Why Netflix Should Invest in MrBeast
How Creators can help Struggling Media Companies unlock New Revenue Streams
It was recently reported that MrBeast was raising $150M at a $1.5BN valuation.
As a VC turned Creator, I couldn’t help but opine — this is everything I’ve ever wanted to write about: content creation, investing, and entrepreneurship… all packaged into one fun scenario.
Having raised $5M for my own Creator Business, I’ve always been fascinated by the idea of investing in Creators.
There are massive risks involved with investing in Creator Businesses.
They have a ‘single point of failure’ — if MrBeast goes down, so does his business.
There are also fascinating legal implications when it comes to investing in a business that’s so deeply tied to a single personality.
For example, how will investors eventually “exit” their investment in MrBeast?
Will MrBeast eventually IPO himself? Or will he — a literal human being — be “acquired” or “sold” to a larger media company?
And how do you value the IP of MrBeast when he eventually retires?
Ignoring how closely all of this parallels literal indentured servitude, I think that any media company that’s serious about surviving will need to invest in and acquire Creators.
The central premise I will argue in this piece is that ‘Creators are just the new TV Channels’.
And the most savvy Creators like MrBeast will eventually evolve into full blown Disneys - a $200bn media empire built around IP that keeps on giving.
Netflix’s Woes
Netflix has been getting crushed in the public markets. Once a high flyer, the company has struggled with subscriber growth as it’s saturated its core markets (~170 million US subscribers).
Simultaneously, it’s seen a flood of competition eat into its market: Disney+, Hulu, HBO Max, Peacock, Paramount+… are all coming for Netflix’s lunch.
Which means there’s been a massive bidding war for quality content.
So if you’re Netflix right now, not only is your first mover advantage getting chipped away, but you’re also struggling with rising content costs.
I don’t pretend to fully understand the Netflix business model - but I know one thing to be true:
Content is King.
Just look at what a single hit can do for the platform:
Starting from House of Cards and now to Stranger Things and Squid Games, subscriber growth and retention is highly correlated with the success of Netflix’s content.
Even anecdotally speaking, I stay subscribed to Netflix for the trashy TV (shoutout to my fellow Love Island stans) and churned from HBO as soon as Game of Thrones left me at the altar.
Shifting Consumer Preferences
At the same time, we’re seeing the rise of a new attention paradigm.
Netflix’s true competition isn’t Hulu or HBO — it’s actually YouTube and TikTok.
Netflix is in a zero-sum battle for our ‘time’. And unfortunately, the Gen Z winds aren’t blowing in their favor.
Attention spans are compressing, and Gen Z (Netflix’s weakest demographic) is much more likely to scroll short-form content than sit down for a movie.
Every minute Gen Z scrolls TikTok is a minute they’re not watching Netflix.
And truthfully, I don’t blame them.
Over the last few years, I’ve watched content on YouTube and TikTok evolve to be more stimulating, culturally relevant, and agile than 95% of the mediocrity Hollywood produces nowadays.
The best YouTubers have evolved into the new ‘TV Channels’: Tiny Meat Gang is the new Comedy Central. MKBHD is the new Wired. And Brat TV is the new Nickelodeon.
These Creators are constantly pushing the lens of what’s even possible from a storytelling, editing, and content format perspective.
But what should be even scarier for Hollywood execs is the sheer volume of talent on the internet.
Hollywood is now competing with millions of Creators vying for fame.
I’d actually argue that Quibi was the first casualty in this war: even the most talented Hollywood writers and $2 billion of venture capital can’t beat the crowdsourced creativity of millions of status-hungry humans on TikTok.
What’s so powerful about platforms like YouTube and TikTok is their ability to crowdsource content across a free market of millions. The highest quality content surfaces to the top in a survival-of-the-fittest competition.
This is fundamentally different to the old guard model, where 15 dudes at HBO fight over a script.
Which begs the question: how should Netflix compete with this new platform model?
My Suggestion: View YouTube and TikTok as a test bed for plucking out proven talent.
Enter MrBeast
So if we know that Content is King - then Netflix must do everything it can to acquire quality content in order to maintain its competitive advantage.
And there is no one who understands quality content for the mass market better than MrBeast.
In just a few years - he’s amassed 130 million subscribers.
To put that into perspective, that’s the population of Canada, South Korea, and Spain combined.
At the same time, Netflix has struggled to capture Gen Z - the demographic where MrBeast shines most.
Ask any 15 year old on the street who MrBeast is… and who Bill Clinton is… and the results might appall you.
The obvious insight here is that if Netflix wants to grow its Gen Z subscriber base, it should work with Creators like MrBeast to create more Gen Z focused content.
The not as obvious insight here is that working with Creators comes with a hidden advantage that working with Celebrities doesn’t.
When you acquire a Creator, you acquire not only that Creator and their content, but you also acquire their pre-built audience.
This is a fundamentally different approach than Netflix’s traditional acquisition model, and unlocks a significantly more efficient customer acquisition cost.
Traditionally, Netflix funds 20+ shows in hopes of producing a single hit. The eventual hope is that this single hit will drive organic word-of-mouth and eventually… new subscriptions.
That’s pretty inefficient.
The Creator acquisition model flips this on its head.
Not only are you investing in a more proven asset, but you also get guaranteed access to the Creator’s pre-built audience. In addition, your platform and distribution muscle at Netflix now amplifies their voice, leading to additional word-of-mouth growth
Creators also have a significantly stronger pull on their audience than even the biggest celebrities Netflix pays up for.
As cool as Brad Pitt is, I’m not going to whip out my credit card for him.
But you can bet your money that I’m churning from Apple Music once Emma Chamberlain’s podcast goes exclusive on Spotify.
While traditional celebrities like Brad Pitt may have wide reach, they don't command the same level of engagement that top Creators do.
Creators serve their audiences while Celebrities serve the movie studios. The intimate, parasocial relationships Creators have with their fans is a magnitude greater than a red carpet celebrity’s.
This is why top Creators like MrBeast can move mountains of product.
And why acquiring MrBeast’s younger audience is just the tip of the iceberg of what Netflix can unlock.
The Real Pie: Milking Netflix’s IP
The real pie is in how MrBeast pushes Netflix to evolve into a much larger, and much more lucrative business model.
MrBeast is just the new Mickey Mouse. And he’s monetizing his IP the same way.
Netflix should think of MrBeast the same way Bob Iger thought about Pixar, Star Wars, and Marvel.
Over the course of 2 decades, Iger 3x’d Disney’s Market Cap by acquiring Pixar, Lucasfilms (Star Wars), and Marvel… and then absolutely blowing out their production volume to the mass market:
And Disney has milked that IP across multiple revenue lines, not just content.
For every $ Disney generates on its Star Wars content, it’s generating another 2x of that on its Star Wars theme parks, plushies, and licensing.
Disney milks IP — and MrBeast has realized this same insight. He’s realized that his built-in audience is just a distribution channel to launch any new product, whether it be burgers or chocolate bars.
Even a theme park isn’t beyond MrBeast’s purview. Just look at the opening of his first MrBeastBurger location - I’d say it was pretty theatrical:
This is the fundamental argument of why I think Netflix should invest in MrBeast — it’s a catalyst for them to finally venture into increasing their average revenue per customer.
Rather than continuing to fight a ground game with Hulu/HBO, why not shift to an air game where your IP creates a moat and maximizes your income across your existing 230 million subscribers?
We get to envision what the world looks like if Netflix evolves into a business that attempts to extract $2,000 per customer per year, rather than just $100 in subscription fees.
Just think about the product line possibilities!
I for one am looking forward to riding the Stranger Things ‘Upside Down Coaster’ at NetflixLand.
MrBeast already has the knowledge of how to convert a viewer into a product-purchasing customer — he’s the perfect testing ground for Netflix’s portfolio of IPs.
AKA Dear Netflix: rather than constantly piss me off with yet another price hike, why not get me to willingly fork over more money for my favorite brands?
Monetize me on the back-end. Don’t compete upfront in the subscription bloodbath.
Conclusion
With all that being said, investing in Creators comes with a ton of risk (see Appendix for a deeper dive).
And investing in MrBeast is in no way a silver bullet for Netflix’s business struggles - but I do think it helps Netflix evolve to meet changing consumer preferences.
More importantly though, it pushes Netflix to evolve its business model from one that generates $100 per subscriber per year, to one that generates $2,000 in upsells.
Top Creators like MrBeast, Emma Chamberlain, and KSI are already running this playbook, monetizing through products on top of their content.
As an incumbent, I’d be jumping at the chance to ride their coattails.
And I mean… just THINK of the thumbnail possibilities!!!
Appendix: Solving the ‘Key-Man-Risk’ Problem
As an addendum for my fellow investing nerds out there, it’s worth addressing the elephant in the room (key-man-risk) and how I’d think about mitigating the downside of investing in Creators.
Investing in MrBeast means you’ve got a massive amount of risk concentrated on a single human being.
What happens if Jimmy calls it quits? Or what if he goes off the rails?
How do you hedge against the downside of a ‘MrBeast Gets Canceled’ scenario?
Unlike a typical business, you can’t just swap out the CEO. There essentially is no business without the Creator-CEO.
Yes, I’m sure there are a ton of legal protections you can throw into the HoldCo that said Creator-CEO ‘works for’, but I think you need to call a spade a spade. Your investment might just be the truest form of a venture bet: betting purely on a person’s potential.
So if MrBeast is out, so is most of MrBeast’s IP.
I like to call this risk: Investing (‘Taylor’s Version’)™.
At the end of the day though, I don’t see this risk being very different than Kevin Spacey with House of Cards, and I think you mitigate it at the portfolio level by investing in a bunch of different Creators.
What I think makes this whole thought experiment more interesting though, is that I’d argue you get a much greater bull case investing in Jimmy than you do with the average Hollywood actor.
Jimmy’s most valuable IP isn’t even MrBeast, it’s his knowledge of 1) how to scale any Creator from 0 to millions of followers and 2) create content Gen Z actually wants to consume.
One of my favorite quotes from Jimmy is when he flexed that he could grow anyone from 0 to 1M subs in 3 months. I don’t doubt this in the slightest - we do this all the time for our Creators here at Stan - growing on social media is just a formula.
One day, Jimmy will scale well beyond his own brand. Or tire of it.
And at any moment, he can turn himself into a Creator Factory, birthing limitless mini-Jimmys with monetizable IP.
Jimmy has the opportunity to become the new-age version of a Hollywood movie studio: he understands the platforms, their distribution, and how to cultivate talent.
We’re entering a phase where the Creator Economy will begin to be productized and commoditized - those with the knowledge of how to do so (like MrBeast) will eventually be able to build Influencer Factories (not too unlike the terrifying ones sprouting up in China):
Yes, a tech dystopia - but also a massive profit driver.
So yes, I’d invest in MrBeast in a heartbeat. 😊
P.S. Jimmy if you’re reading this let me get in on the round. NC homies. 🤝
Banger!
as a former tv producer turned builder for the creator economy... this post put to words what i've been feeling for so long. we're now trading the currency of audiences!
colin & samir's podcast episode with andrew schulz is a fascinating double tap into what you're covering here, i think you'd enjoy.
thank you for diagnosing the key advantages creators have over traditional media. what a satisfying read!!