AnyClip’s Open Letter to Hollywood

At startups, strategies evolve.  So do their entrepreneurs

Only 6 months ago, I became the CEO of a startup called PopTok, a company that had some interesting insights about the film business, but a strategy that would not work.  AnyClip was born from the vestiges of this company and we swiftly adopted the idea that we would create a platform than enabled anybody to find “any moment from any film ever made instantly and legally.”

Successful managers solve problems for their customers in order to create  measurable economic value.  In our case, we believe the best method to stanch YouTube users’ blatant copyright infringement violations was to build a more comprehensive and useful service for reliving film moments.  This service will operate as a gigantic lead-generation mechanism for  the legal consumption of full-length and short-form video-on -demand .  We adapted our rhetorically catchy  vision –any moment from any film ever made — so that we would inspire  the studio ecosystem to embrace a new form of library discovery . AnyClip combats the looming piracy crisis that threatens to irreparably harm the movie industry.

During the summer, we were accepted into TechCrunch 50 — a conference that echoes the film industry by billing itself as the “Sundance of Startups.”  In order to launch at TC50,  AnyClip  had to abide by their rule of complete secrecy.  Only our investors and employees knew we were selected.  This meant that we could not share our prototype with any of our constituencies including content owners.

The TechCrunch guidelines presented a conundrum.  I wanted to use their platform to publicize our company’s strategy.  However,  I also worried that we would neglect a fundamental principle of running a startup —  treat your customers better than anybody on Earth.  How would the studios feel about us demoing the service without allowing them to preview it?

In general, we have been very warmly received by our partners in Hollywood for which we are gratified.  Actors, directors, agents, managers and studio executives demonstrate optimistic intrigue about  a legal database of movie moments that promotes the rich heritage of film.  That said, the industry expects AnyClip to adapt to its cultural norms .  Even giving a demonstration of our service with film clips requires the permission of the studios.  Legally, these demos are well-protected by the fair use statutes, but invoking them is clearly considered disrespectful.   That was ignorant, and I’ve had to adjust my thinking.  Hollywood has a business culture that asks for permission.  Internet companies tend to use legal arguments to justify their business practices and damn the values of  the traditional industries that preceded it.

Perhaps total disruption with potential legal justifications can work (see the Digital Millienium Copyright Act and so-called ISPs YouTube, MetaCafe Daily Motion, Veoh, and my old company Bolt ) , but I neither condone nor intend to deploy these practices. Finding any moment from any film ever made is a seductive economic proposition only if it discourages piracy and promotes the legal consumption of content.

I love films.  I want the movie industry to thrive so people like Spike Jonze and Peter Jackson can continue to make magical moments for me to watch and relive.  AnyClip is designed to grow the home video market (VOD, BluRay, DVD etc) by creating discovery and search capabilities that were not technically possible even a few years ago.

Imagine a comprehensive database that ensures that every watched scene  is one click away from a purchase or rental of the full-length film.  Consider YouTube and IMDB with a rich, searchable, and legal database to integrate into their sites .  AnyClip can do much to help grow the industry, but only if we earn the trust of the rights holders without compromising the needs of their audiences.

These are AnyClip’s challenges. We have to start somewhere and at the beginning we will not be able to license entire libraries.  But make no mistake, the rediscovery of every film ever made is our vision.  Massive legal consumption of every film ever made is our dream.

Why You Should, Talk, Read and Blog

This fall is my first semester teaching college.  I’m an adjunct at New York University where I’m teaching The Business of Media.   The class design focuses on training young people to join media companies.  The grade is comprised of three components class participation, blogging, and a final paper or presentation to a group of media professionals.

These skills, reading, writing, and presenting are vital to your ability to succeed in the workplace.  And everybody from programmers to accountants needs them — even the ability to speak in front of large groups.  Don’t believe me?  Guess who presented Google Wave at their launch?  The product managers who built it.  The smartest thing my son’s kindergarten teacher did was hold a weekly recital where kids stood up in front of all the parents and performed some skill (count to 10, sing the alphabet, play chopsticks) to huge applause.  5 years later all of those kids relish public speaking.

The media world has been changing since I joined it in the early 90s.  The pace of innovation has never slowed.  In fact, it has probably accelerated.  There has been “upheaval, revolution, rebirth, and reinvention” since long before the 20 years that I’ve been in the industry.

And if you don’t read consistently, widely and thoughtfully you will not be able to contribute as much to your organization.  As children’s advertising taught me years ago, Reading is Fundamenal.

Blogging forces you to write about what you read.  Through this process you articulate your ideas into structured thoughts.  These thoughts may or may not contribute to the organization, but I genuinely believe that the process of steady reading and writing is a discipline that will serve you, your colleagues, and your career for years to come.

Why the World (Including Hollywood) Needs AnyClip

Movies are the world’s most influential communication medium.   They catalyze conversation in countries all over the world.  Films teach history, tell stories, and make people laugh until their bellies and faces ache.  Moving pictures are for the young, old, rich, poor, educated, and the illiterate.

Etched in each moviegoer’s memory is a panoply of great scenes from tens of thousands of films.  How much fun is a dinner, cocktail, or keg party if nobody could quote a movie line?   The language of film is universal.

Unfortunately, to re-experience these moments can be painful.  Watching Humphrey Bogart kiss Ingrid Bergman or John Belushi scream “Food Fight” or Russell Crowe facing down tigers in the Coliseum is a challenge. These are moments that everyone wants to experience over and over again. But, does anyone really pop in a DVD and patiently scan for their favorite scenes? No. We search the Internet. Mostly, we don’ find what we’re looking for, and, when we do, it’s far from a cinematic experience.

THE PROBLEMS

So far, The Internet has  provided a piecemeal solution to digital video. There are plenty of video sharing sites filled with user-uploaded content, but their selection is haphazard at best. You might find “I love the smell of napalm in the morning” seven minutes into a longer clip or with abominable picture and sound. Diehard fans do will share shaky, unreliable videos of their televisions shot on camera phones.

So you might find what you are looking for but only if you’re willing to sort through a lot of garbage and put up with subpar film quality. But  people love movies so they put up the  problems.

Over 12 million people have watched the above clip from The Lion King.   I wonder how much money Elton John and Tim Rice have gotten for their work.  Neither the owners of these films nor the artists who make them receive any compensation from the display of their works. If it’s not illegal, it’s definitely unethical. This user-generated video industry combined with other public policy issues have unintentionally driven a wedge between Hollywood and the most dynamic and creative Internet companies. Content owners must benefit from Internet distribution and AnyClip wants to provide the most compelling and engaging platform to help them do so.

WHAT IS ANYCLIP

Six months ago, my co-founder Nate Westheimer and I joined an amazing group of Israeli developers who also happen to love movies. We wanted to build a Web service that would allow anyone to find any moment from any film ever made instantly. Our co-founder and lead investor Erel Margalit suggested we name the company AnyClip.

Everybody wants to relive scenes and AnyClip set out to make that possible. Creating the data and search technology to make that work presents formidable challenges. When searching for a scene from a movie, people describe moments in so many different ways: from dialogue and plot description to hazy memories of shark attacks and flying cars. This creates really engrossing and thorny computing problems. If someone searches for “dead shark,” do they want to see Roy Scheider blowing up Jaws (i.e. action on screen) or Woody Allen lamenting the “death” of his relationship with Annie Hall (i.e. dialogue)? The AnyClip platform incorporates tools to handles these issues and more.

Early tests show our service can be a great discovery engine for films. A search for “I love you” produces countless clips from hundreds of movies. A brief visit to AnyClip can yield an iTunes download or an addition to a Netflix queue. At AnyClip, clips are dynamic and up to four minutes long. You can adjust a clip to relive exactly the joyous, daring, or inspirational moment you crave.  This sample may encourage a purchase, rental, or download of the entire film.  At minimum, it reunites the movie lover with the art and the artists who brought them such joy.  This reaffirm  loyalty and interest in the future work these artists produce.  That’s called “promotion.”  AnyClip evokes memories and channels them to enhance the values of the world’s great film libraries.

Today, we also launch a public API for our data and eventually for legally licensed content. This would allow companies like IMDB, Slide, RockYou, Netflix, Zynga, OMGPOP, Twitter, Facebook, Mahalo and – most importantly – the insanely creative and brilliant independent developers around the world to build great user experiences with movie clips on top of our movie data. AnyClip is a platform to power a renaissance of the greatest movies the world has ever known.

DISRUPTIVE BY DESIGN

If you look closely at the movie ecosystem, the only institutions that suffer from a legally available AnyClip are those that benefit from leaving the current system intact.   First and foremost are existing Internet media providers that hide behind the safe harbor provisions of the Digital Millennium Copyright Act. While nobody knows precise numbers, YouTube has served billions of movie scenes to audiences around the world.  Overseas video sharing and PTP sites — Tudou, Megavideo, PirateBay and BiTTorrent –operate outside the reach of US laws. Naturally content owners have been wary of digital distribution in light of these abuses and violations of the DMCA.

History shows Hollywood struggles with new formats and other technological innovation. They are instinctively protective of their core businesses. Thirty years ago, Universal sued Sony for creating the Betamax. Luckily, they failed and today we have a US $25 billion DVD industry. The good news is AnyClip enhances every distribution window.  Every one. We don’t compete. We complement.

And that’s important, because DVD revenue is dropping for the first time since the format’s introduction. Piracy and Internet video-on-demand from the likes of Amazon, Netflix and iTunes are changing consumption patterns. Economic realities have forced audiences to reassess their entertainment spending.

One way to stanch the bleeding in the Home Video Market is to reinvigorate the value locked in our memories. Short of innovation, the motion picture industry will continue to see declining revenue and audiences will get fewer new magical moments.  Why? Because Quentin Tarantino and Ridley Scott will be given smaller budgets. Does anybody really want to deprive Peter Jackson of the budgets required to make another Lord of the Rings?

Many powerful Hollywood people have told us that AnyClip is amazing but impossible. Some very smart industry executives are rooting for us to succeed but worry about the legal landscape. At its best, the digital rights marketplace is byzantine.  These executives are right to be concerned. For the sake of the movie industry’s wonderful and talented people, and the billions of fans around the world, we certainly hope we can find a way to work within the law to create great opportunities for all.

And this includes AnyClip.  While we will be a smaller participant in any transactions that occur between content owner and consumer, we believe this business will scale just fine. It’s the greatest content that has ever been made etched in the memories of everybody on Earth. We think “reliving movie moments” is a huge market. We are the catalyst for what will be a high-growth legal clip economy.

Our fourth co-founder is the former CEO of Sony America Mickey Schulhof. Mickey knows the pitfalls as well as the upsides of media innovation having introduced the CD and Playstation to North America. He always tells me that if it weren’t for naysayers, we wouldn’t have revolutionary companies.

“Sometimes you just have to do things, Aaron,” Mickey told me when I first described AnyClip.  It’s time for the curtains to open.

Restarting a StartUp

I have been at my new company for 4 months and that’s a good time to reflect on what’s happened and what we might be able to learn about startups from this experience.   We’ve pruned the team, secured new capital, improved our board, hired new blood, and changed the company name from Poptok to AnyClip.  Why?

1.  Strategy matters.  When I got to Poptok the company was focused on creating an emoticons company out of movie clips.  Maybe this is an amazing idea, but betting a whole company on it?  There were many risk factors including a violation of one of my favorite rules — the Penchina Maxim.  Gil Penchina (CEO of Wikia, former Ebay Executive) once told me that Internet products should improve the user experiences of an already established widespread consumer behavior.

Was Poptok solving a consumer problem?  There is little data to suggest that consumers want to send clips as emoticons. It’s an interesting hunch, but unproven.   On the other hand, the newly created AnyClip solves two huge problems.  First, people are watching billions of movie scenes on YouTube annually.  The quality of these clips is consistently inconsistent.  Many of these scenes are shot with handheld cameras that are filming a television.  We are betting that consumers actually care about quality.  That’s a bet I’m willing to make.

The second problem AnyClip solves is the inefficiency of the clip marketplace.  Poptok found out that licensing movie clips is an expensive, cumbersome process.  And guess what? Because the process is painful and economically inefficient the market for movie moments is small.  But the movie industry is huge ($40 bn/year) and people watch movie moments all over the Internet right now with no measurable value creation tranferring to the owners or creators of this content.

2.  Enter with a Hypothesis.  During my discussions with Nate Westheimer before we arrived at what would become AnyClip we developed a hypothesis about what the consumer wanted.  When we started working we set about validating our theories.    We knew what we wanted to do, but we were not sure it was possible for many reasons including the legal landscape in the movie industry.   We were moving forward immediately.  This is not always possible, but Nate and I did considerable unpaid work trying to decide if this was an interesting opportunity for us.  The results of that work gave us confidence to join the company and enabled AnyClip to have new management that hit the ground running.

3.  Embrace DNA Change.  There were some dedicated, well-intentioned, experienced  people in charge of managing the team at PopTok.  But unfortunately they had gone through cycles of executive change and disappointment.  Morale was low.  Cynicism about a variety of issues was palpable as was a dangerous lowering of standards for evaluating success.   Early in my tenure, I was concerned about this teamearly,  but I took 6 weeks to make an informed decision, and 2 weeks to prepare for the changes.  This is never fun, but it has proven to be a crucial decision because it took the friction away from the massive changes we were trying to make.

4.  Earn Your Team’s Trust.  Lots of managers take trust for granted and I did this all the time earlier in my career.  employees of companies that change directions every couple of months start to doubt management.  This is very understandable.  Realize that words are parsed and people don’t automatically believe you will do what you say you will do.  We have a very fine team now.  They need to know that we are in the trenches with them if we expect them to join us for each AnyClip battle.   More than anything this means be transparent, consistent, and fair in all of your interactions with your team.

5.  Recognize that you will never fully understand what really happened before you arrived.  One of the challenges of the turnaround is that you inherit a series of issues  that must be addressed.  Contractual and organzational  baggage created by your predecessors transfers to new management.  PopTok did not have a particularly productive relationship with its Hollywood partners, but AnyClip must have an intimate real value-added partnership.  Of course for Hollywood dealmakers, Poptok and AnyClip are the same and a name change doesn’t obscure that the shareholders, legal agreements and corporate history all remain the same.  This is the baggage that needs to be addressed and put to rest.

6.  Walk before you run, but make sure you run quickly.  When taking on a restart, the first thing you have to do is stabilize.  As the great entrepreneur and my friend  Howard Tullman taught me a decade ago, “there is only one crime in a startup and that’s running out of cash.”  We cut the burn by nearly 50% at AnyClip so we are walking, but time is of the essence.

AnyClip needs to demonstrate significant vaule to content owners, consumers, and application developers this fall.   We will be presenting a massive transition from the old to the new in September only six months after we arrived and only 4 months after we started building software.  It’s as if this venture financed company 15 person operation was operating at the speed of a Y-Combinator seed stage startup.  Maintaining this velocity with productive, thoughtful improvements will probably determine whether this turnaround succeeds.

Bring InfoArbitrage Back

Roger Ehrenberg wrote a revealing post yesterday about his waning interest in blogging.  He listed a myriad of reasons — from his inablity to be heard in Washington to the amount of time it takes to teach two sons to pitch.  While I understand (I coached baseball and am stepping up to Pop Warner Football in the fall),  I quickly wrote him that I would be crushed if Fred Wilson stopped writing and that I was not happy he had abandoned us during what I have worried was a confusing economic recovery  I missed his insights on the economy and realized Roger was influencing how I think about my professional life and AnyClip’s business model.

Look, Roger has a massive portfolio and no partners.  He’s busy.  But the reality is this community of blogger/writers in New York Fred, Roger, Steven Johnson, Jeff Jarvis , and Paul Graham ( honorary New Yorker even though he might be offended) are part of a select  circle of intellectuals that are knitting together our internet culture with politics, economics, culture, media studies and a variety of other disciplines. Hardcore, Hardworking tech intellectuals  Mike Arrington and Om Malik just don’t do these things as well and that hasn’t been their role.

Roger plays a vital role in this ecosystem and it weakens without his contribution.  I feel bad that I didn’t write him to ask what was up, but I’m sure glad he posted on it.  I wish I had a twitter petition tool right now to circulate and motivate him, but in the absence of that go to his blog or twitter  him and tell him what you think.

The Hangover, AnyClip and the Clip Window

I laughed my face off last night.

Several times a  year  a high-quality comdedy cuts through the media fragmentation and captures enough momentum through word-of mouth to create a big audience at the boxoffice. You know what I’m talking about:  Last year it was Superbad,  The Hangover is that movie right now.  Paul Blart:  Mall Cop got there earlier this year, Superbad in 2007 and Wedding Crashers in 2005 are other excellent exmaples.

The Hangover is that movie right now.  And there are numerous moments I want to watch again from last night’s screening.  When I cruise around the Internet I can find various versions of the Electronic Promotional Kit on YouTube or Apple Trailers.  But I cannot find the “stungun scene” or the various tigers scenes.  or if I search Mike Tyson the results take me to YouTube’s Hangover page and a link to a trailer.

Even the clip above doesn’t give me what I want.  I wanted to watch Ed Helms’ at the piano, but instead the marketers recut the scene for promotional purposes.  Actually I enjoyed the clip, but it’s not what I wanted.

Why do we have to wait for the DVD window (which is months and months later) to relive these hilarious moments?  The answer is simple.  That’s the way it always has been.  Meanwhile the Hangover was so funny that I would buy several scenes right now just to watch them again.  Especially if they aren’t different versions of the marketing materials that are meant to drive you to theaters.

Clips allow you to relive moments.  The EPKs that studio marketers create are designed to put “butts in seats” as they say in Hollywood.

Theatrical Release is a first time experience.  DVDs cater to second timers and potential first timers.  The marketers are torn.  But at AnyClip we are the “reliving experience.”

Entrepreneurial Lessons from David Ben Gurion

Three weeks ago, I visited David Ben Gurion’s grave.  Ben Gurion, Israel’s first Prime Minister, chose to be buried near his retirement home on S’de Boker, a kibbutz in the Negev  — a beautiful, desolate endless stretch of rocky hills and sand.  His final resting place overlooks a Grand Canyonesque valley facing a great expanse of the rocky desert that symbolizes the challenges of this complex region.

David ben Gurion

David ben Gurion

I was there for inspiration.This field trip, after two days of wall-to-wall meetings and big party, was the vision of one of the founders, investors, and directors of AnyClip Erel Margalit.  Erel is the founder and leader of Jerusalem Venture Partners.   He has crafted a venture firm that is so distinctive from the dozen other firms with which I’ve worked, that I’m almost feel we need a new category name.  The firm is part classic  ($780mm under management and big returns in telecommunications and semiconductors), part IdeaLab (Erel reminds one of Bill Gross’ legendary entrepreneurial restlessness), and part Ben Gurion – a determined, persistent, driven believer in all that Israel could be.

After a few months getting to know Erel, I realize now that it is no accident that he has located his firm, and, more importantly, his sprawling entrepreneurial campus in Jerusalem.   Israel’s Tel Aviv-oriented high tech community views Jerusalem the way those who are based in Palo Alto would view Bakersfield.   Only an hour by car, most of my Tel Aviv Internet friends tell me they never, ever venture to Jerusalem.

Erel runs the prominent JVP in a place that has been deeply rejected by the cosmopolitan, modern and increasingly affluent high-tech community in Israel.    But Erel has and will stay his ground.  His will to remake Jerusalem fuels his life.  He knows he can blend the ancient with the modern.  On a once broken down set of warehouses, near a defunct train station, JVP has created an incubator, office park, state of the art theater, and restaurant complex.  To see pictures of it only 5 years ago is to realize why people think Erel is “totally crazy.”

But come visit.  It’s all there and thriving.  On campus, there all kinds of interesting companies largely focused on consumer media — a category that has played a distant 4th or 5th Israel’s obsession with the telecommunications, security, and energy that generated huge returns in for JVP and other Israeli firms.  My company AnyClip sits across from Double Fusion (Second to Massive in in-game ad sales) and across from The Animation Lab –Israel’s attempt to replicate Pixar.

Erel is a maverick venture investor. He plays by a set of rules that are deeply grounded in his faith that an entrepreneur can do anything.  You can stumble and he’ll ask what’s next?  He doesn’t like to “prune his portfolio.”   David Ben Gurion created a country.   So what are you doing that’s so tough?  Erel  applies this Jobsian  faith in the invention and reinvention of companies  to the political and economic future of Jerusalem.  He sees hope where almost all see despair.  On the eve of the Israeli elections a couple of months ago, I listened to  Erel talk about his vision for Jerusalem:

I imagine a city that houses companies and office parks that are owned exactly 50/50 by Israelis and Arabs.  I see startups that sit next to each other that blend Jewish and Arab founders and are owned by a multicultural syndicate of investors.  Jerusalem will become the cultural and arts capital of new pan-regional festivals that celebrate all cultures.   Through the opening of Jerusalem, Israel will open and together with the Palestinians, it will become a gateway to the region.  Israel wil transform from the R&D center of world to it’s creative hub in close cooperation with the Palestinian inhabitants.  Diversity will be seen as a source of strength rather than weakness.  Finally, we will have  flights from Damascus and Riyadh to Jerusalem.

Each time I recount Erel’s vision of the new Jerusalem to family, friends, and colleagues they shake their head at me like he (and me for even recounting) are living in fantasy world.  Hope has been decimated for many Zionists.   Intifadas, suicide bombs, rockets falling on both sides instill despair and cultivate vitriol.  Jews pride ourselves on not falling into the cycle of hatred towards Arabs that is so morally vacuous and intellectually specious, but these past 15 years have emboldened the ignorant racists among us.   And while it’s understandable (how would you feel if your mother/brother/father/sister/wife was killed drinking coffee at a roadside café) it has created a sense of futility that betrays the ideals of Israel’s first entrepreneur.

On my journey into the Negev, I learned David Ben Gurion would not have wanted vitriol.  He craved progress.  This was a man who spoke of the importance of developing Solar Energy in the 1950’s!   He learned 9 languages because he believed he couldn’t read the great works of other cultures in the translation.   He located his Zionist ideals in a broad, compassionate view of humanity.  Erel’s own words about Ben Gurion transformed into a meditation about Jewish history that tried to put the ancient and the current into context.  There was a more nuanced presentation of why the political situation is so challenging.  But the intractability does not deter him.  Nor would it have frustrated Ben Gurion, who probably would have been excited by the prospects of flights from Damascus to Jerusalem.

As Erel spoke, I thought about how I ended up in this desert with this collection of entrepreneurs who were making semiconductors to enable high definition video on mobile phones or challenging SAP with a user-friendly ERP solution.   What made us come here?   Israel is only 60 and it’s been a relatively challenging go of it so far.  It was as if we stood at Monticello near Jefferson’s grave before the Civil War.  Who knew what would happen to the United States then?

Israel remains an entrepreneurial experiment and joining the process is intoxicating.   AnyClip, like so many startups, will attempt the theoretically impossible.  But we’ll do it with a better chance than a young David Ben Gurion had of creating a Jewish state on a tiny sliver of landed surrounded by Arabs on every side.
As one of the internet’s most thoughtful intellectuals  Fred Wilson wrote recently, “sometimes you just have to take a leap of faith.”