Declining circulations, lower music revenues and being hugely dependent on just a few blockbusters: The traditional media and entertainment sector is facing a number of challenges. The digitization of all media content has brought with it a fundamental change in the rules of the game along the entire value chain: Production costs are today much lower than in the past; the same holds true for distribution. And thanks to the global reach of the Internet, international sales can begin on day one. Because consumers now have a broader range of choices, demand is fragmented while at the same time more and more users are looking for interaction and conversation instead of pure media consumption.

This is an environment that opens up multiple opportunities for start-ups, as their business models naturally build upon this new environment with the disruptive technology of digitization at its core and social activities as its driver. During the past twelve months, Wellington Partners has financed several very promising young companies, such as ad network Adconion, social gaming market leader GameDuell and online video conversation platform Seesmic.

The progress that these companies are making shows that the talk about the end of the Web 2.0 era is misleading. While it is possible to question the valuations of some companies, it is obvious that this generation of start-ups is about to change the rules of an entire sector and is delivering the tools it takes to satisfy the needs of millions of consumers with respect to interaction and participation. We are going to be seeing an unbroken flow of innovation and new business models in the field of social entertainment.