Subsidized risk

“Cloud Atlas” may have been expensive to make, but “Moonrise Kingdom” and “Black Swan” weren’t, in Hollywood terms (sixteen million and approximately thirteen million dollars, respectively), and one of the things that made them possible was the stars’ willingness to take small salaries (in exchange, I’d guess, for a percentage of earnings). In effect, many of the best Hollywood directors now work the way that Woody Allen has long worked—but this system depends on stars earning enough elsewhere for them to take a chance on a project or a director dear to them. Overall, many of the cinema’s artistic successes depend on a thriving industry, with its performers and technicians, its suppliers and its technical advances. And a look behind the scenes at many low-budget films reveal that their connections to Hollywood, whether tenuous or tangential, nonetheless prove to be significant in practical terms. So, whether Disney’s “Star Wars” movies turn out to be clever reimaginings or merely intergalactic cash cows—may the force be with them.

That's Richard Brody with an interesting take, as always, on the purchase of Lucasfilm and the Star Wars franchise by Disney. He articulates one of the reasons why I don't take hold it against  actors or directors when they do the occasional mainstream movie blockbuster. Often it pays the bills and allows them to do more interesting alternative projects on the side. In structure it's no different than many starving artists who work as baristas at Starbucks to pay the bills. Granted, the biggest Hollywood stars are so wealthy it's just about how many vacation homes they need, but many would be surprised how modestly the vast majority of film industry folk live and that includes some fairly famous actors. The Hollywood blockbusters are the suns around which the entire filmmaking business in LA draw power from.

The Silicon Valley equivalent of the massive Hollywood franchises are the giant companies like Apple, Google, Facebook, Amazon, and Microsoft. They are the hubs which make the Bay Area and Seattle a stable tech ecosystem. People can leave those companies to try startups, but they can go back to those hubs if they fail, or lose the stomach for the entrepreneurial battle, or if they have dependencies like a mortgage and family to support that make that risk-reward equation less tenable. Maybe they are between entrepreneurial ideas, or they've been purchased by one of those giants and are recharging for the next big venture.

When I was in Seattle, Microsoft and Amazon were those hubs. I know so many people from my Amazon days that have left Amazon and gone back, and some have made that switch multiple times.

Some have argued that those colossus dampen entrepreneurship by providing too much of a safety net, but I think it's precisely that safety net that should allow or force entrepreneurs to take bigger swings and risks. It's the way safety belts make people drive more recklessly, or wearing a helmet gives me more confidence to try crazy jumps on my snowboard.

It's easier to compete with the Bay Area as a tech hub than it is to compete with LA as the filmmaking capitol of the world because so much more of tech infrastructure is distributed and accessible from anywhere. You can't access a union grip for your lighting department via Amazon Web Services (at least last I checked). But up and coming tech hubs like New York and Los Angeles still would benefit immensely from having one or more giants based there. The "sun and orbiting planets" or "planets and orbiting moons" configuration is just a more optimal, stable configuration for fostering diversity of life and efficiency of production.

Intellectual property

Lucasfilm sold to Disney yesterday for $4.05 billion dollars. Meanwhile, Zynga is valued at about $1.76 billion dollars as of close of the market today, or below their book value.

Zynga's thesis for its valuation was always that it had unlocked ways to attract and retain players for any game using its gamification strategies. That story held the promise of vaulting it to trading multiples above those of other gaming companies who had to depend on the usual gaming business model, a hit-driven model more akin to that of a Hollywood studio. In a hit-driven business, you're only as good as your next hit. Past performance is not weighted much in predicting future prospects.

But Lucasfilm's sale, at a price one could argue was a bargain for Disney, is a sign of one thing that Hollywood and other gaming companies have done that Zynga failed to do, and that is to build intellectual property value in the form of franchises and characters. I can't think of any Zynga game characters or narratives that offer any other potential revenue streams. Even Rovio has the characters from Angry Birds, and last I checked, their latest game Bad Piggies, centered around characters from their flagship Angry Birds franchise, was the top paid app in the iTunes App Store. Game franchises like Call of Duty or Madden Football can count on a loyal fan base for each new release, much like movie franchises like James Bond.

Lucasfilm hasn't put out a live action Star Wars film in years (a period that could be longer if you consider Episodes I-III to be more digital cartoons than live action), but the rights to license the Star Wars trademarks and characters continues to spin off cash. Those rights might be termed intangible assets, but the cash they generate is very real.

Sorry for the broken links

I just realized that for the past week or so, the Squarespace blog post editor has not been saving the hyperlinks I've inserted into my posts. Apologies for any clicks that just didn't lead anywhere. I submitted a ticket to Squarespace a few days ago and haven't heard back yet. In the meantime I've fixed all the broken links I've found.

Squarespace 6 has some positives, but it's not perfect. Among the issues that really bother me is the editor which you're forced to use to type and submit posts. It's buggy, has a bunch of layout issues, and for creating posts with a bunch of mixed media, forces you to build it in content blocks that feel way more complicated than just allowing users to submit an HTML post. Squarespace 6 doesn't allow posting via XML-RPC, so I can no longer use more user-friendly third-party blog editors to post.

User expectations are higher when we're paying.