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Why Kick's $100M Spending Spree Will Fail
Are you a Quality Filter or a Giant Aggregator?
Quality Filters vs Giant Aggregators
Yesterday I was reading the fantastic Ben Thompson in Stratechery, who was talking about why the Spotify deal with Harry and Meghan never really made sense. Unfortunately the article is paywalled, but I’ll summarize the key points. Ben’s argument centers around the existence of two different kinds of content platforms: Quality Filters and Giant Aggregators.
Imagine a content platform like network television. There’s a limited number of network TV channels and a limited number of hours of programming. It’s also expensive to produce scripted TV programs. What this means is that the job of a TV executive is ultimately to be a quality filter - they have to hand select which programs they think will succeed from among many choices, and promote them to the viewers. Movie theaters and Netflix are also in this business. They’re spending a lot of their own money to pick winning projects, produce them, and get them in front of you. Their power is in their taste and their ability to produce high quality stuff. They are Quality Filters.
Now imagine TikTok. TikTok is absolutely not in the business of hand picking which accounts will be big. They don’t have a content limit in the way network TV or movie studios do. Why? There are no time/space constraints - the amount of space on TikTok is infinite. They don’t produce their own content and thus don’t really worry about cost. In the end TikTok’s strategy is to be the place where ALL short form video content goes. Once they’ve aggregated a gigantic pile of content, they can let social media trends and fan sentiment and the algorithm figure out what’s popular. No executive at TikTok has ever worried about picking who the next TikTok star is going to be. Other companies built in this model include YouTube and Twitch.
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Ben’s point is that Spotify, as a podcast platform, more naturally falls into the ‘gigantic aggregator’ category. They shouldn’t really have to worry about what the next giant hit is going to be, they just need to make sure that they have ALL the podcasts. In that sense it was always a weird bet for them to pay Harry and Meghan $20 million for a podcast series, and was always likely to fail (and similarly, their bets on Joe Rogan and others haven’t been profitable). They’re acting like a Quality Filter when they should be acting like a Giant Aggregator.
Thompson’s piece is great, and I recommend Stratechery for anyone interested in the theories of how platforms and aggregators work in today’s world.
Kick Goes On A Spending Spree
Twitch is the 800 pound gorilla in any conversation around livestreamed content. They have the most popular platform for both streamers and viewers. They have the most big names and the most medium or small-sized streamers. YouTube Gaming is their largest and most stable competitor, but Twitch is still king.
In the last few days, news has come out about upstart streaming site Kick spending enormous amounts of money to steal some of the world’s most famous streamers from Twitch. Kick has previously offered eight figure deals to big streamers like Adin Ross, Kai Cenat, and IShowSpeed. They’ve now broken the nine figure barrier. XQC, Twitch’s most popular streamer, is signing a deal with Kick that he claims will net him more than $100 million. And days after signing the top male streamer on Twitch, Kick signed the top female streamer Amouranth to an undisclosed deal.
Kick is certainly making noise, but these types of splashy streaming sites normally fail. Mixer was a Microsoft-backed site meant to compete with Twitch. They made waves by signing prominent names like Shroud for $10 million and Ninja for $50 million. And then they failed catastrophically only a year after signing Ninja, who walked away with almost all of the money… right back to Twitch. Not a bad deal! Other competitors like Azubu have been so thoroughly consigned to the trash heap of history that you probably weren’t even aware they existed, despite Azubu throwing around gobs of money.
Other than YouTube (which is already the internet’s dominant video site for non-livestreamed content), nobody’s been able to compete with Twitch. Splashy announcements, lots of money, big name signings… none of it has worked. Why?
Organic Growth vs Top Down Growth
The central reason that Twitch is so hard to dethrone goes back to the idea of Quality Filters vs Giant Aggregators. Twitch is an aggregator. They don’t hand pick who the next streaming star will be. They just provide the platform, give millions of people access to live streams, and let the crowd work out what content they want to make and watch. Twitch doesn’t need executives trying to decide who will be popular, because there are streamers organically becoming popular every day on Twitch without management having to do a thing.
Kick is taking a different approach. They’re hand picking some of the biggest names in streaming and offering them huge deals. They also have much more streamer friendly terms - offering a 95/5 cut of revenue to streamers as opposed to Twitch’s standard 50/50. But there’s a problem with this approach, and if you research their top streamers you’ll figure it out.
Every name on this list of Kick’s top streamers got their start on another site - mostly on Twitch, some on YouTube. Kick, to my knowledge, has not yet had a single organically grown star that began their career streaming on Kick. This is a problem. This is not how successful platforms develop. Facebook didn’t beat MySpace by stealing all the top MySpace users. TikTok didn’t become the short-form video king by stealing the best YouTube creators. They grew organically with their own audience, their own network, their own unique crowd and platform. They made their own stars. Kick hasn’t done that and doesn’t appear to be close to doing that.
To be fair to Kick, I’m sure that’s part of the long term goal. They’re young, so it’s hard to have grown very many stars yet. They’re hoping these big names and friendly terms can jump start their own site’s cycle of organic creation. That’s a strategy! It’s an idea! And if you want to challenge the dominant player who has baked in network effects, you’ve got to do something disruptive. That’s all fair.
But I worry that they’re approaching this wrong, and that the ‘Quality Filter’ approach of spending big money on big stars is always going to fail. Twitch has thirty or fifty or a hundred new stars that will be created on Twitch in the next year, without Twitch having to pick them at all. The 'organic creation of stars' is the whole business model for TikTok, YouTube, and Twitch. They don't really have to offer mega deals (although they sometimes do) to get stars to come, because the next star is being created as we speak by the Free Market of Viewer Eyeballs.
Kick’s approach is to hand select the best streamers that will draw a crowd, but that approach misunderstands the business they’re in. Livestreaming is a Giant Aggregator business, not a Quality Filter business. YouTube Gaming is instructive here - they’re they only Twitch competitor that has had any staying power. And it’s not a coincidence that they’re the only Twitch competitor that is able to organically grow their own stars, by virtue of YouTube being a near-monopolist in normal video.
Every previous Twitch competitor that tried to make noise with big name stars has failed. Until Kick (or anyone else) proves they can create their own stars, they’re going to keep losing.