2021 was the year acceleration stuck. It was also the year in which the “passion economy” gave birth to the “ownership economy”, which blurs the line between creators and fans into communal ownership. All driven by the Web3 boom. And it reveals a glimpse into a possible future where all platforms are built, operated, funded, and owned by their users, who are rewarded with tokens that are proportional to the value that they’re able to create.
Chris and Andrew explain this paradigm shift, summarizing in just 20 minutes the 15 industry articles, 31 podcasts, and 7 industry watch lists the RockWater team published in 2021.
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EPISODE TRANSCRIPT:
Chris Erwin:
So Andrew, it is the end of January and we are recording our first Roundup podcast of the year. I think we've left our listeners hanging a bit.
Andrew Cohen:
Pros and cons of not being a full-time media company, try our best to turn out excellent content, but not always the most timely we do our best
Chris Erwin:
We're full-time advisory and just added doing some direct balance sheet investing this year into digital goods as well, trying to have all of... Stay updated on all things content, a little bit of a challenge, but we do our best. So we just published a piece that summarized all of our amazing thinking and all of our articles and podcasts in 2021, it was our year in review and we talked about two key themes. So I'll talk about the first one. And then you could talk about the second. How does that sound?
Andrew Cohen:
Sounds good.
Chris Erwin:
All right. So looking back on 2021, one thing that didn't surprise us was sticky acceleration. So we defined this as that there was certain things, dynamics of the economy that were pulled forward during COVID in 2020. These things include e-commerce penetration, content consumption, and content spending. And what we saw in '21 was that this acceleration, it wasn't a reversion back, it was sticky. It stayed with us in 2021, actually continued along it's trajectory. So let me review a few key stats on that front. On the e-commerce front, reminder that in 2020 during COVID e-commerce sales grew 32%, 2021 they grew by another 16%. Incredible. On the audio front in 2020, 52% of consumers said they began listening to more podcasts. Last year, monthly audio listenership was up 7%.
Chris Erwin:
In OTT video by the end of 2020, 73% of consumers were streaming more OTT video content than they were before the pandemic. Last year in '21, the average number of streaming services per consumer increased 28% year over year. For the creator economy 2020, we saw Cameo grow its bookings by 350% and its GMV by 4.5 times while Only Fans grew its user base by 75% month over month during COVID. But last year in '21, the number of digital creators increased 48% year over year growing the total value of the creator economy market to $104 billion, which we covered in a pretty foundational piece at the end of last year.
Chris Erwin:
So look, a lot of things I think people had been anticipating were going to happen in the digital content e-commerce economy for a while, got pulled forward during COVID 2020, that stayed the trend last year. But as a result of these macro shifts, capital flowed accordingly, right? So we saw $5 billion of investor capital flow to the creator economy, total telecom, media, tech, aka TMT investments hit $233 billion, 27% year over year increase from 2020 and total content global spending increased 14% to $220 billion. Really some staggering numbers here, Andrew. So that was sticky acceleration, but something else happened here too. Tell us about that.
Andrew Cohen:
That might have surprised some people that kind of sticky acceleration, but I think we were always bullish that COVID was more of an accelerant than an aberration and I think that proved true in 2021. But I think one thing I could admit that I definitely did not see coming the beginning of 2021 was the birth of the ownership economy. So just take a step back first, we had the attention economy, let's call it 2010 to 2020, where social media incumbents empowered traders to reach and engage audiences at scale and monetize that reach through ad revenue and grant partnerships. Then last year we wrote about this at top of 2021, we were seeing the birth of the passion economy, where immersion creator economy platforms and services were empowering creators to monetize their fandom directly with things like subscriptions, merch, tipping, you name it.
Andrew Cohen:
And now what we saw in 2021 with the mass adoption and integration of crypto, it allowed creators to drive value beyond merely kind of transacting with their fan communities. And through the implementation of digital scarcity, web3 has enabled creators to monetize and engage their audiences in totally revolutionary new ways. So through limited edition drops and auction models, creators are now able to create and monetize new classes of the super fans, which can be capitalized upon far beyond the price of a single branded hoodie. And in these ecosystems, fans transcend the role of being mere consumers and actually become shareholders and collaborators they're incentives are now completely aligned with those of their favorite creators and their platforms. And the result is what we're calling the ownership economy, which blurs the line between creators and fans into communal ownership. And it reveals a glimpse into a possible future where all platforms are built, operated, funded, and owned by their users who are then rewarded with tokens that are proportional to the value that they're able to create.
Andrew Cohen:
And so the seeds of this ownership economy, we saw begin to sprout in 2021, and we definitely expect them to blossom beyond in 2022. Just a couple stats that really stand out from 2021. First of all, NFT sales in 2021 hit total sales volume of $23 billion, which was up from only $340 million in 2020. So again from $340 million in 2020 to $23 billion in 2021 is pretty incredible. And so as a result, we saw things like the NFT marketplace OpenSea, they recently raised a $300 million Series C for a $13 billion valuation. We saw similar valuations from Dapper Labs and other in the space. This is definitely something that we think is going to continue to emerge and grow in 2022. But as a reminder, we don't believe that this is at odds with the passion economy, see this as kind of a new subset of the passion economy. Definitely think that there's room for the web2 and web3 versions of this to continue to evolve together and not necessarily a zero sum game.
Chris Erwin:
Andrew, I'm just looking at those numbers when you say the sales volume for NFTs from $340 million in '20 to $23 billion in '21 that reminds me when I first started investing in Ethereum and Bitcoin back in 2017. And I just remember the trading volume, I felt like it probably like 10X during that year. And everyone was talking about it, all friends were like, "Are you investing in crypto? Where are you at?" And this year I could say, now the amount of texts that I got from friends and industry peers are saying, what's your status? What's your portfolio in NFT? Looking at these numbers, it explains all that context.
Andrew Cohen:
Very jealous of you, I wish my friends were telling me to invest in crypto in 2017, would be in a lot better place right now.
Chris Erwin:
Well, Andrew on the burgeoning ownership economy, right? So I think what we've established is this is going to be a recurring trend in 2022. And we have some predictions that I'll come out and talk about this. But before we get into those for the year ahead, let's take one last look back at how these trends shaped our priority coverage verticals in 2021. So as a reminder, if you go to our website, wearerockwater.com. You'll see all the different verticals where we specialize. So this includes audio, food, livestreaming, media and commerce, OTT video, and sports, and probably and it's something that we should add will be web3. I have to talk to our website developer about that.
Chris Erwin:
So we are now going to walk through across those main categories. What are the main highlights from last year? And keep in mind. There's a lot here. Our team wrote articles, industry watch lists and podcasts on all these topics. So they're all on our website wearerockwater.com go and check it out. So I think the first key theme, Andrew, is the creator economy and all things at the intersection of media and commerce. What's a highlight that stood out to you?
Andrew Cohen:
To me, when I think back on the creator economy in 2021, I think of the creator war which is yet another wars add to the list. Then we saw these emerging creator economy platforms like Patreon, Substack, how they began to establish market share and raised big money to build out tools and services, to empower and expand creator monetization. And in response, all the incumbents, the Metas, the TikToks of the world, YouTube, they began to replicate those tools in house. So like Facebook launching basically its own version of Cameo and its own Only Fans, as well as billion dollar creator funds that it launched to keep these creators in their ecosystems. I think that was really a defining characteristic of 2021. And now we're kind of beginning to see some of the seams of these creator funds begin to fray at the top of 2022. So very curious how these platforms are going to continue to evolve their models to keep creators happy in 2022.
Chris Erwin:
Yeah. Everyone's talking about that recent Hank Green piece on the TikTok creator fund, but love to save that for a separate podcast. So yeah. Look, I think in a similar vein in livestream shopping, right? So this is a trend we started covering a couple years ago when we saw a hundred billion plus market size out of China. And we're asking ourselves, why haven't these capital flows and investor conversations been happening here in the U.S.? Well, that changed. So all the major incumbents, they enter the race within livestream shopping, we think of YouTube and Meta and TikTok, Twitter, Pinterest. And we even saw some big livestream shopping festivals during the Q4 holiday season from YouTube and Facebook.
Chris Erwin:
But in addition to the incumbents, we also saw the emergent livestream, commerce, native platforms, raising big money to compete with and establish market share against those incumbents. So Whatnot became the first unicorn to emerge in a livestream commerce space at a $1.5 billion valuation. We also saw NTWRK raise a massive Series C and then other investments to Popshop and a bunch of other upstarts that raise rounds as well. So I think we're going to increasingly see capital flows to these upstarts in the new year, but we'll get to more of the details there in our upcoming predictions.
Andrew Cohen:
Absolutely. So moving to audio, what happened in audio in 2020? To me, the biggest defining trend of audio in 2021 was the birth of social audio. If you would've said the word social audio to me, 16 months ago, 18 months ago, I would've had no idea what you're talking about. And just within the first six months of 2021 Clubhouse raised at a $4 billion valuation. Facebook, Twitter, LinkedIn, Slack, Spotify, Reddit, Discord, they all invested and launched major social audio initiatives. Twitter acquired Breaker, Spotify acquired Locker Room to support these endeavors and it still has yet to be seen where this trend is going to go.
Andrew Cohen:
Definitely Clubhouse is not what it was at this time last year, but we are seeing a lot of activity on Twitter Spaces. And it seems like the space is very much influx, but led by Facebook, Spotify, a lot of the big platforms are really taking this seriously and continuing to invest in it. So I don't think that we can say that the story of social audio is over quite yet, but it began in 2021 and excited to see where it goes in '22.
Chris Erwin:
Totally agree. In addition into social audio, there's also some major acquisitions across a traditional podcasting space. So we saw SiriusXM, Pandora acquire Triton digital for $230 million and we saw Libsyn acquire AdvertiseCast for $30 million. So the capital's still flowing in the traditional part of the audio space. On top of that, we saw some major talent and IP deals from the top audio platforms that are vying for early stage market share, all with the goal of winning what we describe as the 'audio wars'. So we saw Call Her Daddy the podcast migrated over from the Barstool network, go over to Spotify for a $60 million licensing fee. And then Smartless was licensed by Amazon for an $80 million fee. So yeah, the money is still moving towards these tentpole talent and tentpole IP in audio, which is also what we're seeing in traditional video and OTT video as well. And we'll get to that in a moment.
Andrew Cohen:
So then moving on to sports, definitely 2021 was an exciting year for sports. Two things to me that really stuck out in terms of how to capture what happened in the world of sports business in 2021, I would say one, the explosion of sports betting in the U.S., cannot talk about sports in 2021 without talk about betting. Sports betting revenues doubled in 2021, putting it now at $52 billion and it's only skyrocketing up from there. And as part of a downstream result of this, but also as a result of several other factors like streaming wars cord-cutting, the increasing value of live content, which we've written about before, but the live rights values for sports teams are also continuing to explode. So this past year, the NFL re-upped its live media rights packages bringing in $110 billion over an 11 year deal, which is an 80% increase from its last deal cycle.
Andrew Cohen:
The NFL also re-upped its live rights package, doubling it in total value. And so as a result, we're seeing a ton of private equity capital moving into this space as well, especially in European markets. We're seeing American investors begin to invest in the media entities and live media rights packages for European sports leagues. So most recently we're seeing a bunch of U.S. PE funds bidding on French soccer leagues, media rights packages, which are being valued at about $14 billion right now. So a big reason why the overall sports economy is continuing to skyrocket at the pace that it is, I would say it's because of gambling, but also because of the huge valuation growth that we're seeing in their live media right packages, which is really the biggest revenue driver for all the major leagues.
Chris Erwin:
The numbers coming out of the sports media space, Andrew, which you've really educated me on, have just been so eye-popping over the last year and a half. I just can't believe it and it continues. Something that we covered extensively last year was the rise of creator competitions. So this is often merging traditional and digital native talent together for a tentpole competitive event that is then wrapped in a lot of different content that helps to market it and amplify the fandom. And it really led to some pretty incredible figures. So we saw Logan Paul fight Floyd Mayweather that drove over $50 million in pay-per-view revenue.
Chris Erwin:
We saw House of Highlights drive a hundred million views across their platforms for the first of its two showdown event series. So shout out to Doug Bernstein and Drew Muller, some of our friends over there. And just in December of last year, Triller announced its plans to go public at a $5 billion valuation, which I think is quadruple what it was last valued at. And as a reminder, Triller is one of the platforms that has actually really gotten behind these creator competition series and a lot of them actually go down on their network.
Andrew Cohen:
Bullish on creator competitions, bearish on Triller, save that for another episode.
Chris Erwin:
We'll have to see how that IPO goes. It's been planned, but it has not yet happened. And I think that'll be a good bellwether of the market here.
Andrew Cohen:
So then moving on to OTT video and the streaming wars, so really continue to escalate in 2021. And especially with really a subset of the streaming wars, which we're calling the IP wars, where, because of these huge arms races for user acquisition between all of the highly capitalized streamers, we are seeing tons of investment capital, M&A activity around studios and production companies. And that really kicked up this year. So a couple examples, MGM studios was acquired by Amazon for $8.45 billion, which is 27.5X EBITDA. Roald Dahl, story company, so all of the IP by author Roald Dahl was acquired by Netflix for $686 million with a planned billion dollar production spend behind it to put into original content, video games, everything.
Andrew Cohen:
And Candle Media, new venture by Mayer, Staggs and Blackstone made a couple big acquisitions, including Moonbug for three billion and Hello Sunshine for $900 million. So as the streaming wars are picking up, we've said the production companies to studios, they are the bullet makers, they're the arms dealers and they're more valuable than ever before. And that really became true in 2021.
Chris Erwin:
Shout out to Roald Dahl's estates. He is my favorite author. Favorite book is Boy, his autobiography. It was just cool to see that happen. Hopefully Netflix is a good servant of the IP that he's created.
Andrew Cohen:
I'm ready for a Matilda sequel bring back Danny DeVito.
Chris Erwin:
Dude, Danny DeVito all day. And also from New Jersey. Rise of kids screen time. So I think another thing that we saw in OTT video is 2020, there's a big inflection point here where I think kids in 2020 for the first time started watching and consuming more content on digital than they were in linear, that is a big deal. And so as a result of this, we started doing a little bit more work in the kids space. We were hired by a kids audio company and also a kids retailer and toy manufacturer. So we really believe in the space in that there's a lot more headroom here. So a few quick stats, kids screen time increased 50% since March 2020, 70% of kids spent at least four hours per day on screens. That's 10% year over year increase. 85% of kids under 11 spend an average of 85 minutes per day, watching videos on YouTube.
Chris Erwin:
And as a result platforms like Amazon, Spotify and Roku, they're all launching kids focused platforms. Instagram tried to launch a kids’ social network, but ran into some snafus there that might emerge again this year. We also saw YouTube, Netflix, ViacomCBS, Warner, Apple, Disney, all increasing their spends on kids' content. So it led to some things like what you talked about, Andrew, the $3 billion acquisition of Moonbug. And then we also saw Like Nastya a massive kids' YouTube personality that is also on a bunch of other platforms signing a major deal with Will Smith's Westbrook studios to produce a portfolio of animated content together. So yes, again, this is the kids and family screen time and retailer space and area that we get really excited about.
Andrew Cohen:
Absolutely. And so last but not least in food, media and commerce. We've always said that much like the kids and family vertical, food, media, really over-indexes on commerce conversions. And we saw that kick off in 2021 where we've previously seen a ton of activity in the CPG space with things like Complex and their Hot Ones hot sauce. During COVID we saw that continue, Barstool launched their frozen pizza line all across Walmart's nationwide. We also saw it expand into the experiential realm, both digital and IRL. So Ghost Kitchens really came on the scene this year, headed up by MrBeast Burger, which sold a million burgers in its first three months and has expanded rapidly since then. Also seeing companies like VDC, Virtual Dining Concepts, and our friends at Popchew build really exciting companies around turnkey style Ghost Kitchen platforms made for traders, brands, publishers to activate their audience in this kind of virtual restaurant and business model.
Andrew Cohen:
And now that things are moving back into brick and mortar, I wouldn't say post COVID, but now that we're not all locked down in our home, we're also seeing the success that some of these virtual restaurant models have had move back into the real world. Again, Barstool has launched a chain of some bars, sports bars, pizza restaurants. And I think with the success that we saw of tying out food markets globally before COVID, I think we're going to see that come back in 2022 in a big way and have these omnichannel food experiences between Ghost Kitchens, in-person restaurants, as well as more CPG activation. So it's an industry that's continuing to kick up steam in 2021 and [inaudible 00:19:54] that really excites us.
Chris Erwin:
Andrew, so I think we're definitely past our time limit. So just a reminder to our listeners guys, we wrote about all these topics in 2021. So if you go to our website, wearerockwater.com go to the content section and you'll get industry articles, industry watch list, podcast about everything that we just talked through. There's a lot there. And then upcoming Andrew, I think we just started to drop our predictions. I think our first one that's out is How Future IP Investments Will Super-Serve Under-Served Audiences Like the 40% of Non-Whites. So I think our next microcast is going to have to cover that topic as well as some other predictions that we have. I'm just looking at our recording. I think we might be a bit past our 15 minutes, Andrew, but maybe that's the new normal for 2022. We're going to be a little bit long-winded this time.
Andrew Cohen:
New normal. All right. See you next time.
Chris Erwin:
All right. Later.
