Why Hollywood's infiltration of Silicon Valley matters

By: Cherie Hu

Published: 2020-03-05

I got to fact-check the entirety of Forbes Senior Editor Zack Greenburg’s book A-List Angels: How a Band of Actors, Artists, and Athletes Hacked Silicon Valley, which comes out next Tuesday (March 10, 2020).

In summary, the book explores how a growing number of celebrities, including Ashton Kutcher, Shaquille O’Neal, Beyoncé, Justin Bieber and Steve Aoki, are using their platform and celebrity to buy stakes in up-and-coming tech startups, instead of just pursuing traditional endorsement deals for cash. It’s an entertaining and engaging read that sheds light on the evolving value of fame, as well as on the deep financial connections between the music and tech worlds that everyday consumers might not see.

For me, fact-checking A-List Angels revealed just how deeply the ideological cross-pollination has run between the music industry and Silicon Valley since as early as the 1990s. For instance:

There are many more gems of knowledge sprinkled throughout the book that I won’t spoil here. Instead, I want to highlight four higher-level themes from the book that I think demonstrate why Hollywood’s infiltration of Silicon Valley matters in the first place, particularly from an artist’s perspective.

The main questions are: In a world where industry boundaries are blurring, how can artists learn from entrepreneurial activity outside of music to help expand and future-proof their own brands? How will artists of all career stages define, and assert, their own value in the next 10 to 20 years? How, if at all, will artists have an upside in the platforms that distribute their own work, instead of always playing catch-up? And which kinds of artists will, and will not, benefit from this trend?

1. Hollywood and Silicon Valley can learn from their similarities — and differences

Throughout A-List Angels, Greenburg highlights a lot of interesting cultural similarities between musicians and tech entrepreneurs that facilitate their increased collaboration. As Greenburg writes: “In a way, U2 began as a startup just as Facebook did.”

Both groups, for instance, believe deeply in some singular vision of the world, and work tirelessly to bring that vision to life. Both also have roughly the same failure rate, but their visionaries toil on anyway — often with the help of funding from an active business partner (e.g. a VC firm or record label) who has a knack not just for identifying great ideas, but also for tactically scaling them

“The network from being a talent manager fit quite naturally into some of the needs that young founders were looking for … in terms of business development, marketing, branding support,” Troy Carter is quoted as saying in A-List Angels. “Just having that experience of working with talent over the years was transferable to the work that I’ve done with founders.”

Of course, there are also some key cultural differences between the two worlds as well. One commonly-cited such difference is the battle between technology and content. Silicon Valley will always think technology is king; Hollywood, of course, will side with the content they are creating. As a result, Hollywood often criticizes Silicon Valley for not respecting content, while Silicon Valley often blames Hollywood for moving too slowly and not being open enough to technological innovation.

Another key point of tension is work culture, particularly a penchant (or lack thereof) for transparency collaboration. “Unlike the movie business, where only one studio could get a hot film, or the music business, where record labels fought to sign top talent, early-stage tech investors often helped each other out,” writes Greenburg.

We’ve definitely seen this play out in key, often dry debates around issues like metadata — in which solutions would require dozens of different rights-holders to embrace a more collaborative mindset, but are slow to implement because of said rights-holders feeling protective over their intellectual property and market share, and/or not being transparent about the flow of information across multiple different middlemen.

2. Silicon Valley is helping Hollywood stars rewrite the value of their own fame

One core historical argument that frames the narrative of A-List Angels is that Silicon Valley and Hollywood trade on fundamentally different currencies.

Silicon Valley has historically run on equity. It’s typical that founders or employees at early-stage startups don’t care about salaries or other forms of upfront payment, but instead want to get paid in equity and stock options with the hopes that the startup becomes wildly successful, and themselves wildly rich. It’s a longer-term, riskier and more abstract notion of valuation and worth.

In contrast, Hollywood artists, including those in music, typically prefer more concrete, upfront cash. Yes, recording and publishing revenue tends to trickle in over a longer period of time — but many artists are drawn to the shiny object of the upfront advance in a standard recording deal. And for brand partnership/endorsement deals, artists are typically given an upfront check to act as an ambassador for a given brand or product, without having an upside in whatever subsequent success that brand or product sees.

That said, there are now artists like Jay-Z, Diddy, Rihanna and Jessica Simpson who run or co-run their own successful fashion, retail and alcohol brands, having full say over their involvement in the finances; if partnering with a third party, they usually receive a royalty on sales in addition to an advance. And as A-List Angels describes in detail, many artists are also trading in cash for equity in the brands with which they partner for promotion, which often proves “to be a far wiser formula than shilling a product for a flat fee, creating lasting wealth in a way that the brand extensions of the 1990s and early 2000s couldn’t,” writes Greenburg.

One open question, though, is whether artists were essentially forced to pay more attention to tech investments in the wake of piracy. D.A. Wallach — a former recording artist with Chester French, turned tech investor (and early blockchain evangelist) — is quoted as arguing in the book that the detrimental impact of peer-to-peer file-sharing platforms like Napster on the recording industry convinced many artists that they were never going to make money from music again. Then they saw startups out of Silicon Valley commanding nine- to ten-figure valuations, and wondered whether that world would be a more lucrative playing field for them to leverage their own brand equity instead of just selling records.

“The reason you get inequality in capitalism is because the returns on capital are much greater than returns on labor, and the growth over time in the returns on capital are much greater,” says Wallach, citing a key concept from Thomas Piketty’s popular book Capital In The 21st Century. “In other words, having wealth has become a greater asset over time than it used to be. And relatively, labor has become a less valuable asset. I’m still in the process of going from being primarily a laborer to being a capitalist.”

For people who are anti-capitalism, that quote might seem a bit cringey. But it’s an ideology that cannot be ignored, because it’s driving some of the most influential and groundbreaking tech investments and cultural transformations in the world right now.

3. New tech partnerships are finally giving artists a share in the distribution of their own work

Another important theme in the book — and a corollary of the wider shift in artist/brand deals from cash to equity — is that artists are now getting a cut of the very distribution platforms that historically sold them short.

As Greenburg puts succinctly: “No major artist is bigger than a major platform.” For instance, Drake has 51.4 million monthly listeners on Spotify, only around 25% of Spotify’s nearly 250 million monthly active users. Katy Perry has 108.4 million followers on Twitter, a fraction of Twitter’s 320 million total monthly active users. Not only has this gap in audience size historically given aggregation-driven tech platforms more leverage over individual artists and creators, but said artists also historically had no equity in these platforms despite being some of their earliest adopters.

With a few exceptions — e.g. Bono nabbing a stake in Facebook in 2004, pre-IPO — “stars felt they were generally missing out on getting a piece of the platforms where their work was consumed and shared,” fomenting a constant “struggle between those who created content and those who built the platforms upon which it would be displayed,” writes Greenburg.

By owning stakes in streaming and social platforms as well as early-stage tech startups, creators can profit both from their work and from its distribution. “At its heart, this is a story about a group of historically underpaid workers finally grab their rightful piece of the means of production,” writes Greenburg.

Beyond A-List Angels, these themes echo throughout many critical conversations that independent artists are still having today about the impact of mass-market streaming services like Spotify, and about the potential for alternative models of music consumption and artist compensation. In particular, the likes of crowdfunding site Ampled and stream-to-own service Resonate are structured as platform cooperatives, giving all artists who sign up a share in those respective companies.

Jay-Z tried to promote the same mission statement when he launched TIDAL, but ultimately focused on artists who were already at the top of the food chain and had already benefited from an arguably unequal system.

Which leads me to my last point:

4. Diversity remains an important motivation, and challenge, among artist-investors

One important conclusion that Greenburg arrives at in A-List Angels is that Hollywood’s foray into Silicon Valley is creating “a shift in generational wealth that’s already changing the complexion of the upper echelons of American society” — i.e. bringing more people of color and people with low-income backgrounds into the same ranks as the wealthy, white, male founders and investors that have run Silicon Valley for decades.

This increasing diversity has been formalized through initiatives like Andreessen Horowitz’s Cultural Leadership Fund, with the two-pronged goal of connecting cultural leaders to tech companies and enabling more African-Americans to enter the tech industry; Nas, Sean “Diddy” Combs, Shonda Rhimes, Will and Jada Pinkett Smith, Quincy Jones and Chance the Rapper are among the African American celebrities listed as the fund’s Limited Partners.

But I still think there are opportunities to improve diversity in the people who are included in this artist-investor trend, or at minimum to question what kinds of artists in general will, and will not, benefit from the convergence of Hollywood and Silicon Valley.

In the back of A-List Angels, Greenburg includes a glossary that reads more like a cast of characters, highlighting key investors, celebrities and companies discussed throughout the book.

Out of the 67 investors and celebrities mentioned in the glossary, only nine (~13% of total) are women:

This gap parallels diversity challenges in Silicon Valley at large, both among tech workers and among investors (e.g. as of late 2019, 65% of VC firms still have zero female partners, according to All Raise).

Greenburg does acknowledge this lack of diversity in the book, adding that “for the average reader, discovering how rich and famous creators get richer and more famous might be enraging, as most deals described in the coming pages simply aren’t available to the typical person.”

Indeed, one goal I have in my research is to get a better understanding of how the convergence of Hollywood and Silicon Valley amongst the 1% of the 1% of both worlds will trickle down, if at all, to the 99% of artists who are independent and who may not have enough cash to invest in a high-risk startup.

Artists of all career stages are leveraging the rhetoric of “ownership” and “diversification” to guide their career strategies. But at worst, the Hollywood/SV convergence will also further widen the existing income equality among artists and make music more of a “blockbuster” business than ever, challenging the notion that the industry is a level playing field.

Personally, I would love to see more initiatives like the Cultural Leadership Fund and Backstage Capital that use wealth as a direct vehicle for improving inclusion and transforming the underlying system of how resources are allocated in both tech and entertainment, instead of merely preserving the status quo.