Subscription observations - 1/10/2020
Streaming, Patreon, the death of non-traditional media, and more.
Streaming
More exclusive contracts in streaming. Exclusive contracts are common in streaming; Twitch and YouTube are well known for them, but as the space gets more crowded, more contracts at higher prices are going to come out.
Popular streamer DisguisedToast (Jeremy Wang) signs an exclusive contract with Facebook Gaming.
Mixer recently has been notorious for going after very big name Twitch streamers, such as Ninja and Shroud.
Caffeine has signed Offset from Migos to stream twice a week.
Why these platforms are going after these specific creators requires a more in-depth post, but they are all trying to go after different pieces of the overall online streaming market.
Facebook Gaming and DisguisedToast is interesting. Facebook obviously has a lot of things going for their streaming service - wide distribution, tech infrastructure, ad tech and ads sales teams. However, one major factor behind why Twitch grew so fast was anonymity — fans (for better or for worse) feel more empowered to be their authentic selves without their real names attached to their accounts. Facebook has seen a significant slow down in organic usage and post creation, as people discover that having their real name associated with public posts is a Pandora’s box. Comments may seem more ephemeral than a wall post, but it remains to be seen if FB Gaming can actually capture significant pieces of Twitch’s market.
Twitch ads: The Information has a report which says “Twitch was on track to deliver about $300 million in ad revenue for the full year” versus “an internal goal for the year of between $500 million and $600 million.” Advertising historically has not been Twitch’s strong suit, and subscription/microtransaction revenue was supposed to dominate. I am not super familiar now with how integrated Twitch is with the rest of Amazon (I know pay packages are relatively uniform, and I have heard that perks have decreased significantly since the acquisition), but it wouldn’t surprise me if Amazon tried to merge more of the Twitch advertising apparatus with their own burgeoning ads business.
Patreon
I got a promotion email from Patreon:
It’s possible that adoption of the Pro Plan hasn’t been as high as hoped. I think most creators are relatively price-conscious, especially given that most creators are not making much money, $100 per month is very little. It’s the first paid activation campaign which I’ve seen at least, but perhaps it will work out for them.
AB5 and “content farms.”
Tom Ziller is one of the best basketball writers out there, previously with SB Nation, and now with Substack. SBNation got rid of Californian contractors after the AB-5 bill passed (in perhaps very unfortunate consequences). His new structure is to write a newsletter with a $5/month, $50/year structure. I honestly expect him to make more money through this setup - high quality content, strong track record, already developed following.
Where I see shortfalls (or opportunity) are services which support these freelancers much like a traditional editing team would at a news outlet.
Other reading.
I really liked this interview with Gumroad’s founder, Sahil Lavingia. A couple things that jumped out to me:
“We helped thousands of creators get paid every month. About $2,500,000 was going straight into the pockets of creators — for rent checks and mortgages, for student loans and kids’ college funds. And it was only growing! Could I really just turn that faucet off?” - even if this segment is not big enough for a VC-backed unicorn, it does create significant value for real people. I think that there is significant deadweight loss in the economy created when the only ways to create a company are 1. be rich already, 2. take VC money and all the strings attached to it. That’s probably worth a separate post.
“And it’s hard to buy ads or go to trade shows or anything, because you’re competing with people who are selling a product where the average contracts and gross margins are much higher. So they can afford to outbid you.” - low margin businesses can’t grow through paid acquisition. That’s why restaurants (notoriously low margin) rarely advertise and why Yelp, despite its position in the culinary zeitgeist, is “only” worth $2.4B and hasn’t really grown with its ads business.
“In 2020 we want to focus on memberships. I think we can build a product that’s better than Patreon. We’ll let you sell a-la-carte and memberships in the same place, and we can do it profitably with a small team. That part is really important. They’ve raised $170 million and have 170 employees. As a creator, if you’re building your livelihood on their platform, you need to understand what expectations their investors have of them.” - this has been part of my core thesis for why Patreon will fail. It has to have low margins because it doesn’t add much value and its customers are price-conscious, whilst also needing to constantly grow. I just don’t see it.