Benjamin Kuo’s Blog

I spent some time today at Digital Hollywood, which is being held today through Thursday at the Loews Santa Monica and Le Merigot hotel. It’s interesting, as much as there has been talk about a convergence between technology, venture capital, and Hollywood, how different the industries operate; as often as there are conferencing covering the entertainment industry and technology, there’s still a divide in how entertainment and technology are funded.

I sat through one of the first sessions, Mainstream Hollywood Meets The VC, which featured several venture capitalists (Mark Mangiola, managing Director of Canaan Venture Capital; Virginia Turezyn , Managing Director of American Capital Stratgies, and Greg Martin, Partner at Redpoint Ventures), and a couple of people from Hollywood (Temple Williams, Senior Vice President at Comedy Central, and Conrad Riggs, of Mark Burnett Productions), along with Roy Salter from The Salter Group and Mark Kapczynski, CEO of Kontrol Media.

Listening to the panel, it was quite clear that there’s still a divide between where venture capital ends and entertainment starts–which entrepreneurs who are looking to start companies in the entertainment and technology convergence should pay close attention to. Asked by Mark Kapcyzinski if venture capitlists invests in content, Mark Mangiola was quite clear: “No.”

Kapczyzinski cited that venture capitalists are not comfortable with the industry, they don’t know the metrics, and traditional media is not their sweet spot. Greg Martin of Redpoint concurred, saying they don’t invest in traditional media content. Virginia Turezyn of American Capital Strategies said that the media industry is still hits driven, which doesn’t lend itself to visibility. Virginia’s assessment: “If you don’t pick your investments right, you have a hole in the ground”

So where does venture capital apply to the entertainment industry? According to Temple Williams, the place that makes the mose sense is opportunities in tangential support — where investments have traditionally been made — in technology that helps bring content to market. The overall consensus of the panel seemed to be that the studios have a lot more money and are much more willing to invest in placing bets on content, with the exception that venture capitalists are looking for things that “flip the model” — as Martin described, that change the costs of distribution, lowering the cost of production, and lower costs of marketing that content. However, content itself is seen, for the most part, as too risky, though the panelists did point to Will Ferrell’s “Funny or Die” as an example of an exception.

Despite the lack of venture capital, both of the panelists from Hollywood - Conrad Riggs and Temple Williams — felt that the future is in new media. Temple said it directly: “New media is the space you want to be in. It’s the place in the future… Growth is in the digital space.”

Rafat Ali has an interesting post (and photo) of George Lucas and Chad Hurley at the D: All Things Digital conference in Carlsbad this morning. Apparently George Lucas was telling Chad and Steve of YouTube to donate money to film schools like USC. (George Lucas went to USC, and last year he donated $175M to expand the USC’s School of Cinematic Arts).

The interesting theme here is that the cross-industry interaction between the technology industry and the film/media industry seems to be the norm now; I consistently see both technology heavyweights and film/entertainment industry schmoozing at industry conferences.

Locally, I’ve also noticed a renewed interest in looking at “new media” type deals, whether that is content, or technology closely related to the entertainment industry–I’ve talked to two venture funds recently (one with a small fund already raised, another currently in the midst of raising a fund) with a specific focus on the new media area.