years or so to, you theaters every seven years or so to, you know, get a new generation of children know, get a new generation of children know, get a new generation of children exposed, exposed, exposed, &gt;&gt; which was the only way to watch movies. &gt;&gt; which was the only way to watch movies. &gt;&gt; which was the only way to watch movies. My brain sort of can't understand this My brain sort of can't understand this My brain sort of can't understand this since home video has existed my entire since home video has existed my entire since home video has existed my entire life. life. life. &gt;&gt; No Disney Plus back then, baby. &gt;&gt; No Disney Plus back then, baby. &gt;&gt; No Disney Plus back then, baby. &gt;&gt; Nope. And until 1985, there was no way &gt;&gt; Nope. And until 1985, there was no way &gt;&gt; Nope. And until 1985, there was no way to watch a Disney film outside of a to watch a Disney film outside of a to watch a Disney film outside of a theater. theater. theater. &gt;&gt; Yep. Yep. So Eisner and Wells and &gt;&gt; Yep. Yep. So Eisner and Wells and &gt;&gt; Yep. Yep. So Eisner and Wells and Catsburg, they're like, "Well, we can do Catsburg, they're like, "Well, we can do Catsburg, they're like, "Well, we can do the same thing with home video." You the same thing with home video." You the same thing with home video." You know, VHS exists now. It's a big thing. know, VHS exists now. It's a big thing. know, VHS exists now. It's a big thing. You know, it's high penetration in US You know, it's high penetration in US You know, it's high penetration in US households. None of the old people at households. None of the old people at households. None of the old people at Disney want to do it. Roy is opposed. Disney want to do it. Roy is opposed. Disney want to do it. Roy is opposed. [laughter] The family's opposed. [laughter] The family's opposed. [laughter] The family's opposed. &gt;&gt; It's heresy. &gt;&gt; It's heresy. &gt;&gt; It's heresy. &gt;&gt; It's heresy. Michael has to convene the &gt;&gt; It's heresy. Michael has to convene the &gt;&gt; It's heresy. Michael has to convene the whole Disney family and get their whole Disney family and get their whole Disney family and get their approval to release Pinocchio as the approval to release Pinocchio as the approval to release Pinocchio as the first of the classics that they're going first of the classics that they're going first of the classics that they're going to put on VHS here in 1985. to put on VHS here in 1985. to put on VHS here in 1985. &gt;&gt; And they're starting low stakes. I mean, &gt;&gt; And they're starting low stakes. I mean, &gt;&gt; And they're starting low stakes. I mean, Pinocchio has already been re-released Pinocchio has already been re-released Pinocchio has already been re-released in theaters five times, seven years in theaters five times, seven years in theaters five times, seven years apart. You would think you're not apart. You would think you're not apart. You would think you're not cannibalizing much at this point on the cannibalizing much at this point on the cannibalizing much at this point on the sixth re-release sixth re-release sixth re-release &gt;&gt; of Pinocchio. So, they agree to a very &gt;&gt; of Pinocchio. So, they agree to a very &gt;&gt; of Pinocchio. So, they agree to a very limited 1.7 million unit run of VHS of limited 1.7 million unit run of VHS of limited 1.7 million unit run of VHS of Pinocchio priced. Pinocchio priced. Pinocchio priced. &gt;&gt; I'm glad you found this, too. &gt;&gt; I'm glad you found this, too. &gt;&gt; I'm glad you found this, too. &gt;&gt; At the very high $29.95 &gt;&gt; At the very high $29.95 &gt;&gt; At the very high $29.95 at retail per copy, it sells out like at retail per copy, it sells out like at retail per copy, it sells out like instantaneously. So that's $50 million instantaneously. So that's $50 million instantaneously. So that's $50 million in gross merchandise sales. Basically in gross merchandise sales. Basically in gross merchandise sales. Basically zero incremental production costs except zero incremental production costs except zero incremental production costs except for the couple bucks of printing the for the couple bucks of printing the for the couple bucks of printing the cassette tapes. And then they do it the cassette tapes. And then they do it the cassette tapes. And then they do it the next year with Cinderella, which proves next year with Cinderella, which proves next year with Cinderella, which proves the exact same thing. So they do a the exact same thing. So they do a the exact same thing. So they do a theatrical re-release on schedule of theatrical re-release on schedule of theatrical re-release on schedule of Cinderella does 34 million in box office Cinderella does 34 million in box office Cinderella does 34 million in box office revenue and then they put out the VHS revenue and then they put out the VHS revenue and then they put out the VHS home video 6 million units. So, between home video 6 million units. So, between home video 6 million units. So, between the two of them, that is $200 million in the two of them, that is $200 million in the two of them, that is $200 million in gross revenue from Cinderella. gross revenue from Cinderella. gross revenue from Cinderella. Oh man. I mean, it's basically another Oh man. I mean, it's basically another Oh man. I mean, it's basically another box office smash like for free that box office smash like for free that box office smash like for free that they're getting here. Yeah. So, it's they're getting here. Yeah. So, it's they're getting here. Yeah. So, it's this crazy thing they discovered where this crazy thing they discovered where this crazy thing they discovered where it seems to not hurt anything, not it seems to not hurt anything, not it seems to not hurt anything, not dampen any demand cuz Michael Eisner dampen any demand cuz Michael Eisner dampen any demand cuz Michael Eisner would sort of later famously point out would sort of later famously point out would sort of later famously point out people buy these tapes but they break, people buy these tapes but they break, people buy these tapes but they break, they lose them. Right. they lose them. Right. they lose them. Right. &gt;&gt; It doesn't make people any less excited &gt;&gt; It doesn't make people any less excited &gt;&gt; It doesn't make people any less excited to go to the theater to go to the theater to go to the theater losing VHS tapes, losing VHS tapes, losing VHS tapes, &gt;&gt; right? It's it's not like, oh, you're &gt;&gt; right? It's it's not like, oh, you're &gt;&gt; right? It's it's not like, oh, you're permanently destroying an asset now that permanently destroying an asset now that permanently destroying an asset now that those tapes exist in the world. No, it those tapes exist in the world. No, it those tapes exist in the world. No, it only increases the demand for more only increases the demand for more only increases the demand for more Cinderella now that the tapes are out. Cinderella now that the tapes are out. Cinderella now that the tapes are out. &gt;&gt; This is the core philosophy behind how &gt;&gt; This is the core philosophy behind how &gt;&gt; This is the core philosophy behind how Walt Disney's flywheel business strategy Walt Disney's flywheel business strategy Walt Disney's flywheel business strategy works. I had read that Disney was works. I had read that Disney was works. I had read that Disney was keeping like between 17 to $20 a pop in keeping like between 17 to $20 a pop in keeping like between 17 to $20 a pop in profits per VHS tape that they were profits per VHS tape that they were profits per VHS tape that they were selling because I think they had so much selling because I think they had so much selling because I think they had so much leverage over the retailers. So home leverage over the retailers. So home leverage over the retailers. So home video quickly becomes a billion dollar video quickly becomes a billion dollar video quickly becomes a billion dollar business for the Walt Disney Company. business for the Walt Disney Company. business for the Walt Disney Company. It's the second biggest profit center It's the second biggest profit center It's the second biggest profit center for the whole company after the theme for the whole company after the theme for the whole company after the theme parks. And then that's just re-releasing parks. And then that's just re-releasing parks. And then that's just re-releasing the classics. Then they start doing home the classics. Then they start doing home the classics. Then they start doing home video of the new hits that are coming video of the new hits that are coming video of the new hits that are coming out and like man does that blow the out and like man does that blow the out and like man does that blow the doors off. doors off. doors off. &gt;&gt; Having a home video release channel &gt;&gt; Having a home video release channel &gt;&gt; Having a home video release channel instantly makes whatever you want to instantly makes whatever you want to instantly makes whatever you want to spend on animation worth it. Yes. spend on animation worth it. Yes. spend on animation worth it. Yes. &gt;&gt; It is this sudden renewed focus on &gt;&gt; It is this sudden renewed focus on &gt;&gt; It is this sudden renewed focus on animation because they realize, oh my animation because they realize, oh my animation because they realize, oh my god, there's a way to get value out of god, there's a way to get value out of god, there's a way to get value out of this. this. this. &gt;&gt; Yes. So, the numbers on this, Aladdin &gt;&gt; Yes. So, the numbers on this, Aladdin &gt;&gt; Yes. So, the numbers on this, Aladdin sells $30 million VHS tapes in 1993. sells $30 million VHS tapes in 1993. sells $30 million VHS tapes in 1993. &gt;&gt; So, that's $900 million in sales in &gt;&gt; So, that's $900 million in sales in &gt;&gt; So, that's $900 million in sales in sales. Sales of tapes. sales. Sales of tapes. sales. Sales of tapes. &gt;&gt; Yeah. Yeah. And then The Lion King &gt;&gt; Yeah. Yeah. And then The Lion King &gt;&gt; Yeah. Yeah. And then The Lion King eclipses it in 1995 when it comes out on eclipses it in 1995 when it comes out on eclipses it in 1995 when it comes out on VHS with 32 million units. The VHS with 32 million units. The VHS with 32 million units. The bestselling VHS of all time, period, in bestselling VHS of all time, period, in bestselling VHS of all time, period, in history ever. history ever. history ever. &gt;&gt; That's a billion dollars of tapes of a &gt;&gt; That's a billion dollars of tapes of a &gt;&gt; That's a billion dollars of tapes of a Lion King sold. Lion King sold. Lion King sold. &gt;&gt; Yes. that Disney is getting roughly 50% &gt;&gt; Yes. that Disney is getting roughly 50% &gt;&gt; Yes. that Disney is getting roughly 50% or greater cash flow margin out of that. or greater cash flow margin out of that. or greater cash flow margin out of that. You should think each of those is half a You should think each of those is half a You should think each of those is half a billion dollars in Disney's bank account billion dollars in Disney's bank account billion dollars in Disney's bank account cuz these films are already quite cuz these films are already quite cuz these films are already quite profitable from the box office cuz the profitable from the box office cuz the profitable from the box office cuz the budgets are low and the box office is budgets are low and the box office is budgets are low and the box office is super high. super high. super high. &gt;&gt; I mean, Lion King is just ridiculous, &gt;&gt; I mean, Lion King is just ridiculous, &gt;&gt; I mean, Lion King is just ridiculous, right? Like 750 million at box office on right? Like 750 million at box office on right? Like 750 million at box office on a $45 million production. So, let's say a $45 million production. So, let's say a $45 million production. So, let's say what does Disney make? 300 million in what does Disney make? 300 million in what does Disney make? 300 million in cash flow out of that theatrical cash flow out of that theatrical cash flow out of that theatrical &gt;&gt; minus distribution and marketing &gt;&gt; minus distribution and marketing &gt;&gt; minus distribution and marketing expenses. I don't know. 250. expenses. I don't know. 250. expenses. I don't know. 250. &gt;&gt; Yeah. Okay. Sure. 250. Out of half a &gt;&gt; Yeah. Okay. Sure. 250. Out of half a &gt;&gt; Yeah. Okay. Sure. 250. Out of half a billion from home video, you're at 3/4 billion from home video, you're at 3/4 billion from home video, you're at 3/4 of a billion in cash out of the Lion of a billion in cash out of the Lion of a billion in cash out of the Lion King within a year [laughter] of King within a year [laughter] of King within a year [laughter] of release. And then, well, we'll get to release. And then, well, we'll get to release. And then, well, we'll get to what else comes out of The Lion King in what else comes out of The Lion King in what else comes out of The Lion King in a second. a second. a second. &gt;&gt; And I don't think there was much backend &gt;&gt; And I don't think there was much backend &gt;&gt; And I don't think there was much backend at that point for any of the actors. So, at that point for any of the actors. So, at that point for any of the actors. So, I think this is literally just going to I think this is literally just going to I think this is literally just going to Disney. Oh, this is also why it fits so Disney. Oh, this is also why it fits so Disney. Oh, this is also why it fits so great with Eisner's philosophy because great with Eisner's philosophy because great with Eisner's philosophy because even though they were signing stars to even though they were signing stars to even though they were signing stars to be voice actors like Robin Williams is be voice actors like Robin Williams is be voice actors like Robin Williams is the genie, etc., etc., they weren't the genie, etc., etc., they weren't the genie, etc., etc., they weren't getting paid much. Like these are very getting paid much. Like these are very getting paid much. Like these are very different deals, especially back then different deals, especially back then different deals, especially back then for those actors than for the live for those actors than for the live for those actors than for the live action films that were starting to get action films that were starting to get action films that were starting to get expensive and actors were, you know, expensive and actors were, you know, expensive and actors were, you know, making real money out of. making real money out of. making real money out of. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; So that's home video. Next, they &gt;&gt; So that's home video. Next, they &gt;&gt; So that's home video. Next, they launched Disney retail stores across the launched Disney retail stores across the launched Disney retail stores across the country. country. country. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; Do you remember these? spent so many &gt;&gt; Do you remember these? spent so many &gt;&gt; Do you remember these? spent so many weekends at the mall when I was a kid in weekends at the mall when I was a kid in weekends at the mall when I was a kid in Disney retail stores Disney retail stores Disney retail stores &gt;&gt; plastered with Disney stuff. Giant piles &gt;&gt; plastered with Disney stuff. Giant piles &gt;&gt; plastered with Disney stuff. Giant piles of stuffed animals. It was a of stuffed animals. It was a of stuffed animals. It was a hallucinogenic experience to go in hallucinogenic experience to go in hallucinogenic experience to go in there. there. there. &gt;&gt; Peak 1990s. &gt;&gt; Peak 1990s. &gt;&gt; Peak 1990s. &gt;&gt; Yes. So they build more than 750 Disney &gt;&gt; Yes. So they build more than 750 Disney &gt;&gt; Yes. So they build more than 750 Disney stores, retail stores in in like stores, retail stores in in like stores, retail stores in in like basically every mall in America, which basically every mall in America, which basically every mall in America, which now between home video where for the now between home video where for the now between home video where for the first time you've got kids and families first time you've got kids and families first time you've got kids and families watching these movies over and over and watching these movies over and over and watching these movies over and over and over again at home. Then on the over again at home. Then on the over again at home. Then on the weekends, these American families, they weekends, these American families, they weekends, these American families, they go to the mall, they go to the Disney go to the mall, they go to the Disney go to the mall, they go to the Disney store, they buy the merch, they revel in store, they buy the merch, they revel in store, they buy the merch, they revel in all this Disney. Like it is back to the all this Disney. Like it is back to the all this Disney. Like it is back to the peak of Disney under Walt where it just peak of Disney under Walt where it just peak of Disney under Walt where it just takes over America basically. takes over America basically. takes over America basically. &gt;&gt; Yep. I bet people of our generation have &gt;&gt; Yep. I bet people of our generation have &gt;&gt; Yep. I bet people of our generation have a unique relationship with Disney a unique relationship with Disney a unique relationship with Disney because of this period because we were because of this period because we were because of this period because we were there in such a heyday. I bet people there in such a heyday. I bet people there in such a heyday. I bet people that are 10, 15 years older than us that are 10, 15 years older than us that are 10, 15 years older than us don't have the same don't have the same don't have the same Disney relationship. Disney relationship. Disney relationship. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Since they were sort of grown-ups by the &gt;&gt; Since they were sort of grown-ups by the &gt;&gt; Since they were sort of grown-ups by the time the Eisner era hit. time the Eisner era hit. time the Eisner era hit. &gt;&gt; Yeah. I mean it was the dark period when &gt;&gt; Yeah. I mean it was the dark period when &gt;&gt; Yeah. I mean it was the dark period when they were children and you got to get they were children and you got to get they were children and you got to get children to make this work and then they children to make this work and then they children to make this work and then they pass it on to their children and etc pass it on to their children and etc pass it on to their children and etc etc. etc. etc. &gt;&gt; So okay home video Disney retail [gasps] &gt;&gt; So okay home video Disney retail [gasps] &gt;&gt; So okay home video Disney retail [gasps] and then three and then three and then three Broadway. This is an absolute master Broadway. This is an absolute master Broadway. This is an absolute master stroke. When we first started the stroke. When we first started the stroke. When we first started the research we like oh yeah we'll put a research we like oh yeah we'll put a research we like oh yeah we'll put a thing about the Lion Kingdom musical in thing about the Lion Kingdom musical in thing about the Lion Kingdom musical in there and Broadway they do that you know there and Broadway they do that you know there and Broadway they do that you know great. It's a thing that Eisner and team great. It's a thing that Eisner and team great. It's a thing that Eisner and team do in the '90s do in the '90s do in the '90s &gt;&gt; right? Oh it must be like Disney on Ice. theater. Disney owns that in, you know, theater. Disney owns that in, you know, in New York now. Then they put on the in New York now. Then they put on the in New York now. Then they put on the Lion King musical, Lion King musical, Lion King musical, &gt;&gt; which is spectacular. &gt;&gt; which is spectacular. &gt;&gt; which is spectacular. &gt;&gt; Oh, amazing. I haven't been in, I don't &gt;&gt; Oh, amazing. I haven't been in, I don't &gt;&gt; Oh, amazing. I haven't been in, I don't know, 15 years or something, but I have know, 15 years or something, but I have know, 15 years or something, but I have a visceral memory of the parade of a visceral memory of the parade of a visceral memory of the parade of animals walking down the aisle and just animals walking down the aisle and just animals walking down the aisle and just how uniquely they did the costume how uniquely they did the costume how uniquely they did the costume designs with the faces of the animals designs with the faces of the animals designs with the faces of the animals that sort of hover above their heads. that sort of hover above their heads. that sort of hover above their heads. It's art. It's back to Walt Disney. It's It's art. It's back to Walt Disney. It's It's art. It's back to Walt Disney. It's art and commerce, like right absolute art and commerce, like right absolute art and commerce, like right absolute art. art. art. And it becomes the highest grossing And it becomes the highest grossing And it becomes the highest grossing Broadway show in history. Broadway show in history. Broadway show in history. &gt;&gt; It's still running today. And if you add &gt;&gt; It's still running today. And if you add &gt;&gt; It's still running today. And if you add up gross on Broadway over the past 30 up gross on Broadway over the past 30 up gross on Broadway over the past 30 years plus the touring company, The Lion years plus the touring company, The Lion years plus the touring company, The Lion King musical has grossed over $11 King musical has grossed over $11 King musical has grossed over $11 billion billion billion in total revenue in its run, which I in total revenue in its run, which I in total revenue in its run, which I think makes it the single highest think makes it the single highest think makes it the single highest grossing entertainment product in grossing entertainment product in grossing entertainment product in history in any medium. Film, music, TV, history in any medium. Film, music, TV, history in any medium. Film, music, TV, video games, other Broadway shows. video games, other Broadway shows. video games, other Broadway shows. &gt;&gt; What? Lion King the Musical is the &gt;&gt; What? Lion King the Musical is the &gt;&gt; What? Lion King the Musical is the highest grossing piece of entertainment highest grossing piece of entertainment highest grossing piece of entertainment ever created in history. ever created in history. ever created in history. &gt;&gt; Of any medium? The highest grossing is a &gt;&gt; Of any medium? The highest grossing is a &gt;&gt; Of any medium? The highest grossing is a Broadway musical. Broadway musical. Broadway musical. &gt;&gt; Yep. Of a a single like non episodic, &gt;&gt; Yep. Of a a single like non episodic, &gt;&gt; Yep. Of a a single like non episodic, but like a single piece of media, a but like a single piece of media, a but like a single piece of media, a single story concept. single story concept. single story concept. &gt;&gt; Lion King the musical. &gt;&gt; Lion King the musical. &gt;&gt; Lion King the musical. &gt;&gt; How is it 11 billion? Cuz even the &gt;&gt; How is it 11 billion? Cuz even the &gt;&gt; How is it 11 billion? Cuz even the biggest box office films do 2.82.9 biggest box office films do 2.82.9 biggest box office films do 2.82.9 billion. I mean, that's Avatar. That's billion. I mean, that's Avatar. That's billion. I mean, that's Avatar. That's Avengers Endgame. And then if you were Avengers Endgame. And then if you were Avengers Endgame. And then if you were to add like an entire home video on top to add like an entire home video on top to add like an entire home video on top of that, we already said the Lion King of that, we already said the Lion King of that, we already said the Lion King home video was a billion. home video was a billion. home video was a billion. &gt;&gt; Yeah. You double it, maybe more. Yeah. &gt;&gt; Yeah. You double it, maybe more. Yeah. &gt;&gt; Yeah. You double it, maybe more. Yeah. &gt;&gt; How do they get to 11 for a Broadway &gt;&gt; How do they get to 11 for a Broadway &gt;&gt; How do they get to 11 for a Broadway musical? musical? musical? &gt;&gt; It's been running for 30 years. &gt;&gt; It's been running for 30 years. &gt;&gt; It's been running for 30 years. &gt;&gt; 30 years. &gt;&gt; 30 years. &gt;&gt; 30 years. &gt;&gt; And they're packing the house around the &gt;&gt; And they're packing the house around the &gt;&gt; And they're packing the house around the world. world. world. &gt;&gt; Traveling show. Pretty high ticket price &gt;&gt; Traveling show. Pretty high ticket price &gt;&gt; Traveling show. Pretty high ticket price to go to a musical to go to a musical to go to a musical &gt;&gt; in London. It's in New York. It's got &gt;&gt; in London. It's in New York. It's got &gt;&gt; in London. It's in New York. It's got the traveling company. the traveling company. the traveling company. &gt;&gt; Wow. &gt;&gt; Wow. &gt;&gt; Wow. &gt;&gt; Yeah. So even spread out over 30 years. &gt;&gt; Yeah. So even spread out over 30 years. &gt;&gt; Yeah. So even spread out over 30 years. Lion King the musical on average that Lion King the musical on average that Lion King the musical on average that means it has generated $350 million in means it has generated $350 million in means it has generated $350 million in gross revenue for Disney every single gross revenue for Disney every single gross revenue for Disney every single year. That is an extra hit movie every year. That is an extra hit movie every year. That is an extra hit movie every year. [laughter] year. [laughter] year. [laughter] &gt;&gt; And they own it outright. &gt;&gt; And they own it outright. &gt;&gt; And they own it outright. &gt;&gt; Yeah. I mean the they have to share &gt;&gt; Yeah. I mean the they have to share &gt;&gt; Yeah. I mean the they have to share theater revenue with you know especially theater revenue with you know especially theater revenue with you know especially the touring company when they go to the touring company when they go to the touring company when they go to theaters around the world but that's the theaters around the world but that's the theaters around the world but that's the same as any movie. It's it's another same as any movie. It's it's another same as any movie. It's it's another movie every year. movie every year. movie every year. &gt;&gt; Wow. 11 billion. &gt;&gt; Wow. 11 billion. &gt;&gt; Wow. 11 billion. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Fascinating. &gt;&gt; Fascinating. &gt;&gt; Fascinating. &gt;&gt; Absolutely incredible. So Eisner in this &gt;&gt; Absolutely incredible. So Eisner in this &gt;&gt; Absolutely incredible. So Eisner in this era really did crack the extensions of era really did crack the extensions of era really did crack the extensions of the brand thing and he also kind of the brand thing and he also kind of the brand thing and he also kind of dipped his foot back into traditional dipped his foot back into traditional dipped his foot back into traditional marketing more. Didn't they start marketing more. Didn't they start marketing more. Didn't they start running a whole bunch of like come to running a whole bunch of like come to running a whole bunch of like come to Disneyland commercials and like Disneyland commercials and like Disneyland commercials and like explaining the rides and I think this is explaining the rides and I think this is explaining the rides and I think this is also when they started the campaign also when they started the campaign also when they started the campaign where the winning Super Bowl MVP would where the winning Super Bowl MVP would where the winning Super Bowl MVP would always say I'm going to world right always say I'm going to world right always say I'm going to world right after they won the the Super Bowl. Well, after they won the the Super Bowl. Well, after they won the the Super Bowl. Well, so, so this is the other big big thing so, so this is the other big big thing so, so this is the other big big thing that Michael Eisner does is he that Michael Eisner does is he that Michael Eisner does is he transforms the parks. The parks were transforms the parks. The parks were transforms the parks. The parks were obviously Walt's genius and part of the obviously Walt's genius and part of the obviously Walt's genius and part of the original Walt vision and business model original Walt vision and business model original Walt vision and business model for what Disney would become, but for what Disney would become, but for what Disney would become, but they're just theme parks when Michael they're just theme parks when Michael they're just theme parks when Michael takes over. takes over. takes over. &gt;&gt; Yeah. They're not really resorts. &gt;&gt; Yeah. They're not really resorts. &gt;&gt; Yeah. They're not really resorts. &gt;&gt; He makes the parks and especially &gt;&gt; He makes the parks and especially &gt;&gt; He makes the parks and especially Florida a resort. He goes from, "Ah, Florida a resort. He goes from, "Ah, Florida a resort. He goes from, "Ah, yeah, we got Disney World and we got yeah, we got Disney World and we got yeah, we got Disney World and we got Epcot and sure, come to Florida." They Epcot and sure, come to Florida." They Epcot and sure, come to Florida." They build the Grand Fian Hotel. They build build the Grand Fian Hotel. They build build the Grand Fian Hotel. They build the Swan. They build the Dolphin. They the Swan. They build the Dolphin. They the Swan. They build the Dolphin. They start the vacation club time share start the vacation club time share start the vacation club time share program with the Old Key West Resort, program with the Old Key West Resort, program with the Old Key West Resort, which my family was a member of. And so which my family was a member of. And so which my family was a member of. And so what did we do every year? We went to what did we do every year? We went to what did we do every year? We went to Walt Disney World every single year. It Walt Disney World every single year. It Walt Disney World every single year. It was a resort. It was a vacation. They was a resort. It was a vacation. They was a resort. It was a vacation. They add Hollywood Studios, then they add the add Hollywood Studios, then they add the add Hollywood Studios, then they add the Animal Kingdom. They completely Animal Kingdom. They completely Animal Kingdom. They completely transform what a theme park resort is. transform what a theme park resort is. transform what a theme park resort is. &gt;&gt; And the Animal Kingdom in particular is &gt;&gt; And the Animal Kingdom in particular is &gt;&gt; And the Animal Kingdom in particular is a wild pitch. What if we build an actual a wild pitch. What if we build an actual a wild pitch. What if we build an actual animal kingdom with lions and zebras and animal kingdom with lions and zebras and animal kingdom with lions and zebras and you know the most it's not it it won't you know the most it's not it it won't you know the most it's not it it won't feel like a zoo. It'll feel like you're feel like a zoo. It'll feel like you're feel like a zoo. It'll feel like you're on the African safari when you're out on the African safari when you're out on the African safari when you're out doing it. They changed the park from doing it. They changed the park from doing it. They changed the park from something that could compete with going something that could compete with going something that could compete with going to a baseball game on a Saturday to to a baseball game on a Saturday to to a baseball game on a Saturday to something that could compete with your something that could compete with your something that could compete with your European 5day vacation. European 5day vacation. European 5day vacation. &gt;&gt; Yes. Yes. And they get into all the real &gt;&gt; Yes. Yes. And they get into all the real &gt;&gt; Yes. Yes. And they get into all the real estate all around it. All those hotels estate all around it. All those hotels estate all around it. All those hotels that they're developing, having that they're developing, having that they're developing, having Imagineering develop. It's not just Imagineering develop. It's not just Imagineering develop. It's not just Marriotts that they're throwing in Marriotts that they're throwing in Marriotts that they're throwing in there, there, there, &gt;&gt; right? And with him raising prices, &gt;&gt; right? And with him raising prices, &gt;&gt; right? And with him raising prices, plowing cash into building out the next plowing cash into building out the next plowing cash into building out the next 10, 15, 20 years of parks and 10, 15, 20 years of parks and 10, 15, 20 years of parks and attracting, oh, I'm not going to spend attracting, oh, I'm not going to spend attracting, oh, I'm not going to spend $300 here. I'm going to drop $3,000 here $300 here. I'm going to drop $3,000 here $300 here. I'm going to drop $3,000 here on a family vacation. on a family vacation. on a family vacation. This starts to become kind of a behemoth This starts to become kind of a behemoth This starts to become kind of a behemoth business of its own. business of its own. business of its own. &gt;&gt; Totally. I mean, it sets the stage for &gt;&gt; Totally. I mean, it sets the stage for &gt;&gt; Totally. I mean, it sets the stage for today. Last year, Disney Parks and today. Last year, Disney Parks and today. Last year, Disney Parks and Experiences contributed 10 billion Experiences contributed 10 billion Experiences contributed 10 billion dollars in operating profit to Disney. dollars in operating profit to Disney. dollars in operating profit to Disney. And it starts with this And it starts with this And it starts with this &gt;&gt; nuts. Now, it's not all sunshine and &gt;&gt; nuts. Now, it's not all sunshine and &gt;&gt; nuts. Now, it's not all sunshine and rainbows on the park side during the rainbows on the park side during the rainbows on the park side during the Eisner era. Eisner era. Eisner era. &gt;&gt; Euro Disney. &gt;&gt; Euro Disney. &gt;&gt; Euro Disney. &gt;&gt; There is Euro Disney, [laughter] uh, &gt;&gt; There is Euro Disney, [laughter] uh, &gt;&gt; There is Euro Disney, [laughter] uh, which costs 4 billion to develop and which costs 4 billion to develop and which costs 4 billion to develop and just loses money for years. The sort of just loses money for years. The sort of just loses money for years. The sort of glib line that I like about this is it glib line that I like about this is it glib line that I like about this is it took Disney a decade to figure out that took Disney a decade to figure out that took Disney a decade to figure out that European parents want to drink wine European parents want to drink wine European parents want to drink wine while their kids run around. while their kids run around. while their kids run around. &gt;&gt; [laughter] &gt;&gt; [laughter] &gt;&gt; [laughter] &gt;&gt; There's more to it than that. But &gt;&gt; There's more to it than that. But &gt;&gt; There's more to it than that. But &gt;&gt; and also, I'm not sure that Europeans &gt;&gt; and also, I'm not sure that Europeans &gt;&gt; and also, I'm not sure that Europeans love being called Euro. Like, if you're love being called Euro. Like, if you're love being called Euro. Like, if you're if you if you live in Paris, you if you if you live in Paris, you if you if you live in Paris, you consider yourself French or or Parisian. consider yourself French or or Parisian. consider yourself French or or Parisian. You don't consider yourself Euro. So, You don't consider yourself Euro. So, You don't consider yourself Euro. So, they rename it Disneyland Paris. They they rename it Disneyland Paris. They they rename it Disneyland Paris. They make a whole bunch of changes. They make a whole bunch of changes. They make a whole bunch of changes. They eventually write the ship and there's a eventually write the ship and there's a eventually write the ship and there's a global macro thing that changes, too. global macro thing that changes, too. global macro thing that changes, too. They sort of opened into a recession, They sort of opened into a recession, They sort of opened into a recession, but yeah, that was a disaster for a but yeah, that was a disaster for a but yeah, that was a disaster for a while. while. while. &gt;&gt; Yep. Yep. But that aside, I mean, man, &gt;&gt; Yep. Yep. But that aside, I mean, man, &gt;&gt; Yep. Yep. But that aside, I mean, man, by the time we're in the mid '9s here, by the time we're in the mid '9s here, by the time we're in the mid '9s here, Disney and the Eisner, Wells, Katsenberg Disney and the Eisner, Wells, Katsenberg Disney and the Eisner, Wells, Katsenberg dream team is just crushing it. dream team is just crushing it. dream team is just crushing it. Operating profit at the company goes Operating profit at the company goes Operating profit at the company goes from well under 300 million when they from well under 300 million when they from well under 300 million when they take over in 1984 to just under two take over in 1984 to just under two take over in 1984 to just under two billion a decade later. So, you know, billion a decade later. So, you know, billion a decade later. So, you know, almost what's that 8x operating profit almost what's that 8x operating profit almost what's that 8x operating profit in in in &gt;&gt; in a decade. a decade. &gt;&gt; in a decade. a decade. &gt;&gt; in a decade. a decade. &gt;&gt; Wow. And it had been declining. I mean, &gt;&gt; Wow. And it had been declining. I mean, &gt;&gt; Wow. And it had been declining. I mean, it fell 25% in 2 years before they it fell 25% in 2 years before they it fell 25% in 2 years before they joined. joined. joined. &gt;&gt; Yeah. Those three guys didn't just save &gt;&gt; Yeah. Those three guys didn't just save &gt;&gt; Yeah. Those three guys didn't just save Disney. Like, they made Disney flourish Disney. Like, they made Disney flourish Disney. Like, they made Disney flourish in a way that Walt only could have in a way that Walt only could have in a way that Walt only could have dreamed of. dreamed of. dreamed of. &gt;&gt; It is quite reasonable to say that &gt;&gt; It is quite reasonable to say that &gt;&gt; It is quite reasonable to say that Disney has never been as successful as Disney has never been as successful as Disney has never been as successful as they were in this period from the early they were in this period from the early they were in this period from the early to mid '90s. to mid '90s. to mid '90s. &gt;&gt; Well, I've got the stat to prove it. So &gt;&gt; Well, I've got the stat to prove it. So &gt;&gt; Well, I've got the stat to prove it. So by 1994, Disney's market cap hits $22 by 1994, Disney's market cap hits $22 by 1994, Disney's market cap hits $22 billion, up 10x from when the Eisner billion, up 10x from when the Eisner billion, up 10x from when the Eisner crew took over, and it becomes the crew took over, and it becomes the crew took over, and it becomes the highest valued of all the traditional highest valued of all the traditional highest valued of all the traditional media companies. More valuable than Time media companies. More valuable than Time media companies. More valuable than Time Warner, more valuable than Viacom, more Warner, more valuable than Viacom, more Warner, more valuable than Viacom, more valuable than Fox and News Corp. Disney valuable than Fox and News Corp. Disney valuable than Fox and News Corp. Disney is on top of the world and it's all is on top of the world and it's all is on top of the world and it's all about to fall apart. about to fall apart. about to fall apart. [laughter and gasps] But before we tell [laughter and gasps] But before we tell [laughter and gasps] But before we tell that story, now is a great time to thank that story, now is a great time to thank that story, now is a great time to thank our new presenting partner, a company our new presenting partner, a company our new presenting partner, a company that we are very excited about, Sierra. that we are very excited about, Sierra. that we are very excited about, Sierra. Yes, we study founders and CEOs of some Yes, we study founders and CEOs of some Yes, we study founders and CEOs of some of the greatest businesses in history. of the greatest businesses in history. of the greatest businesses in history. And those folks today are all wrestling And those folks today are all wrestling And those folks today are all wrestling with the same question. How do I use AI with the same question. How do I use AI with the same question. How do I use AI to grow my business without losing what to grow my business without losing what to grow my business without losing what makes us unique? makes us unique? makes us unique? &gt;&gt; And that's exactly where Sierra comes in &gt;&gt; And that's exactly where Sierra comes in &gt;&gt; And that's exactly where Sierra comes in and part of why we're so excited to be and part of why we're so excited to be and part of why we're so excited to be partnering with them. Well, that and the partnering with them. Well, that and the partnering with them. Well, that and the fact that it's built by basically the fact that it's built by basically the fact that it's built by basically the super group of tech from the last two super group of tech from the last two super group of tech from the last two decades with Brett Taylor and Clay Befor decades with Brett Taylor and Clay Befor decades with Brett Taylor and Clay Befor &gt;&gt; previously ACQ2 guests. &gt;&gt; previously ACQ2 guests. &gt;&gt; previously ACQ2 guests. &gt;&gt; Yes. And the ridiculous group of talent &gt;&gt; Yes. And the ridiculous group of talent &gt;&gt; Yes. And the ridiculous group of talent that they have assembled there. that they have assembled there. that they have assembled there. &gt;&gt; Yes. Sierra has built customerf facing &gt;&gt; Yes. Sierra has built customerf facing &gt;&gt; Yes. Sierra has built customerf facing AI agents that can do a huge range of AI agents that can do a huge range of AI agents that can do a huge range of things. Not just basic support stuff things. Not just basic support stuff things. Not just basic support stuff like answering questions, but the kind like answering questions, but the kind like answering questions, but the kind of hard things that are closer to a of hard things that are closer to a of hard things that are closer to a company's core value creation. So, think company's core value creation. So, think company's core value creation. So, think about things like helping with a about things like helping with a about things like helping with a mortgage application all the way to mortgage application all the way to mortgage application all the way to closing or a car accident to getting a closing or a car accident to getting a closing or a car accident to getting a claim paid, a doctor's referral to claim paid, a doctor's referral to claim paid, a doctor's referral to handling a specialist appointment, or handling a specialist appointment, or handling a specialist appointment, or other use cases like renewing customers other use cases like renewing customers other use cases like renewing customers at risk of turn, collecting overdue at risk of turn, collecting overdue at risk of turn, collecting overdue bills, or turning around abandoned bills, or turning around abandoned bills, or turning around abandoned shopping carts into completed purchases. shopping carts into completed purchases. shopping carts into completed purchases. So, the magic is that these are not So, the magic is that these are not So, the magic is that these are not one-off conversations. These are one-off conversations. These are one-off conversations. These are journeys that unfold over days, weeks, journeys that unfold over days, weeks, journeys that unfold over days, weeks, or even months across phone calls, or even months across phone calls, or even months across phone calls, texts, emails, chat. Every interaction texts, emails, chat. Every interaction texts, emails, chat. Every interaction teaches your AI something new, which teaches your AI something new, which teaches your AI something new, which creates knowledge that is uniquely yours creates knowledge that is uniquely yours creates knowledge that is uniquely yours as a company and strengthens your as a company and strengthens your as a company and strengthens your competitive advantage over time. competitive advantage over time. competitive advantage over time. &gt;&gt; That ambition is what's attracting some &gt;&gt; That ambition is what's attracting some &gt;&gt; That ambition is what's attracting some of the world's biggest companies as of the world's biggest companies as of the world's biggest companies as customers. Today, Sierra partners with customers. Today, Sierra partners with customers. Today, Sierra partners with over 40% of the Fortune 50, one in three over 40% of the Fortune 50, one in three over 40% of the Fortune 50, one in three of the world's banks and five of the 10 of the world's banks and five of the 10 of the world's banks and five of the 10 largest health insurers in the United largest health insurers in the United largest health insurers in the United States. And our favorite part, it's an States. And our favorite part, it's an States. And our favorite part, it's an entirely new business model. Instead of entirely new business model. Instead of entirely new business model. Instead of paying for usage or tokens, you pay for paying for usage or tokens, you pay for paying for usage or tokens, you pay for outcomes. a subscriber renewed or a outcomes. a subscriber renewed or a outcomes. a subscriber renewed or a claim got paid. So you can focus on claim got paid. So you can focus on claim got paid. So you can focus on growing your business, not choosing growing your business, not choosing growing your business, not choosing models or managing tokens. models or managing tokens. models or managing tokens. &gt;&gt; And in fact, we think so highly of &gt;&gt; And in fact, we think so highly of &gt;&gt; And in fact, we think so highly of Sierra that we invested in the company. Sierra that we invested in the company. Sierra that we invested in the company. So to find out how you can build So to find out how you can build So to find out how you can build standout customer experiences that grow standout customer experiences that grow standout customer experiences that grow your business with AI, visit your business with AI, visit your business with AI, visit sierra.ai/acquired sierra.ai/acquired sierra.ai/acquired and just tell them that Ben and David and just tell them that Ben and David and just tell them that Ben and David sent you. Okay, so David, they're flying sent you. Okay, so David, they're flying sent you. Okay, so David, they're flying high. What could possibly go wrong? high. What could possibly go wrong? high. What could possibly go wrong? &gt;&gt; Oh man. Well, 1994 &gt;&gt; Oh man. Well, 1994 &gt;&gt; Oh man. Well, 1994 is a great year for Disney as a business is a great year for Disney as a business is a great year for Disney as a business because Lion King comes out. It's a because Lion King comes out. It's a because Lion King comes out. It's a terrible year for Disney as a company. terrible year for Disney as a company. terrible year for Disney as a company. And there's three huge blows that hit And there's three huge blows that hit And there's three huge blows that hit the company in quick succession. First, the company in quick succession. First, the company in quick succession. First, on Easter Sunday 1994, on Easter Sunday 1994, on Easter Sunday 1994, Frank Wells is shockingly and tragically Frank Wells is shockingly and tragically Frank Wells is shockingly and tragically killed in a helicopter crash while killed in a helicopter crash while killed in a helicopter crash while helisking. helisking. helisking. This is terrible um on every level This is terrible um on every level This is terrible um on every level for the company and the management team for the company and the management team for the company and the management team for all that Michael Eisner was been as for all that Michael Eisner was been as for all that Michael Eisner was been as you said like the creative executive and you said like the creative executive and you said like the creative executive and had to be the public face of the Walt had to be the public face of the Walt had to be the public face of the Walt Disney Company and the Disney Disney Company and the Disney Disney Company and the Disney Renaissance. Frank was like the guy Renaissance. Frank was like the guy Renaissance. Frank was like the guy behind the scenes holding it all behind the scenes holding it all behind the scenes holding it all together. He absolutely was the ying to together. He absolutely was the ying to together. He absolutely was the ying to Michael's Yang and all of a sudden he's Michael's Yang and all of a sudden he's Michael's Yang and all of a sudden he's gone. like one day's here, one day's gone. like one day's here, one day's gone. like one day's here, one day's gone. gone. gone. &gt;&gt; And there's big personalities at the &gt;&gt; And there's big personalities at the &gt;&gt; And there's big personalities at the table. Michael's a big personality. table. Michael's a big personality. table. Michael's a big personality. Jeffrey's a big personality. And Frank Jeffrey's a big personality. And Frank Jeffrey's a big personality. And Frank was kind of the the peacekeeper, the the was kind of the the peacekeeper, the the was kind of the the peacekeeper, the the one who could always relate to everyone, one who could always relate to everyone, one who could always relate to everyone, be the intermediary, calm people down be the intermediary, calm people down be the intermediary, calm people down when they were hot about something. when they were hot about something. when they were hot about something. &gt;&gt; I mean, he was the guy who when Michael &gt;&gt; I mean, he was the guy who when Michael &gt;&gt; I mean, he was the guy who when Michael said, "I need to be number one," he said, "I need to be number one," he said, "I need to be number one," he said, "Okay, no problem. Let's all go said, "Okay, no problem. Let's all go said, "Okay, no problem. Let's all go make magic together." Y and that force make magic together." Y and that force make magic together." Y and that force is just not at the company anymore. So is just not at the company anymore. So is just not at the company anymore. So then three months later, while Michael then three months later, while Michael then three months later, while Michael is at the annual Allen and Company is at the annual Allen and Company is at the annual Allen and Company conference in Sun Valley, Idaho, conference in Sun Valley, Idaho, conference in Sun Valley, Idaho, he starts experiencing chest pains and he starts experiencing chest pains and he starts experiencing chest pains and has to be rushed back to LA into has to be rushed back to LA into has to be rushed back to LA into emergency quadruple bypass open heart emergency quadruple bypass open heart emergency quadruple bypass open heart surgery. surgery. surgery. &gt;&gt; Yeah. And he's out of commission. I &gt;&gt; Yeah. And he's out of commission. I &gt;&gt; Yeah. And he's out of commission. I mean, he is recovering from open heart mean, he is recovering from open heart mean, he is recovering from open heart surgery in the hospital while they're surgery in the hospital while they're surgery in the hospital while they're feeling the loss of Frank Wells. There's feeling the loss of Frank Wells. There's feeling the loss of Frank Wells. There's a lot of decisions that need to get made a lot of decisions that need to get made a lot of decisions that need to get made and there's a lot of like personnel and there's a lot of like personnel and there's a lot of like personnel clashes that needed to get sorted clashes that needed to get sorted clashes that needed to get sorted through. But through. But through. But &gt;&gt; what can Michael do? He's like literally &gt;&gt; what can Michael do? He's like literally &gt;&gt; what can Michael do? He's like literally on the operating table. He even thought on the operating table. He even thought on the operating table. He even thought there was some chance he might not make there was some chance he might not make there was some chance he might not make it. He gave his wife instructions. Hey, it. He gave his wife instructions. Hey, it. He gave his wife instructions. Hey, if I don't wake up, do X, Y, and Z. if I don't wake up, do X, Y, and Z. if I don't wake up, do X, Y, and Z. Harrowing times. Harrowing times. Harrowing times. &gt;&gt; Yeah. Yeah. &gt;&gt; Yeah. Yeah. &gt;&gt; Yeah. Yeah. So then in the middle of this, So then in the middle of this, So then in the middle of this, Katsenberg quits. Katsenberg quits. Katsenberg quits. &gt;&gt; Well, there's a lot of different sides &gt;&gt; Well, there's a lot of different sides &gt;&gt; Well, there's a lot of different sides to this story. One version of it is that to this story. One version of it is that to this story. One version of it is that Jeffrey was promised the number two job Jeffrey was promised the number two job Jeffrey was promised the number two job at the company if Frank ever moved on at the company if Frank ever moved on at the company if Frank ever moved on or, you know, retired or anything. or, you know, retired or anything. or, you know, retired or anything. &gt;&gt; Yep. That was certainly Jeffrey's &gt;&gt; Yep. That was certainly Jeffrey's &gt;&gt; Yep. That was certainly Jeffrey's understanding that Michael had promised understanding that Michael had promised understanding that Michael had promised him that. him that. him that. &gt;&gt; Yes. There were other perspectives, &gt;&gt; Yes. There were other perspectives, &gt;&gt; Yes. There were other perspectives, including from Roy E. Disney that, hey, including from Roy E. Disney that, hey, including from Roy E. Disney that, hey, Jeffrey is great in the job that he has, Jeffrey is great in the job that he has, Jeffrey is great in the job that he has, uh, running the studios, you know, uh, running the studios, you know, uh, running the studios, you know, animation and the other film studios, animation and the other film studios, animation and the other film studios, but he's by no means ready to be the the but he's by no means ready to be the the but he's by no means ready to be the the president of the Walt Disney Company, president of the Walt Disney Company, president of the Walt Disney Company, &gt;&gt; which again, at this point is much more &gt;&gt; which again, at this point is much more &gt;&gt; which again, at this point is much more than just the film studios. You know, than just the film studios. You know, than just the film studios. You know, it's all of those other businesses that it's all of those other businesses that it's all of those other businesses that we talked about, we talked about, we talked about, &gt;&gt; right? And so, we need to sit tight for &gt;&gt; right? And so, we need to sit tight for &gt;&gt; right? And so, we need to sit tight for a little while. So Jeffrey's a little while. So Jeffrey's a little while. So Jeffrey's interpretation of this, which is again interpretation of this, which is again interpretation of this, which is again quite reasonable, is well, quite reasonable, is well, quite reasonable, is well, I thought you told me this was mine. I I thought you told me this was mine. I I thought you told me this was mine. I am itching to do something bigger than am itching to do something bigger than am itching to do something bigger than my current responsibility. I been a good my current responsibility. I been a good my current responsibility. I been a good team player. I just created some of the team player. I just created some of the team player. I just created some of the most successful movies ever. most successful movies ever. most successful movies ever. &gt;&gt; Iconic IP. &gt;&gt; Iconic IP. &gt;&gt; Iconic IP. &gt;&gt; That's right. With the Disney &gt;&gt; That's right. With the Disney &gt;&gt; That's right. With the Disney Renaissance films, Lion King and and Renaissance films, Lion King and and Renaissance films, Lion King and and Beauty and the Beast and all these. If Beauty and the Beast and all these. If Beauty and the Beast and all these. If you don't think I have a a future here you don't think I have a a future here you don't think I have a a future here to become president of this company, to become president of this company, to become president of this company, then I'm out. I'm going to go do then I'm out. I'm going to go do then I'm out. I'm going to go do something else. something else. something else. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; So, he elects that option and leaves. &gt;&gt; So, he elects that option and leaves. &gt;&gt; So, he elects that option and leaves. &gt;&gt; Yep. And he doesn't just leave. &gt;&gt; Yep. And he doesn't just leave. &gt;&gt; Yep. And he doesn't just leave. [sighs and gasps] [sighs and gasps] [sighs and gasps] He leaves and starts a competitor He leaves and starts a competitor He leaves and starts a competitor &gt;&gt; and starts a lawsuit. &gt;&gt; and starts a lawsuit. &gt;&gt; and starts a lawsuit. &gt;&gt; Yes. Yes. He also sues the Walt Disney &gt;&gt; Yes. Yes. He also sues the Walt Disney &gt;&gt; Yes. Yes. He also sues the Walt Disney Company for bonuses that he was owed. Company for bonuses that he was owed. Company for bonuses that he was owed. They end up settling that lawsuit many They end up settling that lawsuit many They end up settling that lawsuit many years later for a reported $280 million. years later for a reported $280 million. years later for a reported $280 million. But yeah, he leaves and starts a But yeah, he leaves and starts a But yeah, he leaves and starts a competitor. competitor. competitor. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; DreamWorks. &gt;&gt; DreamWorks. &gt;&gt; DreamWorks. &gt;&gt; Yes. with Stephen Spielberg and David &gt;&gt; Yes. with Stephen Spielberg and David &gt;&gt; Yes. with Stephen Spielberg and David Geffen. And the intention is DreamWorks Geffen. And the intention is DreamWorks Geffen. And the intention is DreamWorks is going to be a full stack Disney is going to be a full stack Disney is going to be a full stack Disney competitor. They're going to do live competitor. They're going to do live competitor. They're going to do live action. They're going to do animation. action. They're going to do animation. action. They're going to do animation. They're going to do music with David They're going to do music with David They're going to do music with David Geffin. They're going to do television. Geffin. They're going to do television. Geffin. They're going to do television. They're going to do video games. They're going to do video games. They're going to do video games. Basically, the whole Disney Flywheel Basically, the whole Disney Flywheel Basically, the whole Disney Flywheel minus the parks, but then they sign up minus the parks, but then they sign up minus the parks, but then they sign up with Universal as their movie with Universal as their movie with Universal as their movie distributor, and they set up their distributor, and they set up their distributor, and they set up their headquarters on Universal's lot, which headquarters on Universal's lot, which headquarters on Universal's lot, which is also a theme park. So is also a theme park. So is also a theme park. So yeah, yeah, yeah, &gt;&gt; suddenly a very very formidable &gt;&gt; suddenly a very very formidable &gt;&gt; suddenly a very very formidable competitor competitor competitor &gt;&gt; and then they decide to build the &gt;&gt; and then they decide to build the &gt;&gt; and then they decide to build the DreamWorks Animation Studio just down DreamWorks Animation Studio just down DreamWorks Animation Studio just down the street from Disney in Glendale. the street from Disney in Glendale. the street from Disney in Glendale. &gt;&gt; And they start poaching the Disney &gt;&gt; And they start poaching the Disney &gt;&gt; And they start poaching the Disney animators. And one of the first people animators. And one of the first people animators. And one of the first people that Katzenberg recruits is Brenda that Katzenberg recruits is Brenda that Katzenberg recruits is Brenda Chapman, member from Cal Arts in room Chapman, member from Cal Arts in room Chapman, member from Cal Arts in room A13, A13, A13, &gt;&gt; who is head of story for The Lion King. &gt;&gt; who is head of story for The Lion King. &gt;&gt; who is head of story for The Lion King. &gt;&gt; And DreamWorks Animation would soon go &gt;&gt; And DreamWorks Animation would soon go &gt;&gt; And DreamWorks Animation would soon go on to create Shrek. that would do half a on to create Shrek. that would do half a on to create Shrek. that would do half a billion dollars at the box office. This billion dollars at the box office. This billion dollars at the box office. This is the first time Disney has had is the first time Disney has had is the first time Disney has had something like this, a full stack something like this, a full stack something like this, a full stack competitor in its backyard. competitor in its backyard. competitor in its backyard. &gt;&gt; Yep. Adding insult to injury here is you &gt;&gt; Yep. Adding insult to injury here is you &gt;&gt; Yep. Adding insult to injury here is you might say, okay, well, animation is might say, okay, well, animation is might say, okay, well, animation is roaring and you know, it wasn't all roaring and you know, it wasn't all roaring and you know, it wasn't all Jeffrey, so they should be fine. Sadly, Jeffrey, so they should be fine. Sadly, Jeffrey, so they should be fine. Sadly, Howard Ashman passed away from AIDS just Howard Ashman passed away from AIDS just Howard Ashman passed away from AIDS just a couple years before this. a couple years before this. a couple years before this. &gt;&gt; And there's a vacuum of Howard's &gt;&gt; And there's a vacuum of Howard's &gt;&gt; And there's a vacuum of Howard's presence in the animation department and presence in the animation department and presence in the animation department and in the films that they would go on to in the films that they would go on to in the films that they would go on to make from here. make from here. make from here. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; So, kind of from here, what comes out of &gt;&gt; So, kind of from here, what comes out of &gt;&gt; So, kind of from here, what comes out of Disney animation is Disney animation is Disney animation is &gt;&gt; next one is Pocahontas, right? &gt;&gt; next one is Pocahontas, right? &gt;&gt; next one is Pocahontas, right? &gt;&gt; Yep. Then Hunchback of Notredam, &gt;&gt; Yep. Then Hunchback of Notredam, &gt;&gt; Yep. Then Hunchback of Notredam, Hercules, Mulan, Tarzan, Hercules, Mulan, Tarzan, Hercules, Mulan, Tarzan, &gt;&gt; Fantasia 2000, a movie called Dinosaur &gt;&gt; Fantasia 2000, a movie called Dinosaur &gt;&gt; Fantasia 2000, a movie called Dinosaur in 2000, which I actually remember in 2000, which I actually remember in 2000, which I actually remember fondly. I think that was Disney's first fondly. I think that was Disney's first fondly. I think that was Disney's first 3D animated theater. Yeah, exactly. 3D animated theater. Yeah, exactly. 3D animated theater. Yeah, exactly. &gt;&gt; Emperor's New Groove, Atlantis, Lilo and &gt;&gt; Emperor's New Groove, Atlantis, Lilo and &gt;&gt; Emperor's New Groove, Atlantis, Lilo and Stitch, and Treasure Planet. Stitch, and Treasure Planet. Stitch, and Treasure Planet. &gt;&gt; Yeah. You know, you know, some of those &gt;&gt; Yeah. You know, you know, some of those &gt;&gt; Yeah. You know, you know, some of those films, films, films, none of them are The Lion King, none of them are The Lion King, none of them are The Lion King, &gt;&gt; right? &gt;&gt; right? &gt;&gt; right? &gt;&gt; So, &gt;&gt; So, &gt;&gt; So, &gt;&gt; Right. So yeah, in the vacuum left by &gt;&gt; Right. So yeah, in the vacuum left by &gt;&gt; Right. So yeah, in the vacuum left by all of this, Michael decides that uh the all of this, Michael decides that uh the all of this, Michael decides that uh the person he's going to promote to number person he's going to promote to number person he's going to promote to number two, president and chief operating two, president and chief operating two, president and chief operating officer of the Walt Disney Company is officer of the Walt Disney Company is officer of the Walt Disney Company is himself. himself. himself. &gt;&gt; Yeah, it's the Michael Eisner company &gt;&gt; Yeah, it's the Michael Eisner company &gt;&gt; Yeah, it's the Michael Eisner company now through and through. now through and through. now through and through. &gt;&gt; Yeah. Hey, he was great. Like uh he's &gt;&gt; Yeah. Hey, he was great. Like uh he's &gt;&gt; Yeah. Hey, he was great. Like uh he's he's eminently qualified. he's eminently qualified. he's eminently qualified. &gt;&gt; I mean, the last 10 years have been &gt;&gt; I mean, the last 10 years have been &gt;&gt; I mean, the last 10 years have been unbelievable. So unbelievable. So unbelievable. So &gt;&gt; yeah, but uh that's a big job on top of &gt;&gt; yeah, but uh that's a big job on top of &gt;&gt; yeah, but uh that's a big job on top of an already very big job. And really what an already very big job. And really what an already very big job. And really what he's saying is, look, there's there's no he's saying is, look, there's there's no he's saying is, look, there's there's no one obviously ready to be number two one obviously ready to be number two one obviously ready to be number two across films and TV and the parks. And across films and TV and the parks. And across films and TV and the parks. And so until we figure that out, I'm I'm so until we figure that out, I'm I'm so until we figure that out, I'm I'm just going to be the guy. just going to be the guy. just going to be the guy. &gt;&gt; Yep. Yep. And he's also about to pull &gt;&gt; Yep. Yep. And he's also about to pull &gt;&gt; Yep. Yep. And he's also about to pull the trigger on a pretty fundamental the trigger on a pretty fundamental the trigger on a pretty fundamental change in what the Walt Disney Company change in what the Walt Disney Company change in what the Walt Disney Company was that he had been planning for a was that he had been planning for a was that he had been planning for a couple years. He's been sniffing around couple years. He's been sniffing around couple years. He's been sniffing around the TV networks. the TV networks. the TV networks. &gt;&gt; Yes. And wasn't there some regulatory &gt;&gt; Yes. And wasn't there some regulatory &gt;&gt; Yes. And wasn't there some regulatory reason why suddenly this was possible? reason why suddenly this was possible? reason why suddenly this was possible? &gt;&gt; Yes. So, back in 1993, the FCC had &gt;&gt; Yes. So, back in 1993, the FCC had &gt;&gt; Yes. So, back in 1993, the FCC had repealed a law called the Financial repealed a law called the Financial repealed a law called the Financial Interest and Syndication Rules that Interest and Syndication Rules that Interest and Syndication Rules that prohibited TV networks from owning the prohibited TV networks from owning the prohibited TV networks from owning the programs that they aired. programs that they aired. programs that they aired. &gt;&gt; Right? Because the thinking behind this, &gt;&gt; Right? Because the thinking behind this, &gt;&gt; Right? Because the thinking behind this, I think in the 70s when it was enacted, I think in the 70s when it was enacted, I think in the 70s when it was enacted, is that these TV broadcast networks, the is that these TV broadcast networks, the is that these TV broadcast networks, the the big three networks are kind of a the big three networks are kind of a the big three networks are kind of a monopoly on content in the country. monopoly on content in the country. monopoly on content in the country. There's no cable. So if those companies There's no cable. So if those companies There's no cable. So if those companies basically vertically integrate and own a basically vertically integrate and own a basically vertically integrate and own a movie studio and then they air those movie studio and then they air those movie studio and then they air those movies on just the three networks, then movies on just the three networks, then movies on just the three networks, then we kind of have a problem because we kind of have a problem because we kind of have a problem because there's not enough competition in this there's not enough competition in this there's not enough competition in this marketplace. But as two decades go by, marketplace. But as two decades go by, marketplace. But as two decades go by, now you've got cable TV and suddenly now you've got cable TV and suddenly now you've got cable TV and suddenly you've hamstrung all these networks and you've hamstrung all these networks and you've hamstrung all these networks and the networks aren't allowed to produce the networks aren't allowed to produce the networks aren't allowed to produce their own content while they're trying their own content while they're trying their own content while they're trying to fight this existential battle of oh to fight this existential battle of oh to fight this existential battle of oh my god, cable's coming in and eating our my god, cable's coming in and eating our my god, cable's coming in and eating our lunch. lunch. lunch. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; So, of course, the thing that makes &gt;&gt; So, of course, the thing that makes &gt;&gt; So, of course, the thing that makes sense, which is great. I love it when sense, which is great. I love it when sense, which is great. I love it when laws get repealed when they they don't laws get repealed when they they don't laws get repealed when they they don't make sense anymore. That law is repealed make sense anymore. That law is repealed make sense anymore. That law is repealed and suddenly you now have like open and suddenly you now have like open and suddenly you now have like open season on movie studios and TV networks season on movie studios and TV networks season on movie studios and TV networks trying to combine. trying to combine. trying to combine. &gt;&gt; Yep. So Michael is sniffing around. &gt;&gt; Yep. So Michael is sniffing around. &gt;&gt; Yep. So Michael is sniffing around. &gt;&gt; He's like interested in CBS first, &gt;&gt; He's like interested in CBS first, &gt;&gt; He's like interested in CBS first, right? right? right? &gt;&gt; Yeah. He's sniffing around CBS. NBC &gt;&gt; Yeah. He's sniffing around CBS. NBC &gt;&gt; Yeah. He's sniffing around CBS. NBC isn't for sale. He talks to ABC. Does a isn't for sale. He talks to ABC. Does a isn't for sale. He talks to ABC. Does a typical Michael kind of lowball off that typical Michael kind of lowball off that typical Michael kind of lowball off that goes nowhere. But Michael had actually goes nowhere. But Michael had actually goes nowhere. But Michael had actually started his career at ABC. So Barry started his career at ABC. So Barry started his career at ABC. So Barry Diller and Michael, they were TV guys at Diller and Michael, they were TV guys at Diller and Michael, they were TV guys at ABC before they went to Paramount, ABC before they went to Paramount, ABC before they went to Paramount, right? So he knew everybody there. And right? So he knew everybody there. And right? So he knew everybody there. And then at the Sun Valley Conference the then at the Sun Valley Conference the then at the Sun Valley Conference the next year in 1995, next year in 1995, next year in 1995, &gt;&gt; it's always at Sun Valley. &gt;&gt; it's always at Sun Valley. &gt;&gt; it's always at Sun Valley. &gt;&gt; Always at Sun Valley, Michael strikes a &gt;&gt; Always at Sun Valley, Michael strikes a &gt;&gt; Always at Sun Valley, Michael strikes a deal for the Walt Disney Company to deal for the Walt Disney Company to deal for the Walt Disney Company to acquire ABC Capital Cities for $19 acquire ABC Capital Cities for $19 acquire ABC Capital Cities for $19 billion, which was the second largest billion, which was the second largest billion, which was the second largest acquisition in history to that point. acquisition in history to that point. acquisition in history to that point. Man, crazy. $19 billion. That's like Man, crazy. $19 billion. That's like Man, crazy. $19 billion. That's like quaint today. quaint today. quaint today. &gt;&gt; The only bigger one was RJR and Aiscoco. &gt;&gt; The only bigger one was RJR and Aiscoco. &gt;&gt; The only bigger one was RJR and Aiscoco. &gt;&gt; Yes. Yes. Which is going to come up here &gt;&gt; Yes. Yes. Which is going to come up here &gt;&gt; Yes. Yes. Which is going to come up here in a sec. in a sec. in a sec. &gt;&gt; And I think there's there's so much &gt;&gt; And I think there's there's so much &gt;&gt; And I think there's there's so much great lore around this, but I think this great lore around this, but I think this great lore around this, but I think this was like a parking lot conversation was like a parking lot conversation was like a parking lot conversation where Michael had been hoping to run where Michael had been hoping to run where Michael had been hoping to run into Warren Buffett and he finally did. into Warren Buffett and he finally did. into Warren Buffett and he finally did. And Warren calls over Tom Murphy who was And Warren calls over Tom Murphy who was And Warren calls over Tom Murphy who was there. there. there. &gt;&gt; Capital Cities ABC. Yep. and they kind &gt;&gt; Capital Cities ABC. Yep. and they kind &gt;&gt; Capital Cities ABC. Yep. and they kind of start talking and I think within of start talking and I think within of start talking and I think within days, maybe a week or something, then days, maybe a week or something, then days, maybe a week or something, then they've got a deal hammered out. they've got a deal hammered out. they've got a deal hammered out. &gt;&gt; Yep. Yep. Yeah. So, Warren Buffett in &gt;&gt; Yep. Yep. Yeah. So, Warren Buffett in &gt;&gt; Yep. Yep. Yeah. So, Warren Buffett in Brookshire was the largest shareholder Brookshire was the largest shareholder Brookshire was the largest shareholder in ABC Cap Cities, which had been in ABC Cap Cities, which had been in ABC Cap Cities, which had been created a decade earlier in the famous created a decade earlier in the famous created a decade earlier in the famous Minnow Swallows whale transaction. Minnow Swallows whale transaction. Minnow Swallows whale transaction. &gt;&gt; That's right. A lot of listeners &gt;&gt; That's right. A lot of listeners &gt;&gt; That's right. A lot of listeners probably won't know this, but ABC is probably won't know this, but ABC is probably won't know this, but ABC is actually not the parent company that actually not the parent company that actually not the parent company that Disney was going after to acquire. ABC Disney was going after to acquire. ABC Disney was going after to acquire. ABC was owned by something called Capital was owned by something called Capital was owned by something called Capital Cities, which had unbelievably managed Cities, which had unbelievably managed Cities, which had unbelievably managed to acquire ABC even though ABC is much to acquire ABC even though ABC is much to acquire ABC even though ABC is much bigger than it was. bigger than it was. bigger than it was. &gt;&gt; It was like four times bigger. &gt;&gt; It was like four times bigger. &gt;&gt; It was like four times bigger. &gt;&gt; You might say, "How is this possible?" &gt;&gt; You might say, "How is this possible?" &gt;&gt; You might say, "How is this possible?" Well, they had the financial backing of Well, they had the financial backing of Well, they had the financial backing of Warren and Warren and Warren and &gt;&gt; Bshire Hathway. &gt;&gt; Bshire Hathway. &gt;&gt; Bshire Hathway. &gt;&gt; That's right. That's right. So, it's &gt;&gt; That's right. That's right. So, it's &gt;&gt; That's right. That's right. So, it's basically a uh using Berkshire basically a uh using Berkshire basically a uh using Berkshire Hathaway's capital and the small company Hathaway's capital and the small company Hathaway's capital and the small company of capital cities to sort of jointly buy of capital cities to sort of jointly buy of capital cities to sort of jointly buy and control ABC. and control ABC. and control ABC. &gt;&gt; Yeah. one of Warren Buffett's many, you &gt;&gt; Yeah. one of Warren Buffett's many, you &gt;&gt; Yeah. one of Warren Buffett's many, you know, genius deals. know, genius deals. know, genius deals. &gt;&gt; Y so Buffett and Bircher are the largest &gt;&gt; Y so Buffett and Bircher are the largest &gt;&gt; Y so Buffett and Bircher are the largest shareholders in ABC cap cities here. So shareholders in ABC cap cities here. So shareholders in ABC cap cities here. So really the person that Eisner is really the person that Eisner is really the person that Eisner is pitching is is Buffett. Now Ben, you pitching is is Buffett. Now Ben, you pitching is is Buffett. Now Ben, you mentioned something really important mentioned something really important mentioned something really important which was that the reason that these which was that the reason that these which was that the reason that these laws had been repealed by the FCC was laws had been repealed by the FCC was laws had been repealed by the FCC was the new competition from cable TV. I the new competition from cable TV. I the new competition from cable TV. I mean the broadcast networks used to have mean the broadcast networks used to have mean the broadcast networks used to have this monopoly on television content in this monopoly on television content in this monopoly on television content in America. Now all of a sudden here in the America. Now all of a sudden here in the America. Now all of a sudden here in the '9s, cable and pay TV is just this '9s, cable and pay TV is just this '9s, cable and pay TV is just this explosion of content in America and the explosion of content in America and the explosion of content in America and the broadcast networks are under threat. So broadcast networks are under threat. So broadcast networks are under threat. So the broadcast networks like ABC went the broadcast networks like ABC went the broadcast networks like ABC went from like historically these great from like historically these great from like historically these great businesses to businesses to businesses to kind of like okay businesses because so kind of like okay businesses because so kind of like okay businesses because so much of American viewing time and thus much of American viewing time and thus much of American viewing time and thus advertising dollars had transitioned advertising dollars had transitioned advertising dollars had transitioned over to cable. over to cable. over to cable. But it just so happened that buried But it just so happened that buried But it just so happened that buried within ABC within ABC within ABC was the single best cable asset in the was the single best cable asset in the was the single best cable asset in the history of mankind, the entertainment history of mankind, the entertainment history of mankind, the entertainment and sports programming network, better and sports programming network, better and sports programming network, better known as ESPN. Yes. Oh man, the history known as ESPN. Yes. Oh man, the history known as ESPN. Yes. Oh man, the history of ESPN is like completely crazy on its of ESPN is like completely crazy on its of ESPN is like completely crazy on its own. It was acquired by the Getty Oil own. It was acquired by the Getty Oil own. It was acquired by the Getty Oil Company just months after it was founded Company just months after it was founded Company just months after it was founded when it was still a startup. Texico then when it was still a startup. Texico then when it was still a startup. Texico then acquired Getty sold off ESPN to ABC. acquired Getty sold off ESPN to ABC. acquired Getty sold off ESPN to ABC. This happened in 1984. ABC wanted a This happened in 1984. ABC wanted a This happened in 1984. ABC wanted a financial partner for the deal. So they financial partner for the deal. So they financial partner for the deal. So they bring in Nabiscoco like Nabiscoco as a bring in Nabiscoco like Nabiscoco as a bring in Nabiscoco like Nabiscoco as a 20% minority partner in ESPN. 20% minority partner in ESPN. 20% minority partner in ESPN. &gt;&gt; Why? I guess in theory like Nabiscoco &gt;&gt; Why? I guess in theory like Nabiscoco &gt;&gt; Why? I guess in theory like Nabiscoco was going to get some advertising was going to get some advertising was going to get some advertising synergies for their CPG products. Uh I I synergies for their CPG products. Uh I I synergies for their CPG products. Uh I I don't know. don't know. don't know. &gt;&gt; Okay. &gt;&gt; Okay. &gt;&gt; Okay. &gt;&gt; Uh it doesn't matter because the next &gt;&gt; Uh it doesn't matter because the next &gt;&gt; Uh it doesn't matter because the next year Nabiscoco gets taken private by KKR year Nabiscoco gets taken private by KKR year Nabiscoco gets taken private by KKR in the Barbarians at the Gate, you know, in the Barbarians at the Gate, you know, in the Barbarians at the Gate, you know, largest acquisition of all time. Yep. largest acquisition of all time. Yep. largest acquisition of all time. Yep. &gt;&gt; As part of that, they sell off this 20% &gt;&gt; As part of that, they sell off this 20% &gt;&gt; As part of that, they sell off this 20% ESPN minority stake to the Hurst ESPN minority stake to the Hurst ESPN minority stake to the Hurst Corporation, which still owns it to this Corporation, which still owns it to this Corporation, which still owns it to this day. day. day. and Hurst over the ensuing like four and Hurst over the ensuing like four and Hurst over the ensuing like four decades just gets billions and billions decades just gets billions and billions decades just gets billions and billions of dollars of free cash flow out of ESPN of dollars of free cash flow out of ESPN of dollars of free cash flow out of ESPN &gt;&gt; in a complete free ride. They don't have &gt;&gt; in a complete free ride. They don't have &gt;&gt; in a complete free ride. They don't have to to to &gt;&gt; doesn't have to lift a finger. &gt;&gt; doesn't have to lift a finger. &gt;&gt; doesn't have to lift a finger. &gt;&gt; That's right. That's right. &gt;&gt; That's right. That's right. &gt;&gt; That's right. That's right. &gt;&gt; But yeah, ESPN &gt;&gt; But yeah, ESPN &gt;&gt; But yeah, ESPN became this juggernaut and they actually became this juggernaut and they actually became this juggernaut and they actually invented a whole second revenue line for invented a whole second revenue line for invented a whole second revenue line for cable networks in addition to cable networks in addition to cable networks in addition to advertising, the affiliate fee business advertising, the affiliate fee business advertising, the affiliate fee business model. was before model. was before model. was before cable channels would just let themselves cable channels would just let themselves cable channels would just let themselves show up in a cable bundle. They'd let show up in a cable bundle. They'd let show up in a cable bundle. They'd let the cable bundle distribute and say the cable bundle distribute and say the cable bundle distribute and say like, "Oh, well, we're selling ads, so like, "Oh, well, we're selling ads, so like, "Oh, well, we're selling ads, so can you just do the distribution for us can you just do the distribution for us can you just do the distribution for us so that anybody who's buying your cable so that anybody who's buying your cable so that anybody who's buying your cable bundle will get my channel and thus see bundle will get my channel and thus see bundle will get my channel and thus see my ads?" And pre ESPN that was the whole my ads?" And pre ESPN that was the whole my ads?" And pre ESPN that was the whole business model. business model. business model. &gt;&gt; Even more than that, I think for a lot &gt;&gt; Even more than that, I think for a lot &gt;&gt; Even more than that, I think for a lot of startup cable networks, the dollars of startup cable networks, the dollars of startup cable networks, the dollars went the other way. I think they were went the other way. I think they were went the other way. I think they were even paying, even paying, even paying, &gt;&gt; right? They would pay to be included, &gt;&gt; right? They would pay to be included, &gt;&gt; right? They would pay to be included, &gt;&gt; cable operators to carry the channel, &gt;&gt; cable operators to carry the channel, &gt;&gt; cable operators to carry the channel, right? right? right? &gt;&gt; Yes. And ESPN sort of realizes like they &gt;&gt; Yes. And ESPN sort of realizes like they &gt;&gt; Yes. And ESPN sort of realizes like they were buying were buying were buying sports rights to broadcast leagues and sports rights to broadcast leagues and sports rights to broadcast leagues and they needed to cover their costs. So they needed to cover their costs. So they needed to cover their costs. So they asked the bundlers, hey, the the they asked the bundlers, hey, the the they asked the bundlers, hey, the the cable companies like, cable companies like, cable companies like, &gt;&gt; hey, will you pay us X cents per viewer &gt;&gt; hey, will you pay us X cents per viewer &gt;&gt; hey, will you pay us X cents per viewer so that we can actually afford to go buy so that we can actually afford to go buy so that we can actually afford to go buy these rights, these rights, these rights, &gt;&gt; the money to buy the sports? That may &gt;&gt; the money to buy the sports? That may &gt;&gt; the money to buy the sports? That may have been how it started. But pretty have been how it started. But pretty have been how it started. But pretty quickly though, ESPN and then within quickly though, ESPN and then within quickly though, ESPN and then within ABC, once ABC owns it, they realize that ABC, once ABC owns it, they realize that ABC, once ABC owns it, they realize that sports rights are the biggest point of sports rights are the biggest point of sports rights are the biggest point of leverage that they could possibly have leverage that they could possibly have leverage that they could possibly have over the cable operators because all over the cable operators because all over the cable operators because all ESPN has to do is threaten to pull the ESPN has to do is threaten to pull the ESPN has to do is threaten to pull the plug [laughter] plug [laughter] plug [laughter] on any given cable operator and say to, on any given cable operator and say to, on any given cable operator and say to, you know, their thousands or millions of you know, their thousands or millions of you know, their thousands or millions of subscribers out there, "Oh, Oh, hey. You subscribers out there, "Oh, Oh, hey. You subscribers out there, "Oh, Oh, hey. You know, you wanted to watch those NBA know, you wanted to watch those NBA know, you wanted to watch those NBA games or those MLB games or those NFL games or those MLB games or those NFL games or those MLB games or those NFL games or see those highlights on Sports games or see those highlights on Sports games or see those highlights on Sports Center. Sorry, we're in a carriage Center. Sorry, we're in a carriage Center. Sorry, we're in a carriage dispute with ESPN. We're not going to be dispute with ESPN. We're not going to be dispute with ESPN. We're not going to be able to show those. able to show those. able to show those. &gt;&gt; A stick that still gets used today. &gt;&gt; A stick that still gets used today. &gt;&gt; A stick that still gets used today. &gt;&gt; Right. I mean, when that happens, people &gt;&gt; Right. I mean, when that happens, people &gt;&gt; Right. I mean, when that happens, people actually show up at the doorstep of the actually show up at the doorstep of the actually show up at the doorstep of the cable operators and basically riot. cable operators and basically riot. cable operators and basically riot. Americans love nothing more than their Americans love nothing more than their Americans love nothing more than their sports. sports. sports. &gt;&gt; Yep. That is pricing power right there. &gt;&gt; Yep. That is pricing power right there. &gt;&gt; Yep. That is pricing power right there. And so once ESPN figures out this And so once ESPN figures out this And so once ESPN figures out this business model, it just becomes this business model, it just becomes this business model, it just becomes this incredible juggernaut. At first, Ben, incredible juggernaut. At first, Ben, incredible juggernaut. At first, Ben, like you said, they get the cable like you said, they get the cable like you said, they get the cable operators to pay them a few cents per operators to pay them a few cents per operators to pay them a few cents per subscriber that gets the ESPN channel, subscriber that gets the ESPN channel, subscriber that gets the ESPN channel, and it goes up to a dollar, then $2 a and it goes up to a dollar, then $2 a and it goes up to a dollar, then $2 a month, and then $5 a month. Do you know month, and then $5 a month. Do you know month, and then $5 a month. Do you know what ESPN's current affiliate fee what ESPN's current affiliate fee what ESPN's current affiliate fee average deal is per month with pay TV average deal is per month with pay TV average deal is per month with pay TV operators? I know it's the single operators? I know it's the single operators? I know it's the single highest paid channel by like 3x 4x. highest paid channel by like 3x 4x. highest paid channel by like 3x 4x. &gt;&gt; Yeah. Much higher than I'm going to &gt;&gt; Yeah. Much higher than I'm going to &gt;&gt; Yeah. Much higher than I'm going to guess I don't know $10 per subscriber. guess I don't know $10 per subscriber. guess I don't know $10 per subscriber. &gt;&gt; $942 &gt;&gt; $942 &gt;&gt; $942 per month per month per month per subscriber that the cable operators per subscriber that the cable operators per subscriber that the cable operators pay ESPN. This is billions and billions pay ESPN. This is billions and billions pay ESPN. This is billions and billions and billions of highly predictable and billions of highly predictable and billions of highly predictable cash money dollars [laughter] cash money dollars [laughter] cash money dollars [laughter] flowing into ESPN. flowing into ESPN. flowing into ESPN. &gt;&gt; Contractually guaranteed. &gt;&gt; Contractually guaranteed. &gt;&gt; Contractually guaranteed. &gt;&gt; Virtually guaranteed every month. I &gt;&gt; Virtually guaranteed every month. I &gt;&gt; Virtually guaranteed every month. I mean, yeah, sports are the reason, mean, yeah, sports are the reason, mean, yeah, sports are the reason, especially today, that people are buying especially today, that people are buying especially today, that people are buying cable, cable, cable, &gt;&gt; right? &gt;&gt; right? &gt;&gt; right? &gt;&gt; And ESPN is very aware of that value &gt;&gt; And ESPN is very aware of that value &gt;&gt; And ESPN is very aware of that value that they provide to the bundle. that they provide to the bundle. that they provide to the bundle. &gt;&gt; They are very good at value capture. &gt;&gt; They are very good at value capture. &gt;&gt; They are very good at value capture. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; So, back to the Disney Cap City Cities &gt;&gt; So, back to the Disney Cap City Cities &gt;&gt; So, back to the Disney Cap City Cities ABC deal here in 1995. ABC deal here in 1995. ABC deal here in 1995. I don't think if they're really honest I don't think if they're really honest I don't think if they're really honest that Disney and Michael that Disney and Michael that Disney and Michael really knew how how big ESPN was going really knew how how big ESPN was going really knew how how big ESPN was going to become. At this point, ESPN had 66 to become. At this point, ESPN had 66 to become. At this point, ESPN had 66 million cable subscribers, but they were million cable subscribers, but they were million cable subscribers, but they were only just beginning to really ramp their only just beginning to really ramp their only just beginning to really ramp their pricing leverage. There's a Roy E. pricing leverage. There's a Roy E. pricing leverage. There's a Roy E. Disney quote on this. Nobody would have Disney quote on this. Nobody would have Disney quote on this. Nobody would have told you when that deal, the ABC deal, told you when that deal, the ABC deal, told you when that deal, the ABC deal, was being made that ESPN was going to was being made that ESPN was going to was being made that ESPN was going to turn out to be the weightlifter of the turn out to be the weightlifter of the turn out to be the weightlifter of the group. [snorts] Nobody involved in it in group. [snorts] Nobody involved in it in group. [snorts] Nobody involved in it in any way ever would have thought that. any way ever would have thought that. any way ever would have thought that. &gt;&gt; Yep. Yep. At that point, ESPN's average &gt;&gt; Yep. Yep. At that point, ESPN's average &gt;&gt; Yep. Yep. At that point, ESPN's average monthly affiliate fee with their cable monthly affiliate fee with their cable monthly affiliate fee with their cable partners was still less than a buck. So, partners was still less than a buck. So, partners was still less than a buck. So, there was so much more room to scale there was so much more room to scale there was so much more room to scale ahead of it. But absolutely quickly ahead of it. But absolutely quickly ahead of it. But absolutely quickly after Disney acquires Cap Cities in after Disney acquires Cap Cities in after Disney acquires Cap Cities in 1996, ESPN becomes this just crown jewel 1996, ESPN becomes this just crown jewel 1996, ESPN becomes this just crown jewel within the company, almost overnight and within the company, almost overnight and within the company, almost overnight and almost completely by accident. The almost completely by accident. The almost completely by accident. The business model once they got it going business model once they got it going business model once they got it going was so simple, just like call up the was so simple, just like call up the was so simple, just like call up the cable operators every year or two and cable operators every year or two and cable operators every year or two and say, "Hey, we're going to raise carriage say, "Hey, we're going to raise carriage say, "Hey, we're going to raise carriage rates 20%." Oh, you don't like that? Um, rates 20%." Oh, you don't like that? Um, rates 20%." Oh, you don't like that? Um, okay, we'll pull the plug. You sure you okay, we'll pull the plug. You sure you okay, we'll pull the plug. You sure you don't like that? All right, 20% it is. don't like that? All right, 20% it is. don't like that? All right, 20% it is. &gt;&gt; And they had locked up the sports rights &gt;&gt; And they had locked up the sports rights &gt;&gt; And they had locked up the sports rights for like a decade for any of the sports for like a decade for any of the sports for like a decade for any of the sports they were bidding on. They realized that they were bidding on. They realized that they were bidding on. They realized that though we should go get the longest though we should go get the longest though we should go get the longest contracts we can so we have the most contracts we can so we have the most contracts we can so we have the most leverage over these cable companies. leverage over these cable companies. leverage over these cable companies. &gt;&gt; Yep. So this is like the heyday of ESPN &gt;&gt; Yep. So this is like the heyday of ESPN &gt;&gt; Yep. So this is like the heyday of ESPN here in the late 90s into the early here in the late 90s into the early here in the late 90s into the early 2000s. MLB, 2000s. MLB, 2000s. MLB, NBA, they do a big NFL deal in 1998 to NBA, they do a big NFL deal in 1998 to NBA, they do a big NFL deal in 1998 to get Sunday Night Football and Monday get Sunday Night Football and Monday get Sunday Night Football and Monday Night Football rights for ABC. They get Night Football rights for ABC. They get Night Football rights for ABC. They get three Super Bowls out of that. three Super Bowls out of that. three Super Bowls out of that. Meanwhile, they invented the whole Meanwhile, they invented the whole Meanwhile, they invented the whole sports highlight category, which is just sports highlight category, which is just sports highlight category, which is just like, "Hey, we've got these rights." And like, "Hey, we've got these rights." And like, "Hey, we've got these rights." And live sports are worthless the minute live sports are worthless the minute live sports are worthless the minute after they aired, but what if we show after they aired, but what if we show after they aired, but what if we show them again a few hours later in a them again a few hours later in a them again a few hours later in a nightly highlight show with a lot of nightly highlight show with a lot of nightly highlight show with a lot of sizzle and some great anchors and this sizzle and some great anchors and this sizzle and some great anchors and this is Sports Center and like, man, was it is Sports Center and like, man, was it is Sports Center and like, man, was it awesome. Yep. The cost to operate ESPN awesome. Yep. The cost to operate ESPN awesome. Yep. The cost to operate ESPN beyond the sports rights was not that beyond the sports rights was not that beyond the sports rights was not that much. They're operating out of Bristol, much. They're operating out of Bristol, much. They're operating out of Bristol, Connecticut. Connecticut. Connecticut. &gt;&gt; Yeah. The cherry on top to all this, &gt;&gt; Yeah. The cherry on top to all this, &gt;&gt; Yeah. The cherry on top to all this, too. So, so Disney is already in the too. So, so Disney is already in the too. So, so Disney is already in the cable game before acquiring ABC Cap cable game before acquiring ABC Cap cable game before acquiring ABC Cap City's ESPN. They had launched Disney City's ESPN. They had launched Disney City's ESPN. They had launched Disney Channel in 1983. Yep. I think that's Channel in 1983. Yep. I think that's Channel in 1983. Yep. I think that's right. right. right. &gt;&gt; And it was super rocky at first, &gt;&gt; And it was super rocky at first, &gt;&gt; And it was super rocky at first, expensive to get off the ground, way expensive to get off the ground, way expensive to get off the ground, way over budget. It was actually part of the over budget. It was actually part of the over budget. It was actually part of the problems they were going through in ' 83 problems they were going through in ' 83 problems they were going through in ' 83 along with Epcot cost overruns. But now along with Epcot cost overruns. But now along with Epcot cost overruns. But now that they have ESPN, they're able to that they have ESPN, they're able to that they have ESPN, they're able to like collectively bargain with the cable like collectively bargain with the cable like collectively bargain with the cable companies. So, not only could they companies. So, not only could they companies. So, not only could they command premium rates for ESPN, they command premium rates for ESPN, they command premium rates for ESPN, they would also say, would also say, would also say, &gt;&gt; "Oh, the Yeah, you want the Disney &gt;&gt; "Oh, the Yeah, you want the Disney &gt;&gt; "Oh, the Yeah, you want the Disney Channel and A&amp;E and Lifetime." Channel and A&amp;E and Lifetime." Channel and A&amp;E and Lifetime." &gt;&gt; Yeah. Those rates are going up, too. &gt;&gt; Yeah. Those rates are going up, too. &gt;&gt; Yeah. Those rates are going up, too. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Exactly. &gt;&gt; Exactly. &gt;&gt; Exactly. &gt;&gt; It's almost like a bundle within a &gt;&gt; It's almost like a bundle within a &gt;&gt; It's almost like a bundle within a bundle. bundle. bundle. &gt;&gt; And that's not even getting into ESPN 2, &gt;&gt; And that's not even getting into ESPN 2, &gt;&gt; And that's not even getting into ESPN 2, ESPN Classic, ESPN News, ESPN Oo. You ESPN Classic, ESPN News, ESPN Oo. You ESPN Classic, ESPN News, ESPN Oo. You know, [laughter] know, [laughter] know, [laughter] &gt;&gt; these days the SEC network, they go they &gt;&gt; these days the SEC network, they go they &gt;&gt; these days the SEC network, they go they go nuts. go nuts. go nuts. &gt;&gt; So, this is a grand slam for Disney, an &gt;&gt; So, this is a grand slam for Disney, an &gt;&gt; So, this is a grand slam for Disney, an absolute grand slam. But it's yet absolute grand slam. But it's yet absolute grand slam. But it's yet another another another huge management item competing for huge management item competing for huge management item competing for Michael Eisner's attention among all the Michael Eisner's attention among all the Michael Eisner's attention among all the other existing management items at the other existing management items at the other existing management items at the Walt Disney Company. And Eisner's Walt Disney Company. And Eisner's Walt Disney Company. And Eisner's thought going in was it is important to thought going in was it is important to thought going in was it is important to have the Disney brand and our products have the Disney brand and our products have the Disney brand and our products and our content distributed on and our content distributed on and our content distributed on television. Walt did this. That's how television. Walt did this. That's how television. Walt did this. That's how they built the Disneyland they built the Disneyland they built the Disneyland mania around that TV show mania around that TV show mania around that TV show &gt;&gt; with ABC &gt;&gt; with ABC &gt;&gt; with ABC &gt;&gt; bringing it full circle. And all that &gt;&gt; bringing it full circle. And all that &gt;&gt; bringing it full circle. And all that did become important. It was kind of did become important. It was kind of did become important. It was kind of amazing to have ABC and these cable amazing to have ABC and these cable amazing to have ABC and these cable stations as an outlet to promote stations as an outlet to promote stations as an outlet to promote Disney stuff, you know, in this kind of Disney stuff, you know, in this kind of Disney stuff, you know, in this kind of flywheel synergistic aligned way that flywheel synergistic aligned way that flywheel synergistic aligned way that we've been talking about. But to your we've been talking about. But to your we've been talking about. But to your point, David, what it ended up actually point, David, what it ended up actually point, David, what it ended up actually being was just an amazing source of being was just an amazing source of being was just an amazing source of continuous free cash flow that they continuous free cash flow that they continuous free cash flow that they could do other stuff with. Yeah, it's could do other stuff with. Yeah, it's could do other stuff with. Yeah, it's great that we can promote the Disney great that we can promote the Disney great that we can promote the Disney brand and it can provide all this brand and it can provide all this brand and it can provide all this alignment, but you know what's even alignment, but you know what's even alignment, but you know what's even better than that? just spinning off better than that? just spinning off better than that? just spinning off mountains of cash that we can use in mountains of cash that we can use in mountains of cash that we can use in movies, in parks to sort of expand the movies, in parks to sort of expand the movies, in parks to sort of expand the the business. the business. the business. &gt;&gt; Yeah, I think you can make an argument &gt;&gt; Yeah, I think you can make an argument &gt;&gt; Yeah, I think you can make an argument that ABC fits in with the Walt Disney that ABC fits in with the Walt Disney that ABC fits in with the Walt Disney Company and the Disney Flywheel. Company and the Disney Flywheel. Company and the Disney Flywheel. ESPN is this wholly separate thing ESPN is this wholly separate thing ESPN is this wholly separate thing [laughter] [laughter] [laughter] &gt;&gt; that really doesn't. &gt;&gt; that really doesn't. &gt;&gt; that really doesn't. &gt;&gt; Mickey Mouse and Sports Center do not &gt;&gt; Mickey Mouse and Sports Center do not &gt;&gt; Mickey Mouse and Sports Center do not meet. meet. meet. &gt;&gt; I mean, they try to put uh what ESPN &gt;&gt; I mean, they try to put uh what ESPN &gt;&gt; I mean, they try to put uh what ESPN World of Sports in Disney World and World of Sports in Disney World and World of Sports in Disney World and stuff like that. wide world of sports stuff like that. wide world of sports stuff like that. wide world of sports and ESPN zone. and ESPN zone. and ESPN zone. &gt;&gt; Yeah, that's right. Oh, ESPN zone. Yeah. &gt;&gt; Yeah, that's right. Oh, ESPN zone. Yeah. &gt;&gt; Yeah, that's right. Oh, ESPN zone. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. &gt;&gt; But the correct move that they figured &gt;&gt; But the correct move that they figured &gt;&gt; But the correct move that they figured out eventually was kind of firewall ESPN out eventually was kind of firewall ESPN out eventually was kind of firewall ESPN out on its own. Make the best ESPN you out on its own. Make the best ESPN you out on its own. Make the best ESPN you can and just enjoy the dollars. Yep. can and just enjoy the dollars. Yep. can and just enjoy the dollars. Yep. &gt;&gt; And the timing totally lines up with &gt;&gt; And the timing totally lines up with &gt;&gt; And the timing totally lines up with everything you were talking about, everything you were talking about, everything you were talking about, David. Expanding the parks, building David. Expanding the parks, building David. Expanding the parks, building hotels, leaning into resorts. This is hotels, leaning into resorts. This is hotels, leaning into resorts. This is how they funded it all was all the cash how they funded it all was all the cash how they funded it all was all the cash that ESPN and the cable networks, but that ESPN and the cable networks, but that ESPN and the cable networks, but mostly ESPN were spitting out. There's mostly ESPN were spitting out. There's mostly ESPN were spitting out. There's even a quote in Bob Iger's book which even a quote in Bob Iger's book which even a quote in Bob Iger's book which which we haven't talked about Bob yet which we haven't talked about Bob yet which we haven't talked about Bob yet but we will. but we will. but we will. &gt;&gt; Comes into Disney via the Cap Cities &gt;&gt; Comes into Disney via the Cap Cities &gt;&gt; Comes into Disney via the Cap Cities acquisition. acquisition. acquisition. &gt;&gt; That's right. He worked at Capital &gt;&gt; That's right. He worked at Capital &gt;&gt; That's right. He worked at Capital Cities. Cities. Cities. &gt;&gt; Bob is COO of Cap Cities. &gt;&gt; Bob is COO of Cap Cities. &gt;&gt; Bob is COO of Cap Cities. &gt;&gt; Yep. The quote is it gave Disney a scale &gt;&gt; Yep. The quote is it gave Disney a scale &gt;&gt; Yep. The quote is it gave Disney a scale to remain independent while other to remain independent while other to remain independent while other studios were falling on hard times. ESPN studios were falling on hard times. ESPN studios were falling on hard times. ESPN also further stabilized the business also further stabilized the business also further stabilized the business during the ups and downs of animation. during the ups and downs of animation. during the ups and downs of animation. And here David is an astonishing And here David is an astonishing And here David is an astonishing statistic statistic statistic &gt;&gt; laid on me. So, we're flashing forward, &gt;&gt; laid on me. So, we're flashing forward, &gt;&gt; laid on me. So, we're flashing forward, but later on in the 2008 to 2011 time but later on in the 2008 to 2011 time but later on in the 2008 to 2011 time frame, Disney's cable networks segment, frame, Disney's cable networks segment, frame, Disney's cable networks segment, of which analysts believe that 3/4 of of which analysts believe that 3/4 of of which analysts believe that 3/4 of the cable network segment is ESPN. the cable network segment is ESPN. the cable network segment is ESPN. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; That segment accounted for 60% of the &gt;&gt; That segment accounted for 60% of the &gt;&gt; That segment accounted for 60% of the entire company's operating income during entire company's operating income during entire company's operating income during that 2008 to 2011 period. Yeah. over $5 that 2008 to 2011 period. Yeah. over $5 that 2008 to 2011 period. Yeah. over $5 billion dollar in profit just from the billion dollar in profit just from the billion dollar in profit just from the cable channels. I mean, they evolved cable channels. I mean, they evolved cable channels. I mean, they evolved into the cable TV affiliate fees into the cable TV affiliate fees into the cable TV affiliate fees company. company. company. &gt;&gt; Yep. So, back here to the late 90s into &gt;&gt; Yep. So, back here to the late 90s into &gt;&gt; Yep. So, back here to the late 90s into the early 2000s, the early 2000s, the early 2000s, Michael's just overloaded managing all Michael's just overloaded managing all Michael's just overloaded managing all this. And one element of the backdrop to this. And one element of the backdrop to this. And one element of the backdrop to all this is it's the dot era. [laughter] all this is it's the dot era. [laughter] all this is it's the dot era. [laughter] Disney does all sorts of crazy stuff. Disney does all sorts of crazy stuff. Disney does all sorts of crazy stuff. Uh they acquire Starwave, Paul Allen's Uh they acquire Starwave, Paul Allen's Uh they acquire Starwave, Paul Allen's company, uh after Microsoft, company, uh after Microsoft, company, uh after Microsoft, &gt;&gt; right here in Seattle. &gt;&gt; right here in Seattle. &gt;&gt; right here in Seattle. &gt;&gt; Yep. Starwave was basically like a web &gt;&gt; Yep. Starwave was basically like a web &gt;&gt; Yep. Starwave was basically like a web developer that they I think paid a developer that they I think paid a developer that they I think paid a couple hundred million dollars for. Then couple hundred million dollars for. Then couple hundred million dollars for. Then they buy Infosek, which was like the they buy Infosek, which was like the they buy Infosek, which was like the seventh place search engine. They then seventh place search engine. They then seventh place search engine. They then create a separate Disney Internet assets create a separate Disney Internet assets create a separate Disney Internet assets tracking stock that they float tracking stock that they float tracking stock that they float [laughter] [laughter] [laughter] &gt;&gt; what &gt;&gt; what &gt;&gt; what &gt;&gt; publicly. Yeah, you can't make all this &gt;&gt; publicly. Yeah, you can't make all this &gt;&gt; publicly. Yeah, you can't make all this stuff up. It's, you know, do insanity stuff up. It's, you know, do insanity stuff up. It's, you know, do insanity and like, hey, okay, great. Give give and like, hey, okay, great. Give give and like, hey, okay, great. Give give Eisner a pass because everybody's doing Eisner a pass because everybody's doing Eisner a pass because everybody's doing insanity during this era. insanity during this era. insanity during this era. &gt;&gt; Well, the biggest credit to give is the &gt;&gt; Well, the biggest credit to give is the &gt;&gt; Well, the biggest credit to give is the deal that he didn't do. deal that he didn't do. deal that he didn't do. &gt;&gt; Exactly. Yeah. AOL approached him. Steve &gt;&gt; Exactly. Yeah. AOL approached him. Steve &gt;&gt; Exactly. Yeah. AOL approached him. Steve Casease approached him before Time Casease approached him before Time Casease approached him before Time Warner about an AOL Disney combination. Warner about an AOL Disney combination. Warner about an AOL Disney combination. And to Michael's eternal credit, maybe And to Michael's eternal credit, maybe And to Michael's eternal credit, maybe the best thing he did as CEO of the Walt the best thing he did as CEO of the Walt the best thing he did as CEO of the Walt Disney Company, among many, many great Disney Company, among many, many great Disney Company, among many, many great things things things &gt;&gt; other than buying ESPN. other than &gt;&gt; other than buying ESPN. other than &gt;&gt; other than buying ESPN. other than buying ESPN. But yeah, it was was say buying ESPN. But yeah, it was was say buying ESPN. But yeah, it was was say thanks but no thanks to AOL. Yeah, I thanks but no thanks to AOL. Yeah, I thanks but no thanks to AOL. Yeah, I mean looking at what AOL did with Time mean looking at what AOL did with Time mean looking at what AOL did with Time Warner, AOL merged its Warner, AOL merged its Warner, AOL merged its stock that was highly marked, but the stock that was highly marked, but the stock that was highly marked, but the intrinsic value of the company was intrinsic value of the company was intrinsic value of the company was actually worthless with Warner Brothers, actually worthless with Warner Brothers, actually worthless with Warner Brothers, like a a real durable, stable company, like a a real durable, stable company, like a a real durable, stable company, at least at the time. And that could at least at the time. And that could at least at the time. And that could have happened to Disney, too. But amidst have happened to Disney, too. But amidst have happened to Disney, too. But amidst all these very high valuations of the all these very high valuations of the all these very high valuations of the dot era and I watched a bunch of dot era and I watched a bunch of dot era and I watched a bunch of interviews of Michael at this time, he interviews of Michael at this time, he interviews of Michael at this time, he was skeptical and very careful about not was skeptical and very careful about not was skeptical and very careful about not giving away Disney in like a foolish giving away Disney in like a foolish giving away Disney in like a foolish transaction like that. transaction like that. transaction like that. &gt;&gt; Yep. Yep. Yep. While we're on bad &gt;&gt; Yep. Yep. Yep. While we're on bad &gt;&gt; Yep. Yep. Yep. While we're on bad decisions during this era, Michael does decisions during this era, Michael does decisions during this era, Michael does finally finally finally &gt;&gt; hire a number &gt;&gt; hire a number &gt;&gt; hire a number &gt;&gt; hire a president. &gt;&gt; hire a president. &gt;&gt; hire a president. &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] &gt;&gt; And a number two. his close friend and &gt;&gt; And a number two. his close friend and &gt;&gt; And a number two. his close friend and Hollywood super agent Michael Oitz comes Hollywood super agent Michael Oitz comes Hollywood super agent Michael Oitz comes in as um Disney president to be Eisner's in as um Disney president to be Eisner's in as um Disney president to be Eisner's number two and help him operate the number two and help him operate the number two and help him operate the company in uh 1995. Michael famed past company in uh 1995. Michael famed past company in uh 1995. Michael famed past acquired guest. acquired guest. acquired guest. &gt;&gt; That's right. Founder of Creative Artist &gt;&gt; That's right. Founder of Creative Artist &gt;&gt; That's right. Founder of Creative Artist Agency. This was huge. This was huge Agency. This was huge. This was huge Agency. This was huge. This was huge news in Hollywood. news in Hollywood. news in Hollywood. &gt;&gt; Earthshattering stuff. I mean Michael &gt;&gt; Earthshattering stuff. I mean Michael &gt;&gt; Earthshattering stuff. I mean Michael Oitz built CIA into such a force Oitz built CIA into such a force Oitz built CIA into such a force in not only Hollywood but kind of the in not only Hollywood but kind of the in not only Hollywood but kind of the whole creative community. The only thing whole creative community. The only thing whole creative community. The only thing that rivaled the power of the studios at that rivaled the power of the studios at that rivaled the power of the studios at the time was CIA. Going to be the number the time was CIA. Going to be the number the time was CIA. Going to be the number two after being the founder number one two after being the founder number one two after being the founder number one at at CIA said a lot. at at CIA said a lot. at at CIA said a lot. &gt;&gt; And you know what? It also speaks to &gt;&gt; And you know what? It also speaks to &gt;&gt; And you know what? It also speaks to what Eisner had built and assembled at what Eisner had built and assembled at what Eisner had built and assembled at Disney, especially after Cap Cities that Disney, especially after Cap Cities that Disney, especially after Cap Cities that like it was the place to be in media. like it was the place to be in media. like it was the place to be in media. &gt;&gt; And it was almost immediately a horrible &gt;&gt; And it was almost immediately a horrible &gt;&gt; And it was almost immediately a horrible decision. decision. decision. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; On both sides. &gt;&gt; On both sides. &gt;&gt; On both sides. &gt;&gt; Oitz was an agent. Eisner was an &gt;&gt; Oitz was an agent. Eisner was an &gt;&gt; Oitz was an agent. Eisner was an executive. This was a bad idea from the executive. This was a bad idea from the executive. This was a bad idea from the start. start. start. &gt;&gt; You know what the job of a president and &gt;&gt; You know what the job of a president and &gt;&gt; You know what the job of a president and COO is? It's to sit in meetings all day, COO is? It's to sit in meetings all day, COO is? It's to sit in meetings all day, herd cats, make aligned decisions, tell herd cats, make aligned decisions, tell herd cats, make aligned decisions, tell people no, don't people please, make people no, don't people please, make people no, don't people please, make sure that the thing runs, and manage sure that the thing runs, and manage sure that the thing runs, and manage processes that take a really long time processes that take a really long time processes that take a really long time with tens or hundreds of thousands of with tens or hundreds of thousands of with tens or hundreds of thousands of employees to carry out. The job of being employees to carry out. The job of being employees to carry out. The job of being an agent is being liked, saying yes, an agent is being liked, saying yes, an agent is being liked, saying yes, wielding your power, making things wielding your power, making things wielding your power, making things happen quick, being involved in 15 happen quick, being involved in 15 happen quick, being involved in 15 projects at once, or in Michael's case, projects at once, or in Michael's case, projects at once, or in Michael's case, 500 projects at once. The day-to-day 500 projects at once. The day-to-day 500 projects at once. The day-to-day operations of being the number two at operations of being the number two at operations of being the number two at Disney could not have been more Disney could not have been more Disney could not have been more different than the skill set he had different than the skill set he had different than the skill set he had perfected at CIA. perfected at CIA. perfected at CIA. &gt;&gt; Yep. So Oitz lasts just over a year at &gt;&gt; Yep. So Oitz lasts just over a year at &gt;&gt; Yep. So Oitz lasts just over a year at Disney and leaves in December 1996 with Disney and leaves in December 1996 with Disney and leaves in December 1996 with a $140 million severance package cuz a $140 million severance package cuz a $140 million severance package cuz neither Oitz nor Eisner thought there neither Oitz nor Eisner thought there neither Oitz nor Eisner thought there was any chance this was going to fall was any chance this was going to fall was any chance this was going to fall apart. And so the Walt Disney Company apart. And so the Walt Disney Company apart. And so the Walt Disney Company was willing to put in a contract and say was willing to put in a contract and say was willing to put in a contract and say if you don't make it x amount of time if you don't make it x amount of time if you don't make it x amount of time then you get $140 million extra dollars. then you get $140 million extra dollars. then you get $140 million extra dollars. &gt;&gt; Yep. Now, all of this, frankly, is just &gt;&gt; Yep. Now, all of this, frankly, is just &gt;&gt; Yep. Now, all of this, frankly, is just window dressing on what the real problem window dressing on what the real problem window dressing on what the real problem is. The real problem is Disney is. The real problem is Disney is. The real problem is Disney animation. animation. animation. &gt;&gt; That's interesting. &gt;&gt; That's interesting. &gt;&gt; That's interesting. &gt;&gt; Ben, you talked about what the movies &gt;&gt; Ben, you talked about what the movies &gt;&gt; Ben, you talked about what the movies were after 1994, and some of them were were after 1994, and some of them were were after 1994, and some of them were good, but it's a a downhill slide. And good, but it's a a downhill slide. And good, but it's a a downhill slide. And by the time you get to the end of that by the time you get to the end of that by the time you get to the end of that period, Atlantis, Treasure Planet, these period, Atlantis, Treasure Planet, these period, Atlantis, Treasure Planet, these are bad movies. are bad movies. are bad movies. &gt;&gt; Yeah. And with Capital City's ABC, ESPN &gt;&gt; Yeah. And with Capital City's ABC, ESPN &gt;&gt; Yeah. And with Capital City's ABC, ESPN coming in, it's a little bit confusing coming in, it's a little bit confusing coming in, it's a little bit confusing how to think about and organize the how to think about and organize the how to think about and organize the company because company because company because before you had this nice, tidy flywheel before you had this nice, tidy flywheel before you had this nice, tidy flywheel business. You make films with characters business. You make films with characters business. You make films with characters that people love on these universally that people love on these universally that people love on these universally relatable journeys. You make money at relatable journeys. You make money at relatable journeys. You make money at the box office, home video, parks, the box office, home video, parks, the box office, home video, parks, consumer products, and then you recycle consumer products, and then you recycle consumer products, and then you recycle the IP every seven years. It's the IP every seven years. It's the IP every seven years. It's articulatable in one sentence. when they articulatable in one sentence. when they articulatable in one sentence. when they bought Capital Cities, it's totally bought Capital Cities, it's totally bought Capital Cities, it's totally different. Owning TV stations that different. Owning TV stations that different. Owning TV stations that generate revenue from advertising, from generate revenue from advertising, from generate revenue from advertising, from cable subscriptions, mostly using cable subscriptions, mostly using cable subscriptions, mostly using one-time use content that is not one-time use content that is not one-time use content that is not evergreen, most of which you don't evergreen, most of which you don't evergreen, most of which you don't create yourself inhouse. I mean, it it create yourself inhouse. I mean, it it create yourself inhouse. I mean, it it can be profitable and and sometimes can be profitable and and sometimes can be profitable and and sometimes fantastically profitable, but it's worth fantastically profitable, but it's worth fantastically profitable, but it's worth acknowledging that that's a totally acknowledging that that's a totally acknowledging that that's a totally different business model. And now you different business model. And now you different business model. And now you have these two completely different uh have these two completely different uh have these two completely different uh sort of business model, operating model sort of business model, operating model sort of business model, operating model things under one roof. And bringing in things under one roof. And bringing in things under one roof. And bringing in Michael Oitz, what was he supposed to Michael Oitz, what was he supposed to Michael Oitz, what was he supposed to run? Because they're actually two two run? Because they're actually two two run? Because they're actually two two very different things. very different things. very different things. &gt;&gt; Yep. Yep. So all this and you know in &gt;&gt; Yep. Yep. So all this and you know in &gt;&gt; Yep. Yep. So all this and you know in animations animations animations now without Katzenberg. Uh Roy is still now without Katzenberg. Uh Roy is still now without Katzenberg. Uh Roy is still there, but a lot of the talent is there, but a lot of the talent is there, but a lot of the talent is bleeding out to DreamWorks. Even the bleeding out to DreamWorks. Even the bleeding out to DreamWorks. Even the talent that stays, they're getting talent that stays, they're getting talent that stays, they're getting competitive offers from DreamWorks. So competitive offers from DreamWorks. So competitive offers from DreamWorks. So Disney has to pay them more. So all Disney has to pay them more. So all Disney has to pay them more. So all their costs in animation are going up. their costs in animation are going up. their costs in animation are going up. It's really a downward spiral. And for It's really a downward spiral. And for It's really a downward spiral. And for the first couple years, it didn't really the first couple years, it didn't really the first couple years, it didn't really matter that much because the parks were matter that much because the parks were matter that much because the parks were still doing great. They still had all still doing great. They still had all still doing great. They still had all the great IP from the Disney Renaissance the great IP from the Disney Renaissance the great IP from the Disney Renaissance that was driving everything that they that was driving everything that they that was driving everything that they could, you know, put into the parks. could, you know, put into the parks. could, you know, put into the parks. &gt;&gt; Yeah. Because they don't make most of &gt;&gt; Yeah. Because they don't make most of &gt;&gt; Yeah. Because they don't make most of their money from actual profits at the their money from actual profits at the their money from actual profits at the box office when the movie comes out the box office when the movie comes out the box office when the movie comes out the first time, there's a delayed impact to first time, there's a delayed impact to first time, there's a delayed impact to animation sucking that doesn't show up animation sucking that doesn't show up animation sucking that doesn't show up in the financials until way later. in the financials until way later. in the financials until way later. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. or or or until something happens to the parks, until something happens to the parks, until something happens to the parks, which [sighs] is exactly what happens in which [sighs] is exactly what happens in which [sighs] is exactly what happens in September 2001 with September 11th, September 2001 with September 11th, September 2001 with September 11th, obviously national tragedy, but Disney's obviously national tragedy, but Disney's obviously national tragedy, but Disney's parks business basically instantly falls parks business basically instantly falls parks business basically instantly falls off a cliff. I mean, it's like CO for off a cliff. I mean, it's like CO for off a cliff. I mean, it's like CO for Disney parks for the few weeks and Disney parks for the few weeks and Disney parks for the few weeks and months after September 11th. All of a months after September 11th. All of a months after September 11th. All of a sudden, this crown jewel asset within sudden, this crown jewel asset within sudden, this crown jewel asset within the empire just goes to, you know, close the empire just goes to, you know, close the empire just goes to, you know, close to zero. to zero. to zero. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Real bad. &gt;&gt; Real bad. &gt;&gt; Real bad. &gt;&gt; Yep. I mean, for a few weeks, zero &gt;&gt; Yep. I mean, for a few weeks, zero &gt;&gt; Yep. I mean, for a few weeks, zero planes are in the air. planes are in the air. planes are in the air. &gt;&gt; And for years after that, people don't &gt;&gt; And for years after that, people don't &gt;&gt; And for years after that, people don't feel safe traveling. Not to mention, it feel safe traveling. Not to mention, it feel safe traveling. Not to mention, it triggers this like consumer spending triggers this like consumer spending triggers this like consumer spending impact. Not good if you're running a impact. Not good if you're running a impact. Not good if you're running a high fixed cost theme park business. high fixed cost theme park business. high fixed cost theme park business. &gt;&gt; Yep. Yep. &gt;&gt; Yep. Yep. &gt;&gt; Yep. Yep. So Disney stock falls nearly 25% in the So Disney stock falls nearly 25% in the So Disney stock falls nearly 25% in the days after the September 11th attacks. days after the September 11th attacks. days after the September 11th attacks. Fairly quickly thereafter, they're Fairly quickly thereafter, they're Fairly quickly thereafter, they're forced to close the vast majority of the forced to close the vast majority of the forced to close the vast majority of the Disney retail stores that they had Disney retail stores that they had Disney retail stores that they had opened in malls across America. The opened in malls across America. The opened in malls across America. The operating profit from the whole consumer operating profit from the whole consumer operating profit from the whole consumer products division had already been products division had already been products division had already been slowly ticking down as no new good IP slowly ticking down as no new good IP slowly ticking down as no new good IP was coming out of Disney animation to was coming out of Disney animation to was coming out of Disney animation to sell dolls and costumes. Now it's down sell dolls and costumes. Now it's down sell dolls and costumes. Now it's down to like a trickle. to like a trickle. to like a trickle. The worst part of all of this, for The worst part of all of this, for The worst part of all of this, for Michael Eisner at least, is that the Michael Eisner at least, is that the Michael Eisner at least, is that the Bass family, which to this point are Bass family, which to this point are Bass family, which to this point are still Disney's largest shareholders and still Disney's largest shareholders and still Disney's largest shareholders and Michael's strongest supporters among the Michael's strongest supporters among the Michael's strongest supporters among the shareholder base, in the days after shareholder base, in the days after shareholder base, in the days after September 11th, they face a margin call September 11th, they face a margin call September 11th, they face a margin call on their other investments. They have to on their other investments. They have to on their other investments. They have to become forced sellers of$2 billion become forced sellers of$2 billion become forced sellers of$2 billion dollar worth of Disney shares which puts dollar worth of Disney shares which puts dollar worth of Disney shares which puts even further downward pressure on the even further downward pressure on the even further downward pressure on the Disney stock which has already just Disney stock which has already just Disney stock which has already just fallen by 25%. fallen by 25%. fallen by 25%. They sell the majority of their Disney They sell the majority of their Disney They sell the majority of their Disney holdings in a block transaction and holdings in a block transaction and holdings in a block transaction and overnight Eisner's support in the overnight Eisner's support in the overnight Eisner's support in the shareholder base or at least the biggest shareholder base or at least the biggest shareholder base or at least the biggest bulk of it is like gone. Disney is now bulk of it is like gone. Disney is now bulk of it is like gone. Disney is now trading at depressed levels. I mean, trading at depressed levels. I mean, trading at depressed levels. I mean, it's almost like 1984 all over again. it's almost like 1984 all over again. it's almost like 1984 all over again. Corporate raiders showing up to break up Corporate raiders showing up to break up Corporate raiders showing up to break up the company. the company. the company. &gt;&gt; It's eerily similar. Animation in the &gt;&gt; It's eerily similar. Animation in the &gt;&gt; It's eerily similar. Animation in the dumps. Before it was Parks holding the dumps. Before it was Parks holding the dumps. Before it was Parks holding the company up, but now it's ESPN holding company up, but now it's ESPN holding company up, but now it's ESPN holding the company up. the company up. the company up. &gt;&gt; Exactly. And even ESPN for, you know, a &gt;&gt; Exactly. And even ESPN for, you know, a &gt;&gt; Exactly. And even ESPN for, you know, a short period of time is shaky. Like short period of time is shaky. Like short period of time is shaky. Like sporting events stop after 9/11. It's a sporting events stop after 9/11. It's a sporting events stop after 9/11. It's a weird time for the country. weird time for the country. weird time for the country. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. And then [sighs and gasps] And then [sighs and gasps] And then [sighs and gasps] just when it seemed that things couldn't just when it seemed that things couldn't just when it seemed that things couldn't get any worse at Disney in the years get any worse at Disney in the years get any worse at Disney in the years after 9/11, on November 30th, 2003, after 9/11, on November 30th, 2003, after 9/11, on November 30th, 2003, Roy E. Disney announces that he is Roy E. Disney announces that he is Roy E. Disney announces that he is resigning from the Disney board of resigning from the Disney board of resigning from the Disney board of directors, citing quote serious directors, citing quote serious directors, citing quote serious differences of opinion about the differences of opinion about the differences of opinion about the direction and style of management. Man, direction and style of management. Man, direction and style of management. Man, this really is a mirror of 20 years this really is a mirror of 20 years this really is a mirror of 20 years earlier. earlier. earlier. &gt;&gt; Is it ever? Except this time it all &gt;&gt; Is it ever? Except this time it all &gt;&gt; Is it ever? Except this time it all plays out in public because Roy and plays out in public because Roy and plays out in public because Roy and Stanley Gold, his business partner, who Stanley Gold, his business partner, who Stanley Gold, his business partner, who also resigns from the board, would also resigns from the board, would also resigns from the board, would promptly turn around and launch a promptly turn around and launch a promptly turn around and launch a firstofits-kind firstofits-kind firstofits-kind public grassroots shareholder campaign public grassroots shareholder campaign public grassroots shareholder campaign with the website saved Disney.com with the website saved Disney.com with the website saved Disney.com with the stated goal of mounting a proxy with the stated goal of mounting a proxy with the stated goal of mounting a proxy vote to oust Michael Eisner. there as vote to oust Michael Eisner. there as vote to oust Michael Eisner. there as the CEO of the Walt Disney Company. the CEO of the Walt Disney Company. the CEO of the Walt Disney Company. Yeah. Ben, uh, this playbook of starting Yeah. Ben, uh, this playbook of starting Yeah. Ben, uh, this playbook of starting a website of save companyx.com, like an a website of save companyx.com, like an a website of save companyx.com, like an insider, resigning from the company, insider, resigning from the company, insider, resigning from the company, starting a website, and a public starting a website, and a public starting a website, and a public grassroots campaign would famously be grassroots campaign would famously be grassroots campaign would famously be repeated once more in American corporate repeated once more in American corporate repeated once more in American corporate history. Do you know what company? &gt;&gt; No. &gt;&gt; No. &gt;&gt; Savepa John's.com. &gt;&gt; Savepa John's.com. &gt;&gt; Savepa John's.com. [laughter] [laughter] [laughter] &gt;&gt; No way. Yeah. Save Disney and save Papa &gt;&gt; No way. Yeah. Save Disney and save Papa &gt;&gt; No way. Yeah. Save Disney and save Papa John's. Oh man. [laughter] John's. Oh man. [laughter] John's. Oh man. [laughter] &gt;&gt; Well, before we tell the story of Save &gt;&gt; Well, before we tell the story of Save &gt;&gt; Well, before we tell the story of Save Disney and Disney's ultimate leadership Disney and Disney's ultimate leadership Disney and Disney's ultimate leadership transition to Bob Iger that would come transition to Bob Iger that would come transition to Bob Iger that would come out of it, now is a great time to thank out of it, now is a great time to thank out of it, now is a great time to thank one of our favorite companies, Sentry. one of our favorite companies, Sentry. one of our favorite companies, Sentry. That's right. That's S E N T R Y, like That's right. That's S E N T R Y, like That's right. That's S E N T R Y, like someone standing guard, which is what someone standing guard, which is what someone standing guard, which is what they do for developers. Sentry helps they do for developers. Sentry helps they do for developers. Sentry helps teams debug everything from errors to teams debug everything from errors to teams debug everything from errors to latency issues, basically any software latency issues, basically any software latency issues, basically any software problem and fix them before users get problem and fix them before users get problem and fix them before users get mad. It is considered quote unquote not mad. It is considered quote unquote not mad. It is considered quote unquote not bad by millions of developers out there. bad by millions of developers out there. bad by millions of developers out there. And David, this might be one of the most And David, this might be one of the most And David, this might be one of the most ontheme sponsor moments that we have ontheme sponsor moments that we have ontheme sponsor moments that we have ever had on acquired. We are about to ever had on acquired. We are about to ever had on acquired. We are about to spend a good chunk of time on the Disney spend a good chunk of time on the Disney spend a good chunk of time on the Disney Plus launch later the episode. Plus launch later the episode. Plus launch later the episode. &gt;&gt; Yes. And uh think about what that launch &gt;&gt; Yes. And uh think about what that launch &gt;&gt; Yes. And uh think about what that launch actually was. One service going live on actually was. One service going live on actually was. One service going live on basically every device on Earth all at basically every device on Earth all at basically every device on Earth all at once. Phones, video game consoles, smart once. Phones, video game consoles, smart once. Phones, video game consoles, smart TVs, streaming sticks, tablets, already TVs, streaming sticks, tablets, already TVs, streaming sticks, tablets, already for tens of millions of subscribers on for tens of millions of subscribers on for tens of millions of subscribers on day one. At that scale, things break in day one. At that scale, things break in day one. At that scale, things break in places you've never seen. Disney Plus places you've never seen. Disney Plus places you've never seen. Disney Plus launched with Century as the centralized launched with Century as the centralized launched with Century as the centralized error logging service behind it. So when error logging service behind it. So when error logging service behind it. So when something broke, the team knew exactly something broke, the team knew exactly something broke, the team knew exactly why it broke on which device and in why it broke on which device and in why it broke on which device and in which release, all before the angry which release, all before the angry which release, all before the angry email started. And here's the wild part. email started. And here's the wild part. email started. And here's the wild part. That was 2019. What Sentry does now goes That was 2019. What Sentry does now goes That was 2019. What Sentry does now goes a step further. Software is starting to a step further. Software is starting to a step further. Software is starting to fix itself in production. And the clever fix itself in production. And the clever fix itself in production. And the clever thing is how they pull it off. So Sentry thing is how they pull it off. So Sentry thing is how they pull it off. So Sentry is already watching your app in is already watching your app in is already watching your app in production. So the second it breaks, it production. So the second it breaks, it production. So the second it breaks, it has the whole picture. Error logs, the has the whole picture. Error logs, the has the whole picture. Error logs, the trace, the release that it started in, trace, the release that it started in, trace, the release that it started in, it hands that context straight to the it hands that context straight to the it hands that context straight to the tools developers already use. is whether tools developers already use. is whether tools developers already use. is whether that's claude code or cursor or that's claude code or cursor or that's claude code or cursor or century's new agent sear and it century's new agent sear and it century's new agent sear and it automatically finds the root cause and automatically finds the root cause and automatically finds the root cause and opens the PR for the human to review. opens the PR for the human to review. opens the PR for the human to review. That is what makes software self-healing That is what makes software self-healing That is what makes software self-healing and it's why 200,000 organizations run and it's why 200,000 organizations run and it's why 200,000 organizations run on Sentry. Yes, thanks to Sentry for on Sentry. Yes, thanks to Sentry for on Sentry. Yes, thanks to Sentry for making sure everyone's favorite stuff, making sure everyone's favorite stuff, making sure everyone's favorite stuff, including Disney Plus, which let me tell including Disney Plus, which let me tell including Disney Plus, which let me tell you is our favorite stuff in this you is our favorite stuff in this you is our favorite stuff in this household, [laughter] household, [laughter] household, [laughter] actually works. They've got an actually works. They've got an actually works. They've got an incredible customer list including not incredible customer list including not incredible customer list including not only friends of the show Anthropic and only friends of the show Anthropic and only friends of the show Anthropic and Verscell, but also Cursor, Linear, Verscell, but also Cursor, Linear, Verscell, but also Cursor, Linear, GitHub, and many more. If you want to GitHub, and many more. If you want to GitHub, and many more. If you want to learn more, go check out learn more, go check out learn more, go check out sentry.io/acquired. sentry.io/acquired. sentry.io/acquired. And uh one last thing, Sentry is the And uh one last thing, Sentry is the And uh one last thing, Sentry is the host this year of the official Acquired host this year of the official Acquired host this year of the official Acquired community meetup with David and me in community meetup with David and me in community meetup with David and me in San Francisco, Thursday, September 17th San Francisco, Thursday, September 17th San Francisco, Thursday, September 17th at Fort Mason. David and I are going to at Fort Mason. David and I are going to at Fort Mason. David and I are going to have a live conversation going behind have a live conversation going behind have a live conversation going behind the scenes of Acquired. We'll have food the scenes of Acquired. We'll have food the scenes of Acquired. We'll have food and drink and uh a room full of the and drink and uh a room full of the and drink and uh a room full of the acquired community. Tickets are $20 and acquired community. Tickets are $20 and acquired community. Tickets are $20 and 100% of the proceeds will go to the 100% of the proceeds will go to the 100% of the proceeds will go to the Susan Wajiski Foundation for early Susan Wajiski Foundation for early Susan Wajiski Foundation for early detection of lung cancer. detection of lung cancer. detection of lung cancer. &gt;&gt; So great. &gt;&gt; So great. &gt;&gt; So great. &gt;&gt; It really is. Space is limited to 500 &gt;&gt; It really is. Space is limited to 500 &gt;&gt; It really is. Space is limited to 500 people only. So grab your spots now at people only. So grab your spots now at people only. So grab your spots now at acquire.fm/meup acquire.fm/meup acquire.fm/meup and we look forward to seeing you there. and we look forward to seeing you there. and we look forward to seeing you there. &gt;&gt; Indeed. &gt;&gt; Indeed. &gt;&gt; Indeed. &gt;&gt; All right, David. So the save Disney &gt;&gt; All right, David. So the save Disney &gt;&gt; All right, David. So the save Disney campaign. campaign. campaign. First, let me just open with an excerpt First, let me just open with an excerpt First, let me just open with an excerpt from Ride of a Lifetime, Bob Iger's from Ride of a Lifetime, Bob Iger's from Ride of a Lifetime, Bob Iger's book. This is about the resignation book. This is about the resignation book. This is about the resignation letter that Roy had written, letter that Roy had written, letter that Roy had written, &gt;&gt; which he sent copies to Eisner, the &gt;&gt; which he sent copies to Eisner, the &gt;&gt; which he sent copies to Eisner, the board, and then the Wall Street Journal, board, and then the Wall Street Journal, board, and then the Wall Street Journal, the New York Times, and the LA Times. the New York Times, and the LA Times. the New York Times, and the LA Times. &gt;&gt; He went on a blistering three-page &gt;&gt; He went on a blistering three-page &gt;&gt; He went on a blistering three-page critique of Michael's stewardship of the critique of Michael's stewardship of the critique of Michael's stewardship of the company. The first 10 years had been a company. The first 10 years had been a company. The first 10 years had been a success, he acknowledged, but the latter success, he acknowledged, but the latter success, he acknowledged, but the latter years had been defined by seven distinct years had been defined by seven distinct years had been defined by seven distinct failures, which Roy laid out point by failures, which Roy laid out point by failures, which Roy laid out point by point. One, a failure to bring ABC Prime point. One, a failure to bring ABC Prime point. One, a failure to bring ABC Prime Time back from its ratings abyss. Two, Time back from its ratings abyss. Two, Time back from its ratings abyss. Two, the consistent micromanagement of the consistent micromanagement of the consistent micromanagement of everyone around you with the resulting everyone around you with the resulting everyone around you with the resulting loss of morale throughout the company. loss of morale throughout the company. loss of morale throughout the company. Three, a lack of adequate investment Three, a lack of adequate investment Three, a lack of adequate investment into theme parks. Building on the cheap into theme parks. Building on the cheap into theme parks. Building on the cheap that has depressed park attendance, that has depressed park attendance, that has depressed park attendance, which which which that is counter to every other thing that is counter to every other thing that is counter to every other thing that I've heard. that I've heard. that I've heard. &gt;&gt; I mean, yeah. Well, park attendance was &gt;&gt; I mean, yeah. Well, park attendance was &gt;&gt; I mean, yeah. Well, park attendance was down because of September 11th, down because of September 11th, down because of September 11th, &gt;&gt; right? Michael sort of famously had an &gt;&gt; right? Michael sort of famously had an &gt;&gt; right? Michael sort of famously had an eye for making the theme parks great. eye for making the theme parks great. eye for making the theme parks great. The sort of second only since Walt, The sort of second only since Walt, The sort of second only since Walt, &gt;&gt; nobody invested in the parks like &gt;&gt; nobody invested in the parks like &gt;&gt; nobody invested in the parks like Michael Eiser. Michael Eiser. Michael Eiser. &gt;&gt; Right. Right. Four, the perception by &gt;&gt; Right. Right. Four, the perception by &gt;&gt; Right. Right. Four, the perception by all of our stakeholders that the company all of our stakeholders that the company all of our stakeholders that the company is rapacious, soulless, and always is rapacious, soulless, and always is rapacious, soulless, and always looking for the quick buck rather than looking for the quick buck rather than looking for the quick buck rather than long-term value, which is leading to a long-term value, which is leading to a long-term value, which is leading to a loss of public trust. Disney was by this loss of public trust. Disney was by this loss of public trust. Disney was by this point distributing Pixar's early films, point distributing Pixar's early films, point distributing Pixar's early films, but Eisner and Pixar had a uh very but Eisner and Pixar had a uh very but Eisner and Pixar had a uh very contentious relationship. We'll put a contentious relationship. We'll put a contentious relationship. We'll put a pin in that for now. Yep. pin in that for now. Yep. pin in that for now. Yep. &gt;&gt; Five, a creative brain drain from the &gt;&gt; Five, a creative brain drain from the &gt;&gt; Five, a creative brain drain from the company due to mismanagement and low company due to mismanagement and low company due to mismanagement and low morale. Six, a failure to build good morale. Six, a failure to build good morale. Six, a failure to build good relationships with Disney's partners, relationships with Disney's partners, relationships with Disney's partners, particularly Pixar. And seven, your particularly Pixar. And seven, your particularly Pixar. And seven, your consistent refusal to establish a clear consistent refusal to establish a clear consistent refusal to establish a clear succession plan. succession plan. succession plan. This is a brutal letter. Yeah. And then This is a brutal letter. Yeah. And then This is a brutal letter. Yeah. And then Roy ends the letter with, "Michael, it Roy ends the letter with, "Michael, it Roy ends the letter with, "Michael, it is my sincere belief that it is you who is my sincere belief that it is you who is my sincere belief that it is you who should be leaving and not me. should be leaving and not me. should be leaving and not me. Accordingly, I once again call for your Accordingly, I once again call for your Accordingly, I once again call for your resignation and retirement." resignation and retirement." resignation and retirement." Woo! Man, so what is Roy so upset about? Woo! Man, so what is Roy so upset about? Woo! Man, so what is Roy so upset about? Amazingly, Amazingly, Amazingly, Disney animation Disney animation Disney animation had continued to go downhill, had continued to go downhill, had continued to go downhill, &gt;&gt; right? 2003 had Brother Bear. 2004 had &gt;&gt; right? 2003 had Brother Bear. 2004 had &gt;&gt; right? 2003 had Brother Bear. 2004 had Home on the Range. 2005 was Chicken Home on the Range. 2005 was Chicken Home on the Range. 2005 was Chicken Little. You've never heard of any of Little. You've never heard of any of Little. You've never heard of any of these films, I'm sure. Maybe you've these films, I'm sure. Maybe you've these films, I'm sure. Maybe you've heard 2007 they had Meet the Robinsons, heard 2007 they had Meet the Robinsons, heard 2007 they had Meet the Robinsons, which I guess would have been in which I guess would have been in which I guess would have been in development. development. development. &gt;&gt; Yeah. Yeah. Yeah. Uh Bolt was the end of &gt;&gt; Yeah. Yeah. Yeah. Uh Bolt was the end of &gt;&gt; Yeah. Yeah. Yeah. Uh Bolt was the end of this misery in 2008. this misery in 2008. this misery in 2008. &gt;&gt; Yeah. I mean, if you are a little bit &gt;&gt; Yeah. I mean, if you are a little bit &gt;&gt; Yeah. I mean, if you are a little bit younger than David and I, call it 25, younger than David and I, call it 25, younger than David and I, call it 25, maybe 30, you probably don't actually maybe 30, you probably don't actually maybe 30, you probably don't actually have any Disney movies from your have any Disney movies from your have any Disney movies from your childhood that you remember the way that childhood that you remember the way that childhood that you remember the way that we remember Aladdin and The Lion King we remember Aladdin and The Lion King we remember Aladdin and The Lion King and The Little Mermaid and Beauty and and The Little Mermaid and Beauty and and The Little Mermaid and Beauty and the Beast. the Beast. the Beast. &gt;&gt; Totally. But yeah, back to Roy and this &gt;&gt; Totally. But yeah, back to Roy and this &gt;&gt; Totally. But yeah, back to Roy and this Save Disney campaign. I mean, look, Roy, Save Disney campaign. I mean, look, Roy, Save Disney campaign. I mean, look, Roy, as we already talked about earlier, he's as we already talked about earlier, he's as we already talked about earlier, he's a complicated guy. He's so upset about a complicated guy. He's so upset about a complicated guy. He's so upset about Disney animation. I mean, technically Disney animation. I mean, technically Disney animation. I mean, technically he's the one in charge of Disney he's the one in charge of Disney he's the one in charge of Disney animation. So, like, who's he upset at animation. So, like, who's he upset at animation. So, like, who's he upset at here? Like himself. But I think really here? Like himself. But I think really here? Like himself. But I think really like what this is really about and like what this is really about and like what this is really about and Royy's superpower for Disney was that Royy's superpower for Disney was that Royy's superpower for Disney was that even if he wasn't, you know, the best even if he wasn't, you know, the best even if he wasn't, you know, the best executive or leader or in touch with the executive or leader or in touch with the executive or leader or in touch with the marketplace as evidenced by the total marketplace as evidenced by the total marketplace as evidenced by the total flop of Fantasia 2000, he absolutely was flop of Fantasia 2000, he absolutely was flop of Fantasia 2000, he absolutely was the steward and protector of the Disney the steward and protector of the Disney the steward and protector of the Disney spirit. And it was so clear that the spirit. And it was so clear that the spirit. And it was so clear that the Disney spirit, the creative spirit, the Disney spirit, the creative spirit, the Disney spirit, the creative spirit, the spirit that made these timeless stories spirit that made these timeless stories spirit that made these timeless stories that got handed down from generation to that got handed down from generation to that got handed down from generation to generation had left the building generation had left the building generation had left the building &gt;&gt; and the company just spread two things. &gt;&gt; and the company just spread two things. &gt;&gt; and the company just spread two things. Got two completely different business Got two completely different business Got two completely different business models doing two completely different models doing two completely different models doing two completely different things from this merger with ABC. things from this merger with ABC. things from this merger with ABC. &gt;&gt; Yep. So what happens next? Roy and &gt;&gt; Yep. So what happens next? Roy and &gt;&gt; Yep. So what happens next? Roy and Stanley had resigned in a huff from the Stanley had resigned in a huff from the Stanley had resigned in a huff from the board at the end of 2003, right at the board at the end of 2003, right at the board at the end of 2003, right at the holidays. Disney's annual shareholder holidays. Disney's annual shareholder holidays. Disney's annual shareholder meeting is coming up in March of 2004 meeting is coming up in March of 2004 meeting is coming up in March of 2004 where the vote is going to happen to where the vote is going to happen to where the vote is going to happen to hopefully in their minds oust Michael hopefully in their minds oust Michael hopefully in their minds oust Michael Eisner as CEO of Disney. Disney in Eisner as CEO of Disney. Disney in Eisner as CEO of Disney. Disney in response schedules an analyst day, an response schedules an analyst day, an response schedules an analyst day, an investor day for the company in Orlando investor day for the company in Orlando investor day for the company in Orlando in February of 2004 ahead of the meeting in February of 2004 ahead of the meeting in February of 2004 ahead of the meeting to sort of shore up support for Michael to sort of shore up support for Michael to sort of shore up support for Michael and shore up support for the stock. And and shore up support for the stock. And and shore up support for the stock. And they have good news to share. Pirates of they have good news to share. Pirates of they have good news to share. Pirates of the Caribbean is going to save the the Caribbean is going to save the the Caribbean is going to save the company. [laughter] company. [laughter] company. [laughter] &gt;&gt; The movie did great based on a &gt;&gt; The movie did great based on a &gt;&gt; The movie did great based on a Disneyland ride. I mean, you can't write Disneyland ride. I mean, you can't write Disneyland ride. I mean, you can't write a better story. a better story. a better story. &gt;&gt; Can't write a better story. Revenue for &gt;&gt; Can't write a better story. Revenue for &gt;&gt; Can't write a better story. Revenue for the quarter is up 19%. Johnny Depp the quarter is up 19%. Johnny Depp the quarter is up 19%. Johnny Depp riding in. [laughter] riding in. [laughter] riding in. [laughter] Going to save Michael Eisner's job. They Going to save Michael Eisner's job. They Going to save Michael Eisner's job. They all wake up the morning of the investor all wake up the morning of the investor all wake up the morning of the investor day. Eisner's there. Bob Iger is there. day. Eisner's there. Bob Iger is there. day. Eisner's there. Bob Iger is there. By this point in time, he's been By this point in time, he's been By this point in time, he's been promoted to be president and COO of the promoted to be president and COO of the promoted to be president and COO of the Walt Disney Company. Walt Disney Company. Walt Disney Company. And they read the news that Comcast, And they read the news that Comcast, And they read the news that Comcast, the Philadelphiabased the Philadelphiabased the Philadelphiabased cable company, cable company, cable company, is making a hostile takeover bid to is making a hostile takeover bid to is making a hostile takeover bid to acquire Disney for $54 billion in acquire Disney for $54 billion in acquire Disney for $54 billion in Comcast stock. I remember when this news Comcast stock. I remember when this news Comcast stock. I remember when this news hit, it was shocking. I mean, it was hit, it was shocking. I mean, it was hit, it was shocking. I mean, it was shocking. The idea that a cable company, shocking. The idea that a cable company, shocking. The idea that a cable company, a cable company could take over the Walt a cable company could take over the Walt a cable company could take over the Walt Disney Company was like offensive. There Disney Company was like offensive. There Disney Company was like offensive. There were practically no more hated, you were practically no more hated, you were practically no more hated, you know, genre of corporations in America know, genre of corporations in America know, genre of corporations in America than cable operators, largely in part than cable operators, largely in part than cable operators, largely in part thanks to the Walt Disney Company and thanks to the Walt Disney Company and thanks to the Walt Disney Company and ESPN riing everybody up against them. ESPN riing everybody up against them. ESPN riing everybody up against them. [laughter] [laughter] [laughter] And that they would be taking over with And that they would be taking over with And that they would be taking over with stock this treasure of America. stock this treasure of America. stock this treasure of America. Honestly, for Roy and for Stanley and Honestly, for Roy and for Stanley and Honestly, for Roy and for Stanley and their Save Disney campaign, it was the their Save Disney campaign, it was the their Save Disney campaign, it was the best thing that could have happened best thing that could have happened best thing that could have happened because to many people, they look at because to many people, they look at because to many people, they look at this and they're like, "How low has the this and they're like, "How low has the this and they're like, "How low has the Walt Disney Company fallen." Walt Disney Company fallen." Walt Disney Company fallen." &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; But Disney is doing great. The parks &gt;&gt; But Disney is doing great. The parks &gt;&gt; But Disney is doing great. The parks business was down because of September business was down because of September business was down because of September 11th, but it's coming back. Pirates of 11th, but it's coming back. Pirates of 11th, but it's coming back. Pirates of the Caribbean is a big success. They've the Caribbean is a big success. They've the Caribbean is a big success. They've got this great partnership with Pixar. got this great partnership with Pixar. got this great partnership with Pixar. They've got freaking ESPN, which is They've got freaking ESPN, which is They've got freaking ESPN, which is still crushing it. Why does Comcast want still crushing it. Why does Comcast want still crushing it. Why does Comcast want to buy Disney? They sense this opening, to buy Disney? They sense this opening, to buy Disney? They sense this opening, this weakness. And wouldn't it be this weakness. And wouldn't it be this weakness. And wouldn't it be amazing if Comcast could all of a sudden amazing if Comcast could all of a sudden amazing if Comcast could all of a sudden acquire its most important supplier in acquire its most important supplier in acquire its most important supplier in ESPN that has all of this leverage over ESPN that has all of this leverage over ESPN that has all of this leverage over them? them? them? &gt;&gt; They're constantly going to war with &gt;&gt; They're constantly going to war with &gt;&gt; They're constantly going to war with ESPN every year to renegotiate the ESPN every year to renegotiate the ESPN every year to renegotiate the carriage rates. Be nice to own it. carriage rates. Be nice to own it. carriage rates. Be nice to own it. &gt;&gt; We might be able to get ESPN. Holy crap. &gt;&gt; We might be able to get ESPN. Holy crap. &gt;&gt; We might be able to get ESPN. Holy crap. Let's try it. [laughter] Let's try it. [laughter] Let's try it. [laughter] &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Oh man. Just to underscore this ESPN &gt;&gt; Oh man. Just to underscore this ESPN &gt;&gt; Oh man. Just to underscore this ESPN thing, friend of the show Ben Thompson thing, friend of the show Ben Thompson thing, friend of the show Ben Thompson has a great reflection on all this. Walt has a great reflection on all this. Walt has a great reflection on all this. Walt Disney's chart, the famous flywheel one, Disney's chart, the famous flywheel one, Disney's chart, the famous flywheel one, may have been a very satisfying business may have been a very satisfying business may have been a very satisfying business model, but the reality of Disney's TV model, but the reality of Disney's TV model, but the reality of Disney's TV business is that it was scalable in a business is that it was scalable in a business is that it was scalable in a way that the Disney chart could never way that the Disney chart could never way that the Disney chart could never be. The beauty of the cable bundle is be. The beauty of the cable bundle is be. The beauty of the cable bundle is that nearly every household in America that nearly every household in America that nearly every household in America paid for it every single month, paid for it every single month, paid for it every single month, regardless of whether or not Disney had regardless of whether or not Disney had regardless of whether or not Disney had a hit TV show or a must-watch sporting a hit TV show or a must-watch sporting a hit TV show or a must-watch sporting event. Thanks to its suite of channels event. Thanks to its suite of channels event. Thanks to its suite of channels anchored by ESPN, Disney received a big anchored by ESPN, Disney received a big anchored by ESPN, Disney received a big chunk of that money and it grew like chunk of that money and it grew like chunk of that money and it grew like clockwork. In that world, Walt Disney's clockwork. In that world, Walt Disney's clockwork. In that world, Walt Disney's model was a nice side business to the model was a nice side business to the model was a nice side business to the real money maker. real money maker. real money maker. &gt;&gt; Yep. Yep. Man, it's all all about ESPN. &gt;&gt; Yep. Yep. Man, it's all all about ESPN. &gt;&gt; Yep. Yep. Man, it's all all about ESPN. Everything that's happening. [laughter] Everything that's happening. [laughter] Everything that's happening. [laughter] &gt;&gt; Yep. The cable network's operating &gt;&gt; Yep. The cable network's operating &gt;&gt; Yep. The cable network's operating income, the profit within the Walt income, the profit within the Walt income, the profit within the Walt Disney Company at this point was $2 Disney Company at this point was $2 Disney Company at this point was $2 billion. billion. billion. Companywide, they were only making $4.5 Companywide, they were only making $4.5 Companywide, they were only making $4.5 billion. So like almost 50% of the billion. So like almost 50% of the billion. So like almost 50% of the company's total profits is just these company's total profits is just these company's total profits is just these cable networks. cable networks. cable networks. &gt;&gt; Yeah. Which is really ESPN. So on the &gt;&gt; Yeah. Which is really ESPN. So on the &gt;&gt; Yeah. Which is really ESPN. So on the back of this narrative of you know how back of this narrative of you know how back of this narrative of you know how low the Disney company has sunk under low the Disney company has sunk under low the Disney company has sunk under leadership of Michael Eisner which gets leadership of Michael Eisner which gets leadership of Michael Eisner which gets ridiculous but it's the narrative out ridiculous but it's the narrative out ridiculous but it's the narrative out there. the two major shareholder there. the two major shareholder there. the two major shareholder advisory services back, the Save Disney advisory services back, the Save Disney advisory services back, the Save Disney campaign and Roy, and they advise campaign and Roy, and they advise campaign and Roy, and they advise shareholders to vote to withhold their shareholders to vote to withhold their shareholders to vote to withhold their support of Michael Eisner as CEO at the support of Michael Eisner as CEO at the support of Michael Eisner as CEO at the March shareholder meeting. Kalpers, the March shareholder meeting. Kalpers, the March shareholder meeting. Kalpers, the big California pension fund, they big California pension fund, they big California pension fund, they announced that they're going to vote announced that they're going to vote announced that they're going to vote their Disney shares against Eisner and their Disney shares against Eisner and their Disney shares against Eisner and vote for him to resign. So, all of this vote for him to resign. So, all of this vote for him to resign. So, all of this comes to a head on March 3rd, 2004 at comes to a head on March 3rd, 2004 at comes to a head on March 3rd, 2004 at the Disney annual shareholder meeting, the Disney annual shareholder meeting, the Disney annual shareholder meeting, which hilariously had been scheduled which hilariously had been scheduled which hilariously had been scheduled that year to take place in Philadelphia, that year to take place in Philadelphia, that year to take place in Philadelphia, headquarters of Comcast. [laughter] headquarters of Comcast. [laughter] headquarters of Comcast. [laughter] &gt;&gt; They're like just a few blocks away. &gt;&gt; They're like just a few blocks away. &gt;&gt; They're like just a few blocks away. &gt;&gt; At the end of the day, 43% of the &gt;&gt; At the end of the day, 43% of the &gt;&gt; At the end of the day, 43% of the shareholder base votes to withhold shareholder base votes to withhold shareholder base votes to withhold support for Eisner as CEO, which is a support for Eisner as CEO, which is a support for Eisner as CEO, which is a huge number. You don't renew a CEO's huge number. You don't renew a CEO's huge number. You don't renew a CEO's contract when 43% of your shareholders contract when 43% of your shareholders contract when 43% of your shareholders don't want that CEO. don't want that CEO. don't want that CEO. &gt;&gt; Yep. So, the Disney board meets in an &gt;&gt; Yep. So, the Disney board meets in an &gt;&gt; Yep. So, the Disney board meets in an emergency executive session without emergency executive session without emergency executive session without management present during which they management present during which they management present during which they decide to remove Michael as chairman but decide to remove Michael as chairman but decide to remove Michael as chairman but let him remain CEO of Disney for the let him remain CEO of Disney for the let him remain CEO of Disney for the moment. They announce this. The Disney moment. They announce this. The Disney moment. They announce this. The Disney stock jumps in response. Uh meanwhile, stock jumps in response. Uh meanwhile, stock jumps in response. Uh meanwhile, Comcast stock has been falling. So, a Comcast stock has been falling. So, a Comcast stock has been falling. So, a few weeks later, Comcast formally few weeks later, Comcast formally few weeks later, Comcast formally withdraws their bid, but this doesn't uh withdraws their bid, but this doesn't uh withdraws their bid, but this doesn't uh plate Roy and Stanley in the Save Disney plate Roy and Stanley in the Save Disney plate Roy and Stanley in the Save Disney campaign. Eisner is still CEO. A few campaign. Eisner is still CEO. A few campaign. Eisner is still CEO. A few months after that, Michael announces months after that, Michael announces months after that, Michael announces that he will leave the company when his that he will leave the company when his that he will leave the company when his contract expires at the end of 2006. So, contract expires at the end of 2006. So, contract expires at the end of 2006. So, he's announced that he's going to he's announced that he's going to he's announced that he's going to resign. But now there's question, okay, resign. But now there's question, okay, resign. But now there's question, okay, who's going to take over? [laughter] who's going to take over? [laughter] who's going to take over? [laughter] &gt;&gt; Yep. [gasps] &gt;&gt; Yep. [gasps] &gt;&gt; Yep. [gasps] The board announces that is going to The board announces that is going to The board announces that is going to initiate a public highstakes CEO search initiate a public highstakes CEO search initiate a public highstakes CEO search and they intend to name Michael's and they intend to name Michael's and they intend to name Michael's successor by June of 2005. Everyone successor by June of 2005. Everyone successor by June of 2005. Everyone everyone believes it's got to be an everyone believes it's got to be an everyone believes it's got to be an external candidate that is going to come external candidate that is going to come external candidate that is going to come in and take over Disney just like Wells in and take over Disney just like Wells in and take over Disney just like Wells and Eisner came in 20 years ago. and Eisner came in 20 years ago. and Eisner came in 20 years ago. &gt;&gt; Well, do you know what the press release &gt;&gt; Well, do you know what the press release &gt;&gt; Well, do you know what the press release says who it names? Well, it says that says who it names? Well, it says that says who it names? Well, it says that there will be external candidates and there will be external candidates and there will be external candidates and that there will be one internal that there will be one internal that there will be one internal candidate. candidate. candidate. &gt;&gt; Initially, it actually said internal and &gt;&gt; Initially, it actually said internal and &gt;&gt; Initially, it actually said internal and external candidates. And Bob Iger was external candidates. And Bob Iger was external candidates. And Bob Iger was reviewing the press release cuz he's reviewing the press release cuz he's reviewing the press release cuz he's COO. And he goes to the board and says, COO. And he goes to the board and says, COO. And he goes to the board and says, "Wait, Michael's going to be CEO for "Wait, Michael's going to be CEO for "Wait, Michael's going to be CEO for another year." Bob's like, "You you another year." Bob's like, "You you another year." Bob's like, "You you can't really do this. Are there other can't really do this. Are there other can't really do this. Are there other internal candidates or is it just me?" internal candidates or is it just me?" internal candidates or is it just me?" And they say, "It's just you." And he And they say, "It's just you." And he And they say, "It's just you." And he said, "Well, then you need to put me in said, "Well, then you need to put me in said, "Well, then you need to put me in the press release because it it's the press release because it it's the press release because it it's there's going to be otherwise going to there's going to be otherwise going to there's going to be otherwise going to be chaos around here, be chaos around here, be chaos around here, &gt;&gt; right? People will need someone to look &gt;&gt; right? People will need someone to look &gt;&gt; right? People will need someone to look to for leadership because no one's going to for leadership because no one's going to for leadership because no one's going to be looking to Michael. He's a lame to be looking to Michael. He's a lame to be looking to Michael. He's a lame duck." And there's going to be all these duck." And there's going to be all these duck." And there's going to be all these people vying for power or the company people vying for power or the company people vying for power or the company will not function. You have to say will not function. You have to say will not function. You have to say external candidates and Bob Iger. And external candidates and Bob Iger. And external candidates and Bob Iger. And they agree and say, "Okay, then we'll do they agree and say, "Okay, then we'll do they agree and say, "Okay, then we'll do it." it." it." &gt;&gt; So Bob is announced as the internal &gt;&gt; So Bob is announced as the internal &gt;&gt; So Bob is announced as the internal candidate and the board promises they candidate and the board promises they candidate and the board promises they will run an exhaustive search for will run an exhaustive search for will run an exhaustive search for external candidates. Bob, and he external candidates. Bob, and he external candidates. Bob, and he recounts all of this in Ride of a recounts all of this in Ride of a recounts all of this in Ride of a Lifetime, comes up with, I think, one of Lifetime, comes up with, I think, one of Lifetime, comes up with, I think, one of the most brilliant the most brilliant the most brilliant campaign framings that I have ever campaign framings that I have ever campaign framings that I have ever heard. And he actually hires like a heard. And he actually hires like a heard. And he actually hires like a political campaign consultant to help political campaign consultant to help political campaign consultant to help him with this. And he realizes that, him with this. And he realizes that, him with this. And he realizes that, okay, I am the number two to an okay, I am the number two to an okay, I am the number two to an unpopular incumbent. I'm like the vice unpopular incumbent. I'm like the vice unpopular incumbent. I'm like the vice president of a massively unpopular president of a massively unpopular president of a massively unpopular president right now who has just become president right now who has just become president right now who has just become a lame duck. a lame duck. a lame duck. &gt;&gt; Right. Every board member's first, &gt;&gt; Right. Every board member's first, &gt;&gt; Right. Every board member's first, second, and third question for me should second, and third question for me should second, and third question for me should be, "Why should we pick you when you be, "Why should we pick you when you be, "Why should we pick you when you were a part of the previous were a part of the previous were a part of the previous administration administration administration &gt;&gt; and how did you screw up so badly?" &gt;&gt; and how did you screw up so badly?" &gt;&gt; and how did you screw up so badly?" &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; So, he realizes that his only chance is &gt;&gt; So, he realizes that his only chance is &gt;&gt; So, he realizes that his only chance is to completely reframe the situation. to completely reframe the situation. to completely reframe the situation. This isn't about what happened in the This isn't about what happened in the This isn't about what happened in the past. This is only about the future. past. This is only about the future. past. This is only about the future. Which both is the right way to look at Which both is the right way to look at Which both is the right way to look at this and it is Bob's only chance to win. this and it is Bob's only chance to win. this and it is Bob's only chance to win. &gt;&gt; Yes. So he proposes to the board in his &gt;&gt; Yes. So he proposes to the board in his &gt;&gt; Yes. So he proposes to the board in his candidacy candidacy candidacy three pillars of his vision and strategy three pillars of his vision and strategy three pillars of his vision and strategy for the future of the Walt Disney for the future of the Walt Disney for the future of the Walt Disney Company. Number one, we need to devote Company. Number one, we need to devote Company. Number one, we need to devote most of our time and capital to the most of our time and capital to the most of our time and capital to the creation of high quality branded creation of high quality branded creation of high quality branded content. Aka, we need to revive Disney content. Aka, we need to revive Disney content. Aka, we need to revive Disney animation and along with it the Disney animation and along with it the Disney animation and along with it the Disney flywheel. Spot on. Especially now flywheel. Spot on. Especially now flywheel. Spot on. Especially now because the amount of content in the because the amount of content in the because the amount of content in the world is exploding. We're here entering world is exploding. We're here entering world is exploding. We're here entering the social media era. There's Facebook. the social media era. There's Facebook. the social media era. There's Facebook. We're about to get YouTube. Consumers We're about to get YouTube. Consumers We're about to get YouTube. Consumers have infinite choice for content. The have infinite choice for content. The have infinite choice for content. The only way for a company like Disney to only way for a company like Disney to only way for a company like Disney to hope to try and still be relevant is to hope to try and still be relevant is to hope to try and still be relevant is to go back to making the very best content go back to making the very best content go back to making the very best content &gt;&gt; and build a brand to be known for that &gt;&gt; and build a brand to be known for that &gt;&gt; and build a brand to be known for that so people know to look to you for that so people know to look to you for that so people know to look to you for that highest quality tier. highest quality tier. highest quality tier. &gt;&gt; And still nobody is better positioned &gt;&gt; And still nobody is better positioned &gt;&gt; And still nobody is better positioned than Disney to do that. Even despite all than Disney to do that. Even despite all than Disney to do that. Even despite all the problems and distractions and the the problems and distractions and the the problems and distractions and the downfall of animation over the last 10 downfall of animation over the last 10 downfall of animation over the last 10 years, it's still Disney. years, it's still Disney. years, it's still Disney. &gt;&gt; Yep. So, that's one. Two, we need to &gt;&gt; Yep. So, that's one. Two, we need to &gt;&gt; Yep. So, that's one. Two, we need to embrace technology to the fullest embrace technology to the fullest embrace technology to the fullest extent. Now, this sounds like, duh, why extent. Now, this sounds like, duh, why extent. Now, this sounds like, duh, why wouldn't you do that? But this is wouldn't you do that? But this is wouldn't you do that? But this is actually kind of a radical statement at actually kind of a radical statement at actually kind of a radical statement at this point in time. We're about to enter this point in time. We're about to enter this point in time. We're about to enter an era where the entire traditional an era where the entire traditional an era where the entire traditional media industry is going to be either media industry is going to be either media industry is going to be either running scared or actively trying to running scared or actively trying to running scared or actively trying to fight tech in Silicon Valley. Viacom is fight tech in Silicon Valley. Viacom is fight tech in Silicon Valley. Viacom is about to launch a lawsuit against about to launch a lawsuit against about to launch a lawsuit against YouTube to try and sue it out of YouTube to try and sue it out of YouTube to try and sue it out of existence. Everybody remembers what just existence. Everybody remembers what just existence. Everybody remembers what just happened to the music industry and happened to the music industry and happened to the music industry and Napster. Napster. Napster. Bob is saying, "No, we are going to Bob is saying, "No, we are going to Bob is saying, "No, we are going to embrace technology embrace technology embrace technology &gt;&gt; both to produce fresh new cutting edge &gt;&gt; both to produce fresh new cutting edge &gt;&gt; both to produce fresh new cutting edge content the way that Walt did, but also content the way that Walt did, but also content the way that Walt did, but also embrace technology as a distribution embrace technology as a distribution embrace technology as a distribution medium and figure out how to use that to medium and figure out how to use that to medium and figure out how to use that to our advantage, not let technology be the our advantage, not let technology be the our advantage, not let technology be the reason for our downfall." reason for our downfall." reason for our downfall." &gt;&gt; Yep. And then Bob's third pillar of his &gt;&gt; Yep. And then Bob's third pillar of his &gt;&gt; Yep. And then Bob's third pillar of his strategy is expand global reach. We need strategy is expand global reach. We need strategy is expand global reach. We need to better penetrate certain markets, to better penetrate certain markets, to better penetrate certain markets, particularly the world's most populous particularly the world's most populous particularly the world's most populous countries like China and India. Unlike countries like China and India. Unlike countries like China and India. Unlike Waltz era, at this point, something like Waltz era, at this point, something like Waltz era, at this point, something like a third of the global population a third of the global population a third of the global population lives in those two countries. And Disney lives in those two countries. And Disney lives in those two countries. And Disney is all about scale economies. Make the is all about scale economies. Make the is all about scale economies. Make the deepest, best, highest quality content deepest, best, highest quality content deepest, best, highest quality content and characters and stories possible and and characters and stories possible and and characters and stories possible and get as many people around the world to get as many people around the world to get as many people around the world to fall in love with them as possible. fall in love with them as possible. fall in love with them as possible. &gt;&gt; Yep. and we need to get into those two &gt;&gt; Yep. and we need to get into those two &gt;&gt; Yep. and we need to get into those two countries. countries. countries. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; So, amazingly, Bob wins on this &gt;&gt; So, amazingly, Bob wins on this &gt;&gt; So, amazingly, Bob wins on this campaign. In March of 2005, the board campaign. In March of 2005, the board campaign. In March of 2005, the board announces Bob Iger will be the future announces Bob Iger will be the future announces Bob Iger will be the future CEO of the Walt Disney Company. They CEO of the Walt Disney Company. They CEO of the Walt Disney Company. They accelerate his start date and Michael's accelerate his start date and Michael's accelerate his start date and Michael's departure date to that September 2005, a departure date to that September 2005, a departure date to that September 2005, a year ahead of when Michael had initially year ahead of when Michael had initially year ahead of when Michael had initially announced. And the Michael Eisner announced. And the Michael Eisner announced. And the Michael Eisner era at Disney comes to an end after 21 era at Disney comes to an end after 21 era at Disney comes to an end after 21 years. years. years. &gt;&gt; It's so interesting. Michael Eisner's &gt;&gt; It's so interesting. Michael Eisner's &gt;&gt; It's so interesting. Michael Eisner's tenure at Disney in my mind is really tenure at Disney in my mind is really tenure at Disney in my mind is really two chapters. There's that whole first two chapters. There's that whole first two chapters. There's that whole first chapter that sort of ends with chapter that sort of ends with chapter that sort of ends with &gt;&gt; Frank Wells passing, Katsenberg leaving, &gt;&gt; Frank Wells passing, Katsenberg leaving, &gt;&gt; Frank Wells passing, Katsenberg leaving, the end of the great Disney animation the end of the great Disney animation the end of the great Disney animation era era era &gt;&gt; and acquiring Capital Cities. &gt;&gt; and acquiring Capital Cities. &gt;&gt; and acquiring Capital Cities. &gt;&gt; But the ownership of capital cities is &gt;&gt; But the ownership of capital cities is &gt;&gt; But the ownership of capital cities is sort of that that whole second era. sort of that that whole second era. sort of that that whole second era. &gt;&gt; Yes. Yeah. that I think that's the way I &gt;&gt; Yes. Yeah. that I think that's the way I &gt;&gt; Yes. Yeah. that I think that's the way I would frame it too. He and Wells and would frame it too. He and Wells and would frame it too. He and Wells and Katsenberg did an incredible job turning Katsenberg did an incredible job turning Katsenberg did an incredible job turning around Disney in the first 10 years that around Disney in the first 10 years that around Disney in the first 10 years that sort of went sideways in the second 10 sort of went sideways in the second 10 sort of went sideways in the second 10 years, but also Michael made one of the years, but also Michael made one of the years, but also Michael made one of the greatest acquisitions of all time in the greatest acquisitions of all time in the greatest acquisitions of all time in the second 10 years and because of all the second 10 years and because of all the second 10 years and because of all the drama doesn't get anywhere near enough drama doesn't get anywhere near enough drama doesn't get anywhere near enough credit for it. credit for it. credit for it. &gt;&gt; Yeah. It's so interesting when you say &gt;&gt; Yeah. It's so interesting when you say &gt;&gt; Yeah. It's so interesting when you say the greatest acquisitions of all time the greatest acquisitions of all time the greatest acquisitions of all time when I look at ABC Capital Cities. It when I look at ABC Capital Cities. It when I look at ABC Capital Cities. It was because it had ESPN, but it also was because it had ESPN, but it also was because it had ESPN, but it also cost the company its strategic clarity. cost the company its strategic clarity. cost the company its strategic clarity. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Disney never again would get to be just &gt;&gt; Disney never again would get to be just &gt;&gt; Disney never again would get to be just Disney. It's the flywheel business and Disney. It's the flywheel business and Disney. It's the flywheel business and the the the &gt;&gt; ESPN &gt;&gt; ESPN &gt;&gt; ESPN &gt;&gt; affiliate &gt;&gt; affiliate &gt;&gt; affiliate advertising cable business. advertising cable business. advertising cable business. &gt;&gt; Yep. And it's worth it because buying &gt;&gt; Yep. And it's worth it because buying &gt;&gt; Yep. And it's worth it because buying ESPN was this pseudo infinite wellspring ESPN was this pseudo infinite wellspring ESPN was this pseudo infinite wellspring of capital to fund everything else. of capital to fund everything else. of capital to fund everything else. &gt;&gt; But it cost the clarity. &gt;&gt; But it cost the clarity. &gt;&gt; But it cost the clarity. &gt;&gt; Yep. That's exactly right. &gt;&gt; Yep. That's exactly right. &gt;&gt; Yep. That's exactly right. &gt;&gt; By the numbers, Michael's tenure was &gt;&gt; By the numbers, Michael's tenure was &gt;&gt; By the numbers, Michael's tenure was unbelievable. He comes in with a market unbelievable. He comes in with a market unbelievable. He comes in with a market cap a little shy of 2 billion, leaves cap a little shy of 2 billion, leaves cap a little shy of 2 billion, leaves with it worth, I don't know, 50ish with it worth, I don't know, 50ish with it worth, I don't know, 50ish billion. I think there was some billion. I think there was some billion. I think there was some dilution, so it wasn't quite a 25x, dilution, so it wasn't quite a 25x, dilution, so it wasn't quite a 25x, closer to a 20x of the stock. He comes closer to a 20x of the stock. He comes closer to a 20x of the stock. He comes in, revenue is 1.7 billion. He leaves at in, revenue is 1.7 billion. He leaves at in, revenue is 1.7 billion. He leaves at 31 billion. That's a 15% compound annual 31 billion. That's a 15% compound annual 31 billion. That's a 15% compound annual growth rate over his two decades. And growth rate over his two decades. And growth rate over his two decades. And net income goes from 97 million to 2.5 net income goes from 97 million to 2.5 net income goes from 97 million to 2.5 billion. billion. billion. &gt;&gt; Yeah. 26x &gt;&gt; Yeah. 26x &gt;&gt; Yeah. 26x net income during his tenure net income during his tenure net income during his tenure &gt;&gt; by the numbers. &gt;&gt; by the numbers. &gt;&gt; by the numbers. &gt;&gt; Great. And you know, ESPN is arguments &gt;&gt; Great. And you know, ESPN is arguments &gt;&gt; Great. And you know, ESPN is arguments one, two, and three of why was he a one, two, and three of why was he a one, two, and three of why was he a great CEO? great CEO? great CEO? &gt;&gt; Yep. Yep. Yep. and also Disney's &gt;&gt; Yep. Yep. Yep. and also Disney's &gt;&gt; Yep. Yep. Yep. and also Disney's Renaissance, but like I put that at four Renaissance, but like I put that at four Renaissance, but like I put that at four below ESPN, ESPN, and ESPN below ESPN, ESPN, and ESPN below ESPN, ESPN, and ESPN &gt;&gt; and then the Disney Renaissance. Yeah. &gt;&gt; and then the Disney Renaissance. Yeah. &gt;&gt; and then the Disney Renaissance. Yeah. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; I don't know. You got to count Lion King &gt;&gt; I don't know. You got to count Lion King &gt;&gt; I don't know. You got to count Lion King the musical for something. the musical for something. the musical for something. &gt;&gt; That's true. That's very true. &gt;&gt; That's true. That's very true. &gt;&gt; That's true. That's very true. [sighs] [sighs] [sighs] &gt;&gt; So Bob Iger is named CEO. One of his &gt;&gt; So Bob Iger is named CEO. One of his &gt;&gt; So Bob Iger is named CEO. One of his first calls after he gets the news on I first calls after he gets the news on I first calls after he gets the news on I think a Sunday afternoon is to Steve think a Sunday afternoon is to Steve think a Sunday afternoon is to Steve Jobs, the then CEO of Pixar. in addition Jobs, the then CEO of Pixar. in addition Jobs, the then CEO of Pixar. in addition to being the CEO of Apple. And he writes to being the CEO of Apple. And he writes to being the CEO of Apple. And he writes in ride of a lifetime. I barely knew in ride of a lifetime. I barely knew in ride of a lifetime. I barely knew Steve at that point. He was typical Steve at that point. He was typical Steve at that point. He was typical Steve. How long have you worked for Steve. How long have you worked for Steve. How long have you worked for Michael? He asked. 10 years. Huh? He Michael? He asked. 10 years. Huh? He Michael? He asked. 10 years. Huh? He said. Well, I don't see how things will said. Well, I don't see how things will said. Well, I don't see how things will be any different, but sure. When the be any different, but sure. When the be any different, but sure. When the dust settles, dust settles, dust settles, be in touch. be in touch. be in touch. And it turned out that that phone call And it turned out that that phone call And it turned out that that phone call was probably the most important phone was probably the most important phone was probably the most important phone call in the history of the Walt Disney call in the history of the Walt Disney call in the history of the Walt Disney Company. But before we tell the story of Company. But before we tell the story of Company. But before we tell the story of Pixar, now is a great time to thank one Pixar, now is a great time to thank one Pixar, now is a great time to thank one of our favorite companies, Work OS. of our favorite companies, Work OS. of our favorite companies, Work OS. &gt;&gt; Yes. So, I want to start with a line &gt;&gt; Yes. So, I want to start with a line &gt;&gt; Yes. So, I want to start with a line that we quote on this show all the time. that we quote on this show all the time. that we quote on this show all the time. Focus on what makes your beer taste Focus on what makes your beer taste Focus on what makes your beer taste better. better. better. &gt;&gt; Yes. One of the great business metaphors &gt;&gt; Yes. One of the great business metaphors &gt;&gt; Yes. One of the great business metaphors from back when breweries ran their own from back when breweries ran their own from back when breweries ran their own power plants. All that electricity did power plants. All that electricity did power plants. All that electricity did nothing for the taste of the beer. And nothing for the taste of the beer. And nothing for the taste of the beer. And every era of software has its own every era of software has its own every era of software has its own version of the power plant. Right now, version of the power plant. Right now, version of the power plant. Right now, the cost of building software is the cost of building software is the cost of building software is collapsing to near zero. And you can collapsing to near zero. And you can collapsing to near zero. And you can build a real working product with AI build a real working product with AI build a real working product with AI writing 100% of the code. The stuff that writing 100% of the code. The stuff that writing 100% of the code. The stuff that differentiates you is what you build, differentiates you is what you build, differentiates you is what you build, your ideas, and how to serve customers. your ideas, and how to serve customers. your ideas, and how to serve customers. And this is where work OS comes in. And this is where work OS comes in. And this is where work OS comes in. Something that you absolutely should not Something that you absolutely should not Something that you absolutely should not build yourself is enterprise build yourself is enterprise build yourself is enterprise authentication. Nobody needs to roll authentication. Nobody needs to roll authentication. Nobody needs to roll their own. If you're selling software to their own. If you're selling software to their own. If you're selling software to B2B or enterprise buyers, they deeply B2B or enterprise buyers, they deeply B2B or enterprise buyers, they deeply care about their data and they care care about their data and they care care about their data and they care about security. They need things like about security. They need things like about security. They need things like SSO or skim sim audit logs ro based SSO or skim sim audit logs ro based SSO or skim sim audit logs ro based accounts the entire checklist. None of accounts the entire checklist. None of accounts the entire checklist. None of that is the sort of thing that you that is the sort of thing that you that is the sort of thing that you listeners can uniquely do well to make listeners can uniquely do well to make listeners can uniquely do well to make your product better. But all of it sits your product better. But all of it sits your product better. But all of it sits in between you and closing a deal with a in between you and closing a deal with a in between you and closing a deal with a customer. This is the whole reason work customer. This is the whole reason work customer. This is the whole reason work OS exists. They turn those enterprise OS exists. They turn those enterprise OS exists. They turn those enterprise requirements into drop-in APIs. Your requirements into drop-in APIs. Your requirements into drop-in APIs. Your team adds enterprise SSO in an afternoon team adds enterprise SSO in an afternoon team adds enterprise SSO in an afternoon instead of a couple months and gets back instead of a couple months and gets back instead of a couple months and gets back to the stuff that really differentiates to the stuff that really differentiates to the stuff that really differentiates your product. your product. your product. &gt;&gt; Yes. And that is why OpenAI, Cursor, &gt;&gt; Yes. And that is why OpenAI, Cursor, &gt;&gt; Yes. And that is why OpenAI, Cursor, Perplexity, Friend of the show, Perplexity, Friend of the show, Perplexity, Friend of the show, Anthropic, and hundreds of other AI Anthropic, and hundreds of other AI Anthropic, and hundreds of other AI startups build on work OS instead of startups build on work OS instead of startups build on work OS instead of building the power plant themselves. building the power plant themselves. building the power plant themselves. They just plug into the grid so the They just plug into the grid so the They just plug into the grid so the product that you built over a weekend product that you built over a weekend product that you built over a weekend can be ready for the enterprise on can be ready for the enterprise on can be ready for the enterprise on Monday. You can learn more at works.com Monday. You can learn more at works.com Monday. You can learn more at works.com and just tell them that Ben and David and just tell them that Ben and David and just tell them that Ben and David sent you. So during his CEO audition sent you. So during his CEO audition sent you. So during his CEO audition process, Bob Iger had completely lost process, Bob Iger had completely lost process, Bob Iger had completely lost faith that Disney animation can be fixed faith that Disney animation can be fixed faith that Disney animation can be fixed from within. from within. from within. And secretly And secretly And secretly he concludes that the only viable path he concludes that the only viable path he concludes that the only viable path to restore Disney animation to its to restore Disney animation to its to restore Disney animation to its proper glory is to replace the entire proper glory is to replace the entire proper glory is to replace the entire leadership team with Pixar leadership. leadership team with Pixar leadership. leadership team with Pixar leadership. There's this famous moment that Bob There's this famous moment that Bob There's this famous moment that Bob writes about where he's at the opening writes about where he's at the opening writes about where he's at the opening parade of Hong Kong Disneyland in 2005. parade of Hong Kong Disneyland in 2005. parade of Hong Kong Disneyland in 2005. He's watching all the floats go by and He's watching all the floats go by and He's watching all the floats go by and he sees, you know, Cinderella and Mickey he sees, you know, Cinderella and Mickey he sees, you know, Cinderella and Mickey and Snow White and he realizes that and Snow White and he realizes that and Snow White and he realizes that there are no Disney characters from the there are no Disney characters from the there are no Disney characters from the last 10 years or so that are in this last 10 years or so that are in this last 10 years or so that are in this parade. parade. parade. And on the contrary, it's stuffed to the And on the contrary, it's stuffed to the And on the contrary, it's stuffed to the gills with Pixar characters. gills with Pixar characters. gills with Pixar characters. &gt;&gt; Yep. And that's the moment where he's &gt;&gt; Yep. And that's the moment where he's &gt;&gt; Yep. And that's the moment where he's like, "You know what? The path is clear. like, "You know what? The path is clear. like, "You know what? The path is clear. Pixar Pixar Pixar needs to take over Disney animation." needs to take over Disney animation." needs to take over Disney animation." And that's why he called Steve Jobs the And that's why he called Steve Jobs the And that's why he called Steve Jobs the evening that he knew he was going to evening that he knew he was going to evening that he knew he was going to become CEO. So listeners, we thought become CEO. So listeners, we thought become CEO. So listeners, we thought something that would be fun on this something that would be fun on this something that would be fun on this episode is to tell the whole Pixar episode is to tell the whole Pixar episode is to tell the whole Pixar story. We could have done it sort of in story. We could have done it sort of in story. We could have done it sort of in line earlier with Disney animation, but line earlier with Disney animation, but line earlier with Disney animation, but we wanted to carve it out, give it its we wanted to carve it out, give it its we wanted to carve it out, give it its own special section and um in a really own special section and um in a really own special section and um in a really poetic thing for David and I redo our poetic thing for David and I redo our poetic thing for David and I redo our very first episode on acquired which was very first episode on acquired which was very first episode on acquired which was on Pixar here as a segment of this on Pixar here as a segment of this on Pixar here as a segment of this episode. episode. episode. &gt;&gt; Yep. Pixar is the spiritual successor of &gt;&gt; Yep. Pixar is the spiritual successor of &gt;&gt; Yep. Pixar is the spiritual successor of Walt Disney's vision for Disney Walt Disney's vision for Disney Walt Disney's vision for Disney animation. Yep. All right. So, we're animation. Yep. All right. So, we're animation. Yep. All right. So, we're winding the clock back. Let's start with winding the clock back. Let's start with winding the clock back. Let's start with John Lacader. Yep. John Lacader. Yep. John Lacader. Yep. &gt;&gt; So, this is a guy who dreamed of &gt;&gt; So, this is a guy who dreamed of &gt;&gt; So, this is a guy who dreamed of becoming a Disney animator his whole becoming a Disney animator his whole becoming a Disney animator his whole life. One of his early jobs is work in life. One of his early jobs is work in life. One of his early jobs is work in the Jungle Cruise at Disneyland. the Jungle Cruise at Disneyland. the Jungle Cruise at Disneyland. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; And David, as you mentioned, he ends up &gt;&gt; And David, as you mentioned, he ends up &gt;&gt; And David, as you mentioned, he ends up getting into Cal Arts. It's a complete getting into Cal Arts. It's a complete getting into Cal Arts. It's a complete dream come true. Classes are taught by dream come true. Classes are taught by dream come true. Classes are taught by Disney's legendary animators who worked Disney's legendary animators who worked Disney's legendary animators who worked with Walt, the nine old men, as they are with Walt, the nine old men, as they are with Walt, the nine old men, as they are affectionately referred to. Now, he does affectionately referred to. Now, he does affectionately referred to. Now, he does get a job at Disney animation, but it's get a job at Disney animation, but it's get a job at Disney animation, but it's unfortunately during those dark times in unfortunately during those dark times in unfortunately during those dark times in the early 80s, Jon gets obsessed with the early 80s, Jon gets obsessed with the early 80s, Jon gets obsessed with the budding field of computer animation, the budding field of computer animation, the budding field of computer animation, even though no one else in the even though no one else in the even though no one else in the department is, although actually Tron department is, although actually Tron department is, although actually Tron was happening elsewhere in Disney. So, was happening elsewhere in Disney. So, was happening elsewhere in Disney. So, cool computer stuff was happening, just cool computer stuff was happening, just cool computer stuff was happening, just not in the culture of Disney animation. not in the culture of Disney animation. not in the culture of Disney animation. This all comes to a head when John gets This all comes to a head when John gets This all comes to a head when John gets the chance for his directorial debut on the chance for his directorial debut on the chance for his directorial debut on the movie Brave Little Toaster. And in the movie Brave Little Toaster. And in the movie Brave Little Toaster. And in his big pitch meeting, he comes in with his big pitch meeting, he comes in with his big pitch meeting, he comes in with the idea that uh he's gonna use computer the idea that uh he's gonna use computer the idea that uh he's gonna use computer animation to do it. Now, remember, this animation to do it. Now, remember, this animation to do it. Now, remember, this is the early 80s, so computer animation is the early 80s, so computer animation is the early 80s, so computer animation was pretty primitive stuff. was pretty primitive stuff. was pretty primitive stuff. &gt;&gt; The time wasn't actually right yet. &gt;&gt; The time wasn't actually right yet. &gt;&gt; The time wasn't actually right yet. &gt;&gt; He gets asked if it's going to be faster &gt;&gt; He gets asked if it's going to be faster &gt;&gt; He gets asked if it's going to be faster and cheaper than traditional animation and cheaper than traditional animation and cheaper than traditional animation cuz why else are they doing it? And he cuz why else are they doing it? And he cuz why else are they doing it? And he says neither. It's just going to push says neither. It's just going to push says neither. It's just going to push the envelope on what is possible in the envelope on what is possible in the envelope on what is possible in great storytelling. John is immediately, great storytelling. John is immediately, great storytelling. John is immediately, and I'm not kidding, same day, let go. and I'm not kidding, same day, let go. and I'm not kidding, same day, let go. &gt;&gt; Wow, I didn't realize it was same day. &gt;&gt; Wow, I didn't realize it was same day. &gt;&gt; Wow, I didn't realize it was same day. &gt;&gt; It was, "Thank you for your meeting. We &gt;&gt; It was, "Thank you for your meeting. We &gt;&gt; It was, "Thank you for your meeting. We are declining to put this project into are declining to put this project into are declining to put this project into production. And since your project is production. And since your project is production. And since your project is over, you really have no reason to be over, you really have no reason to be over, you really have no reason to be here. here. here. &gt;&gt; Thanks for your meeting. You're fired." &gt;&gt; Thanks for your meeting. You're fired." &gt;&gt; Thanks for your meeting. You're fired." &gt;&gt; Yes. So, we'll put a pin in John's story &gt;&gt; Yes. So, we'll put a pin in John's story &gt;&gt; Yes. So, we'll put a pin in John's story for now while we introduce another for now while we introduce another for now while we introduce another co-founder of Pixar. Flashback to 1963. co-founder of Pixar. Flashback to 1963. co-founder of Pixar. Flashback to 1963. We're at the University of Utah where we We're at the University of Utah where we We're at the University of Utah where we meet Ed Catmull. Ed also wanted to do meet Ed Catmull. Ed also wanted to do meet Ed Catmull. Ed also wanted to do animation his whole life, but he felt animation his whole life, but he felt animation his whole life, but he felt that he didn't have the chops to cut it that he didn't have the chops to cut it that he didn't have the chops to cut it as an artist. So, he got into computers as an artist. So, he got into computers as an artist. So, he got into computers instead. He finds himself in this truly instead. He finds himself in this truly instead. He finds himself in this truly magical program for computer graphics at magical program for computer graphics at magical program for computer graphics at Utah, though it was sort of just this Utah, though it was sort of just this Utah, though it was sort of just this like pocket of an esoteric field that like pocket of an esoteric field that like pocket of an esoteric field that most people did not really care about or most people did not really care about or most people did not really care about or appreciate at the time. Ed ends up appreciate at the time. Ed ends up appreciate at the time. Ed ends up creating one of the first films ever creating one of the first films ever creating one of the first films ever with computer graphics, a rotating model with computer graphics, a rotating model with computer graphics, a rotating model of his own hand, just a black and white of his own hand, just a black and white of his own hand, just a black and white wireframe. His classmates are famed wireframe. His classmates are famed wireframe. His classmates are famed computer scientist Alan K, Jim Clark of computer scientist Alan K, Jim Clark of computer scientist Alan K, Jim Clark of Netscape and Silicon Graphics. Yep. And Netscape and Silicon Graphics. Yep. And Netscape and Silicon Graphics. Yep. And John Waro, who founded Adobe. John Waro, who founded Adobe. John Waro, who founded Adobe. &gt;&gt; And also, wasn't Nolan Bushnell knocking &gt;&gt; And also, wasn't Nolan Bushnell knocking &gt;&gt; And also, wasn't Nolan Bushnell knocking around there? around there? around there? &gt;&gt; Yep. past acquired guest Nolan Bushnell, &gt;&gt; Yep. past acquired guest Nolan Bushnell, &gt;&gt; Yep. past acquired guest Nolan Bushnell, the uh famous founder of not only Atari, the uh famous founder of not only Atari, the uh famous founder of not only Atari, but Chuck-E-Cheese. but Chuck-E-Cheese. but Chuck-E-Cheese. &gt;&gt; That's right. That's right. [laughter] &gt;&gt; That's right. That's right. [laughter] &gt;&gt; That's right. That's right. [laughter] &gt;&gt; So, Ed ends up getting recruited to &gt;&gt; So, Ed ends up getting recruited to &gt;&gt; So, Ed ends up getting recruited to build out this pioneering computer build out this pioneering computer build out this pioneering computer graphics program at New York Tech on graphics program at New York Tech on graphics program at New York Tech on Long Island. So, he's sort of in this Long Island. So, he's sort of in this Long Island. So, he's sort of in this academic sphere now. Meanwhile, in academic sphere now. Meanwhile, in academic sphere now. Meanwhile, in Northern California, the year is now Northern California, the year is now Northern California, the year is now 1979, and there's a guy named George 1979, and there's a guy named George 1979, and there's a guy named George Lucas who is looking for someone who can Lucas who is looking for someone who can Lucas who is looking for someone who can help him uh yeah, heard of him push the help him uh yeah, heard of him push the help him uh yeah, heard of him push the the field of computer graphics forward. the field of computer graphics forward. the field of computer graphics forward. George had just released Star Wars and George had just released Star Wars and George had just released Star Wars and he was working on Empire Strikes Back he was working on Empire Strikes Back he was working on Empire Strikes Back and he had this experience, this amazing and he had this experience, this amazing and he had this experience, this amazing firsthand experience of how computers firsthand experience of how computers firsthand experience of how computers could unlock brand new film making could unlock brand new film making could unlock brand new film making methods and not just for Star Wars but methods and not just for Star Wars but methods and not just for Star Wars but George was looking to develop tools to George was looking to develop tools to George was looking to develop tools to make the whole industry better. This is make the whole industry better. This is make the whole industry better. This is pretty heady stuff at the time. No one pretty heady stuff at the time. No one pretty heady stuff at the time. No one in Hollywood was looking to invest in in Hollywood was looking to invest in in Hollywood was looking to invest in building out new computer technology building out new computer technology building out new computer technology just because. And the reason why George, just because. And the reason why George, just because. And the reason why George, this is actually pretty interesting from this is actually pretty interesting from this is actually pretty interesting from a business analysis perspective. Why did a business analysis perspective. Why did a business analysis perspective. Why did George want to make stuff to push all of George want to make stuff to push all of George want to make stuff to push all of film making forward? Well, a filmmaker film making forward? Well, a filmmaker film making forward? Well, a filmmaker can only make one film at a time and can only make one film at a time and can only make one film at a time and that takes one, two, three years. But that takes one, two, three years. But that takes one, two, three years. But you want an audience who's used to you want an audience who's used to you want an audience who's used to always going to the movies every week or always going to the movies every week or always going to the movies every week or every month and has a great experience. every month and has a great experience. every month and has a great experience. So if you are a filmmaker, you're So if you are a filmmaker, you're So if you are a filmmaker, you're rooting for all the other filmmakers to rooting for all the other filmmakers to rooting for all the other filmmakers to make amazing films to sort of condition make amazing films to sort of condition make amazing films to sort of condition your customer set that your product is your customer set that your product is your customer set that your product is good and they should have a habit of good and they should have a habit of good and they should have a habit of going to the movies. So unlike other going to the movies. So unlike other going to the movies. So unlike other industries, being a filmmaker has this industries, being a filmmaker has this industries, being a filmmaker has this like sort of delightful like sort of delightful like sort of delightful &gt;&gt; sort of collaborators slashcompetitors, &gt;&gt; sort of collaborators slashcompetitors, &gt;&gt; sort of collaborators slashcompetitors, &gt;&gt; right? So George gets put in touch with &gt;&gt; right? So George gets put in touch with &gt;&gt; right? So George gets put in touch with Ed. Ed accepts a job, moves across the Ed. Ed accepts a job, moves across the Ed. Ed accepts a job, moves across the country to join Lucasfilm. He brings country to join Lucasfilm. He brings country to join Lucasfilm. He brings Alvie Ray Smith with him from New York Alvie Ray Smith with him from New York Alvie Ray Smith with him from New York Tech and they create the computer Tech and they create the computer Tech and they create the computer graphics group at Lucasfilm. Y graphics group at Lucasfilm. Y graphics group at Lucasfilm. Y &gt;&gt; and really the goal here is figure out &gt;&gt; and really the goal here is figure out &gt;&gt; and really the goal here is figure out how to do stuff that you couldn't do how to do stuff that you couldn't do how to do stuff that you couldn't do with traditional liveaction techniques. with traditional liveaction techniques. with traditional liveaction techniques. Pretty broad. The first big success is Pretty broad. The first big success is Pretty broad. The first big success is actually not with a Star Wars film, but actually not with a Star Wars film, but actually not with a Star Wars film, but a Star Trek film in The Wrath of Khan. a Star Trek film in The Wrath of Khan. a Star Trek film in The Wrath of Khan. It was a flyby of a planet as it was It was a flyby of a planet as it was It was a flyby of a planet as it was being terraformed and it's shot from all being terraformed and it's shot from all being terraformed and it's shot from all these crazy swooping angles. these crazy swooping angles. these crazy swooping angles. &gt;&gt; So this is now where the two paths &gt;&gt; So this is now where the two paths &gt;&gt; So this is now where the two paths collide. You got John Lasser and Ed collide. You got John Lasser and Ed collide. You got John Lasser and Ed Catball and they see each other at an Catball and they see each other at an Catball and they see each other at an industry conference of all places on the industry conference of all places on the industry conference of all places on the Queen Mary. John has just been fired Queen Mary. John has just been fired Queen Mary. John has just been fired from Disney. Ed doesn't actually know from Disney. Ed doesn't actually know from Disney. Ed doesn't actually know that. Ed is hitting the limitations that. Ed is hitting the limitations that. Ed is hitting the limitations within his graphics group where none of within his graphics group where none of within his graphics group where none of them really know how to tell stories or them really know how to tell stories or them really know how to tell stories or create characters or imbue any emotion create characters or imbue any emotion create characters or imbue any emotion into the things that they're making. Ed into the things that they're making. Ed into the things that they're making. Ed begs John to see if there's any chance begs John to see if there's any chance begs John to see if there's any chance he could take some time and come up he could take some time and come up he could take some time and come up north to hang out at Lucasfilm Graphics north to hang out at Lucasfilm Graphics north to hang out at Lucasfilm Graphics and improve the storytelling in the and improve the storytelling in the and improve the storytelling in the short films that they're starting to short films that they're starting to short films that they're starting to think about. think about. think about. &gt;&gt; John's like, "Oh, let me check my &gt;&gt; John's like, "Oh, let me check my &gt;&gt; John's like, "Oh, let me check my calendar." Uh, yeah, I'm free. calendar." Uh, yeah, I'm free. calendar." Uh, yeah, I'm free. [laughter] [laughter] [laughter] &gt;&gt; Yes. And this is really the first chance &gt;&gt; Yes. And this is really the first chance &gt;&gt; Yes. And this is really the first chance that they had to get like a real that they had to get like a real that they had to get like a real animator. So the duo was now together, animator. So the duo was now together, animator. So the duo was now together, but computer hardware at the time was but computer hardware at the time was but computer hardware at the time was not capable of doing what they needed. not capable of doing what they needed. not capable of doing what they needed. So the group needs to develop hardware. So the group needs to develop hardware. So the group needs to develop hardware. They make the Pixar image computer They make the Pixar image computer They make the Pixar image computer within Lucasfilm. This is the first time within Lucasfilm. This is the first time within Lucasfilm. This is the first time they've actually used the Pixar name for they've actually used the Pixar name for they've actually used the Pixar name for anything. So they're making these short anything. So they're making these short anything. So they're making these short films, which there's no it's not a real films, which there's no it's not a real films, which there's no it's not a real market. It's fun to make, but it's not market. It's fun to make, but it's not market. It's fun to make, but it's not like anyone's buying them. The Pixar like anyone's buying them. The Pixar like anyone's buying them. The Pixar image computer could do MRIs. Basically, image computer could do MRIs. Basically, image computer could do MRIs. Basically, anything where you needed to turn images anything where you needed to turn images anything where you needed to turn images into 3D renders, they did the first into 3D renders, they did the first into 3D renders, they did the first volutric renders of an MRI. They also volutric renders of an MRI. They also volutric renders of an MRI. They also would analyze satellite photos for would analyze satellite photos for would analyze satellite photos for intelligence agencies and build 3D intelligence agencies and build 3D intelligence agencies and build 3D models there. So, they're finding these models there. So, they're finding these models there. So, they're finding these like niche interesting markets to try to like niche interesting markets to try to like niche interesting markets to try to make some money make some money make some money &gt;&gt; for their software and hardware. &gt;&gt; for their software and hardware. &gt;&gt; for their software and hardware. &gt;&gt; Yeah. So, it's interesting. All of this &gt;&gt; Yeah. So, it's interesting. All of this &gt;&gt; Yeah. So, it's interesting. All of this is part of Lucasfilm. Is George is part of Lucasfilm. Is George is part of Lucasfilm. Is George interested in MRIs or or or even like interested in MRIs or or or even like interested in MRIs or or or even like making animated films? making animated films? making animated films? &gt;&gt; Not particularly. I mean, he wants them &gt;&gt; Not particularly. I mean, he wants them &gt;&gt; Not particularly. I mean, he wants them to develop capability for future films, to develop capability for future films, to develop capability for future films, but he doesn't want to actually staff up but he doesn't want to actually staff up but he doesn't want to actually staff up a big story team and have this be a film a big story team and have this be a film a big story team and have this be a film making division. And no, I don't think making division. And no, I don't think making division. And no, I don't think he's particularly interested in the he's particularly interested in the he's particularly interested in the MRIs. He actually has a a different MRIs. He actually has a a different MRIs. He actually has a a different piece of news to share with the team. piece of news to share with the team. piece of news to share with the team. He's going through a divorce. He's short He's going through a divorce. He's short He's going through a divorce. He's short on cash. He needs to free up cash for on cash. He needs to free up cash for on cash. He needs to free up cash for the divorce. So actually what he wants the divorce. So actually what he wants the divorce. So actually what he wants to do is sell the graphics group to do is sell the graphics group to do is sell the graphics group &gt;&gt; which this is fascinating by the way &gt;&gt; which this is fascinating by the way &gt;&gt; which this is fascinating by the way this all happened because George this all happened because George this all happened because George believes so deeply in Star Wars and the believes so deeply in Star Wars and the believes so deeply in Star Wars and the movies he was making that he didn't want movies he was making that he didn't want movies he was making that he didn't want to give up any equity in Lucasfilm as to give up any equity in Lucasfilm as to give up any equity in Lucasfilm as part of his divorce. So he needed to part of his divorce. So he needed to part of his divorce. So he needed to raise cash to pay his [laughter] former raise cash to pay his [laughter] former raise cash to pay his [laughter] former wife cash instead of giving her any wife cash instead of giving her any wife cash instead of giving her any equity in Lucasfilm. Wild. This is like equity in Lucasfilm. Wild. This is like equity in Lucasfilm. Wild. This is like the butterfly flaps its wings that the butterfly flaps its wings that the butterfly flaps its wings that results in Pixar saving Disney. So he results in Pixar saving Disney. So he results in Pixar saving Disney. So he finds a buyer. finds a buyer. finds a buyer. &gt;&gt; Yes. Enter Steve Jobs. &gt;&gt; Yes. Enter Steve Jobs. &gt;&gt; Yes. Enter Steve Jobs. &gt;&gt; Steve Jobs. &gt;&gt; Steve Jobs. &gt;&gt; Steve Jobs. &gt;&gt; Amazingly, they are first introduced by &gt;&gt; Amazingly, they are first introduced by &gt;&gt; Amazingly, they are first introduced by uh Alan K, legendary computer scientist, uh Alan K, legendary computer scientist, uh Alan K, legendary computer scientist, former classmate of Eds, and a trusted former classmate of Eds, and a trusted former classmate of Eds, and a trusted friend of Steve. Steve visits Lucasfilm friend of Steve. Steve visits Lucasfilm friend of Steve. Steve visits Lucasfilm to see the technology firsthand, and to see the technology firsthand, and to see the technology firsthand, and he's impressed. But then he goes dark. he's impressed. But then he goes dark. he's impressed. But then he goes dark. Yeah. Just vanishes for a while. The Yeah. Just vanishes for a while. The Yeah. Just vanishes for a while. The Lucasfilm guys are wondering what's Lucasfilm guys are wondering what's Lucasfilm guys are wondering what's going on. And it turns out this is right going on. And it turns out this is right going on. And it turns out this is right in the middle of when Steve is getting in the middle of when Steve is getting in the middle of when Steve is getting fired from Apple and ousted from his own fired from Apple and ousted from his own fired from Apple and ousted from his own company. So then Steve gets back in company. So then Steve gets back in company. So then Steve gets back in touch after the dust settles. And at at touch after the dust settles. And at at touch after the dust settles. And at at first what he actually wants is the first what he actually wants is the first what he actually wants is the Pixar team and technology to create a Pixar team and technology to create a Pixar team and technology to create a rival consumer computer company to rival consumer computer company to rival consumer computer company to Apple. He wants to get back at Apple Apple. He wants to get back at Apple Apple. He wants to get back at Apple using Pixar as the seeds of the company. using Pixar as the seeds of the company. using Pixar as the seeds of the company. &gt;&gt; He wants Pixar to be next. &gt;&gt; He wants Pixar to be next. &gt;&gt; He wants Pixar to be next. &gt;&gt; Exactly. Ed and John and Alvie and the &gt;&gt; Exactly. Ed and John and Alvie and the &gt;&gt; Exactly. Ed and John and Alvie and the team have no interest in doing that. team have no interest in doing that. team have no interest in doing that. Steve eventually does go and start Next Steve eventually does go and start Next Steve eventually does go and start Next on his own, but he keeps in touch and he on his own, but he keeps in touch and he on his own, but he keeps in touch and he likes these guys and he kind of comes likes these guys and he kind of comes likes these guys and he kind of comes around on the vision to create films. He around on the vision to create films. He around on the vision to create films. He does agree to buy the company and kind does agree to buy the company and kind does agree to buy the company and kind of rescue it out of Lucasfilm and he of rescue it out of Lucasfilm and he of rescue it out of Lucasfilm and he goes into business with Ed and John and goes into business with Ed and John and goes into business with Ed and John and the team. He writes in 1986 a $5 million the team. He writes in 1986 a $5 million the team. He writes in 1986 a $5 million check to George Lucas to buy the check to George Lucas to buy the check to George Lucas to buy the company. another $5 million check into a company. another $5 million check into a company. another $5 million check into a new entity that he just created to fund new entity that he just created to fund new entity that he just created to fund the company. It's formally named Pixar the company. It's formally named Pixar the company. It's formally named Pixar and it is owned 70% by Steve Jobs and and it is owned 70% by Steve Jobs and and it is owned 70% by Steve Jobs and 30% by employees. 30% by employees. 30% by employees. &gt;&gt; And that's Pixar. And that's Pixar. Can &gt;&gt; And that's Pixar. And that's Pixar. Can &gt;&gt; And that's Pixar. And that's Pixar. Can we just say how insane this story is? we just say how insane this story is? we just say how insane this story is? There's a guy who worked at Hallowed There's a guy who worked at Hallowed There's a guy who worked at Hallowed Disney Animation. He gets his first Disney Animation. He gets his first Disney Animation. He gets his first directing gig, but he's fired for directing gig, but he's fired for directing gig, but he's fired for advocating to use the technology of the advocating to use the technology of the advocating to use the technology of the future. Then he finds a kindered spirit future. Then he finds a kindered spirit future. Then he finds a kindered spirit who happens to be working for George who happens to be working for George who happens to be working for George Lucas. [laughter] Lucas. [laughter] Lucas. [laughter] &gt;&gt; George freaking Lucas right in between &gt;&gt; George freaking Lucas right in between &gt;&gt; George freaking Lucas right in between Star Wars and Empire. They're inventing Star Wars and Empire. They're inventing Star Wars and Empire. They're inventing all this insane stuff, but George needs all this insane stuff, but George needs all this insane stuff, but George needs to sell it off and somehow manages to to sell it off and somehow manages to to sell it off and somehow manages to find Steve goddamn jobs. It is like the find Steve goddamn jobs. It is like the find Steve goddamn jobs. It is like the Avengers of technology, of film, of Avengers of technology, of film, of Avengers of technology, of film, of business. I mean, the only way this business. I mean, the only way this business. I mean, the only way this story could get any more awesome is if story could get any more awesome is if story could get any more awesome is if they somehow beat Disney at their own they somehow beat Disney at their own they somehow beat Disney at their own game, got bought by Disney, breathed new game, got bought by Disney, breathed new game, got bought by Disney, breathed new life into the core of the company, and life into the core of the company, and life into the core of the company, and Steve Jobs became the largest Steve Jobs became the largest Steve Jobs became the largest shareholder of Disney itself. [laughter] shareholder of Disney itself. [laughter] shareholder of Disney itself. [laughter] &gt;&gt; Uh, it sounds like a Pixar movie, &gt;&gt; Uh, it sounds like a Pixar movie, &gt;&gt; Uh, it sounds like a Pixar movie, &gt;&gt; doesn't it? This is like &gt;&gt; doesn't it? This is like &gt;&gt; doesn't it? This is like &gt;&gt; This is why Acquired exists. &gt;&gt; This is why Acquired exists. &gt;&gt; This is why Acquired exists. &gt;&gt; It's so uh it's so great. So, they spin &gt;&gt; It's so uh it's so great. So, they spin &gt;&gt; It's so uh it's so great. So, they spin off the company. They don't have any off the company. They don't have any off the company. They don't have any customers for the product. So they go customers for the product. So they go customers for the product. So they go out and they recruit someone to come and out and they recruit someone to come and out and they recruit someone to come and buy their software as a commercial buy their software as a commercial buy their software as a commercial product. product. product. &gt;&gt; Yes. And that customer is Disney. &gt;&gt; Yes. And that customer is Disney. &gt;&gt; Yes. And that customer is Disney. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; The first check to Pixar Inc. is from &gt;&gt; The first check to Pixar Inc. is from &gt;&gt; The first check to Pixar Inc. is from Disney to work with them and create the Disney to work with them and create the Disney to work with them and create the CAPS system for improving their 2D CAPS system for improving their 2D CAPS system for improving their 2D animation. animation. animation. &gt;&gt; Yep. This is the beginning of the Disney &gt;&gt; Yep. This is the beginning of the Disney &gt;&gt; Yep. This is the beginning of the Disney Pixar relationship as a vendor. Pixar relationship as a vendor. Pixar relationship as a vendor. &gt;&gt; As a vendor. So Pixar decides they need &gt;&gt; As a vendor. So Pixar decides they need &gt;&gt; As a vendor. So Pixar decides they need to show the world who they are. They to show the world who they are. They to show the world who they are. They make this make this make this short little film about a a a lamp and a short little film about a a a lamp and a short little film about a a a lamp and a baby lamp and they're playing with a baby lamp and they're playing with a baby lamp and they're playing with a ball and they show it to industry ball and they show it to industry ball and they show it to industry conferences because that's what you did conferences because that's what you did conferences because that's what you did with computer graphics back then and with computer graphics back then and with computer graphics back then and people go nuts. people go nuts. people go nuts. &gt;&gt; You were texting me your dad was at the &gt;&gt; You were texting me your dad was at the &gt;&gt; You were texting me your dad was at the conference where they showed Luxo Jr. conference where they showed Luxo Jr. conference where they showed Luxo Jr. &gt;&gt; Yeah, at one of them. It wasn't the &gt;&gt; Yeah, at one of them. It wasn't the &gt;&gt; Yeah, at one of them. It wasn't the original SIG graph, but it was right original SIG graph, but it was right original SIG graph, but it was right there in the late 80s. It was a joint there in the late 80s. It was a joint there in the late 80s. It was a joint robotics and computer animation robotics and computer animation robotics and computer animation conference. And I remember when I was a conference. And I remember when I was a conference. And I remember when I was a kid, he just told me, I think it was kid, he just told me, I think it was kid, he just told me, I think it was when we were seeing Toy Story and it was when we were seeing Toy Story and it was when we were seeing Toy Story and it was the little short before it. I remember the little short before it. I remember the little short before it. I remember him telling me, "Yeah, I saw this at a him telling me, "Yeah, I saw this at a him telling me, "Yeah, I saw this at a conference and I just I I knew this was conference and I just I I knew this was conference and I just I I knew this was going to change the world." Wow. Wow. I going to change the world." Wow. Wow. I going to change the world." Wow. Wow. I just rewatched Luxo Jr. this morning. just rewatched Luxo Jr. this morning. just rewatched Luxo Jr. this morning. You go on an emotional journey and You go on an emotional journey and You go on an emotional journey and develop feelings for lamps over 90 develop feelings for lamps over 90 develop feelings for lamps over 90 seconds. To me, this is where the seconds. To me, this is where the seconds. To me, this is where the storytelling aptitude and and ability to storytelling aptitude and and ability to storytelling aptitude and and ability to animate lifeless objects into something animate lifeless objects into something animate lifeless objects into something you really care about starts to come you really care about starts to come you really care about starts to come through. through. through. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; So, full steam ahead, right? Let's let's &gt;&gt; So, full steam ahead, right? Let's let's &gt;&gt; So, full steam ahead, right? Let's let's go make movies. Well, there's a problem. go make movies. Well, there's a problem. go make movies. Well, there's a problem. You need like $30 million to go do that. You need like $30 million to go do that. You need like $30 million to go do that. So, first they start making a bunch of So, first they start making a bunch of So, first they start making a bunch of commercials to try to pay the bills. commercials to try to pay the bills. commercials to try to pay the bills. They develop Render Man as a piece of of They develop Render Man as a piece of of They develop Render Man as a piece of of software. It's actually still an software. It's actually still an software. It's actually still an industry standard today for computer industry standard today for computer industry standard today for computer animation. They release it externally. animation. They release it externally. animation. They release it externally. It actually gets used on Jurassic Park, It actually gets used on Jurassic Park, It actually gets used on Jurassic Park, on Terminator 2, uh, a bunch of cool on Terminator 2, uh, a bunch of cool on Terminator 2, uh, a bunch of cool films with early computer graphics, but films with early computer graphics, but films with early computer graphics, but the business is not working. These image the business is not working. These image the business is not working. These image computers are insanely expensive. computers are insanely expensive. computers are insanely expensive. They've only sold like 300 of them ever. They've only sold like 300 of them ever. They've only sold like 300 of them ever. If they're going to do their dream of an If they're going to do their dream of an If they're going to do their dream of an animated film, they need to go all in on animated film, they need to go all in on animated film, they need to go all in on it and and someone needs to fund it. So, it and and someone needs to fund it. So, it and and someone needs to fund it. So, here's what happens. John rekindles his here's what happens. John rekindles his here's what happens. John rekindles his relationship to Disney. From what I relationship to Disney. From what I relationship to Disney. From what I could tell, this is completely outside could tell, this is completely outside could tell, this is completely outside of the whole Caps relationship. John is of the whole Caps relationship. John is of the whole Caps relationship. John is being recruited to join Disney as a being recruited to join Disney as a being recruited to join Disney as a director. This is 1991 or so. director. This is 1991 or so. director. This is 1991 or so. &gt;&gt; Oh, wow. So, right as the Disney &gt;&gt; Oh, wow. So, right as the Disney &gt;&gt; Oh, wow. So, right as the Disney Renaissance is happening, Renaissance is happening, Renaissance is happening, &gt;&gt; that's right. &gt;&gt; that's right. &gt;&gt; that's right. &gt;&gt; They want him back. &gt;&gt; They want him back. &gt;&gt; They want him back. &gt;&gt; That's right. And instead, he says, "No, &gt;&gt; That's right. And instead, he says, "No, &gt;&gt; That's right. And instead, he says, "No, I, you know, I kind of threw my lot in I, you know, I kind of threw my lot in I, you know, I kind of threw my lot in with these guys in Northern California. with these guys in Northern California. with these guys in Northern California. We got something cool here. It's a great We got something cool here. It's a great We got something cool here. It's a great team. Uh, no. I'm turning down multiple team. Uh, no. I'm turning down multiple team. Uh, no. I'm turning down multiple offers to be a Disney animation offers to be a Disney animation offers to be a Disney animation director, his lifelong dream. And he director, his lifelong dream. And he director, his lifelong dream. And he says, "But here's what I think we should says, "But here's what I think we should says, "But here's what I think we should do. Let's do a 30inut Christmas special do. Let's do a 30inut Christmas special do. Let's do a 30inut Christmas special based on our tin toy short." And he's based on our tin toy short." And he's based on our tin toy short." And he's got a little bit of leverage to kind of got a little bit of leverage to kind of got a little bit of leverage to kind of ask for stuff here cuz they just really ask for stuff here cuz they just really ask for stuff here cuz they just really want him to direct something. And want him to direct something. And want him to direct something. And Disney, really, it's Peter Schneider who Disney, really, it's Peter Schneider who Disney, really, it's Peter Schneider who who works with Jeffrey Katzenberg says, who works with Jeffrey Katzenberg says, who works with Jeffrey Katzenberg says, "Hey, forget the 30inut TV special. "Hey, forget the 30inut TV special. "Hey, forget the 30inut TV special. Let's do it. a whole feature film, Toy Let's do it. a whole feature film, Toy Let's do it. a whole feature film, Toy Story. Story. Story. &gt;&gt; Yep. And this is how Toy Story happens. &gt;&gt; Yep. And this is how Toy Story happens. &gt;&gt; Yep. And this is how Toy Story happens. &gt;&gt; So, why is this such a crazy idea? I &gt;&gt; So, why is this such a crazy idea? I &gt;&gt; So, why is this such a crazy idea? I mean, why is it gonna cost $30 million? mean, why is it gonna cost $30 million? mean, why is it gonna cost $30 million? Why did the folks at Disney think this Why did the folks at Disney think this Why did the folks at Disney think this was such a kind of nutty idea to make a was such a kind of nutty idea to make a was such a kind of nutty idea to make a computer animated film? computer animated film? computer animated film? &gt;&gt; Yeah, it seems on the surface like this &gt;&gt; Yeah, it seems on the surface like this &gt;&gt; Yeah, it seems on the surface like this should be easier than 2D animation, should be easier than 2D animation, should be easier than 2D animation, right? You're going to just get right? You're going to just get right? You're going to just get computers to do all of it. [laughter] computers to do all of it. [laughter] computers to do all of it. [laughter] Not quite. So, we got to go spend a day Not quite. So, we got to go spend a day Not quite. So, we got to go spend a day at Pixar and learn from the folks there at Pixar and learn from the folks there at Pixar and learn from the folks there who make Pixar movies how they do it. who make Pixar movies how they do it. who make Pixar movies how they do it. And wow, it was so cool. Embarrassingly, And wow, it was so cool. Embarrassingly, And wow, it was so cool. Embarrassingly, I did not really understand that the way I did not really understand that the way I did not really understand that the way these things are made is kind of like a these things are made is kind of like a these things are made is kind of like a stage play. You actually lay out all the stage play. You actually lay out all the stage play. You actually lay out all the objects on a stage in a 3D virtual objects on a stage in a 3D virtual objects on a stage in a 3D virtual environment and you can put cameras and environment and you can put cameras and environment and you can put cameras and lights anywhere you want. all in this lights anywhere you want. all in this lights anywhere you want. all in this virtual environment. It's like a video virtual environment. It's like a video virtual environment. It's like a video game. game. game. &gt;&gt; Yeah. They're creating the universe &gt;&gt; Yeah. They're creating the universe &gt;&gt; Yeah. They're creating the universe basically. It's not just that you're basically. It's not just that you're basically. It's not just that you're illustrating a still frame. illustrating a still frame. illustrating a still frame. &gt;&gt; Yes. So, hilariously, the best &gt;&gt; Yes. So, hilariously, the best &gt;&gt; Yes. So, hilariously, the best explanation of this, the best sort of explanation of this, the best sort of explanation of this, the best sort of sevenstep process is on the inside cover sevenstep process is on the inside cover sevenstep process is on the inside cover of their S1 IPO perspectives. We'll put of their S1 IPO perspectives. We'll put of their S1 IPO perspectives. We'll put it in the email. It has this little it in the email. It has this little it in the email. It has this little animated guide, the Pixar animation animated guide, the Pixar animation animated guide, the Pixar animation steps. So, here they are. Step one, steps. So, here they are. Step one, steps. So, here they are. Step one, storyboards. Over 4,000 storyboard storyboards. Over 4,000 storyboard storyboards. Over 4,000 storyboard drawings are created as the blueprint drawings are created as the blueprint drawings are created as the blueprint for the action and dialogue of a for the action and dialogue of a for the action and dialogue of a featurelength Pixar film. I think the featurelength Pixar film. I think the featurelength Pixar film. I think the most interesting part of this is they most interesting part of this is they most interesting part of this is they then take the story boards and put them then take the story boards and put them then take the story boards and put them together in a story reel where they're together in a story reel where they're together in a story reel where they're able to like watch it like a movie even able to like watch it like a movie even able to like watch it like a movie even though they're still frames and they though they're still frames and they though they're still frames and they either narrate over it or they do temp either narrate over it or they do temp either narrate over it or they do temp dialogue on top. So in a very dialogue on top. So in a very dialogue on top. So in a very inexpensive way using 2D sort of inexpensive way using 2D sort of inexpensive way using 2D sort of sketching, you really can get a true sketching, you really can get a true sketching, you really can get a true sense of what's going on. This also sense of what's going on. This also sense of what's going on. This also makes it very iterable and revisable. makes it very iterable and revisable. makes it very iterable and revisable. So, we were chatting with folks at Pixar So, we were chatting with folks at Pixar So, we were chatting with folks at Pixar and they said, "Yeah, there's usually and they said, "Yeah, there's usually and they said, "Yeah, there's usually about eight different iterations where about eight different iterations where about eight different iterations where we are revising the plot, the script, we are revising the plot, the script, we are revising the plot, the script, the dialogue to really nail it and make the dialogue to really nail it and make the dialogue to really nail it and make sure that the story works." And I was sure that the story works." And I was sure that the story works." And I was watching old interviews uh with Lacer watching old interviews uh with Lacer watching old interviews uh with Lacer and Jobs and Lasser has this quote, "If and Jobs and Lasser has this quote, "If and Jobs and Lasser has this quote, "If it's working in our story reels, when we it's working in our story reels, when we it's working in our story reels, when we animate it and put color to it, it's animate it and put color to it, it's animate it and put color to it, it's going to work even better. if it's not going to work even better. if it's not going to work even better. if it's not working in story reels, the animation working in story reels, the animation working in story reels, the animation won't save it. And then Jobs says, in won't save it. And then Jobs says, in won't save it. And then Jobs says, in essence, it lets us beta test and essence, it lets us beta test and essence, it lets us beta test and iterate on our films before we actually iterate on our films before we actually iterate on our films before we actually make it. We believe it's one of the make it. We believe it's one of the make it. We believe it's one of the reasons that the hit rate can be reasons that the hit rate can be reasons that the hit rate can be substantially different. So they substantially different. So they substantially different. So they basically make a low res 2D movie before basically make a low res 2D movie before basically make a low res 2D movie before they make a 3D movie. they make a 3D movie. they make a 3D movie. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; And the story and characters all have to &gt;&gt; And the story and characters all have to &gt;&gt; And the story and characters all have to work in 2D first. work in 2D first. work in 2D first. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; All right. So step two, models. Pixar's &gt;&gt; All right. So step two, models. Pixar's &gt;&gt; All right. So step two, models. Pixar's proprietary animation software, proprietary animation software, proprietary animation software, Marionette, is used to create the Marionette, is used to create the Marionette, is used to create the three-dimensional computer models for three-dimensional computer models for three-dimensional computer models for characters, props, and sets. Three, characters, props, and sets. Three, characters, props, and sets. Three, layout. Each scene is begun by layout. Each scene is begun by layout. Each scene is begun by assembling the models for the required assembling the models for the required assembling the models for the required characters, props, and sets and blocking characters, props, and sets and blocking characters, props, and sets and blocking out the action. This is where they out the action. This is where they out the action. This is where they really go into the computer for the really go into the computer for the really go into the computer for the first time. They take the models and first time. They take the models and first time. They take the models and they lay them out to kind of resemble they lay them out to kind of resemble they lay them out to kind of resemble the 2D paper sketches that they made for the 2D paper sketches that they made for the 2D paper sketches that they made for the story reels. Now, hilariously, you the story reels. Now, hilariously, you the story reels. Now, hilariously, you can watch some of these. Like, you can can watch some of these. Like, you can can watch some of these. Like, you can watch the film when it's only done in watch the film when it's only done in watch the film when it's only done in the layout stage. The characters don't the layout stage. The characters don't the layout stage. The characters don't have any of their limbs that move. Their have any of their limbs that move. Their have any of their limbs that move. Their mouths don't move. They're these like mouths don't move. They're these like mouths don't move. They're these like lifeless puppets being dragged around. lifeless puppets being dragged around. lifeless puppets being dragged around. You kind of get the plot, but you get no You kind of get the plot, but you get no You kind of get the plot, but you get no personality or emotion. personality or emotion. personality or emotion. &gt;&gt; Yeah. They're like the 3D equivalent of &gt;&gt; Yeah. They're like the 3D equivalent of &gt;&gt; Yeah. They're like the 3D equivalent of stick figures. stick figures. stick figures. &gt;&gt; Yeah. They have to the the animators &gt;&gt; Yeah. They have to the the animators &gt;&gt; Yeah. They have to the the animators haven't really performed the characters haven't really performed the characters haven't really performed the characters yet. yet. yet. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; So, then step four, animation. Pixar's &gt;&gt; So, then step four, animation. Pixar's &gt;&gt; So, then step four, animation. Pixar's proprietary animation software allows proprietary animation software allows proprietary animation software allows Pixar's animators to choreograph the Pixar's animators to choreograph the Pixar's animators to choreograph the motion in each scene by defining key motion in each scene by defining key motion in each scene by defining key frames or poses. So, this is the frames or poses. So, this is the frames or poses. So, this is the exciting step. Each character goes exciting step. Each character goes exciting step. Each character goes through something called rigging by this through something called rigging by this through something called rigging by this point where they provide the animators point where they provide the animators point where they provide the animators with a buffet of options for each with a buffet of options for each with a buffet of options for each character like moving the hand at the character like moving the hand at the character like moving the hand at the wrist or the arm or the elbow or the wrist or the arm or the elbow or the wrist or the arm or the elbow or the shoulder. And the animator then very shoulder. And the animator then very shoulder. And the animator then very carefully frame by frame first animates carefully frame by frame first animates carefully frame by frame first animates the bodies and then later the faces. the bodies and then later the faces. the bodies and then later the faces. Because if the body motions are working Because if the body motions are working Because if the body motions are working for the story with no facial for the story with no facial for the story with no facial expressions, then all of the facial expressions, then all of the facial expressions, then all of the facial expression and mouth moving is just expression and mouth moving is just expression and mouth moving is just icing on the cake. But you never want to icing on the cake. But you never want to icing on the cake. But you never want to rely on the facial expressions to do the rely on the facial expressions to do the rely on the facial expressions to do the heavy lifting for you. heavy lifting for you. heavy lifting for you. &gt;&gt; This is such a cool part of the process. &gt;&gt; This is such a cool part of the process. &gt;&gt; This is such a cool part of the process. You're turning them from stick figures You're turning them from stick figures You're turning them from stick figures into something that's into something that's into something that's alive is really the best way to frame alive is really the best way to frame alive is really the best way to frame it. it. it. &gt;&gt; Yeah. And to your point, they use the &gt;&gt; Yeah. And to your point, they use the &gt;&gt; Yeah. And to your point, they use the same thing here that the animators used same thing here that the animators used same thing here that the animators used in 1938 with Snow White where they film in 1938 with Snow White where they film in 1938 with Snow White where they film themselves acting it out first and then themselves acting it out first and then themselves acting it out first and then they use that video as sort of reference they use that video as sort of reference they use that video as sort of reference for how would this character act. And for how would this character act. And for how would this character act. And there's all this great footage on there's all this great footage on there's all this great footage on YouTube of in 1992 YouTube of in 1992 YouTube of in 1992 the guy who was animating Woody sort of the guy who was animating Woody sort of the guy who was animating Woody sort of going through motions or for the army going through motions or for the army going through motions or for the army men to figure out how the army men were men to figure out how the army men were men to figure out how the army men were going to move in Toy Story, they duct going to move in Toy Story, they duct going to move in Toy Story, they duct taped ski boots to a a giant plank of taped ski boots to a a giant plank of taped ski boots to a a giant plank of wood and they sort of jumped around the wood and they sort of jumped around the wood and they sort of jumped around the room in it to really understand how room in it to really understand how room in it to really understand how would a person move if their feet were would a person move if their feet were would a person move if their feet were locked together. So, it's it's this locked together. So, it's it's this locked together. So, it's it's this really amazing like performance and then really amazing like performance and then really amazing like performance and then you're teaching the computer through the you're teaching the computer through the you're teaching the computer through the rigging and through effectively like rigging and through effectively like rigging and through effectively like pulling the strings how to make the pulling the strings how to make the pulling the strings how to make the character move the way that you wanted character move the way that you wanted character move the way that you wanted to. Y to. Y to. Y &gt;&gt; then there's shading computer programs &gt;&gt; then there's shading computer programs &gt;&gt; then there's shading computer programs that describe these surface that describe these surface that describe these surface characteristics like textures, finishes, characteristics like textures, finishes, characteristics like textures, finishes, colors that are added to every object in colors that are added to every object in colors that are added to every object in the scene. This is where you can get the scene. This is where you can get the scene. This is where you can get things like wood and metal and fabric things like wood and metal and fabric things like wood and metal and fabric and glass and hair and skin. Then step and glass and hair and skin. Then step and glass and hair and skin. Then step six is lighting using digital lights. six is lighting using digital lights. six is lighting using digital lights. Each scene is lit much in the same Each scene is lit much in the same Each scene is lit much in the same manner as stage lighting. David, you and manner as stage lighting. David, you and manner as stage lighting. David, you and I saw some really cool examples of um I saw some really cool examples of um I saw some really cool examples of um scenes that look boring and lifeless and scenes that look boring and lifeless and scenes that look boring and lifeless and then they go through lighting and oh my then they go through lighting and oh my then they go through lighting and oh my god, suddenly they're gorgeous and god, suddenly they're gorgeous and god, suddenly they're gorgeous and emotional. Yep. emotional. Yep. emotional. Yep. &gt;&gt; And then lastly, step seven, rendering. &gt;&gt; And then lastly, step seven, rendering. &gt;&gt; And then lastly, step seven, rendering. Pixar's render man software draws the Pixar's render man software draws the Pixar's render man software draws the finished image by computing every pixel finished image by computing every pixel finished image by computing every pixel of the image from the model, animation, of the image from the model, animation, of the image from the model, animation, shading, and lighting information. shading, and lighting information. shading, and lighting information. This is insane. Th this is the part that This is insane. Th this is the part that This is insane. Th this is the part that if you think about all the computing if you think about all the computing if you think about all the computing involved for every single frame, it involved for every single frame, it involved for every single frame, it needs to compute and recomputee every needs to compute and recomputee every needs to compute and recomputee every pixel based on what object something is, pixel based on what object something is, pixel based on what object something is, where all the light sources are, each where all the light sources are, each where all the light sources are, each one for each pixel, if they're in one for each pixel, if they're in one for each pixel, if they're in motion, and if so, how to apply motion motion, and if so, how to apply motion motion, and if so, how to apply motion blur. Rendering is so computationally blur. Rendering is so computationally blur. Rendering is so computationally expensive here. In those days, each expensive here. In those days, each expensive here. In those days, each frame would take an hour or two to frame would take an hour or two to frame would take an hour or two to render, and they could only render like render, and they could only render like render, and they could only render like three and a half minutes of footage per three and a half minutes of footage per three and a half minutes of footage per week. They were on this Sun Micros week. They were on this Sun Micros week. They were on this Sun Micros Systemystems hardware that was Systemystems hardware that was Systemystems hardware that was state-of-the-art at the time, and they state-of-the-art at the time, and they state-of-the-art at the time, and they had 117 of them clustered together to had 117 of them clustered together to had 117 of them clustered together to create a render farm for the film. create a render farm for the film. create a render farm for the film. &gt;&gt; Yeah, this last step just highlights &gt;&gt; Yeah, this last step just highlights &gt;&gt; Yeah, this last step just highlights what a fundamentally different thing what a fundamentally different thing what a fundamentally different thing this is from 2D animation. 2D animation this is from 2D animation. 2D animation this is from 2D animation. 2D animation is art. It's like you're painting a is art. It's like you're painting a is art. It's like you're painting a picture. What Pixar does is they are picture. What Pixar does is they are picture. What Pixar does is they are creating a universe and then they are creating a universe and then they are creating a universe and then they are calculating every atom of that universe. calculating every atom of that universe. calculating every atom of that universe. &gt;&gt; That's exactly right. &gt;&gt; That's exactly right. &gt;&gt; That's exactly right. &gt;&gt; And where it really really does have the &gt;&gt; And where it really really does have the &gt;&gt; And where it really really does have the same spirit as Walt and Disney is that same spirit as Walt and Disney is that same spirit as Walt and Disney is that every single one of those steps is also every single one of those steps is also every single one of those steps is also a story step. It's not just like, oh a story step. It's not just like, oh a story step. It's not just like, oh great, we wrote the story. Let's throw great, we wrote the story. Let's throw great, we wrote the story. Let's throw it over to the tech guys and like turn it over to the tech guys and like turn it over to the tech guys and like turn it into the renders. It is all a it into the renders. It is all a it into the renders. It is all a collaboration, creating a universe and collaboration, creating a universe and collaboration, creating a universe and constantly refining the story and making constantly refining the story and making constantly refining the story and making it better and better and better over it better and better and better over it better and better and better over years. years. years. All right, so back to Toy Story. January All right, so back to Toy Story. January All right, so back to Toy Story. January 19th, 1993, they get the green light 19th, 1993, they get the green light 19th, 1993, they get the green light from Disney. And specifically what they from Disney. And specifically what they from Disney. And specifically what they have is a deal to make up to three have is a deal to make up to three have is a deal to make up to three pictures, just one for now, and Disney pictures, just one for now, and Disney pictures, just one for now, and Disney has the exclusive option to extend for has the exclusive option to extend for has the exclusive option to extend for two more, where Disney's basically two more, where Disney's basically two more, where Disney's basically hiring Pixar to make a movie for them. hiring Pixar to make a movie for them. hiring Pixar to make a movie for them. And here are the terms. Disney puts up And here are the terms. Disney puts up And here are the terms. Disney puts up all the capital for production. It ends all the capital for production. It ends all the capital for production. It ends up being about $30 million. Initially, up being about $30 million. Initially, up being about $30 million. Initially, it was budgeted to be about 17 million. it was budgeted to be about 17 million. it was budgeted to be about 17 million. Disney is also responsible for the Disney is also responsible for the Disney is also responsible for the marketing costs. Pixar exclusively can marketing costs. Pixar exclusively can marketing costs. Pixar exclusively can make films with Disney. Pixar is make films with Disney. Pixar is make films with Disney. Pixar is entitled to a small amount of the entitled to a small amount of the entitled to a small amount of the profits and that is profit after paying profits and that is profit after paying profits and that is profit after paying back some of the marketing costs. So back some of the marketing costs. So back some of the marketing costs. So that ends up being less than 10% of the that ends up being less than 10% of the that ends up being less than 10% of the profits which is not exactly an engine profits which is not exactly an engine profits which is not exactly an engine that they can use to build a business. that they can use to build a business. that they can use to build a business. &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] Oh, by the way, Disney keeps all of the Oh, by the way, Disney keeps all of the Oh, by the way, Disney keeps all of the intellectual property rights to Toy intellectual property rights to Toy intellectual property rights to Toy Story. All the characters, all the Story. All the characters, all the Story. All the characters, all the merch, all etc., etc. Disney also will merch, all etc., etc. Disney also will merch, all etc., etc. Disney also will have the right to make sequels if they have the right to make sequels if they have the right to make sequels if they choose. They will offer Pixar to make choose. They will offer Pixar to make choose. They will offer Pixar to make the the sequels with them. But if Pixar the the sequels with them. But if Pixar the the sequels with them. But if Pixar declines, they're still Disneys to make. declines, they're still Disneys to make. declines, they're still Disneys to make. And lastly, the three picture deal does And lastly, the three picture deal does And lastly, the three picture deal does not actually include those sequels, even not actually include those sequels, even not actually include those sequels, even if Disney elects to make them. So if if Disney elects to make them. So if if Disney elects to make them. So if Disney wants a sequel, Pixar makes a Disney wants a sequel, Pixar makes a Disney wants a sequel, Pixar makes a sequel, but it does not count against sequel, but it does not count against sequel, but it does not count against the total of three. So, it's kind of a the total of three. So, it's kind of a the total of three. So, it's kind of a crappy deal, but it is all of their crappy deal, but it is all of their crappy deal, but it is all of their dream and it is basically the only dream and it is basically the only dream and it is basically the only option. And it's Disney, right? I mean, option. And it's Disney, right? I mean, option. And it's Disney, right? I mean, it it's Disney. You do it, right? Well, it it's Disney. You do it, right? Well, it it's Disney. You do it, right? Well, there's no other studio that would make there's no other studio that would make there's no other studio that would make this with them. And Disney did stuff this with them. And Disney did stuff this with them. And Disney did stuff like this. So, they made The Nightmare like this. So, they made The Nightmare like this. So, they made The Nightmare Before Christmas with Tim Burton. It's Before Christmas with Tim Burton. It's Before Christmas with Tim Burton. It's like, "Hey, this is stopotion animation. like, "Hey, this is stopotion animation. like, "Hey, this is stopotion animation. It's something different than what we do It's something different than what we do It's something different than what we do here at Disney animation. Uh, let's get here at Disney animation. Uh, let's get here at Disney animation. Uh, let's get this out there. It's a boutique thing. this out there. It's a boutique thing. this out there. It's a boutique thing. We'll publish it. We're the best in the We'll publish it. We're the best in the We'll publish it. We're the best in the world at publishing animated family world at publishing animated family world at publishing animated family pictures and distributing them to pictures and distributing them to pictures and distributing them to theaters, marketing them. Great. theaters, marketing them. Great. theaters, marketing them. Great. &gt;&gt; Yep. So, what are they actually making &gt;&gt; Yep. So, what are they actually making &gt;&gt; Yep. So, what are they actually making here? Pixar knows they want to make a here? Pixar knows they want to make a here? Pixar knows they want to make a film that is different than your typical film that is different than your typical film that is different than your typical Disney animation. They don't want to Disney animation. They don't want to Disney animation. They don't want to make it a musical cuz at this point in make it a musical cuz at this point in make it a musical cuz at this point in 1993, the last four were all musicals 1993, the last four were all musicals 1993, the last four were all musicals and they don't want it to be a fairy and they don't want it to be a fairy and they don't want it to be a fairy tale. They don't want to hearken back to tale. They don't want to hearken back to tale. They don't want to hearken back to sort of the classic Walt tales either. sort of the classic Walt tales either. sort of the classic Walt tales either. But that does sort of mean that they're But that does sort of mean that they're But that does sort of mean that they're in uncharted waters. They have to in uncharted waters. They have to in uncharted waters. They have to develop their own tone and style and develop their own tone and style and develop their own tone and style and process. So they start translating John process. So they start translating John process. So they start translating John Lasser's vision into the story boards Lasser's vision into the story boards Lasser's vision into the story boards and they keep going to Disney for notes, and they keep going to Disney for notes, and they keep going to Disney for notes, which is both useful cuz Pixar doesn't which is both useful cuz Pixar doesn't which is both useful cuz Pixar doesn't really know what they're doing yet and really know what they're doing yet and really know what they're doing yet and contractually required. [laughter] contractually required. [laughter] contractually required. [laughter] So Katzenberg is uh at the helm at this So Katzenberg is uh at the helm at this So Katzenberg is uh at the helm at this point. He keeps pushing to make the film point. He keeps pushing to make the film point. He keeps pushing to make the film edgier. And through a combination of edgier. And through a combination of edgier. And through a combination of Pixar not really feeling their Pixar not really feeling their Pixar not really feeling their confidence in storytelling and the notes confidence in storytelling and the notes confidence in storytelling and the notes pushing them this way, Woody ends up pushing them this way, Woody ends up pushing them this way, Woody ends up very mean. He's got this uh like brand very mean. He's got this uh like brand very mean. He's got this uh like brand of insult humor. He's so threatened by of insult humor. He's so threatened by of insult humor. He's so threatened by Buzz that that emotion overshadows every Buzz that that emotion overshadows every Buzz that that emotion overshadows every other action he could possibly take in other action he could possibly take in other action he could possibly take in any scene. He's like actively and any scene. He's like actively and any scene. He's like actively and intentionally pushing Buzz out windows intentionally pushing Buzz out windows intentionally pushing Buzz out windows and, you know, behind dressers and stuff and, you know, behind dressers and stuff and, you know, behind dressers and stuff like that. So December of 93, the story like that. So December of 93, the story like that. So December of 93, the story reel screening happens down in Burbank. reel screening happens down in Burbank. reel screening happens down in Burbank. They're like, "All right, here's all the They're like, "All right, here's all the They're like, "All right, here's all the the notes that we've taken. Here's the the notes that we've taken. Here's the the notes that we've taken. Here's the story we've got." It goes over like a story we've got." It goes over like a story we've got." It goes over like a lead balloon. Katzenberg hates it. Roy lead balloon. Katzenberg hates it. Roy lead balloon. Katzenberg hates it. Roy E. Disney hates it. None of the E. Disney hates it. None of the E. Disney hates it. None of the characters were working. So Disney cuts characters were working. So Disney cuts characters were working. So Disney cuts it off. Disney says, "I know we've got a it off. Disney says, "I know we've got a it off. Disney says, "I know we've got a deal, but we are stopping production. deal, but we are stopping production. deal, but we are stopping production. No more money." The Pixar team's like, No more money." The Pixar team's like, No more money." The Pixar team's like, "Whoa, whoa, whoa, whoa. Crap." Like "Whoa, whoa, whoa, whoa. Crap." Like "Whoa, whoa, whoa, whoa. Crap." Like that. That's our whole company. Uh, can that. That's our whole company. Uh, can that. That's our whole company. Uh, can we have two to three weeks? We just want we have two to three weeks? We just want we have two to three weeks? We just want to do a total rewrite. We'll work day to do a total rewrite. We'll work day to do a total rewrite. We'll work day and night. And so they go back up to and night. And so they go back up to and night. And so they go back up to Northern California and they make the Northern California and they make the Northern California and they make the version of the film that they want to version of the film that they want to version of the film that they want to make. And it's not perfect, but suddenly make. And it's not perfect, but suddenly make. And it's not perfect, but suddenly these characters get multi-dimensional. these characters get multi-dimensional. these characters get multi-dimensional. They come back and it's good enough. They come back and it's good enough. They come back and it's good enough. There's real tension in the story. There's real tension in the story. There's real tension in the story. Disney, to their credit, looks at it Disney, to their credit, looks at it Disney, to their credit, looks at it again and says, "Okay, you're back on. again and says, "Okay, you're back on. again and says, "Okay, you're back on. continue the process over the course of continue the process over the course of continue the process over the course of 1994. They're looking at their story 1994. They're looking at their story 1994. They're looking at their story reels. They're kind of iterating reels. They're kind of iterating reels. They're kind of iterating through. They're adding more depth and through. They're adding more depth and through. They're adding more depth and the early tests of the scenes that have the early tests of the scenes that have the early tests of the scenes that have gone through most of the render gone through most of the render gone through most of the render pipeline. pipeline. pipeline. They're really good. The Pixar team They're really good. The Pixar team They're really good. The Pixar team knows it. Steve Jobs has become a knows it. Steve Jobs has become a knows it. Steve Jobs has become a believer and he's starting to believe, believer and he's starting to believe, believer and he's starting to believe, hey, we've got a hit on our hands. And hey, we've got a hit on our hands. And hey, we've got a hit on our hands. And David, I know you've got this part. David, I know you've got this part. David, I know you've got this part. &gt;&gt; Yeah. So Steve being Steve starts &gt;&gt; Yeah. So Steve being Steve starts &gt;&gt; Yeah. So Steve being Steve starts thinking through this and realizes if thinking through this and realizes if thinking through this and realizes if Toy Story is a hit, what's going to Toy Story is a hit, what's going to Toy Story is a hit, what's going to happen? Disney and Michael Eisner, who's happen? Disney and Michael Eisner, who's happen? Disney and Michael Eisner, who's still CEO at this point in time, are still CEO at this point in time, are still CEO at this point in time, are going to realize that they actually just going to realize that they actually just going to realize that they actually just created their worst nightmare, a true created their worst nightmare, a true created their worst nightmare, a true animation competitor to Disney that can animation competitor to Disney that can animation competitor to Disney that can do something that they can't. So, let's do something that they can't. So, let's do something that they can't. So, let's play this out. That happens, play this out. That happens, play this out. That happens, he's probably going to come back to us he's probably going to come back to us he's probably going to come back to us and want to renegotiate the deal to lock and want to renegotiate the deal to lock and want to renegotiate the deal to lock us up for longer. us up for longer. us up for longer. We want to have as much leverage as We want to have as much leverage as We want to have as much leverage as possible. possible. possible. In order to do that, we need to have our In order to do that, we need to have our In order to do that, we need to have our own capital to actually go in 5050 own capital to actually go in 5050 own capital to actually go in 5050 on the production budget of the movies on the production budget of the movies on the production budget of the movies that we're making together. If we don't that we're making together. If we don't that we're making together. If we don't bring any capital, Disney will be able bring any capital, Disney will be able bring any capital, Disney will be able to walk all over us and keep the to walk all over us and keep the to walk all over us and keep the majority of the profits, plus take their majority of the profits, plus take their majority of the profits, plus take their distribution fee, etc., etc. Okay, how distribution fee, etc., etc. Okay, how distribution fee, etc., etc. Okay, how are we going to get the capital? are we going to get the capital? are we going to get the capital? We need to go public and we can't go We need to go public and we can't go We need to go public and we can't go public now because the last four years public now because the last four years public now because the last four years have been losses and we have not yet have been losses and we have not yet have been losses and we have not yet released a movie. We don't want to wait released a movie. We don't want to wait released a movie. We don't want to wait too long after the movie comes out. So, too long after the movie comes out. So, too long after the movie comes out. So, I think we should go public the week I think we should go public the week I think we should go public the week after after after &gt;&gt; yeah, &gt;&gt; yeah, &gt;&gt; yeah, &gt;&gt; Toy Story comes out. And this is where &gt;&gt; Toy Story comes out. And this is where &gt;&gt; Toy Story comes out. And this is where Steve was just brilliant because he was Steve was just brilliant because he was Steve was just brilliant because he was like, "If it's a success, we'll make a like, "If it's a success, we'll make a like, "If it's a success, we'll make a big splash. We'll be the darlings of the big splash. We'll be the darlings of the big splash. We'll be the darlings of the media. We'll have a big hit movie. That media. We'll have a big hit movie. That media. We'll have a big hit movie. That is the time to go public." is the time to go public." is the time to go public." &gt;&gt; If you're anyone else at Pixar, you have &gt;&gt; If you're anyone else at Pixar, you have &gt;&gt; If you're anyone else at Pixar, you have to be thinking, "No, no, no, no. Can't to be thinking, "No, no, no, no. Can't to be thinking, "No, no, no, no. Can't we just do this one and see how it it we just do this one and see how it it we just do this one and see how it it works out?" But this is this is Steve works out?" But this is this is Steve works out?" But this is this is Steve Jobs. Jobs. Jobs. &gt;&gt; Yeah. So, Toy Story comes out on &gt;&gt; Yeah. So, Toy Story comes out on &gt;&gt; Yeah. So, Toy Story comes out on November 22nd, 1995, grosses nearly $400 November 22nd, 1995, grosses nearly $400 November 22nd, 1995, grosses nearly $400 million worldwide. It is the million worldwide. It is the million worldwide. It is the Thanksgiving movie for families to see. Thanksgiving movie for families to see. Thanksgiving movie for families to see. It made 29 million in its opening It made 29 million in its opening It made 29 million in its opening weekend. Went on to become the number weekend. Went on to become the number weekend. Went on to become the number one film in the US and it was the first one film in the US and it was the first one film in the US and it was the first ever animated film that was a ever animated film that was a ever animated film that was a blockbuster that was not created by blockbuster that was not created by blockbuster that was not created by Disney. Disney. Disney. &gt;&gt; And it was the highest grossing film of &gt;&gt; And it was the highest grossing film of &gt;&gt; And it was the highest grossing film of the whole year. the whole year. the whole year. &gt;&gt; Not children's movie like highest &gt;&gt; Not children's movie like highest &gt;&gt; Not children's movie like highest grossing period. grossing period. grossing period. &gt;&gt; Period. So, one week later after Toy &gt;&gt; Period. So, one week later after Toy &gt;&gt; Period. So, one week later after Toy Story premieres on November 29th, 1995, Story premieres on November 29th, 1995, Story premieres on November 29th, 1995, Pixar goes public, Pixar goes public, Pixar goes public, &gt;&gt; right? Which means Steve had been like &gt;&gt; right? Which means Steve had been like &gt;&gt; right? Which means Steve had been like flying around doing a road show, meeting flying around doing a road show, meeting flying around doing a road show, meeting with all these investment bankers as Toy with all these investment bankers as Toy with all these investment bankers as Toy Story is finishing production and Story is finishing production and Story is finishing production and getting ready to go out. It's getting ready to go out. It's getting ready to go out. It's unbelievable. unbelievable. unbelievable. &gt;&gt; Well, this is actually a theme that was &gt;&gt; Well, this is actually a theme that was &gt;&gt; Well, this is actually a theme that was going to come back to in a minute. going to come back to in a minute. going to come back to in a minute. There's no other business guys at Pixar. There's no other business guys at Pixar. There's no other business guys at Pixar. [laughter] It's just Steve. Steve does [laughter] It's just Steve. Steve does [laughter] It's just Steve. Steve does everything that's not creative and everything that's not creative and everything that's not creative and making the movies. So Pixar closes its making the movies. So Pixar closes its making the movies. So Pixar closes its first day of trading at a $ one and a first day of trading at a $ one and a first day of trading at a $ one and a half billion dollar market cap. This is half billion dollar market cap. This is half billion dollar market cap. This is how big a hit Toy Story was and how much how big a hit Toy Story was and how much how big a hit Toy Story was and how much it was in the public consciousness. it was in the public consciousness. it was in the public consciousness. This is how Steve Jobs becomes a This is how Steve Jobs becomes a This is how Steve Jobs becomes a billionaire. billionaire. billionaire. &gt;&gt; Yes, the Toy Story IPO. He didn't make &gt;&gt; Yes, the Toy Story IPO. He didn't make &gt;&gt; Yes, the Toy Story IPO. He didn't make anywhere near that kind of money from anywhere near that kind of money from anywhere near that kind of money from Apple. Toy Story and Pixar is how Steve Apple. Toy Story and Pixar is how Steve Apple. Toy Story and Pixar is how Steve Jobs makes his fortune. So that 140 Jobs makes his fortune. So that 140 Jobs makes his fortune. So that 140 million they raised makes it the largest million they raised makes it the largest million they raised makes it the largest IPO of the year. Larger than Netscape. IPO of the year. Larger than Netscape. IPO of the year. Larger than Netscape. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; The numbers on Steve. He bought the &gt;&gt; The numbers on Steve. He bought the &gt;&gt; The numbers on Steve. He bought the company for $5 million. He actually did company for $5 million. He actually did company for $5 million. He actually did dump $54 million into it over 9 years. dump $54 million into it over 9 years. dump $54 million into it over 9 years. &gt;&gt; He was like wiring money for payroll and &gt;&gt; He was like wiring money for payroll and &gt;&gt; He was like wiring money for payroll and stuff like that. And on IPO day, he stuff like that. And on IPO day, he stuff like that. And on IPO day, he owned 78% of the company. owned 78% of the company. owned 78% of the company. &gt;&gt; So what's that like 1.2 billion? &gt;&gt; So what's that like 1.2 billion? &gt;&gt; So what's that like 1.2 billion? &gt;&gt; Yes. Pixar alone made Steve Jobs a &gt;&gt; Yes. Pixar alone made Steve Jobs a &gt;&gt; Yes. Pixar alone made Steve Jobs a billionaire on IPO day. billionaire on IPO day. billionaire on IPO day. &gt;&gt; Yep. Incredible. Also, this was just a &gt;&gt; Yep. Incredible. Also, this was just a &gt;&gt; Yep. Incredible. Also, this was just a bet the company move. I mean, if Toy bet the company move. I mean, if Toy bet the company move. I mean, if Toy Story didn't work, then the IPO wasn't Story didn't work, then the IPO wasn't Story didn't work, then the IPO wasn't going to work and then the whole thing going to work and then the whole thing going to work and then the whole thing would go bust. would go bust. would go bust. &gt;&gt; And if the IPO didn't work, &gt;&gt; And if the IPO didn't work, &gt;&gt; And if the IPO didn't work, &gt;&gt; then Pixar would have gotten crushed by &gt;&gt; then Pixar would have gotten crushed by &gt;&gt; then Pixar would have gotten crushed by Disney in the next negotiations. Disney in the next negotiations. Disney in the next negotiations. &gt;&gt; This was a series of successive bet the &gt;&gt; This was a series of successive bet the &gt;&gt; This was a series of successive bet the company moves that all needed to work in company moves that all needed to work in company moves that all needed to work in order for it to work at all. So, what order for it to work at all. So, what order for it to work at all. So, what happens next? Steve was exactly right. happens next? Steve was exactly right. happens next? Steve was exactly right. Michael Eisner wants to renegotiate Michael Eisner wants to renegotiate Michael Eisner wants to renegotiate after uh realizing, "Oh my god, we only after uh realizing, "Oh my god, we only after uh realizing, "Oh my god, we only have two more films left with these guys have two more films left with these guys have two more films left with these guys and they're the only credible and they're the only credible and they're the only credible competitor." Jobs throws out, "Hey, competitor." Jobs throws out, "Hey, competitor." Jobs throws out, "Hey, let's do it 50/50 with joint let's do it 50/50 with joint let's do it 50/50 with joint participation 50/50 in the upside now participation 50/50 in the upside now participation 50/50 in the upside now that Pixar has the cash to do it." that Pixar has the cash to do it." that Pixar has the cash to do it." Michael Eisner agrees as long as they Michael Eisner agrees as long as they Michael Eisner agrees as long as they can expand into a brand new five picture can expand into a brand new five picture can expand into a brand new five picture deal, rolling the remaining two from the deal, rolling the remaining two from the deal, rolling the remaining two from the old contract into the new deal. So after old contract into the new deal. So after old contract into the new deal. So after Toy Story, Disney would have the right Toy Story, Disney would have the right Toy Story, Disney would have the right then to make five more movies with Pixar then to make five more movies with Pixar then to make five more movies with Pixar in addition to sequels. Now Disney also in addition to sequels. Now Disney also in addition to sequels. Now Disney also would be doing the distribution of the would be doing the distribution of the would be doing the distribution of the film. So they'd actually end up with film. So they'd actually end up with film. So they'd actually end up with more like 65%, not 50%. But that's some more like 65%, not 50%. But that's some more like 65%, not 50%. But that's some Hollywood accounting that uh I I don't Hollywood accounting that uh I I don't Hollywood accounting that uh I I don't actually think Steve realized that at actually think Steve realized that at actually think Steve realized that at the time. the time. the time. &gt;&gt; Well, the story I heard was that he did &gt;&gt; Well, the story I heard was that he did &gt;&gt; Well, the story I heard was that he did and and like it makes like distribution and and like it makes like distribution and and like it makes like distribution has real costs and marketing and like of has real costs and marketing and like of has real costs and marketing and like of course Disney should get paid for that. course Disney should get paid for that. course Disney should get paid for that. The story I heard is that Steve found The story I heard is that Steve found The story I heard is that Steve found out later from George Lucas that the out later from George Lucas that the out later from George Lucas that the terms of Lucas's distribution deal with terms of Lucas's distribution deal with terms of Lucas's distribution deal with Fox were better than the distribution Fox were better than the distribution Fox were better than the distribution terms that Pixar got with Disney. And terms that Pixar got with Disney. And terms that Pixar got with Disney. And that's what he was pissed about. So the that's what he was pissed about. So the that's what he was pissed about. So the second film they make is A Bug's Life. second film they make is A Bug's Life. second film they make is A Bug's Life. This was also a big success. 360 million This was also a big success. 360 million This was also a big success. 360 million at the box office. Pixar is sort of at the box office. Pixar is sort of at the box office. Pixar is sort of viewed as this uh hit factory. You know, viewed as this uh hit factory. You know, viewed as this uh hit factory. You know, it's only been two so far, but they're it's only been two so far, but they're it's only been two so far, but they're developing Toy Story 2 as the next film developing Toy Story 2 as the next film developing Toy Story 2 as the next film after that. Meanwhile, after that. Meanwhile, after that. Meanwhile, the relationship with Michael Eisner is the relationship with Michael Eisner is the relationship with Michael Eisner is is kind of deteriorating. is kind of deteriorating. is kind of deteriorating. &gt;&gt; Yeah. With with Steve Jobs, Disney wants &gt;&gt; Yeah. With with Steve Jobs, Disney wants &gt;&gt; Yeah. With with Steve Jobs, Disney wants to go direct to video with Toy Story 2. to go direct to video with Toy Story 2. to go direct to video with Toy Story 2. This is actually interesting to flash This is actually interesting to flash This is actually interesting to flash back and think about this. Disney had back and think about this. Disney had back and think about this. Disney had never done anything except for direct to never done anything except for direct to never done anything except for direct to video for sequels. The thinking was that video for sequels. The thinking was that video for sequels. The thinking was that you make something great once, you put you make something great once, you put you make something great once, you put it in theaters, and then it in theaters, and then it in theaters, and then &gt;&gt; you don't overexploit the IP. &gt;&gt; you don't overexploit the IP. &gt;&gt; you don't overexploit the IP. &gt;&gt; That's exactly right. But also, the &gt;&gt; That's exactly right. But also, the &gt;&gt; That's exactly right. But also, the belief was that sequels can't possibly belief was that sequels can't possibly belief was that sequels can't possibly be as good. You're always making this be as good. You're always making this be as good. You're always making this like lesser second tier thing. And they like lesser second tier thing. And they like lesser second tier thing. And they actually hadn't done a ton of sequels, actually hadn't done a ton of sequels, actually hadn't done a ton of sequels, which is quite funny that it's which is quite funny that it's which is quite funny that it's completely flipped now. Now, the goal of completely flipped now. Now, the goal of completely flipped now. Now, the goal of creating the first film is to be able to creating the first film is to be able to creating the first film is to be able to create a franchise so they can exploit create a franchise so they can exploit create a franchise so they can exploit the IP more and more after that. Toy the IP more and more after that. Toy the IP more and more after that. Toy Story 2 is where they learn the lesson Story 2 is where they learn the lesson Story 2 is where they learn the lesson that, "Oh, actually, that is a valuable that, "Oh, actually, that is a valuable that, "Oh, actually, that is a valuable business model." It's actually the Pixar business model." It's actually the Pixar business model." It's actually the Pixar team that goes to Disney and says, "Hey, team that goes to Disney and says, "Hey, team that goes to Disney and says, "Hey, this sucks. We don't want to create an A this sucks. We don't want to create an A this sucks. We don't want to create an A team and a B team at Pixar." Cuz like team and a B team at Pixar." Cuz like team and a B team at Pixar." Cuz like the A team's on Bug's Life. the A team's on Bug's Life. the A team's on Bug's Life. &gt;&gt; The B team is clearly working on the &gt;&gt; The B team is clearly working on the &gt;&gt; The B team is clearly working on the thing that's going to be lower budget, thing that's going to be lower budget, thing that's going to be lower budget, lower distribution, direct to video. We lower distribution, direct to video. We lower distribution, direct to video. We don't know how to do it. Disney is says, don't know how to do it. Disney is says, don't know how to do it. Disney is says, "Okay." So in February of '98, Disney "Okay." So in February of '98, Disney "Okay." So in February of '98, Disney says, "Toy Story 2, you are green lit says, "Toy Story 2, you are green lit says, "Toy Story 2, you are green lit for theatrical release." for theatrical release." for theatrical release." &gt;&gt; But the question is, does it count &gt;&gt; But the question is, does it count &gt;&gt; But the question is, does it count towards the deal or not? towards the deal or not? towards the deal or not? &gt;&gt; So Steve realizes Toy Story 2 is going &gt;&gt; So Steve realizes Toy Story 2 is going &gt;&gt; So Steve realizes Toy Story 2 is going to be good. And again, he wants to to be good. And again, he wants to to be good. And again, he wants to renegotiate. He goes to Eisner and says, renegotiate. He goes to Eisner and says, renegotiate. He goes to Eisner and says, "Hey, can the five picture deal include "Hey, can the five picture deal include "Hey, can the five picture deal include sequels?" Meanwhile, Michael Eisner is sequels?" Meanwhile, Michael Eisner is sequels?" Meanwhile, Michael Eisner is like, "Why would I do that? The paper like, "Why would I do that? The paper like, "Why would I do that? The paper says what it says. We negotiated this says what it says. We negotiated this says what it says. We negotiated this for a reason. You want to change the for a reason. You want to change the for a reason. You want to change the terms of the deal. I don't want to terms of the deal. I don't want to terms of the deal. I don't want to change the terms of the deal, so we'll change the terms of the deal, so we'll change the terms of the deal, so we'll just stick with the deal we have. just stick with the deal we have. just stick with the deal we have. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; You can see why the relationship starts &gt;&gt; You can see why the relationship starts &gt;&gt; You can see why the relationship starts to deteriorate. to deteriorate. to deteriorate. &gt;&gt; Yes. Yes. They make Toy Story 2. Doesn't &gt;&gt; Yes. Yes. They make Toy Story 2. Doesn't &gt;&gt; Yes. Yes. They make Toy Story 2. Doesn't count. count. count. They release it in theaters. It grosses They release it in theaters. It grosses They release it in theaters. It grosses almost $500 million. almost $500 million. almost $500 million. &gt;&gt; Pixar's highest grossing film yet. And &gt;&gt; Pixar's highest grossing film yet. And &gt;&gt; Pixar's highest grossing film yet. And Disney learns all the way to the bank Disney learns all the way to the bank Disney learns all the way to the bank that sequels can be real profitable. that sequels can be real profitable. that sequels can be real profitable. &gt;&gt; Yes, they do. &gt;&gt; Yes, they do. &gt;&gt; Yes, they do. So meanwhile, the backdrop to all of So meanwhile, the backdrop to all of So meanwhile, the backdrop to all of this is Steve Jobs had come back to this is Steve Jobs had come back to this is Steve Jobs had come back to Apple. By this point in time, Apple had Apple. By this point in time, Apple had Apple. By this point in time, Apple had bought Next. Steve is now CEO of Apple, bought Next. Steve is now CEO of Apple, bought Next. Steve is now CEO of Apple, leading the turnaround in the leading the turnaround in the leading the turnaround in the renaissance at Apple. The iPod comes renaissance at Apple. The iPod comes renaissance at Apple. The iPod comes out, iTunes comes out, and one of the out, iTunes comes out, and one of the out, iTunes comes out, and one of the big marketing campaigns for the iPod and big marketing campaigns for the iPod and big marketing campaigns for the iPod and iTunes is RIP, Mix, Burn. But you know iTunes is RIP, Mix, Burn. But you know iTunes is RIP, Mix, Burn. But you know who doesn't like the word RIP? is who doesn't like the word RIP? is who doesn't like the word RIP? is Michael Eisner. Michael Eisner. Michael Eisner. &gt;&gt; So Eisner goes and testifies in front of &gt;&gt; So Eisner goes and testifies in front of &gt;&gt; So Eisner goes and testifies in front of Congress in 2002 Congress in 2002 Congress in 2002 against against against the technology industry and specifically the technology industry and specifically the technology industry and specifically calls out Apple's RIP, Mix, Burn calls out Apple's RIP, Mix, Burn calls out Apple's RIP, Mix, Burn marketing campaign saying it encourages marketing campaign saying it encourages marketing campaign saying it encourages theft of intellectual property via theft of intellectual property via theft of intellectual property via digital piracy. And uh Bob Iger has a digital piracy. And uh Bob Iger has a digital piracy. And uh Bob Iger has a quote about this in Ride of a Lifetime. quote about this in Ride of a Lifetime. quote about this in Ride of a Lifetime. It was clear that Pixar was gaining It was clear that Pixar was gaining It was clear that Pixar was gaining swagger as Disney was losing it. And swagger as Disney was losing it. And swagger as Disney was losing it. And these two strong willed personalities these two strong willed personalities these two strong willed personalities were destined to battle each other for were destined to battle each other for were destined to battle each other for supremacy, man. And if you really want supremacy, man. And if you really want supremacy, man. And if you really want to poke Steve Jobs, it's one thing to go to poke Steve Jobs, it's one thing to go to poke Steve Jobs, it's one thing to go after him in the Pixar negotiations. after him in the Pixar negotiations. after him in the Pixar negotiations. It's another thing to come after him at It's another thing to come after him at It's another thing to come after him at Apple. Now, to be totally fair to Eisner Apple. Now, to be totally fair to Eisner Apple. Now, to be totally fair to Eisner here, Disney had a big music business here, Disney had a big music business here, Disney had a big music business and a big album business. I mean, album and a big album business. I mean, album and a big album business. I mean, album soundtracks for soundtracks for soundtracks for &gt;&gt; and regardless at this point, everyone's &gt;&gt; and regardless at this point, everyone's &gt;&gt; and regardless at this point, everyone's sort of banding together and realizing sort of banding together and realizing sort of banding together and realizing like what's going to happen to music is like what's going to happen to music is like what's going to happen to music is happen to movies next. happen to movies next. happen to movies next. &gt;&gt; Yep. Yep. So, you had good reason to be &gt;&gt; Yep. Yep. So, you had good reason to be &gt;&gt; Yep. Yep. So, you had good reason to be worried here. But worried here. But worried here. But &gt;&gt; yeah, you probably don't want to come &gt;&gt; yeah, you probably don't want to come &gt;&gt; yeah, you probably don't want to come after Steve Jobs and Apple, one of your after Steve Jobs and Apple, one of your after Steve Jobs and Apple, one of your most important partners, Pixar. So, then most important partners, Pixar. So, then most important partners, Pixar. So, then it gets even worse. Finding Nemo is the it gets even worse. Finding Nemo is the it gets even worse. Finding Nemo is the next movie in The Deal. And as Nemo is next movie in The Deal. And as Nemo is next movie in The Deal. And as Nemo is coming together, Eisner sees a early coming together, Eisner sees a early coming together, Eisner sees a early screening of one of the reels of Nemo, screening of one of the reels of Nemo, screening of one of the reels of Nemo, decides he doesn't like it, decides he doesn't like it, decides he doesn't like it, &gt;&gt; which is how story reels work. They're &gt;&gt; which is how story reels work. They're &gt;&gt; which is how story reels work. They're crap at first. This is Pixar's process crap at first. This is Pixar's process crap at first. This is Pixar's process to iterate and make them better. Early to iterate and make them better. Early to iterate and make them better. Early ones are always bad. ones are always bad. ones are always bad. &gt;&gt; Yep. [laughter] &gt;&gt; Yep. [laughter] &gt;&gt; Yep. [laughter] [gasps] [gasps] [gasps] So Pixar has become a board level topic So Pixar has become a board level topic So Pixar has become a board level topic at this point for Disney. at this point for Disney. at this point for Disney. After seeing the Nemo reel, Eisner After seeing the Nemo reel, Eisner After seeing the Nemo reel, Eisner writes a memo to the Disney board where writes a memo to the Disney board where writes a memo to the Disney board where he says that he's seen the Nemo reel. he says that he's seen the Nemo reel. he says that he's seen the Nemo reel. It's a bad movie. It's going to flop and It's a bad movie. It's going to flop and It's a bad movie. It's going to flop and it'll be a quote reality check for those it'll be a quote reality check for those it'll be a quote reality check for those guys and it'll be great for Disney's guys and it'll be great for Disney's guys and it'll be great for Disney's negotiating leverage for Pixar to fail. negotiating leverage for Pixar to fail. negotiating leverage for Pixar to fail. Never mind that Disney is getting over Never mind that Disney is getting over Never mind that Disney is getting over 50% of the economics in Nemo, so you 50% of the economics in Nemo, so you 50% of the economics in Nemo, so you should be incentivized to want it to should be incentivized to want it to should be incentivized to want it to succeed. The memo leaks, right? succeed. The memo leaks, right? succeed. The memo leaks, right? &gt;&gt; The memo gets leaked from the board to &gt;&gt; The memo gets leaked from the board to &gt;&gt; The memo gets leaked from the board to the press the press the press &gt;&gt; and Jobs can see that Michael thinks &gt;&gt; and Jobs can see that Michael thinks &gt;&gt; and Jobs can see that Michael thinks Nemo's bad. He's actively rooting Nemo's bad. He's actively rooting Nemo's bad. He's actively rooting against it even though he's the creative against it even though he's the creative against it even though he's the creative partner producing it with Pixar and that partner producing it with Pixar and that partner producing it with Pixar and that it'll give leverage over Pixar in a it'll give leverage over Pixar in a it'll give leverage over Pixar in a negotiation. You can almost interpret it negotiation. You can almost interpret it negotiation. You can almost interpret it as I'm going to actively work to make it as I'm going to actively work to make it as I'm going to actively work to make it fail so we can increase our leverage. fail so we can increase our leverage. fail so we can increase our leverage. &gt;&gt; Yep. So, Nemo comes out in 2003 and &gt;&gt; Yep. So, Nemo comes out in 2003 and &gt;&gt; Yep. So, Nemo comes out in 2003 and Michael could not have been more wrong. Michael could not have been more wrong. Michael could not have been more wrong. It grosses 871 million in theaters, It grosses 871 million in theaters, It grosses 871 million in theaters, making it the second highest grossing making it the second highest grossing making it the second highest grossing movie of 2003 behind only Lord of the movie of 2003 behind only Lord of the movie of 2003 behind only Lord of the Rings: Return of the King. And then they Rings: Return of the King. And then they Rings: Return of the King. And then they put it out on home video on DVD. put it out on home video on DVD. put it out on home video on DVD. &gt;&gt; And so even before this, let's say the &gt;&gt; And so even before this, let's say the &gt;&gt; And so even before this, let's say the theaters get, I don't know, 400 million theaters get, I don't know, 400 million theaters get, I don't know, 400 million of that. So that's $470 million to of that. So that's $470 million to of that. So that's $470 million to Disney Pixar. Disney Pixar. Disney Pixar. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; From this film even before DVD. [sighs] &gt;&gt; From this film even before DVD. [sighs] &gt;&gt; From this film even before DVD. [sighs] &gt;&gt; These were the days, Ben. These were the &gt;&gt; These were the days, Ben. These were the &gt;&gt; These were the days, Ben. These were the days. The Finding Nemo DVD days. The Finding Nemo DVD days. The Finding Nemo DVD was just like The Lion King VHS was the was just like The Lion King VHS was the was just like The Lion King VHS was the high water mark for VHS. The Finding high water mark for VHS. The Finding high water mark for VHS. The Finding Nemo DVD was the peak, the absolute Nemo DVD was the peak, the absolute Nemo DVD was the peak, the absolute pinnacle pinnacle pinnacle &gt;&gt; of home video &gt;&gt; of home video &gt;&gt; of home video &gt;&gt; of home video in the DVD era &gt;&gt; of home video in the DVD era &gt;&gt; of home video in the DVD era &gt;&gt; cuz even Netflix isn't streaming yet at &gt;&gt; cuz even Netflix isn't streaming yet at &gt;&gt; cuz even Netflix isn't streaming yet at this point. This is 2004. this point. This is 2004. this point. This is 2004. &gt;&gt; There's no streaming. This This is the &gt;&gt; There's no streaming. This This is the &gt;&gt; There's no streaming. This This is the peak. So, we heard in the research that peak. So, we heard in the research that peak. So, we heard in the research that Disney and Pixar would sell 65 Disney and Pixar would sell 65 Disney and Pixar would sell 65 million copies [laughter] million copies [laughter] million copies [laughter] of the Finding Nemo DVD all told, you of the Finding Nemo DVD all told, you of the Finding Nemo DVD all told, you know, across all all time frame know, across all all time frame know, across all all time frame &gt;&gt; at 30 bucks a pop. &gt;&gt; at 30 bucks a pop. &gt;&gt; at 30 bucks a pop. &gt;&gt; 30 bucks a pop. That is $2 billion in &gt;&gt; 30 bucks a pop. That is $2 billion in &gt;&gt; 30 bucks a pop. That is $2 billion in home video gross. So, $3 billion give or home video gross. So, $3 billion give or home video gross. So, $3 billion give or take total gross revenue for Finding take total gross revenue for Finding take total gross revenue for Finding Nemo just between theatrical and DVD Nemo just between theatrical and DVD Nemo just between theatrical and DVD alone. That's not including merch. alone. That's not including merch. alone. That's not including merch. That's not including parks. That's not That's not including parks. That's not That's not including parks. That's not including TV rights. including TV rights. including TV rights. Steve and Pixar did get a reality check. Steve and Pixar did get a reality check. Steve and Pixar did get a reality check. And the reality check is that they don't And the reality check is that they don't And the reality check is that they don't need Disney at all. need Disney at all. need Disney at all. &gt;&gt; The LA Times had an article right around &gt;&gt; The LA Times had an article right around &gt;&gt; The LA Times had an article right around this time after Nemo. Pixar films have this time after Nemo. Pixar films have this time after Nemo. Pixar films have accounted for as much as half of the accounted for as much as half of the accounted for as much as half of the studio Walt Disney's operating income in studio Walt Disney's operating income in studio Walt Disney's operating income in recent years and much of that is driven recent years and much of that is driven recent years and much of that is driven by Nemo. Remember this is the same time by Nemo. Remember this is the same time by Nemo. Remember this is the same time that Disney animation is releasing that Disney animation is releasing that Disney animation is releasing Treasure Planet and Atlantis the Lost Treasure Planet and Atlantis the Lost Treasure Planet and Atlantis the Lost Empire. So Jobs is pissed. He comes back Empire. So Jobs is pissed. He comes back Empire. So Jobs is pissed. He comes back with an even stronger counter proposal. with an even stronger counter proposal. with an even stronger counter proposal. He thinks at this point Pixar is an He thinks at this point Pixar is an He thinks at this point Pixar is an established studio that knows how to established studio that knows how to established studio that knows how to make hits and he just looks at Disney as make hits and he just looks at Disney as make hits and he just looks at Disney as a financing and distribution partner. a financing and distribution partner. a financing and distribution partner. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Which is true, but they did have a &gt;&gt; Which is true, but they did have a &gt;&gt; Which is true, but they did have a contract that still had two more movies contract that still had two more movies contract that still had two more movies in it. He proposes a deal to Eisner, and in it. He proposes a deal to Eisner, and in it. He proposes a deal to Eisner, and this is where the relationship becomes this is where the relationship becomes this is where the relationship becomes irreparable. Hixar should actually be irreparable. Hixar should actually be irreparable. Hixar should actually be getting 100% of the profits, not 50%. getting 100% of the profits, not 50%. getting 100% of the profits, not 50%. And they're now prepared to fund the And they're now prepared to fund the And they're now prepared to fund the budget themselves, too. Disney would budget themselves, too. Disney would budget themselves, too. Disney would just get a 10% distribution fee, much just get a 10% distribution fee, much just get a 10% distribution fee, much like Lucasfilm's deal with Fox. And to like Lucasfilm's deal with Fox. And to like Lucasfilm's deal with Fox. And to top it all off, Jobs asks Disney to top it all off, Jobs asks Disney to top it all off, Jobs asks Disney to relinquish its co-ownership of the past relinquish its co-ownership of the past relinquish its co-ownership of the past movies. Jobs knows that at this point, movies. Jobs knows that at this point, movies. Jobs knows that at this point, Disney needs Pixar real bad. Eisner Disney needs Pixar real bad. Eisner Disney needs Pixar real bad. Eisner stands his ground and declines. stands his ground and declines. stands his ground and declines. And in reality, I mean, Steve was asking And in reality, I mean, Steve was asking And in reality, I mean, Steve was asking for too much here. It actually wouldn't for too much here. It actually wouldn't for too much here. It actually wouldn't make economic sense for Disney to do it make economic sense for Disney to do it make economic sense for Disney to do it because they had such little upside in because they had such little upside in because they had such little upside in the straw man that Steve was putting the straw man that Steve was putting the straw man that Steve was putting together. But man, would it hurt to lose together. But man, would it hurt to lose together. But man, would it hurt to lose Pixar when it is really the only thing Pixar when it is really the only thing Pixar when it is really the only thing working right now. working right now. working right now. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Except for ESPN. &gt;&gt; Except for ESPN. &gt;&gt; Except for ESPN. &gt;&gt; Yep. So, &gt;&gt; Yep. So, &gt;&gt; Yep. So, all this comes to January 2004 all this comes to January 2004 all this comes to January 2004 where Pixar pulls the plug on the where Pixar pulls the plug on the where Pixar pulls the plug on the negotiations and they issue a press negotiations and they issue a press negotiations and they issue a press release. And listeners, we'll we'll link release. And listeners, we'll we'll link release. And listeners, we'll we'll link to this. In fact, I think we'll put a to this. In fact, I think we'll put a to this. In fact, I think we'll put a picture of it in the email that we send picture of it in the email that we send picture of it in the email that we send out. I found it on the way back machine. out. I found it on the way back machine. out. I found it on the way back machine. You can actually see Pixar posted it to You can actually see Pixar posted it to You can actually see Pixar posted it to their website. After 10 months of trying their website. After 10 months of trying their website. After 10 months of trying to strike a deal with Disney, we're to strike a deal with Disney, we're to strike a deal with Disney, we're moving on. We've had a great run moving on. We've had a great run moving on. We've had a great run together. one of the most successful in together. one of the most successful in together. one of the most successful in Hollywood history. And it's a shame that Hollywood history. And it's a shame that Hollywood history. And it's a shame that Disney won't be participating in Pixar's Disney won't be participating in Pixar's Disney won't be participating in Pixar's future successes. [laughter] future successes. [laughter] future successes. [laughter] &gt;&gt; Classic Steve Jobs. &gt;&gt; Classic Steve Jobs. &gt;&gt; Classic Steve Jobs. &gt;&gt; That is definitely written by Steve. &gt;&gt; That is definitely written by Steve. &gt;&gt; That is definitely written by Steve. Personally, Personally, Personally, &gt;&gt; definitely written by Steve. &gt;&gt; definitely written by Steve. &gt;&gt; definitely written by Steve. &gt;&gt; The deal will be up after Pixar finishes &gt;&gt; The deal will be up after Pixar finishes &gt;&gt; The deal will be up after Pixar finishes out the contract with The Incredibles in out the contract with The Incredibles in out the contract with The Incredibles in 2004 and Cars in 2005. Pixar is actively 2004 and Cars in 2005. Pixar is actively 2004 and Cars in 2005. Pixar is actively in talks with other Hollywood studios. in talks with other Hollywood studios. in talks with other Hollywood studios. They think at this point they just need They think at this point they just need They think at this point they just need a distributor. Disney actually does a distributor. Disney actually does a distributor. Disney actually does start a new studio inside the company start a new studio inside the company start a new studio inside the company called Circle 7 Animation that will be called Circle 7 Animation that will be called Circle 7 Animation that will be tasked with developing right away Toy tasked with developing right away Toy tasked with developing right away Toy Story 3, Monsters Inc. 2, and Finding Story 3, Monsters Inc. 2, and Finding Story 3, Monsters Inc. 2, and Finding Nemo 2. Nemo 2. Nemo 2. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; I think they had actually done work on &gt;&gt; I think they had actually done work on &gt;&gt; I think they had actually done work on Toy Story 3. Toy Story 3. Toy Story 3. &gt;&gt; Man, you can bet that that is uh buried &gt;&gt; Man, you can bet that that is uh buried &gt;&gt; Man, you can bet that that is uh buried pretty deep in the vault these days. pretty deep in the vault these days. pretty deep in the vault these days. &gt;&gt; Yes. So, all this happens in the last &gt;&gt; Yes. So, all this happens in the last &gt;&gt; Yes. So, all this happens in the last breaths of the Eisner administration. breaths of the Eisner administration. breaths of the Eisner administration. &gt;&gt; Yeah. This is part of the backdrop &gt;&gt; Yeah. This is part of the backdrop &gt;&gt; Yeah. This is part of the backdrop happening during the Save Disney happening during the Save Disney happening during the Save Disney campaign, the Comcast offer, the campaign, the Comcast offer, the campaign, the Comcast offer, the shareholder proxy vote, the CEO search. shareholder proxy vote, the CEO search. shareholder proxy vote, the CEO search. &gt;&gt; In fact, in that earnings call that blew &gt;&gt; In fact, in that earnings call that blew &gt;&gt; In fact, in that earnings call that blew the doors off. the doors off. the doors off. &gt;&gt; Yeah. It wasn't just Pirates of the &gt;&gt; Yeah. It wasn't just Pirates of the &gt;&gt; Yeah. It wasn't just Pirates of the Caribbean, it was Nemo. Caribbean, it was Nemo. Caribbean, it was Nemo. &gt;&gt; Exactly. Exactly. Both of those movies &gt;&gt; Exactly. Exactly. Both of those movies &gt;&gt; Exactly. Exactly. Both of those movies opened in that quarter. opened in that quarter. opened in that quarter. &gt;&gt; Yep. So, this brings us back to Bob &gt;&gt; Yep. So, this brings us back to Bob &gt;&gt; Yep. So, this brings us back to Bob Iger's phone call to Steve and his Iger's phone call to Steve and his Iger's phone call to Steve and his conviction that Pixar needed to come in conviction that Pixar needed to come in conviction that Pixar needed to come in and be part of Disney and not just be and be part of Disney and not just be and be part of Disney and not just be owned by Disney, but take over Disney owned by Disney, but take over Disney owned by Disney, but take over Disney animation, which is a crazy call to get animation, which is a crazy call to get animation, which is a crazy call to get if you're Steve Jobs, right? Like, hey, if you're Steve Jobs, right? Like, hey, if you're Steve Jobs, right? Like, hey, my predecessor burned the bridge. I'd my predecessor burned the bridge. I'd my predecessor burned the bridge. I'd like to buy you. I'm basically open to like to buy you. I'm basically open to like to buy you. I'm basically open to any price. And also, I would like you any price. And also, I would like you any price. And also, I would like you guys to come and take over the core guys to come and take over the core guys to come and take over the core business that we operate, the most business that we operate, the most business that we operate, the most prestigious animation studio in the prestigious animation studio in the prestigious animation studio in the world. We're waving the white flag. world. We're waving the white flag. world. We're waving the white flag. We've lost. Please come in here and take We've lost. Please come in here and take We've lost. Please come in here and take over and fix this. over and fix this. over and fix this. &gt;&gt; Yep. And I think Steve is so surprised &gt;&gt; Yep. And I think Steve is so surprised &gt;&gt; Yep. And I think Steve is so surprised that it opens the door. And it leads to that it opens the door. And it leads to that it opens the door. And it leads to this great relationship between the two this great relationship between the two this great relationship between the two of them. Once again, just like Bob made of them. Once again, just like Bob made of them. Once again, just like Bob made peace with Roy and instantly fixed that peace with Roy and instantly fixed that peace with Roy and instantly fixed that relationship, he pretty much instantly relationship, he pretty much instantly relationship, he pretty much instantly fixes the Steve Jobs relationship. fixes the Steve Jobs relationship. fixes the Steve Jobs relationship. &gt;&gt; So listeners, we talked to Bob Iger as &gt;&gt; So listeners, we talked to Bob Iger as &gt;&gt; So listeners, we talked to Bob Iger as part of the prep we were doing for this part of the prep we were doing for this part of the prep we were doing for this episode. Bob had this idea and before he episode. Bob had this idea and before he episode. Bob had this idea and before he called Steve, he went to the the board called Steve, he went to the the board called Steve, he went to the the board and said, "Hey, can I have authorization and said, "Hey, can I have authorization and said, "Hey, can I have authorization to like open a conversation with Steve to like open a conversation with Steve to like open a conversation with Steve Jobs about buying Pixar?" And he said Jobs about buying Pixar?" And he said Jobs about buying Pixar?" And he said that it was so unthinkable and such a that it was so unthinkable and such a that it was so unthinkable and such a surprise to the whole board that they surprise to the whole board that they surprise to the whole board that they forgot to say no. forgot to say no. forgot to say no. &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] that everyone was just like, "Uh, sure. that everyone was just like, "Uh, sure. that everyone was just like, "Uh, sure. Call him." Because they thought there Call him." Because they thought there Call him." Because they thought there was no chance that it could possibly was no chance that it could possibly was no chance that it could possibly result in Steve saying yes. result in Steve saying yes. result in Steve saying yes. &gt;&gt; So Bob calls Steve back and floats this &gt;&gt; So Bob calls Steve back and floats this &gt;&gt; So Bob calls Steve back and floats this idea. Disney will buy Pixar, keep it idea. Disney will buy Pixar, keep it idea. Disney will buy Pixar, keep it fully intact as an independent studio up fully intact as an independent studio up fully intact as an independent studio up in the Bay Area, its own email in the Bay Area, its own email in the Bay Area, its own email addresses, its own culture. Nothing will addresses, its own culture. Nothing will addresses, its own culture. Nothing will change. John and Ed will still run it. change. John and Ed will still run it. change. John and Ed will still run it. and they'll also commute down to LA two and they'll also commute down to LA two and they'll also commute down to LA two days a week and take over and run Disney days a week and take over and run Disney days a week and take over and run Disney animation. animation. animation. &gt;&gt; And interestingly, Iger also said, "Hey, &gt;&gt; And interestingly, Iger also said, "Hey, &gt;&gt; And interestingly, Iger also said, "Hey, Lacer and and Catmull, you can also tell Lacer and and Catmull, you can also tell Lacer and and Catmull, you can also tell us you think Disney animation is us you think Disney animation is us you think Disney animation is unrescuable or that you think that you'd unrescuable or that you think that you'd unrescuable or that you think that you'd kill both things by splitting your time kill both things by splitting your time kill both things by splitting your time and you can just tell us you want to and you can just tell us you want to and you can just tell us you want to shut down Disney animation and instead shut down Disney animation and instead shut down Disney animation and instead Pixar will just become our one studio." Pixar will just become our one studio." Pixar will just become our one studio." Yeah. and Ler and Catmill have this like Yeah. and Ler and Catmill have this like Yeah. and Ler and Catmill have this like we couldn't possibly do that. Like we couldn't possibly do that. Like we couldn't possibly do that. Like Disney animation is so important to Disney animation is so important to Disney animation is so important to where we all came from in the world and where we all came from in the world and where we all came from in the world and they fly down and they meet with people they fly down and they meet with people they fly down and they meet with people and they see oh there's actually great and they see oh there's actually great and they see oh there's actually great talent here. They're just not being led talent here. They're just not being led talent here. They're just not being led well and we think we can apply our well and we think we can apply our well and we think we can apply our process and institute a brain trust and process and institute a brain trust and process and institute a brain trust and change the physical construction of the change the physical construction of the change the physical construction of the building and bring in the Pixar way and building and bring in the Pixar way and building and bring in the Pixar way and make this great again. And they do. I make this great again. And they do. I make this great again. And they do. I mean, that's the crazy thing is that it mean, that's the crazy thing is that it mean, that's the crazy thing is that it was John and Ed's option to look at the was John and Ed's option to look at the was John and Ed's option to look at the enemy and, you know, chop off their enemy and, you know, chop off their enemy and, you know, chop off their head. And instead, they said, "No, no, head. And instead, they said, "No, no, head. And instead, they said, "No, no, no. We're going to come in there and no. We're going to come in there and no. We're going to come in there and we're going to we're going to make this we're going to we're going to make this we're going to we're going to make this thing great." thing great." thing great." &gt;&gt; Yeah. So, pretty quickly, they come to &gt;&gt; Yeah. So, pretty quickly, they come to &gt;&gt; Yeah. So, pretty quickly, they come to terms on a deal. $7.4 billion in Disney terms on a deal. $7.4 billion in Disney terms on a deal. $7.4 billion in Disney stock, newly issued Disney stock, which stock, newly issued Disney stock, which stock, newly issued Disney stock, which will make Steve Jobs the largest will make Steve Jobs the largest will make Steve Jobs the largest shareholder in Disney. shareholder in Disney. shareholder in Disney. &gt;&gt; 7%. &gt;&gt; 7%. &gt;&gt; 7%. &gt;&gt; Yep. I think it was a 7.7% &gt;&gt; Yep. I think it was a 7.7% &gt;&gt; Yep. I think it was a 7.7% &gt;&gt; Wow. stake in the company and he'll join &gt;&gt; Wow. stake in the company and he'll join &gt;&gt; Wow. stake in the company and he'll join the board the board the board &gt;&gt; much larger than the entire Disney &gt;&gt; much larger than the entire Disney &gt;&gt; much larger than the entire Disney family put together by this point. family put together by this point. family put together by this point. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. So, it's all done. Both boards approve So, it's all done. Both boards approve So, it's all done. Both boards approve the deal. They're ready to announce it. the deal. They're ready to announce it. the deal. They're ready to announce it. Bob flies up to Emeryville to the Pixar Bob flies up to Emeryville to the Pixar Bob flies up to Emeryville to the Pixar campus the morning of the announcement. campus the morning of the announcement. campus the morning of the announcement. And before the official time when And before the official time when And before the official time when they're going to announce the deal, meet they're going to announce the deal, meet they're going to announce the deal, meet with the whole company, Steve comes up with the whole company, Steve comes up with the whole company, Steve comes up to Bob and says, "Let's take a walk on to Bob and says, "Let's take a walk on to Bob and says, "Let's take a walk on the Pixar campus, just the two of us." the Pixar campus, just the two of us." the Pixar campus, just the two of us." And walk for a bit, they sit down on a And walk for a bit, they sit down on a And walk for a bit, they sit down on a bench, and Steve says, "I have to tell bench, and Steve says, "I have to tell bench, and Steve says, "I have to tell you something, and you have to keep it you something, and you have to keep it you something, and you have to keep it confidential. confidential. confidential. My cancer is back and I don't know how My cancer is back and I don't know how My cancer is back and I don't know how much longer I'm going to live." This is much longer I'm going to live." This is much longer I'm going to live." This is January 2006. January 2006. January 2006. right as they're about to announce the right as they're about to announce the right as they're about to announce the acquisition and Steve says, "I thought acquisition and Steve says, "I thought acquisition and Steve says, "I thought about it and I feel I have an obligation about it and I feel I have an obligation about it and I feel I have an obligation to tell you before we announce the deal to tell you before we announce the deal to tell you before we announce the deal and I want to give you an option to back and I want to give you an option to back and I want to give you an option to back out if you want knowing that I'm about out if you want knowing that I'm about out if you want knowing that I'm about to become your largest shareholder and I to become your largest shareholder and I to become your largest shareholder and I don't know what's going to happen to my don't know what's going to happen to my don't know what's going to happen to my stake after I die." stake after I die." stake after I die." Bob says, "Wow, that's a lot [laughter] Bob says, "Wow, that's a lot [laughter] Bob says, "Wow, that's a lot [laughter] &gt;&gt; and I've got 30 minutes." Yeah, I've got &gt;&gt; and I've got 30 minutes." Yeah, I've got &gt;&gt; and I've got 30 minutes." Yeah, I've got 30 minutes to decide 30 minutes to decide 30 minutes to decide &gt;&gt; and I can tell no one &gt;&gt; and I can tell no one &gt;&gt; and I can tell no one &gt;&gt; Steve is ever the negotiator. &gt;&gt; Steve is ever the negotiator. &gt;&gt; Steve is ever the negotiator. [gasps] [gasps] [gasps] Uh but uh he makes the decision Uh but uh he makes the decision Uh but uh he makes the decision that the deal is still on. that the deal is still on. that the deal is still on. But oh man, it's devastating. So Steve But oh man, it's devastating. So Steve But oh man, it's devastating. So Steve would end up living another five and a would end up living another five and a would end up living another five and a half years after this, but he and Bob half years after this, but he and Bob half years after this, but he and Bob and and Apple and then eventually the and and Apple and then eventually the and and Apple and then eventually the rest of the world knows soon it's it's rest of the world knows soon it's it's rest of the world knows soon it's it's just all borrowed time. just all borrowed time. just all borrowed time. And this is why Steve sold Pixar. One of And this is why Steve sold Pixar. One of And this is why Steve sold Pixar. One of the questions that we had going into the the questions that we had going into the the questions that we had going into the research for this episode was, could research for this episode was, could research for this episode was, could Pixar have actually built a full stack Pixar have actually built a full stack Pixar have actually built a full stack like flywheelbased competitor to Disney like flywheelbased competitor to Disney like flywheelbased competitor to Disney if they'd remained independent? I mean, if they'd remained independent? I mean, if they'd remained independent? I mean, they had defeated Disney. Like, they won they had defeated Disney. Like, they won they had defeated Disney. Like, they won on every dimension. And why did they on every dimension. And why did they on every dimension. And why did they sell? And we asked all the Disney people sell? And we asked all the Disney people sell? And we asked all the Disney people this and we asked all the Pixar people this and we asked all the Pixar people this and we asked all the Pixar people this and we asked everyone we could this this and we asked everyone we could this this and we asked everyone we could this question because from the business question because from the business question because from the business strategy lens strategy lens strategy lens they have what it takes. they have what it takes. they have what it takes. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Like they have the core IP. They have &gt;&gt; Like they have the core IP. They have &gt;&gt; Like they have the core IP. They have movies. They could slowly move into movies. They could slowly move into movies. They could slowly move into theme parks. After the five films they theme parks. After the five films they theme parks. After the five films they would have control of their own sequel would have control of their own sequel would have control of their own sequel and merch rights and they could do it. and merch rights and they could do it. and merch rights and they could do it. And it took us talking to And it took us talking to And it took us talking to all the people involved to realize no, all the people involved to realize no, all the people involved to realize no, there was no chance. Yeah. Pixar never there was no chance. Yeah. Pixar never there was no chance. Yeah. Pixar never ever ever would have done what it takes ever ever would have done what it takes ever ever would have done what it takes to become Disney. So I think there's two to become Disney. So I think there's two to become Disney. So I think there's two reasons. reasons. reasons. &gt;&gt; One, &gt;&gt; One, &gt;&gt; One, Pixar Pixar Pixar is what Walt wanted the Burbank is what Walt wanted the Burbank is what Walt wanted the Burbank animation campus to be when he built it animation campus to be when he built it animation campus to be when he built it in 1940. It is a utopian in 1940. It is a utopian in 1940. It is a utopian creative artist paradise. creative artist paradise. creative artist paradise. There are no suits at Pixar. There are no suits at Pixar. There are no suits at Pixar. It's all about the stories and the art It's all about the stories and the art It's all about the stories and the art and the films. and the films. and the films. &gt;&gt; And amazingly, by getting acquired, they &gt;&gt; And amazingly, by getting acquired, they &gt;&gt; And amazingly, by getting acquired, they kept it that way. Yes. I mean, there kept it that way. Yes. I mean, there kept it that way. Yes. I mean, there were no suits in the early days, but all were no suits in the early days, but all were no suits in the early days, but all the suits are in Burbank. It just gets the suits are in Burbank. It just gets the suits are in Burbank. It just gets to be creative in in Emeryville. It's to be creative in in Emeryville. It's to be creative in in Emeryville. It's this crazy course of history that this crazy course of history that this crazy course of history that allowed this like treasure to exist in allowed this like treasure to exist in allowed this like treasure to exist in Emeryville in a way that it couldn't at Emeryville in a way that it couldn't at Emeryville in a way that it couldn't at Disney. Like it didn't work at Disney Disney. Like it didn't work at Disney Disney. Like it didn't work at Disney Animation in Burbank to make it this Animation in Burbank to make it this Animation in Burbank to make it this utopian paradise because it had to be a utopian paradise because it had to be a utopian paradise because it had to be a business too. business too. business too. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; The reason that could happen before they &gt;&gt; The reason that could happen before they &gt;&gt; The reason that could happen before they sold to Disney was Steve Jobs, sold to Disney was Steve Jobs, sold to Disney was Steve Jobs, &gt;&gt; right? &gt;&gt; right? &gt;&gt; right? &gt;&gt; Like it was only Steve that could have &gt;&gt; Like it was only Steve that could have &gt;&gt; Like it was only Steve that could have done it. And and I do think if Steve had done it. And and I do think if Steve had done it. And and I do think if Steve had lived and if he had felt he had the lived and if he had felt he had the lived and if he had felt he had the energy to do it alongside Apple or maybe energy to do it alongside Apple or maybe energy to do it alongside Apple or maybe who knows even merged the two companies, who knows even merged the two companies, who knows even merged the two companies, he could have done it. He could have he could have done it. He could have he could have done it. He could have built a Disney competitor, but he knew built a Disney competitor, but he knew built a Disney competitor, but he knew he was he was going to die, he was he was going to die, he was he was going to die, &gt;&gt; right? But without Steve, you could &gt;&gt; right? But without Steve, you could &gt;&gt; right? But without Steve, you could imagine the rest of the Pixar folks imagine the rest of the Pixar folks imagine the rest of the Pixar folks looking at each other like, who of us looking at each other like, who of us looking at each other like, who of us has any interest in doing that? I just has any interest in doing that? I just has any interest in doing that? I just want to keep making unbelievably good want to keep making unbelievably good want to keep making unbelievably good stories and delighting audiences and stories and delighting audiences and stories and delighting audiences and making the very best feature films we making the very best feature films we making the very best feature films we can can can &gt;&gt; which does not make a Disney competitor. &gt;&gt; which does not make a Disney competitor. &gt;&gt; which does not make a Disney competitor. &gt;&gt; Yep. So Pixar had to find a home. And &gt;&gt; Yep. So Pixar had to find a home. And &gt;&gt; Yep. So Pixar had to find a home. And &gt;&gt; in particular, Disney is the home. This &gt;&gt; in particular, Disney is the home. This &gt;&gt; in particular, Disney is the home. This is the thing that brings it full circle. is the thing that brings it full circle. is the thing that brings it full circle. &gt;&gt; The Walt era of animation had a &gt;&gt; The Walt era of animation had a &gt;&gt; The Walt era of animation had a spiritual successor which was the Disney spiritual successor which was the Disney spiritual successor which was the Disney Renaissance which had a spiritual Renaissance which had a spiritual Renaissance which had a spiritual successor that was Pixar. Yes, successor that was Pixar. Yes, successor that was Pixar. Yes, absolutely. And this leads to the absolutely. And this leads to the absolutely. And this leads to the revival of Disney animation. Princess revival of Disney animation. Princess revival of Disney animation. Princess and the Frog, Tangled, Frozen, Big Hero and the Frog, Tangled, Frozen, Big Hero and the Frog, Tangled, Frozen, Big Hero 6, Zootopia, Moana, 6, Zootopia, Moana, 6, Zootopia, Moana, all Pixar era. Meanwhile, the hits just all Pixar era. Meanwhile, the hits just all Pixar era. Meanwhile, the hits just keep on rolling at Pixar. Cars, keep on rolling at Pixar. Cars, keep on rolling at Pixar. Cars, Ratatouille. That was like a big thing Ratatouille. That was like a big thing Ratatouille. That was like a big thing before the acquisition. Word had gotten before the acquisition. Word had gotten before the acquisition. Word had gotten out that Pixar was working on a movie out that Pixar was working on a movie out that Pixar was working on a movie about rats making food. about rats making food. about rats making food. &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] &gt;&gt; Yeah. [laughter] Who could do that? What a terrible idea. Who could do that? What a terrible idea. Who could do that? What a terrible idea. Oh, amazing movie. Wall-E up, Toy Story Oh, amazing movie. Wall-E up, Toy Story Oh, amazing movie. Wall-E up, Toy Story 3, Brave, Inside Out, just the best. So, 3, Brave, Inside Out, just the best. So, 3, Brave, Inside Out, just the best. So, years later, after many of these movies years later, after many of these movies years later, after many of these movies come out, during the months before Steve come out, during the months before Steve come out, during the months before Steve died, he and his wife Lorraine have one died, he and his wife Lorraine have one died, he and his wife Lorraine have one last dinner with Bob Iger and his wife last dinner with Bob Iger and his wife last dinner with Bob Iger and his wife Willow. And during it, Steve raises a Willow. And during it, Steve raises a Willow. And during it, Steve raises a glass and a toast to Bob and them glass and a toast to Bob and them glass and a toast to Bob and them together and says, "Look what we did. we together and says, "Look what we did. we together and says, "Look what we did. we saved two companies. saved two companies. saved two companies. The first time I read that years ago, I The first time I read that years ago, I The first time I read that years ago, I thought, I don't really get it. Like, I thought, I don't really get it. Like, I thought, I don't really get it. Like, I get that it saved Disney, but how did it get that it saved Disney, but how did it get that it saved Disney, but how did it save Pixar? And then now doing the full save Pixar? And then now doing the full save Pixar? And then now doing the full research and understanding research and understanding research and understanding Steve was going to die and that Pixar Steve was going to die and that Pixar Steve was going to die and that Pixar really couldn't continue independently really couldn't continue independently really couldn't continue independently without him. And that's how they saved without him. And that's how they saved without him. And that's how they saved two companies together. It's just such two companies together. It's just such two companies together. It's just such an incredible story. an incredible story. an incredible story. &gt;&gt; Yeah, it is. And to validate the Disney &gt;&gt; Yeah, it is. And to validate the Disney &gt;&gt; Yeah, it is. And to validate the Disney animation thing, I mean, I really animation thing, I mean, I really animation thing, I mean, I really wondered about this. How did Disney wondered about this. How did Disney wondered about this. How did Disney animation turn into that hit factory? animation turn into that hit factory? animation turn into that hit factory? They're not Pixar movies, but like they They're not Pixar movies, but like they They're not Pixar movies, but like they they rhyme so closely. We were uh they rhyme so closely. We were uh they rhyme so closely. We were uh talking with Kristen Bell to prep for talking with Kristen Bell to prep for talking with Kristen Bell to prep for this episode, who of course plays Anna this episode, who of course plays Anna this episode, who of course plays Anna in Frozen, and she very much confirmed in Frozen, and she very much confirmed in Frozen, and she very much confirmed the way that Disney animation works the way that Disney animation works the way that Disney animation works today is similar to that Pixar blueprint today is similar to that Pixar blueprint today is similar to that Pixar blueprint from the early '90s. It's an iterative from the early '90s. It's an iterative from the early '90s. It's an iterative process, all about making sure that process, all about making sure that process, all about making sure that you're feeling, if the story is landing you're feeling, if the story is landing you're feeling, if the story is landing when you're looking at the early reels when you're looking at the early reels when you're looking at the early reels and the scripts, this collaborative way and the scripts, this collaborative way and the scripts, this collaborative way to take the notes without ego. Having a to take the notes without ego. Having a to take the notes without ego. Having a willingness to stop, take apart the willingness to stop, take apart the willingness to stop, take apart the story, rebuild it. if it's not working. story, rebuild it. if it's not working. story, rebuild it. if it's not working. Her perspective was like this actually Her perspective was like this actually Her perspective was like this actually has a lot to do with why Disney the has a lot to do with why Disney the has a lot to do with why Disney the company works. company works. company works. &gt;&gt; Yeah. I mean, super validating to hear &gt;&gt; Yeah. I mean, super validating to hear &gt;&gt; Yeah. I mean, super validating to hear that now what is it 20 years after the that now what is it 20 years after the that now what is it 20 years after the acquisition? acquisition? acquisition? &gt;&gt; Yeah. So, if we sit here today and look &gt;&gt; Yeah. So, if we sit here today and look &gt;&gt; Yeah. So, if we sit here today and look back at the Pixar acquisition, it's just back at the Pixar acquisition, it's just back at the Pixar acquisition, it's just such an obvious giant giant success. I such an obvious giant giant success. I such an obvious giant giant success. I mean the the first thing is it clearly mean the the first thing is it clearly mean the the first thing is it clearly saved Disney animation which if you saved Disney animation which if you saved Disney animation which if you believe the thesis that that's the believe the thesis that that's the believe the thesis that that's the center of everything good and durable at center of everything good and durable at center of everything good and durable at the company then great pencils down easy the company then great pencils down easy the company then great pencils down easy answer they paid 7.4 billion 6.4 billion answer they paid 7.4 billion 6.4 billion answer they paid 7.4 billion 6.4 billion when you back out the billion of cash when you back out the billion of cash when you back out the billion of cash but effectively 6.4 billion is the but effectively 6.4 billion is the but effectively 6.4 billion is the hurdle that you're trying to overcome. hurdle that you're trying to overcome. hurdle that you're trying to overcome. There's a couple ways to slice it. There's a couple ways to slice it. There's a couple ways to slice it. David, you and I did the Finding Nemo David, you and I did the Finding Nemo David, you and I did the Finding Nemo exercise earlier. There's another exercise earlier. There's another exercise earlier. There's another exercise you can run kind of going exercise you can run kind of going exercise you can run kind of going franchise by franchise. Toy Story alone franchise by franchise. Toy Story alone franchise by franchise. Toy Story alone did over 4 billion at the box office, did over 4 billion at the box office, did over 4 billion at the box office, which means 1 and a.5 to 2 billion to which means 1 and a.5 to 2 billion to which means 1 and a.5 to 2 billion to Disney. 30 billion in retail sales so Disney. 30 billion in retail sales so Disney. 30 billion in retail sales so far, lifetime of all Toy Story consumer far, lifetime of all Toy Story consumer far, lifetime of all Toy Story consumer goods. So with Disney's 5% licensing fee goods. So with Disney's 5% licensing fee goods. So with Disney's 5% licensing fee on that, that's another 2 billion. So on that, that's another 2 billion. So on that, that's another 2 billion. So that's $3.5 billion conservatively in that's $3.5 billion conservatively in that's $3.5 billion conservatively in very high margin revenue to Disney very high margin revenue to Disney very high margin revenue to Disney before you even start thinking about the before you even start thinking about the before you even start thinking about the contribution to Disney parks. contribution to Disney parks. contribution to Disney parks. &gt;&gt; Yep. They have 19 attractions across &gt;&gt; Yep. They have 19 attractions across &gt;&gt; Yep. They have 19 attractions across four lands with two hotels or doing any four lands with two hotels or doing any four lands with two hotels or doing any attribution from Disney Plus revenue or attribution from Disney Plus revenue or attribution from Disney Plus revenue or any of the licensing deals that they did any of the licensing deals that they did any of the licensing deals that they did for a long time with Netflix. for a long time with Netflix. for a long time with Netflix. &gt;&gt; Yeah. Or man, any of that sweet, sweet &gt;&gt; Yeah. Or man, any of that sweet, sweet &gt;&gt; Yeah. Or man, any of that sweet, sweet home video revenue back in the day from home video revenue back in the day from home video revenue back in the day from Toy Story 1 and Toy Story 2. So you get Toy Story 1 and Toy Story 2. So you get Toy Story 1 and Toy Story 2. So you get at least half, probably 2/3 the purchase at least half, probably 2/3 the purchase at least half, probably 2/3 the purchase price back from the Toy Story franchise price back from the Toy Story franchise price back from the Toy Story franchise alone, even without all of that alone, even without all of that alone, even without all of that ancillary sort of flywheel revenue. But ancillary sort of flywheel revenue. But ancillary sort of flywheel revenue. But really here, I think is the most useful really here, I think is the most useful really here, I think is the most useful way to justify it. We've heard that the way to justify it. We've heard that the way to justify it. We've heard that the vast majority of the top 15 movies vast majority of the top 15 movies vast majority of the top 15 movies viewed every week on Disney Plus are viewed every week on Disney Plus are viewed every week on Disney Plus are either Pixar or Disney animation. Not either Pixar or Disney animation. Not either Pixar or Disney animation. Not live action, not Star Wars, not the live action, not Star Wars, not the live action, not Star Wars, not the Avengers, the stuff that kids watch over Avengers, the stuff that kids watch over Avengers, the stuff that kids watch over and over. And those Disney animation and over. And those Disney animation and over. And those Disney animation movies, all the top ones movies, all the top ones movies, all the top ones &gt;&gt; that they're actually watching, kids &gt;&gt; that they're actually watching, kids &gt;&gt; that they're actually watching, kids these days are the post205 these days are the post205 these days are the post205 Catmull and Lacader era films. Kids are Catmull and Lacader era films. Kids are Catmull and Lacader era films. Kids are not sitting there binging Snow White on not sitting there binging Snow White on not sitting there binging Snow White on repeat. They're watching Frozen and repeat. They're watching Frozen and repeat. They're watching Frozen and Encanto and Moana and Zootopia. And this Encanto and Moana and Zootopia. And this Encanto and Moana and Zootopia. And this is on Disney Plus, which is the biggest is on Disney Plus, which is the biggest is on Disney Plus, which is the biggest strategic bet that the company has made strategic bet that the company has made strategic bet that the company has made in the last decade. I mean, all of their in the last decade. I mean, all of their in the last decade. I mean, all of their chips are there for the future of the chips are there for the future of the chips are there for the future of the company. Yep. No question. Acquisition company. Yep. No question. Acquisition company. Yep. No question. Acquisition absolutely saved the company. So after absolutely saved the company. So after absolutely saved the company. So after Pixar, [laughter] Pixar, [laughter] Pixar, [laughter] Bob and the Disney board are like, "Uh, Bob and the Disney board are like, "Uh, Bob and the Disney board are like, "Uh, well, that worked well. [laughter] well, that worked well. [laughter] well, that worked well. [laughter] What can we do next?" What can we do next?" What can we do next?" &gt;&gt; And that sure is in line with Bob's &gt;&gt; And that sure is in line with Bob's &gt;&gt; And that sure is in line with Bob's point number one in his three-point point number one in his three-point point number one in his three-point strategy of strategy of strategy of &gt;&gt; absolutely &gt;&gt; absolutely &gt;&gt; absolutely &gt;&gt; making the very best content. But before &gt;&gt; making the very best content. But before &gt;&gt; making the very best content. But before we talk about the other two of Bob's big we talk about the other two of Bob's big we talk about the other two of Bob's big three acquisitions, Marvel and three acquisitions, Marvel and three acquisitions, Marvel and Lucasfilm, now is a great time to thank Lucasfilm, now is a great time to thank Lucasfilm, now is a great time to thank our friends at Anthropic, the makers of our friends at Anthropic, the makers of our friends at Anthropic, the makers of Claude. Yes. And today we are going to Claude. Yes. And today we are going to Claude. Yes. And today we are going to share how Claude saved us on recording share how Claude saved us on recording share how Claude saved us on recording day a couple months ago on our Disney day a couple months ago on our Disney day a couple months ago on our Disney part one episode. So David, do you want part one episode. So David, do you want part one episode. So David, do you want to set the scene? to set the scene? to set the scene? &gt;&gt; Yes. So, we were in the middle of &gt;&gt; Yes. So, we were in the middle of &gt;&gt; Yes. So, we were in the middle of recording part one, and recording days recording part one, and recording days recording part one, and recording days are always very time crunched. are always very time crunched. are always very time crunched. [laughter] The whole thing feels like a [laughter] The whole thing feels like a [laughter] The whole thing feels like a highwire act. And right when we got to highwire act. And right when we got to highwire act. And right when we got to Snow White's box office numbers, we Snow White's box office numbers, we Snow White's box office numbers, we realized that a bunch of authoritative realized that a bunch of authoritative realized that a bunch of authoritative sources listed $8 million as the revenue sources listed $8 million as the revenue sources listed $8 million as the revenue for Snow White's box office and its for Snow White's box office and its for Snow White's box office and its original release. But we also had original release. But we also had original release. But we also had Disney's actual 1940 financial Disney's actual 1940 financial Disney's actual 1940 financial statements in front of us, and they statements in front of us, and they statements in front of us, and they showed 4.5 million. we'd immediately showed 4.5 million. we'd immediately showed 4.5 million. we'd immediately thought, well, those can't both be right thought, well, those can't both be right thought, well, those can't both be right and started reconciling the two numbers. and started reconciling the two numbers. and started reconciling the two numbers. We couldn't and so we had to pause We couldn't and so we had to pause We couldn't and so we had to pause recording. recording. recording. &gt;&gt; So, this was actually the day that Fable &gt;&gt; So, this was actually the day that Fable &gt;&gt; So, this was actually the day that Fable 5 came out. So, while David and I were 5 came out. So, while David and I were 5 came out. So, while David and I were trying to sort through, I figured I'd trying to sort through, I figured I'd trying to sort through, I figured I'd let Claude kind of give it a shot. We let Claude kind of give it a shot. We let Claude kind of give it a shot. We uploaded photos we took of the original uploaded photos we took of the original uploaded photos we took of the original financials along with another annual financials along with another annual financials along with another annual report that we had showing how the report that we had showing how the report that we had showing how the revenue breakdowns actually worked and revenue breakdowns actually worked and revenue breakdowns actually worked and Claude untangled the whole thing for us. Claude untangled the whole thing for us. Claude untangled the whole thing for us. There are actually two different ways to There are actually two different ways to There are actually two different ways to report movie revenue. Gross box office, report movie revenue. Gross box office, report movie revenue. Gross box office, which was that 8 million, and film which was that 8 million, and film which was that 8 million, and film rentals, which is Disney and the rentals, which is Disney and the rentals, which is Disney and the distributor share after the theaters distributor share after the theaters distributor share after the theaters take their cut. That is the $4.5 million take their cut. That is the $4.5 million take their cut. That is the $4.5 million number. All the sources we found saying number. All the sources we found saying number. All the sources we found saying 8 million in revenue to Disney were 8 million in revenue to Disney were 8 million in revenue to Disney were actually wrong, and Claude figured that actually wrong, and Claude figured that actually wrong, and Claude figured that out, out, out, &gt;&gt; which is what led us develop novel point &gt;&gt; which is what led us develop novel point &gt;&gt; which is what led us develop novel point that we hadn't seen anywhere else. Snow that we hadn't seen anywhere else. Snow that we hadn't seen anywhere else. Snow White's profits alone couldn't pay for White's profits alone couldn't pay for White's profits alone couldn't pay for the Burbank animation campus. Walt had the Burbank animation campus. Walt had the Burbank animation campus. Walt had to go borrow more money, which created to go borrow more money, which created to go borrow more money, which created the cascading set of events that we the cascading set of events that we the cascading set of events that we talked about in the rest of the episode. talked about in the rest of the episode. talked about in the rest of the episode. So, 20 minutes later, we were back to So, 20 minutes later, we were back to So, 20 minutes later, we were back to recording and we were able to finish the recording and we were able to finish the recording and we were able to finish the episode both on time and be factually episode both on time and be factually episode both on time and be factually correct. uh which is the clearest correct. uh which is the clearest correct. uh which is the clearest example I've ever personally had of example I've ever personally had of example I've ever personally had of Claude being able to solve a problem in Claude being able to solve a problem in Claude being able to solve a problem in the moment using analysis from primary the moment using analysis from primary the moment using analysis from primary sources that we couldn't find anywhere sources that we couldn't find anywhere sources that we couldn't find anywhere else in the middle of a live recording else in the middle of a live recording else in the middle of a live recording day within minutes. So listeners, if you day within minutes. So listeners, if you day within minutes. So listeners, if you want to try out Fable now or you just want to try out Fable now or you just want to try out Fable now or you just want to learn more, go to want to learn more, go to want to learn more, go to claude.ai/acquired claude.ai/acquired claude.ai/acquired and uh if you're inquiring for your team and uh if you're inquiring for your team and uh if you're inquiring for your team or for API use, just tell them that Ben or for API use, just tell them that Ben or for API use, just tell them that Ben and David sent you. All right, so David and David sent you. All right, so David and David sent you. All right, so David Star Wars Star Wars Star Wars Star Wars and Marvel. Well, Marvel is Star Wars and Marvel. Well, Marvel is Star Wars and Marvel. Well, Marvel is first. So, in 2009, Disney acquires first. So, in 2009, Disney acquires first. So, in 2009, Disney acquires Marvel for $4 billion. Marvel for $4 billion. Marvel for $4 billion. This was like highly contrarian at the This was like highly contrarian at the This was like highly contrarian at the time. People thought you're spending $4 time. People thought you're spending $4 time. People thought you're spending $4 billion for a comic book company. The billion for a comic book company. The billion for a comic book company. The Marvel movies had already started to Marvel movies had already started to Marvel movies had already started to come out. Iron Man had come out. I think come out. Iron Man had come out. I think come out. Iron Man had come out. I think a couple others that have been hits, but a couple others that have been hits, but a couple others that have been hits, but um nobody could see what Marvel would um nobody could see what Marvel would um nobody could see what Marvel would end up becoming under Disney. end up becoming under Disney. end up becoming under Disney. &gt;&gt; Yeah, superhero movies were not &gt;&gt; Yeah, superhero movies were not &gt;&gt; Yeah, superhero movies were not obviously formulaically going to work. obviously formulaically going to work. obviously formulaically going to work. Like there had been Batman's many years Like there had been Batman's many years Like there had been Batman's many years before. There had been Superman's many before. There had been Superman's many before. There had been Superman's many years before. There had recently been a years before. There had recently been a years before. There had recently been a Spider-Man, which actually was licensed Spider-Man, which actually was licensed Spider-Man, which actually was licensed to Sony. before pursuing this strategy, to Sony. before pursuing this strategy, to Sony. before pursuing this strategy, Marvel actually licensed out their their Marvel actually licensed out their their Marvel actually licensed out their their best characters to other best characters to other best characters to other &gt;&gt; studios &gt;&gt; studios &gt;&gt; studios &gt;&gt; studios. And so the acquisition was &gt;&gt; studios. And so the acquisition was &gt;&gt; studios. And so the acquisition was weird cuz it was kind of buying all weird cuz it was kind of buying all weird cuz it was kind of buying all these leftover characters. You couldn't these leftover characters. You couldn't these leftover characters. You couldn't use X-Men cuz Fox already had that. You use X-Men cuz Fox already had that. You use X-Men cuz Fox already had that. You couldn't use Spider-Man cuz Sony already couldn't use Spider-Man cuz Sony already couldn't use Spider-Man cuz Sony already had that. They already made a a a film had that. They already made a a a film had that. They already made a a a film out of Iron Man. And the big dogs, out of Iron Man. And the big dogs, out of Iron Man. And the big dogs, Superman and Batman, were over at DC. Superman and Batman, were over at DC. Superman and Batman, were over at DC. So, what are you even buying when you're So, what are you even buying when you're So, what are you even buying when you're buying Marvel? But the team at Marvel buying Marvel? But the team at Marvel buying Marvel? But the team at Marvel Studios and Disney really figured it Studios and Disney really figured it Studios and Disney really figured it out. We're not going to go into all the out. We're not going to go into all the out. We're not going to go into all the details here, but they crafted the details here, but they crafted the details here, but they crafted the Marvel Cinematic Universe in a way that Marvel Cinematic Universe in a way that Marvel Cinematic Universe in a way that became the blueprint for anybody else became the blueprint for anybody else became the blueprint for anybody else who wants to universify their franchise. who wants to universify their franchise. who wants to universify their franchise. this very careful world building of all this very careful world building of all this very careful world building of all these interconnected movies eventually these interconnected movies eventually these interconnected movies eventually culminating in the Avengers movie. The culminating in the Avengers movie. The culminating in the Avengers movie. The first three phases of the Marvel first three phases of the Marvel first three phases of the Marvel Cinematic Universe were really this Cinematic Universe were really this Cinematic Universe were really this franchisebuilding masterclass to behold. franchisebuilding masterclass to behold. franchisebuilding masterclass to behold. By 2025, the Marvel Cinematic Universe By 2025, the Marvel Cinematic Universe By 2025, the Marvel Cinematic Universe has become the most successful film has become the most successful film has become the most successful film franchise in history, generating nearly franchise in history, generating nearly franchise in history, generating nearly 32 billion dollars at the box office. 32 billion dollars at the box office. 32 billion dollars at the box office. That's more than Star Wars. That's more That's more than Star Wars. That's more That's more than Star Wars. That's more than James Bond. Anything else? Now, it than James Bond. Anything else? Now, it than James Bond. Anything else? Now, it helps to have 37 films plus uh helps to have 37 films plus uh helps to have 37 films plus uh &gt;&gt; Yes, they're quite Avengers Endgame, &gt;&gt; Yes, they're quite Avengers Endgame, &gt;&gt; Yes, they're quite Avengers Endgame, which was the second highest grossing which was the second highest grossing which was the second highest grossing film of all time, second only to Avatar, film of all time, second only to Avatar, film of all time, second only to Avatar, I think. I think. I think. &gt;&gt; Yep, I think that's right. &gt;&gt; Yep, I think that's right. &gt;&gt; Yep, I think that's right. &gt;&gt; And it's pretty difficult to estimate &gt;&gt; And it's pretty difficult to estimate &gt;&gt; And it's pretty difficult to estimate the profitability on this cuz there's the profitability on this cuz there's the profitability on this cuz there's too many assumptions you have to bake too many assumptions you have to bake too many assumptions you have to bake in. But it's fair to say there are in. But it's fair to say there are in. But it's fair to say there are singledigit billions in profit from the singledigit billions in profit from the singledigit billions in profit from the box office alone on Marvel movies. And box office alone on Marvel movies. And box office alone on Marvel movies. And then of course there's the consumer then of course there's the consumer then of course there's the consumer products and the park adaptations and products and the park adaptations and products and the park adaptations and actually home video for a while since actually home video for a while since actually home video for a while since those Marvel movies were still the those Marvel movies were still the those Marvel movies were still the Blu-ray era. And then of course part of Blu-ray era. And then of course part of Blu-ray era. And then of course part of the reason people subscribed to Disney the reason people subscribed to Disney the reason people subscribed to Disney Plus. So um Marvel's also been great. Plus. So um Marvel's also been great. Plus. So um Marvel's also been great. &gt;&gt; Yeah, Marvel's also been fantastic. I I &gt;&gt; Yeah, Marvel's also been fantastic. I I &gt;&gt; Yeah, Marvel's also been fantastic. I I think really it was another version of think really it was another version of think really it was another version of the same thesis of Pixar, which was the same thesis of Pixar, which was the same thesis of Pixar, which was there are great stories and storytellers there are great stories and storytellers there are great stories and storytellers here and let's give them a bigger canvas here and let's give them a bigger canvas here and let's give them a bigger canvas to paint on. to paint on. to paint on. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; And it worked incredibly well. &gt;&gt; And it worked incredibly well. &gt;&gt; And it worked incredibly well. Incredibly incredibly well. Incredibly incredibly well. Incredibly incredibly well. &gt;&gt; And then Lucasfilm in 2012 for another &gt;&gt; And then Lucasfilm in 2012 for another &gt;&gt; And then Lucasfilm in 2012 for another $4 billion. I would argue again very $4 billion. I would argue again very $4 billion. I would argue again very different dynamics but a same version of different dynamics but a same version of different dynamics but a same version of the story. Here is the story. Here is the story. Here is one of if not maybe maybe the greatest one of if not maybe maybe the greatest one of if not maybe maybe the greatest story of the last hundred years in story of the last hundred years in story of the last hundred years in humanity. The original Star Wars saga humanity. The original Star Wars saga humanity. The original Star Wars saga &gt;&gt; of mythmaking. &gt;&gt; of mythmaking. &gt;&gt; of mythmaking. &gt;&gt; Of mythmaking. Yeah. And let's give that &gt;&gt; Of mythmaking. Yeah. And let's give that &gt;&gt; Of mythmaking. Yeah. And let's give that a greater canvas to paint on. a greater canvas to paint on. a greater canvas to paint on. &gt;&gt; Yeah. It's pretty interesting reflecting &gt;&gt; Yeah. It's pretty interesting reflecting &gt;&gt; Yeah. It's pretty interesting reflecting back on these what a tear Iger was on of back on these what a tear Iger was on of back on these what a tear Iger was on of identifying tier A+ intellectual identifying tier A+ intellectual identifying tier A+ intellectual property franchises property franchises property franchises that had running room ahead of them and that had running room ahead of them and that had running room ahead of them and building the stable cuz now there Disney building the stable cuz now there Disney building the stable cuz now there Disney owns so much of it that there's not much owns so much of it that there's not much owns so much of it that there's not much left. I mean there's Harry Potter, left. I mean there's Harry Potter, left. I mean there's Harry Potter, there's the Nintendo universe, there are there's the Nintendo universe, there are there's the Nintendo universe, there are a few things left, but I kind of saw a few things left, but I kind of saw a few things left, but I kind of saw this before anyone else. went in with a this before anyone else. went in with a this before anyone else. went in with a bigger checkbook that I think a lot of bigger checkbook that I think a lot of bigger checkbook that I think a lot of people would have been willing to go in people would have been willing to go in people would have been willing to go in with deluded Disney to do it. They these with deluded Disney to do it. They these with deluded Disney to do it. They these were, you know, stock acquisitions or or were, you know, stock acquisitions or or were, you know, stock acquisitions or or many much of it was, many much of it was, many much of it was, &gt;&gt; but now they own these things. It's also &gt;&gt; but now they own these things. It's also &gt;&gt; but now they own these things. It's also fun to sort of speculate on why fun to sort of speculate on why fun to sort of speculate on why Lucasfilm and Marvel were lower price Lucasfilm and Marvel were lower price Lucasfilm and Marvel were lower price tags than Pixar was, like dramatically tags than Pixar was, like dramatically tags than Pixar was, like dramatically lower. Lucasfilm seems easy to me in lower. Lucasfilm seems easy to me in lower. Lucasfilm seems easy to me in that it certainly hasn't generated as that it certainly hasn't generated as that it certainly hasn't generated as much. much. much. &gt;&gt; They didn't have any movies in &gt;&gt; They didn't have any movies in &gt;&gt; They didn't have any movies in production, production, production, &gt;&gt; right? It was certainly right to pay &gt;&gt; right? It was certainly right to pay &gt;&gt; right? It was certainly right to pay less than Pixar. Turns out they should less than Pixar. Turns out they should less than Pixar. Turns out they should have paid well less than whatever they have paid well less than whatever they have paid well less than whatever they were willing to pay for Marvel too were willing to pay for Marvel too were willing to pay for Marvel too because Star Wars just didn't turn out because Star Wars just didn't turn out because Star Wars just didn't turn out to have that much more exploitation to have that much more exploitation to have that much more exploitation ahead of it and frankly they weren't ahead of it and frankly they weren't ahead of it and frankly they weren't done as well. But you know that done as well. But you know that done as well. But you know that &gt;&gt; we'll get to that in a minute. &gt;&gt; we'll get to that in a minute. &gt;&gt; we'll get to that in a minute. &gt;&gt; Yeah. Yeah. Avengers had 37 films and &gt;&gt; Yeah. Yeah. Avengers had 37 films and &gt;&gt; Yeah. Yeah. Avengers had 37 films and there's there's new Star Wars stuff I there's there's new Star Wars stuff I there's there's new Star Wars stuff I like. Andor's unbelievably good. Rogue like. Andor's unbelievably good. Rogue like. Andor's unbelievably good. Rogue One is unbelievably good. But yeah. One is unbelievably good. But yeah. One is unbelievably good. But yeah. &gt;&gt; Yep. So, on the back of these three &gt;&gt; Yep. So, on the back of these three &gt;&gt; Yep. So, on the back of these three acquisitions, the Disney flywheel is acquisitions, the Disney flywheel is acquisitions, the Disney flywheel is revived and soaring again. The core film revived and soaring again. The core film revived and soaring again. The core film characters and stories are back to characters and stories are back to characters and stories are back to all-time heights, not only at Disney all-time heights, not only at Disney all-time heights, not only at Disney animation, but now Pixar, Lucasfilm, and animation, but now Pixar, Lucasfilm, and animation, but now Pixar, Lucasfilm, and Marvel, too. The core of Disney is much Marvel, too. The core of Disney is much Marvel, too. The core of Disney is much bigger and more diverse than it used to bigger and more diverse than it used to bigger and more diverse than it used to be. consumer products. After Frozen be. consumer products. After Frozen be. consumer products. After Frozen comes out, Disney sells three million comes out, Disney sells three million comes out, Disney sells three million Elsa and Anna dresses in the first year Elsa and Anna dresses in the first year Elsa and Anna dresses in the first year after the movies released. By 2015, after the movies released. By 2015, after the movies released. By 2015, Disney is doing over $50 billion a year Disney is doing over $50 billion a year Disney is doing over $50 billion a year in gross sales at retail of merchandise, in gross sales at retail of merchandise, in gross sales at retail of merchandise, up almost 2x over the past 5 years. That up almost 2x over the past 5 years. That up almost 2x over the past 5 years. That is the health of the characters and IP is the health of the characters and IP is the health of the characters and IP in the company right there. Music hit in the company right there. Music hit in the company right there. Music hit songs are back for Disney. Let It Go songs are back for Disney. Let It Go songs are back for Disney. Let It Go wins the Oscar for best song. And get wins the Oscar for best song. And get wins the Oscar for best song. And get this, this is wild. The Frozen this, this is wild. The Frozen this, this is wild. The Frozen soundtrack is the bestselling album of soundtrack is the bestselling album of soundtrack is the bestselling album of 2014, selling 10 million copies with 2014, selling 10 million copies with 2014, selling 10 million copies with streaming equivalents in there. Even streaming equivalents in there. Even streaming equivalents in there. Even beating 1989 from Taylor Swift. beating 1989 from Taylor Swift. beating 1989 from Taylor Swift. [laughter] [laughter] [laughter] &gt;&gt; Wow. &gt;&gt; Wow. &gt;&gt; Wow. &gt;&gt; My girls love Taylor, but they might &gt;&gt; My girls love Taylor, but they might &gt;&gt; My girls love Taylor, but they might love Frozen even more. love Frozen even more. love Frozen even more. &gt;&gt; Wow. &gt;&gt; Wow. &gt;&gt; Wow. &gt;&gt; The parks are revived. Disney launches &gt;&gt; The parks are revived. Disney launches &gt;&gt; The parks are revived. Disney launches Cars Land in LA in 2012. So, fun fact Cars Land in LA in 2012. So, fun fact Cars Land in LA in 2012. So, fun fact about that, they were originally before about that, they were originally before about that, they were originally before the acquisition of Pixar developing Car the acquisition of Pixar developing Car the acquisition of Pixar developing Car Land Land Land &gt;&gt; and then they bought Pixar and they &gt;&gt; and then they bought Pixar and they &gt;&gt; and then they bought Pixar and they thought, "Oh, thought, "Oh, thought, "Oh, &gt;&gt; well, let's just make Cars Land." &gt;&gt; well, let's just make Cars Land." &gt;&gt; well, let's just make Cars Land." [laughter] [laughter] [laughter] &gt;&gt; This is back when the Imagineers &gt;&gt; This is back when the Imagineers &gt;&gt; This is back when the Imagineers independently developed lands that were independently developed lands that were independently developed lands that were unrelated to unrelated to unrelated to &gt;&gt; franchise flywheel stuff. &gt;&gt; franchise flywheel stuff. &gt;&gt; franchise flywheel stuff. &gt;&gt; Yep. overall parks revenue nearly &gt;&gt; Yep. overall parks revenue nearly &gt;&gt; Yep. overall parks revenue nearly doubles and operating income nearly doubles and operating income nearly doubles and operating income nearly triples in the decade from 2005 when Bob triples in the decade from 2005 when Bob triples in the decade from 2005 when Bob takes over to 2015. And yeah, overall takes over to 2015. And yeah, overall takes over to 2015. And yeah, overall during that time period, Disney's market during that time period, Disney's market during that time period, Disney's market cap is up 4x to $200 billion, up from cap is up 4x to $200 billion, up from cap is up 4x to $200 billion, up from the $50 billion when Bob took over. the $50 billion when Bob took over. the $50 billion when Bob took over. Overall revenue grows from 32 billion to Overall revenue grows from 32 billion to Overall revenue grows from 32 billion to 52 billion. Operating income goes from 52 billion. Operating income goes from 52 billion. Operating income goes from 4.7 to 14.7 billion. 4.7 to 14.7 billion. 4.7 to 14.7 billion. Incredible. Incredible. Incredible. &gt;&gt; And I'm going to keep bringing this back &gt;&gt; And I'm going to keep bringing this back &gt;&gt; And I'm going to keep bringing this back to cable profits because that continues to cable profits because that continues to cable profits because that continues to be this guaranteed contractual to be this guaranteed contractual to be this guaranteed contractual cash gushing business that they have. If cash gushing business that they have. If cash gushing business that they have. If you go line up those three acquisitions, you go line up those three acquisitions, you go line up those three acquisitions, which sound ludicrous on their price which sound ludicrous on their price which sound ludicrous on their price tags, especially when you didn't know tags, especially when you didn't know tags, especially when you didn't know how they were going to pay off, Pixar at how they were going to pay off, Pixar at how they were going to pay off, Pixar at 7.4 billion, let's even include the cash 7.4 billion, let's even include the cash 7.4 billion, let's even include the cash in there. That's about 2.5 years of in there. That's about 2.5 years of in there. That's about 2.5 years of cables then profit, cables then profit, cables then profit, &gt;&gt; right? Marvel at 4 billion, that's less &gt;&gt; right? Marvel at 4 billion, that's less &gt;&gt; right? Marvel at 4 billion, that's less than one year in 2009 of cable profits. than one year in 2009 of cable profits. than one year in 2009 of cable profits. And Lucasfilm in 2012, their 4 billion And Lucasfilm in 2012, their 4 billion And Lucasfilm in 2012, their 4 billion was well under a year of cable profits. was well under a year of cable profits. was well under a year of cable profits. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; ESPN kept providing the cash to do all &gt;&gt; ESPN kept providing the cash to do all &gt;&gt; ESPN kept providing the cash to do all of this. of this. of this. &gt;&gt; Such a good point. ESPN paid for Pixar, &gt;&gt; Such a good point. ESPN paid for Pixar, &gt;&gt; Such a good point. ESPN paid for Pixar, Marvel, and Lucasfilm Marvel, and Lucasfilm Marvel, and Lucasfilm &gt;&gt; with about four years of ESPN cable &gt;&gt; with about four years of ESPN cable &gt;&gt; with about four years of ESPN cable profits, profits, profits, &gt;&gt; right? It's almost like a Buffett type &gt;&gt; right? It's almost like a Buffett type &gt;&gt; right? It's almost like a Buffett type thing where Buffett has things in his thing where Buffett has things in his thing where Buffett has things in his portfolio that are cash producers and portfolio that are cash producers and portfolio that are cash producers and cash consumers and he's just trying to cash consumers and he's just trying to cash consumers and he's just trying to construct the most efficient way to get construct the most efficient way to get construct the most efficient way to get cash out of the cash producers where you cash out of the cash producers where you cash out of the cash producers where you can't effectively reinvest the capital can't effectively reinvest the capital can't effectively reinvest the capital and put the cash into places where you and put the cash into places where you and put the cash into places where you can reinvest the capital. can reinvest the capital. can reinvest the capital. &gt;&gt; Yep. So, speaking of ESPN, [sighs] come &gt;&gt; Yep. So, speaking of ESPN, [sighs] come &gt;&gt; Yep. So, speaking of ESPN, [sighs] come 2015, 2015, 2015, ESPN and all the rest of Disney is ESPN and all the rest of Disney is ESPN and all the rest of Disney is really riding high. The strategy looks really riding high. The strategy looks really riding high. The strategy looks completely genius and and Wall Street completely genius and and Wall Street completely genius and and Wall Street loves it and consumers love it and the loves it and consumers love it and the loves it and consumers love it and the franchises are all franchises are all franchises are all healthy and producing stuff people love healthy and producing stuff people love healthy and producing stuff people love and the parks are doing great. Everyone and the parks are doing great. Everyone and the parks are doing great. Everyone at Disney looks like geniuses. at Disney looks like geniuses. at Disney looks like geniuses. &gt;&gt; Yep. As you pointed out, it's like Bob &gt;&gt; Yep. As you pointed out, it's like Bob &gt;&gt; Yep. As you pointed out, it's like Bob has finally figured out a way to marry has finally figured out a way to marry has finally figured out a way to marry these two sides of the company. Use the these two sides of the company. Use the these two sides of the company. Use the cash flow geyser from ESPN to add and cash flow geyser from ESPN to add and cash flow geyser from ESPN to add and feed to the flywheel on the Disney side. feed to the flywheel on the Disney side. feed to the flywheel on the Disney side. It's all working great. It's all working great. It's all working great. &gt;&gt; Yep. Unfortunately, &gt;&gt; Yep. Unfortunately, &gt;&gt; Yep. Unfortunately, the stock hit an all-time high on the the stock hit an all-time high on the the stock hit an all-time high on the very same day very same day very same day &gt;&gt; as Disney's Q3 &gt;&gt; as Disney's Q3 &gt;&gt; as Disney's Q3 2015 earnings call. 2015 earnings call. 2015 earnings call. &gt;&gt; Well, an all-time high except for that &gt;&gt; Well, an all-time high except for that &gt;&gt; Well, an all-time high except for that weird COVID aberration that we'll get weird COVID aberration that we'll get weird COVID aberration that we'll get to. to. to. &gt;&gt; There was a little little shortlived &gt;&gt; There was a little little shortlived &gt;&gt; There was a little little shortlived moment there where it went even higher moment there where it went even higher moment there where it went even higher there in 2021. there in 2021. there in 2021. &gt;&gt; Yep. So on that earnings call on August &gt;&gt; Yep. So on that earnings call on August &gt;&gt; Yep. So on that earnings call on August 4th, 2015, 4th, 2015, 4th, 2015, Bob Iger mentions that ESPN was Bob Iger mentions that ESPN was Bob Iger mentions that ESPN was experiencing quote modest subscriber experiencing quote modest subscriber experiencing quote modest subscriber losses due to consumer cord cutting of losses due to consumer cord cutting of losses due to consumer cord cutting of cable subscriptions. It would come out cable subscriptions. It would come out cable subscriptions. It would come out later in Disney's annual report that later in Disney's annual report that later in Disney's annual report that ESPN lost 3 million subscribers that ESPN lost 3 million subscribers that ESPN lost 3 million subscribers that year, which still meant it had 92 year, which still meant it had 92 year, which still meant it had 92 million in total. But still, they'd only million in total. But still, they'd only million in total. But still, they'd only ever grown. I mean, I think they hit ever grown. I mean, I think they hit ever grown. I mean, I think they hit around 100 million and kind of stayed around 100 million and kind of stayed around 100 million and kind of stayed flat for a while because 100 million flat for a while because 100 million flat for a while because 100 million households households households &gt;&gt; basically is all of America. &gt;&gt; basically is all of America. &gt;&gt; basically is all of America. &gt;&gt; Yeah. But ESPN and anything related to &gt;&gt; Yeah. But ESPN and anything related to &gt;&gt; Yeah. But ESPN and anything related to ESPN ESPN ESPN revenue only ever went up and profits revenue only ever went up and profits revenue only ever went up and profits only ever went up. So, this was a shock. only ever went up. So, this was a shock. only ever went up. So, this was a shock. Even though everyone had been talking Even though everyone had been talking Even though everyone had been talking for a while about, for a while about, for a while about, &gt;&gt; oh, cord cutting is coming. This is &gt;&gt; oh, cord cutting is coming. This is &gt;&gt; oh, cord cutting is coming. This is &gt;&gt; and young people when they move, they &gt;&gt; and young people when they move, they &gt;&gt; and young people when they move, they don't necessarily activate a cable don't necessarily activate a cable don't necessarily activate a cable subscription. They'd like to access subscription. They'd like to access subscription. They'd like to access stuff online. It was like, "Yeah, yeah, stuff online. It was like, "Yeah, yeah, stuff online. It was like, "Yeah, yeah, yeah, but the numbers are still up into yeah, but the numbers are still up into yeah, but the numbers are still up into the right, so we're all good." the right, so we're all good." the right, so we're all good." &gt;&gt; Yep. This sets off a barely controlled &gt;&gt; Yep. This sets off a barely controlled &gt;&gt; Yep. This sets off a barely controlled freak out across the entire media freak out across the entire media freak out across the entire media landscape with ESPN and this earnings landscape with ESPN and this earnings landscape with ESPN and this earnings call as like ground zero. People call as like ground zero. People call as like ground zero. People knew that this was coming like you said, knew that this was coming like you said, knew that this was coming like you said, but I mean Netflix was already a $50 but I mean Netflix was already a $50 but I mean Netflix was already a $50 billion market cap company at this billion market cap company at this billion market cap company at this point. So, shouldn't have been a point. So, shouldn't have been a point. So, shouldn't have been a surprise to anyone. surprise to anyone. surprise to anyone. But the very next day, Disney stock But the very next day, Disney stock But the very next day, Disney stock drops 10%. And over the next couple drops 10%. And over the next couple drops 10%. And over the next couple days, Fox, Time Warner, and Discovery days, Fox, Time Warner, and Discovery days, Fox, Time Warner, and Discovery all experience similar draw downs. And all experience similar draw downs. And all experience similar draw downs. And Viacom, which people view as even more Viacom, which people view as even more Viacom, which people view as even more indexed to the cable network landscape, indexed to the cable network landscape, indexed to the cable network landscape, gets whacked over 20%. gets whacked over 20%. gets whacked over 20%. &gt;&gt; And we should say, just so we don't bury &gt;&gt; And we should say, just so we don't bury &gt;&gt; And we should say, just so we don't bury the lead, Disney's stock price today is the lead, Disney's stock price today is the lead, Disney's stock price today is what it was then. what it was then. what it was then. &gt;&gt; Y &gt;&gt; Y &gt;&gt; Y &gt;&gt; it's gone up and down, but it is flat to &gt;&gt; it's gone up and down, but it is flat to &gt;&gt; it's gone up and down, but it is flat to 11 years ago. 11 years ago. 11 years ago. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Meanwhile, the S&amp;P 500, David, what did &gt;&gt; Meanwhile, the S&amp;P 500, David, what did &gt;&gt; Meanwhile, the S&amp;P 500, David, what did you tell me is up how much in that time? you tell me is up how much in that time? you tell me is up how much in that time? &gt;&gt; Three and a halfx over that time period. &gt;&gt; Three and a halfx over that time period. &gt;&gt; Three and a halfx over that time period. &gt;&gt; Yeah. Now, market cap isn't everything, &gt;&gt; Yeah. Now, market cap isn't everything, &gt;&gt; Yeah. Now, market cap isn't everything, but it is a measure of what the but it is a measure of what the but it is a measure of what the investment community investment community investment community believes your company's cash flows are believes your company's cash flows are believes your company's cash flows are worth in the extreme long run. So, we're worth in the extreme long run. So, we're worth in the extreme long run. So, we're not here saying, you know, Disney's not here saying, you know, Disney's not here saying, you know, Disney's revenues been flat or profits been flat, revenues been flat or profits been flat, revenues been flat or profits been flat, although we we'll get to all that. But although we we'll get to all that. But although we we'll get to all that. But what we are saying is 11 years ago, what we are saying is 11 years ago, what we are saying is 11 years ago, people thought Disney's future was people thought Disney's future was people thought Disney's future was exactly as bright in the form of future exactly as bright in the form of future exactly as bright in the form of future cash flows that they believe today. cash flows that they believe today. cash flows that they believe today. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. Well, Well, Well, we're about to talk about what happens we're about to talk about what happens we're about to talk about what happens to the whole rest of the traditional to the whole rest of the traditional to the whole rest of the traditional media landscape after this earnings media landscape after this earnings media landscape after this earnings call. call. call. &gt;&gt; Yeah. Disney managed to stay &gt;&gt; Yeah. Disney managed to stay &gt;&gt; Yeah. Disney managed to stay independent. independent. independent. &gt;&gt; Yeah. Yeah. So, that moment kicks off I &gt;&gt; Yeah. Yeah. So, that moment kicks off I &gt;&gt; Yeah. Yeah. So, that moment kicks off I really don't know how to say it other really don't know how to say it other really don't know how to say it other than the most insane than the most insane than the most insane period of panicked frenzy period of panicked frenzy period of panicked frenzy in media landscape history. I mean, in media landscape history. I mean, in media landscape history. I mean, maybe in any industry's history. maybe in any industry's history. maybe in any industry's history. Basically, Basically, Basically, everyone in the TV and film landscape everyone in the TV and film landscape everyone in the TV and film landscape decides all at once that they need to decides all at once that they need to decides all at once that they need to take dramatic action to respond to cord take dramatic action to respond to cord take dramatic action to respond to cord cutting and the rise of streaming. So, cutting and the rise of streaming. So, cutting and the rise of streaming. So, over the next couple years, Time Warner over the next couple years, Time Warner over the next couple years, Time Warner sells itself to AT&amp;T. sells itself to AT&amp;T. sells itself to AT&amp;T. AT&amp;T changes its mind, spins out Time AT&amp;T changes its mind, spins out Time AT&amp;T changes its mind, spins out Time Warner, [laughter] which then merges Warner, [laughter] which then merges Warner, [laughter] which then merges with Discovery. with Discovery. with Discovery. Viacom Viacom Viacom remerges with CBS, but none of those remerges with CBS, but none of those remerges with CBS, but none of those brands are any good. So, they decide to brands are any good. So, they decide to brands are any good. So, they decide to name themselves Paramount after the name themselves Paramount after the name themselves Paramount after the studio that they own. Paramount almost studio that they own. Paramount almost studio that they own. Paramount almost collapses under its debt load and David collapses under its debt load and David collapses under its debt load and David and Larry Ellison. Yes, of course, that and Larry Ellison. Yes, of course, that and Larry Ellison. Yes, of course, that Larry Ellison buy it and merge it into Larry Ellison buy it and merge it into Larry Ellison buy it and merge it into Sky Dance Media. So, it becomes Sky Sky Dance Media. So, it becomes Sky Sky Dance Media. So, it becomes Sky Dance Paramount, Dance Paramount, Dance Paramount, &gt;&gt; which is the thing that David Ellison &gt;&gt; which is the thing that David Ellison &gt;&gt; which is the thing that David Ellison kind of founded and runs. kind of founded and runs. kind of founded and runs. &gt;&gt; Yep. And then of course this all &gt;&gt; Yep. And then of course this all &gt;&gt; Yep. And then of course this all culminates in what's happening here real culminates in what's happening here real culminates in what's happening here real time here in 2026 where Warner Brothers time here in 2026 where Warner Brothers time here in 2026 where Warner Brothers Discovery almost gets bought by Netflix Discovery almost gets bought by Netflix Discovery almost gets bought by Netflix and instead looks like it's getting and instead looks like it's getting and instead looks like it's getting merged into the Paramount Sky Dance merged into the Paramount Sky Dance merged into the Paramount Sky Dance fever dream. So like it's insanity out fever dream. So like it's insanity out fever dream. So like it's insanity out there. there. there. &gt;&gt; Well now on hold pending legal &gt;&gt; Well now on hold pending legal &gt;&gt; Well now on hold pending legal challenges as of recording date. So challenges as of recording date. So challenges as of recording date. So we'll see. But what's really happening we'll see. But what's really happening we'll see. But what's really happening is that all of these traditional media is that all of these traditional media is that all of these traditional media companies, companies, companies, with the exception of Disney, have with the exception of Disney, have with the exception of Disney, have basically all become kind of surfs in basically all become kind of surfs in basically all become kind of surfs in the streaming kingdoms of the technology the streaming kingdoms of the technology the streaming kingdoms of the technology companies of which Netflix and YouTube companies of which Netflix and YouTube companies of which Netflix and YouTube are actually the winners here. are actually the winners here. are actually the winners here. &gt;&gt; Yeah, I think that's the right way to &gt;&gt; Yeah, I think that's the right way to &gt;&gt; Yeah, I think that's the right way to phrase it. I mean if you just do the phrase it. I mean if you just do the phrase it. I mean if you just do the very simple exercise of looking who very simple exercise of looking who very simple exercise of looking who generates profits in the movie TV generates profits in the movie TV generates profits in the movie TV Hollywood landscape right now it is Hollywood landscape right now it is Hollywood landscape right now it is Netflix, YouTube and Disney generating Netflix, YouTube and Disney generating Netflix, YouTube and Disney generating the large profit streams. the large profit streams. the large profit streams. &gt;&gt; Yep. So Disney decides to launch Disney &gt;&gt; Yep. So Disney decides to launch Disney &gt;&gt; Yep. So Disney decides to launch Disney Plus. Bob and the board basically draw a Plus. Bob and the board basically draw a Plus. Bob and the board basically draw a line in the sand and they say, "We are line in the sand and they say, "We are line in the sand and they say, "We are not going to just sit around and let not going to just sit around and let not going to just sit around and let ourselves get Netflixed like everyone ourselves get Netflixed like everyone ourselves get Netflixed like everyone else. We're going to stand and fight else. We're going to stand and fight else. We're going to stand and fight toe-to-toe. We are going to build our toe-to-toe. We are going to build our toe-to-toe. We are going to build our own direct to consumer streaming own direct to consumer streaming own direct to consumer streaming company." This goes back to Bob's company." This goes back to Bob's company." This goes back to Bob's priority number two in his strategy priority number two in his strategy priority number two in his strategy presentation to the board when he became presentation to the board when he became presentation to the board when he became CEO. And like look, this is totally CEO. And like look, this is totally CEO. And like look, this is totally laudable. It's also arguably necessary. laudable. It's also arguably necessary. laudable. It's also arguably necessary. I mean, without Disney Plus and its own I mean, without Disney Plus and its own I mean, without Disney Plus and its own streaming service, Disney wouldn't have streaming service, Disney wouldn't have streaming service, Disney wouldn't have the ability to control discoverability the ability to control discoverability the ability to control discoverability of its films and shows. And like that's of its films and shows. And like that's of its films and shows. And like that's so important. You want to get people so important. You want to get people so important. You want to get people into the parks, they got to interact into the parks, they got to interact into the parks, they got to interact with the IP and the characters. with the IP and the characters. with the IP and the characters. &gt;&gt; Yeah. It's funny. You and I sort of had &gt;&gt; Yeah. It's funny. You and I sort of had &gt;&gt; Yeah. It's funny. You and I sort of had this thesis coming in where you just this thesis coming in where you just this thesis coming in where you just keep the hundreds of millions of dollars keep the hundreds of millions of dollars keep the hundreds of millions of dollars that Netflix is paying you each year and that Netflix is paying you each year and that Netflix is paying you each year and you keep putting your content on Netflix you keep putting your content on Netflix you keep putting your content on Netflix and other places and everything and other places and everything and other places and everything downstream of that, all the consumer downstream of that, all the consumer downstream of that, all the consumer products and parks and everything works products and parks and everything works products and parks and everything works better because better because better because you're spreading your content across the you're spreading your content across the you're spreading your content across the whole world. And the problem with that whole world. And the problem with that whole world. And the problem with that thesis is that once Netflix's algorithm thesis is that once Netflix's algorithm thesis is that once Netflix's algorithm controls whether families see your controls whether families see your controls whether families see your movies or not, you've got a big problem. movies or not, you've got a big problem. movies or not, you've got a big problem. &gt;&gt; That's right. That's right. You have no &gt;&gt; That's right. That's right. You have no &gt;&gt; That's right. That's right. You have no sort of guaranteed distribution. Having sort of guaranteed distribution. Having sort of guaranteed distribution. Having Disney Plus, and we'll talk about all Disney Plus, and we'll talk about all Disney Plus, and we'll talk about all the trade-offs involved in this in a the trade-offs involved in this in a the trade-offs involved in this in a minute, cuz God are there trade-offs. minute, cuz God are there trade-offs. minute, cuz God are there trade-offs. But the thesis is if we do this and we But the thesis is if we do this and we But the thesis is if we do this and we stand up our own streaming service, then stand up our own streaming service, then stand up our own streaming service, then we can form deep direct relationships we can form deep direct relationships we can form deep direct relationships with consumers. we can create these with consumers. we can create these with consumers. we can create these whole sort of universes on Disney Plus whole sort of universes on Disney Plus whole sort of universes on Disney Plus that more deeply explores the characters that more deeply explores the characters that more deeply explores the characters from given movies, which creates more IP from given movies, which creates more IP from given movies, which creates more IP that the parks can use, which creates that the parks can use, which creates that the parks can use, which creates these merchandising opportunities, these merchandising opportunities, these merchandising opportunities, spin-off shows, all this stuff. And on spin-off shows, all this stuff. And on spin-off shows, all this stuff. And on top of this, it's crazy to think that top of this, it's crazy to think that top of this, it's crazy to think that Disney didn't have any relationship with Disney didn't have any relationship with Disney didn't have any relationship with any of their customers prior to this, any of their customers prior to this, any of their customers prior to this, unless you had visited a park for a unless you had visited a park for a unless you had visited a park for a hundred years. If you bought a home hundred years. If you bought a home hundred years. If you bought a home video, you bought it from a retailer. If video, you bought it from a retailer. If video, you bought it from a retailer. If you went to a theater, you went to a you went to a theater, you went to a you went to a theater, you went to a theater. Or if you had a cable theater. Or if you had a cable theater. Or if you had a cable subscription, Disney did not know who subscription, Disney did not know who subscription, Disney did not know who you were. you were. you were. &gt;&gt; Yeah. Disney didn't collect revenue &gt;&gt; Yeah. Disney didn't collect revenue &gt;&gt; Yeah. Disney didn't collect revenue directly from consumers except in the directly from consumers except in the directly from consumers except in the parks. parks. parks. &gt;&gt; And they didn't collect email addresses &gt;&gt; And they didn't collect email addresses &gt;&gt; And they didn't collect email addresses or home addresses or demographic or home addresses or demographic or home addresses or demographic information. They just got the checks information. They just got the checks information. They just got the checks from the people that they were from the people that they were from the people that they were distributing through and trusted there distributing through and trusted there distributing through and trusted there was an end consumer on the other side. was an end consumer on the other side. was an end consumer on the other side. &gt;&gt; Yep. So after August 2015, Bob and the &gt;&gt; Yep. So after August 2015, Bob and the &gt;&gt; Yep. So after August 2015, Bob and the board decide very quickly, let's go board decide very quickly, let's go board decide very quickly, let's go build our own Netflix competitor, or build our own Netflix competitor, or build our own Netflix competitor, or more accurately, let's go buy the pieces more accurately, let's go buy the pieces more accurately, let's go buy the pieces we need to build it because Disney we need to build it because Disney we need to build it because Disney [laughter] [laughter] [laughter] doesn't have like any in-house doesn't have like any in-house doesn't have like any in-house capabilities to go build and operate an capabilities to go build and operate an capabilities to go build and operate an internet streaming service here, internet streaming service here, internet streaming service here, &gt;&gt; right? &gt;&gt; right? &gt;&gt; right? &gt;&gt; And this is when Disney almost buys &gt;&gt; And this is when Disney almost buys &gt;&gt; And this is when Disney almost buys Twitter. [laughter] Twitter. [laughter] Twitter. [laughter] &gt;&gt; The forgotten chapter. &gt;&gt; The forgotten chapter. &gt;&gt; The forgotten chapter. &gt;&gt; The forgotten chapter. Thankfully, the &gt;&gt; The forgotten chapter. Thankfully, the &gt;&gt; The forgotten chapter. Thankfully, the chapter that did not come to pass. So, chapter that did not come to pass. So, chapter that did not come to pass. So, yeah, they start looking around at like, yeah, they start looking around at like, yeah, they start looking around at like, okay, what scaled internet companies are okay, what scaled internet companies are okay, what scaled internet companies are out there that we could buy and use as a out there that we could buy and use as a out there that we could buy and use as a base to set up our streaming service? base to set up our streaming service? base to set up our streaming service? And basically, the only ones within And basically, the only ones within And basically, the only ones within reach are Twitter and Snapchat. reach are Twitter and Snapchat. reach are Twitter and Snapchat. &gt;&gt; Everything else is just too big. I mean, &gt;&gt; Everything else is just too big. I mean, &gt;&gt; Everything else is just too big. I mean, giant market cap companies. giant market cap companies. giant market cap companies. &gt;&gt; Jack Dorsey happens to also be on the &gt;&gt; Jack Dorsey happens to also be on the &gt;&gt; Jack Dorsey happens to also be on the Disney board at the time. So, they Disney board at the time. So, they Disney board at the time. So, they basically get all the way to a deal and basically get all the way to a deal and basically get all the way to a deal and then at the last minute, Bob backs out. then at the last minute, Bob backs out. then at the last minute, Bob backs out. He just like can't imagine Disney owning He just like can't imagine Disney owning He just like can't imagine Disney owning and operating Twitter and that was and operating Twitter and that was and operating Twitter and that was probably the right decision. probably the right decision. probably the right decision. &gt;&gt; I think it was all papered and they were &gt;&gt; I think it was all papered and they were &gt;&gt; I think it was all papered and they were going to sign Monday morning and going to sign Monday morning and going to sign Monday morning and announce it, right? announce it, right? announce it, right? &gt;&gt; Yep. Yep. &gt;&gt; Yep. Yep. &gt;&gt; Yep. Yep. &gt;&gt; It was like Sunday night that he bailed &gt;&gt; It was like Sunday night that he bailed &gt;&gt; It was like Sunday night that he bailed on it. on it. on it. &gt;&gt; Yep. Something like that. It was very &gt;&gt; Yep. Something like that. It was very &gt;&gt; Yep. Something like that. It was very last minute. So once the Twitter deal last minute. So once the Twitter deal last minute. So once the Twitter deal falls apart, they turn to a far more falls apart, they turn to a far more falls apart, they turn to a far more logical candidate, although a more logical candidate, although a more logical candidate, although a more hidden one. Bam. hidden one. Bam. hidden one. Bam. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Bam is this incredible story. It is a &gt;&gt; Bam is this incredible story. It is a &gt;&gt; Bam is this incredible story. It is a streaming technology platform that was streaming technology platform that was streaming technology platform that was part of Major League Baseball. They part of Major League Baseball. They part of Major League Baseball. They began a streaming service for baseball began a streaming service for baseball began a streaming service for baseball games all the way back in 2002. games all the way back in 2002. games all the way back in 2002. Initially, I remembered this from the Initially, I remembered this from the Initially, I remembered this from the research when I went back and looked at research when I went back and looked at research when I went back and looked at it to start streaming Seattle Mariners it to start streaming Seattle Mariners it to start streaming Seattle Mariners games to Japan. That's right. games to Japan. That's right. games to Japan. That's right. &gt;&gt; Because Ichiro, &gt;&gt; Because Ichiro, &gt;&gt; Because Ichiro, &gt;&gt; had come to MLB and was a phenomenon &gt;&gt; had come to MLB and was a phenomenon &gt;&gt; had come to MLB and was a phenomenon back in back in back in &gt;&gt; I think Nintendo owned the Mariners at &gt;&gt; I think Nintendo owned the Mariners at &gt;&gt; I think Nintendo owned the Mariners at this point. this point. this point. &gt;&gt; That's right. That's right. Nintendo of &gt;&gt; That's right. That's right. Nintendo of &gt;&gt; That's right. That's right. Nintendo of America owned the Mariners. America owned the Mariners. America owned the Mariners. &gt;&gt; This group actually started Advanced &gt;&gt; This group actually started Advanced &gt;&gt; This group actually started Advanced Media by making websites. Media by making websites. Media by making websites. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; For MLB baseball teams &gt;&gt; For MLB baseball teams &gt;&gt; For MLB baseball teams &gt;&gt; and then they got into streaming for &gt;&gt; and then they got into streaming for &gt;&gt; and then they got into streaming for Japan and Iro. Japan and Iro. Japan and Iro. &gt;&gt; Yep. And then their first when when they &gt;&gt; Yep. And then their first when when they &gt;&gt; Yep. And then their first when when they spun out of baseball, they I think stood spun out of baseball, they I think stood spun out of baseball, they I think stood up the streaming backend for the then up the streaming backend for the then up the streaming backend for the then fledgling HBO Now. fledgling HBO Now. fledgling HBO Now. &gt;&gt; Yes. Yes. And they also had taken on the &gt;&gt; Yes. Yes. And they also had taken on the &gt;&gt; Yes. Yes. And they also had taken on the NHL. So they were doing the NHL's NHL. So they were doing the NHL's NHL. So they were doing the NHL's streaming service. streaming service. streaming service. &gt;&gt; So it's kind of perfect. They can do &gt;&gt; So it's kind of perfect. They can do &gt;&gt; So it's kind of perfect. They can do sports streaming. They've run HBO now, a sports streaming. They've run HBO now, a sports streaming. They've run HBO now, a streaming service for HBO. Like, it's streaming service for HBO. Like, it's streaming service for HBO. Like, it's perfect. So, August 2016, Disney buys a perfect. So, August 2016, Disney buys a perfect. So, August 2016, Disney buys a 33% stake in BAME from Major League 33% stake in BAME from Major League 33% stake in BAME from Major League Baseball with an option to increase that Baseball with an option to increase that Baseball with an option to increase that to a majority stake over the next couple to a majority stake over the next couple to a majority stake over the next couple years. The next year in 2017, they years. The next year in 2017, they years. The next year in 2017, they announced that they're going to announced that they're going to announced that they're going to accelerate that option to purchase a accelerate that option to purchase a accelerate that option to purchase a controlling stake in Bamch. and they controlling stake in Bamch. and they controlling stake in Bamch. and they announced publicly that they will be announced publicly that they will be announced publicly that they will be launching an over-the-top direct to launching an over-the-top direct to launching an over-the-top direct to consumer streaming service for ESPN the consumer streaming service for ESPN the consumer streaming service for ESPN the next year in 2018 and then a Disney next year in 2018 and then a Disney next year in 2018 and then a Disney streaming service in 2019. And as part streaming service in 2019. And as part streaming service in 2019. And as part of the same announcement, Ben, like you of the same announcement, Ben, like you of the same announcement, Ben, like you alluded to, they say they will be ending alluded to, they say they will be ending alluded to, they say they will be ending their content agreements with Netflix their content agreements with Netflix their content agreements with Netflix and pulling all Disney, Pixar, Marvel, and pulling all Disney, Pixar, Marvel, and pulling all Disney, Pixar, Marvel, and Lucasfilm content off of Netflix by and Lucasfilm content off of Netflix by and Lucasfilm content off of Netflix by 2019, which Netflix was already paying 2019, which Netflix was already paying 2019, which Netflix was already paying them hundreds of millions of dollars them hundreds of millions of dollars them hundreds of millions of dollars annually for that content. annually for that content. annually for that content. &gt;&gt; Yep. And that's just pure profit. &gt;&gt; Yep. And that's just pure profit. &gt;&gt; Yep. And that's just pure profit. &gt;&gt; Yeah. no expenses associated with that, &gt;&gt; Yeah. no expenses associated with that, &gt;&gt; Yeah. no expenses associated with that, &gt;&gt; which Disney at that point was &gt;&gt; which Disney at that point was &gt;&gt; which Disney at that point was generating about $15 billion in generating about $15 billion in generating about $15 billion in Disneywide operating income at that Disneywide operating income at that Disneywide operating income at that time. So that's 2ish% of the company's time. So that's 2ish% of the company's time. So that's 2ish% of the company's profits are coming from that one Netflix profits are coming from that one Netflix profits are coming from that one Netflix deal. And they're just saying, "All deal. And they're just saying, "All deal. And they're just saying, "All right, we're going to we're going to rip right, we're going to we're going to rip right, we're going to we're going to rip that up. We think it is worth it in the that up. We think it is worth it in the that up. We think it is worth it in the long run for us to start from zero, long run for us to start from zero, long run for us to start from zero, build an entire customer base, and then build an entire customer base, and then build an entire customer base, and then reach this customer base directly." And reach this customer base directly." And reach this customer base directly." And look, this is another point where having look, this is another point where having look, this is another point where having ESPN as part of the company as a bull ESPN as part of the company as a bull ESPN as part of the company as a bull work even though ESPN is now declining work even though ESPN is now declining work even though ESPN is now declining is critical. Like that's what enables is critical. Like that's what enables is critical. Like that's what enables Disney to do this. Disney to do this. Disney to do this. &gt;&gt; That's a great point and it means that &gt;&gt; That's a great point and it means that &gt;&gt; That's a great point and it means that you have to nerf the ESPN offering on you have to nerf the ESPN offering on you have to nerf the ESPN offering on streaming because you need to keep that streaming because you need to keep that streaming because you need to keep that gravy train flowing in. So the ESPN Plus gravy train flowing in. So the ESPN Plus gravy train flowing in. So the ESPN Plus thing that ended up debuting in 2018 was thing that ended up debuting in 2018 was thing that ended up debuting in 2018 was &gt;&gt; kind of a nothing burger. &gt;&gt; kind of a nothing burger. &gt;&gt; kind of a nothing burger. &gt;&gt; Yeah. all the content that almost no one &gt;&gt; Yeah. all the content that almost no one &gt;&gt; Yeah. all the content that almost no one wants to watch cuz all the good stuff is wants to watch cuz all the good stuff is wants to watch cuz all the good stuff is still on ESPN, the cable channel that still on ESPN, the cable channel that still on ESPN, the cable channel that prints cash. So, we're going to leave it prints cash. So, we're going to leave it prints cash. So, we're going to leave it there. Thank you very much. And like there. Thank you very much. And like there. Thank you very much. And like look, it's a really tough thing for the look, it's a really tough thing for the look, it's a really tough thing for the ESPN side of the business to move to ESPN side of the business to move to ESPN side of the business to move to direct to consumer because part of the direct to consumer because part of the direct to consumer because part of the whole magic of the affiliate fee whole magic of the affiliate fee whole magic of the affiliate fee business model is you get paid a business model is you get paid a business model is you get paid a subscriber fee whether those subscribers subscriber fee whether those subscribers subscriber fee whether those subscribers watch the channel or not. All of a watch the channel or not. All of a watch the channel or not. All of a sudden, you're now going to actual usage sudden, you're now going to actual usage sudden, you're now going to actual usage based of like, hey, I'm only going to based of like, hey, I'm only going to based of like, hey, I'm only going to get paid by the people who want to watch get paid by the people who want to watch get paid by the people who want to watch this. this. this. &gt;&gt; Well, this is the magic of bundling is &gt;&gt; Well, this is the magic of bundling is &gt;&gt; Well, this is the magic of bundling is you get some money from the people who you get some money from the people who you get some money from the people who would never have paid you any money would never have paid you any money would never have paid you any money before if you were trying to sell just before if you were trying to sell just before if you were trying to sell just one product. There are way fewer people one product. There are way fewer people one product. There are way fewer people who are willing to subscribe for a high who are willing to subscribe for a high who are willing to subscribe for a high dollar amount, call it $30 to ESPN dollar amount, call it $30 to ESPN dollar amount, call it $30 to ESPN directly, than there are people who are directly, than there are people who are directly, than there are people who are willing to pay 50, 70, 80, $100 for all willing to pay 50, 70, 80, $100 for all willing to pay 50, 70, 80, $100 for all the channels. You're missing out on all the channels. You're missing out on all the channels. You're missing out on all of those sort of casual fans or the the of those sort of casual fans or the the of those sort of casual fans or the the &gt;&gt; the non-consumers. &gt;&gt; the non-consumers. &gt;&gt; the non-consumers. &gt;&gt; That's right. That's right. So Bob &gt;&gt; That's right. That's right. So Bob &gt;&gt; That's right. That's right. So Bob basically issues an all hands- on deck basically issues an all hands- on deck basically issues an all hands- on deck directive. He directs all the creative directive. He directs all the creative directive. He directs all the creative studios within Disney, Disney animation, studios within Disney, Disney animation, studios within Disney, Disney animation, Disney liveaction, Pixar, Lucasfilm, Disney liveaction, Pixar, Lucasfilm, Disney liveaction, Pixar, Lucasfilm, Marvel to start producing content and Marvel to start producing content and Marvel to start producing content and gearing up specifically for the new gearing up specifically for the new gearing up specifically for the new first party Disney streaming service first party Disney streaming service first party Disney streaming service coming in 2019 on top of all the coming in 2019 on top of all the coming in 2019 on top of all the existing slate of content that they were existing slate of content that they were existing slate of content that they were also working on. And then he gets a call also working on. And then he gets a call also working on. And then he gets a call from Rupert Murdoch. [laughter] And from Rupert Murdoch. [laughter] And from Rupert Murdoch. [laughter] And Rupert says that he and Fox are Rupert says that he and Fox are Rupert says that he and Fox are obviously going through the same obviously going through the same obviously going through the same strategic reviews and exercises as strategic reviews and exercises as strategic reviews and exercises as Disney and every other media company. Disney and every other media company. Disney and every other media company. And Rupert has concluded that the best And Rupert has concluded that the best And Rupert has concluded that the best path forward for Fox is to combine with path forward for Fox is to combine with path forward for Fox is to combine with Disney and lend its scale, its content, Disney and lend its scale, its content, Disney and lend its scale, its content, and its efforts to Disney's first party and its efforts to Disney's first party and its efforts to Disney's first party streaming service to compete with streaming service to compete with streaming service to compete with Netflix. Well, to combine some of its Netflix. Well, to combine some of its Netflix. Well, to combine some of its assets, basically Fox did an analysis assets, basically Fox did an analysis assets, basically Fox did an analysis and looked at everything that had a and looked at everything that had a and looked at everything that had a library value, you know, rewatchability. library value, you know, rewatchability. library value, you know, rewatchability. And they kind of looked at it and said, And they kind of looked at it and said, And they kind of looked at it and said, the highest and best use of a library the highest and best use of a library the highest and best use of a library over the coming decades is going to be over the coming decades is going to be over the coming decades is going to be on these streaming services. The deep on these streaming services. The deep on these streaming services. The deep catalog, like I fall asleep at night catalog, like I fall asleep at night catalog, like I fall asleep at night watching The Office. So, I have Peacock watching The Office. So, I have Peacock watching The Office. So, I have Peacock because they have library content so I because they have library content so I because they have library content so I can watch The Office. Same thing with can watch The Office. Same thing with can watch The Office. Same thing with Arrested Development. Same thing with Arrested Development. Same thing with Arrested Development. Same thing with Seinfeld. They ran all the numbers and Seinfeld. They ran all the numbers and Seinfeld. They ran all the numbers and decided we don't really want to be in decided we don't really want to be in decided we don't really want to be in the streaming game over here at Fox. the streaming game over here at Fox. the streaming game over here at Fox. Let's try to fetch a high value for Let's try to fetch a high value for Let's try to fetch a high value for people who do and who need that library people who do and who need that library people who do and who need that library content. But I think we'll keep content. But I think we'll keep content. But I think we'll keep everything that has all of its value on everything that has all of its value on everything that has all of its value on first run. So news, sports, they sort of first run. So news, sports, they sort of first run. So news, sports, they sort of went all in on linear TV instead of went all in on linear TV instead of went all in on linear TV instead of keeping the library, which would require keeping the library, which would require keeping the library, which would require building out the streaming service. It's building out the streaming service. It's building out the streaming service. It's the opposite of Disney. Disney's keep the opposite of Disney. Disney's keep the opposite of Disney. Disney's keep things that have high rewatchability and things that have high rewatchability and things that have high rewatchability and monetize them over and over. monetize them over and over. monetize them over and over. &gt;&gt; Yep. Now, you said Rupert and Fox ran &gt;&gt; Yep. Now, you said Rupert and Fox ran &gt;&gt; Yep. Now, you said Rupert and Fox ran some analysis on their library visav some analysis on their library visav some analysis on their library visav streaming. I suspect part of that streaming. I suspect part of that streaming. I suspect part of that analysis also led them to the conclusion analysis also led them to the conclusion analysis also led them to the conclusion that hey our library just isn't strong that hey our library just isn't strong that hey our library just isn't strong enough [laughter] to be compelling as a enough [laughter] to be compelling as a enough [laughter] to be compelling as a streaming product. Like it's true, you streaming product. Like it's true, you streaming product. Like it's true, you know, it's got Avatar. It's great. It's know, it's got Avatar. It's great. It's know, it's got Avatar. It's great. It's got the Simpsons. got the Simpsons. got the Simpsons. &gt;&gt; Come on. How often are people &gt;&gt; Come on. How often are people &gt;&gt; Come on. How often are people re-watching Avatar? re-watching Avatar? re-watching Avatar? &gt;&gt; Exactly. Simpsons are rewatchable. Maybe &gt;&gt; Exactly. Simpsons are rewatchable. Maybe &gt;&gt; Exactly. Simpsons are rewatchable. Maybe &gt;&gt; Family Guy. Family Guy is rewatchable. &gt;&gt; Family Guy. Family Guy is rewatchable. &gt;&gt; Family Guy. Family Guy is rewatchable. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; The National Geographic channel, &gt;&gt; The National Geographic channel, &gt;&gt; The National Geographic channel, &gt;&gt; but you know, it's a lot of liveaction &gt;&gt; but you know, it's a lot of liveaction &gt;&gt; but you know, it's a lot of liveaction film IP. We do have the FX network which film IP. We do have the FX network which film IP. We do have the FX network which has always Sunny and a bunch of great has always Sunny and a bunch of great has always Sunny and a bunch of great shows, shows, shows, &gt;&gt; right? It's not zero, but it's not &gt;&gt; right? It's not zero, but it's not &gt;&gt; right? It's not zero, but it's not anywhere near enough to be compelling on anywhere near enough to be compelling on anywhere near enough to be compelling on its own. its own. its own. &gt;&gt; And it's synergy value is actually a lot &gt;&gt; And it's synergy value is actually a lot &gt;&gt; And it's synergy value is actually a lot higher than the value is just a Fox higher than the value is just a Fox higher than the value is just a Fox because if you start to look at some of because if you start to look at some of because if you start to look at some of these things, X-Men, Deadpool, these things, X-Men, Deadpool, these things, X-Men, Deadpool, Wolverine, Fantastic 4, huh? Those are Wolverine, Fantastic 4, huh? Those are Wolverine, Fantastic 4, huh? Those are actually worth a lot more to Disney than actually worth a lot more to Disney than actually worth a lot more to Disney than they are to us. they are to us. they are to us. &gt;&gt; Exactly. Bingo. So, December 2017, they &gt;&gt; Exactly. Bingo. So, December 2017, they &gt;&gt; Exactly. Bingo. So, December 2017, they announced the deal. Disney will be announced the deal. Disney will be announced the deal. Disney will be acquiring all the entertainment and acquiring all the entertainment and acquiring all the entertainment and international assets of Fox in a 52 international assets of Fox in a 52 international assets of Fox in a 52 billion dollar all stock transaction. So billion dollar all stock transaction. So billion dollar all stock transaction. So not Fox News, not Fox Sports, not the not Fox News, not Fox Sports, not the not Fox News, not Fox Sports, not the Fox broadcast network, but the library Fox broadcast network, but the library Fox broadcast network, but the library and all the general entertainment and all the general entertainment and all the general entertainment assets. And that 52 billion was after a assets. And that 52 billion was after a assets. And that 52 billion was after a lot of back and forth negotiation. It lot of back and forth negotiation. It lot of back and forth negotiation. It was best and final. Everyone at Disney was best and final. Everyone at Disney was best and final. Everyone at Disney ran all the models they possibly could ran all the models they possibly could ran all the models they possibly could to see what is the very most we could to see what is the very most we could to see what is the very most we could pay to get the value that we need out of pay to get the value that we need out of pay to get the value that we need out of these assets. So the deal's done is it these assets. So the deal's done is it these assets. So the deal's done is it just needs regulatory approval which is just needs regulatory approval which is just needs regulatory approval which is going to take several months as it going to take several months as it going to take several months as it always does. always does. always does. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; During the regulatory approval process, &gt;&gt; During the regulatory approval process, &gt;&gt; During the regulatory approval process, &gt;&gt; there's a different ruling that happens &gt;&gt; there's a different ruling that happens &gt;&gt; there's a different ruling that happens around AT&amp;T's merger. around AT&amp;T's merger. around AT&amp;T's merger. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; That's right. &gt;&gt; That causes Comcast to go, huh? Hm. You &gt;&gt; That causes Comcast to go, huh? Hm. You &gt;&gt; That causes Comcast to go, huh? Hm. You know, we previously counted ourselves know, we previously counted ourselves know, we previously counted ourselves out for these assets because we didn't out for these assets because we didn't out for these assets because we didn't think it was going to pass regulatory think it was going to pass regulatory think it was going to pass regulatory approval. I bet it would have. Let's see approval. I bet it would have. Let's see approval. I bet it would have. Let's see if we can lob in a bid. Even though if we can lob in a bid. Even though if we can lob in a bid. Even though Disney and Fox say they have a done Disney and Fox say they have a done Disney and Fox say they have a done deal, let's just throw in a bid and see. deal, let's just throw in a bid and see. deal, let's just throw in a bid and see. Comcast once again, Comcast once again, Comcast once again, Disney ends up getting bit up to 71.3 Disney ends up getting bit up to 71.3 Disney ends up getting bit up to 71.3 billion dollar, billion dollar, billion dollar, &gt;&gt; a full 19 billion more than they had &gt;&gt; a full 19 billion more than they had &gt;&gt; a full 19 billion more than they had originally signed the deal on. That's a originally signed the deal on. That's a originally signed the deal on. That's a free 19 billion for Fox shareholders free 19 billion for Fox shareholders free 19 billion for Fox shareholders because Comcast lobbed in the bid. because Comcast lobbed in the bid. because Comcast lobbed in the bid. &gt;&gt; Yep. Disney's total market cap at the &gt;&gt; Yep. Disney's total market cap at the &gt;&gt; Yep. Disney's total market cap at the time was around 170 billion. So this is time was around 170 billion. So this is time was around 170 billion. So this is like 40% of the value of the entire Walt like 40% of the value of the entire Walt like 40% of the value of the entire Walt Disney Company. Disney Company. Disney Company. Way more way more than Pixar, Marvel, Way more way more than Pixar, Marvel, Way more way more than Pixar, Marvel, and Lucasfilm all combined. and Lucasfilm all combined. and Lucasfilm all combined. Now to be fair, so they do the deal. Now to be fair, so they do the deal. Now to be fair, so they do the deal. Disney is able to pay down a lot of that Disney is able to pay down a lot of that Disney is able to pay down a lot of that purchase price pretty quickly through purchase price pretty quickly through purchase price pretty quickly through devestatures of Fox's regional sports devestatures of Fox's regional sports devestatures of Fox's regional sports networks and then their stake in Sky, networks and then their stake in Sky, networks and then their stake in Sky, the British pay TV operator. Yeah, that the British pay TV operator. Yeah, that the British pay TV operator. Yeah, that those numbers were 14 billion and 15 those numbers were 14 billion and 15 those numbers were 14 billion and 15 billion. So together, you can actually billion. So together, you can actually billion. So together, you can actually back it down 29 billion. The the real back it down 29 billion. The the real back it down 29 billion. The the real price of what Disney paid and the assets price of what Disney paid and the assets price of what Disney paid and the assets they kept was about 44 billion. So they kept was about 44 billion. So they kept was about 44 billion. So that's sort of the the hurdle to that's sort of the the hurdle to that's sort of the the hurdle to overcome in trying to make this overcome in trying to make this overcome in trying to make this acquisition pay back. Yep. acquisition pay back. Yep. acquisition pay back. Yep. And [sighs and gasps] And [sighs and gasps] And [sighs and gasps] they probably don't get anywhere near they probably don't get anywhere near they probably don't get anywhere near $44 billion worth of value out of the $44 billion worth of value out of the $44 billion worth of value out of the assets that they do get. As we talked assets that they do get. As we talked assets that they do get. As we talked about the library assets for the about the library assets for the about the library assets for the streaming service, sure, they're nice to streaming service, sure, they're nice to streaming service, sure, they're nice to have, but they're not really going to have, but they're not really going to have, but they're not really going to drive that many signups or retentions drive that many signups or retentions drive that many signups or retentions for the service. Wolverine and Deadpool for the service. Wolverine and Deadpool for the service. Wolverine and Deadpool had a big box office win. Avatar now has had a big box office win. Avatar now has had a big box office win. Avatar now has lands in the parks. lands in the parks. lands in the parks. &gt;&gt; Yep. True. Yeah, it's not nothing. Uh &gt;&gt; Yep. True. Yeah, it's not nothing. Uh &gt;&gt; Yep. True. Yeah, it's not nothing. Uh they did get a third of Hulu Y as a part they did get a third of Hulu Y as a part they did get a third of Hulu Y as a part of this deal. So they already owned a of this deal. So they already owned a of this deal. So they already owned a third. This gave them a third. So then third. This gave them a third. So then third. This gave them a third. So then they had a controlling interest. they had a controlling interest. they had a controlling interest. &gt;&gt; Yep. Another big part of the strategic &gt;&gt; Yep. Another big part of the strategic &gt;&gt; Yep. Another big part of the strategic rationale for the deal and for the rationale for the deal and for the rationale for the deal and for the increased price was that Fox had a lot increased price was that Fox had a lot increased price was that Fox had a lot of India assets. That's right. Both of India assets. That's right. Both of India assets. That's right. Both content and distribution. And this is content and distribution. And this is content and distribution. And this is back to Bob's strategic pillar number back to Bob's strategic pillar number back to Bob's strategic pillar number three for the company. Great. We need to three for the company. Great. We need to three for the company. Great. We need to enter India. This is a great way to do enter India. This is a great way to do enter India. This is a great way to do it. Those assets end up not performing it. Those assets end up not performing it. Those assets end up not performing for Disney nearly as well as they for Disney nearly as well as they for Disney nearly as well as they thought they would. They end up merging thought they would. They end up merging thought they would. They end up merging them with Reliance in 2024 in a deal them with Reliance in 2024 in a deal them with Reliance in 2024 in a deal that values them at only a fraction of that values them at only a fraction of that values them at only a fraction of what they valued them in the Fox what they valued them in the Fox what they valued them in the Fox acquisition. acquisition. acquisition. Yeah. But the general philosophy of Yeah. But the general philosophy of Yeah. But the general philosophy of we're gonna go buy a deep library and we're gonna go buy a deep library and we're gonna go buy a deep library and we're gonna buy we're gonna buy we're gonna buy a third of a general streaming service a third of a general streaming service a third of a general streaming service with Hulu, not a specialized curated one with Hulu, not a specialized curated one with Hulu, not a specialized curated one with universes like Disney. It does kind with universes like Disney. It does kind with universes like Disney. It does kind of give them this kitchen sink in of give them this kitchen sink in of give them this kitchen sink in addition to their highly curated thing addition to their highly curated thing addition to their highly curated thing with Disney Plus where you can get kind with Disney Plus where you can get kind with Disney Plus where you can get kind of scale, this general entertainment of scale, this general entertainment of scale, this general entertainment platform without diluting the pristine platform without diluting the pristine platform without diluting the pristine Disney brand as long as you can keep Disney brand as long as you can keep Disney brand as long as you can keep Disney Plus really separate from Hulu in Disney Plus really separate from Hulu in Disney Plus really separate from Hulu in the mind of consumers. That's kind of the mind of consumers. That's kind of the mind of consumers. That's kind of the strategy. the strategy. the strategy. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; But certainly it's the worst of the four &gt;&gt; But certainly it's the worst of the four &gt;&gt; But certainly it's the worst of the four big acquisitions. Five if you include big acquisitions. Five if you include big acquisitions. Five if you include Bamch. Bamch. Bamch. &gt;&gt; Yep. Either way, the deal closes in &gt;&gt; Yep. Either way, the deal closes in &gt;&gt; Yep. Either way, the deal closes in March 2019, March 2019, March 2019, right in time before Disney launches the right in time before Disney launches the right in time before Disney launches the long- aaited Disney streaming service long- aaited Disney streaming service long- aaited Disney streaming service the very next month in April 2019 at an the very next month in April 2019 at an the very next month in April 2019 at an investor day that they hold to announce investor day that they hold to announce investor day that they hold to announce Disney Plus. The vault is now open. Disney Plus. The vault is now open. Disney Plus. The vault is now open. &gt;&gt; I loved this. &gt;&gt; I loved this. &gt;&gt; I loved this. &gt;&gt; It was great. The clarity of product &gt;&gt; It was great. The clarity of product &gt;&gt; It was great. The clarity of product vision of the original Disney Plus is vision of the original Disney Plus is vision of the original Disney Plus is incredibly incredibly incredibly laudable. laudable. laudable. &gt;&gt; Totally. It was a very compelling &gt;&gt; Totally. It was a very compelling &gt;&gt; Totally. It was a very compelling product. All of Disney IP, Pixar, product. All of Disney IP, Pixar, product. All of Disney IP, Pixar, Lucasfilm, Marvel, the Fox assets coming Lucasfilm, Marvel, the Fox assets coming Lucasfilm, Marvel, the Fox assets coming in and then they announce the price. in and then they announce the price. in and then they announce the price. $6.99 a month for the initial price. $6.99 a month for the initial price. $6.99 a month for the initial price. &gt;&gt; Consumers go nuts. I mean, they beat &gt;&gt; Consumers go nuts. I mean, they beat &gt;&gt; Consumers go nuts. I mean, they beat every early projection that they had to every early projection that they had to every early projection that they had to sign up for this thing. Wall Street sign up for this thing. Wall Street sign up for this thing. Wall Street loves it. The stock jumps 11% the next loves it. The stock jumps 11% the next loves it. The stock jumps 11% the next day. By the end of April 2019, the stock day. By the end of April 2019, the stock day. By the end of April 2019, the stock is up 20%. When the service finally is up 20%. When the service finally is up 20%. When the service finally launches in November, Disney gets 10 launches in November, Disney gets 10 launches in November, Disney gets 10 million signups. Within the first 24 million signups. Within the first 24 million signups. Within the first 24 hours, 26 million in the first quarter. hours, 26 million in the first quarter. hours, 26 million in the first quarter. And the setup for all this looks great. And the setup for all this looks great. And the setup for all this looks great. Here we are midway through 2019. Pixar Here we are midway through 2019. Pixar Here we are midway through 2019. Pixar and Disney animation are soaring. and Disney animation are soaring. and Disney animation are soaring. Lucasfilm is crushing it. They're Lucasfilm is crushing it. They're Lucasfilm is crushing it. They're twothirds of the way through the new twothirds of the way through the new twothirds of the way through the new Star Wars trilogy. Plus, they've made Star Wars trilogy. Plus, they've made Star Wars trilogy. Plus, they've made Rogue One, which is an amazing, amazing Rogue One, which is an amazing, amazing Rogue One, which is an amazing, amazing movie. movie. movie. &gt;&gt; High art. &gt;&gt; High art. &gt;&gt; High art. &gt;&gt; Oh, so great. The Marvel run is just &gt;&gt; Oh, so great. The Marvel run is just &gt;&gt; Oh, so great. The Marvel run is just reaching its apex, its peak. I mean, reaching its apex, its peak. I mean, reaching its apex, its peak. I mean, unprecedented in Hollywood history. unprecedented in Hollywood history. unprecedented in Hollywood history. Avengers Endgame is about to come out Avengers Endgame is about to come out Avengers Endgame is about to come out and set new records all over the world. and set new records all over the world. and set new records all over the world. &gt;&gt; $2.8 billion in box office gross just &gt;&gt; $2.8 billion in box office gross just &gt;&gt; $2.8 billion in box office gross just from that film. from that film. from that film. &gt;&gt; Yep. But unfortunately, &gt;&gt; Yep. But unfortunately, &gt;&gt; Yep. But unfortunately, all is not quite as well as it seems. all is not quite as well as it seems. all is not quite as well as it seems. Under the hood, each of Disney's core IP Under the hood, each of Disney's core IP Under the hood, each of Disney's core IP pillars is actually not in a great place pillars is actually not in a great place pillars is actually not in a great place right now. So, right now. So, right now. So, &gt;&gt; I'd call them fully exploited. &gt;&gt; I'd call them fully exploited. &gt;&gt; I'd call them fully exploited. &gt;&gt; Well, that's part of it. There's a bunch &gt;&gt; Well, that's part of it. There's a bunch &gt;&gt; Well, that's part of it. There's a bunch of problems. So, at Pixar and Disney of problems. So, at Pixar and Disney of problems. So, at Pixar and Disney Animation, they're in the midst of a Animation, they're in the midst of a Animation, they're in the midst of a major leadership transition. John major leadership transition. John major leadership transition. John Lacader has just been kicked out of the Lacader has just been kicked out of the Lacader has just been kicked out of the company and Ed Capmill has just retired, company and Ed Capmill has just retired, company and Ed Capmill has just retired, so they need new leadership at both of so they need new leadership at both of so they need new leadership at both of the marquee studios of Disney. Lucasfilm the marquee studios of Disney. Lucasfilm the marquee studios of Disney. Lucasfilm looks great, but it's on the cusp of a looks great, but it's on the cusp of a looks great, but it's on the cusp of a major crisis. Solo just bombed in major crisis. Solo just bombed in major crisis. Solo just bombed in theaters and audiences don't know it theaters and audiences don't know it theaters and audiences don't know it yet, but episode 9 is in trouble. Like yet, but episode 9 is in trouble. Like yet, but episode 9 is in trouble. Like major trouble. Well, episode eight and major trouble. Well, episode eight and major trouble. Well, episode eight and nine did not have a cohesive vision nine did not have a cohesive vision nine did not have a cohesive vision between the two and had different between the two and had different between the two and had different directors. So, episode 8 went in this directors. So, episode 8 went in this directors. So, episode 8 went in this interesting but somewhat not Star Warsy interesting but somewhat not Star Warsy interesting but somewhat not Star Warsy direction. And then episode 9 had to direction. And then episode 9 had to direction. And then episode 9 had to like smear Star Wars Vaseline all over like smear Star Wars Vaseline all over like smear Star Wars Vaseline all over the top of it so that you would remember the top of it so that you would remember the top of it so that you would remember that it was still Star Wars. So much so that it was still Star Wars. So much so that it was still Star Wars. So much so that we got Palpatine back from the dead that we got Palpatine back from the dead that we got Palpatine back from the dead again and like 10,000 star destroyers again and like 10,000 star destroyers again and like 10,000 star destroyers rising up from a planet. rising up from a planet. rising up from a planet. &gt;&gt; It was bad. &gt;&gt; It was bad. &gt;&gt; It was bad. &gt;&gt; A little foresight and vision would have &gt;&gt; A little foresight and vision would have &gt;&gt; A little foresight and vision would have been nice. Yeah. Yeah. But nobody knows been nice. Yeah. Yeah. But nobody knows been nice. Yeah. Yeah. But nobody knows this yet because the film doesn't come this yet because the film doesn't come this yet because the film doesn't come out until December of that year. out until December of that year. out until December of that year. &gt;&gt; Episode 8 was so different than the &gt;&gt; Episode 8 was so different than the &gt;&gt; Episode 8 was so different than the films around it. It's like no one was films around it. It's like no one was films around it. It's like no one was talking to each other talking to each other talking to each other &gt;&gt; and and there was no plan for episode 9. &gt;&gt; and and there was no plan for episode 9. &gt;&gt; and and there was no plan for episode 9. That was the problem. That was the problem. That was the problem. &gt;&gt; And then Marvel, I mean, Marvel's on &gt;&gt; And then Marvel, I mean, Marvel's on &gt;&gt; And then Marvel, I mean, Marvel's on this absolute high with Avengers this absolute high with Avengers this absolute high with Avengers Endgame, but the problem is it's Endgame, but the problem is it's Endgame, but the problem is it's literally an endgame. Like the story literally an endgame. Like the story literally an endgame. Like the story [laughter] [laughter] [laughter] ends, ends, ends, right? is Disney is now saying, "Oh, hey right? is Disney is now saying, "Oh, hey right? is Disney is now saying, "Oh, hey Marvel, we need you to start pumping out Marvel, we need you to start pumping out Marvel, we need you to start pumping out even more content for the streaming even more content for the streaming even more content for the streaming service." service." service." &gt;&gt; And it ends in this beautiful cinematic &gt;&gt; And it ends in this beautiful cinematic &gt;&gt; And it ends in this beautiful cinematic fashion. Like it it tied 15 different fashion. Like it it tied 15 different fashion. Like it it tied 15 different strings all together. Marvel actually strings all together. Marvel actually strings all together. Marvel actually did have a tremendous amount of did have a tremendous amount of did have a tremendous amount of foresight. It was highly coordinated. I foresight. It was highly coordinated. I foresight. It was highly coordinated. I think I cried in that last scene where think I cried in that last scene where think I cried in that last scene where they're showing each character as they're showing each character as they're showing each character as they're sort of reflecting back on the they're sort of reflecting back on the they're sort of reflecting back on the whole thing and the way they they whole thing and the way they they whole thing and the way they they handled the the snap, the character handled the the snap, the character handled the the snap, the character development of the villain with Thanos. development of the villain with Thanos. development of the villain with Thanos. It's like it's a very relatable villain. It's like it's a very relatable villain. It's like it's a very relatable villain. It's a villain that is like trying to do It's a villain that is like trying to do It's a villain that is like trying to do the right thing. It's the best kind of the right thing. It's the best kind of the right thing. It's the best kind of villain. Really elegant if the end game villain. Really elegant if the end game villain. Really elegant if the end game is the end game, is the end game, is the end game, &gt;&gt; right? [laughter] &gt;&gt; right? [laughter] &gt;&gt; right? [laughter] Really inelegant if you're about to Really inelegant if you're about to Really inelegant if you're about to follow it up by increasing production follow it up by increasing production follow it up by increasing production 50% in the studio. 50% in the studio. 50% in the studio. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yeah. Which they do. And if you do flash &gt;&gt; Yeah. Which they do. And if you do flash &gt;&gt; Yeah. Which they do. And if you do flash forward, the post2021 movie slate forward, the post2021 movie slate forward, the post2021 movie slate might actually be negative on a might actually be negative on a might actually be negative on a theatrical return. If you look at the theatrical return. If you look at the theatrical return. If you look at the Marvel, Marvel, Marvel, &gt;&gt; Ant-Man, Quantumania, Eternals, this is &gt;&gt; Ant-Man, Quantumania, Eternals, this is &gt;&gt; Ant-Man, Quantumania, Eternals, this is even ignoring the Disney Plus shows, even ignoring the Disney Plus shows, even ignoring the Disney Plus shows, some of which were very cool, Loki and some of which were very cool, Loki and some of which were very cool, Loki and Wanda Vision, but the existence of them Wanda Vision, but the existence of them Wanda Vision, but the existence of them by trying to be bigger and broader and by trying to be bigger and broader and by trying to be bigger and broader and more expansive even than the movies make more expansive even than the movies make more expansive even than the movies make the original universe feel unimportant. the original universe feel unimportant. the original universe feel unimportant. Y Y Y &gt;&gt; like my beef with Loki is who cares &gt;&gt; like my beef with Loki is who cares &gt;&gt; like my beef with Loki is who cares about Thanos when he's killing people in about Thanos when he's killing people in about Thanos when he's killing people in just one just one just one strand of an infinite multiverse and strand of an infinite multiverse and strand of an infinite multiverse and like all you kind of should care about like all you kind of should care about like all you kind of should care about is what Loki's doing versus that is what Loki's doing versus that is what Loki's doing versus that pathetic little thing called the MCU. So pathetic little thing called the MCU. So pathetic little thing called the MCU. So that you know like we I just spent a that you know like we I just spent a that you know like we I just spent a decade of my life investing in that and decade of my life investing in that and decade of my life investing in that and now you're telling me it didn't even now you're telling me it didn't even now you're telling me it didn't even matter. So there's this big issue that matter. So there's this big issue that matter. So there's this big issue that it's kind of supposed to be over and it's kind of supposed to be over and it's kind of supposed to be over and both creatively and commercially the both creatively and commercially the both creatively and commercially the stuff that comes after people don't want stuff that comes after people don't want stuff that comes after people don't want it whether it's on streaming or whether it whether it's on streaming or whether it whether it's on streaming or whether it's in theaters other than the second it's in theaters other than the second it's in theaters other than the second Black Panther which was amazing. Black Panther which was amazing. Black Panther which was amazing. &gt;&gt; That was great. That was great. &gt;&gt; That was great. That was great. &gt;&gt; That was great. That was great. &gt;&gt; Yeah. But all of this and everything &gt;&gt; Yeah. But all of this and everything &gt;&gt; Yeah. But all of this and everything you're saying highlights the strategic you're saying highlights the strategic you're saying highlights the strategic trade-off that Disney made in pursuing trade-off that Disney made in pursuing trade-off that Disney made in pursuing the streaming strategy to go toe-to-toe the streaming strategy to go toe-to-toe the streaming strategy to go toe-to-toe with Netflix. Operating a tier one with Netflix. Operating a tier one with Netflix. Operating a tier one direct to consumer streaming business is direct to consumer streaming business is direct to consumer streaming business is yet another yet another yet another wholly and completely different business wholly and completely different business wholly and completely different business model than either the core Disney model than either the core Disney model than either the core Disney flywheel or the ESPN affiliate fee flywheel or the ESPN affiliate fee flywheel or the ESPN affiliate fee model. Yep. If you're going to try and model. Yep. If you're going to try and model. Yep. If you're going to try and operate a tier one streaming service, a operate a tier one streaming service, a operate a tier one streaming service, a service that is going to reach the service that is going to reach the service that is going to reach the maximum number of subscribers, not a maximum number of subscribers, not a maximum number of subscribers, not a niche service, but a Netflix type niche service, but a Netflix type niche service, but a Netflix type competitor, competitor, competitor, your number one job is to retain your number one job is to retain your number one job is to retain subscribers that have signed up. subscribers that have signed up. subscribers that have signed up. &gt;&gt; You got to feed the beast. &gt;&gt; You got to feed the beast. &gt;&gt; You got to feed the beast. &gt;&gt; You need to feed the beast. &gt;&gt; You need to feed the beast. &gt;&gt; You need to feed the beast. &gt;&gt; Those existing subscribers content or &gt;&gt; Those existing subscribers content or &gt;&gt; Those existing subscribers content or they're going to churn. they're going to churn. they're going to churn. &gt;&gt; Exactly. So, I want to quote Ben Gilbert &gt;&gt; Exactly. So, I want to quote Ben Gilbert &gt;&gt; Exactly. So, I want to quote Ben Gilbert here. here. here. &gt;&gt; [laughter] &gt;&gt; [laughter] &gt;&gt; [laughter] &gt;&gt; Oh god. When from the end of Acquired's &gt;&gt; Oh god. When from the end of Acquired's &gt;&gt; Oh god. When from the end of Acquired's 2019 Disney Plus episode [laughter] in 2019 Disney Plus episode [laughter] in 2019 Disney Plus episode [laughter] in which we were incredibly excited about which we were incredibly excited about which we were incredibly excited about Disney Plus, I mean, it was so exciting Disney Plus, I mean, it was so exciting Disney Plus, I mean, it was so exciting back then. But you did say one thing at back then. But you did say one thing at back then. But you did say one thing at the end of the episode. You said, quote, the end of the episode. You said, quote, the end of the episode. You said, quote, "One reason to doubt it, it being Disney "One reason to doubt it, it being Disney "One reason to doubt it, it being Disney Plus, is I think Disney may be Plus, is I think Disney may be Plus, is I think Disney may be underestimating just how much content underestimating just how much content underestimating just how much content people need to stay satiated. It's a people need to stay satiated. It's a people need to stay satiated. It's a beautiful and amazing thing to have beautiful and amazing thing to have beautiful and amazing thing to have access to the entire back catalog of all access to the entire back catalog of all access to the entire back catalog of all these really storied franchises. But am these really storied franchises. But am these really storied franchises. But am I going to pay $7 a month to keep an I going to pay $7 a month to keep an I going to pay $7 a month to keep an option available to go watch those option available to go watch those option available to go watch those things? No. If I ever want to rewatch a things? No. If I ever want to rewatch a things? No. If I ever want to rewatch a Star Wars movie, I'll just reactivate my Star Wars movie, I'll just reactivate my Star Wars movie, I'll just reactivate my subscription at a given time. They subscription at a given time. They subscription at a given time. They really do need to aggressively turn on a really do need to aggressively turn on a really do need to aggressively turn on a fire hose of content here. fire hose of content here. fire hose of content here. &gt;&gt; Oh man, you summed it up. [sighs] You &gt;&gt; Oh man, you summed it up. [sighs] You &gt;&gt; Oh man, you summed it up. [sighs] You summed it up. This is the problem. That summed it up. This is the problem. That summed it up. This is the problem. That whole strategy of a fire hose of content whole strategy of a fire hose of content whole strategy of a fire hose of content is completely orthogonal to is completely orthogonal to is completely orthogonal to &gt;&gt; yes &gt;&gt; yes &gt;&gt; yes &gt;&gt; the flywheel strategy of only the best &gt;&gt; the flywheel strategy of only the best &gt;&gt; the flywheel strategy of only the best content very infrequently content very infrequently content very infrequently &gt;&gt; and that is what Disney did the best &gt;&gt; and that is what Disney did the best &gt;&gt; and that is what Disney did the best content infrequently with a theatrical content infrequently with a theatrical content infrequently with a theatrical release a cultural moment around it and release a cultural moment around it and release a cultural moment around it and then be quiet for a while and and then be quiet for a while and and then be quiet for a while and and harvest the fruits of that one movie but harvest the fruits of that one movie but harvest the fruits of that one movie but be quiet for a while and streaming is be quiet for a while and streaming is be quiet for a while and streaming is the exact freaking opposite. It is every the exact freaking opposite. It is every the exact freaking opposite. It is every time I open that, there better be time I open that, there better be time I open that, there better be something new and fresh for me to something new and fresh for me to something new and fresh for me to consume. And I I got to wonder how consume. And I I got to wonder how consume. And I I got to wonder how much the Disney folks knew that when much the Disney folks knew that when much the Disney folks knew that when they made this decision to push all they made this decision to push all they made this decision to push all their chips in and accelerate their chips in and accelerate their chips in and accelerate going to streaming in a direct consumer going to streaming in a direct consumer going to streaming in a direct consumer way. Y way. Y way. Y &gt;&gt; the biggest issue really is that Disney &gt;&gt; the biggest issue really is that Disney &gt;&gt; the biggest issue really is that Disney had something to lose. They had two had something to lose. They had two had something to lose. They had two things to lose. things to lose. things to lose. They had an existing content library They had an existing content library They had an existing content library that was highly differentiated. And when that was highly differentiated. And when that was highly differentiated. And when you bolt things onto a universe of a you bolt things onto a universe of a you bolt things onto a universe of a differentiated library, it makes the differentiated library, it makes the differentiated library, it makes the original content less valuable. original content less valuable. original content less valuable. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; I remember watching the Obi-Wan &gt;&gt; I remember watching the Obi-Wan &gt;&gt; I remember watching the Obi-Wan TV show on Disney Plus and being like, TV show on Disney Plus and being like, TV show on Disney Plus and being like, "Oh man, that kind of shatters how I "Oh man, that kind of shatters how I "Oh man, that kind of shatters how I think about Obi-Wan." think about Obi-Wan." think about Obi-Wan." &gt;&gt; Yeah. It's not as cool as I thought it &gt;&gt; Yeah. It's not as cool as I thought it &gt;&gt; Yeah. It's not as cool as I thought it was. was. was. &gt;&gt; Yeah. because you have something to &gt;&gt; Yeah. because you have something to &gt;&gt; Yeah. because you have something to lose, you actually risk destroying the lose, you actually risk destroying the lose, you actually risk destroying the stuff you had that's great by sort of stuff you had that's great by sort of stuff you had that's great by sort of corrupting it and and destroying the corrupting it and and destroying the corrupting it and and destroying the competitive advantage that you have in competitive advantage that you have in competitive advantage that you have in the marketplace by the marketplace by the marketplace by &gt;&gt; This is such a good point. In a top tier &gt;&gt; This is such a good point. In a top tier &gt;&gt; This is such a good point. In a top tier high quality content, stories and high quality content, stories and high quality content, stories and characters world, characters world, characters world, every time you make a sequel, you're every time you make a sequel, you're every time you make a sequel, you're taking a big risk. And this is the risk. taking a big risk. And this is the risk. taking a big risk. And this is the risk. &gt;&gt; This is why Disney didn't make sequels &gt;&gt; This is why Disney didn't make sequels &gt;&gt; This is why Disney didn't make sequels prior to the '90s. prior to the '90s. prior to the '90s. &gt;&gt; Yep. Now, Pixar proved to them that you &gt;&gt; Yep. Now, Pixar proved to them that you &gt;&gt; Yep. Now, Pixar proved to them that you can make sequels and they can be great, can make sequels and they can be great, can make sequels and they can be great, but you need to put that same amount of but you need to put that same amount of but you need to put that same amount of care and effort and time into it. care and effort and time into it. care and effort and time into it. &gt;&gt; Yeah, Pixar does one every seven years. &gt;&gt; Yeah, Pixar does one every seven years. &gt;&gt; Yeah, Pixar does one every seven years. &gt;&gt; Yep. You can't increase the production &gt;&gt; Yep. You can't increase the production &gt;&gt; Yep. You can't increase the production line. line. line. &gt;&gt; The second thing is that the Disney &gt;&gt; The second thing is that the Disney &gt;&gt; The second thing is that the Disney brand itself means something. brand itself means something. brand itself means something. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; The Netflix brand doesn't mean anything &gt;&gt; The Netflix brand doesn't mean anything &gt;&gt; The Netflix brand doesn't mean anything to anyone. The Netflix brand is the to anyone. The Netflix brand is the to anyone. The Netflix brand is the button that I push on my TV when I want button that I push on my TV when I want button that I push on my TV when I want to watch stuff. And sometimes it's great to watch stuff. And sometimes it's great to watch stuff. And sometimes it's great stuff, but if it's not great stuff, stuff, but if it's not great stuff, stuff, but if it's not great stuff, whatever. It whizzes by. I I don't think whatever. It whizzes by. I I don't think whatever. It whizzes by. I I don't think one way or another about Netflix. The one way or another about Netflix. The one way or another about Netflix. The Disney brand has something to lose. And Disney brand has something to lose. And Disney brand has something to lose. And so if you have a bunch of bombs in a so if you have a bunch of bombs in a so if you have a bunch of bombs in a row, I think less of the Disney brand, row, I think less of the Disney brand, row, I think less of the Disney brand, which again takes away your compounding which again takes away your compounding which again takes away your compounding competitive advantage by being Disney. competitive advantage by being Disney. competitive advantage by being Disney. Whereas if you release a bunch of great Whereas if you release a bunch of great Whereas if you release a bunch of great things in a row, even if they're more things in a row, even if they're more things in a row, even if they're more spaced out over time and you're really spaced out over time and you're really spaced out over time and you're really judicious with it, which is not judicious with it, which is not judicious with it, which is not congruent with the streaming operating congruent with the streaming operating congruent with the streaming operating model, then it can really add to the the model, then it can really add to the the model, then it can really add to the the brand bucket of the Disney brand. So brand bucket of the Disney brand. So brand bucket of the Disney brand. So Disney sort of has this compounding Disney sort of has this compounding Disney sort of has this compounding asset that is at risk when going asset that is at risk when going asset that is at risk when going head-to-head with Netflix. head-to-head with Netflix. head-to-head with Netflix. &gt;&gt; Yep. Yep. Yep. So that's all the &gt;&gt; Yep. Yep. Yep. So that's all the &gt;&gt; Yep. Yep. Yep. So that's all the strategic trade-offs on the Disney film strategic trade-offs on the Disney film strategic trade-offs on the Disney film and TV side. Then there's the whole and TV side. Then there's the whole and TV side. Then there's the whole cable ESPN side of the house. cable ESPN side of the house. cable ESPN side of the house. &gt;&gt; Yes. Like what what is going on there in &gt;&gt; Yes. Like what what is going on there in &gt;&gt; Yes. Like what what is going on there in this 201819 this 201819 this 201819 period? period? period? Well, as you can imagine, cable Well, as you can imagine, cable Well, as you can imagine, cable subscriptions are only getting cancelled subscriptions are only getting cancelled subscriptions are only getting cancelled at a faster and faster rate, which can at a faster and faster rate, which can at a faster and faster rate, which can actually still be fine. You can actually actually still be fine. You can actually actually still be fine. You can actually still grow your revenue for a while if still grow your revenue for a while if still grow your revenue for a while if you're in the high leverage position you're in the high leverage position you're in the high leverage position that ESPN is because you can just raise that ESPN is because you can just raise that ESPN is because you can just raise your prices faster than your prices faster than your prices faster than &gt;&gt; cancellations are happening. &gt;&gt; cancellations are happening. &gt;&gt; cancellations are happening. &gt;&gt; Exactly. But later on around 2023, even &gt;&gt; Exactly. But later on around 2023, even &gt;&gt; Exactly. But later on around 2023, even this would come to a head. the declines this would come to a head. the declines this would come to a head. the declines were happening too rapidly and affiliate were happening too rapidly and affiliate were happening too rapidly and affiliate fee increases could no longer outpace fee increases could no longer outpace fee increases could no longer outpace subscriber losses and revenue then would subscriber losses and revenue then would subscriber losses and revenue then would start to decline 23 into 24. So start to decline 23 into 24. So start to decline 23 into 24. So &gt;&gt; basically cable and ESPN entered the &gt;&gt; basically cable and ESPN entered the &gt;&gt; basically cable and ESPN entered the endgame to use an Avengers term. endgame to use an Avengers term. endgame to use an Avengers term. &gt;&gt; Yes. Yes. So that's on ESPN's revenue &gt;&gt; Yes. Yes. So that's on ESPN's revenue &gt;&gt; Yes. Yes. So that's on ESPN's revenue side. On the cost side there's another side. On the cost side there's another side. On the cost side there's another big problem. big problem. big problem. &gt;&gt; Sure people are turning off cable but I &gt;&gt; Sure people are turning off cable but I &gt;&gt; Sure people are turning off cable but I don't know that's manageable as long as don't know that's manageable as long as don't know that's manageable as long as your your costs stay fixed. But the your your costs stay fixed. But the your your costs stay fixed. But the sports leagues have now realized that sports leagues have now realized that sports leagues have now realized that they can extract much more value. That they can extract much more value. That they can extract much more value. That it turns out that in this whole value it turns out that in this whole value it turns out that in this whole value chain of watching a sports game, way chain of watching a sports game, way chain of watching a sports game, way more of the profits should be going to more of the profits should be going to more of the profits should be going to the sports league than to the network the sports league than to the network the sports league than to the network that's sort of sitting in the middle. that's sort of sitting in the middle. that's sort of sitting in the middle. &gt;&gt; And the the NFL, the NBA, I think they &gt;&gt; And the the NFL, the NBA, I think they &gt;&gt; And the the NFL, the NBA, I think they just didn't fully extract everything just didn't fully extract everything just didn't fully extract everything that they could have for decades. That that they could have for decades. That that they could have for decades. That probably is true, but they were probably is true, but they were probably is true, but they were hamstrung because there there really hamstrung because there there really hamstrung because there there really weren't any other biders except ESPN for weren't any other biders except ESPN for weren't any other biders except ESPN for so much of these rights because ESPN had so much of these rights because ESPN had so much of these rights because ESPN had this whole scale economy's power where this whole scale economy's power where this whole scale economy's power where because they were getting the most cash because they were getting the most cash because they were getting the most cash and affiliate fees, they could pay the and affiliate fees, they could pay the and affiliate fees, they could pay the biggest prices for sports rights and biggest prices for sports rights and biggest prices for sports rights and block everybody else out except for the block everybody else out except for the block everybody else out except for the like really really big stuff that the like really really big stuff that the like really really big stuff that the broadcast networks would come after too. broadcast networks would come after too. broadcast networks would come after too. Now other biders show up in the form of Now other biders show up in the form of Now other biders show up in the form of the tech companies. the tech companies. the tech companies. &gt;&gt; And the tech companies not only have &gt;&gt; And the tech companies not only have &gt;&gt; And the tech companies not only have these incredibly deep pockets, at least these incredibly deep pockets, at least these incredibly deep pockets, at least until all of them started destroying all until all of them started destroying all until all of them started destroying all their free cash flow doing AI capex their free cash flow doing AI capex their free cash flow doing AI capex &gt;&gt; building data centers. &gt;&gt; building data centers. &gt;&gt; building data centers. &gt;&gt; Yes. But they have more ways to monetize &gt;&gt; Yes. But they have more ways to monetize &gt;&gt; Yes. But they have more ways to monetize the consumer. So they can afford to bid the consumer. So they can afford to bid the consumer. So they can afford to bid more for the same consumer than an ESPN more for the same consumer than an ESPN more for the same consumer than an ESPN or that a TV network could because or that a TV network could because or that a TV network could because Amazon can get you as a prime Amazon can get you as a prime Amazon can get you as a prime subscriber. subscriber. subscriber. &gt;&gt; This is Amazon's NFL deal right here. &gt;&gt; This is Amazon's NFL deal right here. &gt;&gt; This is Amazon's NFL deal right here. &gt;&gt; Yes. Yeah. So any any student of &gt;&gt; Yes. Yeah. So any any student of &gt;&gt; Yes. Yeah. So any any student of economics will kind of see the writing economics will kind of see the writing economics will kind of see the writing on the wall here. The price is set by on the wall here. The price is set by on the wall here. The price is set by the highest bidder. And if somebody has the highest bidder. And if somebody has the highest bidder. And if somebody has a business model that structurally can a business model that structurally can a business model that structurally can outmonetize what you can, then they're outmonetize what you can, then they're outmonetize what you can, then they're going to win and the price is going to going to win and the price is going to going to win and the price is going to be set by them. be set by them. be set by them. &gt;&gt; Yep. This is why ESPN won for many years &gt;&gt; Yep. This is why ESPN won for many years &gt;&gt; Yep. This is why ESPN won for many years and this is why the tech companies are and this is why the tech companies are and this is why the tech companies are winning. Now winning. Now winning. Now &gt;&gt; the other thing driving the prices up is &gt;&gt; the other thing driving the prices up is &gt;&gt; the other thing driving the prices up is as you get a more and more abundance of as you get a more and more abundance of as you get a more and more abundance of content online and onlineness, content online and onlineness, content online and onlineness, there is an increasing return to shared there is an increasing return to shared there is an increasing return to shared cultural experiences happening live in a cultural experiences happening live in a cultural experiences happening live in a way that made sports way more important way that made sports way more important way that made sports way more important than they ever have been before. the than they ever have been before. the than they ever have been before. the prices people were paying for World Cup prices people were paying for World Cup prices people were paying for World Cup final tickets and Taylor Swift tour final tickets and Taylor Swift tour final tickets and Taylor Swift tour tickets and Super Bowl tickets that sort tickets and Super Bowl tickets that sort tickets and Super Bowl tickets that sort of manifests in rights deals too, of manifests in rights deals too, of manifests in rights deals too, &gt;&gt; right? There's a trickle down effect. &gt;&gt; right? There's a trickle down effect. &gt;&gt; right? There's a trickle down effect. &gt;&gt; Exactly. Exactly. So in 2006, just look &gt;&gt; Exactly. Exactly. So in 2006, just look &gt;&gt; Exactly. Exactly. So in 2006, just look at the Monday Night Football package at the Monday Night Football package at the Monday Night Football package that ESPN buys. 06 it was a 1.1 billion. that ESPN buys. 06 it was a 1.1 billion. that ESPN buys. 06 it was a 1.1 billion. 2011 it was at 1.9 billion a year and by 2011 it was at 1.9 billion a year and by 2011 it was at 1.9 billion a year and by 2021 it went up to $2.7 billion a year. 2021 it went up to $2.7 billion a year. 2021 it went up to $2.7 billion a year. now and the viewership for Monday Night now and the viewership for Monday Night now and the viewership for Monday Night Football is actually going up Football is actually going up Football is actually going up &gt;&gt; even amidst all this cord cutting. Like &gt;&gt; even amidst all this cord cutting. Like &gt;&gt; even amidst all this cord cutting. Like it turns out that the NFL is the thing it turns out that the NFL is the thing it turns out that the NFL is the thing that we all want to watch. that we all want to watch. that we all want to watch. &gt;&gt; Yep. So the structural force though &gt;&gt; Yep. So the structural force though &gt;&gt; Yep. So the structural force though that's working against ESPN here is that that's working against ESPN here is that that's working against ESPN here is that ESPN used to be the only place that you ESPN used to be the only place that you ESPN used to be the only place that you could go to watch highlights and replays could go to watch highlights and replays could go to watch highlights and replays and now you can get a lot of that on and now you can get a lot of that on and now you can get a lot of that on social media. So in the long run, if the social media. So in the long run, if the social media. So in the long run, if the main reason to subscribe to any given main reason to subscribe to any given main reason to subscribe to any given channel ends up being actually about the channel ends up being actually about the channel ends up being actually about the game content itself and not game content itself and not game content itself and not differentiated by stuff around the game, differentiated by stuff around the game, differentiated by stuff around the game, then the excess profits in the long term then the excess profits in the long term then the excess profits in the long term will just be captured by the rights will just be captured by the rights will just be captured by the rights holders like the NFL and the NBA. holders like the NFL and the NBA. holders like the NFL and the NBA. &gt;&gt; Yep. And to be clear, we've probably &gt;&gt; Yep. And to be clear, we've probably &gt;&gt; Yep. And to be clear, we've probably undersold ESPN's undersold ESPN's undersold ESPN's creativity and innovation in this creativity and innovation in this creativity and innovation in this episode. I mean, highlights, sports episode. I mean, highlights, sports episode. I mean, highlights, sports center, everything they did was center, everything they did was center, everything they did was &gt;&gt; even more recently at McAfee show or my &gt;&gt; even more recently at McAfee show or my &gt;&gt; even more recently at McAfee show or my god Manning cast. I cannot wait for fall god Manning cast. I cannot wait for fall god Manning cast. I cannot wait for fall to watch Manning cast at Monday Night to watch Manning cast at Monday Night to watch Manning cast at Monday Night Football. It is the thing I look forward Football. It is the thing I look forward Football. It is the thing I look forward to from uh I don't know, July 15th to from uh I don't know, July 15th to from uh I don't know, July 15th onward. onward. onward. &gt;&gt; They really are the best of the best at &gt;&gt; They really are the best of the best at &gt;&gt; They really are the best of the best at high quality content production around high quality content production around high quality content production around sports. sports. sports. However, However, However, this is not the same as Disney. Sports this is not the same as Disney. Sports this is not the same as Disney. Sports have a very limited shelf life. You are have a very limited shelf life. You are have a very limited shelf life. You are not going back and watching Manning cast not going back and watching Manning cast not going back and watching Manning cast episodes from last season. [laughter] episodes from last season. [laughter] episodes from last season. [laughter] &gt;&gt; The flywheel does not apply here. So, &gt;&gt; The flywheel does not apply here. So, &gt;&gt; The flywheel does not apply here. So, you can't build long-term value around you can't build long-term value around you can't build long-term value around that original content. You know, sure that original content. You know, sure that original content. You know, sure you can with like 30 for30 and stuff you can with like 30 for30 and stuff you can with like 30 for30 and stuff like that, but that's so small a niche like that, but that's so small a niche like that, but that's so small a niche at ESPN. The vast majority of the at ESPN. The vast majority of the at ESPN. The vast majority of the production that ESPN is making has very production that ESPN is making has very production that ESPN is making has very very limited shelf life. very limited shelf life. very limited shelf life. &gt;&gt; That's so interesting because the &gt;&gt; That's so interesting because the &gt;&gt; That's so interesting because the content has very limited shelf life, but content has very limited shelf life, but content has very limited shelf life, but they've locked up these incredibly they've locked up these incredibly they've locked up these incredibly predictable revenue streams. Yeah, predictable revenue streams. Yeah, predictable revenue streams. Yeah, there's ad sales. They have to figure there's ad sales. They have to figure there's ad sales. They have to figure out how they're going to do in the ad out how they're going to do in the ad out how they're going to do in the ad sales, but that's plus or minus a few sales, but that's plus or minus a few sales, but that's plus or minus a few percent. They know a few years from now percent. They know a few years from now percent. They know a few years from now how much free cash flow they're going to how much free cash flow they're going to how much free cash flow they're going to get from ESPN in a way that they have no get from ESPN in a way that they have no get from ESPN in a way that they have no idea from their movie slate. It has been idea from their movie slate. It has been idea from their movie slate. It has been this stabilizing force. this stabilizing force. this stabilizing force. &gt;&gt; Oh yeah. The beauty that we've talked &gt;&gt; Oh yeah. The beauty that we've talked &gt;&gt; Oh yeah. The beauty that we've talked about on this episode that Iger ended up about on this episode that Iger ended up about on this episode that Iger ended up realizing of of having these two realizing of of having these two realizing of of having these two businesses together was take that stable businesses together was take that stable businesses together was take that stable cash flow and use it to invest in the cash flow and use it to invest in the cash flow and use it to invest in the Disney flywheel. Disney flywheel. Disney flywheel. &gt;&gt; Right. &gt;&gt; Right. &gt;&gt; Right. &gt;&gt; I'm just making the point that it's not &gt;&gt; I'm just making the point that it's not &gt;&gt; I'm just making the point that it's not like as ESPN has come under this like as ESPN has come under this like as ESPN has come under this pressure that they could start building pressure that they could start building pressure that they could start building their own flywheel here. It's like no no their own flywheel here. It's like no no their own flywheel here. It's like no no this is a declining asset. this is a declining asset. this is a declining asset. &gt;&gt; Right. Right. Right. All right. So take &gt;&gt; Right. Right. Right. All right. So take &gt;&gt; Right. Right. Right. All right. So take us forward. How does Disney Plus go? How us forward. How does Disney Plus go? How us forward. How does Disney Plus go? How does ESPN Plus go? So, for better or for does ESPN Plus go? So, for better or for does ESPN Plus go? So, for better or for worse, I think Disney either doesn't see worse, I think Disney either doesn't see worse, I think Disney either doesn't see or doesn't have to deal with the fact or doesn't have to deal with the fact or doesn't have to deal with the fact that they have these pretty major that they have these pretty major that they have these pretty major strategic issues on both sides of the strategic issues on both sides of the strategic issues on both sides of the house with their streaming strategy house with their streaming strategy house with their streaming strategy because the minute after they launch it, because the minute after they launch it, because the minute after they launch it, the entire world gets turned upside the entire world gets turned upside the entire world gets turned upside down. down. down. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Disney Plus launches in November 2019. &gt;&gt; Disney Plus launches in November 2019. &gt;&gt; Disney Plus launches in November 2019. It's unbelievable that was just sitting It's unbelievable that was just sitting It's unbelievable that was just sitting there right on app stores and in TVs the there right on app stores and in TVs the there right on app stores and in TVs the moment COVID hit. moment COVID hit. moment COVID hit. &gt;&gt; Yeah. February 2020, Bob Iger retires as &gt;&gt; Yeah. February 2020, Bob Iger retires as &gt;&gt; Yeah. February 2020, Bob Iger retires as CEO. Uh this COVID thing is starting to CEO. Uh this COVID thing is starting to CEO. Uh this COVID thing is starting to happen. He says, "Hey, I'm going to happen. He says, "Hey, I'm going to happen. He says, "Hey, I'm going to remain as executive chairman for a remain as executive chairman for a remain as executive chairman for a little while to just help stabilize the little while to just help stabilize the little while to just help stabilize the transition, especially, you know, in the transition, especially, you know, in the transition, especially, you know, in the parks here the couple weeks before we parks here the couple weeks before we parks here the couple weeks before we reopen everything here." [laughter] Oh, reopen everything here." [laughter] Oh, reopen everything here." [laughter] Oh, man. man. man. Bob JPEC of course who was head of the Bob JPEC of course who was head of the Bob JPEC of course who was head of the parks division has come in as the new parks division has come in as the new parks division has come in as the new CEO. March 2020 comes and everybody CEO. March 2020 comes and everybody CEO. March 2020 comes and everybody realizes this co thing isn't a uh couple realizes this co thing isn't a uh couple realizes this co thing isn't a uh couple week kind of thing here. Disney's market week kind of thing here. Disney's market week kind of thing here. Disney's market cap drops 40% cap drops 40% cap drops 40% in March of 2020 because the parks in March of 2020 because the parks in March of 2020 because the parks business goes to zero. Actually zero. business goes to zero. Actually zero. business goes to zero. Actually zero. Nobody's there. Nobody's there. Nobody's there. &gt;&gt; I mean Disney's net income that year was &gt;&gt; I mean Disney's net income that year was &gt;&gt; I mean Disney's net income that year was actually negative. actually negative. actually negative. &gt;&gt; Yeah. Yeah. And then the roller coaster &gt;&gt; Yeah. Yeah. And then the roller coaster &gt;&gt; Yeah. Yeah. And then the roller coaster goes up. [laughter] Ben, as you said, goes up. [laughter] Ben, as you said, goes up. [laughter] Ben, as you said, Disney Plus is just sitting there. Disney Plus is just sitting there. Disney Plus is just sitting there. Everybody's at home now. When they Everybody's at home now. When they Everybody's at home now. When they announced Disney Plus originally, Disney announced Disney Plus originally, Disney announced Disney Plus originally, Disney said that their goal was to get 60 to 90 said that their goal was to get 60 to 90 said that their goal was to get 60 to 90 million subscribers within 5 years. All million subscribers within 5 years. All million subscribers within 5 years. All of a sudden, CO happens. Everybody's of a sudden, CO happens. Everybody's of a sudden, CO happens. Everybody's sitting at home. Disney gets 100 million sitting at home. Disney gets 100 million sitting at home. Disney gets 100 million subscribers within subscribers within subscribers within 16 months. March of 2021, they announced 16 months. March of 2021, they announced 16 months. March of 2021, they announced they've passed 100 million subscribers, they've passed 100 million subscribers, they've passed 100 million subscribers, blown way past even their most blown way past even their most blown way past even their most aggressive projections. aggressive projections. aggressive projections. The stock goes to the moon. The stock goes to the moon. The stock goes to the moon. &gt;&gt; Well, that's the other thing. It was &gt;&gt; Well, that's the other thing. It was &gt;&gt; Well, that's the other thing. It was zero interest rates. So, any any good zero interest rates. So, any any good zero interest rates. So, any any good sign the market's amplitude is higher sign the market's amplitude is higher sign the market's amplitude is higher than normal. than normal. than normal. &gt;&gt; Yes. Disney's market cap in March of &gt;&gt; Yes. Disney's market cap in March of &gt;&gt; Yes. Disney's market cap in March of 2021 on this announcement hits $360 2021 on this announcement hits $360 2021 on this announcement hits $360 billion. billion. billion. &gt;&gt; Wow. here at its peak. They all look &gt;&gt; Wow. here at its peak. They all look &gt;&gt; Wow. here at its peak. They all look like geniuses and for the moment they like geniuses and for the moment they like geniuses and for the moment they were. All these strategic questions were. All these strategic questions were. All these strategic questions we've talked about are non-issues. we've talked about are non-issues. we've talked about are non-issues. &gt;&gt; And worth noting it hit that peak right &gt;&gt; And worth noting it hit that peak right &gt;&gt; And worth noting it hit that peak right around January 1st of 21 and by October around January 1st of 21 and by October around January 1st of 21 and by October of 21 it had begun its fall right back of 21 it had begun its fall right back of 21 it had begun its fall right back down to where it started. down to where it started. down to where it started. &gt;&gt; Yep. So that December of 2021, Bob Iger &gt;&gt; Yep. So that December of 2021, Bob Iger &gt;&gt; Yep. So that December of 2021, Bob Iger fully retires. As we head into the next fully retires. As we head into the next fully retires. As we head into the next year, year, year, there start to be some cracks in the there start to be some cracks in the there start to be some cracks in the Disney Plus strategy. Subscriber numbers Disney Plus strategy. Subscriber numbers Disney Plus strategy. Subscriber numbers are still good, but churn is high, and are still good, but churn is high, and are still good, but churn is high, and they're spending a lot of money they're spending a lot of money they're spending a lot of money acquiring and reacquiring acquiring and reacquiring acquiring and reacquiring subscribers. subscribers. subscribers. This is the treadmill of a Netflix This is the treadmill of a Netflix This is the treadmill of a Netflix competitor streaming service. competitor streaming service. competitor streaming service. You got to not only provide the content You got to not only provide the content You got to not only provide the content to people every month, but you got to to people every month, but you got to to people every month, but you got to tell them about it. I mean, on the ESPN tell them about it. I mean, on the ESPN tell them about it. I mean, on the ESPN side, ESPN didn't do the marketing to side, ESPN didn't do the marketing to side, ESPN didn't do the marketing to consumers. That was the cable company's consumers. That was the cable company's consumers. That was the cable company's job. They got the subscribers. They job. They got the subscribers. They job. They got the subscribers. They managed the churn. On the Disney side, managed the churn. On the Disney side, managed the churn. On the Disney side, &gt;&gt; yeah, you got to advertise a new movie. &gt;&gt; yeah, you got to advertise a new movie. &gt;&gt; yeah, you got to advertise a new movie. So, they So, they So, they &gt;&gt; Sure. Sure. &gt;&gt; Sure. Sure. &gt;&gt; Sure. Sure. &gt;&gt; You spend tens of millions or hundreds &gt;&gt; You spend tens of millions or hundreds &gt;&gt; You spend tens of millions or hundreds of millions of of dollars advertising of millions of of dollars advertising of millions of of dollars advertising them, them, them, &gt;&gt; but there is no concept of churn, &gt;&gt; but there is no concept of churn, &gt;&gt; but there is no concept of churn, &gt;&gt; right? &gt;&gt; right? &gt;&gt; right? &gt;&gt; You're not trying to, you know, keep &gt;&gt; You're not trying to, you know, keep &gt;&gt; You're not trying to, you know, keep everybody, everybody, everybody, &gt;&gt; right? So, the interesting thing, &gt;&gt; right? So, the interesting thing, &gt;&gt; right? So, the interesting thing, they're all in on this Disney Plus and they're all in on this Disney Plus and they're all in on this Disney Plus and Hulu, this streaming strategy. And the Hulu, this streaming strategy. And the Hulu, this streaming strategy. And the question is, is there actually a pile of question is, is there actually a pile of question is, is there actually a pile of gold worth chasing in streaming? It's gold worth chasing in streaming? It's gold worth chasing in streaming? It's structurally a worse business, as you structurally a worse business, as you structurally a worse business, as you were just mentioning, than the old cable were just mentioning, than the old cable were just mentioning, than the old cable bundle where you just got checks. bundle where you just got checks. bundle where you just got checks. Consumers can cancel easily. They do so Consumers can cancel easily. They do so Consumers can cancel easily. They do so every few months. It's expensive to make every few months. It's expensive to make every few months. It's expensive to make the amount of content you need to make, the amount of content you need to make, the amount of content you need to make, especially now with the quality that especially now with the quality that especially now with the quality that people expect out of streaming content. people expect out of streaming content. people expect out of streaming content. They expect like cinema TV shows. Yeah. They expect like cinema TV shows. Yeah. They expect like cinema TV shows. Yeah. Consumers don't want to have a zillion Consumers don't want to have a zillion Consumers don't want to have a zillion services. You have to build your own services. You have to build your own services. You have to build your own technology and keep the user experience technology and keep the user experience technology and keep the user experience great as platforms add new features and great as platforms add new features and great as platforms add new features and change the UI and everything which is change the UI and everything which is change the UI and everything which is very expensive to hire and pay good very expensive to hire and pay good very expensive to hire and pay good engineers, good designers, good product engineers, good designers, good product engineers, good designers, good product people. You have to acquire your own people. You have to acquire your own people. You have to acquire your own customers directly. Expensive. You have customers directly. Expensive. You have customers directly. Expensive. You have to retain your own customers directly. to retain your own customers directly. to retain your own customers directly. Expensive. Expensive. Expensive. &gt;&gt; When they turn, you have to reacquire &gt;&gt; When they turn, you have to reacquire &gt;&gt; When they turn, you have to reacquire them. them. them. &gt;&gt; That's right. And critically, you don't &gt;&gt; That's right. And critically, you don't &gt;&gt; That's right. And critically, you don't get a second exploitation window the way get a second exploitation window the way get a second exploitation window the way that a a limited edition home video that a a limited edition home video that a a limited edition home video re-release has. re-release has. re-release has. &gt;&gt; Theatrical re-releases followed by home &gt;&gt; Theatrical re-releases followed by home &gt;&gt; Theatrical re-releases followed by home video windows that mah that was the video windows that mah that was the video windows that mah that was the business to be in. And sitting here business to be in. And sitting here business to be in. And sitting here grumbling about it and wishing that that grumbling about it and wishing that that grumbling about it and wishing that that could come back is is not the answer. could come back is is not the answer. could come back is is not the answer. But Disney is sort of seeing the reality But Disney is sort of seeing the reality But Disney is sort of seeing the reality in 23 24 that oh my god streaming wasn't in 23 24 that oh my god streaming wasn't in 23 24 that oh my god streaming wasn't just like invest some money to build it just like invest some money to build it just like invest some money to build it out one time and then we've got this out one time and then we've got this out one time and then we've got this great asset. It's this constant great asset. It's this constant great asset. It's this constant expensive nurturing thing that we expensive nurturing thing that we expensive nurturing thing that we haven't had to deal with before. haven't had to deal with before. haven't had to deal with before. &gt;&gt; Yep. So heading into 2022 &gt;&gt; Yep. So heading into 2022 &gt;&gt; Yep. So heading into 2022 Bob Chapeek does a reorg basically Bob Chapeek does a reorg basically Bob Chapeek does a reorg basically reorginging the entire company around reorginging the entire company around reorginging the entire company around the streaming strategy. consolidates all the streaming strategy. consolidates all the streaming strategy. consolidates all the studios all together into one the studios all together into one the studios all together into one reporting segment. Disney media I think reporting segment. Disney media I think reporting segment. Disney media I think DMED. Meanwhile, losses at Disney Plus DMED. Meanwhile, losses at Disney Plus DMED. Meanwhile, losses at Disney Plus are just piling up as they're spending are just piling up as they're spending are just piling up as they're spending all of this money in production and all of this money in production and all of this money in production and customer acquisition cost and churn customer acquisition cost and churn customer acquisition cost and churn management and technology development. management and technology development. management and technology development. It culminates in November 2022 in It culminates in November 2022 in It culminates in November 2022 in Disney's fiscal Q4 earnings call when Disney's fiscal Q4 earnings call when Disney's fiscal Q4 earnings call when investors start asking a lot of investors start asking a lot of investors start asking a lot of questions about these losses at Disney questions about these losses at Disney questions about these losses at Disney Plus and Bob JPEG and the company's Plus and Bob JPEG and the company's Plus and Bob JPEG and the company's strategy for addressing them and it does strategy for addressing them and it does strategy for addressing them and it does not go well. not go well. not go well. &gt;&gt; Well, and there's all these other &gt;&gt; Well, and there's all these other &gt;&gt; Well, and there's all these other self-inflicted wounds. I mean, all over self-inflicted wounds. I mean, all over self-inflicted wounds. I mean, all over the company, they they announce they're the company, they they announce they're the company, they they announce they're moving a bunch of Imagineers to Florida moving a bunch of Imagineers to Florida moving a bunch of Imagineers to Florida and then they cancel that expansion even and then they cancel that expansion even and then they cancel that expansion even after a bunch of them like already after a bunch of them like already after a bunch of them like already bought houses. Then there's the whole bought houses. Then there's the whole bought houses. Then there's the whole spat between CHP and the governor of spat between CHP and the governor of spat between CHP and the governor of Florida. Florida. Florida. &gt;&gt; Oh yes. &gt;&gt; Oh yes. &gt;&gt; Oh yes. &gt;&gt; Then they designed, built, opened, and &gt;&gt; Then they designed, built, opened, and &gt;&gt; Then they designed, built, opened, and operated a Star Wars themed hotel at operated a Star Wars themed hotel at operated a Star Wars themed hotel at Disney World that I was very excited to Disney World that I was very excited to Disney World that I was very excited to go to. I mean, it's super expensive, but go to. I mean, it's super expensive, but go to. I mean, it's super expensive, but I I I really want I I I really want I I I really want &gt;&gt; You would have paid it. Yeah. &gt;&gt; You would have paid it. Yeah. &gt;&gt; You would have paid it. Yeah. &gt;&gt; And then they promptly closed it. It &gt;&gt; And then they promptly closed it. It &gt;&gt; And then they promptly closed it. It felt like a company in complete felt like a company in complete felt like a company in complete disarray. Even streaming challenges and disarray. Even streaming challenges and disarray. Even streaming challenges and losses aside, losses aside, losses aside, &gt;&gt; after the earnings call, the board meets &gt;&gt; after the earnings call, the board meets &gt;&gt; after the earnings call, the board meets and fires Bob Jek as CEO of Disney, two and fires Bob Jek as CEO of Disney, two and fires Bob Jek as CEO of Disney, two and a bit years into his tenure. And Bob and a bit years into his tenure. And Bob and a bit years into his tenure. And Bob Iger returns out of retirement to come Iger returns out of retirement to come Iger returns out of retirement to come be CEO again and stabilize the ship. be CEO again and stabilize the ship. be CEO again and stabilize the ship. &gt;&gt; Yeah, you and I have been kind of going &gt;&gt; Yeah, you and I have been kind of going &gt;&gt; Yeah, you and I have been kind of going around and round, back and forth. Why around and round, back and forth. Why around and round, back and forth. Why did Bob come back? Why did Bob need to did Bob come back? Why did Bob need to did Bob come back? Why did Bob need to come back? What does it mean that Bob come back? What does it mean that Bob come back? What does it mean that Bob came back? came back? came back? Ultimately, I kind of think they just Ultimately, I kind of think they just Ultimately, I kind of think they just chose the wrong guy in Bob Chapeek. chose the wrong guy in Bob Chapeek. chose the wrong guy in Bob Chapeek. &gt;&gt; And I think Iger's mistake in &gt;&gt; And I think Iger's mistake in &gt;&gt; And I think Iger's mistake in recommending Bob Chapek for the job was recommending Bob Chapek for the job was recommending Bob Chapek for the job was thinking that the company was about to thinking that the company was about to thinking that the company was about to enter a peace time. enter a peace time. enter a peace time. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; A a time where it needed like a &gt;&gt; A a time where it needed like a &gt;&gt; A a time where it needed like a caretaker and it needed the exact caretaker and it needed the exact caretaker and it needed the exact opposite. opposite. opposite. &gt;&gt; Like, ah yeah, all the pieces are in &gt;&gt; Like, ah yeah, all the pieces are in &gt;&gt; Like, ah yeah, all the pieces are in place. Disney Plus, it's doing great. place. Disney Plus, it's doing great. place. Disney Plus, it's doing great. &gt;&gt; But they weren't. what Disney Plus ended &gt;&gt; But they weren't. what Disney Plus ended &gt;&gt; But they weren't. what Disney Plus ended up being is so different than the up being is so different than the up being is so different than the original thing they conceived of Disney original thing they conceived of Disney original thing they conceived of Disney Plus as. It's a super different Plus as. It's a super different Plus as. It's a super different business, different business model. And business, different business model. And business, different business model. And I think all the downstream effects of I think all the downstream effects of I think all the downstream effects of the Disney Plus strategy, it wasn't just the Disney Plus strategy, it wasn't just the Disney Plus strategy, it wasn't just like great, execute the strategy now. like great, execute the strategy now. like great, execute the strategy now. It's like we're still learning a lot in It's like we're still learning a lot in It's like we're still learning a lot in real time. So, it's almost like the real time. So, it's almost like the real time. So, it's almost like the person that set that in motion kind of person that set that in motion kind of person that set that in motion kind of needed to see it through. And it was by needed to see it through. And it was by needed to see it through. And it was by no means just a keep your hand on the no means just a keep your hand on the no means just a keep your hand on the wheel and make sure the the company is wheel and make sure the the company is wheel and make sure the the company is cared for time. cared for time. cared for time. &gt;&gt; Yep. And then things got crazier. 2023 &gt;&gt; Yep. And then things got crazier. 2023 &gt;&gt; Yep. And then things got crazier. 2023 was the year of the Hollywood strikes. was the year of the Hollywood strikes. was the year of the Hollywood strikes. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; And then there's another &gt;&gt; And then there's another &gt;&gt; And then there's another proxy shareholder fight. This time with proxy shareholder fight. This time with proxy shareholder fight. This time with Ike Pearl Mutter, who is the previous Ike Pearl Mutter, who is the previous Ike Pearl Mutter, who is the previous owner and chairman of Marvel, and his owner and chairman of Marvel, and his owner and chairman of Marvel, and his friend and activist investor Nelson friend and activist investor Nelson friend and activist investor Nelson Peltz. They launch a public proxy fight Peltz. They launch a public proxy fight Peltz. They launch a public proxy fight against Disney. Ultimately, it doesn't against Disney. Ultimately, it doesn't against Disney. Ultimately, it doesn't go anywhere, but it's a major go anywhere, but it's a major go anywhere, but it's a major distraction that costs a lot of time and distraction that costs a lot of time and distraction that costs a lot of time and money. And then there's this big money. And then there's this big money. And then there's this big question of what to do with the question of what to do with the question of what to do with the declining asset of ESPN. It's so funny. declining asset of ESPN. It's so funny. declining asset of ESPN. It's so funny. I'm just sitting over here chuckling. I'm just sitting over here chuckling. I'm just sitting over here chuckling. This declining asset of ESPN. Yeah. It's This declining asset of ESPN. Yeah. It's This declining asset of ESPN. Yeah. It's a declining asset that does $3 billion a a declining asset that does $3 billion a a declining asset that does $3 billion a year now in operating income. year now in operating income. year now in operating income. &gt;&gt; Right. Right. &gt;&gt; Right. Right. &gt;&gt; Right. Right. &gt;&gt; I mean, this is like this is still this &gt;&gt; I mean, this is like this is still this &gt;&gt; I mean, this is like this is still this cash gusher. cash gusher. cash gusher. &gt;&gt; I'll take that declining asset. Thank &gt;&gt; I'll take that declining asset. Thank &gt;&gt; I'll take that declining asset. Thank you very much. Yeah. you very much. Yeah. you very much. Yeah. &gt;&gt; Right. And when you say declining, I &gt;&gt; Right. And when you say declining, I &gt;&gt; Right. And when you say declining, I mean might be more fair to call it flat. mean might be more fair to call it flat. mean might be more fair to call it flat. The cable side is declining, but the The cable side is declining, but the The cable side is declining, but the thesis is maybe they can using the ESPN thesis is maybe they can using the ESPN thesis is maybe they can using the ESPN streaming service. I don't know that streaming service. I don't know that streaming service. I don't know that Disney would acknowledge that it is a Disney would acknowledge that it is a Disney would acknowledge that it is a declining asset, declining asset, declining asset, &gt;&gt; which actually sort of explains Wall &gt;&gt; which actually sort of explains Wall &gt;&gt; which actually sort of explains Wall Street agitation to spin it out. Oh, Street agitation to spin it out. Oh, Street agitation to spin it out. Oh, it's not any good in Disney anymore. I it's not any good in Disney anymore. I it's not any good in Disney anymore. I would like that, please. would like that, please. would like that, please. &gt;&gt; Right. In response to that, in October &gt;&gt; Right. In response to that, in October &gt;&gt; Right. In response to that, in October of 2023, they do separate ESPN out into of 2023, they do separate ESPN out into of 2023, they do separate ESPN out into its own business segment for the first its own business segment for the first its own business segment for the first time in Disney's financial reporting. time in Disney's financial reporting. time in Disney's financial reporting. So, there's now a sports business So, there's now a sports business So, there's now a sports business segment, which is ESPN. Basically, segment, which is ESPN. Basically, segment, which is ESPN. Basically, that's creating optionality to spin it that's creating optionality to spin it that's creating optionality to spin it out. out. out. &gt;&gt; If that's the thinking, then I want them &gt;&gt; If that's the thinking, then I want them &gt;&gt; If that's the thinking, then I want them to make a segment for uh general to make a segment for uh general to make a segment for uh general streaming entertainment, like [laughter] streaming entertainment, like [laughter] streaming entertainment, like [laughter] Hulu with Foxike assets on it. That that Hulu with Foxike assets on it. That that Hulu with Foxike assets on it. That that should be its own non-D Disney company. should be its own non-D Disney company. should be its own non-D Disney company. &gt;&gt; [laughter] &gt;&gt; [laughter] &gt;&gt; [laughter] &gt;&gt; All right. Well, we we'll get there. &gt;&gt; All right. Well, we we'll get there. &gt;&gt; All right. Well, we we'll get there. We'll get there. In 2025, We'll get there. In 2025, We'll get there. In 2025, they do a deal with the NFL. The NFL they do a deal with the NFL. The NFL they do a deal with the NFL. The NFL trades the NFL Network cable channel trades the NFL Network cable channel trades the NFL Network cable channel into ESPN in return for a 10% stake in into ESPN in return for a 10% stake in into ESPN in return for a 10% stake in ESPN itself. ESPN itself. ESPN itself. &gt;&gt; I love this deal in so many ways. &gt;&gt; I love this deal in so many ways. &gt;&gt; I love this deal in so many ways. &gt;&gt; Great deal for everybody. &gt;&gt; Great deal for everybody. &gt;&gt; Great deal for everybody. &gt;&gt; The NFL gets 10% of ESPN, uh, which is &gt;&gt; The NFL gets 10% of ESPN, uh, which is &gt;&gt; The NFL gets 10% of ESPN, uh, which is great if you're ESPN. Honestly, it's great if you're ESPN. Honestly, it's great if you're ESPN. Honestly, it's like, woo, good. They're invested in our like, woo, good. They're invested in our like, woo, good. They're invested in our success. And then success. And then success. And then what is the NFL doing in this like what is the NFL doing in this like what is the NFL doing in this like content production and distribution content production and distribution content production and distribution business made no sense. So having NFL business made no sense. So having NFL business made no sense. So having NFL Network and Red Zone and all that live Network and Red Zone and all that live Network and Red Zone and all that live over and ESPN, which their core over and ESPN, which their core over and ESPN, which their core competency, what they're good at, I love competency, what they're good at, I love competency, what they're good at, I love it. it. it. &gt;&gt; And for the NFL, they want ESPN to &gt;&gt; And for the NFL, they want ESPN to &gt;&gt; And for the NFL, they want ESPN to continue to be a viable bidder for their continue to be a viable bidder for their continue to be a viable bidder for their rights. So it's to prop up ESPN. rights. So it's to prop up ESPN. rights. So it's to prop up ESPN. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Finally, at the end of the year, they &gt;&gt; Finally, at the end of the year, they &gt;&gt; Finally, at the end of the year, they launched the long- aaited full [snorts] launched the long- aaited full [snorts] launched the long- aaited full [snorts] direct to consumer ESPN service, ESPN direct to consumer ESPN service, ESPN direct to consumer ESPN service, ESPN Unlimited. So, 30 bucks a month, full Unlimited. So, 30 bucks a month, full Unlimited. So, 30 bucks a month, full unlimited access to all ESPN channels. unlimited access to all ESPN channels. unlimited access to all ESPN channels. They aggressively bundle it with Disney They aggressively bundle it with Disney They aggressively bundle it with Disney Plus and Hulu. Basically, if you Plus and Hulu. Basically, if you Plus and Hulu. Basically, if you subscribe to ESPN Plus, you can add subscribe to ESPN Plus, you can add subscribe to ESPN Plus, you can add Disney and Hulu for only an extra $6 a Disney and Hulu for only an extra $6 a Disney and Hulu for only an extra $6 a month. month. month. &gt;&gt; Nob brainer. Which actually is done for &gt;&gt; Nob brainer. Which actually is done for &gt;&gt; Nob brainer. Which actually is done for two reasons that I I did not fully two reasons that I I did not fully two reasons that I I did not fully appreciate at first. The first is appreciate at first. The first is appreciate at first. The first is obviously the general bundling theory, obviously the general bundling theory, obviously the general bundling theory, which is eh even if I'm not that big of which is eh even if I'm not that big of which is eh even if I'm not that big of a Disney Plus fan, I'll just subscribe a Disney Plus fan, I'll just subscribe a Disney Plus fan, I'll just subscribe to this whole bundle and that that way to this whole bundle and that that way to this whole bundle and that that way you get subscribers that you wouldn't you get subscribers that you wouldn't you get subscribers that you wouldn't have otherwise. The the casual fan. The have otherwise. The the casual fan. The have otherwise. The the casual fan. The second that I didn't realize that Disney second that I didn't realize that Disney second that I didn't realize that Disney has really keyed into is churn has really keyed into is churn has really keyed into is churn mitigation. Yeah, mitigation. Yeah, mitigation. Yeah, &gt;&gt; the bundle subscribers churn at a much &gt;&gt; the bundle subscribers churn at a much &gt;&gt; the bundle subscribers churn at a much lower rate than any individual streaming lower rate than any individual streaming lower rate than any individual streaming service cuz you're not thinking that service cuz you're not thinking that service cuz you're not thinking that hard about how much value am I getting hard about how much value am I getting hard about how much value am I getting out of this particular app this month. out of this particular app this month. out of this particular app this month. &gt;&gt; Yeah. I mean, there was just so much &gt;&gt; Yeah. I mean, there was just so much &gt;&gt; Yeah. I mean, there was just so much that Disney had to learn about operating that Disney had to learn about operating that Disney had to learn about operating direct to consumer streaming services. direct to consumer streaming services. direct to consumer streaming services. &gt;&gt; Yep. The real story of the last couple &gt;&gt; Yep. The real story of the last couple &gt;&gt; Yep. The real story of the last couple years though has been the parks. Man, years though has been the parks. Man, years though has been the parks. Man, coming out of co the parks have just coming out of co the parks have just coming out of co the parks have just been crushing it. And there's all sorts been crushing it. And there's all sorts been crushing it. And there's all sorts of criticisms that you could levy at of criticisms that you could levy at of criticisms that you could levy at them and people do like they're charging them and people do like they're charging them and people do like they're charging too much. They're nickel and dimming. too much. They're nickel and dimming. too much. They're nickel and dimming. But especially as ESPN has been But especially as ESPN has been But especially as ESPN has been declining and as Disney Plus streaming declining and as Disney Plus streaming declining and as Disney Plus streaming has had a rocky go at best over the last has had a rocky go at best over the last has had a rocky go at best over the last couple years, the parks have totally couple years, the parks have totally couple years, the parks have totally filled that gap. filled that gap. filled that gap. &gt;&gt; David, it's so funny you say they've &gt;&gt; David, it's so funny you say they've &gt;&gt; David, it's so funny you say they've been crushing it. Visitors are actually been crushing it. Visitors are actually been crushing it. Visitors are actually down down down &gt;&gt; on a financial basis. &gt;&gt; on a financial basis. &gt;&gt; on a financial basis. &gt;&gt; Everything is about price increases. &gt;&gt; Everything is about price increases. &gt;&gt; Everything is about price increases. There's 145 million people that visit There's 145 million people that visit There's 145 million people that visit the parks each year. Before the the parks each year. Before the the parks each year. Before the pandemic, it was actually 157 million. pandemic, it was actually 157 million. pandemic, it was actually 157 million. That was their all-time high. So, they That was their all-time high. So, they That was their all-time high. So, they are down from the pre- pandemic high are down from the pre- pandemic high are down from the pre- pandemic high even 6 years after the pandemic. even 6 years after the pandemic. even 6 years after the pandemic. But, of course, the amount that they But, of course, the amount that they But, of course, the amount that they make per visit is is way up and has make per visit is is way up and has make per visit is is way up and has climbed, I don't know, 5% per year for climbed, I don't know, 5% per year for climbed, I don't know, 5% per year for decades now. decades now. decades now. &gt;&gt; Yep. Which, yeah, maybe that is a &gt;&gt; Yep. Which, yeah, maybe that is a &gt;&gt; Yep. Which, yeah, maybe that is a double-edged sword, double-edged sword, double-edged sword, &gt;&gt; but maybe it's not. On the other hand, &gt;&gt; but maybe it's not. On the other hand, &gt;&gt; but maybe it's not. On the other hand, every time I go to Disneyland, it's every time I go to Disneyland, it's every time I go to Disneyland, it's super full. It It doesn't seem to be super full. It It doesn't seem to be super full. It It doesn't seem to be keeping people away. keeping people away. keeping people away. &gt;&gt; Yeah, exactly. That was the point I was &gt;&gt; Yeah, exactly. That was the point I was &gt;&gt; Yeah, exactly. That was the point I was going to make, too. I think consumers going to make, too. I think consumers going to make, too. I think consumers have had some version of that complaint have had some version of that complaint have had some version of that complaint about Disney ever since Michael Eisner about Disney ever since Michael Eisner about Disney ever since Michael Eisner took over in 1984. [laughter] took over in 1984. [laughter] took over in 1984. [laughter] &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; And it doesn't keep people away. &gt;&gt; And it doesn't keep people away. &gt;&gt; And it doesn't keep people away. &gt;&gt; And if it did, they would stop doing it. &gt;&gt; And if it did, they would stop doing it. &gt;&gt; And if it did, they would stop doing it. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Because it's in Disney's interest to &gt;&gt; Because it's in Disney's interest to &gt;&gt; Because it's in Disney's interest to keep a giant middle class keep a giant middle class keep a giant middle class wrapped around the Disney brand. I mean, wrapped around the Disney brand. I mean, wrapped around the Disney brand. I mean, if if you could get the same amount of if if you could get the same amount of if if you could get the same amount of revenue from 200 million visitors a year revenue from 200 million visitors a year revenue from 200 million visitors a year or 100 million visitors in a year, you or 100 million visitors in a year, you or 100 million visitors in a year, you want it more dispersed because you want want it more dispersed because you want want it more dispersed because you want all 200 of those people imbuing Disney all 200 of those people imbuing Disney all 200 of those people imbuing Disney fandom into their core childhood fandom into their core childhood fandom into their core childhood memories. Yep. So, parks is now almost memories. Yep. So, parks is now almost memories. Yep. So, parks is now almost 60% of the company's operating income, 60% of the company's operating income, 60% of the company's operating income, while ESPN and sports is down to 16%. while ESPN and sports is down to 16%. while ESPN and sports is down to 16%. So, it's a total reversal from the So, it's a total reversal from the So, it's a total reversal from the situation 10 years ago. Wow. And all situation 10 years ago. Wow. And all situation 10 years ago. Wow. And all that leads to that leads to that leads to February of this year, 2026, February of this year, 2026, February of this year, 2026, where Josh Dearo, the head of Disney where Josh Dearo, the head of Disney where Josh Dearo, the head of Disney Parks and Experiences, is announced as Parks and Experiences, is announced as Parks and Experiences, is announced as the next Disney CEO, effective 6 weeks the next Disney CEO, effective 6 weeks the next Disney CEO, effective 6 weeks later in March with Dana Walden, who later in March with Dana Walden, who later in March with Dana Walden, who came over from Fox named president came over from Fox named president came over from Fox named president number two, and chief creative officer number two, and chief creative officer number two, and chief creative officer of the company, a new role within the of the company, a new role within the of the company, a new role within the company. And Bob Iger will stay on as a company. And Bob Iger will stay on as a company. And Bob Iger will stay on as a senior adviser and board member until senior adviser and board member until senior adviser and board member until his full retirement at the end of this his full retirement at the end of this his full retirement at the end of this year in 2026. year in 2026. year in 2026. &gt;&gt; Yep. So before we get to the business &gt;&gt; Yep. So before we get to the business &gt;&gt; Yep. So before we get to the business today, we should talk about the uh today, we should talk about the uh today, we should talk about the uh beginning and end of Bob Iger's tenure beginning and end of Bob Iger's tenure beginning and end of Bob Iger's tenure just like we did with Michael Eisner. So just like we did with Michael Eisner. So just like we did with Michael Eisner. So when Bob Iger came in September 30th, when Bob Iger came in September 30th, when Bob Iger came in September 30th, 2005, market cap of about $50 billion, 2005, market cap of about $50 billion, 2005, market cap of about $50 billion, the stock price 5xed by the time he the stock price 5xed by the time he the stock price 5xed by the time he left. So you know that second decade left. So you know that second decade left. So you know that second decade like we talked about flat but that first like we talked about flat but that first like we talked about flat but that first decade had 5x growth in it. Revenue decade had 5x growth in it. Revenue decade had 5x growth in it. Revenue tripled from 31 billion in 2005 to 94 tripled from 31 billion in 2005 to 94 tripled from 31 billion in 2005 to 94 billion 20 years later and net income billion 20 years later and net income billion 20 years later and net income went from 2.5 billion to 12.4 billion. went from 2.5 billion to 12.4 billion. went from 2.5 billion to 12.4 billion. So interestingly net income outpaced So interestingly net income outpaced So interestingly net income outpaced revenue. They became five times more revenue. They became five times more revenue. They became five times more profitable while generating three times profitable while generating three times profitable while generating three times more revenue. more revenue. more revenue. &gt;&gt; Interesting. Which also is the same &gt;&gt; Interesting. Which also is the same &gt;&gt; Interesting. Which also is the same thing that happened under Eisner. thing that happened under Eisner. thing that happened under Eisner. &gt;&gt; Right. So, it's been an exercise in for &gt;&gt; Right. So, it's been an exercise in for &gt;&gt; Right. So, it's been an exercise in for two big CEO stretches making the company two big CEO stretches making the company two big CEO stretches making the company more profitable, more profitable, more profitable, &gt;&gt; which probably says more about the &gt;&gt; which probably says more about the &gt;&gt; which probably says more about the company back in 1984 [laughter] than it company back in 1984 [laughter] than it company back in 1984 [laughter] than it does over the last 40 years. But but does over the last 40 years. But but does over the last 40 years. But but yeah, yeah, yeah, &gt;&gt; I think that's right. Okay, so should we &gt;&gt; I think that's right. Okay, so should we &gt;&gt; I think that's right. Okay, so should we talk about the business today? talk about the business today? talk about the business today? &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; First, some stats on Disney Plus since &gt;&gt; First, some stats on Disney Plus since &gt;&gt; First, some stats on Disney Plus since that is the strategic focus of the that is the strategic focus of the that is the strategic focus of the company today. company today. company today. 132 million people are Disney Plus 132 million people are Disney Plus 132 million people are Disney Plus subscribers. A little under half of subscribers. A little under half of subscribers. A little under half of those are in the US and Canada. Hulu has those are in the US and Canada. Hulu has those are in the US and Canada. Hulu has 64 million subscribers. ESPN Plus has 24 64 million subscribers. ESPN Plus has 24 64 million subscribers. ESPN Plus has 24 million subscribers. So, here's a crazy million subscribers. So, here's a crazy million subscribers. So, here's a crazy number. When they last reported this in number. When they last reported this in number. When they last reported this in 2024, 2024, 2024, Disney generated over $19 billion in Disney generated over $19 billion in Disney generated over $19 billion in subscription revenue, up from subscription revenue, up from subscription revenue, up from essentially zero in 2017 when they essentially zero in 2017 when they essentially zero in 2017 when they launched any of these streaming launched any of these streaming launched any of these streaming services. That 19 billion of revenue services. That 19 billion of revenue services. That 19 billion of revenue probably closer to 22ish billion now. probably closer to 22ish billion now. probably closer to 22ish billion now. They they've stopped reporting it They they've stopped reporting it They they've stopped reporting it individually, which is around a quarter individually, which is around a quarter individually, which is around a quarter of the company's revenue and their of the company's revenue and their of the company's revenue and their single largest source of revenue. We've single largest source of revenue. We've single largest source of revenue. We've been talking about Disney Plus in this been talking about Disney Plus in this been talking about Disney Plus in this like, oh, it's low margin or oh, it like, oh, it's low margin or oh, it like, oh, it's low margin or oh, it costs a lot of money to build it out, costs a lot of money to build it out, costs a lot of money to build it out, but the revenue is huge. They have but the revenue is huge. They have but the revenue is huge. They have transitioned revenue sort of from other transitioned revenue sort of from other transitioned revenue sort of from other places into Disney Plus now. And as of places into Disney Plus now. And as of places into Disney Plus now. And as of now, it is still subscale compared to now, it is still subscale compared to now, it is still subscale compared to Netflix. Netflix has 325 million Netflix. Netflix has 325 million Netflix. Netflix has 325 million subscribers around the world. subscribers around the world. subscribers around the world. &gt;&gt; That's the last time they reported. It's &gt;&gt; That's the last time they reported. It's &gt;&gt; That's the last time they reported. It's up since then. Y So it's nearly triple up since then. Y So it's nearly triple up since then. Y So it's nearly triple Disney Plus. Disney Plus. Disney Plus. &gt;&gt; Yep. And last year generated 45 billion &gt;&gt; Yep. And last year generated 45 billion &gt;&gt; Yep. And last year generated 45 billion in revenue. So what almost twice as much in revenue. So what almost twice as much in revenue. So what almost twice as much as Disney's 25 billion that they're as Disney's 25 billion that they're as Disney's 25 billion that they're doing in streaming revenue. doing in streaming revenue. doing in streaming revenue. &gt;&gt; Yeah. And that's Hulu and Disney Plus &gt;&gt; Yeah. And that's Hulu and Disney Plus &gt;&gt; Yeah. And that's Hulu and Disney Plus combined. combined. combined. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; How much operating income does Netflix &gt;&gt; How much operating income does Netflix &gt;&gt; How much operating income does Netflix generate? generate? generate? &gt;&gt; 13 and a half billion [laughter] &gt;&gt; 13 and a half billion [laughter] &gt;&gt; 13 and a half billion [laughter] &gt;&gt; compared to negative for Disney, right? &gt;&gt; compared to negative for Disney, right? &gt;&gt; compared to negative for Disney, right? &gt;&gt; No, Disney is now positive on on uh on &gt;&gt; No, Disney is now positive on on uh on &gt;&gt; No, Disney is now positive on on uh on their direct to consumer segment, but their direct to consumer segment, but their direct to consumer segment, but for a long time it was negative. But uh for a long time it was negative. But uh for a long time it was negative. But uh so Netflix's operating income on so Netflix's operating income on so Netflix's operating income on streaming, their entire business is the streaming, their entire business is the streaming, their entire business is the same as Disney's entire company same as Disney's entire company same as Disney's entire company operating income. operating income. operating income. &gt;&gt; Yep. Yep. &gt;&gt; Yep. Yep. &gt;&gt; Yep. Yep. &gt;&gt; That is a completely new phenomenon. &gt;&gt; That is a completely new phenomenon. &gt;&gt; That is a completely new phenomenon. Just to go back in time, in 2017, Just to go back in time, in 2017, Just to go back in time, in 2017, Netflix's operating income Netflix's operating income Netflix's operating income was under a billion. Wow. was under a billion. Wow. was under a billion. Wow. Disney's Disney's Disney's was 14 billion, was 14 billion, was 14 billion, &gt;&gt; right? Disney had that severe dip from &gt;&gt; right? Disney had that severe dip from &gt;&gt; right? Disney had that severe dip from COVID parks closing, investing in Disney COVID parks closing, investing in Disney COVID parks closing, investing in Disney Plus, massive losses from investing to Plus, massive losses from investing to Plus, massive losses from investing to Disney Plus, and they're almost back to Disney Plus, and they're almost back to Disney Plus, and they're almost back to where they were, whereas Netflix over where they were, whereas Netflix over where they were, whereas Netflix over that 8-year stretch has taken their that 8-year stretch has taken their that 8-year stretch has taken their operating income from sub billion to now operating income from sub billion to now operating income from sub billion to now equal to Disney. equal to Disney. equal to Disney. &gt;&gt; Yep. And look, I mean, streaming is a &gt;&gt; Yep. And look, I mean, streaming is a &gt;&gt; Yep. And look, I mean, streaming is a scale economies business. So like the scale economies business. So like the scale economies business. So like the more scale you have, the more operating more scale you have, the more operating more scale you have, the more operating leverage you should have. leverage you should have. leverage you should have. &gt;&gt; Yep. So to put numbers on the investment &gt;&gt; Yep. So to put numbers on the investment &gt;&gt; Yep. So to put numbers on the investment into Disney Plus, cumulatively there into Disney Plus, cumulatively there into Disney Plus, cumulatively there were 13 billion or so of losses that were 13 billion or so of losses that were 13 billion or so of losses that Disney incurred in building it out in Disney incurred in building it out in Disney incurred in building it out in that segment. But David, they they are that segment. But David, they they are that segment. But David, they they are now profitable. They generated about a now profitable. They generated about a now profitable. They generated about a billion dollars last year. This is not billion dollars last year. This is not billion dollars last year. This is not and probably never will be the margins and probably never will be the margins and probably never will be the margins of owning cable channels, but it is of owning cable channels, but it is of owning cable channels, but it is definitely a a writing of the ship definitely a a writing of the ship definitely a a writing of the ship versus how expensive it used to be to versus how expensive it used to be to versus how expensive it used to be to run Disney Plus, acquire, retain run Disney Plus, acquire, retain run Disney Plus, acquire, retain subscribers, all that stuff. subscribers, all that stuff. subscribers, all that stuff. &gt;&gt; Yep. And really, this is what Bob Iger &gt;&gt; Yep. And really, this is what Bob Iger &gt;&gt; Yep. And really, this is what Bob Iger spent the last couple years since coming spent the last couple years since coming spent the last couple years since coming back from retirement doing. back from retirement doing. back from retirement doing. &gt;&gt; Moving over to the parks, like we had &gt;&gt; Moving over to the parks, like we had &gt;&gt; Moving over to the parks, like we had said earlier, there's 145 million people said earlier, there's 145 million people said earlier, there's 145 million people who visit the parks each year. They have who visit the parks each year. They have who visit the parks each year. They have 12 parks across six locations. They're 12 parks across six locations. They're 12 parks across six locations. They're designing a new park in Abu Dhabi. They designing a new park in Abu Dhabi. They designing a new park in Abu Dhabi. They have eight cruise ships which is growing have eight cruise ships which is growing have eight cruise ships which is growing to 13, bringing on a new cruise ship to 13, bringing on a new cruise ship to 13, bringing on a new cruise ship almost every year for the next several almost every year for the next several almost every year for the next several years. years. years. &gt;&gt; Yeah, cruises we didn't talk about, but &gt;&gt; Yeah, cruises we didn't talk about, but &gt;&gt; Yeah, cruises we didn't talk about, but has been a big success for the company. has been a big success for the company. has been a big success for the company. &gt;&gt; Yeah, that was an Eisner thing. The &gt;&gt; Yeah, that was an Eisner thing. The &gt;&gt; Yeah, that was an Eisner thing. The thesis actually originally was after you thesis actually originally was after you thesis actually originally was after you finish up at Disney World for 3 or 4 finish up at Disney World for 3 or 4 finish up at Disney World for 3 or 4 days, you may want to go hop on a cruise days, you may want to go hop on a cruise days, you may want to go hop on a cruise for three or four days. And so you'd for three or four days. And so you'd for three or four days. And so you'd sort of depart from Florida and then go sort of depart from Florida and then go sort of depart from Florida and then go down to the Bahamas and come back up. down to the Bahamas and come back up. down to the Bahamas and come back up. They were kind of wrong that people They were kind of wrong that people They were kind of wrong that people would want to do those things at the would want to do those things at the would want to do those things at the same time. same time. same time. &gt;&gt; Clearly a strategy not devised by people &gt;&gt; Clearly a strategy not devised by people &gt;&gt; Clearly a strategy not devised by people who actually have young kids, [laughter] who actually have young kids, [laughter] who actually have young kids, [laughter] &gt;&gt; but people love the cruises. &gt;&gt; but people love the cruises. &gt;&gt; but people love the cruises. &gt;&gt; They're awesome. I've done them. They're &gt;&gt; They're awesome. I've done them. They're &gt;&gt; They're awesome. I've done them. They're great. great. great. &gt;&gt; This area is where the company is &gt;&gt; This area is where the company is &gt;&gt; This area is where the company is investing the most heavily. So in 2023, investing the most heavily. So in 2023, investing the most heavily. So in 2023, they announced that they're investing they announced that they're investing they announced that they're investing $60 billion of capital expenditures over $60 billion of capital expenditures over $60 billion of capital expenditures over the next decade into parks and cruises. the next decade into parks and cruises. the next decade into parks and cruises. A lot of that is probably going to build A lot of that is probably going to build A lot of that is probably going to build those cruise ships, one giant cruise those cruise ships, one giant cruise those cruise ships, one giant cruise ship a year. 30 billion of it will be ship a year. 30 billion of it will be ship a year. 30 billion of it will be used in domestic parks in Florida and used in domestic parks in Florida and used in domestic parks in Florida and Anaheim. So, if you live in the US, get Anaheim. So, if you live in the US, get Anaheim. So, if you live in the US, get excited because there's lots of new uh excited because there's lots of new uh excited because there's lots of new uh rides and lots of new lands that are rides and lots of new lands that are rides and lots of new lands that are opening. The mental model I have around opening. The mental model I have around opening. The mental model I have around this is they had a cash gusher in cable this is they had a cash gusher in cable this is they had a cash gusher in cable affiliate fees. It's going away. They affiliate fees. It's going away. They affiliate fees. It's going away. They had a very profitable box office, had a very profitable box office, had a very profitable box office, especially in the golden era where you especially in the golden era where you especially in the golden era where you could make and market a film like could make and market a film like could make and market a film like Avengers, the original one, for I don't Avengers, the original one, for I don't Avengers, the original one, for I don't know two $300 million and then gross a know two $300 million and then gross a know two $300 million and then gross a billion and a half at the box office. billion and a half at the box office. billion and a half at the box office. Yep. Yep. Yep. &gt;&gt; That kind of seems to be over. &gt;&gt; That kind of seems to be over. &gt;&gt; That kind of seems to be over. &gt;&gt; ESPN affiliate fees are declining. &gt;&gt; ESPN affiliate fees are declining. &gt;&gt; ESPN affiliate fees are declining. Sports leagues are commanding more of Sports leagues are commanding more of Sports leagues are commanding more of the profits. People aren't going to the the profits. People aren't going to the the profits. People aren't going to the movies like they used to. And these big movies like they used to. And these big movies like they used to. And these big IP movies are more expensive than ever. IP movies are more expensive than ever. IP movies are more expensive than ever. I saw a rumor go by that Avengers I saw a rumor go by that Avengers I saw a rumor go by that Avengers Doomsday is going to cost $700 million Doomsday is going to cost $700 million Doomsday is going to cost $700 million between production and marketing. Well, between production and marketing. Well, between production and marketing. Well, that'll come out this December. And of that'll come out this December. And of that'll come out this December. And of course, Disney along with the whole course, Disney along with the whole course, Disney along with the whole world has shifted to streaming, which world has shifted to streaming, which world has shifted to streaming, which has proved to not be as profitable of a has proved to not be as profitable of a has proved to not be as profitable of a business that they sort of had hoped. business that they sort of had hoped. business that they sort of had hoped. And so, where do you make your profits? And so, where do you make your profits? And so, where do you make your profits? Parks. But theme parks, unfortunately, Parks. But theme parks, unfortunately, Parks. But theme parks, unfortunately, don't really scale the way that cable don't really scale the way that cable don't really scale the way that cable profits did. there's a constraint of profits did. there's a constraint of profits did. there's a constraint of physical room in the parks and rooms in physical room in the parks and rooms in physical room in the parks and rooms in hotels. So that's why they turned to hotels. So that's why they turned to hotels. So that's why they turned to charging more per guest since they charging more per guest since they charging more per guest since they really can't cram more more guests in. really can't cram more more guests in. really can't cram more more guests in. And what do you have to do to justify a And what do you have to do to justify a And what do you have to do to justify a trip to Disney World or a cruise costing trip to Disney World or a cruise costing trip to Disney World or a cruise costing thousands of dollars now you better thousands of dollars now you better thousands of dollars now you better invest $60 billion and make it worth it? invest $60 billion and make it worth it? invest $60 billion and make it worth it? Y Y Y &gt;&gt; so that's like how you can kind of wrap &gt;&gt; so that's like how you can kind of wrap &gt;&gt; so that's like how you can kind of wrap your mind to this giant investment and your mind to this giant investment and your mind to this giant investment and the price increases in the parks. the price increases in the parks. the price increases in the parks. &gt;&gt; Yep. So overall business uh 94 billion &gt;&gt; Yep. So overall business uh 94 billion &gt;&gt; Yep. So overall business uh 94 billion in revenue, 13 billion in net income. in revenue, 13 billion in net income. in revenue, 13 billion in net income. The segments are actually pretty The segments are actually pretty The segments are actually pretty interesting to look at. Entertainment is interesting to look at. Entertainment is interesting to look at. Entertainment is 42 billion. That's movies, streaming, 42 billion. That's movies, streaming, 42 billion. That's movies, streaming, content. Experiences is 36 billion, so content. Experiences is 36 billion, so content. Experiences is 36 billion, so somewhat comparable to entertainment. somewhat comparable to entertainment. somewhat comparable to entertainment. Sports is smaller at 18 billion. But Sports is smaller at 18 billion. But Sports is smaller at 18 billion. But profits are where it gets interesting. profits are where it gets interesting. profits are where it gets interesting. So in entertainment, the operating So in entertainment, the operating So in entertainment, the operating income is 4.7 billion. But in income is 4.7 billion. But in income is 4.7 billion. But in experiences, the operating income is 10 experiences, the operating income is 10 experiences, the operating income is 10 billion. Yeah. [laughter] billion. Yeah. [laughter] billion. Yeah. [laughter] &gt;&gt; So despite comparable revenue between &gt;&gt; So despite comparable revenue between &gt;&gt; So despite comparable revenue between entertainment and experiences, the parks entertainment and experiences, the parks entertainment and experiences, the parks and the cruises are generating twice as and the cruises are generating twice as and the cruises are generating twice as much profit. much profit. much profit. &gt;&gt; Yep. Yep. And and this is Disney Plus. &gt;&gt; Yep. Yep. And and this is Disney Plus. &gt;&gt; Yep. Yep. And and this is Disney Plus. Like it should not be the case in theory Like it should not be the case in theory Like it should not be the case in theory that a media content product is a lower that a media content product is a lower that a media content product is a lower margin product than a physical theme margin product than a physical theme margin product than a physical theme [laughter] park product except when [laughter] park product except when [laughter] park product except when you're investing heavily into a you're investing heavily into a you're investing heavily into a streaming service. streaming service. streaming service. &gt;&gt; Yep. Almost 60% of the profits of the &gt;&gt; Yep. Almost 60% of the profits of the &gt;&gt; Yep. Almost 60% of the profits of the entire company come from parks and entire company come from parks and entire company come from parks and cruises. cruises. cruises. &gt;&gt; This is why Josh is CEO. &gt;&gt; This is why Josh is CEO. &gt;&gt; This is why Josh is CEO. &gt;&gt; Yes. And when I say the entire company, &gt;&gt; Yes. And when I say the entire company, &gt;&gt; Yes. And when I say the entire company, that includes the $3 billion a year of that includes the $3 billion a year of that includes the $3 billion a year of profits from ESPN, and it's still 60% profits from ESPN, and it's still 60% profits from ESPN, and it's still 60% come from Parks and Cruises. come from Parks and Cruises. come from Parks and Cruises. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; And my last observation, I could not &gt;&gt; And my last observation, I could not &gt;&gt; And my last observation, I could not believe this. I thought I was believe this. I thought I was believe this. I thought I was misinterpreting their annual report. misinterpreting their annual report. misinterpreting their annual report. Disney does report subsegments of their Disney does report subsegments of their Disney does report subsegments of their business. Their segment for theatrical business. Their segment for theatrical business. Their segment for theatrical distribution, that's movies released in distribution, that's movies released in distribution, that's movies released in theaters, is $2.6 billion theaters, is $2.6 billion theaters, is $2.6 billion &gt;&gt; in revenue. &gt;&gt; in revenue. &gt;&gt; in revenue. &gt;&gt; That is 3% of their overall revenue. &gt;&gt; That is 3% of their overall revenue. &gt;&gt; That is 3% of their overall revenue. &gt;&gt; From the outside, we think about the &gt;&gt; From the outside, we think about the &gt;&gt; From the outside, we think about the Walt Disney Company as these movies and Walt Disney Company as these movies and Walt Disney Company as these movies and box office. And that is not the box office. And that is not the box office. And that is not the business. That's 3% of the revenue of business. That's 3% of the revenue of business. That's 3% of the revenue of this company. this company. this company. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; It's streaming's world and Disney is &gt;&gt; It's streaming's world and Disney is &gt;&gt; It's streaming's world and Disney is just living in it. just living in it. just living in it. &gt;&gt; Yep. Well, I think that is probably the &gt;&gt; Yep. Well, I think that is probably the &gt;&gt; Yep. Well, I think that is probably the perfect tea up to transition to analysis perfect tea up to transition to analysis perfect tea up to transition to analysis and the main question here, which is was and the main question here, which is was and the main question here, which is was Disney Plus the right strategy? Like, Disney Plus the right strategy? Like, Disney Plus the right strategy? Like, could Disney actually viably have done could Disney actually viably have done could Disney actually viably have done anything different back in 2015, 2017, anything different back in 2015, 2017, anything different back in 2015, 2017, 2019? 2019? 2019? &gt;&gt; Right? The only way to answer this &gt;&gt; Right? The only way to answer this &gt;&gt; Right? The only way to answer this question is to answer it with a real question is to answer it with a real question is to answer it with a real thing they could have done differently thing they could have done differently thing they could have done differently because do nothing was not actually an because do nothing was not actually an because do nothing was not actually an answer, right? Like enjoy the the answer, right? Like enjoy the the answer, right? Like enjoy the the wonderful profits of the past was not an wonderful profits of the past was not an wonderful profits of the past was not an option. option. option. &gt;&gt; Well, yeah. So, just to start off, &gt;&gt; Well, yeah. So, just to start off, &gt;&gt; Well, yeah. So, just to start off, clearly what would have happened in the clearly what would have happened in the clearly what would have happened in the do nothing category is what happened to do nothing category is what happened to do nothing category is what happened to every other major media company which is every other major media company which is every other major media company which is consolidate, get acquired or slim down consolidate, get acquired or slim down consolidate, get acquired or slim down significantly. significantly. significantly. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. It's funny that the one thing that I I It's funny that the one thing that I I It's funny that the one thing that I I did want was for them to slim down did want was for them to slim down did want was for them to slim down significantly. In my heart, I want significantly. In my heart, I want significantly. In my heart, I want Disney Plus to be a boutique streaming Disney Plus to be a boutique streaming Disney Plus to be a boutique streaming service with just service with just service with just highquality content on it, to not be highquality content on it, to not be highquality content on it, to not be messing around with Hulu, to just focus messing around with Hulu, to just focus messing around with Hulu, to just focus on the core franchises, and somehow also on the core franchises, and somehow also on the core franchises, and somehow also to discover a streaming business model to discover a streaming business model to discover a streaming business model that doesn't require a content treadmill that doesn't require a content treadmill that doesn't require a content treadmill that just treats these these gems as the that just treats these these gems as the that just treats these these gems as the the special gems that they are. the special gems that they are. the special gems that they are. I don't think that's a business, even I don't think that's a business, even I don't think that's a business, even though I like the product. though I like the product. though I like the product. &gt;&gt; I know. I know. I so wanted this to be &gt;&gt; I know. I know. I so wanted this to be &gt;&gt; I know. I know. I so wanted this to be the answer to all throughout our the answer to all throughout our the answer to all throughout our research of the past several months of research of the past several months of research of the past several months of making these episodes. As a consumer and making these episodes. As a consumer and making these episodes. As a consumer and as a parent, I want Disney Plus just to as a parent, I want Disney Plus just to as a parent, I want Disney Plus just to be what it is to me, which is the very be what it is to me, which is the very be what it is to me, which is the very best parenting product ever invented best parenting product ever invented best parenting product ever invented [laughter] in the history of humankind. [laughter] in the history of humankind. [laughter] in the history of humankind. &gt;&gt; And the laying around on Saturday and &gt;&gt; And the laying around on Saturday and &gt;&gt; And the laying around on Saturday and thrown on a Marvel movie thing. thrown on a Marvel movie thing. thrown on a Marvel movie thing. &gt;&gt; Yeah, exactly. But I don't think it's &gt;&gt; Yeah, exactly. But I don't think it's &gt;&gt; Yeah, exactly. But I don't think it's realistic. realistic. realistic. &gt;&gt; Yeah. And the reason I don't think it's &gt;&gt; Yeah. And the reason I don't think it's &gt;&gt; Yeah. And the reason I don't think it's realistic, people just don't go to the realistic, people just don't go to the realistic, people just don't go to the movie theater anymore. movie theater anymore. movie theater anymore. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; And the old Disney business model and &gt;&gt; And the old Disney business model and &gt;&gt; And the old Disney business model and content model was completely dependent content model was completely dependent content model was completely dependent on that. The way that you seated new on that. The way that you seated new on that. The way that you seated new stories and characters and reinvigorated stories and characters and reinvigorated stories and characters and reinvigorated old stories and characters into the old stories and characters into the old stories and characters into the public consciousness was through the public consciousness was through the public consciousness was through the movie theater. People go once or twice a movie theater. People go once or twice a movie theater. People go once or twice a year for a huge event movie. They'll go year for a huge event movie. They'll go year for a huge event movie. They'll go for the Odyssey. They'll go for Toy for the Odyssey. They'll go for Toy for the Odyssey. They'll go for Toy Story 5. Story 5. Story 5. &gt;&gt; I'm going for the Odyssey on Saturday &gt;&gt; I'm going for the Odyssey on Saturday &gt;&gt; I'm going for the Odyssey on Saturday and the reason I haven't gone before is and the reason I haven't gone before is and the reason I haven't gone before is because I've been prepping for this because I've been prepping for this because I've been prepping for this episode and I don't have time. But like episode and I don't have time. But like episode and I don't have time. But like that is I went literally to Toy Story 5 that is I went literally to Toy Story 5 that is I went literally to Toy Story 5 and I'm going to the Odyssey and I have and I'm going to the Odyssey and I have and I'm going to the Odyssey and I have no other plans to see movies. Oh, Dune no other plans to see movies. Oh, Dune no other plans to see movies. Oh, Dune 3. I'll go see. 3. I'll go see. 3. I'll go see. &gt;&gt; Nice. Yeah. Yeah, I'll go see that, too. &gt;&gt; Nice. Yeah. Yeah, I'll go see that, too. &gt;&gt; Nice. Yeah. Yeah, I'll go see that, too. But they're probably not going to go see But they're probably not going to go see But they're probably not going to go see a film like Ratatouille and they're a film like Ratatouille and they're a film like Ratatouille and they're &gt;&gt; Oh, that's interesting. &gt;&gt; Oh, that's interesting. &gt;&gt; Oh, that's interesting. &gt;&gt; Yep. They're not gonna go see Enkanto &gt;&gt; Yep. They're not gonna go see Enkanto &gt;&gt; Yep. They're not gonna go see Enkanto and they're not gonna go see Tangled. and they're not gonna go see Tangled. and they're not gonna go see Tangled. &gt;&gt; And those franchises are so important to &gt;&gt; And those franchises are so important to &gt;&gt; And those franchises are so important to Disney. So the only way that Disney can Disney. So the only way that Disney can Disney. So the only way that Disney can make sure that the maximum number of make sure that the maximum number of make sure that the maximum number of people and the maximum number of people and the maximum number of people and the maximum number of generations get exposed to those generations get exposed to those generations get exposed to those franchises is to have a widely available franchises is to have a widely available franchises is to have a widely available streaming service. streaming service. streaming service. &gt;&gt; You know, it it's interesting. It is &gt;&gt; You know, it it's interesting. It is &gt;&gt; You know, it it's interesting. It is backed up by the numbers. If you look at backed up by the numbers. If you look at backed up by the numbers. If you look at the new Pixar films developed in the the new Pixar films developed in the the new Pixar films developed in the last 10 years, 9 10 years, none of them last 10 years, 9 10 years, none of them last 10 years, 9 10 years, none of them have set new records. have set new records. have set new records. &gt;&gt; Y &gt;&gt; Y &gt;&gt; Y &gt;&gt; the only record setters and real smash &gt;&gt; the only record setters and real smash &gt;&gt; the only record setters and real smash hits are these sequels. hits are these sequels. hits are these sequels. &gt;&gt; Yeah. Toy Story 5 is going to be a &gt;&gt; Yeah. Toy Story 5 is going to be a &gt;&gt; Yeah. Toy Story 5 is going to be a banger. But again, you know, five banger. But again, you know, five banger. But again, you know, five &gt;&gt; I don't think Pixar has gotten any worse &gt;&gt; I don't think Pixar has gotten any worse &gt;&gt; I don't think Pixar has gotten any worse at doing the Pixar thing. I think these at doing the Pixar thing. I think these at doing the Pixar thing. I think these have been great films that the the have been great films that the the have been great films that the the original ones that have come out but original ones that have come out but original ones that have come out but only generated 2, three, 400 million box only generated 2, three, 400 million box only generated 2, three, 400 million box office. It's that the the bogey has office. It's that the the bogey has office. It's that the the bogey has moved. Product market fit is an evolving moved. Product market fit is an evolving moved. Product market fit is an evolving thing. Not just because the product is thing. Not just because the product is thing. Not just because the product is changing, but the market is changing changing, but the market is changing changing, but the market is changing &gt;&gt; and the market is not one that goes and &gt;&gt; and the market is not one that goes and &gt;&gt; and the market is not one that goes and sees ratatouille when they enter the sees ratatouille when they enter the sees ratatouille when they enter the movie theater anymore. movie theater anymore. movie theater anymore. &gt;&gt; And so what is going to get ratatouille &gt;&gt; And so what is going to get ratatouille &gt;&gt; And so what is going to get ratatouille in front of consumers? It's either the in front of consumers? It's either the in front of consumers? It's either the Netflix algorithm or the YouTube Netflix algorithm or the YouTube Netflix algorithm or the YouTube algorithm or it's a first party algorithm or it's a first party algorithm or it's a first party streaming service that Disney owns and streaming service that Disney owns and streaming service that Disney owns and can make sure that Soul or Turning Red can make sure that Soul or Turning Red can make sure that Soul or Turning Red or Elemental or Encanto gets in front of or Elemental or Encanto gets in front of or Elemental or Encanto gets in front of consumers. consumers. consumers. &gt;&gt; Even though you can't be that profitable &gt;&gt; Even though you can't be that profitable &gt;&gt; Even though you can't be that profitable by running said service. by running said service. by running said service. &gt;&gt; Yep. But &gt;&gt; Yep. But &gt;&gt; Yep. But &gt;&gt; when you're making 10 billion out of the &gt;&gt; when you're making 10 billion out of the &gt;&gt; when you're making 10 billion out of the parks and that's the IP that's feeding parks and that's the IP that's feeding parks and that's the IP that's feeding the parks, the parks, the parks, &gt;&gt; you damn sure need a way to make sure &gt;&gt; you damn sure need a way to make sure &gt;&gt; you damn sure need a way to make sure people see it. people see it. people see it. &gt;&gt; Yep. Could you have your cake and eat it &gt;&gt; Yep. Could you have your cake and eat it &gt;&gt; Yep. Could you have your cake and eat it too? Could you run a highquality, skinny too? Could you run a highquality, skinny too? Could you run a highquality, skinny service that reaches, I don't know, 30 service that reaches, I don't know, 30 service that reaches, I don't know, 30 to 50 million people who really just to 50 million people who really just to 50 million people who really just want the straight drip of Disney, but want the straight drip of Disney, but want the straight drip of Disney, but also make hundreds of millions of also make hundreds of millions of also make hundreds of millions of dollars licensing that content dollars licensing that content dollars licensing that content elsewhere, but just kind of spreading it elsewhere, but just kind of spreading it elsewhere, but just kind of spreading it around to make sure that when you have a around to make sure that when you have a around to make sure that when you have a big thing that you think is the big thing that you think is the big thing that you think is the equivalent of a box office hit, you you equivalent of a box office hit, you you equivalent of a box office hit, you you do release it on Netflix to their 350ish do release it on Netflix to their 350ish do release it on Netflix to their 350ish million people. million people. million people. &gt;&gt; That's the only other viable strategy &gt;&gt; That's the only other viable strategy &gt;&gt; That's the only other viable strategy that I could think of. Sounds like you that I could think of. Sounds like you that I could think of. Sounds like you ended up in the same ended up in the same ended up in the same &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; spot. &gt;&gt; spot. &gt;&gt; spot. &gt;&gt; Disney Plus also constrains your reach. &gt;&gt; Disney Plus also constrains your reach. &gt;&gt; Disney Plus also constrains your reach. I mean, it was quite bold to think that I mean, it was quite bold to think that I mean, it was quite bold to think that you could go and build a Netflix you could go and build a Netflix you could go and build a Netflix competitor 10 years after Netflix competitor 10 years after Netflix competitor 10 years after Netflix started and just bet that the Disney IP started and just bet that the Disney IP started and just bet that the Disney IP was enough to sort of catch you up to was enough to sort of catch you up to was enough to sort of catch you up to them and then also be as good as they them and then also be as good as they them and then also be as good as they are at going and getting filler content are at going and getting filler content are at going and getting filler content even when you have the high prestige even when you have the high prestige even when you have the high prestige Disney brand holding you back from Disney brand holding you back from Disney brand holding you back from smashing as much filler content as you smashing as much filler content as you smashing as much filler content as you can in. So the result is you you don't can in. So the result is you you don't can in. So the result is you you don't and you end up with a subscale streaming and you end up with a subscale streaming and you end up with a subscale streaming platform. So they do have Disney Plus. platform. So they do have Disney Plus. platform. So they do have Disney Plus. It does have 130 million people It does have 130 million people It does have 130 million people subscribed, but 130 is not 350. And so subscribed, but 130 is not 350. And so subscribed, but 130 is not 350. And so your content that you want to drive your content that you want to drive your content that you want to drive people to the parks and to merch is only people to the parks and to merch is only people to the parks and to merch is only reaching 40% of the people that it could reaching 40% of the people that it could reaching 40% of the people that it could if it were on Netflix or whoever the if it were on Netflix or whoever the if it were on Netflix or whoever the biggest streaming service of the day biggest streaming service of the day biggest streaming service of the day would be. Yeah, you'd be subservient to would be. Yeah, you'd be subservient to would be. Yeah, you'd be subservient to them in in actually showing it to them in in actually showing it to them in in actually showing it to people, but you you are hamstringing people, but you you are hamstringing people, but you you are hamstringing yourself by not giving your content the yourself by not giving your content the yourself by not giving your content the most reach that you possibly can. In the most reach that you possibly can. In the most reach that you possibly can. In the theatrical world, you'd come out with a theatrical world, you'd come out with a theatrical world, you'd come out with a Disney movie, it would go to every Disney movie, it would go to every Disney movie, it would go to every theater, everyone would see it. You theater, everyone would see it. You theater, everyone would see it. You know, you had reach. In the Disney Plus know, you had reach. In the Disney Plus know, you had reach. In the Disney Plus world, Disney Plus doesn't actually give world, Disney Plus doesn't actually give world, Disney Plus doesn't actually give you the reach that being on the biggest you the reach that being on the biggest you the reach that being on the biggest streaming services would give you. streaming services would give you. streaming services would give you. &gt;&gt; Yep. I still think [sighs] it probably &gt;&gt; Yep. I still think [sighs] it probably &gt;&gt; Yep. I still think [sighs] it probably doesn't work. And the reason is the doesn't work. And the reason is the doesn't work. And the reason is the algorithms. Netflix is not the movie algorithms. Netflix is not the movie algorithms. Netflix is not the movie theater. theater. theater. &gt;&gt; Yeah. But if if your content is &gt;&gt; Yeah. But if if your content is &gt;&gt; Yeah. But if if your content is unbelievably compelling, it will rise to unbelievably compelling, it will rise to unbelievably compelling, it will rise to the top. the top. the top. &gt;&gt; Sure. For people that Netflix knows will &gt;&gt; Sure. For people that Netflix knows will &gt;&gt; Sure. For people that Netflix knows will be interested in that content. Again, be interested in that content. Again, be interested in that content. Again, it's not like the movie theater. The it's not like the movie theater. The it's not like the movie theater. The movie theater, it rises to the top for movie theater, it rises to the top for movie theater, it rises to the top for everybody. People go to the movies. everybody. People go to the movies. everybody. People go to the movies. &gt;&gt; No, I I disagree with that. in a in an &gt;&gt; No, I I disagree with that. in a in an &gt;&gt; No, I I disagree with that. in a in an alternate universe where the Disney alternate universe where the Disney alternate universe where the Disney Netflix deal is still in place. Whenever Netflix deal is still in place. Whenever Netflix deal is still in place. Whenever a new Disney movie would get released on a new Disney movie would get released on a new Disney movie would get released on Netflix, it would be a top 10 movie for Netflix, it would be a top 10 movie for Netflix, it would be a top 10 movie for sure, sure, sure, both organically and if it's a good both organically and if it's a good both organically and if it's a good movie, then people are going to talk movie, then people are going to talk movie, then people are going to talk about it about it about it &gt;&gt; and they're going to tell their friends &gt;&gt; and they're going to tell their friends &gt;&gt; and they're going to tell their friends and it's going to get more popular and and it's going to get more popular and and it's going to get more popular and it's going to bubble up in the it's going to bubble up in the it's going to bubble up in the algorithms. algorithms. algorithms. &gt;&gt; I Yes. But even a top 10, top five, top &gt;&gt; I Yes. But even a top 10, top five, top &gt;&gt; I Yes. But even a top 10, top five, top three movie on Netflix in a given month, three movie on Netflix in a given month, three movie on Netflix in a given month, what percentage of Netflix's subscriber what percentage of Netflix's subscriber what percentage of Netflix's subscriber base is watching it? I don't think it's base is watching it? I don't think it's base is watching it? I don't think it's a super high percentage. It's a a super high percentage. It's a a super high percentage. It's a supermarket driven by an algorithm. It's supermarket driven by an algorithm. It's supermarket driven by an algorithm. It's not a movie theater with a curated not a movie theater with a curated not a movie theater with a curated finite set of I finite set of I finite set of I &gt;&gt; stalls that are showing a &gt;&gt; stalls that are showing a &gt;&gt; stalls that are showing a &gt;&gt; It's not power law distributed enough &gt;&gt; It's not power law distributed enough &gt;&gt; It's not power law distributed enough where like the big content each month where like the big content each month where like the big content each month gets 70% of people to watch it. You're gets 70% of people to watch it. You're gets 70% of people to watch it. You're saying it any given piece of content saying it any given piece of content saying it any given piece of content tops out at like 10% of viewers or tops out at like 10% of viewers or tops out at like 10% of viewers or something like that. You're you're something like that. You're you're something like that. You're you're competing with Seinfeld on Netflix. You competing with Seinfeld on Netflix. You competing with Seinfeld on Netflix. You go to the movie theater, you're go to the movie theater, you're go to the movie theater, you're competing with whatever else is out that competing with whatever else is out that competing with whatever else is out that week in the seven other, you know, week in the seven other, you know, week in the seven other, you know, theaters in the movie in the megaplex. theaters in the movie in the megaplex. theaters in the movie in the megaplex. &gt;&gt; Yeah. Yeah. It's interesting. &gt;&gt; Yeah. Yeah. It's interesting. &gt;&gt; Yeah. Yeah. It's interesting. &gt;&gt; All that to say, same as you, I went in &gt;&gt; All that to say, same as you, I went in &gt;&gt; All that to say, same as you, I went in wanting there to have been a different wanting there to have been a different wanting there to have been a different strategy. And I'm actually not sure I strategy. And I'm actually not sure I strategy. And I'm actually not sure I could come up with a better one. could come up with a better one. could come up with a better one. &gt;&gt; And any pontificating we could do lacks &gt;&gt; And any pontificating we could do lacks &gt;&gt; And any pontificating we could do lacks data and Disney has all the data. And so data and Disney has all the data. And so data and Disney has all the data. And so if there were a better strategy, they're if there were a better strategy, they're if there were a better strategy, they're real smart. Like they probably would real smart. Like they probably would real smart. Like they probably would have come up with it and they have have come up with it and they have have come up with it and they have access to more information than we do. access to more information than we do. access to more information than we do. &gt;&gt; Yeah. The one thing that I that I don't &gt;&gt; Yeah. The one thing that I that I don't &gt;&gt; Yeah. The one thing that I that I don't think has become true is that Disney think has become true is that Disney think has become true is that Disney Plus provides a deeper relationship with Plus provides a deeper relationship with Plus provides a deeper relationship with customers. It's not like there's any customers. It's not like there's any customers. It's not like there's any synergy with the park. Y I mean, they synergy with the park. Y I mean, they synergy with the park. Y I mean, they finally unified my login, but it's not finally unified my login, but it's not finally unified my login, but it's not like my park experience is any different like my park experience is any different like my park experience is any different based on my Disney Plus viewing habits. based on my Disney Plus viewing habits. based on my Disney Plus viewing habits. I'm not even sure I would want that. I I'm not even sure I would want that. I I'm not even sure I would want that. I can't think of any of the synergies that can't think of any of the synergies that can't think of any of the synergies that you you would actually want. It sounds you you would actually want. It sounds you you would actually want. It sounds good in a pitch to say, "Oh, we have good in a pitch to say, "Oh, we have good in a pitch to say, "Oh, we have this direct and personal relationship." this direct and personal relationship." this direct and personal relationship." But like the biggest benefit I can tell But like the biggest benefit I can tell But like the biggest benefit I can tell is what we already talked about that you is what we already talked about that you is what we already talked about that you actually can force content in front of actually can force content in front of actually can force content in front of my eyeballs this way. my eyeballs this way. my eyeballs this way. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; But this general insight that I didn't &gt;&gt; But this general insight that I didn't &gt;&gt; But this general insight that I didn't have before starting the episode, that have before starting the episode, that have before starting the episode, that if you want to operate a streaming if you want to operate a streaming if you want to operate a streaming service that gets to scale, and if service that gets to scale, and if service that gets to scale, and if you're going to operate a streaming you're going to operate a streaming you're going to operate a streaming service, it has to get to scale since service, it has to get to scale since service, it has to get to scale since the fixed costs are so high, then you the fixed costs are so high, then you the fixed costs are so high, then you must have a broad set of content. must have a broad set of content. must have a broad set of content. That is weird. That is weird. That is weird. that it must be a broad set of content that it must be a broad set of content that it must be a broad set of content because you must appeal to lots of because you must appeal to lots of because you must appeal to lots of people and therefore you need diverse people and therefore you need diverse people and therefore you need diverse content to appeal to all of them. Put content to appeal to all of them. Put content to appeal to all of them. Put another way, the winning streaming another way, the winning streaming another way, the winning streaming service will be the kitchen sink. service will be the kitchen sink. service will be the kitchen sink. &gt;&gt; Yep. Yep. Yep. And that's what Netflix &gt;&gt; Yep. Yep. Yep. And that's what Netflix &gt;&gt; Yep. Yep. Yep. And that's what Netflix is. is. is. &gt;&gt; And that's how bundles work. I mean, the &gt;&gt; And that's how bundles work. I mean, the &gt;&gt; And that's how bundles work. I mean, the winning thing in TV was the kitchen winning thing in TV was the kitchen winning thing in TV was the kitchen sink. The cable bundle. Yep. sink. The cable bundle. Yep. sink. The cable bundle. Yep. &gt;&gt; That's a kitchen sink. That's what Hulu &gt;&gt; That's a kitchen sink. That's what Hulu &gt;&gt; That's a kitchen sink. That's what Hulu is. is. is. &gt;&gt; Yep. Again, I don't know that I actually &gt;&gt; Yep. Again, I don't know that I actually &gt;&gt; Yep. Again, I don't know that I actually could come up with a different, better could come up with a different, better could come up with a different, better strategy, but the world that Disney and strategy, but the world that Disney and strategy, but the world that Disney and all the traditional media companies all the traditional media companies all the traditional media companies entered starting in 2015 is just a entered starting in 2015 is just a entered starting in 2015 is just a fundamentally worse one for their fundamentally worse one for their fundamentally worse one for their content content content &gt;&gt; to run content businesses. Yes. &gt;&gt; to run content businesses. Yes. &gt;&gt; to run content businesses. Yes. &gt;&gt; Yeah. And specifically for Disney &gt;&gt; Yeah. And specifically for Disney &gt;&gt; Yeah. And specifically for Disney because they got to increase their because they got to increase their because they got to increase their production output so much. And the whole production output so much. And the whole production output so much. And the whole brand promise of the company is founded brand promise of the company is founded brand promise of the company is founded on scarce content that's always great. on scarce content that's always great. on scarce content that's always great. &gt;&gt; Yep. Kind of interesting. Is it a worse &gt;&gt; Yep. Kind of interesting. Is it a worse &gt;&gt; Yep. Kind of interesting. Is it a worse world for content businesses? But we world for content businesses? But we world for content businesses? But we actually live in the best world ever for actually live in the best world ever for actually live in the best world ever for consumers of content. consumers of content. consumers of content. Like consumers have an immense amount of Like consumers have an immense amount of Like consumers have an immense amount of choice. You can and you can choose from choice. You can and you can choose from choice. You can and you can choose from everything from someone influencing on everything from someone influencing on everything from someone influencing on their phone to their phone to their phone to high quality cinema available both in high quality cinema available both in high quality cinema available both in the movie theater in IMAX and on your TV the movie theater in IMAX and on your TV the movie theater in IMAX and on your TV a mere 45 days after it comes out in the a mere 45 days after it comes out in the a mere 45 days after it comes out in the theaters. theaters. theaters. &gt;&gt; Right. Immense amount of choice for a &gt;&gt; Right. Immense amount of choice for a &gt;&gt; Right. Immense amount of choice for a minuscule amount of money compared to minuscule amount of money compared to minuscule amount of money compared to the old world. the old world. the old world. &gt;&gt; Right. Right. It's a it's the best deal &gt;&gt; Right. Right. It's a it's the best deal &gt;&gt; Right. Right. It's a it's the best deal ever for consumers. ever for consumers. ever for consumers. &gt;&gt; Yeah. YouTube is free. Netflix &gt;&gt; Yeah. YouTube is free. Netflix &gt;&gt; Yeah. YouTube is free. Netflix &gt;&gt; all these services combined cost &gt;&gt; all these services combined cost &gt;&gt; all these services combined cost approximately the same price as a cable approximately the same price as a cable approximately the same price as a cable bundle. Right. And compare that to going bundle. Right. And compare that to going bundle. Right. And compare that to going to the movie theater every weekend. to the movie theater every weekend. to the movie theater every weekend. &gt;&gt; The only case I can possibly make that &gt;&gt; The only case I can possibly make that &gt;&gt; The only case I can possibly make that we live in a worse environment is we live in a worse environment is we live in a worse environment is the um overexloitation of IP franchises the um overexloitation of IP franchises the um overexloitation of IP franchises and and SQLitis. and and SQLitis. and and SQLitis. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; But we live in a pretty amazing content &gt;&gt; But we live in a pretty amazing content &gt;&gt; But we live in a pretty amazing content time. time. time. &gt;&gt; Yep. Okay. So, I think we should move &gt;&gt; Yep. Okay. So, I think we should move &gt;&gt; Yep. Okay. So, I think we should move this into bull and bear. Bullcase and this into bull and bear. Bullcase and this into bull and bear. Bullcase and bear case for Disney from here. Let's bear case for Disney from here. Let's bear case for Disney from here. Let's start with the bearcase. The core of the start with the bearcase. The core of the start with the bearcase. The core of the Disney Flywheel and the ESPN beautiful Disney Flywheel and the ESPN beautiful Disney Flywheel and the ESPN beautiful affiliate fee business model are both affiliate fee business model are both affiliate fee business model are both compromised and perhaps permanently compromised and perhaps permanently compromised and perhaps permanently impaired. impaired. impaired. &gt;&gt; Yes, &gt;&gt; Yes, &gt;&gt; Yes, &gt;&gt; that's the core of the bear case to me. &gt;&gt; that's the core of the bear case to me. &gt;&gt; that's the core of the bear case to me. &gt;&gt; Yes. Illustrated by this question. Has &gt;&gt; Yes. Illustrated by this question. Has &gt;&gt; Yes. Illustrated by this question. Has Disney produced a single new franchise Disney produced a single new franchise Disney produced a single new franchise in the last decade that has been a in the last decade that has been a in the last decade that has been a commercial success? commercial success? commercial success? Everything I can think of that did big Everything I can think of that did big Everything I can think of that did big dollars after 2016 at the box office and dollars after 2016 at the box office and dollars after 2016 at the box office and and I picked 2016 cuz that's uh when and I picked 2016 cuz that's uh when and I picked 2016 cuz that's uh when Moana and Zootopia came out. Moana and Zootopia came out. Moana and Zootopia came out. &gt;&gt; Everything after that that was big box &gt;&gt; Everything after that that was big box &gt;&gt; Everything after that that was big box office for the company is harvesting office for the company is harvesting office for the company is harvesting existing IP. existing IP. existing IP. &gt;&gt; Yep. Yep. And coincides exactly with &gt;&gt; Yep. Yep. And coincides exactly with &gt;&gt; Yep. Yep. And coincides exactly with when streaming kind of became king. when streaming kind of became king. when streaming kind of became king. &gt;&gt; Yeah. If you wanted to have a big &gt;&gt; Yeah. If you wanted to have a big &gt;&gt; Yeah. If you wanted to have a big concern, I I think that's sort of it. concern, I I think that's sort of it. concern, I I think that's sort of it. What's the Lion King of tomorrow or the What's the Lion King of tomorrow or the What's the Lion King of tomorrow or the Toy Story of tomorrow or the Avengers of Toy Story of tomorrow or the Avengers of Toy Story of tomorrow or the Avengers of tomorrow? Koko and and KTO are probably tomorrow? Koko and and KTO are probably tomorrow? Koko and and KTO are probably the best shots at it. Maybe Elemental, the best shots at it. Maybe Elemental, the best shots at it. Maybe Elemental, but it's interesting because those those but it's interesting because those those but it's interesting because those those did not have big box offices and so you did not have big box offices and so you did not have big box offices and so you sort of have to rely on streaming to sort of have to rely on streaming to sort of have to rely on streaming to tell you that it's big and number two to tell you that it's big and number two to tell you that it's big and number two to kind of carry it. kind of carry it. kind of carry it. &gt;&gt; And it's kind of case in point, as &gt;&gt; And it's kind of case in point, as &gt;&gt; And it's kind of case in point, as awesome as those movies are and those awesome as those movies are and those awesome as those movies are and those franchises are and they're showing up in franchises are and they're showing up in franchises are and they're showing up in the parks, they're not Frozen. Frozen the parks, they're not Frozen. Frozen the parks, they're not Frozen. Frozen might have been the last mega hit. might have been the last mega hit. might have been the last mega hit. &gt;&gt; It's fascinating. &gt;&gt; It's fascinating. &gt;&gt; It's fascinating. My other one is that the three My other one is that the three My other one is that the three acquisitions, Marvel, Pixar, Lucasfilm, acquisitions, Marvel, Pixar, Lucasfilm, acquisitions, Marvel, Pixar, Lucasfilm, were brilliant, were brilliant, were brilliant, but in retrospect, but in retrospect, but in retrospect, it's kind of looking like they provided it's kind of looking like they provided it's kind of looking like they provided amazing fuel for about 20 years, but not amazing fuel for about 20 years, but not amazing fuel for about 20 years, but not for 50 years. for 50 years. for 50 years. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; I mean, is where does Star Wars go next? &gt;&gt; I mean, is where does Star Wars go next? &gt;&gt; I mean, is where does Star Wars go next? And is is Marvel fully exploited now? And is is Marvel fully exploited now? And is is Marvel fully exploited now? and and the company has bet so big on and and the company has bet so big on and and the company has bet so big on these IP flywheels that like, you know, these IP flywheels that like, you know, these IP flywheels that like, you know, every new thing in the park is tied to every new thing in the park is tied to every new thing in the park is tied to one of them. All the sequels are tied to one of them. All the sequels are tied to one of them. All the sequels are tied to them. And when you run out of sequels, I them. And when you run out of sequels, I them. And when you run out of sequels, I got to tell you, I'm scared for Avengers got to tell you, I'm scared for Avengers got to tell you, I'm scared for Avengers Doomsday. I saw the trailer and I was Doomsday. I saw the trailer and I was Doomsday. I saw the trailer and I was like, I remember when I used to be like, I remember when I used to be like, I remember when I used to be really, really excited about this. really, really excited about this. really, really excited about this. &gt;&gt; I know. I know. &gt;&gt; I know. I know. &gt;&gt; I know. I know. &gt;&gt; And I just have a feeling in my stomach &gt;&gt; And I just have a feeling in my stomach &gt;&gt; And I just have a feeling in my stomach like I'm just not anymore. like I'm just not anymore. like I'm just not anymore. &gt;&gt; I'm barely even aware that it's coming, &gt;&gt; I'm barely even aware that it's coming, &gt;&gt; I'm barely even aware that it's coming, which is even a worse [clears throat] which is even a worse [clears throat] which is even a worse [clears throat] place to be. which says a little bit place to be. which says a little bit place to be. which says a little bit more about the cultural importance of more about the cultural importance of more about the cultural importance of theaters. Although I bet you knew the theaters. Although I bet you knew the theaters. Although I bet you knew the Odyssey was coming. Odyssey was coming. Odyssey was coming. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; I bet you knew Dune 3 is coming. &gt;&gt; I bet you knew Dune 3 is coming. &gt;&gt; I bet you knew Dune 3 is coming. &gt;&gt; Yep. Yep. So, okay. Bullcase. I will &gt;&gt; Yep. Yep. So, okay. Bullcase. I will &gt;&gt; Yep. Yep. So, okay. Bullcase. I will take the exact opposite side of what you take the exact opposite side of what you take the exact opposite side of what you just laid out in the long run. I think just laid out in the long run. I think just laid out in the long run. I think these franchises whether it's core these franchises whether it's core these franchises whether it's core Disney, Pixar, Lucasfilm, Marvel are Disney, Pixar, Lucasfilm, Marvel are Disney, Pixar, Lucasfilm, Marvel are just like luxury brands. You cannot kill just like luxury brands. You cannot kill just like luxury brands. You cannot kill them. They will have up times and they them. They will have up times and they them. They will have up times and they will have down times, but they will will have down times, but they will will have down times, but they will always come back because these are the always come back because these are the always come back because these are the core myths of our society and they get core myths of our society and they get core myths of our society and they get handed down generation to generation. handed down generation to generation. handed down generation to generation. And when they are at their lowest point, And when they are at their lowest point, And when they are at their lowest point, that is the moment that they will turn that is the moment that they will turn that is the moment that they will turn around and surprise us in new ways. around and surprise us in new ways. around and surprise us in new ways. &gt;&gt; That's a great narrative. I have no way &gt;&gt; That's a great narrative. I have no way &gt;&gt; That's a great narrative. I have no way to push back. And to make your point, at to push back. And to make your point, at to push back. And to make your point, at some point here in the next couple some point here in the next couple some point here in the next couple years, I can't wait to show my son Star years, I can't wait to show my son Star years, I can't wait to show my son Star Wars for the first time, and he's going Wars for the first time, and he's going Wars for the first time, and he's going to grow up watching Star Wars. And is he to grow up watching Star Wars. And is he to grow up watching Star Wars. And is he going to care that they made a crappy going to care that they made a crappy going to care that they made a crappy Obi-Wan show? No. He'll never see it. Obi-Wan show? No. He'll never see it. Obi-Wan show? No. He'll never see it. It's It's still the core myth of his It's It's still the core myth of his It's It's still the core myth of his time. In fact, didn't George Lucas do time. In fact, didn't George Lucas do time. In fact, didn't George Lucas do like a Star Wars holiday special way like a Star Wars holiday special way like a Star Wars holiday special way back in the8s? And you know what? None back in the8s? And you know what? None back in the8s? And you know what? None of us have ever seen and never affected of us have ever seen and never affected of us have ever seen and never affected any of the mythmaking. any of the mythmaking. any of the mythmaking. &gt;&gt; The Star Wars Holiday Special. Yeah. &gt;&gt; The Star Wars Holiday Special. Yeah. &gt;&gt; The Star Wars Holiday Special. Yeah. Well, and I think it's actually the Well, and I think it's actually the Well, and I think it's actually the story of this whole episode. And it story of this whole episode. And it story of this whole episode. And it always comes back. It always comes back. always comes back. It always comes back. always comes back. It always comes back. These franchises, These franchises, These franchises, these studios, and and these characters these studios, and and these characters these studios, and and these characters and stories are going to live forever. and stories are going to live forever. and stories are going to live forever. &gt;&gt; Yep. All right. I've got a few reasons &gt;&gt; Yep. All right. I've got a few reasons &gt;&gt; Yep. All right. I've got a few reasons for optimism here. for optimism here. for optimism here. &gt;&gt; Great. Despite the fact that they &gt;&gt; Great. Despite the fact that they &gt;&gt; Great. Despite the fact that they intentionally accelerated the demise of intentionally accelerated the demise of intentionally accelerated the demise of their older profitable businesses, their older profitable businesses, their older profitable businesses, they're back to all-time highs on total they're back to all-time highs on total they're back to all-time highs on total profits. Now, they took those kind of profits. Now, they took those kind of profits. Now, they took those kind of rebuilding years, five, six years in the rebuilding years, five, six years in the rebuilding years, five, six years in the middle, had a pandemic in the middle of middle, had a pandemic in the middle of middle, had a pandemic in the middle of it that shut down all their parks. But I it that shut down all their parks. But I it that shut down all their parks. But I I think in 2026, it's looking like I think in 2026, it's looking like I think in 2026, it's looking like they'll set a brand new net income they'll set a brand new net income they'll set a brand new net income record ever based on the way it's record ever based on the way it's record ever based on the way it's trending. And just 5 years ago, it was trending. And just 5 years ago, it was trending. And just 5 years ago, it was negative during CO and really kind of negative during CO and really kind of negative during CO and really kind of dug out of that hole after losing all dug out of that hole after losing all dug out of that hole after losing all this money in streaming. So yeah, for this money in streaming. So yeah, for this money in streaming. So yeah, for for all the headwinds that we described, for all the headwinds that we described, for all the headwinds that we described, they're going to continue to set new they're going to continue to set new they're going to continue to set new financial records. Now, it's not growing financial records. Now, it's not growing financial records. Now, it's not growing at the speed that you'd want for a at the speed that you'd want for a at the speed that you'd want for a business to justify a high multiple or a business to justify a high multiple or a business to justify a high multiple or a fast growing stock price, but in many fast growing stock price, but in many fast growing stock price, but in many ways, Disney is a scale company that has ways, Disney is a scale company that has ways, Disney is a scale company that has kind of accomplished its mission. So, I kind of accomplished its mission. So, I kind of accomplished its mission. So, I don't I don't know that I want it to be don't I don't know that I want it to be don't I don't know that I want it to be a 20% year-over-year grower. I as a a 20% year-over-year grower. I as a a 20% year-over-year grower. I as a consumer, I quite like that it's a 3% or consumer, I quite like that it's a 3% or consumer, I quite like that it's a 3% or a 5 percent [laughter] growth company. a 5 percent [laughter] growth company. a 5 percent [laughter] growth company. &gt;&gt; Yeah, I think this might even be a &gt;&gt; Yeah, I think this might even be a &gt;&gt; Yeah, I think this might even be a version of the same thing, too. The version of the same thing, too. The version of the same thing, too. The Disney parks are also a fundamental just Disney parks are also a fundamental just Disney parks are also a fundamental just part of our culture that gets part of our culture that gets part of our culture that gets transferred from generation to transferred from generation to transferred from generation to generation that parents take their kids generation that parents take their kids generation that parents take their kids and it's just always going to be that and it's just always going to be that and it's just always going to be that way. way. way. &gt;&gt; Yep. The parks are amazing. No &gt;&gt; Yep. The parks are amazing. No &gt;&gt; Yep. The parks are amazing. No competitor has the sort of brand competitor has the sort of brand competitor has the sort of brand affinity they have, the flywheel affinity they have, the flywheel affinity they have, the flywheel infrastructure they have. Yeah, a lot of infrastructure they have. Yeah, a lot of infrastructure they have. Yeah, a lot of reason to be optimistic. reason to be optimistic. reason to be optimistic. &gt;&gt; All right, then I've got one more point &gt;&gt; All right, then I've got one more point &gt;&gt; All right, then I've got one more point to the bullcase for Disney. to the bullcase for Disney. to the bullcase for Disney. &gt;&gt; Are you going to pitch Josh tomorrow on &gt;&gt; Are you going to pitch Josh tomorrow on &gt;&gt; Are you going to pitch Josh tomorrow on doing an acquisition? doing an acquisition? doing an acquisition? &gt;&gt; Absolutely. [laughter] &gt;&gt; Absolutely. [laughter] &gt;&gt; Absolutely. [laughter] I But here's what it is. I think Disney I But here's what it is. I think Disney I But here's what it is. I think Disney still is, just like it was when Bob took still is, just like it was when Bob took still is, just like it was when Bob took over. I think it's still the very best over. I think it's still the very best over. I think it's still the very best home for the best characters and stories home for the best characters and stories home for the best characters and stories and IP franchises in the world when they and IP franchises in the world when they and IP franchises in the world when they need a home. And there are two extremely need a home. And there are two extremely need a home. And there are two extremely obvious ones to me out there right now. obvious ones to me out there right now. obvious ones to me out there right now. One is Bluey, which you know is the One is Bluey, which you know is the One is Bluey, which you know is the greatest children's show ever made. greatest children's show ever made. greatest children's show ever made. That's also much more than a children's That's also much more than a children's That's also much more than a children's show. It's already quasi within Disney. show. It's already quasi within Disney. show. It's already quasi within Disney. It's It's got placement in the parks. It's It's got placement in the parks. It's It's got placement in the parks. It's got a deal with Disney Plus. It's got a deal with Disney Plus. It's got a deal with Disney Plus. &gt;&gt; Bluey is not Pixar. It's not at that &gt;&gt; Bluey is not Pixar. It's not at that &gt;&gt; Bluey is not Pixar. It's not at that scale, but it's so many echoes of Pixar scale, but it's so many echoes of Pixar scale, but it's so many echoes of Pixar right now. It's not really capable of right now. It's not really capable of right now. It's not really capable of continuing and standing alone on its continuing and standing alone on its continuing and standing alone on its own. Like Joe Brum isn't going to make own. Like Joe Brum isn't going to make own. Like Joe Brum isn't going to make Blueie into a Disney competitor, but Blueie into a Disney competitor, but Blueie into a Disney competitor, but Disney can be the very best steward for Disney can be the very best steward for Disney can be the very best steward for all the future of Blowie. And Bluey has all the future of Blowie. And Bluey has all the future of Blowie. And Bluey has so much more running room ahead of it in so much more running room ahead of it in so much more running room ahead of it in terms of what it can be. terms of what it can be. terms of what it can be. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; All right. So, that's one. &gt;&gt; All right. So, that's one. &gt;&gt; All right. So, that's one. &gt;&gt; And then the other one, the opposite end &gt;&gt; And then the other one, the opposite end &gt;&gt; And then the other one, the opposite end of the spectrum is Nintendo. Man, of the spectrum is Nintendo. Man, of the spectrum is Nintendo. Man, Nintendo has fallen on hard times. Do Nintendo has fallen on hard times. Do Nintendo has fallen on hard times. Do you know what Nintendo's market cap is you know what Nintendo's market cap is you know what Nintendo's market cap is right now? 50 billion, but down 50% from right now? 50 billion, but down 50% from right now? 50 billion, but down 50% from last year. last year. last year. &gt;&gt; Whoa. &gt;&gt; Whoa. &gt;&gt; Whoa. &gt;&gt; Yeah. I mean, you could pick up Nintendo &gt;&gt; Yeah. I mean, you could pick up Nintendo &gt;&gt; Yeah. I mean, you could pick up Nintendo for less than the cost of Fox. Now, now for less than the cost of Fox. Now, now for less than the cost of Fox. Now, now I I I don't know that Nintendo would I I I don't know that Nintendo would I I I don't know that Nintendo would ever sell. ever sell. ever sell. &gt;&gt; Japan would not let it. &gt;&gt; Japan would not let it. &gt;&gt; Japan would not let it. &gt;&gt; Uh, but you know, look, they have this &gt;&gt; Uh, but you know, look, they have this &gt;&gt; Uh, but you know, look, they have this relationship with Universal now. I mean, relationship with Universal now. I mean, relationship with Universal now. I mean, it is a travesty, frankly, that Disney it is a travesty, frankly, that Disney it is a travesty, frankly, that Disney let Nintendo go to Universal. Nintendo let Nintendo go to Universal. Nintendo let Nintendo go to Universal. Nintendo is like Pixar, Marvel, and Lucasfilm is like Pixar, Marvel, and Lucasfilm is like Pixar, Marvel, and Lucasfilm combined. I mean, they have some of the combined. I mean, they have some of the combined. I mean, they have some of the very best IP in the entire world. very best IP in the entire world. very best IP in the entire world. They've got three franchises that can They've got three franchises that can They've got three franchises that can stand toe-to-toe with anything at Disney stand toe-to-toe with anything at Disney stand toe-to-toe with anything at Disney in Mario, Zelda, and Pokémon. And then in Mario, Zelda, and Pokémon. And then in Mario, Zelda, and Pokémon. And then they've got a whole slew of other great they've got a whole slew of other great they've got a whole slew of other great stuff. Donkey Kong, Metroid, Kirby, Star stuff. Donkey Kong, Metroid, Kirby, Star stuff. Donkey Kong, Metroid, Kirby, Star Fox, Animal Crossing. I mean, there are Fox, Animal Crossing. I mean, there are Fox, Animal Crossing. I mean, there are movies for decades to be made here, plus movies for decades to be made here, plus movies for decades to be made here, plus the video games. And then the parks. I the video games. And then the parks. I the video games. And then the parks. I took my girls to Nintendo Land at took my girls to Nintendo Land at took my girls to Nintendo Land at Universal Studios in LA. It was amazing. Universal Studios in LA. It was amazing. Universal Studios in LA. It was amazing. And it's like And it's like And it's like 150th the size of Disney World. With the 150th the size of Disney World. With the 150th the size of Disney World. With the bigger Disney canvas, Nintendo physical bigger Disney canvas, Nintendo physical bigger Disney canvas, Nintendo physical experiences could be so much more. experiences could be so much more. experiences could be so much more. &gt;&gt; H. [clears throat] There you go. That's &gt;&gt; H. [clears throat] There you go. That's &gt;&gt; H. [clears throat] There you go. That's my pitch. my pitch. my pitch. &gt;&gt; I like it. Seven powers. &gt;&gt; I like it. Seven powers. &gt;&gt; I like it. Seven powers. &gt;&gt; Powers. Yes. &gt;&gt; Powers. Yes. &gt;&gt; Powers. Yes. &gt;&gt; All right. So, listeners, this is the &gt;&gt; All right. So, listeners, this is the &gt;&gt; All right. So, listeners, this is the part of the episode where we use part of the episode where we use part of the episode where we use Hamilton Helmer's framework to discuss Hamilton Helmer's framework to discuss Hamilton Helmer's framework to discuss why a company gets to be more profitable why a company gets to be more profitable why a company gets to be more profitable than its nearest competitor. And there than its nearest competitor. And there than its nearest competitor. And there are seven of them. Scale economies, are seven of them. Scale economies, are seven of them. Scale economies, network economies, counterpositioning, network economies, counterpositioning, network economies, counterpositioning, switching costs, branding, cornered switching costs, branding, cornered switching costs, branding, cornered resource, and process power. resource, and process power. resource, and process power. Man, how do we do this this time? Man, how do we do this this time? Man, how do we do this this time? &gt;&gt; I think we do it this time for the &gt;&gt; I think we do it this time for the &gt;&gt; I think we do it this time for the streaming era. streaming era. streaming era. &gt;&gt; Disney Plus versus streaming &gt;&gt; Disney Plus versus streaming &gt;&gt; Disney Plus versus streaming competitors. competitors. competitors. &gt;&gt; Yep. Yep. Yep. So, the pitch of Disney &gt;&gt; Yep. Yep. Yep. So, the pitch of Disney &gt;&gt; Yep. Yep. Yep. So, the pitch of Disney Plus versus other vertical Plus versus other vertical Plus versus other vertical competitors, Peacock or Paramount Plus, competitors, Peacock or Paramount Plus, competitors, Peacock or Paramount Plus, is that it has higher quality, is that it has higher quality, is that it has higher quality, durable franchise intellectual property durable franchise intellectual property durable franchise intellectual property that those other ones don't really have. that those other ones don't really have. that those other ones don't really have. &gt;&gt; Yep. Corned Resource. Yep. &gt;&gt; Yep. Corned Resource. Yep. &gt;&gt; Yep. Corned Resource. Yep. &gt;&gt; And they have them forever, just like &gt;&gt; And they have them forever, just like &gt;&gt; And they have them forever, just like the vertical ones. you know that Peacock the vertical ones. you know that Peacock the vertical ones. you know that Peacock has The Office Forever or that Paramount has The Office Forever or that Paramount has The Office Forever or that Paramount Plus has Star Trek Forever, but Disney Plus has Star Trek Forever, but Disney Plus has Star Trek Forever, but Disney just has a lot more of those than in the just has a lot more of those than in the just has a lot more of those than in the other vertical ones. The funny thing other vertical ones. The funny thing other vertical ones. The funny thing that I'm struggling with here is it's that I'm struggling with here is it's that I'm struggling with here is it's not like they actually do generate more not like they actually do generate more not like they actually do generate more profits than the real competitor than profits than the real competitor than profits than the real competitor than than Netflix. than Netflix. than Netflix. &gt;&gt; Yeah. Well, I think it's really simple. &gt;&gt; Yeah. Well, I think it's really simple. &gt;&gt; Yeah. Well, I think it's really simple. It all just comes down to scale It all just comes down to scale It all just comes down to scale economies in the streaming business. economies in the streaming business. economies in the streaming business. This is why Netflix has what did we say This is why Netflix has what did we say This is why Netflix has what did we say 45 billion in revenue and 13.5 billion 45 billion in revenue and 13.5 billion 45 billion in revenue and 13.5 billion in operating income and Disney streaming in operating income and Disney streaming in operating income and Disney streaming business is half of that in revenue and business is half of that in revenue and business is half of that in revenue and barely profitable. That is the clearest barely profitable. That is the clearest barely profitable. That is the clearest illustration of scale economies that I illustration of scale economies that I illustration of scale economies that I can present to you. can present to you. can present to you. &gt;&gt; Yeah. &gt;&gt; Yeah. &gt;&gt; Yeah. So does the world end up where you have So does the world end up where you have So does the world end up where you have Netflix which is the giant winner take Netflix which is the giant winner take Netflix which is the giant winner take all scale economies player in paid all scale economies player in paid all scale economies player in paid streaming then you have YouTube which is streaming then you have YouTube which is streaming then you have YouTube which is the giant winner take all one in adup the giant winner take all one in adup the giant winner take all one in adup supported free creatorled supported free creatorled supported free creatorled content instead of professionally content instead of professionally content instead of professionally created content and Disney created content and Disney created content and Disney can sort of stay subscale because it's can sort of stay subscale because it's can sort of stay subscale because it's subsidized by the profits from their subsidized by the profits from their subsidized by the profits from their other businesses. So, it doesn't need to other businesses. So, it doesn't need to other businesses. So, it doesn't need to be as competitive on a like for-like be as competitive on a like for-like be as competitive on a like for-like basis with Netflix. basis with Netflix. basis with Netflix. &gt;&gt; Yeah, I think Disney's best bet here is &gt;&gt; Yeah, I think Disney's best bet here is &gt;&gt; Yeah, I think Disney's best bet here is to be a clear number two. to be a clear number two. to be a clear number two. &gt;&gt; And they probably shouldn't lean into &gt;&gt; And they probably shouldn't lean into &gt;&gt; And they probably shouldn't lean into that cuz if you're trying to be number that cuz if you're trying to be number that cuz if you're trying to be number one, then you're going to chase the one, then you're going to chase the one, then you're going to chase the content kitchen sink all the way there. content kitchen sink all the way there. content kitchen sink all the way there. &gt;&gt; Yep. Yep. They need enough of a content &gt;&gt; Yep. Yep. They need enough of a content &gt;&gt; Yep. Yep. They need enough of a content kitchen sink to be superior to Peacock, kitchen sink to be superior to Peacock, kitchen sink to be superior to Peacock, etc. But frankly, they're already there, etc. But frankly, they're already there, etc. But frankly, they're already there, right? They can dial back content right? They can dial back content right? They can dial back content production a lot and let the flywheel production a lot and let the flywheel production a lot and let the flywheel heal itself a little bit. heal itself a little bit. heal itself a little bit. &gt;&gt; Agree. &gt;&gt; Agree. &gt;&gt; Agree. &gt;&gt; And still be just fine. &gt;&gt; And still be just fine. &gt;&gt; And still be just fine. &gt;&gt; Keep Hulu Hulu. Yeah. Hulu and Disney &gt;&gt; Keep Hulu Hulu. Yeah. Hulu and Disney &gt;&gt; Keep Hulu Hulu. Yeah. Hulu and Disney Plus keep getting closer and closer Plus keep getting closer and closer Plus keep getting closer and closer together the more they bundle it and and together the more they bundle it and and together the more they bundle it and and put the content in each other as apps. put the content in each other as apps. put the content in each other as apps. &gt;&gt; Are you starting a uh make Hulu great &gt;&gt; Are you starting a uh make Hulu great &gt;&gt; Are you starting a uh make Hulu great again campaign here? again campaign here? again campaign here? &gt;&gt; I'm I'm starting a spin co of Hulu and &gt;&gt; I'm I'm starting a spin co of Hulu and &gt;&gt; I'm I'm starting a spin co of Hulu and Fox assets campaign here. That's what Fox assets campaign here. That's what Fox assets campaign here. That's what I'm doing. Keep Avatar in Disney, but I'm doing. Keep Avatar in Disney, but I'm doing. Keep Avatar in Disney, but everything else has to go. All right. everything else has to go. All right. everything else has to go. All right. Quintessence listeners, this is our Quintessence listeners, this is our Quintessence listeners, this is our exercise to wind down the episode, bring exercise to wind down the episode, bring exercise to wind down the episode, bring it home, and talk about kind of the one it home, and talk about kind of the one it home, and talk about kind of the one big idea that stuck with us. big idea that stuck with us. big idea that stuck with us. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; My quintessence is that the environment &gt;&gt; My quintessence is that the environment &gt;&gt; My quintessence is that the environment changed. changed. changed. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Yep. &gt;&gt; Disney used to operate in an &gt;&gt; Disney used to operate in an &gt;&gt; Disney used to operate in an unbelievable and easy environment. The unbelievable and easy environment. The unbelievable and easy environment. The cable bundle allowed ESPN to generate cable bundle allowed ESPN to generate cable bundle allowed ESPN to generate huge profits basically on autopilot. huge profits basically on autopilot. huge profits basically on autopilot. Partially because of ESPN, all the other Partially because of ESPN, all the other Partially because of ESPN, all the other TV channels that Disney offered also TV channels that Disney offered also TV channels that Disney offered also were super profitable. Customers used to were super profitable. Customers used to were super profitable. Customers used to go to the movies super often and Disney go to the movies super often and Disney go to the movies super often and Disney had some of the most profitable and had some of the most profitable and had some of the most profitable and successful movies. Then to put this on successful movies. Then to put this on successful movies. Then to put this on steroids, they could box and sell the steroids, they could box and sell the steroids, they could box and sell the movies after that and make giant profits movies after that and make giant profits movies after that and make giant profits again. Yeah, again. Yeah, again. Yeah, &gt;&gt; you had everything going for you. &gt;&gt; you had everything going for you. &gt;&gt; you had everything going for you. &gt;&gt; That was peak traditional media. &gt;&gt; That was peak traditional media. &gt;&gt; That was peak traditional media. &gt;&gt; Then the modern environment is the exact &gt;&gt; Then the modern environment is the exact &gt;&gt; Then the modern environment is the exact opposite. Cable bundles getting opposite. Cable bundles getting opposite. Cable bundles getting destroyed. Disney could no longer destroyed. Disney could no longer destroyed. Disney could no longer realize those profits. People stop going realize those profits. People stop going realize those profits. People stop going to movie theaters so box office growth to movie theaters so box office growth to movie theaters so box office growth dries up. Streaming turns out to be dries up. Streaming turns out to be dries up. Streaming turns out to be expensive to build, expensive to expensive to build, expensive to expensive to build, expensive to maintain, expensive to acquire maintain, expensive to acquire maintain, expensive to acquire customers, harder to create events customers, harder to create events customers, harder to create events around. People don't rally around them around. People don't rally around them around. People don't rally around them like they did movie theaters. It's like they did movie theaters. It's like they did movie theaters. It's expensive to retain customers. It's far expensive to retain customers. It's far expensive to retain customers. It's far less profitable and it's not a less profitable and it's not a less profitable and it's not a replacement for the theatrical revenue. replacement for the theatrical revenue. replacement for the theatrical revenue. And ultimately, because of all this, And ultimately, because of all this, And ultimately, because of all this, there's just not as much cushy surplus there's just not as much cushy surplus there's just not as much cushy surplus everywhere, and you have to make a lot everywhere, and you have to make a lot everywhere, and you have to make a lot of really shrewd business decisions if of really shrewd business decisions if of really shrewd business decisions if you want to keep generating the same or you want to keep generating the same or you want to keep generating the same or more profits each year. So, where does more profits each year. So, where does more profits each year. So, where does this leave us? Disney's going to be this leave us? Disney's going to be this leave us? Disney's going to be fine. and if managed very carefully fine. and if managed very carefully fine. and if managed very carefully thrive. They're still going to produce thrive. They're still going to produce thrive. They're still going to produce beloved characters and stories we all beloved characters and stories we all beloved characters and stories we all love, but the prosperity from the late love, but the prosperity from the late love, but the prosperity from the late 90s and the 2005 to 2019 era, that was a 90s and the 2005 to 2019 era, that was a 90s and the 2005 to 2019 era, that was a complete anomaly due to how good all the complete anomaly due to how good all the complete anomaly due to how good all the structural forces around the business structural forces around the business structural forces around the business were. And it's just brutal that as a were. And it's just brutal that as a were. And it's just brutal that as a company they will forever be compared company they will forever be compared company they will forever be compared against those eras. against those eras. against those eras. &gt;&gt; Yep. Yep. And &gt;&gt; Yep. Yep. And &gt;&gt; Yep. Yep. And frankly, the management team in that era frankly, the management team in that era frankly, the management team in that era just knocked it out of the park in terms just knocked it out of the park in terms just knocked it out of the park in terms of seizing those opportunities and and of seizing those opportunities and and of seizing those opportunities and and innovating all the stuff they added. innovating all the stuff they added. innovating all the stuff they added. Home video, Broadway, the stores in the Home video, Broadway, the stores in the Home video, Broadway, the stores in the malls, the parks, and transforming Walt malls, the parks, and transforming Walt malls, the parks, and transforming Walt Disney World into a resort. Disney World into a resort. Disney World into a resort. &gt;&gt; You know what it is? You could make &gt;&gt; You know what it is? You could make &gt;&gt; You know what it is? You could make money in media then. money in media then. money in media then. &gt;&gt; Yeah. Yeah. Yeah. like you you had to do &gt;&gt; Yeah. Yeah. Yeah. like you you had to do &gt;&gt; Yeah. Yeah. Yeah. like you you had to do clever stuff, but like there was money clever stuff, but like there was money clever stuff, but like there was money to be made. to be made. to be made. &gt;&gt; There was room for creativity to thrive. &gt;&gt; There was room for creativity to thrive. &gt;&gt; There was room for creativity to thrive. &gt;&gt; There's much less of that now. &gt;&gt; There's much less of that now. &gt;&gt; There's much less of that now. &gt;&gt; Totally agree. &gt;&gt; Totally agree. &gt;&gt; Totally agree. &gt;&gt; Absent a completely different business &gt;&gt; Absent a completely different business &gt;&gt; Absent a completely different business model like being Mr. Beast, there's a model like being Mr. Beast, there's a model like being Mr. Beast, there's a whole other universe where you can whole other universe where you can whole other universe where you can create very successful media business create very successful media business create very successful media business models now, but it's so far from models now, but it's so far from models now, but it's so far from Disney's universe that it you you can't Disney's universe that it you you can't Disney's universe that it you you can't even see a path to it. even see a path to it. even see a path to it. &gt;&gt; Yep. And that leads right into my &gt;&gt; Yep. And that leads right into my &gt;&gt; Yep. And that leads right into my quintessence. I guess I'm [laughter] quintessence. I guess I'm [laughter] quintessence. I guess I'm [laughter] ever the optimist on this front. Disney ever the optimist on this front. Disney ever the optimist on this front. Disney is the home of generational myths and is the home of generational myths and is the home of generational myths and you'll never kill it. It's what I said you'll never kill it. It's what I said you'll never kill it. It's what I said in my bookcase. in my bookcase. in my bookcase. &gt;&gt; Unkillable. &gt;&gt; Unkillable. &gt;&gt; Unkillable. &gt;&gt; It'll have its ups and downs and maybe &gt;&gt; It'll have its ups and downs and maybe &gt;&gt; It'll have its ups and downs and maybe we'll never see another era like the we'll never see another era like the we'll never see another era like the '9s. And that was truly peak Disney from '9s. And that was truly peak Disney from '9s. And that was truly peak Disney from a business and creativity standpoint a business and creativity standpoint a business and creativity standpoint &gt;&gt; and the early 2010s. &gt;&gt; and the early 2010s. &gt;&gt; and the early 2010s. &gt;&gt; And the early 2010s, too. Yep. Yep. &gt;&gt; And the early 2010s, too. Yep. Yep. &gt;&gt; And the early 2010s, too. Yep. Yep. Absolutely. But this is sort of my Absolutely. But this is sort of my Absolutely. But this is sort of my point. It goes in 20 years cycles and I point. It goes in 20 years cycles and I point. It goes in 20 years cycles and I wouldn't be surprised if it's back on wouldn't be surprised if it's back on wouldn't be surprised if it's back on top of the world in another 10 years. top of the world in another 10 years. top of the world in another 10 years. Love it. Carveouts. Love it. Carveouts. Love it. Carveouts. &gt;&gt; Carveouts. Let's do it. &gt;&gt; Carveouts. Let's do it. &gt;&gt; Carveouts. Let's do it. &gt;&gt; This is the part where we talk about &gt;&gt; This is the part where we talk about &gt;&gt; This is the part where we talk about products that we have been loving that products that we have been loving that products that we have been loving that have nothing to do with this episode, have nothing to do with this episode, have nothing to do with this episode, but we want to share with you listeners. but we want to share with you listeners. but we want to share with you listeners. I have a Warby Parker one to share with I have a Warby Parker one to share with I have a Warby Parker one to share with everyone. everyone. everyone. &gt;&gt; Oo, fun. I have been wearing glasses &gt;&gt; Oo, fun. I have been wearing glasses &gt;&gt; Oo, fun. I have been wearing glasses more recently and in the uh summer more recently and in the uh summer more recently and in the uh summer months it's nightmarish to carry two months it's nightmarish to carry two months it's nightmarish to carry two pairs of glasses with you. So what's the pairs of glasses with you. So what's the pairs of glasses with you. So what's the answer? Transition lenses. But answer? Transition lenses. But answer? Transition lenses. But transition lenses just look so derpy. I transition lenses just look so derpy. I transition lenses just look so derpy. I mean I I [laughter] mean I I [laughter] mean I I [laughter] classically transition lenses are like classically transition lenses are like classically transition lenses are like there's a treatment on regular glasses there's a treatment on regular glasses there's a treatment on regular glasses and when you're wearing regular glasses and when you're wearing regular glasses and when you're wearing regular glasses and they're tinted it just looks really and they're tinted it just looks really and they're tinted it just looks really bad. So Warby Parker has a product bad. So Warby Parker has a product bad. So Warby Parker has a product called their transitions extra active called their transitions extra active called their transitions extra active which are dark outdoors. They even which are dark outdoors. They even which are dark outdoors. They even transition in the car. And I got them in transition in the car. And I got them in transition in the car. And I got them in brown. And I think this is the key brown. And I think this is the key brown. And I think this is the key unlock. They don't look as dorky when unlock. They don't look as dorky when unlock. They don't look as dorky when the tint is brown as when the tint is the tint is brown as when the tint is the tint is brown as when the tint is just regular gray. And if you get them just regular gray. And if you get them just regular gray. And if you get them in a frame that can kind of play as both in a frame that can kind of play as both in a frame that can kind of play as both &gt;&gt; indoor outdoor &gt;&gt; indoor outdoor &gt;&gt; indoor outdoor &gt;&gt; indoor outdoor then then it can work. So &gt;&gt; indoor outdoor then then it can work. So &gt;&gt; indoor outdoor then then it can work. So for the first time in my life I've been for the first time in my life I've been for the first time in my life I've been wearing a form of transition lenses that wearing a form of transition lenses that wearing a form of transition lenses that I like and uh yeah brown extra active I like and uh yeah brown extra active I like and uh yeah brown extra active from Orby Parker. from Orby Parker. from Orby Parker. &gt;&gt; Nice. Nice. &gt;&gt; Nice. Nice. &gt;&gt; Nice. Nice. &gt;&gt; At some point this is like my fifth &gt;&gt; At some point this is like my fifth &gt;&gt; At some point this is like my fifth sunglasses carveout. My carveouts will sunglasses carveout. My carveouts will sunglasses carveout. My carveouts will exclusively be forms of eyewear. exclusively be forms of eyewear. exclusively be forms of eyewear. &gt;&gt; We should start a uh acquired retail &gt;&gt; We should start a uh acquired retail &gt;&gt; We should start a uh acquired retail &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; Yes. &gt;&gt; sunglasses. &gt;&gt; sunglasses. &gt;&gt; sunglasses. &gt;&gt; Y. All right. Moving on, I have three &gt;&gt; Y. All right. Moving on, I have three &gt;&gt; Y. All right. Moving on, I have three carveouts. So, my first one that I was carveouts. So, my first one that I was carveouts. So, my first one that I was sure you were going to take is Michael sure you were going to take is Michael sure you were going to take is Michael Arts, Toy Story 3. Arts, Toy Story 3. Arts, Toy Story 3. &gt;&gt; Oh my god, it's so good. &gt;&gt; Oh my god, it's so good. &gt;&gt; Oh my god, it's so good. &gt;&gt; lecture on YouTube. Michael was the &gt;&gt; lecture on YouTube. Michael was the &gt;&gt; lecture on YouTube. Michael was the screenwriter for Toy Story 3 and shared screenwriter for Toy Story 3 and shared screenwriter for Toy Story 3 and shared this lecture on YouTube about how story this lecture on YouTube about how story this lecture on YouTube about how story works at Pixar. It was part of our works at Pixar. It was part of our works at Pixar. It was part of our research for this episode. So many research for this episode. So many research for this episode. So many people told us about it people told us about it people told us about it &gt;&gt; and not only did he share a talk, he got &gt;&gt; and not only did he share a talk, he got &gt;&gt; and not only did he share a talk, he got permission to share a bunch of the early permission to share a bunch of the early permission to share a bunch of the early story reels. So you get to see the rough story reels. So you get to see the rough story reels. So you get to see the rough drafts of what the story was before the drafts of what the story was before the drafts of what the story was before the brain trust weighed in and made it brain trust weighed in and made it brain trust weighed in and made it better. better. better. &gt;&gt; Yeah, it's so good. Well worth it. It's &gt;&gt; Yeah, it's so good. Well worth it. It's &gt;&gt; Yeah, it's so good. Well worth it. It's like an hour and 20 minutes of your time like an hour and 20 minutes of your time like an hour and 20 minutes of your time if you care at all about story or even if you care at all about story or even if you care at all about story or even just understanding what goes into making just understanding what goes into making just understanding what goes into making the magic of a Pixar movie. the magic of a Pixar movie. the magic of a Pixar movie. &gt;&gt; Yeah, &gt;&gt; Yeah, &gt;&gt; Yeah, &gt;&gt; go check it out. Um, then I have a a &gt;&gt; go check it out. Um, then I have a a &gt;&gt; go check it out. Um, then I have a a carveout request also related to the carveout request also related to the carveout request also related to the episode. So, we were in New York episode. So, we were in New York episode. So, we were in New York recently for the event that we did with recently for the event that we did with recently for the event that we did with Sierra and uh I brought the family and Sierra and uh I brought the family and Sierra and uh I brought the family and my older daughter was super excited to my older daughter was super excited to my older daughter was super excited to go to the Nintendo store in Rockefeller go to the Nintendo store in Rockefeller go to the Nintendo store in Rockefeller Center in New York because she thought Center in New York because she thought Center in New York because she thought that there in New York at the, you know, that there in New York at the, you know, that there in New York at the, you know, flagship they might have Princess Peach flagship they might have Princess Peach flagship they might have Princess Peach costumes. They did not have Princess costumes. They did not have Princess costumes. They did not have Princess Peach costumes. As far as I can tell, Peach costumes. As far as I can tell, Peach costumes. As far as I can tell, Nintendo does not make first party Nintendo does not make first party Nintendo does not make first party Princess Peace costumes. This is why Princess Peace costumes. This is why Princess Peace costumes. This is why Disney needs to acquire Nintendo because Disney needs to acquire Nintendo because Disney needs to acquire Nintendo because the [laughter] fruit is just laying the [laughter] fruit is just laying the [laughter] fruit is just laying there right hanging off the trees. there right hanging off the trees. there right hanging off the trees. &gt;&gt; Josh David wants to come in and do strat &gt;&gt; Josh David wants to come in and do strat &gt;&gt; Josh David wants to come in and do strat planning with you. So, planning with you. So, planning with you. So, &gt;&gt; bring bring him in. &gt;&gt; bring bring him in. &gt;&gt; bring bring him in. &gt;&gt; I don't care if it's Disney or Nintendo &gt;&gt; I don't care if it's Disney or Nintendo &gt;&gt; I don't care if it's Disney or Nintendo or Universal or whoever. Just make some or Universal or whoever. Just make some or Universal or whoever. Just make some Princess Peach costumes for my almost Princess Peach costumes for my almost Princess Peach costumes for my almost 5-year-old. [laughter] 5-year-old. [laughter] 5-year-old. [laughter] And then my last carveout is the Golden And then my last carveout is the Golden And then my last carveout is the Golden State Valkyries, the WNBA franchise here State Valkyries, the WNBA franchise here State Valkyries, the WNBA franchise here in San Francisco. We've gotten to know in San Francisco. We've gotten to know in San Francisco. We've gotten to know Jess Smith, the president of the Jess Smith, the president of the Jess Smith, the president of the Valkyries. We uh have done a few events Valkyries. We uh have done a few events Valkyries. We uh have done a few events with her. with her. with her. &gt;&gt; Yeah. She's so great. Actually, at the &gt;&gt; Yeah. She's so great. Actually, at the &gt;&gt; Yeah. She's so great. Actually, at the Sentry event that we did, what last Sentry event that we did, what last Sentry event that we did, what last year? year? year? &gt;&gt; Yes. What she and the whole Valkyries &gt;&gt; Yes. What she and the whole Valkyries &gt;&gt; Yes. What she and the whole Valkyries organization and the Warriors organization and the Warriors organization and the Warriors organization, it's the same ownership organization, it's the same ownership organization, it's the same ownership group, have done with the Valkyries is group, have done with the Valkyries is group, have done with the Valkyries is nothing short of incredible. It's the nothing short of incredible. It's the nothing short of incredible. It's the second year of the franchise. It is the second year of the franchise. It is the second year of the franchise. It is the most successful women's sports franchise most successful women's sports franchise most successful women's sports franchise in the entire world. It's worth over a in the entire world. It's worth over a in the entire world. It's worth over a billion dollars now. We went for the billion dollars now. We went for the billion dollars now. We went for the first time to experience it. I've never first time to experience it. I've never first time to experience it. I've never been to anything like it. It was one of been to anything like it. It was one of been to anything like it. It was one of the best sporting events I've ever been the best sporting events I've ever been the best sporting events I've ever been to, period. My little girls were so into to, period. My little girls were so into to, period. My little girls were so into it. It's like magic. it. It's like magic. it. It's like magic. &gt;&gt; They were standing up, cheering, &gt;&gt; They were standing up, cheering, &gt;&gt; They were standing up, cheering, applauding, yelling. The arena was sold applauding, yelling. The arena was sold applauding, yelling. The arena was sold out. They've sold out every single game out. They've sold out every single game out. They've sold out every single game they've ever played. It's really they've ever played. It's really they've ever played. It's really awesome. If you're in San Francisco, go awesome. If you're in San Francisco, go awesome. If you're in San Francisco, go to a game. to a game. to a game. &gt;&gt; All right, off to come down. Well, with &gt;&gt; All right, off to come down. Well, with &gt;&gt; All right, off to come down. Well, with that, listeners, we have some thank yous that, listeners, we have some thank yous that, listeners, we have some thank yous for everyone who helped us with this for everyone who helped us with this for everyone who helped us with this episode. First to our partners, Sierra. episode. First to our partners, Sierra. episode. First to our partners, Sierra. Sierra helps the great companies of the Sierra helps the great companies of the Sierra helps the great companies of the world build better, more human customer world build better, more human customer world build better, more human customer experiences. Sierra.aiacquired experiences. Sierra.aiacquired experiences. Sierra.aiacquired to work OS. Start selling to enterprise to work OS. Start selling to enterprise to work OS. Start selling to enterprise customers with just a few lines of code customers with just a few lines of code customers with just a few lines of code and build authentication in minutes and build authentication in minutes and build authentication in minutes instead of months. That's works.com instead of months. That's works.com instead of months. That's works.com to Sentry application monitoring to Sentry application monitoring to Sentry application monitoring software considered not bad by millions software considered not bad by millions software considered not bad by millions of developers. That's of developers. That's of developers. That's centry.io/acquired. centry.io/acquired. centry.io/acquired. And also, Sentry is our partner for the And also, Sentry is our partner for the And also, Sentry is our partner for the annual Acquired meetup this year annual Acquired meetup this year annual Acquired meetup this year happening on September 17th. More info happening on September 17th. More info happening on September 17th. More info at acquired.fm/meup. at acquired.fm/meup. at acquired.fm/meup. And to Anthropic, Claude is a truly And to Anthropic, Claude is a truly And to Anthropic, Claude is a truly incredible AI product that thinks with incredible AI product that thinks with incredible AI product that thinks with you, just like it thought with me in you, just like it thought with me in you, just like it thought with me in preparing for this episode, preparing for this episode, preparing for this episode, claude.ai/acquired. claude.ai/acquired. claude.ai/acquired. You can click the link in the show notes You can click the link in the show notes You can click the link in the show notes to learn more about any of our partners. to learn more about any of our partners. to learn more about any of our partners. And as always, all the sources and books And as always, all the sources and books And as always, all the sources and books and everything for this episode are and everything for this episode are and everything for this episode are linked in the show notes. So, some thank linked in the show notes. So, some thank linked in the show notes. So, some thank yous first as always to Arvin Navaratnam yous first as always to Arvin Navaratnam yous first as always to Arvin Navaratnam at Worldly Partners for his great write at Worldly Partners for his great write at Worldly Partners for his great write up on Disney linked in the show notes. up on Disney linked in the show notes. up on Disney linked in the show notes. Check out worldlypartners.com. Check out worldlypartners.com. Check out worldlypartners.com. Yep. Well, I've got a long list of folks Yep. Well, I've got a long list of folks Yep. Well, I've got a long list of folks to thank for all their time and to thank for all their time and to thank for all their time and conversations helping us prepare for conversations helping us prepare for conversations helping us prepare for this episode. first to Nancy Lee, to Bob this episode. first to Nancy Lee, to Bob this episode. first to Nancy Lee, to Bob Iger, to Josh Dearo, to Pete Doctor, Jim Iger, to Josh Dearo, to Pete Doctor, Jim Iger, to Josh Dearo, to Pete Doctor, Jim Morris, and all the incredible folks who Morris, and all the incredible folks who Morris, and all the incredible folks who hosted us for the day at Pixar, hosted us for the day at Pixar, hosted us for the day at Pixar, including Danielle Fineberg, Katherine including Danielle Fineberg, Katherine including Danielle Fineberg, Katherine Sarafian, and the incredible people who Sarafian, and the incredible people who Sarafian, and the incredible people who run the Pixar Archives. That was an run the Pixar Archives. That was an run the Pixar Archives. That was an experience like none other. experience like none other. experience like none other. &gt;&gt; To Kristen Bell, the voice of Anna in &gt;&gt; To Kristen Bell, the voice of Anna in &gt;&gt; To Kristen Bell, the voice of Anna in Frozen, who helped us think about Disney Frozen, who helped us think about Disney Frozen, who helped us think about Disney animation and Pixar. to our friends animation and Pixar. to our friends animation and Pixar. to our friends Robbie Nandan at A24, Chase Carrey at Robbie Nandan at A24, Chase Carrey at Robbie Nandan at A24, Chase Carrey at Liberty Media and Fox, and to Mitch Liberty Media and Fox, and to Mitch Liberty Media and Fox, and to Mitch Laski at Benchmark, to Robbie Wheelen at Laski at Benchmark, to Robbie Wheelen at Laski at Benchmark, to Robbie Wheelen at the Wall Street Journal, who has a book the Wall Street Journal, who has a book the Wall Street Journal, who has a book on Disney coming out later this year. on Disney coming out later this year. on Disney coming out later this year. Also to Ben Fritz and Emily Nelson at Also to Ben Fritz and Emily Nelson at Also to Ben Fritz and Emily Nelson at the Wall Street Journal, and I know you the Wall Street Journal, and I know you the Wall Street Journal, and I know you have a list, too. have a list, too. have a list, too. &gt;&gt; To Ed Catmill, who needs no &gt;&gt; To Ed Catmill, who needs no &gt;&gt; To Ed Catmill, who needs no introduction. To Jeffrey Katzenberg, introduction. To Jeffrey Katzenberg, introduction. To Jeffrey Katzenberg, same thing. to Bill Block who formerly same thing. to Bill Block who formerly same thing. to Bill Block who formerly led Miramax to Ben Thompson for his led Miramax to Ben Thompson for his led Miramax to Ben Thompson for his exceptional analysis of Disney over the exceptional analysis of Disney over the exceptional analysis of Disney over the last decade that inspired a lot of my last decade that inspired a lot of my last decade that inspired a lot of my thinking. I think I read every strategy thinking. I think I read every strategy thinking. I think I read every strategy piece uh on the company to prepare for piece uh on the company to prepare for piece uh on the company to prepare for this. And lastly to our friend Shawn this. And lastly to our friend Shawn this. And lastly to our friend Shawn Bailey, former executive at Disney and Bailey, former executive at Disney and Bailey, former executive at Disney and led one of the studios there and uh has led one of the studios there and uh has led one of the studios there and uh has helped us with a bunch of episodes uh helped us with a bunch of episodes uh helped us with a bunch of episodes uh but obviously this one was particularly but obviously this one was particularly but obviously this one was particularly close to home. So thank you so much close to home. So thank you so much close to home. So thank you so much Sean. If you like this episode, go check Sean. If you like this episode, go check Sean. If you like this episode, go check out Disney Part One on Walt's Life. Some out Disney Part One on Walt's Life. Some out Disney Part One on Walt's Life. Some other episodes you may like, the NFL, other episodes you may like, the NFL, other episodes you may like, the NFL, Coca-Cola, Vanguard, or if you're Coca-Cola, Vanguard, or if you're Coca-Cola, Vanguard, or if you're willing to dive very deep into the willing to dive very deep into the willing to dive very deep into the acquired back catalog, we've got Pixar, acquired back catalog, we've got Pixar, acquired back catalog, we've got Pixar, Marvel, Lucasfilm, ESPN, Bamch, Marvel, Lucasfilm, ESPN, Bamch, Marvel, Lucasfilm, ESPN, Bamch, uh a Disney Plus episode from 2019. I uh a Disney Plus episode from 2019. I uh a Disney Plus episode from 2019. I may be forgetting some, but the there's may be forgetting some, but the there's may be forgetting some, but the there's there's plenty of Disney sprinkled there's plenty of Disney sprinkled there's plenty of Disney sprinkled around in the back catalog. Yep. You can around in the back catalog. Yep. You can around in the back catalog. Yep. You can click the link in the show notes to get click the link in the show notes to get click the link in the show notes to get access to the companion PDF with access to the companion PDF with access to the companion PDF with visuals, charts, tables, and key visuals, charts, tables, and key visuals, charts, tables, and key illustrations from this episode. You can illustrations from this episode. You can illustrations from this episode. You can join the email list at acquire.fm/e join the email list at acquire.fm/e join the email list at acquire.fm/e to get access to all the photos that we to get access to all the photos that we to get access to all the photos that we talked about and to uh learn a hint at talked about and to uh learn a hint at talked about and to uh learn a hint at what next [music] episode will be. what next [music] episode will be. what next [music] episode will be. That's acquire.fm/e. That's acquire.fm/e. That's acquire.fm/e. Join the Slack at acquired.fm/slack. Join the Slack at acquired.fm/slack. Join the Slack at acquired.fm/slack. And with that, listeners, we'll see you And with that, listeners, we'll see you And with that, listeners, we'll see you next time. next time. next time. &gt;&gt; We'll see you next time. &gt;&gt; We'll see you next time. &gt;&gt; We'll see you next time. &gt;&gt; Who got the truth? &gt;&gt; Who got the truth? &gt;&gt; Who got the truth? Is it you? Is it you? Is [music] it you? Is it you? Is it you? Is [music] it you? Is it you? Is it you? Is [music] it you? Who got the truth now? Huh?