About PARQOR
PARQOR is the handbook every media and technology executive needs to navigate the seismic shifts underway in the media business. Through in-depth analysis from a network of senior media and tech leaders, Andrew Rosen cuts through what's happening, highlights what it means and suggests where you should go next.
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My monthly opinion piece for The Information is now live. It’s called “Wall Street’s Expectations for Legacy Media Companies Are Getting Weird” and it argues the shift from subscriber growth to revenue per user is a deceptively huge one. Media companies are being forced to get good at a whole new game—and not all of them will.
I built the piece around a favorite joke of mine from stand-up comic Mitch Hedberg about working in Hollywood. You can watch it here. The joke is about struggling in Hollywood, doing everything possible to be as best as one can be at their skillset, and then when the moment in the spotlight arrives, the talent being told they would be valuable if they could do something entirely different.
Jimmy Donaldson aka MrBeast is a creator who has successfully figured out successful direct-to-consumer media and commerce business models by doing something entirely different. He's bet on YouTube - his channel has over 17.4B lifetime views and he earned $54MM in gross revenues - and he also has launched successful direct-to-consumer businesses in fast food and chocolate.
He’s an archetype for the evolution that Wall Street correctly understands for the future of media. But he's also the archetype for what Wall Street and legacy media simply don't understand about hit-making in the era of YouTube and Netflix.
Key Takeaway
Focusing on solving average revenue per user seems increasingly like a fool's errand when legacy media's hit-making machines have a path to evolving and succeeding, thanks to MrBeast.
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Total time reading: 4 minutes
From YouTube to Netflix
MrBeast says he reinvests 100% of what he makes on his channel, and he obsesses over the types of content YouTube's algorithm rewards. He's now expanding that model to other e-commerce vendors and other creators via a fund called Night Capital in partnership with The Chernin Group (I wrote about this earlier this month).
He recently told the hosts of the Flagrant podcast that he plans on doing a Netflix show eventually because “YouTube’s not great for episodic content. People go to Netflix to watch multiple episodes.”
He proposed a couple of concepts to the show’s hosts:
One of the proposed shows would gather 10,000 MrBeast fans in a stadium for a 10-episode elimination tournament. The other idea would also employ a “last person standing” conceit, but it would be much more violent than a typical MrBeast video. It would be an animated battle royale series set on an isolated island. Or, as Donaldson put it, “evil Saw MrBeast.”
His point echoes what happened with “Cobra Kai” after it jumped to Netflix for its second in 2020. The show is now in its fifth season and it now averages ~100MM hours viewed in a week. But on YouTube the show had failed to take off behind the YouTube Premium paywall.
He also would not be the first YouTube creator to make the leap over to Netflix, with comedienne Miranda Sings being the most notable failure and kids animation series CocoMelon being the most notable success story.
Understanding the Algorithm
Instead, I think it’s worth focusing on his show ideas. They’re obviously inspired by Netflix’s hit South Korean show "Squid Game", which racked up 1.65B hours viewed in its first 28 days to become the most popular Netflix TV show worldwide. He also has previously produced two Netflix IP-themed productions: a real-life version of Netflix’s “Squid Game.” and “I Built Willy Wonka's Chocolate Factory!”.
First, he understands which will be rewarded by YouTube’s algorithm. It's an argument that each YouTube video has to be its own event and experience. He produces only 25 videos per year according to that philosophy. That sounds a lot like the theatrical model evolved onto the YouTube platform, and no legacy media company seems to be approaching YouTube that way.
Second, he believes he understands what Netflix’s algorithm will reward and it looks an awful lot like “Squid Game”. Meaning, he's not saying every show on Netflix needs to be "Squid Game". Rather, it seems to be an argument that the success of “Squid Game” was a creative idea that touched upon themes of competition and survival that mapped perfectly to how and whom Netflix's algorithm recommends content.
A counterpoint to Wall Street
It’s a fascinating angle that I have yet to read or hear (and, obviously may exist out on the Internet).
And, it's a great counterpoint to Wall Street's demand that companies focus on ARPU. He's basically saying, "Why focus on ARPU? Entertainment is a hit-driven business. If there's an opportunity to create content that an algorithm will reward with hundreds of millions of views, why not invest in solving for that?"
In other words, why hold management accountable on ARPU when there's a new science for the future of hits? And it's being openly discussed by one of its most successful mad scientists? Why not hold them accountable for figuring that out?
Wall Street seems stuck in believing that creators like MrBeast are not “premium content” (which I wrote about two weeks ago), and that all "premium" legacy media streaming services need to do to succeed is to figure out how to shamelessly borrow from creator economy innovations to grow ARPU. Solve that problem, and everything is right in the share price and media universe again.
That's too simplistic.
Rewriting the definition of "hit"
MrBeast is openly outlining at least two key ways legacy media's hit-making businesses can and must evolve:
The theatrical model can translate to YouTube at exponentially lower costs (and with the same IP, as his Chocolate Factory video prove); and,
No one needs to borrow liberally from "Squid Game", but its success reveals the types of themes with which Netflix's algorithms will find consumers.
They may be Netflix and YouTube-centered insights, but where else can media companies find hundreds of millions of potential viewers aggregated at scale? Not on their streaming services (Disney excluded, of course). Focusing on ARPU seems increasingly like a fool's errand when legacy media's hit-making machines have a path to evolving and succeeding, thanks to MrBeast.