He was thirty-five and opted to take what he said was a 90 percent pay cut and accept equity to become president of the Sling Media Entertainment Group. Sling Media sells a product, the Slingbox, which allows users to watch their home television and DVR on their PC, MAC, or mobile devices. His editors selected what they think of as “the best stuff, putting it on the front page” of a Sling media guide. They plan to make money by selling ads and sharing revenues with their content providers. One day, he hopes, Sling Media will also create its own content. Sling Media aims to become another distribution platform, letting users watch what they want when they want it on various devices, and letting Sling gather data on user preferences which they would share with content partners. Once again, Hirshhorn struck gold. Soon after he joined, Sling Media was sold for $380 million to EchoStar Technologies, the satellite television company. “We’ve built a virtual cable distributor online,” he said. He knew that the Slingbox, like Apple TV, could prove to be a dud, or that he could feel restrained operating under a new corporate owner. But Jason Hirschhorn was very rich and had a sandbox to play in.
For a while at least. Chafing under the constraints he felt working within a traditional media company that he said “did not move fast enough into the digital age,” in late 2008 Hirshhorn did what he had done at Viacom and left in search of another sandbox. He found it in the spring of 2009, when the company he wanted Viacom to buy—MySpace—had slumped and Murdoch brought in new management, including Jason Hirshhorn as chief digital officer.
MARC ANDREESSEN HAS SPENT much of his life working in the digital sandbox, achieving the fame and financial success others seek. A large man with an immense, shaved, egg-shaped head, his restless leg hammers the floor, and he speaks rapidly in a booming voice. His professed motto is, “Often wrong, never in doubt.” A self-made multimillionaire at age thirty-eight, Andreessen has often been right. As a computer science major at the University of Illinois at Urbana-Champaign, he worked at the university’s National Center for Supercomputing Applications. Inspired by Tim Berners-Lee’s vision of open standards for the Internet, in 1992 he and a coworker, Eric Bina, created an easy to use browser called Mosaic. The browser worked on a variety of computers, facilitating the hypertext links that allow Web surfing and Google search, helping users to effortlessly hop from site to site. After graduating in 1993, he moved to California, where he met Jim Clark.
The former founder of Silicon Graphics, Clark shared Andreessen’s conviction that the browser could be a transformative technology, and he had the money to advance that dream. Not long after, Andreessen became cofounder and vice president of technology for the company that would become Netscape Communications.
With Netscape’s IPO in 1995, Andreessen became very prominent in new media circles. He also became very rich, and even richer when Netscape was sold to AOL for $4.2 billion in 1999. After a brief stay as chief technology officer for AOL, Andreessen started Loudcloud, a Web-hosting company that sold software and consulting services. After its own IPO in 2001, Loudcloud was sold to EDS and changed its name to Opsware, with Andreessen remaining for a time as chairman.
He had no interest in being a CEO, though. “I’m a well-trained introvert,” he told me. “Being with people drains me of energy.” He had a wide range of interests, though, and deep pockets, and he wanted to marry both. He chose to become an angel investor. He put money into Digg, a social news site, and Twitter, among others. He joined the board of eBay. He wrote a blog that displayed his eclectic and wide range of interests—in books, TV shows, movies, politics, press criticism, Wall Street, debt to capital ratios.
The investment about which Andreessen is most passionate is Ning, a social network that enables those who join—artists, musicians, students, educators, a fan club for the Jonas Brothers, a snowboard community, etcetera—to create their own communities of interests. The idea came out of his association with Gina Bianchini, who met Andreessen soon after she received a master’s degree from the Stanford Business School and started a company in 2000. When her company was sold in 2004, Bianchini and Andreessen brainstormed her idea of forming a social network among those who seek like-minded communities and his idea of providing a platform on which to build them. They named the site Ning because that was the best name they could agree on that cost no more than $10,000, he said. The site would have two revenue sources: Google’s AdSense to reach advertisers wishing to communicate with each community and those niche channels willing to pay a monthly fee to Ning for a range of services, including $19.95 per month for space to sell their own ads with Google or to forgo ads entirely. By the summer of 2008, Bianchini said, there were 465,000 social networks on Ning, with 10 million registered users, 40 million unique users each month, 5 billion monthly page views, and 116 employees working from a building in Palo Alto. As chairman, Andreessen has an office there, but appeared only a couple of days each week, and rarely in the morning. “I wouldn’t be sitting here without him,” said Bianchini. “He funded Ning and made me CEO. He put up the money, and he took only 50 percent of the equity.”
His closest friend, Ben Horowitz, who worked with him at Netscape and in early 2009 became his partner in starting a $300 million venture capital fund, describes Andreessen as a Renaissance man. “You can talk about the economy, fashion, military strategy, whatever, with Marc. I don’t know anybody else like that who goes across so many domains.”
Andreessen likes to be alone, to stay up most of the night surfing the Web and reading, and rising late and avoiding meetings. He found a kindred spirit in Laura Arrillaga, who teaches at Stanford’s Business School and is the daughter of Silicon Valley’s wealthiest real estate tycoon and Stanford benefactor, John Arrillaga. “Laura reinforces my hermitlike tendencies,” he said. “We love to be home.” They are, he said, “dream customers” for old and new media. “We have more DVDs. We have Blue-ray Discs. We do downloads. We’re a huge iTunes customer. We’ve got, between the two of us—she still uses her old house as her office—eight or nine Direct TV dishes. We’re about to add Comcast’s Video on Demand, because I want to try that. We’re about to add a Windows’ Media Center PC.” They have a Vudu box, Apple TV, two Tivos, several PVRs and DVRs, and numerous high-speed Internet connections. In all, their monthly subscription bill comes to about $2,500, he said.
Although he consumes old media, Andreessen delights in tossing grenades at it. As late as 2005 and 2006, he said, traditional media was “totally putting their head in the sand. They were in complete denial.” He cited YouTube, the burgeoning video Web site, as exhibit A: “YouTube ends up being this hub for tens of millions of people to watch video. In two years, it’s going to be a direct competitor to TV networks and cable networks. A direct competitor with more users and viewers.... All of a sudden, that’s a new hub. It’s like the old joke: ‘Where are they going? I’m their leader and I must find them!”’
He sees the Internet as a medium that will soon have 2.5 billion users worldwide, an audience far larger than any reached by traditional media. And the audience will be composed of those who “want whatever they want when they want it.” They will want to skip commercials and watch movies or TV programs on multiple devices and be able to get DVDs of movies the day they are released in theaters. “When has the music industry and the movie industry and the TV industry ever had a market that big to deal with before?” Andreessen said. “And when has distribution ever been this cheap?” The costs that burden traditional media, from paper to printing and manufacturing to trucks to sharing revenues with movie theaters, could be drastically reduced, he said. “An entrepreneur looks at that and says, ‘Oh, my God, it’s a monster opportunity!’ Somebody who is protecting an existing business says, ‘Oh, my God, I’m going to go out of business!’ Now they’re both right. It depends on whether they radically make the changes they need to make.”
GOOGLE WAS BOLDLY MAKING CHANGES. It outmaneuvered Murdoch, Viacom, and Yahoo and stunned the media world when in October 2006 it purchased YouTube for $1.65 billion. The deal eclipsed any that Google had done before, and the potential impact of YouTube was vast. Since its start in February 2005, YouTube by the fall of 2006 was attracting thirty-four million monthly viewers, or four out of every ten video Web site visitors. And this number was soaring. What visitors viewed on YouTube was mostly “user-generated content,” or short homemade video clips: a pet trick, an artfully told joke, firsthand footage of the devastation from Hurricane Ka trina, Janet Jackson’s “wardrobe malfunction” at the Super Bowl—that users uploaded and sent to YouTube. Increasingly, though, YouTube was expanding its audience with clips from
Saturday Night Live
and
The Daily Show with Jon Stewart,
with sports highlights and music videos; these, too, were recorded and shared by users, arousing piracy concerns.
The reason YouTube was persuaded to sell, said cofounder Chad Hurley, then twenty-nine, was simple: They feared the site lacked the resources to cope with its explosive growth. “When we started, we thought one million daily uploads would be great.” Instead, they were getting a hundred times that many. “We thought we’d burn up our bandwidth. We worried our servers would go down.” The marriage to Google, he said, meant more investment capital, more servers and computers, more brainpower, more help finding partners and figuring out how to place advertising on their site. “We needed resources to scale the company. We only had a staff of sixty people dealing with the weight of the world. An option was to raise more money and hire more people and take a long time. But we were visible, unlike the early Google. We had competition. We were challenged by the old media.” He and his cofounder, Steve Chen, were enamored of Google’s focus on users and its emphasis on the long term. “They wanted to give us the freedom not to have to maximize revenues right away.”
YouTube and Google’s ambitions were immense. Hurley described the site as “a democratic platform” for user-generated and “independently produced content.” He vowed that the “creative people who produced content would have more opportunities in the future without answering to a network.” Had network executives heard those words, their paranoia would, no doubt, have been stoked. They would have been even more perturbed to hear Eric Schmidt say that YouTube’s real challenge was to figure out how to sell advertising. “If that works,” he told me, “it will seem like the birth of the CBS network in 1927.”
Because YouTube was making no money, there was a fair amount of sneering from media executives. Like Napster, they said YouTube would be hobbled by copyright lawsuits and would be unable to monetize its enormous traffic. “Right now,” Microsoft CEO Steve Ballmer declared, “there’s no business model for YouTube that would justify $1.6 billion. And what about the rights holders? At the end of the day, a lot of the content that’s up there is owned by somebody else.” That “somebody else,” the broadcast and cable networks believed, was them. YouTube, they asserted, built its success on their backs; thirteen of the twenty most popular videos on the site, the
Wall Street Journal
reported in early 2007, were professionally made, not user generated. Sumner Redstone, whose Viacom owned
The Daily Show With Jon Stewart,
told Charlie Rose, “There are some issues with YouTube. They use other people’s products. The only way they avoid litigation now is they stop doing it if you call them.”
To acquire YouTube, Google tapped its enormous market capitalization. The company’s stock value at the time the deal was announced was $132 billion, giving it a competitive advantage over the largest media companies on earth, none of which was worth more than one-third this amount. Those still oblivious to the challenge posed by Google were awakened by the YouTube acquisition. “They can buy anything they want, or lose money on anything they choose to,” said Irwin Gotlieb. “I can only do things that are rational to do for my business.”
Media companies were chasing a new fox. It did not go unnoticed by Gotlieb—or other savvy executives—that Google was expanding its online advertising portfolio to include video. Or that YouTube users would only swell Google’s unmatched database. More ominous for traditional media, Google, despite its denials, was now in the content business. Like the television networks, YouTube publishes content produced by others and sells advertising. The more consumers linger on YouTube, the more pages they view, and the more page views, the more YouTube’s ad rates rise. In search, Google sped users off its site without any particular interest in their destination; with YouTube, it had a stake. The purchase of YouTube represented something else as well. Their Google Video store, announced by Larry Page nine months earlier at the Consumer Electronics Show, was a flop. “YouTube was an admission by Google that they couldn’t just build things,” said Danny Sullivan, longtime editor of
Search Engine Land.
WHAT FOLLOWED was a protracted round of negotiations between the broadcast and cable television companies and Google. The discussions revolved around three issues: money, copyright, and trust.
Money was a stumbling block. Traditional media companies sought a version of the system they had long relied upon: an up-front license fee from distributors to air their content. Google agreed to pay something but argued that with a new distribution platform they should not be locked into old and expensive formulas. YouTube, Google argued, was a terrific promotional platform that would expand traditional media’s audience. The networks countered: Show
me the money!
Cable networks also claimed that if they licensed their content to YouTube for a lower price than they charged distributors, cable systems owners would demand the same discount.