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Nebula Blog

How the streaming sausage is made.

2023 Year-End Review

It would be hard to overstate just how big 2023 was for us. In January we made the decision to take control of our destiny and bring all of our marketing and communications efforts in-house. This was a huge change, and definitely not without risk. How did that work out for us? Let’s take a look at the numbers.

  • Added nearly 200k direct subscribers.
  • Direct monthly recurring revenue (MRR) increased 162%.
  • Overall MRR increased 16%.
  • Direct subscriber churn decreased from 9% to 4.4%.
  • Direct subscriber lifetime value (LTV) increased 41%.

In short: we have more subscribers, they pay us more, and they stay longer.

Before we go too much further, the elephant in the room:

Historically we’ve talked about total subscriber counts. For context, we started 2023 with about 650,000 total subscribers and ended with about 680,000 total subscribers. Focusing on this number made sense when Nebula was available as part of a bundle (which drove many of our signups) but for 2023 onward might be a distraction. Since the goal for 2023 was to grow direct subscribers, and since direct subscribers are the only contributors to revenue as of 2024, we expect overall subscriber count to stay fairly flat as those viewers convert over to direct subscriptions, while revenue will continue to grow significantly. Direct subscribers are simply worth a lot more revenue. Going forward, we’re only interested in direct subscriber metrics.

Marketing

Bringing Nebula’s marketing efforts 100% in-house was the single largest driver of growth for us over the last year. It’s also the biggest risk we’ve ever taken. Speaking frankly, this move was terrifying. Running the campaign wasn’t a huge departure — we’ve been doing that for years — but paying for it out of our own cash reserves meant burning cash until the new revenue could offset it, and we didn’t have that much cash to burn. We were literally betting the entire company that our audience would pay more for Nebula as a standalone service.

Subscription service marketing is very much a numbers game. If you imagine the average lifetime value of a Nebula subscriber is $75, our target cost to acquire that customer should be $25. Nebula costs $5 per month, which means that it would take us five months to break even. That doesn’t account for churn — the rate at which customers cancel their subscriptions — so we were racing against time to hit a point where revenue growth pays back the initial marketing investment.

Our solution was to emphasize annual subscriptions. We removed discounts for new monthly subscribers, making annual the more attractive option. Annual subscriptions are $50, or $30 if you sign up using a creator link, so the hope was that enough people would choose annual that our up-front cash would be more offset. Our most optimistic and aggressive models had us hitting equilibrium in Q3.

In reality, it was instant. So many customers chose annual that our first-month revenue was more than the cost per acquisition in the very first month of the campaign. We make more money from new subscribers than we pay to bring them in. This, combined with a lower churn rate, means that it’s in our best interests to keep investing in the creators. Nebula spent nearly $5m on sponsorships in 2023.

Every penny of our marketing budget is spent paying our creators to promote Nebula to their audience. We’ve never seen anything perform as well as sponsorships. We’ll certainly expand our marketing over time as we seek awareness beyond our current audience, but I don’t ever see a world where we stop paying the creators to promote. It’s simply too powerful.

Prestige

In product marketing, there are goods and services which are up-market, meaning they’re higher quality and appeal to more discerning customers, or down-market, meaning they’re relatively inexpensive and generally lower in quality. Being part of a bundle meant that Nebula was an add-on. A thing you get for free. Inherently down-market. Shifting to direct subscribers was about increasing Nebula’s value perception.

At the beginning of the year we started placing internal emphasis on prestige. Will a given feature, Original, or event move Nebula up-market or down-market? Unbundling was definitely an up-market move. Red carpet premieres are up-market moves. If we want to keep pushing in that direction, we need to dial up our Originals slate.

Nebula started life as “education-y streaming service where you can see your favorite creators’ videos early and ad-free.” This year, inspired by the cultural impact of The Prince, we recognized an opportunity to do something big — bridging the gap between “YouTuber” and traditional media and entertainment — and we’ve spent much of 2023 investing in our development and production pipeline. This investment has led to some big changes, like bringing in Jet Lag creator Sam Denby as our chief content officer. We also hired a communications director (publicist) in order to be more intentional about how, when, and where we make announcements, specifically hiring someone whose background is entertainment, not creator economy or technology. The effort has paid off, getting us some ink in Variety and more attention behind the scenes from more traditional sources. Some of our projects in development have been announced, like IDENTITEAZE and Dracula’s Ex-Girlfriend, but that only scratches the surface of what we’re working on.

Still, these prestige-play, up-market projects simply cost a lot more to produce. We could wait for the money to come in and build slowly, or we could find another option.

Lifetime Memberships

Every business needs capital. There are four basic ways to get it:

  1. Start out rich
  2. Borrow the money and pay it back with interest
  3. Sell equity and give up some long-term upside
  4. Make so much money from your customers that you don’t need options 1–3

The parasocial nature of our creators’ audience relationships creates a kind of trust. Nebula, as an extension of the creators themselves, inherits that trust. It’s why, I think, our marketing efforts have been so effective. Rather than take a loan or take investment from venture capitalists, we decided to experiment with lifetime memberships as a way to let the audience themselves place a bet on us.

Simply put, a lifetime membership takes the full presumed value of a Nebula subscriber over some period of time and moves all of that future money to today. We intentionally chose a price higher than what our data tells us is the average lifetime value of a customer, and we stated very clearly that this was not the best deal. The only reason to buy a lifetime membership is to support Nebula and help us invest in more big-idea Originals. A lot of people seem to like this option.

We’ve turned lifetime memberships off and on a few times over the year, trying to protect against a scenario where total monthly signups is negatively impacted. To our surprise, in every single test the total number of non-lifetime signups goes up when lifetime is available, and better yet, those additional sales are almost entirely for annual subscriptions. The existence of a lifetime option anchors the annual plan as the best deal.

How well did it go? Lifetime memberships generated more than $4.1m in sales in 2023. Turns out the best way to raise funding is to ask our own customers to help us make bigger Originals. What a beautiful privilege that is.

Operations

Trajectory is hard to map at the moment, in part because so much has changed over the last year, but more specifically December was nuts. Our five biggest days ever for signups all happened in December. The month saw new records for single-day watch time, daily active users, monthly active users, cash flow, revenue, and month-over-month revenue growth. Our biggest month ever by all metrics before Christmas.

Will this pattern hold? December had a lot going for it — several new Originals, a Real Engineering video specifically about our streaming infrastructure, a major announcement from Abigail Thorn, a ten-minute teaser from Lindsay Ellis. Oh right, and a new season of Jet Lag featuring Michelle Khare.

Another major driver was folks switching over from the bundle, which we expect to persist across 2024. Our forecasts remain conservative, but who knows.

2023 was a year of change and growth for us. We did a ton of work behind the scenes to overhaul operations, taking the ethos of our Snow Leopard initiative and applying it to every single facet of the business. This effort was, silently, the most important change we made all year, bringing focus and clarity to every team in the company to act as a single machine rather than a system of loosely interconnected parts. Along the way, we brought more creators into day-to-day operational roles, intentionally blurring the lines between staff and client to ensure everyone was on the same team. At present, content development, talent management, in-studio production, and marketing are all led by creators.

Our mission is to elevate our creators. To elevate their work. To elevate the medium. This isn’t a collection of “YouTubers,” this is a community of journalists, philosophers, filmmakers, experts, and storytellers whose work deserves to be taken seriously. 2023 was about developing into a mature and sustainable independent business, but everything until now has been defined by what the creators have helped us build. 2024 onward will be defined by what we help our creators build.

A year ago I wondered if I was crazy to think we could pull this off. I won’t say it was easy. It wasn’t. But we did it, better than I ever could have dreamed. To every single person who has ever signed up for a direct Nebula subscription: thank you.

Nebula’s biggest competitive advantage is hundreds of amazing, talented, empathetic, clever people working together on a shared vision and a common goal. I’m proud to be one of them.

Unbundle

We’ve been getting a lot of questions about the CuriosityStream bundle and whether Nebula will be included going forward, especially in light of statements that CuriosityStream has been making publicly and to its customers. For example, we’re aware of communications from CuriosityStream to customers making the promise that Nebula will be included in their bundle beyond 2024 if you sign up now for a two year bundle term. This is not accurate.

If you renew your CuriosityStream bundle subscription this calendar year, you will still get Nebula through the end of your 12-month subscription term. The latest someone will get access to Nebula via the CuriosityStream bundle is December 31, 2024, if they renewed their CuriosityStream bundle subscription on December 31, 2023. If they renewed on March 5 of 2023, they’ll get access until March 5 of 2024. And so on.

If your bundle access is set to renew in November or December of 2023, you still can still take advantage of the bundle. However, given that so many of you signed up, at least in part, because you wanted to support the creators, we should note that Nebula will not be paid for bundle users in 2024. CuriosityStream has stated, including in their recent SEC filings, that they will be ceasing revenue sharing with Nebula in January. The only way to ensure that all of your dollars go to Nebula and its creators is to sign up directly with Nebula.

This situation is understandably frustrating and confusing. We’re going to try to make it as painless as possible. Nobody should be punished for trying to support us, and we have no desire to ask anyone to pay twice. You can purchase an annual direct subscription today at a discounted rate of $30, and we won’t start the clock on your subscription until your bundle access expires.

While the bundle was advantageous to us in the past, one weird side effect is that there are a bunch of folks who use Nebula every day, but whose primary customer relationship is with CuriosityStream. That doesn’t mean we take your attention and support for granted. It just means we have an opportunity to prove our value and win your business as a direct subscriber. There are a lot of amazing, smart people here — creators and staff alike — working hard to make more great things for you. We hope you’ll stick around.

Lifetime Memberships — Part Two

For the month of September, starting now, we’re offering lifetime memberships for $300. For as long as both you and Nebula are alive, you’ll have access to everything monthly and annual subscribers get. No catch.

Back in April we did a test run of lifetime memberships. We were already planning on ramping up Nebula Originals in the second half of the year, and we wanted to test to see if lifetime memberships could be a way to front-load revenue and spend more on content development. We assumed that we could probably sell about 1,000 over the course of the month.

In reality, we sold just over 1,500 in a week. Lifetime memberships were so popular that we decided to pump the brakes, look over the data, and try to figure out what it all means. 

The big question: would this cannibalize ongoing revenue? Logically we knew we were playing a game of balancing revenue against cash, but the exact implications are important. To our surprise, over 50% of the people who purchased lifetime memberships were brand new customers. Of the folks who were switching, less than half were direct subscribers. Even more surprisingly, we actually saw monthly and annual subscriptions increase

Lifetime memberships are a net positive in every way.

The only thing we’re changing this time is the price point. $300 more fairly represents the long-term value of Nebula without cannibalizing our revenue. If that’s not worth it for you, we totally understand. Lifetime isn’t intended to be the best short-term value. You’ll have all month to decide if this is right for you. If not, we’ll probably do another round eventually. No guarantees on what the price will look like if or when we do, though.

Last time, despite spelling out our intentions, we saw some well-intentioned-but-misguided speculation that this must mean some kind of trouble. Nope. We just want to build bigger things without losing autonomy.

Our primary focus right now is increasing Nebula Originals budgets. We wanted to ensure a balance between paying the creators (one third of the money goes to whichever creator whose code you used when you came in) and building amazing new things. There are other ways to get this money. The most traditional path would be to go take funding. Venture capitalists hit us up constantly. We don’t want to do that. We’re much more interested in building this with you.

Nebula Lifetime. $300. Available all September.

Nebula Originals

TLDR: We’re going big on Nebula Originals, and we’ve hired a new chief content officer to help make it happen.

Nebula began life as a joint venture between Standard, a talent management company, and the group of creators we represent. The partnership is simple: the creators provide streaming licenses, and we provide the resources to build the platform itself. We split the profits equally, and if we ever sell Nebula, we split the proceeds evenly.

Our build mode energy has been well-spent. Four years after launch, we have apps available for iPhone, iPad, web, Android, Apple TV, Roku, Android TV, Samsung, and LG. We launched our own API, built a custom streaming backend, and added support for classes and podcasts. As a platform, Nebula is fairly built. As we look at the horizon, where do we put our energy to keep up our half of the bargain?

Earlier this year I talked about Snow Leopard, our plan to spend 2023 focusing on refinements and bug fixes rather than major new features. By June we had seen so much progress in our thinking and so much benefit to the organization as a whole that we realized Snow Leopard isn’t a one-year project, it’s a way of life. This needs to be our new normal. We’ll still add features, of course — our recommendations system is in development and already helping us to understand new ways to help viewers find things they’d enjoy. Our work is very, very far from complete and we have a long roadmap in front of us, but there’s an argument to be made that our build mode phase is over for the platform. Nebula as a piece of software is much more in run mode.

Where will we put that build mode energy? Nebula Originals.

For our first few years, Nebula has primarily been a creator streaming service, not a content streaming service. Our focus has been on creating a wonderful home for all of the things our creators make. As a bootstrapped independent company, we don’t have billions of dollars to throw at content development; our experiments have largely been smaller-budget projects that tackle a more adult subject matter, or break the creator’s typical format. The few times we’ve really swung for the fences, though, the results have been extremely compelling. Night of the Coconut, The Prince, and even Jet Lag were designed to get a little more ambitious and see what happened.

What happened is that the audience has started to associate us with specific Originals as much as specific creators. There’s an element of prestige in this projects, which grants Nebula itself an air of prestige. We think this is the most compelling future for Nebula.

Over the last few months we’ve completely redesigned and re-implemented our Nebula Originals development process. That process, we feel, should be creator-led, so we’ve turned to someone with an excellent track record for successfully developing and executing a variety of formats: Sam Denby, of Wendover, Half as Interesting, Extremities, and Jet Lag fame. (He didn’t have enough to do.) Sam has joined the team as our chief content officer to lead Nebula Originals development, aided by both our internal team and by the team at Wendover Productions.

This is a seismic shift for us. While we’re slowing the pace of growth for the software team, we’re not stopping entirely, and this change won’t cause money to magically appear in the hands of the content development team. This will be a steady shift across the back half of this year, with the real gains coming in 2024. We hope to use the development process itself to generate enthusiasm for projects by announcing them with more fanfare and much earlier. (We’re also looking at ways for the audience to directly impact budgets for given projects, but more on that later.)

We’re actively soliciting pitches from our creators and a select few outside friends. The team has crafted a pitch guide, and built a system to offer one-on-one development support for folks who have never pitched a show to a network or streamer before. The new process is in full swing, and we’ve already heard some genuinely bonkers ideas that I can’t wait to help make into reality. Expect to hear more soon, as we begin to announce projects in development and build out our slate for Q4 and 2024.

Nebula creators are an immensely talented group of people, and we want Nebula to not just be a home for what they make, but an epicenter of creative and professional growth, empowering and enabling them to create things above and beyond what’s possible on public, user-generated platforms.

The creators built Nebula. Now it’s time for Nebula to build the creators.

Recommended For You

One of the more surprising phenomena to emerge from Nebula’s growth is discovery. When we started, the assumption was that a subscriber would come in for the creator or creators they loved. Our community was small, so you could easily browse the categories, find the creators you already knew, follow them, and move on with life. To our bemusement, people almost immediately started clicking around and just… watching stuff. Maybe the curated nature of Nebula leads to greater confidence in exploration.

We didn’t design or expect Nebula to be a discovery platform, so while we enjoyed reading emails, tweets, and reddit posts from folks who had discovered new creators they love and binged all of their videos, we weren’t really sure what to do with it. Our Featured page, modeled after Apple’s App Store more than anything else, was comprised of a hero rail, there to promote Nebula Originals, and a random assortment of loosely-defined category rails. I’ll be honest: we were just trying to fill up the page to prove we had stuff you could watch.

As time went by, Featured became more sophisticated. We added rails designed to show off exclusive content types, and our editorial team started creating topical rails to coincide with world events or big movie or game releases. These editorial rails are intended to take advantage of the evergreen nature of most of our catalog. Aside from me occasionally complaining about puns in the rail names, the team has full autonomy over what gets featured.

To keep things fresh, we also added a top rail called “Latest Videos”. This is just a waterfall feed of every video as it gets posted. We average 10-15 new videos per day, so this does a great job of giving Nebula a bit of life. It also helps the audience spot things they might enjoy from creators they may not be aware of. This works great until we start getting complaints that TLDR News fills up the rail every morning and people start asking for a mute button.

Nobody actually wants a mute button. Not really. What people want is to use that rail for discovery, and they want it to only be populated with things they’d like. Filtering the waterfall will only work for so long — eventually we’ll have enough creators releasing enough new videos that no amount of muting will bring it under control. Mute? No, what the audience wants is a recommendation algorithm.

Fine. We’ll do it. You’re getting a recommendation algorithm.

I know, I know. Believe me, I know. There are a million ways to get this wrong, and millions of people have millions of opinions about what works and what doesn’t. However, despite what some might guess, we’re not of the opinion that recommendation systems are inherently bad. Our careers are made possible by recommendation algorithms. We discover new creators through recommendation algorithms. Some of my best friends are recommendation algorithms.

The reason creators are often frustrated by recommendation systems isn’t that they’re evil, it’s that they’re opaque, and that opacity can easily feel unfair when your hard work suddenly doesn’t perform as expected and you have no way of immediately identifying why. There’s an entire cottage industry of low-effort content gurus who will gleefully charge you to give you recycled advice on how to improve your thumbnails.

What makes these systems good or bad is how they’re used. In our case, Nebula has a distinct advantage over public, user-generated content platforms: curation. The average Nebula video is of objectively higher quality than the average video on any social media platform. Nebula videos are nutritious. We have no junk food to push on you, and no advertisers for which the content needs to be ad-friendly. I’ll humbly submit that if we were to randomly choose ten videos for you from our catalog, you’d probably enjoy at least one of them.

This presents an interestingly low barrier to entry, and a solution to the real problem that many of us have with these recommendation systems: lack of transparency. What if — and I’m just spitballing here — what if we, like, just told everyone how it works? We could ship a minimum viable product version of a recommendation algorithm in a week, and collect feedback from creators and subscribers over time to make it better and more fair, and we could openly discuss how we do it so that others can chime in and offer suggestions for how to keep it balanced.

Yeah. That sounds cool. Let’s do that. Instead of spending ages building an opaque, potentially broken system for people to complain about, let’s scratch an immediate itch and make it a conversation all of the stakeholders can participate in. We’ll treat this feature as a public beta, make it visible to everyone, and invite discussion. We’ll hold regular roundtable discussions with our creators to refine the system over time, based on their needs and the feedback from the audience. Most importantly, we’ll document it. We’ll keep an up-to-date breakdown of the system logic at go.nebula.tv/algorithm for anyone to read.

At its best, a recommendation algorithm is an adorable robot puppy. It excitedly greets each new visitor with things the visitor might like. Over time, as the puppy is trained by behavior, it gets better and better at guessing what each visitor would want to watch. You liked this video, and other people who liked it also liked this other video. Would you like to see it? The puppy just wants to make you happy.

As a creator-built platform largely designed to sidestep the frustrations we felt with recommendation algorithms, we realize the only way we can feel comfortable building our own algorithm is to do so in a way that every creator can understand and contribute to. The system needs to have clearly defined goals and priorities, and safeguards to ensure that smaller creators don’t get pushed down.

We’re building this according to three simple, straightforward rules:

  1. The algorithm should be transparent. The creators and the audience should have a reasonable understanding of how the system works. This is a conversation, and we need all participants on the same page.
  2. The audience should have tools to control what they see. Over time we’ll add settings, like buttons, and other feedback systems. Recommendations shouldn’t only be based on behavior.
  3. Creators should take priority in recommendations. User behavior is good and interesting, but no matter how hard we try, the creators will understand those relationships better than we can. We’ll give the creators themselves tools to influence what gets recommended after or around their videos.

For the beta launch, we’re keeping it simple by adding a couple of rails at the fringes of what we think will eventually be truly useful: “Discover Something New” and “Channels You Might Have Missed”. In terms of “discovery” this is obviously a little reductive, but it’ll help us start to understand a little more about user behavior and — importantly — the impact on site performance. Going deeper will require a little more internal tracking of user behavior, which we want to approach very, very cautiously. Over the coming weeks and months we’ll apply what we learn to more experimental rails, based on the heuristics laid out in our algorithm definition, and informed by feedback from subscribers and creators.

It won’t be perfect to start. That’s the point. Let’s train this puppy together.