Patreon Invests 8 Figures Into Original Content, Netflix Acquires Game Studio, and Golf’s Pandemic Growth Story

October 4, 2021 by  wearerockwater

What We’re Reading

5 articles + RockWater analysis to make you a better investor and operator.

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Patreon Battles for Creators by Investing in Original Content
Bloomberg, 9.30.21

  • Patreon’s plans, which haven’t been previously reported, include courting podcasters, video game livestreamers, YouTubers, and major celebrities
  • The company is hiring engineers and product executives to build new tools for content consumption
  • Creators will benefit from a single platform that allows them to access the back-end services required to run a media business, but also publish the content they create

The RockWater Take by Andrew Cohen

Last week, Patreon announced that it’ll be dedicating a “significant portion” of its recent $155 million capital raise to funding original programming. Although the details haven’t been fully disclosed, Patreon will be partnering with tentpole creators on original content that will debut on Patreon before it’s available anywhere else.

This announcement caught our attention because it represents the convergence of two major, yet seemingly disparate, trends we’ve been tracking: huge investments in the “Creator Economy” and in original content. However, we feel this announcement raises more questions than it answers: What’s the core strategic goal of this initiative? Creator recruitment / retention? Growing Patreon’s audience and making it a destination content platform for consumers? How are they planning on monetizing? Is this simply to drum up investor excitement for their upcoming IPO? We’ll be keeping a close eye on how this initiative unfolds.

 

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Netflix Acquires its First Game Studio in Deal with Oxenfree Creator Night School Studio
VentureBeat, 9.28.21

  • The Glendale, California-based game studio has 21 people and a history of pushing the boundaries for storytelling in games
  • Night School published Oxenfree in 2016 and has been working on Oxenfree II: Lost Signals for the Switch
  • Netflix is serious about moving into games, and it isn’t just focusing on mobile games as the company hinted in an earlier earnings call
  • The original Oxenfree is available across eight platforms on mobile, console, and PC

The RockWater Take by Michael Booth

In a vacuum, this acquisition may seem inconsequential, however there is a silent convergence of game studios + streamers afoot. This is the latest of many signals that Netflix is pivoting hard into games — other streamers have been making moves as well: Amazon Game Studios ‘New World’ just set a new record for most concurrent users on opening day, Disney is a large investor in Epic Games, many rumors about Apple making a gaming console, etc.

Streamers drive user acquisition with exclusive content, so it’s understandable they see gaming as bolt-on content to enhance their existing IP library. Two key questions this poses: 1. Will this dynamic heat up an M&A spree by streamers and private equity for game studios (like we’re currently seeing with production companies) and 2. Will game studios start building their own streaming services that verticalize their IP? TBD. We’ll keep you updated as we see more activity 🙂

 

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TikTok’s New Ad Products Invite Users to Interact with Taps, Swipes, Likes, and More
TechCrunch, 9.30.21

  • TikTok this week presented its new plan to ramp up advertiser investment in its video platform with the expansion of e-commerce, a new promise of “brand safety”, and the launch of several new and interactive ad formats
  • Live shopping will be available to brands
  • With “pop out showcase,” advertisers can access a library of stickers and images that can be superimposed on top of their TikTok videos to illustrate the products they’re demonstrating or other key story elements
  • Instead of just watching a TikTok ad, the “Choose Your Own Adventure”- style format lets users tap to direct the action in the video to shape the narrative and personalize the outcome

The RockWater Take by Michael Booth

TikTok’s speed to market with new features to attract advertisers is impressive! Their viewership growth since the start of the pandemic has been meteoric, yet ad buys have materially lagged behind. Building tech that enables better conversions for marketers will help TikTok close their ad spend gap with incumbent social platforms, and ideally will cement them as bottom funnel for their creators (many of which repost TT content to YT shorts for ad monetization). Most ambitiously, TikTok announced that they will offer to handle shipping / fulfillment for select advertisers — which would be a tremendous value prop for SMBs.  Ambitious visions come down to execution, and I wouldn’t bet against TikTok’s team here.

 

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Golf’s Growth in Popularity is Much Bigger than a Pandemic Story
CNBC, 9.26.21

  • More than 24.8 million people played golf in the U.S. in 2020, up more than 2% year-over-year and the largest net increase in 17 years, according to the National Golf Foundation.
  • The sport also saw the largest percentage increase in beginner golfers and youth golfers since 1997

The RockWater Take by Eric Kenigsberg

With the pandemic reviving millennial interest in golf, there is white space for golf retailers to make products that appeal to this cohort’s unique tastes. If we’re really being honest, golf clothes are just really boring. Some brands have already taken notice — Nike’s Jordan Brand has increased its exposure to golf over the last several years with its reimagined and golf-ized Jordan Retro models. Golf brands could collaborate with hype fashion labels to build excitement. Imagine Jordan giving Virgil Abloh the reigns to release an Off-White x Jordan golf shoe. Who knows, maybe we’ll see putters in NFT form or Supreme x Callaway golf balls in the future? We can’t wait to see what brands make of this trend!

 

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Brilliant Earth Stock Soars Past Expectation for IPO
WWD, 9.23.21

  • Listed under ticker BRLT, the company had made a last-minute change and cut its original initial public offering by half — putting up a total 8.33 million shares at $12 each
  • Brilliant Earth’s stock soared 40% in its Nasdaq debut, with shares moving between $15.31 and  $17.12 on the first Friday of its public life

The RockWater Take by Eric Kenigsberg

Brilliant Earth’s IPO and its subsequent soar in share price demonstrates investor sentiment and future outlook for DTC jewelry. Jewelry is an industry that is overwhelmingly dominated by small businesses, many of which lack the e-commerce reach that Brilliant Earth has, as well as generational retailers such as Tiffany and Cartier, which do not serve as adequate entry points for the younger generation due to premium pricing. Sure, chain retailers such as Kay exist, but consumers know the quality may not meet their standards for a significant purchase. Resultantly, Brilliant Earth fits a niche that other retailers have not yet exploited. That is, far-reaching (thanks to e-comm channel), well-priced, and offering quality products. Brilliant Earth is also able to attract young adults considering the buying habits that they have come to exhibit. Firstly, Gen Z shoppers are the most ethically-minded consumers, so ethically sourcing diamonds is of importance. Secondly, Millennials and Gen Z consumers purchase or research diamond jewelry online by 20 percentage points more than older generations (67% vs. 47%). These are all factors that are important to keep in mind, even for generational retailers. How can they keep up with the younger generation? Brand name may be enough, but only for so long. Time to start thinking ahead and seeing what next-gen retailers such as Brilliant Earth are doing right.

 

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If these insights are relevant to projects you are thinking through, ping us at hello@wearerockwater.com. We’re always excited to riff through ideas!

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