Monday, April 21, 2014

For Silicon Valley VCs -- LA Finally Matters! Oculus Rift & Maker

LA-based content-driven digital media investment is the new super-hero of the VC world!

LA’s venture and startup/Silicon Beach community needed a big digital media “win.”  And, it got it with Disney’s $500-$950 million mega-deal with leading MCN (multi-channel network) Maker Studios.  This was followed up in rapid succession by Facebooks’s acquisition of SoCal-based pioneering "tech meets content" company Oculus Rift for $2 billion.

Not surprisingly (in fact, as expected), now even the tech-centric (and nearly universally skeptical) VC world of Silicon Valley has taken notice in meaningful numbers.  I have confirmed this with several leading national tech and VC-savvy journalists.  You see, big numbers mean big eyeballs searching for the next big opp (and these are massive numbers).  Now many non-believers of LA-based investment/startups have converted.

As they should ....

As just one example, significant VC returns on the LA-based content-driven investment world of MCNs show no signs of abating.  First, last year, DreamWorks picks up AwesomenessTV.  Then, Disney lays down big big cash for Maker.  Then, in rapid succession, AwesomenessTV becomes the sensei and picks up Big Frame.  And, we ain’t done yet.  As I recently said in Variety before the Big Frame deal, “MCNs are now top-of-mind for all the major studios.  There certainly will be a flurry of M&A activity in the next 12-18 months.”  In a later blog post, I even identified and discussed in detail several MCNs that are “ripe” for the picking (adding Latino-focused MiTu Networks later to my list -- and now also add Collective Digital Studio to that list).  I wrote a guest article in Variety that lays out the reasons that MCNs matter to major media and entertainment companies -- outlining the rationale for Disney’s massive cash commitment.  Won’t repeat those here.

Why am I bullish in LA-based content-driven digital media investment opportunities, and why do I believe that Northern California investors will now begin to focus real significant resources on such SoCal/Silicon Beach investments?   Check out my recent interview in TechCrunch in which I lay out my overall belief set that we are in a new golden age of content -- SoCal’s and Hollywood’s creative community empowered and enabled by Northern California technology.

Silicon Valley finally meeting Silicon Beach.  In other words, the long-awaited world of real meaningful convergence.  Oculus Rift is a perfect example of this.

The LA digital media/tech scene is vibrant, and that energy and innovation feeds on itself to attract (and keep) more entrepreneurs which, in turn, generates more energy and innovation.  Oculus Rift’s and Maker Studios’ mega-wins also finally underscore that “it” can, in fact, happen here -- which, again, attracts (and keeps) more entrepreneurs.

And attracting more venture capitalists ... who, in turn, tell two friends ... and so on ... and so on ....  Good to Great’s beloved “Flywheel Effect.”

LA’s/SoCal's long awaited tipping point?

Friday, April 18, 2014

Why Coachellas Exist -- "Let’s Get Physical"

Coachella weekend 2 starts today -- an appropriate time for me to republish my recent blog post from Wired in which I discuss how it is increasingly important for humans (that’s me and you) to find physical/communal sanctuary in this ever-increasing virtual world.  I should know.  I attended (and reviewed) Coachella weekend 1.  Here is a modified version of that post.

We frequently write and read about the virtual world of online media, but not so much about the physical world of live media experiences. But the virtual and physical worlds absolutely should be connected in this increasingly disconnected world in which we can all communicate with each other, but rarely really meaningfully communicate and feel that we are part of a real community.

First, let’s take film. Why do we still go to the movies, still fight traffic and the throngs, and still pay for expensive popcorn when we can watch from the quiet solitude of our own homes? Precisely because we are social creatures, and we don’t always want quiet solitude. Have you experienced watching a thriller in a theater and, then, the same thriller at home? It’s an entirely different experience due to the entirely different energy generated in the big communal room versus your smaller private room. It’s simply more thrilling to watch a thriller with others who gasp when you gasp and jump when you jump.

How about music? Music business models are disrupted. Traditional revenue streams are drying up. All doom and gloom, right? Wrong. Music festivals are sprouting all over. Why? Because these festivals become so much more than the music itself. The music draws you in, but the real magic comes from the like-minded community and shared immersive experience created during that moment in time. Coachella embodies these possibilities. Yes, Coachella is an extremely lucrative business. But it is also absolutely an authentic physical community experience where the audience bonds over music, literally (frequently, very literally) connects with each other, and creates a magical moment in time.  

Take the EDM-filled Sahara Tent.  In a strange (very strange) way, it is not a faceless or frightening mass crowd you see dancing under its pulsating lights.  Instead, a feeling of human intimacy and connectivity permeates it.  Maybe this generation of digital natives are so devoid of physical connection amidst their day-to-day lives of virtual interaction that the Sahara becomes a refuge of sorts.  Maybe the late teens and twenty-somethings just want to know what it is like to really “feel”?   That intense human contact is not daunting -- it is not claustrophobic -- it is desirable.  And not for any untoward reason.

So, how many online movie and music services get it right and fully embrace their physical alter-ego? Not many.

Take Netflix, the grand-daddy of premium online video services. Netflix is great in many ways, but the customer experience is all virtual. Why shouldn’t Netflix try to differentiate itself from its increasing list of behemoth competitors with significantly more diverse business models (Amazon, Google/Youtube, and Apple) and bring the Netflix brand and experience into the physical world? That doesn’t necessarily mean theaters alone -- myriad possibilities exist (Netflix-branded community screenings, film festivals). After all, online video services like Netflix gather deep user data of like-minded viewers in cities across the country. If any of these premium video service providers successfully create physical communities under their individual banners, then they can leverage these new offline experiences to drive further and magnified success online.



The same can be said for music. As examples, take leading online music purveyors like Pandora. These pure-play companies suffer from increasing competition from industry behemoths (like Apple and Google), as well as challenging artist relations and costs of goods (primarily ever-increasing music licensing costs). What’s a Pandora to do amidst these daunting realities? Perhaps differentiate itself from all others by bringing their customer experiences into the physical world of music festivals. Expand their connection with their virtual customers. Deepen them. Create a real differentiated and fully realized community. The Pandora “Unboxed” Music Festival! Gold Jerry, Gold! Again, the online community drives offline success – and then the offline more deeply connected community drives further online success.

But, don’t stop there. Music festivals -- harness the energy from your magical weekends. That energy typically dissipates when the weekend is over. Mobilize that passionate community you created. Continue its life and extend that energy online. Continue the “conversation” beyond the physical venue itself via virtual interaction and social media. Drive even deeper differentiation and engagement by adding a dose of “giving back” and philanthropy to the equation -- a la the “Life is Good” festival -- and then, man, you really have something. A virtuous -- truly virtuous -- cycle of online/offline/impact and connection. To forge bonds and mobilize like only music and media can do.

Tuesday, April 15, 2014

Coachella 2014 Weekend 1 Highlights - Lana, Banks, Cage, Skrillex & Poolside at La Quinta

Just returned from my 5th Coachella -- one of the best ever, with an incredible line-up.  Weather hot (of course).  Dust storms blowing (of course).  Sahara tent thumping (more than ever).  This one was classic.  Here are some Weekend 1 highlights:

(1) Lana Del Rey -- surprised on the Outdoor Stage.  Love her music, but was skeptical about how she would perform live (especially after her SNL debacle a couple years back).  But, I am a believer.  Voice in great form.  Comfortable in her own skin.  Staging perfect -- especially with the smoke machines in the heavy wind.  Dark.  Mysterious.  Captivating. And she engaged with her rabid crowd.  And, I mean rabid.  The kids love her.  No.  More like worship her.

(2) Cage the Elephant -- played the Main Stage in the afternoon.  Full energy.  No holding back.  This band has it.  Great songs.  Great passion.  The real deal.  THIS is rock and roll like it was meant to be.  Authentic.

(3) Banks -- if you don’t know her, get to know her.  This is THE “under the radar” pick.  See her on the Gobi Stage.  She is a rising musical powerhouse.  Check out her incredible songs before you go.  And, they become even more alive when you see her live.  Like Lana, Banks is captivating -- even in the daytime.

(4) Skrillex -- MUSE simply couldn’t compete.  This was perhaps THE most anticipated performance of Coachella.  At Sahara of course.  I made it to the absolute front of the “tent” -- don’t ask how.  That alone was a feat of strength and endurance.  The mosh pit moshed right into me - over and over again.  Held my ground.  Worth the pain.  The energy was incredible.  And, he is a surprisingly effective performer.  Hard to beat this experience -- one that you cannot see (or feel) anywhere else.  The Sahara Tent alone is worth the price of admission.  (And I met him - which was classic in and of itself - I am now my kids’ hero!).  For a MUSE fan like me, shocked myself that I missed them.  But tough choices need to be made at Coachella.

(5) Poolside at La Quinta -- yes, this is a “must see” this year.  Go to the Main Pool (not the smaller DJ pool) -- just find a way.  You will see intimate stripped down performances from great bands.  We did.  We saw Chvrches, Grouplove, The 1975, and Bear Hands.  Right up in front -- easily.  And, all of these bands are accessible -- and happy to talk, take pictures.  The resort does not publicize this -- so consider it my gift to you.  My wife and kids joined me poolside -- so, for them, this was their own private Coachella experience.  Here is a pic of my two kids with Grouplove.

[Here are my bonus “under the radar" picks -- Austra -- another band you should know if you like EDM in any way and appreciate a bit mellower vibe; check our their music before you go too -- and experience them; and -- Krewella -- EDM about as EDM-ish as you can get; the afternoon energy at Sahara was as big as Skrillex’s -- wish I had seen more -- impressive].

Biggest disappointment?  Warpaint.  Like the band (a lot).  Saw them at SS Coachella.  This set seemed unfocused, disjointed -- simply didn’t connect with me.

Go forth and conquer!

Tuesday, April 08, 2014

Coachella Set Times Finally Out! Here’s My Schedule - My Picks

FINALLY!  Coachella 2014 set times announced!  Here is where I will be -- let’s meet up:

FRIDAY
12 noon - 12:40 Tom Odell
1:05-1:45 Wye Oak
2:10-2:55 Austra - MUST SEE PICK OF THE DAY!
2:50-3:35 Ms. Mr.
4-4:50  Grouplove
5:20-6:10 AFI
6:40-7:30 Ellie Goulding
7:30-8:20 Broken Bells
8:45-9:45 Martin Garix
9:15-10:15 Bryan Ferry
10:30 The Knife
10:40-11:30 The Cult
11:30 OutKast

SATURDAY
12:50-1:20 Bear Hands
1:45-2:30 Foxygen
2:35-3:20 White Lies
3:15-4:05 Cage the Elephant
3:45-4:20 Banks -- MUST SEE PICK OF THE DAY!
4:05-4:55 Churches -- FOR YOU!
5:20-6:10 The Head and the Heart
5:45-6:35 Kid Cudi
5:55-6:40 Washed Out
6:15-7:15 Warpaint
7:05-7:55 MGMT
7:55-8:45 Lorde (although I really don’t care)
8:15-9:15 Fatboy Slim
9:10-10 SleighBells
19:35-11:35 Pharell Williams
11:25 Skrillex -- DILEMMA OF THE DAY -- WHICH DO WE SEE?
11:30 MUSE -- DILEMMA OF THE DAY -- WHICH DO WE SEE?

SUNDAY -- the weakest link of the weekend
5:40-6:30 The Naked and Famous -- MUST SEE PICK OF THE DAY!
8:15-9:05 Lana Del Rey
8:30-9:20 Daughter
9:10-10:05 Adventure Club
10:20 Arcade Fire





MiTu -- Another Vertically-Focused MCN You Should Know

Last week -- following the most recent seismic shift in the MCN/media space (i.e., AwesomenessTV buying Big Frame) -- I wrote my since-well-traveled post about “Who’s Next?” to be acquired in that MCN world.  Time to augment my (and your) MCN list -- MiTu, an MCN focused on the Latino market -- is one you should definitely know.  I spent some time earlier today with CEO Roy Burstin -- and I believe in what he and his company are doing.  They are “the one” for this significantly under-served vertical market that flies under the radar ... for now.

Definitely worth checking out.

(As an aside, it almost seems as if all roads lead to Allen DeBevoise in the MCN space.  Chairman of leading MCN Machinima.  Investor in vertically-focused DanceOn (as are we at Manatt Digital Media Ventures).  And, investor in MiTu Networks as well.  One thing’s for certain -- more eyes than ever before are focused on the MCN space in the wake of the recent MCN March Madness.  And, if you are some of those eyes, then you should be watching Allen and the moves he is making).


Thursday, April 03, 2014

MCN March Madness -- Who’s Next?

March Madness -- it’s not just about hoops anymore.  Just look at the past several weeks in the wacky world of MCNs -- which spilled over to a fine April day just yesterday (just like the hoops classic spills into this April weekend with the Final Four).  LA investors -- you are finally getting your close-up!

Here’s the scoreboard:

March 10 -- gamer-focused MCN Machinima -- $18 million new investment led by Warner Bros.

March 24 -- broad-based MCN Maker Studios -- acquired by Disney for $500 million (up to $950 million).

March 26 -- talent-centric MCN Collective Digital Studio -- German TV giant ProSieben acquires a 20% stake in the company.

March 31 -- Machinima back in the news -- announces cable industry veteran Chad Gutstein as its new CEO.

April 2 -- yesterday -- hours ago -- talent-centric MCN Big Frame -- acquired by AwesomenessTV (a division of DreamWorks) for $15 million.  When comparing Big Frame’s $15 million to Maker’s $500 million or higher price tag, note that Big Frame has about 1/10th of Maker’s subscribers -- 39 million compared to 380 million; and while Big Frame has had 3.6 billion view views to date, Maker reports 5.5 monthly billion views.

In any event, make no mistake, by no means are we done yet.  As the Carpenters once sang (yes, sadly, I know many of you will have no idea who I’m talking about!), “we’ve only just begun.”  I voiced this same theme one week ago -- on March 24 -- immediately after the Maker deal when I was asked to comment by Todd Spangler of Variety.  Here is what I said at that time:

“MCNs are now top-of-mind for all the major studios.  There certainly will be a flurry of M&A activity in the next 12-18 months.”

10 days before that on March 14th in a guest article for Variety, I predicted Big Frame to be one MCN that would be directly in the relevant line-of-sight for such M&A activity.  And now, here we are.  Maker Studios, cashing out.  Big Frame, cashing out.  They have found dance partners in Disney and DreamWorks, respectively.

So, who’s next?  THAT is the question!  One thing’s for sure -- the studio water coolers are buzzing right now with that very question.

Here is my “take” -- my predictions, if you will, based on the chatter and overall buzz I hear in Silicon Beach.  These are not necessarily listed in order of “buzz-worthiness”-- but you will notice a trend -- virtually all of these are vertically-focused MCNs, unlike both Maker Studios and Big Frame.  That alone makes this list interesting.  Expect many (if not most) to be taken out in the next 12-18 months:

ZEFR -- while technically not an MCN (although there is no single “right” answer to the question, “what is an MCN?” anyhow), this LA-based company is built on top of YouTube and is hot, hot, hot.  Great technology, great mega-name brand clients.  They won’t last more than 12 months.

MACHINIMA -- it’s only a matter of time here.  This one is obvious.  They are one of the most high profile MCNs, and they cater to the coveted young male demographic.  In the hands of the right acquiring platform, this could be magic.

STYLEHAUL -- this one is vertically-focused on fashion/beauty/lifestyle -- kind of the anti-Machinima demographic.  This company is hot hot hot as well, with over 4000 channels and a potentially massive international opportunity.  Lots of chatter here.  Very positive chatter.

FULLSCREEN -- this one is a known “player” in the space -- somewhat of a cross between Maker Studios (broad-based content) and ZEFR (deep analytics and technology).  That makes them “different.”  And, different can be good in the right hands.

DANCEON -- this vertically-focused MCN is the “MTV of dance” and fills an obvious void for that massively under-served market.  DanceOn is hot and growing fast -- very fast -- and is backed by A-list investors, including AMC Networks, Nigel Lythgoe (creator of “American Idol” and “So You Think You Can Dance”), Guy Oseary, and Madonna.  Madonna??!!!  And dance??!!  How can you go wrong?  You can’t!  DanceOn owns this very international category.  This one is also only a matter of time.

CRUNCHYROLL -- all anime, all the time -- which means the audience is passionate.  The studios are watching this one closely.  Other vertically-focused MCNs compare themselves to this one to give outsiders context of the overall market opportunity.

INDMUSIC NETWORK -- this one bills itself as “YouTube’s Largest Music Network,”giving indie musicians and those who support them the tools to more effectively monetize.  Very ZEFR-like in that way.  Music, of course, is an obvious vertical with an equally obvious passionate customer base.  And, look at the A-list investors and management team behind this one.

THE WHISTLE -- here’s an obvious vertically-focused MCN, which apparently wasn’t obvious to too many, since it just launched in January of this year.  I only recently learned about this sports-focused MCN -- but the vertical alone makes this one intriguing.  And, this company somehow has cobbled partnerships together from most of the major sports leagues in record time.  Which makes it doubly Intriguing.

TASTEMADE -- I also just learned about this foodie-focused MCN -- a vertical that is much bigger than you may think for the YouTube set.  They’ve raised significant money themselves and have established a nice international audience.

Grab your popcorn.  We are still only in this movie’s early frames ....


Tuesday, March 25, 2014

The Disney-Maker Mega-Deal -- A Big Win for All Involved, Including LA-Based Content-Focused Investment

Well, those rumors were true -- Disney has, in fact, bought Maker Studios for the $500 million price-tag that we had come to expect (and with kickers that could bring it up to nearly $1 billion).  I wrote a feature article about this “possibility” 10 days ago in Variety (this is the link to that story) -- and I just shared my thoughts with Variety now that this deal has, in fact, become reality.

I lay out the business rationale for this mega-deal in these Variety articles (and won’t repeat them here). I also discussed them in this CNBC segment.  Certainly, this is a big big win for Maker’s investors.  I also believe it is a smart deal for Disney -- the strategic value and justification of which is not captured by looking at Maker’s financials alone.  Maker has tremendous value that can be unlocked uniquely in the Mouse House Machine.

Ultimately, this deal also is a big win -- a very big win -- for LA-based content-focused investment.  LA is a serious hub of digital media and tech-focused entrepreneurialism.  The Silicon Beach community is vibrant and alive with innovation.  But, up to now, LA has felt a bit insecure about its position in the world of venture capital and investment.  Next to its older and bigger NorCal sibling, it frequently felt unworthy (and that Silicon Valley sibling certainly frequently fueled that insecurity by not believing in content-focused investments).  The LA digital media/tech community has been looking for its first “big win” -- essentially its poster child.

Well LA, you have found that win in the guise of Maker Studios!  So shake off that insecurity, and get ready for a continuous string of significant SoCal-focused M&A activity in the next 12-18 months.

Strap on your seat-belts, it’s going to be a bumpy ride ... but an exhilarating one too.

Looks like NorCal’s little brother is growing up ....

Monday, March 24, 2014

Apple’s iTV Finally Coming Thanks to Comcast? Here’s Why It Would Be Smart. Very Smart.

[UPDATE -- I share my views in today’s article in USA Today]

Tantalizing news you may have missed over the weekend -- Apple and Comcast allegedly are negotiating a potential mega-deal to offer an OTT “TV” service.  If true -- and if a deal ultimately happens -- this has the potential to be massive.  It would likely be THE critical missing ingredient that has prevented Apple from releasing its long-anticipated all-in-one flatscreen iTV (and its much-needed new product category).

I have predicted an iTV well before it became conventional wisdom to do so.  And, I have always felt -- and written -- that Apple can only follow its integrated hardware/software-services playbook if it was able to offer full compelling “TV” programming, including critical “must have” live television (especially ESPN).  Well, Comcast can solve that problem -- since Comcast, of course, already offers all that content/programming (and may have those rights to distribute that programming nationwide).  Mega-cable/broadband company Comcast also has the power to optimize the quality of service of any such OTT programming (a la Comcast’s recent deal with Netflix).  So, rather than Apple needing to negotiate one-by-one with the major broadcasters and studios (who are increasingly wary of Apple), the iTV would get all of the programming it needs in one-fell swoop.  And, does Apple really care about being the actual programming “packager”?  No!  For Apple, the programming is just the means to an end -- the means to deliver a great overall customer experience -- and sell more hardware (in this case, iTVs). THAT is its business model.  Always has been.

Think of such a mega-deal as being analogous to Apple’s break-through into the phone world several years back with AT&T.  AT&T enabled Apple to do this.  Apple made the beautiful hardware (iPhone).  AT&T provided the necessary service to make the iPhone functional.  And, Apple wrapped the overall hardware/software/service in a beautiful and seamless user experience -- and the rest is history.  That deal was good (massively good) for all involved (and not so much for the other service providers).

Similarly, an Apple/Comcast deal not only would be good for Apple, it could be very good for Comcast.  Comcast -- as well as all other cable companies -- understand that the world has changed, and that OTT services are here to stay.  Comcast and others also understand that OTT premium video services require more bandwidth -- and, in fact, are massive bandwidth hogs -- which require consumers to upgrade to more expensive broadband packages (for which consumers are already accustomed -- and willing -- to pay).  And, providing “fatter pipes” is a more compelling business proposition as compared to providing the content services -- since margins are significantly higher.

But, the single biggest potential mega-benefit for Comcast is that Apple -- given its passionate base across the land -- has the potential to expand Comcast’s now limited geographic footprint nationwide via a new iTV.  Again, Apple provides the hardware (the iTV itself); Comcast provides the programming out of its geographic footprint (and has the direct customer relationship a la AT&T with the iPhone); and other cable companies actually enable this “competing” reality via their own pipes (the broadband).

Tantalizing indeed.

And smart for Apple and Comcast.  Very smart.  Two behemoths.  Both hungry for -- and in need of -- a new mega-growth story.

Mentoring With the Mouse @ Disney Accelerator


Disney just recently launched its new Disney Accelerator with much fanfare, together with partner TechStars.  And, I am pleased to have been invited to join -- and have joined -- the team of Mentors to help grow and hopefully inspire selected companie.

The Disney Accelerator is now focused on 10 “early stage companies with innovative consumer and media entertainment product ideas.”  Those startups will receive both $120,000 and mentorship, as well as direct access and opportunities with Disney’s top management.

Another important data point that SoCal/Silicon-Beach based tech and digital media innovation and entrepreneurialism is alive and well.


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