Ok, get a cup of coffee, sit down and get comfortable. I am about to go into a very long dissertation as to why Y Combinator's statement is both seriously short sighted and potentially dangerous for any new media start up. Ready? Ok let's go.

As the CEO of a media start-up and someone who has been deeply entrenched with every aspect of the Entertainment industry for the last 18 years, I have a deep understanding of "Hollywood" and the ecosystem it represents. So, let's review:

Content Production - While there are some very legitimate ways to make pretty great content on a low budget, there are only a few really successful ways you can do that. First and foremost, the cost of the film or video by itself is only one very small factor. It takes relationships, knowledge of the industry, access to talented individuals and a whole lot more money to market your content in a way that will create the revenue you would actually require to consider it a successful product. So let's review what it takes in "Hollywood" to make a product that will (hopefully) resonate with viewers:

1. Money. Whether it's a few thousand dollars, or hundreds of millions of dollars, there are no productions, and I mean none, that cost nothing to make. You have to make some kind of investment whether it is in software, the camera (even an iphone), an internet connection to distribute it, what have you. So even with depreciated assets, you're still investing money somewhere. But, let's come up a few hundred feet and talk about the content that is actually made in Hollywood, with that kind of spending power:

2. Cost of Production. This is not just the money spent on the production, but the actual cost of goods sold. The first phase includes the development, the pre-production, the actual production, the post-production and the ground level marketing (shopping it around film festivals, etc.) The second phase is what happens after your content has been acquired. Now we're in the really big money. Now we're in P&A costs, which stands for Prints and Advertising. This is the cost of marketing your product. To put it into perspective, a film like Napoleon Dynamite was made for around $500K. It was acquired for $3m at Sundance. Then the studio spent another $xx million to market it. Napoleon Dynamite went on to be one of the most successful independent films ever created. It made over $140m in the video market alone. THIS. Is an outlier. Now let's talk about the median products. The ones that Studios personally finance and market. Let's say they spent $30m to produce a film. Most of that money goes to the talent and the UNION crews that work on them. (We'll get to the unions later.) They distribute the $30m picture across screens worldwide. Worldwide the picture makes $45m. Not bad, right? Wrong. Because that $30m production cost another $80m to market. That's right.. almost three times the cost of the actual production. And the $45m it made worldwide? Well that's only $22.5m back to the studio because the theaters take HALF the ticket sales. HALF. They do almost NOTHING to market the film, get paid to host the film, charge $9823598746 on snacks and they get HALF THE FREAKING REVENUE from the film. So, the studio’s net LOSS on that product is $87.5m. That’s what we like to call in this industry.. a tank. You can spend $30m on a film, get some of the best talent you can think of, and still it falls flat. Why? Well if you can answer that, then there is a job waiting for you in Hollywood. No one really knows for sure what the general public will accept as an amazing film until it’s released and the ticket sales and social buzz generate the outcome. I have seen some amazing films that I thought were some of the most creative and concept-forward films I have ever seen, and they tanked at the box office. It all comes down to the public’s taste at any given time.

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