This year, the company formerly known as CollegeHumor nearly doubled its streaming subscribers to reach the mid-six figures and doubled its development output with a lineup of seven new shows set to debut in 2024.
While those stats are small in comparison to the latest from Netflix, Disney and Warner Bros. Discovery, the growth seen at Dropout over the past 12 months is in no way modest and enviable on a relative scale.
“There’s still only seven shows on Dropout — nine if you’re generous about what constitutes a show,” Dropout CEO Sam Reich told Variety. “And we’re somewhere between seven and 10 times the size that we were when IAC dropped us, from an audience perspective.”
Dropout — which rebranded from CollegeHumor in September, choosing to label the company as a whole by the name of its five-year-old indie streamer and primary business — did this by “really doubling down” on its most successful formats, including Dungeons & Dragons roleplaying game show “Dimension 20” and oddball competition “Game Changer” (which just released its Season 6 trailer Monday). Reich, who hosts “Game Changer,” notes there were also “a whole lot of new users that flooded into the platform and continue to flood into platform” thanks to its latest hit game show, “Make Some Noise,” also hosted by Reich.
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Three years after Barry Diller’s IAC dropped Dropout, selling the brand to then-CCO Reich just before the COVID-19 pandemic hit, Dropout is not only profitable, but profitable to the point it went through its first round of profit sharing with employees (the company has 17 full-time staffers and will be adding more at the start of 2024). And Reich sees more growth areas ahead for the streamer as bigger companies slow down amid the end of Peak TV.
“This era of hyper-premium content, $100 million dollar budgets on streaming shows, this era of AI, what it’s going to create is a counter market and the counter market is going to be for grass-fed organic content, where you know the names of the cows producing your milk,” Reich said. “That’s what we create and people respond to.”
Here, Reich speaks with Variety about the state of Dropout and where it’s headed.
You switched over from CollegeHumor to Dropout a couple of months ago — what has the transition been like for consumers?
The truth is, from a business perspective, that emphasis has been on Dropout for years now. So the conversation around CollegeHumor was more like, “Whatever happened to CollegeHumor?” for folks who didn’t know that Dropout was here and thriving. I think the danger of getting rid of the name, whenever you’re getting rid of a name that has that kind of historical significance, where it’s like, you can talk to someone in their 40s or 50s and they might know what CollegeHumor is, but they’ll have no idea what Dropout is, it’s almost sentimental. It feels in some ways there might be some folks who are less aware of us now that we’ve shed that snake skin. But ultimately, I’m happy we did. I think it was time to evolve.
What was the turning point, in terms of growth, after you purchased it from IAC in 2020?
We went into this without expectations. We took over a company that was hemorrhaging. We went from 105 employees to seven employees overnight. We knew we were going to take over the company but we only signed our deal with IAC two days before lockdown here in L.A. It literally could not have been a worse time to take over a company and then we treaded water for six to eight months. We were losing a little bit of subscribers and then gaining those subscribers back but we weren’t growing meaningfully. Then came vertical video on TikTok and Instagram Reels and YouTube Shorts and that’s when we started to grow.
We just did our first ever profit share, which is something we’re really proud of. We took a portion of our profits for the year — which, we were profitable for the year, it was a privilege to be able to do this — and we redistributed it among anyone who had ever made $1 with us over the course of the year. So that includes cast and includes crew, includes folks who merely auditioned for us, because we pay folks to audition for us. But we had this sort of like minor moral crisis where we were like, we really don’t want to promote the fact that we did this too loudly. Because the point is to do good by these people. It’s not to turn it into a PR stunt.
The last subscriber count was reported at mid-six figures. What is that number in relation to last year?
This feels wild to say, but we’re ending the year with nearly double the amount of subscribers that we began. If we get into financial projections for years beyond, we’re not projecting that kind of growth. We actually projected very conservatively; we’ve learned our lesson from the corporate days. And we want to prepare for a very conservative future and then surprise ourselves. But, man, did we surprise ourselves this year.
Bigger companies are shifting focus from adding more subscribers to reducing churn. Alongside your growth, what does Dropout’s churn look like?
Controlling every part of this process, being the folks who are creating the content, as well as running the platform and distributing and marketing it, gives us the ability to optimize that a lot of traditional streamers don’t have. So when we have a show that’s successful, we can imagine what would it mean to have the show going on all the time. Our biweekly release schedule helps with that, too, which is more akin to the world of podcasting than it is akin to the world of streaming. So, “Dimension 20” is on more often than not. If we can get a user interested in “Dimension 20,” we’ve got them. These days, if you’re a “Game Changer”/”Make Some Noise” fan, we’ve probably got you.
The average Dropout user right now sticks around for a year and a half, which is a pretty wild number. Now mind you, annual is a big part of that mix and annual skews the number — about a third of our subscribers are annual subscribers. So if we’re looking at just our monthly subscribers, that number is lower; a little less than a year, maybe, but it’s still healthy. Our goal obviously is to try to convert as many people to annual as we can because those subscribers are sticking around for longer.
Do you have plans to increase subscription price in the future?
Right now we’re thinking that we might increase the price by like $1 every couple of years, which is so slow. Part of that is we feel like Dropout users, by and large, are folks without a whole lot of disposable income and the price point really does make a difference to them. As other streamers ratchet up their prices, we feel like we can look differentiated by keeping our costs low. Mind you, when we do that, we’ve also decided to keep pricing intact for everyone who is an existing subscriber. So as prices go up, they don’t go up for anyone who is subscribed today, which creates another incentive not to churn.
What are your biggest goals for 2024?
As far as the future is concerned, we are, and probably will forever be, focused on finding the next big show. I would say that development has been slow for us partially because we’re still in the process of developing that discipline. So over the past year, we did a huge amount to try to lock in, what is our development philosophy and process? And we will be premiering six shows in the next six to eight months. Our goal is to release as many as two shows a quarter going forward and then using what stands out as the big hits to try to find the next “Dimension 20,” “Game Changer,” “Make Some Noise.” We have a mild ambition to try some other adventurous things. Like maybe a card game, maybe a video game. None of that is our core focus, and we’re trying not to split our focus too much.
What are your thoughts on M&A opportunities, especially based on where you started?
As you can imagine, as word of our rising like a phoenix from the ashes has gotten around, there have been more folks sniffing around us. A little bit less of a focus on the A, a little bit more of a focus on the M. We, for the time being and I think for the considerable future, have no interest in losing our independence. I don’t think that’s necessarily a savvy business decision. It is way more to do with the lifestyle we want. I had 10 bosses over the course of 15 years, and I’m finally in charge. So I’m not eager to get someone in above me. And that means outside money. So we’re trying as much as possible to keep this simple and within the family.
Dropout was able to make content during the writers and actors strikes over the summer, but at first stopped in solidarity with the guilds, right?
Yes, solidarity — but also we just had bad information. There were a lot of people being like, “Dropout deliberately stopped producing content out of solidarity with the strike.” Nope! We just thought we couldn’t; we just thought we weren’t allowed. And when we learned that we could, we were obviously excited because we saw an opportunity, again, to differentiate ourselves from the big players and our attitude has always been as long as we’ve been in charge, how do we do a little bit better by our people than anyone even expects and is the precedent for our industry.
You’re submitting “Game Changer” up for a Peabody Award this year. What was the reasoning for that one in particular?
We do a kind of nontraditional storytelling on “Game Changer.” We hope they can appreciate just how out-of-the-box the show is, as well as the ways in which we’ve made capitalism the bad guy on “Game Changer.” It’s kind of interesting social commentary. Ultimately, it is about finding a new audience. I think if anything were to ever happen to us, I would probably sob heavy tears out of a feeling of being legitimized.
I know “Dimension 20” is hosting two live shows in the U.K. Are you planning on focusing more on live events?
We’re really dipping our toes in the water slowly. We sold 12,000 seats for the live “Dimension 20” in less than 24 hours. And I think that clued us in to a hunger for that stuff, which we didn’t necessarily know is there. I think commercially, again, we are so scared of taking our eye off the ball, that programming is always going to be like where 90% of our focus goes. I wouldn’t be surprised if we start flirting a little bit more with live events over the course the next few years. I think the ultimate ambition is probably something akin to like a Dropout Con. That could be like five years away at this point. My personal ambition is to take shows to the Edinburgh Fringe, which is my favorite thing on the planet. We’ll see if I can convince the other partners that that’s worth doing.
This interview has been edited and condensed.
