Jim Lanzone, President, CBS Interactive, and Lauren Zalaznick, Executive Vice President, Media Innovation and Cross Company Initiatives, NBCUniversal, joined Fortune's Pattie Sellers at Brainstorm Tech.
Below is an unedited transcript:
PATTIE SELLERS: I would like to introduce you to Jim Lanzone, the president of CBS Interactive, and Lauren Zalaznick, executive vice president in charge of Media Innovation and Cross-Company Initiatives at NBCUniversal. It’s a very innovative title, Lauren.
I’ve known Lauren for years, I mean practically since she came to NBCU in 2004 from Viacom, and just met Jim backstage but Jim’s really good —
JIM LANZONE: I feel so close to you though already.
PATTIE SELLERS: I know. We do, we do.
So this is a one-on-two. We can talk about —
LAUREN ZALAZNICK: We consider it a two-on-one. (Laughter.)
PATTIE SELLERS: I told you to play tennis well with me here.
We’re going to try and have sort of an energetic and very interactive conversation here. It is a sort of open ask them any. I want to go to the audience questions early. The first question that I would like to ask you is, how do you define your companies right now, NBCUniversal and CBS? And as assigned change agents in your companies how would you like to change that definition?
LAUREN ZALAZNICK: You know, I think it’s a straightforward answer and a more straightforward answer than you would think to parts one and parts two. NBCUniversal is a world class media company, spanning film, theme parks, entertainment, broadcast, cable, Spanish language, English language, sports, news, and we produce content for all of those avenues. We pick our audiences. We program to them.
The second piece is where do we see it going. If you just take that as a continuum for 50 or 70 years, however long NBC has been in business, now NBCU, we spent all this time being expert at audience development through great content that we develop, produce, market, distribute and sell, primarily for the thing called the TV screen.
The future is all of that expertise, all of that passion around audience development for great original, high quality content probably for the TV screen for some time yet to come, but also for alternative screens. And more than the screens themselves, for where audiences are going to congregate who are congregating there today.
That’s the past and present, and that’s my vision of a content company with strong distribution arms for the future.
JIM LANZONE: So CBS is a much more narrow scope than a Disney or an NBC, you know, Comcast. It’s unabashedly a content company, and CBS Interactive is no different, except that while we have the network online portion of our division at CBS Interactive, so CBS.com, CBS Sports, CBS News, and we produce things like the Super Bowl Online, et cetera, we also over the years CBS has acquired public companies like CNET and Sportsline, and with those have come big businesses that expanded the scope of CBS. So they’re almost the verticals, they’re almost the cable equivalent for CBS at a time when they didn’t have it.
And what we see is I think even a few years ago maybe digital would have been the shiny object over on the side for a television company like CBS, but especially over my last — you know, my two and a half years here, you’ve seen digital come to be right part of everything, every division that CBS is doing.
There are —
PATTIE SELLERS: So is it — is it a television company with digital arms or is it —
JIM LANZONE: No, it’s a content —
PATTIE SELLERS: — a digital company with a TV component?
JIM LANZONE: It’s a content company that is distributed in various ways. And those ways are becoming more diverse and more complicated and we get paid in different ways now. It’s not just advertising on television, it’s retrans fees. Online I mean we’re doing every type of distribution you could imagine. We’re on Apple with EST and you can pay to download. People are licensing the content from us for hundreds of millions of dollars. And we do ad-based distribution as well.
PATTIE SELLERS: So Jim came in to CBS in 2011 via an acquisition of his company, Clicker, and he is a digital guy through and through. He ran Ask.com years ago. He’s been involved in startups your whole career.
You are meeting for the first time at Brainstorm TECH. Lauren is a TV person. She started as an independent film producer. She built Bravo at NBCU. And now she has this, she got this new job last year that makes her not an operator as she used to be, you’re overseeing Fandango and some operations, but she is now a diplomat.
LAUREN ZALAZNICK: Corporate executive vice president.
PATTIE SELLERS: — diplomat but cross-company, diplomat, brand ambassador, persuader for all of NBCU’s businesses to get on the ball digitally.
LAUREN ZALAZNICK: Yeah.
PATTIE SELLERS: So what do you do? What is your day-to-day job?
LAUREN ZALAZNICK: Well, you just described it really well. I’m an advocate, I’m an educator, I’m a proselytizer.
And what’s interesting is the first 10 or 12 years of my post-college career I was on the sales side. I was an independent producer. I had an independent production company and I was on the sales side. And through a series of just happenstance almost I moved over to the buy side, meaning I went to work for a company. But I was well into my 30s, right?
So at that point I was taking a dip into working for a big company, but I always woke up every day and thought, you know, I wonder if I’m going to get my next gig, even though my next gig was at the office the next day.
Fifteen years later, now I’ve been a hard-core operator. I have grown businesses, I have turned around businesses, I have kept businesses growing when they’re at the top. Every day, anyone who’s an operator knows what you are focused on.
And then all of a sudden this fluidity first from film to television, seller to buyer, and now operator to corporate, it’s just another piece of the learning experience about business.
And the most dramatic thing that’s kind of interesting and unexpected is that it’s almost like shackles that I didn’t know I had were thrown off by the drive for an individual P&L, no matter how big, $2 billion in revenue, which is what my P&L was. When you throw that off and you’re really looking at what the company needs to do to expand and grow strategically in an area where it historically had not focused, that’s what I actually get up and think about every day. And then there’s 19 divisions and hundreds of millions of viewers and users, and billions of page views, and that’s what I synthesize every day.
PATTIE SELLERS: Okay, that’s great. We get a sense of what you do. And what is the opportunity here for companies, people in this Brainstorm TECH audience, whether they’re building technology companies or they’re big brand honchos, to get in on what you are building in terms of the ultimate cross-platform, on-demand experience for viewers?
LAUREN ZALAZNICK: Well, look, if you picture the future, like it’s great that we are past the argument of are you a technology company, are you a — remember that was the whole discussion a few years ago. You had to define your company. You would ask the tech companies that, the platform companies. We’re past that.
We are an audience development company making compelling experiences everywhere people are going to be able to consume it. It’s happening at our theme parks, which is highly digitally focused. It’s happening at the movie studio where digital distribution is transforming. And of course it’s happening at our gigantic television businesses.
But through all of it my vision would be to never have a standalone digital business, to just infuse all of the distribution opportunities, all of the monetization opportunities against a series of digital content, which is really the same as linear content, along a life of product that’s under change.
PATTIE SELLERS: I want to get specific here. What’s a good example of what — you know, some advertiser who may be in the audience or some company that you’re working with could get value out of what you’re doing? Jim?
JIM LANZONE: Pay us a lot of money to — no. (Laughter.) Well, I mean, I don’t know what the opportunity would be. They could be creating content that we would distribute or advertise with us.
But, you know, because we do it at a very different scope than say a YouTube or things that might be an easier path on the Internet. I mean, these are very expensive pieces of content to produce, but it’s extremely varied. One of the things with our business is it’s not just about TV ads online, it’s also about being able to advertise your product at the exact point of a consumer’s decision-making, and that’s the other thing that we look at. Because the way online advertising is going you either have super premium or you have things that are in that vertical chain of decision-making, kind of the funnel. Or you’re kind of going programmatic and you’re competing against the rest of the web in abundance. And I think our job every day is to stand out from that abundance, and that’s where we see value and that’s why we’re growing.
PATTIE SELLERS: Lauren?
LAUREN ZALAZNICK: Well, I would agree 100 percent, and say two things. Number one is we are such a big diverse portfolio company. Our digital businesses today are unexpected, and some of them are things you wouldn’t think about unless you experience them like our Golf Now business, which is 100 percent digital transactional business that books tens and tens of millions of tee times across the country for a fee. And it’s mobile network for booking these tee times, has grown dramatically. Fandango is a 1.0 utility web business that used to sell movie tickets as a utility, and has now transformed itself, growing something ridiculous like everyone experiences in mobile, over 100 percent in mobile video views year over year with just devoting some resources to high quality talent, expertise and distribution of things about movies instead of just the ticket.
At the same time, I would say that when you look at the entrepreneur world and you treat it as sort of a development spectrum, it’s very important to know what people are thinking about for other people. If people are thinking about how to get them cheaper and more sharable hotel space, and that’s Airbnb, that is an interesting thing, and I’m sure people in the hotel industry, the linear hotel industry are like, hmm, I should look at that, or Trip Advisor should think about that.
The equivalent to me are entrepreneurial content deliverers or creators. So I’m very interested in strategically aligning the content that we’re good at creating with the platforms that are being built for consumption, or with innovative content creators that might be a subscription clothing company, because I’m dominant in the young, female space, and they consume that stuff.
So I kind of treat it as a business development and real old fashioned content development opportunity, and that also to me is the definition of digital for our company.
PATTIE SELLERS: Who has a question? And please identify yourself. Do we have any questions yet? If we — ah, over here.
QUESTION: Hi. Christy Ferer, Vidicom branded video content company.
What is the future of branded content in the non-news divisions, and how are you going to take it cross-platform?
JIM LANZONE: You’re talking about branded content from the sponsored side?
QUESTION: From the sponsor — well, not necessarily sponsored, integrations.
JIM LANZONE: Right. I mean, I think it’s one of the fastest growing parts of Internet video, especially highly produced Internet video. So the future is very bright and I think a lot of it is just getting started.
And we also are seeing that’s a great way for us to launch new brands. So, for example, in the fall we’re launching CNET appliances, CNET in Espanol for the Latin America audience, and a new auto brand called XCAR, which is really for true auto enthusiasts, because that’s really one of the fastest growing parts of tech right now is actually auto. We’ve seen it kind of merge into appliances, but now you’re actually getting into the car, and we’re creating a brand around that.
PATTIE SELLERS: So what will XCAR be?
JIM LANZONE: It’s a video-based brand that just has — I mean, it’s almost car porn for people who are total car enthusiasts. The tagline is “For the love of cars.”
And so for launch we’re actually doing that in conjunction with partners who we can’t announce yet. And that’s been a way to get that profitably off the ground for day one, and they’re integrated right into that brand.
But again you see that in all kinds of places, in a lot of the new online brands, coffee with comedians and cars and things like that. So I think the future is very bright, and we’re always looking for partnering for these kinds of things.
LAUREN ZALAZNICK: I would only add, you know, my pretty consistent drumbeat, that I’m tired of the future. I’m all about today. And the future of branded entertainment is here today, what you mentioned, which is when you look across style hall or full screen and people compare the new video platforms to early days of cable, and there’s all sorts of parallels that I deeply believe in, one of it is just an innate scrappiness. You’re just not at the same table with the grownups.
And the other piece of my career was I started in big movies, I went to small movies. I started in movies, I went to television. This is not a U-turn or a left-turn in my career. I have always said and grown digital brands as much as possible for years when it wasn’t in existence.
So the branded entertainment opportunities that people are finding as individuals or as MCNs, advertisers are scrappy, they’ve got to get their message out there, they’ve got to find brand loyalists in new ways. And the platforms for branded entertainment, you know, I think started years ago with the buzzword of authenticity, that you’ve just got to embrace it and stop telling a story of zero to 60 in X seconds and start telling a story of why it’s a bespoke product that’s mass produced for you. And I think the platforms have caught up to the trend in marketing that led to branded integration in the past decade or so.
PATTIE SELLERS: Let’s talk about some emerging platforms that could be opportunities or threats, and I want you to go here with me. I want quick, very quick answers on each of the names that I’m going to throw your way.
Netflix. Jim, quick.
JIM LANZONE: Great partner for us. They’re licensing a lot of our content. And I think the future is very bright for Netflix.
PATTIE SELLERS: Lauren?
LAUREN ZALAZNICK: Awesome, ditto. Great piece of the window that didn’t exist a couple of years ago, and personal plea to Reed Hastings to keep the long tail alive, which was one of the original promises of Netflix that I think is important to consumers for the long run.
PATTIE SELLERS: Amazon.
LAUREN ZALAZNICK: Awesome. Prime customer. My shoes get there, the books for my kids, can’t get enough of Amazon, love their video for the same reasons as Netflix.
JIM LANZONE: Jealous of Prime. It’s a killer app for launching new products like that.
LAUREN ZALAZNICK: Killer.
PATTIE SELLERS: Aereo.
LAUREN ZALAZNICK: Under litigation, can’t comment.
JIM LANZONE: Ditto. You had to ask.
PATTIE SELLERS: I had to ask. I had to ask.
JIM LANZONE: They’re everywhere. I mean, for every single one of our brands it’s still the number one way that people get to content online. I think 80 percent — I used to work in search — 80 percent of all sessions online still start at a search engine.
LAUREN ZALAZNICK: Awesome, scary, can do anything they want, so sell capitalized, can’t wait to see what blows us all away and makes us happy and makes us mad.
PATTIE SELLERS: What company worries you most?
LAUREN ZALAZNICK: Nielsen.
PATTIE SELLERS: Why?
LAUREN ZALAZNICK: Because the whole ecosystem of the new and the traditional are needing to partner with a company that’s moving as fast as it can, but is highly reliant on difficult technology, difficult people, consumers, and an ecosystem that highly dependent on one company has a big burden, a lot of partners, and that’s why.
JIM LANZONE: I’d say Apple as a corollary to that, that we launched our iPad app in March. It’s taken off like crazy. And you can see how much of our distribution will be through mobile in the future. But again things like Nielsen have not been integrated in the past. Really from our point of view it doesn’t matter where someone watches it as long as it’s measured.
PATTIE SELLERS: And Apple worries you most why?
JIM LANZONE: Well, it’s been difficult to get measurement through mobile, because from an advertiser’s point of view, you know, they need to know the total scope of the audience and you want to make sure you have it. But also just from being the gatekeepers for distribution for all that.
PATTIE SELLERS: So tomorrow, my colleague Miguel Helft, who most of you know by now, has a really fantastic cover story that will be released tomorrow. So go to Fortune.com to read it. But it’s all about YouTube emerging as a mainstream entertainment platform. And a lot of this is jumping off the news, DreamSpark buying Awesomeness TV, a big YouTube programmer for 33 million, Time Warner leading and invests a $36 million investment for Maker Studios. We heard from Courtney Holt yesterday. And I actually have gotten permission from Miguel and the editors to just share a little bit with you, and I would love your response.
Miguel says YouTube is not about to kill off television, but here’s a fact. Americans have their TV sets on for 34 hours a week according to Nielsen, and they watch one hour of video on the Internet per week. But 18 to 24 demo, 23 hours watching TV, 21.5 hours of online video watching.
So Miguel says if the first era of television was broadcast TV with a few channels, the second era, cable television with hundreds of channels, the new era is the web incarnation with tens of thousands of channels tailored to niche audiences, YouTube as a distribution platform, an organizing form and the next generation, Comcast, Time Warner Cable, and Cox Cable rolled into one. Not only that, it is an open platform, a sandbox for people, anyone to create their own content and YouTube to take half the revenues.
So what does that mean? Do you agree with this and what does that mean for you?
JIM LANZONE: Well, look, it’s certainly — I mean, especially with my kids it’s one of the main things that they consume in a given day. It’s taking up a huge new percentage of their time. And I watch a lot of things on YouTube. And again I think what I said earlier, abundance is kind of the major issue.
But if you go back in time, you know, don’t ask me why I was reading a book called The Jackie Gleason Story. They make you do that at CBS. It’s part of the indoctrination. But they were talking about how in the early ’50s on a movie set they wouldn’t allow televisions on the movie set because movie producers were so paranoid of TV taking out movies.
And if you just go back to radio to movies to television to the Internet in general, really none of this has — think about how strong our radio division is still today, even with online radio.
And so really at the end of the day in some way consumers are finding time for all of this, and you just have to start wondering where that’s all coming from.
PATTIE SELLERS: Lauren?
LAUREN ZALAZNICK: I think it’s a nascent business. It’s brackish water today. There’s freshwater and there’s salty water, and they’re meeting at this place called YouTube.
We are watching — well, you know, I usually don’t subscribe to the using your kids as focus group theory. My eldest of three graduated from high school in the spring, and she asked for a graduation present, and that graduation present is to attend VidCon next week.
PATTIE SELLERS: To attend what?
LAUREN ZALAZNICK: VidCon, which is the YouTubers’ convention.
PATTIE SELLERS: Are you going with her?
LAUREN ZALAZNICK: I was already going to industry day, and then she’s staying on as a fan to get YouTubers, selfies and — okay. (Laughter.)
So what I would say is I do believe there’s a lot of similarities between the thing called YouTube, which by the way is a host right now for animals called Maker, animals called Machinima, it’s a host animal for true the beginnings of cable channels, right? Because you aren’t a creator, you don’t get to call yourself a cable channel. People who actually develop and create content, they can call themselves that and then when they have two revenue streams, which is what built cable against the broadcast dominance, then you can take another step forward.
But today, the similarities are too much choice and everyone saying there’s too much choice, nobody wants that, that was 30 years ago, amateur content, nobody wants that, that was also 30 years ago, advertisers will never want that, that was also 30 years ago. So those are big similarities.
The dissimilarities are the finances, which were very strong at the very dawn of cable. So that’s a big separator.
I think that when you think about all those billions of views on YouTube, there’s a user-generated piece and there’s also a high quality traditional broadcasters piece. When you look at Jimmy Fallon on YouTube, he doesn’t just make that up, that’s coming from a highly organized, high production value place.
So I think the brackish water is we’ll figure out professional and amateur. We have to figure out financially advertising and subscription. And most importantly the reason I think it is, to use a youthful phrase, it’s all good, is because when there’s that much energy around audience consumption, you have to be there with what you do for a living, and you will find a way to commercialize it if you’ve been good at that in all your other enterprises.
PATTIE SELLERS: Great.
Who else has a question? Back here. Yes?
QUESTION: Hi. Sharon Waxman from The Wrap. Hi, guys.
Jim, when you spoke at our conference last year, you were clear that CBS’s strategy vis-à-vis other networks was distinct and smarter in the sense that you guys were holding onto your own IP, bringing readers into —
JIM LANZONE: You mean not doing Hulu.
QUESTION: Pardon me?
JIM LANZONE: You mean from not doing Hulu strategy?
QUESTION: Yeah, exactly.
So I’d like to revisit that question and see if you still feel the same way now that Disney and Fox and NBCU, who did make that decision but are holding onto Hulu, and now that those, you know, original content is just crowding quickly, and quality content onto those platforms.
JIM LANZONE: Yeah, absolutely. I mean, I think the notion of competing against ourselves with another website that would have our content on it versus having people come to CBS.com to watch it is still fundamental to the strategy of not entering into that partnership.
And CBS.com is the number one network site. Its growth is — it’s a rocket ship in terms of growth. And again we’re selling, we get 100 percent of the ad revenues from what we sell on that site, and it’s basically sold out at almost all times. So I think, yes, we are absolutely committed to that strategy and I think that it’s working great for us.
PATTIE SELLERS: One more question?
QUESTION: Can Lauren comment on that?
LAUREN ZALAZNICK: Oh sure.
PATTIE SELLERS: Can Lauren comment on that?
LAUREN ZALAZNICK: Well, you know what, I actually think that it’s incredibly healthy for media companies that sort of look the same to an outsider, anyone who remembers that there was once a CBS animal, an NBC animal, an ABC animal and a FOX animal, and those were the four things that sort of looked the same, it is actually really important and essential for every company to have its mandate, because they are not exactly like every other company. So I actually believe that you can have two right answers and the better a company knows itself, the less it will chase the other animals around.
At the same time, particular to this issue around our huge television shows and where we monetize them and where people view them, I think we’re in for another couple of years of change and formation that we don’t quite know about yet in the form of TV everywhere, because that’s actually happening. Our deals are set. It will roll out by the end of 2014. And that will force a lot of viewing and a lot of monetization discussions about our full episode, highest rated, medium rated, lowest rated shows. Everything will be available through that means. And that will take it all together, and I think we’ll morph in the next couple of years.
JIM LANZONE: Sharon, I will say — I mean, there’s a difference between Hulu and Hulu Plus where we realize this content. It’s a subscription business versus first day after air, free, competing sales forces, which is something that we stay away from.
PATTIE SELLERS: Our time is up. It’s all good.
LAUREN ZALAZNICK: It’s all good.
PATTIE SELLERS: Thank you, Lauren. Thank you, Jim.
LAUREN ZALAZNICK: Thanks, Pattie.
PATTIE SELLERS: Okay. Great to have you. (Applause.)