Google, Apple, Amazon and Netflix: Surrender your eyeballs

Get ready for the tech industry's war to control your every waking moment

Topics: Google, Apple, Netflix, Movies, Hollywood, Television, Books, Writers and Writing, amazon, , ,

Google, Apple, Amazon and Netflix: Surrender your eyeballsSergey Brin, Tim Cook (Credit: Reuters/Stephen Lam/Robert Galbraith)
Excerpted from "Dogfight"

The upheaval in media and technology that the iPhone started, the Android movement accelerated, and the iPad broadened into a full-on revolution has unleashed a maelstrom in the years since Jobs died that few in Silicon Valley, New York, or Hollywood have seen before in their careers. It’s not just that two of the biggest, most influential corporations in their worlds—Apple and Google—are fighting each other to the death. It’s that the mobile revolution they set off has suddenly put roughly $250 billion in revenue from half a dozen industries up for grabs.

For those on the wrong end of these changes, the past five years have been unpleasant. Newspaper publishers have seen print advertising revenue and circulation fall to twenty-year lows. The number of journalists employed at newspapers has been cut almost in half in the past five years. Book publishers are worried that they are about to get hit in a similar way. Amazon is not only driving prices down beyond publishers’ ability to make a profit but also trying to lure away their most profitable authors. Movie studio executives are already reeling from watching their DVD business evaporate. Now their ability to build audiences for bad movies is being destroyed by moviegoers’ loud and instant reactions to films on Facebook and Twitter. The television industry is worried because tech companies such as Netflix and Google’s YouTube are competing for their audience with their own content, putting pressure on monthly subscription rates.

But the mobile revolution has also created scores of new moneymaking opportunities—particularly in television—and it is enabling business partnerships never before thought possible. Tech companies are making impressive strides partnering with top entertainment-industry directors and producers, whereas the companies had previously shown little interest or affinity. New York and Hollywood big shots are now building slick mobile apps and partnering with software developers, whom they once called criminals for encouraging the theft of their content. Indeed, New York and Los Angeles now boast thriving tech start-up communities. Los Angeles is fast approaching a thousand tech start-ups, while New York now has roughly seven thousand. Top agents and producers, who previously had little reason to visit Northern California, are now making the trek almost every week.



“We’ve launched five different start-ups [for our clients and others] now,” said Michael Yanover, the head of business development at Creative Artists Agency (CAA) in Hollywood. “Every time we launch a start-up, it has to get funded. So we are constantly circling VCs for funding, information, and access. We meet with all of the interesting start-ups and the bigger, established companies. We work a lot with Amazon, for instance, and also with YouTube. We look at anything that is emerging. If it’s Pinterest. If it’s IntoNow. If it’s Shazam. We would like to be part of all of that.”

Yanover, who looks fortyish but would not tell me his age, has been thinking about the Silicon Valley–Hollywood axis for fifteen years. He was running his own start-up in Los Angeles when Macromedia in San Francisco recruited him to help it build out the first explosion of web content during the Internet bubble.

We did some very pioneering work with Matt Stone and Trey Parker, the guys behind South Park, and Tim Burton and James L. Brooks, to create content on our site in return for equity. It wasn’t TV, but it serialized episodically like TV. We bought Atom Films, and I ended up running all the content that was nongaming, which was anything film, animation, music, videos, and even greeting cards.

One of the things I was doing at Macromedia was working on embedded Flash. And Flash, at that point, was driving all rich media [video] on the Internet. What we thought was the natural evolution of Flash [now owned by Adobe] was to embed it into mobile devices, embed it onto set-top boxes, embed it into game consoles, et cetera. So we developed an initiative, which we code-named Columbus, because it was the new world, right? Columbus was all about embedding Flash everywhere, including the mobile phone.

The experience of mobile apps was very primitive in 2002. But to me it was always clear that everything was going to be on your mobile phone. In emerging markets they were already skipping over the PC and going right to the mobile phone. And they were skipping over landlines and going right to wireless. So those two factors in and of themselves told you that, oh my God, the mobile phone is going to be the device where content gets displayed and broadcast.

But most of Yanover’s work building web content needed to be shelved for a while because the technology just wasn’t ready. Most homes didn’t even have broadband back then, let alone wireless connections and devices that were fast enough to show video. He joined CAA in 2003 and represented as many mobile ventures as he could find. “And then Steve Jobs came along with the iPhone,” he says,

and suddenly the world opened up and totally emancipated all of these developers and all of these creative people from the stranglehold of the carriers and from the lack of flexibility and the screwed-up platform that existed in the traditional feature phone. And so when the iPhone showed up, it was like Moses leading people out of the desert into the Holy Land. It was an amazing moment. And it freed everybody. Of course it made Apple much stronger. But it was a freeing moment. Today it’s much easier. You have iOS and you have Android and it’s very simple, that’s it.

•••

Experimental—that’s what tech companies like to call their growing interest in media. If so, it’s a big experiment. Netflix just spent two years and $100 million producing its hit House of Cards with Kevin Spacey. It just revived Arrested Development, the Mitchell Hurwitz comedy that ended its three-year run on Fox seven years ago. It plans to make twenty other shows the same way. Google is spending hundreds of millions to jump-start production of dozens of channels for YouTube, effectively turning it into the Internet’s first cable television network. And Facebook, with a membership that now represents half the Internet—half— is becoming an important part of the movie money-raising and distribution process. You can’t finance and distribute a Hollywood blockbuster through Facebook, but you can do an independent film with a budget of a few million dollars. Amazon, Hulu, and Microsoft are now also in the early stages of professional content financing and distribution.

Most think it is only a matter of time before Apple does something big in TV—either with another revolutionary device or by using its enormous cash hoard to turn iTunes into the most current and deepest source of content anywhere. Before he died, Jobs told biographer Isaacson that he’d finally figured out a way for Apple to do it. There has been no big, splashy announcement yet, but already Apple TV with Airplay has been incrementally turning Apple’s iPhone and iPad into personalized TV remote controls. You can start watching a movie on your iPhone or iPad while cleaning the kitchen and continue it on your TV after you’ve finished your chores. Or if you like the two-screen experience, you can switch the movie to the TV while using the iPhone or
iPad to tweet or Facebook with friends about it—or use the iPhone or iPad to do something else entirely.

Meanwhile, old-line Hollywood agencies such as CAA and William Morris Endeavor (WME) now not only shop their clients to big studios but to app developers too. In 2011, with money from chip maker Qualcomm, CAA created Moonshark, a company that would produce mobile apps the same way the agency packages writers, actors, and producers for feature films or TV shows. Yanover said that all the mobile entertainment apps that exist now are great but could be so much bigger if they could tap into the storytelling and production machinery of Hollywood. Writers could give game characters names and origin stories, for example. “Angry Birds was fantastic, but really it’s the tip of the iceberg. It’s the beginning of what is going to really happen,” Yanover said. Last year, in an effort to capitalize on the new money-making opportunities of convergence, big tech investor Silver Lake Capital bought a third of WME for an undisclosed sum. TPG, meanwhile, bought a chunk of CAA. “It used to be the only things the agent did—back when I started—was TV, movies, books, and theater,” said Ari Emanuel, the CEO of WME, during an onstage interview last year. “Now there are a wide variety of distribution points and places where artists can start creating content. Clients are now creating games, turning it into a book and then a movie. The agency now has a new media department. Apps are getting developed. It’s very dynamic.”

Here’s an example. Lady Gaga’s next album, ArtPop, won’t be issued initially as a CD or digital download but as a mobile app. Her manager, Troy Carter, has a lot more in common with Facebook founder Mark Zuckerberg than with the traditional rockstar managers of old. He’s one of the first to use social media as the primary marketing vehicle for his client. In addition, he is fast becoming known as one of the savviest high-tech angel investors around, with early stakes in apps such as music service Spotify, taxi service Uber, and news service Summly (just bought by Yahoo!). “The music industry is healthier than ever right now, and it’s a fantastic time to be in it,” he told London’s Guardian newspaper at the end of 2012. When was the last time anyone said that about the music industry?

Emanuel says that from his and his clients’ perspectives not only have all the changes been good, they’ve created an embarrassment of riches: just as broadcast and cable companies are bidding for his clients’ work, so too are half a dozen tech companies—ones with enough spare cash to outbid any cable or broadcast company. Indeed, if you add up the cash on the balance sheets of Apple, Google, Amazon, Microsoft, Facebook, and Netflix, it approaches $300 billion—enough to buy all the big cable companies and broadcast networks combined. Emanuel has been critical of Silicon Valley’s lack of respect for copyrights. But he says Google especially is getting better about this. And it is hard to ignore how much the tech companies are bidding up the prices of his clients’ services. Emanuel said that there were 39 scripted TV shows in 2009. In 2011 there were 139. Yet the quality of programming, and the bidding for talent and distribution, has increased along with the supply. The quality of television programming today is accepted as better than it has ever been before. Emanuel has a reputation as one of the toughest negotiators in Hollywood, accused of never having a nice word for anyone. But of the rush of Silicon Valley money into Hollywood, he says, “It’s fantastic. I love them.”

•••

For Emanuel to call the blurring of the lines among Hollywood, New York, and Silicon Valley “dynamic” may actually be an understatement. Five years ago the words television and TV show had unambiguous meanings. Now they have become almost too confusing to use in conversation. Are you watching TV if you are watching House of Cards by Netflix exclusively on a smartphone or a tablet? It feels as if you are, but you are watching something backed and distributed by a technology company based in Los Gatos, not Hollywood. And you are watching something that is being distributed outside the cable and broadcast-television infrastructure. The only way to get House of Cards is with an Internet connection and a Netflix subscription.

What about the difference between web content and professionally produced content? That distinction used to be clear too. Now, it’s no longer rare for hit shows to start on YouTube before getting picked up by big broadcast or cable networks for huge sums. That’s what happened with Burning Love and Web Therapy. And it is no longer rare for the big networks to take advantage of the Internet’s reach to play that game in reverse. Last fall, in order to build buzz and audience for a new series called Go On, NBC aired part of the pilot on YouTube about six weeks before the series’s official debut. Fox did the same thing with Homeland and New Girl.

The blurring of technology and media is even changing how TV shows are produced, said Michael Lynton, Sony’s U.S. boss, during a 2013 interview at an All Things D conference:

In the past you had a really difficult time creating long- form, open-ended drama. You had to wrap up every epi- sode neatly in a bundle at the end—so that if you had never watched the show, you would know what was going on. That was because that was the way people were used to watching television, and it was because of the syndica- tion side of things [through which series were sold to TV/ cable stations complete or in chunks depending on their budgets]. Then when [some shows did test those rules] people would say, “I’ve missed two or three episodes. This is not worth my time and effort.

Then the PVR shows up, and Netflix shows up, and people say, “Oh, I can miss a couple of episodes and catch up.”

I personally believe that one of the reasons you are seeing such an explosion in creativity—whether it’s Mad Men to Breaking Bad to House of Cards to Justified to Sons of Anarchy—is the fact that you can create thirteen- episode, long-form narratives where characters can be developed over thirteen hours. Better writers come to this because they say, ‘Gee, I can’t get it done in two hours of a movie.’ Better directors come to this. For a long time people have wondered when all this new technology was going to affect the creative side of things. This is the first one I’ve seen. Generally people think that is a good thing.

All this has been enabled or accelerated by the explosive growth of smartphones and tablets in the past five years. At about 4 billion, the number of televisions in use worldwide is still double the number of smartphones and tablets—about 2 billion. But at current growth rates, there will be more smartphones and tablets than TVs within three to five years. Smartphone sales are growing at better than 25 percent a year, and tablet sales are more than doubling every year. Meanwhile, the sales of TVs worldwide is actually declining. Some of that is because of the global recession. But some of that is because more and more new college graduates aren’t bothering to buy one.

Investor Marc Andreessen says that smartphones and tablets have not just exponentially expanded the number of people in the world who can consume media, they have also exponentially in- creased the number of times and places throughout each day that those people can watch. “You’ve got your phone and you can watch TV or movies anytime you want. The same with tablets. With a TV you have to be at home—to be sitting still—to watch it.”

Andreessen sounds giddy when he talks about all this. He has been thinking about these issues and watching them evolve for more than twenty years, and he has been doing it from one of the best vantage points in the world—with the access to people and information only available to a select few Silicon Valley insiders. At the moment he and his partner, Ben Horowitz, are known as two of the top VCs in technology. But many have forgotten that Andreessen was also the cocreator of the first Internet browser, Mosaic, which became Netscape Communications in 1994. He helped sell it to America Online for $4 billion in 1999—despite losing the browser wars to Microsoft. Then in 2000 he cofounded one of the first cloud-computing companies, Loudcloud. It nearly failed when the Internet bubble popped. But he and Horowitz changed the name to Opsware, rebuilt it, and sold it to Hewlett- Packard for $1.6 billion in 2007. Most of the best-known VCs took a decade or more to make a splash. Andreessen and Horowitz have become two of the top VCs in four years.

Andreessen says,

In 1993 it was very obvious what the world would be like if everyone had a high-speed Internet connection and a big screen because at the University of Illinois [where he was at college] we had those things. But the only reason we had those things was because the federal government was paying for them, and they were only paying for them at four universities. Our first demo for Netscape showed how you could watch Melrose Place [the hot TV show at the time] in the browser.

I actually think mobile is the biggest thing our indus- try has ever done. Our industry was basically born around 1950 at the end of World War Two [when William Shockley invented the transistor]. And that sixty years was basically a prologue to finally being able to put a computer in ev- erybody’s hands. We’ve never had the ability as an indus- try to give a computer to five billion people [the number of people with cell phones currently], and that is precisely what is happening right now.

Excerpted from “Dogfight: How Apple and Google Went to War and Started a Revolution” by Fred Vogelstein, published in November 2013 by Sarah Crichton Books, an imprint of Farrar, Straus and Giroux, LLC. Copyright © 2013 by Fred Vogelstein. All rights reserved.

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