Recently Ari Emanuel stopped by the Valley to drop some knowledge upon us hapless clowns. For those unfamiliar, Ari is a bit of a bad ass down in LA (Ari from Entourage is modeled after him) and he’s shown a lot of entrepreneurial spirit in a town that typically doesn’t reward that sort of initiative. One of the main points of his talk was the relationship between Silicon Valley (ye olde big pipes of technology) and Hollywood (provider of all things content). Ari’s point was simple: pipes aren’t very valuable if there isn’t anything to fill them with. Ergo, Hollywood is a deeply important piece of Silicon Valley’s success.
Eh…I’m gonna disagree here. Hollywood has the option to be integral to Silicon Valley’s success, but it’s not a required relationship.
The Value of Content
Once upon a time, I used to believe in the oft heard phrase: “Content is king.” It was only natural to view things that way — you often do when it’s the studios paying for your 6 minute increments. I think there’s an addendum most people in “the industry” would add to that phrase: “Great content with high production values is king.” This phrase is emblematic of a deep belief that the relatively small set of companies in the business of creating blockbuster content are essential ingredients to any platform looking to entertain people. It’s a sweet thought, and it was probably true at one point. But things change.
Historically, content has been significantly constrained by the limited distribution options available. Television, radio, books, newspapers and movie theaters were basically the only places where people could access content. The limited shelf space and the costs associated with distributing that content meant that each piece of content needed to capture significant revenue to be viable. A television show couldn’t survive on a few thousand viewers, it needed millions to be a going concern. Capturing that type of number required a tremendous investment in production values in order to make the content sufficiently differentiated and appealing to a maximum cross-section of the population. Same goes for books, newspapers, video games and so forth – each has a long distribution pipeline with numerous middle men. Content needed to kick ass to survive.
But you know what? That’s not the case any more. Nowadays, content can be distributed at extremely low costs and may become viable with the smallest of audiences. The natural corollary is that this content is sustainable at much lower levels of investment. YouTube, Twitch.tv, ebooks publishers and app platforms are all examples of the burgeoning trend toward low-cost distribution and the associated expansion of low-cost content. Interestingly, each of the platforms have largely been successful without the participation of mainstream media. But why?
The Old Way of Doing Things
I often think it’s because sophisticated content creators are used to creating content designed for everyone. They have very little experience in reaching down to micro-trends in media consumption because there just isn’t sufficient revenue to be had there. The low-cost platforms have provided the distribution outlet for any number of smaller content creators that are perfectly willing to capitalize on these tiny audiences. Think of a YouTube channel like Machinima, which has grown into hundreds of millions of views on the back of short clips of video game play. This is one example of many: the rise of eSports on Twitch, the alternate news consumption on Twitter, the 600k+ apps on iOS. Traditional media has no significant stake in any of these, yet they are tremendous entertainment time sinks. High quality content is simply not required.
Furthermore, quality content is certainly impacted by these trends. Already we see a decline in television consumption among those under the age of 35. The simple fact is that younger users are perfectly fine with getting their entertainment from non-traditional sources, and catered niche content can be a compelling lure compared to generalized mass market fare. When the voices speak directly to a person, they inspire far greater loyalty, even if they’re creating “inferior” content in terms of production values. I think it would be crazy to say that Machinima hasn’t taken at least some viewing time away from G4 – the simple fact is that people can get the EXACT content they want at any given time. Hollywood content is one option among many alternatives.
The availability of choice can fundamentally undermine the traditional content creation model. Hollywood still makes use of the high cost distribution platforms, but as they come under increasing competition from niche alternatives, there’s a real question of how they should adapt. They’ve invested in the tentpole mentality, and that’s a far cry from a few dudes filming their cats. They can scoff at the low resolution kitten, but maybe they should pay more attention to the millions of views. It should concern sophisticated content creators that the first piece of billion dollar content to come out of mobile was made by a small developer game based in Finland.
So how do they take advantage of these platforms? Frankly, I think they could probably capture the top slots on a lot of the newer platforms if they were willing to sacrifice a few sacred monetization models. Historic deal structures (massive guarantees, restrictive exclusivity requirements, etc.) are probably not going to work out. Instead, there will need to be a movement toward free options and a willingness to play ball on new platforms (even those just starting out). Their goal should be to bargain away an element of control in favor of gaining ubiquity in the marketplace.
If they’re willing to play ball, then they can turbocharge the new platforms and form a symbiotic (if dysfunctional) relationship not unlike the cable ecosystem. If not, I get the feeling Silicon Valley is gonna do just fine without them, which is a shame, because I really like Game of Thrones.
JM: I’m a little late to reply, but to my mind this is a tale of two parallel philosophies each finding success, and believing that that success means the other approach is wrong. I see this a lot, it’s like the blinders that direct a horse to walk in one direction, but in this case the blinders are success. To my eye, the big steps to an audience have been reduced to a graceful ramp. This allows vastly more ideas to test at market, on their own merit, and then become eligible for big Hollywood-style machinery.