One of our recurring jokes at The Verge is that every YouTuber eventually makes a video where they talk about how mad they are at YouTube. Whether it’s demonetization or copyright strikes or just the algorithm changing, YouTubers have to contend with a big platform that has a lot of power over their business, and they often don’t have the leverage to push back.
On this episode of Decoder, I’m talking to Dave Wiskus, the CEO of two really interesting companies: one is called Standard, which is a management company for YouTubers, and the other is Nebula, an alternative paid streaming platform where creators can post videos, take a direct cut of the revenue, and generally fund work that might get lost on YouTube.
What really stood out to me here is that Dave is in the business of making things: this conversation was really grounded in the reality of the creator business as it exists today and how that real business can support real people. You’ll hear it when we talk about Web3 and NFTs a little bit — Dave just thinks that stuff is bullshit, and he says so because it’s not a business that exists now. That’s an important dynamic to think about — and one for more platforms to take seriously.
Okay, Dave Wiskus. Here we go.
This transcript has been lightly edited for clarity.
Dave Wiskus is the founder and CEO of Standard, a company that manages creators, and Nebula, a streaming service for those creators. Welcome to Decoder.
Thank you very much for having me.
I am very excited to talk to you. Dave and I have run in the same circles for years, but this is the first time we are meeting. There is a lot of familiarity, but also, “Who are you?” I think this is going to be a good episode.
Let’s start with some context. A few weeks ago, CNN+ announced that it was going to be shut down. You tweeted the response, “Our self-funded indie streamer, Watch Nebula, is about to hit half a million paying subscribers.” That is obviously a pretty wide dichotomy of things; CNN+ has a massive billion-dollar investment while your indie streaming service, Nebula, is a paid service. There are not a lot of smaller creator platforms that work and have grown as consistently as Nebula. Tell us what Nebula is and why you think it has been working.
We are sometimes accused of being a YouTube competitor, but we don’t see it that way at all. We are more like an expansion pack to YouTube.
It is not education content, but “education-ish.” It is the kinds of things you would watch on YouTube with the kinds of creators you would watch on YouTube, where you go to learn something or nerd out about something that you love. Those creators all got together and built their own thing. It is sort of a Netflix-y or Apple TV Plus-y view of the world, where we can take all of the things that were going onto YouTube, condense them here with no ads, and post them early on our own platform. We have control of how it all runs, and we can produce content that wouldn’t necessarily work on YouTube, like full-on original productions or exclusives, with more of a premium vibe.
It is not far off from what people were already doing independently — on Patreon for example — but in a more condensed “subscribe to this service to get all the things and we can all share the benefits together” sort of a setup.
How much does Nebula cost?
That depends on how you come in. We just launched Nebula Classes — which is our online courses addition to the platform. That kind of marks the moment where we are spending a lot more money on content, so we had to bring the price up a little bit. Our list price right now is $10 per month or $100 per year. If you come in through a creator’s page, you can sign up for $8 per month or $80 per year. If you don’t care about the classes, you can come in through the Curiosity Stream bundle, which varies depending on their pricing.
That is really fascinating. You now have tiered pricing and you have different products inside of the platform. I feel like the beginning of this was very simple, in that you were managing a bunch of creators. YouTube’s economics were not necessarily great and you could make your own platform. How long has that process been?
The idea for Nebula came up about three and a half years ago, around November. A top streaming provider company reached out to us saying, “We would love for one particular creator to build a streaming service on our platform.” I won’t name the creator.
Can we name the company?
Sure, if you want me to.
It was Vimeo. They reached out asking us to build a streaming platform for a creator they really like. I said, “That guy only makes one video every six months. Who would pay monthly? He does fine on Patreon. What is the incentive for anybody in this scenario to do a bunch of work and move to a new platform to give Vimeo money?”
In the end, the only way this would make sense is if we had all of the creators building. “Oh, we should do that. That’s not a bad idea. How far off are we on the technology? How long would this take to build?” I kept talking to their team, exploring the options and thinking it through. It became clear that there really was, I don’t want to say easy, but a straightforward path. The technology was there. We would not be paying for bandwidth, we would be paying per user. There wasn’t an infinite-costs-without-infinite-revenue scenario. We realized it would be relatively cheap to get it up and running, and relatively cheap to keep it running forever.
Years ago there was a thing called Vessel that attempted to do something similar to what Nebula does. There was no equity or ownership, they just had a bunch of creators signed on to make shows. Contracts were in place and content was being made. Then they got bought by Verizon for about $50 million, and the first thing Verizon did was shut the whole thing down. There is a big L on the records of the creators now. There’s this great big ugly thought of, “Well, yeah, the last time we tried to do this, the whole thing collapsed.” It is not a good look for the creators or the audience, so they were very concerned coming into this. What happens if this thing collapses? What if it fails or goes away?
We had to put a lot of structures in place on the business side to make sure that we were accounting for that. Bottom line, it would cost $2,000 or $3,000 a month just to keep it running; the optics would never be “failure” but they would be “slowly trailed off,” which is not the worst thing in the world. We all kind of agreed that was fine. We built it up over the next six months to get the 1.0 out the door and figured, “We will just see what happens from here.”
I definitely want to talk about the structures that protect creators. To be a successful creator, you have to go get an audience. You have a big marketing start problem, to get people to watch your stuff. The easiest way is obviously to participate in the big platforms, whether that is YouTube, Vimeo, or the podcasting ecosystem. You started out managing creators on those platforms and running businesses for them. That’s still what Standard does. How did that work? How do Standard and Nebula play together?
Standard manages the business relationships for the creators, primarily sponsor bookings and that sort of thing. We do a lot of platform relationship development. We handle merch.
Wait. Explain what platform relationship development is.
Oh, so for example, I was up late last night arguing with a friend who runs the YouTube algorithm about how a thing should work. If the creators have a problem with the video being demonetized, we know the people to go to. It is tough if they have a problem with the video — even up to and including a glitch in the video, where the file needs to be replaced — because they have to be able to make a very strong case for it. But we have the relationships and can go to the right people and lobby for it. It doesn’t guarantee what happens, but we can lobby for it. It is anything that helps a creator better understand how the system works.
A lot of it comes down to the algorithm itself, the functions around demonetization, content restriction, or content ID. These are things that the creators feel are a very opaque black box. It can be very scary as an independent creator. With the platform relationships, we are working to help the creators understand how things actually work and humanize YouTube to them. And in the other direction, to YouTube lobbying on behalf of the creators. We represent 160 creators. The weight that I can walk into that room with is a little bit different than any one individual creator. I don’t want to say we act as a lobbying arm or a union, but it is spiritually along those lines, where you have a stronger position. You have more leverage when you work as a group.
I feel this core idea behind Standard — you are going to bring together a bunch of creators to handle their business affairs, sponsorship deals and platform relationships in particular — this is the idea that has been around for a while. I feel like every media company went through their multi-channel network phase, the MCN.
This may be way too in the weeds for the regular Decoder listener, but the media people listening probably all broke out in hives when I said MCN. Every company — even Vox Media — tried to do this thing where you would bundle up a bunch of channels, get some leverage over the YouTubes of the world, and you would get a better deal for yourself. YouTube is mostly too big to get leverage over and all the MCN deals fell apart. Why do you think Standard has been successful?
Exclusivity. The creators that we represent, we represent exclusively. You have to go through us if you want to do deals with the folks on our roster. It is not about giving us or me as an individual power; it is about giving those creators power. If you want to do something with Devin from LegalEagle, you have to answer to all of the restrictions and all of the requirements of how we do deals. It has all been developed and designed over a course of years after seeing how the bad actors or shady sharks of the world will approach creators.
The influencer world — the creator economy — is filled with people who are looking to extract value. We developed systems after seeing how they work and how they behave. For example, we will not sign a contract that requires us to do a make-good if the video doesn’t get enough views. We know that sponsor value is not determined by how many people saw the video, it is determined by conversions. Not getting enough views is not a good reason for somebody to have to do another video for free. We will not sign that. One creator saying they won’t do that means the sponsor goes away, but 160 of the biggest creators saying they won’t do that means the sponsor says, “Okay, whatever you want, sir.”
Is that how that plays out?
“This is what I’ve got if you want to do business.” How do you get the creators to participate in that? This is kind of the business structure question. You have to get a bunch of people to say, “Okay, we’re going to give up some of the outs that would make us deals otherwise. But you have to protect us.” What does the protection look like?
They will never sign any contract other than with us. We handle all of the documents that get signed with the sponsors. We have master documents that the sponsors sign with us to govern how the relationship works. Then we have the contracts that we sign with the creators. To be very transparent here, our fiduciary response always is to the creator. We are never working for both sides. In every scenario, 100 percent of the time, we represent the creator and the creator’s interest.
When we sign a document with the sponsor, it is us making them say that they understand that this is how it works and this is what they are going to have to do if they want these things to happen. We can go to the creators and explain that we get performance data because of that.
If a sponsor is going to run on your show, they have to tell us how well you performed. There is no magical mystery pricing where they can come back and ask for another because it was good. If we tell them to pay more and they refuse, we are going to show them their own data and say, “Well, you wanted it to be this valuable. It was, so you should pay us this much money.” There is no room for argument.
A lot of our philosophy is, “Never negotiate for money, negotiate for data.” If you negotiate for data, the money is just math. It makes everything cleaner. Because we have these structures in place, and because our contract with the creators is only a 30-day rolling contract and we have a strong reputation, it is really easy for the creators to look at our roster, how we work, who we work with — both on the creator side and on the sponsor side — and the things that we have built, and take that first step into trusting us.
Your contracts are only 30-day rolling contracts? So at the end of 30 days, the creator can choose to opt out?
As a rule in business and in life, I don’t want to be in a relationship with somebody who doesn’t want to be in a relationship with me. It is easy to get lazy when locking somebody in. My 80 employees and I have to constantly be in a mode of proving our value if there is a 30-day ticking clock. We have to earn it every day.
I think it is a good way to live and why we built Nebula. It is why we have expanded beyond sponsorships into handling merch and building the largest — as far as I am aware — production company in the world specifically catering to YouTubers. It is why we built a content strategy team and a syndication team. We know that we have to keep coming up with ways to add value for the folks we work with, or someone else will eventually catch up with us.
That is really interesting the way you have described your functions. You have described a media company, but any big media company has a bunch of core services in the middle, like content strategy or platform relationships. Usually the people who make this stuff work at the media company. The people who make this stuff for you, do not work for you. They are your clients in a much more direct way. How do you think about that balance?
I like them being my boss and not the other way around, because the creators hold the cards here. I hate to keep using the buzzword-y term “the creator economy,” but it is for simplification. As you look across the creator economy — at the players who are coming into this space and the way they are approaching it — there are a lot of old media people, ad media people, technology people, and traditional talent people. Nobody really quite understands all of it. The talent people don’t understand the tech, the tech people don’t understand the talent, and Hollywood doesn’t understand anything. We are in a position where we can see the mistakes that other people have made where things converge.
The MCNs were all about gathering up a bunch of channels, locking them up under a banner, and extracting value for as long as possible. Their deal was that they would occasionally bring you sponsorships and you would be happy to get them. They would take a cut of those and also get a cut of your AdSense revenue. So all day, every day you are making them money and sometimes they bring you value. That is a very old media or traditional media way of looking at the world.
The one nice thing about the talent management company structure is that the inmates run the asylum a little bit more. The talent has the power. If the people who are putting all of the banger content on YouTube or TikTok or Instagram all leave, then we have nothing.
For me, it is just a matter of simply acknowledging that reality. I think most companies who are in a similar position to us see that as an existential threat, but we see it as the exact thing that gives us power. We can either be afraid that the creators we represent will leave, or we can use that energy to build better things to make sure they don’t want to. We can take that exact same power imbalance that the bigger world does not necessarily recognize yet, and do our best to hold the mirror up to the platforms. We can ensure that they recognize that the only reason people watch YouTube is for the videos, and maybe they should be a little bit nicer to the people who make them.
It’s a noble goal. I feel like I have to unpack the structure here a little bit. You said “80 people” when talking about Standard, which is the management company. Nebula is the video streaming platform company. They are not the same company. Of those 80 people, how many are at Standard and how many are at Nebula? How does that all work?
The answer is, “Yes.” It’s weird. We are in this sort of middle stage of history right now. We were the same company for a long time. Our biggest sponsor partner, Curiosity Stream, hounded us for two and a half years, saying they would love to buy in. We finally hit a point where we realized they had paid for all of our marketing because of this bundle arrangement we had with them. Every time one of our creators goes out and promotes the Curiosity Stream bundle, they are promoting Nebula. We have all of this awareness. We just hit half a million paid users because Curiosity Stream has truly been a partner to us the entire way, making sure that these creators are getting time on their dime to tell their audience about the thing.
It has all been very mutually beneficial, but we stopped and recognized that Nebula has potential to grow more. We were profitable, but we knew that some cash injection would be good. It meant that we could spend more on content development and try new kinds of marketing.
We built Classes out of that. We wanted to be respectful to the relationship investment that they had made. It’s weird to think of a publicly traded company as a friend, but no joke, we truly do see them that way. They have been huge supporters of everything we do, and it felt right to acknowledge their role in us building this. They do not have a controlling stake. It is all very much on the up and up. The creators still run everything, but it made sense to build the relationship out that way. With that, Nebula gets spun off into its own company.
At that point, we have to figure out the corporate structure of Nebula, which is an LLC. Our engineering team and content team are all standard employees. So how do we do this? In this middle phase, Nebula simply contracts to do the development at cost, what we are doing to get from point A to point B. We recognize that those are all Nebula employees. It’s like on the creator side; when we have 160 creators, we have leverage.
A lot of our employees are in the US and we do have 401(k)s. We have a little bit more leverage because we have 80 employees total, instead of 40 each for two companies. We are kind of navigating what the exact right answer will be in the end, to make sure that employees are all taken care of and can still behave as one team. We see ourselves as one team, there are just corporate structures and legal entities to navigate. It’s needlessly confusing, especially for our accounting team.
You said you had 80 employees across the two companies in that structure. How is that organized? How many people are in sales? How many people are in the production department? How are you structured?
I think we have nine or 10 digital department heads. Oh God, someone is going to be mad at me if I forgot them. I want to say we have about 30 people in engineering, which is iOS development, Android development, Roku, web front-end, and web back-end. We have around 30 people in production, which is motion graphics, editing, sound, in-house composing, 3D, and thumbnail designing. Then we have a handful of people in project management, QA, content strategy, and syndication. They carve up content, move it onto other platforms, manage Facebook accounts for creators, things like that.
I do not know the exact division. I would have to see an org chart. Even then, we have been discussing lately what an org chart even means for us. Apparently there’s one version of an org chart that instead of top-down, it just goes off in different directions. That feels right.
I always joke that this is fundamentally a podcast about org charts. So if you ever figure that out, you have to come back and tell me how that all works.
I realize this is an audio podcast, but if you would like to mentally visualize our org chart, imagine a plate of spaghetti and I am the meatball. I don’t know.
That’s good, you’re just a meatball. So Standard — in its purest form — represents a bunch of creators as talent. It goes to the platforms and you can lobby the platforms for different changes. You have the leverage to do good ad deals, and not just the dirtiest possible. You then sell the videos to Nebula, right? Do you ever get to the point where Dave Wiskus, the CEO of Standard, is negotiating with Dave Wiskus, the CEO of Nebula?
When you say selling the videos to Nebula, what do you mean?
Well, this is from my understanding of the basic structure of Nebula. Creators make videos and put them on both platforms — YouTube and Nebula — but there is a rev share on Nebula that occurs.
Yes. There is also a structure in place that if Nebula is ever sold, 50 percent of the proceeds go to the creators as a pool. It is a form of what is called shadow equity. It means that there are no tax implications today, but if we sell the thing, we have to share the money. That guarantees that if this thing blows up, you’re cut in.
The spirit of this is very simple: We are building it together. Nebula is literally creator-owned, in that Standard’s cap table is 100 percent creator; our operating agreement stipulates that only Standard creators can own Standard, of which there are about 30 of them. On the Nebula side, there is a 50/50 split monthly and in totality out to the creators. It’s both literally and spiritually creator-owned. The inmates run the asylum.
We see it as a partnership. The creators provide the videos and we provide the platform and support so those videos can make more money. It is all one big conversation with the creators, and we discuss things very openly. We have a Slack channel with the creators where we specifically just talk about Nebula and the business, and how we should build things.
Before we built Nebula Classes, we had a long talk with the creators about how this should work. What are the features that we care about? What kinds of classes do we want to make? We did not pull the trigger on building that until we had a real understanding of what it was they would want, as well as a sense of assurance from ourselves that we could actually build that. We needed to make sure that whatever pipeline we built, there would be enough content over a period of time that we could live up to our internal promise of one new class per week. That had to come out of the conversations with the creators. We cannot just go into a back room somewhere, dream up what it is, then come out and hand down orders.
This all leads into the classic Decoder question. How do you make decisions? It sounds like you are taking in a lot of input from a lot of stakeholders. You have one publicly traded company, 160 creators, 30 of them on the cap table. You have YouTube and brands off in the distance. How are you managing that? How do you make decisions?
It is a lot of conversation. It really comes down to relationships. This is a relationship business in every facet. How are these people being taken care of?
We recognize that with sponsorships, what we are selling isn’t airtime on a show. We are selling access to the trust that the audience has in the creator. We can make better decisions and build better relationships off that piece of knowledge and understanding. We can say, “Our philosophy is that we are here to protect that trust, not to sell ads or sponsorships. We are here to keep the sponsors from ruining the show, and if at all possible, add value.”
We have seen over the last several years that if you run a Curiosity Stream or Audible sponsorship, there is a prestige that comes with that. The audience sees that as, you have leveled up. These audiences are very savvy and they understand, much more than I would have expected, the way the business side of being a creator works. I think transparency works in everyone’s favor.
It is still a parasocial relationship — another buzzword — and we have to be respectful of that. We have to approach the sponsor relationships and platform relationships as guardians of trust, although that sounds like I am glorifying our position. I guess what I am trying to say here is that there is a balance that needs to be struck. We know that at the end of the day, the sponsor makes more money if the audience trusts the creator.
We know that YouTube gets more views and Nebula gets more signups if the audience is happy. The common thread here is, “How do we make the audience happy?” We need to get everybody on that same page of doing things, so we are having conversations and balancing needs. We approach it as just simply a relationship business, and, “How do we make sure that everyone can end up a winner?” It helps to simplify the way we think about it. The decision-making process is just to talk to everyone and think a lot.
Yeah. That’s a good one. I will tell you that you need to get it into an acronym or something so you can sell a book.
I need a tweetable version.
Exactly. What are you going to put on your LinkedIn?
Let’s talk about winners and losers for a second. I want to talk about how the rev share works on Nebula. If you look at any of the big platforms, there are the big stars, there is the medium tail that is cranking every day just to do okay, and then there is the long tail that makes no money. For a platform like Nebula, you have some big stars and you have some people in that sort of middle tail. How do you make sure the rev split is equal? You have half a million people paying somewhere between $10 and $12 a month. That is only a finite amount of money. How do you make that into an equitable split for all the creators on the platform?
I love this question so much. There is so much to unpack here, so I apologize if I go off a little bit. The rev share month over month is based on watch time. There’s going to be winners, and there’s going to be losers. That is how life works. Equity is not equality. We can’t say everyone gets the same slice of pie here. Different people contribute differently and there is nothing inherently good or bad about that.
What might surprise you is that the people you think are small often outperform the people that you would think are big. We have creators on YouTube who will get 50,000 views per video, but make $10,000 per sponsorship. Then we have people who will get 1 million or 2 million views per video, who will only make $5,000 per sponsorship, because views are not conversions. Audience size does not turn into money from sponsors.
What the sponsors care about is how many people click the link and buy the thing. If you have 2 million people who don’t buy a thing versus 50,000 people who all buy a thing, the latter is just worth more. That audience is more engaged, more excited, and more attached. When that creator goes out and promotes something or talks about what they have been working on, more of the audience activates. Some of those really big creators will bring in about the same number of people to check things out, because maybe their views are primarily driven by news, search, or viral algorithmic views.
YouTube did something really interesting that I don’t think they get enough credit for. I find it strange as a representative of creators to be out here talking about how great YouTube is, but I don’t think that YouTube’s position is fully understood yet. For the entirety of human history until 17 years ago, there was no such thing as a middle-class content creator. There has never been a moment in time for people where somebody could wake up in the morning and go produce something that would be seen, heard, and consumed by an audience of potentially millions sustainably, with no gatekeepers. That is brand new and is really cool. You need a discovery system to do that. YouTube’s algorithm gets a lot of guff from creators — I think in some ways deservedly so — but they are constantly working on it
You know as well as anybody that if you put a podcast out there, nobody listens until you tell them about it. Your first 100 or 1,000 or 10,000 listeners are people that you told about the show. On YouTube, you put out a video and your first million viewers might just be people who showed up. It’s much more like being a store at a mall than releasing an indie magazine and putting it up in record stores. There is a true discovery system.
The way the audiences attach to individual creators will vary wildly by creator. The equitable split of how people are making money on Nebula comes down to how excited they make their audience and how good a job they do at convincing that audience to go watch their stuff. Are they releasing extra content? If you tell folks that they can go over to Nebula to watch a whole unedited interview instead of just snippets, then you are probably going to get more people coming over. When that happens, you get more of the watch time split. The percentage split will constantly be rebalancing. If all of those people are coming over to spend more time on Nebula and we have all this retention, then revenue goes up and the pie gets bigger.
You could add another 160 people to Nebula. You have to assume they are going to bring subscribers with them, right? How do you make the decision to sign up that 161st creator? We know they are going to add watch time to the denominator, but we have to increase the numerator as well.
We trust the creators. If somebody comes to me and says, “Hey, I’m friends with the creator of this channel and they do really good stuff. I think they would be a good fit,” I will take the call. If I get a cold email from a YouTuber saying, “Hey, I have 100,000 subscribers and I want to be on Nebula,” I don’t reply. It is not because I want to be a jerk or ignore those people, but because I just don’t have a mechanism for vetting them. If the creators come to me and tell me about what they are watching and are excited about, they are the best filter system I could ever hope for.
If one of the creators who is doing stuff on Nebula and owns a piece of Nebula comes to me and says, “This person should be here too,” I trust that they are smart enough to only be making recommendations that are going to add value. It all comes down to trust and relationships. If I trust that creator, then I do not have to think of how the new person will add value in a clinical or cynical business sense. I only have to think about if this person is a good social fit, and if we are going to be excited to have them on the team.
Right. You have to have some model where you’re like, “I’m going to bring somebody over and add them to the team. Some watch time will go to them and they will get some money out of the pie, but they have to bring X number of subscribers to the mix to balance that out and make it equal.” This would probably never happen, but just for the sake of the argument, let’s say you add a super-popular creator that brings no subscribers and they take all the money.
This is what I call the Mr. Beast problem.
What is the Mr. Beast problem?
Mr. Beast is the biggest creator on YouTube. What happens if he were to start putting stuff on Nebula and his army of 100 million teenagers all starts watching but not paying? How would that happen? How could they possibly watch his stuff on Nebula without paying us? Maybe the half a million people that are currently paying for Nebula’s subscriptions all decide that they are only going to watch Mr. Beast, but if that is all they want then the audience is voting with their time.
That is a potential danger. The army of teenagers probably doesn’t have as much disposable income. You could add the content to your platform, but they decide they are just going to wait a day to watch it with ads on YouTube. Then the paying Nebula audience watches that stuff early, and now you have ended up in a bad position. It may not be a realistic concern, but from the way you are describing the model, it is a potential concern.
Maybe, maybe. I will be honest and say that we have not really thought through that scenario. At least our audiences do not necessarily work that way. I guess there is no perfect model. I am thinking through it now.
I don’t know if this needs clarification, but just for the record, the value proposition in our mind for somebody watching things on Nebula — versus on YouTube — is not just about getting the video early and without ads. Being a YouTube Premium Premium is not the most exciting thing in the world for us. That is a feature, but I do not think of it as really being our core feature.
We are spending millions of dollars this year on original content. We have these classes, and we have fully produced original productions and documentary series that never would have been made on YouTube. We think that over time, it is more interesting for the audience to come get that stuff than it is to just watch the video early. Again, that is a big feature, but if we look at Netflix as a template, we can only do that for so long.
In the early days for Netflix, they were all about catalog content and slowly adding originals. People came over because you could watch all of the movies on Netflix. Even that was built off of a system where they were literally mailing you DVDs. So they said, “Okay, we are going to put all this stuff onto servers. You can watch it on your TV or on your computer over the internet.” You didn’t go there because they had Stranger Things and Squid Game, because those things did not exist yet. You went there because they had, I don’t know, Friends. Our early days are a similar position. We don’t have Stranger Things or Severance or Peacemaker.
Yeah. You should get Peacemaker.
I’ll make some calls.
That show is great.
We do not have a big, obvious collection of hits. If you look at switching the model in the early days, we have to kind of Netflix it up and recognize that is the position we have been in. Going forward, I think Netflix is a terrible role model. I think Netflix is bleeding subscribers, bleeding money, and now bleeding staff, because they do not value the creators. Their business model is to take billions of dollars, go out and produce every noodle of spaghetti, and throw them all at the wall. Anything that does not stick gets canceled. That has worked for years, but it doesn’t scale. Remember a couple years ago, when we all laughed at Apple TV Plus because they only had like five shows?
Jump forward a couple years. You know what? Those five shows are excellent. Every single one of them. Every time they put something new on Apple TV Plus, it is excellent. You can laugh that they do not have the biggest library in the world, but it is actually pretty decent now. You know that anytime they put something up, it is at least worth trying. Severance is amazing, Ted Lasso is universally loved. Meanwhile, what does Netflix have? They are scrambling to get season two of Squid Game because they need a hit.
I am very much obligated to disclose at this point that I am the EP of a Netflix show that is coming out in a couple weeks, but that is neither here nor there. We just made the show. It’s great. My responsibility to that show was helping to predict the future. So I feel good about that, but that is your disclosure.
Here is my question about that though. That Netflix curve is well known. You buy a bunch of catalog content on the cheap and monetize it against access, basically. People couldn’t get Friends easily before. When they pay to get it, you spend the profits on originals to hopefully lock them in. That was the model for Netflix, and in many ways the model for everyone else. The exception being Apple TV, which has no catalog content. They are just buying the premium stuff, but they make the iPhone, so I feel like their economics are different.
You are kind of describing the same thing. We are going to get a bunch of YouTube catalog content that you can pay for. You might window it early, but that is just the basics. “What we are going to do is spend money on productions for creators,” then you keep saying this phrase that I want to push on, “on things that might not work on YouTube.” That is a pretty loaded phrase to me. It implies a lot of things.
Do you want some examples?
Battle of Britain. Real Engineering made a series called Battle of Britain that is airing now. It is a follow-up to a series that he made on Nebula called The Logistics of D-Day. This is content about wars. There is no graphic violence shown, but things blow up; there are weapons, and discussions of death and violence. Those videos on YouTube would be demonetized and be age-restricted. They would not make money. It would not work on YouTube because the platform itself is — and I think rightfully so — conscientious of how things are presented to the audience. They have to assume the widest possible collection of human beings is seeing this, and that includes children.
I will throw a little bit of shade, as they are also very concerned with what advertisers will enjoy. They do not really do a lot of work to find advertisers who are more interested in that kind of content. Fair enough, right?
Brian from Real Engineering did upload the first episode of The Logistics of D-Day to YouTube to promote the whole series. It was demonetized and it has made no money. I do not know if I can say exactly how much money, but a lot was spent on that show. The first episode went to YouTube and it has made $0. He would have canceled the entire project and been out a very large sum of money. It just wouldn’t work.
Is that show profitable on Nebula?
Yes. There is a fun economics thing that has happened here. I have talked about and hinted at pieces of the relationship that we have with Curiosity Stream. They pay us to go promote Nebula. This whole podcast now is a secret ad for Curiosity Stream. If you sign up for the bundle, you get Nebula included. At the end of the videos, the creators will say, “I have this original series or this really cool, interesting thing on this platform that I am helping to build. Me and a bunch of creators got together, and it’s called Nebula. You get it included when you sign up for Curiosity Stream.”
They have been paying for these sponsorships for a little over two and a half years now. When people sign up, the creators make money. The sponsor rates are based on how many people went and signed up for the last one. When we are promoting something that is so deeply rooted in the parasocial connection, the audience wants more of the things that these creators are making. We end up in a situation where more people sign up, so sponsor rates go up. We have one creator who was making $5,000 per video, but his most recent video was $300,000. This is based on actual performance, real numbers.
He was converting it into that many sales of whatever product.
Yes. He was sending that many people over to Curiosity Stream that it was worth $300,000. He was at $5,000 less than a year ago. He just leaned hard on doing stuff on Nebula that was exclusive. More people went and signed up. The $300,000 dramatically more than covers the production of the show that he is doing as a Nebula original.
The actual production work is handled by our studios team, and we get a cut of that so that we can pay the people. How do I want to say this? We have a whole machine to make these things and a machine to make sure that all of the different parts of the machine are making money.
I feel like this would be a good time to be a video podcast so I could draw this on a whiteboard, but I am going to try. It sounds like there are two different revenue things happening here. Just correct me if I am wrong as I walk through this. Let’s say you are a creator on YouTube and have a reasonably sized audience. You can say, “Hey, in the middle of my video, look at this phone case.” That will make you some money and Standard will help you get a better deal there. Right? That is pretty normal. Everyone understands that.
My advice would be to do it at the end of the video, but yeah.
Then you can say at the end of the video, “Hey, go sign up for my stuff on Nebula.” When that happens, Curiosity Stream pays a conversion fee. That seems to be what is happening there. That can make you $300,000.
Then when the videos are on Nebula and people watch them, there is a subscription fee that gets doled out based on a watch-time calculation as well. So that is three ways that creators are making money with Standard and Nebula and Curiosity Stream.
Yes. I will pay you to make a thing. I will pay you to promote that thing. I will pay you based on how many people watch the thing. Then you own equity in the platform, so you are getting paid four times over if Nebula ever sells.
Let’s look at the normal economics of a Hollywood movie as an example. It’s very simple. You get a bunch of financiers together, you say you are going to get Tom Cruise and a fighter jet, something good will happen here. Then you front a bunch of money to pay for this thing. You have an asset that you sell to different markets and different platforms. You window it to HBO, and at the end of the road, TNT is running it with ads in the middle. That is like the last bit of money you can count.
This does not sound like your model at all. The video itself does not seem like the thing that is being valued. It seems like a bunch of conversions along the way. I’m trying to push on that. Every time I have one of these creator economy conversations, I come back to, “Well, how much is the asset itself worth? How much is a song worth for Spotify? How much is a video worth for YouTube?” How much is a video worth for you?
How much does a car cost? It really depends. How big is the thing? How well does it perform? What is it made out of? There are a bunch of different factors. Who is the creator behind it? How many people are likely to come over and watch it? Is this something that people are still going to be watching in a year? When we spend money to produce an original, we have to ask, “Is this an amount of money that is going to be returned to us in some way?”
The economic machine is not as simple as people paying us for the service, therefore, we have money coming in and we can spend accordingly. It is more beautifully complex than that. There’s the relationship with the sponsor, Curiosity Stream, and Standard makes a commission on the sponsor rate. So Standard as a company is making a cut of that fee that comes in. So we have incentive to do things to invest in making that fee go up.
Every month, Curiosity Stream pays us based on the number of active users who are in through the bundle, so we have an incentive for that number to go up. There are multiple ways in which each piece of content, for lack of a better word, gets valued. There are different ways for those things to make us and the creators money. Depending on the structure, Standard or Nebula may be in a commission chain or a licensing chain on any one of those things. At the end of the day, it all comes down to the creator needing to make more money and seeing more of the value.
One thing that might confuse you even further is those videos — the assets — we do not own them, the creators do. We will pay money and provide funding for a creator to go out and make something that they own. I don’t know of anyone in Hollywood who does that.
How do you decide to spend that money? You have a budget and a production company. You say you think it is the largest production company for creators. Are you greenlighting pitches? Are you killing ideas?
Yes. We have our chief content officer, Nikki Levy, who comes from a traditional studio background. The guy we have running the studios team right now was a producer with Marvel Studios. We have people who understand creator stuff, but also understand a more traditional Hollywood system.
The way YouTubers work is very fast and loose, get it done so they can ship the video tomorrow. Hollywood will spend a year or two years making something, spend half that time in post-production, and then half the budget goes into marketing et cetera. We needed to get to a point where we could have a little bit more thought put into how we develop the content. How can we be useful to the creator in developing content? Where can we add value?
We have a structure now, but for a long time it was kind of me and my gut looking at something to decide what would or wouldn’t work. Frankly, for the first stretch of time, it was just Curiosity Stream giving us funding for originals. We got to play around a lot. As long as they would see an increase in conversions, it was worth it to them to throw money at things. So they were paying our marketing budget and our content budget. You can see why we like them.
At this new stage of life, we have a much better understanding of the world. We have more access to marketing tools of our own. We have audience awareness and audience affinity. We have a brand that people recognize and appreciate, and we have an understanding of how to develop the content.
Over time, we have taken on more and more of this ourselves. We have had to build a machine specifically for looking at projects and making a decision. Is this something that the creator is going to be proud of? Is this something that they can promote that will lead users over here? If you look at the Netflix model, the Apple TV Plus model, or even the Spotify model, the thing that is different about what we do, the magic of it, is that the audience is invested in the creator. They want the creator to succeed.
Nobody signs up and pays for Netflix because they are personally invested in the financial security of the Stranger Things kids. Nobody is paying for Netflix because they want to make sure that Dave Chappelle is making money. Nobody cares about Tom Hiddleston’s private life, his financial security and whether or not he is able to keep making shows.
I think a lot of people care about Tom Hiddleston’s private life.
They care who he is dating. They do not care how his 401(k) is shaking out and whether or not he is going to be able to retire. He is not out there promoting Disney Plus like, “Hey, thanks for subscribing. Be sure to click the link below. It really helps the channel.” It’s not a thing. To an extent, people will care about celebrities, but it is not the same. Do you know Paul Rudd’s wife’s name?
No, but I’m horrible at celebrities.
I don’t even know if he’s married.
But there are people listening to this who just said the name, instinctively. Hollywood has built itself on parasocial relationships with celebrities for a long time.
I think with fame relationships there is going to be some of that. There is going to be US Magazine, like, “Here’s Kate Hudson buying groceries. Look, they’re just like us.” There is a celebrity attachment, but I think parasocial is all about feeling like that person is a character in your story.
Brad Pitt is a character in the world’s story; I don’t feel like I know him or I am friends with him, even though I know things about him because I have read them in magazines. When I am a fan of someone like Thomas Frank, I watch his videos every week and learn about his life, and I feel more deeply connected. The audience is signing up for Nebula and staying because of that connection. They get invested in the projects because they are invested in the creator.
Do you worry about the flip side of that? One thing I hear from creators all the time is that they are burned out. The audience — especially when they start paying them in different ways — has expectations that go up. There is a desire for constant content, and the need to open the doors to your entire life ratchet up as you become more successful in that way. That leads to burnout. Do you think about that with the Nebula group?
I mean, you can look through our roster. It is mostly nerds making explainer videos and video essays. It’s a little bit less “look at me.” If you look at he-who-shall-not-be-named, Logan Paul, he was making daily vlogs where cameras just followed him around. He had to constantly be on. For our audience, they go watch a Marvel movie, then they come home and think about it. They argue with their friends on the internet, sit down to write an essay and record that into a microphone, or go out and build something interesting to show off. It is less about following them around with a camera and doing “look at me” vlogger stuff. It is a little bit more thoughtful.
That sounds dismissive of other kinds of content. I don’t mean it that way, but it is more intentionally intellectually driven and less celebrity-driven. I think that matters, at least for us. I don’t see that kind of burnout from creators.
I do definitely see burnout. Most of the folks we work with are in their 20s, and this is their first or second job, and they just don’t have structures in place. A lot of what we try to do is help them build structures so that they can take some time off or get an outside editor working on their video. That way they are not spending 100 hours a week making a video to get cranked out so that the algorithm will be happy, or that they are meeting sponsored deadlines or whatever. We are building businesses, rather than just successful channels.
Do you think this model is applicable to entertainment celebrity? I mean, that is the bigger side of YouTube, right?
I don’t know, honestly. I have been chatting with some bigger celebrity-type YouTubers about this, trying to get my head around how their businesses work. It is unclear to me exactly how the pieces fit together.
A friend of mine, Dr. Mike — not somebody we work with, but a friend — just did a tour where he went around the East Coast of the country doing a live stage show as “People Magazine’s Sexiest Doctor Alive.” He was getting up on stage, doing game shows and sketch comedy-style things for an audience of people who truly love him. Watching him interact with fans and thinking about the way those tickets would sell, or the kinds of people who would go to that sort of show, is that something that would apply to creators like the folks we work with? What are the needs, what are the demands, and what are the challenges?
I work with people who have audiences in the millions, who can walk down any street in the world and not get recognized, because they are not really on-camera talent. And I have friends who if we are out anywhere, we get stopped constantly. I don’t yet fully understand what it must be like to have to deal with that second set of problems. So I don’t know, and I can’t really say.
Have you thought about an expansion in that direction?
I think that as Nebula becomes a more interesting story to the world and not just this niche of creators, we will need to expand. My big-picture vision, my dream for Nebula is that it should be the home of high-quality, curated independent creator content. I am not interested in getting every creator in the world to put stuff on Nebula, but there is plenty of thoughtful, intellectually sincere, and passionate content out there that would be a great fit.
I am not saying we should add tens of thousands of channels, but at least in the hundreds. If that is the direction of the platform, then at some point we have to start appealing more to the creators who might have different relationships with their audience, with their content, or with their platforms. The more understanding I can have of the story, of the experience, of being an online content creator, the better for me.
You recently launched Classes. I feel like I am going to ask this question and it is going to sound bonkers, but go with me on this.
I love it already.
You recently launched Classes. I have had a number of people on the show talk about creators with me and they immediately bring up Web3 and NFTs. I told you it was going to sound wild.
I love it.
It is all in the same bucket. We just described this incredibly complex revenue model, because in many cases, the asset itself is not saleable directly. You can’t sell a YouTube video. You have to have something to sell. For whatever reason, the market has decided that classes are a thing you can just pay for. For whatever reason, the market has decided that NFTs are a thing you can pay an increasingly smaller amount of money for. But it is a thing you can sell directly to the consumer, as opposed to having this architecture of revenue streams around an asset that you can’t sell. Is that how you think about Classes? We just need to open up a thing where we are selling more directly? Is that how you might think about NFTs?
If we are going to talk about crypto, am I allowed to swear?
Jesus fucking Christ. So the problem with crypto is, “What problem does this solve?”
I think the answer is that it is just something to sell at this point, honestly.
Right. If you are selling a class, you are teaching someone something. If you are selling access to a video, you are selling time and entertainment. If you sell crypto, you are selling nothing. It doesn’t even solve the problem it claims to solve. It is a file; it is a JSON entry on the blockchain that points to a file on somebody else’s server. It doesn’t even do the thing it pretends to do, let alone solve a problem that anyone actually has.
I find it increasingly frustrating watching influencers promote crypto bullshit, and I find it increasingly frustrating watching people who I regard as being very smart buying into this bizarre-ass Ponzi scheme. Remember all that shit I said earlier that what you are really selling is access to the trust that the audience has in the creator? If you want to sell all of your trust up front, go nuts with crypto. It is not going to age well. It is already not aging well.
If we want to make sure that nobody ever takes us seriously — that the creator economy is a tech bro flash in the pan that fizzles out — this is the best way to do it. I find it horrifying, genuinely. It is perplexing, it is confounding, and it is horrifying that smart people are doing this. It doesn’t even come down to malice, necessarily. I think it is inexperience.
Like I said, a lot of these people are younger. I don’t mean that in a dismissive way; they are incredibly smart, but they do not have the kinds of experience and context in the tech industry. A lot of big-name YouTubers are not from the tech industry. If you have been in the tech industry for a while, as I think you have been, you may remember there were lots of things that were too big to fail. I remember AOL. I remember Yahoo. I remember Friendster. I remember Myspace. All of these things were too big to fail. Remember Orkut?
Orkut was huge in Brazil.
Look, I am very skeptical of crypto. I think all of our listeners are aware of that. What I am saying is that I can abstractly identify one problem it solved, which is that artists have something to sell in a way that they cannot sell songs or movies anymore. All that stuff has been wrapped up into streaming subscription bundles. If you say, “I can sell a thing,” that is a very powerful tool to give an artist, whether or not the tool exists, has longevity, or is technically real.
I am just putting that next to Classes because we interview creators on the show that say, “Okay, we sell classes. That is actually the revenue and the stuff we do on the platforms is marketing to sell those classes.” That is becoming a very common model. I am wondering if classes are a thing that adds value, that you can sell directly.
Yes and no. Generally speaking, I think you are absolutely correct. I think that the creators using the free ad supported platforms as a way to promote things they own is the future of the creator economy. The only way this is going to be interesting and sustainable in the future is if the creator economy is owned by the creators. It should not be owned by trillion-dollar mega tech companies, and it should not be owned by finance bros or tech bros.
There are going to be lots of sharks in the water and lots of big ideas will fizzle out. I think that as more of the creators themselves try things, the future is more likely to be that you start on one platform and then build your own. I think that is a good thing. There is an entrepreneurial spirit around NFTs that is healthy. It is the execution that I have a problem with.
Most online classes are either the creator selling one class à la carte from their website, or a cohort-based thing, where you pay some number of thousands of dollars for them to get on Zoom with 100 people once a week and tell you how smart they are. Most of the cohort-based stuff is highly parasocial creators selling the idea that you can be successful like them, the Tony Robbins and Tim Ferriss-type people. It is much more about, “Look at how successful I am. Don’t you want to be like me?” They are people who make YouTube videos about how much money they make, and that kind of stuff. Not that there is anything necessarily wrong with that, but it is a way of doing things.
Selling classes à la carte tends to be people who are more professional and have experience that is applicable to their audience or what the audience wants to do. People like a friend of the family, Rick Beato, selling courses on how to train your ear to develop perfect pitch. I think that is one of his classes. He sells stuff like that at a flat fixed rate. He has been very successful. These models work.
The other model that isn’t really being tested out by creators en masse yet is more of the MasterClass model, where a bunch of creators get together on a platform to build things that are part of a subscription. For us, Nebula Classes are just baked into Nebula. If you sign up for Nebula, you get Classes there as part of the deal. It is not an extra or anything. We did raise the price to account for this, but it is not a separate fee.
We are going to keep adding value to the platform that we have already built. It isn’t, “How do we come up with a new thing to sell?” When I look at who our model for success is, on the technology side and on the distribution side, I don’t really look at YouTube. I look at Apple’s philosophies. Apple is an ecosystem company and their purpose for existence, according to their behavior and the way they tend to model their products, is to do opinionated things and get you into the ecosystem. If you use an iPad, but don’t use a Mac, that is fine. If you don’t sign up for Apple TV Plus, that is fine, as long as you are using an iPhone. Using all of the products isn’t necessarily the point. Getting you into the ecosystem and then showing you how great the other stuff is over time, and slowly winning you over with the improvement of experience, is much more interesting. In that regard, I think Nebula is modeled after iTunes for nerds.
You have given us so much time. That is a great place to end it. I have to ask this question though. There is a ton of consolidation in the media. Everyone is buying everything. Are you thinking of an exit for Nebula? I know you’ve got the out, so everyone gets paid if you exit. Are you thinking about a sale or are you in it for the long haul?
It’s not really up to me. You asked earlier about decision-making. The way that the companies are structured, I have the executive team that I answer to. I have Standard’s 30-something owners that I answer to. I have 160 creators that I answer to, and 80 employees that I answer to. Curiosity Stream has a minority stake in Nebula. They are a publicly traded company. I have to answer to them.
At the end of the day, we have structures in place so that if some foreign billionaire with blood money came in and wanted to just buy the whole thing up — I might be tempted, personally — but I couldn’t. There are structures in place. The creators would have to sign off on that. If Mr. Beast came in and wanted to buy it all for the lulz and give it away in a video like a chocolate factory, I couldn’t say yes to that. They would have to be voted on. There would have to be discussions around it.
We can imagine all sorts of things. Would it be neat for us to be the first creator economy startup to go public? Maybe. There is a ton of bullshit that comes with that, and that might be less exciting. Are we truly creator-owned at that point? There are a lot of philosophical questions we would have to ask ourselves.
Right now, our operational profit trajectory is great and we don’t really see a need to exit. I get plenty of emails from VC people. They are all very nice so I don’t want to throw shade there, but I think that there are plenty of people out there who are looking for opportunities to extract value from creators. We are in a position where our fundamental reason for existence is to add value to creators. It is hard to imagine what an exit looks like that doesn’t hurt the people that we are here to serve.
Are you profitable right now on a runway that lets you just keep going forever?
Yes. The growth curve could be anything. Maybe if you injected $1 billion of cash into our bank account, we could grow a lot faster, do bigger and more interesting things, and take over the world and beat Elon to Mars. Who knows? Everything comes at a cost. We could take money, but we would give up control.
I think what makes the machine work is that the creators are running it. The platform answers to the creators and that is not the case for most platforms. YouTube does not see themselves as answering to the creators. They have shareholders and they have their own internal business needs. They are a mega tech company that is a smaller piece of a much bigger mega tech company. It is hard to imagine. I don’t think that YouTube in particular has anything against the creators. I think they do a really great job there, but they are still answerable to others. For us to do the things that we want to do, I think we need to keep that accountability. Whatever happens next, it will have to happen with that accountability maintained.
That’s great. Dave, it has been so great talking to you and meeting you after all these years. Thank you so much for coming on Decoder.
It’s been so great ranting at you.