RockWater Roundup

2021 was the year acceleration stuck. It was also the year in which the “passion economy” gave birth to the “ownership economy”, which blurs the line between creators and fans into communal ownership. All driven by the Web3 boom. And it reveals a glimpse into a possible future where all platforms are built, operated, funded, and owned by their users, who are rewarded with tokens that are proportional to the value that they’re able to create. Chris and Andrew explain this paradigm shift, summarizing in just 20 minutes the 15 industry articles, 31 podcasts, and 7 industry watch lists the RockWater team published in 2021.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com--EPISODE TRANSCRIPT: Chris Erwin:So Andrew, it is the end of January and we are recording our first Roundup podcast of the year. I think we've left our listeners hanging a bit. Andrew Cohen:Pros and cons of not being a full-time media company, try our best to turn out excellent content, but not always the most timely we do our best Chris Erwin:We're full-time advisory and just added doing some direct balance sheet investing this year into digital goods as well, trying to have all of... Stay updated on all things content, a little bit of a challenge, but we do our best. So we just published a piece that summarized all of our amazing thinking and all of our articles and podcasts in 2021, it was our year in review and we talked about two key themes. So I'll talk about the first one. And then you could talk about the second. How does that sound? Andrew Cohen:Sounds good. Chris Erwin:All right. So looking back on 2021, one thing that didn't surprise us was sticky acceleration. So we defined this as that there was certain things, dynamics of the economy that were pulled forward during COVID in 2020. These things include e-commerce penetration, content consumption, and content spending. And what we saw in '21 was that this acceleration, it wasn't a reversion back, it was sticky. It stayed with us in 2021, actually continued along it's trajectory. So let me review a few key stats on that front. On the e-commerce front, reminder that in 2020 during COVID e-commerce sales grew 32%, 2021 they grew by another 16%. Incredible. On the audio front in 2020, 52% of consumers said they began listening to more podcasts. Last year, monthly audio listenership was up 7%. Chris Erwin:In OTT video by the end of 2020, 73% of consumers were streaming more OTT video content than they were before the pandemic. Last year in '21, the average number of streaming services per consumer increased 28% year over year. For the creator economy 2020, we saw Cameo grow its bookings by 350% and its GMV by 4.5 times while Only Fans grew its user base by 75% month over month during COVID. But last year in '21, the number of digital creators increased 48% year over year growing the total value of the creator economy market to $104 billion, which we covered in a pretty foundational piece at the end of last year. Chris Erwin:So look, a lot of things I think people had been anticipating were going to happen in the digital content e-commerce economy for a while, got pulled forward during COVID 2020, that stayed the trend last year. But as a result of these macro shifts, capital flowed accordingly, right? So we saw $5 billion of investor capital flow to the creator economy, total telecom, media, tech, aka TMT investments hit $233 billion, 27% year over year increase from 2020 and total content global spending increased 14% to $220 billion. Really some staggering numbers here, Andrew. So that was sticky acceleration, but something else happened here too. Tell us about that. Andrew Cohen:That might have surprised some people that kind of sticky acceleration, but I think we were always bullish that COVID was more of an accelerant than an aberration and I think that proved true in 2021. But I think one thing I could admit that I definitely did not see coming the beginning of 2021 was the birth of the ownership economy. So just take a step back first, we had the attention economy, let's call it 2010 to 2020, where social media incumbents empowered traders to reach and engage audiences at scale and monetize that reach through ad revenue and grant partnerships. Then last year we wrote about this at top of 2021, we were seeing the birth of the passion economy, where immersion creator economy platforms and services were empowering creators to monetize their fandom directly with things like subscriptions, merch, tipping, you name it. Andrew Cohen:And now what we saw in 2021 with the mass adoption and integration of crypto, it allowed creators to drive value beyond merely kind of transacting with their fan communities. And through the implementation of digital scarcity, web3 has enabled creators to monetize and engage their audiences in totally revolutionary new ways. So through limited edition drops and auction models, creators are now able to create and monetize new classes of the super fans, which can be capitalized upon far beyond the price of a single branded hoodie. And in these ecosystems, fans transcend the role of being mere consumers and actually become shareholders and collaborators they're incentives are now completely aligned with those of their favorite creators and their platforms. And the result is what we're calling the ownership economy, which blurs the line between creators and fans into communal ownership. And it reveals a glimpse into a possible future where all platforms are built, operated, funded, and owned by their users who are then rewarded with tokens that are proportional to the value that they're able to create. Andrew Cohen:And so the seeds of this ownership economy, we saw begin to sprout in 2021, and we definitely expect them to blossom beyond in 2022. Just a couple stats that really stand out from 2021. First of all, NFT sales in 2021 hit total sales volume of $23 billion, which was up from only $340 million in 2020. So again from $340 million in 2020 to $23 billion in 2021 is pretty incredible. And so as a result, we saw things like the NFT marketplace OpenSea, they recently raised a $300 million Series C for a $13 billion valuation. We saw similar valuations from Dapper Labs and other in the space. This is definitely something that we think is going to continue to emerge and grow in 2022. But as a reminder, we don't believe that this is at odds with the passion economy, see this as kind of a new subset of the passion economy. Definitely think that there's room for the web2 and web3 versions of this to continue to evolve together and not necessarily a zero sum game. Chris Erwin:Andrew, I'm just looking at those numbers when you say the sales volume for NFTs from $340 million in '20 to $23 billion in '21 that reminds me when I first started investing in Ethereum and Bitcoin back in 2017. And I just remember the trading volume, I felt like it probably like 10X during that year. And everyone was talking about it, all friends were like, "Are you investing in crypto? Where are you at?" And this year I could say, now the amount of texts that I got from friends and industry peers are saying, what's your status? What's your portfolio in NFT? Looking at these numbers, it explains all that context. Andrew Cohen:Very jealous of you, I wish my friends were telling me to invest in crypto in 2017, would be in a lot better place right now. Chris Erwin:Well, Andrew on the burgeoning ownership economy, right? So I think what we've established is this is going to be a recurring trend in 2022. And we have some predictions that I'll come out and talk about this. But before we get into those for the year ahead, let's take one last look back at how these trends shaped our priority coverage verticals in 2021. So as a reminder, if you go to our website, wearerockwater.com. You'll see all the different verticals where we specialize. So this includes audio, food, livestreaming, media and commerce, OTT video, and sports, and probably and it's something that we should add will be web3. I have to talk to our website developer about that. Chris Erwin:So we are now going to walk through across those main categories. What are the main highlights from last year? And keep in mind. There's a lot here. Our team wrote articles, industry watch lists and podcasts on all these topics. So they're all on our website wearerockwater.com go and check it out. So I think the first key theme, Andrew, is the creator economy and all things at the intersection of media and commerce. What's a highlight that stood out to you? Andrew Cohen:To me, when I think back on the creator economy in 2021, I think of the creator war which is yet another wars add to the list. Then we saw these emerging creator economy platforms like Patreon, Substack, how they began to establish market share and raised big money to build out tools and services, to empower and expand creator monetization. And in response, all the incumbents, the Metas, the TikToks of the world, YouTube, they began to replicate those tools in house. So like Facebook launching basically its own version of Cameo and its own Only Fans, as well as billion dollar creator funds that it launched to keep these creators in their ecosystems. I think that was really a defining characteristic of 2021. And now we're kind of beginning to see some of the seams of these creator funds begin to fray at the top of 2022. So very curious how these platforms are going to continue to evolve their models to keep creators happy in 2022. Chris Erwin:Yeah. Everyone's talking about that recent Hank Green piece on the TikTok creator fund, but love to save that for a separate podcast. So yeah. Look, I think in a similar vein in livestream shopping, right? So this is a trend we started covering a couple years ago when we saw a hundred billion plus market size out of China. And we're asking ourselves, why haven't these capital flows and investor conversations been happening here in the U.S.? Well, that changed. So all the major incumbents, they enter the race within livestream shopping, we think of YouTube and Meta and TikTok, Twitter, Pinterest. And we even saw some big livestream shopping festivals during the Q4 holiday season from YouTube and Facebook. Chris Erwin:But in addition to the incumbents, we also saw the emergent livestream, commerce, native platforms, raising big money to compete with and establish market share against those incumbents. So Whatnot became the first unicorn to emerge in a livestream commerce space at a $1.5 billion valuation. We also saw NTWRK raise a massive Series C and then other investments to Popshop and a bunch of other upstarts that raise rounds as well. So I think we're going to increasingly see capital flows to these upstarts in the new year, but we'll get to more of the details there in our upcoming predictions. Andrew Cohen:Absolutely. So moving to audio, what happened in audio in 2020? To me, the biggest defining trend of audio in 2021 was the birth of social audio. If you would've said the word social audio to me, 16 months ago, 18 months ago, I would've had no idea what you're talking about. And just within the first six months of 2021 Clubhouse raised at a $4 billion valuation. Facebook, Twitter, LinkedIn, Slack, Spotify, Reddit, Discord, they all invested and launched major social audio initiatives. Twitter acquired Breaker, Spotify acquired Locker Room to support these endeavors and it still has yet to be seen where this trend is going to go. Andrew Cohen:Definitely Clubhouse is not what it was at this time last year, but we are seeing a lot of activity on Twitter Spaces. And it seems like the space is very much influx, but led by Facebook, Spotify, a lot of the big platforms are really taking this seriously and continuing to invest in it. So I don't think that we can say that the story of social audio is over quite yet, but it began in 2021 and excited to see where it goes in '22. Chris Erwin:Totally agree. In addition into social audio, there's also some major acquisitions across a traditional podcasting space. So we saw SiriusXM, Pandora acquire Triton digital for $230 million and we saw Libsyn acquire AdvertiseCast for $30 million. So the capital's still flowing in the traditional part of the audio space. On top of that, we saw some major talent and IP deals from the top audio platforms that are vying for early stage market share, all with the goal of winning what we describe as the 'audio wars'. So we saw Call Her Daddy the podcast migrated over from the Barstool network, go over to Spotify for a $60 million licensing fee. And then Smartless was licensed by Amazon for an $80 million fee. So yeah, the money is still moving towards these tentpole talent and tentpole IP in audio, which is also what we're seeing in traditional video and OTT video as well. And we'll get to that in a moment. Andrew Cohen:So then moving on to sports, definitely 2021 was an exciting year for sports. Two things to me that really stuck out in terms of how to capture what happened in the world of sports business in 2021, I would say one, the explosion of sports betting in the U.S., cannot talk about sports in 2021 without talk about betting. Sports betting revenues doubled in 2021, putting it now at $52 billion and it's only skyrocketing up from there. And as part of a downstream result of this, but also as a result of several other factors like streaming wars cord-cutting, the increasing value of live content, which we've written about before, but the live rights values for sports teams are also continuing to explode. So this past year, the NFL re-upped its live media rights packages bringing in $110 billion over an 11 year deal, which is an 80% increase from its last deal cycle. Andrew Cohen:The NFL also re-upped its live rights package, doubling it in total value. And so as a result, we're seeing a ton of private equity capital moving into this space as well, especially in European markets. We're seeing American investors begin to invest in the media entities and live media rights packages for European sports leagues. So most recently we're seeing a bunch of U.S. PE funds bidding on French soccer leagues, media rights packages, which are being valued at about $14 billion right now. So a big reason why the overall sports economy is continuing to skyrocket at the pace that it is, I would say it's because of gambling, but also because of the huge valuation growth that we're seeing in their live media right packages, which is really the biggest revenue driver for all the major leagues. Chris Erwin:The numbers coming out of the sports media space, Andrew, which you've really educated me on, have just been so eye-popping over the last year and a half. I just can't believe it and it continues. Something that we covered extensively last year was the rise of creator competitions. So this is often merging traditional and digital native talent together for a tentpole competitive event that is then wrapped in a lot of different content that helps to market it and amplify the fandom. And it really led to some pretty incredible figures. So we saw Logan Paul fight Floyd Mayweather that drove over $50 million in pay-per-view revenue. Chris Erwin:We saw House of Highlights drive a hundred million views across their platforms for the first of its two showdown event series. So shout out to Doug Bernstein and Drew Muller, some of our friends over there. And just in December of last year, Triller announced its plans to go public at a $5 billion valuation, which I think is quadruple what it was last valued at. And as a reminder, Triller is one of the platforms that has actually really gotten behind these creator competition series and a lot of them actually go down on their network. Andrew Cohen:Bullish on creator competitions, bearish on Triller, save that for another episode. Chris Erwin:We'll have to see how that IPO goes. It's been planned, but it has not yet happened. And I think that'll be a good bellwether of the market here. Andrew Cohen:So then moving on to OTT video and the streaming wars, so really continue to escalate in 2021. And especially with really a subset of the streaming wars, which we're calling the IP wars, where, because of these huge arms races for user acquisition between all of the highly capitalized streamers, we are seeing tons of investment capital, M&A activity around studios and production companies. And that really kicked up this year. So a couple examples, MGM studios was acquired by Amazon for $8.45 billion, which is 27.5X EBITDA. Roald Dahl, story company, so all of the IP by author Roald Dahl was acquired by Netflix for $686 million with a planned billion dollar production spend behind it to put into original content, video games, everything. Andrew Cohen:And Candle Media, new venture by Mayer, Staggs and Blackstone made a couple big acquisitions, including Moonbug for three billion and Hello Sunshine for $900 million. So as the streaming wars are picking up, we've said the production companies to studios, they are the bullet makers, they're the arms dealers and they're more valuable than ever before. And that really became true in 2021. Chris Erwin:Shout out to Roald Dahl's estates. He is my favorite author. Favorite book is Boy, his autobiography. It was just cool to see that happen. Hopefully Netflix is a good servant of the IP that he's created. Andrew Cohen:I'm ready for a Matilda sequel bring back Danny DeVito. Chris Erwin:Dude, Danny DeVito all day. And also from New Jersey. Rise of kids screen time. So I think another thing that we saw in OTT video is 2020, there's a big inflection point here where I think kids in 2020 for the first time started watching and consuming more content on digital than they were in linear, that is a big deal. And so as a result of this, we started doing a little bit more work in the kids space. We were hired by a kids audio company and also a kids retailer and toy manufacturer. So we really believe in the space in that there's a lot more headroom here. So a few quick stats, kids screen time increased 50% since March 2020, 70% of kids spent at least four hours per day on screens. That's 10% year over year increase. 85% of kids under 11 spend an average of 85 minutes per day, watching videos on YouTube. Chris Erwin:And as a result platforms like Amazon, Spotify and Roku, they're all launching kids focused platforms. Instagram tried to launch a kids’ social network, but ran into some snafus there that might emerge again this year. We also saw YouTube, Netflix, ViacomCBS, Warner, Apple, Disney, all increasing their spends on kids' content. So it led to some things like what you talked about, Andrew, the $3 billion acquisition of Moonbug. And then we also saw Like Nastya a massive kids' YouTube personality that is also on a bunch of other platforms signing a major deal with Will Smith's Westbrook studios to produce a portfolio of animated content together. So yes, again, this is the kids and family screen time and retailer space and area that we get really excited about. Andrew Cohen:Absolutely. And so last but not least in food, media and commerce. We've always said that much like the kids and family vertical, food, media, really over-indexes on commerce conversions. And we saw that kick off in 2021 where we've previously seen a ton of activity in the CPG space with things like Complex and their Hot Ones hot sauce. During COVID we saw that continue, Barstool launched their frozen pizza line all across Walmart's nationwide. We also saw it expand into the experiential realm, both digital and IRL. So Ghost Kitchens really came on the scene this year, headed up by MrBeast Burger, which sold a million burgers in its first three months and has expanded rapidly since then. Also seeing companies like VDC, Virtual Dining Concepts, and our friends at Popchew build really exciting companies around turnkey style Ghost Kitchen platforms made for traders, brands, publishers to activate their audience in this kind of virtual restaurant and business model. Andrew Cohen:And now that things are moving back into brick and mortar, I wouldn't say post COVID, but now that we're not all locked down in our home, we're also seeing the success that some of these virtual restaurant models have had move back into the real world. Again, Barstool has launched a chain of some bars, sports bars, pizza restaurants. And I think with the success that we saw of tying out food markets globally before COVID, I think we're going to see that come back in 2022 in a big way and have these omnichannel food experiences between Ghost Kitchens, in-person restaurants, as well as more CPG activation. So it's an industry that's continuing to kick up steam in 2021 and [inaudible 00:19:54] that really excites us. Chris Erwin:Andrew, so I think we're definitely past our time limit. So just a reminder to our listeners guys, we wrote about all these topics in 2021. So if you go to our website, wearerockwater.com go to the content section and you'll get industry articles, industry watch list, podcast about everything that we just talked through. There's a lot there. And then upcoming Andrew, I think we just started to drop our predictions. I think our first one that's out is How Future IP Investments Will Super-Serve Under-Served Audiences Like the 40% of Non-Whites. So I think our next microcast is going to have to cover that topic as well as some other predictions that we have. I'm just looking at our recording. I think we might be a bit past our 15 minutes, Andrew, but maybe that's the new normal for 2022. We're going to be a little bit long-winded this time. Andrew Cohen:New normal. All right. See you next time. Chris Erwin:All right. Later.

Over the last few weeks we've tracked various Content x Commerce activations. From Cameo buying Represent and Fanatics exploring RSN acquisitions, to Walmart partnering with Netflix and Barstool, and Shopify partnering with Spotify and Mailchimp. Based on this activity, we explain three different ways Content x Commerce companies go to market via the Build-Buy-Partner framework, and which model we believe is best.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com--EPISODE TRANSCRIPT: Chris Erwin:So, Andrew, our team has tracked, over the past few weeks, a lot of different activations and partnerships within the content and commerce space. Have you been seeing this too? Andrew Cohen:Yeah, definitely. I mean, the convergence of content and commerce is definitely one of our core themes that we cover at RockWater that we help clients on, so always tracking those and definitely feels like over the past couple weeks, been seeing a few big news stories around announcements of deals, partnerships, acquisitions and everything like that. Chris Erwin:So, yeah. I'll go through some of the recent announcements, and then we could talk about what are the different structures that we're seeing in terms of building, buying or partnerships between content and commerce, and which ones do we think are best pros and cons, and then where it's headed. So, with that, let's get into it. Chris Erwin:Over the past few weeks, Shopify has partnered with Spotify to enable artist storefronts and has also announced a partnership with MailChimp and I think TikTok over the past month as well. We also saw Walmart partner with Netflix to create a Netflix branded storefront on walmart.com organized by IP. In addition, another partnership with Walmart and Barstool, which builds upon past kind of media brand partnerships with Camp and Tasty for BuzzFeed. So, a few stats on the Barstool partnership, sold 150,000 units of Barstool's pizza from the first 10 days of launch, and on Buzzfeed Tasty, I think they sold five million units of Tasty Cookware with just the first year of launch. We don't have any data, I think, on how much Squid Game product has been sold, but just to get a sense of that we think the numbers are going to be pretty eye-popping, sales of white Vans have increased by 7,800% since the show debuted, right? Pretty impressive stuff. Chris Erwin:We also saw that Cameo acquired Represent, which is a celebrity merch platform and that Fanatics, I think like a 15-year-old sports commerce company, is exploring the acquisition of RSNs or regional sports networks. So, it starts to raise the question, Andrew, of why is this interesting? What's one of the questions that stands out to you. Andrew Cohen:Yeah. So, what was really interesting to me about this is that it shows this kind of convergence between content and commerce happening through a few different models. You're seeing acquisitions. You're seeing partnerships and outright builds. It's interesting because it's something that we talk to clients and help them work through a lot at RockWater. We work, we specialize in this convergence of content and commerce. We often help commerce brands expand into content and content brands expand into commerce. The difficult question is always how. Do you do it via buy, build or partner? It's really, there's no one size fits all solution. There's no silver bullet. It's really case by case, and there's pros and cons for all. So, yeah. So, to me, I think it's interesting to see a couple different cases represented here. Chris, yeah, maybe we could just walk through it and break down in general the pros and cons of each model. Chris Erwin:Yeah, and even before doing that, Andrew, I think you're right that it is ... When we go to our clients and they're saying, "Okay, we want to enter this new market. Do we build by partner?" it's like, well, that's a decision that you're going to make a few times over a sequence over the next few years, right? So, for example, I think like in the beginning, we often say, hey, your goal is that you want to build enterprise value for the company. You want to drive outsize revenue and financial performance, but you also want to be capital light and lean in the beginning. So, from a sequence perspective, maybe doing partnerships in the beginning to learn, try things out that are low capital commitments, and then as you learn what's best fit and what's the opportunity for you, then you can think about maybe acquiring another company in this space or building out a dedicated team. So, I think that's one important highlight before we dive into this. Chris Erwin:Then, second, Andrew, I think like you said, it's very case-by-case specific. So, for certain companies and certain industries, there might be more acquisition opportunities out there than others. So, it's like, you know what, yeah, it makes sense to buy, but if there's not a lot of acquisition targets, you might say, "You know what? Really want to enter this new market or product category, and I guess we're just going to have to build the team to do that." So, it is very circumstantial. It's important to understand. Andrew Cohen:Well said. So, maybe we can go through it. We'll start with buy, the acquisition route. You mentioned a few. So, we see both content buying into commerce and commerce buying into content. The more common approach that we've seen is commerce buying into content. So, you mentioned Fanatics, the big sports e-comm and merchandiser. They're looking at acquiring some regional sports networks. Hasbro, the major toy company, a couple years ago, they bought Entertainment One, a major film studio. In terms of content buying its way into commerce, you had just mentioned Cameo. They bought merch platform called Represent, but we've also seen other examples of this like MeatEater buying First Lite. So, if we were to break down this approach, the buy route of acquisitions, how do you assess the pros and cons? Chris Erwin:A few quick highlights here. So, pros is buying is speed to market, right? When you compare having to build out a new business unit and hire a new team and really build all those capabilities from scratch, getting to market faster by buying a company that has this unique expertise and all the operations set up and allows you to kind of enter the market and beat out your competition that isn't there is very valuable. Yeah, I think it's really hard to build these capabilities. If you're a content business, your DNA is in creative and building amazing content experiences for audiences. That's very different DNA than building out a supply chain, developing product and getting in the hands of your consumers and vice versa. Chris Erwin:So, I think some cons though to highlight is that there's often in M&A, there's an acquisition premium to take an asset off the table. You have to convince leadership, founders, investors, and the board that it's like, hey, the value that you're going to get from us buying you versus you continuing to run your company, you're going to have to pay up for that. Then, you can enter deal conversations, Andrew, and a deal, more likely than not, is not going to get done because you got to reach out to the target. You got to go through their representation. You got to line on a growth vision, agree on a price, get a bunch of lawyers and accountants involved, do your due diligence, see where the bodies are buried. At the end of the day, you might go through 18 months of talks, and then a deal doesn't happen. That's wasted time where you could have just said, "Should've just built this out ourselves." Chris Erwin:Then, in addition, once you buy the company, almost in a way, that's like the easy part. Integrating the operations where you're aligning on the growth vision, is the leadership going to come together? They're going to be like one leadership from just the acquisition target or from the acquire. How do you get the different teams and the cultures on the same page? Then, the un-sexy stuff like integrating offices and software, that's a lot to do there. That could be a lot of friction, and that takes time, and that takes money. Andrew Cohen:The next approach of build, building it out themselves. So, we see commerce building into content. Most famous example being Amazon building out Amazon Studios, Amazon Prime Originals, Amazon Live. Shopify, another example. They actually recently built out Shopify Studios, which is a film and TV studio. Mattel Studios, they are kind of emerging as one of the major traders of features with 17 premium films in development, but we're also seeing content building in the commerce. A couple weeks ago, we saw Netflix announce that they're building out Netflix Shop. Food52 has done a really great job of building out their owned and operated cookware line. So, Chris, we talked a bit about the pros and cons of buying a company. How about building into a new space yourself? Chris Erwin:So, some of the pros here, it can definitely be cheaper than buying. You're not paying that acquisition premium, right, but we've seen the examples where actually trying to build a team yourself can be more expensive so that's one that there's nuance too, but another pro is that you can build as you see fit. So, you can closely align the content team with the product development teams from day one, right, where the content team is building out content that is getting consumer feedback and intelligence, and also creating content that specifically highlights products that you feel are higher margin and are better for consumers and that flywheel for how that all works together. You can set that vision from day one of when you're building and execute against that exactly versus trying to put these two different teams together that have been operating independently for the past five or 10 years and getting them to align towards the same goal. Chris Erwin:I think some of the challenges though is that when you're building, the time to market can take a while, right? You're starting from scratch versus having a full-fledged operation from day one. Even though you're not paying an acquisition premium, the time value of that missed revenue can be very substantial. Also, I think there's challenges where if you're a commerce team, like being able to hire and enable content team members and to really understand that DNA and vice versa, that's really challenging, right? We've seen a lot of leaders and a lot of companies struggle with this when trying to reach across into new areas of business expertise east that is new to them, and there's a really big learning curve. Chris Erwin:Specifically, I think for a content team that's trying to build out a supply chain that is very robust, that can put product in the hands of consumers in a variety of different geographies in a timely basis, that's also really smooth and capital efficient like I was saying in the beginning, that is not easy to do. I think we're seeing in the current supply chain troubles that we're having that really nailing that is really key if you're a modern commerce company. Anything that you feel I missed there, Andrew? Andrew Cohen:No, Chris. I think that was well said. So, now, the last model in this five build partner scenario is partner. Last but definitely not least. Feels like it's the most common one that we see probably for a reason. You mentioned a few up top, so Walmart partnering with Netflix and Barstool, Shopify partnering with MailChimp, TikTok and Spotify. So, how would you break down the pros and cons here? Chris Erwin:Yeah. I think this is pretty straightforward, right? Looking at the partnerships, the process, just stick to what you know and what you do best, right? So, if you're a media company, you develop and you create content. If you're a commerce company, you develop product, and you have a supply chain to put in the hands of consumers. So, I think that can be very powerful where that's going to allow you to get to market sooner, and delight customers because everyone on that joint partnership team is in a lane where they have the experience and the pedigree and the focus that they're very comfortable with, right? I also think another significant pro is you're learning before future investment. So, again, you want to stay capital light in the beginning. You want to learn before you're putting more capital to work. Partnerships are a great way to do this to enhance your capabilities very quickly. Chris Erwin:I think some of the challenges though is that like if the long-term goal is driving enterprise value and outsize revenue and margin performance, you're not necessarily going to get that from a partnership in the beginning unless you're an amazing negotiator, right? So, on a typical licensing deal, a media company might only get like three to 8% of revenues that you're generated, yet you're doing all the work of building out that audience. I think that's okay for maybe the first couple years, but then thereafter, you want to think about revisiting that deal or maybe building or acquiring the functions that you need. Chris Erwin:I think a second con, Andrew, is that it's dangerous to become overly reliant on third party partners, where if you are a commerce company, for example, you may not be getting access to all of the audience data that you're looking for. As a media company, you may not be seeing all of the credit card, the transaction data of, and everyone who is actually making the end purchase. That's really valuable to understand your end consumer and how to better delight them going forward. I think another risk that's also part of this is you might see your partner start to invest in some of these capabilities in-house, and your partner today could be your competitor tomorrow, particularly as the content commerce landscape continues to consolidate. Andrew Cohen:Yeah. I think that's probably why we see partnerships as the most common route. So, then looking at, all right, which model will win out, it's probably not as simple as just picking one, but a dynamic that I've been thinking about is actually easier. This might be a broad generalization but for content companies to be successful at commerce than vice versa because it's really hard to make content that people actually care about. Once you've done that, selling them the products is actually the easy part although, and we'll get to this in a second, it's the actual business logistics of commerce that are really the hard and expensive parts. Andrew Cohen:So, if you look at Nelk, he's a YouTuber with seven millions subscribers. He generated $70 million in merch sale revenue last year. So, that is purely a product of him being able to market and to generate an audience. You're going to be hard pressed to find a commerce company who can just, in one year, merch sales get up to 70 million, but that's kind of the power of building an audience. When you look at the other way around, it's tough for commerce brands to just like flip a switch and build that muscle and start building audience. We have actually seen a lot of in-house media brands from commerce companies that have folded over the past couple years like MEL Magazine by Dollar Shave Club, but here is the tough part. It's commerce companies are usually the ones with the capital to actually expand an owned an operated verticals that content companies don't. Andrew Cohen:So, when these mergers happen, it's usually the commerce companies that are buying the content companies. Like we said, it was Hasbro buying eOne. It was Amazon buying MGM and Wondery and Audible and Twitch. Penn National Gaming buying Barstool. So, a lot of times, we do see these acquisitions happen because it's the commerce buying out content. I think a lot of times, it is because it's just really hard for those companies to start creating content that entertains and delights audiences. I think right now, it's such a saturated consumer ecosystem with so many endless options that to actually get attention, get fandom, and make someone seek out your brand, your content against all others, like you got to do it really well. If it's not in your brand's DNA, it's really tough to just build that out. Chris Erwin:Andrew, so to respond to a couple of your points there, I think, one, one of the toughest things to do in the modern consumer economy is to build and maintain audience. I think that some of these modern media brands and creators and influencers that have done that at scale is really incredible. I hear your point that for the content companies probably doing the hardest part of the consumer equation, that that's really valuable. Chris Erwin:I think something that has surprised us and is a real reality check is I think people assumed it's like, oh, yeah, creating product, that's a commodified approach or business. You just create product, and you could slap a logo on it and then just get in the hands of the consumer. I think a lot of that was assumed to be as pretty straightforward. Turns out, that's not the case, and we've covered this in, I think in some of our past podcasts where being able to deliver product in a timely way where consumers are and doing it in a way that's also really capital efficient is not easy to do. That's why we believe companies like Amazon and Walmart have a really significant advantage in this new content and commerce economy. Chris Erwin:The second thing, Andrew, that you said I think is really interesting is, yes, traditionally, the commerce companies have had more capital to invest in buying media companies versus the other way around, but I do wonder again with everything we've talked about with the IP wars and more demand for content from all the streamers and through licensing deals and co-productions, are these media companies start going to be having better balance sheets that's going to allow them to invest and acquire more commerce companies to support their overall stack? Might be something that we see flip over the next 18 months. Andrew Cohen:Definitely agree that the actual nuts and bolts of commerce is way harder than you might think, just getting into it. I think you look at that partnership with Walmart and Barstool, I think it's a perfect example of why partnership makes so much sense. It's really like only a brand like Barstool can have their first ever frozen pizza that is selling through the roof in the first week and only with a medium machine like that. Can you accomplish that? Only with an commerce juggernaut like Walmart could you actually fulfill the execution of that demand nationwide like they've been able to do so, yeah. It's definitely two very diversion expertises but that complement each other through a really unified customer journey and funnel. Andrew Cohen:So, overall, I mean, like I said, I don't think that necessarily one is going to win out. We'll probably keep seeing that's being taken on build-outs and acquisitions, but definitely, partnerships are most reliable. They will persist. Don't see them going away anytime soon, but what do you think in terms of where this all goes, and does one model win out? Chris Erwin:Well, I think, Andrew, I think we're at the end of our time here, so I'm going to have to say we'll probably need a follow-up podcast to kind of check in on this and until next time. Andrew Cohen:See you then.

Social platforms are investing big money into creator funds and products. Like LinkedIn ($25 million), Facebook and Instagram ($1B), YouTube Shorts ($100M), Snap ($1M per day), Only Fans (£80K), and the list goes on. The platforms are also aggresively launching new creator tools ranging from social / livestream commerce and live audio to self-publishing, fan payments, and subscriptions. Chris and Andrew explain why, and how this trend could evolve into program pullbacks and creator illwill, investment in creator-owed businesses, different incentive structures for different content types, and more. Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com--EPISODE TRANSCRIPT:Chris Erwin:So Andrew it's time for another Roundup podcast. But before we talk about the topic of this week, which is creator funds, just a quick explainer to the audience we have been off for about a month since we last published. We took a little break at the end of August and through Labor Day. We think it's helpful to refresh and energize. I was off surfing in Portugal. And then was at my brother's wedding in Texas. What were you doing Andrew? Andrew Cohen:On a wedding tour as well. Chris Erwin:Hopefully we're coming back with a Roundup that's going to be better and stronger, version 2.0. Andrew Cohen:Yes. Feeling well rested. Hopefully it's rest, not rust. Chris Erwin:I've never heard that before, but I like it. All right. So let's talk about creator funds. So what's happening? Platforms are investing big money into different creator funds and initiatives, really to keep creators on the platform. Right? So some news like LinkedIn over the past couple of weeks launched a 25 million dollar creator fund. Facebook and Instagram have announced that they want to pay out over a billion dollars to creators. Snap has their spotlight program initially a million dollar per day, but pulling back on that, talk about that in a sec. YouTube has a shorts fund for 100 million, and then there is a long laundry list. They're Square, and Linktree, SoundCloud, Pinterest, OnlyFans, Twitter, and a bunch more. But clearly Andrew, a lot of activity in the space to try and get creators excited, right? Andrew Cohen:The formula is simple. Creators bring audience and audience brings revenue. So the way it used to work was that these incoming platforms, they would offer a really broad reach and that they would monetize creators and publishers audiences via advertising by connecting marketers with the customers. And creators and publishers, they would make revenue through a piece of the advertising on the social platform, but really the real outsize revenue and big enterprise value would come through monetizing their fandom off a platform through merge, through product licensing, through upstream TV and film sales, subscriptions, everything else. So really it would be social media is kind of the top funnel for audience reach and engagement and the bottom funnel would happen elsewhere where the creators would make the real money, but it started to change. Andrew Cohen:So first, emerging creator economy platforms as we'll call them, things like Substack, Patreon, OnlyFans, Cameo, they began offering more ways for creators to monetize their fans. And so creators and fans then started spending more time on those platforms. So quick lists, Substack has 500,000 paid subscribers and their top writers make over a million dollars annually. Patreon has 200,000 traders on their platform and they pay out over a billion a year to its creator community. OnlyFans had 85 million users. And last year in 2020 paid over a billion dollars to its creators. Chris Erwin:Andrew, I just have to pause you on OnlyFans. I can't believe 85 million users. Like that's huge. And a question. I don't know if you know this, but in the past couple of months OnlyFans, weren't going to cater to sex workers or sexually explicit content. Do you know if that user count fell since then? Andrew Cohen:I'm not sure. Because they did kind of do away with that decision almost within a week of making it. So I'm not sure if there was even long enough for a backlash to really manifest in user count. Chris Erwin:Sorry, tangent, but go ahead. Andrew Cohen:All good. Numbers made me step back as well. And so finally Cameo last year in 2020 had 100,000 new creators showing the platform and paid out 75 million to its creators in 2020. Yeah. So because of that, creators started spending more time on those platforms and their audiences did too. Secondly, platforms started to realize that how much revenue they're missing out on by only providing this top of funnel because outside of these immersion creator economy platform, there's a lot of top publishers and creators were using social platforms to build an audience and then they monetize elsewhere. So for example, Parcelforce said that this year that they're making 200 million in revenue in 2021. I bet social media is a huge part of their audience development strategy, yet a very minor piece of their revenue strategy. Andrew Cohen:MrBeast, remember MrBeast Burger last year, which has a projected revenue potential of 300 million. His whole audience comes off of YouTube. And finally Ryan's World last year in 2020 made 30 million in consumer products, which was more money than he generated off of YouTube ad. So I think between those two things, social media platforms saw that they've got some work to do to keep creator community and then their fan community on the platform and keep them happy. Chris Erwin:Andrew, based on all of that, I think now what we're seeing is that these incumbent platforms, they really want to better cater to creators. They don't want to just be like the top of funnel solution and distribution platform for their content, but really the ability to be an end to end funnel where they can allow creators to really engage more deeply with their fans, develop new monetization and revenue relationships, and really drive more time on platform for both audiences and publishers. So there's a few themes from these different product driven initiatives that we've seen platforms like Facebook, and YouTube, and Twitter do. And look, we really saw a spike in these product announcements from the end of 2022 to the first quarter of this year in 2021. And look, new announcements continue to persist up until today, but there was really that spike period during that six month window. Chris Erwin:And I think what we saw is that a lot of the incoming platforms were getting inspiration from some of these new emergence and upstarts and even their peers just brought it on and be like, well, where can we be a fast follower? What can we replicate? Right. That's a whole same classic argument of Instagram stories copying what Snapchat was doing back in the day. And I think the question that we have that's outstanding is which of these product initiatives are going to be experiments and are probably going to fall by the wayside? And what's really going to have staying power? What's going to really move the needle for creators and really delight their fans? And what's going to stick? We don't know, but it's definitely worth tracking. So there's, I think around four or five product themes that we've seen. One when Clubhouse came out with live audio, and everyone's talking about that being the next consumer frontier, just saw Twitter launch Spaces, Facebook get into the audio game and LinkedIn even do the same. Chris Erwin:And then when you saw OnlyFans and Patreon enabling direct to consumer monetization and like a tip jar, you saw Facebook fan payments, subscriptions, offering the ability to charge for live events. And then Twitter getting into super follows, allowing exclusive tweets and content. Right. Then there was a whole explosion of newsletters and the whole Substack revolution. Twitter this year, earlier this year bought Revue, a self publishing platform, Facebook even gotten to the self publishing platform again as well. And then e-commerce and live stream commerce. That was really exciting. You saw Popshop raise at a big valuation earlier this year, Whatnot did the same. So a lot of these platforms were like, oh, how can we get in the live shopping game as well? So Facebook and YouTube started innovating on some of their live shopping products. I think more is in the mix. TikTok has a Shopify partnership and then YouTube is even selling digital goods through a new partnership with Spring. That's a short list. There's likely many more after that. But I think the big question Andrew is, how is all of this going to evolve? Andrew Cohen:I'm really interested to see. I think what's fun about this is that no one knows for sure. There's so much competition and so much capital out there that we're all kind of building it and learning to fly the plane as we're building it. So I think like you said, there's already been some pullback, but I think that the structure and incentive of these funds and of these creator initiatives I think are going to continue to evolve in different ways. I think one thing that's really exciting to me is maybe the potential of these funds and platforms investing in creator owned business. So we've already seen VC Funds owned by creators like Josh Richardson and Mr. Beast launched two investing creator businesses. We saw Triller buy Verzuz. So could there be any more investments like that where platforms can tap into the true enterprise value creation and enable and empower custom integrations that can really grow creator businesses in unique ways, kind of more of a white glove approach than what we've seen so far. Chris Erwin:Platforms like Snap have launched incubators or accelerators for companies that are building tools that really power the snap ecosystem. I think the question is operationally, is this going to require the platforms to have like different fund structures, different dedicated teams to do this right? I would probably say yes and see what happens. I think another point Andrew is that, are we going to see different creator incentive structures for different types of content, right? Promoting long form versus short form, video versus audio versus text, right? Macro versus micro creators. And I think this stems from just talking to a few executives at companies like Facebook and YouTube, like there's a real concern about the explosion of TikTok viewership for short form content. So that's why YouTube launched it's 100 million dollar program for shorts, right? Realizing that they don't want to fall too behind the eight ball there. And they really want to go to where the eyeballs are headed. Chris Erwin:But yeah, I would say don't be surprised when TikTok, as they're really building out their short form audience, they're starting to move into longer form content, right? They just had an announcement a few months ago, having videos go from 30 seconds to three minutes. What's next five minutes, 10 minutes, like longer form? And is TikTok going to start thinking about a creator program that incentivize that longer form engagement for them? I don't know. Andrew Cohen:And it probably won't be a one size fits all solution. What works for Substack in text is going to be different than what works for Roblox and their creator programs and the meta verse, could be different from what TikTok is doing in short form and YouTube in long form. So I think it's going to be really interesting to see how it all comes together in kind of custom ways based on the needs of each platform and it's creator community. Chris Erwin:Final point here, Andrew, before we wrap up is yeah, I think a lot of these platforms really start needing to think about what are their KPIs for measuring ROI, right? Is it user acquisition, engagement, retention, is it time on platform? What is it? Look, I think back to the early days when I got into digital media at Big Frame and Awesomeness, and it was initially, like we were building for comScore numbers. So just be able to raise our next investment round and then realize that we have to have a sustainable P&L and business model. And we got to start driving towards revenue and profit. So I think that everyone, all these platforms are looking around and saying, all right, like you said, Andrew creators bring audience and they bring revenue and advertisers. Chris Erwin:So now everyone's launched these creator programs and people were like, well, we don't want to get left out. We want to have like a big press release. We want to show we're committed to this. But I think there's a chance that if you don't do this right, and you don't know what you're working towards, there's going to be some big fallout. And you're going to have a pullback of these programs that aren't getting the ROI that they need. Leadership's going to start like turning the screws on some of their lieutenants. This is already is starting to happen, right? Like Clubhouse over the past couple of weeks, some press about them not delivering on talent deals, not bringing the revenue, the sponsorships, the marketing support that a lot of these Clubhouse creators wanted. Chris Erwin:And then even Snapchat came out and said that I think they're taking Spotlight. And instead of having that be a million dollars a day, they're rethinking how they spread out that revenue and that program like throughout the month. I think there was concerns about seeing a lack of content innovation. A lot of just like me too formats that followed the most recent trend and they want to see something different. So that can also cause a lot of ill will with the creator community. So I'm curious to see what happens there. Andrew Cohen:Throwing a couple of million or billion at a problem doesn't necessarily give you the solution that you're looking for. So I think all of these funds are going to be refined over time. Chris Erwin:So Andrew, I think we are at the end of our time here. Think as we always say, till next time. Andrew Cohen:Hopefully that wasn't too rusty.

Today's episode is part 2 of our Audio Wars coverage. Since 2018 we've tracked over 30 M&A deals on our industry Audio M&A Watch List, like Amazon / Wondery and SiriusXM / Stitcher. There's also been numerous talent and IP licensing deals like Amazon / Smartless and Spotify / Call Her Daddy, as well as upstart fundraisings for companies like MeetCute, BlueWire, and Headgum. Why? Because we're in the Audio Wars, where music streamers are aggressively spending to capture growing listener consumption, and podcasts are proving to be one of the most powerful assets for user acquisition and retention...just like the video streamer wars! In this 14 minute part 2 episode, Chris and Andrew quickly recap the rends around spoken word audio, and then discuss four new buyer groups that will further drive market activity; smart speaker manufacturers, social media platforms, traditional Hollywood and OTT streamers, and sports media and betting operators.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com--EPISODE TRANSCRIPT:Chris Erwin:So Andrew, I think last week we recorded Audio Wars, part one, and there is a lot more that we wanted to get into, but we realized, we're going over our 15 minute limit and we're going to probably have to cut this one into two. Andrew Cohen:This is our first sequel. So maybe the beginning of more sequels to come, but definitely once you get us to started on audio, it's tough to keep us under 15 minutes. Chris Erwin:Yeah. Exciting development for the RockWater Roundup. All right. So yeah, last week, a quick recap, as we were talking about the audio wars, where we had written about this on our blog, which is on our website, that we're seeing a lot of capital flows, M&A exclusive licensing deals, venture investments in the audio space. So Spotify buying Locker Room in March of this year, Amazon buying Wondery, Sirius XM, buying Stitcher, exclusive licensing deals for SmartLess and Call Her Daddy, just a lot more. So we talked about, and you did a good job, Andrew explaining why is this happening? And we made parallels into the video streaming wars where there's a land grab for audio listeners. So as audio listenership is going up, a lot of the major platforms are spending aggressively to capture market share. And in addition, I think a lot of platforms, including the social networks like Facebook, like others are looking at audio to create additional stickiness and user engagement on their platforms. Chris Erwin:So it's driving a lot of activity. But something that we often talk about with our clients is we get asked, well, hey, there's all this capital flows right now, but is this going to start to Peter out over the next like couple years? Like, are we in peak podcasts? And it's funny because I've been covering the audio space for multiple years now, I've heard peak podcasts for like more than half a decade. And I think Andrew, that we agree that this is definitely not the case. We think that the audio space is growing a lot more, buyers are going to emerge and we have some specific ideas about that, which we're going to get into now. Andrew Cohen:Absolutely. Yeah, no, this is, if anything, it's just the early innings and the audio wars, I think were the impetus that started off a lot of this capital flow, but it's not like once that kind of land grab is settled, the bubble is going to burst. Because we're already beginning to see new waves of buyers emerge and investors. And definitely think that the audio wars might have been wave one, but we definitely think that wave two, three, four, and who knows how many others are going to follow. Chris Erwin:Exactly. So I think you've broken out there's four different categories of buyers that we're going to get into today. Right? Want to give a quick preview? Andrew Cohen:Yeah. So these are just four. Definitely think that there's even more than this. Even just this week Substack and WordPress got into the audio game. So there's tons of different types of players and stakeholders that a year ago, you would've never thought would be intersecting with audio that are now investing heavily in this space. But four that we're going to talk about today is smart speaker manufacturers, social media platforms, Hollywood and traditional media, and sports, both sports broadcasters teams and sports betting operators, but let's get into it. I know Chris, we've been big on the rise of microcasts, following tailwinds of the boom of smart speakers and how smart speakers might trigger kind of what we're calling the at-homeiffication of audio and the birth of microcasts. So clearly we're big on microcast. We're on one as we speak. So this might get meta, but what do you think, why are smart speakers so exciting in terms of what it can do for audio? Chris Erwin:So, yeah, this is another topic that we've covered extensively on our blog. Smart speakers, we consider it one of the largest new consumer frontiers. So let's first talk some numbers. This year, it's projected that there's going to be over 163 million smart speakers installed worldwide. That's 21% year over year growth, but this install base is going to grow to 640 million by 2024. So in just a few years. Now break out the US, the US is a market leader here with over 90 million devices and 45% year over year growth. And then of note, since COVID Andrew, 35% of US adults smart speaker owners are listening to more news and information. That means that smart speaker podcast listening is going up. And in recent months, Amazon, Google and Apple, they've all announced additions or updates to the smart speaker product suites, signaling that this is a priority sector for them. Chris Erwin:And I think it's also worth noting. I was talking with a new point at the Alexa startup fund just yesterday at DD dash. This is a $200 million dedicated fund to nurture use cases around the smart speaker ecosystem. That feels very reminiscent to me of the YouTube Original channel program that really sparked the growth of digital video that I was a part of over the past decade. So some very exciting developments, but why is this relevant? Why would smart speakers become buyers of audio? Well it's because their product can be very commodified, right? A lot of the audio hardware is similar and we know that Google, Apple, and Amazon are really going to control the leverage in smart assistant integration. So how do these manufacturers build a moat or have competitive differentiation? And we think a proprietary content library, like we see moves in many other goods and services companies. Chris Erwin:So just like how the video and audio streamer platforms are buying media companies and doing exclusive content deals, we think the smart speaker makers are going to start doing the same. And the reality is Andrew, it's already happening. Right? So last year, Sonos invested in QCode series a round, and we expect more speaker brands to follow suit like Amazon, Apple, Bose, Google, Samsung, Sony, and a growing list. But a question I think, we were debating this before is like, how much of a lift is investing in content? How much content is needed and how expensive could that be to make a difference for these manufacturers? And I think that was like a caveat that I raised, but you had a good counterpoint, Andrew. Andrew Cohen:As a reminder, a lot of the leading smart speaker companies are already investing in content. If you look at it, it's Amazon who just acquired Wondery and has Amazon Studios, it's Apple, which is already investing a lot in content. We're hearing that they might be acquiring A24. It's Google that owns YouTube and a bunch of YouTube Originals. So it could be something as simple as when I asked for an update on soccer scores to my Apple smart speaker device Ted lasso is talking back at me. And how cool would that be? Chris Erwin:Ugh, speaking of Ted lasso, I adore that show and I actually was just watching episode one of the new season. So good. Andrew Cohen:Oh, I haven't started the new season yet. No spoilers, but I'm pumped for it. Chris Erwin:Andrew. So okay, a second buyer group here is social media and social audio. So what are you thinking here in terms of like how they expand into this audio buyer verse? Andrew Cohen:Yeah. So really 2021, just speaking of buyers that we had no idea would be involved in audio. A year ago the phrase social audio meant nothing. In 2021 it's everywhere. I mean, Clubhouse raised a series C at a $4 billion valuation, Spotify acquired Locker Room, Twitter acquired Breaker and launched Twitter Spaces. And on top of that, Facebook, Reddit, LinkedIn, Discord, Slack, and Telegram all announced major investments in the live and social audio this year. So as social audio moves into the mainstream and becomes a more prominent feature on all of these platforms, I'd definitely expect social incumbents to become even more acquisitive. I think it's going to help them differentiate from other social audio platforms and other social media platforms by adding exclusive premium content that can compliment their existing UGC offerings and make acquisitions across the podcasting stack, including IP, production, monetization, data, there's all sorts of different stakeholders within the audio universe that I think social media companies are going to start acquiring, investing in, and kind of adding to enhance their overall social audio experience. Chris Erwin:Social audio is interesting Andrew. I was actually, again, in the conversation with this partner rep at the Alexa fund yesterday, they were mentioning that there's some really cool new social audio startups in LA that were not even on my radar. So this definitely feels like it's a fast growing burgeoning ecosystem. And I think we're going to see a lot more developments here in the future. Andrew Cohen:Totally. Very exciting space. So then number three, Hollywood and international studios. So we've already kind of seen a lot of film studios starting to get into audio, definitely expect this to happen more. But what do you think about that? Chris Erwin:I think in 2020 audio became a much more valuable weapon in the streaming wars. And there's a few different angles here as we kind of analyze this world. One was the ability to really amplify marketing. The top streamers use podcast to drive users to their platforms by developing companion content, which what we like to think of as generating cultural relevance around their tent-pole programming. A really good example of this is what HBO did with their tent-pole Chernobyl series. So they produced a Chernobyl podcast in partnership with Pineapple Street Media, a venerable producer in the audio space, where the series creator of Chernobyl joined the host after each episode to discuss the true stories that shaped the scenes, themes, and characters on the show. And I was actually just doing a little bit of online exploration about the show yesterday. And I went on YouTube where they are actually publishing the series. Chris Erwin:The first episode of the season had over 2.5 million views over 1600 comments and over 19,000 likes. Pretty amazing numbers. And I think it speaks to creating once and then you publish this content everywhere and it really hit a global audience. As I was going through the comments, there was feedback from users all over the world. So it's really expanding the global conversation around the hit show. But in addition to marketing and amplification for content and development and acquisition, we've seen actually like the audio, video, and IP pipeline flow both ways. So we've seen top streamers start to extend their IP into audio to launch new franchises and series. A good example is Marvel's recent announcement to launch a new audio series of Sirius XM. So this is similar Andrew, to when Marvel expanded it's franchise into multiple character breakout series on Netflix, right? Like Jessica Jones, and Luke Cage, and Daredevil. Chris Erwin:It's now doing a multi-part original scripted audio series called Marvel's Wastelanders, which actually just wrapped its finale episode. What I like about this is that again, it's not just extending the franchise. It's also creating new ways for fans to engage with Marvel and it's facilitating new community dialogue and deeper franchise affinity. So this is very similar to what HBO did with Chernobyl. This partnership now has the Marvel Method Show. It's a weekly podcast on Marvel fandom hosted by Method Man, a rapper known for being an avid comic book reader and Marvel Declassified, it's a nonfiction deep dive into Marvel comics. As part of this to a IP pipeline, what we find even more fascinating is that streamers are looking to audio to incubate and discover new IP and formats and personalities, and to not have to bid on the open market for IP. Right? Chris Erwin:So Homecoming, which came out of Gimlet Media back in 2018, that went onto a exclusive show for Amazon Prime. It had Hollywood heavyweights like Sam Esmail and Julia Roberts behind it. And then, Wondery is one of the largest premium content producers in the audio space. Their Dirty John went to Netflix, done two seasons. Their Dr. Death is now on Peacock. So I think that's pretty exciting because Amazon just bought Wondery and probably that pipeline is going to be exclusive to Amazon Prime platform and Audible. Chris Erwin:So yeah, that's yet another Andrew, very exciting buyer category here. And we think a lot more activity is going to ramp. So Andrew, I think a closing point about streamer activity that is ramping in audio is, you look at Netflix announcing a new head of podcasting over the past month, rumors that Apple is launching a subscription podcast service to bundle with Apple TV plus. But we really haven't seen any audio M&A except for Amazon buying Wondery. And I think we're going to see that change in a big way, going forward, particularly as the streamer wars really ramp up even more. But let's talk about this final fourth category of buyers in sports. Andrew Cohen:Yeah. So over the past year or two, we've seen the booming business trajectories of both audio and sports media, two things that we love talking about, they intersected. And we saw the rise of sports audio, is everything from new player centric podcasts, and podcast network launches like from Kevin Durant, Blake Griffin, Pat McAfee, and a ton of others. Blue-chip strategic partnerships and joint ventures like what we saw with WynnBets and Blue Wire. We're seeing IP and talent deals like the blockbuster deal between DraftKings and Dan Le Batard's Meadowlark Media. We're seeing MMA like, they're acquisitions of Barstool and The Ringer. DrafKings acquiring VSiN, capital raises again, Blue Wire is a big series A this year and a slew of new sports centric companion podcast launching to drive attention to big marquee events. We're seeing right now, Blue Wire just launched a podcast with NBC to promote the Olympics. Andrew Cohen:So I think with the rise of sports betting and with the rise of sports streaming and how live sports rights are now intersecting with the streaming wars, all of this money is now converging. And definitely think that because of this, I expect to see investments in the audio space from different stakeholders throughout the sports world, from leagues, teams, broadcasters, and betting operators to escalate over the next year or two. So again, stakeholders throughout this ecosystem whose core revenues come from kind of stoking the flames of fandom and live engagement for them, podcast is going to become an even more valuable component in their overall content strategy. And so rather than remain relying on third party podcast networks, which is what we're mostly seeing right now, definitely anticipate that many are going to choose to invest in bringing those capabilities in house via M&A and investment, and definitely excited to see what that looks like. Chris Erwin:Exciting times, Andrew. Well, look, I think we're getting to the end of this. So before we make this into a three-part series, let's wrap this up so. Andrew Cohen:I think so. Chris Erwin:Till next time, Andrew. Andrew Cohen:Later.

Mattel Films is partnering with MGM to put Polly Pocket on the silver screen. Hasbro and Epic Games are creating a line of Victory Royale toys for Fornite fans. And Kidfluencers are driving over $1 billion in toy sales. The kids market activity is being driven by (1) the explosion in kids screen time and (2) that kids digital viewership overtook linear for the first time in 2020. We highlight the key deals, consumption and regulatory trends, and the evolution of kids business models from subscriptions and FAST streaming apps to digital goods and social commerce.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com--EPISODE TRANSCRIPT:Chris Erwin:So Andrew, have been noticing that media entertainment companies are rapidly investing in building out of kids-focused content verticals as of late. Andrew Cohen:Yeah. We wrote a report about it a few months ago. Because as we track deals in a space, it seems like every week, every month we kept seeing new big announcements around kids content. Chris Erwin:And I think in that report, which came out April 1st, it's on our blog if I remember correctly, that we tracked over 20 major investments, deals and partnerships around digital kids content over the past couple of years. That same deal activity, that trend has continued, if not accelerated. And we're seeing also a particular ramp up in content initiatives by toy manufacturers. So, some of those deals that we referenced in the report, we talked about the launch of new subscription apps for kids. So we saw launches by the New York Times, Amazon, Times, Spotify, Apple, and more. We also saw an increase in ad-based kids content models. So 2B Kids, Roku Kids, and even a cool partnership between NFL and Nickelodeon, creating a unique kids experience for a linear TV and digital stream of NFL game. Chris Erwin:Also, the growth of derivative commerce and partnerships. So like Nastya, a massive global kidfluencer, she did a deal with Will Smith-owned Westbrook Studios. We saw OK Play raise 11 million. And HOMER, another digital app, raise 50 million from Lego, Sesame Workshop and Gymboree. And then even since then the highlights have continued. Back in April, Hasbro and Epic Games came together to create a new line of product, a Victory Royale toys for Fortnite fans. Then in May, MGA Entertainment is moving its L.O.L. Surprise! unboxing brand under more screens and a new film that's going to land on Netflix in October. And then less than a couple of weeks ago, Mattel Films partnered with MGM to develop a new Polly Pocket feature film. So we're seeing all this activity, there's a lot more here than what I've just gone over, but Andrew, why is this happening? Andrew Cohen:So I think it's two main things. One is that visual content consumption among kids is growing at unprecedented rates. So publishers and platforms see an opportunity here to bolster longterm fan loyalty by capturing this first truly digital, first native generation. And two, new regulation is arising that complicates how this viewership is monetized. So starting with the first one, young kids are spending more time today on digital platforms than ever before. Today's generation children is the first to grow up spending more time on visual platforms than on traditional media. And in 2020 to 2021, as this entire generation has been forced to stay home and adopt e-learning, this paradigm shift has only intensified. And 2020 really represented an inflection point in this transition from linear to digital consumption. Andrew Cohen:So really these are not the screens that their parents grew up on, or that we grew up on. Growing up watching Nickelodeon, cartoon networks. In 2020, for the first time children younger than eight we're watching more videos online than on live TV, or even on streaming services. Online videos accounted for nearly 75% of all screen time for young kids. And in the U.S., kids ages four to 15 spent on average 85 minutes per day watching YouTube and 80 minutes a day watching TikTok. Chris Erwin:Just to be clear, Andrew, so that's 165 minutes total between both platforms, right? Andrew Cohen:Yeah, it's crazy. I mean, I don't know how much time I used to spend watching cable as a kid, but seeing those numbers for TikTok and YouTube is really eye-opening. It's the availability of mobile devices and of the internet, I think has been the most significant factor for why kids are spending increasingly more and more time consuming online content. In 2020, 97% of young children live in homes with at least one smartphone, which represents a 54% growth since 2013. So as a result, 170,000 kids go online for the first time every day. And as of 2018, 40% of new internet users globally were children. So when the COVID lockdown started in March, screen-time instantly shot up around 50%. And now over a year later, that percentage still hasn't budged. But Chris, as digital consumption is ramping up, so is the legislation that regulates how we monetize it. Chris Erwin:And it's funny, just I think late last week I was talking to an advisor on privacy regulation and COPPA requirements. And yeah, overall there's growing government regulation and parental concerns around kids' screen time, which makes a monetization of this audience particularly challenging. And with regulation it creates uncertainty. And as we know, investors and operators don't like conducting business where they don't know what the rules are and how it's going to evolve. But yeah, of note, there's also increasing scrutiny by Congress and the government overall about consumer data collection and protections. And as we saw over the past month, there was big new legislation that was just recently proposed. But particularly on children, there's the Children's Online Privacy Protection Act. It's also known as COPPA. A lot of people talk about this, but don't know exactly what it is, so let's quickly explain it. Chris Erwin:COPPA requires operators of commercial websites, online services and mobile apps to notify parents and obtain their consent before collecting any personal information on children under the age of 13. The aim of this is they give parents more control over what info is collected from their children online. And this is enforced by the FTC. So yeah, there some violations here over the past couple years that were pretty big. So in 2019, right? Google and YouTube were forced to pay record $170 million fine for violating this law. That same year, TikTok also paid a $5.7 million fine. Over the past couple of months, as Instagram has worked to launch their new kids platform, they've increasingly become under scrutiny, I think from the government and different watch groups as well. Chris Erwin:So speaking to the point of uncertainty and what's changing here, California passed legislation protecting kids up to the age of 16, right? So extending this by three years. And there's now new laws, even at the national level, to extend COPPA to kids up to 16 as well. That is material for all the different brands and marketers and publishers that target audiences in that age range. Overall, as the laws designed to protect kids who are consuming content online are developing and expanding, it's estimated that by the end of 2021 800 million kids will be protected by digital privacy laws, as opposed to only 130 million just in 2018. Chris Erwin:So, that's probably around a four X increase in just the past few years. So what's the main takeaway? Regulation is not going to stop viewership, but it does create uncertainty around monetization. So, companies need to create kid-safe environments that they control. So this is the emergence of new business models that are direct-to-consumer with subscriptions, dedicated apps and digital experiences, new ad based models, and then derivative commerce, right? Monetizing through alternative products like physical and digital goods. So Andrew, let's expand on that. Andrew Cohen:Yeah. So you just mentioned subscriptions, and we're seeing that kids content is really a secret weapon to bolster LTV, its lifetime value for subscription services, which is kind of the golden metric for them. And when you think about it that way, it's no wonder that everyone from Netflix, Disney+, Apple TV+, Paramount+, HBO Max, Spotify, New York Times, Amazon, Time Magazine, the works, everyone who you named up top and more, are investing so much in building out their kids vertical across subscription platforms. Andrew Cohen:The role of kids in the streaming wars is particularly interesting. It's an effective tool to onboard two generations of subscribers with parents and kids, thus boosting customer acquisition, and also allows them to develop sticky habits that reduce churn, boosting customer retention. So kids content not only drives customer acquisition for subscription services by promoting signups among parents, there's also an opportunity to kind of skate to where the puck is going by providing an early stage on-ramp to younger audiences who are now going to grow up with these platforms and develop meaningful user relationships. And as these younger audiences begin building habits on these platforms at an early age, they're only going to come more and more valuable to these platforms over time. So that's the subscription model. But as you mentioned, Chris, with COPPA, it's making ad-based models a bit tricky. So you want to talk about that? Chris Erwin:So even though with all the new regulation and watch group scrutiny, the ad-based business models around kids content is trickier. Companies are still going to navigate it because it's still a huge, big market and it's growing quickly. So, let's talk about some stats here. 61% of parents say they are more attentive when watching TV with their kids than when they're watching alone. How does that translate into potentially buying more products? Chris Erwin:Well, parents are 250% more likely to buy products that they see advertised while watching with their kids. And then, parents spend 59% more than non-parents across categories. So, when there's co-consumption between parent and child of content, parents are leaning in, they're engaged more, they're more likely to buy products, they're more likely to spend than their non-parent counterparts in across all those categories. That's very powerful. It's thus no wonder that the kids digital advertising market is projected to grow by over 20% between 2018 and 2021, culminating in 1.7 billion by the end of this year, which is projected to make up around 37% of the total kids advertising spend. So I think there's a third new revenue line here to also consider, Andrew, which is derivative commerce. Tell us about that. Andrew Cohen:Yeah. So, kids IP franchises are the most viable path to the diversified revenue flywheel that all content brands are striving for regardless, kids and not kids. And this is really best epitomized by Disney model flywheel that we've seen. I think it's really interesting to note that 13 of the 16 highest grossing media franchises are from kids' IP. And the vast majority of revenue generated by these franchises comes from merchandise. So really the kids' audience, I think, is the most prime to spend on consumer products around the content and the characters that they love. Traditionally, we've seen this with Blockbuster, franchises on the big screen from Disney, but now we're starting to see it with kind of small screen visual influencers as well, led by Ryan's World and pocket.watch. Chris Erwin:And this is an example, Andrew, that everyone loves to talk about, but let's dive into the specific data here. So this is probably the leading example of the kids digital content flywheel. So pocket.watch's digital content portfolio has 7.4 billion video views each month, powers a massive consumer products division of over a hundred licensees across multiple categories. Chris Erwin:So Ryan's World in particular, over 29 million YouTube subs, generating over a million hours of video views each day. Their total retail empire has surpassed over $500 million in revenue. And they're selling consumer products everywhere from Walmart to Amazon, to FAO and more. In 2020 alone, Ryan's World CP generated more than 250 million in sales. Now I think from our research, Ryan and his family takes home around 30 million in revenue across their whole business. And for the first time last year, I think they saw around 60 to 70% of that 30 million come from their consumer products division. That's the first time it has outpaced their YouTube ad revenues, a very big new trend for that family and also for kidfluencers overall. And then also another big note, Ryan's World launched their own virtual world on Roblox last year, where fans can purchase gems that can be exchanged for virtual goods and more. And then we're going to see a lot more of these virtual activations by kidfluencers going forward. And Andrew, I think there's some other detail you have there. Andrew Cohen:Definitely. I think when you look at where kids are spending time and money, you have to talk about gaming, and specifically the metaverse. The top metaverse platforms each command one to one and a half billion hours of playtime per month. So it's no wonder why not only Ryan's World, but also toy companies like Lego, Hasbro, Mattel are all activating these virtual spaces. And not only is that where they're spending their time, like I said, it's where they're spending their money. Sometimes on physical products, but oftentimes on virtual products and in-app purchases. So 82% of free children's apps, those made for kids five to 12, offer in-app purchases. In 2020, in-app purchases generated 31 billion in revenue. A prime example of this is Kim Kardashian, whose kids friendly, free-to-play mobile game generated $200 million per year, mostly through these in-app purchases. So it's definitely... I think probably the next great frontier of kids content and commerce. Chris Erwin:So Andrew, I think we are really at the end of our time. So I think the takeaway here is that content is driving these massive new revenue streams across overall kids entertainment and kids experiences. There's a lot more activity to track here. We'll have to get to it in a future roundup. So I'll just have to say Andrew, till next time. Andrew Cohen:Next time. See you then.

Etsy just bought Depop, an ecommerce marketplace known for vintage clothes and streetwear that's highly popular with Gen Z. We discuss the deal logic, how the $40 billion resale market is outpacing overall apparel, the recent IPOs of Poshmark and Thredup, Gen Z buyer values, downward seller fee pressures from incumbents like Facebook Marketplace and eBay, and how resale platforms bolster their competitive position via product UX and distribution partnerships.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com--EPISODE TRANSCRIPT:Chris Erwin:So Andrew, lots of activity in the overall resale goods market, particularly just saw that Etsy over the past couple of weeks bought Depop for around a little over 1.6 billion. Did you see this? Andrew Cohen:I did. I did. Yeah. The market is definitely having a moment right now. Chris Erwin:Pretty wild stuff. So a few details on the deal. So Depop is a secondhand e-commerce marketplace that's known for vintage clothes and streetwear. It's very popular with Gen Z, while the Etsy audience skews a bit older, typically targeting Millennials. Chris Erwin:A few notes on the combination and deal logic. Both are very aligned in terms of DIY spirits across both companies. The Depop apparel items are known for being a bit more cool and cutting edge, that whole streetwear vibe. So Etsy gains access to Depop's high-value Gen Z audience, and then for Depop they get improved search and discovery, which is something that Etsy has been working on for years. Also, the ability to scale internationally, which Etsy has done, and then also a boost in fulfillment and logistics support as well for the overall Depop market end users. Chris Erwin:Also of note is that the revenue multiple for the deal was 23X, and that is reflective of 2020 revenue of around 70 million. A pretty high multiple there, but I think it's time to step back, Andrew, and talk about all the activity that we are seeing in the resale market overall, and I think you have a few interesting datapoints here. Andrew Cohen:The Depop deal is just the tip of the iceberg, and the resell market as a whole is definitely having a moment right now. In 2019, the growth of the second-hand fashion market outpaced that of the overall retail market by 25X. This year, resale apparel sales are excited to hit 40 billion worldwide, and although that's only 2% of the total apparel market, it's also projected to grow up to 20% year over year for the next five years. So we definitely expect it to represent a much bigger share of the fashion market going forward, and because of that, definitely excited to see a lot more of these deals, a lot more companies popping up to meet this market demand going forward. Andrew Cohen:Couple of big recent deals that also speak to the power of this moment. Poshmark, which went public in January after raising 280 million, its valuation peaked at 7 billion, thredUP went public in March after raising 170 million, and all this momentum is really fueled by some unique buying habits that we're seeing, mostly from Gen Z. So for Poshmark, they had 6.2 million active buyers. For thredUP, 77% of their supply comes from repeat seller, which jumps out at me as really being indicative of a deeply engaged, passionate user base, and as we see in media or really any other consumer business, that's how you win. It's really going deep with an everyday, recurring, passionate user base and it definitely seems like it's Gen Z is the demo that's fueling that fire. What do you think? Chris Erwin:I think, look, we've done a lot of research into the Gen Z audience and consumer base, and have also done surveys of them as well, both in the US and in China. There's a few interesting characteristics of them that we've observed. So particularly as it relates to resale, that Gen Z shoppers are turning to greener and more economical purchases, and that's what resell offers. In addition, that they prefer to buy online versus in store. So looking at digital marketplaces, this has also explained the growth of StockX and Goat, which we talked about in our last microcast, and so this trend was also further accelerated by COVID. Chris Erwin:When you break down the demographics of the buyers and sellers on Depop, there's some interesting insights or things that we want to figure out. So what were some of the numbers that you've found Andrew? Andrew Cohen:Yeah, this jumped out at me, 90% of the Depop buyers are under 26. That definitely checks out like we were saying, it definitely seems to jive with Gen Z purchasing behavior. But what really stood out to me was that the average seller is 39 years old, so 13 years older than most of the buyers. That definitely jumped out at me because my first instinct was that secondhand apparel works really well in social commerce environments because there's this feedback loop between buyer and seller, where the buyer is the seller and the seller is the buyer. It's what has fueled social content creation itself. But looking at these numbers, that's not really the case. There's definitely a different class of buyers then there are sellers here. I don't know, how do you reconcile that and bridge that gap? Chris Erwin:I'm more closely aligned with the age of the average seller, around 39, so I'm definitely a Millennial. I do know that for Gen Z, 90s vintage product, music, apparel is very popular, and I think a lot of that exists in the closets or in the homes and apartments of Millennials that are around 39 years old. I think if you're in the age range of 15 to 26, which is the target Depop buyer base, then I think maybe that dynamic is playing a factor. That's just one thing that came to mind. Does that make any sense, Andrew? Andrew Cohen:No, I can see it. I've got some anecdotal experience there myself. I actually helped start a music festival called 90s Fest. It was basically just purely built on this same level of nostalgia for 90s culture. At each event we would have this bizarre, which was basically just a market of local thrift shops and everything, and that was happily one of the most popular affirmations that we had, and just seeing firsthand how much people love digging through a vintage Coolio shirt or whatever. You could definitely see that connection that generations have for vestiges of the past. Chris Erwin:So on a vintage Coolio shirt, what was the image on the shirt? I just think of his hair, how he used to do it, which is pretty wild. Andrew Cohen:The hair is the main silhouette. He was a performer. He brought the house down. Chris Erwin:Yeah, that's a pretty cool thing you did back in the day and another version of yourself. Andrew Cohen:So on one hand, this market is clearly blowing up right now. Everything we just said shows major tailwinds. But at the same time, what gave me pause is we're also seeing a lot of headwinds. Poshmark, their value is down 54% year to date RealReal is down 10% year to date. Rent the Runway closed down all of its stores in 2020. I don't know, Chris, how do you reconcile the good with the bad that we're seeing in this market right now? Chris Erwin:I very much agree. As I was reflecting on this, I think there's this theme of he duality. It's the headwind plus the tailwind. Chris Erwin:Just the of note for Rent the Runway, lots of challenges after they raised that 125 million in 2019, because they really catered to special events like weddings and for work wear. During the pandemic when that just wasn't happening, their usership and revenue just fell through the floor. But their subscribers are now up 100% year over year and they're at 60% of pre-pandemic levels so there is some good here. Chris Erwin:But here's how I break it down. There's definitely a lot of increasing competition, which is putting downward pressure on seller fees. So think of the major competitors like eBay, which I think has around 185 million buyers and 19 million sellers, and then Facebook marketplace. The marketplace alone has around an 800 million average users. Then, what's not even being discussed enough but we brought up last week, is these emerging resale marketplaces like Whatnot, like Goldin Auctions and in all these niche verticals there's going to be more. Chris Erwin:We've had conversations privately with a lot of clients and founder peers that are launching resell products. The typical revenue take is around 15 to 20%, but that's likely going to be coming down from some of these platforms because eBay only takes 10% cut, Facebook charges sellers is 5%. So I think Poshmark and thredUP and the RealReal and others are going to see some downward pressure on their margins. Chris Erwin:That then raises the question of what do these companies need to do? I think there's a few ideas that we have. One is thinking about just overall user growth and thinking differently about distribution. I liked what thredUP has done. They've done distribution partnerships with Walmart, Gap and Macy's and many other big box retailers, where if you go to the Walmart website, you can actually buy resale product from thredUP. Chris Erwin:Then I also think about going really deep in your vertical and giving a custom user experience. Poshmark has done this really well. They've really emphasized social features, so when you go into their marketplace, you can follow different sellers the same way that you follow different personalities on an Instagram or on a TikTok, for example. Then because they really understand what happens around the transaction, and within resale goods there's a lot of returns and exchanges, so Poshmark makes it very easy to custom print a return label and return product, and wherever there's any mix-up their customer service gets involved right away to right the situation for both buyer and seller. I think companies need to be thinking like this, but what else stands out to you, Andrew? Andrew Cohen:Yeah, I totally agree. I think the resell marketplace is particularly interesting when it comes to user experience, because in this case that applies to both buyers and sellers. So in addition to all of the improvements that you just mentioned to make the buying experience more seamless, the same could be said for the selling experience. Andrew Cohen:For example, the guy looking to make some money and free up closet space by selling off his collection of vintage Coolio shirts isn't a professional retailer, so how can platforms best empower him with a custom product experience? I think of what we're seeing in the livestream selling space like Popshop Live offering a creator playbook and real time analytics dashboards to make it easy for independent sellers to succeed on their platform, and I'm sure we'll see more innovations like this in the future as the resell marketplace continues to evolve. Chris Erwin:All right, Andrew. Well, I think we are running up on time. So I think, look, my closing note is we're seeing a lot of the revenue multiples for these IPOs or the M&A in the space. We're in the low 20s, that was in the beginning of this year. They've really come down to now be in the low teens. Are they going to go up in the future as some of these things are sorted out? Maybe, but we'll have to track. But at the least I do expect, I think there's going to be a lot more product launches here. There's going to be a lot more marketplace activity, and I think this market's just going to grow consistently overall. All right. Any final notes you want to add? Andrew Cohen:No, I agree. It's only just beginning, so I'm sure we'll have a Part 2 soon. Chris Erwin:All right. Till next time, Andrew. Andrew Cohen:Later.

Anthony Pompliano, an investor and podcaster, launched Bitcoin Pizza, a new "decentralized" pizza brand. It's yet another example of a creator or media brand launching a direct-to-consumer food & beverage brand. In this episode we explain why food media overindexes on commerce success, how these capital-lite business initiatives are being powered by ghost kitchens and delivery apps, and what we've learned talking about food initiatives with traditional and digital publishers.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com---EPISODE TRANSCRIPT:Chris Erwin:So Andrew, one of the things that we have not yet covered on this microcast, but that we do a lot of writing and work on at RockWater, is the explosion of the food, media and commerce space.Andrew Cohen:Yes. Very excited to dive into this one.Chris Erwin:And there was a recent deal that was announced that I think is a great jumping off point. So over the past couple of weeks, Anthony Pompliano, an investor and podcaster, and who has a large online following, he launched Bitcoin Pizza, which has been described as a new decentralized direct to consumer pizza brand. So he launched it in 10 cities and the launch was enabled by Popchew, which is a company that helps launch food brands for different partners. And of note, we know the Popchew team, we think very highly of them. And we think this is a really cool market data point for some of their upcoming growth. But I think Andrew, what this sparks, is that this is one of many similar food meeting commerce deals that we've seen over the past, call it year and a half, right?Andrew Cohen:Yeah. We are always advocating for our media clients that they diversify revenues by expanding into D2C commerce. And as we're tracking the market, we kept noticing that some of the biggest commerce successes we were seeing were happening in the F&B space when it came to media brand launches. And if you just look this week, the TikTok influencers of the Sway House just launched their own limited edition cereal with Magic Spoon. Dwayne, The Rock Johnson's personal tequila brand is on track to sell 300,000 cases in its first year. MeatEater launched a branded whiskey that sold out in its first week. And we're also seeing this, not just with CPG products, but also with what we're calling F&B branded experiences. So everyone knows about the MrBeast ghost kitchen activation, which launched 300 locations across the country and had a projected revenue potential of 300 million.Chris Erwin:Hold on, wait, did you say 300 million?Andrew Cohen:I said 300 million. Yeah, it's crazy.Chris Erwin:Okay. Wow.Andrew Cohen:Also, other virtual restaurant chain activations food, Barstool Sports, launching a one bite pizza delivery app, which processed over a hundred thousand transactions in its first month, the LA Dodgers partnered with Postmates and a specialized ghost kitchen startup called the Home Team kitchen to deliver their stadium food to fans across LA during their games and demand for this service doubled their initial projections. And even in brick and mortar, we've seen the success of branded F&B experiences, albeit pre-COVID, but Time Out was incredibly successful with Time Out Food Markets, which in 2019 generated 17 million in net revenue and processed a total transaction volume of 56 million. So Bitcoin Pizza comes as no surprise on the tail of all these other success stories that we've seen. We've been tracking a part of them, definitely plan on putting together a more robust watch list. So, stay tuned for that in the coming weeks.Chris Erwin:All right, Andrew. So that's a lot to bite off there and I know there's a lot more on the list, but yeah, let's talk about like why food and beverage over index's on commerce for these digital media brands and creators? So look, I think back to when I first joined the digital video revolution and I was early at some of these YouTube, MCNs like Big Frame and Awesomeness, we were all aligning around different verticals, whether it was creating content around beauty or teens or gaming. And then we saw companies like Tastemade, which had built content verticals around food and just seeing how quickly that they grew their audience and viewership was incredible. And then noticing that a lot of the different verticalized content brands that started creating lifestyle and food and beverage adjacent content, that the viewership around those sub-brands was growing like crazy.Chris Erwin:And so I think we've seen the same, if you look at new platforms like Instagram and TikTok and others, content around food and beverage, just increasingly dominates the charts. And so some of the driving factors that I think that we've observed is that, one, food is universal. Everyone eats, it's a cultural unifier. It brings people together. And there's much that happens around the food and beverage experience, right? Brings people together. There's lots of different products. There's the cookware, there's the eating ware, there's different ingredients. There's the preparation, there's the going out to restaurants, there's the experience at home. So, there's a lot. We started seeing this and then I think there was a couple of questions that we started raising both to ourselves and that we were bringing to clients. And I know you have a point of view here Andrew?Andrew Cohen:It's definitely become more of a lifestyle accessory. It used to be the only people with Food and Bev commerce empires were professional chefs like Emeril Lagasse. Now you have someone like Dave Portnoy can be the biggest influencer in the pizza space, even though I doubt he's ever cooked a pizza before, but it's really more about influence now. But what we're seeing is, a lot of the media companies and creators who are holding this influence and who are driving discovery and sales of these products are leaving a ton of money on the table. All of these activations that we're seeing for the most part are licensing deals where the IP owner, the brand owner, the creative talent themselves are getting only about 3 to 7% of the total revenues from these products that are so successful, because of their promotion, their likeness, their personality.Andrew Cohen:And so we started wondering why? We started to think licensing and partnerships is a great way to kind of dip your toe in the water before diving in head first, just to kind of test the potency of your brand and move product at a specific space. But once we've seen success stories, we were expecting to see a lot more O&O owned and operated launches in this space, where the brands and creators will be able to retain a lot more of that upside, but we just weren't seeing it.Chris Erwin:I think that's right Andrew, the two things that we saw just to properly recap is, we were asking ourselves, why are not more media brands, our clients, and other prospects out there, why are they not launching more food and beverage businesses? And then two, like you said, why are they not going from the licensing model, taking a minority share of revenues to thinking about doing JVs with operating partners, or going owned and operated, right? More capital up front for more higher upside. So we had a partner that we started working with, which is one of the world's foremost food and beverage innovators and formulators.Chris Erwin:And so we started going out to our media clients and saying, "Okay, like, Hey, we have a partner, let's bring some ideas to market. This is what we're thinking." But we started hearing some really serious hesitations. They're like, "Okay, Chris and team, we're excited about this idea. We want to diversify revenues. We see where the market's headed, but here's the challenge. It's like, we're not in the manufacturing business. We don't know how to create a different formula and then how to find an operating partner at scale. But then we're concerned about inventory management. We're concerned about scale distribution. We also believe that to really drive the proper brand awareness for this launch and to make it work that we need brick and mortar placement, we need shelf placement. And we need to think about how do you do in-store marketing?"Chris Erwin:And so, as we started to hear these concerns and increasingly that, this is a very different muscle that their team would have to flex versus what they've typically done, which is create content and then build audiences around that content. So there was concern about how much capital that have to be put up front and then how to hire and scale an organization, recruit the right executives, right? A lot of new learnings to beat that were here.Chris Erwin:This was very good feedback. And as we started thinking about solutions, we then started reading about the emergence of ghost kitchens in the market, which felt almost like the perfect hybrid, where you have ghost kitchens and delivery, where you're piggybacking off the delivery apps, where it's like, "Okay, you're starting to solve all these problems. They're capital light and efficient, but you still have more upside from a revenue and profit point of view. It's like, all right, it's just like the perfect middle porridge."Chris Erwin:To break that down with ghost kitchens, you already have remnant kitchen inventory, or these kitchens that can do all of the food manufacturing. If you're starting with a small alpha launch, maybe you're using only five locations. And then as you go to nationwide or international, you're working with hundreds or thousands of different partners, right? So easy to scale, low capital. You're not on the hook for managing inventory. And then for the distribution point, you're piggybacking off of Uber Eats, DoorDash, Grubhub, or Postmates, that's already doing the last mile delivery. You don't have to figure that out yourself or build out that infrastructure, which is really expensive. This got us excited, right?Andrew Cohen:Oh, for sure. I mean, it makes perfect sense. And there's so many ways you can do it. You can look at it as a revenue play. I mean, just look at Mr Beast, $300 million revenue potential. I would certainly say that's a revenue play, you could also look at it as marketing, I'm sure for the Dodgers example, that it's not exactly moving the bottom line for the Dodger's organization, but it's a great way to kind of eventize the at-home experience during the broadcast to get people get around the couch, order a Dodger dog, lean in to that broadcast experience. So it can really function as marketing as well. I'm excited to see how other brands and creators can activate ghost kitchens, kind of both ways.Chris Erwin:I really like the point about you can eventize around the experience and you can thoughtfully extend your brand, all the different places where your consumers or your fans are. Right, that's really key. So look, we think that there's a duality approach here where you can drive meaningful top line revenue and bottom line profit, but just the improved marketing, which then bolsters your overall media business is really powerful. Now, look, there are challenges. This is not perfect. And a lot of people have to figure out things like, how do you kind of grow your menu over time? How do you maintain quality control? Where if you have a lot of different ghost kitchens and different partners that are creating the same product, how can you have product consistency throughout? But in terms of just getting something off the ground launch and running and learning from it, great way to go.Chris Erwin:A big question that we think about, and we'll close this out. We've seen the emergence of companies like Teespring and others, where if you want to launch a T-shirt line or a mug or any different types of branded product, where you can take your brand logo and likeness and slap it onto a physical, tangible good, there's a lot of solutions that are out there. But who's going to launch the new turnkey solution to do this for food. It seems that Popchew who we talked about enabling the Pompliano business is definitely one of them. And I think that we're going to see more going forward. We see it as a huge opportunity, but any other big questions that you think of Andrew?Andrew Cohen:No, I think that's a good one. I'm going to respect the 30 minutes or less promise and say until next time.Chris Erwin:All right. Later Andrew.Andrew Cohen:Later.

There have been a handful of recent livestream deals in music and sports. NBCU tapped Twitch to produce and deliver live content that will live on a new NBC Olympics Twitch channel for the 2021 Tokyo Olympics. And Warner Music invested in virtual concert platform Wave, and Deezer invested in live concert platform DREAMSTAGE. We break down the power of "live" via 4 success pillars, and how livestreaming will impact the future of these two verticals. Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com---EPISODE TRANSCRIPT:Chris Erwin:Andrew, have you been tracking some of the Livestream deals over the past couple of weeks? I think I saw something about Twitch and NBCU and Warner buying a stake in Wave. You've been tracking this? Andrew Cohen:Yeah. No just over the past couple of weeks, but it seems like ever since the beginning of lockdown last March, we've been seeing more and more Livestream news happen every week. Chris Erwin:It's pretty wild. Yeah, we actually have a little shout-out to our website. If you go to one of our blog posts, we have a Livestream watch list. You can go see all the recent fundings out over the past year, 18 months or so. Andrew Cohen:Always be plugging. Chris Erwin:Always be plugging. Okay. There's a few that stood out. So one in particular was this partnership between NBCU and Twitch, and so NBCU has the exclusive live rights to the 2021 Summer Olympics in Japan. And so NBC is tapping Twitch to produce and deliver live content that will live on a new NBC Olympics Twitch channel for the summer games. It's going to include Olympics theme content. It's going to have daily unique Twitch-produced content, such as daily interactive clip shows, daily competition among three teams of Twitch creators, and primetime side casting and a live from Tokyo segment. I think there's a cool quote from one of the deal-makers here that says "The way that people consume traditional sporting events is changing. They no longer want to simply spectate. They want to be as close to the action and athletes as possible, and that's what Twitch is bringing to the mix." Chris Erwin:Just a couple of other quick deals. Warner bought a stake in a virtual concerts platform called Wave, and a Paris-based music streaming startup called Deezer took a minority stake in DREAMSTAGE, a live music streaming startup. So a lot of activity here, and I think, Andrew, something that you've thought a lot about and written about is, why is this happening? And you've captured four interesting pillars, so I think it could be fun for you to break that down for our listeners here. Andrew Cohen:So, really what we're saying is that across all these different verticals, live media is becoming more and more valuable. We think that live media is defined by four pillars, all of which evoke a deeper level of audience engagement and thus valuable. Andrew Cohen:Pillar number one, it's moment driven, which drives tune in. So the fleeting nature of live content and of live moments creates a sense of urgency for viewers. Each live event holds the potential for a completely unique moment, a new unique experience, so you tune in. There's real urgency around that versus something that's on-demand. Andrew Cohen:Pillar number two, we're calling the FOMO factor, which drives lean in. So it's that fear of missing out on a memorable moment that keeps users glued to the action because the next moment may always be that "can't miss" moment that everyone's going to be talking about, which is why in part consumers watch live video for 10 to 20 times longer than they do on-demand content. Andrew Cohen:Number three, authenticity, which drives form of connection. It makes users connect. Really, live content is, by nature more authentic as opposed to scripted dramas on HBO or the meticulously rehearse and edited videos on TikToK, or even the highly dramatized reality shows on TV. The memorable moments that make live entertainment special tend to be organic and unscripted, and this authenticity evokes a deeper and more intimate level of audience connection, which is just the ultimate currency. Live video, it engages viewers in this immediate and authentic way that other format just can't. We see that with podcasting as well, where it's known as just a really immediate and intimate medium, and because of that, advertising is more lucrative there because it fans really feel like they're connecting with the hosts. Andrew Cohen:And wrapping it up, pillar number four is that it's social, which causes users to share. So viewers feel like participants in live content rather than just passive observers. The communal experience of live consumption to a group of friends and strangers with a common passion engaged in a shared moment, it's inherently social. So from watch parties, to water cooler recaps, live events have always inspired communal engagement, and now social media has become the world's biggest watch party, the most active water cooler. And so, viewers, they share clips and they discuss content in real-time across social media, promoting the event by not only evoking the sense of FOMO in those who aren't launching it, but also by inspiring those who are watching to engage more deeply and contribute their own point of view to the conversation. Andrew Cohen:On a typical Sunday afternoon in the fall, the top 30 trending topics on Twitter are all related to the NFL games that are underway. This unique interactivity of the live medium, I think amplifies this already heightened form of audience connectivity and just results in a collective level of sustained engagement and real time peer-to-peer promotion that's nearly impossible to replicate on static on-demand mediums. Chris Erwin:Cool. I really like those four pillars. I always say, Andrew, I think you have a knack for putting things into a really clear framework for our listeners or readers, so kudos on that. Andrew Cohen:Well, thank you. Chris Erwin:We describe what's happening in deal activity in this space. You just explained why there's all this activity with these four pillars. So I think what's now most interesting is how is Livestreaming going to evolve different industries? And so we've seen a ton of different capital flows, as well as partnerships, around a lot of different industry segments, in sports, in social media, in shopping, in music, in fitness and so much more. That can easily take a whole nother three-hour podcast. I think what we want to focus on for today is specifically targeting music and sports. Andrew Cohen:Don't get us started on Livestream shopping or this microcast will quickly become a macrocast. Chris Erwin:Yeah, that's true. We're going to save that for probably not one single microcast, but a bunch of others. So let's dive into music and sports. This is cool. I'll talk about music. A peer had sent me a demo of their new, I think, alpha or beta product over the weekend. It's a virtual VR concert startup. I felt like the energy that it evoked from its technology was so cool, got me more excited about the space. In speaking of frameworks, I think for music, there's three things that stand out that I see. Scale and speed, personalization and access, and new revenues. So let's just quickly dive into those. Chris Erwin:Scale and efficiency. I think there's a lot less financial and physical burden on the artists who can perform in front of millions of fans in multiple countries all in a single event, and they can even stand up shows to meet new demand rather quickly and at lower costs. I think there's a great example that we were talking about before, that's with Travis Scott breaking down. Let's talk about his live touring schedule in 2018 to 2019. 55 live shows over four months of travel, reach 850,000 fans and grow 64 million in revenue. Now let's compare that to his 2020 Fortnite shows, four virtual shows, one weekend, no travel reach, 28 million fans. That's like a 35X multiple relative to his previous live tour and 20 million in revenue. So when you compare just the time and commitment versus the revenue, it's really, really compelling. Chris Erwin:I think there's also an angle that it goes like the same things for the fans. Fans who spend so much time and money on getting to a venue, whether it's driving there or flying across borders. Now with virtual concerts, more time and money can be spent on enjoying the moment with the artists and supporting the artists versus the getting there. And I think that supports a whole bunch of new revenues. Andrew Cohen:Yeah, and I think it's important to realize too that, much like all live streaming, it's not one or the other. I really think that there's a world where the two can be complementary. We saw earlier in the year Fortnite announced that they're opening up an island that's just for live concerts, and they want it to kind of become a new destination, a new stop that artists have on their tour. So they could do 55 live shows around the world like Travis Scott did, but then also do a few shows on Fortnite, and the two can be complementary. You can start off with Fortnite to reach a massive audience and reach new fans, promote an upcoming tour. And then maybe that will inspire fans to come out and buy tickets to see you in person when you come to their town, can really be synergistic that way. Chris Erwin:100%. So a couple of quick hits before we get over to you on sports and before we run out of time here. Second is personalization and access. So think about experiences that fans can't get at live concerts or festivals, right? Easy access where you can go see multiple brand activations. You can go see multiple different stages within a shorter amount of time instead of being like, "Oh, I got to walk 30 minutes to this other stage." You get VIP access. You can get backstage views. I've even starting to see developments around enabling climbing up the equipment on the stage or doing stage dives in a virtual environment. Something maybe you'd never do in real life, but that you want to experience virtually, go ahead. Chris Erwin:And different ways to express yourself. Imagine if you go to different types of shows, like you're a metal head or you're an emo head, and then you want to go see an Eagles concert. You can have different avatars, different dance moves, different ways to express yourself, different identities for each of these shows and events. I think that's really cool. Chris Erwin:And then a third one, on new revenues for advertisers, like we broke out with the Travis Scott Fortnite example, you're reaching a greater audience and that adds value to advertising inventory. You can actually start to create more digital activations that can wrap the event, like virtual storefronts, sponsoring live chat feeds. Another one, you can do a la carte ticketing. So maybe instead of buying a ticket to the entire show, you just want to go for the last 30 minutes and the finale. Buzzer's doing this in the sports space. Maybe that happens for live music. Chris Erwin:And then all the virtual and digital goods, seeing things like, you want artists selfies, you want artists hangout sessions after the show, you want to have maybe digital fashion for the event. So we're talking about RTFKT and their digital sneakers. Maybe that supports a whole new digital fashion movement within the live music and even NFTs of special concert moments. And lastly, Bandsintown, which was a band discovery platform, they now have a subscription package. It's like the class pass for music. So all these new revenue streams, there's a million more things to talk about. But I want to make sure that you have time for sports because there's some cool stuff there. Andrew Cohen:In sport, Livestreaming is going to be a game changer as well. I think it's really going to be crucial for supporting two growing priorities for sports and broadcasters. It's growing Gen-Z fandom and growing gambling revenues. So when it comes to Gen-Z fandom, it's important to note the average age of audiences for NFL, MLB, and NCAA basketball football is 53 years old. Chris Erwin:Wow. That's older than I would've thought. Andrew Cohen:Yeah, me too. Then you juxtapose that with eSports where 79% of fans are under the age of 39 and where 68% of Gen-Z males agree that gaming and eSports are an important part of their identity. You really have to look at eSports as kind of a model for maybe what the next generation of a broadcast experience looks like when it comes to Livestreaming, especially when you consider that 80% of eSports fans watch online via Livestreaming, whereas traditional sports viewership is the exact inverse. It's 80% on traditional linear platforms. So as everything shifts towards Livestreaming, really think that eSports is going to be an important playbook for traditional leagues to follow to reach the next generation of fans. Andrew Cohen:So the content experience on eSports can really be broken out to three main pillars. It's personalization, gamification, and social interactivity. On personalization, it's things like allowing the viewer to select their camera angle, change the interface, change the color of commentators, track certain players of interests. On gamification, you can reward viewers for interacting with the stream with extensions to let fans predict gameplay, like who's going to score the next goal, test knowledge with trivia, compete with other fans on leaderboards. On social interactivity, you can encourage fans to cheer using teams-specific bits and emotes inside a chat window and reward this engagement by a lot of participants to unlock new emotes and bits to cheer for their team and to express their fandom. Something that we're seeing big in the eSports world that can definitely be applied to traditional sports as well. Andrew Cohen:And then within all of this, it opens up all these new monetization strategies. We're seeing with eSports the sale of physical and digital items easily integrated throughout the stream, much like Livestream shopping. Given just the size of the eSports audience, with even just a 1 to 3% conversion rate, this revenue could soon become a bigger part of eSports revenue than advertising this right now. So already we know how much merchandise factors into the traditional sports revenue pie, and Livestreaming can really unlock this. Andrew Cohen:Quickly on betting, really Livestreaming can unlock a whole new wave of live in-game betting. Right now in Europe, 70 to 80% of sports betting revenue already comes from in-play gaming, and as regulation relaxes in the US, we think that this could become even more prevalent here. It's going to be totally enhanced by Livestreaming. This could include free to play gaming for younger audiences and kind of these curious top-of-funnel potential betters, but also live betting integrations backed by Sportsbook partnerships, totally integrated within the Livestream. We're already seeing this emerge in the US, the recent partnership with the PGA and NBCU and Sportsbet where you can bet on a hole-by-hole basis right within the Livestream itself, and even on a free play basis with the match, the Tiger Woods versus Phil Mickelson event on the Bleacher Report app, where there was a lot of kind of side-betting and gaming going on integrated into the experience. Andrew Cohen:So really, definitely think that Livestreaming is going to be a huge game changer for how people experience sports viewership. Chris Erwin:Awesome. Well, Andrew, I think we're backed up against our 15-minute wall. So we'll just have to schedule more microcast to get into more topics here. Andrew Cohen:Till next time. Chris Erwin:Till next time. Later.

In December 2020, Clubhouse had 600,000 users. As of April 2021, it has 10 million. But just as it’s beginning to achieve critical mass, its core “Social Audio” experience is being replicated by a slew of well-capitalized incumbents like Facebook, Twitter, Spotify, and Slack, as well as ambitious upstarts like Stereo and Fireside. We explain why via the duality of “Lean-Back” and “Lean-In”, how Social Audio drives time on platform, and the paralells with livestream video.Subscribe to our newsletter. We explore the intersection of media, technology, and commerce: sign-up linkLearn more about our market research and executive advisory: RockWater websiteEmail us: rounduppod@wearerockwater.com---EPISODE TRANSCRIPT:Chris Erwin:So Andrew, there's been a lot of news about live and social audio as of late, hasn't there? Andrew Cohen:Crazy. It seems like we went from November, something we've never heard of, to March, we're hearing a new announcement every day. Chris Erwin:It's crazy. Let's go through a few of those, and then we'll talk about why this is happening. So over the weekend, Clubhouse just announced a Series C at a four billion valuation. There's also been the launch of Fireside backed by Mark Cuban, and then also Stereo as well. And then incumbent platforms have been either announcing new product builds or rolled out features. Facebook just had a big announcement this past Monday, Twitter has spaces, then there's Slack, Discord, LinkedIn Telegram, and even Reddit. And there's also been some M and A in the space, Spotify acquired Locker Room, focused on sports live audio, and then Twitter acquired Breaker. Am I missing anything there? I know it's a pretty long list. Andrew Cohen:I think you just covered it all. And it's crazy that even after all of those launches, all those builds, all those acquisitions in the space, Clubhouse is still able to raise at a $4 billion acquisition. Chris Erwin:It's wild. Again, led by Andreessen. There were supposedly demand that that valuation could have been higher from other investors. And I think that Apple is making an audio announcement potentially right now, but unsure what that's going to be. So anyway, though, Andrew, why do you think all this live and social audio is happening? We've been writing and thinking about this for our newsletter and also for our clients. And I think there's a few key trends that you've identified. What are you thinking? Andrew Cohen:It definitely seems to be a uniquely kind of engaging and accessible media. And I think all these platforms are trying to get in on that action, because they see it as an opportunity to kind of expand the time that both users and creators are spending on their platforms, and to deepen the engagement, both peer-to-peer engagement and trader to fanning. So we're kind of like what Spotify has been doing with the introduction of podcasts, or how Instagram and Facebook and even LinkedIn introduced stories, or what Instagram is doing now with Reels. I think all of these platforms where you're seeing social audio is another really engaging form of communication that they can integrate into their whole suite of communication tools to keep people in their ecosystem for longer and keep them leaning in even harder and deeper. Chris Erwin:I think that's interesting, to even think about the Facebook announcement this Monday, is I think from Zuckerberg's point of view, it's all right, there's a lot of people listening to audio and we don't want to miss the boat on that. Like you said, we just, we win and we make money by keeping our audience on our platform and engaged. And so even though I think Facebook and Ben Thompson did a good job covering this, that Facebook is a visual first medium, or first focused on text and editorial, then introduced videos. Bringing an audio into the mix, is that going to be kind of like wonky for the user experience? Potentially, but we'll see how they do it. They're going to bring in audio, I think, into live virtual rooms, which could be really complimentary to the Facebook communities and Facebook groups. Chris Erwin:And I think they're also going to bring in sound bites into the newsfeed, but I think Zuckerberg looks at stats like over 57% of U.S. adults are aware and have listened to a podcast. And then I think over the past month, at least 41% of U.S. adults have listened to a podcast. And so he's like, Hey, we should build towards that audience behavior. Andrew Cohen:Oh, for sure. And I think Facebook, like all of the other incumbent platforms that you just mentioned, the key to them is going to be how to integrate this feature organically into the existing user experience on their platform, so it doesn't kind of feel like this out of place, wacky third party pack on, but something that, again, just like stories did it, when it was added to Instagram, just feels like such a natural extensions they're already doing on that platform. And so that's why I think it would be interesting to see how each platform approaches these features in their own unique way, which begs the question what's the future of Clubhouse? Is Clubhouse going to lose its appeal once its core experience has just become another feature on all of these other apps, or like we've seen with Snap and with TikTok, is it still going to remain a vibrant destination in and of itself with its own identity in fan relationship? What do you think? Chris Erwin:Well, I think you just highlighted one of the main challenges for Clubhouse is that they were kind of first to this live and social audio craze. You could go in, log into the app and there was all these rooms about a variety of different topics. And you're like, you could see how this could expand to topics around sports, topics around investing, coaching, cooking, baking, all the things. But it feels like all of those niche communities are now starting to be stripped away from the platform as like, okay, Facebook is your friends and family, and LinkedIn is your professional network, and maybe Slack is your colleagues, right? And Reddit is other vertical communities. Chris Erwin:So then that means, what does Clubhouse stand for? What is its vertical? And then from there, how's it going to build unique features into that? I think that's the second part of the equation, is you can have the interest graph focus, but you need to uniquely build features and user experience for that community to win. I think there are certain must have features like there should be, you should enable recording from live so that you can then publish at a later date to an RSS feed, but you got to uniquely cater to your community to win and create stickiness, and uniquely recruit both creators and listeners. Andrew Cohen:It seems to me like Clubhouse is going for the professional trader angle, with their suite of monetization tools that they rolled out. Maybe that they see that as their big differentiator. But as we've seen with the creator economy overall, it's only a matter of time before these incumbents can roll out the same forms of creator monetization, live tipping, ticketed events, and all of that stuff. And as we're seeing right now with livestream shopping, creators are very hesitant to move their audiences to a third party platform to provide an experience that they can just as easily provide on the platforms where they're already engaging with their audiences, like in Instagram or Facebook, or from usual artists like a Spotify, and for professionals like a LinkedIn. So again, I only think that those creator tools are going to take you so far if there's no sense of identity and purpose associated with that. Chris Erwin:I really liked that point, rallying around a unique identity is key. Look, broadly, we're big at RockWater. We're big evangelizers and ambassadors of podcasting and audio overall. So at the least, I think that we look at the introduction of live and social audio features as part of all of these social creator platforms as a good thing. Facebook, with this rollout, which is it's probably the largest social platform on the planet, over 2 billion users, it's going to introduce a lot more creators and users to audio and podcasting. And that's a total win. It's going to bring in more listenership, more audience, which then attracts more advertiser dollars and more ways for creators to make money. When you look at it from this top down perspective, I think us as a team, we're like, yeah, this is totally fantastic. Andrew Cohen:Absolutely. I think Mark Zuckerberg pointed out that a reason he really likes the medium is because "you can walk around a lot more easily, you can consume it without having to look at the screen, and do that in the background while doing something else." So for Facebook, which is you pointed out earlier, is a really visual medium. That's obviously a good thing in terms of really driving that engagement, but it also creates all of these other more ambient moments where users don't even have the attention to be engaging with Facebook. And that's where we've seen podcasts and audio really take off. 79% of monthly podcasts listeners say that the top reason that they listen is because "you can do other things while also listening to the spoken word audio." Andrew Cohen:So in these opportunities where listeners are too busy to really focus on their screens and look at Facebook or look at LinkedIn, they're turning the audio. And I think these more visual platforms like a Facebook, like a LinkedIn, like a Reddit, are seeing that opportunity to broaden that time on platform, broaden that opportunity for engagement, and really create that more holistic experience where they can be touching their users at all times. Chris Erwin:Another angle I think I'm excited about here is everyone talks about figuring out audio discovery, that it's a really friction full process, and trying to find new podcasts on Apple podcasts or Spotify is really difficult. I really liked the idea, and I'm blanking on the name of the startup, but they essentially have this AI where they create a curated audio feed based on your interests and existing podcasts that you listened to. For example, if there are certain shows that are 30 to 60 minutes long, they have unique AI that can say, "Here's the top one to three minutes segment," then bring that into the feed as well as a lot of other curated segments. And then as a listener, you're listening through that and be also scrolling on your phone. And if one of those really peaks your interest, you can then click into it and listen to the full episode. I think that's a fantastic idea. Chris Erwin:Now, Facebook seems like they might be trying to introduce, they're going to be introducing audio right AKA sound bites into the Facebook overall feed, which is editorial and video and then soon to be audio. I wonder if they soon realize, Hey, let's just create a dedicated audio feed. And not only could there be curated snippets of programs that you may like, but even maybe commentary and recommendations from your friends and likes around there. That could be really exciting for new audio discovery. What do you think? Andrew Cohen:Absolutely. I think that opt-in on demand nature of podcasts have always been a double-edged sword. On one hand, it's one of the things that creates that intimacy between the listener and the creator. But on the other hand, it is a barrier to entry. I think it keeps a lot of people on the sidelines when it comes to audio consumption. And that's one thing that we've seen Clubhouse kind of crack with this drop in linear programming live nature of it that really creates this frictionless access point to introduce fans to audio, which I think can ultimately function as a really great top of funnel for audio creators who want to find new fans and fans who are curious about audio and would want to find the shows and creators that are good for them without having to sift through an endless sea of options and make that one decision to commit their time to. Andrew Cohen:So yeah, discovery sharing in general are going to be huge points that need to be innovative to continue to unlock the potential of the medium. But I think that's one thing that Clubhouse has definitely hit on that I think is going to be around the sec. Chris Erwin:Andrew, we're getting to the end of our time here. So I think some closing thoughts. I think one for me is that I think a lot of people are asking, is this the call it for Clubhouse, the equivalent of the Snap, Instagram moment, where Facebook and Instagram replicates stories, and then Snap for a couple of years need to figure out what it's core value prop and identity was. But clearly, Snap has really bounced back and they've been a very fast moving innovative product for organization that really understands the uniqueness of their user base. I think Clubhouse can do that. It's going to be contingent on finding their vertical identity being really innovative on the product front and having really great leadership from the top down and also from their investors. But they have a hard road ahead, but where there is competition, there's also incredible opportunity. Any final takeaways that you want to highlight? Andrew Cohen:Well said. I think Clubhouse needs to figure out who they are to their fan. I'm not saying they can't do it. I think everything you've said is spot on in terms of what needs to be done and how they could accomplish that. Personally, if you're asking my opinion, if they were offered four billion for an acquisition, I would take it. But hey, I said the same thing about Snapchat selling for one billion in 2010, so don't take my advice. Chris Erwin:Noted. All right. Well, more to come.