In less than 2 years, Disney+ notched 104m subscribers and is prob worth $100B+ as a standalone entity.
How did Disney build a Netflix competitor so fast? By acquiring a tech firm spun out from MLB (yes, Major League Baseball) for $2.6B.
Here's the story 🧵
1/ It starts in 2000: the height of Dotcom.
MLB Commissioner Bud Selig wants to consolidate digital rights and create websites for the league's 30 teams.
To make sure the project is "fair" to every team, he creates an independent arm: MLB Baseball Advanced Media (BAM).
2/ To fund BAM, Selig asks for a $4m commitment ($1m per year for 4 years) across all 30 teams = $120m.
The first big project -- MLB .com -- is outsourced to a consulting firm. It's a complete disaster.
Lesson learnt: BAM will now create everything in-house.
3/ In 2001, Japanese sensation Ichiro Suzuki (the OG Ohtani) joins the Seattle Mariners.
BAM creates an audio streaming product so that Japanese fans can listen to games lives.
They spend millions on the product but it totally flops...getting less than 1k subscribers.
4/ With these failures, BAM looks doomed.
Running low on cash, the unit catches a break: MLB gives BAM ticketing rights.
BAM then tells TicketMaster "pay up or no baseball". The ticket giant ends up giving BAM $10m, which it uses on its next bet: streaming video.
5/ On August 26th, 2002, the MLB streams its first ever game: New York Yankees vs. Texas Rangers.
This is 3 years before YouTube is launched.
30k people watch at a pathetic speed of 280 kilobits per second (one BAM exec calls is like "watching a flip book").
6/ Even so, fans LOVE it.
For the 2003 season -- 4 years before Netflix streams -- MLB TV debuts and 100k fans pay $80 for access to live stream games.
BAM is now stable and only takes $77m (of the $120m commitment) from team owners before paying a dividend.
7/ With a cash cow in place, BAM starts innovating.
It figures out how to handle live audiences at scale, video quality and key issues that every streaming service will eventually face:
8/ By mid-2010s, BAM is the fastest and most cost-effective streaming provider.
BAM builds for the WWE ('14), NHL ('15), PGA ('15), Playstation ('15) and HBO Now ('15).
HBO thought it would cost $900m over 3yrs (BAM did it for $50m in 3.5 months).
9/ To reach its full potential, MLB spins out BAM as "BAM Tech" in 2015 (sales = $900m, employees = 800+).
Enter Disney: the media conglomerate knows streaming is the future and needs expertise.
In August 2016, it buys 1/3rd of BAM for $1B with the option to buy more.
10/ In August 2017, Disney drops another $1.6B ($2.6B total) to own 75% of BAM Tech.
It then announces it will launch streaming for: 1) ESPN (sports network); and 2) its outrageous IP catalogue (Marvel, Star Wars, Pixar, Classics).
BAM Tech becomes Disney Streaming Services.
11/ At first, many are critical of the Disney deal.
Former CBS head Les Moonves says "We didn’t buy BAM Tech for a zillion dollars. We [built streaming] internally."
As it turns out, timing is everything: Disney+ launches in November 2019, months before a global pandemic.
12/ With the stay-at-home orders in place, Disney+ is among the big COVID media winners.
By March 2021 (1.5 years from launch), Disney's streaming service reaches 100m subs.
A *much* faster pace than Netflix or AMZN Prime, all powered by the artist formerly known as BAM Tech.
13/ Today, Disney+ has ~104m subs.
Of course, you can't actually *separate* Disney+ from its parent. But using the same "market cap-per-sub" ratio as Netflix gives Disney+ a standalone value of $119B.
While that is ~35% of Disney's total value...
14/ ...it's not an outrageous value guessimate.
Consider this: $DIS is up 55% of the past year, from $212B to $330B. That's a $118B market cap gain even as its parks, cruise and theatre businesses have been mostly shuttered.
15/ And lets not forget that -- last fall -- Disney frickin' reorganized the entire company around its direct-to-consumer streaming business.
16/ The latest data point.
Disney released the Marvel film "Black Widow" over the weekend. It had the largest COVID-era box office domestic opening in the US: $80m.
The film also came streamed on Disney+...where it pulled in nearly as much money: $60m.
Thank you BAM Tech.
17/ If you enjoyed that, follow @TrungTPhan for other business breakdowns and some really dumb memes:
◻️ Between 2009-19, Disney spent $80B on content (Marvel, LucasFilms/StarWars, Fox). BAM Tech at a fraction of spend ($2.6B) was the streaming unlock.
◻️ Can BAM Tech be in the same ballpark as FB/Instagram ($1B) and Google/YouTube ($1.6B) for value creation?
20/ If you prefer Disney parks to streaming, check this LOL.
Francis Ford Coppola’s new film “Megalopolis” cost $120m and he self-financed it (including money from selling his winery).
Coppola is a legend of “going all in” and “putting skin in the game”.
The GOAT example is “Apocalypse Now”, his classic 1979 war film with arguably the most insane production story ever.
Let’s rewind to 1975, the year Copolla turned 36: he is on top of Hollywood after directing “The Godfather” (1972) and “The Godfather II” (1974).
What does Coppola choose to do next? Make a film about the Vietnam War. The script was based on Joseph Conrad’s “Heart of Darkness”, the 1889 novel about the horrors of colonialism in the Belgian Congo.
The major studios all said “no” to Coppola’s pitch for three major reasons:
1️⃣ He wanted full creative control
2️⃣ He wanted to own all of the film rights
3️⃣ The Fall of Saigon happened in April 1975 and the American audience wasn’t exactly asking for a Vietnam War film (the studios wanted Coppola to make another Mafia flick)
Coppola was undeterred and made a huge bet.
“The Godfather II” cost $14m and the director estimated that “Apocalypse Now” would be the same budget.
He put up $7m (mostly from those sweet Godfather checks) and raised another $7m from United Artists (which bought domestic distribution rights for ~7 years).
But the project was a disaster from the start.
Filming started in The Philippines in March 1976 and was supposed to last 3-4 months…it would take 16 months:
▫️Harvey Keitel was the initial lead but Coppola fired him after one week.
▫️Martin Sheen (Captain Willard) took the lead role but drank so much on set that he gave himself a stress-induced heart attack and almost died.
▫️Dennis Hopper was doing 3g of coke and 20+ drinks a day while on set (him and Marlon Brandon also hated each other).
▫️A typhoon destroyed 80% of the set and delayed filming for 2-3 months.
▫️Actual dead bodies — stolen from a local grave — were used on set and the Filipino government and its strongman leader Ferdinand Marcos threatened to shut down production after finding out.
▫️Marlon Brando (Col. Kurtz) demanded a huge fee ($3m+ for 3 weeks of work and 10% of the film’s gross). He then showed up late, asked for rewrites, declined to read Conrad’s book and was so overweight that the costumes wouldn’t fit (to obscure his heft, Copolla filmed Brando in the shadows and had him wear oversized dark clothing).
The budget ballooned to over $30m.
To maintain creative control and maintain all the film rights, Coppola mortgaged his home and borrowed money against his ownership in The Godfather.
After the success of “Star Wars” (1977), Coppola even asked his friend and business partner George Lucas — who was originally tapped to direct Apocalypse — for some funds.
I repeat: Coppola went ALL THE WAY IN and had SKIN IN THE GAME.
His wife Eleanor took recorded video of all the insanity and the footage was turned into a 1991 documentary (“Hearts of Darkness: A Filmmaker's Apocalypse”).
The total cost for the film — including marketing spend — reached $45m.
Against all odds, Coppola finished the project and the film was released in August 1979. It grossed $105m and Coppola would make a fortune on future DVD, Home Video and other ancillary revenue streams (below is a trailer for a re-mastered cut from 2019).
During the Cannes Festival in May 1979, Coppola famously said of the film: “The way we made it was very much like the way the Americans were in Vietnam. We were in the jungle, there were too many of us, we had access to too much money, too much equipment, and little by little, we went insane.”
Coppola also said at Cannes that “My movie is not *about* Vietnam. My movie *is* Vietnam”.
It’s def one of the best films ever but that is … a stretch of a comparison.
If you want more on Apocalypse Now, I went on Jim O'Shaughnessy’s “Infinite Loops” podcast with Rob Henderson to talk about the making and psychology of the film. open.spotify.com/episode/38OYIn…
When Iron Man came out in 2008, Robert Downey Jr. was *not* a marquee star.
He was rebuilding his career and paid a below market rate of $500k.
But the deal terms set him up for one of the great acting comebacks ever (while earnings $450m+ as Tony Stark).
Here’s the story 🧵
The Marvel Cinematic Universe (MCU) we know today was a long shot in the early 2000s.
Marvel was a public co. coming off bankruptcy in 1996 and had sold rights to its best IP (Spiderman, X-Men, Fantastic 4)
From 2000-07, films based on the IP minted cash but Marvel made little:
In the early-90s, Downey Jr. was one of the brightest young stars in Hollywood, receiving a Best Actor nomination for "Charlie Chaplin" in 1992 (@ 27yrs old).
In the 2nd half of the decade, though, he dealt with drug addiction, arrests and jail stints before going clean in 2003.
Masayoshi Son does the craziest investment swings:
▫️In mid-90s: invested $1.7B into 100+ internet firms (including a ~30% stake in Yahoo! for $100m)
▫️In 2000: was worth $78B at peak Dotcom and was the richest person in the world for 3 days (ahead of Gates)
▫️The bubble burst and he lost 99% of wealth
▫️In 2000, puts $20m into Alibaba for a 34% stake (sold out almost entirely by 2023 and made ~$72B)
▫️Lost $14B on WeWork
▫️Once owned ~5% of Nvidia but sold it all for $3.6B in 2019 (that stake would now be worth $90B)
▫️In 2016, Softbank bought Arm Holdings for $32B (still owns 90% and the stake is $114B, a gain of $82B)
Based on his ownership in Softbank and other investment vehicles, his personal wealth is currently ~$15B.
Nearly 100% of intercontinental internet traffic goes through submarine cables.
It is a robust system with many redundancies.
There are 500+ subsea cables and a fleet of 60 repair shops on stand-by but Big Tech isn’t taking chances:
▫️GOOGLE invested in 25 cables (and owns 12 outright). Per The Economist, the search giant started its sea cable program in 2008.
◽META invested in 15 cables (owns 1 outright).
◽MICROSOFT partly owns 4 cable.
One of the 500+ cable gets cut every 3 days (most common reasons are shark bites, anchor drops and deep-sea fish trawlers).
Remote areas are still very at risk.
Example: In 2022, a volcano erupted near Tonga and a mudslide took out the only cable nearby. Starlink provided some free internet coverage while it took 5 weeks for the cable to be fixed (5 weeks!!).
Robert Metcalfe (inventor, ethernet cable) famously predicted internet would flame out. He thought cables couldn’t handle traffic and not enough investment in them.