Recession Scorecard: DVDs Down, Hulu & The Pirate Bay Up

The accelerating economic downturn is taking its toll on the entertainment industry, with DVD sales lagging and Blu-ray sales disappointing, according to the New York Times. DVD sales are down 4 percent so far this year, the paper reports, citing data collected by Warner Brothers. The results for the third quarter are even worse, with a 9 percent drop overall and a steep 22 percent decline for new titles, according to numbers from Nielsen VideoScan quoted by the Times.

Meanwhile, free online content is doing better than ever. Hulu attracted 5.3 million unique visitors in October, a nearly 90 percent surge over the previous month. The Pirate Bay doubled the number of simultaneously connected users within the last six months, reaching a total of 25 million peers in November. The site’s admins apparently couldn’t quite believe their logs either, asking somewhat perplexed: “Wtf is going on(?)” The answer, in short, is this: We are in a recession.

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The F|R Interview: Chris Michel on the Good in Giving Your Equity Away

We’ve written recently about how to preserve your equity when fundraising. This week we spoke with serial entrepreneur Chris Michel, who explained why founders should not be afraid to give additional equity disbursements — out of their personal stakes! — to reward senior staffers.

That’s what Michel did just six months before selling his latest startup, Affinity Labs, to Monster.com for $61 million in January. Michel gave up a tidy bit of his own windfall, but he has no regrets, and thinks more founders should follow suit.

F|R: You gave half a percent of your personal stake in Affinity Labs to three senior managers shortly before selling the company. Why?

Chris Michel: One key to success is having a very small and overqualified team. We all know this, but forget that the best people could also go and be CEOs at their own companies. In a “war for talent” you have ask yourself: What wouldn’t you do to bring the right people onto your team and keep them in the game? Rarely is compensation enough to make anyone happy. First, people want to be at a place that they’re proud of, surrounded by people who are as talented or more talented than they are, working on problems that matter. Second, they want to be [remuneratively] valued. Compensation is a necessary, though not sufficient, tool. But you can’t screw up the comp stuff because it’s the easiest thing to do right. Read More about The F|R Interview: Chris Michel on the Good in Giving Your Equity Away

The Dangers of a Startup Democracy

Back in January 2007 while taking a shower I thought up the idea of my startup. 😉
I’m a business major, but I can’t write a single line of code. I knew I’d also need someone I to help with marketing and administrative parts and since my budget was nearly nonexistent, these would have to be people I could trust, and who’d be willing to take sweat equity. I started talking to a few of my friends. It was my 1st mistake.

Two of them were already working at other jobs, but I was not willing to spend our tight budget on salaries from day one. I figured I could get their attention by offering to split the company between us. Three of them accepted Read More about The Dangers of a Startup Democracy

Question of the Day: Salaries or Equity, what’s worth more?

Google has paid notoriously low salaries, in exchange for stock options, to its rank and file long since before the stock was north of $600 a share. Well, today’s Question of the Day is about such employee compensation, from a would-be founder named Alex. Alex would like to know whether it’s wise for him to give away equity so he can pay early employees an attractive salary, OR if — following the Google model — he should only hire those employees who’d take equity in lieu of a nice paycheck?
How will this compensation decision influence Alex’s company culture early on? And what should be worth more to him at this stage: cash to pay his staff, or keeping his equity “in house”? Read More about Question of the Day: Salaries or Equity, what’s worth more?

Question of the Day: Wanna go Dutch?

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NetSuite went public Thursday in a Dutch auction, meaning its shares were priced through an auction of would-be buyers, not by a handful of investment bankers, as is the process in a traditional IPOs. (NYSE: N)

Bankers tend to under price IPOs by a few bucks to guarantee their clients a quick pop in value on the day the shares debut. Trouble is, the “clients” best-served by old-school IPOs are the institutional investors and wealthy brokerage customers with friends on the bank’s syndicate desk — NOT the hardworking founders of the company, who are made to sell their equity at a discount to give others that instant upside.

Using open bidding, Dutch auctions aim to price equity “fairly.” The idea, first notably used by Google, was actually hatched by veteran Silicon Valley banker, William Hambrecht, of WR Hambrecht & Co. (We’ll interview Mr. Hambrecht on Found|WATCH in January, so stay tuned for more from this thought leader.)

Dutch auctions haven’t gained much momentum yet, but given NetSuite’s performance, they might finally catch on.

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Priced at $26, shares soared 77% in their first two days, closing Friday near $39. But this, then, begs our…

Question of the Day:
Despite the Dutch auction, could the post IPO run-up mean NetSuite founder, Evan Goldberg, left money on the table anyway?

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