Binge Times

Inside Hollywood's Furious Billion-Dollar Battle to Take Down Netflix

Dade Hayes, Dawn Chmielewski

• Publisher: William Morrow
• Year: 2022
• ISBN:
  9780062980021
• Topic: Negocios y empresa
• Subtopic: Industria de medios y comunicaciones

The first comprehensive account of the biggest wake-up call in the history of the entertainment business: the pivot to streaming. Go inside a disparate group of media and tech companies -- Disney, Apple, AT&T/WarnerMedia, Comcast/NBCUniversal and well-funded startup Quibi – as they scramble to mount multi-billion-dollar challenges to Netflix.

After spotting Netflix and the deep-pocketed Amazon Prime Video a decade's head start, rivals from the tech and start-up realm (Apple, Quibi) and traditional media (Disney, WarnerMedia, NBCUniversal) all decided to move mountains to enter the streaming game. At a cost of billions, each went after their own piece of the market, launching five new services in a seven-month span. And just as the derby was heating up, the coronavirus pandemic arrived, a black-swan event bringing short-term benefits but also stiff challenges.

The battle for streaming supremacy may end up having more than one winner, but the cost and disruption to decades-old business models have also produced a lot of losers. Binge Times reveals the true costs of the vision quest as companies are turned inside-out and repeatedly redraw their org charts and strategicplans. Stretching from Silicon Valley to Hollywood to Wall Street, it is a mesmerizing, character-rich tale of hubris and ambition, as the fate of a century-old industry hangs in the balance.

Part I

Netflix Sets the Bar

Chapter 1

The Discovery of Television Among the Bees

As an independent filmmaker, David Blair had presented his movies at plenty of festivals and college campuses, where the screening ritual was well established. Audiences would wait expectantly for the room to darken before his images would fill the giant screen.

On this April day in 1993, as Blair entered the General Motors building in Manhattan, he knew this screening would have a completely different feel. The audience would watch on their computers as his experimental new work, Wax, or the Discovery of Television Among the Bees, became the first feature-length film ever streamed online.

A group of people gathered in an office that looked as if it once housed a giant, room-filling computer, sipping drinks from plastic cups. They greeted Blair, who held a VHS cassette of his film. The walls of the room were lined with exposed insulation that looked, to Blair’s eye, “like a cheap Russian space suit.” A lone piece of furniture dominated the room: a table holding a VHS tape player and a high-end Silicon Graphics machine connected via a T-1 dedicated telephone line to the internet’s multicast backbone (or MBone), which was used to transmit real-time video and audio. The streaming experiment would easily outdo the most daring office activity at the time, according to one Sun Microsystems engineer: watching someone brew coffee. This demonstration would require all the computing firepower the group could muster. Only four years earlier, British scientist Tim Berners-Lee had conceived of a way for scientists in universities and research institutions to share information via a network of computers known as the World Wide Web.

Blair had struggled to get distribution for his film, which he wrote and directed. It centered on a maker of weapons guidance systems named Jacob Maker, who falls under the control of his bees. The insects turn out to be agents of dead souls who insert a crystal television in his head, using Maker as a guided missile of sorts to attack Iraqi commandos in the desert.

The filmmaker touted his project on an electronic mailing list known as Phrack, which was devoted to phone hacking. That caught the attention of a noted computer scientist, Dave Farber, who shared the details with members of his “Interesting People” email list.

Soon enough, the buzz among the technorati reached the ears of the founders of a new magazine celebrating digital culture called Wired. In its review of the film, the magazine hailed it as “one of the hottest pieces of ‘electronic cinema.’” Blair received an invitation to Wired’s launch party, where he encountered “slightly larger, more dangerous fish”—two of whom followed up with a proposition, which he eagerly accepted, to “play [his] movie on the internet.” Soon, the provincial world of independent film would have unprecedented reach.

The technology demonstration, by all accounts, was a clumsy engineering endeavor. Blair popped the film into the VCR and fed it into the computer, which pushed the video out onto the internet. A team of Sun Microsystems engineers in Mountain View tuned in the flickering image on their massive computer workstations midway through its digital premiere.

Thomas Kessler, then engineering manager at Sun, was on the receiving end of the transmission, which in those days was known as a multicast. The stream represented the culmination of research in video compression done at Stanford University, the University of Southern California, and the Lawrence Berkeley National Laboratory, distributed via the internet. Most internet traffic, at that point, was devoted to research and government business. But telecommunications companies like WorldCom and AT&T were interested in creating a more robust network for business applications. “That particular movie—that was the first effort to go completely global,” recalls Kessler. “This guy came along . . . He was doing it as a bit of a publicity play. It was kind of a cult movie. He wanted to get a little coverage. We were looking for interesting things to experiment with so we said, ‘OK.’”

The picture was blurry, in Kessler’s recollection. It was delivered at a sluggish fifteen frames per second, about half the standard broadcast rate, with sound “like a bad phone call.” Nevertheless, that moment, two decades before the widespread adoption of streaming, marked the birth of digital video. Blair found his moment in history’s spotlight oddly anticlimactic. “Here was a room with no seats and a VHS machine,” he said. “This is like the lowest resolution—and nobody’s watching. They carefully put it in, pressed the button on the keyboard, and it just went.”

Even if it wasn’t an obvious triumph, the screening was historic. More than that, it connected with a long line of visionary attempts to make pictures move through machines. The public’s fascination with moving images on a screen can be traced back almost two hundred years and largely parallels the rise of industrialization. As Jeff Kisseloff relates in his indispensable oral history of television, The Box, the first efforts date to the 1820s. “These early marvels had equally marvelous names,” he writes, like the fantascope, the phenakistoscope, and the zoetrope. “They were made by imprinting drawings around the edges of a disc. When the disc spun and was seen through a viewer, the pictures appeared to be in continuous motion.”

After the astonishing invention of the telephone after the Civil War, a feat credited to AT&T cofounder Alexander Graham Bell, spellbound Americans started to anticipate that images would one day mingle with voices. An 1879 spread in Punch magazine showed a fanciful rendering by George du Maurier of a fictional but entirely plausible device beaming moving pictures onto a living room wall. His fanciful pencil drawings showed a family communicating from their home with tennis players taking a break from their match. French artist and writer Albert Robida in that same era—well before the advent of vaudeville, motion pictures, radio, or television—created a futuristic vision of a device similar to du Maurier’s. He named it the téléphonoscope.

A contemporary of Jules Verne who is considered one of the progenitors of the genre of science fiction, Robida wrote and illustrated a range of technology-obsessed stories. One of his most enduring novels, Le Vingtième Siècle (The Twentieth Century), postulated in 1883 a multimedia environment that would take at least a century to become reality. Robida uncannily anticipated devices and consumer habits that lie at the heart of today’s connected, streaming world. He imagined six hundred thousand subscribers paying for live news, tawdry serials akin to modern reality shows, and an array of other enticements. The téléphonoscope screen would take up the entire wall of a room and serve as the nerve center for a pipeline of personalized, on-demand programs from around the world. It would display footage of a war in China, soap operas, musical follies, opera and ballet from European capitals, retail goods for sale, and remote-classroom lessons. (How very 2020.)

RealNetworks founder Rob Glaser remembers crowding around a computer screen with board members of the Electronic Frontier Foundation in Austin, Texas, one day during the spring of 1993 and glimpsing the future. “You’ve got to see this Mosaic thing,” said Dave Farber, who was a foundation member, as he launched the first modern web browser. Up until that point, the internet had been a collection of flickering letters, numbers, and characters. Mosaic displayed images, inspiring Glaser to go one step further and give the mute collection of words and pictures a voice. He used stock proceeds from his decade at Microsoft and money raised from investors like Lotus founder Mitch Kapor to finance a startup to deliver voice across the web, “because at the bit rates we’re talking about here, doing polyphonic audio in a way that would be at all aesthetically pleasing would seem a challenge,” Glaser said. His company launched the RealAudio Player in April 1995 with a broadcast of National Public Radio’s morning and evening news programs Morning Edition and All Things Considered and updates from ABC News. Internet speeds and compression were continually improving, making it possible to stream music and video.

Around the same time, Mark Cuban was sitting in a California Pizza Kitchen in Dallas, having lunch with his friend and business partner Todd Wagner, chewing over an idea of transmitting live sports to people’s pagers. “I didn’t think that it was feasible to broadcast to pagers,” said Cuban. “So we abandoned that idea quickly and I discussed with Todd that I could try to figure out a way to use this brand-new thing called the internet to listen to our alma mater Indiana University’s sports.” Anything would be better than putting a radio next to a speakerphone in Bloomington so he could listen to the games in Dallas. The duo launched AudioNet.com from the second bedroom in Cuban’s home, selling a local AM radio station on the notion “that the internet could be as big a disruptive force to radio as cable was to TV.” They hooked up a $30 VCR to the radio station’s audio board and every eight hours, when the tape was full, brought it to Cuban’s house, encoded it, and put it on a server to stream. By the time it went public in 1998, in a record-setting IPO, the rechristened Broadcast.com was carrying live events, including the Super Bowl. Its sale to Yahoo for $5.7 billion, at the peak of dot-com mania in 1999, would make the company’s provocative cofounder with a Texas-sized swagger a billionaire. Netflix, founded in 1997, would soon be able to lay the foundation for its global business on these early technologies, as would internet e-commerce pioneer Amazon.com and democratizing video platform YouTube. “We made streaming mainstream,” said Cuban. “We made it something that millions of people used every day. It was a special time.”

Once this early proof of streaming’s potential existed in the marketplace, it didn’t take long for one Hollywood producer to develop a vision for how it could move entertainment forward.

Jonathan Taplin began his career in show business as a tour manager for Bob Dylan and the Band. In a few short years, he transitioned to film, producing Martin Scorsese’s breakthrough feature, Mean Streets. Over the next two decades, his creative portfolio would expand to include twenty-six hours of television documentaries and a dozen feature films (including Scorsese’s The Last Waltz, which captured the Band’s farewell performance in San Francisco). As a film producer, Taplin was well aware of the challenges of theatrical exhibition—especially for makers of documentaries or auteur dramas who had to vie for screens with blockbusters like Titanic, Jurassic Park, and Men in Black. The advent of the megaplex jammed as many as thirty screens into the same venue, doubling the number of U.S. screens over the course of a decade. But even though the 1990s were a fertile time in the indie business after the success of Sex, Lies, and Videotape spurred a succession of breakout hits, top Hollywood titles hogged most of the screens. Taplin recognized that technology had provided an opportunity to revolutionize movie distribution with on-demand digital video.

An early demonstration of video delivered via a phone line at the CableLabs research facility in Louisville, Colorado, convinced Taplin it could be done. The video was choppy, as he later recalled, but big enough to fill a television. “That was just like a light went off in my head,” says Taplin, who wanted to offer consumers a more expansive array of video rental options than could typically be found lining the back wall of the Blockbuster video store on a Friday night. “I thought, ‘This is a horrible experience, and yet, people want to see movies. They want what they want, when they want it.’ That was our theory.”

In June 1996, he launched Intertainer, developing a consumer interface and conducting tests of delivering movies via the internet to computers. Microsoft offered the venture access to its software tools and Windows Media Player, having failed to win over any of the studios with that proposition. Taplin raised almost $100 million from Microsoft and other corporate heavyweights like Sony, Intel, and Comcast to build a service that could stream entertainment to TV sets and computers.

Intertainer amassed the largest online movie library of its kind and started to gather momentum as high-speed internet access reached an increasing number of homes. Taplin struck catalog deals with most of the major Hollywood studios—not only the one owned by its investor Sony Pictures, but also Warner Bros., Universal Pictures, Lionsgate, and MGM. Paramount Pictures chief Jonathan Dolgen was a belligerent holdout, expressing a fear and loathing of technology’s disruptive power.

“He said, ‘I’m not putting my movies on any wire, anywhere,’” remembers Taplin. One of Dolgen’s assistants reassured him with an account that may well have exaggerated the media executive’s hostility toward the digital future: “You got off easy. Last week, the guys from TiVo came in here and gave us a demonstration. When it was all over, they said, ‘Well, can we do some kind of a deal?’ . . . Dolgen took the TiVo box and threw it out the [window of the] second-story building.” While he may not have been a tech utopian, Dolgen had a practical reason to preserve the status quo. Paramount’s corporate parent, Viacom, also owned Blockbuster.

Intertainer’s premature death, in 2002, could be traced to the studios’ decision to pull back all the rights and control internet distribution themselves, through a Sony-led venture called Moviefly (and later renamed Movielink). “In one week, we went from having about eight thousand movies on the service to having about eight,” Taplin said. “So, I had no choice but to shut it down.”

Taplin sued Sony Pictures, Universal Studios, and AOL Time Warner (then parent of Warner Bros. and New Line Cinema), claiming the studios stole his idea and reneged on agreements to provide Intertainer their movies. After a three-year court battle, the case was resolved with a settlement in the tens of millions. But it was a pyrrhic victory for Taplin, who effectively ended his film career when he chose to take on the studios. He started a new chapter in academia, teaching at the University of Southern California and writing and speaking about technology and media.

With the backing of studios, Movielink got out ahead of even Netflix, which transitioned to streaming in 2007 after an initial decade mailing discs to subscribers. Ira Rubenstein began work in 1999 on a prototype for Movielink, conceived of as a movie download service intended to help Sony Pictures and other studios combat the gathering threat of internet piracy. It would afford consumers a certain degree of flexibility—they could rent a movie or burn a copy of a movie and loan it to a friend (who would need to jump through the extra hoop of obtaining the digital “keys” to unlock the file). But it would come with technological locks to thwart unauthorized copying.

Rubenstein met with executives at Paramount Pictures, Universal Studios, and 20th Century Fox to build support for a legitimate online movie service. He concluded each presentation with a demonstration that underscored the urgency of the threat. “By the way, your movie’s already on the ’net,” Rubenstein recalled telling angst-ridden studio executives, who would use his computer to screen a pirated copy of a film that was currently showing in theaters.

Movielink capitalized on a rare moment when the studios’ interests aligned—or, perhaps more accurately, coalesced in a shared paranoia that the movie industry would suffer the same fate as the music business. After moving too slowly in developing an alternative to peer-to-peer file-sharing sites like Napster, the music industry was seeing its revenue fall off a cliff. Having peaked at $14.6 billion in 1999, it would drop to about $7 billion in 2015, according to the Recording Industry Association of America. The prevailing feeling in the rest of entertainment was, “There but for the grace of God go we.” Movielink at least offered a tangible, proactive path that would help the studios to avoid getting Napster-ed.

Metro-Goldwyn-Mayer Studios, Paramount, Universal Studios, and Warner Bros. all joined the venture. Soon, their interests diverged. Paramount insisted on disguising the download file to frustrate piracy, a technical demand that delayed the service’s launch. Studio attorneys insisted on limiting the rental period to twenty-four hours—dramatically less than the seven-day rentals at Blockbuster—to comply with language in contracts with HBO that restricted the terms of pay-per-view offers. The studios refused to discount the rental or sale price, for fear of cannibalizing DVD sales or cutting into profit margins.

“I stopped going to the board meetings because it was too painful watching someone kill my baby,” Rubenstein said.

Movielink launched in 2002 with online movie rentals, but it struggled to gain traction with its stale selection of titles offered thirty to sixty days after their availability on DVD. By 2006, it began selling digital movie downloads on the same day as the home video release—a milestone in the industry’s embrace of digital distribution that nonetheless failed to lift the service. A year later, it was sold to Blockbuster, as the movie-rental giant saw Netflix, Apple, Amazon.com, and Walmart all moving to online distribution.

Blockbuster, of course, would go the way of the videocassette itself. The once-dominant force in the movie-rental market lost out to fleet-footed technological rivals, filing for bankruptcy in 2010. The last of the company-owned stores closed by 2014. Along with Netflix, Amazon, and Apple’s iTunes, the video streaming space was also populated by niche digital purveyors like GreenCine and Jaman. As a category, these services would surpass DVD and Blu-ray sales in the U.S. for the first time in 2016.

After squandering early chances to innovate, the mandarins of media closed out the 2010s rushing headlong after futurist Albert Robida into the living room, no lo...