How Feastables Funds MrBeast's Million-Dollar Videos

0:00In this episode of the Denoise podcast, we're going to break down the creator economy and take a dive into Mr. Beast. business. YouTube creators holding their own upfront event. And Netflix tips of stone podcasting with a Kill Tony special. Let's get into it.

0:16Welcome back, Eddie. Hey, thanks, man. Welcome back to our own podcast. Best part of my week. Love to do it. So this one, I think it's a good time to kind of take a dive into something a little bit different than we haven't talked about much. The creator economy, which I feel like more and more is becoming less of its own separate bucket and overlapping more and more with Hollywood and traditional media and what we think of that. And they're both kind of converging. And I think it's good to kind of talk about it, especially because there's been a couple of stories that have been popping up on my radar and I want to dig into them.

0:45Let's do it. So the first one that's been circulating a bit is a couple of stories that came out about Mr. Beast. And he is fundraising to raise from this article, The Verge. He's raising about$200 million in a funding round, which if successful would value his company at more than$5 billion. Wow. Both huge, but then also a lot of the attention came to the fact that basically his videos don't make any money and all of his money is being made off Feastables, his chocolate bar. What a brilliant move. I mean, did you know that he has a whole studio complex in North Carolina? He built it himself. Yeah.

1:16Yeah. He built it in his hometown, these massive stages. So all that stuff, all those employees, all that infrastructure is just to brand some kind of consumer goods. I mean, that's the play. And that's been the play for a lot of a lot of different creators. And one, let's see, he's raised over$450 million in the past four years. He just had the Beast Games, the show that he produced for Amazon, which the original budget, I believe, is$100 million. But I believe he surpassed that because he's also been saying that he lost money on producing the Beast Games because he like doubled the prize money at the last second, just did a bunch of stuff.

1:47Can't just give away a million dollars every time. Well, he tried to. Yeah, so it's kind of coming. People are just like, oh, wait, You know, this guy's making these huge, massive videos and the videos don't make money. And he's making money off of chocolate bars. This doesn't feel like anything new to me if you've sort of been paying attention to what he's been doing, because first off, his videos in one of the reports, each video it was reported costs about like YouTube videos cost about three to four million dollars. That's correct. Which is a crazy number for a YouTube video. But he realized and like I've kind of tracked him for a while, like even going back to his earlier interviews with Colin Samir and like talking about his early process, he realized early on that like the YouTube game and success and sort of like unlocking the algorithm for him was like more money, bigger, like put it back all back into the videos, like gets more attention.

2:31I think even one of his very first videos where he kind of cracked this was like he had a sponsor deal for I think it was maybe$5 ,000. And he was like, double it. And like, I'm gonna give it to like a homeless person. And like, trust me, it's gonna like do way better than 5000. And so he gave like$10 ,000 to like someone off the street and kind of recorded the reaction. And that was sort of like his big initial like sponsor video that did really well. And he realized like basically just like taking all the money you make and reinvesting it into making the next video bigger and better was the fuel that like fueled his success.

3:03Now the numbers are just getting like crazy. It's crazy. I mean, the stakes are so high. So one of the stories that he told on one of the podcasts that I listened to was the idea for how he came up with Feastables, the chocolate. So I think either Hershey or Mars or one of those big chocolate companies came to him for ad placement in one of his videos. And then he was charging them like whatever, one or two million dollars. And then he realized that his videos get a billion views, like no problem, right? And he's like, well, actually, they're making money from me because I think the inherent value was probably$50 million in sales or whatever.

3:42And they're only paying 5 million. So he's like, why don't I just own my own chocolate company and capitalize on that difference? Yeah, he has the audience and attention. He's driving all of this traffic and revenue to another company. Yeah. And not making any more off the million or two that he makes, that he sells to them. Yeah. And then the other thing that he mentioned was just how difficult it was to create a chocolate company amidst the monopoly of Cadbury, M &M, and the Hershey company. Yeah, that's a very broad, like high-level commodity. It's not something like a creator course or something that's a lot more niche.

4:14There's like big pharma. There is big chocolate. Big chocolate. Yeah. Yeah. Yeah. And I feel like that's sort of what happens with a lot of creators is they build up their channel. They build up the audience. They build up the newsletter, whatever they have. And they're selling ads to other companies and like driving revenue to them. And then it's like, well, wait a minute. Why don't I just drive the same traffic to my product and build out the product myself? So yeah, I mean, this has been the playbook. What are some of the other creators that we've seen that have like kind of followed this playbook?

4:38You talk about the Prime Energy drink and Logan Paul, Jake Paul, KSI. Prime has been so successful in pushing into Gatorade territory, like mainstream America drink category. And that's, I mean, you talk about, you know, there was so much beef between KSI and Paul. And they just realized, wait a minute, we're both really famous. Why don't we just shake hands and make money together? And that's exactly what they did. Yeah, I mean, Prime is everywhere. And I mean, I think I'd seen Prime before I even realized that it was like the Paul Brothers. And the other thing Mr. Beast has is Beast Burgers.

5:15That was kind of short lived. That was... I think it's still around. It's like a ghost kitchen setup. It was a ghost kitchen setup. I think he killed it because it was a ghost kitchen. Quality control was like, he couldn't do it because they're basically just sending out packages to other service providers and there's no consistency in the burger. I think people were posting, you know, like raw burger patties that they're getting. Yep. I think he did kill that because he went with Feastables because I think it was more profitable. And he controls the whole thing. I mean, when you sell to Walmart, imagine the volume of chocolate you're selling.

5:46Yeah. The other thing you do was a Lunchables competitor, Lunchly. That was another one that he launched. And that was also with Logan Paul. Yeah, that's right. Another food product that you can control. Clearly, his demographic is the middle school students. I mean, his target audience. Yeah. I haven't had Lunchly. I've had the chocolate bars. Yeah, what do you think? Yeah, so those chocolate beans are sourced from Peru. Yeah, like good sourcing. Yeah. I wonder what the chocolate about is. Because like also with Hershey's, it's like you're buying a little bit of chocolate and a bunch of sugar and filler.

6:15But I know he's talked about trying to have better ingredients and a better quality bar. I think he also supports like sustainable farming and chocolate, which is obviously a big deal. Chocolate farmers are under horrible conditions sometimes, you know, compared to slavery. And Mr. Beast is all about charity. He has Beast Charities, which is a separate arm of the company. So it feels like a lot of the good positive energy is there as far as him being frontman for a$5 billion business. Anyone that gets that popular gets like hate for sometimes no reason or like even when he got hate for the like videos of helping a vision where he restored vision or I forgot the specific medical condition, but when he paid for the surgeries for like a thousand people to restore their eyesight.

6:58Oh, okay. And he got hate for that. Yeah. And I was like, really? I mean, yeah. Yeah, if you like pay attention to a lot of his podcasts, the guy doesn't really care about money. No, because he just like takes it all and then puts it all back into the videos. He's not flying, you know, like private jets and driving luxury cars. Like he's not that tight. And he's in his 20s. Yeah, he's still in his 20s, yeah. And he has a very charitable side to him, which is really cool. Yeah. With some other creators that have branched out to, Emma Chamberlain was one that she started selling coffee beans. and then there's a chamberlain coffee store at the century city mall oh did you go that's by your house i've seen it the line to that thing is bananas is it like viral coffee like i don't even know what so i mean i've seen i looked at the menu and it had some like you know kind of cutesy drinks and stuff and i bought her coffee yeah it's kind of sound the most i've bought her coffee at Erwan before.

7:55God, we're done with this episode. That's awesome. You're so Westside. What were you doing at Erwan, Joey? We're just humble podcast hosts. We don't have that kind of money. I don't defend Erwan. It's a cool place. The food is really good. The hotline? They have a good hot bar. They have really good pizza too. Oh yeah? The pizza's not crazy expensive. Dude, they have this bulgogi barbecue burrito thing. I haven't had that. Oh, okay. I'm going to have to try that. They also sell interesting things that you don't find elsewhere, like Emma Chamberlain coffee, which I did buy the beans a while ago.

8:31And it was good. But yeah, this coffee shop, I think is the first time a standalone coffee shop from a creator. Emma Chamberlain was, she doesn't do videos, I think anymore, but she was like one of the earlier fashion vloggers. And it's just crazy to even, even without her doing a bunch of videos, this coffee shop pops up. I had first seen it on like TikTok and people were like, the lines are crazy. And then I was there, I think maybe a month after that the thing opened and the line was like still crazy. Wow. And it was one of those like Disney effects where you like see the coffee shop and then you see the line coming out of it.

8:59And I'm like, oh, it's kind of a long line. I don't know. And then you go around the side and then you realize that the line goes to another spot and starts zigzagging behind the store. And it was one of those like secret extra long lines. That's crazy. So just the like still virality and power of people like - this coffee from an influencer. Crazy. Yeah. And I just recently read an article somewhere that studios and brands are just allocating influencer dollars now. Like it's a separate budget category. Yeah. I mean, they put aside money for definitely UGC, YouTube generated content. You know, I feel like that's a bit, it gets conflated, but I feel like it's kind of two separate things.

9:35It's like, if you're paying money for Mr. Beast, you're paying money for a Logan Paul, like you're paying because like they have the brand, they have the like power and the influence. Yeah. And then the separate kind of UGC stuff where it sometimes feels like a volume thing for brands where it's like we just want people on TikTok or on these short form apps to like talk about our product. Oh, yeah. And it's not necessarily because they have like a big following. It's just because we like want the more people to talk about it and like hashtags out there. And then we can put money behind and promote the video.

10:03But it looks organic, the better it is, especially for like a direct to consumer kind of product. And we talked about it on a couple of podcasts episodes ago. they even have the power to make or break companies like with mqbhd and fisker yeah yeah mqbhd and samsung and like a lot like he has so much power to say product is good or bad right i mean you know in his defense he was like you put the product out like you ship this to people are paying money for it it's not it wasn't like a private preview or something that wasn't publicly available it's like as a car guy i agree with them i didn't think the fisker product was all that great yeah i think Like if you put the product out and you're charging people money for it, it's fair game.

10:41Fair game. Yeah. Yeah. And yeah, he also had a deal recently with Ridge Wallet where he partnered up and I think partly as an advisor and partly to help them develop products. And I think they just did launch a new wallet with like his sort of like branding style. Yeah. And he's been selling products for a while. He's got the keyboard accessories. He's got the wallpaper app that took some heat. Yeah. Yeah. He had that. But before that. It's very Erwan, isn't it? He came out and said like, this app is for like a very tiny, tiny portion of people who like care about wallpapers on their phone are willing to pay a hundred dollars for it or whatever yeah yeah but even before that he had a he had a there's a scented candle he had a scented candle he had a scented candle yeah see like these guys are so smart and girls they make or sponsor products that are just everyday consumables coffee chocolate yeah candles you know usually should tie into their brand like if it was you and me i think we would uh sponsor like some cinematic lens that only 10 people in the world buy you know the denoise diesel lens diesel hit us up yeah seriously i remember at neb last year there were a couple products that launched that were made with creator partnerships like potato jet did a tripod with i know potato jet right through his brother i don't know he had a brother yeah he was uh he was the editor for uh space writer oh okay cool amazing guy amazing family yeah okay cool yeah yeah he's got he's got great content yeah yeah someone who was in the creator space potato jet tripod yeah that's amazing and there was um another kind of filmmaker-centric youtube creator did some stuff with uh condor condor blue okay up your name they've done a variety of partnerships with creators of like for camera specific products like we'll help you develop this product that you know it's some solves a problem and you're behind it as a creator and let's do some wishful thinking if we were to go out there and figure out a product for us what would it be for you don't say wallpaper no not people i'm always like trying to deal with cables and stuff it'd probably be like some right angle smarter cable that keeps things more streamlined on on camera setups i would create some like style filters ai style filters that are just really out there how out there like uh like uh like an ai lut kind of thing like yeah yeah like you know we talked about the mid-journey style code stuff yeah like i would have 10 or 15 proprietary style codes that are the addy style codes and just kind of push that how would that how would those not get ripped off like in two seconds yeah but see the i mean the cool thing about the hardware is it kind of defensible a bit i mean at least it takes like knowledge like i like you know offhand like right now like i wouldn't really know how to like make a product i don't know go to alibaba but like i wouldn't know offhand how to like if i wanted to develop an original like product or cable or something i wouldn't know but that's kind of the cool thing with like these established companies was like, oh, we know the manufacturers, we know the process to make the thing, like, what's your idea?

13:32We'll like work in conjunction with you. Makes sense. Yeah. The one thing that out of all this whole kind of talk with creators and making money on videos versus making money on products, the question that raises for me is, is this the only way to be like a sustainable creator if you're kind of going out independently and you are your own production media house? Pretty much like it kind of keeps going back to like the only way for these creators to survive is they have to have a separate product line. I mean, diversifying is never bad, but is there a reality where they can make the videos and just live off the money for the videos?

14:02Well, no, because as you know, you're on YouTube, you're a YouTuber. The YouTube game is a bell curve. So, you know, you will very soon hit 100 ,000, a million subscribers, 10 million, whatever. And then that subscribership will slowly wane over time and next generation YouTubers will take your audience. so what do you do during that bell curve during that peak you diversify your revenue and you do it before your time runs out so i think that's what a lot of these creators are doing i know it makes sense but it's like is if you were to separate from youtube or maybe reach a level where you start producing stuff for like an amazon or netflix yeah and you're just you're a production company and you just get a bigger platform and you're not solely dependent on youtube okay yeah i'm just trying to think of like if someone has made that leap or if there's something that is, I'm trying to think of creators where they have sustainable models and that doesn't involve making or selling products.

14:56Yeah, I'll give you a name of a couple of incredible YouTubers that have never dived into the world of consumer goods and products. Casey Nesdott, right? He's like a bonafide filmmaker. He could probably win an Academy Award if he wanted to, right? Like he's got a very artistic eye. Gawks from France, another filmmaker g-a-w-x he's he's huge um he makes a lot of videos that are just beautifully cinematic and somebody like that i don't see them there's such an artist that they can't turn over and then sell consumer goods right artistry for one thing but also just like if you start expanding you know start making products it kind of becomes a distraction from like making the videos and making the stuff that you were doing in the first place yeah and i know that's a lot of these creators partner with other companies that you know are basically like we'll handle the actual production stuff we like handle all that you just keep making your thing and we like split the profits or sometimes they just do stuff because it's cool like a good example is mr who's the boss who just bought a view one system oh yeah which you know and he paid for it and uh then he went on and had a whole video about it and uh view didn't sponsor any of it but it was because he's just really into tech and let's face it view one system is an amazing piece of tech for somebody like yeah i think it was you know smart on them where it's like okay we got a whole package thing where it's like you can buy the package and with the wall with the server set up with their software that makes it easy to load up backgrounds and stuff.

16:21AI backgrounds. Yeah. I wonder how much this whole space was because he like really decked out the whole. He's like a MQBHD level tech YouTuber, right? Like he's in the millions of followers. Yeah. Yeah. So the guy's got money, I'm sure. Yeah. Curious where these models go. But speaking of these models, and maybe this is the answer and the solution to what we're just talking about. Second story, this just came out in Hollywood Reporter, Colin Samir, big YouTube creators who kind of make content focused on the creator economy are holding their own upfront event for focused on creators. That's so crazy.

16:53With Spotter Studio. It's called Spotter Showcase. They're building the road as they go, you know, which is so innovative and so bold. Yeah, they've been carving out this like, both showing that it's possible to be like a media company in the creator space and then focused on the creator economy and dissecting what other creators are doing and how they're being able to financially be how they can optimize the sponsorships and dollars and that's what upfronts is right yeah so yeah what people are not familiar with upfronts yeah what are upfronts uh so it typically happens in new york every year it's where all the big advertiser agencies brands come together and uh it's sort of like new york fashion week but for advertising it's it's like the where to be seen and be seen sounds like colin samir said uh you know whatever is happening with the establishment let them be we're just going to do our own thing over here.

17:42And yeah, it's usually like the TV studio or all the networks are like, hey, here's our slate. Here's what's coming up for the year that you could buy ads on. Like, here's what we're going to make. And if you're interested, like it's where they sell their, I don't know what percentage, but where they sell like their advertising for their future slate. When I was with Verizon, we did a live activation with our Unreal Engine powered animated character at Upfronts. It was well received, but you know, like brands will go to that length to impress clients and stuff. Did it bring in ad dollars? Yes.

18:10So yeah, so what they're doing is something similar, but they're doing it with content creators, YouTube creators. And this is interesting, too, because it's both showing like much more of an established, mature network for YouTube creators, because basically the creators have to come and pitch to advertisers and be like, hey, here's our programming slate for like the next six months or for the year. We know we're going to make these videos. Yeah. And you can get in on being the sponsor for these videos. But like, you have to have the foresight and planning. Yeah. And these operations are getting sophisticated enough.

18:38And the staff and just the sort of predictor. Yeah, and once you get to advertising these levels, like, well, you also have to deliver on that. Yeah, 100%. You're going to take$10 million from Nestle. You better come through, right? The other cool thing here is a lot of attention hours are now diverted to creators versus traditional content. And so, you know, we only have 24 hours in the day. You and I will maybe consume a few hours of content over the course of the day. The question is, what percentage of that is going to a creator versus a traditional studio streamer or whatnot? And it feels like more and more of our attention hours are now on the creator side.

19:20And brands know this. They see the data. And so that's where the dollars are being funneled out of Hollywood into the hands of creators. Yeah. And I mean, traditional streaming, as I say, Netflix, which is now getting rooted to traditional. Yeah, they're realizing this, too, because even YouTube is rising in its consumption on TV. And it's not like just, oh, let me watch it on my mobile phone anymore. I mean, it's data that came out last December. YouTube accounted for 11.1 % of TV streaming, surpassing Netflix, which came in at 8.5%. So like the number one most popular streaming app is YouTube.

19:52100%. It's crazy. I mean, I consume YouTube more than any other platform. And linear TV. On your TV? Where do you watch YouTube? On my TV. On your TV, yeah. Yeah. On a very fancy OLED TV that's meant for cinema, I'm watching YouTube videos. But also this goes to feel like most of the, a lot of the creators are also upping up the production value. I mean, they're like traditional-ish TV shows, but they make it in a way that is a different system and they could do it faster, cheaper, quicker. Yeah. Like if you look at a Johnny Harris video, do you know who that is? I mean, his videos are as polished, if not more polished than like a National Geographic episode.

20:25The map guy. Yeah. He does. He makes great videos and his stuff is, yeah, the animation, the quality. And I was watching one of his on the TV the other day. I watched the video, which I think we'll talk about in a future episode on Kodak from Team 2 Films. Oh, yeah. I love that video. Kodak exploration of shooting on film. Yeah. I watched that on my TV. Yeah. And you could see the film grain. It was a great way to watch it too. Yeah. Exactly. Because they took a lot of time to shoot on a bunch of film stocks. Yeah. And it's good to watch it on TV. Yeah. So the upfront event, it's going to feature Mr.

20:53Beast, Dude Perfect, Ryan Trahan, and then a bunch of other creators. It doesn't mention one here, but one person that also stood out to me as someone who's like planned out their content a lot is uh michelle caray who does um uh challenge accepted definitely it feels like i've seen some of that network level quality yeah show she's a great one where she was training for a boxing match and just the it was like a mini documentary like easily could have been on broadcast tv would you say high quality these creators are so sophisticated in their operations that their production quality their staff and their business operation is already at like a Netflix level before Netflix approaches them.

21:31Yeah. And I think she and her husband is also a producer. They did an interview on one of the editing podcasts. And one thing that stood out was like, they already do something similar to this upfronts where it's like, they already know because their videos involves like a lot of training, a lot of prep. She does a lot of stuff with like, I was a secret service agent. So it's like, she has to get permission for the secret service and plan this whole thing out. So all of her videos, she only does like one a month. Yeah. But they're a lot of high production and they know what it is, the slate is for the year.

21:54So they go to advertisers and are like, we know we're going to do this this year. Do you want to get on board with this? Oh, that's so cool. But she also said that they had been approached in the past from like more traditional networks or production companies like, hey, we can take this format and, you know, pitch it as a TV series. But she was like, you know, they want like she does a lot of training and a lot of work and to make the videos authentic. And they're like, well, we need to shoot, you know, 12 episodes in like a month. And she's like, I don't do that. I can't do that. And also, you know, they're like, they're just like way more heavier on the production aspect of, you know, just more crew, more cameras and like her team creative control for the execs yeah her team does it i don't know how big their team is but you know i think they're shooting these videos with probably three four people you know you probably have like two cameras and they probably are all running sound themselves uh maybe an assistant i mean maybe on a bigger shoot about five or six but like way leaner than a traditional like network 100 show would shoot they're probably all non-union you know yeah yeah freelance yeah especially in the create in the youtube space when you're like you got you know to make money or make a profit, you got to be lean.

22:54But at the same time, like there is no lack in quality. There's another thing that stood out too. And I think the quality has evolved and what people are expecting on YouTube has evolved. Because I remember in an interview with Mr. Beast, I think it might have been the first Colin and Samir studio tour from like two or three years ago. He was like showing off the cameras and the gear and stuff. And this was Mr. Beast, you know, when he's still like big YouTuber, but not like, not like an Amazon series. Yeah, before the Amazon series. And he was like showing off the gear and stuff they shot on.

23:20And Because I think he had like, you know, Canon C300 or C400s like in the shelf in the back. And they were like talking about the gear. And he was like, we actually don't use that because we found like the better the production quality looked, it turned people off. Like they like the more. I think I've seen that. They like the kind of more like, you know, amateurish look. Yeah, cell phone handheld. And that was him maybe two, three years ago. I think that's evolved because he does like all of his videos now like heavy visual effect. I think maybe the Squid Games was like a turning point where he made the Squid Games knockoff video.

23:51And the VFXR is like, you need to shoot raw. And actually with the Beast Games, I don't know how many cameras, but there was a post from ARRI. And they used like 20 or 30 ARRI Alexas to shoot the Beast Games. Oh, wow. Really? Yeah. We'll post this on the image. That's awesome. But they had like an army of like dozens of ARRI Alexas. I mean, that's like a hundred million dollar movie level equipment. And there's shots of like all of the army of camera people like a full reality show, you know, shooting everyone's reaction. That's nuts. It's like a whole wall of camera people like everyone focused on like a different character.

24:26So that has definitely changed. But I think that's also just an indicator of how basically it's like a battle of like YouTube is becoming TV while TV is trying to become YouTube. Yes. And like what's going to what's going to hit first. And I think right now YouTube becoming TV is winning the race for TV to be YouTube. Yeah, I don't think TV will ever become YouTube, mainly because TV is a much slower moving beast. And by the time they adopt the YouTube language, the YouTube efficiency and the budgets, YouTube will have moved. Yeah, and when they chill out with the content or the gear requirements or the spec requirements.

24:58Like, yes, that's definitely needed at certain levels. But I think for other levels, having the specific requirements for like this camera, this format, this stuff like slows things down. Yeah. Also, I mean, I'll defend the TV and movie industry. They do cross the T's and dot the I's by hiring safety coordinators, you know, caterers and like, oh, there's like a whole slew of secondary production crews. And that's, they want to prevent people from getting hurt and prevent people from sort of suffering on set, if you will. Yeah, of course. Yeah. But then do you, I mean, since YouTube productions are so lean, mean, and efficient, do you think they're doing all those things sometime?

25:35I mean, there were reports with Beast Games of like crappy conditions and like crappy stuff coming out of that. I don't remember how if they like. So I can't support productions that don't treat their staff well. There is. Right. And yeah, with like that hours and like not, you know, pushing people. Unions exist for a reason. Exactly. Yeah. This is like why they started in the first place. You don't push people to work 18 hour days because that's ridiculous. Exactly. It should not happen. Yeah. And, you know, I'm sure we'll probably see something too of like as this matures and this industry matures too.