By Farhad Meher-Homji
If you have listened to the episode of the Creator Generation podcast that covered this topic (or the “Recession Session” as Ant likes to call it), then you will know that I have seen a couple of economic downturns in my time running media companies. This included the 2008 “great” recession and two other downturns caused by “black swan” (unpredicted) events. Over the years my team has also worked with hundreds of Creators, helping them navigate a variety of niche-specific bumps such as the changing regulations for kids content, to more industry-wide hurdles like ‘Adpocalypse’.
In that time I have learned a number of valuable (and sometimes difficult) lessons and I wanted to share a few with you here so that hopefully they can give you some guidance in how to tackle whatever the future has in store.
It’s fair to say that its been a pretty strong couple of years for content creators and apart from the brief downturn we had during COVID, most Creators have never really run their channels / creative businesses through periods of sustained economic strife.
I’m here to tell you though that it's not all doom and gloom. In fact it can be the opposite.
Economic downturns can sound pretty scary but there are plenty of things that Creators can do to prepare themselves. There are couple of key steps you should look to put in place and if you do these well, there is every chance that you could not only weather a rough economic patch but actually come out on top.
TLDR
Now if you don’t want any of the background, then you can just skip ahead to the “What Does This Mean For Creators?” section below but hey…if you have a spare 5 minutes, I think its worth understanding how we got here.
What’s Causing The Issues In The Economy Right Now?
In a nutshell the problem we are seeing worldwide is based around escalating inflation. Inflation basically means that things (goods and services) are getting more expensive and harder purchase.
You see when COVID happened, governments were terrified. Not just for the public health impact but for the effect an oppressive pandemic with a hard-to-define timeline might have on the economy. As such governments around the world printed money and pumped huge amounts of funds and stimulus into the economy to keep things moving. When that mixed with all the pent up demand from everyone being locked inside, it caused people to spend…a lot. That much spending caused huge supply issues as manufacturers scrambled to keep up and when you throw in the ongoing pressure from lockdowns in major manufacturing hubs like China AND a war in Europe, then the issues were exacerbated.
So these supply issues and high demand have been causing escalating prices (inflation) and this needs to be brought under control otherwise we are never going to be able to afford anything as the value of our money drops.
The main way governments tend to combat inflation and an overheating economy is by increasing interest rates. When interest rates rise, its harder to borrow money, people spend more money servicing their debts and thus don't spend as much on other stuff. Businesses (who are also finding it harder to borrow money) make less - they let go of some employees and unemployed people don’t have a lot of money to spend…and thus the cycle goes until the economy slows and gets back on track (at least that’s the theory).
What Exactly Is Going To Happen?
Well most people agree it doesn’t look great but how bad it’s going to get is hotly debated, mainly because this is SUCH an unusual time in human history with so many factors in play like the ongoing effects of COVID, the Ukrainian war, and a resistant and strong job markets, to name just a few.
You can however already see some of the impact these factors are having on the stock and crypto markets right now.
That said there are some people who are still bullish on the future and say things wont get as bad as others make out. And they could be right. But when I am unsure about a situation and what direction it might go, what I like to do is look at the fundamentals, and here is what I’m seeing:
A lot of money has been borrowed / there is a lot of debt
Economies are overheating and the printing of money is at an all time high
Inflation is at 40 year high in the US and in many places around the world
And finally something from Michael Burry (the guy who predicted the 2008 housing market crash two years before it happened) who pointed out that:
US personal saving levels have fallen to 2013 levels
US personal savings rates are at 2008 levels
Credit card debt has grown at a crazy rate in the US - the same as that seen pre-covid
AND all this is with record government spending and stimulus.
Burry noted that this indicates a consumer recession is inevitable.
So based on these factors it should mean people will invariably be spending less and the economy will slow.
I should also point out Burry predicted this inflation issue over a year ago.
So What is a Recession?
Just very quickly - a recession sounds scary but what it is, is basically a period of negative growth in the economy. Everyone gets impacted in different ways depending on your personal circumstances, your occupation and where you are in the world.
Although recession are not fun and many people do suffer, there are a bunch of things you can do to weather it better, and in some cases actually come out on top. Also its probably worth noting that recessions / corrections are (arguably) needed in order to correct all the craziness I mentioned above and get things back into equilibrium again - kind of like how fires are ultimately useful (albeit painful) for forests as part of the long term ongoing cycle of life.
What Does This Mean for Creators?
Like I mentioned - depending on your circumstances, the type of Creator you are and where you are in the world, the impact will vary but there are certain things that will most likely happen if we see a downturn across the global economy.
Consumers (viewers) will be spending less as that’s what happens during a recession. In a nutshell, they may not have as much discretionary spending so will prioritise more essential purchases.
Advertisers will also be spending less as they adjust, so you will see a drop in ad rates and lower RPMs and CPMs.
It also effects brand deals so brands and agencies may not have as much to spend on brand integrations and sponsorships
How much will this drop exactly and when? Its hard to tell, although I have seen projections of between 5-30%, with effects building over the next 6 months, although this is going to be different for everyone.
What Should Creators Do?
There are three key areas I recommend Creators focus on:
Strengthening and Diversifying Revenue Streams
Understanding and Preparing Their Creative Business
Developing a Value-based mindset
Strengthen and Diversify Revenue Streams
Help brands make smarter choices
Just because brands might be spending less doesn't mean they are spending nothing. They still need to sell their products so will be looking to make smarter choices with their money and this is where working with Creators can be a good option for many brands.
What you need to do is demonstrate to a brand that you are a smarter choice because you:
Are focused on a specific niche
Have a captive and loyal audience
Therefore money spent with you (the Creator) will be more targeted for that brand with potentially better conversion.
As such I would recommend looking into brands that suit your audience and niche. Start putting together a pitch focused on the value you can bring to both them and their audience so you can justify the rates you charge. Any data you can provide to support this and help paint your picture is going to be useful so look back through your analytics, comments and past campaigns. If you aren't sure what to charge there are a number of guides but we have provided a pricing guide here.
Be strategic in diversifying your revenue
If you only have a few income streams or you depend heavily on ad revenue, then I would look to diversify your revenue in a manageable way.
What I mean by “manageable” is don’t go out there and try every different revenue stream under the sun because you will just end up doing all of them badly. Instead, look at a couple of good opportunities you might be able to handle and scale up in in the next 6 or so months.
For example if I had a channel with revenue based on YouTube Ads and a Merch store, then I would perhaps look at diversifying by way of:
Brand deals in the way I mentioned previously. Perhaps get an agent to help you (but ensure you have lots of flexibility - no lock ins / reasonable rate). You are looking for someone who will help and not restrict you. Also make sure that you are aware of any red flags in the brand deal itself as some brands may look to take advantage of desperate creators.
Talk to a content aggregator about promoting your catalogue on a different network - like Jellysmack for example. These companies can take content you already have and monetise it for you across new networks.
Look to build a product you can produce and distribute without massive overheads - like a digital product. While creating a digital product might be a little time intensive its generally not as capital intensive as building a physical product. Ensure that whatever you produce has actual value for your audience and is priced accordingly.
Understand and Prepare Your Creative Business
Know your business
Ensure that you understand how much your business is making and how much you are spending (and what you are specifically spending your money on). You would not believe how many Creators I have talked to who have very little idea about where their money goes. Ensure you are across your finances and budget out the next 6-12 months. Knowledge is power and in this climate the more you know, the better you will be. It will help you to make better decisions if you have to adjust your spending down the track.
I like to use a pretty straight forward cash forecasting spreadsheet that helps me track and visualise where all the money is going in the next few months.
Put aside some $$
Put aside some spare money. The exact amount can depend, but what you are trying to do is protect yourself from unforeseen circumstances that tend to be more problematic during economic slowdowns. Don’t forget downturns don’t just effect you but others too, so if a brand for example is late paying their fee because of some factor effecting them, then you have access to the spare funds that act as buffer to help you out.
Develop a ‘Help’ network
Put together your ‘Help’ network. This is basically a series of contacts and people that can be helpful in difficult times. The first group in this network provide administrative help. For example ensure you have the name and contact details for the people who help manage your business such as your accountant, agent and lawyer.
The second group is for overall guidance and support and can make a huge difference to how you weather hard times. For this group you should look to connect with other creators and build a support network so that you can share information and help each other out. If you don’t have a network, you can always join the Creator Generation network and we can be that support.
Develop a Value-based Mindset
Give a little
This might sound like an odd one but it’s actually hugely important. If you have a value-based mindset then you are always thinking about how you can add value to your viewers experience. In times of difficulty its always nice when things alleviate your mental load and that's going to be the same for your viewers. If you can give them a great experience and provide plenty of value (entertainment value, educational value, relational value or whatever your channel provides) you are going to make things just that little bit better for them. In addition you will build a closer relationship with the viewer which is hugely beneficial in the long run.
Be a good person
Reed Duchscher the CEO of Night Media recently released a good post for his creators regarding what to do in a downturn. One of the tips he gave was to be aware of the economic impact on people around you and understand that many people are going through hard times. Don’t be tone deaf - don’t flaunt wealth or create content that flagrantly flies in the face of the viewer.
I would add to that by saying don't take advantage of people. When people are down and scared don't take advantage of their misery or induce further panic in order to further your own cause or win a few cheap views. Wherever possible be helpful and show empathy. If you keep a value-based mindset and support other creators in getting through whatever is to come, then you are going to make things that much better for everyone.
As mentioned I have run companies during economic downturns before and I have seen that the impact can vary greatly from person to person and business to business. The steps I mentioned above were very similar to what I put in place through three different and tricky downturns and each time the company came out on top. That said out of all the tips I have outlined, having a value-based mindset and being compassionate stand out most. While the companies weathered each well, the second downturn had a personal impact on me and I will never forget the kindness and assistance offered to me by friends, colleagues and complete strangers. It made everything that much easier and the recovery that much faster. I feel if everyone can be there in some small part for everyone else then, whether what's to comes is a blip or bump, we are all going to be ok :-)
Resources:
- Make a copy of this free budgeting template so you can understand your financial forecast - Check out what you should be charging for your content
Farhad is one of the founders of Changer Studios and has been running media companies for the past 20 years. He works with some of the worlds top Creators, helping them develop strategies to grow successful channels and creative businesses
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