Over the last few weeks we've tracked various Content x Commerce activations. From Cameo buying Represent and Fanatics exploring RSN acquisitions, to Walmart partnering with Netflix and Barstool, and Shopify partnering with Spotify and Mailchimp.

Based on this activity, we explain three different ways Content x Commerce companies go to market via the Build-Buy-Partner framework, and which model we believe is best.

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EPISODE TRANSCRIPT:

Chris Erwin:

So, Andrew, our team has tracked, over the past few weeks, a lot of different activations and partnerships within the content and commerce space. Have you been seeing this too?

Andrew Cohen:

Yeah, definitely. I mean, the convergence of content and commerce is definitely one of our core themes that we cover at RockWater that we help clients on, so always tracking those and definitely feels like over the past couple weeks, been seeing a few big news stories around announcements of deals, partnerships, acquisitions and everything like that.

Chris Erwin:

So, yeah. I'll go through some of the recent announcements, and then we could talk about what are the different structures that we're seeing in terms of building, buying or partnerships between content and commerce, and which ones do we think are best pros and cons, and then where it's headed. So, with that, let's get into it.

Chris Erwin:

Over the past few weeks, Shopify has partnered with Spotify to enable artist storefronts and has also announced a partnership with MailChimp and I think TikTok over the past month as well. We also saw Walmart partner with Netflix to create a Netflix branded storefront on walmart.com organized by IP. In addition, another partnership with Walmart and Barstool, which builds upon past kind of media brand partnerships with Camp and Tasty for BuzzFeed. So, a few stats on the Barstool partnership, sold 150,000 units of Barstool's pizza from the first 10 days of launch, and on Buzzfeed Tasty, I think they sold five million units of Tasty Cookware with just the first year of launch. We don't have any data, I think, on how much Squid Game product has been sold, but just to get a sense of that we think the numbers are going to be pretty eye-popping, sales of white Vans have increased by 7,800% since the show debuted, right? Pretty impressive stuff.

Chris Erwin:

We also saw that Cameo acquired Represent, which is a celebrity merch platform and that Fanatics, I think like a 15-year-old sports commerce company, is exploring the acquisition of RSNs or regional sports networks. So, it starts to raise the question, Andrew, of why is this interesting? What's one of the questions that stands out to you.

Andrew Cohen:

Yeah. So, what was really interesting to me about this is that it shows this kind of convergence between content and commerce happening through a few different models. You're seeing acquisitions. You're seeing partnerships and outright builds. It's interesting because it's something that we talk to clients and help them work through a lot at RockWater. We work, we specialize in this convergence of content and commerce. We often help commerce brands expand into content and content brands expand into commerce. The difficult question is always how. Do you do it via buy, build or partner? It's really, there's no one size fits all solution. There's no silver bullet. It's really case by case, and there's pros and cons for all. So, yeah. So, to me, I think it's interesting to see a couple different cases represented here. Chris, yeah, maybe we could just walk through it and break down in general the pros and cons of each model.

Chris Erwin:

Yeah, and even before doing that, Andrew, I think you're right that it is ... When we go to our clients and they're saying, "Okay, we want to enter this new market. Do we build by partner?" it's like, well, that's a decision that you're going to make a few times over a sequence over the next few years, right? So, for example, I think like in the beginning, we often say, hey, your goal is that you want to build enterprise value for the company. You want to drive outsize revenue and financial performance, but you also want to be capital light and lean in the beginning. So, from a sequence perspective, maybe doing partnerships in the beginning to learn, try things out that are low capital commitments, and then as you learn what's best fit and what's the opportunity for you, then you can think about maybe acquiring another company in this space or building out a dedicated team. So, I think that's one important highlight before we dive into this.

Chris Erwin:

Then, second, Andrew, I think like you said, it's very case-by-case specific. So, for certain companies and certain industries, there might be more acquisition opportunities out there than others. So, it's like, you know what, yeah, it makes sense to buy, but if there's not a lot of acquisition targets, you might say, "You know what? Really want to enter this new market or product category, and I guess we're just going to have to build the team to do that." So, it is very circumstantial. It's important to understand.

Andrew Cohen:

Well said. So, maybe we can go through it. We'll start with buy, the acquisition route. You mentioned a few. So, we see both content buying into commerce and commerce buying into content. The more common approach that we've seen is commerce buying into content. So, you mentioned Fanatics, the big sports e-comm and merchandiser. They're looking at acquiring some regional sports networks. Hasbro, the major toy company, a couple years ago, they bought Entertainment One, a major film studio. In terms of content buying its way into commerce, you had just mentioned Cameo. They bought merch platform called Represent, but we've also seen other examples of this like MeatEater buying First Lite. So, if we were to break down this approach, the buy route of acquisitions, how do you assess the pros and cons?

Chris Erwin:

A few quick highlights here. So, pros is buying is speed to market, right? When you compare having to build out a new business unit and hire a new team and really build all those capabilities from scratch, getting to market faster by buying a company that has this unique expertise and all the operations set up and allows you to kind of enter the market and beat out your competition that isn't there is very valuable. Yeah, I think it's really hard to build these capabilities. If you're a content business, your DNA is in creative and building amazing content experiences for audiences. That's very different DNA than building out a supply chain, developing product and getting in the hands of your consumers and vice versa.

Chris Erwin:

So, I think some cons though to highlight is that there's often in M&A, there's an acquisition premium to take an asset off the table. You have to convince leadership, founders, investors, and the board that it's like, hey, the value that you're going to get from us buying you versus you continuing to run your company, you're going to have to pay up for that. Then, you can enter deal conversations, Andrew, and a deal, more likely than not, is not going to get done because you got to reach out to the target. You got to go through their representation. You got to line on a growth vision, agree on a price, get a bunch of lawyers and accountants involved, do your due diligence, see where the bodies are buried. At the end of the day, you might go through 18 months of talks, and then a deal doesn't happen. That's wasted time where you could have just said, "Should've just built this out ourselves."

Chris Erwin:

Then, in addition, once you buy the company, almost in a way, that's like the easy part. Integrating the operations where you're aligning on the growth vision, is the leadership going to come together? They're going to be like one leadership from just the acquisition target or from the acquire. How do you get the different teams and the cultures on the same page? Then, the un-sexy stuff like integrating offices and software, that's a lot to do there. That could be a lot of friction, and that takes time, and that takes money.

Andrew Cohen:

The next approach of build, building it out themselves. So, we see commerce building into content. Most famous example being Amazon building out Amazon Studios, Amazon Prime Originals, Amazon Live. Shopify, another example. They actually recently built out Shopify Studios, which is a film and TV studio. Mattel Studios, they are kind of emerging as one of the major traders of features with 17 premium films in development, but we're also seeing content building in the commerce. A couple weeks ago, we saw Netflix announce that they're building out Netflix Shop. Food52 has done a really great job of building out their owned and operated cookware line. So, Chris, we talked a bit about the pros and cons of buying a company. How about building into a new space yourself?

Chris Erwin:

So, some of the pros here, it can definitely be cheaper than buying. You're not paying that acquisition premium, right, but we've seen the examples where actually trying to build a team yourself can be more expensive so that's one that there's nuance too, but another pro is that you can build as you see fi...