Share with your friends!

Sam Reich, CEO of Dropout TV, shares insights into the unique business model of his company, its origins, and the challenges of navigating the media landscape.

Introduction to Dropout and Its Unique Model

In a recent episode of Decoder, hosted by Hank Green, Sam Reich discussed the evolution of Dropout TV, a subscription-based platform that emerged from the remnants of CollegeHumor. The conversation highlighted the unconventional path Reich took to acquire the company and the innovative strategies he employed to steer it toward success.

Acquisition of CollegeHumor

Reich’s journey began when he took over CollegeHumor, which was struggling under the ownership of IAC. The company had been exploring various revenue models, including ad sales and television production, but none had proven sustainable. In a surprising turn of events, Reich made an offer of zero dollars to acquire the company, a move that many would consider risky.

“I offered IAC zero dollars, which was the amount of money I had to buy it,” Reich explained. “There was another offer for $3 million, but it would’ve gone to a competitor.” This gamble paid off for IAC, as they retained a minority stake, allowing them to benefit if the venture succeeded while avoiding the consequences of handing the company over to a rival.

The Challenges of Transitioning to Dropout

Upon taking control, Reich faced immediate challenges. The onset of the COVID-19 pandemic in March 2020 forced him to downsize the company drastically, reducing the staff from 105 employees to just seven overnight. This drastic cut was not just a response to the pandemic but also a strategic move to streamline operations and focus on the core mission of creating quality content.

“We signed our deal with IAC on a Tuesday in March of 2020, on Wednesday, the basketball teams stopped playing, and on Thursday, we were in COVID lockdown,” Reich recalled. This timing added another layer of complexity to an already challenging situation, but it also provided an opportunity to rethink the business model.

Subscription-Based Comedy SaaS

Reich described Dropout’s business model as a “comedy SaaS,” where subscribers pay for access to a range of programs. This model stands in stark contrast to traditional media companies that rely heavily on advertising revenue and shareholder expectations. By eliminating these external pressures, Reich believes Dropout can focus on creating content that resonates with its audience.

Creative Autonomy vs. Business Complexity

The conversation between Green and Reich delved into the complexities of running a growing business. As companies expand, they often face competing priorities from various stakeholders, making it challenging to maintain a clear creative vision. “It’s much easier to do your creative work when your company is just you or maybe just you and a few other people,” Reich noted. “It’s a lot harder when you have a bunch of stakeholders with competing priorities.”

In contrast, Dropout operates with a lean team, allowing for greater creative freedom. “The simpler your business is, arguably the better it is, or certainly the more effectively you can run it,” Reich stated. This simplicity is a key factor in Dropout’s ability to innovate and produce engaging content without the constraints often imposed by advertisers and shareholders.

Marketing Strategies and Subscriber Growth

Initially, Reich and his team believed they could convert their existing YouTube audience into paid subscribers. However, they quickly realized that this strategy was not as effective as anticipated. “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,” he explained. “That well ran dry fast.”

Despite these challenges, Dropout has seen steady growth in its subscriber base. Reich attributes this success to the unique content offerings and the strong community that has developed around the platform. Shows like “Game Changer” and “Dimension 20” have garnered dedicated followings, contributing to the platform’s overall success.

Innovative Content Creation

One of the standout features of Dropout is its commitment to innovative content creation. Reich, who is not only the CEO but also an active participant in the creative process, emphasized the importance of maintaining a strong creative vision. “I’m not just sort of showing up and reading the teleprompter. I am also coming up with ideas for shows,” he said.

Game Changer: A Unique Concept

“Game Changer,” one of Dropout’s flagship shows, exemplifies this innovative approach. The premise of the show is that each episode features a different game, with contestants arriving unaware of what they will face. This format allows for a dynamic viewing experience that keeps audiences engaged and guessing.

“Sometimes it takes more and less work to figure it out,” Reich explained. “The idea is to create an experience that feels fresh and exciting each time.” This commitment to innovation has helped “Game Changer” become a fan favorite, with many viewers eagerly anticipating each new episode.

Balancing Creativity and Audience Expectations

Reich acknowledged the challenges of balancing creative ambitions with audience expectations. “Sometimes ‘Game Changer’ is a game, and other times it’s more akin to performance art,” he noted. This flexibility allows the show to appeal to a broader audience, but it also requires careful consideration of how to maintain engagement.

“I think we grappled with this internally because sometimes the game is more straightforward, while other times it’s more abstract,” he said. “We want to keep the audience guessing while also delivering a satisfying experience.” This approach has proven effective, as evidenced by the show’s popularity and the loyal fan base it has cultivated.

Future Directions for Dropout

Looking ahead, Reich is optimistic about the future of Dropout. The platform’s unique business model and commitment to creative autonomy position it well to navigate the evolving media landscape. As more companies grapple with the challenges of traditional advertising models, Dropout’s subscription-based approach may serve as a blueprint for success.

Reich’s journey from acquiring CollegeHumor to leading Dropout is a testament to the power of innovation and adaptability in the face of adversity. By prioritizing creative content and fostering a strong community, Dropout has carved out a niche in the crowded media landscape, proving that there is still room for unique voices and ideas.

As the conversation wrapped up, Green expressed his appreciation for Reich’s insights and the innovative direction of Dropout. “This was a great conversation with a great friend, and I hope you enjoy it,” he concluded, setting the stage for continued exploration of the intersection between business and creativity in the digital age.