Thread by @lillianmli

1) Let's talk about a key part of the Chinese creator economy. The creator management and incubator agencies known as Multi-Channel Networks (MCN). We''ll summerise key lessons for the western creator economy.

And know how Li Ziqi got her 12m YouTube subscribers

2) MCNs are modern-day talent agencies (but more) who target influencers and creators as their clients. It originated in the US but has proliferated in China, with industry estimates of 5k-7k Chinese MCN operating as of 2020.

3) Typically, as creators gain enough following, they find it difficult to be an-all-in-one content creator, editor, customer support rep, accountant, lawyer, and marketing guru that the job demands.

Enter the MCNs who offers the creator the following:

4) Audience and traffic growth, PR management, monetisation through ads & e-commerce and support with retail fulfillment.

Their services are more holistic than western MCNs, who's offerings are more domain-specific.

5) Agreements between Chinese MCNs and creators can get into guarantees of the number of followers provided, copyrights, subtitling and distribution help, as well as providing analytical feedback on their content.

6) Monetisation methods are also more varied. Whereas the majority of western creators monetise through ads. The majority of Chinese creators monetise through retailing. Opening up a Taobao store or holding livestreaming e-commerce session to do this is the norm.

7) The MCNs will charge a cut of GMV sales from these sales, typically a 30%-70% split with the creators. In most cases the creator is only responsible for the goods' promotion and MCNs would be in charge of production, fulfilment and post-sale support.

8) At this point, you might recognise that MCN are a combination of talent agencies and 3PL and you'd be right. The lines between entertainment and commerce are blurred in China.

9) Creators often end up as livestreamers and livestreamers are top-of-funnel for marketing, I wrote more about this here

lillianli.substack.com/p/livestreamin…

10)They were instrumental in refusing all advertising for Li Ziqi in the early days, as her branding was premium enough to justify a launch of proprietary products. That bet has paid off handsomely. I look forward to the day when I have to dispute that I earn millions.

11) But unfortunately, this is the minority. Creators come forward to tell horror stories of MCNs in 2020. when their relationship sored with MCNs, they lost everything, including access rights to their accounts.

12) Creators are often not domain experts in reading and negotiation contracts well. As the creator and livestreaming economy heated up, bad players were rampant. Fly by night agencies that didn't do anything but sucked all the royalties

13) There's also a brand of MCN that doesn't want to deal with the hassle of dealing with established creators and have started to incubate their own. This process is already very mature with a 6-month cycle of cultivating a creator from identification to selling on platforms.

14) Ruhn, which is listed on the Nasdaq is a prime example of this, but these MCNs suffer from homogeneity of creators and are all but retailers in disguise when you go through their P&L.

15) Key lessons 1: MCNs will grow once the creator economy takes off in the West, their services will become more encompassing (as often the stars are getting younger or only are only content specific domain experts)

Prepare for bad players

16) Key lesson 2: Creators will do well to put off engaging with a MCN until they to. The rise of creators is that they have their unique voice and MCNs don't help with that, infact often the opposit. They really aren't useful in the early stages

17) Key lesson 3: Creators should demand more from MCNs and in turn MCNs should provide more services. I'd love to see terms of services MCN sign with creators in the west but do they include minimium threshold for traffic that they can bring?

18) Key lesson 4: Contracts should be read carefully and the outcome structured to be mutually beneficial.

Always consult a professional

I'll be doing threads like this for the rest of Jan so follow if you like these to spam your TL.

If this gets more likes than my Meituan thread (400 likes so far) I'll write the deep-dive on this instead. 😅😅😅😅