This is the seventh story in a Re/code Special Series about the Los Angeles tech scene. In these LA Stories, we’ll take you behind the scenes of a playful, powerful and potentially game-changing tech boom taking place across the Southland.
By now, it has become an old meme: Hollywood executives and Silicon Valley entrepreneurs have always struggled a little to get along.
Since the days of young hackers downloading free music via Napster, the entertainment industry has been belligerent about what it perceived to be thieving teenagers up north. And since the days of those big-media industry executives suing young hackers, the technologists up north have been dismissive of the stodgy fat cats in Hollywood.
There has always been other kinds of sibling rivalry between the two California regions, north and south, over all manner of things: Sports teams, rock music, food and wine, imported intellectuals, overall ethos and lifestyle.
But it has been in tech where the tensions have been highest, especially with hugely lucrative businesses at risk on both sides. Still, in LA at least, some are hoping after decades of hype about convergence, the relationship is perhaps finally changing for the better.
Peter Chernin, a longtime media executive and founder of the Chernin Group, thinks the tension is cooling off now, pointing to successful Hollywood-tech mashups like Netflix: “It was pretty heated for a while, but it seems more low-key right now. I don’t hear the Hollywood people ranting and raving about Silicon Valley quite as much.”
He predicts that the biggest and most interesting Hollywood investments will be in YouTube-related companies like Maker Studios. Tech companies like Twitter and Facebook could start to invest in these, as well, he said.
Does this mean that we’ll have to deal with Miley Cyrus as a venture capitalist — and am I ready for that?
Troy Carter, a tech investor and entertainment executive who managed Lady Gaga, agreed. “A lot of people in LA feel as though the [Silicon] Valley guys are pirates and don’t respect content. In the Valley, they feel like people coming from Hollywood are litigious and archaic,” he said. “There’s truth on both sides — but now they both need each other.”
One night, at 41 Ocean, a Santa Monica bar and would-be community hub for techie types, I met Robyn Ward, a young executive at United Talent Agency, who said that as a veteran of six startups, she at first had no interest in Hollywood, but they kept trying to recruit her.
“I come from the world of 12 developers and cardboard desks,” said Ward, who previously worked in business development at electronic-document depository Docstoc. “But I just kept running into these Hollywood agents, and all they’d want to do is talk tech. At first I was like, why would I want to do that? Commute out to Beverly Hills? Then I was like, what’s the future? It’s this convergence of tech and entertainment. That’s the home run.”
People I spoke to on both sides of the divide said as these two industries converge, tech and entertainment will begin to see that they weren’t so different after all.
“LA has this culture of aspiration, hope, high energy, changing the world baked into its ethos. … I would argue that entrepreneurship and entertainment are two sides of the same coin,” said Matt McCall, a partner at Pritzker Ventures. “Nothing under the sun is revolutionary. Everything is just coming together in new ways, everyone was doing their thing in parallel — now it just all has to jell.”
Which returns us to the question we started the series with: Does this mean that we’ll have to deal with Miley Cyrus as a venture capitalist — and am I ready for that?
Iovine and Cue: An Insecure Hollywood and an Overconfident Silicon Valley
Onstage last month at the Code Conference at the Terranea resort in Rancho Palos Verdes, Calif., Apple SVP Eddy Cue and Beats co-founder Jimmy Iovine talked about the cultural anxieties of Cupertino and Culver City.
That recently announced $3 billion deal for Apple to buy the music hardware and service company, more than any other transaction so far, is the most definitive example of entertainment-tech detente there has ever been.
Still, differences remain.
“In the entertainment business, everybody is desperately insecure. And the guys in Silicon Valley seem to be slightly overconfident,” said music mogul Iovine, who spoke with exuberance (the Apple acquisition had been announced that day). “So, you know, that’s a rub.”
Then there’s the skill gap between the two industries. “Most tech companies are culturally inept. Record companies are technically inept,” the effusive Iovine said, gesturing with one hand up and one hand down. “So …”
“In the entertainment business, everybody is desperately insecure. And the guys in Silicon Valley seem to be slightly overconfident.”
Jimmy Iovine, co-founder of Beats
The relationship, he noted, went awry when music piracy began. “You cut to 1999, and what the entertainment business knew of Silicon Valley was: ‘We take your stuff, rip it and burn it and your sales go down,’” Iovine said. “There’s a fear, there’s an intimidation and there’s that insecurity and overconfidence.”
Apple executive Cue said that the issue is that neither Hollywood nor Silicon Valley have had any idea what the other side really does — all the specialized skill and labor that goes into movies or tech.
“A lot of Silicon Valley looks at what Hollywood does, and says, ‘It’s really easy, you put a camera in front of a few actors, you got yourself a movie. How hard is that?’” Cue said in the Code interview. “They don’t appreciate the artistic talents and the amount of work it takes to do that, because they do it so well.”
On the reverse side, Cue continued, “the entertainment industry has leveraged a huge amount of their business success based on technology — DVDs, CDs, 8-Tracks — not developed by these industries, but by technology companies. And they took that for granted.”
Jessica Alba vs. Lady Gaga: Call in the Celebrities! Or Not.
No one in LA tech seems to agree on whether celebrities are useful or not. To hear both sides, I reached out to two executives — Brian Lee, who founded a natural baby products company with movie star Jessica Alba and Troy Carter, a venture capitalist and former manager of pop star Lady Gaga.
Serial entrepreneur Lee thinks that celebrities remain a “natural resource” for LA tech to plumb.
The Honest Company, founded by Lee and Alba, has 200 employees and makes $100 million in revenue a year. It’s two years old and growing 20 percent month over month, Lee claimed, and opening storefronts in New York and LA.
When I visited the lofted, warehouse-like office, the wall of glass windows was open, and a breeze was coming in.
The soft-spoken Lee said that that there’s a growing mistrust in brands, but that consumers still trust celebrities — and that’s a natural advantage for LA tech.
“They don’t think they need celebrities to build Facebook, and maybe that’s true. But the way we look at celebrity is very different than the way [Silicon] Valley looks at celebrity,” Lee said. “For us, it’s part of our culture. Studios are all around and celebrities are all around. You should use your natural resources.”
Beyond adding an element of trust, celebrities bring in an audience: “Jessica has millions and millions of loyal followers. She can get onto any talk show in America.”
Celebrities, Lee argued, are the ultimate entrepreneurs. He gets pitched weekly by celebrities wanting to start companies.
“It is so hard to even be a reality star,” he said. “I’ve worked closely with Kim Kardashian. She thinks of herself as an entrepreneur, absolutely. I’ve worked with Rachel Zoe. They’re all risk takers. It’s a personality type.”
“It’s not every day someone wakes up and says, ‘I’m going to be Gwen Stefani,’” Lee said. “It’s a similar move to wake up and say, ‘I’m going to start WhatsApp.’”
“Celebrity is overrated. It can get you on ‘Good Morning America.’ It doesn’t add any value in terms of really being able to reach a customer.”
Troy Carter, founder, chairman and CEO of Atom Factory
Carter — whose firm Atom Factory invested in Dropbox, Uber, Lyft and Spotify — disagrees. He thinks that celebrities have absolutely nothing to do with tech success.
“Celebrity is overrated. It can get you on ‘Good Morning America,” [but] it doesn’t add any value in terms of really being able to reach a customer,” Carter said. “You can get them once, maybe. You can’t get them to repeat. It starts and ends with great product.”
And celebrities will only really use a product they like.
“That’s why Instagram worked well — celebrities actually use it,” Carter said. “They like it. They aren’t paid to use it.”
We met in the library of his Culver City office, where Carter — boyish-looking in an oversized plaid button-down shirt — sat in a leather Eames chair.
There was a full bar in back and, along the shelves, among the music awards, an anthology of William Claxton’s photos of legendary jazz musicians was displayed between twin copies of the Walter Isaacson biography of Steve Jobs.
Carter got interested in tech out of necessity, he said.
When she started out, Lady Gaga’s style was so different from the pop music played on the radio at the time that Carter needed to find a new way to reach an audience, so he tapped into YouTube and Myspace.
“It was desperation,” he said. “And it came quite naturally. We got into social really early, just as Facebook was coming off .edus and Twitter was on the rise.”
Necessity, for Carter, grew into something more interesting. He felt an emotional connection with the tech community.
“Tech really reminded me a lot of hip-hop in its early days — a very entrepreneurial, us against them, renegade mentality that I noticed in a lot of the startups there, too,” he said.
Joe Lonsdale, the co-founder of data-organizing service Palantir, offered to help Carter get his record label’s data in order. “It took us three weeks to put all our stuff together and Joe said it’s the worst data that he’s ever seen,” Carter said, laughing.
“The music industry has operated in the same way for 80 years,” he said. “Some of that knowledge up there lets us apply a fresh perspective.”
I pressed Carter a little. Are there ever times when celebrity can be helpful for a startup?
“Sure. We do a Grammy event here, and Uber will be the official car for it, so all of a sudden you have a bunch of tastemakers riding in them,” Carter said. “Uber gets the halo effect. We get the halo effect. But it’s because they actually like Ubers.”
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