WHEN: Today, Wednesday, November 13
WHERE: CNBC Delivering Alpha conference
Following is the unofficial transcript of a CNBC interview with Artists Equity Co-Founder & CEO Ben Affleck and RedBird Capital Partners Founder, Managing Partner & CIO Gerry Cardinale and CNBC’s David Faber live during the CNBC Delivering Alpha conference today, Wednesday, November 13th.
Mandatory credit: CNBC Delivering Alpha conference.
Realtime Transcription by www.RealtimeTranscription.com.
DAVID FABER: Hi, everybody. We’re between you and some drinks, but I hope you’ll enjoy what’s coming next. Last spring, I had the opportunity to have dinner with Gerry and with Ben, as well, and I — you know, obviously like so many of you knew Ben Affleck as an accomplished actor, writer, director. What I did not really appreciate until we sat down and started talking was what a businessman he is as well and sort of how advanced his thinking is in terms of what, for lack of a better term, Hollywood is going to look like in the current and future period. He and Gerry, who runs RedBird, if you don’t know, 10 billion plus under management, obviously in the midst, as I’m sure the audience is well aware of, completing the acquisition of Paramount. Gerry is probably not going to be able to add too much on that given the lawyers have been at him on it. Nonetheless, I’m very much excited to sort of talk to both of them about Artists Equity, RedBird and investor. It’s an independent artist-led studio, it is co-founded by Ben Affleck and Matt Damon and Gerry Cardinale. Without any further introduction, let me bring out Ben Affleck and Gerry Cardinale. How is the beard working out for you?
BEN AFFLECK: Very well, thank you. Thanks for sticking around. I’m sorry I’m late, I came from shooting. I’m playing an undercover cop, which you can see is very grizzled and tough, so I have this maddening, irritating beard.
DAVID FABER: Well, it looks pretty good.
BEN AFFLECK: Thank you, thank you very much.
DAVID FABER: Not bad at all. Gerry, I’m going to start with you. As we both know, Ben can talk a lot, so I want to start with you and we’ll see how it goes from there. Just tell us what you’re doing as an investor and partner in Artists Equity and how it does differ from the typical model in terms of the approach investing in, so to speak, film entertainment.
GERRY CARDINALE: Look, I’ve been investing in intellectual property, really, for 30 years. Today, it’s very difficult to underwrite how to do that with any kind of transparency and specificity because content is being technologically disintermediated. Now, I look at that as a good thing because if you traffic in the best intellectual property, which I’ve been fortunate to do because I’ve been doing it for a long time, then that kind of disintermediation is more friend than foe. Then you start to get to layers of answering this question, which is how could Ben Affleck and me come together? And the answer is, that for the first time in my career, I actually think content has the possibility of being king.
DAVID FABER: You didn’t believe some of Redstone all those years ago?
GERRY CARDINALE: Well, Redstone — Paul Allen, you know, in the late ’90s, we were rolling up cable systems. And what everybody thought was that Paul wanted to get into distribution. He actually didn’t. He wanted to create walled gardens of content. I think he was one of the first people to talk about content being king, but he was way ahead of his time. Today, content has the ability to be king, and what is really interesting is that individuals actually can be intellectual property in and of themselves. So Artists Equity is really an evolution in how a scaled professional investor like myself can invest around streaming and the dislocation that sort of Netflix has unleashed. There is a supply-demand imbalance in Hollywood. There is a tremendous desire for original content across all different forms of distribution. The first wave of streaming was about volume. The second wave that we’re in now is about quality. What people are looking for are commercially successful high-quality stuff. And I have to say in my 30 years of trafficking in this area, I couldn’t imagine two better guys to do that with than Ben and Matt. And as you said, David, in your intro, what’s interesting — not to talk about Ben like he’s not here, but what’s interesting —
BEN AFFLECK: You’re not the first one, but go ahead.
GERRY CARDINALE: What is interesting is rarely in my career have I met talent that can give me a run for my money on the business side of things. Great thing about this guy, left-brain, right-brain, he can go in there and win an Oscar and at the same time we’re in a room white boarding on building a business together, and that is just so unique. The final thing I’ll say, David, is as I’m trying to navigate this technological disintermediation and turn it into a win, there really isn’t any better guy then — if you can find talent like this, there’s no better guy for a guy like me in deploying capital.
DAVID FABER: Ben, do you want to sort of explain what the approach is in producing movies versus kind of the old system, so to speak, and how it’s going to work and whether you think it’s working?
BEN AFFLECK: Well, first of all, I will say thank you. That was very embarrassing and a little bit humbling and probably overstating quite a bit, but I appreciate it, it’s very nice of you to say. I guess sort of broadly speaking in terms of our approach here, it sort of mirrors what I — I met Gerry a long time ago, I’ve known him for a long time. When I went back to him and approached him with this, I found that we were of like minds, really principally in the sense that we both believe that if you align incentives from the beginning, you’re going to have very few problems. In fact, it’s the most fluid and the most effective way to work. So that’s how our company is structured, that doesn’t require inorganic acts, that doesn’t require friction points, that doesn’t involve issues that can really bedevil and paralyze companies where you have people incented to do different things. In Hollywood, there is an awful lot of that. Historically, for a lot of reasons which I won’t bore you with, where we’ve sort of arrived at now in Hollywood is where you have the people oftentimes working on and making the things that ultimately are going to either be valuable or not to the consumer have very different effectives. They have different profit motives, they have different goals that oftentimes they are in complete contrast to the investor. And there is a tension dynamic that’s setup where one person is pulling for one thing and the other is pushing on them, and then because sort of the lesson has been that there is no real profit participation — and even in share price, I can’t tell you how many times people say my stock price is worthless, my options are garbage because Hollywood has been treated as, because they are basically, value stocks. Right? People don’t act like owners, frankly, at all. There is a very short-term mentality, there’s kind of a cash grab mentality which is exacerbated by the sense that, hey, this is fleeting and the phone can stop ringing, so I’m going to get what I need to get now. And any promises of participation down the road or future benefits are hollow and won’t come true. There’s many things that prove to be the case —
DAVID FABER: But there’s a willingness on the part of performers to still step up because even though you know that your incentives aren’t aligned at least —
BEN AFFLECK: There isn’t really. What happens now is what’s my fee. And as long as I’m going to get my fee and these are my weeks, I’m going to come in and do the movie. I hope it’s good, I’m going to do my best, but when it comes time for you to sell the product that I’ve helped you create, I have no incentive to participate. Because for one thing, like what’s the appeal? I’m going to go on a talk show, maybe I get canceled. I say the wrong thing and I’ve got to — aside from this event only —
[ LAUGHTER ]
— going out and talking all the time is not always enormously pleasant or rewarding in public. So that people don’t want to go on an endless carousel of programs, especially given that it makes no fundamental difference to them. Now that’s a real problem. If you look at the way that what Gerry believes in, in terms of IP and in terms of people with cultural footprints in one area or another, whether it’s LeBron, whether it’s Matt, all this array of IP that we now sort of view the world not only in terms of like intellectual property, but human beings — and this has to do with social media and other factors — come to sort of represent things. Where 20 years ago someone would ask you what kind of person are you, and you might say, ah, elegant or stylish, and now you’ll say Beyonce or Jay-Z — you know, you have these — the answers are actually anthropomorphized as people, right? That’s the extent to which this has been penetrated. And it’s the extent to which talent, people, creators are meaningful and necessary to the process of taking your investment and creating return. So you’ve got to — what we’ve sought to do is realign those incentives and say, listen, we’re going to sit you effectively side by side with us, and we’re going to give you more latitude and more breadth of control, because my belief is that creatively you hire somebody who’s excellent, you want to avail yourselves of their instincts. They’re excellent and they’re successful for a reason. Not so they can sit here, I can tell them what to do. So that they can be empowered to do their best, and then you want to incent them so that they care about promoting the movie, so that they care about working on the moving. So we’ve sought to create those kinds of incentives, many of which I really saw for the first time in practice in my deal with Gerry.
DAVID FABER: You have to be a lot more transparent, Ben? Sorry. Do you have to share a lot more than is typically the case, for example?
BEN AFFLECK: I think if you have stuff to hide, you have a problem.
GERRY CARDINALE: You don’t have to share a lot more, Ben. It’s all performance-based. So if performance improves, you share along with it.
BEN AFFLECK: It’s clear right up front. Here’s the deal. For example, this movie that we’re doing now. For the first time we’ve obtained from Netflix, like, very concrete, performance-based bonuses, which haven’t existed in the past at all. And they were a lot of work to codify and establish. And I wanted to distill them into a way that people could understand it. So they go, okay, if this movie does as well as Lift with Kevin Smith — or if our movie does as well as Triple Frontier with Ben Affleck on Netflix — towering success — then I know there are escalating traunches of bonus money. Now what we’ve done with that money is that we’ve used that to manage downward our initial investment, both with cast and crew. So we say here is what you’re going to get up front is not your full fee. But in success — and this is where you have to deliver on that — in modest success, you’re going to capture what you consider to be your rate. But in real success, you’re going to make a hell of a lot more. And you’ve got to believe there’s something real out there to motivate people to do it, and then they’ll do it. And you don’t have to manage them and you don’t have to worry about it because you’re aligned. And we’ve done the same with the crew. And that goes for every production assistant, gaffer, you know, construction person, foreman, are bonused relative to their salaries so that they know, look, there’s another $10,000 in it for me if it does a little bit better. So they care.
DAVID FABER: So what are you seeing in terms of — I mean, you’ve got some early returns. What’s it looking like?
GERRY CARDINALE: Look, we’re two years in. We’ve presold north of 700 million dollars in revenues in seven projects. We’re meaningfully cash flow positive. We have built a company in two years. Now what’s interesting, if you look at it unemotionally from a guy like me, in my perspective, you know, Ben and Matt are at a very interesting point in the Hollywood ecosystem. Because all the guys that came ahead of them want to work with them and all the guys that are coming up. You know, the Hemsworths, the Coopers, and Jennifer Lawrence, they want to work with them. So Ben and Matt are actually a living portal for the best content in Hollywood. And there is a demand in this supply-demand imbalance for great original content that’s commercially successful. Now what Ben has introduced into this equation, which I find fascinating but it’s also a comfort zone for me as a guy who sits on top of investment committees, is, you know, he basically not only has access to the best content, but then he will go into the marketplace with the distributors and say tell me what the market clearing price is for this content and we will decide, like investment committee, whether we want to make it. And what’s great is that Ben is not only the guy that wins Oscars, but Ben knows the economics of making movies, and he knows what he can make it for. So implicit in this entire construct is I have a guy I’m partnered with here who knows the economic trajectory of monetizing content.
DAVID FABER: I’m trying to understand. Who are you having that conversation with and —
BEN AFFLECK: I had that conversation with John Krasinski last night, where I said, “This is why you should direct the movie, John.” And he said, “I don’t understand. How does this work? Straight what’s in it for me?” I said, “Well, here’s what’s in it for you: broader creative latitude and you’re betting on the movie. Here’s what’s in it for you at this tier of success, here’s what’s in it for you at that tier, here’s what it looks like over this waterfall if you’re going to do it theatrically in this way, here’s what it looks like in the streaming world.” Those are different economics, and yes, they’re going to be a function of your success. It’s not for everybody. It’s for people who are willing to bet effectively on themselves. But what does it mean to understand the economics of Hollywood? Like, I’ve been doing this for 30 years. That’s one of the things I spent the last ten years before I started this business, sort of walking around, I remember talking to David Fincher when we were doing Gone Girl, saying, “David, do you ever not just stand on the set and say, ‘What the fuck are all these people doing here?'” Like, truly, honest to God, there’s about ten of us making this movie here. You know what I mean? And I always viewed and understood, because of the way Matt and I came up, I understood the relationship between the level of investment and degree of risk someone was willing to take. I’m sure it sounds like very obvious to you, but it’s not necessarily to some people, particularly in the creative space. Where you say, okay, we want to make Good Will Hunting, it has to be inexpensive. And we looked around and they are making Clerks for $25,000. We can do that. I heard they made Reservoir Dogs for a million dollars because they got Harvey Keitel. So, okay, this has to be — we built and engineered that movie like a business, where we said, okay, the cost has to be low, right? So it’s going to be a movie with people in rooms talking to one another that we can shoot pretty expeditiously. We’ll shoot the exteriors in Boston and the interiors are in Toronto where we can get a tax rebate. And we need a movie star. And if we’re going to get a movie star, we have to make the term short, we have to make the economics very good. So we spent $12 million to make that movie. And robin got 5 million and 15 gross points in the movie. So he got his 5 million bucks for his two and a half weeks, and we all said, well, the movie star is going to want all the good speeches and to look smarter and cooler than everybody else. So we’ve got to set him up with that. Means you have to incent the talent. It’s the same approach we take now whether it’s in the advertising business or — like, understanding what’s going to attract talent and then articulating to them, like, yeah you’ve got to invest yourself in this, but if you win, there’s a real win out there for you that’s economically meaningful. And that’s sort of the equity in Artists Equity. To me it’s there for fairness. You’ve got to believe there’s a fundamental fairness at play, and there hasn’t been in Hollywood.
DAVID FABER: When does the conversation with the distributor take place, though? Is that ongoing? Is that —
BEN AFFLECK: It happens on a project-by-project basis.
GERRY CARDINALE: But what’s interesting is Ben will have the conversation directly, right? And it’s a very interesting thing to watch when Ben Affleck calls, you know —
BEN AFFLECK: Don’t embarrass me.
GERRY CARDINALE: — one of the streamers directly and says, you know, this is what I want to do and he negotiates the deal. Now, we’re not looking to just intermediate the agent ecosystem in Hollywood, but what are we talking about here? You know, what I’ve done in my career is I’ve played in the agent world and converted it into principal opportunities. And I am absolutely convinced, because I’ve been doing it for so long, that that’s what is coming —
DAVID FABER: So when you say you don’t want to just intermediate the agent world, you really mean you do want to?
BEN AFFLECK: No, because the agents who represent a lot of the actors in our movies, still commission them, right? So the agents commission all those actors. There aren’t that many buyers. There aren’t that many studios. And one of the things that I saw, was that it used to be, you know, before Gulf and Western bought Paramount, I mean, the original studios had Harry and Jack Warner. These people, they were owners, operators, founders. They cared about stories, and that’s what they built, and then they sold them to other companies and sold them to other companies, and there became a greater distance between the people at the heart of it, sort of caring about telling the stories and the people who viewed them as valuable businesses in which to invest. What that means now is particularly in the case of public companies, you have a different kind of management than you do with owner managers. There is a management class. They come in and they have a more short-term agenda. There are different incentives at play. I’m sure this audience I don’t need to explain.
DAVID FABER: You’re sitting next to a guy who’s going to be owning one of the most storied studios in Hollywood pretty soon.
BEN AFFLECK: Right. And by the way, and that’s what I think is great about that story. Two things. One, David Ellison, right, and Gerry running this studio own it. It’s not management class. It’s not who are we going to bring in. They’re negotiate their package, and they’re going to look at it in a very different way than somebody who’s invested as an owner. How many public companies are there run by the owners? And Hollywood needs more robust entities like Paramount. It’s bad for the business when competition goes away, when it turns into oligopolies. It doesn’t function as well. And there’s a hell of a lot of money to be made in the linear studio space. I’d love to be Gerry and David Ellison. I’d love to go into that ecosystem and say, yeah, there’s going to be some difficulty, there’s going to be some hard choices, but there’s tremendous opportunity and a lot of money to be made.
DAVID FABER: Why do you think that?
BEN AFFLECK: Because I know —
DAVID FABER: When you say the linear, are you talking about theatrical release of movies?
BEN AFFLECK: By legacy studios. Yes.
GERRY CARDINALE: Look at AI. AI, everyone’s scared of AI. AI is a tool in the tool box that will rejuvenate intellectual property. You will make more intellectual property, more original content for half the cost. Now, there’ll be dislocations along the way, but that is a positive. And so the key is how do you keep rejuvenating the intellectual property, right? That’s what you’ve got to do, and you’ve got to start with the best intellectual property. All we’re doing in this conversation and what we’ve articulated is we’re starting to put the talent at the table. Now, by the way, the Saudis put the talent at the table in golf, right? That’s the “so what” of LIV, right? And so we put the talent at the table and we created one team with the NFL PA and Major League Baseball PA. So this is not necessarily a new phenomena —
BEN AFFLECK: This isn’t so radical. I’m having very fluid conversations with other directors.
GERRY CARDINALE: But what does it require? It requires — you know, I remember when we created YES with Steinbrenner. The genius of Steinbrenner, 20-something years ago, was that he took less of a media rights fee. He was wearing two hats. He was wearing his Yankee hat and he was wearing his YES hat. And we were creating YES. He took less of a media rights fee to enable the equity appreciation in the network that hadn’t even been created yet. That was genius. Same thing here. You’ve to have actors that are willing talent. Not just the actors but all the way through the production thing.
DAVID FABER: Although, Gerry, to be fair, it’s somewhat unique. I mean, Ben Affleck and Matt Damon.
GERRY CARDINALE: Yes.
DAVID FABER: You can’t recreate that at all.
GERRY CARDINALE: No.
BEN AFFLECK: You can recreate these models. You can recreate these structures. You can create the fact that you can save 15 percent on any movie that you’re making out there right now because the truth is Hollywood used to sit on top of a very frothy space. There was five studios and three broadcast networks and almost anything you put out there 10 million people were going to watch. And there was three movies that came out every weekend. And you could buy a week, and it was a great fucking business. And it started to build up a kind of a culture of like, you know, the executive class started. We’re going to have a place in Cabo. And I think you should get 3 and a half a year, you should get 4. And that culture is in a fastidial — way, still present a little bit. That’s the other part that needs to be disintermediated. It can’t just be labor and the people producing it. And that’s going to be slightly painful.
But let me tell you a little secret. It doesn’t take 30 people to decide which ten movies to make. It just doesn’t. Committees don’t function that well. You’ve got to be able to embrace the nature of risk, make really smart bets, not spend too much money on what you’re making, and understand what the market is for the product that you’re creating and not seek to differentiate commercial from quality. Those two things should be synonymous. These things are pretty obvious.
DAVID FABER: So you think it’s replicable beyond just the fact that you and Matt Damon —
BEN AFFLECK: Absolutely.
DAVID FABER: — happen to occupy a certain level in Hollywood, so to speak, that is not populated by too many people?
GERRY CARDINALE: He’s doing it now for other like-minded actors. All he’s teaching — and not everyone will necessarily be oriented this way, but he’s teaching them to have a stake in the game. The agent team mentality is you don’t have a stake in the game. You get your fee, regardless of how you perform. I don’t know about you guys, but what other business is like that? Right? I mean Hollywood thinks they get a free pass on that. And now with the challenges that it’s facing, that’s —
BEN AFFLECK: Happy Days have to be over. In order to survive and thrive, which Hollywood can and should and is vital to this country. It’s a massive export of ours, it’s a part of our soft power, it’s a part of our global hegemony. It’s part of who we are as a culture, it’s one of a things that unites us and is beautiful and is both incredibly profitable, creates a lot of jobs and is a kind of an inspiring, extraordinary — not to go on and on about Hollywood, but we’ve got to apply the same efficiencies. That’s just the truth. And we have to have the same kind of intelligence in management. You look at companies spending $350 million a year and over to make ten movies, I mean, I just don’t understand that. I don’t understand — you’re going to miss. You just have to make smarter bets, and you have to understand that it’s a function of risk, so you have to ask the people who are participating to take that risk with you. And the very best people and the most talented people and the people that you want out there working on that for you, for your investors, are ones who are invested themselves. And if you can create that — and that may mean that on the upside, which is why we chose Air as the first movie. For those of you who haven’t seen it, it’s about Michael Jordan’s deal with Nike, and Michael Jordan did very well on that deal, and the point is he damn well should have. It was the best fucking thing that ever happened to Nike. And great. And short-term greed around — people will come back to me and go, Guess what? I capped their bonus at… I’m like, Why would you do that? Like that’s the best fucking problem you have in the world. The movie makes a billion dollars and you’re telling me how great it is that you capped them at 200,000? Go change it. You know, we’re trying to work with people. We’re trying to create actual fair. You think you’re going to make 2 billion dollars and come back and go, How could they get 650?
That’s like, you have got to have a broader take on this and understand these are your partners. And if they’re willing to make that investment, they’re going to bring your costs down and they’re going to — look at what Hugh and Ryan did promoting Wolverine and Deadpool. The fact that they were invested in it and they cared about it and they were generating advertising materials and they were doing more than they needed to and they clearly loved it and loved being there both for the process and afterward cannot be separated from the enormous success of that movie. People want to go out and see some good movies. I know, I have kids, I can’t be the only parent that kids want to avoid.
DAVID FABER: The theatrical release is still a thing.
BEN AFFLECK: Yes.
DAVID FABER: It’s not just about watching it at home on a streaming service.
BEN AFFLECK: No. It’s both. You just have to understand where —
DAVID FABER: Do you think the streamers still have an appetite for buying movies? You know, it’s not clear and I know they don’t share a lot that they moved the needle in terms of subscribers. Do you still think the demand will be there for —
BEN AFFLECK: Definitely there. In some cases — for example, on Amazon, you got MGM and their service. They’re making roughly the same amount if they’re looking to do theatrical and on the service. For Netflix, they have a very robust demand for movies. They are — their metrics are a little bit different, but that’s — Hollywood used to have uniform metrics. Right? Universal, Disney, Warner Brothers, the only thing different is that Warner was doing 17 percent, Disney was doing 15. Now, Apple has an entirely different economy and entirely different goals. Amazon has an entirely different company, and Netflix. So you have to be mindful of what constitutes success for your partner in regards to each property. That’s part of how the properties are created, that’s part of how they’re sold. What we deliver is like, for example, in this new dawning post-strike era, there is about a 20, 25 percent reduction in spending. Right? They think we spent too much, we overspend — Netflix is not losing money, but some people have lost money on streaming, so they want to bring it back. Great. So then we said, okay, let’s negotiate for incentives.
Artists Equity says here is the amount you’re going to pay for this movie, and you’ll never pay a dime more, never go over. We carry all of that risk because I know how to manage that risk because I know that it’s really a function of who you are working with. And I know that a lot of times in this business it’s gotten a little bit — it needs disintermediation, and we’ve been very successful doing that. And we’ve been able to bonus people quite well in the process of disintermediating and lowering costs. So when you do that — if Netflix were able to look at — if I were Spence Neumann, I’ll send a message directly to Spence wherever he is, the CEO of Netflix, I assume that he has to think, well, look, there’s a delta between the number we greenlight our movies at and what we end up spending on the movie because often movies go over, if that’s 8 percent, 5 percent, 3 percent, it doesn’t matter because with us, it’s zero. So we want to incent them to make more and more movies with them. So on the one part, we have to manage that side and just as important, if not more important, they have to be fucking great. And great sometimes means one thing at Netflix and one thing somewhere else, but Netflix is definitely, to my knowledge, invested in movies and will be, not the theatrical experience the same way because they want you to watch it on —
GERRY CARDINALE: I think the punchline, David, is if you’re going to invest in content today, to fulfill this notion that is content finally king, you’re going to have to change the paradigm. This is just one example of that trajectory.
DAVID FABER: I’m still trying to understand the balance of power and how you approach it. Particularly, again, I know you can’t discuss in any detail, but you’re going to be involved in a large media company.
GERRY CARDINALE: Right.
DAVID FABER: How do you think about it in terms of the Amazons, the Netflix, the Apples who have unlimited amounts of —
BEN AFFLECK: Paramount is Paramount. Right? Paramount is thinking about the consumer. Paramount is what are the — I mean, I’m not buying Paramount, I don’t know why I’m answering this question.
GERRY CARDINALE: Well, you’re answering it because I can’t answer it.
BEN AFFLECK: The filibuster —
DAVID FABER: Keep going.
BEN AFFLECK: I know he can’t really talk about it, but the truth is that’s what Paramount has to care about. That’s what Disney has to care about. Paramount has to care about that we make really good movies and not — in my view, and this is certainly not speaking on anyone else’s behalf, there is an instinct particularly because, hey, look, let’s look at what works and replicate that, it’s common in the business world because it makes sense. It doesn’t exactly apply. If you only seek to just make this movie work, let’s make a sequel, let’s copy it, the audience gets bored, it starts to be repetitive and you run the appetite. If you have no original stuff, you have no new franchise, you have no new things to go to. So they’ll need to balance that, they’ll need to manage their costs and they’ll need to figure out streaming. There you go, Richard.
DAVID FABER: It’s going to be easy, Gerry. Don’t you worry about it.
GERRY CARDINALE: I think you have to look at everything, and I think you have to be financially accountable. I don’t see the same level of financial rigor and accountability in the entertainment — in this part of the entertainment industry that I see in other industries.
DAVID FABER: Even now? Even after what have been tough times and everything else?
GERRY CARDINALE: It’s a lot of rinse and repeat. It’s kind of practicing Einstein’s definition of insanity. People want to have different outcomes, but they’re not breaking it to go do it. And, you know, Artists Equity is just one example of empowering talent who are financially motivated with the outcome. Most actors, they don’t care about the outcome. They get their fee, right? The agents get their fee. There is a whole ecosystem of unaccountability. In the real world, that’s what the whole capitalistic construct is about, is accountability. For me, it’s an arbitrage that I’ve been practicing in sports and media for 30 years, in some form. It’s the same thing. And Ben — now, the only thing that’s new, which is so interesting to me, is now the talent’s at the table. That genie is never going back in the box.
BEN AFFLECK: And in terms of Paramount, just broadly what I will say is, the labor is feeling the rollback. Talent, if you look at like news, revenue for actors, writers, directors, is feeling the rollback. Typically the last group to feel that is the executive class. But that has to come too, it just does, if you want fairness. You can’t ask other people —
DAVID FABER: Come on, Ben, you’re going too far.
BEN AFFLECK: Don’t stone me, but that’s — where things were great and you were making much money and nobody asked any questions, great. It’s a little harder to do this job now. You actually have to complete a little bit more, the consumer has more options. They don’t just have three networks, they don’t just have a few studios. You know, YouTube is kicking people’s ass. You can watch a lot of things. It’s very diffuse, so you have to work harder and you have to be better. You have to have better managers, you have to be better executers, you have to work with the best talent, and you have to have the most rigor.
DAVID FABER: Given all that, how much capacity do you have to do, whether it’s shows or movies or commercials, even? How much can you actually see Artist Equity undertaking?
BEN AFFLECK: You know, more than we’re doing now. But, listen, part of it is I’m lucky I have good partners, and I’m learning, and one of the things I’ve learned is something that you probably all here know much better than I do, which is a lot of that is a function of hiring like-minded people and skilled people. You’re only as good as the team that you work with and the people at your company. You have to be sure that they understand that philosophy, they understand the defining values of your company, they understand, for example, the models that we’ve created and set up. In so doing, it can scale. But you can’t just have a ravenous appetite to scale, absent everything else. You’ve got to scale mindfully, deliberately, and with a sense of — that can be reasonably achieved. I don’t need to make all the movies. I’m not going to and I shouldn’t. There should be many voices. But I think that this model and this way of working so far has been attractive to people, and so far I’m really proud of what we’ve done, quality and commercially speaking. And I’m grateful for Gerry for giving me the opportunity.
DAVID FABER: As we kind of wrap up here, I do want to come back to AI. Gerry, you mentioned it. Ben, earlier you guys weren’t here. We did a demonstration, my colleague Andrew Sorkin and I. We created ourselves and our voices. How do you see it? I mean, is it a benefit or is it a real threat? Is it possible that a Netflix can say, We’re going to do our own James Bond thing out there with a bunch of actors specifically created for this market or that market?
BEN AFFLECK: A, that’s not possible now. B, will it be possible in the future? Highly unlikely. C, movies will be one of the last things, if everything gets replaced, to be replaced by AI. AI can write you excellent imitative verse, that sounds Elizabethan. It cannot write you Shakespeare. The function of having two actors or three or four actors in a room and the taste to discern and construct that is something that currently entirely eludes AI’s capability, and I think will for a meaningful period of time. What AI is going to do is going to disintermediate the more laborious, less creative and more costly aspects of film making that will allow costs to be brought down, that will lower the barrier to entry, that will allow more voices to be heard, that will make it easier for the people who want to make Good Will Huntings to go out and make it. Look, AI is a craftsman, at best. Craftsmen can learn to make Stickley Furniture by sitting down next to somebody and seeing what their technique is and imitating. That’s how large video models and large language models basically work. Library of vectors of meaning and transformers that interpret it in context, right? But they’re just cross-pollinating things that exist. Nothing new is created.
DAVID FABER: Not yet. Not yet.
BEN AFFLECK: Yeah, not yet, and really in order to do that, look, craftsman is knowing how to work. Art is knowing when to stop. I think knowing when to stop is going to be a very difficult thing for AI to learn because it’s taste. And also lack of consistency, lack of controls, lack of quality. AI, for this world of generative video, is going to do key things more — I wouldn’t like to be in the visual effects business. They are in trouble. Because what costs a lot of money is now going to cost a lot less, and it’s going to hammer that space, and it already is. And maybe it shouldn’t take a thousand people to render something. But it’s not going to replace human beings making films. It may make your background more convincing, it could change the color of your shirt. It can fix mistakes that you’ve made. You might be able to get two seasons of House of the Dragon in a year instead of one. And if that happens, according to macro economics, in cultures where there are basically oligopolies competing, what should happen is with the same demand and the same spend is they should just make more shows. Which — you should have the same spend and now you can just watch more episodes. Eventually AI will allow you to ask for your own episode of Succession, where you can say, I’ll pay $30, and can you make me a 45-minute episode where Kendall gets the company and runs off and has an affair with Stewy? And it will do it. It will be a little janky and a little bit weird, but it will know those actors and it will remix it in effect. It will do that. That’s the value, in my view, long term of AI for consumers, which is eventually my hope for AI is that it’s an additional revenue stream that can replace DVD, which took 15-20 percent out of the economy of film making. And there should be negotiated rights and — say if you want to — people want to make five-minute, 30-second TikTok movies where they look like the Avengers. Great. Just like you used to be able to buy your Ironman costume at the store, you’re going to buy your Ironman pack and you and your buddies are going to look like Ironman and Hawkeye on Twitch. That’s what’s going to really happen. It’s not going to take over and —
DAVID FABER: So you see AI as the creators in a way, instead of —
BEN AFFLECK: At this point, I see it empowering the creators. I see it creating new streams of revenue. I see it potentially forging partnerships between Hollywood and Silicon Valley that haven’t been able to be made historically. There are already laws on the books about you can’t generate copywritten — images. You still can’t. Will there be bad actors? Will there be criminals? Yes, there will. They’re in all these spaces. But it doesn’t — what I know about film making and what I’ve seen working with AI doesn’t make me think, oh my God, we’re finished. It makes me think, oh, this will be cheaper and that will replace green screen, and that actually is pretty good for inserts and stuff like that. Eventually it should take 30 percent off the cost of production. But it should spur more production as a consequence. I worry about AGI. I don’t think you should have untethered artificial intelligence. But in terms of large video models, these are contained and —
DAVID FABER: You’ve clearly been thinking about it a lot.
BEN AFFLECK: Yeah, because when I first saw it, I was like, Fuck! We’re finished!
[ LAUGHTER ]
Then I spent a lot of time looking at it, and I was like, No, no, no. we’ll be all right.
DAVID FABER: As long as we have an Attorney General who applies the laws, which I’m sure we will.
GERRY CARDINALE: Don’t touch that one.
BEN AFFLECK: If I’ve learned anything in this life, Gerry, it’s when to be silent.
[ LAUGHTER ]
DAVID FABER: Well, we’re glad you weren’t. And I think everybody in the audience sort of learned what I did from our dinner sometime back. Guys, I can’t thank you enough for your time.
BEN AFFLECK: Thanks very much.
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