Creator Businesses Are a Risky
How to build with de-risking in mind
One of the biggest blind spots in creator economy discussions is about just how risky creator businesses really are. This is for quite a few reasons, but predominantly:
- Creator mental health / burnout: it’s hard to keep up with the joneses.
- Hype cycles: time on top has an expiration date.
- Poor decision making: one bad decision and a creator’s career is over.
- Platforms and algorithms: at the will of platform changes, decisions, and distribution.
- Revenue inconsistent and not diversified: a lot of creators have over 50% of their revenue coming from one source.
The MCN model was to de-risk through volume in exchange for 10% of ad rev. This hasn’t played out because it heavily favored MCNs.
So, I think the better question to ask is: how do boutique management agencies or small creators de-risk? And then, further, how do companies entering the space build with de-risking at the core? Here are some ideas:
Make creator collectives.
Let’s say, a creator agrees to put 10% of her YouTube ad revenue into a pool with a group of amateur creators. Over the long-term, she’s betting that one creator will succeed in a huge way. It may or may not be her. This de-risks and promotes collaboration.
Build out other content / IP.
Simple in theory, more difficult in practice. Study Barstool to understand how to do this well. Look at Disney’s evolution, as well.
Build a better Team 10.
Team 10 gets a bad wrap, but it was a revolutionary idea that fizzled because of the personalities involved. There’s a seed of something there that someone will get right, whether that’s an individual creator or management company.
Build fundamentally great businesses, and hire great partners.
This is so much more than merch. It’s about building separate companies, that aren’t hedged on a creator’s growth and pushes. Bonus: acquire small businesses that have plateaued and improve them with your distribution.
Build an advisory board.
Self-explanatory. Everyone needs a sounding board, but especially when on the hedonic treadmill of chasing views.
Invest in the infrastructure of the space.
If you’re in the creator space, it’s probably because you think it’s going to keep growing. I agree with you. Hedge one creator’s success by investing a portion of revenue into the infrastructure that will support the long-tail of the entire industry.
Diversify platforms and revenue sources ASAP.
Bonus points if you can create a source of recurring revenue. We’ve really only seen this from teams like Nelk that were forced to do this because of demonetization.
