Marc Andreessen has taken the occasion of the Hollywood writers' strike to meditate on the folly of the entertainment industry, and the odds for revamping it in the image of Silicon Valley. When he says 'entertainment' he's really talking about the flix, both the big screen and the small screen. (For today we'll ignore the recorded music industry, over there in the corner being nibbled to death by ducks.)
If you're not in the Valley scene, the provocative nature of Marc's assertion that we can rebuild Hollywood may not be clear. In normal times, the Valley (that nebulous aggregate of entrepreneurs, funders, engineers and management) hates 'content' of all kinds. Pick your reason: We're notoriously bad at forecasting consumer tastes. We don't have the experience base. We've lost money every time we tried it. It just feels wrong. They're all partially correct over time, and collectively they mean that anyone touting the current generation's version of 'Sillywood' is going to suffer with a lot of people rolling their eyes behind his or her back.
And yet. We are all about disruption, and it's in the air. The advent of YouTube and its clones heralds that the 'visual arts' are within reach of assault, just as the coming of MP3 did for the music biz. And besides, those folks down South are more or less leaning over with a sign on their backs that says 'Kick Me'. So maybe it's time to risk the eye-rolling and have a go.
What We Have In Common
Stand back far enough, and Hollywood and the Valley do something similar: We bring new things into the world, in the face of risk. The tech heavy Valley takes a bigger helping of execution risk, and trendy Hollywood worries more about the fickle tastes of the audience. But from a financier's point of view, it's all risk.
And at the first level, we mitigate the risk in a similar fashion: portfolio theory. Knowing that many of our bets are going to be losers, we make a lot of them, and hope that some degree of judgement of properties or ventures, plus an appeal to the power of averaging, will bring us through with an acceptable ROI. In Hollywood, the portfolio managers are studios. In the Valley, it's venture capitalists (and corporate R&D managers).
The Hollywood Game
From there the models diverge. Both the VCs and the studio heads would like to think they bring something special to the game. Marc spelled out the Hollywood way concisely:
"The classic Hollywood economic model is built around the existence of a few very large companies -- studios -- that dominate production, marketing, and distribution."
Of those functions, production and marketing are a bunch of hired guns. It's distribution that has allowed the studios to dominate the entertainment scene. It started with the movie houses, and then the big 3 networks, but it's long since ramified into a complex mash of foreign rights, DVDs, tie-ins, logo'ed merchandise, and on down to the plush Disney character toy that turns up a world away.
That kind of distribution has been a huge barrier to entry. It's a risk mitigation factor that Hollywood can apply to turn the hits into ROI blockbusters, and the mediocre properties into profits after they've left the theaters. It's an asset that the Valley does not command, though we've had some relevant experience.
Back in the day, those of us in startup mode worried about The Channel, which at the time (we're talking the '80s and early '90s here), was the only way we had to get our products out to end users. We're talking retail computer stores, VARs, and stocking distributors like Ingram. The Channel is still with us, but much reduced in its power since the coming of the net. It's in niches like console games where a tangible good is still involved that the influence of distribution, and a vestige of a studio model (think Electronic Arts) still lingers in the Valley.
So if the choke hold of distribution can be broken for software and most hardware, why not for the flix? It's just bits. There Marc names the game we have to play: development of new business models for entertainment media.
How We Are Different
Marc pointed out one salient difference between the models: In the Valley, the creative talent is usually a part owner of the venture. In Hollywood, they are hirelings, paid by those who control the means of distribution. (Just go read it if you haven't already.) There are other differences that are just as important in constructing new business models, and envisioning what type of content goes with them.
Hollywood mounts projects. The Valley builds companies.
In film, the continuing entity is the studio and its distribution channel. The particular 'title' is usually ephemeral, as is the team assembled to create it. The ownership Marc describes is possible here because we create a corporate entity inside which multiple generations and lines of products can be housed, building equity if there is a success. It's telling that the proximate cause of the Hollywood strike is a fight over 'residuals', in other words, giving the talent an ongoing stake in the success of the title. As the power of distribution breaks down, the model is shifting in our direction.
Hollywood takes its risk in one shot. The Valley stages risk.
Most film makers found out how they did on their opening weekend. A winner gets the whole power of the distribution network behind it. A turkey goes off to DVD and foreign markets, and the tie-in deals are quietly cancelled. A TV series dies a more lingering death, but still basically gets one shot at finding an audience. This is the anatomy of a hit-driven business, evolved to maximize the wins at the 'head of the Long Tail.'
The Valley has evolved models of risk stages. Whether you call them A round, B round and C round, or Dev, Alpha and Beta, we're all about wringing out the uncertainties in engineering and marketability as we go. There's still a hit-driven element to the win - everyone loves a Netscape or a Google - but we're a lot better at getting rid of our turkeys before we fund the next Water World.
Hollywood stages spectacles. The Valley builds assets.
OK, that's maybe a bit harsh. A long running series, or a popular character, can indeed become an asset and risk mitigator for the next project. (Or lead to a crummy sequel.) And again, it's that continuing value that's at the core of the current conflict in Hollywood.
But it's generally true that the movie project is a one-shot. The whole notion of how a title comes into existence and is produced is dramatically at odds with the Valley system. You don't find Hollywood building 'the one to throw away', or beta'ing a lower production value prototype with a friendly audience. This may be the nut of the problem to be faced in applying the Valley model to visual arts: How do you create a continuing asset in which to share ownership, and which can gain equity value over time?
The Valley way (even more in an open source, networked age) is to start small, test a lot, iterate, save some features for later, do it again next year. What's the equivalent in visual arts? I have no crystal ball on this, but I'd speculate that some of the answers are in this list:
- Bringing back 'serials' as a form
- Long term character development
- Cross-pollination with manga and anime
- Direct to DVD projects
- Faces and characters that emerge in the blogosphere
In short, anything that can start small, find a place somewhere down the Long Tail curve, and work its way upward, gaining audience and value as it goes. Low-rent and scrappy. The night of the living dead for the Hollywood studio execs.