Benner on Tech: Media Angst, Disney and Valuation Math
People are Talking About…
There’s been trouble brewing between Hollywood and Silicon Valley for years. Tech innovation has lowered the cost of content production, along with barriers to entry and profit margins for the entertainment industry. One former Hollywood agent once described this dynamic to me as the new war between the North and the South.
While a long-running spat over who controls content distribution probably doesn’t rise to the level of a civil war, a house divided and a fight for the moral center of the United States, we do live in a world where Frank Underwood is probably the only House Whip most Americans know by name. The entertainment industry is a big, important part of our lives, and tech is totally upending the sector.
My former colleague Tom Dotan will release a series of stories that explore the tense relationship between Hollywood and Silicon Valley. His first installment for The Information explores how the loss of distribution control has given tech a huge leg up in the media world, even though tech companies still don’t understand how to produce or value premium content. (Want to get meta? The story is behind a paywall. Yes, I paid to read it.)
Despite the long-running bad blood between the moguls and the techies, top media companies have long known that they need to figure out this tech stuff. They’ve just not been very good at it. Remember the AOL-Time Warner deal?
Disney’s bid for Maker Studios may, too, go down in history as an old entertainment brand’s misguided attempt to buy digital innovation. In a separate piece, Dotan reports that Disney paid nearly $1 billion for Maker -- $500 million upfront, with another $450 million in the form of a potential earn-out. A big price tag for a company that had net revenues of about $20 million in 2013, losses of about $2 million a month and tons of internal strife.
Yet another reminder that valuation is a slippery thing: The big data startup Hortonworks said that it was valued at more than $1 billion when it raised its most recent round of venture funding back in March. But my colleague Jack Clark says that the company now has an implied valuation of $496 million to $579 million. The new, smaller number is based on the company’s IPO plans and it shows that public market investors may be less willing to support the eye-popping valuations that private markets have been bestowing on the startup world.
The Boston Globe reports that Airbnb acquired Pencil Labs, a Cambridge-based startup that made a scheduling app called Wyth and was funded by Matrix Partners and CRV.
In the war of the storage startups, Dropbox has always owned the consumer space and Box has catered to businesses. But those lines may be blurring. TechCrunch got the scoop that Dropbox is about to launch a business API this week.
Fortune’s Dan Primack says that Goldman Sachs is selling pieces of Uber to the bank’s high-net-worth clients, which could look like deals that it has done for past IPO candidates like Facebook.
SpaceX is hiring a farmer… in Texas.
People and Personnel Moves
The New York Times has a profile of Russian celebrity entrepreneur Pavel Durov, founder of the social network VKontakte, who fled Russia this spring and lives in exile. (The company is more popular in Russia than Facebook, and Durov is considered that country’s Mark Zuckerberg.)
The Internet was once seen as a way to diversify Russia’s economy beyond oil. When VKontakte started in 2006, Mr. Durov says, he envisioned his country as a tax-free and libertarian utopia for technologists.
“The best thing about Russia at that time was the Internet sphere was completely not regulated,” he said. “In some ways, it was more liberal than the United States.
Now the Internet is viewed with suspicion by Mr. Putin, who has called it a “C.I.A. project” and has taken steps to insulate Russia from the rest of the digital world. One leading Russian activist recently said the government was on a “campaign to shut down the Internet.”
It’s time for jurors in Oakland, California to determine whether or not Apple violated antitrust laws by forcing consumers to use iTunes. Bloomberg's Karen Gullo writes, “The trial promises a trip back in time, when the iPod was still new and dominated in digital music. Gwen Stefani’s “Hollaback Girl” and Green Day's “Boulevard of Broken Dreams” were hits and Apple sold more 22 million iPods in 2005.” The proceedings will also include old emails sent by former Apple CEO Steve Jobs, which the prosecution hopes will help make its case that Apple was able to charge more for iPods and stifle competition by locking iPod owners into iTunes.
Corporate customers are mulling alternatives now that the company is finally splitting up.
The online retailer is trying to disrupt itself with lots of new offerings. CNET says that one new product, the company’s voice-controlled speaker, Echo, is "too much of a work in progress to enthusiastically recommend at its full list price."
The Wall Street Journal reports that General Electric, a 122-year-old company, is determined to imprint its brand onto millions of millennial brains, so it’s embracing branded content, Instagram, Vine, Pinterest and Tumblr. Can’t wait for a slew of appliance-related .gifs. And the GE Second Life jet engine demo space.
Sony hired the forensics experts at Mandiant (a division of FireEye) to help the company recover from a security breach that was serious enough to catch the attention of the Federal Bureau of Investigation. The FBI also warned businesses that the type of malicious software used in the Sony hack is part of a destructive cyberattack in the U.S. That was apparently too late, though, to stop Fusion's Kevin Roose from getting his hands on documents showing how much money the top brass at Sony Pictures Entertainment is making.
News and Notes
In the wake of the protests and riots in Ferguson, Missouri over the killing of the unarmed teenager Michael Brown, the Obama administration is dedicating $263 million in Federal funding for body cameras and additional training for police officers. Businessweek reports that two major U.S. companies sell body cameras: Vievu and Taser.
The U.S. Supreme Court is still trying to figure out when hateful and threatening comments online cross the line between free (distasteful) speech and serious threats. My Bloomberg View colleague, Noah Feldman, sorted through these issues in a column yesterday. "Anthony Elonis doesn't deserve sympathy or admiration -- but he does deserve for the government to prove that he meant to threaten others before he goes to jail," Feldman wrote.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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Timothy L. O'Brien at email@example.com