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Entertainment payroll startup Wrapbook raises $27M round led by a16z
Wrapbook, a startup that simplifies the payroll process for TV, film and commercial productions, has raised $27 million in Series A funding from noteworthy names in both the tech and entertainment worlds.
The round was led by Andreessen Horowitz, with participation from Equal Ventures and Uncork Capital, as well as from WndrCo (the investment and holding company led by DreamWorks and Quibi founder/co-founder Jeffrey Katzenberg) and from CAA co-founder Michael Ovitz.
“It’s time we bring production financial services into the 21st century,” Katzenberg said in a statement. “We need a technology solution that will address the increasing complexities of production onboarding, pay and insuring cast and crew, only exacerbated by COVID-19, and I believe that Wrapbook delivers.”
Wrapbook co-founder and CEO Ali Javid explained that entertainment payroll has remained a largely old-fashioned, paper-based process, which can be particularly difficult to track as cast and crew move from project to project, up to 30 times in single year. Wrapbook digitizes and simplifies the process — electronically collecting all the forms and signatures needed at the beginning of production, handling payroll itself, creating a dashboard to track payments and also making it easy to obtain the necessary insurance.
Wrapbook founders Cameron Woodward, Ali Javid, Hesham El-Nahhas and Naysawn Naji
Although the startup was founded in 2018, Javid told me that demand has increased dramatically as production resumed during the pandemic, with COVID-19 “totally” changing the industry’s culture and prompting production companies to say, “Hey, if there’s an easier, faster way to do this from my house, then yeah let’s look at it.”
Javid also described the Wrapbook platform as a “a vertical fintech solution that’s growing really fast in an industry that we understand really well and not many others have thought about.” In fact, he said the company’s revenue grew 7x in 2020.
And while Wrapbook’s direct customers are the production companies, co-founder and CMO Cameron Woodward (who previously worked in filmmaking insurance and commercial production) said that the team has also focused on creating a good experience for the cast and crew who get paid through the platform — a growing number of them (12% thus far) have used their Wrapbook profiles to get paid on multiple productions.
Image Credits: Wrapbook
The startup previously raised $3.6 million in seed funding. Looking ahead, Javid and Woodward said that Wrapbook’s solution could eventually be adopted in other project-based industries. But for now, they see plenty of opportunity to continue growing within entertainment alone — they estimated that the industry currently sees $200 billion in annual payments.
“We’re going to double down on what’s working and build things out based on what customers have asked for within entertainment,” Javid said. “To that end, we’re working towards hiring 100 people in the next 12 months.”
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That dreadful VPN might finally be dead thanks to Twingate, a new startup built by Dropbox alums
VPNs, or virtual private networks, are a mainstay of corporate network security (and also consumers trying to stream Netflix while pretending to be from other countries). VPNs create an encrypted channel between your device (a laptop or a smartphone) and a company’s servers. All of your internet traffic gets routed through the company’s IT infrastructure, and it’s almost as if you are physically located inside your company’s offices.
Despite its ubiquity though, there are significant flaws with a VPN’s architecture. Corporate networks and VPNs were designed assuming that most workers would be physically located in an office most of the time, and the exceptional device would use a VPN. As the pandemic has made abundantly clear, fewer and fewer people work in a physical office with a desktop computer attached to ethernet. That means the vast majority of devices are now outside the corporate perimeter.
Worse, VPNs can have massive performance problems. By routing all traffic through one destination, VPNs not only add latency to your internet experience, they also transmit all of your non-work traffic through your corporate servers as well. From a security perspective, VPNs also assume that once a device joins, it’s reasonably safe and secure. VPNs don’t actively check network requests to make sure that every device is only accessing the resources that it should.
Twingate is fighting directly to defeat VPNs in the workplace with an entirely new architecture that assumes zero trust, works as a mesh and can segregate work and non-work internet traffic to protect both companies and employees. In short, it may dramatically improve the way hundreds of millions of people work globally.
It’s a bold vision from an ambitious trio of founders. CEO Tony Huie spent five years at Dropbox, heading up international and new market expansion in his final role at the file-sharing juggernaut. He’s most recently been a partner at venture capital firm SignalFire . Chief Product Office Alex Marshall was a product manager at Dropbox before leading product at lab management program Quartzy. Finally, CTO Lior Rozner was most recently at Rakuten, and before that Microsoft.
Twingate founders Alex Marshall, Tony Huie and Lior Rozner. Photo via Twingate.
The startup was founded in 2019, and is announcing today the public launch of its product, as well as its Series A funding of $17 million from WndrCo, 8VC, SignalFire and Green Bay Ventures. Dropbox’s two founders, Drew Houston and Arash Ferdowsi, also invested.
The idea for Twingate came from Huie’s experience at Dropbox, where he watched its adoption in the enterprise and saw firsthand how collaboration was changing with the rise of the cloud. “While I was there, I was still just fascinated by this notion of the changing nature of work and how organizations are going to get effectively re-architected for this new reality,” Huie said. He iterated on a variety of projects at SignalFire, eventually settling on improving corporate networks.
So what does Twingate ultimately do? For corporate IT professionals, it allows them to connect an employee’s device into the corporate network much more flexibly than a VPN. For instance, individual services or applications on a device could be set up to securely connect with different servers or data centers. So your Slack application can connect directly to Slack, your JIRA site can connect directly to JIRA’s servers, all without the typical round-trip to a central hub that a VPN requires.
That flexibility offers two main benefits. First, internet performance should be faster, since traffic is going directly where it needs to rather than bouncing through several relays between an end-user device and the server. Twingate also says that it offers “congestion” technology that can adapt its routing to changing internet conditions to actively increase performance.
More importantly, Twingate allows corporate IT staff to carefully calibrate security policies at the network layer to ensure that individual network requests make sense in context. For instance, if you are a salesperson in the field and suddenly start trying to access your company’s code server, Twingate can identify that request as highly unusual and outright block it.
“It takes this notion of edge computing and distributed computing [and] we’ve basically taken those concepts and we’ve built that into the software we run on our users’ devices,” Huie explained.
All of that customization and flexibility should be a huge win for IT staff, who get more granular controls to increase performance and safety, while also making the experience better for employees, particularly in a remote world where people in, say, Montana might be very far from an East Coast VPN server.
Twingate is designed to be easy to onboard new customers according to Huie, although that is almost certainly dependent on the diversity of end users within the corporate network and the number of services to which each user has access. Twingate integrates with popular single sign-on providers.
“Our fundamental thesis is that you have to balance usability, both for end users and admins, with bulletproof technology and security,” Huie said. With $17 million in the bank and a newly debuted product, the future is bright (and not for VPNs).
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4 quick bites and obituaries on Quibi (RIP 2020-2020)
In memory of the death of Quibi, here’s a quick sendoff from four of our writers who came together to discuss what we can learn from Quibi’s amazing, instantaneous, billions-of-dollars failure.
Lucas Matney looks at what the potential was for Quibi and how it missed the mark in media. Danny Crichton discusses why billions of dollars in VC funding isn’t enough in competitive markets like video. Anthony Ha discusses the crazy context of Quibi and our interview with the company earlier this year. And Brian Heater looks at why constraints are not benefits in new products.
Lucas Matney: A deadpool company before it was even launched
There will be dozens of post-mortems on Quibi, but the fact is there were dozens of post-mortems written about Quibi before it even launched. The whole idea was, to be kind, audacious, though it was also clear to most people that weren’t personal friends with founder Jeffrey Katzenberg that it was doomed from the start.
Quibi’s death is an important moment for streaming, largely because it’s a pretty strong rebuke of services trying to one-up the Netflix model by solely focusing on high-dollar original content. I think Quibi made several mistakes, but its most pertinent ones can be tied to a lack of flexibility in vision.
The startup insisted that all of its titles were mobile-only, high-production value and relying on Hollywood star power when they probably could have succeeded by keeping a closer eye on what kind of quick-bite content was succeeding elsewhere. Snap has seen success with Discover after years of attempts, and there is space for a dedicated player here, but Katzenberg tried to level-up by throwing checks at his friends and not doing the hard work of scouting out rising trendsetters in the creator world.
There are other lessons here that apply to other streaming new-comers like Apple. Namely that creating a hit TV show is hard and buying a hit TV series is easier if you already have the money. Quibi and Apple TV+ both launched with plenty of new series and no back libraries of beloved legacy content for users to spend time digging into. There’s just so much good stuff out there already. Apple has shifted strategy here, but Quibi boxed itself in and probably couldn’t afford to play here once its error was made clear.
Quibi showcases how the streaming wars’ upending of Hollywood has probably eclipsed reason at this point. Players like Apple don’t belong here, and there’s just too much money pouring into original content that loosely fits the Hollywood mold.
Netflix stock is down 7% today after earnings yesterday showcased slowing growth. With HBO Max, Disney+, Peacock and Apple TV+ all launching in the last 12 months, the streaming market’s cup runneth over. And while I don’t think a Quibi death spells the end for innovation here, I think that the market is ready for some 2021 consolidation.
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Still a year away from launch, Meg Whitman and Jeffrey Katzenberg’s Quibi keeps adding talent
Video won’t start rolling on Meg Whitman and Jeffrey Katzenberg’s new bite-sized streaming service with the billion-dollar backing until the end of 2019, but talent keeps signing up to come along for their ride into the future of serialization.
The latest marquee director to sign on the dotted line with Quibi is Catherine Hardwicke, who will be helming a story around the creation of an artificial intelligence with the working title “How They Made Her,” according to an announcement from Katzenberg onstage at the Variety Innovate summit.
Hardwicke, who directed “Thirteen,” “Lords of Dogtown” and, most famously, “Twilight,” is joining Antoine Fuqua, Guillermo del Toro, Sam Raimi and Lena Waithe in an attempt to answer the question of whether Whitman and Katzenberg’s gamble on premium (up to $6 million per episode) short-form storytelling is a quixotic quest or a quintessential viewing experience for a new generation of media consumers.
Katzenberg also revealed in a LinkedIn post that Quibi would be working on a basketball-related series with Steph Curry’s production company. He wrote:
I announced a new docu-series by Whistle called “Benedict Men” coming exclusively to Quibi. “Benedict Men” will be executive produced by Stephen Curry’s Unanimous Media and will give viewers an inside look at one of the most unique high school basketball teams in America at St. Benedict’s Prep in Newark, New Jersey.
St. Benedict’s Prep is an all-boys secondary school founded on the core belief ‘What Hurts My Brother Hurts Me,’ and aims to foster a legacy of strong character, community, leadership, and faith. As one of the top athletic high schools with a storied basketball program and the highest graduation rate in New Jersey, the series will follow the brotherhood of young men who seek to balance life in complicated surroundings.
In some ways, the big adventure backed by Katzenberg, the former chairman of Walt Disney Studios and founder of WndrCo, and every major Hollywood studio — including Disney, 21st Century Fox, Entertainment One, NBCUniversal, Sony Pictures Entertainment and Alibaba Goldman Sachs — is the latest in an everything old is new again refrain.
If blogs reinvented printed media, and podcasts and music streaming reinvented radio, why can’t Quibi reinvent serialized storytelling.
Again and again, Whitman and Katzenberg returned to an analogy from the early days of the cable revolution. “We’re not short form, we’re Quibi,” said Whitman, echoing the tagline that HBO made famous in its early advertising blitzes. That Whitman and Katzenberg’s project to take what HBO did for premium television and apply that to mobile media is ambitious. Now industry-watchers will have to wait until 2019 at the earliest to see if it’s also successful.
In the interview onstage at a Variety event on artificial intelligence in media, Katzenberg cited Dan Brown’s “The Da Vinci Code” as something of an inspiration — noting that the book had more than 100 chapters for its 500 pages of text. But Katzenberg could have gone back even further to the days of Dickens and his serialized entertainments.
And right now for the entertainment business it really is the best of times and the worst of times. Traditional Hollywood studios are seeing new players like Netflix, Amazon, Apple and others all trying to drink their milkshake. And, for the most part, these studios and their new telecom owners are woefully ill-equipped to fight these big technology platforms at their own game.
Taking the long view of entertainment history, Katzenberg is hoping to win networks with not just a new skin for the old ceremony of watching entertainment but with a throwback to old style deal-making. The term serialization here takes on greater meaning.
Quibi is offering its production partners a sweetheart deal. After seven years the production company behind the Quibi shows will own their intellectual property, and after two years those producers will be able to repackage the Quibi content back into long-form series and pitch them for distribution to other platforms. Not only that, but Quibi is fronting the money for over 100 percent of the production.
Katzenberg said that it “will create the most powerful syndicated marketplace” Hollywood has seen in decades. It’s a sort of anti-Netflix model where Katzenberg and Whitman view Quibi as a platform where creators and talent will want to come. “We are betting on the success of the platform — and by the way, it worked brilliantly in the ’60s and ’70s and ’80s.” Katzenberg said. “Hundreds of TV shows were tremendous successes and [like the networks then] we don’t want to compete with our suppliers.”
In addition to the business model innovations (or throwbacks, depending on how one looks at it), Quibi is being built from the ground up with a technology stack that will leverage new technologies like 5G broadband, and big data and analytics, according to Whitman.
Indeed, launching the first platform built without an existing stable of content means that Quibi is preparing 5,000 unique pieces of content to go up when it pulls the curtains back on its service in late 2019 or early 2020, Whitman said.
And the company is looking to big telecommunications companies like Verizon (my corporate overlord’s corporate overlord) and AT&T as partners to help it get to market. Since those networks need something to do with all the 5G capacity they’re building out, high-quality streaming content that’s replete with meta-tags to monitor and manage how an audience is spending their time is a compelling proposition.
“We want to work to have video that looks good on mobile [and] ramp up content in terms of quantity and quality,” Whitman said. That quality extends to things like the user interface, search features and analytics.
“We have to have a different search and find metaphor,” Whitman said. “It takes eight minutes to find what you’re looking for on Netflix… We will be able to instrument this with data on what people are watching and using that in our recommendation engine.”
Questions remain about the service’s viability. Like what role will the telcos actually play in distribution and development? Can Quibi avoid the Hulu problem where the various investors are able to overcome their own entrenched interests to work for the viability of the platform? And do consumers even want a premium experience on mobile given the new kinds of stars that are made through the immediacy and accessibility that technology platforms like YouTube, Instagram and Snap offer?
“Where the fish are today is a phenomenal environment,” Katzenberg said of the current short-form content market. “But it is an ocean. We need to find a place where there are these premium services.”
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Why IGTV should go premium
It’s been four months since Facebook launched IGTV, with the goal of creating a destination for longer-form Instagram videos. Is it shaping up to be a high-profile flop, or could this be the company’s next multi-billion-dollar business?
IGTV, which features videos up to 60 minutes versus Instagram’s normal 60-second limit, hasn’t made much of a splash yet. Since there are no ads yet, it hasn’t made a dollar, either. But, it offers Facebook the opportunity to dominate a new category of premium video, and to develop a subscription business that better aligns with high-quality content.
Facebook worked with numerous media brands and celebrities to shoot high-quality, vertical videos for IGTV’s launch on June 20, as both a dedicated app and a section within the main Instagram app. But IGTV has been quiet since. I’ve heard repeatedly in conversations with media executives that almost no one is creating content specifically for IGTV and that the audience on IGTV remains small relative to the distribution of videos on Snapchat or Facebook. Most videos on it are repurposed from a brand’s or influencer’s Snapchat account (at best) or YouTube channel (more common). Digiday heard the same feedback.
Instagram announced IGTV on June 20 as a way for users to post videos up to 1 hour long in a dedicated section of the app (and separate app)
Facebook’s goal should be to make IGTV a major property in its own right, distinct from the Instagram feed. To do that, the company should follow the concept embodied in the “IGTV” name and re-envision what television shows native to the format of an Instagram user would look like.
Its team should leverage the playbook of top TV streaming services like Netflix and Hulu in developing original series with top talent in Hollywood to anchor their own subscription service, but in it a new format of shows produced specifically for the vertically oriented, distraction-filled screen of a smartphone.
Mobile video is going premium
Of the 6+ hours per day that Americans spend on digital media, the majority on that is now on their phone (most of it on social and entertainment activities) and video viewing has grown with it. In addition to the decline in linear television viewing and rise of “over-the-top” streaming services like Netflix and Hulu, we’ve seen the creation of a whole new category of video: mobile native video.
Starting at its most basic iteration with everyday users’ recordings for Snapchat Stories, Instagram Stories and YouTube vlogs, mobile video is a very different viewing environment with a lot more competition for attention. Mobile video is watched as people are going about their day. They might commit a few minutes at a time, but not hour-long blocks, and there are distracting text messages and push notifications overlaid on the screen as they watch.
“Stories” on the major social apps have advanced vertically oriented, mobile native videos as their own content format
When I spoke recently with Jesús Chavez, CEO of the mobile-focused production company Vertical Networks in Los Angeles, he emphasized that successful episodic videos on mobile aren’t just normal TV clips with changes to the “packaging” (cropped for vertical, thumbnails selected to get clicks, etc.). The way episodes are written and shot has to be completely different to succeed. Chavez put it in terms of the higher “density” of mobile-native videos: packing more activity into a short time window, with faster dialogue, fewer setup shots, split screens and other tactics.
With the growing amount of time people spend watching videos on their social apps each day — and the flood of subpar videos chasing view counts — it makes sense that they would desire a premium content option. We have seen this scenario before as ad-dependent radio gave rise to subscription satellite radio like Sirius XM and ad-dependent network TV gave rise to pay-TV channels like HBO. What that looks like in this context is a trusted service with the same high bar for riveting storytelling of popular films and TV series — and often featuring famous talent from those — but native to the vertical, smartphone environment.
If IGTV pursues this path, it would compete most directly with Quibi, the new venture that Jeffrey Katzenberg and Meg Whitman are raising $2 billion to launch (and was temporarily called NewTV until their announcement at Vanity Fair’s New Establishment Summit last Wednesday). They are developing a big library of exclusive shows by iconic directors like Guillermo del Toro and Jason Blum crafted specifically for smartphones through their upcoming subscription-based app.
Quibi’s funding is coming from the world’s largest studios (Disney, Fox, Sony, Lionsgate, MGM, NBCU, Viacom, Alibaba, etc.) whose executives see substantial enough opportunity in such a platform — which they could then produce content for — to write nine-figure checks.
TechCrunch’s Josh Constine argued last year Snapchat should go in a similar “HBO of mobile” direction as well, albeit ad-supported rather than a subscription model. The company indeed seems to be stepping further in this direction with last week’s announcement of Snapchat Originals, although it has announced and then canceled original content plans before.
Snapchat announced its Snap Originals last week
Facebook is the best positioned to win
Facebook is the best positioned to seize this opportunity, and IGTV is the vehicle for doing so. Without even considering integrations with the Facebook, Messenger or WhatsApp apps, Facebook is starting with a base of more than 1 billion monthly active users on Instagram alone. That’s an enormous audience to expose these original shows to, and an audience who don’t need to create or sign into a separate account to explore what’s playing on IGTV. Broader distribution is also a selling point for creative talent: They want their shows to be seen by large audiences.
The user data that makes Facebook rivaled only by Google in targeted advertising would give IGTV’s recommendation algorithms a distinct advantage in pushing users to the IGTV shows most relevant to their interests and most popular among their friends.
The social nature of Instagram is an advantage in driving awareness and engagement around IGTV shows: Instagram users could see when someone they follow watches or “likes” a show (pending their privacy settings). An obvious feature would be to allow users to discuss or review a show by sharing it to their main Instagram feed with a comment; their followers would see a clip or trailer, then be able to click-through to the full show in IGTV with one tap.
Developing and acquiring a library of must-see, high-quality original productions is massively capital-intensive — just ask Netflix about the $13 billion it’s spending this year. Targeting premium-quality mobile video will be no different. That’s why Katzenberg and Whitman are raising a $2 billion war chest for Quibi and budgeting production costs of $100,000-150,000 per minute on par with top TV shows. Facebook has $42 billion in cash and equivalents on its balance sheet. It can easily outspend Quibi and Snap in financing and marketing original shows by a mix of newcomers and Hollywood icons.
Snap can’t afford (financially) to compete head-on and doesn’t have the same scale of distribution. It is at 188 million daily active users and no longer growing rapidly (up 8 percent over the last year, but DAUs actually shrunk by 3 million last quarter). Snapchat is also a much more private interface: it doesn’t enable users to see each others’ activity like Facebook, Instagram, LinkedIn, YouTube, Spotify and others do to encourage content discovery. Snap is more likely to create a hub for ad-supported mobile-first shows for teens and early-twentysomethings rather than rival Quibi or IGTV in creating a more broadly popular Netflix or Hulu of mobile-native shows.
It’s time to go freemium
Investing substantial capital upfront is especially necessary for a company launching a subscription tier: consumers must see enough compelling content behind the paywall from the start, and enough new content regularly added, to find an ongoing subscription worthwhile.
There is currently no monetization of IGTV. It is sitting in experimentation mode as Facebook watches how people use it. If any company can drive enough ad revenue solely from short commercials to still profit on high-cost, high-quality episodic shows on mobile, it’s Facebook. But a freemium subscription model makes more sense for IGTV. From a financial standpoint, building IGTV into its own profitable P&L while making substantial content investments likely demands more revenue than ads alone will generate.
Of equal importance is incentive alignment. Subscriptions are defined by “time well spent” rather time spent and clicks made: quality over quantity. This is the environment in which premium content of other formats has thrived too; Sirius XM as the breakout on radio, HBO on linear TV, Netflix in OTT originals. The type of content IGTV will incentivize, and the creative talent they’ll attract, will be much higher quality when the incentives are to create must-see shows that drive new subscribers than when the incentives are to create videos that optimize for views.
Could there be a “Netflix for mobile native video” with shows shot in vertical format specifically for viewing on smartphone?
The optimization for views (to drive ad revenue) have been the model that media companies creating content for Facebook have operated on for the last decade. The toxicity of this has been a top news story over the last year with Facebook acknowledging many of the issues with clickbait and sensationalism and vowing changes.
Over the years, Facebook has dragged media companies up and down with changes to its newsfeed algorithm that forced them to make dramatic changes to their content strategies (often with layoffs and restructuring). It has burned bridges with media companies in the process; especially after last January, how to reduce dependence on Facebook platforms has become a common discussion point among digital content executives. If Facebook wants to get top producers, directors and production companies investing their time and resources in developing a new format of high-quality video series for IGTV, it needs an incentives-aligned business model they can trust to stay consistent.
Imagine a free, ad-supported tier for videos by influencers and media partners (plus select “IGTV Originals”) to draw in Instagram users, then a $3-8/month subscription tier for access to all IGTV Originals and an ad-free viewing experience. (By comparison, Quibi plans to charge a $5/month subscription with ads with the option of $8/month for its ad-free tier.)
Looking at the growth of Netflix in traditional TV streaming, a subscription-based business should be a welcome addition to Facebook’s portfolio of leading content-sharing platforms. This wouldn’t be its first expansion beyond ad revenue: the newest major division of Facebook, Oculus, generates revenue from hardware sales and a 30 percent cut of the revenue to VR apps in the Oculus app store (similar to Apple’s cut of iOS app revenue). Facebook is also testing a dating app which — based on the freemium business model Tinder, Bumble, Hinge, and other leading dating apps have proven to work — would be natural to add a subscription tier to.
Facebook is facing more public scrutiny (and government regulation) on data privacy and its ad targeting than ever before. Incorporating subscriptions and transaction fees as revenue streams benefits the company financially, creates a healthier alignment of incentives with users and eases the public criticism of how Facebook is using people’s data. Facebook is already testing subscriptions to Facebook Groups and has even explored offering a subscription alternative to advertising across its core social platforms. It is quite unlikely to do the latter, but developing revenue streams beyond ads is clearly something the company’s leadership is contemplating.
The path forward
IGTV needs to make product changes if it heads in this direction. Right now videos can’t link together to form a series (i.e. one show with multiple episodes) and discoverability is very weak. Beyond seeing recent videos by those you follow, videos that are trending and a selection of recommendations, you can only search for channels to follow (based on name). There’s no way to search for specific videos or shows, no way to browse channels or videos by topic and no way to see what people you follow are watching.
It would be a missed opportunity not to vie for this. The upside is enormous — owning the Netflix of a new content category — while the downside is fairly minimal for a company with such a large balance sheet.
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Jeffrey Katzenberg and Meg Whitman announce the name of their stealthy mobile video startup
Onstage at Vanity Fair’s New Establishment Summit in Los Angeles, Jeffrey Katzenberg and Meg Whitman unveiled the name of their highly anticipated mobile video company known until now as NewTV.
The name is Quibi, short for “quick bites,” per a note on its new website: “Something cool is coming from Hollywood and Silicon Valley — quick bites of captivating entertainment, created for mobile by the best talent, designed to fit perfectly into any moment of your day.”
The short-form video service, launching next year, will operate on a two-tiered subscription model similar to Hulu, per Deadline. Quibi is cooking up original content with Oscar-winning filmmaker Guillermo del Toro, Southpaw director Antoine Fuqua and Spider-Man director Sam Raimi, as well as Get Out producer Jason Blum and Van Toffler, the CEO of digital media production company Gunpowder & Sky, a spokesperson for the company confirmed to TechCrunch.
The Hollywood Reporter says the del Toro project “is a modern zombie story,” the Fuqua project is “a modern version of Dog Day Afternoon” and the Blum project, titled Wolves and Villagers, could be compared to Fatal Attraction.
Katzenberg, the former chairman of Walt Disney Studios and founder of WndrCo, a consumer tech investment and holding company, has raised $1 billion for Quibi from Disney, 21st Century Fox, Entertainment One, NBCUniversal, Sony Pictures Entertainment, Alibaba Goldman Sachs, JPMorgan Chase, Madrone Capital and several others. He hired Meg Whitman as Quibi’s CEO in January.
Quibi, given Katzenberg and Whitman’s entertainment and business acumen, is expected to compete with the biggest players in the space, including Instagram, Netflix and Snap, which today announced Snap Originals. The new effort will have the ephemeral messaging service rolling out 12 new scripted shows on its app, from Keeping Up with the Kardashians creator Bunim/Murray, Friday Night Lights writer Carter Harris and more.
Quibi is hiring aggressively, recently bringing on former Instagram product manager Blake Barnes and former Hulu chief technology officer Rob Post.
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Old media giants turn to VC for their next act
The Web 1.0 and Web 2.0 eras weren’t kind to the world’s largest media conglomerates, throwing their business models into question, creating whole new categories of content consumption, and bringing online competition to subscription and ad pricing. Many of the media giants from the 1990s and early 2000s remain market leaders with multi-billion dollar valuations, however, and have become active investors in startups as a tactic to help themselves evolve.
Of the traditional media companies that have committed to corporate venturing, there are two distinct strategies: those whose investing seems to be about replacing the historic classifieds section of newspapers and diversifying into a range of consumer-facing marketplaces, and those whose investing is concentrated on capturing an early glimpse (and early equity stake) in startups reshaping media.
Replacing Classifieds, Investing in Marketplaces
Mathias Doepfner, CEO of Axel Springer. The company’s startup accelerator is one of the most active in Europe. (Photo by Michele Tantussi/Getty Images)
Given the first crisis newspaper groups faced from tech startups in the 1990s and early 2000s was the rise of online classifieds sites (like Craigslist) and transactional marketplaces (like eBay and Amazon), the disruption of their lucrative classified ads revenue stream drove their attention to e-commerce.
Aside from Hearst, the major US newspaper and magazine chains – like Gannett, News Corp, Meredith Corp / Time Inc, and Digital First Media – haven’t made many investments in startups. Perhaps the financial straits of most US newspaper companies have left little cash for VC investments that won’t pay off for years in the future.
But in Northern and Central Europe, where news readership and even print publishing remain healthy by comparison, the leading media groups have been aggressively investing in marketplace and e-commerce startups across the continent over the last decade.
Europe’s leading publisher, Axel Springer has made itself an established player in the European startup scene. Axel Springer’s Digital Ventures team has backed marketplaces from Caroobi (for cars) to Airbnb, and their Berlin-based accelerator (run in partnership with Plug & Play) has invested in over 100 young startups, like digital bank N26, boat rental marketplace Zizoo, and influencer-brand marketplace blogfoster. In a move more strategic to its business, the 15,000-employee group made a large investment in augmented reality unicorn Magic Leap this past February as well, forming a partnership to leverage its content IP in the process.
Meanwhile, Norway’s Schibsted, Sweden’s Bonnier, and Germany’s Hubert Burda Media (best know to many in tech for their annual DLD conference in Munich) and Holtzbrinck Publishing are each globally active, multi-billion dollar publishers who operate active early- or growth-stage VC portfolios composed mainly of e-commerce brands and marketplaces.
The most iconic corporate venture investment by a newspaper conglomerate (or any company for that matter) is without question the $32M check written into 3-year-old Chinese social web startup Tencent in 2001 by the South African publishing group Naspers (founded in 1915). Tencent, now valued around $400B, is Asia’s largest and most powerful digital media company and Naspers’ 31% stake was worth roughly $175B in March 2018 when it sold $10B in shares.
As a result, Naspers has transformed into a holding company that incubates, acquires, and invests in online marketplace businesses around the globe (though it still maintains a relatively small publishing unit).
The challenge for traditional media companies investing in startups beyond the realm of media is that even if wildly successful, those investments neither give them a distinct advantage in media itself nor make their business model like that of a tech company by way of osmosis. These investments can be flashy distractions to make management and shareholders call the company innovative while it fails to actually re-envision its core operations. Investing in Airbnb or BaubleBar doesn’t address the key challenges or opportunities a traditional publishing group faces.
Therefore the best case scenario in this strategy seems to be that these companies find enough financial success that they just transition out of the content game and become holding companies for other types of consumer-facing brands the way Naspers has. But even then the path seems uncertain: despite all its other activities, Naspers’ market cap is less than the value of its Tencent shares…it’s not clear that the best case scenario necessarily transforms the core organization.
Investing in the Next Generation of Media
Thomas Rabe, CEO of German media group Bertelsmann. Bertelsmann is unique in treating startup investments as a dedicated division of the conglomerate. (TOBIAS SCHWARZ/AFP/Getty Images)
The other track for “old media” giants has been to focus on venture capital as a means to uncover the future of the media business so the old guard can learn from the new generation of media entrepreneurs and react to market changes sooner than competitors. Intriguingly, it is consistent that the conglomerates who have taken this strategy are ones whose operations in television, radio, data, and telecom outweigh any involvement in newspapers.
Bertelsmann, Hearst, and 21st Century Fox have been the most aggressive corporate venture investors in startups working to shape the future of media, whether it be through streaming video services, crowdsourced storytelling platforms, or augmented reality.
With annual revenue over €17B, Bertelsmann is one of the largest media companies in the world, spanning television production and broadcasting (RTL Group), book publishing (Penguin Random House), newspapers, magazine publishing (Grüner + Jahr), and education. Unlike of media companies though, it treats venture investments in media startups as a key division of its company rather than as a side project.
The company’s core Bertelsmann Digital Media Investments (BDMI) invests across the US and Europe in companies like Audible, Mic, The Athletic, and Wondery (and in funds like Greycroft and SV Angel) but there are also the 3 regionally-focused funds investing in China, India, and Brazil plus the education-focused University Ventures fund it anchors in NYC. Collectively, Bertelsmann teams made 40 new startup investments in 2017 and generated €141M in venture returns, according to their 2017 Annual Report.
The investment arm of Hearst, one of America’s largest publishers with $10.8B in 2017 revenue, has likewise been a major backer of BuzzFeed, Pandora, Hootesuite, and Roku not to mention Chinese language app LingoChamp, live entertainment brand Drone Racing League, VR capture startup 8i, and dozens of other media-related startups. Hearst’s ownership in these ventures makes strategic sense: they provide market insights relevant to the core businesses, offer immediate partnership opportunities, and would be strategic acquisition targets that evolve the company’s position in a changing market.
21st Century Fox and Sky Plc (in which 21st Century Fox owns a 39% stake and is trying to acquire outright) have both made a whole slate of startup investments across the media sector in the last few years. In addition to its $100M investment in live-streaming platform Caffeine (announced on September 5) and similarly massive investment in WndrCo’s NewTV venture led by Meg Whitman, Fox has invested repeatedly in sports-centric OTT service fuboTV, hit newsletter brand TheSkimm, VR studio WITHIN, and fantasy sports app Draftkings with Sky often co-investing or building meaningful stakes in international startups like iflix (a leading streaming video service in Southeast Asia and the Middle East).
Since traditional media giants own extensive intellectual property of hit shows, films, and often exclusive rights to popular live events – not to mention established distribution channels to tens or hundreds of millions of people – there are immediate partnerships that can be signed to benefit both a startup and the incumbent. The incumbents often re-invest repeatedly to build their ownership and deepen the alignment between the companies, which rarely happens when media companies invest in marketplace startups.
Tencent’s always-be-evolving model
The new crop of digital media giants that includes Netflix, Snap, VICE, and BuzzFeed aren’t doing much if any strategic investing. Instead they’re keeping focused on growth of their core product offering. The notable exception is China’s Tencent.
In addition to dominating China’s booming messaging app sector with WeChat and QQ, owning 75% market share of music streaming in China, and being the world’s leading games publisher through its own studios (Riot Games, Supercell, etc.) and its minority stakes in Activision Blizzard, Epic Games, and others, Tencent has taken a strategy of investing often and early in promising digital media startups…and it has its tentacles in everything.
Based on Crunchbase data, Tencent has done over 300 investments in startups. It is likely the most active venture investor in China, where most of its portfolio is concentrated, but also backs Western media startups like SoundHound, Wattpad, Spotify, Smule, and Wonder Workshop.
Tencent can give distribution to these upstarts through its vast portfolio of digital properties and it can keep tabs on what new content formats or business models are gaining traction. It operates from a mindset of perpetually evolving, and trying to snatch up startups whose products could be key assets in the future of content creation, distribution, or monetization. This approach is one both old media giants and the next gen of unicorn media startups should consider.
The pace of innovation is moving so fast, and so many new doors are opening up – from subscription streaming and esports to voice interfaces and augmented reality – that corporate venture as a core strategy can unlock opportunities for the organization to evolve early, before it ends up being categorized as “old media”.
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Jeffrey Katzenberg’s NewTV closes a billion-dollar round, says report
Jeffrey Katzenberg’s new mobile video startup NewTV, which snagged Meg Whitman as CEO in January, has now closed on $1 billion in funding, according to a report out today in CNN. Investors in the round include Disney, 21st Century Fox, Warner Bros, Entertainment One and other media companies, with a combined $200 million investment, while institutional investors from the U.S. and China made up the rest.
The news follows a May report from Bloomberg, which said NewTV had then raised around $800 million. It had also said 21st Century Fox and Warner Bros. were investors.
Last fall, an SEC filing revealed WndrCo was looking to raise as much as $2 billion. That could indicate that the round CNN is reporting is still in the process of raising.
NewTV declined to comment, when TechCrunch reached them for confirmation.
Details are still fairly sparse on NewTV, which is being incubated by Katzenberg’s WndrCo, a holding company that’s also invested in startups including Mixcloud, Axios, Node, Flowspace, Whistle Sports, and TYT Network.
So far, we know NewTV aims to bring high-quality Hollywood production values and storytelling to mobile, but in a different format. Instead of producing regular-length TV shows, it aims to release content in “bite-sized formats of 10 minutes or less.” This will also involve custom-designed technology built specifically for mobile, it claims.
But it’s unclear why – beyond having Katzenberg and now Whitman’s names attached – this makes the company worth a billion dollar investment. The market for this type of content hasn’t really been proven out. After all, today’s youngest video consumers are happy with YouTube – their TV alternative of sorts – which is filled with short-form video.
And while YouTubers’ grasp of production values and storytelling chops may fall short of “Hollywood” standards, streaming services like Amazon, Netflix, Hulu and others are filling in the gaps in terms of quality, and are growing sizable subscriber bases.
If there is actually demand for “high-quality short-form” video, it seems content producers could just sell to existing distributors directly.
It’s also unclear for now if NewTV aims to own and distribute its content to others, act as its own standalone streaming service, or plans for a mixture of both.
In any event, as CNN points out, even a large round like this is a small bet for the bigger media companies involved. In addition, they don’t want to miss a shot at backing Katzenberg’s latest – especially given his prior successes at Paramount, Disney and DreamWorks.
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Jeffrey Katzenberg is looking to raise $2B for a new video startup
As tech giants like Apple and Facebook prepare to spend billions of dollars on movies and TV, longtime Hollywood executive Jeffrey Katzenberg is looking to write some big checks for original content, too. Katzenberg began his career at Paramount Pictures (where he worked on Star Trek: The Motion Picture), but is best known for running Disney’s motion picture division during the period… Read More
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