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This week: Why the creator economy could be facing a nuclear winter, how Sriracha grew to $150 million in revenue with no ad spend, and how Roku became the Trojan Horse that took 36% of the video streaming market.
1. A creator economy nuclear winter?
The creator economy is bigger than ever — but could its rise as a means of income for thousands and entertainment for millions be slowing down?
John Hu, a VC, former investment banker, and creator himself, wrote a thread on why he thinks the creator economy could be facing its first “nuclear winter.” The first reason, he wrote, is the first post-COVID summer. According to him, TikTok and YouTube views are down 30-40% because everyone’s too busy being outside to watch videos.
The next reasons he cited were too much VC hype, fierce competition, and creator burnout: “Creator Burnout: No one is talking about this enough. The content creation hamster wheel is _AWFUL_ on mental health. My bet is that we’ll see steady-state churn mirroring the restaurant/SMB industry.”
2. The spicy history of Sriracha
For some, no meal is complete without that magic elixir known as Sriracha, a Vietnamese staple that took over the US when David Tran began producing it in California in the 1980s. The Hustle writer Trung Phan wrote a thread outlining how the business took off.
“Sriracha's success has come with: No sales team (Tran has mostly maintained the same 10 distributors and wholesale pricing from the 80s),” Phan wrote. “No ads (Sriracha's cult-like status comes from "word of mouth"). In 2019, sales hit $150m (10% of the US hot sauce market).”
Tran came to the US as an immigrant following the Vietnam War, and soon hit upon the idea of producing the then-unknown sauce. Today, the iconic Sriracha still has no patent to its name (hence the multitude of competitors), but still outsells every other brand.
While the sauce’s maker, Huy Fong Foods, has been approached many times about being bought, Tran has no interest in selling, despite his company being worth an estimated $1 billion.
3. Roku, the Trojan Horse of streaming
Roku may not be talked about much when it comes to TV streaming empires, but the platform owns 36% of the video streaming market, more than Apple and Amazon, writes Chris Hladczuk. And it all started with an abandoned Netflix project.
In a thread, Hladczuk outlined how Roku CEO Anthony Wood contacted Netflix CEO Reed Hastings about a potential partnership in 2007.
Netflix was just getting into streaming, but Reed wanted its content on video game systems as opposed to its own hardware. Wood, however, thought going all-in on a hardware streaming device would make more sense. The two briefly struck a deal to work together, but after 9 months, Wood left Netflix, taking 30 employees with him. The result was Roku’s streaming hardware, which has since grown to be a massive success.
“10 years ago, most investors laughed at this hardware startup,” Hladczuk wrote. “But Wood knew that advertising would be their future. And that served as a Trojan horse to get Roku into 53 million homes in America.”
“Today, Roku is a $45 billion public company,” he added. “And Netflix owned a 15% stake in the business. That would be worth $7 billion today if they didn’t sell it for a $1.7 million gain in 2009. Never underestimate the scrappy underdog.”
One of the key players in the development of Roku was a former VP of product at Netflix, Gibson Biddle. Check out our Q&A with Biddle, which delves into Biddle’s role in the abandoned Netflix product that became Roku.
