DEEP DIVE

The Creator-Company Paradox

Not so long ago, content creators were simply employees at media companies, i.e. journalists, reporters, marketers, etc. 

They were there not because they wanted to work for a media company, but because they simply had no choice — it was the only way to do what they loved while making a living wage. 

The onset of The Creator Economy changed that.

Thanks to platforms and tools like Substack, Canva, and Patreon, more creators than ever are able to strike out on their own. These tools have given creators the ability to manage, operate, and monetize their content with ease. 

And this has led to what I call the Creator-Company Paradox:

• Creators seek employment with a media company because they need and/or want the resources, capital, and support it provides, but… 
• Many of the best creators strike out on their own because they feel undervalued by those companies — and, often, have ambitions to build their own personal brand.

Frequently, it’s a lose-lose. Media companies lose the talent that makes them great, while most creators struggle to really make it on their own.

The graduation of 10X creators

If SaaS companies need 10X engineers, then media companies need 10X creators. These creators lower CAC and increase LTV — as well as just about every other major KPI of a media company.

In 2018, Jarrod Dicker wrote one of the most thought-provoking pieces in recent memory, The Next Media Opportunity: Talent, Reputation and Lessons from Record Labels. He argued that media companies should act like record labels, saying that “your business model is your product strategy”. 

At that time, many media companies brushed off the need to change their business model…. but since then, there’s been an exodus of “10x creators” from the most-circulated publications, like Barstool, Tech Crunch, Morning Brew, and others. 

In short, media companies are experiencing a graduation problem. Once creators “get big”, they don’t stick with the team — they strike out on their own.

Why? Because they haven’t adapted to Jarrod’s “record label” model.

Instead, most media co’s business models rely on undiscovered talent. They hire great creators when they’re early in their careers, build them up — and then, as the publisher becomes bigger and better, they replace them with undiscovered talent to maintain the status quo (i.e. lower salaries). 

These media co’s use the margin they save on creators to build out other lines of revenue or diversify into less profitable channels. This is particularly true with newsletter businesses. They play a qty not qlty game. 

Know who you are 

It’s time we start viewing ourselves as one of two things: (1) a talent center or (2) a distribution center. 

The reality is, you can’t be both. 

The choice is a difference in philosophy. Do you believe a media company needs top talent to sustain success? If yes, build for a talent center. If not, build a distribution center. 

Talent-centered companies will attract the best and brightest creators for long periods of time but will have smaller margins on their core media business (example: advertising). They’ll put the creator — and their success — at the center of their product strategy. This will open opportunities to more easily diversify into consumer revenue streams. 

Distribution centers will cycle through undiscovered creators that they find. They will arbitrage the salary of creators for as long as they can. They will build the product strategy around the institution rather than the creator. They will focus on hiring the best operators. Their core drive of revenue will come from mass distribution and attention, with super healthy margins. 

There are pros and cons to both. The important thing? Decide which way you want to go, then build for that — don’t get lost trying to build for both.

Successful talent centers 

Axios, The Athletic, and a select group of others have proven that they can attract top talent and keep them on the payroll for a long period of time. What are some lessons?

Embrace individuality

Axios allows its content creators to be at the forefront of their IP. Here is a great example with Dan Primack’s Pro Rata newsletter. 

Fair pay with incentives of growth

The Athletic built a business model that was simple: attract the best talent from local newspapers by paying them more and giving them bonuses for growing subscribers. Even though the business is a bit shaky, I’d say they’re doing a lot better than newspapers. 

Listen to their needs

For most content creators, the thing they resent the most is being viewed as a COG. They want to be championed, they want their ambition enabled, they want balance in their life, they want creative freedom, they want extraordinary benefits, they want to own their IP. Every creator has different needs, but if you’re building a talent center, you need to listen to your creators and pull the levers that make them happiest. 

Look at DAOs

This may seem crazy to some of you, but DAOs could be a great solution to attracting the best talent while creating enterprise value. Creators can earn their pay based on contributions, operators earn their pay based on performance, and it allows your readers/community to earn while they consume. It’s a win/win, but executives and founders have to be ready to cut their equity in half… at least. 

Don’t be stubborn

Jarrod Dicker was ahead of his time. He knew what was coming — and with the explosion of crypto, the exodus of creators will only accelerate. 

If you can’t tell, I’m a believer that the media company that can attract and retain the best creators will win. It’s not an easy thing to figure out, and the idea of creator rev share or giving up half your equity probably makes a lot of operators’ skin crawl. But it’s time to rethink how we structure media businesses so we can solve this Creator-Company Paradox.

IN A MEME

PERPETUAL’S PERSPECTIVE

*This section today was written by Workweek creator, Alan Soclof. Alan is cooking up something new that this audience is going to find valuable. Give him a follow!

Not all subs are created equal 

TLDR: Last week, Disney announced that they added 7.9M global streaming subscribers in Q1. This was a strong beat for The Mouse as analysts expected the company to add ~5M subs. This takes Disney’s total subs to over 205M across Disney+ (137.7M), ESPN+ (22.3M), and Hulu (45.6M). For reference, Netflix closed Q1 with 221M subs after losing ~200K subs in Q1.  

Perpetual’s Perspective: From a global subscriber perspective, Disney is closing in and looking to overtake Netflix as the #1 streamer. However, the subscriber metric does not tell the full story. Disney’s India service, Hotstar, has 50.1M subscribers at an ARPU of just $.76. Not only does Hotstar make up 25% of Disney’s subs, but they are also in risk of seeing a mass exodus of subs from Hotstar as the service owns the rights to India’s Cricket League – the #1 driver to the platform. As streaming wars heat up, keeping your eye on ARPU is just as important as the total number of subs. 

Man City – the esports juggernaut? 

TLDR: Manchester City’s push into the esports arena continued as the EPL giant announced the signing of Fortnite player, Skram Konrad. This is Cities second major Fortnite signing after the franchise signed Aiden “Threats” Mong in October of 2021. 

Perpetual’s Perspective: In 2019 (pre-pandemic), 77% of gamers aged 18-25 spend more time watching other people play video games than watching broadcast sports. These trends only get stronger the younger you look. This is Man City’s logic of increasing engagement and exposure with current and prospective fans.
Interestingly, Man City’s stars are also big Fortnite players. Star striker Kevin De Bruyne (17.5M instagram followers) frequently plays Fortnite, even breaking massive injury news on his stream. Also, fan favorite Deli Alli (7.4M instagram followers) supermodel girlfriend broke up with him due to “playing too much Fortnite.” 

I expect the best team in Manchester to see serious success from these moves – much more success than Alli’s last relationship. The leveraging of brand, rise of gaming, and passion for gaming by their superstars are the reasons why.  

A glimpse into the future

TLDR: NBC Universal kicked off the upfront season in NYC featuring a Kelly Clarkson performance, presentations from Jimmy Fallon, Seth Myers, Lester Holt and a whole lot more. This is the unofficial kickoff of the 2023 ad market as the TV giants kickoff their pitch to advertisers looking to scoop up as much cha-ching as possible from budgets. 

Perpetual’s Perspective: Rumors from the upfront will likely give us our first significant insight into the 2023 ad market. How are advertisers feeling about 2023? Will they pull back in fears of rescission? What do they expect consumers’ spending habits to be next year? 

Additionally, we are coming off a smoking hot year at the Upfronts where media giants like Disney saw “double digit” increases in CPM and revenue. 
A couple other things I will be watching closely: What is the sentiment around advertising in streaming? Does Roku continue to take ad share from legacy media? How will Netflix’s entrance into the ad space next year change or not change things? 

TL;DR – we will learn a lot from upfronts