7 ms·

Slated aims to disrupt Hollywood as the AngelList for film funding

70 points by bproper 15y ago

sunchild 15y ago
This idea has been kicking around since the late 90's. The difference is that production costs have (in theory) gone way down since then. The flip side of that is everyone with a Mac and a Canon 5D thinks he's Stanley Kubrick, so it's harder to spot real talent. Either way, it's an inevitability that the market for financing feature films and "television" series will spread horizontally as the costs keep coming down. I wonder how many people realize that Hollywood Studios are basically financed by major banks. It's the talent pooling and fairly consistent ROI that keeps the lenders coming back.
- technoslut 15y ago
  >The flip side of that is everyone with a Mac and a Canon 5D thinks he's Stanley Kubrick, so it's harder to spot real talent. This is the only point I disagree with. I don't care how much more accessible the tech gets it's still about te storyline, the acting and cinematography.
  - jasonwocky 15y ago
    I assume sunchild called it "harder" to spot talent simply because the increased accessibility of tech means there's now more crap to wade through.
    - technoslut 15y ago
      I can't make that assumption. Any one of these crafts: direction, acting, editing, cinematography and soundtracking is always hard to find. You always had to wade through a mountain of garbage. The way most execs did it previously is through word of mouth. I don't believe that's changed today.
    - sunchild 15y ago
      That's exactly what I meant. It becomes a real problem when you're looking to fill a technical spot. It's really no different than casting actors, though – that's always been a flood of wannabes. My point was just that lowering the barriers to entry on the technical side means more people feel qualified, even if they aren't. Practical issue more than an insurmountable obstacle.
  - alan_cx 15y ago
    Im not even that sure acting and cinematography are essential. I know with web based TV type shows, the only thing I have cared about is the plot. An example is Pioneer One. Terrible production values, which is OK because it only cost $10k ish per episode, but the plot was interesting enough to keep watching. OK, if I pay to go to the cinema to see a film I expect something a lot better, but then there is more cash coming it to cover that. Anyway, my silly little point, is that a good plot and script can carry a hell of a lot of iffy production.
    - technoslut 15y ago
      If you're looking for talent they all matter. You, as a studio exec, go after what you see or feel. For example, one of my favorite films was The Brothers McMullen which was made with $25,000. It was done on a low budget but anyone could see that Edward Burns was the true talent in the film when he was the actor, director and writer. The movie didn't become popular because a ton of execs waded through thousands of movies but rather by word of mouth. This has been the same in the music industry for years. >OK, if I pay to go to the cinema to see a film I expect something a lot better I'm not sure if that's true. A good portion of that 'experience' of movies is to see it with other people – even with people you don't know. It is just something to do. Some just like to see a bad movie and throw popcorn at the screen. I'm sure that many didn't go to see Transformers 3 because they expected better than an indie flick.
- deleted 15y ago
  [deleted]
- jonnathanson 15y ago
  "The difference is that production costs have (in theory) gone way down since then." What's actually quite interesting is that there's been a bifurcation in production costs. The physical costs of production -- equipment, editing software, distribution, and so forth -- have come down dramatically. But Hollywood's cost structure has increased in this same timeframe, because the costs of big talent have gone up. Top actors, directors, writers, source material, producers, and so forth have commanded steadily higher prices. And the outlays on special effects, locations, and other mainstays of blockbuster filmmaking have increased at a steady pace. We should note that this represents a choice on Hollywood's part. Maybe it's not a monolithic, homogenous, across-the-board choice. Perhaps it's something more like the agglomeration into coherence of a thousand daily choices by a thousand different players in the Hollywood system. Perhaps some of those players -- agents and producers -- have had an outsized impact. Regardless, somehow Hollywood has actively participated in spending more and more each year on production at the same time that it earns less and less each year on distribution and sales. To your point, the banks and hedge funds got into the game because they recognized these inefficiencies on the production side. They've got deep enough pockets to finance some of the production risk, knowing that they'll always be paid back, so hence, it's not actually risky for them. And, since production keeps getting more expensive, Hollywood will always be out looking for more deficit financing each year. At what point the tail started wagging the dog, or whether it actually has, is anyone's guess. But the general observation is that the hedge-fundization of the system kicked into full swing in the early 2000s. To my eye, this entire ecosystem looks to be resting on a very shaky foundation. Perhaps existing mega-talent will price itself out of startup filmmaking, but new talent seems to be headed in that direction at a breakneck pace. And, lest we dismiss "alternative" content as the typical, unsophisticated, flash-in-the-pan UGC we've seen on YouTube for so many years, we should take note that a lot of really high-quality independent filmmaking is hitting the charts on Netflix, iTunes, and other sources -- right alongside Hollywood fare. For the time being, Hollywood is in no danger of being displaced by these upstarts. But the mere fact that small fry can get collaboratively filtered right alongside the big fish portends to an eventual disruption of a lot of common assumptions about necessary costs in the Hollywood model. We live in interesting times.
  - roc 15y ago
- rdouble 15y ago
  Rather than emulating Stanley Kubrik, I think young people armed with 5Ds want to make music videos, comedic shorts and skateboard films... all of which have improved to an amazing degree over the past decade. I'm not so sure startups changing financing for feature films will "kill Hollywood." The preference of the newer generation to watch shorter bits of content that don't require such financing in the first place, might.
  - kthakar3 15y ago
    I see a lot of great (spectacular in some cases) videos being posted on vimeo. Most of these are as you said, young people with 5Ds making short films. However, it is still a leap of imagination to think that people will switch to shorter content over films and TV.
    - ericd 15y ago
      Agreed, people's ancient appetite for storytelling isn't going anywhere, and a youtube clip isn't going to satisfy that.
randall 15y ago
AngelList's peg / competitive advantage is Venture Hacks / Nivi and Naval. It sounds like this guy is a technology insider (investing in SecondMarket) not a Hollywood insider. That makes me think it's going to be more difficult for the winner investors to get on-board... and I don't know about you, but if AngelList just had random investors from podunk nowhere, it'd definitely not have the cred it has. Do people producing movies care about who their investors are? Do film investors have the same relationship with their producers as startup founders do with their investors? (Aside about AngelList: Some people I've talked to still feel like asking money on an open platform such as AngelList is something you do if you're not going to have a brand name investor. That means it's a backup or round-filler strategy for the hottest startups, which lessens its utility compared to traditional strategies of generating dealflow.)
- bproper 15y ago
  Paternot has worked in the film industry for the last 8 years and definitely acknowledged that the biggest challenge was getting the social proof in place to ensure that investors and talent feel comfortable listing on Slated.
rockarage 15y ago
"A good example of “Hollywood accounting” would be “Harry Potter and The Order of the Phoenix”, which took in $938 million in revenue, yet still produced a $167 million loss. In cases like this the distributor, Warner Bros., still makes a bundle, but the film and its backers, set up as a independent corporation, wind up in debt. How is this possible? You can get a more detailed picture in this episode of Planet Money, which details how Disney paid itself more than $200 million in distribution fees on the Nicholas Cage vehicle “Gone in 60 Seconds.” The film made a lot of money for Disney, even while the corporation created to produce “Gone In 60 Seconds” was a loser on the official accounting." Now I understand why Hollywood does not want simplified and efficient distribution. It has nothing to do with ignorance and everything to do with greed and avoiding all risk. They overcharge for complicated distribution and DRM, and pass all the risk of to the film and its backers.
- nextparadigms 15y ago
  This kind of reminds me of Yahoo when they didn't want a more efficient ad system because they wouldn't be able to charge the media buyers as much. I don't really care they are doing this. They will eventually be replaced because of this. I just want the Government to stop protecting them from getting replaced. It's not the Government's job to stop disruptions from happening.
  - alan_cx 15y ago
    So, if the government were to put money in to troubled businesses to prop them up or even create jobs, it gets heavily criticised. Its seen as socialist and evil. However, if the government criminalises its citizens to support a dying business, well, that's OK and all American, patriotic even. Protecting American jobs by criminalising Americans. Have I missed something? I must have. Surely, the government should be merely supporting the market forces of capitalism, and if the current form of Hollywood dies, well, isn't that exactly as it should be? All that will happen is that new business models will emerge. Oh, I dunno. Too much interference, if you ask me. If "we" truly believe in capitalism, then why not sit back and let it do its thing? OK, so Warners or who ever goes bust. Well, wont all those people simply go out and start again, but in a different way? In fact, while the government supports the antiquated Hollywood, its is in fact holding back the natural progress. Imagine if the government made moves to protect valves, and transistor possession was made illegal. Would we have still gotten the microchip? Well, it amuses me!!!
tomkin 15y ago
I'm probably way off, but this is my understanding of this whole "kill Hollywood campaign" that we've got ourselves into. Step 1) Create a company that destroys Hollywood. Stick it to Studio X by way of Y tech advantage. Step 2) Become a profitable company, maybe even a titan in the industry. Step 3) Watch as others see your service as a threat, build their own competing tech. Step 4) Fight to keep your stake in the market, or exit. Fighting leads to bullshit tactics. Exit eventually gives your company to the very studios you were against. Step 5) Studio X acquires your company in an attempt to compete with the "new way of doing things". Your research & development goes into their melting pot and the cycle repeats OR Studio X acquires one of your aforementioned competition, leaving you no choice but to resort to bullshit tactics to survive (after all, you're huge at this point). To me, the problem isn't Hollywood. It's the laws that surround and re-enforce it. Locking up an industry in a closet full of weapons is asinine and the end result is obvious.
- wr1472 15y ago
  And you could substitute "Hollywood" for any other industry out there. Isn't this just how the business world rolls?
  - tomkin 15y ago
    Sure, but we're not all about taking out the industry. The raison d'etre is undignified by the motivation.
NerdSatire 15y ago
Hallelujah! Once Stephen Paternot orchestrates this coup d'état of Hollywood, its new motto will be: "Got the girl. Got the money. Now I'm ready to live a disgusting, frivolous life." My apologies that this comment is very un-HN like.
drumdance 15y ago
I've thought about doing something similar in the past. While researching it I noticed that there are not a lot of "insider" blogs like we see in the tech/VC world. In fact, I briefly thought about getting into film production and using blogging as a way to document the process and create a brand. (I ultimately decided I like my current career better.) I think someone will eventually do this and build a huge name for themselves. I asked this question on Quora but didn't get any response: http://www.quora.com/Why-arent-there-more-movie-TV-finance-and-production-blogs http://www.quora.com/Why-arent-there-more-movie-TV-finance-a...
brown9-2 15y ago
The article, and idea behind the startup, seems to be that the studios are screwing over the backers and the funding corporation. But if this is so, why do people continue to invest in these vehicles? Don't the backers of these movies, especially a blockbuster like Harry Potter, know that this accounting is going to happen? It seems to me like there must be another explanation at work here - such as the funding corporations being set up as losers purposefully for the purposes of taxes. Otherwise, if the studios were screwing their funders so much, wouldn't they have run out of suckers by now?
- untog 15y ago
  I don't have a citation for this because it's from memory, but I believe that a lot of the companies that go under in debt are actually subsidiaries of the studios themselves. It works out as a tax/debt write-off.
  - mcao 15y ago
    Just curious, how is this different from what Enron was doing? They are basically setting up shell companies to hide their losses right?
    - rgoddard 15y ago
      The shell companies are to hide the profits and maximize the studio's gain.
smoody 15y ago
This has been done before. But, as we know, being early is the same as being wrong.
redthrowaway 15y ago
FTA: >In response Paul Graham, the Svengali of of the startup community, posted an essay calling for ideas that would kill Hollywood. From Wikipedia: >The word "svengali", has come to be used as a common noun referring to a person who, with evil intent, controls another person by persuasion or deceit. The Svengali may use pseudo-kindness and manipulation to get the other person to turn over their autonomy. How, exactly, is this an apt description of pg?
TheCowboy 15y ago
So in reality, Hollywood profits are decreasing due to unintentionally-on-purpose losing more money to studios such as Disney, rather than actual pirates. Make sure to share this information with anyone you know when discussing SOPA.

70 points by bproper 15y ago

This idea has been kicking around since the late 90's. The difference is that production costs have (in theory) gone way down since then. The flip side of that is everyone with a Mac and a Canon 5D thinks he's Stanley Kubrick, so it's harder to spot real talent. Either way, it's an inevitability that the market for financing feature films and "television" series will spread horizontally as the costs keep coming down. I wonder how many people realize that Hollywood Studios are basically financed by major banks. It's the talent pooling and fairly consistent ROI that keeps the lenders coming back.

technoslut 15y ago
>The flip side of that is everyone with a Mac and a Canon 5D thinks he's Stanley Kubrick, so it's harder to spot real talent. This is the only point I disagree with. I don't care how much more accessible the tech gets it's still about te storyline, the acting and cinematography.
- jasonwocky 15y ago
  I assume sunchild called it "harder" to spot talent simply because the increased accessibility of tech means there's now more crap to wade through.
  - technoslut 15y ago
    I can't make that assumption. Any one of these crafts: direction, acting, editing, cinematography and soundtracking is always hard to find. You always had to wade through a mountain of garbage. The way most execs did it previously is through word of mouth. I don't believe that's changed today.
  - sunchild 15y ago
    That's exactly what I meant. It becomes a real problem when you're looking to fill a technical spot. It's really no different than casting actors, though – that's always been a flood of wannabes. My point was just that lowering the barriers to entry on the technical side means more people feel qualified, even if they aren't. Practical issue more than an insurmountable obstacle.
- alan_cx 15y ago
  Im not even that sure acting and cinematography are essential. I know with web based TV type shows, the only thing I have cared about is the plot. An example is Pioneer One. Terrible production values, which is OK because it only cost $10k ish per episode, but the plot was interesting enough to keep watching. OK, if I pay to go to the cinema to see a film I expect something a lot better, but then there is more cash coming it to cover that. Anyway, my silly little point, is that a good plot and script can carry a hell of a lot of iffy production.
  - technoslut 15y ago
    If you're looking for talent they all matter. You, as a studio exec, go after what you see or feel. For example, one of my favorite films was The Brothers McMullen which was made with $25,000. It was done on a low budget but anyone could see that Edward Burns was the true talent in the film when he was the actor, director and writer. The movie didn't become popular because a ton of execs waded through thousands of movies but rather by word of mouth. This has been the same in the music industry for years. >OK, if I pay to go to the cinema to see a film I expect something a lot better I'm not sure if that's true. A good portion of that 'experience' of movies is to see it with other people – even with people you don't know. It is just something to do. Some just like to see a bad movie and throw popcorn at the screen. I'm sure that many didn't go to see Transformers 3 because they expected better than an indie flick.
deleted 15y ago
[deleted]
jonnathanson 15y ago
"The difference is that production costs have (in theory) gone way down since then." What's actually quite interesting is that there's been a bifurcation in production costs. The physical costs of production -- equipment, editing software, distribution, and so forth -- have come down dramatically. But Hollywood's cost structure has increased in this same timeframe, because the costs of big talent have gone up. Top actors, directors, writers, source material, producers, and so forth have commanded steadily higher prices. And the outlays on special effects, locations, and other mainstays of blockbuster filmmaking have increased at a steady pace. We should note that this represents a choice on Hollywood's part. Maybe it's not a monolithic, homogenous, across-the-board choice. Perhaps it's something more like the agglomeration into coherence of a thousand daily choices by a thousand different players in the Hollywood system. Perhaps some of those players -- agents and producers -- have had an outsized impact. Regardless, somehow Hollywood has actively participated in spending more and more each year on production at the same time that it earns less and less each year on distribution and sales. To your point, the banks and hedge funds got into the game because they recognized these inefficiencies on the production side. They've got deep enough pockets to finance some of the production risk, knowing that they'll always be paid back, so hence, it's not actually risky for them. And, since production keeps getting more expensive, Hollywood will always be out looking for more deficit financing each year. At what point the tail started wagging the dog, or whether it actually has, is anyone's guess. But the general observation is that the hedge-fundization of the system kicked into full swing in the early 2000s. To my eye, this entire ecosystem looks to be resting on a very shaky foundation. Perhaps existing mega-talent will price itself out of startup filmmaking, but new talent seems to be headed in that direction at a breakneck pace. And, lest we dismiss "alternative" content as the typical, unsophisticated, flash-in-the-pan UGC we've seen on YouTube for so many years, we should take note that a lot of really high-quality independent filmmaking is hitting the charts on Netflix, iTunes, and other sources -- right alongside Hollywood fare. For the time being, Hollywood is in no danger of being displaced by these upstarts. But the mere fact that small fry can get collaboratively filtered right alongside the big fish portends to an eventual disruption of a lot of common assumptions about necessary costs in the Hollywood model. We live in interesting times.
- roc 15y ago
rdouble 15y ago
Rather than emulating Stanley Kubrik, I think young people armed with 5Ds want to make music videos, comedic shorts and skateboard films... all of which have improved to an amazing degree over the past decade. I'm not so sure startups changing financing for feature films will "kill Hollywood." The preference of the newer generation to watch shorter bits of content that don't require such financing in the first place, might.
- kthakar3 15y ago
  I see a lot of great (spectacular in some cases) videos being posted on vimeo. Most of these are as you said, young people with 5Ds making short films. However, it is still a leap of imagination to think that people will switch to shorter content over films and TV.
  - ericd 15y ago
    Agreed, people's ancient appetite for storytelling isn't going anywhere, and a youtube clip isn't going to satisfy that.

randall 15y ago

AngelList's peg / competitive advantage is Venture Hacks / Nivi and Naval. It sounds like this guy is a technology insider (investing in SecondMarket) not a Hollywood insider. That makes me think it's going to be more difficult for the winner investors to get on-board... and I don't know about you, but if AngelList just had random investors from podunk nowhere, it'd definitely not have the cred it has. Do people producing movies care about who their investors are? Do film investors have the same relationship with their producers as startup founders do with their investors? (Aside about AngelList: Some people I've talked to still feel like asking money on an open platform such as AngelList is something you do if you're not going to have a brand name investor. That means it's a backup or round-filler strategy for the hottest startups, which lessens its utility compared to traditional strategies of generating dealflow.)

bproper 15y ago
Paternot has worked in the film industry for the last 8 years and definitely acknowledged that the biggest challenge was getting the social proof in place to ensure that investors and talent feel comfortable listing on Slated.

rockarage 15y ago

"A good example of “Hollywood accounting” would be “Harry Potter and The Order of the Phoenix”, which took in $938 million in revenue, yet still produced a $167 million loss. In cases like this the distributor, Warner Bros., still makes a bundle, but the film and its backers, set up as a independent corporation, wind up in debt. How is this possible? You can get a more detailed picture in this episode of Planet Money, which details how Disney paid itself more than $200 million in distribution fees on the Nicholas Cage vehicle “Gone in 60 Seconds.” The film made a lot of money for Disney, even while the corporation created to produce “Gone In 60 Seconds” was a loser on the official accounting." Now I understand why Hollywood does not want simplified and efficient distribution. It has nothing to do with ignorance and everything to do with greed and avoiding all risk. They overcharge for complicated distribution and DRM, and pass all the risk of to the film and its backers.

nextparadigms 15y ago
This kind of reminds me of Yahoo when they didn't want a more efficient ad system because they wouldn't be able to charge the media buyers as much. I don't really care they are doing this. They will eventually be replaced because of this. I just want the Government to stop protecting them from getting replaced. It's not the Government's job to stop disruptions from happening.
- alan_cx 15y ago
  So, if the government were to put money in to troubled businesses to prop them up or even create jobs, it gets heavily criticised. Its seen as socialist and evil. However, if the government criminalises its citizens to support a dying business, well, that's OK and all American, patriotic even. Protecting American jobs by criminalising Americans. Have I missed something? I must have. Surely, the government should be merely supporting the market forces of capitalism, and if the current form of Hollywood dies, well, isn't that exactly as it should be? All that will happen is that new business models will emerge. Oh, I dunno. Too much interference, if you ask me. If "we" truly believe in capitalism, then why not sit back and let it do its thing? OK, so Warners or who ever goes bust. Well, wont all those people simply go out and start again, but in a different way? In fact, while the government supports the antiquated Hollywood, its is in fact holding back the natural progress. Imagine if the government made moves to protect valves, and transistor possession was made illegal. Would we have still gotten the microchip? Well, it amuses me!!!

tomkin 15y ago

I'm probably way off, but this is my understanding of this whole "kill Hollywood campaign" that we've got ourselves into. Step 1) Create a company that destroys Hollywood. Stick it to Studio X by way of Y tech advantage. Step 2) Become a profitable company, maybe even a titan in the industry. Step 3) Watch as others see your service as a threat, build their own competing tech. Step 4) Fight to keep your stake in the market, or exit. Fighting leads to bullshit tactics. Exit eventually gives your company to the very studios you were against. Step 5) Studio X acquires your company in an attempt to compete with the "new way of doing things". Your research & development goes into their melting pot and the cycle repeats OR Studio X acquires one of your aforementioned competition, leaving you no choice but to resort to bullshit tactics to survive (after all, you're huge at this point). To me, the problem isn't Hollywood. It's the laws that surround and re-enforce it. Locking up an industry in a closet full of weapons is asinine and the end result is obvious.

wr1472 15y ago
And you could substitute "Hollywood" for any other industry out there. Isn't this just how the business world rolls?
- tomkin 15y ago
  Sure, but we're not all about taking out the industry. The raison d'etre is undignified by the motivation.

NerdSatire 15y ago

Hallelujah! Once Stephen Paternot orchestrates this coup d'état of Hollywood, its new motto will be: "Got the girl. Got the money. Now I'm ready to live a disgusting, frivolous life." My apologies that this comment is very un-HN like.

drumdance 15y ago

I've thought about doing something similar in the past. While researching it I noticed that there are not a lot of "insider" blogs like we see in the tech/VC world. In fact, I briefly thought about getting into film production and using blogging as a way to document the process and create a brand. (I ultimately decided I like my current career better.) I think someone will eventually do this and build a huge name for themselves. I asked this question on Quora but didn't get any response: http://www.quora.com/Why-arent-there-more-movie-TV-finance-and-production-blogs http://www.quora.com/Why-arent-there-more-movie-TV-finance-a...

brown9-2 15y ago

The article, and idea behind the startup, seems to be that the studios are screwing over the backers and the funding corporation. But if this is so, why do people continue to invest in these vehicles? Don't the backers of these movies, especially a blockbuster like Harry Potter, know that this accounting is going to happen? It seems to me like there must be another explanation at work here - such as the funding corporations being set up as losers purposefully for the purposes of taxes. Otherwise, if the studios were screwing their funders so much, wouldn't they have run out of suckers by now?

untog 15y ago
I don't have a citation for this because it's from memory, but I believe that a lot of the companies that go under in debt are actually subsidiaries of the studios themselves. It works out as a tax/debt write-off.
- mcao 15y ago
  Just curious, how is this different from what Enron was doing? They are basically setting up shell companies to hide their losses right?
  - rgoddard 15y ago
    The shell companies are to hide the profits and maximize the studio's gain.

smoody 15y ago

This has been done before. But, as we know, being early is the same as being wrong.

redthrowaway 15y ago

FTA: >In response Paul Graham, the Svengali of of the startup community, posted an essay calling for ideas that would kill Hollywood. From Wikipedia: >The word "svengali", has come to be used as a common noun referring to a person who, with evil intent, controls another person by persuasion or deceit. The Svengali may use pseudo-kindness and manipulation to get the other person to turn over their autonomy. How, exactly, is this an apt description of pg?

TheCowboy 15y ago

So in reality, Hollywood profits are decreasing due to unintentionally-on-purpose losing more money to studios such as Disney, rather than actual pirates. Make sure to share this information with anyone you know when discussing SOPA.