By Robert Green, Another Green World
For much of the 2000s, the content start-up community lived in the slipstream of the crash of 2000. VCs took the approach that content was a bad bet. Instead they put money into ad tech, pipes, all the accoutrement but none of the actual substance. Investment firms ignored what was needed to create a real robust marketplace that would require all that infrastructure — entertainment consumers would actually want to watch on-line.
That has since changed slightly, when content publishers like Awesomeness TV, Buzzfeed and Vice created opportunities for VCs that made sense to them. But VC’s are now repeating history with VR failing to recall that when you are in the oil market, it’s not enough to build derricks and pipelines and sell picks and axes — you need someone to go out there and start wildcatting. It’s risky, you can lose your shirt, and lots of wells come up dry,but what the end user needs to support the entire value chain is oil. No oil for the consumer — no value in the pipes.
We are in a pipes ‘n picks ‘n axes moment as far as VCs are concerned. Everyone wants to hear about patents, or hardware, or software. Morpheus, Oculus, Ion, Vive, the Gear, already in the market, estimates are that there will be over 10 million headsets in the marketplace in 18 months (Cite). So of course the question becomes: what will all those headset wearers be able to watch? what “premium content” (not games, because for the purposes of this article you can assume I don’t give a shit about games or gamers) will drive consumers to want to pay to support a content ecosystem?
I’m not a prophet, but one thing I do know: there is a long-standing methodology for creating top quality audience-pleasing money-making content. It’s called a Film fund. The basics: you put a large amount of money into a revolving line-of-credit facility from a bank or very high net worth finance group (think 100 million dollars for the sake of argument). That money is divvied by acquiring IP rights, getting scripts written, paying for overheads like the salaries of top notch creative talent, who develop scripts, put together packages of directors/stars, and find distribution for each piece, or a slate of pieces. When these benchmarks are hit,often with some type of specific rules like ”must have a star at least of Jonny Depp’s level,” for instance, then you can draw on the credit line for your production money, and see the project to its premiere
Easy! The whole process can take between 12–18 months, usually, given schedules and development cycles. But if you say to a VR-focused VC right now “hey, we need money to create a content machine” they will tell you that there’s no distribution mechanisms in place now, so they won’t do it. But they do believe there will be lots of distribution in 12–18 months, because they’ve all read the same Goldman-Sachs research. So what they really are saying is: “we’ve written checks for patents/software/hardware/gaming/toes-in-the-water of content, but we won’t write a check for a real content play until we know there’s a financial model that works.”
And therein lays the chicken-egg scenario facing VR right now. In 12–18 months, there will be 10 million headsets, and very little in the way of high quality content. Lead times are where this entire edifice will crumble. So what can the humble VC with a couple hundred million burning a hole in her pocket do about all this? VC’s should form a VR content fund, with an expected return on that money of between 10–30% and a time horizon of 3–5 years for payout, and put that money in escrow. While at it, take 5% of the total money put into the production account (let’s say 150 million and 7.5 million for the purposes of this argument) and roll that into a 2 to 3 year overhead number with a much bigger payout in success. Use it to hire great development executives, a talented production team, and start investing in great creative. Sure, if you build it, viewers may come but if the entertainment experience is dead on arrival, well, there’s no empty room like a virtual one.
Robert Green has worked as an executive in film, television and digital content for over 15 years. With experience ranging from overseeing development of such films as “Stuart Little” and “Gladiator”, to launching and managing production of HuffPost Live and digital content at Conde Nast Entertainment, Green has established a worldwide reputation for successfully developing and producing exceptional content. Today, Green runs Another Green World Productions, a fullservice production and consulting company that he founded in 2007. At AGW, Green has continued his reputation for excellence by developing and producing content for clients such as American Express, Federated Media, UCB, The Young Turks and Morgan Spurlock, among others. Green currently resides in New York City with his wife, the artist and photographer Jill Greenberg, and their two children.