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. In our firm we have been having an “active discussion” as to whether or not the writers’ strike in Hollywood is the inflection point that will drive mainstream America off their couches and onto their computers for new video content.

Just to be clear, 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. At Panorama Capital, we are all believers in using the Internet for cost-effective video distribution and have invested in this space, but we’re still waiting for the market to really rival that of traditional television.

For the demographics that currently do not spend more time in front of the computer than in front of the television, will the hangover from the strike drive them to watch new content on the Internet? Will it deliver a Nielsen ratings point for some Internet video shows? What shows would you recommend to your parents to watch to get them to move away from the television?


Tiran Kiremidjian

Actually, whatever the next paradigm is for TV, the search-discovery-and-choose process must be MUCH easier than the time warner remote. And actually, creating this part of the solution is (my bet) the most important part of the next TV paradigm.

And yes, that search-discovery-and-choose process must cover “user generated” content and such. Though this is not as important as making sure access to professional content is seamless.


If bringing in Moms and Dads is key to online media you need to get the content on to the television. That’s the key. It’s a simple device (even if my Mom sometimes can’t figure out which remote does what). Best of all, its opposite the couch or recliner.

The other issue, and its been said, is content. First, we’re beyond the era of a guy sitting in front of his webcam being considered professional content and too much of the content out there today is two guys standing in front of a green screen reviewing products. It’s done to death.

We need serialized situation comedies, dramas, reality series, news, etc. Everything that television offers needs to be offered on the internet.

Shameless plug: Lutz and Balls, Paranormal Investigators (http://www.lutzandballs.com) is a new series in development that is a situation comedy in short form (3-8 minute episodes). Perpetual salesmen and slackers, Craig Lutz and Bill Balls lose their corporate sales jobs and set off to get rich quick by diving into the tabloids as paranormal investigators. It’s X-Files meets Bill and Ted… Heck, here’s a sneak peak at episode 1: http://www.vsocial.com/video/?d=114432

When the market allows, we’ll kick it up to 22 minutes just like a full blown 30 minute sitcom on television, but at this time we don’t think the audience is there… yet.

Prove us wrong, though. We’d love to get a big production deal and we’re still looking for sponsors.

Michael McGregor


You are absolutely right that the distribution method is already setup (in terms of microsoft). And while I agree that a large minority of web savvy citizens would jump at the chance to be a part of internet television (as consumers), I can only think that much of our society is stuck in the baby boom era. Personally, I don’t see my parents, or their friends, hoping on the internet television distribution channel yet. Although if Apple can properly market Apple TV and fix a few bugs, that is the best model for bringing in high quality content to the average home. After all, wi-fi is practically common place in many middle to upper class homes. I feel a subscription program would make the average boomer more inclined to jump on the internet TV band wagon. Possibly something in the vein of Sirius, or Rhapsody, only for television.


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Tiran Kiremidjian

Could the writers strike be an inflection point? In other words, will online video grow ever faster cannibalizing “TV” as we know it and become “the dominant” platform? I think it’s possible.

When I was incubating TV stations, we looked for opportunities where there was some significant disruption in the chain of the ecosystem I spell out above. In the Czech Republic, it was in the distribution area; we secured one of two national frequencies. In Taiwan, the venture also won a license (the fifth in the country) but that was not enough. The Taiwan venture was successful because it started producing a good proportion (but not all) of its content in Taiwanese vs. Mandarin. The other stations were chiefly Mandarin even though 80% of the population speak the Taiwanese dialect at home. (The reason a station could start broadcasting in Taiwanese was due to the political change occurring in the country at the time.)

So, is the writers strike a sizable disruption in the present TV ecosystem where a new venture could get started? I think it could be — but it depends on what happens with the other three legs of the chair.

The disruption that has happened is that an enormous volume of talent has come available to produce new shows. Furthermore, the incumbent TV platform is not producing new shows. This almost never happens. A new venture could really differentiate itself and secure the ability to produce lots of new content over a prolonged period of time. We can only say this is an OUTSTANDING opportunity. The incumbent TV industry has really left itself vulnerable.

So Step One — The New Venture must secure the talent. VCs should put in, say $100 million (and this is just for starters, the costs will grow fast and), and sign every single writer that they can find. If this were really to happen, watch how quickly the studios would settle, so the New Venture would need to move really fast and sign say 10% to 15% of the writers including some of the best (whoever they are).

Second Step — Distribution. OK, the internet is sufficiently progressed where video can be efficiently distributed to the home. While there’s a lot of work still to do to make this more consumer-friendly, it’s believable that the cable companies are endangered of being stepped over TO THE HOME. However, I believe there’s a bottleneck WITHIN the home — namely the distance between the typical home computer and the typical home TV screen. The solution is easy enough: wireless connectivity, but there’s a sizable re-tooling effort required to equip homes with the right wireless standard and in adopting the typical TV screen to it. I believe this is akin to putting up an antenna or satellite dish and is totally doable — but it will slow down adoption. Speed of adoption will depend on the volume and quality of new content originating from the New Venture — so it will depend in part on signing the most and the best new talent now on strike. So perhaps you’d like to start with a few more $100’s million to secure more talent — it will speed up talent. You’ll also have to spend on some R&D to perfect and endorse some standard, but those are details.

Marketing. Here, the New Venture would face a favorable climate. Creating a new TV company and giving jobs to striking talent would captivate the minds of many, many Americans. The New Venture would most certainly be noticed. But you’ll need bucks for a prolonged, inventive marketing effort. (Furthermore, you’d have to deliver on that imagination, meaning the combination of computer and tv screen the New Venture would be pushing would need to have many new, useful features. I believe this is possible, namely because I have a few ideas in this category that I think would be very useful and compelling but I have not heard them discussed in the industry much. So the R&D budget mentioned above is not small.)

Monetization. going to be tough, don’t kid yourself. Viewers aren’t going to pay much if anything for a subscription at first, and advertisers aren’t going to flock to you, no matter how much of a hit you become in the first year or two. So figure if all goes well, you’ll see some meaningful revenue in year 3 and by year 5, you’ll breathe a sigh of relief that yes, there is actually a revenue model here. And if you do create the computer TV/video model for America, you’ll make a good return. Probably extremely good.

So, what would it take? hmmm…I don’t know, but I’ll take some guesses:

Step 1. Securing the talent is really key. This actually creates a barrier to entry to your competitor — the media companies. always nice having a barrier to entry, kinda like a patent. So you want to spend liberally here. And you’ll have to promise the best talent that you’ll be around for a while so contracts with them for a few years will be necessary. I really don’t know how much these guys make. If I said $100 million over three years, that’s $33 million per year. That doesn’t seem like enough, so I’d say $250 million over three years.

Step 2. Distribution — which is perfecting the home solution — the software that will run the system and give all the new cool features, the wireless standard and adoption to existing and new TV screens. Again, I have no idea, but $150 million over the next 3 years? Also, you might want to subsidize the price of the home wireless system and the adopters to the screen to speed adoption in the home. So, there’s a lot more you can spend here too.

Step 3. Marketing. I have no idea, again, but … $60 million/year x 3 years = $180 million

Step 4. Monetization. The cost here is what are your running costs before you break even? So, the chief consideration will be production. How much are you going to produce? Again I don’t know, but in the first year, I’d say your production costs should be 1/2 of the cost of one of the networks. In the second year, 100% of the typical networks content costs, and in year 3, 150% of a typical network. I am sure there’s someone who can tell me that but I am going to take a stab in the dark and say production costs are a billion a year at a typical network. So over 3 years, make sure you got $2 billion to plow into production.

So, if I do my math right, about $2.58 billion over three years.

Rupert spent a lot more than that to start Fox.

Any takers?

P.S. As I think more about this, it’s actually more possible than I originally think. And I hate to bring up the bogie of Microsoft, but their media center is a lot better than people give them credit for. they pretty much solve the in-home distribution system. They are well positioned to be the ones to secure the talent to make the new shows and put it over their media networks. And they have enough cash for it too. But i doubt they’d have the guts to buck the studios. On the other hand, their media centers could be leveraged by a new entrant.

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