Today at TechCrunch Disrupt in New York City, there was a panel with the video comedy house Funny Or Die. Mark Kvamme, a partner at Sequoia Capital (which invested in Funny Or Die) moderated a panel with Funny Or Die’s Dick Glover, Chris Henchy, and Andrew Steele. The topic was the disruption of old media with this new model of short, cheap videos. All seemed confident they would not only be able to compete with the old guard but would change the business growing forward.
Funny Or Die is already doing “tens of millions of dollars in revenue,” according to Kvamme. When he tells that to people, they don’t believe him. But advertisers are starting to come with million-dollar deals as the site grows in popularity. And while the revenues still may be nothing compared to what traditional Hollywood gets, the key is that the overhead costs are a fraction of the costs of what they are in Hollywood. Kvamme says that when he recently showed off a video to Fox, they thought it cost them tens of thousands to hundreds of thousands of dollars to make. It actually only cost them $2,200.
So why would anyone want to work when they’re not getting paid as much? “We offer something that traditional companies don’t have. We offer freedom, more than money,” Steele says. That’s appealing to some big Hollywood stars because they’re vain, Steele half-jokes. But it’s also appealing to the up-and-coming generation of actors, actresses, writers, and directors, because it’s a platform that gives them a faster route to opportunity than they’re going to get in the traditional Hollywood system.
When Kvamme asked if this would kill the system in which a show like Mad Men (an expensive show to make) gets made. Steele said he thinks they can make their own Mad Men in the future. It’s all about the advertising. That’s what makes Mad Men possible on AMC, and that’s what will make it possible on the web, he says. It’s not there, yet, but it’s coming. Currently some 90% of FunnyOrDie’s revenues come from ads.
Kvamme also brought up what he thinks is the key to a successful online video company: the library. He notes that MGM is being sold for something like $2 billion even though they rarely make movies anymore. The value of the company is entirely its library. Web content houses are still too new to have large libraries, but over time that will grow. And that will make these companies’ value continue to grow.