When we look at market share, number of movies, and box office revenues, there are a handful of studios that dominate in the entertainment business. These studios are Walt Disney, Warner Bros, Universal, Paramount, Sony, and 20th Century Fox.
Here’s a very simplified overview of how the movie industry works. In the music business, Sony, Warner and Universal dominate. While tech companies like Netflix and Spotify are challenging those legacy businesses, it is an amusing irony that we are seeing growing awareness and a little bit of acceptance of studios in tech!
When we look at what kind of organizations exist in tech, almost everyone would know that there are big tech companies, tech or tech enabled startups, accelerators/incubators and investing firms. But there is another, less discussed and often disregarded kind of organization that is almost impossible to learn about if you are an outsider or even an insider who typically keeps up with popular conversations in tech. This fifth category is called studios.
In broad strokes, tech studios are movie studios but for tech businesses. There are dozens of nuances that got stripped in that framework but it is useful to think about tech studios in those terms. You will be able to enlist 10 hot startups or 10 top tier funds easily but you will likely struggle to come up with a list of tech studios. A tech studio is the least understood organizational structure in tech.
Having worked at Betaworks in 2016, Human ventures in 2017 and Science in 2018, I have been fortunate to build an intimate understanding of how a studio’s business model, incentive management, team-building, funding, risk-return profile, and value proposition are very different from the other kind of mainstream organizations in tech. One intuitively understands how startups and funds work. Studios are very opaque. While all the companies in the visual above are labelled as studios, they operate and grow very differently.
If you are interested in learning about the origin and evolution of the studio model and the challenges it has faced over the last two decades, here’s an excellent piece. Anyhow, I am writing about this today because of a major announcement made by an SF based studio called Atomic yesterday. I very much recommend reading their CEO’s post to not only understand what they are doing but also learn about the role of startup studios in bringing some efficiency in how certain kinds of businesses get built in 2018.
It is very cool to be a founder or solo GP in tech these days. It will soon be very cool to be part of the studio teams in tech. Studios, for the most part, get bad rep. And, that’s for valid reasons (that’s a post for another day!).