Monday AM Briefing #64 (**Link Fixed**)
Need* to know stories and trends for this morning & the week ahead; A Short Essay on Growth in Hollywood-meets-Creator-Economy
[Author’s Note #1: This went out earlier with a broken link to Google Forms. It has been fixed.
Author’s Note #2: I have a favor to ask. I’ve been working on new slogans. I’ve boiled them down to six.
You can vote for your favorite here. It will take you less than 1 minute, guaranteed.
Any votes and all feedback are invaluable. If you don’t like any, I’d be grateful for your suggestions!]
A Short Essay on Growth in Hollywood-meets-Creator-Economy
Last Friday’s Mic Drop on Spotify highlighted how Spotify bet on Hollywood deals for growth, and how quickly and soundly Wall Street investors rejected that story.
The Hello Sunshine essays (here (free), here (free) and Member Mailing here ($ - paywalled)) have explored how the deal structure reflects emerging bets on Creator Economy business models by A-List Hollywood talent, and why Blackstone is betting ~$3B on Kevin Mayer, Tom Staggs, and Hello Sunshine.
Both Spotify and the team of Mayer, Staggs and Blackstone are making bets on growth via Creator Economy business models.
But, they are doing so from two entirely different parts of the value chain:
Hello Sunshine is betting on Creator Economy-type production models (podcasts, community, e-commerce) that rely on third-party platforms to drive growth; and,
Spotify is betting being a third-party platform that Creator Economy creators rely upon (via Anchor) for hosting and distributing podcasts, community, and growth.
But, what does growth look like in each scenario?
Spotify’s “Creator Economy” aims for growth by offering Podcast Subscriptions and Spotify Open Access as solutions for creators and publishers to earn revenue from their Spotify listeners.
Both will “unlock an entirely new class of content on Spotify”.
CEO Daniel Ek also told investors on the FY Q2 2021 earnings call:
the platform we are building is all about moving from 8 million to 50 million creators and from 400 million to more than 1 billion users on our platform. For each improvement, we will turn more listeners into super fans, give voice to more types of creators and offer users multiple of ways to interact and engage with the talent they love. When we connect creators at every stage with fans around the world, our flywheel moves faster and faster, unlocking even more potential growth. We are still early in moving linear radio to on-demand audio, which just goes to show the growth opportunity still out there is significant.
Here Ek is giving us hard estimates for growth from a “Creator Economy” business model will look like: 5x the number of creators and almost 3x the number of users currently on Spotify.
We don’t have similar numbers for Hello Sunshine, with which Kevin Mayer and Tom Staggs seek to build a “flywheel” business model across platforms, as Mayer told Variety’s Cynthia Littleton:
“You should look to see us have multiple revenue streams beyond licensing and owning content. The great first step is to generate brands and franchises,” Mayer said. “We’re going to leverage that connection for other means” in line with the company’s stated focus on e-commerce transactions and building social communities around artists and brands.
So, like Spotify, there is the objective of a “flywheel”.
But, unlike Spotify, we have little transparency into what this “flywheel”, or its growth, will look like (mainly because it is a private equity investment), or how they will convince Blackstone and its investors that the $500MM price tag and the $400MM in equity incentives — alongside $2B in additional spend for additional acquisitions — can lead to exponential growth, too.
Another key challenge with growth is the “flywheel” model itself.
Spotify’s “growth” will come from what Ben Thompson describes as:
“controlling the value chain such that suppliers come on to your platform on your terms because you monetize them better than anyone else, even as you capture the excess value.”
Even if Spotify’s bet on growth of 5x the number of creators and almost 3x the number of users reads ambitious, the “flywheel” mechanisms are discernable:
more creator podcasts → more subscribers and more engagement → more subscription and advertising revenues → more revenues for creators → more creator podcasts…
But, they are yet to be discernible for the Hello Sunshine bet, which relies upon this “flywheel” logic (shared by Mayer in a recent Variety interview):
Category-defining content from brands and franchises that commands a marketplace premium → social-, commerce-driven, and community-driven businesses around artists and brands → arms dealer model → Category-defining content from brands and franchises that commands a marketplace premium
Mayer, Staggs and Blackstone have the capital and expertise to build a “flywheel” of content and e-commerce offerings across Creator Economy platforms like YouTube, Twitch, Facebook, Patreon and Gumroad.
But, as Reese Witherspoon’s total of zero subscribers to her YouTube channel reflects, they are effectively starting from scratch in a Hollywood-meets-Creator-Economy very much in its infancy.
Blackstone’s Hello Sunshine will need Spotify, YouTube, and other Creator Economy platforms to help to grow their community and e-commerce models.
But, those platforms also will be expanding their Creator Economy models: YouTube’s Premium Partner strategy shared in April that over 140K channels earned money from Paid Digital Goods on YouTube in the month of December 2020 alone -- an increase of over 140% since December 2019.
So Mayer’s and Staggs’ bet on “category-defining content” will also be navigating an inherent tension:
Blackstone’s Hello Sunshine bets on e-commerce and community will need Spotify and other platforms to help to drive growth; but,
Spotify’s definition of growth in the Creator Economy maximizes its return by exponentially multiplying the base of competitors and imitators of Hello Sunshine.
It’s a fascinating, arguably dysfunctional dynamic that is in its early days of playing out.
There are many paths to growth in the emerging Hollywood-meets-Creator-Economy marketplace. But the path Blackstone and Hello Sunshine are betting on leads to exponentially growing competition to the benefit of Spotify.
Must-Read Monday AM Articles
Emerging "Metaverse"-type convergence strategies
Bloomberg’s Tae Kim argues Facebook isn’t positioned to win the “Metaverse” (whatever that is).
Benedict Evans thinks that Augmented Reality and Virtual Reality aren’t in a much different place than his essay from 2017 thought they were, then.
TikTok and Shopify, the e-commerce platform, said they were working together to add the ability for consumers to shop directly in the TikTok app for the first time
Aggregator 2.0
YouTube is the fastest-growing paid music service in the world with 50MM subscribers, according to Midia Research, and now accounts for about 8% of the world’s subscribers. Chief Business Officer Robert Kyncl spoke to CNBC about the milestone.
Richard Waters offers a prescient take on the future of entertainment going beyond streaming. ($ - paywalled)
Amazon is investing in live audio as a way to bolster the types of content it can offer through its voice assistant, Alexa, and its smart speaker products.
JP Morgan analysts reported they met with management teams from several exhibition companies who said there is a “real interest” from Netflix to play some of its movies in cinemas for an extended period.
Sports & Streaming
Bloomberg’s David Heller dove into the unique marketplace dynamics around Amazon owning most of France’s Ligue 1 distribution deal, and why they’re more interesting after Leo Messi’s arrival at Paris Saint-Germain.
DAZN secured a new three-year contract worth over €2.5 billion (US$2.9 billion) to secure domestic rights for the top-tier Serie A until the end of the 2023/24 season. However, its opening weekend of coverage saw complaints about the transmission that was distributed over the internet, with viewers reporting poor signal, buffering and bad video quality.
At a time when questions about the future of RSNs are growing, according to Sportico, Real Madrid TV has emerged on Cinedigm.
The PGA Tour has struck a deal with Netflix on an all-new episodic documentary series in the vein of its successful Formula 1: Drive to Survive
Creative Talent & Transparency in Streaming
Olivia Rodrigo’s new music video for “brutal” reflects “how Apple is able to show off the extraordinary power of its brand to touch every piece of pop culture, from where we listen to music (Apple Music), to shooting videos, and now even the fun features within those videos.”
OnlyFans shows Visa and Mastercard are 'choke-points' of online speech
A good read on Gaming and the Creator Economy
Original Content & “Genre Wars”
Jan Koeppen, Disney’s EMEA president, said Disney was now “far more focused and far more invested” in telling European stories, adding that the company was now expecting to produce 60 originals from the region by 2024, up from its previously announced 50.
This opinion piece in Variety argues Disney’s “addiction to streaming” is good for consumers.
Antony Root, who heads up WarnerMedia’s originals drive across EMEA, promised “a broader approach going forward” in terms of both form and genre, saying that series would often still have HBO’s trademark edge but “should be accessible”.
TCM’s executives say that last Wednesday’s latest refresh is an aesthetic one, meant to help the cable channel stay relevant and reach a wider audience (NOTE: I also think it reflected a UX problem of a block-y serif font in a sans serif interface. H/T Scott Porch)
How NBCU “burned tons of promotional jet fuel, only to drive a ratings hit for Netflix and wind up with nothing for itself” with Manifest
Vanity Fair asks, “Has Peak TV Already Peaked?“
Comcast’s & ViacomCBS’s Struggles in Streaming
As of now, every Sunday Night Football game will stream on Peacock, including Super Bowl LVI on Sunday, February 13, 2022. That also includes the 2021 Thursday night Kickoff and Thanksgiving games.
Antenna released data showing Antenna data indicates that the Tokyo Olympic Games were Peacock’s largest paid Sign-up driver since launch.
AVOD & Connected TV Marketplace
CTV accounts tor 60% Of Premium Video Ad Views, Programmatic Buys up to 24% (free - sign-up required)
Benedict Evans dove into the “unresolved questions” of the advertising marketplace, which seem to be growing.
The average subscription to an over-the-top streaming service in U.S. broadband households is roughly 2.5 years and has an extremely impacted by age, according to a study released this week by Parks Associates.
HBO Max, Netflix, Hulu and Disney+ lost a combined $80.2M in “churn” subscriber losses in April 2021 alone, according to estimates from Wurl Analytics. (free - sign-up required)
OTT ad spend across digital, national TV and print platforms rose 47% in 2021, compared with the prior year. (free - sign-up required)
I think these models also imply to investors worrying about Spotify’s stock price — which is now below where it was in June 2020, while the S&P is up nearly 40% in that same time — that the Joe Rogan, Hollywood talent aggregation bets have objectively failed as growth stories for investors.