If this was a video essay this is where I’d put a supercut of content creators saying the phrase “my streaming service Nebula”. Unfortunately this is a blog post so you’ll have to use your imagination.
Nebula is a video on demand streaming service focusing primarily on educational content. Unlike other streaming services such as Netflix and YouTube, Nebula is distinct in that it was built by content creators. So surely the title of this post is a silly question then, right? Nebula is owned by the content creators. They say so themselves in all their videos.
I wasn’t so sure though. I never could pinpoint why, but the “creator owned” narrative at the forefront of all their promotional material just felt too good to be true. I’ve spent most of my career working in the venture capital funded tech industry, and based on that experience my gut told me Nebula was just like all those other tech companies and was only masquerading as a co-op. Up until recently I ignored that feeling assuming it was just me being overly cynical, but then I saw this Philosophy Tube video announcing Abigail Thorn’s upcoming movie. Much of that video was spent discussing the structure of Nebula and it seemed to confirm something I had previously assumed wasn’t true: that the creators own 50% of Nebula.
I’ve seen various sources report that Nebula is owned 50% by a company called Standard Broadcast, and 50% by the creators on the platform. I could never find a first hand source for this information though and thought it was a misunderstanding of some very carefully crafted answers on the company’s FAQ page.
How do the creators get paid?
Nebula profit is divided 50/50 between the creators and Standard. The creator pool is paid out based on watch time.
Who owns Nebula?
Nebula is owned and operated by Standard and the creators, with Curiosity Inc (CuriosityStream) holding a minority stake and a board seat. There are no plans to bring in additional investment.
The first answer indicates that there is a 50/50 profit share. This means that the content creators on the platform get to take half of the profit that Nebula makes, but that doesn’t tell us anything about how much of the platform the creators actually own.
The second answer is about ownership but is much more vague. It doesn’t specify who owns what percent, and includes a the extra verb “operated” which makes things more unclear. It could be that both ownership and operation are shared between Standard and the creators, but one could also interpret that to mean that Standard owns and the creators operate. What I can say is that it’s mathematically impossible to have a 50/50 split between three parties, and there are three parties listed. This is no big deal though. Nebula never claimed there was a 50% ownership split. That claim was just some unaffiliated people on the internet misinterpreting the FAQ.
But then I watched that Philosophy Tube video. It began with the familiar rhetoric of “Nebula is owned by the creators who are on it”. But there was more. “50% of the equity in Nebula is distributed between the creators”. This was the first time I had heard a Nebula creator say the number 50% referring to ownership. “The other 50% is owned by the parent company, an agency called Standard”. At this point the math really wasn’t adding up. A parent company by definition owns more than 50% of a subsidiary, that’s what makes it a “parent”. Also a 50/50 split would mean there’s no percentage left over for Curiosity Stream. But then there’s the real kicker: “When you’ve been on Nebula for a certain amount of time you get the option to buy a piece of the parent company. Standard actually invented an entirely new kind of cooperative corporate governance to make this happen”.
The fact that there’s interest in buying into Standard seems to indicate there’s something lacking about the ownership you get from just being a Nebula creator, but what really sets off the alarm bells for me is the “entirely new kind of cooperative corporate governance”. If you want to have a creator-owned cooperative you can just do that. There’s nothing novel about co-ops. So why not just do that?
My intuition after watching this video was that Standard Broadcast, which is owned by a small subset of Nebula creators, actually owned the vast majority of Nebula. I suspected the options were offered as a way for the most successful creators (that is to say the ones with the most money) to buy their way into the organization that actually holds all the cards. Intuition is often wrong though so I decided I needed to do some actual investigation.
The Wendover Documentary
The first source I found when looking for more information was a video from Wendover Productions, a YouTube/Nebula channel created by Sam Denby. I thought this would be a good place to start because Denby is one of the original content creators on Nebula, and as I was about to learn one of the owners of Standard Broadcast.
The Inside Story of Nebula is an interesting “documentary” (propaganda piece might be more accurate) chronicling the rise of Nebula. It has all the hallmarks you’d expect to find in a tech company marketing pitch. There’s an absurd and unsubstantiated valuation of $150 million dollars, talk of infinite growth, the “minimum viable product” model, and even an enlarging pie analogy.
More interesting to me though was how carefully phrased the information about profits and sharing was. “So, through complex financial and legal wizardry, we developed a system where 50% of Nebula profits were distributed to the creators, including crucially, if the platform were ever to be sold”. This clarifies that creators get 50% of the profit as well as 50% of the proceeds from a sale of the company, but very specifically doesn’t mention ownership. Do they get paid 50% because they own 50%? Do they own less than that but get 50% through some other mechanism such as liquidation preference? Is there just some contract that says the company owes them money in the event of a sale?
The ownership structure of Standard Broadcast is described with slightly less ambiguity. The company was initially founded by Dave Wiskus, CGP Grey, and Philip Dettmer, but Gray and Dettmer later sold their stake in the company to five other creators. So at that point ownership of Standard was split between six individuals:
- Dave Wiskus
- Brian McManus (Real Engineering)
- Alex (LowSpecGamer)
- Devin Stone (Legal Eagle)
- Thomas Frank
- Sam Denby (Wendover Productions)
As I mentioned previously, some ownership of Standard has since been offered to other creators through stock options, but it’s unclear how much or what type of stock those options represent.
The firsthand information about Nebula and Standard Broadcast was turning out to be less useful than I had hoped, but the documentary did provide one valuable lead: the investment from Curiosity Stream. “While the exact numbers are not public, what is is that they bought a significant minority stake that valued Nebula, the company that did not exist just three years prior, at over $50 million.” That’s a little vague, but an investment and a valuation number was something I could start to do math with.
Whenever a company makes shares available for purchase, they have to file that information with the SEC through what’s called a Form D notice. Watch Nebula LLC has only ever made one Form D filing so it’s not hard to find the investment. Nebula sold precisely $6 million worth of shares, so if we take $50 million as a lower bound for the valuation we can calculate the upper bound of what Curiosity Stream owns. $6 million is 12% of $50 million, so Curiosity Stream could own as much as 12% of Nebula. There’s also another $6.5 million that was authorized but not sold (at least at the time the Form D was filed).
The Reddit AMA
Following the announcement that Nebula was taking investment from Curiosity Stream, Standard Broadcast’s CEO did an AMA on Reddit. I figured this would be a good place to look for more info about that investment, especially since the answers came straight from the top.
One user was curious about the leverage Curiosity Stream would have over the platform.
Oddtail: What, if any, leverage CS has over Nebula and how it operates? If none, what does CS get in return for the investment?
dwiskus: CS gets a board seat and a percentage of ownership, meaning a cut of future profits. They get a vote on things like budget approval, but operational and creative control remains with us. Practically speaking CS is well-aware of our plans, and how our plans will significantly benefit them. They aren’t interested in changing our course or slowing us down even if they could. Quite the opposite.
__law: can we know what % cs own? And who are the other owners of the company?
dwiskus: Percentages weren’t disclosed, but it’s a minority stake. There are no other investors.
This confirms that Curiosity Stream does own a portion of Nebula (which is undeniable based on the Form D filing I talked about before), but it also adds that they get a single board seat out of the deal. Furthermore, and possibly more importantly, this confirms that the board controls the budget.
Another user wanted to know about the relationship between Standard and Nebula.
PatrickStirling: are Nebula and Standard completely separate entities? or is one technically under the other?
dwiskus: Nebula is a subsidiary. Standard holds the majority of Nebula LLC equity.
If we assume that words mean things (specifically the word majority in this case), this confirms my earlier suspicion that Standard owns more than 50% of Nebula.
Another user seemed to be connecting some of the same dots I was and started asking questions about dilution. In case you’re unfamiliar with dilution, when companies take investment they typically do so by issuing new shares for the investor to purchase. This means the total number of shares increases, thus lowering the value of any existing shares as a percent of the total.
yolomatic_swagmaster: How does Curiosity Stream’s investment affect the other creators in terms of them being part-owners? I’m not super clear on how that works anyway. but wondering if anything changes for their set up.
dwiskus: Complicated question, but in short: creators still have full control and have lost no equity value.
gurgelblaster: …but the equity
share is lower?
dwiskus: Nope! Like I said, it’s complicated.
And once again we have a contradiction. We added new shares but nobody lost equity. How is that possible? “It’s complicated”.
Some Actual Answers
At this point I’d grown tired of non-answers. I’m not ok with impossible equity numbers being hand waved away as “a new kind of corporate governance”, “financial and legal wizardry”, or just simply “complicated”. These are not the kind of answers people who are being entirely truthful give.
Luckily there was one other place I could think to look for hard numbers. The Wendover documentary may have claimed that “the exact numbers aren’t public”, but that’s only partially true. Nebula is a private company, and as such only has to file the unfortunately sparse Form D when offering stock. Curiosity Stream, on the other hand, is publicly traded and has to make much more detailed quarterly filings about all their financials. This includes their investments.
So what does Curiosity Stream’s SEC filing say about the Nebula investment?
Watch Nebula LLC (“Nebula”)
On August 23, 2021, the Company purchased a 12% ownership interest in Watch Nebula LLC for $6,000. Nebula is an SVOD technology platform built for and by a group of content creators. The Company is committed to purchasing an additional 13% ownership interest through eight quarterly payments of $813, which after each payment, the Company will obtain an additional 1.625% of equity ownership interests. Prior to the Company’s investment, Nebula was a 100% wholly owned subsidiary of Standard Broadcast LLC (“Standard”). The Company obtained 25% of the representation on Nebula’s Board of Directors, providing the Company with significant influence, but not a controlling interest.
So let’s go down the list of what we can learn from this:
- The initial $6 million was for 12% ownership
- They had offered enough stock for a potential ownership of 25%. (that’s the additional 6.5 million from the Form D)
- Standard Broadcast owned 100% of Nebula prior to this investment
- Curiosity Stream controls 25% of Nebula’s board
From this we can infer:
- Nebula was valued at exactly $50 million, not over
- Nebula has 4 board members
- The creators directly own 0% of Nebula
As a side note, if they want to say owning part of Standard Broadcast means you own part of Nebula, then owning part of Curiosity Stream also means you own part of Nebula. Since Curiosity Stream is partly owned but venture capitalists, that would mean that Nebula has in fact taken VC investment. They don’t get to have that cake and eat it too.
How Can 0% Be Right?
At this point I got frustrated and typed something like “Nebula creators don’t own any of the company” into Google. This was mostly just me shouting into the void. I didn’t expect to get good results from a query like that, but somehow those turned out to be the magic words that returned the one firsthand source I hadn’t found yet.
It turns out the answer can be found in
an episode of the Decoder podcast. After all that time I spent digging through cagey answers and SEC filings, it turns out Dave Wiskus just straight up tells us (assuming you know what to listen for). It also turns out that the reality is neither novel nor particularly complicated.
There is also a structure in place that if Nebula is ever sold, 50 percent of the proceeds go to the creators as a pool. It is a form of what is called shadow equity.
Shadow Equity (sometimes called Phantom Stock) isn’t real stock. It’s basically just an IOU that’s worth the same dollar value as the actual stock. The creators will get paid 50% of the proceeds in the event the company sells, but legally they don’t actually own any of the company.
The Final Tally
So what does that leave us with? Who actually owns Nebula? After looking through
a more recent SEC filing to figure out how many of those subsequent stock purchases Curiosity Stream actually made we’re left with the following final numbers:
- 83.125% Standard Broadcast
- 16.875% Curiosity Stream
- 0% The Creators (Directly)
Conclusion
Unfortunately, without access to one of their contracts, we can’t know for sure what power the broader group of creators actually has. It’s possible that the terms are so favorable for creators that their shadow equity is as good as actual ownership. It’s equally possible, however, that the system was set up in order to keep any meaningful power away from the creators. If the creators don’t control the board then creators don’t control the budget, which means they don’t control the platform. While some creators may have the means to buy into the stock options offered by Standard Broadcast, that only serves to create a class hierarchy divided by wealth. Even if the contract terms are stellar, that’s still a system that completely undermines the progressive values of the creators who make the platform great.
Nebula is trading on the idea that it’s a creator owned platform and isn’t like those other tech companies that take VC funding. They utilize the language of cooperatives in order to craft an image that appeals to their left leaning audience, but it appears actual ownership lies primarily in the hands of six (mostly white) men. When you pull away the progressive veneer it turns out Nebula probably
is just another tech company. While they may be operating in the best interests of the creators for the moment, I wouldn’t be surprised if that doesn’t continue forever.
