Paramount+Skydance, Night Capital & Conflicting Definitions of "Creator-Friendly" Models
Good afternoon (and Good Morning to the West Coast)!
The Medium delivers in-depth analyses of the media marketplace’s transformation as creators, tech companies and 10 million emerging advertisers revolutionize the business models for “premium content”.
In addition to “technological prowess”—which I wrote about last Thursday—another interesting turn of phrase was used last week in the Paramount presentation by Skydance: “Some people are hungry for Paramount to be a place that’s creator-friendly again.”
The speaker was Jeff Shell, the presumptive soon-to-be President of Paramount, and he was adding color to the "creator-friendly" vision outlined by Skydance’s David Ellison:
“Our belief is that you can’t be a ‘B+’ anymore. You have to be an ‘A’ … I think when you create that culture of fostering creativity and setting a high bar, our hope is that the most talented people in the world will want to call Paramount home.”
Around the same time, Reed Duchscher—CEO of Night, the creator talent management agency—wrote in an unrelated post on LinkedIn:
“In 2022, we started a production studio with the goal of helping creators develop premium content for streaming platforms like Netflix and Amazon. However, after a couple of years, it has not materialized as we had hoped, despite our best efforts.”
Duchscher then added: “Most top creators no longer view premium distribution as the ultimate goal”.
The two objectives seem to be on opposite ends of a spectrum of "creator-friendly" models. On one side lies Skydance management’s vision for Paramount to produce elite “A” content for broadcast, theatrical and streaming distribution. That seems to exclude a broader swatch of creators from the Creator Economy. But, Duchscher is saying that streaming platforms has actively been trying to work with these creators, and are effectively failing to be "creator-friendly".
Duchscher wrote that the challenge has been that “streamers are still getting their heads around the power of creators to tell stories and move audiences.” Night Capital “hopes to see more progress in this area soon”. But, the loud-and-clear message of his LinkedIn post is that creators cannot aim for studios' version of "creator-friendly" while studios and streamers try to figure it out or favor creators who deliver elite “A” content.
The implication is that this is not a spectrum but a schism.
Key Takeaway
The question seems to be when—and not if—studios realize that their definition of "creator-friendly" will require a fundamental rethink. They will need to open the doors to their "big IP" to a broader set of creators in the next two to three years, or sooner.
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“Premium Content”
Both quotes offer a broad framing of how the definition of “premium content” is not expanding but narrowing. For example, Warner Bros. Discovery is now rebranding its highest profile titles (e.g., “The Penguin”, “Dune: Prophecy”) into HBO Originals, premiering them simultaneously on both Max and HBO. But, it is also due to many companies in Hollywood cutting back on spending.
Warner Bros. Discovery’s move highlights that particular challenge with its library of valuable intellectual property. It is betting on premium series from its DC comics library (“The Penguin” and “Lanterns), "Harry Potter", and horror hit “IT” (“Welcome to Derry”). In one sense, those models will continue to drive subscription revenues from HBO and Max, and digital advertising revenues for Max, alone.
But, beyond distribution, they can and should be able to deliver additional sources of revenue from additional channels like merchandise and gaming (e.g., "Hogwarts Legacy" from Warner Bros. Games).
Night Capital
That is the premise of Night’s model, which is a bet that YouTube creators can be as valuable—if not more—to studios than A-list Hollywood talent. A creator’s ability to build and engage with their community will create more business opportunities like subscription fees and merchandise than an "A" content streaming series, alone.
Back in September 2022, Night Capital was funded with $100 million from private equity firm The Chernin Group to focus on creators with passion projects and passionate communities who can “harness established platforms to sell products and market themselves.” At the time, Duchscher was still managing Jimmy Donaldson aka MrBeast under Night Talent—Donaldson left the agency in May—and Night Capital was a bet that more MrBeast-type talent could be identified, funded and scaled.
Night has since leveraged those funds to acquire LFM, an influencer talent management firm, and Rooster Teeth podcast networks. Its roster has grown to at least 65 clients, up from only 10 in 2020. In the case of creators like Dude Perfect—not represented by Night—those opportunities include the launch of Disney and NBCUniversal flywheel-like models with an owned-and-operated streaming platform, a line of toys and games in Walmart and plans to build a $100 million theme park.
Creator economy models increasingly seem to mirror the business models of “big IP” but without “the tyranny of big IP”, and Night Capital aims to be a key player in that evolution.
An Uncomfortable Truth
Duchscher’s post suggests that the market opportunities for monetizing elite "A" content premium IP in Hollywood will only narrow. Hollywood streamers are already witnessing their libraries of content declining in size, both due to cutbacks in spend and better opportunities to monetize their libraries on third-party platforms like Netflix or free-ad-supported TV platforms (FASTs).
High churn rates are resulting in low engagement. Even if every Warner Bros. Discovery “big IP”-driven, elite “A” series is a hit, they will not be enough to keep audiences churning out of Max once they are done. A subscription model needs more and Night Capital has painfully learned that bringing creators behind walled gardens is not yet a solution to that problem.
The implication is if “big IP” cannot drive optimal business models with fan communities from within the walled gardens, and creators cannot be a solution to that problem within walled gardens, then creators will have to be the solution without those walled gardens.
Timing
The question is when—and not if—studios realize that the logic of “creator friendly” will require a fundamental rethink. I recently had coffee with a media executive whose background is in the “big IP” world, and he predicted that it probably would be another two to three years before we see this outcome.
Intuitively, I think growing churn and declining engagement on streaming platforms are the type of pain point that will force studios with owned-and-operated streaming services and “big IP” to crack their walled gardens open to creators sooner than later.
Either way, Skydance and Warner Bros. Discovery management both seem to have roadmaps for “big IP” backed by big investments scheduled to launch over the next 12 to 24 months. Indeed, it may be three years before they realize their business models require a fundamental re-think of "creator-friendly" away from elite "A" content.
That leaves open the question of what plays out in between: Does the spectrum remain? Or will it devolve into a schism?
If it is a spectrum, then we are effectively waiting on a pendulum swing away from the Skydance team's definition of "creator-friendly" to Night Capital's definition. But, if it is a schism, we are about to witness some ugly, winner-take-all competitive dynamics between creators and weakened walled gardens around "big IP". Because Duchscher has learned that a bet on the middle ground is a fool's errand.