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Note: the following is an excerpt from my contribution to Finding Genius: Venture Capital and the Future it is Betting on, by Kunal Mehta, which features interviews and contributions from dozens of venture capitalists about the industries they invest in. It has been lightly edited for publication in OneZero.
Global media and entertainment is a $2 trillion industry consisting of filmed entertainment (movies, television, digitavideo), audio (music, radio, podcasts), publishing (newspapers, magazines, digital publishers), and video games (console, PC, mobile, eSports.) The United States represents a third of the global market — over $700 billion in annual revenue and has traditionally produced the most prolific media assets, which are subsequently distributed around the world. Media, perhaps more than any other industry, has been radically transformed since the advent and mass adoption of the internet. Prior to the internet, the vast majority of media and entertainment content was produced and distributed by a select few gatekeepers: movie and TV studios, record labels, book publishers, and newspapers. This control was necessary, as the costs to produce and distribute content was extremely high and out of reach of the everyday citizen. In the past 20 years, the democratization of distribution technology and falling costs of content production have opened the proverbial floodgates and allowed “new” media companies to emerge. However, industry incumbents have thus far survived and adapted, relying on their high-quality (and expensive) talent networks and capital advantages while ramping up investments in promising media startups.
Investing in media startups is a risky gamble, as content is highly subjective, and it’s difficult and expensive to produce quality at scale. In fact, entertainment is a hits-driven industry (much like venture capital), where investments in a few “home-run” projects yield outsized returns, covering losses on a majority of other investments. Some venture capital firms explicitly avoid media investments, and founders I’ve spoken with have expressed with frustration that “most VCs don’t understand media.” The truth is, the media industry is a complicated ecosystem…
