Y Combinator’s Short-sighted War Against Hollywood

All PG is talking about is taking out the parasitic channels and blocks that impede content from being made and enjoyed if they don't get their pound of flesh. All the arrogance that makes them demand not only that law be rewritten and diplomacy bound to their will, but that anybody daring to speak against them be castigated as enemies of democracy and capitalism and presumably Mom and apple pie.

They deserve to shuffle off into the dustbin - let's get back to having fun and making things. That's what PG is after, and he's right. Everybody knows the emperor's naked - those fat cats do nothing creative, and nothing to improve anything at all except their bank balances; they're rentiers so deeply to the core that they see nothing at all wrong with wanting their money back after buying the President of the United States when he failed to dance to their tune for three minutes this week.

Good riddance to the lot of them.

First, while the "heart" of Hollywood (whatever that is) may be in its aspiring stars, they have little control over what the executives do. Aspiring actors and directors know that there are many others waiting to take their role - if they don't agree to the terms (however terrible) there are plenty of others waiting to take their place. Hollywood is a monopsony. They are a cartel whose absolute control of the market makes it more difficult for "the heart and soul of Hollywood" to pursue their dreams. Breaking up the Hollywood cartel would make things easier for aspiring actors and directors.

Second, while "war may rarely be the solution", that doesn't mean that there is no place for war. If the other side is willing to do whatever it takes to destroy you, you have to fight back or be destroyed. SOPA/PIPA showed that music and movie industry have absolutely no sympathy for legitimate internet users. If it comes down to a choice between accepting the SOPA/PIPA and fighting the media industry with every tool at my disposal, I'll choose to fight any day of the week.

Finally, Ben Parr brings out the "what about the masterpieces?" argument. He misses the point that masterpieces like Schindler's List and Planet Earth exist despite Hollywood, not because of it. The movie industries are not interested in taking "unnecessary risks" on a movie that may turn into the next Citizen Kane. Remember, "masterpiece" movies are not often popular or profitable. It's much safer for studios to fund yet another proven, moneymaking sequel. Breaking up the Hollywood cartel would allow those with higher tastes for risk to enter the movie funding business, making it easier for future masterpieces to gain funding.

- that Hollywood is on its way out, because film and TV as forms of entertainment have largely remained the same despite significant technological advances. Movements like SOPA are indicative of the industry's inability to evolve with the times.

- that startups aiming to find better or cheaper forms of entertainment are likely to be extremely big companies in the future, largely by replacing the role in society that Hollywood currently plays.

- and that YC should fund companies it thinks will be big.

That line of logic seems sound.

FWIW, I believe that this bit

I have had the privilege to meet hundreds of amazing aspiring actors, actresses and musicians through the production companies I advise. Their dream — their only dream — is to be on that stage and entertain millions. Proposing to destroy Hollywood will also destroy the livelihoods and the dreams of these entertainers and the crews, writers and creatives that support them. That is irresponsible.

begs the question of whether the current Hollywood system is the only way that the entertainers, crews, writers, etc., can profit from their work and achieve their dreams. I see no particular reason to believe that such a thing is true, and - to my notions - this undermines the entire argument that YC's "war" is short-sighted.

This article is also ignoring the fact that one could interpret the YC response as nothing but self-defense. It would be one thing if this call were totally unprovoked, but that's hardly the case here.

The only question left is to decide what side you're on.

How does an entertainment world not dominated by Hollywood threaten this?

Answer: It doesn't.

What we have with Hollywood is execs who obsessively control marketing and distribution channels and thereby get to determine who becomes famous and who does not.

For many people it's just impossible to imagine things any other way. But that does not mean it is actually impossible for things to be another way. Hollywood is a very recent development in the history of entertainment.

We could take the execs out of the system, and the audience would still be able to decide who becomes famous and who does not.

The audience is the final arbiter.

Entertainment execs are only middlemen.

When PG says "Kill Hollywood", it's meant in the exact same sense as "Kill Microsoft". That's the only "uh oh" in his whole posting, it doesn't say "declare war on Hollywood". Neither Hollywood nor Microsoft comprise the entirety of the entertainment industry and the tech industry no matter how much they want to and no matter how much the average ignorant random-person-on-the-street might believe they already do, so clearly it's not even a desire to kill off an industry, just to remove a particular member's influences from it and from everything else.

I think it's "irresponsible" that in 2012 we still have a "spot" for entertainers and artists to make a living. That's nonsense. By progressing from horse to car, a lot of horse-related jobs declined. But literally an entirely new paradigm of societal structure emerged, arguably, for the better overall (Just an illustration, I know it's rough but bear with me). Maybe if Hollywood collapses many Hollywood folks will suffer, and I understand that pain. But an open Internet acts as a stage beyond any geographical limits and can create, again, an entirely new open frontier for artists and entertainers all over the planet...and the necessary staffs and execs for them individually.

Hollywood doesn't support the Internet. Even the "young execs" who "get it" and "embrace" the thing they supported the censorship of only support it in the sense of trying to build walled gardens to preserve their last chance of money-grabbing. That's it. They support the Internet that helps them, but if something happens to zig where they want to zag, well...we know their reactions by now. 1 Don't be fooled. The article is fair and good, but the arguments inside are empty at best. Fuck Hollywood.

Hollywood doesn't really "make" movies so much as market and distribute them.

Destroying "hollywood" according to the ideas proposed would likely open up millions MORE opportunities for entertainers to entertain and would likely change the market dynamics from a winner take all market dominated by a few "stars" to a more yeoman farmer type system where everyone does OK.

"Hollywood" makes entertainers sign grossly unfair contracts at the beginning of their careers justified only by the winner take all market they propagate. Hollywood is unnecessary in an age where anyone can put blender on their computer, buy an HD video camera and start making movies. You don't need huge budgets to make decent movies. Hollywood keeps most artists starving in order to gain leverage, if most artists did OK it would dramatically change the landscape at the bargaining table.

The average artist will do better with out hollywood at the expense of the "stars".

After Hollywood is dead there probably won't be any entertainers who have "millions" of fans but likely far more that have tens of thousands of fans.

If Hollywood dies because of the RFS it will be because the people voted with their feet and decided the offerings of the RFS are superior to the offerings of Hollywood. I believe that's called a "free market". It's not up to PG, me, Ben Parr or anyone else to decide what is best for the people, it is up to the people decide what is best for them. Any projected funded by YC will only succeed to the degree that it provides a better experience to consumers.

He has had a few posts over the past week that might be enlightening to some. http://johnaugust.com/

Basically, the aim is not to kill entertainment but to wrest control of it away. This is more akin to Kodak getting "destroyed" by digital cameras than the internet starting a vendetta.

This makes it extra silly to talk about aspiring actors and the Art. It's unlikely that Y Combinator will fund anything that really replaces cinema, but if it does it will be amazing.

It is the decentralization of movie making that will destroy Hollywood, not start-ups.

If people can easily find content they would like (that are controlled by those that are not bent on attacking the people - so like the crazy behavior we see supported by the large hollywood distributors) they will watch it. They will substitute it for content they would watch that funds the anti-society behavior now funded by those watching "Hollywood" and big label music.

I am not so anti-Hollywood that I will not watch some great show (yet). But I would certainly favor content that isn't paying for anti-society efforts.

If there were good ways to discover content I would like and note what is managed by those that respect society instead of those that don't I would use it. I would pretty easily just chose to try out stuff that is not going to support those that will use income to attack society. I doubt I would boycot anything from those anti-society organization (yet). But even if we just carve off a portion and build up those that produce entertainment for society while respecting us that is a good thing. And I believe if it started the power would build upon itself. Those engaging in bad behavior would lose in the marketplace and likely adjust behavior. Maybe they wouldn't - in which case as we build up good alternative entertainment we can just drop dealing with their organizations altogether.

This is like arguing that we have to keep on fighting wars because army bases are valuable to the economy.

> War is rarely the solution.

PG is talking about competition, not war. The word "war" never appears in PG's essay

> Entertainment and art are relative.

Good- Then Hollywood can keep attracting customers, even if there is competition from elsewhere. What are you worried about?

This is why Netflix, Hulu and YouTube are making distribution deals but also creating or licensing exclusive content to give them more leverage. If Netflix exclusively owns a couple of hit shows they suddenly have a lot more leverage when licensing content.

If you want to take down Hollywood you have to help them monetize first, they do create great content so instead of taking them down this model puts them in line with other content creators. I think it's the same with the fact Apple is opening iTunes Connect up further.

The ideal, for me, would be a massive outpouring of different ideas about what the tech industry can do. Some will fail, but ultimately there will be a better chance of finding a solution that works better than what we have just now.

This is a startup idea: software to determine when and how long a predicted meme will overwhelm a company culture allowing investors to short the stock while the meme, as a cultural virus, runs it course. Sort of like a company health predictor using the semantics of current events as units of measurement.

* Progress? Hulu and Vevo place the same digital content we were once able to own and manipulate into chains. We are no longer even allowed to watch it at our leisure.

* Great works still happen without big industry.

I think this author doesn't understand that YC isn't attacking the idea of movies and TV shows--they're attacking the moronic copyright-related actions of the industry.

3. Relationships. This is a big one, and although it can get very complicated, I’ll try to make it as simple as possible. In order to make a great piece of content, you need to have talented writers. Those writers depend on casting directors and the actual Director to cast the right talent to make their stories come alive. The producers need to ensure that the best casting directors and most talented writers and directors are attached to the project. The casting directors rely on talent management agencies to sign and nurture the best talent out there, and maintain integrity with how they present their clients. The talent themselves spend thousands and thousands of dollars on creating a better product (their craft, so-to-speak) with acting classes, headshots, travel, etc. (I feel an ecosystem pictograph would work best here, but you’ll just have to visualize this instead.) And even greater than just what we call “above-the-line” costs (Producers, Directors, Writers, Talent), you also have to have the infrastructure available for all the other thousands of jobs each film employs including but not limited to the Director of Photography (camera), his/her crew of camera assistants, the grips and gaffers (lighting and rigging folks), script supervisors, location manager, production managers, drivers, production assistants, accountants, animators, editors, special effects, props, visual effects, stunt men/women, wardrobe, vehicles, omg I could go on forever. Sit through the credits next time and you’ll get a new appreciation for what it takes to make even a shit film. And the thing is.. they are ALL REQUIRED ASSETS.

4. UNIONS. Often striking fear in the hearts of people everywhere, unions are not to be messed with. They are there to protect their members and ensure their labor is treated fairly and compensated appropriately. That’s not to say all production is union production, because it isn’t. In fact, pretty much all independent film and television (and even studio and network productions) to some degree uses non-union labor. But, unions are there to also ensure you have the highest quality of talent available. You have to demonstrate experience to be a part of a union, and then even when you get the job as a union paid employee, you still need to prove that you’re worthy to continue being hired for the next project. The unions are a way to provide checks and balances for the best of the best in their fields. And it works. Making a film is like starting a business from scratch. You want to hire the best and brightest people in the business to be successful. Sometimes those are union people and sometimes those are your friends. But in any case, there needs to be some measure of trust in the quality of work you will receive.

If Ben understands that, I guess his post would be entirely different.

As the CEO of a media start-up and someone who has been deeply entrenched with every aspect of the Entertainment industry for the last 18 years, I have a deep understanding of "Hollywood" and the ecosystem it represents. So, let's review:

Content Production - While there are some very legitimate ways to make pretty great content on a low budget, there are only a few really successful ways you can do that. First and foremost, the cost of the film or video by itself is only one very small factor. It takes relationships, knowledge of the industry, access to talented individuals and a whole lot more money to market your content in a way that will create the revenue you would actually require to consider it a successful product. So let's review what it takes in "Hollywood" to make a product that will (hopefully) resonate with viewers:

1. Money. Whether it's a few thousand dollars, or hundreds of millions of dollars, there are no productions, and I mean none, that cost nothing to make. You have to make some kind of investment whether it is in software, the camera (even an iphone), an internet connection to distribute it, what have you. So even with depreciated assets, you're still investing money somewhere. But, let's come up a few hundred feet and talk about the content that is actually made in Hollywood, with that kind of spending power:

2. Cost of Production. This is not just the money spent on the production, but the actual cost of goods sold. The first phase includes the development, the pre-production, the actual production, the post-production and the ground level marketing (shopping it around film festivals, etc.) The second phase is what happens after your content has been acquired. Now we're in the really big money. Now we're in P&A costs, which stands for Prints and Advertising. This is the cost of marketing your product. To put it into perspective, a film like Napoleon Dynamite was made for around $500K. It was acquired for $3m at Sundance. Then the studio spent another $xx million to market it. Napoleon Dynamite went on to be one of the most successful independent films ever created. It made over $140m in the video market alone. THIS. Is an outlier. Now let's talk about the median products. The ones that Studios personally finance and market. Let's say they spent $30m to produce a film. Most of that money goes to the talent and the UNION crews that work on them. (We'll get to the unions later.) They distribute the $30m picture across screens worldwide. Worldwide the picture makes $45m. Not bad, right? Wrong. Because that $30m production cost another $80m to market. That's right.. almost three times the cost of the actual production. And the $45m it made worldwide? Well that's only $22.5m back to the studio because the theaters take HALF the ticket sales. HALF. They do almost NOTHING to market the film, get paid to host the film, charge $9823598746 on snacks and they get HALF THE FREAKING REVENUE from the film. So, the studio’s net LOSS on that product is $87.5m. That’s what we like to call in this industry.. a tank. You can spend $30m on a film, get some of the best talent you can think of, and still it falls flat. Why? Well if you can answer that, then there is a job waiting for you in Hollywood. No one really knows for sure what the general public will accept as an amazing film until it’s released and the ticket sales and social buzz generate the outcome. I have seen some amazing films that I thought were some of the most creative and concept-forward films I have ever seen, and they tanked at the box office. It all comes down to the public’s taste at any given time.

Continued below...

5. MARKETING. We touched on this in the Cost of Production bullet, but let’s expand on this. Studios have hundreds (and in some case thousands) of employees dedicated to nothing but marketing. At any given time a studio could be spending upwards of over a billion dollars just marketing their current slate of films that are set to be released. This is where most of the risk in film financing occurs because it costs VASTLY more than just the production of the content. In fact, many films are made and then shelved until a later time (or never released, or go straight to video, or are only released in a foreign market, etc.) because either the marketing is too risky, there is another studio releasing something similar, one of their actors got caught in some damaging publicity, etc. Timing is CRITICAL to the release of a film. And, if a studio knows they will be vying for Oscar contention (which they apply for and then spend another $987359872460982456092486 campaigning for votes.. you think the ACTUAL political campaigns are bad, you should see the campaigns for the oscars!) then they release that particular film around the end of the year. It gets them qualified for Oscar contention and they hold it back so another studio has less chance of competing against it.

6. Measurement. The least sexy of the bullets is arguably the most important. Studios and ESPECIALLY television networks positively rely on measurement to gauge the success of their product prior to or post, distribution. (Generally, prior for film, post for television). Surveys, pre-screenings, press feedback, etc. is heavily relied on by studios to understand the best possible release strategy for their product. Even more money is spent on this endeavor and is billed to the film’s cost center.

Millions of people work in this industry. Thousands of companies rely on the entertainment economy to survive. A war on Hollywood would also mean a war on Joe’s Camera shop, where Joe has been renting cinematography equipment for the last thirty years. And also a war on Miguel’s Lighting, which rents lighting packages to studios and also helps out independent filmmakers because they have the revenue to give back to those passionate individuals that have a story to tell but don’t have the money to make it. And, all the other thousands and thousands of freelance professionals that depend on each project to pay their rent, their car payment, their water bill and to eat.

If you think of Hollywood as some Leona Helmsley world of mean, then you are both right and very wrong. Getting to the top of this food chain is like climbing Mount Everest, without a guide.. twice. It’s that fucking hard. So sometimes you encounter a little arrogance (ok a lot), and some entitlement. But MOST of the people that work in this industry are hard working, shit-shoveling, awesome, fucking people. They are your next-door neighbor, your son, your friend. And they choose to work in this industry because most of them can’t imagine working in any other field. They love what they do, they pay their dues (and then some) and they work harder than you could ever imagine.

I once worked on an independent film when I was living in NYC, trying to make it as an assistant director. I remember one day in July being in a 10x10 room with no air conditioning, no windows, 1000 watts of light, on take number 28 with 17 other people in the room. We started the day at 6:00am and we ended that day at 3:00am. On our feet all day in 98 degree weather, 104 degrees inside the room. And we fucking loved it. And you know how much I made that day? 50 bucks…. Fifty.

So, although I applaud Y combinator for finally shedding some light on the media start-ups that have been vastly ignored over the past years by VCs (HELLO! We need some funding people!), what they don’t understand is that Hollywood isn’t just a few folks that make up an entire global economy worth $2 trillion dollars. It’s a community of millions of people, representing millions of jobs that have fed the economy of this country for almost a hundred years. And that’s worth fighting for.

While I significantly oppose SOPA and PIPA in their current forms, the people of this country have already sent a message to our government that this is not the right legislation. Y Combinator should spend their energy and their vast reach across the capital investing landscape to fund smart media companies based on their merits, not on their short-sighted agendas.