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Writers Strike a Boon to Web Venutres
December 17, 2007

If nothing else, the ongoing writers' strike could be a huge boon for online-based ventures. The Los Angeles Times reports today that dozens of film and TV writers are negotating with venture capitalists to set up companies that would bypass the Hollywood studio system and reach consumers with video entertainment on the Web.

Seven groups are planning to form Internet-based businesses that would ironically strike a blow to the very issue of digital residuals at the heart of the 7-week WGA strike.

The Writers Guild is fighting the major studios over how much their members are paid when their work is distributed online.

Silicon Valley investors have repotedly begun considering more entertainment investments after observing the enormous sums paid for popular Web video companies, including the $1.65 billion that Google Inc. paid for YouTube.

"I'm 100% confident that you will see some companies get formed," venture capitalist Todd Dagres told the Times. "People have made up their minds."

Any deal ocould put pressure on the studios and help the writers' public relations campaign. Writers who are talking to venture investors say the studios would suffer a brain drain if high-profile talents received outside funding and were no longer beholden to them.

Already this year, a handful of sites have received venture backing, including FunnyorDie.com, co-founded by comedic actor Will Ferrell, and MyDamnChannel.com, launched by former MTV executive Rob Barnett.

MyDamnChannel pays for the production of original content by a handful of artists and splits ad revenue with them.

Under the Hollywood system, writers are typically employed by the studios to create and manage TV shows and movies. The studios own the copyrights and pay writers for the initial use of the material and a small percentage of the licensing fees they collect when the work is rerun or sold on DVD.

With television viewership and DVD revenue declining, writers have sought bigger rewards when their work is distributed online. Studios argue that Web economics are still too uncertain for them to give a larger share of the proceeds to writers.

Broadband access has allowed more Americans to watch video online, prompting the big entertainment companies and a host of others to put more clips on the Web.

Some of the writers who are drafting business plans say that the prolonged strike with reruns and reality shows filling the airwaves could allow them to grab a wandering audience.

"The companies are pushing us into the embrace of people that are going to cut them out of the loop," marveled one show runner who is tracking the start-up trend but not participating.

Posted by Ned Randolph on December 17, 2007 | Comments (0)