From Report on Small Business magazine, Nov. 26, 2008
In a corner of the office Jeffrey Elliott and Raja Khanna share at GlassBox Television sits the one thing on which they just can't agree: a set of aging, brown corduroy couches. The two entrepreneurs, who teamed up this summer as co-CEOs of the upstart broadcasting company, are in sync on the big issues - how the TV business is in a profound state of flux as broadcasters either embrace or fortify themselves against the Internet; how teenagers who've abandoned TV for the Web can be lured back with the right content; and how, in the wake of massive industry consolidation, a small, independent channel can still wedge itself in among the networks. But the couches are a sticking point. Khanna wants them gone; Elliott loves them like a Labrador retriever.
"I'm the one who pushed for this funky concrete look," Khanna laments, referring to the company's spartan-chic, open-concept office inside a squat industrial building in Mississauga. "We're totally simpatico on everything, but he pulled rank on that."
Elliott carries some extra sway because he is, after all, the founder-a married guy with a kid and a mortgage who left a well-paying job at Alliance Atlantis Communications to spend the next "four years, 16 days and one hour" unemployed as he struggled to get GlassBox off the ground. When his brainchild, Bite TV, finally went on air in the spring of 2005, it wasn't much to look at: rough, edgy, sometimes juvenile programming made by young, amateur comedians, musicians and talk-show hosts. Part of a sea of specialty channels on the upper end of the digital dial, Bite had one major distinction, however: It offered most of its content online and for download to cellphones, hoping to reach its audience of 18- to 34-year-old men through whichever medium they preferred.
Since then, Bite TV has amassed a respectable 140,000 subscribers, but the partners are convinced they can do a lot better. A channel-clicker tour suggests why: Television today is packed with people vying for fame, or at least notoriety. The GlassBox CEOs believe that somewhere between the high glitz of Canadian Idol and the low-brow grit of online webcasters exists a place for a station that blends the two. "There are various steps in between YouTube and a big network," says Khanna. "And the next step for a 20-year-old who's been doing a show out of his parents' garage is probably not a prime-time talk show on CTV. There's a gap there." So, this fall, the duo is expanding Bite's show roster and adding a second channel, Aux TV, dedicated to garage bands starved for attention. Everything on both channels will be created by amateurs and available online. "What Raj and I are making is the new kind of broadcasting company," says Elliott.
Most people acquainted with the cutthroat TV business are bound to scoff at such preposterous ambition. After all, small broadcasters' odds of succeeding get longer every year. The number of specialty channels has increased tenfold in the past decade, even as the Internet lures viewers away. "If you look at the lineup of a typical satellite or cable TV provider, it's getting longer and longer," says Kaan Yigit, an analyst with Solutions Research Group, a Toronto consultancy. "Niche players are at a disadvantage: People don't know where to find you."
But Elliott and Khanna hold an edge. This summer, they got an endorsement-and a $5-million cheque-from a group of media power-brokers who've agreed to come on board with advice and industry connections. The blue-chip list includes Gary Slaight, former CEO of Standard Broadcasting; Jay Switzer, who used to run CHUM; Ted Riley, former head of TV distribution at Alliance Atlantis; and Stephen Tapp, who until last year was president of satellite radio start-up XM Canada. Drawn in part by Khanna's stellar rep in new-media ventures, they plan to help the partners test their theories about where TV is heading. "What [the investors]share is a sense that this is a new world," says Switzer. "Other people see challenges. We see opportunity."
One floor below the CEOs' office, in the darkened bowels of the building, Matt Chin, a 22-year-old with aspirations to be the next David Letterman, is in full talk-show-host mode. "Hey, everybody, Matt Chin here!" There's no one else in the room, no studio audience, no TV execs keeping watch. But The Week Show with Matt Chin, which involves Chin doing stand-up and sketch comedy he writes himself, is one of Bite TV's most popular shows.
Unhappy with the first take, Chin stops to do a second, this time with more of that talk-show effervescence. "Hey, everybody!..." Barely out of college, Chin has already logged several years as a host, and yet a real TV studio is new to him: He and his sidekick Ricky Thompson, the Garth to his Wayne, have been doing the program out of Chin's parents' garage.
Chin started the show on his personal website six years ago, then branched out onto YouTube before talking a Toronto community channel into putting him on air. Soon after, Elliott came calling, having noticed Chin's online following (on a good night, 30,000 people tune in). Now, as part of the Bite TV overhaul, Chin will become one of the channel's signature faces. On this day, he isn't shooting a segment of his show but a promo for an energy drink. Bite has experimented with unconventional commercials, including Molson Canadian spots that, at as little as five seconds in length, barely give the viewer time to grab the remote. The latest effort is shooting ads on spec in the hope the featured brands like them and sign on.
As part of the revamp, Chin's show will move out of the garage and into the GlassBox studio full-time. He'll get a small production crew, a green screen for special effects, and he'll no longer have to operate the camera himself. Bite is also springing for a new set, which means no more wacky shower curtains as a backdrop for Chin's opening monologue.
Programs like The Week Show are the lifeblood of Bite TV, and are what sets it apart from other specialty channels. There are no sleek dramas or movie reruns, just a mishmash of short segments, most 10 minutes or less in length. Viewers can tune in to Da Laws of Nature, a sketch comedy about park rangers; an extreme-sports/indie-bands show called Rippin' It/Lippin' It; and Miss Multiplatform, where young women compete for votes to become Bite TV hosts. They're raw, low-budget productions-"low pro" in the vernacular-typically submitted by the people who write, make and star in them.
GlassBox eschews the typical TV deal, wherein a production company or the network owns the rights to the shows. Here, the creator owns the concept; GlassBox gets the distribution rights, which allow it to put the show on TV, online and on cellphones. The performer may receive a few hundred dollars to help with production, along with the use of the company's studio and equipment. It's not enough to live on, but for people like Chin, the draw is the exposure. If Chin ever becomes a star like his idol Tom Green, GlassBox can run the episodes it made with him, but he's free to do his show for Fox or Warner Bros.
"It is critically important for us that we not become known as Big Brother to this young, emerging talent base, but as a place that's actually supporting them," says Khanna. "Most people who come in here are just so suspicious. They're, like, 'Okay, where are you going to get me on this?' And we tell them, 'Our business is selling advertising. We're keeping that money. You keep everything else.'"
Still, advertising comprises only 15 per cent of GlassBox's revenue. Mobile fees-paid by cellphone companies for the right to offer Bite's shows to customers with video-equipped handsets-are an even smaller piece of the pie. The bulk of revenue comes from the subscription fees collected and passed on by the cable or satellite services that carry the channel. The fees are only about 30 cents to 50 cents a month per subscriber, but they can add up: Bite TV pulled in more than $519,000 in subscriber revenue in 2007, and parlayed it into a small operating profit. This is minuscule compared to the sales of top specialty broadcasters that command over a buck a subscriber, but Bite is doing better than such indie rivals as The Fight Network (focused on mixed martial arts) and Game TV (gaming and contests), both of which lost more than $2-million last year.
Elliott knew that setting up a channel in multiple media wouldn't be easy. He first envisioned television online when he managed TSN's website in the mid-'90s, then nursed the idea while running the digital division at Alliance Atlantis. In 2001, he devoted himself full-time to his project, and spent the next four years trying to raise money. But most people he talked to, from VC firms to specialty-channel operators, didn't think such unpolished programming would draw an audience (this was years before YouTube began to hint otherwise). One of the few supporters he found was Khanna, a young digital-media entrepreneur whom he ran into at TV conferences. "We just hit it off," says Elliott. In fact, Khanna became one of Elliott's first investors.
It wasn't until 2004, when a Toronto-area TV producer offered Elliott the use of his studio space, that the concept began to take shape. "He said that unless we get this thing out of a binder, nobody's going to understand it," Elliott recalls. Bite TV launched in April, 2005, with a gruesome-funny, one-minute animation called Bone. The audience grew steadily, and Bite seemed headed for a marginal existence on the fringes of the specialty universe. But in the summer of last year, Elliott and Khanna met for beers at Elliott's home and decided that wasn't enough. They both saw a bigger opportunity, but grasping it would require capital to beef up production, marketing and staff. It would also require Khanna's deep industry contacts and full-time involvement.
Stephen Tapp remembers being summoned to the Spoke Club, an upscale watering hole in Toronto, on a blistering afternoon in July, 2007, to meet with Elliott and Khanna. It was billed as casual drinks, but as soon as he sat down, he saw the pair had business on their minds.
Tapp, who is now a consultant, knew both men well, having worked with each one at various points in his career. Conversation turned to the consolidation sweeping the industry, putting most independent channels in the hands of a few corporate giants. Elliott and Khanna argued that there was an opening for a new kind of grassroots television that took advantage of interactive technology and viewers' creative enthusiasm-a place, akin to MTV or MuchMusic circa 1985, that gave young viewers a sense of ownership over the programming.
Tapp fell in love with the pitch. "It's weird," he says, "a lot of this is instinct and gut, and just having a belief that there's a bit of a vacuum there now-a space between the really big players and the little players." He particularly liked the Aux TV concept, since cable music networks have moved away from showcasing videos and toward the more structured format of 30-minute and one-hour shows. "We can reposition Bite with this music channel and really get some momentum," Tapp says.
Aux was Khanna's idea. The 35-year-old amateur musician knew small bands were desperate for exposure, and he had a track record of pioneering new-media niches. A law school grad, Khanna's first venture was Snap Media, a Web-design studio that he started from his Toronto apartment while in university. Snap's site for DeGrassi: The Next Generation was an early example of social networking, linking hundreds of thousands of fans around the world and bringing the company international attention and awards. Then, in 2004, Khanna's interest in mobile video led him to launch QuickPlay Media, into which he folded Snap a year later.
If you've ever watched a game highlight or a news clip on your BlackBerry or Treo, chances are that QuickPlay made it happen. The company quickly became the go-to outfit for Canadian broadcasters wishing to go mobile and for wireless companies in need of video content to offer subscribers. As QuickPlay added clients such as ESPN and MTV, Khanna became a regular speaker at TV conferences, and it was not uncommon to see him being swarmed by industry types after a session, explaining to them the emerging wonders of mobile content.
By 2007, Khanna had again grown restless. He was in Little Rock pitching QuickPlay's technology to an American wireless carrier, and he recalls having an almost out-of-body experience. "I was watching myself sell software in Arkansas, and I realized that I was in the wrong job. Nothing against Arkansas, but it just wasn't me. I'm not a software salesman." Meanwhile, he was increasingly passionate about GlassBox's potential, provided it got some money.
Khanna decided to step back from QuickPlay (though he's still a co-owner) and team up with Elliott. Gary Slaight recalls Khanna dropping in to see him shortly after Slaight had sold his Standard Radio network to Astral Media for $1.08-billion. "Initially, he didn't ask me to put money in; he wanted to pick my brain and see if I would get involved in some way." Slaight, like the other investors, won't reveal how much money he contributed, but he agreed to take a seat on the board. Switzer, the former CHUM CEO, joined too, impressed with Khanna's past entrepreneurial instincts and understated approach. "He doesn't pretend to have figured it out, but in my books, he's got a better chance than most at putting the pieces together," says Switzer. "I'm backing Raja as much as I am the business."
Here, hold this," Elliott says, picking up a glistening statuette that sits unassumingly on a coffee table outside his office. "Heavy, isn't it?"
It is indeed. This chunk of gold-plated metal is the Emmy that Bite TV won last year for best international interactive channel, the first time the award went to a Canadian company. (It comes with its own Emmy-issued screwdriver in a cushioned box-just in case one of the golden screws comes loose.) Elliott places the trophy back on the table and saunters into the office, plunking himself down on one of the disputed couches. Dressed in a short-sleeved Hawaiian-style shirt and given to talking with his hands, he seems like the kind of guy's guy for whom Bite TV would be a regular destination. Khanna, in contrast, sports the monochromatic Johnny Cash look and the laid-back air of a hipster whose iPod holds nothing but obscure indie bands.
Since deciding to become co-CEOs, the partners have spent a lot of time delineating the boundaries of their roles. They dedicated three days this year just to devising a dispute resolution plan, determining who will have pull in what situations. Khanna is the numbers guy; Elliott oversees operations. In addition to focusing on the new music channel, Khanna is in charge of financial and legal issues, as well as the mobile and Internet sides of the business. Elliott heads up sales and marketing, as well as Bite TV.
On this day, their most pressing task is preparing for the November launch of Aux. "If you look at a 20-year-old today who is passionate about music, the things they love are not reflected in mainstream media," says Khanna. The new channel will offer not just music videos but profiles and interviews with small bands, as well as an opportunity to connect with them online. Aux will first emerge on the Web, with TV to follow when and if GlassBox gets a CRTC licence for it. Then the company will have to persuade cable and satellite distributors to carry the new channel. While Bite is offered by most distributors in Canada, Shaw Communications, the second-largest, along with its satellite arm, StarChoice, have yet to pick it up. Shaw argues that it must turn down numerous niche newcomers each year as bandwidth-hogging high-definition channels multiply.
The partners hope the boardroom firepower they've assembled will help them negotiate carrier deals. They'll also push new content onto cellphones and the Web to build buzz. Additional channels are already on the drawing board. Despite having only 15 employees, Elliott and Khanna insist the company is preparing for a vastly different TV industry, one where audiences no longer distinguish between watching video on phones, TV sets or computer screens. Any "glass box" will do.
Sharing the corner office: Are two CEOs too much of a good thing?
Several major Canadian companies, from Research In Motion to Power Corp., have successfully adopted the dual-CEO model. But is it for everyone? Anton Rabie, co-CEO of Toronto-based toy manufacturer Spin Master, and Douglas Reid, professor of strategy at Queen's School of Business, argue the cases for and against.
Why it works
"It's not an easy thing," admits Rabie, who's shared the CEO title at Spin Master with his partner, Ronnen Harary, since the company launched in 1994. If done right, however, twice as much work gets accomplished. Toy executives are constantly jetting around to meet with clients and suppliers, so splitting the CEO duties can, in effect, allow the head honcho to be in two places at once.
The co-CEO approach works particularly well when the two top dogs complement each other's talents and are equal stakeholders in the company. Then they can operate like a yin and a yang, testing out ideas on each other and rounding out their skill sets. "If I go into a factory and I'm busy schmoozing with the owner, he'll be studying their [operation]" Rabie says of his partner. "His eyes could pick up something that could help us avoid a product safety issue."
But conflict is a risk, so it's essential to determine in advance which CEO is responsible for which tasks, says Rabie. "There's formal authority like signing contracts, and there's informal authority like hiring people If your partner is going to hire someone, can they do it without talking to you?" You've got to be thorough in crafting the arrangement, he says, and review how it's working every six months.
Why it doesn't work
The simple answer: People prefer to have one boss, says Reid, who advises companies on management structure. "Most businesses follow the principles of organizational design, and one of the key principles is unity of command." In companies with two founders, owners or top managers, there is a danger that conflicting messages will confuse the staff.
Problems can also arise in sorting out which executive should take the flak when something goes wrong. "It's a lot more difficult to have that clarity when you're dealing with two people," says Reid. "Co-CEO models tend to create the possibility that things will fall between the cracks." This risk is exacerbated in downtimes, when a company faces tough decisions and its operations are struggling. And, at such times, it becomes especially hard to justify the added cost of two CEOs, both of whom are likely drawing high salaries. "How would you do a downsizing? It would be the first place you would look for redundancy," he says.
Reid believes the co-CEO model is sometimes simply an accommodation aimed at appeasing two key executives. "But the evidence is not clear that you're getting much [return]"
As part of Bite TV's revamp, talk-show host Matt Chin will get a new set, which means no more wacky shower curtains as a backdrop for his monologues
How to get your own channel
Anyone with ambitions to become an independent broadcaster first needs a licence from the Canadian Radio-television and Telecommunications Commission, which requires new channels to prove they would not infringe on existing ones. This has prevented other entrepreneurs from starting their own versions of hit channels like The Food Network. But that's only step one. Assuming you get a licence, you must then persuade cable and satellite carriers to offer your channel on their services-not an easy task, as distributors have become increasingly reluctant to give up bandwidth to newcomers with untested subscriber appeal. Each year, the CRTC issues dozens of licences for new channels that never make it to air.
Most specialty channels in Canada are owned by large broadcasters-MuchMusic and YTV belong to CTVglobemedia, for example, and Bravo! to CanWest Global Communications. That's because traditional television production and distribution require large overheads. There are some indie success stories, such as The Score, a sports channel that started in the 1990s with little more than game scores and news summaries, and now rivals heavyweights TSN and Sportsnet. Another independent, The Weather Channel, is one of the most profitable specialty properties around. But TSN president Phil King points out that many specialty channels don't reach anywhere near a million homes-a benchmark of mainstream success-even after a decade in business. Most indies either fail or remain tiny operations with cult followings.
Getting from subsistence to success involves a simple but hard-to-accomplish feat. "How do you break through the clutter? The short answer is, you need hits," says Kaan Yigit, an analyst who tracks the media sector. He notes that Bite TV, like other start-up channels, could be "one major hit away from runaway success."