Matt Heiman - Founder & CEO of Diagonal View

Full transcript: Matt Heiman on London Real

0:00 In London, technology is the silicone roundabout. Introducing a new talk show dedicated to the people of the London technology startup scene. Silicon Real. Each week, interviewing entrepreneurs, venture capitalists, financial technology, accelerators and incubators in an exciting three-person format. Learn about the people behind the innovation, locally filmed, locally sourced, Silicon Reel. It’s about the people. Alright guys, let’s do this. Here we go.

0:42 This is Silicon Reel, the weekly talk show dedicated to the people of the London technology startup scene. I am Brian Rose, I also host London Real. It’s a similar setup. We get three guys in the room, try to figure some things out. We We had astrophysicist Neil deGrasse Tyson on last week.

0:59 We had Mike Dolce, who was the trainer of the year for Mixed Martial Artists, the Cage Fighter guys. And we had a comedian, Tom Rhodes. So if you want to check them out, come to LondonReal.tv. But today we’re here to talk about tech. My co-host is entrepreneur Colin Pyle, Canadian, hockey fan, coffee man.

1:17 What’s going on? Yeah, Canada US, 5 p.m. today. So I apologize when this comes out. We will beat the US.

1:24 How about say, do you really need to watch that? I mean, is it kind of a no brainer? What are the odds on that game? I don’t know. I don’t think Canada is as far ahead anymore as they used to in hockey.

1:33 So I think it’s still pretty tight. But I still think we’re the clear victors, I’m pretty sure. Didn’t they inch past them in the previous Olympics? Yeah. Double overtime?

1:41 Yeah, cross. That was in Vancouver, wasn’t it? What, the yanks beat them? No, you guys won. We won, yeah, yeah.

1:46 We wouldn’t talk about it if Canada lost. Okay, I remember seeing the celebrations. We’re sensitive. You guys go pretty crazy. Oh, the girls won last night.

1:53 Gold. I did. Yeah. Canadian girls. Congratulations.

1:58 That was a great game, yeah. And in curling. And in curling. Fantastic. A Winnipeg, I believe, was a skipper.

2:03 Oh, really? I think so. Cool. Well, all the best. Here we go.

2:08 There you go. Okay. Good. You know, before I get to our guests, I just wanted to say a shout out to the people at TaskRabbit. They’re helping us sponsor.

2:14 They’re an online marketplace that allows you to outsource, you know, tasks in your neighborhood. We had Lauren Sherman here, who was the head of community a few weeks ago. She really killed it, right? She was good, yeah. She said her dad saw that episode.

2:23 Oh, really? Yeah, and so they’re right, right? So I think maybe cry emotional about it. Yeah. Wow. Yeah, she was that good. Yeah Yeah, so yeah, we love them. They actually do a lot of the back end stuff for Silicon Reel So they help us slice our videos up. So they’re really good If you want to check them out you can get 25 pounds of free tasks. They’ll do anything They’ll go get your coffee for you to clean your house They’ll you know do whatever do it and they do some pretty intense tasks So it’s be surprised at the level of sort of efficiency and stuff they can do so yeah Very competent. Just ask them. Yeah, so it’s taskgrabber.co.uk use the code real25 and you get like two hours of free work So shout out to those guys also our initial sponsor FinTech innovation lab things are happening over there They picked seven companies right seven finalists. Yeah, so it’s going really well pixel pin is one of the finalists It was on the podcast a few months. We had them before they were chosen exactly before the big shows that we are on The cutting edge of tech here. Yeah, so yeah these guys pixel pin. It’s fantastic idea I mean instead of having to remember your passwords you just draw you pick places on photos that you know So it could be a picture of you on the beach and you have to hit like the shark you and the X Yeah, then you’re in nice. Yeah, and so it’s a it’s a great idea So yeah, so seven finalists and then the final day is what March 26 March 26

3:39 Yeah, they’re gonna give a whole pitch and if you’re an investor, you can actually attend that Yeah, and and just email them its fintech at Accenture comm you can go and yeah See the future I guess see the seven FinTech companies. Yeah. Yeah, great really cool Great place to make a lot of money and we hope to have a few of them on in the future because to hear their Story and how the last three months was will have been in the incubator. Yeah, it’s fantastic so check them out if you want to know more about their website, you can find it on silicon real calm and There you go on with the show our guest today is mr. Matt Hyman Who is the founder and CEO of diagonal view which is an online video production company that makes Short form video content that runs mainly on YouTube or mainly on YouTube. Okay, you guys cover music sports celebrity news Fashion pets top 10 lists. You guys are famous for those famous for that. Yeah. I mean all the YouTube guys I know they don’t stop talking about your top 10 list Your videos have been watched over 2 billion times worldwide in the US 10% of the population watches you monthly, correct?

4:40 That’s big. You’ve cataloged over 2 million hours of video You work with Reuters, ITN, Getty Images, and you produce 30 of your own in-house videos per week. Correct. As a fellow YouTuber, welcome to Silicon Real. Thank you very much.

4:55 It’s nice to meet another YouTuber. You know, it is nice, you know, people don’t understand the lonely and strange existence of a YouTuber. You know, there’s a strange bunch. I’ve been down to the studios, I’m sure you’ve been down there. It’s interesting to meet some of these guys on YouTube because they’re quite sometimes anti-social, but when they’re on camera, they’re really social.

5:11 I’d say maybe I’m similar. You know, but you’ve been starting you’ve been out this since 2008 Correct. I think I uploaded my own first personal video on YouTube in like 2008 It just started it was me and it was actually me on that elephant I talked about really Yeah, that’s Molly your elephant. It was big ones. I was in Africa. Okay, fair enough Yeah, but you Google bought YouTube what no six Oh seven. Oh seven. So just after okay Yeah, so I think that was when I first started using it. But back then there was no one on YouTube There were a lot of bits and bobs.

5:42 I mean, if we go back in time to 2006, 2007, we met YouTube pretty early in that story arc because my previous startup was in digital video as well. We were the first people to commercialize video on a mobile phone. So if we look at the story arc of YouTube, it was people uploading sort of random events in their lives. The tagline to the company at that time was broadcast yourself. And so it was really a chance to, if you imagine, take a video, create a URL and send that URL then to your friends on your social graph.

6:15 And your social graph at that time was probably fairly limited to email, right? This was early days of MySpace. But in terms of the ability to just upload something onto the internet and capture a bit of footage was totally unique and drove that platform. Yeah. In retrospect, it seems like a no-brainer, like so much tech, but at the time it was really special, wasn’t it?

6:34 It was really special. And even going back to my previous startup, we looked at doing and patented a similar capability of videoing something from a mobile phone, anything, and then creating that URL and doing a peer-to-peer network. So instead of it being a hub like YouTube, it would just be the ability to send it to your friend’s mobile phone as a long HTML message. Then you click on it and you can watch it anywhere in the world. So at the time, the reason we met YouTube was we’re starting to think in the same direction, but they really nailed it because they built a platform not only of content but also of audience.

7:12 And then once there’s audience, then over time, audience attracts money. And then if you have content, audience, money, then you start to attract the world. Well said. That’s the end of the interview, isn’t it? Yeah, I guess that says it all.

7:25 I didn’t think about it. So they weren’t trying to scramble after monetization. They just wanted to build people that uploaded the videos, then build the audience, and then the money comes after them. I can’t speak for them. I mean, even in those days, you had little toaster adverts that popped up for like ringtones and stuff, you may remember that, or click-throughs to sort of, you know, very small flash-based video games.

7:46 So in the early days, it was extremely early adopters of advertising on YouTube. I think their model, if they had a model, was just let’s create a place for video on the internet, and video’s going to be big. The guy who put the first and I believe only venture check into YouTube was also looking at investing in previous business of mine and that’s how I really started to understand a little bit about platform versus content as well. He’s a pretty smart guy.

8:13 He was the CFO of PayPal before that. He’s a partner at a venture firm. You can Google him if you want to know more. The idea though that we dodged towards content because his thought was there’s going to be many, many more platforms built off the back of the YouTube success. The idea is, if there’s a pendulum that swings between content and distribution, distribution at that time was overfunded and content was underfunded, so we went for the other side of the pendulum and licensed a whole boatload of content and kind of then waited for the pendulum to switch back and that’s still happening today, I feel.

8:49 And what were the early days like of Diagonal View as opposed to now, as far as what were What were you doing in those early days, 08, 09, 10? Well, I can’t tell you a lot of what we were doing. I mean, some of that stuff’s very private. But the FBI is looking for it. Exactly.

9:03 He’s now linked into you. I don’t know why that guy linked into me. So the early days of diagonal view, we were running the business off of a half-broken laptop in a second bedroom, looking through a massive archive of content, kind of like the Getty images of video, saying what’s cool here and what could go viral. But instead of it thinking about as a single viral hit, one thing that YouTube had done to create that platform, instead of it just being single URLs, the way they were attracting audiences, they had built the ability to grow channels.

9:37 So for you, the reason I asked, when you hopped onto YouTube, at some point in that evolution of that platform, they realized that people would wanna capture multiple videos over time onto their own channel, and then be able to ref people to the channel rather than just to a single video. absolutely ingenious move, because stickiness and cut through. We’ll keep coming back to that, hopefully, over the next course of this interview. But those things really weren’t possible until the channelization of YouTube began.

10:04 So once we saw that, we had the ability to parse that amazing archive against some creative input and say, let’s create a channel of great virals all the time. So in 08, there was pretty much, 808 and 09 even going into 2010, there was us sort of neck and neck with Top Gear in terms of views on YouTube. They’ve since overtaken us because we ran out of amazing wicked viral material for that specific channel. At the time it was huge. In kind of 2008 social media parlance, which was MySpace, we were bigger than the Family Guy and the Simpsons combined on MySpace’s own platform, which is also owned by Newscore.

10:44 So yeah, we kind of latched on to something that was pretty cool. And that was that top 10 list? Was your bread and butter? It wasn’t. It was a channel called Diagonal View, that’s how we began, same name as a company.

10:54 It’s a little bit like, if you imagine Viacom being called MTV, we didn’t know we had more than one channel in us. A couple of guys kind of going, that’s a cool video, let’s edit it up, see how it goes. And the co-founder of the business should be credited, you know, he was the creative genius to go, let’s create a channel of all virals that are amazing and see where that runs. So rather than trying to do it personality-based or maybe too heavily branded, the content spoke for itself and the channel’s called Diagonal View.

11:20 What that did is it allowed us to then learn from audience feedback on that channel perfectly because a clip only worked if people were socializing it. There’s no ad spend, no marketing spend to make stuff work, so there was no artificial noise. It was absolute purity in terms of signaling coming back. Pure feedback. Pure feedback.

11:38 Realized is that sometimes an animal clip would start to get some interest. But it wouldn’t get interest within certain groups, so not only could you get data and perfect data, but you could parse it into boys, girls, Southern California, et cetera, et cetera. So you could regionalize some of the feedback. And what you could see is repeat feedback from some people on, say, cats on skateboards started to be consistent, whereas maybe some of the other stuff, other data and other audience was a bit noisy.

12:02 So what we did is we took all of our content relating to animals and created a second channel called Yuzu, which sounds very simple in retrospect, but at the time, it was like, hang on, why would we ever do that? We have this massive audience on the diagonal view channel, why would you ever pull that away? The truth was we wanted that signaling to be even more pure. So we wanted diagonal view to just truly be virals, not about animals, and then the third channel we created was celebrities doing amazing things, because the celebrity stuff on diagonal view started to do really well, and we thought, let’s parse that into a third channel.

12:34 Then the fourth channel was, we started to see lists doing pretty well, and we thought, sort of, I shouldn’t take credit for it, you know, creatives in the space. So sat around one day and said, we have an idea for fourth channel, it’s going to be a list channel, because lists have gone very well, but it’s based on empirical feedback, so not only creative, but some quantitative feedback. And yeah, what happened is, we created a channel called All Time Tans, and that allowed us us to create even more clarity of voice. Because not only do you know generally that it’s going to be a fact-based clip, but also it’s going to be 10 pieces of information. Then if you’re a regular watcher, there’s always two or three takeaway items that you can take to the pub or your digital equivalent of the pub, say your Facebook channel or whatever it might be, Facebook page, and you can populate that saying, hey, aren’t I clever? Did you know …? And so that idea of takeaway style is probably the biggest change to answer your first question between 2008 and now in terms of the content we produce that’s probably our host style and what we’re known for in the marketplace those few takeaway items that’s probably the biggest change and you say take away is important because people engage off of the platform precisely and that brings them back and that off of the channel so it might be a clever youtuber who then kind of reposts your clear your clip or it might be someone who comments on it

13:56 A lot of our dwell time is so huge, we assume we’ve done some audience testing, and also in the comments itself, we see that a lot of people are Wikipedia-ing our list to fact check. How many times have you been wrong? You know what’s really cool, I’m going to give away a little bit of our special sauce, but what’s really cool is when you’re wrong is when you really make some good money. So- I say it’s good to be wrong. Yeah, it’s good to be wrong.

14:19 At least you get the haters then, but the thing that’s really cool in terms of special sauce is not to attract haters, it’s to take a point of view in terms of our own top 10. So some of the things are not necessarily quantitatively top 10. And what you might say is this is, in our opinion, maybe three through seven, it could come down to a little bit of a judgment call. Even better is when Wikipedia is wrong, because Wikipedia is crowd sourced. It’s not always 100% right.

14:45 And also Wikipedia is a moment in time. So the top 10 most earning Super Bowl commercials might have improved since 2013. So one of our clips might actually be at a date. That’s just a simple example where someone will fact check it and say, oh my God, this is wrong. And then what happens is we have an army of about two to two and a half million people who will then go and say, you fool, this was published in 2013.

15:08 Wow. That’s quite an evolution. And in the last year or so or two, has your business model changed completely? I mean, there wasn’t any advertising when you started. Wasn’t any advertising share with YouTube?

15:20 What was that? I believe it was a share. It was just a bit like having the square root of fuck all. So am I allowed to say that type of thing? Yeah, you can actually.

15:29 One of the beauties we have here. And it’s only marginally bigger than fuck all now. So the return is not TV ad rates. I mean, we’re not getting $75 CPMs, but it’s certainly bigger than the pennies that we used to receive. I think in terms of our model, we have been on YouTube since day one.

15:47 The business has been around, but most of our money came in from the other platforms, so from MSN, Yahoo, AOL, and several other sort of syndicated video platforms, and what’s cool there is that those are professional platforms, so they can pull in professional ad dollars, and so we got paid very well, they’re very stable in terms of ad rates, very stable in terms of audience, because they’re well-managed, whereas YouTube, it’s self-managed, so it’s It’s only as good as the audience you can pull in. It helps when you’re good at it, and it’s very difficult when you’re not good at it. I kind of make the analogy, it’s a bit like swimming, right?

16:23 If you’re not swimming very well, you’re drowning. If you’re swimming very well, you’re getting from point A to point B saying, hang on, isn’t this a great way to get around? And YouTube is a little bit like that. We’ll get into the second part of our business, which is not just producing, but helping professional content owners on board and then better manage their audience and their content on YouTube. It’s a skill set that we’ve developed over the last couple of years, because we had to do it in-house if we were serious about YouTube.

16:48 And since there was money on YouTube, we wanted to be serious on YouTube, so we developed a second part of the business in the audience management side. But to answer your question, YouTube’s now, I think only just recently, probably about 50% of our revenue. Okay, and before that, it was actually licensing your content to the other networks, or the advertising revenue you got? It’s still on a rev share. Rev share, okay.

17:10 Yeah, we’ve done very few kind of upfront or minimum guarantee deals. Okay, and is that dropping on those other networks as YouTube gets more and more market share? It’s not. It’s not, no, there isn’t much cannibalization going on. In fact, you know, there’s competitors who are trying to base their whole business model on an off YouTube strategy in the hopes that that does someday become a viable model.

17:33 It’s incredibly difficult. The way we put it is it’s a little bit like being good at nine hole golf. I mean, can either of you two name me the number one nine hole golfer in the world? Okay, do they exist even? Is there a league table? Highly unlikely. But you can definitely name some people in the top, say, five or ten channels on YouTube. They’re household names now. It is the world equivalent of 18 hole golf. The way we put it is to be good at nine hole golf. You want to be good at 18 hole golf because you can also go and impress some friends on the putting range. But right now, YouTube is the game.

18:07 Well said. Yeah, I have to agree with you on that. Okay, before we delve into all the nuances and you want to talk about basically, is that an MCN model, your multi-channel network when you help other people or do you not use that phrase? It’s a great phrase. So, one of the board members of a big US media company came through, I think they’re either number one or number two in the world, and he said, you know, I’m doing due diligence on behalf of the board on MCNs and I said, well, can you tell, can you define what an MCN is?

18:34 And he said, no. And I said, you know, it’s not a one acronym catch-all phrase. So when we started out, we were a multi-channel network because there were multiple channels. They were in a network, but they were all our own produced channels. And so we could have stayed there and done that in the same way that, I don’t know, maybe Disney runs its own suite of channels.

18:55 But I think MCN implies managing other people’s content, or it should. It does these days. It does these days. It did a year ago. That’s constantly changing.

19:03 I think probably YouTube coined the phrase MCN. If they didn’t, they picked it up off of some other really smart person and then popularized it. I’m not going to say that that’s how Google makes money because it would be far too easy of fruit to pluck from the tree. The idea being an MCN usually implies working with third party content. We do that to some extent, although what we believe is that there really needs to be a strong business reason, business rationale for someone to be in our network versus is having simply a commercial relationship with us.

19:34 They may have their own network, but need our skill set. More want to collaborate with us in certain verticals, and we’re more than open to that. Because every YouTuber who has a channel of decent traffic gets contacted by the usual suspects. You know, I could name them, but I won’t. And they say, OK, be part of our group.

19:52 And well, a year or two ago, it was, we’ll raise your CPM rates. We’ll give you cross-pollinization. But they didn’t necessarily have a really good reason they should partner with them. And I think it’s becoming more and more obvious not to go with an MCN these days unless they actually bring certain things to the table. And I’m guessing that’s how you choose your people.

20:10 I think there’s two questions there. One is what do MCNs actually provide? And two is how do they evolve at all? So if we roll back the clock, let’s put how do they provide value? So the former question, let’s put that on hold for a bit and talk about the latter.

20:25 So MCNs evolved really in two ways in the early days. One is, back to the first comment you made on YouTube, it can be a very lonely place. And the idea to have the ability to just idea share is pretty much welcome, especially when there’s some money on the line, right? So you’re a creator, everybody thinks they’re talented. You’re a talented creator, you start to get audience, it feels like all the right things are happening, but no money’s coming in.

20:54 One, you can ask for some help, and there are all kinds of communities, blogs, et cetera, online, outside of your MCN that can give you some salient advice. And it’s great. I think it’s probably, for me, it’s one of the greatest things about producing content right now, is the feedback loop is incredibly tight. You can, people are very open, whether it’s critical or not, or supportive, 90% of the time they are very supportive because they can see you’re putting your heart and your energy into this stuff.

21:20 As long as your heart and your energy in the right place, it really works. So that part of a community, that’s not what the MCN stands for, but that community to me is vibrant, alive, and can be accessed whether you’re in an MCN or not. The piece that early day MCNs came along with was a check. So they said, I’ll pay you, let’s pick a number out of mid-air, five bucks for every thousand views you get. Knowing full well that YouTube was paying people, let’s call it a dollar, maybe two dollars so I don’t get in any trouble with my peers.

21:54 And so of course you’d take that phone call. Of course you’d click the box or sign the document. And there were kids who were underage signing documents. It was the Wild West. But when you’re coming from a lonely, dark place where you don’t have any friends and you’re wondering where all the money is, you’re probably very welcome to jump into the warm water.

22:12 And because we’re a content producer, MCNs would come to us and they’d say, come on, here’s the deal, and so on and so forth. And why would they do that? Because they expect to make more money from you in the long term. Yeah, where’s the spread coming from, right? YouTube pays them too and they pay you five.

22:27 That’s venture capital. It’s just, yeah, exactly. You get WhatsApp that gets sold for 19 billion, just buying users and audience and eyeballs. WhatsApp is probably pretty profitable. But yeah, you have an arbitrage model where if you can build value and close the gap, then you’re in business.

22:48 So going back to my spreadsheet junkie days, I was in investment banking before I had started my own business in 2001, 2002. There’s three ways to value business, cash flow, so there’s no cash flow. Two, asset value. So for example, a gold mine that hasn’t been mined yet, doesn’t have cash flow but has high asset value. So there might be asset value to an MCN.

23:10 We should probably parse all three of these, or three, there might be some future value that you’re building in some way, shape, or form. $19 billion was not current cash flow of WhatsApp, but in terms of future value, it might have had it there. So contained value is kind of the catchphrase within venture. Let’s just go through each of those really quickly. If we think of cash flow, I think, well, going back almost a year, we’re the only apparently profitable MCN.

23:38 We’re told that by a very good source. I’m not sure if it’s true or not. There’s probably others out there. They’ll be ringing me as they say this. But in terms of the ecosystem, there aren’t many that are cashflow positive.

23:48 And even us, we’ve been on each end of it. As we’ve invested in new channels, new IP, we’re constantly kind of, rather than looking at our P&L thinking about how much value we’re really creating. I think when it comes to the MCN question, cashflow maybe wasn’t front and center. So let’s put that one aside. The second one is asset value.

24:05 And I think probably the biggest point of difference between diagonal view and almost every other NCN in the world is not the cash position because we haven’t had any venture money, so we’ve had to be very tight. It’s actually the second one, which is what assets have we been making? When we talk about all-time tens, which is that top channel you were referring to, some of the top clips in terms of earning us money today were produced three years ago. When we look at vintages of content that we’ve made, we make more money on our 08 produced content this year than we have in any other year through the higher ad rates, more audience, better content management, i.e. kind of what we do with it for those third parties.

24:44 So when I look at contained value, which is owned IP, we’ve built up a massive amount of that. And this could be an old top ten list from 2008, 2009 that people are still watching and there’s still seven of ads. If somebody offered me the digital rights to Star Wars, I’d bite their arm off, right? Not for necessarily the money I would make this year, but the money I would make into perpetuity. Do you repackage that content from the past?

25:04 Sometimes, if it’s relevant. So if we can find a reason to bubble it up, say we’re making top ten most dangerous places revisited will attach in a playlist, the original top 10 most dangerous places. So there’s some bubbling up, some is just occurring naturally, but probably the most important part, Brian, is when it’s made, we think about it as an evergreen piece of content. So we’re very, very rarely chasing ambulances. Which is rare for YouTube.

25:27 There’s a lot of content that has no shelf life, newsworthy, football goals, scores, that kind of thing. So our biggest football clip, we’re one of the largest channels, if not the largest channel in Europe, in football, it’s called the Football Daily, plugging my own channels here. Shameless. Okay, I’ll stop it. Can I even do a shout out to our advertisers, because you opened with that.

25:48 Yeah, sure, it’s fine. You want to thank your wife while you’re here? Jesus. No comment. Okay.

25:54 The, I think the, that’s pretty good, two award ceremonies this week, so I got to work on those speeches. I think the bottom line is on tens or something like to that effect, that we think about like Messi versus Ronaldo on football. How long is that gonna be relevant, right? Messi versus Ronaldo when they’re top players, it’s gonna be relevant for years rather than the moment in time. So if we said here’s Messi’s reaction to such and such, that’s only maybe a couple of hours worth of heat in terms of trending.

26:29 But Messi versus Ronaldo, it’s proved to be somewhat timeless. Right now, our top football clip is Pele versus Maradona, I believe, and Naimar will start to come up as Brazil gets more relevant, but it’s these types of things, and those clips were made years ago, that just keep buzzing, and there’s many, many, many examples of that. What do you get the footage from that? Do you have to buy that or source it? Because from the beginning, it said you’re working with Getty Images and all that.

26:53 A lot of just initial YouTubers, they wouldn’t have thought of getting access to that footage and then combining it. Yeah. I mean, we went kind of for pro content day one. And our ambition was to build a major producer of professional content online and we’ve succeeded in that. So yeah, it’s a good question.

27:10 I didn’t really talk about the early days in terms of operationally or our rights deals, but that’s what we’re known for is we have the rights to the moon landing if we want to use it. We have the rights to Muhammad Ali and many, many, many other well-known personalities ranging from JFK to Snoop Dogg. How do you get that stuff? You license it. Okay.

27:30 And you’re first in. Yeah, you don’t need to be. You don’t need any privileged position. I think in the new world of media, it’s all about tone of voice, building audience, and building that point of view that people want to keep coming back to your channel, and you get known as the guy. To me, it seems like exclusivity deals or long dated contracts, those are a thing of the past, where if you’re not doing stuff with it, you’re cheating your partner, and you should be handing that contract back.

27:58 What did some of these guys say to you when you went in 2008? Right? Which guys? Which guys? It’s just like, you know, you’re trying to, you know, license their content.

28:07 I’m going to put your content, recut it, jig it up and put it online and they’re like, yeah, sure. What line? You can’t make any, what line? Or, you know, you can’t make any money online, right? Well, we talked about the circle line earlier.

28:17 That’s really what they thought. It wasn’t quite that bad. So going back in time, I had competed against a couple of them with my previous business and competed in an honest and hopefully honorable way. And so when I went to speak to them, they sort of knew what I was about, appreciated the vision that online was going to be big, also appreciated that they didn’t have the commercial kind of resource or structure to be able to bring the asset to life. And so when we started, it was really some vision, but also some reality that they needed a partner, an operational partner.

28:52 To monetize this dead content that really they could do nothing with? I think it was evidenced within the first 30 days we’d done more views on this single laptop on diagonal view than one of our early partners had done in their entire lifetime online in 30 days. Did they not want to go it alone and do their own piece and set up their own YouTube channel? I mean, are we talking like big studios and big media? Yeah, you’re talking about the biggest rights owners in the world.

29:16 It’s just strange that they wouldn’t license that stuff and do their own digital. It’s point of view. It wasn’t like we were the first company to come along and say, let’s do a syndicated media deal. There’s EPKs that are buzzing around, there’s press kits, there’s a whole syndicated news world that’s existed for 50 years. And so in that way, it was not a different model than they saw.

29:39 It was just a different platform, which was digital. There’s two key pieces to it. One is getting the right of edit. So we’ve kind of talked, because you guys see us now as big grown-up business, we think about it as the stuff we’ve made. But in the early days, they probably did have a massive risk factor against, oh my God, are these gunners going to take what is some of the best-known content, best-known personalities in the world and mash it up into something that, yes, is massively commercially successful but creates a gigantic liability.

30:08 And when we explained to them that the vision was to create these audiences and a real asset that we could keep going back to, that we weren’t just trying to create mega hits that would flash up one day and be gone to the next, that’s when they really saw that there was a proper long-term partnership approach. I think even fast forwarding now, five years, six years later, I think the relevance of our skill set is even higher because we went to, like I said, competing on parity pretty much with Top Gear and some of these other major media brands pretty quickly even on YouTube where we really weren’t focused because there wasn’t that much money. We got there very fast, but it wasn’t as noisy.

30:45 I hear now there’s a million YouTube partners, i.e. people getting checks from YouTube every out there are a million creators. They opened up the partner application of a year, year and a half, and let everyone become partners. Which is when I was going to get to the third part of creating value, that’s probably the most value destroying or worry if you’re a traditional MCN today. So before you used to say, hey kid, you’re not getting paid, we’ve got this future goldmine here that we’re going to open this up to for you.

31:18 We’ll teach you some things. Here’s a PDF. We’ll pay you a little bit of money in the meantime, some arbitrage between today’s ad rates and the future ad rates, but what we’re really doing is welcoming you into the warm water of YouTube. Get out of the cold, come on in. When they opened up their partner program, for me, that would be the thing that’s scary as hell with the traditional MCN model, just to finish that one, two, three.

31:40 It made a lot of MCNs really wonder where their value was. What are they adding value if you can go become a partner on your own? Some of them wouldn’t even have thought that, which is even worse. But yeah, it’s a head-scratching moment, I think. If any of your perceived value of your company is either one, you can outsell Google.

32:04 If you can out-Google Google, by all means, you’re better man than me. So if your business plan is predicated on higher ad rates, wow. And some are. Go for it on your own time. Secondly, if you think that you can use other people’s IP and make more money than they could on their own, for me, Moore’s Law applies.

32:27 And I’ve seen the knowledge curve in this space, take that arbitrage and reduce it to very little. And I even know, I mean, I know some of these MCNs, CEOs and founders extremely well have for a long time. And they say they’re getting outsold already in certain markets by YouTube. How does Moore’s Law apply to using someone’s IP and getting better rates than they could on their own? Maybe you should explain Moore’s law real quick just in case.

32:48 The speed of technology is going so quickly that if I want to know something, I want to know what your MCN is. I’m probably only two touch points away from getting that. Knowing what I know. Correct. Okay.

33:00 And what’s amazing about that is five years ago, if I was doing a TV deal and trying to find out what the other producer’s getting, it’d be almost impossible. And that to me is absolutely amazing. So then coming back to what is the value of an MCN, is it knowledge? Not really. join a community, be well informed, or even just watch some Googled term MCN feedback in YouTube and watch some very informed 14-year-olds tell you about their contracts.

33:24 It’s amazing what you can meta-learn on YouTube. I tell you all the time. You can learn how to learn anything on YouTube, even learn about YouTube. Well, YouTube actually put up a slide on how we were paying people, the major MCNs in the world, on an xy axis. And when I asked them how they found that information, they said, we Googled it, which I thought was brilliant.

33:42 Again, we don’t have venture capital in our business, so it’s not like I have to worry about that kind of thing. I think you asked me, while we’re still talking about the MCN piece, I don’t want to dwell on this, because it’s not what this meeting’s about. But as an MCN, what we really believe in is then adding value. So question mark, how do we add value? Number one, we have our own owned and produced IP.

34:03 So that stuff, we live it, breathe it, love it. And if you came to the office, the second floor of the office is producers, researchers, editors, guys operating cameras, because now we film our own stuff, and working with talent every day. And that’s owned IP. And that would probably get 80 to 100 million views a month, and that puts us in a very, very, very large, and it’s a very large number, it puts in a very small pool of producers in the world, in terms of MCNs.

34:34 I can’t think of other groups that compete at that level, but again, I’m sure they’re out there, and they’re, you know, send me an email. Who does compete at that level? Now you’re talking major media companies that compete at that level. I don’t know. From MCNs, I don’t know.

34:46 I know they talk about putting XYZ amount of money into productions. By production, it’s 100% of that money flowing to their bottom line. I don’t think so, but still, the media world can be opaque when it needs to be. Do they have 100% control of that media? I don’t know.

35:02 Yeah, so I would hesitate to guess. I know from looking at other business plans or from other partners who we manage in a formal basis, it’s a big number of produced and owned IP. So if you look at our company in that side, what’s interesting around that is if we bring in a new channel into our network, as we’d call it, say we bring in a music channel and they say, how are we going to amp up our current traffic in terms of views or subs? We can say we can use your music in the top tens, we can use your music in diagonal view, piece of content and we know that even if that doesn’t increase views upon today, we can say that we have current traffic of X and those people now know your music, which is incredible.

35:48 I mean, it’s a true value add. The second thing is there’s a couple million people watching that content every day and we can do little reference points, annotations, click-throughs, et cetera, that if we want can promote members of our network. The main thing is not around basically the money. It’s about trying to build a real network of activity. That part is the most exciting part of our business is that we get to actually bring in some like-minded producers and say, how do we create something really cool together?

36:18 That creation of content, that depth of IP is what really gets us excited. For example, what would that be? Something we’ve done recently is we’ve extended our all-time tens channel that you very very kindly said is one that everyone’s talking about. It’s a great channel, I have to say. Do you have a couple of channels?

36:37 Well, yeah, I was just going to say we’ve extended that now within our own network to all-time conspiracies. All-time numbers is in a soft launch at the moment. Go and have a look. I love these plugs that I get to put in. And then the fourth channel.

36:51 We’ll click throughs on the video later. As long as it’s metatagged, guys. The fourth one, which is actually then in JV, is we We said to a large and successful television company called Zig Zag, they produce TV shows, why don’t we create something called All Time Magic? Their television success, specifically in the magic sector, puts them in a market position where they have 20 magicians on call, 2-0. Instead of the magic channel being hosted by one magician, which could get a little samey, maybe he’s the end of card tricks or I don’t know, illusionist, we get 20 points of view on magic.

37:27 So it would have to be very poor and uncreative for that channel to go dead, because you have 20 creatives inputting their tricks all the time. So you bring the 20 magicians into your studio as they do? In rotation, doing different things. Now some of the friends of Diagonal View, people who aren’t even in our network, massive YouTube stars have been like, oh my god, that’s such a clever idea. How can I help with all-time magic?

37:49 So they’re going to star in the clips, and sometimes they’re going to kind of be the mug or the pigeon who gets the trick done on them. they’ll be collaborating and there’s just this kind of openness to creating that and really bring that energy in and already what’s happening there is it’s gotten us to think, okay, what other production companies should we be thinking about with that same point of view? How can we take some of their TV properties and kind of YouTubeify them in a way of taking either original recorded material or new material and saying, let’s take a diagonal view on it and plug it into YouTube.

38:21 That’s why the company’s called Diagonal View, right? What does that mean specifically? So it’s a double meaning. One is we take a new view on content. So even if it’s already been recorded, we’re going to re-edit it and position it in something different that’s highly applicable and specific to digital and social media, obviously.

38:37 That’s one. And two is diagonal view. When you look at an EPG, you’ve got your channels running one way and your shows running the other. So we’re neither a show nor a channel, because that’s not how people watch stuff on YouTube. They watch it on a diagonal.

38:51 Okay. Which means they go from piece to piece. They don’t stay on a channel? correct stay on yeah they like if you’re on a Rihanna channel shoot at the end the n-board might be pointing you to some new talent right so you no longer in the Rihanna channel you’re still on his music video but just not the Rihanna channel you minute flip to another channel so you’re on a diagonal across the EPG it’s a bit conceptual if you’re not a TV person but pretty much everywhere in the world has EPGs now so I don’t think I’m off-piste with that okay I know you want to ask a question I just want to ask really quickly you said incorporating YouTube stars a lot of youtubers you know use the famous as a YouTube star and they collaborate with each other and stuff.

39:26 Do you do a lot of that? Because I don’t remember you doing that per se. What’s so amazing about that question is I could give you a hug right now. It’s not the hug that makes me excited so much as the question itself, which is we were and still are one of the market leaders in collaborations. But the reason that question is so good is it doesn’t feel like a collaboration.

39:50 It’s a little bit like having an advert at the beginning of the show if you feel like it’s part of the show, that’s an oh my god creative moment. And you’ve just given me an oh my god creative moment, so I thank you for that. We did, for example, the first collaboration between KSI and anyone, and it was real Ferdinand. So we managed real Ferdinand. Professional footballer, great personality, amazing group of friends. We brought KSI in who is also an Xbox fan, and the two of them played a video game together. Totally natural collab because they’re both video game fans, totally natural because they’re cool dudes, didn’t feel like a collaboration.

40:24 Now, what is the secret to that is if I was running an MCN and I was being paid by other people or expected by other people to organize these things, then I would have to wedge inappropriate audience into those channels. We’ve seen it happen time and time again. You get a big spike and you say to your constituents, hey, didn’t I do you a massive favor? See how this collaboration worked out? The trouble is it was an inappropriate collaboration.

40:47 So now you have two audiences who don’t like each other. The best thing that can happen at that point is those audiences can go away. The worst thing that happens, and it happens more often than not, is the haters stay, and they start trolling your channel. I’m not going to say that MCNs are a broken model, but certain market forces are no longer in play. I think overbidding for CPMs is a dangerous game, selectively maybe, but know that you’re you’re writing yourself a short-term contract.

41:22 Two, inappropriate collaborations don’t work. And three, we’re all grownups. If we’re not providing value at a material level over time, we should find something else to do. You know, they’re calling this, Matt’s unlike any of you guys we’ve had really before. Just because it’s a startup, but I don’t know.

41:37 You know, you’re not the guy that’s looking for the next round of capital. It sounds like you looking to fund yourself with cashflow. And no, I mean, I’m kind of in trans listening to all this stuff, but what do you want to ask? Are we geeking out? You guys are geeking out on me a little bit because you guys know so much about YouTube and I’m I’m a new YouTube guy But you know, it’s it’s interesting. I think some of your comments are fantastic I think you know I perhaps I think be cool to touch on just some of your your history from from how you arrived where you are now and Where you where do you see it going? Is YouTube is having your own YouTube channel?

42:10 Like having your own website in five years. Do you know I mean, I’m just curious where you see this going in the next five years Where’s the diagonal view going as well? Does that require financing in the future? Does that require that YouTube’s business model stays the same? I mean, YouTube changes itself every six months and rarely gives you notice where it’s going.

42:28 I wish I had a pen and paper because there’s four or five questions there and all of them are excellent and require a very thoughtful answer. So I’ll try and go through them in order. Although memory is not my strong point. I have an infant child and memory has never been my strong point particularly at this moment in time, it’s a stretch. Okay, let’s go Future of Diagonal View.

42:48 Can I back it up a little bit? Yeah, go for it. So the idea of is a YouTube channel, the equivalent of having a website. So I would say to 90% of the internet, if you don’t have a YouTube channel, you’re not on the internet. So if I was making shoes, I’d make sure I had a good appropriate YouTube video for those shoes.

43:17 So it’s kind of 10 years ago, if you didn’t have a website, then you were nothing. You had no presence on the internet, correct? So now you’re saying 10 years now or at this moment in time, if you don’t have a YouTube channel, then you don’t have an internet presence. Except imagine if the internet was 10 years more important than it is now to your business. So that maybe 40% of your shoes sold online, but you don’t have a video of those.

43:42 So basically, the second largest search engine in the world has no information on your product. More importantly, it has information on your product that’s probably user-generated. So you’ve missed two tricks. One, you haven’t put in a link to that user-generated content thanking them. And two, you don’t have control.

44:00 So what you have is not the internet 10 years ago. What you have is the internet now with you actively participating and not wanting to be relevant. It’s a conscious choice. And it’s amazing how many big name companies, their YouTube channels are just horribly managed and run and just, it’s just almost like they said, okay, I need a YouTube channel, so I’m gonna go register the name and do nothing with it. And that’s where I think your analogy of 10 years is a good one, right?

44:29 They have a URL, they’ve done the domain claim and nothing with it. Except again, there’s the amplification of the last 10 years now looking at that domain saying, muppet. There’s two natural hurdles, sometimes three. The first is video’s not as easy. So when you start to film someone or something, there takes an expertise to it.

44:50 And that’s where, for us, for four years, we only made and managed content online. That’s what we did. And then in the past two years, we started to manage some third-party content, all of it professional, on YouTube. And so, we come from that making stuff background that has a very, very high bar. And I think probably not raising venture capital is the best thing that happened to us because we had to keep the bar so high in terms of what we made that it just kept the riff raff out.

45:18 And so, if I’m a brand right now, I’m thinking, oh my God, I’ve got to do this. If I put my adverts up there, you get the haters. So, it’s really the idea of how do I create a narrative for my brand online in video. So, there’s two questions being asked, video and online at the same time. The second part is you’ve got some other smart guy going, well, how are we going to make any money at that?

45:38 What I would love to know is for one of these, say it’s a sneaker brand, how much money do you make off the advertising on your own website? There’s this expectation that if I’m taking time and money producing stuff, I should have a comeback. The truth is no, you should just be there. If you’re not there, you’re not really online. I don’t think it’s far off.

45:59 I think, you know, in terms of where you said, where’s the next five years going? That is certainly the proliferation of professional content, whether it’s online or specifically on the 18 whole course of YouTube. I think it’ll be on YouTube and I think we’ll see a hell of a lot of it. Yeah. Okay.

46:17 Dagen, with you going forward, what’s the next two years, five years for you? Is your business model going to change radically and is it really dependent on what YouTube does? I’d say in the past 12 months, YouTube’s doing a lot of the right things. It’s pretty amazing. Their corporate governance has improved a lot, their business acumen has increased a lot, so there’s confidence from us and trust that’s increased in terms of our balance sheet.

46:39 We now can deploy against it with some certainty, which is really, really helpful. We don’t have a lot of capital to hit banana skins, so we have to execute pretty impeccably. To hit banana skins, that means not to take too many crazy chances. When you’re walking down the street and you hit a banana skin, you hit the back of your head on the cement. We can’t do that too often.

46:57 You need to bet on sure things. You need to bet on sure things, and YouTube is feeling like a surer thing, touch wood. But I think if you look at our CPMs as a company over time, so CPMs being the ad rate on our content, on an average, because now YouTube is improving so much, our CPMs keep going up. We’ve always been good at getting views, even way back to the days I referred to on MySpace, et cetera. We’ve had very sociable content, all of it professionally produced.

47:29 A lot of P&G and car adverts on there, Procter & Gamble, car adverts, really high CPMs. But now those ads are starting to gravitate to professional content on whatever platform, including YouTube. And so for us, it’s like the whole thing has started to move in a really commercially exciting way. So in terms of would we like them to do more, if they could just keep doing what they’re doing, that would be amazing. Better business acumen, better corporate governance, better ad rates and professional content.

48:01 That feels to me like a good place to be. There was a recent article in the New York Times and they were featuring some of the younger people with YouTube channels and talking about how the CPMs had kind of dropped from say $9 average down to $7 average and how they’re having a harder time completely running their entire, you know, small media empires on ads in YouTube and how, you know, maybe even two out of ten of those ads are even getting served up. That’s the thing.

48:26 There isn’t the inventory and, you know, I think it’s something that any real YouTuber has known for a long time that you cannot survive on YouTube ads. You have to have some other revenue stream, whether it be a corporate placement or selling t-shirts or something like that. People say that. I don’t know if it’s true. Okay.

48:43 Which part? Yeah, I was going to get to that. But I think probably the New York Times does its research, so that part is probably true. I think the broad brushstroke of saying that CPMs on YouTube aren’t high enough is exactly that. Because there’s a lot of nonprofessional content.

48:58 Precisely. Yeah, so I think if you’re kind of making it a hair and makeup channel, probably hair and makeup advertisers want to be on there. They’re large. There are large MCNs who can bring in that ad, which is amazing, backtracking on the MCN model, there’s value there of aggregating and then selling a vertical. So chances are if you’re making hair and makeup and you’re a powerful channel, you’re probably doing really well because it’s an attributable market that’s looking for advice on a product and a product that can be sold fairly easily via an advert.

49:29 So that to me, I think that CPM is probably fairly high. I don’t have evidence. That’s why I can speak about it, but I would imagine it’s pretty high. If you’re a kid recording someone else’s IP, putting your voice over the top of it, is it even your IP is where I would start that conversation. Secondly, will an advertiser go on that? Don’t know because it’s not your IP. Thirdly, even if an advertiser wrote a check for $100,000, probably they’re not writing it to you directly putting it in your mailbox.

49:55 So you don’t know if that money is going to come in and they don’t know that you’re going to be there tomorrow making another great, wonderful, amazing clip without using the F word. So there’s an inconsistency or at least a lot of questions that need to be asked about probably 95% of the content on YouTube, whereas that 5% that’s run by professional studios produced for the platform, that’ll probably keep attracting, well has attracted and probably keep attracting more and more money over the next few years because there’s consistency of product. And also, as we’ve grown up, there’s just greater audience because audience is starting to gravitate to more pro content over time.

50:31 What about diagonal view? Is it something that you need to scale to survive in the future? you need more investment or it sounds like you don’t necessarily. You guys have grown organically very well for the last six years. Yeah. Yeah. We’ve grown organically. I think in terms of support, you know, well, let’s get to the, let’s do the next three, five years. So in three years, we’ll be nine years old as a company. I think where we’d like to take the company is to have in the next 12 months, probably next 16 months, we’d like to get to 10 million subscribers on our own content. We’re at just over 3 million on our own content today. So 10 million would make a pretty big footprint. We have a plan that takes us by the end of June to get there.

51:12 So that’s execution piece number one, and we’re really excited about it. We’re putting more money into developing our current products and further product suites in terms of what we make. We just went above on our managed channel side. So the other segment of the business, we just went through 23 million subscribers. So that’s content that we either make or we manage for third parties and that’s a big number to get into that areas even not geeking out.

51:41 It’s just a lot of people watching a lot of content. Just so people know, getting subs, when someone clicks on that subscriber button, it’s a major investment they’re making. They’re actually going out of their way saying, I want to see this again and it’s very difficult to do. Getting views is one thing. Getting Twitter followers is another thing, but getting subscribers on YouTube is quite It’s quite an accomplishment.

52:02 Well, you’re getting two things when you get a sub. One is you’re getting a direct channel into their email inbox, which is awesome, because when you update your channel, they get notified. They usually get notified. Nice one. Yeah.

52:14 Then the second one is you’re on your home page. So that’s pretty cool, right? When you open up YouTube, if you’re a subscriber, Bosch, the channels that have updated content, then update your home page, which is really fun. So there’s two touch points, maybe more to come, who knows? YouTube’s pretty good at that, right?

52:31 They are a very, very good platform. They know how to manage that. So in terms of where we’re going on the managed side, I think what we’d like to do is go into some co-productions with some of our partners who we manage content with, coming back to that IP thing that’s so close to our heart. I think we’d like to understand how we can take a diagonal view with them, rather than simply managing that content to sit alongside of them, maybe take some risk in terms of some productions, but a calculated risk, knowing we have audience reach to 23 million people when we make stuff together.

53:03 And so that’s maybe the next two years. There’s just some big numbers. I’d like to do that. You’re not sick of YouTube. You’re not sick of making it on my video.

53:12 I’m just getting excited by it. I think early days it was some pretty hard work. The uncertainty was the toughest part. About their business model or? Just about where their agenda was at.

53:25 But now it feels to me like this is a proper partner. They’ve done some great things in terms of extending to mobile and supporting that as a new platform. They’re now starting, it feels like they’re starting to extend on to television as well. Just under 1% of our views are already on TV. I mean, we’re making some pretty impeccable products, you’d imagine it would transition to TV, or you’d hope, but- Through like smart TVs.

53:48 Through smart TVs. Okay. Yeah. Even version, you know, cable and stuff, you can get a YouTube channel now. And there’s also entire television programs that just feature YouTube videos as well, right?

53:57 Which is maybe the next thing for us as a company, right? We’ve only done short form video so far. And if you imagine a tens list, it’s over two minutes, sometimes three minutes in length. We’d like to extend into a bit longer form. All the cool kids are doing long form content.

54:09 And we’ve got a lot of content. We’ve got a lot of professional content that should transition very easily to TV. I think we need to find a production partner who may be willing to take a bit of risk together and then transition there appropriately. We’ve never launched our own website. So none of our properties have properly built and managed websites.

54:26 So yeah, even though it’s the internet, I’ve just turned this thing on called the www. And you don’t need it. It’s going to be big Sunday. You’re like Instagram. You don’t need the internet.

54:34 Well, we didn’t go there to start. But I think in terms of having a direct relationship with audience, it could be a pretty cool thing to do. Again, I probably said it four or five times. I’ll say it again right now. There has to be a reason for audience to want to go there.

54:47 There has to be a reward, a bit of give back from us. We started to crack that code internally. We have some pretty tough creatives to get over the line, like saying, no, that’s not good enough. So when we launched something, we wanted to feel really special and worthwhile for the journey to come to that site. That’s why we haven’t done it to date.

55:03 It’s interesting to see a venture that’s not venture cap funded and how they make decisions that a normal business would make. Okay, we’re not gonna bet the farm on this. We’re not gonna go and expand in this way unless we know it’s probably an intelligent idea. What do you guys think? I mean, if you look at it from the outside, what would you love to see on YouTube that you don’t see today?

55:25 Yeah, you’ve produced a couple television shows. Yeah, I think TV is just completely dead. I think it just solves zero, just doesn’t hit any of my sort of pleasure points anymore. I don’t know that you can put those types of pleasure points on YouTube. Oh, there you go.

55:40 Well, some other channels maybe. But you just don’t have, I think the days of releasing a TV show at nine o’clock every week is totally ridiculous, and Netflix is sort of breaking that barrier and doing incredible, right? I think paying for subscriptions on YouTube is just sort of starting and I think that’s an interesting way of doing it where YouTube just becomes the TV of the future and you just, you know, go on and watch House of Cards or go on and watch these sorts of things. I think I don’t need a TV anymore and I think that’s where the future is, you know, having amazing content on YouTube and having it professionally produced and having it to a level that is equal or better than sort of what’s on TV I think is just a matter of time. Will people pay for YouTube subscriptions in the future? Ever.

56:28 Wow. Yes, ever is a long time. So there’s two things that I think are really cool about YouTube. One is that that nonlinear experience with content, I think that’s really cool from a functionality point of view. The diagonal. The diagonal piece across. And the reason that’s that’s pretty cool, and I hope YouTube’s spending a lot of time thinking about that, is that journey is facilitated by end boards and all those funny things within clips, et cetera, et cetera.

56:55 So it can be a managed journey where you get more of what you want without it feeling like it’s dictated. So they’re active choices you’re making. So one of the themes that we picked up on Diagonal View very quickly was the feedback loop. So if someone liked, if we A-B tested content, like we put up two clips at one time, which one did better, cat or dog. If people liked dog and then we made another dog clip, but we made a Doberman and a German Shepherd and they always went to the German Shepherd, we’d start making more German Shepherd clips.

57:24 So simple A-B testing of video. What that got us to was the idea that this isn’t just people watching, this is people participating and actively telling us what they want to see more of. And I think if I can say the second part of YouTube is not just that ability to click through, which is an active choice, but then to comment. After spending a good portion of my day on YouTube and seeing the activity, now when When I go to a longer form piece of content or something that’s been more traditionally EPG’d, I feel like it’s a bit of a dead medium.

57:56 It lacks that two-way heartbeat. There’s no conversation after the viewing. Precisely. Right. Okay.

58:02 Or both, or feedback loop, both of those things. Both. Just activity. Activity. Just that idea that content without a community is not really, I don’t know, it’s difficult for me to be the single arbiter of good taste, right?

58:14 I like it when there’s a cluster conversation around something, when it’s creative. So I think now that feedback loop is probably the most powerful tool that YouTube offers as there’s a community of like or dislike-minded or unlike-minded people who are participating in that content. So it makes it a, not just a platform for content, but a platform for activity and that’s pretty cool. You didn’t answer my question, though, on what you guys would like to see on YouTube.

58:44 On YouTube? Yeah. More London Real. No, I mean, it’s… More episodes.

58:50 I actively canceled my Virgin Media cable subscription about three, four months ago, and I’m so glad I did. I just shut it off. When I ever turned it on, it was making me angry. And now I get to choose what I want to watch, when I want to watch. But I think, also, we have to admit that the television is still alive.

59:06 It’s still going to be alive for another 10 years. There are still a large number of people that do watch it. watch it. When it comes to House of Cards, it’s an amazing thing. You can watch 13 hours straight of House of Cards on Netflix and it forces you to watch the next episode in like 15 seconds. You actually have to hit the spacebar twice to get it to stop. That kind of long form content is really exciting. We’ve been involved with YouTube and they’re big promoting serial content. They want people to tune in regularly on YouTube. They want to help them film that content. It’s going to be interesting to see how that goes forward.

59:38 Series you know made by these young filmmakers in their 20s you know with crazy ideas. I think Colin’s question there like around the paid subscription if I look at Netflix what it’s done so we work in diagonal view works in professionally produced content for the for a digital platform that’s our domain and really if I look at professionally produced content online right now there are two models the ad-funded model to your question of Are there going to be paid subscriber plays? That’s going to be a big crossover because right now that’s the domain of Netflix.

1:00:12 Right. Yeah. NHBO, I guess. NHBO in America. But I’d be happy to pay, rather than pay Virgin, whatever, say 30, 40 pounds a month for my TV subscription, I’d pay say 10 different channels, two pounds each and I got everything I want.

1:00:31 But you’re used to getting them for free and you’ve always gotten them for free. but then he wouldn’t have any ads on it. Yeah, no, I know, in theory I would, but what I really, I mean, it does sound like a great idea. And maybe it’s a mixed model. Maybe there’s house of cards with ads in it, and there’s house of cards for the subscriber fee with no ads in it.

1:00:48 And so that idea of a balancing of not only what content do you want, but what model do you wanna use, that I think is maybe the next play. And you could have an active take ads off the next 10 episodes. I could give that as a Christmas gift. That might be what I give Colin for Christmas this year, is 10 ad-free episodes of House of Cards. Maybe it’s a Valentine’s gift if it’s House of Cards. But that idea that there are almost now two religious factions, it almost feels like there’s the Protestants and the Catholics. They’re both in the Christian empire of digital video, but right now they’re two very different, slightly different models, which is one is a paid, all you can eat in the other one is a unpaid ad-based.

1:01:35 The reason that it’s so important to me is we work for professional producers who make some of the most popular content online in the world. And I think that it’s real money to these guys. And real money has always followed a pay-me-up-front commissioning model, not make-it-now-the-money-will-come. And so what that’s doing to take the five-year view is that’s either an opportunity or a risk for us. So the opportunity could be me understanding audience, understanding production costs against P&L.

1:02:08 I can take risk knowing I can get paid over three years rather than one check in 30 days that funds a show for the next 12 months. So information and knowledge can hopefully have us take a bit better risk in terms of producing professional content. I think if you’re a traditional producer right now, you’re kind of going, where’s my commission check? Yeah. Yeah.

1:02:31 Is this a three-year commission? Is this a pilot? Where’s my money? And that piece to me, unless someone can take risk with a balance sheet, is going to mean that whatever it would be, 99% of the producers in the world, professional producers, are just going to say, I’ll wait and see. So I guess my point being that Netflix, which writes those checks, may be the place for more traditional long form for a little while until someone managing the capital and balance sheet at a large company can say, let’s allocate x, knowing we’re not going to get paid back in the first 12 months of the episode of the series, but we’re going to have to take a longer view.

1:03:09 Well, if anyone should know that, it should be you guys. You guys have IP that continually gives you returns on your assets. Yeah, and we run a model. I mentioned those vintages of content. We run a model that looks at each quarter that that content has existed, whether or not it’s making us more or less money, and also whether that vintage, basically the area under the graph, is higher or lower as time has gone on.

1:03:33 Our vintage is improving. I mentioned 08. Is 09 following that same model? Is it better or worse? Because if you’re not improving as a company in terms of the return you’re getting from your content, then you’ve got to go and take another look and say, what can we improve to make sure that those graphs not only are going up, but that are going up at a higher rate than they were before, or else you’re not a learning company.

1:03:54 Last couple of questions. Your thoughts on London as a tech startup industry, I mean, I don’t know, are you guys a tech startup company? It’s weird, I don’t know if you guys qualify in the same way that a lot of companies that have been on here that have started 18 months ago and did their angel invest, that kind of thing. But what’s your view of being, I guess, around in a city that’s now talking a lot about tech startup? I think what’s really cool about that question is that undoubtedly there’ll be, I would hope that people with an informed view would be like diagonal views, not a tech company.

1:04:25 It’s a media company. And what I would love them to do then is to answer the question of how many silicon manufacturers are on silicon roundabout. Can you guys name them? Shortest grind. Are there any silicon manufacturers in the UK?

1:04:42 Okay. So none. And so therefore, we’ve opened the aperture from strictly being tech companies. And I think that that’s the opportunity within London, is now that we don’t necessarily need hard manufacturing, hard coding, but now that tech has opened up to being even an app company or a company that can build a platform upon even a platform, then to me, that opens up a London conversation. So that then starts to bring in an agency world.

1:05:13 It starts to bring in a creative world. There’s just different angles then that 30 years ago, in Silicon Valley, it was pretty literal in terms of that use of the term, whereas now it’s an expanded universe. So any company kind of can be that kind of a startup vision? Maybe it’s digital roundabout. Yeah, yeah, well we’re seeing everything from snacks companies to ad companies.

1:05:37 Everything is digital or tech now anyways. Except for the people who don’t have channels on YouTube. Right, they don’t exist. Sorry people, you know, we geeked out a lot on YouTube today and I’m loving this, but I’m gonna ask you a little bit of a personal question now, Matt, but something we ask everyone that comes here. I wish I’d seen another interview.

1:05:53 And that’s okay. If you could make a quick phone call to the 20-year-old Matt Hyman and give that young man a bit of advice, what would you tell him to do or not to do? Wow, I had two thoughts on the opposite side of the spectrum simultaneously. At first, I was gonna say work harder and then I was gonna say don’t work as hard. So, there’s this FT question which is talent or ambition, you read this interview and it says talent or ambition.

1:06:17 I think a lot of the world is around working hard and I think if you keep your nose to the grindstone, it’s a good thing. So yeah, that’d be kind of point one. The reason I would say don’t work hard is then at age 23, I took a job where I worked almost 100 hours a week for several years. So, at Royal Bank of Canada, investment banking? Yeah.

1:06:41 It’s an incredible experience. It’s like taking an MBA and an LLB in six months, which was great. LLB is legal degree? Not legal degree, yeah. I think that work hard would be my message to that 20-year-old, but the other one would be maybe be a little bit more greedy.

1:07:01 The model I’ve run personally has been to give more than I’ve taken. What I’d say is that sometimes that proof point, people kind of go, what’s in it for him? Yeah, I would have probably played my cards a little bit tighter to my chest. As in don’t give as much. Yeah.

1:07:22 I think I’ve… Or give smarter. Give smarter. Right. Yeah.

1:07:27 And make it known, right? So I’ll give my time or I’ll give a thought to people without really necessarily asking for anything back. And to me, London, it’s a tough town. I’m from a small town in Canada, where implicitly people just give back. Whereas here, you don’t need to contract, but certainly people are not shy about asking.

1:07:47 So watch yourself a little bit more. Yes. I would have watched myself a little bit more. Interesting. I thought you were going to say to give more.

1:07:53 You kids out there have to give more. We normally ask all sorts of other questions about the industry. We kind of cover most of the stuff. Is there anything I missed, you know, otherwise this could go on for another hour, right? Yeah, I know, I got a hockey game to watch, so I’ve got no more questions.

1:08:08 Work harder. Work harder. That’s what Matt said. Work harder. But I’m 32, so I’m talking back to the 20-year-old.

1:08:15 Colin’s burnt out. I’m burnt out. You know, just on a final note, YouTube has been essential to the growth and creation of London Real. It’s something that since maybe I had played with in 08, I always knew that when we started our podcast, which I guess I now call a weekly talk show, I knew it had to have a video component, and we had cameras from the very get-go, when a lot of people or just turning on digital microphones and trying to do that, because I just thought it was essential that you at least see the people that maybe you’re one day listening to, and our iTunes audience is 10 times the size of our YouTube audience, but I do believe that that initial touch point of seeing us is so important, and YouTube has been essential to our growth, and we’re trying to use it in all the new ways every week, and we’re trying to get the most.

1:08:56 They’ve been really helpful with offering the studios and offering help like that, but it’s interesting, we might not be able to make all the money in the world, But as a tool, as a distributor, as a utility company, YouTube is essential to getting our message out there. And so it’s just fascinating to watch how it grew and to look at the acquisition cost. I mean, at the time, I think Google spent a billion or 1.6 billion, which was like 0.01% of the company.

1:09:19 Facebook just spent 10% of their company on WhatsApp. And it’s just interesting to see at the time, people were like, what was Google thinking? It wasn’t profitable for many years. But now it’s obviously a no-brainer for them to pick that asset up. The platform, it is the market leader and it’s an invaluable asset, I would say.

1:09:39 At this point in time, people speculate about what it’s worth within Google, but some things don’t have a price. And I think YouTube is approaching that level. To get your message out there, you almost need to be on YouTube. Yeah, you most definitely do. And I agree, it’s very hard to quantify that.

1:09:58 As YouTube reminds you, they are the second largest search engine in the world. So like how can you not be on there? So it’s fascinating now because they say the WhatsApp, a lot of that acquisition was about pictures. And they said Facebook, essentially, if you think about it, is a picture sharing platform and that maybe they want to be in the instant message picture platform. And then we’re in the business of video.

1:10:18 So where does that come in? Is that something more in the future? What’s fascinating there is that I used to be in M&A. And when you look at YouTube, it’s grown organically for the most part. They’ve made one extraordinarily small acquisition, but other than that, that’s an asset that’s grown organically.

1:10:34 And I think that’s massively overlooked, that that platform is that powerful without having any bolt-on acquisitions. Being Canadian, when Apple became more valuable than Exxon, I remember the speculation through my Facebook feed was, how is that possible? Surely these companies, it’s a moment in time. And of course, being a cheeky bastard, I had to respond, Exxon is actually called Exxon Mobile. And it’s not actually a single company that they’ve grown through acquisition.

1:11:06 And I think if you look at that industry, that’s an industry that’s consolidated to grow, whereas thankfully, you guys are talking about and two businesses that have grown organically through sometimes raising venture capital, but probably sticking to their knitting, keeping a bit of the hedgehog principle rather than growing through acquisition relative to, say, the oil and gas and mining industry. And it’s something that we often overlook, because you can grow fast with other people’s capital. Yeah.

1:11:33 I hadn’t even thought about that with YouTube. Matt, I’d love to keep you here for another hour and pick your brain, but we’re going to move on. If you listen to us on iTunes, you can see all of our good-looking faces on YouTube. Our channel is SiliconReal. We’re on Twitter at SiliconReal Facebook.

1:11:47 If you want to help out, send us a message, hello, at siliconreal.com. We got a bunch of people helping us out, right? Yeah, a couple of guys helping us out, which has been great. They’re going to cut up some new clips and yeah, keep them coming. We need more help.

1:11:59 The more archives we have, the more we want to sort of turn those around and keep them fresh and keep spitting them out. Yeah, okay, awesome. As we say on Silicon Real, it’s about the people, all the best to you and diagonal view in the future. Thank you, sir. I’m very curious what you guys are going to come up with.

1:12:14 I am as well. It sounds exciting. So thanks so much for coming. Pleasure. All right, guys.

1:12:21 Take care. Thanks.