Why Silicon Valley and Hollywood Don’t Get Each Other and Who Will Win the Future

Posted on Nov 5, 2012 | 44 comments


For the past three years I have been pounding the table as loud as I can about the future opportunities in digital video. The concise guide is here.

My narrative has stayed pretty simple:

  • People in the US watch 5.3 hours of TV per day
  • People read for less than 30 minutes
  • You will not fundamentally change consumers media consumption habits
  • So you tell me what the future of the Internet will be?

Ah, but the CPMs on YouTube are so low! And investing in content companies won’t return money! Right? Wrong.

  • Yes, CPMs on YouTube are lower today. But audience size and consumption is massive and growing plus; Study Innovator’s Dilemma (my cheat sheet here)
  • Costs of product on YouTube content is literally 99% cheaper than traditional TV and;
  • Distribution of content can now go viral and can predictably distributed via social networks. Watch out for an investment announcement from me here soon.
  • For the first time in history content producers can build a direct relationship with views through subscribers, email addresses and mobile phone number. For once content is becoming like selling clothes on Gilt Groupe
  • It’s the reason I invested in Maker Studios and they’re on a tear. Now the largest network on YouTube according to ComScore.

Come on, Mark. You’re forgetting – you’re locked into the YouTube network and you will be crushed. Crushed, I say!

Bollocks.

  • You need to produce content for YouTube these days because that’s the lion share of online video consumption. It’s like selling candy bars and not wanting to be at Walmart
  • You need to segment your audience and find a way to get your highest quality customers over to O&O (owned & operated) inventory where you can get higher CPMs, sell merchandise and capture more customer information
  • Eventually other networks will emerge. They have to. Hello, Yahoo!?! (I talked to an ex Yahoo! senior exec about this more than a year ago. Interview here). Microsoft? Amazon? Apple? AOL? You know you want to. Must do. It’s the future, guys.
  • Over time if you produce compelling content you can package it up and repurpose it to distribute through other channels. If you don’t know that you don’t know anything about the TV & film industry

But here’s what Silicon Valley doesn’t get about Hollywood

  • No matter how much it bothers you, people do like to entertain themselves with a “lean back” experience. As humans we like story telling. And we like to be entertained.
  • This requires more than technology. It requires writers, actors, film crews, lighting, costume & set designs, make-up artists, post production, sound, editors and so on. You can’t replace this stuff with Java
  • It is no longer a “hits driven business” and I don’t know why VCs haven’t gotten that memo. Hits driven businesses come when production costs or distribution costs are so high that you need a home run to cover the huge costs of development. At Maker Studios we can produce content at $200-$400 / minute. If we get a video wrong our loss is $2,000 at the most. But many of our videos get predictable traffic like this Gates vs. Jobs rap battle at 33 million views (and climbing) or my favorite Mr. T vs. Mr. Rogers at 36 million.
  • Ironically in Silicon Valley consumer Internet business have become hits driven businesses. Think about. You now need a star like Jack Dorsey or Dave Morin. You need a huge budget – millions – to shoot for the stars. And you still have no idea if you will accidentally become Pinterest or if your $41 million will produce a Waterworld.

And what Hollywood does’t get about Silicon Valley?

  • A very senior executive in this town that everybody knows still privately told me that he saw the Internet as “dumb pipes” and “just the latest last mile like cable.” He said, “in the end great stories and actors are what people want.” Guess what, Hollywood. That’s bullshit. The Internet is “smart pipes.” For the first time in history you can know who is watching your videos. You can A/B test your videos, your copy, your thumbnail images. You can earn the right to ask for customer information and remarket to them. And if you don’t capture the customer relationship – trust me tech companies will. You don’t want another Walmart to dominate your distribution.
  • When I asked many traditional producers about YouTube money they got they told me, “I got the talent, the audience will come.” Me, “ok, but who is going to provide your technology? What analytics are you going to use? How are you going to drive social adoption? How will you grab email addresses? How will you get people to download your apps?” Them, “Oh, we’ve hired A,B,C company to do it for us.” Me, “I see. You only wanted the golden egg so you gave them the goose. Well played.”
  • Your antiquated systems are necessary for your old-line businesses. We get why windowing mattered in a physical world. It will matter much less in the future. We get why agents run around town brokering deals and making it more complicated to do business. Business managers, lawyers and other red tape. This system can’t hold up in a world of deflationary economicswhere the cost structure of the industry won’t support it.
  • Hollywood cringes at the quality of YouTube content. But that’s because they can’t understand The Innovator’s Dilemma that in a world of abundance very few shows can support the cost structure of traditional video. And anyways with every major change in the medium the type of content produced has changed. The Internet video era will not equal the old living room experience. We have second screens, social sharing, social viewing, participation and so much more.
  • I think the people who get it the most are creative talent. They like the fact that the time from creation to seeing finished work in front of customers is dramatically reduced. Creative people hate working on projects that take years until an audience gets a look. And I’m guessing creative talent will have more control. If you’re a writer this must be nirvana.

So Who Will Win the Future?

Me? I’m looking for a new breed of entrepreneur. And I’m seeing it emerge all around me in Los Angeles. We now have an entire industry spun up here of next generation content producers. In just 2 years we’ve gone from garage startups to more than 600 people across just 5 companies: Maker Studios, Machinima, FullScreen, BigFrame and Zefr. And video views now produced and managed by these 5 companies totals more than 4 BILLION per month. With a B.

And that’s not including scores of other networks like StyleHaul, The Young Turks and others.

And I’m also funding a new breed of entrepreneurs bringing tool sets to this new Hollywood ecosystem that has developed.

I’m looking for people who understand how to bridge the North / South divide.

If you want to know more you can watch this video interview of Sam Teller interviewing me at the Paley Center. It’s about 40 minutes long. We cover a lot of topics. I think you’ll enjoy it if you’re interested in this topic.

  • http://www.onetact.co/ Rishi

    Mark, Somewhat relevant…I’m probably being selfish here because I’m trying to validate a product we are about to work on…what would your thoughts be on future of audio/radio? I’m not talking about something like Pandora, but more of audio as a medium to publish digital content. About 1 in 2 car drivers in US spend about an hour driving (alone) everyday, and I think that’s a huge market.

  • George Strompolos

    Own the audience and the rest will follow.

  • http://bothsidesofthetable.com msuster

    I have looked at some people trying to tackle that market including DAR.fm and Jelli Radio. Not sure of the right solution but agree that there is much time / attention paid to radio in the car. Car time = captive time

  • http://bothsidesofthetable.com msuster

    That is for sure. Amazing to see the growth of LA video networks and how little is known about them outside of LA/NY

  • Ben Tseitlin

    loved the interview. i’m super excited about this space and feel there’s never been a better time to create a content company with direct distribution. hope to see more interviews about this from you

  • Sam Hocevar

    If the future of Hollywood and the Silicon Valley is “Gates vs. Jobs rap battles” with billions of views (OH YES WITH A B), I don’t want either to “win the Future”. I want both to die in a fire and their ashes burnt into smaller ashes.

    I wish you a very nice day.

  • http://www.facebook.com/efader Eric Fader

    Both Hollywood and the Valley still have a long way to go. Both need to work together so that shows, movies, and games are simultaneously released across platforms that consumers want. Ex: Movie available in theaters, online, dvd, at the same time.

  • http://www.facebook.com/joshuajordison Joshua Jordison

    Great post. There’s a great deal of opportunity right now, between the entertainment industry and the tech industry. There needs to be more communication between the two industries, which requires each to learn to speak the other’s language. In the end, I think it will be the tech industry that extends the olive branch – at least that’s what I’m seeing, as someone who works in both industries.

  • http://bothsidesofthetable.com msuster

    thank you. If you follow link at top to presentation I gave last year there’s a 20 minute video there. And speaking at Paley next week in NYC and likely will be livecast.

  • http://bothsidesofthetable.com msuster

    That may be. And you may not eat McDonalds every day either. But turns out much of the country does. I don’t. And I don’t watch YouTube comedy every day either. Being a target demo vs. understanding target demo very different thing.

    I am used to commentary like yours. It is your revulsion for that which is not educated enough for you. I read the Economist. I read the New Yorker. I watch Meet The Press, for Pete’s sake. But I acknowledge many more people read the USA Today. Or TMZ.

  • http://bothsidesofthetable.com msuster

    windowing will change over time as virtual trumps physical. but won’t die straight away as old economic systems never do.

  • Jackie Lampugnano

    Hi Mark,

    I’ve been reading your blog for probably the past year or so and this is the first time I’ve commented. Apologies for that. I promise I always RT ;)

    The reason I’m commenting now is because I think it’s *finally* time for me to ask a question. You continuously bring up the Valley and LA (sometimes NYC too), but I’m wondering specifically…do you have an opinion about Chicago’s startup/entrepreneur and VC scene? I can recall maybe one post where Chicago was even on your radar. If that’s the case, I’d be interested in hearing why you think we’re so far under the radar. I work in tech PR in Chicago and recently joined a VC that’s well-known here but maybe not so much on a national level. Right now I’m looking to get as much outsider perspective and feedback on the subject as possible, and I’d love your input.

    Would you be willing to share some initial thoughts with me? I’m happy to connect off of the comments section if that’s easier for you.

    Looking forward to getting your input!

  • Gunther Sonnenfeld

    Mark — insightful piece on many levels. I come from both worlds, and I’d say the one thing that Hollywood still has on the Valley is a more artistic ability to tell stories (and more seasoned storytellers)… But that is a whole separate discussion in and of itself. As I’ve discussed at length with Ezra Cooperstein regarding the tech and media side of things, impression models are still very antiquated (or just underevolved), but I do think there is great value in three areas of what I call “audience intelligence” — impression value, viewership capacity and network effect. I talk a bit about it here, based on some work I did recently for Hulu:

    http://goonth.posterous.com/143503710

    Cheers,

    Gunther

  • http://bothsidesofthetable.com msuster

    Coming to Chicago next week to speak at Seedcon so maybe chat there?

  • Nick Brody

    Epic Rap Battles is 3 mins of cool, I think (My son will probably think it’s great). Can you give some more examples of Maker’s disruptive $200-400 per min content? I will be watching Homeland while waiting for a response.

    Point being, I don’t think Maker Studios or anyone has really figured out how to mechanize GOOD, FAST, and CHEAP. As the saying goes, pick two. Inexpensive production equipment and ubiquitous distribution (see YouTube) are the game changers. These factors have led to a new era of creativity and content from all over the world. I am not sold that a low cost centralized production model (studio) is really meaningful in this larger tectonic shift in digital creation and distribution.

    Also, I believe I read as part of their funding initiative, YouTube put $6-10MM in Maker Music, Tutele, Moms View (Owned and Operated properties), which according to deadline are doing a combined 200,000 views per week (aka hundreds of dollars in revenue). How do you explain?

    Overall, you make some great points. This is an exciting space and there is an interesting opportunities for first movers. However, I do think you are overly bullish on video production as a VC financing opportunity.

    Enjoyed the read…Keep up the great stuff!

  • Darren Marble

    Mark, I think you’re spot on regarding trends and opportunities around short-form content. What you neglect to mention is the equally transformative change taking place around feature films and the studio system, which is what most people think of when they hear “Hollywood” – not YouTube.

    FilmBreak aims to exploit the massive inefficiencies in the filmed entertainment industry by launching a fully integrated virtual studio (next week). Specifically, we have built a tool that allows filmmakers to actively build, engage and monetize their audience. Through audience aggregation, filmmakers are able to unlock financing and distribution opportunities via our online marketplace.

    We’d love to sit down with you and show you the progress we’ve made since we met earlier this year. I am a huge fan of yours and look forward to hearing more from you about the other half of the “Hollywood” equation.

  • http://bothsidesofthetable.com msuster

    over time we will increase the costs of production / production quality. but we have many shows that are consumed by 10s of millions every month

  • Denis Kitchen

    CPMs? What’s that?

  • Nick Brody

    How about this thought: YouTube (digital video) is as close to TV as Magazines or Blogs are to Books. Same medium, but vastly different consumption experience. “Gates vs. Jobs rap battles” is great for YouTube. And there is no shame in that. It is snackable, sharable. relevant, great for the kids. It is not TV or Film. It is not Mad Men, Monday Night Football, Modern Family, or The Avengers. We can compare YouTube and TV based on time spent, but let’s not get caught comparing apples and oranges. It’s a fools trap for the time being. Certainly digital video will grow and traditional media will contract…a bit. Let’s just enjoy and celebrate YouTube and the awesome companies, content, and creators who power this massive and disruptive platform. The game will change, but for all our sakes, let’s not loose sight of what it takes it make and market Mad Men, Monday Night Football, Modern Family and The Avengers…more than $400 per min.

  • http://www.3pmobile.com/ Peter Cranstone

    Interesting play. Although $2.5m split between a couple of VC’s is NOT a big bet, it’s barely getting your toes wet. And what about metrics like ‘Net Profit’? (that funny little line item that people forget about).

    The page views look amazing, the number of channels huge, but the 64 dollar question will always center around the quality of the content and the ability to monetize.

    So i’m trying to think of the exit strategy. Who buys Maker? or who copies it if it’s successful? The cost of switching can’t be that much, the audience just moves to a different URL.

    As Steve Balmer once quoted there are four stages to a company. Think it up, scale it, milk it, think it up. The killer is always the third stage and it will be interesting to see what Makers B and C round look like.

  • Simo9000

    That is thinking like a fox. As low brow as it may seem there is a ton of money in viral video. You can’t compare Antoine Dodson and the titanic on a literary level. However they could rake in comparable sums if real time auctioning went on behind the scenes and ad spot prices chased viral videos.

  • http://ryangtanaka.com/ Ryan Tanaka

    Hi Mark,

    I’m sort of in a similar Hollywood-Valley type of area right now, and have been working with and advising a few startups in the “Silicon Beach” area during the last few years in addition to writing about the issues surrounding its practices. The issue that a lot of people are grappling with right now is, as seen even here, is the quality of content that the internet has been producing as of the late.

    As mentioned in the article, you can’t replace creatives with code, though the perception that it might have been somewhat possible in past years, I think it itself has caused the value of its labor to be devalued overall. It’s particularly bad in music, where even the London Olympics refused to pay the musicians because they were getting “publicity” — and it’s not unusual for artists to get the short end of the stick in this way, even in the “real world”. If you look at wage standards, any study will show that it has gone down since the advent of the internet — so it’s not really a “nirvana” situation for the vast majority of people out there.

    I’m most interested in seeing the Valley bring its culture of meritocracy into artistic practice, because I think it could do it a lot of good. If they prove themselves, they pay their engineers very well and take good care of them so they never leave, and I think this practice has worked very well. The majority of entertainment productions right now are through short-term contracts, so there’s kind of a schizophernic feel to most of the things out there even in the content that they produce.

    I think the internet can be made into a cultural hub at some point, though it will have to move away from its “free for all” mentality and into something with more of an active curatorial process with clear, sustainable, and realistic means for independent artists to carve a living for themselves through their work. Only then we might see some things with artistic value come out of the net. As it stands now, the infrastructure to make it happen simply isn’t there.

  • http://veespo.com David Semeria

    About a year ago my wife got me into “Modern Family”. Watched one episode and I was hooked. Why? An ephemeral combination of newness/wittiness/direction/acting.

    Key point: I didn’t know any of the actors when I first watched it.

    This is why you’re right Mark: give talented people the means to create REALLY great output in a professionally produced context and the punters will lap it up.

    They don’t give a duck’s arse who the actors are.

  • http://www.onetact.co/ Rishi

    Thanks Mark. Jelli seems to be doing something interesting.

  • http://www.larry.com/ LE

    “I’d be interested in hearing why you think we’re so far under the radar.”

    Let me take a shot at that. I don’t read anything anywhere (in what I read) about tech in Chicago. Only exception might be groupon (if you want to call that tech).

    The answer is obvious. Lack of PR. Ironic.

    PR is driven by the main stream media as much as it’s driven by mention by Mark, Fred, TC, HN, TMM, TNW etc.

    In order to get main stream mention you have to have your “dead body parts selling on ebay” moments. You have to have an angle and create a story about a company that the main stream media will find interesting because there is a hook or angle.

    It’s not that hard to do. There is always an angle. And when there isn’t one you can create one from practically anything. I’ve done this and have gotten mention on front page WSJ by simply releasing information with a twist at the right time of year strategically which hooked the writers. Not that difficult to do. I’ve gotten other mention in the NYT by simply coming up with a quotable that I knew the writer would be able to use. Find the angle and create the story. Contact me if you want further ideas.

  • http://www.larry.com/ LE

    “I acknowledge many more people read”

    Never forget the entrepreneur that I invited to speak to a class when I was in college that said “serve the masses, eat with the classes” (he was a builder of lower end housing.) In real estate there is room for Trump and Trump’s father.

    By the way as far as quality goes, I went thought that issue with laser printers and the lack of quality vs. high end typesetting. In that business (the 80’s) all the professionals laughed at the idea that people would accept 300 or even 1200 dpi. They were wrong. Not only did the market get larger, the quality got better and people were willing to accept a lower end product for their office sell sheet or product catalog.

    I also remember back in the 90’s a jeweler with a family history dating back to the 30’s in that industry stating very emphatically that diamonds could never be sold over the internet because customers needed to see the product in person. His wife is now supporting their family, the market has completely dropped out of his business (wholesale and retail) because of Blue Nile and others.

  • NathanLA

    I couldn’t agree more and it’s amazing that this is still an issue. Content will always matter, just not content as we’ve known it. Personally I love having access to quality, niche content over most broadcast content.

    Short-format seems to be the first step. Without the rigid constraints of broadcast slots (read VOD -v- over the air), quality can come at the expense of scope. An added benefit is the length of a show can be whatever makes the most sense artistically. Quality is quality, whether it comes in a bite-size 5 minute clip or a 90-minute film.

    As an auto/motorcycle enthusiast I love what Drive and RideApart are producing on YouTube. They are local and aware of the larger/longer value owning the content and distribution hold to their future. I can only hope for shows that speak to my other interests in the future.

  • Scott Schlichter

    Mark,

    There is a strong argument for “in the end great stories and actors are what people want.” We’ve seen consumer sentiment in what they consume as entertainment for years. Crappy shows on TV disappear. Bad movies die in week 2 at the box office.

    All of your assumptions and thoughts are correct, only you left out an enormous piece of the puzzle that adds to your thesis

    Maker Studios, Funny or Die, and others are winning the views battle with shorter form, bit size, consumable $200-300 per minute content. I totally agree and it is changing everything. However, this is all new, made-for content, but there is an enormous amount of library content that is available that has of yet come into the market. This substantial available content can now get off the sidelines and participate either as full shows/films, or be produced down to bit size segments. The converse of your suggestion to combine for other distribution.

    What has changed to open the flood gates for this content? It is the perfect storm of technology providing lower bandwidth costs, multiple distribution outlets to monetize, deflationary economic conversion and distribution toolsets, and commoditization of storage prices. Our company has begun to merge North and South, by using these tools on what has been a stagnant and antiquated business model for the “old” content. In fact, in many cases this is the story, actor driven content that your senior executive is talking about, to to make it available you need technology to drive it.

    It is this convergence of North of South that will open not only smart pipes, but getting to the pipes themselves. Heavy cost of production/post production opened the door to the new studios (anyone with a camera and FCP). Technology has also opened the door to the consumers for entertainment. It is the same technology that can “smart” up tools to uncork existing content, which is a low hanging fruit that will play an important and significant role in this new market.

  • http://twitter.com/bwertz Boris Wertz

    Great post, Mark, and I definitely think that are some interesting opportunities but you could also make the case that video follows exactly the path of social gaming (though at a different scale): we thought that social gaming marked the end of a hit-driven business until the noise in the vertical got so loud that it became again a hit-driven business; we also thought that Facebook woud only be the initial distribution channel and in the long-run gaming companies could build up their O&O properties – 5 years later, nobody has made significant progress. I agree with you that there are great opportunities in creating long-tail video content for the next 3-5 years but ultimately barriers to entry to content production are so low that the only winners will be the networks (i.e. YouTube)

  • https://plus.google.com/u/0/b/114718778524214371963/114718778524214371963/posts kidmercury

    Mark I am very disappointed with this post. I agree with the whole thing so there is nothing to beef with. And on top of that its not long enough for me to diss for being too long. Its even formatted well to make reading easy. So what am I supposed to say?

    Not cool mark.

  • Jean-Michel Koenig

    Fascinating stuff. The question is how do you find a non-traditional path to profitability for content that costs millions of dollars to produce like animated feature films? As an independent studio in Cape Town (Triggerfish Animation Studios) we’re very excited about the disruption, but the traditional model still pays the bills. There is no way we could make a return using YouTube.

  • A

    This line stuck out for me: “This requires more than technology. It requires writers, actors, film crews, lighting, costume & set designs, make-up artists, post
    production, sound, editors and so on. You can’t replace this stuff with Java”

    THANK YOU. I can’t count how many VC’s look at me & say “the company’s not focused enough on technology”. It’s because our metrics our driven by CONTENT. That is what keeps our audience engaged, that is what brings in our advertisers, that is what drives our revenue & keeps this company kicking.

    Advertisers could care less about what platform you use, or whether it’s PHP or Java. They want profitable audiences.

  • Chris Yeh

    I didn’t realize you were invested in Maker! Good call.

    The way I like to think of these issues is a matter of content and distribution, not content versus distribution. The more the world wants to share, the more it needs things to share.

  • Chris Yeh

    One more thought:

    Today’s Hollywood studios are hit-driven in a bad way. They refuse to bet on anything unless it has a II or III in the title, or springs from a comic book.

    It’s not clear to me that the consumer internet is hit-driven in the same way. People bid up the hits, but the hits aren’t hits because of the “stars” attached (hello Color!). The hits are hits because people adopt them en masse (hello Pinterest!) even when many investors previously ignored them.

    Our business is far less predictable, and it’s far more plausible to build a smash product on a shoestring than it is to film a blockbuster on a shoestring. In other words, we have numerous “Blair Witch Projects” every year; Hollywood has one or two per decade.

  • http://www.justanentrepreneur.com Philip Sugar

    When I see the 5.3 hours of TV I wonder how much of that is “content snacking”. I.e. the TV is on, but its not dedicated watching. You are doing something else. Even during football (hate the Eagles, but my Cowboys are right there in the cellar with them and the Redskins), I’m not really dedicated watching I’m messing with the home network etc. Again I shouldn’t extrapolate my behavior, but I don’t actually think anybody has solved the “background video” from an internet perspective. Maybe I’m wrong on that as well.

  • Jonathan Vanasco

    Mark, I want to hug you.

    I got into this argument with Jeff Zucker at a Harvard Business School Digital Execs roundtable that the Committee for Concerned Journalists organized last year. He went on his tirade about Analogue Dollars vs Digital Pennies and most of the other media properties (I repped TheDailyBeast/Newsweek) and the HBS profs were loving it. But they just didn’t see the right picture, and I pounced on that. The vast majority of people running Hollywood & Media see every transaction as a loss of a real, tangible good… not just in terms of revenue, but in terms of Supply , Demand and inventory. In Zucker’s mind, he equated every person that purchased an episode of Friends on iTunes for 99¢ as a loss of someone who would have bought a DVD that bundles multiple ones together for $19.99. iTunes, to the media old guard, doesn’t just devalue the price – but also the bundling control.

    Among the many problems with this view on digital media is the fact that it is publisher and immediate-transaction centric. It doesn’t take into account the end user or a realistic market. iTunes didn’t succeed , as Zucker argued, because they undervalued a $15 CD to a 9.99 download (or 99¢ song) — they upvalued a stolen/freely downloaded song. iTunes didn’t dominate the market by competing with CDs, they were competing with Napster/AudioGalaxy/etc. Steve Jobs made it cheaper , easier and faster to legally download a record than to steal it. For only 99¢ you could immediately get this great new song by _____ , or you could spend 2hrs trying to find a copy and then wait for it to download. This line of thinking was alien to just about everyone in the room with me. If you drew a venn diagram, they would have one circle of potential customers, with the same pool buying physical and digital goods. In reality though, we have two circles – some people only want digital, others want physical, and there’s an overlap in between.

    When you talk about CPMs, I can’t help but think of Hulu. When they got pressured into kicking Boxxee and other devices off their site… it was a sign of them going downhill. It could/should have been a huge partnership where they would instantly be able to say “GREAT! we can now use a device ID to segment out all the people who buy tech stuff early , and sell higher priced ads to them”. Instead they created a system where users tried to hide. Honestly, they just don’t “get it” when it comes to digital.

    That’s why I think Silicon Valley and “consumers” will win. The recording industry shot themselves in the foot and are quickly becoming irrelevant. Video and Publishing are doing the same. They’ve had every chance to learn from mistakes, yet fight it. The longer they refuse to shift with the market, the smaller their addressable market will be.

    Incidentally, my new startup offers toolsets for Content Creators. We’re not focusing on video right now, but it’s the next step…

  • NathanLA

    Mass Animation is taking a stab at crowd-sourced animation. They have a small team but a few heavy hitters. http://www.massanimation.com/

  • Nick Brody

    That’s not an answer to the question. If seems with +$6MM you could deliver more than a 200K views per week. This reality seems to fly in the face of your thesis.

    “over time we will increase the costs of production / production quality” and over time you will find yourself competing with the many accomplished incumbents (NBC Studios, Magical Elves, Fox Studios, Original Entertainment, Endemol, Fremantle, etc etc) . You act as though you are inventing a new thing called low-cost production. You don’t think everyone is trying to create great content at a low cost. The reality is it’s hard. It takes years of training to make great content. It takes great writers, producers, editors, etc. These people are expensive and you get what you pay for. 3 college kids with a 7D does not guarantee great content. So, where is the competitive advantage? Where is the differentiation? Where is the reinvention? Where is the scalability?

    Mark, you make some great points, but you should spend more time looking at the traditional production and distribution models before you start quoting the Inventors Dilemma. Have you been on a film set? Have you been to a TV show tapping? Have you spent time with the best production companies in town? This would be an informative process in your crusade.

  • http://about.me/lord_nolan Nolan Clemmons

    Wufasta: The Premiere Prize Portal for Online Gaming.

    We aim to capitalize on the two things that people love most: digital entertainment and free stuff.

    angel.co/wufasta
    launch.wufasta.co

    Yes, there is “growth” in Mobile & Social Gaming, but they suck. You won’t have as rich of an experience playing Angry Birds on you phone or Farmville on Facebook as you would from PC, Console or “Portable” (Nintendo DS, PSP/vita) Gaming.

    Core gaming predates Facebook and the iPhone. Think back and remember what that time was like for us. That’s what I mean when I talk about “gaming”.

    Enough about my own stuff, back to the Future of Video:

    I can pirate whatever media I want. I don’t pay money for that stuff. I usually don’t see ads or commercials either. The occasional one or two will slip through Adblock.

    The only point of TV then is for live events, such as Sports (which I can still pirate, but the picture quality is poor). I don’t deal with “TV market blackouts”, I bypass them. So then what’s the point of not giving me what I want for free when I will get it anyway?

    I don’t even care how the new stuff “monetizes”. Just give them the money so that I can watch cool stuff for free. No more lame movies. Stop over-paying celebrities.

  • http://www.bluecoastrecords.com/ Cookie Marenco

    Interesting post and comments. I agree with most of what you’re saying, though, I don’t believe I would have kept “and who will win the future” in the title of the piece. To have a winner implies there is a loser between Silicon Valley and Hollywood. IMHO, they are very different beasts that need each other to co-exist and work together.

    I’m a Bay Area native that has survived here creating content for more than 30 years. The Bay Area has never been conducive to content creation. What does exist in the Bay Area is the sense of freedom of thought, rebellion from the masses, non conforming creativity, new technology, mild climate and an open, culturally diverse lifestyle. But it’s almost distasteful to earn money from content here. Crazy.

    Digital Audio Workstations, computer graphics and games all had their start in the Bay Area, in no small part due to Lucasfilm and Apple — just a few to mention. But what percentage of the content comes from the Bay Area? and where do content creatives earn a middle class living? Not in the Bay Area. I survived by working with technology and getting paid well, but am a relative unknown anywhere else outside of the niche of industry extremists I cater to.

    Technology doesn’t sell content, but content sells technology and content needs media to reach the masses. That infrastructure does not exist in the Bay Area.

    Let’s say you’re in Omaha… If you want to be a film director or tv star, you move to LA, you don’t move to San Francisco. It’s a different money game in LA because you can monetize content in LA.

    There’s probably a reason why George Lucas was the only investor in Lucasfilms. And even he is leaving his legacy to Disney in SoCal. Who’s he going to sell it to in SV? Google? don’t think so and thank god for that.

    Mark, I’m glad you still have a soft spot for creatives. :) I wish you the best.

  • VL123

    Ha….keep dreaming. Obama will tax any incentive or entrepreneur idea. And Hollywood will be happy with it. You didn’t build that!!

  • http://www.bluecoastrecords.com/ Cookie Marenco

    Jonathan, these are excellent points. Along your line of thinking, and involving music sales… In our startup, we have a businesss model based on upvaluing the consumer sound experience using a new audio format. We’ve introduced it to a very focused group of consumers based around their purchasing of audio gear. We have found that these customers are willing to pay as much as $4-5 per single and $40-50 for an album download. 70% live outside of the USA.

    These customers value the emotional experience they get from sound, not the ease of holding 10,000 songs in their pocket. Because we control the experience from content creation to customer delivery and payment, ti’s allowed us to own the database of customers, not just the users of free downloads. Uptil now, in both traditional physical distribution and mp3 digital downloads/streaming, content creators did not know their customers. It allows us to engage, converse and offer products that we know they want in advance, not just what we’ve guessed through trial and error.

    As you said, this is about both digital AND physical content for customers. While the CD is considered ‘dead’ we had enough response for physical products that we branded a new ‘upvalued’ CD made from gold. It offers a better experience and we found customer will pay $40 per disc. Our sales doubled nearly over night… and as you pointed out, many customers want physical and digital products which we found to be true.

    Focusing on what the customer wants has never been what record labels were good at (having worked for them, I have direct experience). Once you engage a customer and converse, they’ll not only tell you what they want, but will buy all kinds of products from you. You can target smaller runs of focused content/products and add a healthy margin that goes back to the content creators.

    Again, you made some very great points. I’m interested to hear more about your startup!

  • http://youarekillingme.net steveray

    Thanks for writing Mark, you have been a great champion of our space.

    The content quality issue always comes up, especially for those of us born in the pre-cable TV era. It is really hard for those uninitiated with YouTube culture to appreciate the content on there at first – it certainly was for me, and sometimes still is. After you have spent some time inside (or watched how teens and tweens consume content now) you realize that much of YouTube content is very “native to the web”. It is the natural evolution of the trends that Clay Shirky, Kevin Kelly and Seth Godin have been talking about for years. Content consumption on YouTube is a 2-way street in ways that really transcend the pixels in the media player.

    And thank you for Silicon Valley, for making YouTube and the myriad content distro and marketing tools we are using to create the next class of media companies – couldn’t do it without you.

    Steve Raymond – CEO Big Frame

  • James Cherkoff

    Excellent use of the word ‘bollocks’.