Let's start with a pop quiz!

Q: What is the biggest trend in media today?

  1. Technological disruption. New filming and editing technology is decreasing the cost of content creation.
  2. Audience fragmentation. Content consumers are breaking up into ever-smaller groups with ever-more-specific tastes.
  3. Interactive feedback. Online reviews and comments are turning media consumption into a participatory experience.
  4. All of the above.

The answer, of course, is No. 4.

Consider: Netflix never would have happened without the advent of streaming technology, and, once it decided to become a content creator, it never would have been able to quickly produce such quality content without innovations in productive methodology. Netflix has also benefited from its ability to serve a variety of tastes and interests while pioneering the use of audience reviews and profiling to keep viewers watching.

However, while Netflix has benefited from those three trends, it's not clear whether the company can continue to keep pace. Indeed, while younger viewers do watch Netflix, they're much more likely to be watching YouTube.

And that could be bad news for Netflix and other traditional content creators and distributors. If there's anything that the past 30 years have taught the world about marketing and business models, lower barriers to entry combined with a fragmented customer base means more competition for the same dollars.

However, for at least one media company, Austin-based Rooster Teeth, these three inexorable trends--disruption, fragmentation, and interactivity--are very good news indeed. To explain why this might be the case, I need to provide some background.

Rooster Teeth got its start in 2003, when founders Burnie Burns and Matt Hullum created an animated comedy web series entitled Red vs. Blue. Here's the first episode, which--unlike a lot of stuff from that era--is still funny today, especially if you've ever wondered what the characters inside computer games are thinking about:

If the animation looks a bit, well, minimal that's because, rather than traditional computer animation (which then and today can cost thousands of dollars a minute), Burns and Hullum simply added dialogue to the real-time video output of a video game, a quick-and-dirty process known as machinima.

[Full disclosure: I met Burns and Hullum briefly at a 2005 machinima conference. I mentioned this when I interviewed them for this column, but they clearly didn't remember me, which isn't surprising since they were the superstars while I was just an amateur whose project was up for a machinima award.]

Anyway, fast forward to 2017. Red vs. Blue is still in production, making it the longest-running web series of all time. Meanwhile, Burns and Hullum have expanded the media offerings to many other types of content, including full animation, live-action, podcasts, reality TV, and "let's play" videos, a newly popular genre in which people (mostly Gen-Zers) watch gamers play video games while providing wry commentary.

Burns and Hullum have created in Rooster Teeth what can perhaps best be called a media mini empire, employing more than 300 people who collectively create a surprisingly large amount of original content. According to Rooster Teeth's press materials, the company has more than 38 million subscribers to its YouTube Network, gets five million unique monthly visitors to its RoosterTeeth.com hub, and has over two million registered community members.

While that might seem like small beer and potatoes compared to Netflix's 100 million-plus paid subscribers, Rooster Teeth's business model is particularly well-adapted to a media environment that's increasingly disruptive, fragmented, and interactive.

For example, unlike Netflix, whose revenue comes entirely from subscriptions, Rooster Teeth makes money on subscriptions, onsite pre-play ads, YouTube pre-play ads, licensed studio production, branded merchandise, and a yearly series of well-attended live events.

While Rooster Teeth obviously lacks the deep pockets of a Netflix, it continues to use disruptive technology--such as inexpensive special-effects breakthroughs--to achieve production quality that rivals the big-studio productions from only a few years back. Case in point: the company's 2015 feature film Lazer Team:

Netflix, like all traditional media firms, guesses what its audience wants to see and then reacts on the basis of the viewership it achieves. By contrast, because of its fan community, Rooster Teeth can use crowdfunding to both offset production costs and build an audience for projects that otherwise might prove risky. Lazer Team, for example, started with an IndieGoGo campaign asking for $600,000 that eventually collected a whopping $2.4 million.

While Netflix tries to create all-content-for-all-people, Rooster Teeth's offerings tend to have a highly distinctive and easily recognizable brand image. Lazer Team, for instance, has a very Red vs. Blue vibe to it. Similarly, the company's video podcasts have hosts who seem as if they came from the company's fan base, which is indeed frequently the case.

Similarly, while big media companies like Netflix use fan events like Comic Con to promote their soon-to-be-released content, Rooster Teeth executives and employees, by contrast, tend to mingle and converse with attendees, using their conference presence as informal market research.

For example, at one conference, Burns and Hullum noticed that wearing fans Rooster Teeth "gear" (like t-shirts) also seemed to wear gear celebrating the Japanese form of animation known as anime. The company consequently launched its own anime series, RWBY, now in its fifth season, which is the only American-produced anime that's being exported to and avidly watched in Japan:

Rooster Teeth might not seem like much of a threat to mighty Netflix, but thinking of the conflict as the battle of the titans is totally missing the point. As mass audiences continue to fragment into fanboy and -girl communities, and as content creators leverage new technology to continually decrease production costs, behemoths like Netflix may eventually become irrelevant if not obsolete.

In other words, Rooster Teeth may already be where Netflix, 10 years hence, will be wishing it had been today. If so, Burns and Hullum may turn out to be the conceived-in-a-garage visionaries who saw the future early on and made it real, whilst everyone else was pursuing the strategy that worked yesterday.

Published on: Oct 2, 2017