This week on Recode Media with Peter Kafka, Reza Izad stopped by to chat about YouTube, television and movies — and the possibility that talent online can migrate to other screens. Izad is the co-founder of Studio 71, a media agency that represents some of the biggest YouTube stars.
You can read some of the highlights from the interview at the link above, or listen to it in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.
Peter Kafka: This is Recode Media with Peter Kafka. That’s me. It’s powered by Digital Media. That is a real company with an awkward name, but they’re really good. I’m here with Reza Izad. Speaking of awkward names, did I get it correct?
Reza Izad: You did.
Your company’s name is now Studio 71.
I’m going to guess that even some of the most ardent Recode Media listeners have not heard of Studio 71. So let’s describe who you work with, first of all.
In the old days, they would have said you work with YouTube stars.
Correct. Like Lilly Singh, Roman Atwood, Rhett & Link, and a number of others.
If you are a young person, or if you know young people, you know who these people are.
Yeah, you do.
And they work with you, they work for you, you help distribute their videos, all of the above.
So I’ll give you the ... You want the narrative on how we got here?
Yeah, we’ll get there in a second. I just want to set the stage.
That’s correct. We definitely help enable them to monetize and sort of grow their offering. Whether it’s with advertisers, merchandising, and obviously intellectual property has been a big part of creating ... Intellectual property’s been a big part of our business.
When I first met you, you ran a company called Collective.
Gone through a couple different iterations now, and I think at one point we would have called you an MCN, a multichannel network, that would have been part of your business, but you’ve expanded beyond that. You’re not just YouTube. So we can really talk about the evolution of video, because it’s kind of the evolution of your business, right?
Good. Okay, done.
Now we can begin at the beginning.
When I first met you, I think you were still in the talent business, right?
Very much so. Yeah, very much so.
There was a company called Collective, and you guys were managing bands?
Yeah, so the company started, we were managing a bunch of film and TV, comedians, and obviously a bunch of musicians, like Linkin Park.
Linkin Park was the big one.
Big one. Enrique Eglesias was another one. We worked for Kanye West for a while.
I like that you say, “worked for,” not “worked with.”
When you’re a manager, you definitely work for and obviously alongside your clients.
Do you want to tell me a good Kanye story? You do, don’t you?
I do but I probably shouldn’t.
Tell me a medium Kanye story, one you can get away with.
I don’t know if I have one.
Since you’re no longer in the Kanye business, or getting back into it.
It would be such a breach, because they’re pretty inside baseball. But all the things that you guys witness on the public stage, the references to Steve Jobs and all that, are definitely a part of what you experience working with him on a day-to-day basis.
So this is great, because on the one hand you get to work with the biggest stars in the world.
It’s also demanding, right? Because it’s a service business, and you are servicing them.
And running around and taking care of their needs.
Well, here’s the one difference between us, I think, and our orientation. Our founder was a guy named Michael Green, who’d started a company called The Firm.
Which was a very, very large management company in the ’90s and early 2000s. And I think the thesis of the whole company, sort of how we even ended up in digital video, was that we believed that disintermediation, the idea that a talented individual could go direct to consumer, was going to allow people like us, who built the right infrastructure, to step in alongside them and partner with them on their content and other offerings that they may have.
Right. This is one of the ideas that people have been talking about since the internet showed up: That stars could eventually create their own businesses, and they wouldn’t have to go through a record label or a TV network, or wherever. And this was a thesis for a long time, it wasn’t actually true. Now we’re kind of getting there.
Well, we’re definitely getting there. And the thesis may not be true in the recorded music business, particularly for the large acts, because the majors provide a sense of the biggest value from all, which is cash. They still need want cash.
Even Justin Bieber, who came up through YouTube.
He’s on a major label.
Absolutely. So it’s cash and radio. Those are the two power points that they still hold, and they are immensely powerful. So we built this entire marketing apparatus, with the thinking that we were, over time as they came out of their deals, we would actually partner with these artists. And we actually, early on, had some great success in stand-up comedy with a comedian named Katt Williams.
We knew that he had a good social following.
Another difficult personality.
Another very difficult personality. We knew he had a really strong social following, and this was the days of Myspace, and we knew he had it kind of “going on in the hood,” if you will. And we knew that there was an appetite for his standup. So we financed the first comedy special of his called “Pimp Chronicles,” and we licensed it to HBO, and we released it on home video. We did all the marketing ourselves, and this was early days of YouTube. We’re putting clips on YouTube. We’re giving, obviously, clips out on Myspace, and that was sort of the beginning, the success of that. We sold three million DVDs over the course of three years.
And that’s you guys selling it instead of a label.
Instead of a label. So a lot of those economics stayed with us, and with Katt Williams.
So now you’re not in that business. So why did you move out of that business? That seems like a pretty good idea.
Well, obviously the DVD business got highly impacted by streaming. So everything physical has gone digital, and the way we sort of evolved out of that business was a manager had signed a kid named Lucas Cruikshank, he’d created the character Fred on YouTube. So at the time it was the No. 1 channel on YouTube. And I remember the first day, looking at it, going, “This is really awkward content.” And somebody said, "Just check out how big he is relative to Universal Music."
This is one of those things where ... I wish you could play a clip of Fred here. We’ll leave a pause here so we can play Fred here. Because if you hadn’t heard of him or seen him, you’d think, “This is not a thing.
Here we’ll take a pause right here. This is what Fred sounded like.
Audio Clip: Hey, it’s Fred. I get to go to the movies. My mom dropped me off and she thinks I’m going to go see furry little animals. But I’m actually gonna see “Nightmare on Sesame Street.” Hey, can I have one ticket for “Nightmare on Sesame Street”?
Um, you have to be 17 to see that movie.
Oh. Hey sir, can you please buy me a ticket for a rated-R movie? I heard it’s really bloody.
What’s in it for me?
Well, I have a single mom and she’s desperate. She’ll go on a date with you for sure.
I need one ticket for “Nightmare on Sesame Street,” please.
All right, so that’s not for everybody, specifically not for us, right? It was for ... Who was Fred’s audience?
It was young kids. And so we kind of we started-
Like 12? Younger?
It was the Nickelodeon audience.
Because that’s ultimately where we distributed the movie, and to great success. And so what started with ... We did a Christmas record, somebody said he speaks in a high-pitched voice, and somebody else said, well The Chipmunks sold a lot of records. We were real, you know, creative guys at that time, so we decided to record a four-song EP. We did music videos, real simple music videos. YouTube to iTunes — and this is 2008, this is real early. And we sold about 100,000 copies really quick and all these light bulbs went off in our heads.
So YouTube’s a thing. People know what it is. Google would spend a billion and a half dollars on it. But everyone was sort of looking at it and going, “What do we do with it?”
Do we take stuff from “SNL” and put it on there? All this stuff that’s native to YouTube is really weird, and you guys said, “No, no. That’s good. We want to get in on that.”
We saw some opportunity there. And what was interesting about Lucas, if there was one thing to give him real credit for, beyond just sort of the impetus of starting the character, that character was really well developed. If you could actually sit through it all, he developed an entire universe of the girl next door who was in love with him. The bully across the street who was bullying him every time he was trying to get to the girl. The mother who was a little, sort of, out there. The father who was in jail, so that was the basic framework.
I’m just going to nod like I’m familiar with it, but I’m not. I actually want to fast-forward for a second where nearly 10 years later from when Lucas Cruikshank/Fred was a big deal. Where is he now?
He’s still on YouTube working.
Yeah? He’s still working it?
He’s actually doing quite well, yeah. He has his own channel. He lives in Nebraska, and is doing quite well, actually, with his community.
Because YouTube’s a decade old, right?
And so there’s now a generation, maybe multiple generations that had a big following on YouTube and have been supplanted, I assume, at this point?
So there’s definitely an arc to all of this stuff. The narrative of Lucas was, he did the character on YouTube. It was wildly successful. He then did three movies for Nickelodeon. I think in 2010 that was the highest-rated movie of the year in all of cable TV. He also did 25 half hours of TV, in that character. And he decided he didn’t want to be that earnest, you know, he didn’t want to be that character anymore. So he did another show for Nick, and that didn’t pan out quite as well as anticipated, and now he’s back on YouTube doing his thing. He’s vlogging, and he’s actually doing quite well.
We can pull it back a bit, but this is one of the ideas that’s really interesting to me is one, I mean, what’s the half-life of a YouTube or a digital video star? Is it the same as anyone else from any other medium? I would assume it goes faster. And then the other related question is, can their audiences move? We’ve seen people try to go from YouTube to TV. Seems like probably if you’re watching stuff on YouTube, you’re not going to move to TV and watch it, but maybe sometimes it does work.
Well look, the Fred stuff really worked. It was a huge ratings success.
Yeah, and you think those were his fans watching it, or were they exposed for the first time? Or both?
Absolutely. 100 percent it was his fans, and by the way, you can see it now on Netflix. It’s done quite well in that environment as well. And so, it’s had a really strong shelf-life because of two things. One, he created a really strong character that I think a lot of people related to, and two we partnered with Brian Robbins and we made a real project. It wasn’t a half-baked idea that we were going to take to TV. YouTube to TV doesn’t work, but a lot of these personalities, developed the right way, definitely can work.
What do you mean that YouTube to TV doesn’t work but personalities do?
Meaning just trying to replicate the formats that you see online. That’s not going to work for the medium of TV. I think you gotta give it another extra polish, if you will, and a different set of creative sensibilities, because it’s a different medium.
But YouTube is very different than TV, even though YouTube has tried to get its creator to sort of fancy up their stuff and be more ambitious. If you look at it, it’s still a lot of people looking straight on the camera, just like they were in their mom’s basement or in front of their laptop, or wherever it is. And that seems to be the format that people respond to.
It’s sort of that same question people had about “Saturday Night Live” sketches, almost none of them transferred to movies, right? Popular characters on “SNL” didn’t become movie stars, or at least those characters didn’t work in movies, because that was something that worked in a three-minute format, not 90 minutes. So it seems like there’s something about the intimacy of web video, of YouTube video, that works there, and you can’t port it to TV.
I disagree. Like taking “SNL,” right?
And it’s your job, so I agree with you.
No, but take “SNL,” right? You have “Wayne’s World,” which was a massive success.
Yeah, but it was an outlier, most of them weren’t.
By the way, most successes in entertainment are outliers.
“Star Wars” is an outlier. “Friends” is an outlier. Most TV, I think there’s 70 percent cancel rates on the first season. So everything that’s successful in entertainment is an outlier. I think the first thing everybody in broadcast or other mediums needs to look at when they’re evaluating a YouTube star is, can they translate appropriately into that medium? First of all, the first question you’d ask is, can they act? For instance, can they take on a character?
When you look at another character that I think is doing quite well on Netflix, the “Miranda Sings, Haters Back Off” show, that’s a fully-formed, fully-developed character on YouTube. It’s coming directly at you, if you will, looking front in a vlog-type format. But it’s completely evolved when it goes on to Netflix. It’s much more like a TV show. It’s fully produced, if you will.
And I had the same question about, related question, if you go to VidCon, which is the YouTube stars big giant convention. And also if you have any interest in this as a business you also go there, because you can see you and everyone else who matters in this business in a day. It’s super efficient.
It’s really striking because the kids there, 13-, 14-year-old girls, sort of shaking and vibrating like they’re seeing The Beatles or name your star. But they also have a lot of access to them, and they’re in awe of them, but they also can literally reach out and touch them and interact with them. When they go from YouTube to Netflix, then they go from YouTube to TV, can they keep that connection? Or is that something that only works when they’re sort of only digital?
Well, let me flip ... So look, proximity, right? The physical proximity only happens in meetups and at locations like VidCon. But the interactive relationship between star and audience, there’s a ton of talent that do it really well that are more mainstream. Take The Rock. He’s built a very vibrant social following. He’s very interactive with his fan base. So I think it works both ways. So as the Rhett & Links of the world evolve or the Lilly Singhs of the world evolve, if they give up what their strength is, which is their ability to reach and activate that audience. That’s just going to be a miss in their careers going forward, which I doubt they would do because they get so much, you know, they get a lot of positive feedback off of that.
Speaking of positive feedback, we’re going to hear from one of our fine sponsors right now. Stay put. Don’t leave. Do not fast-forward. We’ll be right back.
And we’re back, thank you for listening, thanks for buying, thanks for clicking. Reza, you want to get to other parts of your business ...
... but I want to get to the background.
I’m gonna do both. So like I said, when I met you, you were transitioning from this management business to a YouTube own-a-bunch-of-IP business. To be clear, did you think we’re just done with traditional stars? We’re done with traditional music stars? We’re done with the Katt Williams of the world. We’re just moving to an entirely different way of entertaining people? Or you thought there was just more opportunity in a field where not many people were there.
Well, it was both, right? Consciously we wanted ... If you think about back to the thesis of the company, direct to consumer, ability to sort of disintermediate the other distributors, the traditional distribution ecosystem. That thesis was fully borne out with Fred, The Annoying Orange, Video Game High School, a lot of the seminal things. And what I don’t think you can do is, I don’t think you can run two businesses that are actually starting to really diverge from one another, really successfully. So my partners and I made a very conscious decision that over a period of a couple of years, we were going to get out of the management business completely.
You were gonna get into the YouTube business.
And we were going to invest ourselves completely into the digital video business, of which YouTube is by far and away the largest part of it.
And at the time, that was all there was.
Correct. That’s exactly right.
I mean, people would try to make a competitor YouTube and none of them exist.
You know, we owned a very failed competitor many, many years ago called MetaCafe, so I know how hard that is.
Yeah, you bought those guys.
And I remember there was a period where they were a serious competitor to YouTube.
Very much so.
Or at least in that second tier. And we could talk about the other competitors that existed to YouTube now, but just to fast-forward, you eventually sold this company to ProSieben?
Which is a giant German conglomerate.
Well, we took on capital from them first, and then what was interesting was they’d started a company actually called Studio 71, which was very similar to ours. They didn’t have the long tail of influencers, so the big difference between us and a lot of our competitors is we don’t have tens of thousands of channels. We actually have about 1,200 globally, of which 300 of them are TV shows. And so when we looked at what ProSieben was doing in Germany, it was very, very simpatico to what we wanted to do. And given the fact that just the nature of YouTube is global distribution literally on the first upload, we knew we needed to globalize the business in order to drive things like RPMs, which is revenue per thousand views, up. And our thought was, let’s grow Europe, which is in the YouTube world relatively weaker for them.
Right this is one of the challenges for everyone who’s in YouTube is that it’s still difficult, and has been for a long time, difficult to make money there. Even when you rack up millions of views you don’t get that much money for them. And then the farther you get out of the U.S., the less money you get for each one of those views, basically.
That’s correct. Yeah, so anyone who complains about not making a lot of money on YouTube — but doing billions of views — needs to look at where those views originate. Because if they originate in Brazil or other parts of the world, it’s just really tough to make money there. And Europe was relatively depressed from our perspective, and the idea to partner with a major media company there to start lifting up our CPMs, because not only are they the No. 1 broadcaster in the market, I think they control north of 30 percent of all video ad budgets. So they have a profound influence in terms of ad sales in their marketplace.
And remind me, you sold before or after Maker sold to Disney?
We sold about six months after Maker.
Because there was the period where everyone was very excited in companies that owned YouTube networks, then they were not excited, then Maker sold to Disney for half a billion dollars, people thought it might be a billion, it turned out to be less. And then there was another wave of interest in buying assets, and you were part of that wave.
That’s correct. Yeah. We were part of that wave.
Part of that wave. And then I think, again, people kind of turned on that model. I’m assuming you’ve evolved from that as well.
Well look ... Turned from what model?
People are just less excited about owning a giant conglomeration of YouTube networks.
I think that’s a very tough business, right? So if you’re operating a YouTube-scale network, I think that’s a very, very tough business to be in because the margin profile’s really low, right? So our business essentially ... But the cornerstone of our business is our talent relationships and our creator network. Out of that, we’ve built a very strong business in creating intellectual property, in doing branded content and working with advertisers in a myriad of interesting ways, and building out merchandising and licensing.
So take Lilly Singh, big giant YouTube and other video star. You work with her. What part of the Lilly Singh business do you own? What part does she own? How does that pie get split up?
So we — primarily in the case of Lilly Singh — own her advertising business and partner with her on her advertising business. So when you see her endorsing Coca-Cola, in Canada she has a relationship with TD Bank, those are deals that were ...
So you’re working almost like a traditional agent would have at that point.
I guess that’s one way to work it, but we also manage the creative. There’s a lot of media that runs ... I mean, there’s a whole host of activations that come along it. So it’s very much a package media product, but Lilly’s very much at the center of making that world sort of spin around.
And then if she’s debating, “Do I get a TV show? Do I make a Netflix show?” are you participating in that, or does she work with other people for that?
In that case, everybody has a slightly different deal. So in the case of Lilly, I don’t think we’re involved in her TV stuff. I don’t know, she’s doing some small casting stuff at the moment, but if that were to go, I don’t know that we’ll be involved in that.
So you have different deals with different talent. It works in a different way.
We have tons of different deals with talent.
How has your business changed since you sold about a year and a half ago?
It’s grown quite significantly in terms of revenue. And one of the most interesting things, just on YouTube scale, which is an odd thing to talk about when you’re saying the margins don’t work. We’ve added about three billion monthly views and no channels. We started last year with 1,200 channels. We ended the year with like 1,205, and essentially doubled our ...
You’re making the same amount of stuff. You’re getting more people watching it.
We’re making the same amount of stuff and more people are watching. We’ve obviously switched out some of our partnerships, but we’ve had a really good run at keeping a very tight-knit thing, which is driven a lot of our growth.
So ProSieben’s a big German TV business.
What do they want from you? Do they want to find stuff that they can turn into TV? Do they want to make money from internet video? Probably both.
It’s really interesting. Going back to the original question, why did you merger? Their model was singularly unique in the marketplace. They were taking their top-tier TV shows, “The Voice of Germany” or “Germany’s Next Top Model,” formats that we may know here. They were cutting them up into clips, not unlike NBC does with Fallon and stuff like that. Putting it on YouTube and selling an advertising package that was “The Voice” plus guys like LeFloid or Gronkh, who are the top YouTubers in the marketplace.
I’m gonna nod like I’ve heard of Gronkh.
Yeah, LeFloid interviewed Angela Merkel, for instance, as an example. And that becomes a really premium ad product. So it’s TV that you can’t buy anywhere else, married with the top-tier influencers. That’s a very robust sort of monetization product. And again, I think unique in the marketplace, which is why recently we brought on a number of other European broadcasters, because our goal is to continue to replicate that model with, again, premium TV content married with the best of the internet.
And where do they make the ... Is the idea to make that consumption happen on television, or do they now no longer care where that happens?
Well look, ratings still make the world turn. So we’re not in the business, and we’re not putting complete shows up. So let’s be also clear about that. We’re putting up clips. So we’re still in the short-form business, but we’re pulling short-form from TV. So what we’re not doing is the big drama, that’s not anything we’re messing around with. It’s the news shows. It’s the comedy sketch shows.
And is the idea, “Let’s put that stuff on the internet where we can eventually get an audience and drive that back to TV,” or do you say, “No, no, that doesn’t happen. We want to make money from the audience we find on the internet”?
Here’s what I would tell you. I think it becomes both. Right? I think what everybody’s fighting for in a world of infinite content is relevance. And it’s really, really hard to obtain relevance if you’re not on platforms where consumers are. The reality is about “The Voice” in Germany, right? If they don’t put those clips on? Guess what? There’s a thousand other clips that somebody else is putting on, or there’s another clip of a singer doing something on YouTube. So you’re not going to get that audience unless you’re actually reaching them where they’re consuming. And so what this does, when you look at TV ratings and you see a small slippage in 18-34, or actually maybe a profound slippage in that core part of the advertising demographic coming online.
Yeah, I think it’s pretty profound now.
The way to do it is you bundle all of the places where your brands are being activated and being engaged. So in the case of “The Voice,” it’s happening on TV. It’s happening on catch-up services. It’s also really happening online on YouTube and Facebook. And if you can capture that holistic ad environment across all of those, it’s a really unique proposition.
We were just talking about, before we went on the air, how the Times now has done a thing where they compile all the clips of last night’s Fallon and Kimmel and all those guys. And you can watch all those clips there. And I think there’s still a debate about, does Jimmy Kimmel benefit, because eventually I’ll watch his actual show on television. It seems hard to imagine, that if I’m watching on the internet, I’m going to move to TV, and that they should just try to accept that the audience is there on the internet. Do you think that’s now conventional wisdom?
I think again, it goes back to being relevant, right? It’s hard to be relevant if you aren’t where popular culture’s being consumed. So part of it’s happening on TV. Part of it’s happening in the press. And part of it’s now happening in a big way in digital video online. That’s the game.
In terms of revenue — this is the interesting part: By no means are we replacing the TV income that’s coming off of TV, but where we are today, 3-5 percent of the revenue of the TV shows is coming on the social video piece. So you think about a marketplace where there’s ad decline, or theoretical or potential ad decline, 3-5 percent suddenly is how you make your year. And when you look at the volumes of ...
So you may not make up, because people are talking about double-digit declines, but you can certainly claw back a bunch of it.
We can definitely start to claw back, plus there’s the catch-up services. That’s the other place where there’s ability to sort of claw back some more of that. So it’s not a one to one, you know; there’s more windows, if you will, than just the TV window.
We’ve spent almost this entire conversation talking about internet video and YouTube as being one and the same. And that used to be the case, up until recently. Now there’s Facebook ... In fact, what’s the conversation now about internet and videos about Facebook, weirdly YouTube is sort of like an old story. It’s still, I think, by far where most of the money — almost all of the money — is today. We can talk about that. Can we go through sort of what various platforms offer to the talent you work with?
So YouTube still is the biggest.
It’s where I think most of the ad dollars are.
It depends. In branded content, what brands are looking for in terms of a narrative, is the ability to tell a story across a lot of these platforms.
Branded content is what we used to call an ad.
It might be what you used to call ... I guess it’s an ad organically delivered, right?
Something I wish to watch.
Sure. It’s a thing you wish to watch, but for instance, if you integrate into Rhett & Link, who are really good at creating branded content pieces. You buy a segment. It’s usually on a Thursday. It’s a few minutes in their show, and that’s guaranteed distribution. You’re not paying for people to engage with it. That’s a 100 percent guarantee that several million people will engage with it over a very quick period of time.
Rhett & Link is, again, a big YouTube duo.
They have a show called “Good Mythical Morning” that’s like the “Today” show of the internet.
And they’ve been around for a while, so a lot of staying power.
They’ve been doing it for a long time, yeah.
And so if I buy branded content on Rhett & Link and I’m Pepsi. Where are people going to watch that? On YouTube? On Facebook?
They’ll watch it on YouTube. There will be a clip in Facebook for sure. There’ll be some Instagram integrations, and Snapchat. That tends to be the holistic package that most people are looking to buy. And obviously some talent ... like, Lilly’s incredibly strong on YouTube, but also on Instagram. You tend to go where the audience of that talent is in terms of packaging it. So branded content goes across all these platforms. The reality, though, is on a media basis today, it’s still only YouTube that’s driving premium media dollars our way.
People buying ads.
People buying ads and our ability to sell those ads. That’s only happening in that environment, because the rest of the ecosystems frankly don’t really pay for the content that’s on those platforms.
Yeah, with Facebook, in part because they’re literally, like, in Facebook’s case, there’s almost no way to buy ads that run on the stuff. That’s going to start changing. They’re going to start doing these mid-roll ads. How quickly do you think that scales up to something where it becomes relevant to you and who you work with?
Well, on Facebook we do several billion video starts a month, so it’s pretty big. I think it’s a question of ... I mean, think about it. There’s a ton of deals they have to make. Then there’s a ton of accounting and infrastructure, think about all the things that YouTube currently does that we take for granted. I think there’s a lot of work they need to do in terms of building out all the teams and infrastructure. Which I think they’ve quietly been doing in the background and been testing products. So I would assume in the next year or two, they become a real viable force in the monetization of online video content. The question is, when and how fast does it accelerate?
When I want to watch Rhett & Link or Lilly Singh on YouTube, I go to YouTube and search for them. I know where to find them. Do you think Facebook has to create that mechanism as well? Or because they’ve got the feed, will they bring it to me?
Well, I think that one’s a lean-forward, you’re going and getting what you’re a fan of. I think today Facebook is still very much a lean-back. When I think about the videos I really watch, I tend to watch much more current news things on Facebook, or the funny thing everybody’s sharing at the moment, or maybe the ...
Here’s a chicken wearing an outfit.
Right, or the video of my cousin doing a dunk that’s only in my family that we’re sharing it. So those are the things I currently watch. I think there is ... They built this video tab in the app now, and I think that’ll be a place where they start to try to figure out how to really develop audience, where you’re coming back over and over for the same thing.
And what do you think about Snapchat, which is currently the thing everyone’s obsessed with? Their ad business, their model right now is based on sort of selling TV-like ads. But I think most of the usage is people talking to each other as a chat app, really.
I mean, the media business is very interested in it, but I think most of the users are communicating with each other, and then maybe they watch a video. So does that become a ... Do you think that changes and that becomes a real place for you guys?
Well, we have some talent there that have really big ... Shonduras has a lot of scale in that platform. So his open rates are comparable to an MTV story in the Discover section.
His fans seeking him out.
Yeah, his fans seeking him out. So he’s having a one-to-many conversation at scale. So are a number of these folks. And so that’s the product we end up selling. Snapchat has, for whatever reason, not embraced its creator community in the way Facebook is starting to, and YouTube has. They very much had a very specific vision for what they’re doing, and it’s very Cosmo and, you know, Warner Music ...
They’re going to old-media, generally established brands, saying, “Work with us. We’ll do deals with you. We’ll control the ad inventory. We’ll sell it.” Most likely.
So there isn’t a place yet for us to play with them in their Discover section of the app.
And is there a mystery video app that I haven’t heard of that’s on your radar? Or an up-and-coming ...
You know, here’s what’s interesting. There’s so many livestreaming apps that we’re seeing, that are doing interesting things. Mostly out of Asia, that are kind of interesting. Obviously everyone knows about Musical.ly, and Live.me, they’re doing similar-type stuff that’s kind of compelling, but nothing that I’ve seen that’s really hitting critical mass, but a lot of interesting stuff.
And we’ve seen Twitter, obviously, with Periscope. Facebook pushed Facebook Live last year. It seems like the bigger platforms ... And YouTube just announced a new live thing. It seems like the big platforms have all tried live and gotten in and out of it. And it doesn’t really catch on.
Here’s what’s interesting about live. You have to really produce live. So we’ll go back to the Tasty folks, right? Didn’t they wrap a watermelon?
BuzzFeed did a watermelon with a thousand rubber bands, and that drove some interesting stuff. We did a test with Roman Atwood on Live.me. He got a monster truck. He put it in his backyard in Ohio, and he literally smashed a car with it.
I’d watch that.
And it was literally shot on a phone. I mean, we had one of our employees out there shooting this thing on an iPhone. And it did quite well. It had hundreds of thousands of people on that stream.
Well, here’s the but. The but is you have to think about producing at that scale, something really unique, one-time-only-can-be-seen-here kind of thing. That’s what makes live work.
That’s what I think about that YouTube stream where the astronaut pushed out of a Red Bull satellite, and he parachuted here.
Yeah, yeah, that’s perfect for live.
Yeah, but you can really only do that once.
That’s correct. Just like Roman could only destroy something in his backyard once. And have it have that impact on an audience.
So live works for some people for some things, but you don’t think it’s gonna be sort of a consistent part of a media diet.
Look, there’s always going to be somebody who comes up with the format that really works, like the outliers that make the world sort of turn around in the entertainment business. We haven’t seen it yet. What we’ve seen is things that are singularly unique, more highly produced, even though I know we said we were shooting it with a phone. We still had to get a truck, and a backyard big enough to hold it, and a driver and all that stuff. We had to produce the thing. Those are the things that will work in live, and it has to really relate to the audience that you’re very organically reaching out to.
We talked about your past with internet video. We talked about the present. What’s the future look like?
That’s a good question. For us, the future is, can we bring in other broadcast partners to replicate the model we’re doing in Germany and do it on a global scale? And that’s what we’ve been focusing on over the ... And hopefully over the next couple of years ...
Can you find big television networks who want to give you some of their stuff, allow you to distribute it, and then go back the other way?
Yep. And package and sell, yeah, and go the other way. That’s exactly right. And I think we can give them a very quick tutorial on how to do it. Get them up to speed. We know the product very, very well. We know how to build scale on the product really well. And we think that’s a really unique advertising product, in terms of how a broadcaster can still keep that connection with the part of the audience that’s consuming all their brands, right? That they’ve spent millions of dollars building, but are no long consuming on the platforms that they own.
Who is the next hot, up-and-coming digital video star? Who’s the next Lilly Singh? If I want to go home and tell my kids about somebody they should be checking out.
That’s a good question.
Well, I can’t tell them that because they won’t want to watch it. Who should I feign interest in?
We have a channel called Guava Juice that’s doing ... It’s a young guy. It’s a gamer. He comes out of a partnership, he had a channel called Wassabi, and he sort of broke off from the guys. And it’s doing real interesting business. Doing about 150 million views a month.
That’s a new PewDiePie.
It’s different. It’s a little different because it’s a little more out there, but it’s actually quite interesting.
There’s nothing less compelling than two middle-age guys talking about what the next PewDiePie is.
Probably. Here’s all I know. We did a toy box. We’ve done a subscription box with him. And I took the toy box into my daughter’s class. She asked me to bring two in for her friends. And it was on one hand a huge mistake because everyone in the class wanted one. But it was really awesome to see the reaction of a bunch of 4th and 5th graders freaking out over ...
Guava Juice. I think that’s a real solid one.
All right. If you can remember one thing from this podcast, remember Guava Juice. Reza, thanks for your time.
Thank you for having me. I really appreciate it.
This article originally appeared on Recode.net.