Out with the Old

Out with the Old

The most common affliction among media executives, even more common than insufficient sleep and attention deficit disorder, is hubris. Over the past year or so, when old-media execs made their high-profile, well-funded new-media moves, the idea they tried to convey was that you can stop worrying, the grown-ups have arrived: Internet-based entertainment is now legitimate, we know what we're doing.

It hasn't turned out that way. Already this month,, a site that barely managed to issue three skeletal press releases and zero films over the past year, has shut its doors, despite being brought to you by DreamWorks and Imagine Entertainment. Atomic Pop, the "21st century music company" founded by former MCA head Al Teller, which never sold more than 36,000 copies of any album, "has undertaken a major restructuring" that includes "significantly reduced overhead." The Digital Entertainment Network is gone, Shockwave has laid off more than 10 percent of its staff, and rumors about troubles at other companies are common.

This is nothing new. Anyone paying attention knows that the recent failures are merely the latest in a long line. Pathfinder, Time Warner's expensive attempt to integrate its sundry existing holdings under one online marquee, failed largely because it was a slow-loading, difficult-to-navigate shovelware site without an identity of its own.

When News Corp., parent of 20th Century Fox and sundry other entertainment ventures, purchased the Delphi Internet online service in 1994, the idea was to, in the words of one internal memo, "leverage our synergies." That usually meant digitizing large photographs of Fox characters like the Power Rangers. In many cases, the idea was simply to dump material related to Fox television shows and movies online, without any interest in interactivity or immersion. (I worked at Delphi for part of this period.) During News Corp.'s stewardship of Delphi, more and more resources were poured into the to-be-launched proprietary graphical-environment access-and- content service, which then turned into a to-be-launched Web-based access-and-content service, which then never launched.

Many old-media executives, mostly from television, were hired. All of them were smart people who had succeeded in their previous careers and - as in the early days of other media - most of them sought to graft their previously successful ideas onto the newest medium. Attempts to build interactive applications that celebrated the two-way nature of the Web were, more often than not, rejected in favor of repurposed content. After going through four management teams and, reportedly, many tens of millions of dollars, News Corp. sold the Delphi name and service back to the original owners at a fraction of the price News Corp. paid for them. The original team now has a much more modest but much more solid business, having returned to the company's roots as a collection of online communities.

So it's not news that old-media models don't work on the Internet, whether they be newspaper, music or film models. When you consider the films that was supposedly going to release, such as a Flash animation of "a magician who does amazing things but kills his assistant every time" and a show called My Life Sucks, you're grateful that the site never launched at all. There was little evidence of interactivity; it was the typical Hollywood model of "we know what you want, shut up, sit back and enjoy it."

With so much evidence that the companies that thrive on the Internet are those that don't rely on old-media models (eBay and Google, for example, are tailor-made for the Internet), why do so many Internet companies insist on mirroring old-media structures and methods? Some of the useless similarities are merely semantic, like retaining the term "producer" to describe someone with both technical and "content" skills. But at least one other is far more basic.

The engine that runs Hollywood is the production-deal system, in which ostensibly independent entities are funded by the major studios to come up with new ideas that are either picked up or rejected by the Big Boys. That, in a nutshell, also describes the incubator model that's so popular among Internet companies and venture capitalists. This can work reasonably well for investors, who can skim the most-likely-to-succeed businesses off the top and abandon the other ones after a relatively small investment, but it's unclear whether individual businesses fare as well in this model.

Because the incubated companies are being judged in part by how well they work with the other companies (or, as some executives might put it, by how well their synergies can be leveraged), the decision regarding continued funding and potential success is dependent on how the incubated company fits in with all the other incubated companies. Is there too much overlap? Do they compete? It's uncannily similar to how film executives determine which projects to green-light.

In such an environment, it's harder to find reward for innovation. Retreads rule. Just as film producers pitch their ideas in terms of previous successes ("think Die Hard meets The Sound of Music"), Internet entrepreneurs are reduced to backward-looking comparisons ("it'll be the of plumbing supply"). Just as the most successful and iconoclastic films are often those developed without studio interference (can you imagine a Hollywood suit funding The Blair Witch Project?), many intriguing ideas for the Internet still take shape before the VC folks weigh in. Shockwave, because it was started by the software company Macromedia, may be among the most forward-looking of Internet-movie sites, with a good number of its offerings being games and greeting cards that have some level of interactivity (even the disgusting, one-joke Frog in a Blender). Still, like the popped, its name acts are directors like Tim Burton and South Park's Trey Parker and Matt Stone delivering one-way animations in a new medium. If what the Web turns out to be for entertainment is simply a new distribution medium for "content" that was developed for other media, what's the point of all this development?

In the end, being a successful entertainment executive comes down to something crucial but mundane: understanding your customer. You might find the latest splatterfest or wrestling vehicle repulsive, but they're successful because, over the decades, film and television have generated timeworn strategies for determining what the audience wants. In the age of the Internet, with no similar tools yet developed for entertainment companies to figure out how to force-feed customers, these executives are forced to go on instinct, on hubris, and that's why they're failing.

At PC Forum early last year, USA Networks' chairman and CEO Barry Diller, then still convinced that he'd added Lycos to his holdings, was asked by conference chair Esther Dyson, "Do you like these people, your customers?" He looked as if he had been insulted, and soon the large room was full of uncomfortable laughter. After stalling a bit, he said, "I've never in my life, in any terms that you can think of, thought of it that way." The most successful Internet companies are those with executives who at least attempt to identify with their customers - understand what they think and need. Until the Barry Dillers of the world think that the wonderful, weird online audience has anything to teach them, until they accept that "new media" is indeed a new medium and not merely an extension of the old, we'll be stuck with lengthy Flash animations worth ignoring and well-funded companies tanking.

Jimmy Guterman is a also a columnist for, and he is president of the Vineyard Group, a consultancy.

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