Netflix and video podcasts; plus the economics of food creators
And a couple of interesting YouTube documentaries, as well as the perils of launching a consumer product.
Before diving in this week, a little announcement!
As mentioned last week, I’ve been publishing since September with the goal of cutting through the noise to focus on trends that are important to TV, film and digital content people now or over the next years. So producers, company owners, production management, as well as commissioners, financiers, commercial, distributors, brand managers, ad agencies, digital creators, marketers, freelancers and so on. And also people in adjacent markets; so hello to all the agents, publishers, academics and developers who subscribe.
I’ve asked you for feedback in the past, and you’ve told me you value this big weekly email rather than shorter more frequent emails. So to that end, this Friday email is going to stay as it is.
However, starting next week I am going to publish a new second weekly email, which will be full of case studies to inspire you all with concrete examples of online content businesses, brands, channels, creators and campaigns.
I’ll focus at first on YouTube, but not exclusively, and will also include social, podcasts, newsletters, memberships and more. The idea is to create a catalogue of case studies to help producers think practically about how the creator and direct to consumer market works. As a flavour, if you liked this YouTube post from December, well, it will be a weekly dose of a whole lot more:
This second weekly case studies email will be paid, however the first one I send next week will be free to all of you. If you like it, you can subscribe, but if you’d rather stay on the free tier that is completely fine too.
After next week, if you don’t subscribe to the paid tier, you’ll continue to receive this free weekly email, and you won’t receive the second case study one in the future. This is frankly out of respect for the sanctity of your inbox.
Anyway - announcement over - and thank you again for subscribing.
Netflix and Video Podcasts
Business Insider reported last week that Netflix is thinking about hosting video podcasts on its platform (although Netflix refused to comment officially). It is worth exploring why they might be doing this, and there are likely to be several factors at play here.
Firstly, and most significantly and broadly, is the collapsing of what were previously different markets into one amorphous mass. Before, TV sets were just about watching TV and DVDs (plus Ceefax). Then playing games via a console or mini games via your satellite or cable provider. Then streaming on demand of TV shows and films. And now, all of this, as well as watching a broad range of content - some TV, some not TV - via YouTube.
In the same way, spoken word audio used to solely meant radio. And then along came podcasts in the early 2000s, and they were either on devices like iPods, and later podcast apps or websites, streamed or downloaded. Then on a music platform like Spotify. Then YouTube. Then video podcasts on YouTube and Spotify. To the extent that Google has said that 1bn viewers per month watch podcasts on YouTube, and 400m podcasting hours per month are via YouTube on the connected TV.
So when you put all this together, you end up in a world where YouTube, Spotify and now Netflix are competing with each other - not just for your time on your devices but also on connected TVs. And this means your subscription money as well as crucially advertising revenue too.
Let’s also not forget the elephant in the room, which is Amazon. They compete with seemingly everyone in all sectors. So ignoring their e-commerce and cloud businesses, in media they compete on devices, ebooks, audiobooks and podcasts (via Audible), and of course TV & film through Amazon Prime Video.
Secondly - related to the above and something I’ve written about several times before - is the war to be the operating system of choice for us consumers in as many aspects of our lives as possible. This is where Netflix, Amazon, Google and Apple are competing with themselves as well as Microsoft plus LG and other consumer products manufacturers. Never mind retailers like Walmart and so on.
Within this context, getting people to spend more time on your platform helps, especially as the streamer steep subscriber growth curve has now levelled off. When you have multiple subscription tiers at different price points, and are trying to carve out a healthy share of the ad market, then having a range of content that is low, medium and high cost to produce or acquire is important. As a talent talent agent said about Netflix and podcasts when quoted in Business Insider:
It’s a way to get an amazing volume of content at a fraction of what they pay for scripted and unscripted budgets.
Remember Spotify and the 70% of revenues they give to music IP holders? Their push into podcasting as well as owning music rights is a similar attempt to increase profit margins.
It could also be seen as a defensive move - depending of course how it is executed by Netflix - more on that in a moment. If all your competitors have podcasts, perhaps they become a hygiene factor - which is everything a customer expects to receive. Rather than a motivating factor - which would be something that makes people take out, or not cancel, their subscription.
As previously mentioned, one of the routes to get people to spend more time on Netflix has been games. The company’s game strategy has been moveable over the last few years:
AAA games around their own IP (although their studio leading on this was shutdown last year);
licensing blockbuster AAA third party games such as Grand Theft Auto;
publishing and licensing a whole bunch of cheap and cheerful mini-games unrelated to their shows;
announcing they are to publish a new game a month in their standalone Stories app.
The hiring of Alain Tascan (of Fortnite creator Epic Games) to lead the games division last summer should see a renewed strategy emerge at some point perhaps this year.
As a quick aside, how much Netflix paid for the licence to publish Grand Theft Auto is unknown, but a year ago it was reported that Xbox paid around $12 - 15m per month to have GTA V within Game Pass (so if you have a Game Pass Xbox subscription you can play it for free, similar to the Netflix offering).
As for what’s working, this piece by Kasey Moore at What’s On Netflix is worth a read. While games around own IP have worked, it is notable that simple puzzle games like Solitaire (as well as big games franchises like GTA) have been key in driving engagement on the platform.
So similar to games, podcasting fits within Netflix’s strategy as summarised by Kasey Moore:
At its core, Netflix’s number one goal across its business is actually really simple—engagement. The more time users spend watching and playing, the more likely they are to maintain their subscriptions. Currently, Netflix’s engagement strategy is built on two pillars: TV and movies, which have solidified its position as the world’s leading streaming service. The question now is whether it can establish “live” content and gaming as equally important pillars.
However, the podcast announcement did cause a few eyebrows to raise. Firstly, because of the suggestion of exclusivity in their announcement. In general, podcasters are in the reach game, so being on as many platforms as possible is important to them. Worth remembering that Spotify has paid significant sums to Joe Rogan but even then the exclusivity requirement seemed too great (instead, a new deal in 2024 agreed non-exclusivity plus Spotify handling distribution and ad sales for the podcast).
Netflix may do a distinctive Netflix-style spin on a video podcast that creates a motivation to subscribe - perhaps some sort of new TV/podcast hybrid will emerge from the deal between The Rest is History and Wheelhouse? Conversely, having only non-exclusive video podcasts that are also on YouTube and Spotify seems unlikely to be a value add to anyone considering whether or not to renew their subscription to Netflix.
wrote this great piece a few weeks ago on Netflix and video podcasts.
What does all this mean for TV producers?
Well, most obviously is that if you have content that can be re-versioned into a podcast, you should be exploring that. Off the back of this activity, then exploring podcasting as an additional creative format and revenue stream is important, whether it is commissioned, self-financed or brand funded. It has been common to see podcasts as a way to test ideas for bigger TV or film projects, and so skewing your mindset to see podcasting as part of your development strategy might help rationalise the costs if you are self-funding them. Finally, as the delineation between media types collapses, then the more we will see ‘podcasts’ and ‘TV’ move closer together, similar to the example of Max’s ‘SmartLess: On The Road’ show based on Jason Bateman, Will Arnett, and Sean Hayes' podcast.
And then of course, most obviously, make sure you are on all the podcasting platforms - the biggest share of the US podcast market belongs to YouTube so this should be your focus followed by Spotify. As reported in Variety:
In the U.S., about 31% of weekly podcast listeners choose YouTube as their preferred service, over Spotify (27%) and Apple Podcasts (15%), per Edison Podcast Metrics research released last October.
Two interesting YouTube documentaries
There have been a couple of interesting launches on YouTube in the last couple of months that are worth drawing your attention to.
Phil Collins: Drummer First - Drumeo’s YouTube channel
Launch date: December 2024
Views: 4.4m
Channel subscribers: 2m
This two hour documentary has been produced by Drumeo, a Canadian drumming platform that started life selling drumming lessons as video downloads back in the late 1990s, before shifting to online drumming videos on YouTube. It now the place to learn to drum as well as celebrate the world’s greatest drumming talent. The platform includes over 6,000 transcribed songs so members can play-along-and-learn, and it has 50,000 active students plus 6m social followers. There is an article here on their business and history.
This is a great example of the founders turning their hobby and passion into an online business for a specific global tribe. And their business has multiple dimensions to it: YouTube content which will generate advertising revenue, but more importantly sponsorship from instrument manufacturers, and then the paid membership programme. The parent company has added other similar instruments such as Pianote and Singeo.
Jude Bellingham: The Full Story - Jude Bellingham’s YouTube channel
Launch date: December 2024
Views: 975k (film) and series (6.5m)
Channel subscribers: 874k
Jude Bellingham has been on YouTube for less than a year, but his team have already released a four part series ‘Out of the Floodlights’ as well as a 2 hour documentary ‘Jude Bellingham - The Full Story’. They appear to be produced by his own company, Bellingham Media.
As outlined in this Forbes article, this is the natural progression for a broad range of talent (sports, but also wider) to shift from short form social content into longer form TV and TV-like programming and feature films, and now where they produce, fund and distribute the programming themselves rather than via their agents or third parties.
Separately, Little Dot announced this week that Real Stories on YouTube would be the US premiere channel for the upcoming C4 title Surviving Michael Jackson.
Hits and misses by YouTube food creators
Recipes and cooking have always been big business, and the online video food market is highly competitive with a whole host of individuals, brands, publishers and studios competing for attention.
As a quick recap: It won’t come as any surprise that the economics of YouTube are completely different to those of TV - one of the many reasons the platform hasn’t been embraced quickly and easily by TV production companies. In very basic terms, the advertising revenue (post YouTube’s share of 45%) works out approximately at:
1m views = £5,500 (US $6900)
20m views = £110k (US $138k).
This doesn’t take into account that some content generates a higher advertising premium, other content has a higher (or lower) ad load. It also doesn’t include the revenues an individual channel can make through sponsorship (which is 100% retained by the channel), or share of any YouTube premium income. And of course any YouTube channel can act as marketing for something else.
So, back to recipes and food creators. Colin & Samir recently showcased two very different experiences.
The first is Mythical Kitchen, the cookery channel with 1bn views and 3.5m followers on YouTube alone. So without knowing their exact metrics, this channel is likely to have generated around £5.5m in advertising revenue (net of YouTube’s share).
It helps that this channel is part of the stable of two of the biggest creators online - Rhett & Link who own the entertainment studio Mythical. The portfolio includes YouTube channels with 76m subscribers and a total of 27bn views, plus 52 followers across all the other social platforms, as well as various podcasts and merchandising.
One of their brands - Good Mythical Evening - has been running ticketed livestreams for four years, and they have been selling 70,000 tickets a year, starting at $17.99. So gross perhaps $1.2m each year. And now Mythical Kitchen are going to do the same, with a live streamed cooking event in April.
Having run ticketed and non-ticketed online live streamed events before (not around cooking but with relatively well known names in a significant global niche), it was always surprising how few people would join - sometimes in the tens if perhaps the low hundreds of people. So to generate live stream ticket sales of this volume is quite noteworthy. Mythical clearly have an online audience that is also willing to spend money and time with them as creators and a brand.
A different story has been the experience of YouTube creator Carla Lalli Music. She left Conde Nast’s Bon Appétit Test Kitchen in 2020 (along with others) and started her own solo operation of regular food recipe videos, books with the ambition of landing a TV series.
Despite building 230k YouTube followers and 18m views, she’s announced she’s stopping video production to instead focus on her books, Substack and podcast.
She’s outlined various reasons for this decision, but to focus on the financial: her costs to create weekly long form recipe videos for YouTube was about $14k, and yet her average gross earnings (net of YouTube’s share) was $4k. She then would take on brand sponsorship deals to try to make up the difference, but rarely seemed to be making a profit. As she hints at herself, if she had double or triple her audience per month, then the financials would suddenly have made it all worthwhile. Or indeed, even if the videos themselves weren’t profitable, but drove book sales then again the effort could be justified. Perhaps similar to the trend in TV, the creator economy is one where the middle can get squeezed.
Her full post is worth a read, if only for how transparent she’s been about her approach and the realities of trying to make it as a profitable individual YouTube food creator.
Another important observation is how even ‘food’ is not one content monolith, rather there are all sorts of different formats under the hood and as a result there isn’t a universal platform and media approach. So the scale potential of YouTube works well for the 'food as entertainment brand of Mythical Kitchen, while for recipe information, then the written word on Substack, books and short cheaper videos on Instagram and TikTok (and YouTube shorts) are better - thus driving the production costs right down.
Getting into Consumer Packaged Goods
Diversification is a common theme for those in the content world, whether it is TV companies looking to find new commissioners so not too dependent on too few buyers, breaking into new genres, factual getting into scripted and vice versa, opening up podcasting or branded divisions. And for others it is events, subscriptions, FAST channels or memberships. The example of Drumeo above really demonstrates this approach.
One common area to look to diverse into is CPGs - or consumer packaged goods. These are distinct from merchandising, where a show, talent or company logo is emblazoned on a product. A CPG is a product that is used regularly by average consumers - something that is used quickly and therefore should be repurchased fairly often.
Some of the biggest creators have launched CPG brands in the last couple of years. The most obvious example is the Prime Hydration phenomena, launched by Logan Paul and KSI - which has had over $1.2bn in sales in 2023. MrBeast also has a CPG division, which includes a chocolate snack Feastables that Time magazine reported generated $500m in revenue in 2023.
Indeed, in October last year, Forbes has this article Influencers To Entrepreneurs: How Creators Are Launching Tomorrow's Biggest Brands. And many commentators talk about how creators are becoming business empires with direct to consumer products part of the mix.
However, there is a lot of risk around launching and building a CPG brand that is long lasting with consumers rather than a faddish flash in the pan. Perhaps best demonstrated that by the end of 2024, Prime Hydration is being referred to as a ‘novelty’ as reported in the Grocer:
Talk about a fall from grace. This time last year, Prime was Top Products’ third-biggest success by absolute value gain. Twelve months later, it’s down £63.1m: the largest loss of any food and drink brand. Volumes have plunged 32.6%, or 8.8 million litres.
A few weeks ago I wrote about a recent interview with MrBeast/Jimmy Donaldson and it is worth listening to his experience of launching a consumer product good and why he would caution creators against it. From 35 mins below.
This is a helpful description of the difference between getting into CPGs versus instead doing a brand licensing deal with a separate company who specialises in certain products. The idea being that together they are better than the sum of the parts. An example of this is MrBeast with the Australian toy designer and manufacturer Moose Toys, who also works with brands such as Bluey And Despicable Me4. They launched a set of toys under the name MrBeast Lab.
The exact detail on the relationship isn’t clear - is it a joint venture, or closer to a brand licensing deal - however, this isn’t Jimmy Donaldson launching a toy brand on his own, rather working together with a company with expertise in the design and manufacture of toys.
And interestingly, MrBeast and Moose Toys have announced they are going to create a series of animated shorts around the MrBeast Lab toys, due to launch in Autumn this year. The animated shorts will be produced by Stoopid Buddy Stoodios, as reported here:
… with Sam Levine serving as showrunner. Sam directed the critically acclaimed animated feature DC League of Super-Pets for Warner Bros., developed and wrote on Disney Animation Studios’ Wreck-It Ralph, and also co-created and served as showrunner for Disney’s animated series Penn-Zero Part-Time Hero.
Worth keeping an eye on where these shorts appear - YouTube and social most obviously, but also whether they appear on streamers or broadcasters in the future.
While Jimmy Donaldson is warning other creators about the perils of CPGs, Lucas Shaw yesterday in Bloomberg had a good exclusive that he is looking to raise a couple of hundred million at a $5bn valuation. The piece says Jimmy Donaldson is raising money to:
… fund a holding company that owns all or part of several businesses, including the chocolates brand Feastables, the snack company Lunchly and his video production company. The business is profitable and generated more than $400 million in sales last year, said two of the people. He is looking to expand both his packaged goods and media businesses.
The world of brands and franchise management is going to become even more important for TV, film and digital content producers over the coming years. To that end, Will Harrison has launched a new Substack called ‘Brands to Fans’, where he shares his knowledge and experience of working with IP owners to extend and commercials their brands including Harry Potter at Warners, HBO, Disney and more. I’d encourage you to subscribe if you want to understand how the world of brand and IP franchise management works:
Find out more about me and the purpose of this newsletter, say hi via email hello@businessoftv.com, or connect with me on LinkedIn.