Dwight Schrute Bobbleheads!

In my previous post Television 2.0, I alluded to 6 recent investments that we have made bringing internet functionality to TV’s juicy markets. The most recent is Delivery Agent, a San Francisco pioneer that has cracked the code on leveraging Hollywood content into high-margin e-commerce.

Delivery Agent promises a new revenue stream for studios and networks in a world of declining ad revenues (e.g. last week J&J pulled out entirely from the TV Upfronts, depriving the industry of its typical $500 million media buy). Leveraging the interactive and transactional capabilities of the internet. Delivery Agent brings community and e-commerce to the loyal fans of movies, TV, and music videos.

Now, on the same web site that streams recent episodes, you can shop for clothes, electronics, cars, or any other prop that graces the scene. Buy Teri Hatcher’s jeans, or a Dwight Schrute Bobblehead. Load up on insignia Olympics jackets from Torino, or DVDs of last season’s West Wing. And subscribe to RSS feeds that keep you on top of the fashions and special offers, like the chance to bid on the actual miniskirt Eva Longoria wore when she tramped over to her young gardener’s apartment.






The company is already executing brilliantly, as celebrated in this week’s Entrepreneur Magazine. The Apprentice, Lost, Days of Our Lives, Da Vinci Code, Law and Order, Will & Grace, Rent, Alias, General Hospital, Martha Stewart, Monday Night Football and 70+ other shows and films have contracted to partner with Delivery Agent. And as more and more programs stream on the web, the conversion ratio of watchers-to-shoppers will obviously rise (Delivery Agent's technology will even enable Click-to-Buy while watching). Ultimately, Delivery Agent’s infrastructure will enable any manufacturer or retailer (online and offline) to drive demand by associating their merchandise with the media in which they appear.

Television 2.0

I'm en route to New York today, where the largest TV advertisers and broadcast networks are converging for the annual Upfronts Week, a $9 billion media auction for sponsorships of next Fall's TV Season hits. On everyone's mind this year: it was only a matter of time before the internet changed TV in a way more profound than color or cable. That kind of disruption calls for a VC road map...

The entertainment industry managed to ignore the net for a decade. Only 250 miles apart, Hollywood and Silicon Valley might as well have been on different planets. Happy with their structural oligopoly, TV networks resisted change, and (just as buyers and sellers keep each other coming back to eBay) the talent and the audiences stayed loyal to the networks.

Back in the 90's a few startups tried but failed to repurpose television talent online--like Den (the most egregious flame-out of all), and my own doomed investment icebox (but you can still delight in Jesus and His Brothers, Queer Duck, and Hard Drinkin Lincoln). There was neither enough chicken nor egg to shift the center of gravity away from the TV.

Strategically positioned between the audience and the talent, TV networks protected their cash flow by resisting the growing economic pressure to bring the interactivity, e-commerce, and community of the web to TV's huge, loyal audiences. But Tivo cracked that dam, and over ten years the crack expanded to jeopardize the integrity of that industry structure. Exploiting computers and the internet to displace channel-surfing with random access content, DVR's so enhanced the TV experience that viewers changed their habits, causing the Dammed Networks to sprout dangerous leaks of ad revenue.

Compounding the Tivo risk, computer and phone screens now attract so much viewership that the vacuum of quality content invites new competition into the distribution game. And so this year, finally, the dam has collapsed, as progressive voices in the entertainment industry have overcome complacent inertia.

Hollywood video now flows through web sites, cell phones, and iPods, as new business models wrestle vigorously for sunlight in the new landscape. Soon there will be no more network loyalty, no more 30-second spots, no more $70 billion a year in brand advertising revenue. So how will advertisers reach large audiences with high impact messages? Who, if anyone, will control the new distribution channels? Will cable providers evolve or stagnate? Most importantly, who will pay Eva Langora, Chris Carter, and Jerry Bruckheimer to keep the yucks coming?

Worry not--venture capitalists are waving checkbooks, and the talent agents are tuning the contractual fine print to carve out rights for online and mobile syndication, merchandising. endorsement, ringtones, screensavers. games, etc. Soon enough, new revenue streams will subsidize Desperate Housewives and Scrubs so they're always an RSS feed away.

In the next week I'll post some news on 8 recent investments Bessemer made in the pioneers of Television 2.0.

Mark: My Word

The same week that President Bush and Governor Schwarzenegger were speaking in Silicon Valley, I opted instead to attend a dinner for Mark Warner, former governor of Virginia (hosted by VCs Dick Kramlich and Ted Dintersmith). Warner is a presidential hopeful--widely regarded as the Democratic front runner behind Hillary in 2008.

Warner didn't disappoint (unlike the food), showing some compelling characteristics as a presidential candidate. As governor of a red state, he has positioned himself as more of a centrist than Hillary. After 8 years of torture by a corrupt and incompetent Republican President, liberal voters in the primaries may well tolerate Warner's moderate platform in order to nominate a Democrat who is more electable in November than Kerry or Hillary.

Warner spoke well at dinner, telling his story in such a natural way that he conveys the image of a statesman smart enough to converse without the crutch of staff-crafted speeches. Buoyed by a successful stint as His Excellency of the Commonwealth of Virginia, Warner brings credibility and sophistication to social issues like the economic marginilization of small town America. A co-founder of Nextel, Werner promises to extend the benefits of technology more broadly, catching the US up to other nations in broadband internet penetration and IT training programs. Indeed, one of his accomplishments in Virginia was a novel program that issued PCs to churches in order to attract interest and trust in a Tech Riders program that trained 16,000 of the state's rural citizens. (If you can't beat the brainwashers, join them!)

What about the downside to Warner? (i) He's a venture capitalist (not very sympathetic) but he is also a self-made success--the first of his family to graduate college. (ii) He offered nothing new on the challenge of Iraq, but does anyone have good answers to that quandary? (iii) I don't know if it's naivete, partisan politics, or simple pandering, but Warner dislikes Health Savings Accounts--a revolutionary step for US healthcare that, like it or not, the Republicans passed. (iv) As for Warner's unfortunate opposition to gun control, it's admittedly not the most important issue of the day.

Overall, Warner came across as intelligent, real, and electable, and so I hope his candidacy continues to gain steam. But if Werner portrays himself as the Technology President, he ought not pass up the opportunity to be the first Presidential Blogger.

What better way to expose himself to the electorate than to document his own journey as a candidate? Warner's blog (he can even use my post title "Mark My Word") would give him a chance to explain his vision in more depth than sound bites, and to genuinely mull the tough questions people ask him as he campaigns. Warner could comment on world affairs as they happen, shaping his own medium rather than begging for airtime or expecting voters to shell out $25 for a hardcover book with stale, over-edited observations. Better than a one-way commercial, his blog comments would function as a running town hall meeting.

A recent study of 56,000 blog readers suggests that:

Political blog browsers may be the most engaged in the blogosphere. The largest portion of the bunch read five blogs each day, and over 18 percent spend 10 hours each week reading blogs. In the last six months, 70 percent contributed to a cause or campaign online, 41 percent spending $100 or more.

To be fair, the PAC behind Mark's campaign does have a blog, but it's not a personal statement from Mark himself. At least the site shows off some cool technology, like the Flash talking head of Mark (which changes for repeat visitors).

Mark, if you really want our country to leverage the web, start with your own campaign.