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Silicon Valley consumer startups are Hit Driven Businesses -- Mark Suster


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"People in the US watch 5.3 hours of TV per day

People read for less than 30 minutes

You will not fundamentally change consumers media consumption habits

So you tell me what the future of the Internet will be?"

But here’s what Silicon Valley doesn’t get about Hollywood

  • No matter how much it bothers you, people do like to entertain themselves with a “lean back” experience. As humans we like story telling. And we like to be entertained.
  • This requires more than technology. It requires writers, actors, film crews, lighting, costume & set designs, make-up artists, post production, sound, editors and so on. You can’t replace this stuff with Java
  • It is no longer a “hits driven business” and I don’t know why VCs haven’t gotten that memo. Hits driven businesses come when production costs or distribution costs are so high that you need a home run to cover the huge costs of development. At Maker Studios we can produce content at $200-$400 / minute. If we get a video wrong our loss is $2,000 at the most. But many of our videos get predictable traffic like thisGates vs. Jobs rap battle at 33 million views (and climbing) or my favorite Mr. T vs. Mr. Rogers at 36 million.
  • Ironically in Silicon Valley consumer Internet business have become hits driven businesses. Think about. You now need a star like Jack Dorsey or Dave Morin. You need a huge budget – millions – to shoot for the stars. And you still have no idea if you will accidentally become Pinterest or if your $41 million will produce a Waterworld.

Example: Upworthy

Upworthy got to 6 million uniques pretty much on the backs of 2 videos: a woman who owns how fat she is and Mitt Romney being uncomfortable around a gay veteran.

Is Upworthy hit-driven? No, they're doing something bigger.

Did hits help Upworthy raise money? Hell yes!

 so you agree or disagree?

Today's Hollywood studios are hit-driven in a bad way.  They refuse to bet on anything unless it has a II or III in the title, or springs from a comic book.

It's not clear to me that the consumer internet is hit-driven in the same way.  People bid up the hits, but the hits aren't hits because of the "stars" attached (hello Color!).  The hits are hits because people adopt them en masse (hello Pinterest!) even when many investors previously ignored them.

Our business is far less predictable, and it's far more plausible to build a smash product on a shoestring than it is to film a blockbuster on a shoestring.  In other words, we have numerous "Blair Witch Projects" every year; Hollywood has one or two per decade.

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