Media Execs Divided on Netflix's 'House of Cards' Model

UPDATED: Discussing the evolution of content during a Soho House panel, Jeffrey Katzenberg, Ari Emanuel, John Landgraf, Michael Lynton and others agree on "golden age" for writers -- and warn of potential threats to cable TV productions.

The changes in content creation and technology sweeping the entertainment world were very much on the minds of a participants at the opening panel Tuesday morning in West Hollywood of a summit on innovation presented by the Founder’s Forum and U.K. Trade & Investment.

“There’s no question today more people than ever are watching movies around the world and that just continues to explode,” said DreamWorks CEO Jeffrey Katzenberg. “The fact is, it is transition and how they watch, at what price points and windowing are in the center of the story right now. It is a moment of unprecedented transition and transformation.”

While in agreement that it is a time of change, William Morris Endeavor co-CEO Ari Emanuel said as a talent agent he also sees it as a time of great opportunity as well because all the new platforms still need high quality products that go beyond what is generated by users.

Emanuel called it a “dynamic time for content." “For creators, it’s the best time of all," he said. "There is going to be a need for more content. There is a renaissance in television as never before and in movies.”

The panel was part of a two day innovation summit held at Soho House designed to bring together leading entertainment, technology and new media experts to discuss new business models. High level people from more than 60 companies in the U.S., U.K and other parts of the world met to discuss next generation distribution and transatlantic trade opportunities.

John Landgraf, president of the FX Network, said he spends at least five hours every week in discussions with various executives at News Corp about “evolution and new business models.”

“I think there’s a myth that we don’t understand those [new media] companies,” said Landgraf. “We think about them all the time. It is just different, however. Amazon and Google operate on low [profit] margins but are based on [high] volume. In Hollywood, we operate based more on margin than volume. If you have the sense we should get religion and just care about volume , you don’t understand the content business.”

Michael Lynton, CEO of Sony Corp. of America and Sony Pictures Entertainment, said one big change is the way people interact with content. “People are getting over the idea of ownership,” says Lynton. “It’s more about access to content. People are breaking the emotional hold of ‘I have to have own it if I consume it.’ Once it shifts, a lot changes and it is happening pretty quickly."

The rapid changes haven't been all bad, though. "For the first time we feel the opportunities outweigh the fears and disadvantages of things we’ve faced over the last ten years," said Universal Music Group CEO Lucian Grainge.

Katzenberg agreed that the new distribution platforms like Amazon and Netflix are changing the way business is done. But he pointed to YouTube as a place where they are “actually creating a new form of content, a very different paradigm in terms of both consumption and what creatively is the driver of it as well as ways in which to curate that together and find a new engagement with consumers. It’s a different type of product."

“It is, to me right now, at the tip of this convergence between what is the best of the south [Hollywood] and the best of the north [Silicon Valley],” added Katzenberg. “I think you’re starting to see something very new, very original budding out of it. There is something great going on there ... Right now, to me, it is the wild, wild west. It’s the place of great opportunity from a creative standpoint.”

Lynton cited the development of the digital video recorder as something that has caused change that could not have been predicted. “The DVR radically altered the landscape of scripted drama,” said Lynton. “Nobody could predict that would happen, that it would create open-ended drama series.”

Emanuel, whose agency helped set up the recent Netflix original drama House of Cards, espoused the growth of binge-watching, noting it has created a “golden age for writers." The big issue in the future will be pricing, he added, pointing out that different platforms – TV, theatrical, digital, mobile – will all have to be priced differently. “That’s going to be a big issue for us and Silicon Valley,” he said.

“Ten years from now, content we create will be available ubiquitously in a very narrow window,” agreed Katzenberg.

What won’t change, Katzenberg said, is the need for great content. “The locomotive for us remains the highest end premium experience.” He also said that he believes that by targeting content for theaters, it will only get better as it moves to smaller screens.

Landgraf said there is a danger from “radical business models that undermine the content business.” He said it remains important to have brands that offer people content that is organized in a way they can understand, which can also be used to market that content in an ever more complicated and diverse marketplace.

He said these branded channels might diminish, but he doesn’t believe they will ever go away because they are needed. He said the danger is what happens with advertising. For instance, as content moves to mobile, he said that at present they can only monetize about half of what is show. “We have to move to on demand space and know there is an advertising basis and similarity.

Landgraf said if cable TV, as it exists today, were to lose 20 percent or 30 percent of its current revenue, “half of the content production would go away.” For now, added Landgraf, awareness of content still “overwhelmingly comes from television. As much as (new media) is the future, the present tense still looks like the past tense. Most people still find it through television.”