With Media Camp, Turner Broadcasting Hedges Against a Digital Future
Every recent tome on corporate innovation preaches the same basic truth: big companies need to keep taking risks on new products and business models, or they’ll eventually lose market share to nimbler upstarts. It turns out that this is easier said than done—and big media companies like newspaper chains and record labels have been among the slowest to adapt to the digital age. But there’s one media Goliath that hopes to befriend a few of today’s Davids, and maybe even teach them a thing or two about where to aim. It’s Atlanta, GA-based Turner Broadcasting, which is setting up an accelerator for media entrepreneurs in the heart of San Francisco startup territory.
The new accelerator is called Media Camp, and it’s co-directed by David Austin, an Apple veteran who helped to develop Keynote and iWork and also took a spin in the venture world. Austin and four colleagues from Turner have spent the last three months vetting applicants for the new program, and they say they expect to reveal the names of the six startups admitted to the inaugural class by early next week.
Austin withheld details about the companies in a conversation yesterday, except to say that all six “have a little hint of social to them, which is not too surprising given what is going on in media.” Although Turner conducted a national search, all six of the companies happen to be based in the Bay Area. We’ll bring you the details about the companies when the news breaks.
Turner Broadcasting, which is itself a unit of media behemoth Time Warner, is the parent of famous television brands such as CNN, TNT, TBS, the Cartoon Network, Turner Classic Movies, Turner Sports, Adult Swim, the reality TV network TruTV, and HLN (formerly known as CNN Headline News). Under founder Ted Turner, the company cut its own disruptive swath through the television industry in the 1970s and 1980s, most notably by establishing a 24-hour cable news operation that stole millions of viewers away from the traditional network news shows.
But today, says Austin, Turner Broadcasting is a bit “old school”—though he hastens to add that he means this “in the nicest possible way. It’s a classic large enterprise, just because it has been around for a long time.”
One of the two guiding ideas behind Media Camp, Austin says, is that technology entrepreneurs who want to make it big in the media business need to understand how established media companies like Turner actually work. “The economics, the value system, why analytics and content rights are important, how our relationships with cable vendors work”—all of these subjects will be part of the Media Camp curriculum, Austin says. “It’s a very complex business where VCs don’t invest very much, because in the past they’ve had difficulties. Helping our companies understand all that is really key.”
The other guiding idea is that Turner doesn’t have all the answers about the future of media, and that there’s a lot for executives in Atlanta to learn about trends bubbling up from Silicon Valley. “There is openmindedness enough to admit that there is stuff happening in the world that isn’t completely controlled by Turner,” Austin says. “Understanding that and being part of it is much better than just digging in your heels. That didn’t work very well for the music industry.”
Austin was recruited to lead Media Camp by Balaji Gopinath, the vice president of emerging technology in Turner’s Audience & Multiplatform Technologies group. An angel investor and MIT grad who splits his time between San Francisco and Atlanta, Gopinath joined Turner “with the goal of understanding how disruptions occur and do it to ourselves before it’s done to us,” says Austin. He hired a handful of former entrepreneurs and technologists, including Austin, to act as Turner’s eyes and ears in Silicon Valley, and dreamed up Media Camp as a way to guarantee more direct interaction with the startup community. The company announced the accelerator program and began soliciting applications right before the South by Southwest Interactive Festival in March.
As an incubator for media startups, Media Camp may be the first of its kind. But the idea itself isn’t a radical one, given the recent profusion of accelerators grooming companies to enter specific industries. In fact, in one five-block-square area of downtown San Francisco there are now three “vertical” accelerators: Rock Health in the healthcare industry (on Grant Street), Greenstart in the cleantech industry (on Battery Street, appropriately), and Media Camp (on Sansome Street).
The first generation of startup accelerators, such as Y Combinator and TechStars, focused on consumer Web services, where the barriers to entry are low and getting lower. The rise of the new specialized accelerators, however, is in part an acknowledgement that innovative technology alone may not be enough for startups in established industries, and that the byzantine complexities of working with the existing players can be a challenge. That’s why, at Media Camp, “the focus is heavily on education,” Austin says. “We want to help [our companies] rework their business models to give them the best chance to have a commercial arrangement with a media company.”
One way Media Camp plans to do that is through a classic mentor model—the only difference being that most of the Media Camp mentors will be drawn from Turner Broadcasting and perhaps other parts of Time Warner. “Say a company is doing something news-related; we’ll bring in someone from CNN. Say it’s gaming—we can find someone from the Cartoon Network,” says Austin.
Structurally, Media Camp will closely mirror other local accelerator programs. Turner will provide each of the admitted startups with $20,000 in seed funding, in return for 5 or 6 percent of their common stock. The program will get underway on June 18 and will last 12 weeks, with each week devoted to a subject such as basic startup paperwork, technology changes in the media business, selling to media enterprises, copyright and content licensing, search and discovery, personalization, audience analytics, and advertising. The program will culminate in a “Pitch Day” for investors in mid-September.
So many companies applied for the inaugural session that “we could easily have picked 10 or 20 good ones,” Austin says. The focus in the selection process, he says, was on technology companies with actual prototypes, rather than pure content plays. A game development company would probably have a hard time getting in, for example, whereas a gaming platform company would have a better shot. “We are looking for technology disrupters who are changing the way content is going to be consumed in the future,” Austin says.
As I ticked off specific areas that might fit under this description—mobile and tablet software, connected TVs, targeted advertising, context-aware search, new forms of content delivery—Austin kept nodding. “The one area where we have the least interest, probably, is music,” he says, “just because it’s already been disrupted in so many ways. But it’s hard to say never.”
Even more unusual than Media Camp’s focus on a single industry is the fact that it has a single backer: Turner. (I know of only two other corporate-sponsored accelerators: Wieden & Kennedy’s Portland Incubator Experiment in Portland, OR, and Citrix System’s Citrix Startup Accelerator in Silicon Valley.) That will put the participating startups in an interesting position, since it will be clear to the outside world that to some extent, they’re all auditioning for a permanent berth at Turner—and that they’re being evaluated based on their technologies’ strategic importance to the broadcasting giant.
“Since we are fully funded by Turner,” taking money from Media Camp “will be seen by future investors as a strategic investment, which can be a bonus or a negative for a company,” Austin acknowledges.
He says he can see three possible outcomes for successful Media Camp companies: First and least desirable, the company’s product might so useful that some Turner brand becomes its primary customer. “We could suck them dry, whip them around, and make them do what we want, but in that case they may not last, and we want them to be around for while,” he says.
More desirable—but least likely—Turner might “find a company we love so much that we want to acquire them,” Austin says. But Turner doesn’t yet have much of a record of startup acquisitions, with the exception of Zite, the maker of a personalized news reader for tablets that we profiled here in March. CNN bought the startup last fall.
Third, and most likely, in Austin’s words: Turner “really likes” the company and decides to make a strategic investment beyond the initial $20,000. He points out that Time Warner has a strategic fund, Time Warner Investments, for just such occasions. This January, for example, the fund led a $12 million Series B round for Cambridge, MA-based Bluefin Labs, a social TV analytics company.
But even if the Media Camp startups don’t end up having any long-term relationship with Turner or Time Warner, the company will work to get them funded by other investors, Austin says. That’s the point of the pitch day for venture and angel investors, and participating startups will also get exposure to specific venture firms close to Turner. “We are not going to guarantee funding coming out of this, but hopefully we can find some kind of commercial arrangement to utilize their technologies, and we will do everything in our power to help them get funded externally.”
Personally, I’ve been an early, vocal, and public cord-cutter—I prefer my TV content in Internet-mediated, à la carte form, not in the expensive, bundled form the cable providers and TV networks would rather sell me. And I’m pretty sure I’m not alone. So I asked Austin whether the creation of Media Camp is in part a hedge against the day when Turner’s revenues from cable TV programming begin to drop. His response was a veiled yes.
“My personal belief is that the number of cord-cutters is still very small, and more people have been coming on board than cutting,” he says. “That doesn’t’ mean there won’t be a major disruption, but if there is going to be a decline, I don’t believe it is going to be a cliff, it will be more gradual. The problem is that digital [i.e. Internet] dollars, classically, amount to pennies on the linear dollar. [“Linear” is cable-speak for live.] I think there are ways of making more money off digital, and we are close to doing that, but that is one area where I am looking for startups that are interesting. If linear dollars do decline, it would be nice to have the digital dollars to make up the difference.”
“That,” Austin sums up, “is why it makes sense for a company like Turner, which still makes the vast majority of its revenue outside the digital realm, to focus on digital, which we are doing here in San Francisco. I don’t think we have the answer today. But my personal belief is that we have a few years to figure this out.”