A Conversation With Ari Emanuel About Entertainment and AI

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Listen to this post: Good morning, This week’s Stratechery Interview ended up not being an Interview, but rather a conversation with Hollywood super-agent Ari Emanuel. Emanuel is the Executive Chairman of WME Group, Executive Chair and CEO of TKO Group Holdings (the owner of UFC and WWE), and Founder of MARI, a live events and experiences company. The occasion for this conversation née interview was the recent publication of Emanuel’s memoir, Roll the Calls, a reference to Emanuel’s relentless daily phone call routine; I got on Emanuel’s roll for the first time a couple of years ago, and quickly learned that when Emanuel wants something he gets it. That’s a theme of his book, and of this interview: Emanuel decided he wanted to have a conversation and ask me some questions too, so that’s exactly what we did. We cover everything from the state of social networks, AI’s impact on Hollywood and the tech industry, and what skills might not just persist but become more valuable. We also discuss why Emanuel is making such a big bet on live, whether or not Hollywood is logical, and whether talking on the phone is the antidote to polarization. As a reminder, all Stratechery content, including interviews, is available as a podcast; click the link at the top of this email to add Stratechery to your podcast player. On to the conversation: A Conversation With Ari Emanuel About Entertainment and AI This interview is lightly edited for clarity and content. Topics: The State of Social | Roll the Calls | AI and Creativity | Buying UFC | Post-AI Tech | AI and Generational Change | MARI | Hollywood Logic The State of Social Ari Emanuel: Can I ask you one question? Because I saw your interview. Who was it — you did it with a guy in New York. Patrick O’Shaughnessy? AE: Patrick, yeah, who I love. Yeah, I read your interview with him, it was great. AE: I loved your point of view, and explain a little bit more to me because I love your thinking — that on a SaaS model, the only one, based on my understanding, based on your model right now, that’s got it right, OpenAI should have gone to advertising as opposed to charging, Muse has it right. Yeah, for sure. AE: They don’t need to charge you because they have the other revenue stream. Right. And well, not just that, but the LLM, like, it’s actually really interesting. So when they launched Muse, they made this promise, “We won’t use your data that you use with Muse for advertising”, and no one cares. No one knows they made that promise, and no one cares, because no one cares about that stuff. And so they, in some respects, handicapped themselves by making this promise. AE: Just like Apple, we’re not going to look at your data, major mistake when Tim [Cook] said that. Right. But in the long run, I think it’s going to pay off, because you’re going to have this complete change in how advertising works. Right now you sort of have data on the user and you have data, broadly speaking, of what a particular product matches with and you’re matching, it’s called the two-towers approach. So you’re matching these two things together, and that’s how advertising basically works at scale, and it’s all these vector databases, all these sorts of things. AE: Television never did it properly. That’s right. So the way advertising is going to work in the future, and it’s already happening, is it’s going to predict what you want. AE: Well, the funny thing, what I thought when you said that— (laughing) I can never remember if I’ve said it before. AE: One is, Mark is going to be able to make a ton personally and charge, he’s going to be able to use the AI to do it, and it’s going to be just more and more and more. It’s more than that. So what you’re going to do is you’re going to get a personalized ad predictor that basically is inside your VM. They’re going to be credibly able to say it’s totally private, because it is totally private. AE: Because it’s just directed at you. That’s right, it’s just predicting what you want to see. Just like it’s going to be a predictor of content you want to see. AE: Oh, I didn’t think about it that way, yeah. The reason why there’s such massive upside is this whole agent thing — this is the real Google threat. So everyone thought when ChatGPT came out, that was a threat to Google, but the human was still in the loop. As long as the human is still in the loop, Google is okay. But all of Google Search, Amazon search— AE: Once the human is out of the way… Then all these search-skim ad models, which is what all these models are, they’re all bullshit models, because it’s just attacks on search. AE: Well, are you saying the same thing about Amazon? Yeah, 100%. AE: I think Amazon, because of Muse — I mean, Walmart made the deal with them. Which is a huge deal. AE: Amazon’s going to have to figure out — I mean, a lot of stuff is going to go through. Well, and the problem is that the problem with having a physical moat is that means you have a lot of capital tied up in that, which means you do have a forcing function that means you have to adjust. AE: It’s what happens when you’re just saying that when you have a digital, not a personal, on the Amazon side, your $60 billion is in jeopardy on your advertising business. I mean, it’s a problem. It’s a big problem, a huge problem for them. So the upside is the new products still need advertising, and things like live events, all the sorts of personalized stuff that the Internet makes possible. Like, one of the most important functions is going to be the generation of human desire, that is the post-AI economy. AE: MARI! That’s exactly how I think about it. It’s like, you know, not only what Elon [Musk] said to me — it can’t be disintermediated. Don’t waste it. We’re going to get to it. I get to talk now, you don’t get to talk, because I have to record this for the interview. AE: I can’t believe we’re not recording now! I am recording, but I didn’t say we hadn’t started yet, so maybe we can include this. We should make this more of a conversation. AE: We can just go. This is the interview. Okay, this is the interview, we started. AE: Exactly how my life goes. Okay, I’ll throw away my script here. AE: The reason I love talking to you is this, I can’t articulate it as well as you can. You have this massive need for the generation of human desire, and you’re going to have people like you who are creating the vessels in which to sort of collect that human desire. But that means that advertising has just been between 1% and 2% of GDP, so let’s say that holds. AE: Oh, it’s going up more. It has gone up with digital, yeah, it’s up to between 2% and 3% now, but historically, it’s been between 1% and 2%. AE: I think it’s going to above that. I think it will too. So this is the conservative estimate. Amazon advertising is impaired, and Google advertising is impaired, because there’s no more human in the loop, that advertising is going to flow to surfaces that are not impacted by AI. AE: Facebook. Facebook. AE: I couldn’t think, after that conversation you had with Patrick, if there’s another group out there, and maybe it’s X? Because I think Elon’s going to do that, right? But I didn’t think of another one, another kind of digital player that could do that, except maybe Microsoft inside LinkedIn. Which, by the way, is doing very well. AE: Very well. Because actually that is a digital personal because people are involved. I think social networks are only going to get more valuable over time, not less. AE: I agree. If anything, we’re almost at the nadir of social network value. AE: So name the social networks in the United States. Facebook. Instagram. X. And I said LinkedIn. Did I miss one? No, I don’t think so. So that’s the brilliant thing about Muse, it’s not only this phenomenal opportunity, it’s also a direct heat missile at Meta’s competitors, to the extent it lands, and that money’s going to flow back into Meta. AE: And I think it actually — depending on what [Amazon CEO] Andy [Jassy] does, who’s very smart, he’s got to make a deal. Over time, he’s got to figure out that $60 billion, which is one of the biggest problems. Here’s one thing that’s interesting, and I’m curious what you’re thinking about it. So in the long run, of course, AI is very highly deflationary but I think there’s an aspect that it is short-to-medium-term inflationary, in that ads are a subsidy to the people who are not impacted by the ads. Stuff is cheaper, Amazon is a good example — the prices Amazon charges are definitionally less than they would be absent advertising. And we know this because their advertising revenue is more than their e-commerce revenue — or their profit, I should say. AE: And the advertising does subsidize all that. That’s right. So if the advertising goes away and they have to charge more, that is actually inflationary to a certain extent, because prices have to go up. And I think you’re going to see this — like, for example, what’s a very easy Muse use case? Find these subscriptions that are lingering, what subscriptions do I have that I should cancel? There’s a lot of advertising businesses that are supported by people forgetting to cancel their subscription. AE: This is the same argument I’ve been making with people. The cable business — ESPN was elevated not because so many people were watching it, there was that select group of people that had to have it, and then they could get up to $10 for it. And everyone paid it. AE: And once that broke with Netflix, etc., it just went away. The cable operators and cable were broken, it just fell to the ground. Yep, and you have to pay directly for sports, so sports fans were the biggest welfare recipients in history throughout the entire cable era. AE: And now they’re going to pay for it, but advertisers are going to pay premiums for it, because it’s a very high-end group of people that they want, on whatever platform they have. All the video advertising, streaming advertising — particularly to your point, if they actually finally do it right. And which, by the way, Amazon is probably the furthest ahead there, generally speaking. AE: I think [Skydance CEO] David Ellison will catch up. He hired the right CTO out of Facebook, and he’s going to build a pretty good model. The one place — would you define YouTube as a social network? It’s in between, right? What is a social network? So is Instagram even a social network anymore? It is, to an extent. But the big shift, and the reason why TikTok sort of blindsided Meta, is TikTok is classified as a social network, but it’s not a social network at all, it’s a user-generated content network. AE: Well, so is Reels. That’s right, and Reels is a direct response to realizing, “Holy cow, we missed it”. AE: And the issue is that, unlike Threads, Reels works. There’s this famous Paul Krugman article that’s saying the Internet is not going to have any more economic impact than a fax machine. AE: He said that? Yeah. Maybe it was a long time ago, I wrote about 2014, he must have said it in the late ’90s, early 2000s or something. And the reason is because most people don’t have anything interesting to say and the funny thing is he was actually half right and you saw this with what happened to Facebook. As long as your content was limited to people you knew, it was fun. AE: Everybody cared! They came to not care, because what happened was TikTok realized, if you’re limiting what people see to only the people you know, they’re not seeing the best stuff. What the TikTok algorithm does is it basically finds the best content across the entire service, and feeds it to you, such that it’s the best content in the world — even though the percentage of good content to bad content is hilariously small. The vast majority of content sucks, but the absolute value of good content is very large, because the total amount of content is so great, even if you get a very small number on a massive denominator. And so they’re like, “We’ll just show you the best content”. AE: And that’s what their algorithm did, they could figure that out. That’s right, and that was Meta’s blind spot, because they killed Snapchat by leveraging their network. You already had friends — you could see a story on Instagram, and it was instantly useful to you, because you were already following people on Instagram. AE: But why — I want to ask you a question, and this brings up Snapchat. Why hasn’t he [Snap CEO Evan Spiegel], as opposed to doing glasses, figured out he is one of the last social networks? And it’s still good. He’s got a billion users. (laughing) There’s a lot of good questions that can be asked about Evan Spiegel‘s corporate governance, most of which are not very flattering. AE: I mean, he is one of the last social networks, we’re talking about social networks — he’s one of the last ones, and he actually still has a great user base. He does, and it’s still young. AE: Very young, and they use it to talk to people. The engagement is off the charts. If you use it, you use it all the time. AE: And if he did it right with AI, as opposed to the glasses I mean, this is the eternal Snapchat question. That’s why they are still such a lure to investors, despite the fact they pay out gazillions in stock-based compensation, they never seem to really make money, blindsided by Apple a few years ago, and all these sorts of things, is because it’s so clearly a tremendously valuable asset. AE: And completely utilized by a generation. Yeah, absolutely. So, yes, Snapchat is always a question. AE: So now let’s get to the advertising piece on live. Because my opinion is the following, let’s just say you were right, 1% or 2%. By the way, this is a perfect framing for this interview, where you just sort of took it over. I think we’re actually conveying, at a meta level, the experience — the Ari Emanuel experience. So anyway, continue. AE: (laughing) Well, it’s kind of the experience, I’ve been reading your newsletter, and I just call you out of the blue, and we start talking. Roll the Calls Well, your book is Roll the Calls. AE: You got one of them! I rolled you! You did. It kind of made me scared for this interview when I was actually reading the book, I’m like, “do you actually stop for an hour and not talk on the phone?”. AE: Yeah, because it’s an interesting conversation, I’m going to learn something. I did remember the first time you called me. AE: You were in Asia, weren’t you? No, I was in Seattle the first time you called me, but I was still living in Asia. And the second time I was in Asia, I missed your call in the middle of the night. But what was striking is your assistant emailed me, I found the email asking for my phone number which says, “Ari wants to call you”. I replied, and I think my phone rang within 30 seconds, which was stunning to me. AE: (laughing) Were you sleeping, and you had woken up and got there? No, it was Microsoft Build, it was in May, so I was there. I think I was going to interview [Microsoft CEO] Satya [Nadella]. I was in the lounge at the Hyatt downtown getting breakfast. AE: Oh, wow. I don’t remember what the conversation was about. It was some Article I wrote, I don’t remember what it was. AE: I didn’t understand it completely, and I wanted some answers. Do you still talk on the phone as much as you did back in the ’80s? AE: Oh my god, yeah. I don’t like this whole thing. Ron Meyer once said to me, we were talking about this — and he still reads papers, and I read papers online — and he said, “You know, if texting existed before telephones did, and then all of a sudden telephones came out, people would be calling people as opposed to texting”, because the reverse happened, texting’s cool, and people just do that. So yeah, I’d rather have a conversation. The bandwidth is just higher. AE: Especially for me — one, being dyslexic. Two, the misinterpretation, potentially. Larry David can write funny texting, I can’t do that. Well, I think what’s interesting is, I mean, a lot of the book is — and you talk about this — just sort of your not giving up, I think, is a generous way to put it. Asking a million times, you mentioned the dyslexic angle, not being embarrassed, people can keep saying no — it doesn’t bother you. But I think there’s an aspect of that relentlessness combined with, in a phone call, because it’s so much higher bandwidth, you get the shape of the problem or the shape of the person much more clearly and so that pressure you’re putting on is also much more finely targeted. AE: When I get on a phone call, like I just hung up with Marc Andreessen about something, and I didn’t understand something he was asking me, I was asking him a question. I just want the answer to that one thing. I’m not sitting here — it could be 14 calls, because I might have multiple calls, but in each situation I don’t have a long conversation. I just don’t understand something, I want an answer, I’m going to the people that I think have an answer. That answer, for whatever my life is going on, answers some question that I want answered, to kind of continue a conversation or understand something so I can think about what we’re doing, how we’re thinking about this. This is one of the reasons I wanted to do this — because one, I love your newsletter, I read it, as you know, consistently, but I was wondering, AI, live — your point of view on it. I have a point of view — one, that people are going to have more free time, they’re going to come to it. But also, I think there’s going to be the ability to put it on social and I think advertising in arena is going to go pretty high, because you’re concentrated and I think that’s true for both TKO and I think that time that people have now is going to be so much more precious, they’re going to have more money — we can talk about that — and it’s just like where the world’s going. So is it “Mari”? Is that how you say it? AE: Do you know how that name came about? I do not. AE: I have a Monday morning weekly call with all the executives at TKO — WWE, UFC, everybody — and we were going over, I don’t know, an advertising issue or a site fee issue and the executive goes, “Mari!”, I go, because Mark Shapiro was talking — I go, “What did you just say?”. Oh, it was Mark and Ari. AE: I lost my shit on him, it was hysterical, then I had shirts made with “Mari” — Mark and my face combined, it was really funny, so that’s how it came. You mentioned, as far as the thesis, people are going to have more free time, live events are going to become more valuable. AE: And what were you just saying about your point of view about people’s time and events? You were just talking about. I agree. And I think there’s a second layer, which is I can relate to — you just have a question, you want to get answered. You came up in like the age of the world talking on the phone so of course you’re going to call someone to get the answer. AE: Or somebody that I think has thought about it maybe differently than me, that I could — would make me change an opinion or add to my opinion. Right. Well, but in the ’80s, you’re an agent, you needed to know everything that was going on and that was the original purpose of rolling the calls. So I obviously am younger than you. AE: It’s not obvious that you’re younger. (laughing) I know, you do look great. These are your barbells and your famous walking treadmill. So Google came out when I was in college, it was unbelievable, it was so much better than everything else. But even before then, you go back to me being a kid, and like having the encyclopedia at home, or having the dictionary. Every time you encounter a new word, go look it up, every time you encounter a concept, look it up. This aspect of just always, if anything comes up that I don’t know, “Get the answer!”. AI obviously takes this to the extreme — do you ever ask AI for any of your questions? AE: All the time. I was having this conversation — maybe this is way too political. I just didn’t understand why people, both on the far left and the far right, were using the phrase “genocide” as it relates to Israel and I said, “How the F did that work?”, there was that book about how words were created, I forgot the name of the book, long time ago I read it. So I used Grok, and it said, “This guy, 1944, a lawyer, family went through the Holocaust, etc”, and I’m like, they’re trying to take a word that was created because of a genocide, by a Jew, and make it their own — the whole thing blew me away, we all constantly use it. But that’s a great topic where it’s like, are you going to have like an unloaded conversation about that? AE: Every time I ask somebody, “Do you know where that came from?”, I just did it with Bill Maher — nobody knows. This guy in 1944 was adopted by the UN in ’48, and they defined the term in two different — a Latin word and a Greek word, and it was crazy. There’s this aspect though, when you can ask AI anything — tech is really fundamentally atomizing as it is, you all have your individual feed, I could be sitting here on TikTok, you’d be on TikTok, we’re watching totally different things, even though we’re sitting next to each other. Although our TikToks would probably be relatively somewhat similar. AE: You’re looking at golf videos? I go through phases. AE: (laughing) I go golf and surfing videos. Yeah, we’re getting into skiing season, all very aspirational. Not reflected in real life at all, at least for me. But one area where we still would talk to people all the time is asking for help or asking questions, “How do I do this?”, “I’m trying to figure this out”. And one of the amazing unlocks for AI is you can do anything. My assistant was just here and, like, he’s creating all these AI apps, and he didn’t know what GitHub was. He had to do all these sorts of things, but it’s fine — he could just take screenshots, and the AI would walk him through it. So on one hand, that’s phenomenal, that’s amazing, anyone can do anything if they have volition. On the other hand, in one fell swoop, we eliminated an entire vector of human contact. AE: No question. I now no longer — if you really want to get to it — except for how to train, you can put videos of your golf swing into the AI and say— I have a friend that does this! AE: “How does Mac O’Grady think about P2 and P3 and P5?”, and it shows you exactly. Yep, and he’s like, “My golf game has progressed more in the last three months because of that”. AE: A hundred percent. But the point of that is, I think this fundamental desire for human connection is going— AE: Going to skyrocket. That’s right. And so that’s the benefit of actual social media, not just UGC social media, but actual people that you know. It’s to the benefit of live and live events. AI and Creativity AE: But don’t you think AI is going to help user-generated? It’s going to unlock more creativity? They’re going to be able to do more because of it, and create more interesting user — with a little bit of AI in it? And I don’t think that is going to be detrimental to interaction. Oh, I’m not saying UGC is going away, this is an “and”. AE: I agree with you. One thing that has come up in reading your book and thinking of your history, very sort of clear, you came up big in TV when it wasn’t super popular. AE: You know why? Because the scripts were short. AE: 39 pages. See, I actually read the book. AE: It was so fucking great when I saw that I stopped sweating when people used to give me 120, 140-page feature scripts. I used to, when I got them at CAA, I used to go to Warner Brothers, and I would have the person that was doing coverage get me the coverage. So if there was a modern screen-reading software where the AI could just read it to you, would you have been a movie guy? AE: Oh my god, I do it now. I read a bunch of scripts, but one of the great softwares, I use Speechify — it’s incredible how it reads the script to me, and I can get them done now, understand them all in an hour. It’s fantastic. But then you see streaming coming, that’s sort of a big shift and I think sort of being attuned to technological changes and their inevitability. I actually have a question about that, I want to ask about the streaming shift specifically. But where do you see AI then in terms of entertainment? AE: I think it’s going to be an incredible unlock for creativity. There’s going to be some disintermediation for people inside the system that now exist because you can imagine, very soon, you’re just shooting — either it’s a green screen or light stage — you get the shot, you put it into the AI, say, “I now want this”, or you do the makeup once, and then the guy or the woman never has to put on makeup. There’s going to be some difficult conversations. But for the likes of great filmmakers like Baz Luhrmann or Alejandro, I think it’s only going to be one of the great creative unlocks of all time, and David Ellison talks about it, a lot of people talk about it. And I think the cost of production is going to come down in a good way. That means there’s going to be more content and I think there’s going to be more time for the consumer, and therefore a lot more content being made because David Ellison’s going to pay $30, I think Netflix is starting to pay more, Disney, Amazon, that’s only a good thing. There’s going to be more content being made, more creative, I think you’re going to find also a lot more creative people that we’re not thinking about now that are going to use AI to create an incredible storyline. But isn’t this ultimately a YouTube bull case? Why is that good for Hollywood? AE: No, I still think you need a Ben Affleck, a Marty Scorsese, a Baz Luhrmann — you need real, you know, Jim Brooks, Larry David — you need great creative to make great product. I don’t think it is like, “Oh, anybody can make a great movie, a great TV show”, I don’t think the AI is going to step into that breach, I do not believe that. Is it going to be, though, much more — you’re going to find the next great creators because they did get started on their own? AE: No, no, no. I think, first of all, if you are a creator — whether it be a writer, director, actor, whatever — this town finds you. Has that changed? How has that changed in the last 40 years? AE: It hasn’t. An agent’s going to find you, whether that be on YouTube or wherever, they’re going to find you and they’re going to help you and the great thing about being an agent is there’s constant conflict — budget, actor, distribution, storylines. Our job is to, one, get the best economics for you, find you the money. It’s going to be easier, because I think it’s going to be less money and then make sure the distribution, the marketing, and all that works properly. There’s going to be other ways to distribute it, that maybe you can create models that, depending on the economics, you can use the system on social, YouTube, etc., but the job of an agent to find those people — one, that are creatively incredible, and to match them and resolve the conflicts that occur — that is a skill set that I don’t think is going away anytime soon. Is Hollywood agents? Because I just asked about Hollywood, and you just gave me the bull case for agents, are they one and the same thing? AE: Well, you need us to make sure that whole assembly line of when products get made, to happen and sometimes it happens at the high end, which is a Warner, a Netflix, an Amazon, a Disney, and sometimes it happens at a smaller scale, and then you have to navigate how to get bigger people with better economics to buy it and that’s the job of an agent. Buying UFC One way to think about your career is you’re an agent, you’re hustling, start your own firm, firm needs to get bigger, you have two transformative deals — William Morris and then IMG. But then there’s the, “What? They just bought what? UFC?” AE: Well, what we did was, you know, this was Egon Durban and myself and when we were just William Morris, I was running around all over the world trying to raise money, as Teddy [Theodore Forstmann] got sick. In IMG, back in the day, I went to see Eike Batista in Brazil, who was at the time at $30 billion, one of the fifth richest men in the world, I saw Martin Sorrell when he was running WPP, Khaldoon [Al Mubarak] in Abu Dhabi, just to, “Okay, I think I’m going to need this amount of money”, and then I had been in business, you know, been talking through Raine, Marc Andreessen and Egon Durban. And Egon and I — when he had Skype, and then he had sold it, he wanted to put content on Skype, he had thought about that way before anybody was thinking about that. I think that was 2009 or ’10, so we had been talking about how to do that, he wanted Raine to invest. And he saw the world early, before anybody in PE had seen it, where it was going with content and distribution and that and when we had built the company, we were global, we had live events, we had sports production, sports distribution — we had negotiated all these deals on sports and movie and television rights. And we said, “We should now own something”, so we just had this combination where, when we represent something, we realized, “Oh, they’re losing value, and we could change it, then we could buy it”, we had the licensing business, all these things, we had sponsorship, if you put something on that you owned, you could really reap the benefits, and you do all the things anyway — you’re just collecting 10% and that was a conversation we had. The first one actually was PBR, and we made that work. And then Lorenzo and Frank Fertitta decided to sell and our nervousness was it was on Fox, the deal I had made — they could have stepped in easily, and then Jeff Bewkes at Warner wanted it, or his team wanted it. Jeff was trying to downsize, to sell it, and so he didn’t want to do it and that just left us against the Chinese, who was the other bidder. And Dana [White] didn’t want to go with them — he wanted to come, I’d known him for 20-plus years, and it was an