Dropout CEO Sam Reich on business, comedy, and keeping culture weird

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Hello, and welcome to Decoder. This is Hank Green, general internet guy and co-founder of Complexly, where we make SciShow and Crash Course and a bunch of other educational YouTube channels. This is my last time in the Decoder guest host chair, unfortunately. Unless Neelai decides to have another kid someday.

Just give me a call. But we're going to make the best of it, because today I'm talking with my friend Sam Reich, who is the CEO and, I think at least, the founder of Dropout TV. You'll hear him argue with me about whether he is the founder, and that's okay. He was there. probably knows what he's talking about. But this...

is an incredible story. Sam bought this company, which used to be called College Humor, for zero dollars, immediately had to lay off almost all of the entire staff, and then got smacked right in the face with COVID shutting everything down because it was early 2020. You wouldn't think this would be a likely recipe for success, but Sam has been very successful. Dropout has grown every year since then. You've probably seen their...

clips on a vertical video platform, if not watch them on Dropout TV from their most popular shows, including Game Changer, which Sam hosts. Well, host might not always be quite the right word for what happens in every episode, but he's definitely there. And you'll hear us talk about that a little bit, too. But what Sam and I really spent a lot of time on was the problem of running a business that is getting...

It's much easier to do your creative work when your company is just you or maybe just you and a few other people. It's harder when you have a bunch of stakeholders with competing priorities and they all want something from you.

for example, have to deal with some combination of advertisers and shareholders who all want to make money. Dropout doesn't really have advertisers or shareholders. It has Sam and a few other folks, all of whom make good comedy sam described the business model to me as a comedy sass subscribers pay money and get programs they want to watch it sounds like a pretty good business model to me honestly but it's pretty rare so sam and i got into the weeds about why it's

harder to do than you'd think. This was a great conversation with a great friend, and I hope you enjoy it. Okay, Sam Reich, here we go.

Sam Reich, you are the founder and CEO of Dropout. Welcome to Decoder. Hi. Thank you so much for having me, Hank. I'm flattered to be here. You're doing a very interesting thing in a very different way than I think anybody else in media, which is why I think it's really going to be exciting to talk to you about this stuff and also try and figure out.

the whys and hows that you can do that but to start usually I don't really tend to go in that much for origin stories I think they're usually mostly just like a way to sort of make people think that they could imagine, that they could learn something from the very particular circumstances that one person experienced, which I think are going to be different from other people's, and also a way for people to toot their own horns. But can you give me an origin story of Dropout?

from the beginning of Dropout. So we don't need to get into like 2006 and college humor and stuff, but just hit me with like, how did Dropout end up in your hands? Sometimes some people call me the founder of Dropout, which actually is not true. Dropout. Well, I. You beg to differ. I do. Great. I'll take it. Listen, Dropout was.

A priority that came out of IAC, who was our corporate parent at the time. So this was who owned College Humor. This is who owned College Humor. And for years and years, IAC was trying to figure out how. We would make not just a lot of money, but a lot, a lot of money.

And there was always kind of a, a cynic might call it a get rich quick scheme of the time. And it was ad sales. And then social media took a big chomp out of ad sales. And then it was television. And it turned out television production didn't scale very effectively. And then finally, the idea was, let's try going direct to audience. Yeah. Just to go OTT, as they say. As they say. And there was a collection of... I'm not sure exactly what the top we're going over is.

But we're going over the top of something. Yeah. I guess the whole system. It does feel like that phrase makes it feel like we're gambling the house. And in a way, we kind of were. Okay. There was a collection of executives who were very bullish about this within College Humor. I wasn't necessarily one of them. I slowly but surely warmed up to it, imagining that if it didn't work, at least we'd get to create our own cool stuff for a while.

The notion was go direct to audience. There won't be the gatekeepers that there are in Hollywood. We won't have to start over every year like we do in ad sales. that is by the way one of the intrinsic benefits of subscription is that you're not starting your business over every year versus ad sales where you have to go out and sell every year start from zero and the yeah things are always changing yep And also, you're not just doing the YouTube thing, where certainly you're selling...

against views, but also you're selling on these platforms that decide whether or not you get the views that can have their priorities shift in ways that are going to be advantageous or not to your business. And that's always going to be their idea.

That's true. I think that was the sort of meat of our first announcement video. And I think it's really true where AVOD, as it were, is like advertising video on demand. It's a word like you could also just say anyone who is not going subscription. Yeah. That is a business that involves like us, the audience, the platform and the advertiser. Bounds and all those things. Yeah.

Yeah, it's not even a menage a trois. It's a menage a four. And everybody knows once you break trois, it's just a mess in there. Somebody's always getting left behind. That's right. That's right. It's harder for everybody to achieve orgasm. You can decide to keep that in or not. Never break. Never break twine. That's a business rule. Honestly, I like sometimes I look at YouTube and I'm like, oh, my God, their party, the YouTube party.

that they are having has so many different people at it that they have to satisfy. And that includes like the government, you know, like regulators. Totally. And I'm like, man, I just never want to break to walk. I want to have like my audience. I want to have my team, so the people who work for the thing, and then I want to have maybe the advertisers or maybe myself. And you, I mean, you can decide, you know.

Not to break trois if, for instance, making money isn't important to you or satisfying the YouTube algorithm isn't important to you. You can decide that these aren't priorities. Yeah. Well, I mean, if you're going to pay people salaries, you can't decide that money doesn't matter. Exactly. Exactly. This was a big aha moment for me in running a business, realizing that the simpler your business is, arguably the better it is, or certainly the more effective you can run it.

Yeah. Especially at the beginning. Yeah. I mean, businesses get complicated because they have a lot of, because they've succeeded already and they have opportunities to complexify, but they do not get complicated at the beginning. Yeah.

Yeah, yeah, yeah. I am willfully trying to keep our business as uncomplex as possible, and it is hard. You just added advertising. You did it. So the final episode of Game Changer. We did not actually add advertising to Dropout. There are fans who are very concerned that it's going to happen. That is not going to happen. There was a sponsorship, though. There was a sponsorship, yes.

That made a lot of sense in place that you would have made this so that you could fund a high-dollar game show. Quote-unquote made a lot of sense is an interesting way to put that. But yeah. As a viewer, it made sense. Yeah, yeah, yeah, yeah, yeah. So I warmed up to subscription. Like I warmed up to the idea of going direct to audience means we get to simplify this operation.

It means that we get to call the shots. It means that even though budgets will be less, our creative autonomy will be more. I mean, would budgets definitely be less? Like the thing about like obviously per viewer, you're making a lot more money. It's really about the number of people you can convert and that marketing.

Was there a lot of discussion about how you would actually market the subscription product? Or was it just like, let's make this available. We'll pop a bumper on the end of the videos and people will go sign up. The theory when we launched was that we would be converting YouTube subscribers. to paid subscribers for a lot longer than that turned out to work. Oh. Do you know what I mean? Like that well ran drive fast. Yep. Yeah. That sounds familiar.

So it turns out you did have a marketing vehicle eventually arrived, but this did not end up being a successful thing for the people at IAC and CollegeHumor. And IAC is like a big media conglomerate. They own like people. They own a bunch of... magazines and TV shows, TV channels. For sure, for sure. And I think IAC kind of gets a bad rap in all of this, but for the record, they were patient with us in terms of us not delivering them a big chunk of money for over a decade. Arguably, they...

showed more patients than I think a lot of parent companies would in that same situation. And a lot of people in the meanwhile gave birth to spectacular careers coming out of college humor when IAC did not very much benefit. So I remain grateful to IAC for being our...

shepherds through that decade. And then when they got bored of us, we didn't objectively fail. We just didn't succeed spectacularly either. We had like 75,000 subscribers at the end of year one. I think they were hoping for like double that. They tried to sell us, but we looked very bad on paper because we had just burned through their whole investment. So a lot of people were interested at first, and then they saw the amount of money we were losing.

And the business plan, which had us losing even more money before turning profitable. And they all dropped out one by one. Leaving me. Leaving you. man, leaving me. And so you came with all your, your big pile of money that you somehow had. And you just said, Hey, I'm going to buy it. Hey, what's that? You got a cigar back room deals.

No, this is the weirdest part of the story for me. So you did not, in fact, go to them with a bunch of money to acquire Dropout. How did you acquire College Humor from IAC, Sam? I find it very funny when there's a certain soundbite on the internet that's like Sam used his dad's money to come and buy Dropout. Oh, wow. Which is very funny in the context of my dad being the inequality guy. I'm like, you are missing.

informed in terms of how much money you think this family has. Yeah. For those who don't know, Sam's dad is Robert Reich, who was the labor secretary under one of the... Bill Clinton? Is that right? Yes, under Clinton, which, as we all know, labor secretary is the most lucrative profession that you could possibly imagine. You see him on the Internet sometimes yelling about inequality, probably. Yes, yes, yes, yes.

and does it very well. So I went and I offered IAC zero dollars, which was the amount of money I had to offer. There was another offer for $3 million, but it would have gone to a competitor. They would have fired everybody and taken the assets and see what they could do with them. And I think that they liked the idea of gambling. Oh, sorry. So my offer was zero dollars. They would end up in the minority, the minority stakeholder.

So it was sort of like idiot insurance for them. So they'd get to hold on to whatever Sam does with it. Yeah, yeah, yeah. Insurance for them in case things go very, very well. And I think that they liked the idea of gambling on me more than the idea of handing the company over to a competitor. It's a better story. If it works out, it's more exciting for them.

And so we did that deal. And for the record, I would not have done that deal purely sentimentally. I did it because I really believed in the business case. You feel like you saw something that the people at the parent company didn't see or that the executives who had been operating College Humor didn't see? Like where the value was maybe wasn't where they thought it was?

Maybe. I mean, what we did with the company was so disruptive. I have a hard time imagining any corporate parent going, yeah, let's try that. Like, it was so extreme. I think it probably only could have happened in a new environment. And so the kind of immediate first step was the company got very small after you. It was in your hands.

Yeah, we went from 107 employees, I think we were, or 105 employees to seven employees overnight. So you were also signing up for that? Yes. We signed our deal with IAC on a Tuesday. In March of 2020, on Wednesday, the basketball team stopped playing. And on Thursday, we were in COVID lockdown. Whoa. I didn't realize that. That's new information to me. That's wild.

Isn't that crazy? The basketball team stopped playing is such like a triggering phrase to me. Totally. Totally. That's how I get people with that story. They're like, oh, I remember. Yeah. I remember now. Then you had College Humor, which has since rebranded to align with the name of the pre-existing streaming platform. But I would call it, at this point, a pretty different business, and thus I consider you the founder of Dropout.

But you don't have to consider yourself that. You certainly are the CEO, though, and you're super in charge. And a strange way for this all to happen. When you proposed this, did you feel like it was likely that they would say yes? No. Ah, love that. I mean, I saw the writing on the wall, which is to say, like, I saw that they didn't have a lot of options. But for the record, I was a chief creative officer.

And I didn't even then, much to my own lack of credit over the course of 10 plus years at IAC, I didn't really speak business. So it was a... A leap of faith in me as a non-businessman. That's what I felt very conscious of walking into that room.

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Welcome back. I'm Hank Green talking with Dropout CEO Sam Raich. We were just talking about his origin story, how he became, in my opinion anyway, though not his, the founder of Dropout. And I think that's made him something very unusual. Someone who... There was a time when media companies were more likely to be led by people who enjoyed making media. And a time when now, maybe now, media companies are mostly led by people who are kind of on the...

On the numbery side, the businessy side. And you are a current example of a person who is a media executive, if you'll excuse. But who is extraordinarily and deeply and constantly involved as a creative force, as a host on screen talent, but also constantly ideating and even writing.

Like, you're not just sort of showing up and reading the teleprompter. You are also coming up with ideas for shows, and you are the creative vision behind, I think, probably what is your most successful show, question mark? Game Changer? I think Game Changer and Dimension 20 are constantly duking it out for position on the platform. Dimension 20 came a lot, like existed as a product when College Humor...

launched Dropout. Is that right? It was a, you know, day one Dropout franchise. Yeah. So did Game Changer, though. Oh, I didn't know that. That's why it's been around. That's why it has seven seasons or eight seasons or whatever. Exactly. Exactly. And I know that you're not super proud of those early episodes, but we love them. That's nice. That's nice. I'm so determined to jump the shark.

Yeah, well, I mean, you have got a real sort of creative problem with Game Changer in that you continue to escalate. And eventually there is there's no more there's no more rungs on the ladder that you can. It's true. It's hard to go further than outer space. Yeah.

So, yeah, if you don't know this, the idea of this of Game Changer is it is a game show in which the game is different every episode and the contestants arrive not knowing what the game is going to be. And then they have to figure it out, which. Yeah, sometimes it takes more and less work to figure it out. I mean, the season finale of the most recent season, I don't think I figured it out until halfway through.

Sure, sure. I was like, at what point is this going to change? At what point is the next thing going to happen? It was like, oh no, this is the whole thing. Yeah, yeah. But wild. And also like... You know, part of this is that you work with a lot of improv comedians, and so that's kind of the jam, that's the vibe. It's like, you know, we're going to play in this space together. But it does seem like you're able to direct the future.

With the way that you write the shows, it felt like it could have gone a number of ways that would have been much less satisfying than the way that it went. Was that an illusion? Did you create that illusion for me? Was that like sort of a written thing? Could it have gone differently? I don't think so.

I mean, I think that like we grappled with this internally. Yeah. You know, because sometimes Game Changer is a game and other times it's more akin to performance art. And there certainly are the game wonks who like those episodes. And then there are sort of like the kind of lighter hearted audience members who appreciate Game Changer sort of no matter what it is. I really wanted to do this episode and I would say that we pushed it through.

despite some inherent flaws that it has. And one of them is that the conclusion is inevitable. But what we wanted to do with Jacob and with the audience is to sort of like tease them. in terms of just how inevitable is it. Yeah, no, it didn't feel inevitable as a viewer. Yeah, yeah, yeah. To make him feel like there might actually not be a net underneath him and to trick the audience into thinking there might not be a net underneath him either.

But of course, I would not have let him fail. Okay. All right. You've ruined that for me now. I mean, the game feature host I know would absolutely terrorize anybody in any way. That's part of the character. Well, I wasn't going to like... Stop the episode before he knew I stole his blood. Let's put it that way. Yeah, I guess there was a lot of stuff that that you would want to have happen. OK, turned out very well. So but back to the thing.

Why do you think that it is less likely and harder to have a creative person at the helm of a media company now than it once was? I mean, I think, like, happens to industry in general. Industries take on meta qualities as people want for them to be more successful, and therefore business people take over in an effort so that those businesses make more money. I think...

And therefore, what you get is a little bit of like separate what's occur. What I've seen occur is this sort of separation between these companies that are giant and monolithic and they're run mostly by. Finance people or maybe like promoted legal or marketing people, because those are the people who the board has basically decided can best pull the business levers. Right. Creative is the.

product, but let's pull the levers of the business. The product is a minor part of the business. I'm saying that facetiously, but that's the attitude of these companies. And then on my side of the aisle, these smaller businesses that arguably... shouldn't exist because they're much more vulnerable. It's vulnerable to run a small business. It's very vulnerable to run a medium-sized business in the world we're in now where the middle class of...

Our industry has been hollowed out. Sorry to sound like someone you know. Your dad? My dad. But we are run mostly by people. who would be doing something like this regardless of how successful it was because we're so passionate about it, which means that we need to be creators because no savvy business person would do this. Now, we are in an unusual position, to be clear. When I signed up to do this, I thought it might be nice and small and humble.

And that I could work without a boss on my own terms for a long period of time, which coming out of the corporate world is what I wanted. It's been way more successful than I could have ever imagined. Yeah. And it's a lot more work and more stress and work. complicated than I could have ever hoped for. So, yeah, I got into this to run a small business, and in fact, we're in a medium-sized business. Yeah, you do. It has grown. What kind of business is it? Is it...

So obviously Dropout itself is a streaming platform, but I imagine that you do not consider yourself a person who runs a streaming platform. You consider yourself a CEO of a media company. I suppose, although... I'm like really into boiling this business down to its essence and also not sort of like glorifying it. And I think what it is is basically a subscription platform. Like if you were to like really corner me, I would basically say I run a comedy.

I don't actually think that you're allowed to say that. I don't like that. I feel really anti-pretentious about what this is. It's a brand. You want laughs? We will provide them for $7 a month. I do feel a little bit like Andy Warhol sometimes. I think dropout means a lot of things to a lot of people. For my... purposes, we are a Campbell's soup can on a canvas, which is to say, like,

The transaction is you pay us now $6.99 a month and we deliver to you this collection of programming. And yes, we have all sorts of creative ambitions. And yes, I think Dropout has collected this like really unique and wonderful. audience of people who are connected to the content, they're connected to the talent, they're connected to certain things that they've come to understand the brand stands for. But at the core of it is this like...

mechanism that's working. It could work or not work. And if it didn't work, all of this would go away. And that feels really important for me to know. I guess I should ask what the mechanism is that's working.

I wanted to ask something else, but hopefully I'll get there. But what's the thing that's working right now for you? So obviously more people are subscribed to Dropout this year than they were last year and last year than they were the year before that. And it's growing. What is the thing that is? working there. I...

In terms of, like, your funnel, in terms of, like, why do people sign up? Who are these people? Because you don't have, like, friends. You know, you don't have a bunch of, like, storied media properties. You don't have that many shows. There's not, like, that much content on Dropout.

But lots of people are signing up. I don't know if you can tell me a number of the number of people who you have subscribed. For a while, I've been saying now we're like spinning distance from a million and that's still true. Wow. Yeah. I mean, I think what's working, without putting too fine a point on it, is that people subscribe and they stay subscribed. And then more and more.

And also more and more people are subscribing and they watch. And they watch. So there's people subscribe. They don't just like coast the way I do with Netflix, where I'm like, well, maybe there's something I'm going to want to watch there sometime. My rocket money situation isn't what it should be, and I haven't subscribed. But, you know, like Dropout pops on my TV a fair amount. So these people are subscribed and actively watching. Yes.

We have a highly engaged user base. What's your funnel? How do people come into the platform? There are a few different ways. The dominant one is through organic social. Meaning they've watched clips from our shows on largely Instagram and TikTok and YouTube shorts. And you design shows to be good at being... Well, I don't know if you design them that way, but you do now. I would say... Better, sometimes better and sometimes worse, we do that. Yeah. Right? Game Changer is very good at this.

Because it's just like, it's like kind of got that whose line is it anyway vibe for people who have never heard of any of this, where there's just like good clippable moments a lot. I think Game Changer's good at this. I think Make Some Noise is very good at this. When you think of Make Some Noise being, being.

prompt execution, prompt execution. Arguably, Dimension 20 really shouldn't be good at this, and yet it somehow is. Sometime, yeah, they're just talented, funny people. I say as a person who was once on the show. Yeah, you get to claim a percentage of credit for that compliment. But it's so true, Hank. I mean, like, you as that character creating moments on the show.

Some little voice in the back of your head is like, let me turn this into a moment. And when you have a great moment, that becomes marketing for the show in the world in which we now live. And that didn't exist five years ago. COVID happened, that was a very small ecosystem. And now it is a huge part of online video and also very hard to turn into value. So very few people are able to turn their reels and their shorts and their TikToks into any.

any amount of money uh some people have ways some people have very large audiences and then it gets easy But you have you turned it around where it's like this content only exists because of a thing that costs money. And if you would like to see more of it, you can come be one of the people who is the reason that this content exists by being a subscriber.

I think it'd be very hard for Dropout to work if we hadn't imploded the advertiser-supported part of our business. Yeah, you just kicked it off. You were like, I don't need this. Yeah, it was basically like, I can't run an ad business. I'd be no good at it.

I'm in a lot of ways like a terrible salesperson. Sure. So that just wasn't in the cards. You can sell things. I just don't think that you want to sell that particular thing. Sure. Hey, thanks, man. You are, on the other hand, a very good salesman. I have so many socks because of you, and I love them all.

I love that. So what you're saying is the vast majority or, you know, the biggest hunk of the people who are subscribed to Dropout came in because they saw clips and then they saw another clip and then they saw another clip and they're like, fine, I got to watch this. And where is this? I'll find it. The vast majority of people. So I think 10% of our subscribers right now come in through paid. Oh, okay. So you do, you just sort of like run the best clips.

Yeah, we do. We do. We sort of use the organic social performance to clue us into what clips we should amplify. And I think that's helped us out through lull periods. Even that is you're using the clip. You're just like, you're going, you're moving from organic to paid. Yes, so that's...

That's really the thing. And do you ever like I know that you did like Dungeons and Drag Queens where there were some new there was like new talent bring to the platform. These people have fans. Maybe those fans are going to sign up. Has that also been effective? Oh, for sure, for sure. I mean, you could argue that we are certainly using the content to market itself, but there's all sorts of ways that we're doing that. So casting and stunt casting is certainly one of them.

And Dungeons and Drag Queens was huge for us. Great. Yeah. Are the shows that have the most audience the most responsible for signups? I would say so. Yeah. A bit of a self-fulfilling prophecy there. Where it's like the most popular shows, the most watched on the platform tend to have the biggest social channels tend also to drive the most viewers. Yeah. So what are those?

I mean, no show that's currently on the platform doesn't have its own hardcore dedicated audience. You know, if a show isn't collecting audience. That's a problem because you can't cancel anything, Sam. Yeah, I mean, we have not exactly formally canceled, but we have sort of paused production, sideline, put on the back burner shows that are not, didn't. collect audience as well. The most popular shows on the platform are Dimension 20 and Game Changer.

And then the second most popular shows on the platform are some combination of smarty pants, very important people, and make some noise. That makes sense to me. We have to take another short break here. We'll be back in just a minute.

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Welcome back. This is Hank Green talking with my friend and Dropout CEO Sam Reich. We were just talking about what's popular on Dropout and how it got that way. And that gave me a chance to ask how they make it and what else might go on the platform. Have you ever considered putting stuff on that you didn't produce? So right now, everything on the platform is College Humor or Dropout produced. For sure. For sure. We have. We are.

I think the reason why it's tricky is because we consider social marketing to be a big differentiator in terms of how we do things. And if we were to go license a mainstream show, there's no way that they would allow us to power their social channels. Yes. So there is no point to us doing that unless we get to do that. Weird. That's such a specific reason to not do that that I would not have imagined. I mean, okay, the other reasons are out there too, right?

If we just license anything under the sun, does it dilute the brand? We're not trying to be a utility. We're trying to be more of a brand play. But I would say that we are. interested in potentially hosting content on the platform that we could power its social content. And so we are having some of those conversations because we think it'll be an interesting experiment. But we're being very, very, very choosy about it, obviously.

Gotcha. How many people are at Dropout right now? We are 40-ish. Uh-huh. uh on a full-time basis but that really doesn't account for so many people who are such major contributors to what we do right yeah because there are so many contract players involved the crew side on the talent side And you and like, you know, those people do feel a lot like part of the team, especially because like in terms of like dropout kind of cast members, those people are mostly not employees. They are kind of the.

the folk that people imagine when they imagine what Dropout is. There's just a bunch of recurring comedians who come in and are seen as Dropout. the Dropout family by the audience. For sure. So those people are contractors, but are also something more, it feels like.

Definitely. And which is why, by the way, profit share and which is why, by the way, like so many of the things that we do, we bend over backwards to make working at Dropout a positive experience for folks. I think that. Hollywood is a system where people are used to this and expect this to a degree. There are all sorts of inherent... sort of benefits and drawbacks to the full-time equation. Like, we did have full-time talent for a long time.

The benefit there is security for both of us, right? Like we know that we have people that we can turn to and they know that they have that amount of job security. And then the downsides are that we have to make use of those people and only those people because we have to derive that amount of value from them. So it means that the pool gets smaller. And then the downside for them is that they can't explore other opportunities that might pop up as a result of their employment with us.

You know, there's also like I mean, this is a big this has been a weakness of a lot of YouTube companies. BuzzFeed is the best example where you have employees and then they get a really popular show. And then they're being paid as an employee, but their show is making the...

the company, a bunch of money, and they're not being paid as talent. And so like, you know, if Seinfeld gets popular, Jerry Seinfeld gets paid more. But if, you know, the Try Guys get popular, how do the Try Guys like get to negotiate like a three times higher?

salary this year it's sort of not how business works and so the try guys start to feel pretty uncomfortable being part of buzzfeed and maybe want to go do their own thing and this this from the very beginning of youtube a big problem and i feel like this model of just like

listening to how Hollywood has worked in the past actually makes sense in this case where it's like, okay, well, you're going to come and you're going to do this show this season. And the next season, if the show did really well, like your agent's going to have a conversation with us.

And we're going to be figuring out like and you're not going to like you're going to be able to do a bunch of other stuff. But like this is going to be a big part of your yearly income now because that show is popular because people really like it. And you're creating a lot of value.

I don't know how much people know about exclusivity, but I think this stuff is so interesting where it's like if you are signing up to participate in a project, let's say Apple TV comes and wants for you to be in their show, you will sign a contract with Apple TV. That's like you are committed to X number of episodes. Y period of time. You're usually signing up for multiple seasons. But as a part of that contract is like you can't do other things, usually in that category, which is to say like.

You can't do other streamers' shows, for instance, without Apple's permission. But then imagine for a moment that... Apple takes a long time to pick up a second season of your show. And those times are built into your contract. So maybe it takes them like nine months to pick up another season of your show. For that nine months.

You are not allowed to do other streaming things, which is a huge. You just got to learn to juggle or something. What are you doing? What do you do? You just got to like stay in shape too, because they need you to look the same. You know, and it's like nine months went by, man. I'm a different guy. Yeah, for sure. Keep your hair the same length. Keep your nails the same length. You know? Yeah. Don't.

I mean, it's that that's tough. Exclusivity is really tough for folks who are grateful to be working with this business in this business at all. And so very little negotiating room. So like our attitude about it is. If we were not accommodating of people's other work, we would simply be forcing them to make a choice between us and the other work, whatever it is. So the fact...

that we don't ask for exclusivity of any kind means that Lou Wilson can work with us because otherwise he is full time at Jimmy Kimmel Live. Right. You know? Oh, yeah. Interesting. We are trying to position ourselves as everyone's. favorite second job unless unless they don't have a first job in which case you know they are very you know We're happy to be working with, we want for them to be very happy to be working with us even so.

I mean, you're getting a reputation for this, for being like, like pioneering the more creative ways of doing things, being more worker friendly to everybody from PAs to talent and everything in between. And, you know, profit sharing. for contractors is like for talent it's not usually how things work though like there's like residual systems like various ways of doing this but like I've never heard of anybody doing like a straight profit share it

Why do that? I guess why? And also, like, why is it hard? Like, is it hard? Is the reason that other people don't do it because it's hard? Or is the reason because, like, they don't have to?

I don't think it's hard. I don't think what we're doing is that hard. Say nothing about our brilliant finance team who does it. But like specifically the reason we're doing profit share and like not royalties. I don't mean like it's logistically hard to cut the checks. I mean, it's hard to make the business model work. I think it is kind of hard to cut the checks. I feel like Paramount can figure that out. I think royalties are harder. Yeah, for sure, royalties are harder.

Which is why we do profit share, because it's like a much simpler for us from an admin standpoint. I think that other companies don't do this because it is not standard and because they can get away with not. But the big one is probably this, which is that they have people that they need to satisfy, a whole category of people they need to satisfy who we don't have because we're not a public company. They ascended twa. They made that critical error going up from twa.

And right there, number four, number five, number six, depending on the company is the shareholders. And that means like there are people like basically by hoarding money, you are satisfying someone. Yeah. Right? Which, like, we don't have. There's no one to satisfy. Well, I mean, IAC, theoretically, they never come knocking and say, like, man, you could turn this into a big boy now.

Come and show us the success. I see, theoretically, me, theoretically, right? Brennan is also a partner in the company. Brennan, theoretically. I've tried to invest, but you will not take my money. Maybe I someday will. Let me know. And don't get me wrong. Like we're all making money. Right. No one like when we say profit share, we're not even talking about the whole profit.

Yeah. Right. Some of that profit goes to me and I see. And of course, there's also operational funds. You're not going to zero out the bank account every year. Of course. Of course. There's operational funds. There's play money. You know, we want to try new things. Yeah, try new things. So all that money is going all sorts of different places. But there are no shareholders to satisfy.

Which means us being more and more and more profitable every year is not necessarily our first priority. What is your first priority then? What are you trying to do? What are you trying to do, Sam Reich? I don't know, man. I don't know, Hank. What do you think I should do? I don't know. That's a good point. You're in the same boat. More or less. I could really easily turn this around on you. I can tell you why I do it. Oh, please, give me one. Give me one.

Oh, I mean, I feel a strong sense of obligation to the things that I have made and the people who I work with. I feel a strong sense of obligation to the audience. And I also am very rewarded by making things sometimes. Like, obviously, there are some parts of my job that I do purely because of the obligation. There are some parts of my job that I do because I get paid to do it. And there are some parts of my job that I do that. And this is like, you know, different.

Different amounts in every column and different activities. But sometimes I'm doing it because I just freaking love doing it. It's so fun. Yeah. Yeah. That's interesting. I don't feel... I feel a little bit of a sense of obligation. I wouldn't say that's my primary driver. I think that I feel very aware and very grateful for the ability to create things under a unique set of circumstances where I don't have...

I feel uniquely under the twa. Uniquely lower than twa. And I think that's a very... And you've got to hold on to that. What we're learning. Yeah. It's like a really... Hold on to the twa. It's a really unique ecosystem to be a part of. And I think it means that we can create some uniquely cool stuff. And I love that.

Like giving birth to the stuff is my favorite part. I'm an art snob at the end of the day. I mean, I've been to the... edinburgh fringe now like three years in a row and uh this year to have be part of your job oh total i mean barely You know what I mean? I used to pull some acts out of there. Yeah, yeah, yeah, for sure. Fringe, by the way, is like a very weird comedy festival that happens in Edinburgh.

It's like it's like weeks long and it's tiny rooms and it's just weird art happens. And I'm very jealous. I've never gotten to go. Oh, Hank, we got to go some year and I'll show you around. I'm waiting for my son to be old enough. Yeah, that's fair. They've got great kids stuff, too. They've got a whole kids programming component. Yeah. All right. We're going. But I just love.

you know, weird and unusual stuff. And when I think about like what I want to leave behind in the world, it's more of it. Okay. Love that. How do you make decisions? That's the decoder question. We got to ask that one. Yeah, I... There's a terrific TED Talk on decision-making, which talks about how when you're faced with a difficult decision, it's usually because...

There's pros and cons that feel roughly equivalent to each other. And so it kind of doesn't matter. So just pick one. Just pick one. Ruth Chang, How to Make Hard Choices. A lot of the important decisions... It's pretty clear what direction to go. And then with the difficult ones, you sort of have to decide what you're voting for, like what you're optimizing for. And so if you have your priorities in order.

oftentimes the right decision will emerge. Meaning, again, hopefully our business is pretty simple. There are a lot of factors that we have to incorporate, and those factors are something in between the content itself, the experience of the audience. the welfare of the cast and crew, our financials, what's personally creatively exciting to me. And if I have those...

you know, roughly in the, they're not in that order. I don't exactly know what order they fall into off the top of my head, but if I have those in the right order, I can usually make the right decision. How do you imagine dropout in the media world right now? Do you even feel like you're a part of this industry? Or do you feel like you're kind of hanging off to the side? Do you feel like you worry about the industry broadly? Or are you just sort of like...

That's not me. It's more that's not me. I mean, I do feel like I'm on a little bit of an island where I get to be sort of like, you know, the mad trickster king of my domain. Yeah. And I mean, like, it's very weird to be like, you know, for most streaming platforms like that have been launched by big companies to have a million subscribers would be a tremendous failure. And showing that that it seems like.

A little bit in terms of like macro media ecosystem thing, it seems like this is a totally inevitable thing and that it should have happened more already. Yeah, I completely agree. Everything keeps fracturing, right? Like, so like, you know. more and more nichification of everything. And why wouldn't this happen to streaming platforms? And we haven't even talked about the fact that Vimeo enables this with a pretty low lift. So you use...

I think a product called Vimeo OTT. That's correct, yeah. And so Vimeo basically lets you build a streaming platform. You know, they have they have a version of it that's that's all it all integrates with itself and it can be in the app stores and it can be on Roku and all the PS5 or wherever, you know. For sure. And that simplifies this process. And I think that what Vimeo is betting on there is that...

as that this nichification will occur. But I think when you look at the people who use that, it's a lot of like, like individual creators or people who have like, like a workout, like a. thing you know they're like lifestyle influence type things i think that maybe the the rupaul stream yeah wow presents yeah i think so criterion collection oh okay yeah um Yeah, it just feels like it would head in that direction and that the different segments would each get their own.

their own little world, which will, of course, continue to alienate us from each other because no one's watching the same things. It feels symptomatic of this world of content that we're living in. And so it's a fair question, like, well, why not more? And that's a good question.

I kind of expected it. When Dropout first hit for me, I was like, oh, two years from now, everybody's going to have one of these things. And that has not really happened. And people have tried to launch some that have been less successful. Yeah, sure, sure, sure. I mean, I do think that like, as is the case in the internet, when you're browsing TikTok and you learn about someone with 9 million subscribers or followers who you've never heard of before.

There are plenty of examples in our industry of businesses that are just running a little bit under the radar that are doing very, very well. I think Nebula, for instance, is one of those businesses. In the last couple of years, maybe a little bit inspired by us, maybe not, depending on the specific example. But Try Guys have launched their answer to this. Critical Role have launched their answer to this. But my hope.

is that there are more people that follow in our footsteps, because I think it's only better for Dropout if there are more examples that people can point to to say, I subscribe to this small collection of... indie streamers. And I think it behooves us. to have that group be larger because it means better resources for our business as well you know we depend on third-party technology in order to power drop out and and you know if there aren't enough streamers

To use Vimeo OTT or, you know. They're not going to keep supporting the product. Yeah, exactly. Do you ever regret using Vimeo OTT or like not building your own thing? No, we tried. People don't realize this.

The first rendition of Dropout was built on Vimeo OTT's API, but it was our own product. And we employed... something like eight sophisticated engineers at IAC to build our own product around it. And it was brutal, which is to say it's just very hard to do very well. And these were great engineers.

Yeah. What you're doing is in part... running a company being a business person managing your direct reports i should ask how this is all structured how many direct reports do you have um technically i think i have like Two or three, something like that. What we decided pretty recently, like within the last year, is that I should have almost no direct reports.

Like basically just the C-suite. And then everyone else should fall under someone else. Okay. But that's pretty new. What are your departments? There is creative. burgeoning department. There is marketing. They make a lot of YouTube shorts in the marketing department. Uh-huh. There is. Yes. And paid. And email and everything else that falls into the world of marketing. There is tech, which is pretty small, but does exist. There is production.

There is programming as it is independent from production, which are the folks who not only handle our content as it's related to like metadata. uh but also are responsible for like maintaining our programming schedule and putting stuff up into the platform also qc is a part of that department uh meaning quality control um we have for instance one very talented person whose job it is simply to

This is not all they do, but it's a big part of what they do to watch every episode to make sure that there are no glaring issues with it before it posts to the website, to the platform. I think that's about it. with one or two straggling, oh, design, with one or two straggling departments that features one person or two people. Yeah. There's the person who keeps the Dimension 20 lore book.

To make sure. Yes. Well, interestingly, Dimension 20 is kind of like its own department. Okay. Yeah. Because it's such a big operation. And lately, Game Changer makes some noise. It's sort of become its own department as well. So you're partially running this business trying to make all the things work, and I assume mediating when people disagree with each other and doing all of that.

hr is new hr is new as of like the last like uh seven heads And then you're also on-screen talent. But I think there's another thing that... And creative and writing and all this. But there's another thing that you are that... I think that this is not... That unusual, like there's always like a public facing role to a CEO. But beyond that, you really like, not only do you have a public facing role as the CEO and on screen talent and.

kind of founder depending on how you want to count that that you know you kind of embody what dropout is trying to be and and and a strength and i think a potential problem is that you're trying to be a good guy while you do it. Like, you're not Carl Icahn. You're not, you know... like ruthless businessman. Sure. Right. Sure. Like trying to do this the right way. And one of the things my brother and I call this the perfect person problem that if you, if you tell people you're trying to do.

do things well and you're trying to do things right then people expect you to do it perfect and there's no such thing as perfect and and there's always things that you're balancing and how do you imagine and like uh and manage your own like public perception Where you want people to know that you really are trying to do things better. But you also need to convey to people that you will not be perfect.

I think like this is definitely a work in progress. So I think that like the dropout audience in part because of I mean, there's like a demographic thing here, but there's also, you know, they're responding to and signing up in part because of. a halo here that you're helping to create by doing things well, their expectations are going to be high.

Like you've got a high expectation crowd. And I've seen some examples where they feel as if you're not maybe living up to your values or something like that. Is that management, that reputational management, do you see that as a big part of your job? And how do you imagine that? Yes and no. I mean, I think that like...

When I say work in progress, I guess that applies not only to this meta question, but also the way I look at Dropout in general, which is perfect isn't impossible to achieve standard. And I try... at least when I'm out in the world, to really as much as possible convey that I am like a comedy person who inherited this thing, who is trying to do things.

novelly and experimentally, but that I don't even know as much about this kind of stuff as like Adam Conover does, as like part of my peers do. So... When I say work in progress, I really mean that we are trying things and we will make mistakes. And what I'm specifically not doing... on social media or anywhere else for that matter. And in conversations like this on panels is to portend as if. Dropout or I have it all figured out that we are an exceptionally moral company.

Or that we are an exceptionally idealistic company, because I think that that tension between like running a company and being good to people inherently exists. So, so we are. What I've claimed to be the case, and I really do still think is the case, is I consider myself a highly creative person. I'm trying to make content that's as innovative and interesting and funny as possible. And I hope people hold us to that standard. And otherwise, I'm trying to set...

Maybe some new standards for decency, but I would underline that word. I am also, as you have coached me through a lot over the months and years, Hank. becoming quickly used to the fact that you can't please everybody and that, you know, you will have to make decisions that are unpopular sometimes. And that's okay. I actually, you know, some people, particularly entertainers, need to be liked by everybody. And I think some people worry about me.

in that way because they think that my affable nature means that I would really dislike being unpopular. And I am actually totally okay if some people don't like me. Is this part of growing up in a household where a lot of nasty things might have been said about your dad? I honestly like, you know, nepotism, I'm sure, served me even ways that I'm not fully conscious of and like all sorts of ways. But but.

One thing that is really useful is that my dad modeled fame for me. So I do have someone like very close to me out there in the world who's also a public person who, by virtue of his job. deals with controversy at least three times a year, which does, it probably thickens my skin a little bit. Interesting. Is there on the list of reasons?

that you like this or want to do this. We talked about those before, but let's end here with this. Is on that list just that people aren't doing things weird enough and you want to do things weird? You want to like show that like...

A hundred percent. You and I have connected a lot on the topic of Homestar Runner over the years. Homestar Runner may be like hugely responsible for my career taking the direction it has. Like it was incredibly influential on me. And something I loved about it was that. It felt like a walled garden of weird that existed at a URL. And I think about how sometimes— That resonates.

I wish that I could plant a forest full of weird trees on the internet. I wish that the internet was still a place where there was really fun, mysterious, hopeful stuff that existed. a urloa i would hope that dropout can just be one of those things all right well that feels that feels right to me and i hope that you keep doing it and i hope that people keep finding it and

loving that weird being, being in a little place where a lot of strange things happen. Hank, you are also hugely responsible for. And inspiring in the creation of weird stuff for the internet. You're also inspiring insofar as you just like are so prolific. In terms of the amount that you do. Yeah, I do. If nothing else. But and also a lot else. So so thank you for being. There certainly is quantity.

But a sincere thank you for being both the friend and the inspiration that you are. Thanks a lot. I appreciate coming on and chatting with me and getting into the... the weeds and the details here. And someday we will find some other podcasts where we will just do bits. I look forward to that day. All right. Thanks, Sam. Thank you, man.

I'd like to thank Sam for taking the time to speak with me and thank you for tuning in. I hope you enjoyed it. If you'd like to let us know what you thought about the show, you can drop us a line. You can email the team at decoder at the verge.com. They really do read every email or you can hit me up directly on threads. or Blue Sky. Decoder also now has a TikTok and an Instagram. You can check those out at DecoderPod. They're a lot of fun.

If you like Decoder, please share it with your friends and subscribe wherever you get your podcasts. Decoder is a production of The Verge and is part of the Vox Media Podcast Network. The show is produced by Kate Cox and Nick Statt and edited by Ursa Wright. The Decoder Music. is by Breakmaster Siliter. See you next time. The number one reason Series A rounds fail? Unrealistic valuations. Equidam prevents this by grounding your ask in data.

survival rates, market benchmarks, and proper risk adjustments. Avoid valuation traps at equidam.com. That is E-Q-U-I-D-A-M dot com. Yo, this is important, man. Uh, my favorite Lululemon shorts, the ones you got me back in the day, I think they're pace breakers, the ones with all the pockets. Well, I just got back from vacation and I think I left them in my hotel room.

And dude, I need to replace these shorts. I wear them like every day with that Lulu hoodie you got me. Could you send me the link to where you got them? Thanks, bro. Talk soon. Looking for your newest go-tos? Shop Lululemon's bestsellers now at lululemon.com. Do you want to know about science that's changing the world? I'm Alicia Wainwright, and I'm excited to tell you that When Science Finds a Way is back for season three.

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