Manatt Digital Media's May Newsletter Is Out - Evolution of the Digital Economy

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Manatt, Phelps & Phillips, LLP May 13, 2015 Manatt Digital Media – May Newsletter: The Growth and Evolution of the Digital Economy The Rise of the Global Digital Content Market—Esprit de Corps at MIP Digital Fronts MCNs No More, “MPN” Please! (or, What’s in a “P”?) Digital Influencers, Millennials and the New Rules of Engagement 5 Questions with New Form Digital SVP JC Cangilla—Exclusive Q&A MDM Spotlight Profile Social media, livestreaming, feature films, original programming, virtual reality—these are all areas new to the old world of YouTube, and areas into which digital-first media companies and influencers are quickly expanding into as they evolve their business and content models. In this newsletter, we take you behind the scenes of this evolution and introduce some of the players who are driving change. The Rise of the Global Digital Content Market—Esprit de Corps at MIP Digital Fronts By Eunice Shin Warm weather with a gentle breeze on the French Riviera is pretty fantastic. Add to that a wave of excitement in seeing the growth and potential of the global digital market—and there you have an incredible MIP Digital Front event. Read more MCNs No More, “MPN” Please! (or, What’s in a “P”?) By Peter Csathy As many of you know, we write regularly about MCNs (multi-channel networks). But, just in the past few months—reflecting how fast things are moving in this space—the relevant lexicon has changed. Read more Digital Influencers, Millennials and the New Rules of Engagement By Mary Ermitanio Digital influencers—popular personalities on YouTube, Twitter, Vine, Instagram and other social platforms—are increasingly attracting a large share of the consumer attention pie and are transforming the rules of engagement with Millennials. A survey conducted for Variety last year concluded that YouTube stars were more influential than mainstream celebs among U.S. teens. Read more 5 Questions with New Form Digital SVP JC Cangilla—Exclusive Q&A By Peter Csathy New Form Digital, a digital-first studio, was launched with great fanfare almost exactly one year ago by Hollywood legends Ron Howard and Bryan Grazer, who joined forces with Discovery Communications. I recently spent some time with SVP JC Cangilla who runs overall operations, among his many other tasks. Cangilla previously worked as a senior executive in video at Yahoo! and has been a digital dealmaker for years. In a digital video world still dominated by low production values and large doses of serendipity (not necessarily bad traits, by the way), New Form Digital’s approach is very different and, well, a bit more “traditional”—focused on high production values and scripted story-telling—but with digital, mobile and Millennials top of mind. Read more MDM Spotlight Profile MDM’s multi-disciplinary team of business consultants, lawyers and venture capitalists provides a unique perspective in addressing the challenges and opportunities our clients face. Eunice Shin leads MDM’s consulting team and advises media, technology and emerging growth companies on business strategy, organizational priorities and business development.  Read more Contact Us:  T. Hale Boggs Chairman Email 310.312.4269 Peter Csathy CEO Email 310.231.5445 Eunice Shin Director  Email 310.231.5494 Mary Ermitanio Senior Analyst Email 310.312.4170 Practice Area Links Manatt Digital Media Team

Verizon/AOL - 5 Reasons Justifying the $4.4B Mega-Deal

Verizon -- You've Got Mail! Massive breaking media news today -- Verizon has agreed to buy AOL for $4.4 billion cash.

Remember back in 2000 when AOL bought Time Warner for $162 billion?

My how fortunes have changed over the course of those 15 years. AOL, the previous behemoth, lost its way along the way and held on too long to its dial-up bread and butter -- and ultimately failed to capitalize on its massive distribution on the content side.

Verizon hopes to change that. And, it might just be able to do that.

Here Are 5 Reasons Why:

(1) With AOL, Verizon becomes almost Comcast/NBCUniversal-like -- vertically-integrated, with a massive distribution platform to pipe heaps of content;

(2) Even more, Verizon's mobile distribution platform is the one that matters most in these transformed media times. Mobile is no longer the "second screen" -- it is absolutely the first screen (absolutely) with the millennials who matter most to marketers.  And, don't forget, Verizon plans to roll-out its mobile-focused OTT video service soon, very soon -- so it needs to feed "the beast" with compelling content.  Make no mistake, mobile is absolutely driving this deal; 

(3) Speaking of marketers, AOL is still a powerful force. Its sales force is proven -- and, in Verizon, it now has a massive new advertising platform to sell (and, again, for the young eyeballs that matter most).  Let's also not forget that AOL has invested significantly in ad-tech over the years, including Vidible and Adap.tv;

(4) Verizon needed to do something significant to counter AT&T's increasingly bold media moves, which include its mobile-focused $500+ million Otter Media joint venture with The Chernin Group. This is that significant move -- although AOL's success in the generally shorter-form mobile-driven video space is unproven (whereas AT&T's Otter Media J.V. owns leading mobile and millennial-focused multi-channel network (MCN) Fullscreen which already has a massive audience with billions of monthly views); and

(5) Verizon can now also use its heft via its FiOS network to supercharge its in-home OTT media ambitions with existing and increasingly well-funded video content from AOL. Netflix "Killer"? Maybe not so drastic, but certainly FiOS just got a lot more interesting.

Fascinating development. Bold. That's precisely the kind of strategic mega-moves that these times deserve. At first blush, my "blink" reaction is that I like it.

Media Execs - 5 Reasons To ACT Despite No Proven ROI (with Mobile-First Video)

Media executives, this one's for you.  I meet with many of you on an ongoing basis.  Some of you "get" it (i.e., that we are in the midst of an era of fundamental digital/mobile-driven media and entertainment transformation) -- but many others still don't (or simply won't even try).  Those in denial -- those who choose to stick their heads in the sand and ignore the clear data (and obvious reality) of our brave new mobile-driven millennial world of media -- consistently use the same justification for their failure to take action.  And, here it is -- "Peter, we need to know that any action we take is ROI positive and proven."  Here's a corollary to that -- "Peter, we are judged and compensated on making our numbers now."  And here's another one that flows from the first two -- "Peter, no one is making any real money in the digital, mobile-first game right now, and all we need is one hit movie.  Then we are fine.  Just fine.  We are still a hits-driven business.  We can sell that."

But, here's the thing -- while that may sound logical to media traditionalists (and is understandable to a certain extent given the human incentives involved) -- it is divorced from the very non-traditional forces at work today and is a luxury that you simply can't afford.  This is no time for extensive spreadsheets created by teams of internal B-school strategists manufacturing numbers from outdated assumptions.  We can all make up numbers to justify our actions/in-actions.  These are new times that demand real action, real innovation, real investment right now.

HERE ARE 5 REASONS why having no ROI proof doesn't mean you shouldn't act:

(1) MOBILE AS THE FIRST SCREEN IS THE NEW REALITY!  Yes, the data proves it -- and, your own personal experience proves it!  Look around you.  The kids -- those who matter to the big brands and marketers -- exist on their mobile devices.  I have two kids -- 15 and 12 -- and I live it.  Don't ignore the obvious.  Trust your instincts.  If that's where the market is, that's absolutely where you must be, plain and simple.  Don't have a proven business model or established ROI story?  Join the club.  Nor do your competitors.  But, they recognize that they must "play" where the game is today -- and is going tomorrow at an even more accelerated pace.  And, that game is mobile.  

(2) YOUR COMPETITORS ALREADY HAVE ACCEPTED THIS REALITY.  They have already internalized it.  That means they are already ahead of you.  Don't let them extend that lead.  Jump into the game.  And, don't go quietly into that good night.  This is a time for bold moves.  Disney's acquisition of Maker Studios is the poster child for that kind of bold move.  I continue to applaud it.  Just because you can't see its ROI positivity today, doesn't mean that it isn't there.  It is.  And, it will reveal itself over time.  The next Star Wars alone may single-handedly do the trick.

(3) IT'S EXPERIMENTATION TIME.  Business models and user experiences are unproven -- and are being worked out as we speak.  In any new period of disruption, business models struggle to find a new point of equilibrium -- which is frequently at a higher level than the original one (more on that in my movie/television example below).  That struggle is happening now.  And, only those who act -- and boldly experiment - will lead and profit (rather than follow and potentially lose ... big time).

(4) WE'VE SEEN THIS MOVIE BEFORE.  Literally.  First, we had the movies (ruled the day 100 years ago).  Then, 50 years later, enter the world of television.  Doomsayers predicted the end of movies.  But, guess what?  Both movies and television thrived -- and movies reached an entirely new level.  Why?  Because they represented fundamentally different experiences -- different modes of content consumption.  And -- importantly -- television itself was harnessed to drive more movie consumption via marketing.  Movies and television entered into a symbiotic relationship, from which both profited ... massively.  So, here we are about 50 years later once again -- with the smallest of those three screens now mainstreaming new modes of video "packaging" and consumption.  Faced with this reality, why not live in a world -- and mindset -- where this transformation is viewed as being a positive rather than a negative?  Harness the power of mobile to monetize more effectively -- and holistically -- across all screens.  Treat digital-first, mobile-driven video content (and the personalities behind them) as opportunities, not threats.

(5) WE'VE ALSO SEEN THE "DEER IN HEADLIGHTS" MINDSET DOOM ONCE-GREAT COMPANIES BEFORE.  Other massive players -- who once proudly wore the hat of being market leaders and innovators -- also failed to act.  They froze amidst new technological forces that enveloped them -- and banked on the past (and their existing then-lucrative business models) -- to justify their own in-action.  Blockbuster Video anyone?  They could have owned it!  But, where are they now?  Certainly not in your neighborhood ... or in any 'hood period.  Kodak?  Another cautionary tale of rationalizing a failure to act in the name of ROI -- and another great brand that has left our lexicon.  Just think about all of those jobs ....

LESSON -- Take action.  Make bold moves.  Hire leaders with vision and experience in both the content and technology worlds.  Make sure they live and breathe media and technology and live it, authentically and passionately.  Make sure they know how to partner, since this is no era of going it alone.  Trust them and their instincts (but, yes, use evermore sophisticated new technologies to measure performance ... patiently).  Compensate/incentivize them to invest in the future, not just the past.

And don't look back ... because that media past ain't coming back.  As I said in a recent Los Angeles Times piece, "Once technology is developed, you can't rein it in."

Harness it instead!

David Goldberg -- Shocking, Sad (& Reminder to Us All ...)

I, like you, was shocked and saddened by the sudden loss of serial digital media entrepreneur David Goldberg this past weekend.  I certainly didn't know David well -- but I interacted with him "back in the day" during my time at online music pioneer Musicmatch and his time as head of digital music at Yahoo!  Those were heady, thrilling, "wild west" digital music/media times.  There were few precedents back then -- we made them up.  We created streaming deals where none existed.  David was a key media/tech innovator who made it happen and led the way.  And, among other things, he was a key driver of Yahoo!'s acquisition of Musicmatch after his own digital music company Launch had been acquired by the purple "Y."  I respected David -- and, like you, have admired his continuous string of entrepreneurial successes.

David's "gone-way-too-soon" loss is poignant in so many ways.  His family -- his wife, his kids.  Tragic.  His friends.  Colleagues.  Can't define it.  Won't even try.  But, for some reason, I had to write about it -- at least briefly.

At these tragic times, it is important to stop.  To reflect.  To prioritize.  And, to stick with those priorities.

Those of you who are reading this likely are, like me, driven, passionate, and intense.  We have so many things to do.  So many things we want to accomplish.  And, not enough hours to accomplish them.

But, here's the thing.  Yes, we do (I am saying this to myself right now, by the way).  And, yes, we can -- and must -- turn "it" off some times.  What really matters?  What's it all about?  What's lasting?  Certainly not new questions -- am breaking no new ground here.  But, these questions are timeless.  We, on the other hand, are not.  David's tragic death reminds us of that with a blunt senseless hammer.

None of us, of course, know what the future will bring.  That's precisely why sucking the marrow out of life we must.

So, take the time to create and immerse yourself in real-world, non-virtual experiences.  Share them with those closest to you.  Music festivals have become "that thing" -- that obsession -- for me.  And, my family joins me now in that obsession.  Now it has become "our thing."

These are lasting when much of the other "stuff" is not.

The digital media/tech world has absolutely lost a true leader and innovator in David.  But, more importantly -- far more importantly (by an order of magnitude) -- his family has lost a husband, a father.

But, they will never lose those experiences they shared together ....

Sun God 2015 - UCSD's Mini-Coachella

Whirlwind weekend covering music festivals.  Saturday, Desert Daze -- the anti-Coachella in sweltering Mecca, California (here is my review amidst the 100 degree dust-storm).  Yesterday, Sun God -- UCSD's mini-Coachella a world away in downright chilly La Jolla, California (and featuring a Ferris wheel, just like its much bigger brother).

Sun God is impressive -- student organized, student run.  Virtually only open to UCSD students (as part of their student services fees -- no separate purchase required) -- about 20,000 of them (I attended as an official member of the press).  In a bold move (surprising to me given generally conservative college administrations), the festival featured Snoop Dogg as the headliner -- and Snoop did not disappoint.  Not your usual Snoop show to be sure, as the wafting of smoke was minimized by some of the tightest festival security I have ever seen.  OK Go (pictured to the left) also stood out amidst the festive, carnival-like atmosphere where EDM was also minimized this year (certainly in an attempt to rein in the general EDM "state of mind" -- which is frequently altered as part of the genre's definition).  Sure, the festival this year was held on a Sunday -- and sure it ended just after 8 pm (in further nods to an increasing conservatism).  But, it was held.  THAT is what matters.  Students look forward to it all year.  And, Sun God organizers pulled off this mini-major once again-- no small feat given myriad challenges in an official school sponsored event.

Desert Daze-d -- A Review of the Anti-Coachella (& Dust-Free Bonus Images)

  

My family and I (that's us below -- Luca, 12, with the dust-protecting bandanna, Hunter, 15, friend Izzy, and my wife Luisa) attended the dust-storm that was the Desert Daze music festival yesterday in Mecca, California -- only miles away from the Coachella mega-festival a few weeks back -- but a world away in virtually all else.  While Coachella is lush, grassy, and downright pristine -- Desert Daze was literally a dust storm and nothing but dirt (we are still coughing up that dirt).  While Coachella is expansive and massive -- Desert Daze was small and narrow.  While Coachella is EDM-driven -- Desert Daze was dark Indie-driven (with headliner Warpaint killing it on the main stage late night).  And while Coachella is filled with garlands in hair and white lace -- Desert Daze has no flowers at all -- and certainly no white frill.

But, all THAT is precisely why Desert Daze works!  It's the perfect 1-2 Coachella Valley punch -- the anti-Coachella, if you will.  And neither is "better" for most who attended, they are just fundamentally different.  Yes, Desert Daze's Mecca location is "random," but the small tent city and artisans who filled it were organized in their own very organic and earthy way -- a new kind of hippie society.  My kids loved it (above is a picture of them grasping Warpaint lead singer Emily's hand after they fought their way to the very front row like the true festival warriors they have become) -- my wife, Luisa, am not so sure.  But we all agreed that Desert Daze was an "experience" in every sense of the word.

And, isn't that what music festivals are all about?  (Other standout performances included goth-artist Chelsea Wolfe and guitar-driven DIIV.)

My Weekend As A Music Journalist - Desert Daze & Sun God

Those of you who are reading this know that, if nothing else, I am prolific.  Write a lot.  Here in my own blog.  And also as a contributor to Variety, TechCrunch, Billboard, VideoInk, HuffPo, Business Insider, Wired and soon-to-be-for Forbes, among others.  For me, writing/journalism is an important "hat" I wear -- love doing it, and love adding a nugget of value/insight/access/amusement here and there.

Those of you who are reading this also likely know that I am a music junkie -- listen 24/7 -- attend festivals and live events all the time (just saw The Decemberists and Lucius with my family two nights ago in San Diego -- an excellent show by the way).

This weekend brings these two great tastes (writing and music) together  -- in one weekend where I will cover two separate music festivals as an official member of the press.  Festival #1 today, Saturday -- Desert Daze in Mecca, California (about 30 minutes from the site of Coachella).  And, Festival #2 tomorrow, Sunday -- Sun God at the University of California, San Diego (UCSD) right here near me in La Jolla.  The two are hundreds of miles apart -- and also a world away in terms of the featured music.  Desert Daze -- primarily indie-focused -- features Warpaint and DIIV, among others (am preparing by listening to DIIV right now).  Sun God, on the other hand, features Snoop Dogg.  Not Snoop Lion, Snoop Dogg.  Need I say more?

Will certainly write about the music -- and about the overall festival scene and experience.  After all, my family and I continuously attend festivals and other live music events.  Our upcoming two big summer vacations are festival-driven through and through -- (1) Live Earth in Paris in June (about which I am writing for Forbes) and (2) Outside Lands in San Francisco in August.

But, I will also explore how these festivals and other live events use digital media/technology to enhance and extend the overall experience -- and how our increasingly digital/online/virtual world beckons more and more of us to engage and actively participate in the offline/physical world.

Stay tuned for my reports ...