New Media Ventures Not Making Piles of Money, Yet

When the Hollywood writers strike ended in February, the group of scribes behind Strike TV, a website for videos about the work stoppage, figured their site had come to an end as well. But with submissions of short form videos continuing to roll in, the creators decided to keep Strike TV going as a way for talented people in the entertainment industry to get their work distributed outside of the traditional studio system. The site would become the portal to handle the advertising and distribution while the creative people came up with the content. “We realized this was a great opportunity for a great section of Hollywood to take control of their own careers, create their own stories, own their content and have complete freedom for the first time,” said Peter Hyoguchi, the chief executive of Strike TV. The three-month fight between the Writers Guild and the major Hollywood studios was a fight over the revenues from online streaming and downloads to home computers and mobile devices; the same fight behind the stalemate between the Screen Actors Guild and the studios over a new contract. The history of Hollywood has been one of film and television production and distribution being in the hands of the few but the Digital Age has changed that. High quality yet inexpensive cameras and editing equipment give filmmakers tools they might not otherwise afford. High-speed broadband connections and high-def flash programs can turn any website into a television channel. Mix in a labor walkout with frustrated writers to spark an entrepreneurial spirit and the result is ventures like Strike TV, Hollywood Disrupted, and Virtual Artists all started during the strike. That’s not to say the major studios have not gotten into the game of creating original online content. NBC Universal and News Corp. teamed to launch Hulu, while The Walt Disney Co. started Studio 9. The major broadcast networks stream shows online after they appear on TV and for nearly two years Disney has offered television and films for sale on iTunes. The strike, however, just accelerated a direction the industry was already headed in. Being at odds with the studios gave the inclination to say enough is enough of how business was done. “Without the strike people would still be focusing on traditional distribution and traditional funding,” said Hyoguchi, of Sherman Oaks. “The fact we felt like we were being screwed gave the motivation to launch our own ship,” added Aaron Mendelsohn, one of the writers who started Virtual Artists; ( aaronmendelsohn.com/ ). Post-strike, the former antagonists are now on friendlier terms. Virtual Artists has been in talks with the media studios and distributors about working together. The networks have been welcoming to Strike TV, which can provide potential series pilot done on their own dime and limit the financial risk from the networks. If the site develops a hit than all of the hard work will have been done and it can be presented to a network with an audience already attached, Hyoguchi said. The intention of the independent ventures was never to cut the studios out of the picture, Mendelsohn said. “This is an opportunity to work alongside them rather than underneath them,” said Mendelsohn, of Studio City. How to make money? Lack of interest from writers, directors and actors to make online content is not a problem in the Digital Age. What does appear to be questionable is how to make money from it. Sure, Disney CEO Robert Iger can say, as he did this spring, that he expects the company to pull in $1 billion in online revenues but that includes sources other than advertising on websites. Companies remain in the experimental phase of working out a business plan and will be for some time although the revenue will be generated through either ad-supported content or subscription-based services, said K.C. Blake, Director of Business Development at the Entertainment Technology Center at the University of Southern California. “In five years time, we will understand the new media consumer much better and I suspect we will find that a mixture of both ad-supported and subscription-based services will continue,” Blake said. Product placement will grow to more prominence and link brands into storylines of both short and long-form content, Blake added. That is a path taken by Virtual Artists to act as a conduit to the professional writing community for media buyers and ad agencies. The writers can bring in story ideas that can be vehicles for advertisers and the agencies can supply marketing briefs with ideas for branded entertainment that writers will execute, Mendelsohn said. One project given the greenlight by Virtual Artists is for a $3 million web series sponsored by a major automaker. This car company, like other businesses, sees a large chunk of advertising dollars going online and wants to experiment on delivering more efficient marketing methods. These can come in the form of web spinoffs of network shows or “podbuster,” a two-minute narrative that takes the place of commercials featuring characters from the show on which it airs, similar to what The CW Network did with its content wraps. “We are trying to figure it out together,” Mendelsohn said. The writers behind Strike TV spent about $10,000 to get the website running and its business plan includes advertising and self-funded distribution. Venture capital or angel investments may be taken at some point but not in the immediate future, Hyoguchi said. What the site is betting on are fans viewing new programs from writers of their favorite shows that are no longer on the air. The only place they can see these shows made by writers of “Star Trek: The Next Generation,” “Friends,” and “The Office” will be on Strike TV. “We are striking out independently and we are striking while the iron is hot in new media,” Hyoguchi said. “If we are lucky we will strike it rich.”