Strauss Zelnick on Embracing Change Through Innovation and Creativity | 2024 Upfront Summit

Aditi Maliwal (0:00)

Hello, everyone. Good afternoon. We have audience members ready.

Hi, Strauss. Thanks for joining us.

Strauss Zelnick (0:10)

Nice to be here.

Aditi Maliwal (0:11)

It's good to have you here. There's so many things we can talk about, but I've been told we only have like 23 minutes. So we're going to make it as speedy but kind of get into some of the greater stories.

I want to start off by asking, take us back. This is also going to give you a good lead up into telling us more about you and how ZMC started, but you're now running a $35 billion holding company amongst other things underneath it. How did that whole journey begin?

Strauss Zelnick (0:42)

Well, it began in borrowed offices with second-hand computer equipment, and we had one fewer chair than we had people working at the firm. And that's true. And when you tell when the men's room was usually out of commission and the way it was out of commission is you would go into the men's room and there'd be water sheeting down the wall.

And I tell that story because, you know, when people, when things work out well, everyone looks at it and says, wow, that was like, that looked very inevitable and very quick. And I like to say the only overnight successes are other people's successes. And it actually wasn't romantic at all. The reason we started the business was we thought there was a great opportunity to invest behind the notion that digital technology would supercharge entertainment, communications and all forms of media, which in 2001, I thought was a completely obvious idea. But thankfully, big media did not think it was either an obvious or smart idea.

And if you take a look at the market caps of big media companies, so our market cap at that time was exactly zero. Oh, and by the way, we had no capital whatsoever.

Aditi Maliwal (1:52)

And now take the aggregate— We have a lot of scrappy entrepreneurs in this audience.

Strauss Zelnick (1:55)

Yeah, you need to be. And take the aggregate market cap of the big entertainment players, which is where I came from, Legacy Entertainment, in 1 and now look at it today. So to put it in context, you talked about the assets that we manage today, and today Paramount Global's equity market cap is about $8 billion. Just to put it in context. Wow. So anyhow, we started that way. We were a fundless sponsor for seven years. Another way of saying we had no money.

Raised our first fund. I have investors in the audience. Thank you. In 7 and 08, which is a hard time to raise a fund. Thankfully, we did well. Our second fund in 15, third fund in 19, and basically just finished raising our fourth fund.

And what's interesting is the same notion, the intersection of digital technology and all things media, remains as powerful, if not more powerful, an idea today as it was back then.

Aditi Maliwal (2:51)

You do multiple things. I want to start there.

More on the professional side. We'll talk personal at some point. You're an investor, but you're also an operator. You're engaged on both sides of things right now. How are you spending your time, and how are you prioritizing what's most important right now?

Strauss Zelnick (3:10)

It's a great question. I think part of it is ZMC's approach is that we're very hands-on, and we're very, very disciplined about the companies that we take on. So we're in our fourth one. We've been around for 23 years, and I think we have 10 companies, and we've done well. Most of our competitors with the same AUM would have 25, 30 active enterprises. And we also have a lot of people for relatively small private equity firms, still a middle market firm. We have about 35, 36 people. We are actively engaged with all of our businesses, and I oversee all of them.

So I'm engaged with... I mean, we have one of our investors in the audience, so she'll appreciate this. I mean, we have a company that's in the live entertainment business. It's a great deal. It's a phenomenal deal, and it's going really well. And they actually... You wouldn't have never... There's not one person here who ever has been to Pigeon Forge, Tennessee. If you've been to Pigeon Forge, Tennessee, all right. Did you go to Dolly Parton's Stampede?

You did. We own that company.

So we feed 1,000 people three times a day at Dolly Parton's Stampede. You're looking at a man who sells 2.4 million chickens a year.

And by the way, when I got into this business, I never thought that media included selling chickens, but it turns out it does. So anyway, I spent last weekend with my family doing a taste test because I thought the dessert was no good at Dolly Parton's Stampede. And I can tell you that the apple turnover has been reformulated, and it's going to cost us three cents more per serving, and it's much better.