Archive | Entertainment RSS feed for this section

Live Sets & Release Parties – Turntable.fm as a (legal) Business

27 Jun

As a music junkie, one of my favorite companies right now is turntable.fm, the collaborate music DJing and listening site that allows you to listen to music with your friends, chat, and try to accumulate enough points to upgrade to a sweet DeadMau5 avatar (below).  

According to reports last week, the service has now accumulated 140,000 users in its first month. By all accounts, Seth Goldstein and Billy Chasen have really created something compelling here. By combining elements of social (chat rooms are cool again!), music discovery, and gaming, its the most fun I’ve had listening to music in a long time. However, as Turntable grows in popularity, the key question, as Peter Kafka asked last week, will very quickly become “is it legal?” I’ll leave that debate for others more familiar with the Digital Millennium Copyright Act and the intricacies of music licensing than I, however, assuming the lawyers can work out a solution to keep Turntable spinning, I believe the business potential for the site is tremendous.

As The Next Web pointed out in a post over the weekend, the service has a number of future directions that would not only expand its platform and usefulness to users, but generate meaningful revenue. These include:

  • Customizable and branded rooms
  • Celebrity guest appearances
  • Audience engagement by media companies

I completely agree with these opportunities and they are already materializing. Silicon Angle reports that such companies as Gowalla, Path, Zaarly, and Vaynermedia already have a presence on the site. In fact, I became aware of Zaarly as a service through interaction on Turntable.fm, when they tweeted to invite me into their room. Music is a powerful tool through which brands can interact with their audiences and there will be no shortage lining up to do just that via Turntable – IF they can keep their legal house in order. As we saw in the early days of YouTube, advertisers are skittish about placing their brand against content of questionable legality.

However, I think that another significant business opportunity for Turntable would be to engage with the very same music labels and publishers that may question this legality. Turntable could be a powerful tool for bands themselves to engage with their fans. Imagine getting an email (as Turntable’s “fan” feature currently allows) that your favorite band is having an album release party for their new record in a Turntable room. Or that you could catch the debut of the latest mash-up track from Girl Talk. Or that Foster the People (check these guys out if you haven’t yet – they’ll be huge) will be hosting a replay of their latest sold-out live set that you couldn’t get tickets to. And that you could chat with the artist during the event. And that all your friends could (virtually) go. You’d pay for that right? I know I would.

As the $400 million of investment in music start-ups this year indicates, lots of smart people think the music industry isn’t dead as a profitable business. In fact, Rick Rubin. former co-Chairman of Columbia Records recently stated that “the music business could be bigger than ever.” I certainly agree, but it will require the labels and publishers to finally accept that their model has irrevocable evolved and start thinking about companies like Turntable as a giant opportunity to make money, and not a threat. As I tweeted last week, if the music industry establishment chooses the latter, they truly have no vision for the future of music in the digital era. And that future looks a lot like Turntable.fm

Fan me on Turntable.fm: DJ AP

[Update (7/6/2011): Music + Fashion site One Band One Brand recently held a marketing event in a Turntable.fm room that includes trivia contests and giveaways: http://www.hypebot.com/hypebot/2011/06/1band-1brand-holds-turntablefm-party.html. Look for more of this!]

(Theater) Exhibitionism – Good News for Indie Films?

19 Feb

Last weekend, the LA Times highlighted a joint venture (JV) struck between AMC Theaters and Regal Cinema to produce, acquire, and distribute films. This is a big deal because, as the article states:

“The move potentially disrupts the longtime and delicate business relationship between theater operators and studios, in which they have acted as partners and divided a movie’s box office ticket sales. Instead, the venture would essentially thrust theaters into the studio’s role of distributor, turning a partner into a rival as the theaters’ own movies compete for screens against those from the studios.”

Before we examine the future possibilities spawned by this strategic shift, first a bit of history. Hollywood has long been a very controlled and regimented business, dating back to a 1948 Supreme Count decision to break up the major studios complete monopolistic vertical integration. This case established legal separation between the studios and exhibitors, though in recent years the government has relaxed these rules. This separation has led to a reasonably healthy homeostasis between studios and exhibitors where studios finance, produce, market, and distribute films to the exhibitors who play the films to the public.

However, it has also created the “windowing” concept that we have all grown up with and only recently begun to question. Think back to when you were growing up – a movie would initially be released in a first-run theater, then at the “dollar” or discount movie theaters, then on home video (Blockbuster – how’s that business going?), then on premium cable (HBO, Showtime), then on cable TV (TNT, USA), finally on network television. Sounds so antiquated and regimented now in the world of Netflix and Redbox, eh? This windowing concept was created to maintain the delicate balance between studios and exhibitors and maximize revenue for both. Studios are clearly incented to make their films as widely available as possible, while exhibitors wish to maintain their exclusive hold on films for as long as possible. Thus, recent disputes with Redbox over when it can release films at its kiosks, and heated discussions between the parties over accelerated in-home release.

Who’s Who?

To set the landscape: In the U.S., there are a “Big Six” of studios, who have all been around since the dawn of Hollywood in the early 20th century, albeit following consolidation and many changes of ownership.

Studio “majors”

  • 20th Century Fox (Parent: News Corp.),
  • Columbia Pictures (Parent: Sony),
  • Paramount (Parent: Viacom),
  • Warner Bros. (Parent: Time Warner),
  • Walt Disney/Touchstone (Parent: Walt Disney Corporation),
  • Universal Pictures (Parent: Comcast/GE)

As for the exhibitors, there are really a “Big Three,” who collectively control 14,000 of the 40,000 screens in the U.S (~40% and nearly double the market share of exhibitors 4-10 combined), and an even greater percentage in major markets.

Exhibitors (by screen count)

  • Regal: 6,777
  • AMC: 5,336
  • Cinemark: 3,825
  • Exhibitors 4-10: ~8,000 screens

As expected with such a propensity of screens, this group of three tends to drive trends in the industry (implementation of digital cinema to facilitate 3D – see DCIP, live events, etc.).  At PwC, I worked on a project to help a large technology vendor understand the financing for digital cinema conversion to determine whether to insert itself into the financing process – remember this was in the throes of the credit crunch and the original financing deal had dried up. Eventually, JP Morgan stepped in to provide project financing. At the time (early 2009), less than 4,000 digitally enabled screens existed in the US and if digital conversion was going to occur, it would be on the backs of the Big Three. And, clearly, given the 3D uptick in production of films, popularity at the box office, and the growing presence of live events (2D and 3D) in movie theaters – anyone who has seen the previews before a movie recently has seen promos for concerts and sporting events at theaters near you – these leaders have irreversibly moved the exhibition market in the direction they wanted. So, in seeing Regal and AMC take this step, I would wager to say this is creating a new world that is here to stay.

Why did Regal and AMC create this venture?

Content Acquisition

As the article highlights,

“From 2007 to 2010, the number of movie releases in the U.S. dropped 16%, according to Box Office Mojo. At the same time, the theater industry’s trade group estimates that the number of screens in the country has risen 3%, making fewer pictures available for a larger number of screens.”

This reduction in the number of films forces theaters to show films longer than their optimal screening window, ultimately showing movies to a greater number of empty seats. New films mean full theaters and this venture takes a step to put more films in theaters.

Control

As discussed above, innovations like Redbox’s DVD kiosks, Netflix’s streaming content, and iTunes are increasing consumers’ access to films. HD TVs are decreasing the viewing quality delta between seeing a movie in the theater and at home, and in the wake of rising ticket prices (up ~50% in the last decade), audiences are much choosier as to which films merit the price. Finally, and perhaps most importantly, we are firmly in the “anywhere, anytime” world of content consumption. Consumers have grown to detest restrictions on when, where and on what device they consumer content and this is irreversible.

In this world, to inspire audiences to leave their living room and pay rising ticket prices, you need fresh and compelling content. This move by Regal/AMC will place some measure of control in their hands as to the population of films available for their screens. It will also provide leverage in their negotiations with studios around pricing and engagement time (how long an exhibitor agrees to keep a film on its screens) as they have available additional and, presumably, cheaper options from their own distributor.

What Does This Mean For Hollywood And Your Night At The Movies?

More “Play” for Indie and Art-house Films

If you are an independent, “artsy” movie producer, director or just fan, this is good news. The Regal/AMC JV provides another funding source in the market to both fund production and to purchase and distribute existing films. As an example, expect more films submitted to Cannes, Sundance, Toronto, etc. and more and richer deals to occur there. The Regal/AMC JV adds another bidder to the cadre of groups like the indie arms of studio majors (Fox’s Searchlight, Universal’s Focus, etc) and stand-alone studios like Summit, Lion’s Gate, Weinstein and Participant that can bankroll these films.

This is also exciting news to the indie film fan. The built-in relationship between the JV and its exhibitor owners will provide a ready outlet to allow these films to be shown on many more screens. I think this is a great shot in the arm for the indie film industry and has the potential to spur a similar awareness explosion and consumption increase to that which the internet has done for indie music, by disintermediating it from the confines of studio control. Play on, players.

More Pressure on Big Budget “Studio” Films To Perform

This JV, and the implications discussion thus far, increases the pressure on big-budget, studio-funded films to perform. Particularly in the last few years as the number of studio funded films have decreased while screen count has increased, exhibitors found themselves forced to leave universally-panned films (I’m looking at you, “Clash of the Titans”) in theaters, simply to fill their screen inventory. By both increasing the supply of films and, most importantly, gaining a measure of control over a portion of their film inventory, these exhibitors will apply tacit pressure on the studios to produce and distribute quality (or at least commercially successful) films, and will have actual options to replace these films if they do not perform.

Ticket Price Tiers

A final change I’d like to toss around. I think (or at least hope) this JV could be an initial step to ticket price tiers at movies. There are movies I will pay $11 (I live in Chicago) to see, but there are many more that I won’t. Given the business model, however, exhibitors have been locked into their pricing by the film costs they must pay to studios. As a result, all movie tickets have been priced the same (the best ticketing analogy to this occurrence is sports tickets where historically tickets in a certain section were priced the same for each opponent. However, recently many NBA teams have begun to price discriminate in this manner, recognizing that fans will pay more to see the Miami Heat in town than the Charlotte Bobcats). Similarly, the films produced under this venture may now present an opportunity for Regal/AMC to reduce the prices on the indie films they produce and acquire, given the ventures ability to know and control costs, as well as to price different films to different moviegoers, ultimately building a larger audience and convincing consumers to take a risk on a movie they know little about simply because it costs $5. Cost, particularly in a post-recessionary economy and a crowded media landscape can be as powerful an incentive as quality, and may serve to offer exhibitors one more tool to coax consumers into their theaters.

I see this deal as a shot across the bow to the Hollywood establishment, foretelling big changes on the way that will force every ecosystem participant to reexamine the traditional model and innovate to stay relevant and profitable in the increasingly crowded contest for audiences’ entertainment dollars and attention.

Want to learn more?

Edward Jay Epstein’s books on the business of Hollywood

LA Times Company Town Twitter feed

Deal File – Run to the Cloud!

6 Feb

[Note: this the first in an irregular series looking at recent M&A transactions]

In the last two weeks, Verizon (VZ) and Time Warner Cable (TWC) spent significant money to acquire and bolster their footprint in business services, specifically, managed storage or “cloud” services.

On Thursday, January 27, Verizon spent $1.4 billion to purchase Terremark (TMRK), a Miami-based operator of data centers in the United States, Europe and Latin America, that provides managed information technology services, including hosting, disaster recovery, security and colocation. Their crown jewel data center, the NAP of the Americas in Miami was specially designed to link the U.S. to Latin America. Check out this bad boy’s specs and pic below.

The deal bolsters Verizon’s Business Services profile which, in addition to the communications and mobility services you’re aware of, also includes IT services (such as “cloud,” data center and managed services), and security services (such as identity and access management, and managed security services).

On the heels of that deal, this week Time Warner Cable (yes, the cable arm) announced its acquisition of NaviSite (NAVI), an Andover, MD-based provider of managed cloud services, managed hosting, and managed application services. Sound familiar? [Disclosure, GTCR, my employer, is a minority owner of NAVI. However, as a minority shareholder of a publicly traded company, the firm has no access to non-public information]

We can all agree “the cloud” is hot. Whether used for the delivery of SAAS applications like Salesforce or the storage of data like all your Facebook pictures, the need for data and application servers, as well as high-speed and ultra-reliable access to those applications and data is exploding. These deals have highlighted a new class of competitor in the the hosting and delivery of cloud services, with Telco/MSO’s Verizon and Time Warner Cable joining Microsoft, Amazon, HP, Dell, IBM and others in racing to provide a full slate of business services to their customers.

This is interesting to me, as it means that tradition “services” businesses, which is what Verizon and TWC are, are becoming more serious about diversifying away from their bread and butter service offerings (wireline /wireless services and cable, respectively). This is a different strategy shift than what we’ve seen from HP (acquisition of EDS), Dell (acquisition of Perot) over the past few years where hardware providers have looked to services to augment their core revenues.

If nothing else, these deals show the cloud market remains red hot. Looking forward, companies like  Saavis (SVVS.O) and Rackspace (RAX.N), whose stocks are up 13% and 23% YTD, respectively, may be in play as others (Comcast, Sprint ?) look to keep pace.

Finally, as a media/entertainment junkie, one other less-discussed element of these transactions intrigues me. For years, there has been discussion around consumers’ desire and media/entertainment companies’ efforts (or lack thereof) to allow consumers to access their digital media (e.g. downloaded music, movies, TV shows) anywhere from any device. While credentialing and format/standards are generally discussed as the larger hurdles to this utopia, storage is certainly a component as well. How about a world where Verizon houses your iTunes collection, which you then access seamlessly through your Verizon iPhone (finally!) or iPad. Um, thanks Apple, but I’ll have the 1GB version. Intrigued? I am. Please weigh in.