[gergles]

The real reason a VC company isn't going to kill hollywood is because there's not enough money in it. The author throws around $65 billion industry as if that's some sort of impressive number. FB alone is worth $100B. We could liquidate FB and buy the entire industry and shut it down if we really wanted to. Compare that to LNKD, EBAY, GOOG, hell even CRM. We have hit after hit after hit that are worth more than the entire film industry after a few years' worth of nurturing.

No, the reason that a VC-funded company won't kill Hollywood is because there's not enough money there - not because Hollywood has some sort of monopoly on how to entertain people.

[tlb]

$65B is Hollywood's annual revenue. $100B is Facebook's market cap -- its revenue is $5B (2012). Hollywood's revenue is a plenty big enough prize to chase.

[robin2]

It rather depends what you count as "killing Hollywood".

Back in the late 90s, I used to get rather perplexed by the way geeks railed against DVD zoning, DMCA, etc. Yes, the entertainment industry was acting in fairly nasty ways to defend itself, but then drug dealers can be unpleasant too. My view was the debates around DRM circumvention didn't even touch on the root cause of the entertainment industry's power.

Michael Ventura once summarized the meaning of entertainment: "You go from a job you don't like to watching a screen on which others live more intensely than you." On that view of things, something like meetup.com is more of a threat to Hollywood than youtube could ever be.

[JackFr]

Ummmm, not quite. Fox, Disney, Universal all have market caps larger than FB at P/E's 20 times lower. I think the $65 billion he's talking about is revenue.

[Alexx]

Revenue and Market Cap aren't comparable. I don't know where the figure of $65 billion is from, but Disney alone has a turnover of $45 billion, so I suspect it is an order of magnitude off the total hollywood economic value - which is worth vastly more than the box office total.

To compare directly, Facebook received $2.5bn in funding, last year turned over $5bn and made loss of $0.5bn. Disney received no funding, turned over almost $45bn and a profit of $9bn (Making it roughly as profitable as Google).

Not to mention if you couldn't liquidate Facebook if you tried, but say you defied economics and did - you couldn't buy even a single one of the top Hollywood studios with the proceeds - their market caps are all much larger than Facebook. It wouldn't even make a scratch in the industry, let alone buy it out and shut it down.

Saying there isn't enough money in Hollywood for VC's to bother with is a bit like saying there isn't enough money in oil. This is an industry that will happily dump half a billion into a single film and take cash write-downs that would make VCs shudder. Hell, lots of the hollywood companies OWN VC funds.

[maxerickson]

What do you want to call Hollywood? Disney has revenues of $19 billion on TV and $13 billion on their parks, while they only make about $6 billion on movies. The movies have a profit of $722 million, TV $6.6 billion.

I guess I wouldn't be terribly surprised if Disney were making more money from ESPN than from producing movies (I didn't look real hard if they break out their various cable property revenues and such).

Perhaps that only weakens your point, but it seems like Google is maybe a better business than making movies.

(This comment expanded after I finished writing it, I had accidentally clicked submit...)

[Alexx]

Yeah, that's what I meant by the total hollywood economic value. Google makes money from multiple services and products too, and in the context of new companies coming in and taking a slice of the pie it makes sense to look at hollywood as a whole. Content (TV, Movies, whatever) and Merchandise (Parks, toys etc) got hand in hand. You can buy angry birds plush toys because once any company establishes a brand they are going to find multiple avenues to exploit it, and any companies coming into the market will be in that position too.

Edit: And you're right Google is a 'better business' than making movies most likely. But that doesn't mean it's not of interest to VC. After all, oil is clearly a 'better business' than Google!

[maxerickson]

I disagree that oil is a better business than Google. Each dollar of gross profit for a company like Exxon requires a lot more operations than each dollar of gross profit for a company like Google (It's something like 50% more now, even after Google has captured a significant majority of online advertising and begun dithering around looking for more businesses to get into). Microsoft's licensing power gives it a nearly silly position in this comparison (but that has long since ceased to be a major growth industry, disappointing investors).

Energy certainly provides an opportunity to establish a huge operation and make huge profits, but it also requires a huge amount of capital.

[Alexx]

Tech has a higher profit margin, but is a smaller industry. So depends which metric you want to use to define better- Efficiency or total profit. Comparatively the largest pure tech (none hardware) company Google is valued at $290bn publicly, and the Financial Times estimates the largest pure oil company Saudi Aramco privately at $2000-$7000bn based on the size of it's reserves.

It's a fruitless argument either way. I simply meant the fact industries with larger figures exist, doesn't mean VCs just look at the random top-line numbers and ignore an industry because it's 'not big enough' when you're dealing with billions of dollars.

[vehementi]

Sounds like there's an untapped $65 billion market that other VCs won't touch. What opportunity!