On the subject of entrepreneurship, LoveFilm co-founder Antony Ceravolo is vocal about the importance of businesses adapting to change, especially in the media, having brought competition to the film rental market with his film-on-demand venture.
The fall of high-street entertainment retailers HMV and Blockbuster has been well publicised and commentators have written at great length about their downfall – but what does one of the founders of their closest competitor make of it?
"HMV are Blockbuster are great brands, but their business models have been severely disrupted by digital downloads and closer to my business interests, LoveFilm. The rental of content via online is taking over from the physical purchase or rental of physical products at a rapid pace. What can we learn? The customer is king and shopping habits and digital distribution and purchase of content will accelerate. The high street has serious issues to face, but there is time and business leaders need to adapt their models and innovate new ones, and follow consumer trends in order to remain of interest to consumers and survive."
Ultimately, the consumer is the winner, but success shouldn't be measured in terms of the number of physical stores on our high street. He explains: "Digital distribution is providing choice and convenience to customers. We can either hang onto old purchasing habits or evolve and keep moving forward to provide better satisfaction to the customer. Yes the high street will suffer, but new businesses will appear to take the place of loss-making businesses. Landlords also need to re adjust their expectations in terms of rents to allow business models to survive. I would also say that major shopping malls have more to do with the issues on the high street than the effect of digital distribution. The problem is we base our "success" on the retail consumerism we see day to day; this should not always be the focus."
Before launching his own businesses, Ceravolo trained as a lawyer and was an investment banker for Citygroup for four years managing mergers and acquisitions in New York. During his time there he was inspired by the business model and technology of US online DVD rental company Netflix. Netflix had introduced the online monthly subscription model in 1999, and by 2001 had nearly 500,000 subscribers and growing.
He saw the market opportunity to set up a rival to Netflix in Europe, where no such service existed and has continued his track record of looking abroad to import ideas from foreign markets and apply them domestically with subsequent ventures. He says the formation of LoveFilm has lessons that can be applied to businesses that feel the heat from new entrants and a volatile economic climate.
"I decided to import the idea of online DVD rental to the UK; I developed the technology and the subscription model, and crucially was the first to do so. I raised the capital and started the business Video Island Inc in 2002, well before anyone else in the sector, and merged with Screen Select two years later. In 2006 we merged with LoveFilm, using the LoveFilm brand and integrating the management structure and technology platform I had initially developed."
What are his top tips for achieving growth in uncertain economic times like these?
"A successful new business should ask and answer the question, what do people and their environments need and want? A company is triumphant when it is relevant and useful. I learned how to identify a good idea and import it into a market where it did not yet exist and grow it into a successful business. Staying humble, thinking long term and being lean has allowed me to achieve success in a tough economy."
The next great innovative idea takes more than an entrepreneur. I requires people that are willing to invest in that person's vision too. I asked him how he convinced others to invest in his ventures: "Successfully raising capital also requires a very select approach with VC houses and banks, and you need to know your business model back to front. Seed your ideas first, show positive milestone growth and momentum, and know your investors and build relationships and trust."
He concludes by saying things are only going to change quicker, and that requires leadership. "Investors do sometimes follow trends and follow investment themes, and being ahead of the curve in the right sector makes your proposition attractive for venture capitalists. To convince others, you need to lead by example and lead from the front. The rate and degree of change is increasing in the media sector all the time now. Technology is penetrating every aspect of it. Unless you are constantly monitoring and living and breathing how to adapt to change you are dead."
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