Frank Biondi, the former head of Universal Studios, has reinvented himself as a dot-com entertainment investor. There's a phrase for that in the New Hollywood: Good career move.
1999 was the year entertainment executives along the Malibu-Glendale corridor finally realized that the Internet would transform their industry. "Even if they couldn't see the writing on the wall," analyst Gary Arlen of Arlen Communications observes, "they could see the writing on the front page ofVariety every day." The concern many execs felt about the Internet devolved into sheer panic following the news of the AOL-Time Warner merger. Variety editor in chief Peter Bart quoted one major Hollywood executive confiding to his shrink that he felt "disoriented" and "whipsawed" by the dizzying pace of change.
One Tinseltown veteran who claims he isn't feeling whipsawed is Frank Biondi. The former chair and CEO of HBO, and ex-president and CEO of Viacom, Biondi was booted from the top post at Universal Studios in November '98. But like ex-Disney president Michael Ovitz and former NBC Entertainment head Warren Littlefield, Biondi has ambitions of becoming a major player on LA's Digital Coast. Ovitz, who left Disney in early 1997 with $90 million in severance, later teamed up with former Disney Online head Richard Wolpert to put money into several Internet startups, including Beverly Hills-based Scour, a broadband entertainment-related search company. Littlefield invested in the online music business Launch Media.
As for Biondi, these days he's putting his fingerprints on all sorts of Net-related entertainment deals, investing in a diverse group of startups with the partners at his current outfit, WaterView Advisors. Biondi sits on the boards of eight companies that stream short and long films over the Web, aggregate broadband webcasts, hawk Pokémon figures and other licensed merchandise, and hatch big plans to serve the business-to-business needs of the global media community.
What it all will amount to is an open question - Hollywood hubbub doesn't automatically impress people in Silicon Valley, and the Biondi label counts for considerably less up north than down south. "I've never heard his name in any deals we've looked at," says one general partner at a major VC firm in the Valley. "My sense is that Biondi is not currently an integral part of the network of power players who are involved in tech-related companies."
"Biondi is definitely well-connected and smart, but he does not know much about the Net or convergence," says an executive at an entertainment site in Silicon Valley. "He wants very much to be perceived as Hollywood's 'Internet Guy,' but right now he is not the guy you want repping your Internet company in the film community. They look at him as an operations guy with a lot of TV experience, and no Internet credibility beyond spending money."
Plenty of people disagree with that dismissive assessment, arguing that guys like Biondi are in a perfect position to capitalize on their relationships, networks of talent, and ability to manage entertainment or content businesses. Dana Ardi, a top industry recruiter who heads the media, Internet, and ecommerce practice for TMP Worldwide, says the current flux in entertainment represents "an amazing opportunity for people like Biondi, Ovitz, and Littlefield. They understand how to capture the consumer's attention and use celebrity to bring people in."
"Hollywood people realize that the Internet is the future of the entertainment business," says Jupiter Communications senior analyst Mark Mooradian. "They recognize a growth opportunity and are aggressively pursuing it. Stupid money is being thrown at every venture that's Web-based. How do you get the smart money? That's where Frank really brings something to the table. Not only does he give strategic legitimacy to these ventures, he gives a tinge of operational credibility."
That's undeniably true, but raises a more fundamental question about the power relationship between Hollywood and the Valley. The entertainment industry and the Web will continue to converge, but Hollywood is still struggling with the fact that it's not calling all the shots anymore.
"I've never met Biondi, and while I have no doubt that it's true that the web of relationships in the entertainment world is long-standing and thick, business isn't done that way on the Internet," says George Bell, president and CEO of Excite@Home. "Business is much more slack, less hierarchical, more open, and meritocracy-oriented, not hierarchy-oriented. It's the 'best idea wins' industry. And while there's no question that there's value in being able to penetrate that web of entertainment relationships, if you gave me a choice between having those relationships or understanding how business is done on the Web, I'd choose the latter. Yahoo! and Excite didn't come from the entertainment industry, and there isn't an executive in Hollywood who wouldn't take a meeting with us. It becomes easier to penetrate those entertainment relationships if you've first built a distribution platform organic to the Web that has some real clout."
Biondi, 55, lives in a stately home with a brick facade in Brentwood, not far from where O.J. Simpson used to practice his golf swing in the moonlight. I drive up a gravel parkway past a reflecting pool, complete with small fountain, and a one-story building that contains the $2.3 million screening room Universal built for Biondi when he was still flying high at the studio. (Universal vowed to remove the theater, but it's still here.)
After a short wait in a sunroom adjoining the main foyer, Biondi appears, trim and compact, with neatly cut gray hair and eyes that seem frozen in a genial expression. These days he wears polo shirts and slacks as regularly as he used to wear suits and ties.
Biondi's transformation from unemployed "media god" - as one dot-com entrepreneur characterizes him - to éminence grise of the online entertainment world happened fast, a classic case of an old media player moving quickly to get with the digital program. The idea of setting up a fund came from Richard Reiss, a veteran Wall Street media investor and an old friend from Biondi's early career days in investment banking. Reiss already ran a group of funds called Georgica Advisors and wanted to create an equity fund for the private deals Georgica wasn't set up to handle. So Reiss, an investor in media, approached his old friend, a manager of media. Another partner, Gus Oliver, was brought on to help administer the fund.
Biondi and Reiss, both of whom had oceanfront homes on Martha's Vineyard, pored over a map of the island in search of a name for the fund. "Turns out," Biondi says, "there must be a lot of money managers on Martha's Vineyard - almost all the logical names were taken." They decided to go for the generic WaterView.
Biondi mainly works out of his Brentwood home, with regular trips to New York, where his partners are based. All the paperwork submitted to the fund by hopeful dot-commers lands on his desk, which, he allows, "puts a fair amount of reading stress on me." Far from having circles under his eyes, though, Biondi looks as if he's just come from three weeks of tennis at La Costa.
Ironically, WaterView wasn't supposed to be an Internet fund at all. Online investments were intended to be limited to a small slice of the fund - "about 10 percent," he says. That figure now looks more like 50 percent. While Biondi is clearly intrigued by the possibilities of the new medium, he's like a kid who won't own up to his crush on the girl next door. "It's just the deal flow," he says, explaining how the fund came to be dominated by Internet companies. The fund has somewhere between $190 and $210 million. "I'm not sure we understand the rules or metrics," he says. "Maybe nobody does," he adds.
Biondi slips out of the room for a moment and returns with what looks like an Excel spreadsheet, which he reads leaning forward in his seat. The fund has private investments in 23 companies. Top of the list is "Atom Corporation."
AtomFilms is an Internet company that streams short films and animation over the Web and is now branching out into producing shorts. (See "MyHollywood," Wired 7.10, page 214.) During January's Sundance Film Festival, the company outfitted a bus with video monitors so attendees could watch some of its three- to six-minute films while being shuttled around town. AtomFilms is probably WaterView's best-known investment; thanks to its big-name alliances with Sundance, HBO, and Warner Bros. Online, it's also as close to being a blue-chip company as any startup in the online entertainment space.
Overall, WaterView's portfolio covers content, distribution, ecommerce, business-to-business, licensed merchandising, and technology infrastructure. (See "The Upstarts," page 164.) Many of the CEOs have strong media backgrounds. For Biondi, the Internet feels like a "hits business" very similar to movie portfolio strategies, where you spread your bets and hope for aTitanic - or, in this case, a priceline.com - that will cover the whole fund.
In contrast to the unrestrained enthusiasm of other dot-com entrepreneurs, Biondi's vision of the Internet is as sober as a Monday-morning staff meeting. The term "interactive" seldom pops up. Biondi sees the Net as the latest development - albeit a radical one - in a 20-year trend in media that he sums up with the phrase "What I wanna see when I wanna see it."
Choice and convenience are the drivers. He recalls a time years ago at HBO when he and his colleagues were dumbstruck to discover that a large percentage of HBO customers were also subscribing to Showtime, "just to have four chances to see the same film in a week instead of two." The public will always gravitate toward what he describes as "the next best simulation of video-on-demand." Media in general, and entertainment in particular, will evolve into Internet distribution. HBO-on-demand. Movies-on-demand. And even TV-on-demand. "That stuff gets me kind of excited," he says. "It involves the old players and new players. And guess what? We know most of the old players and we're getting to know most of the new ones."
On the other hand, he and his partners are less sanguine now about content than they were some months ago. "The Web as a medium of its own is really premature," he says. "A lot of the content area is chasing theoretical revenue. There isn't a line out there in the cash community that says 'short films'; you have to create the demand for short films and convince advertisers in the Atom model. That's not always easy. Fortunately, the cost side is reasonable for Atom." Companies that provide what he calls "very specialized video-based entertainment" at costs ranging as high as $60,000 for eight minutes (he's alluding to the Santa Monica, California-based Digital Entertainment Network) will, he thinks, have a harder time of it. "You probably couldn't make money at NBC with those economics, let alone on the Net."
If Frank Biondi is more comfortable with technology than most Hollywood executives, it may be because his father was an engineer at Bell Labs. Frank Sr. moved the family from Manhattan to New Jersey when the labs relocated to Murray Hill. Early on, Frank Jr. demonstrated a talent for numbers and baseball. Biondi entered college thinking he'd be a math major. "What I found out is that I was an arithmetic major," he says, a talent that nonetheless has served him well in his career.
He attended Harvard Business School during the Vietnam era, then drifted into investment banking. He admits to having been "pretty good" at it, but he had to learn a new business every 30 days. "I didn't want to do that," he says. Instead, he took a position at the pioneering cable provider Teleprompter in 1972, where he met his future wife, Carol, and began a long involvement with the cable TV industry. Biondi likes to say that he began his career in new media and worked his way back into old media. He left Teleprompter for the Children's Television Workshop, best known for creatingSesame Street. In 1978 he moved over to a small cable company called Home Box Office.
Biondi says he spent much of his time in his early days there "worrying about intermissions," which were then filled mainly by short films and music videos. HBO eventually dropped both types of interludes in favor of promotional programming; to this day, he regrets that HBO didn't fill the gaps with music videos, and that it lost out on that business to MTV.
Biondi worked his way up to chair and CEO in 1984. What he liked about HBO was that "it was easy to be involved in everything." The company had about 15 big customers, five or six studios to deal with, and, as he puts it, "only 40 or 50 important moving parts." He liked that the issues were all strategic, and that he could keep it all inside his head. Talking to him, you get the impression that HBO may have been the most satisfying professional experience of his career.
Nevertheless, in 1985 he was lured to Coca-Cola as executive VP of its entertainment-business sector, the umbrella for such television-production companies as Merv Griffin Enterprises. He stayed there until July 1987, running Coke's TV division, where he may have acquired his famously hands-off management style.
"Coke," he says, "ran the business by getting great people, giving them great instructions and the tools to do it right, and setting them loose."
Biondi tried to apply those principles when he became president and CEO of Viacom in 1987. Some of the top executives he recruited are still there, like Viacom Entertainment Group chair Jonathan Dolgen and Paramount Pictures chair and CEO Sherry Lansing. Biondi says Viacom gave him the opportunity to apply his financial skills to an interesting mix of businesses - film and television (Paramount), music videos (MTV, VH1), and children's programming (Nickelodeon), among others. But in early 1996, Sumner Redstone caused industry jaws to drop when he gave Biondi the pink slip. He walked with a $15 million settlement.
Not everyone in the entertainment business shares Biondi's philosophy about delegating authority. Unfortunately, one of those who begged to differ was his next boss: Seagram president and CEO Edgar Bronfman, who recruited Biondi for the top job at Universal in April 1996. From the outset Biondi was at a disadvantage. He couldn't hire his own management team, since Bronfman had already filled most of the key positions with his own hires. Bronfman then transferred Universal's television business to Barry Diller's USA Networks without consulting Biondi beforehand. Once that happened, Biondi began living on borrowed time. A string of costly flops in the company's motion picture division - rememberMeet Joe Black? - presaged Biondi's dismissal in November 1998. This time he picked up a $30 million settlement.
"Frank has had some high-profile firings," says longtime friend Michael Fuchs. "He's maintained his confidence. He picks himself back up." Fuchs ran both HBO and Warner Music Group until he was fired in 1995; now he, too, is playing in the Internet sandbox - he's chair of Autobytel.com and an investor in Internet startups including WhatsHotNow.com (a WaterView property) and Wink Communications. "There's life after what many people think of as death," he told one interviewer recently.
Fuchs was head of special programming at HBO in the mid-'70s. At one point he asked Biondi, who was still at the Children's Television Workshop, for his opinion on HBO's business model. "He gave me a perfect capsule analysis of HBO," Fuchs recalls. "He said it had a classic middleman dynamic. That's HBO's cross to bear - and its uniqueness." He brought Biondi in as a director of coproductions.
About six months after hiring him, Fuchs - an effusive character compared with his cool-headed friend - dropped by Biondi's office: "Frank, isn't this the greatest? Aren't you having a ball?"
"I've been trained my whole life to be an analyst," Biondi told Fuchs. "This is so subjective. There aren't any real answers."
"Analysis is Frank's strength," Fuchs says. "Some of the interconnections in the new media space are extraordinary. I honestly believe this is what Frank does best - complicated decisionmaking and investing." This analytical style sets Biondi apart from many of his freewheeling peers in the media business. "I like to do homework," Biondi tells me, describing himself as an intellectually hands-on person who attempts to interrelate whatever media business he is in with others in his experience.
Biondi's moves in the Internet world inevitably are seen as emblems of tensions between Northern California's techies and Hollywood's dealmakers. The perception, quickly turned cliché, is that these are two tribes with a barely disguised distaste for each other. "There's this cross talk that's so dismissive," says Allen DeBevoise, CEO of Creative Planet, a WaterView-funded company. "LA and New York media people say, 'Those Silicon Valley people are so soulless. All they ever talk about is the efficiency of the market.' The members of the tech crowd up north are saying, 'Those Hollywood people are at theseparties ... this whole Hollywood thing.'"
In this scenario, dragging a rust belt industry like the entertainment business out of its sitcom past and into a sun-filled digital future is a daunting task - a task uniquely suited to old-guardmachers like Biondi, Ovitz, and Littlefield. Venture capitalists up north may have an idea of how movies and TV shows get made, Biondi says, "but they don't know all the tissues, nerves, who-knows-who, who-hates-who - which you need to know at some level if you're going to be dealing with the content world."
It plays well in Hollywood, but not everybody buys it. "Frank is assuming that knowing all the tissues is the key to success in digital media," counters the decidedly tech-oriented Stewart Alsop, a general partner in the VC firm New Enterprise Associates. He sits on the board of TiVo and is an investor in three Internet audio companies, including the Los Angeles-based Hiwire (formerly RocketRadio). "So far," Alsop asserts, "knowing the tissues has been a liability."
"There's probably a group of venture capitalists that hopes you can somehow create content robotically," Biondi responds. "That's probably not going to happen." Hollywood is all about personal relationships, he asserts. Directors, producers, and writers will be a lot more comfortable talking to people they've worked with than to a venture capitalist. "We get most of our really good sources of deals from friends," Biondi maintains. "These are people you've dealt with over the years. You can shake hands with them and you've got a deal."
One person who understands the deal dynamic in the New Hollywood is Cliff Gilbert-Lurie, a senior partner in the Century City entertainment law firm Ziffren, Brittenham, Branca & Fischer. In addition to a full load of traditional industry clients (Sandra Bullock, Eddie Murphy), Gilbert-Lurie also prowls the Internet world. He was instrumental in bringing together DreamWorks, Imagine Entertainment, and $50 million of Paul Allen's money to form Pop.com. "When I do San Francisco meetings," he says, "the tech crowd always tells me that 'those guys in Hollywood are all dead dinosaurs.' They have it backward. People don't watch the pipes. And George Lucas is Hollywood, even if he doesn't live there."
What's his take on the drift of Hollywood execs into the Internet space? "Two motivations are driving it," he says. "There are people who are genuinely fascinated by the Internet and see its possibilities. This typifies some high rollers." More important, Hollywood is also populated by people who are intensely competitive and status-conscious. "These people love the money and the power. Now they see the spotlight shifting to someone else - these kids making multiples in Northern California." Convergence is a simple concept for these types, he concludes; it boils down to: "How do we make the spotlight beam wide enough to include us?"
Biondi admits that the money being made by Silicon Valley entrepreneurs has Hollywood executives spinning. "There are guys and gals who by any measure are incredibly successful in conventional media," who are suddenly "dumbfounded by the amount of money people who were in college four years ago are worth on paper."
It's a frigid and clear Monday morning in Marina Del Rey, site of the headquarters for WhatsHotNow.com. The office is strewn with licensed merchandise the 3-year-old company sells on its site. Pokémon and South Park dolls peek out from cubicles. Outside the main conference room where a board meeting will soon come to order, a table has been laid with sliced kiwi, bagels and cream cheese, and other goodies alongside elegant coffee dispensers. Caterers dressed in white stand unobtrusively to the sides.
Biondi arrives in a dark green polo shirt, tan slacks, and navy blue sport coat. WhatsHotNow.com's execs and board members are mingling; nearly everyone is dressed in dark pinstripes and ties. Biondi's eyebrows rise. "What's with all the suits?" he asks, arms extended. Obviously, dress code is one of those convergence issues that hasn't been worked out between Silicon Valley and Hollywood. A couple of months earlier, Biondi showed up in a gray suit and tie to a board meeting at San Francisco-based CNX Media. All the other members wore casual clothes. Virtual CEO Randy Komisar wore a neck-to-ankle jumpsuit.
WhatsHotNow.com chair Rob Fried arrives a little late and walks up to shake Biondi's hand. A boyish 40, the bearded Fried is beaming. "It took me an hour to fix this," he tells Biondi, pointing to what has to be the most perfectly knotted tie I've ever seen.
Fried ran Savoy Pictures in the mid-'90s and still has his own movie-production company, which madeWinchell, for HBO, andSo I Married an Axe Murderer, starring Mike Myers and Fried's wife, Nancy Travis. Before long, he has Biondi in tow and is headed for his office, saying, "I've got an email I want to show you."
It remains to be seen whether Biondi and Fried can approach the new medium unencumbered by old media ways of thinking. Between 1995 and 1998, AOL and Microsoft lost millions in attempts to build an audience for online entertainment programming. Intel and CAA-backed American Cybercast, which had ambitions of becoming the NBC of cyberspace, filed for Chapter 11 in January '97 - and in the process soured the investment community on Internet content. Web entertainment was done in by lack of bandwidth, inadequate authoring tools, and an indifferent audience.
Then, in 1999, more bandwidth became available and audiences got larger and more sophisticated. Streaming-video technology edged up from awful to mediocre. Tools like Macromedia's Flash made it possible to deliver fairly compelling animation over slow Internet connections. The digital coast became a hot destination for investment dollars, and Internet entertainment startups began popping up like mushrooms after a spring rain.
Still, much of the failure of earlier online entertainment ventures like American Cybercast can be attributed to the influx of cable and television executives who tried to transfer what worked on those formats to the Internet.
"There is a new medium - emphasis on new - that requires crossover ability, that is focused more on the properties of the new medium than the properties of either computing or entertainment," says New Enterprise Associates' Stewart Alsop. "The new medium is real-time, interactive, fast-changing. The new media investor knows to value these three properties above anything learned in a previous medium."
Then there's the vision thing. Biondi and his ilk are "known for visibility, strategic thinking, and running mature businesses," observes Montana Artists Agency's Carl Bressler, "not for creating industries." Despite Biondi's important contribution to the growth of the cable industry, he's much better known as a manager and a financial whiz than as a visionary. "He has much more of an operational reputation than an entrepreneurial one," says Jupiter's Mooradian, "given the size and scope of the companies he's run in recent years."
Biondi understands this and is savvy enough to leave the task of building startups to others. His talents may be better suited to figuring out how these startups can be scaled or bundled together into major companies, says TMP Worldwide's Dana Ardi: "Traditional players in entertainment, like Frank Biondi, understand they can become great aggregators."
In fact, if Biondi succeeds, it may be by finally putting to rest the tired notion of north-south tribal warfare.
Creative Planet's Allen DeBevoise thinks that top media executives like Biondi can build bridges between Silicon Valley and Hollywood.
"There's a need for a combination of what Silicon Valley does best and what Hollywood does best," DeBevoise says. "The John Doerrs and Mike Moritzes are unquestionably geniuses at creating shareholder value and building companies with 2,000 employees in 18 months. Nobody in the entertainment industry knows anything about that." Silicon Valley investors, on the other hand, hit a brick wall in dealing with the talent side of the equation and the world of agents. "If you take a Silicon Valley investor and go to a creative talent like a director or writer, the agent will get in the middle and say, 'Pay us $2 million.' That's not the way the typical venture capitalist wants to build their company."
DeBevoise thinks Biondi can help smooth the way for deals that fit the Internet's still-modest scale. "Frank Biondi has been an executive in a true business with shareholders," he says, "and he understands the talent side." Biondi's familiarity with the latter aspect of the business takes on added importance now that talent agencies are getting involved in the content game; the Endeavor Agency's deal last February to create Web-based programming with Orange County's Broadband Interactive Group was likely the first of many similar arrangements.
For the time being, Frank Biondi is having fun. "He likes his life," says Atom's Mika Salmi. Biondi is doing what he does best: dispensing advice, doing due diligence on deals, making friends, collecting favors, expanding his knowledge base. Some day - next month, next year, or whenever the convergence dust has settled - he will have completed his homework and prepared himself to assume a top management post in a Yahoo!-Disney or some other Internet-media-entertainment aggregation. As Scott Sander, CEO of distribution site SightSound.com - a prime WaterView holding - puts it, "Frank Biondi is tan, rested, and ready."
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