Does Owning IP Actually Matter?

The ownership of intellectual property (IP) can be an unbelievable asset for a media business. When I think about Disney, which is obviously going through some turmoil right now, I can’t help but remain bullish on the brand for the longterm specifically because of all the valuable IP that it owns. I don’t see why anyone would want to bet against Star Wars, Marvel, Pixar and its suite of children’s material, and the good old fashioned Mickey Mouse.

Owning that IP is extremely powerful. In 1996, Warren Buffett said this about Disney and its IP: “…it’s kind of nice to be able to recycle Snow White every seven or eight years. You hit a different crowd. And it’s kind of like having an oil field, you know, where you pump out all the oil and sell it. And then it all seeps back in over seven or eight years.” The reality is, if you create something, you should be able to monetize it consistently over the long-term.

And so, the natural advice is, that the media company should always own the IP. Especially if you consider that we are the ones taking the financial risk, why shouldn’t we have the upside tied to owning the IP? And in many respects, I agree with this. But it depends entirely on the types of content that we’re working with.

For example, creating a new character in Star Wars is something that should absolutely be owned wholly by Disney. There’s no denying that. It’s a one-time investment that lives on forever in a broader universe. Even the creation of an entirely new character in, say, the Pixar-lens should still be owned by the company. There’s just no reason to give it up.

But what about a podcast? When you start looking at these sorts of personality-driven shows, how much of the success is tied to the individual versus the media company?

Let’s rewind to mid-2020. Barstool Sports had a show called Call Her Daddy, which was quickly becoming one of its most successful products. According to one person I spoke with, at the time, Call Her Daddy was selling more merchandise than any other creator at Barstool Sports. But Call Her Daddy was fundamentally a brand dependent on Alex Cooper and, to some extent, Sofia Franklyn.

The New York Post chronicled what happened:

The Barstool honcho recapped his entire relationship with the duo, saying he discovered them via Cooper’s Instagram and offered the women a three-year deal. Initially, the two didn’t want to give up their brand’s intellectual property, including the “Call Her Daddy” name. When they learned there was no deal without Barstool owning the brand, the women relented and signed the contract, which paid them around $70,000 annually each, plus bonuses.

That’s how most of these deals play out. We’ll give you a salary plus upside and in exchange, we’re going to own the brand name. And so, for two years, that’s what happened. But in 2020, they both realized that they wanted more. According to NYP:

A few months ago, when the duo wanted to renegotiate their contracts, their lawyer sent Barstool a list of demands — including $1 million guaranteed, for each of them, according to Portnoy. They no longer wanted to be Barstool employees and they wanted 50 percent of all money earned from the brand, including merchandise and ads. And they wanted to own the brand.

Call Her Daddy is a great name, but the name isn’t why the show is successful; the two women were why the show was successful. Having the two walk away without their brand would have hurt Barstool Sports more than it would have hurt the two of them. Yes, they’d have to figure out infrastructure and ad sales and all of that, but the reality was, the audience liked them.

And this is why it’s not always about owning the IP. Call Her Daddy without one or both of the stars was relatively valueless. Had they walked, Barstool would have owned a cool name without the people to make the show a success. And so, working out that 75/25 deal was in the company’s best interest.

So, what matters more then?

Rather than pushing to always own the IP, we should instead be looking at ownership over monetization for a set period of time with some semblance of upside tied to the IP. And this is what Barstool Sports did where it would own 25% of the brand while Alex Cooper would get 75%—Franklyn got nothing.

And this is why it’s not always about owning the IP. Call Her Daddy without one or both of the stars was relatively valueless. Had they walked, Barstool would have owned a cool name without the people to make the show a success. And so, working out that 75/25 deal was in the company’s best interest.

It was able to monetize the brand for another year and keep some upside to de-risk the deal. In the case of Call Her Daddy, Spotify came along a year later and gave Alex Cooper so much money, there was no way that she wasn’t going to leave Barstool Sports. But not every show is going to be Call Her Daddy. And when it comes to these personality-driven shows, being able to monetize the IP is more important than owning it.

So, I come back to this idea of ownership over the monetization for a set period of time. All of the monetization tied to a product should be owned by the media company, even if the IP itself is owned by someone else. In the case of Call Her Daddy, it would not have been right for anyone but Barstool Sports to be selling the ads.

However, it’s not just ad or subscription revenue that matters. Here’s an example…

I’ve long believed publishers shouldn’t just let their reporters take stories they reported while on the job and turn around and get a book published. The publisher fronts all the financial investment for the reporting, but sees no upside in the downstream revenue potential from that investment.

I come back to an example I’ve used before, which is John Carreyrou, who did incredible reporting on Theranos. But when he published his book Bad Blood, the WSJ saw none of the upside. And, just as problematic, Carreyrou got no legitimate help from WSJ to promote the fact that he had written a book.

This is the wrong way to think about it. Instead, the media company should take a stake in whatever their reporter or personality has done while employed. By taking a stake, they have an incentive to push to make it as successful as possible. In the case of a book deal, WSJ could have easily promoted the book to any subscriber who had read reporting on Theranos. I suspect it has that data. How many additional books might have been sold? More than enough to offset the percentage WSJ would get?

In theory, this works, but in practice, it’s complicated. When choosing between promoting something you own part of and something you own all of, it’s often just easier to focus on the latter. This is why many joint ventures ultimately fail. But more than that, it’s a systemic issue where most media companies don’t look at their content and editorial teams as assets. Instead, they are thought of as simply cogs in a machine.

On the other hand, is it any wonder that some of the fast successes over the past few years, like Puck and Punchbowl News, have been content-led organizations? Even Axios had the backing of the most connected DC reporter in the business: Mike Allen.

In an era of algorithmic content creation, the who behind the content didn’t matter as much, so we could be much stricter with our requirements for IP. But as we move into an era where most content will be AI-generated and only the very best will come from top quality creators, it’ll be a fight to have those people. And if you have someone who is truly the best, perhaps giving up on the fight for IP in exchange for owning monetization might be in our best interest.

What do you think? Are there examples in your mind where owning the intellectual property is not a fight worth fighting? Hit reply and let me know your thoughts or join the AMO Slack.

We’re a little over a month out from the AMO Summit, being held here in NYC on October 26th. If you wish to attend, buy your ticket today. Prices increase on Tuesday. And if experience tells me anything, tickets will sell very quickly in the last 30 days, so act fast. Have a great weekend and see you next Tuesday.