Letter #238: Ben Affleck and Gerry Cardinale (2024)
Cofounder & CEO of Artists Equity and Founder, Managing Partner, CIO of RedBird Capital | The Disruptor and The Dealmaker
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Ben Affleck is the CEO and a Cofounder of Artists Equity, as well as a Cofounder of LivePlanet, Pearl Street Productions, and the Eastern Congo Initiative. He is also an actor, writer, director, and producer who has received two Academy Awards.
Gerry Cardinale is the Founder, Managing Partner, and Chief Investment Officer of RedBird Capital Partners, which manages over $10bn of equity capital. Some of RedBird’s investments include: AC Milan, Everpass Media, Skydance Media, Fenway Sports Group, the Yankees Entertainment and Sports Network, The Springhill Company, and Formula One’s Alpine Racing team. Prior to founding RedBird, Gerry was a Partner at Goldman Sachs, where he was a senior leader of the Merchant Bank’s private equity investing business.
Today’s letter is the transcript of a conversation with Ben Affleck and Gerry Cardinale at the CNBC Delivering Alpha Conference. In this conversation, Ben and Gerry discuss their business partnership in Artists Equity and what they’re trying to and how they differ from the typical film entertainment company model, the importance of aligned incentives, early signs of success, conversations with other actors/directors/producers, conversations with distributors, disintermediating the agent world, owning Paramount, the replicability of the Artists Equity model, if the streamers still have an appetite for movies, investing in content, the lack of financial accountability and rigor in the industry, and whether and how AI will or will not disrupt the filmmaking industry.
I hope you enjoy this conversation as much as I did!
[Transcript and any errors are mine.]
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Transcript
Host: 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 -- 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, $10bn+ 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.
Host: Well, it looks pretty good.
Ben Affleck: Thank you, thank you very much.
Host: Not bad at all. 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 Artist Equity, and how it does differ from the typical model in terms of the approach on investing in, so to speak, film entertainment.
Gerry Cardinale: Yeah, look, I mean I've been investing in intellectual property really for 30 years. And 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 just been doing it for a long time, then that kind of disintermediation is more friend than foe. But then you start to get to layers of answering this question, which is: How could Ben Affleck and 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, and I--
Host: You didn't believe Sumner Redstone all those years ago?
Gerry Cardinale: Well, forget Sumner Redstone. Paul Allen, 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, and 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's really interesting is that individuals actually can be intellectual property in and of themselves. So Artist’s 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's a supply and 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, and 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's interesting is, rarely in my career have I I met talent that can give me a run for my money on the business side of things. The 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 whiteboarding on building a business together. And that is just so unique. Final thing I'll say, David, is I'm trying to navigate this technological disintermediation and turn it into a win. There really isn't any better guide than--if you can find talent like this--there's no better guide for a guy like me in deploying capital.
Host: Ben, you want to sort of explain what the approach is to 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 well?
Ben Affleck: First of all, I want to say thank you, that was very embarrassing, and a little bit humbling, and probably overstating quite a bit, but I appreciate it, that's very nice of you to say it. 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, and when I went back to him and approached him with this, I found that we were of like minds, and 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, most effective way to work. And what was--and 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 often times working on and making the things that ultimately are going to either be valuable or not to the consumer, have very different incentives. They have different profit motives, they have different goals. Oftentimes they're in complete contrast to the investor. And there's a tension dynamic that's set up where one person is pulling for one thing and the other is pushing on them, and then because the sort of lesson has been that there is no real profit participation, and even in share price--I can't tell you how many times people go My stock price is worthless, my options are garbage, because Hollywood has been treated as, because they are, basically, value stocks. People don't act like owners, frankly, at all. There's a very short-term mentality, there's a kind of a cash grab mentality, which is exacerbated by sense that Hey, this is fleeting and the phone could stop ringing. Somebody 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 cases that that's in fact proved to be the case. So--
Host: 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 in the--
Ben Affleck: There isn't really. What what happens now is, What's my fee? And as long as I know 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, what's the appeal? I'm going to go on a talkshow, maybe I get canceled, I say the wrong thing, I got to do more--aside from this event only--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. They don't--especially given that there's--it makes no fundamental difference to them. Now that's a real problem. If you look at the way that--what Jerry 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 a lot of 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 elegant or stylish, and now you'll say Beyonce or Jay-Z. You have these--answers are actually anthropomorphized as people. 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 and 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 movie, 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. And as we--
Host: Do you have to be a lot more transparent, Ben, sorry, I mean, 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, because it's all performance-based. So as perform improves, you share along with it.
Ben Affleck: Here's the deal. For example, this movie that we're doing now. For the first time, we've obtained from Netflix very concrete performance-based bonuses, which haven't exist in the past at all--and they were a lot of work to 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 tranches 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's what you're going to get up front, it’s 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, construction person, foreman, are bonused relative to their salary so that they know, Look, there's another $10,000 in it for me if it does a little bit better, so they care.
Host: What are you seeing in terms of--I mean you've got some early return-- what's it looking like?
Gerry Cardinale: Look, it’s--we're two years in, we've pre-sold north of $700mn 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 and my perspective, Ben and Matt are in 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, the Hemsworths and the Coopers and Jennifer Lawence, 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 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's 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 that I have a guy that I'm partnered with here who knows the economic trajectory of monetizing content.
Host: Can you share any of that kind of conversation—like, I'm trying to understand what that conversation--who are you having that conversation with, and what--
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, but I don’t understand, how does this work? Basically, 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 it's in for you at that tier, here's what it looks like over in 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--like I've been doing this for 30 years. That's one of the things that I spent the last 10 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 go What the fuck are all these people doing here? Like truly, honest to God. Like there's about 10 of us making this movie here, you know what I mean? And what--I've always viewed and understood because of the way Matt and I came up, that 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 it’s like, Okay, we want to make Goodwill Hunting? It has to be inexpensive. And we looked around, like they’re making Clerks for $25,000. You can do that? I heard they made Reservoir Dogs for a million dollars, because they got Harvey Keitel. Okay, this has to be--we built and engineered that movie like a business, where we said, Okay, the cost has to be low, 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 in Toronto, where we can get tax rebate, and we need a movie star. And if we're going to get a movie star, we have to make the terms short, we have to make the economics very good--so we spent $12mn to make that movie, and Robin got $5mn and 15 gross points in the movie. So he got his $5mn bucks for his 2.5 weeks, and we also thought, Well, the movie star is going to want all the good speeches. and they'll look smarter and cooler than everybody else, so we got to set them up with that, because you have to incent the talent. It's the same approach we take now, whether it's being in our 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 Artist Equity. To me, is a synonym for fairness. You've got to believe there's a fundamental fairness at play, and there hasn't been in Hollywood.
Host: 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. And it's a very interesting thing to watch when Ben Affleck calls--
Ben Affleck: Don’t emabarass me.
Gerry Cardinale: One of the streamers directly and says, This is what I want to do, and this is--and he negotiates the deal. Now we're not looking to disintermediate the agent ecosystem in Hollywood, but what are we talking about here? 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's coming to Hollywood.
Host: So when you say you don't want to disintermediate 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. 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, before Gulf & Western bought Paramount, I mean, the original studios had the Harry and Jack Warners, these people, they were owners, operators, Founders. They cared about stories, 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 cared 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's a management class, they come in, they have a more short-term agenda--there are different incentives at play--I'm sure this audience I don’t need to explain to.
Host: But 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, that's what I think is great about that story. Two things: 1) David Ellison, and Gerry running this studio, own it. It's not management class, it's not who are we going to bring in, and who they're going to 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. We need--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 gonna be some hard choices, but there's tremendous opportunity, and a lot of money to be made there.
Host: Why do you think that?
Ben Affleck: Because I know that--
Host: When you say the linear, are you talking about theatrical release--
Ben Affleck: Legacy studios, yes. Theatrical, side-by--
Gerry Cardinale: Technology. It’s like an AI. Look at AI. I mean, everyone's scared of AI. AI is a tool in a toolbox that will rejuvenate intellectual property. You will make more intellectual property, more original content, for half the cost. Now there will be dislocations along the way, but that is a positive. And so the key is, how do you keep rejuvenating the intellectual property? That's what you got to do. And you 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--that's the so what of LIV. And so we put the talent at the table, and we created one team with the NFLPA and Major League Baseball PA. So this is not necessarily a new phenomenon--
Ben Affleck: This is so radical. It's like I'm having very fluent conversations with other directors, actors--
Gerry Cardinale: But what does it require? It required--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 got to have actors that are willing--talent, not just the actors, but all the way through the production thing, that--
Host: Although Gerry, to be fair, somewhat unique.
Gerry Cardinale: Yes, it is unique.
Host: I mean, Ben Affleck and Matt Damon--you can't recreate that at all.
Gerry Cardinale: No.
Ben Affleck: You can recreate these models, you can recreate these structures, you can recreate the fact that you can save 15% 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 10mn people were going to watch. And there was three movies that came out every weekend, and you could buy a weekend--it was a great fucking business. And it started to build up a kind of a culture of like, the executive class starts to swell, and we're going to have a place in Cabo, and I think you should get 3.5 a year, you should get 4--and that culture is, in a vestigial 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 10 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. Like these things are pretty obvious.
Host: So you think it is replicable--
Ben Affleck: Absolutely.
Host: beyond just the fact that you and Matt Damon 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 agenting mentality is that you don't have a stake in the game, you get your fee regardless of how you perform. And now I don't know about you guys, but what other business is like that? Hollywood thinks that they get a free pass on that. And now, with the challenges that it's facing, that's--
Ben Affleck: Those days are 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 part of our soft power, it's part of our global hegemony, it's part of who we are as a culture, it's one of the things that unites us and is beautiful and is both incredibly profitable, creates a lot of jobs, and is a kind of inspiring, extraordinary--not to like go on and on about Hollywood--but we've got to apply the same efficiencies. And that's just the truth. And we have to have the same kind of intelligence in management. You look at companies spending $350mn a year in overhead to make 10 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 in the upside, which is why we chose Air as the first movie--and for those of you who haven't saw it, it's about Michael Jordan's deal with Nike, and Michael Jordan did very well well in 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--well, 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 we have in the world. Movie makes $1bn and you're telling me how great it is that you capped them at $200,000? Go change it. We're trying to work with people--we're trying to create actual fairness. Like you think you’re going to make $2bn and come back and go how could they get $650k? It's like, you’ve 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 cost down, and they're going to care--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 in the process and afterward, cannot be separated from the enormous success of that movie. People want to go out of the house and go to movies--I know, I got kids. I can't be the only parent that kids want to avoid.
Host: So theatrical release is still a thing.
Ben Affleck: Yes.
Gerry Cardinale: Yeah.
Host: It's not just about watching at home on a streaming service.
Gerry Cardinale: No, no.
Host: You believe--
Ben Affleck: It's both. You just have to understand where the--
Host: And do you think the streamers still have an appetite for buying movies? It's not clear, and I know they don't share a lot that they move the needle in terms of subscribers--do you still think the demand will be there for movies?
Ben Affleck: Definitely there. In some cases, for example on Amazon, you've got MGM and the service--they're making roughly the same amount. They're looking to do through theatrical and on the service. For Netflix, they have a very robust demand for movies. Their metrics are a little bit different, but that's what else is interesting. Hollywood used to have uniform metrics. Universal, Disney, Warner Brothers--the only thing different was that Warner was doing 17% and Disney was doing 15%. And now, Apple has an entirely different economy and entirely different goals. Amazon has an entirely different company, and Netflix has a--so you have to be mindful of what constitutes success for your partner in the regard to each property, and 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's about a 20-25% reduction in spending. The thing is like, we spent too much, we overspent. Netflix is not losing money, but some people have lost money on streaming. So they want to bring it back. So great. So then we said, Okay, let's negotiate for incentives. Artist Equity says, Here's the amount that you're going to pay for this movie and you'll never pay a dime more-- they 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're working with. And I know that a lot of times, in this business, it's just gotten a little bit-- it needs this intermediation, 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 cost. And so when you do that, if Netflix were be able to look--if I were Spence Newman--I’m gonna send a message directly to Spence, wherever he is out there--the CFO 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%, 5%, 3%, 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, and accord to Bella, invested in movies, and and will be. Not the theatrical experience in the same way, because they want you to watch it on the Surface at home.
Gerry Cardinale: I think the punchline, David, is if you're going to invest in content today to fulfill this this notion that is content finally King, you're going to have to change the paradigm. This is just one example of that trajectory.
Host: But I'm still trying to understand the balance of power, and sort of how you approach it-- particularly again, I know you can't really discuss in any detail, but you're going to be involved in a large media company operate--how do you think about it? In terms of the Amazon, the Netflix, the Apples, who have unlimited amounts of--
Ben Affleck: Paramount is Paramount. Paramount is thinking about the consumer. Paramount is--what are the--I mean, I'm not buying Paramount, I don't why I'm answering this question other than--
Gerry Cardinale: Well you're answering because I can't answer it.
Host: I was like, okay, yeah…
Ben Affleck: Look, filibu--I obviously--it was a filibuster.
Host: Keep going. Keep going.
Ben Affleck: Well no, 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's got to care about we make really good movies, we got to--and not--in my view, and this is certainly not speaking on anyone else's behalf, you've also--there's an instinct, particularly because Hey look, let’s look at what works and replicate that is common to the business world, because it makes sense--it doesn't exactly apply. If you only seek to just--with this movie worked, let's make a sequel, let's copy it, the audience gets bored, it starts to be repetitive, and you run the appetite out. If you have no original stuff, you have no new franchises, 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! Right Gerry? That covers it, basically.
Host: It’s going to be easy, Gerry. Don't you worry about it.
Gerry Cardinale: I think you got to relook at everything and you got to be financially accountable. I don't see the same level of financial rigor and accountability in the entertainment industry, in this part of the entertainment industry, that I see in other Industries. And--
Host: 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. It's like, people want to have different outcomes, but they don't--they're not breaking it to go do it. And Artist Equity is just one example of empowering talent who are financially motivated with the outcome. Most actors don't--they don't care about the outcome. They get their fee. The agents get their fee. There's a whole ecosystem of unaccountability. And in our--in the real world, we're all-- that's what the whole capitalistic construct is about--it's accountability. So for me, it's an arbitrage that I've been I've been practicing in sports and media for 30 years, in some form. It's the same thing. And Ben--and now, the only thing that's new, which is so interesting to me, is now the talent's at the table. That Genie’s never going back in the box.
Ben Affleck: And in terms of Paramount, and just broadly, what I will say is, the labor is feeling the rollback. Talent, if you look at like dues, 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--
Host: Come on now, Ben, you're going too far.
Ben Affleck: I know, stone me, but that's going to be part of that process. Because when things were great and you were making so much money and nobody asked any questions, great. It's a little harder to do this job now. You actually have to compete a little bit more. The consumer has more options. They don't just have three networks, they don't just have a few studios. YouTube is kicking people's ass. You can watch a lot of more varied things--it's very diffuse, so you have to work harder, and you have to be better. And you have to have better managers, you have to have better executors, you have to work with the best talent, and you have to have the most rigor.
Host: Given all of that, how much capacity do you have to do, whether it's shows or movies or commercials even, I mean, how much can you actually see Artist Equity undertaking?
Ben Affleck: More than we're doing now. But it's--listen, part of it is I'm lucky I have good partners, and I'm learning--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're working with and the people at your company. And you have to be sure that they share that philosophy, they understand the the defining values of your company, they understand for example the models that we've created and set up, and 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 they can be reasonably achieved. And I don't need to make all the movies, and 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 to Jerry for giving me the opportunity.
Host: As we kind of wrap up here, I do want to come back to AI. Gerry, you mentioned it, but Ben, how did--earlier you guys weren't here, we did a demonstration, my colleague Andrew Sorkin and I recreated 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 could say, We're going to do our own James Bond thing out there with a bunch of actors that are completely recreated 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 filmmaking 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 to--for the people who want to make Goodwill Huntings to go out and make it. Look, AI is a craftsman, at best. Craftsman can learn to make stickly furniture by sitting down next to somebody and seeing what their technique is and imitating. That's how large video models, large language models basically work. A library of vectors of meaning and transformers that interpret it in context. But they're just cross-pollinating things that exist--nothing new is created--
Host: Not yet. Not yet.
Ben Affleck: Yeah, not yet, and really, in order to do that--look, craftsmen is knowing how to work, art is knowing when to stop. And 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're in trouble. Because what cost 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 can change the color of your shirt, it can fix mistakes that you've made, it can make it--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 macroeconomics, 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 should--you should have the same spend and now you can just watch more episodes. And 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 Stewie. And it'll do it. And it'll be a little janky, and a little bit weird, but it'll know their sets, they'll know those actors, and it will remix it, in effect. And it will do that. That's the value, in my view, longterm, 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% out of the economy of filmmaking, which is--and there should be negotiated rights, and visual rights that say, If you want--because what do people want to make? 5 minute, 30 second TikTok videos where they look like The Avengers. Well great, you can--just like you used to be able to buy your Iron Man costume at the store, you're going to buy your Iron Man pack and you and your buddies are going to look like Iron Man and Hawkeye on Twitch. That's what's going to really happen. Like, it's not going to take over and dominate--AGI is--
Host: So you see it empowering the creators in a way instead of--at this point.
Ben Affleck: 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 and 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 filmmaking, 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'll replace greenscreen, and, Oh, that actually is pretty good for inserts, and stuff like that, eventually you should take 30% 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 that can jump effectively from box to box. But in terms of large video models, these are contained--
Host: 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! Then I spent a lot of time looking at it, and I was like, No, no, no. We’ll be all right.
Host: 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.
Host: 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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Wrap-up
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