January 25, 2022

There’s Gold in The Evergreen

One of the big mistakes that media companies large and small make is they focus most of their energy on the next piece of content. When they publish a piece, the discussion becomes, “what’s next?”

But is this really the right approach?

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There appears to be an increasing demand for evergreen content. According to Insider:

Creator startup Jellysmack is on the hunt for old YouTube videos.

It’s setting aside $500 million to buy licensing rights to influencers’ back catalogs, using its internal algorithms to identify which evergreen content has the best shot at generating future ad revenue for the company.

In exchange, Jellysmack will pay creators an upfront sum based on what it thinks their content libraries are worth. Its president Sean Atkins said each deal will be creator-specific, but payments could land anywhere from $50,000 to $50 million. The company declined to share the time frame over which it plans to spend the $500 million in capital, saying it will depend on how fast it can identify creators to work with.

To explain it simply, Jellysmack finds creators that have a deep catalog of videos on YouTube and gives the creator upfront money in exchange for all the ad revenue earned from those videos for a period of time. This is a licensing deal that guarantees the creator cash and gives Jellysmack the revenue from any plays against that evergreen content.

The offer is compelling, though it’s impossible to say whether it’s good or not. For the creator, they get an upfront sum of cash to put back into their business. Perhaps they need new gear or they want to add a new member to the team. For Jellysmack, they get more video ad revenue.

The reason I can’t comment on whether it’s good is that Jellysmack is, by default, undercutting what the creator would make in total. If the licensing agreement is for two years and the creator was expecting to generate $75,000 in revenue from those videos, Jellysmack might pay $50,000. Jellysmack then gets two years of ad revenue and generates profits of $25,000 on an initial $50,000 investment.

These numbers are made up and they may not be that stark; perhaps the arbitrage opportunity is only 5%. But for Jellysmack, it’s still a good deal because its costs are incredibly low; it doesn’t actually create any content, so it can generate high margins on low arbitrage amounts.

Ultimately, this is a play on cash flow financing. It’s not a loan, so the creator has no risk other than missing out on revenue. If, for example, one of the videos goes viral, the creator would miss out on the upside. But anytime there’s a guarantee, there’s a risk.

Jellysmack is just one of many companies that are moving into these cash for revenue financing options. As Insider explained in the piece:

It’s one of several companies that have been experimenting with new business models for investing directly in creators. VC firm Slow Ventures paid YouTube creator Marina Mogilko $1.7 million last year in exchange for a 5% cut of her future earnings. And payment startup Creative Juice paid out $250,000 to four YouTube channels in exchange for a percentage of AdSense revenue, brand deal earnings, and other revenue streams over about a 2-year period. 

These sorts of arbitrage opportunities can be compelling.

Why do I bring this up?

I think a lot of publishers don’t spend a lot of time in their archives and it’s a missed opportunity. For a good example of a publisher whose entire business is built on its archive, just look at Dotdash. Because it is focused on evergreen content, it is able to extend the length of time that the piece of content generates revenue. In the event that it needs to cut costs for whatever reason, it can still promote content that it has already created.

There are two ways that I would be thinking about extracting value out of content.

The first is the more immediate way of using one amount of work to create multiple pieces of content. Let’s say your team creates an article (it can be original reporting, service journalism, or whatever). Rather than just publish that and then move on, why not also turn it into a two-minute YouTube video? Yes, it adds work, but the actual ideation and creation of the original work are already done.

The second is a longer-term approach. Buried in the archive are stories that are so interesting that people might love them all over again. Consider this… Half of the books I read are historical. There is no denying that people are obsessed with true crime. There’s an entire Hulu original show about people’s obsession with true crime. Not everything that people consume has to be present tense.

How can you take that content that you’ve already created and repurpose it?

To some extent, this already happens, but the authors reap most of the benefits. When John Carreyrou started investigating Elizabeth Holmes and Theranos, he was getting paid by The Wall Street Journal. And he delivered, producing some of the best business reporting out there.

The story became so big, he got a big publishing deal from Knopf to write Bad Blood. Good for him. But not so great for WSJ since they not only didn’t generate any revenue from that work, but they also lost him as a reporter.

But in my opinion, this should have been something WSJ did with Carreyrou. He’s already done a lot of the reporting for his work, so why not incentivize him to create the book and both parties can benefit from it? I’ve long believed that media companies should offer this as a benefit to their writers rather than watching them leave with big book deals.

There are obviously all sorts of reasons why media companies don’t do this. It creates a new proficiency that many of them might not have. But what if the author still went out and got a deal from a publisher, but the paper traded ad promotion of the book for a cut of the royalties? In the case of Bad Blood, there’s now a movie coming, so that would be even more revenue.

Maybe this example is too complicated, but there are likely other options as well. Could Bloomberg create a video series on 10 great investors, using the actual reporting that its team had done over the past 20+ years to inform everything? Or what about repackaging a few articles around a certain topic and using it as lead generation for newsletter subscribers?

The reality is, publishers have spent a lot of money on the creation of content. One way to spread that cost out is to use the content in multiple ways. An article could turn into a short video; a few articles could turn into a podcast season. It does require additional work, but the costs shouldn’t be linear to the creation of brand new ideas.

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