Panorama Capital’s Allan Leinwand asks Giga Om readers: Is the Writers’ Strike: An Inflection Point for Online Video?
Venture capitalists are always looking for inflection points in a market – events that turn a market up or down dramatically. [Will] the writers’ strike in Hollywood be the inflection point that will drive mainstream America off their couches and onto their computers for new video content?
I am not referring to YouTube clips or previously aired network television shows online, but something that Mom and Dad would want to sit on the couch and watch for an hour. We’re still waiting for the market to really rival that of traditional television.
This morning, the NY Times published a story on how lunchtime is online video time. I personally think online video has in some ways replaced the proverbial cigarette break. In other words, I do not think people consume video in the way they take lunch breaks, but rather, people consume video the way smokers light up during the day: too frequently and throughout the day… and then again when they’re gone from work. Video consumption is no longer the anomaly or an exception, it is the rule.
Summer 2007: Online Video Hits Inflection Point
Connecting Mr. Leinwand’s question to my comments on the NY Times’ story, I think that indeed online video has already reached a tipping/inflection point. I think that happened sometime in the summer of 2007, when:
- Nearly three out of four (74.3 percent) U.S. Internet users streamed video online.
- More than one out of three (35 percent) U.S. Internet users streamed video on YouTube.com.
- The average online video viewer consumed 63 video streams, or more than two per day.
User Consumption vs. Corporate Spending
That is in terms of user consumption. VCs care more about corporate spending since advertising, and not subscriptions drive the Web economy. But online video advertising is just not there yet, though it has grown quickly and will overtake search by 2018 as total online advertising surpasses TV advertising by 2021, something we’re already starting to see in parts of Europe.
The Role - and Responsibility - of the Money Men
Ideally, VCs like to invest right before inflection points: early enough to avoid paying a premium but not too early when it’s unclear who will win. VCs have over-invested in file sharing video networks and video ad networks. Personally (I’m biased in saying the following), I think VCs need to start investing in more video content plays, particularly because distribution has become commoditized and it’s quite easy to scale content thanks to broadband video being digital and as such, boundaryless.
But, I think Mr. Leinwand is wrong on both the reason (strike) and demographic (”something that Mom and Dad would want to sit on the couch and watch for an hour”). I also think that the community he represents is proving to be a hindrance in creating “something that Mom and Dad would want to sit on the couch and watch for an hour.” But more on that last sentence at the end.
The Strike: An Accelerator of History
Vladimir Lenin said that war serves as an accelerator of history. He was referring to how World War I accelerated the inevitable revolution of the Communists in 1917. But we can draw a parallel to the war between media companies and writers. Inevitably, TV is going to go through the very same shrinking of business phenomenon that print media has undergone since the mid 1990s which is being fully felt today.
So yes, the strike will serve as an accelerator and Mom and Dad will add to the momentum, but in the grand scheme of things, the writers’ strike will be as relevant to this titanic shift as Trotsky’s assassination in Mexico in 1940 will be to the history of the Russian Revolution and the USSR. In other words, a footnote. Don’t get me wrong: the strike has decimated Los Angeles but it will not make that much of a difference for a couple of reasons, mainly: the philosophy and culture between old and new media is too different. Mainly, our time horizons and definition for success are too different. Most writers from TV view the Web as a step down. They wonder how quickly they will get “millions of hits” when any self-respecting new media or technology entrepreneur understands what matters is sustainable video streams by partnering up with distribution outlets in all forms of media.
A Specter is Haunting Old Media
All in all, there is indeed a specter haunting Old Media. This is why there is much envy and angst amongst TV executives because digital media revenues are not incremental.
But because:
- old media writers are too impatient, too old, and view new media as a step down
- old media companies fear their businesses shrinking
- have seen VCs fund companies that raid their intellectual property without giving them anything tangible in return
- VCs have yet to really back content companies (apart from the odd investment here and there)
Then there is little incentive to create “something that Mom and Dad would want to sit on the couch and watch for an hour” other than “YouTube clips or previously aired network television shows online”.
Tunnel-Vision VCs + Shell-Shocked Media Moguls = Bad News
I’ve had the fortune of not needing VC money to start and grow WatchMojo.com, which produces original video content on cars, fashion, health, video games, music, comedy skits, film, travel, etc. We strive to create something that would stand the acid test against TV content, so to paraphrase Mr. Leinwand, not what you typically see on YouTube and rather something that Mom and Dad [too] could sit and watch.
But over time, the fact that other would-be WatchMojo.com’s never see the light of day due to a lack of funding, then - connecting the dots - corporate spending (read online video advertising) might not grow fast enough because the perception of online video by marketers will be awfully similar to Mr. Leinwand’s perception: that online video is limited to “YouTube clips or previously aired network television shows online”.
Billion-Dollar Opportunity Will Always Be in Content
It’s a shame, because there is a lot of creativity and ingenuity across America and the world, but VCs have blinders on and focus solely on platforms and networks but fail to back the content plays that will actually unleash that value. The financiers that understand that winning video means winning in video content will ultimately walk away with the multi-billion dollar opportunity.
As we part ways, let me leave with you something from Sumner Redstone: As National Amusements grew Redstone believed that content would become more important than distribution mechanisms. There would always exist channels of distribution (albeit in varied forms), but content was always going to be necessary, hence his famous quote that “content is king!”.
Rupert Murdoch and Sumner Redstone became billionaires by leveraging old media into new media. For them new media was cable (FOX and MTV respectively) and for my generation it’s Web video. But, one thing is sure, they sure as hell did not get to where they are by investing in a better, bigger or faster printing press. The common denominator was then as it is today and will be tomorrow content.
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