Wednesday, October 3, 2007
Interview with Warren Chao, My Damn Channel
There has been a lot of funding and interest lately in content-focused startups developing professionally produced content for the Web. Among the companies who have recently raised capital in this space is My Damn Channel (www.mydamnchannel.com), which is operating out of Los Angeles and New York. To try to get a better understanding of how My Damn Channel is approaching the online content industry, we spoke with Warren Chao, Chief Operating Officer and Co-founder of the firm. Warren came from TV Guide International, and also is a former venture capitalist, having been at Dynafund Ventures. His partner in the venture is Rob Barnett, former President of Programming at CBS Radio. Ben Kuo spoke with Warren.
What is the idea behind My Damn Channel?
Warren Chao: The principals involved in My Damn Channel are myself and Rob Barnett. Rob used to be the former president of programming for CBS Radio, and prior to that he was at MTV and VH1 in the 90's. He's from the content production side of the fence. I met him through a mutual friend last year at TV Guide. I heard what he was doing, and we ended up working together. In a nutshell, we are building a scalable business model around creating professional content for the web and mobile. The way we analyze the business, is we've looked at what has been done in the past, and what's in this space. Back in 2000, there were lots of ventures which got involved with Hollywood. They had huge budgets, and broke the bank, and were some of the notable flameouts of the bubble era. Fast forward, seven years later, and a couple of things have changed. Video distribution is a lot easier to do--people now have broadband connections, there have been advances in compression technology and player technology--and now, we almost wonder how we survived without video on the web. There is an opportunity on the web to create new areas of video, which haven't been done. There are two big buckets of video--one are professional video networks, which are initiatives which take existing content like 24 and Battlestar Galactica and bring that to a web--repurposed video; on the other side of the spectrum, there is user generated content, and a huge amount of it. YouTube is clearly the largest destination site in that space. The question is, how do you make money on user generated content? It's a long tail issue--with so much content, how do you build an audience around it? In the middle ground between those two, though, there is a whole swatch of professional content creators--TV personalities, actors who have been successful in traditional media--looking to build a new business model around ways to distribute content. They are looking for a way to create content, which is well produced, story lined, and episodic, and where you can build a whole season's worth of stories and characters to follow. That's the sweet spot we are targeting. This was made possible by video technology, and a larger market for online advertising, which people have finally realized is here to stay.
How did the company start and why did you decide to start the company?
Warren Chao: I think a lot of it was my years as a venture capitalist. The key pieces are the management team; then, the actual opportunity itself--what is the fundamental business model. The third thing is timing. If you have one of the three, but not all of the three, it's harder to swim upstream. My background is business development and law. I worked in Silicon Valley in the late 90's, for Wilson Sonsini, Intel, and worked in Los Angeles for Dynafund in 2000, and subsequently TV Guide. It's always been interesting for me to start businesses, doing deals, raising money, and building businesses. Rob came in through this friend of mine, and from where I was at TV Guide, I saw a huge wave coming in online video. It was a great opportunity. Rob is the perfect CEO for this. We jokingly say he's from "old media" but he's an astute businessman. I felt like the timing was here, the people where there, and it was a good business--and content is ultimately still king. Here in Hollywood, if you've got a good story, or plot, or development, you'll always be able to build a business model around it. I met Marc Averitt at Okapi, when he was in Intel around 1998 or 1999. He recently started a fund, Okapi VC in Orange County. So I introduced him to Rob sometime in January, because Marc was looking to do deals on the Internet/Media side of the world. He met Rob, was very impressed with Rob--as I was--and thought this was a great idea and great timing. He told me -- I'll invest in the company, if you join the company. It was almost like a perfect storm.
Do you think having been a VC it was easier to get this started and to raise the capital?
Warren Chao: As a venture capitalist, you see what works, and what doesn't work as a business. You learn how important it is to build a good business model. As a venture capitalist, it's good to cross over the side of the entrepreneur financing divide. You get to see issues that go on as a venture capitalist and board member, where you are usually watching the game being played. However, there's often lots of things you want to get involved with, but you can't. Now that I have changed roles, it's very, very energizing. I have a lot of contacts, a lot of knowledge from being a venture capitalists, and almost the best way to apply that is running a company--which a test in spades, and puts your money where your mouth is.
There has been lots of debate over the cost of generating content on Internet and how much revenue it can generate. What are your thoughts?
Warren Chao: That's something we think about every day. A metric we look at every day is revenue per dollar spent on content. The good news is that it's a lot more balanced than it used to be. We've basically staked our business on creating very good content, and recouping that from advertising dollars. We're still in the early stages of it, but we see some ad dollars coming in, and we'll see more as advertisers learn about our shows, and the audiences we're building. It was important for us to build a sound business model. The other key thing about our business was that it was important not to build a closed garden and just have that content on our site. Our production philosophy is to create great content, and syndicate it widely on the web. We have two great partners, YouTube and MySpace, which have created audiences in the millions who can share our videos.
You've got some big names on the content side--can you talk about that a little?
Warren Chao: I lot of this is because Rob comes from the content creation side, and has a relationship with people he has worked with at CBS, VH1, and MTV. The top talent, in no particular order, includes Harry Shearer, who is involved now with The Simpsons. He's got a great body of work on the comedy side--he also happens to be the legendary bassist from Spinal Tap. The second part is David Wain, who is a comedian involved with MTV, and a group called Stella. He's created this hilarious sitcom for the web, Wainy Days. We've got Don Was, who was a producer for the Rolling Stones, Bob Dillon, and Bonny Raitt, who is driving the music part of the business. It's an intriguing area, we have seen a meltdown in the music business with the rise of iTunes, and he's looking at ways of distributing music, where advertisers pay for production and distribution of MP3s for sale. It's similar to the deal Paul McCartney has with Starbucks, and Prince has with a newspaper in London. The other people are Andy Milonakis--extremely important from the young adult set--who was also on MTV, he did his own show there, and has brought his show to our site.