tl;dr: Today, creators sit in a vulnerable middle space: not employees (with legal protections), not fully independent (like traditional vendors who diversify risk across clients), but a new kind of worker - structurally exposed, with unpredictable revenue-shares usually making up the bulk of income. The unique exposure of creators mandates a new set of protective standard practices across the revenue waterfall.

A note before we begin:

For a long time, I planned to tell my story – to go back, defend myself, and refute all the false claims made about me.

But in the eye of the storm, September 2023, one of my mentors gave me some advice I have come back to, over and over:

“Your reputation isn’t what people say about you in any given moment; it’s how you truly behave, hour after hour, day after day, over the course of years. The truth will emerge in time.”

One day, I may still tell the story in detail. If that’s something you're interested in, you can sign up for my newsletter to be notified. I've also published a concise overview here.

None of the following is meant to be an excuse for what happened to Kast. Others survived, we didn't, and that's due to my own business failings – simple as that.

But that’s not the focus of this letter.

I believe that if you continue to do the right thing in each moment, with each decision, the rest will take care of itself. Ignore the noise, focus on the work at hand, and do the right thing for the people who depend on you today.

That's what I've been doing for the last two years. And that's what I'll keep doing.

But today's letter is about something bigger than me.

The Problem: Creators Are Uniquely Vulnerable 

If you don’t know me, I’m the guy with whom “everyone in the podcast industry was mad” in 2023.

I founded Kast Media in 2016 as a podcast production company. We added advertising sales for podcasts around 2018. We grew rapidly, and within two short years, we were the ninth-largest podcast network. We paid out creators over $30M from 2019 - 2022.

But then, in the latter half of 2022, things took a turn for the worse.

I believe in ultimate accountability, and many people were hurt under my leadership. That is a responsibility I accept. 

I am sorry to the people who were hurt in a variety of ways during this time. It is not what I intended.

But I’m not here to seek forgiveness. Today, I hope that my difficult learning journey and both the fair and the unfair criticisms can become a catalyst for change in the Creator Economy.

Recently, a judge entered an order confirming Kast's Chapter 11 bankruptcy plan. If you’ve ever experienced your company going through a Chapter 11, you’ll know the odd celebration of a plan confirmation. If not, you probably can’t imagine the tug of contrasting emotions: gratitude for a process that allows you to finally move forward productively, and yet tremendous sadness, as this is not the way you ever imagined events unfolding as you dreamed and worked countless hours over years' worth of time building your company. 

A complicated sense of vindication, even as the scars will remain for a lifetime.

However, it made me reflect on a much more hectic moment in my life: around September 2023, a YouTuber who goes by Coffeezilla (real name: Stephen Findeisen) released a video about me. He accused me of “stealing from” and “defrauding” creators. 

To state it plainly, if that were true, the bankruptcy court would’ve made it clear, and the outcome could have been very different. You see, in Chapter 11, you hand over everything – years of bank statements, contracts, emails, texts, Slack threads, internal memos. Every transaction is examined, every contract dissected. And by the people with the biggest vendetta against Kast and against me personally. 

And after all of that, over more than a year, thousands upon thousands of pages of documents, and answering questions under oath for probably a good 16+ hours total, the court found no evidence for the accusations and approved Kast’s restructuring.

I’m grateful the court confirmed our plan after a long, invasive, and thorough investigation. That confirmation speaks volumes.

But Stephen posed an important question: 

“Why does this keep happening to Creators?”

To attempt to answer this question properly, we must first understand how bankruptcy actually works.

Bankruptcy

I look back fondly on a time when I could proudly say, “I don’t know anything about how bankruptcy works.” Sadly, that is no longer the case, so let’s dive in:

You can run a business provided you have enough cash - either in the bank, generated from profitable operations, or raised through investment - to avoid running out. At the same time, you have receivables (which are debts owed to you by your customers) and payables (which are debts owed by you to others - your vendors). A snapshot of this in time is called your Balance Sheet.

If revenues decrease unexpectedly, you need to cut - expenses - faster than revenue declines. But cutting costs can be more difficult than it seems, depending on how much your business model relies on hard (vs. flexible) costs (more later), and especially when measures like layoffs often include severance costs, which near-term increase expenses. Alternately, you need to find some other way to get cash in the bank, often through new debt, as you try to weather the storm.

However, bankruptcy is designed for the moment after you have tried and tried and tried to right the ship, but failed.

You don’t reach the point of bankruptcy without first attempting practically every measure possible to avoid it, which usually includes incurring more debt and stretching payables across all vendor types to preserve cash. 

At this breaking point, the business is “overleveraged” - it has more debt than it can reasonably repay through its ongoing operations.

When you file for bankruptcy protections, the courts effectively say “pause!” to this cycle. Then, during the bankruptcy, the courts go through the accounting records, examine them, and make calculations, ensuring that everyone receives fair treatment and is paid an appropriate amount based on various factors. Each party that is owed money is paid some amount less than the full amount owed based on a formula that has been decided as fair through enacted laws.

The bankruptcy process ultimately protects the parties who are owed money. Without bankruptcy, an over-leveraged business would be forced to prioritize payments based not on fairness, but on pressure - rewarding those with the loudest voice, most aggressive lawyer, or a cousin who’s not above showing up in person to “renegotiate terms.” 

In my case, I was given the following advice over and over: “just pay X, otherwise they’ll make your life hell.” Implicit in this advice is that X is paid instead of others, because they have some leverage through the size of their platform, their ability to fund (or in other ways deploy) litigation, their emotional state of mind, etc. 

However, bankruptcy, enshrined in the Constitution, establishes a framework for distributing what is available fairly to those who are owed.

This is the sad, unfortunate reality of bankruptcy. To quote the judge in Kast’s case,

“Nobody gets here without making mistakes.” 

Too true.

But Stephen’s question surely applies to all bankruptcies, right?

I doubt Stephen is advocating for the dissolution of bankruptcy law, as it serves an important purpose as outlined above. Rather, he seems to be making a point that creators are different from other vendors.

But what’s so special about creators? 

A lot, just ask them…

But seriously, this is the crux of the point: That there is, in fact, something unique about the plight of the creator. 

A New Type Of Worker

Having lived through a collapse that exposed systemic flaws that have and will continue to allow this situation to happen again and again, I’m uniquely positioned to help start a conversation about structural protections for creators.

The best revenue potential for creators often comes from voiced-ads, ads that are created and (in podcasting) voiced by the creators themselves. “Hostreads.”

To effectively sell hostreads, exclusivity is typically required to avoid market confusion, which will degrade revenue potential for the creator. As a consequence, all of a creator’s hostread revenue is often tied up with one party, leading to an exposed financial position for the creator.

At the end of his video, Stephen dramatically states to creators that “you don’t need these people.” I can only assume this is because Stephen comes from a YouTuber background, where, given enough success, YouTube can itself provide a meaningful source of revenue to its creators through the in-house advertising it sells and payments based on its premium user view time.

That is not the case in podcasting, as historically, none of the distribution platforms sell advertising across all podcasts like YouTube does. Podcasters operate within an ecosystem that has always necessitated hostread advertising and advertising through third parties to fund ongoing production. 

But even beyond podcasting, creators who specialize in all mediums benefit from selling their own brand-direct advertising above and beyond the revenue that their platform may facilitate, because rates per impression are higher for this premium type of advertising, and distribution platforms don’t offer this kind of monetization in-house. 

As a creator, you have to work with a third party to sell these premium advertisements.

If Stephen knows this, is he then making the argument that creators should avoid the smaller, independent advertising firms when it comes to which third parties they choose to work with to sell their hostreads? Perhaps as a podcaster, you should seek to only work with iHeart, Sirius, and other multi-billion-dollar corporations. This should safeguard your receivables better, as larger corporations have a lower likelihood of failure, although there is still always some risk.

And yet, in practice, creators often find that large corporations have limited capacity to actively focus on high-yield monetization efforts for smaller podcasts, and so do a poorer job of monetizing their content than would a smaller, more niche-focused firm. This dynamic tends to play out across industries beyond podcasting. It’s just the way the world works.

In all industries, it’s a sad cycle to witness when growth leads to consolidation among the top companies, the acquisition or suffocation of smaller startups and businesses, and barriers to entry increase, resulting in a new, less varied and vibrant ecosystem replacing the old one. 

You can see podcasting heading in exactly this direction, and I’m sad to acknowledge that the story of my own business failings at Kast may have contributed to the trend.

Creators are Unique

We now come to the ways in which creators are truly a unique category of business vendor.

Every business has the experience of being a vendor to another business, and then needing to write off receivables, either because a customer can't pay or has gone bankrupt. In accounting, it’s called “bad debt.”

But when this same dynamic takes place in the Creator Economy, specifically to a company whose business model is to sell hostreads for creators, the consequence of this bad debt can be far more severe for the creator vendors, as their receivables are necessarily (as described above, due to the exclusivity component) highly centralized with one company which now cannot afford to pay them.

Now, we get to one further escalation of creator exposure when it comes to advertising: payment terms. “Payment terms” in business refers to the amount of time contractually allowed for a company to process payment for its payables. Extended payment terms from advertisers and the damaging effect have been well - documented - over - time, some pay after 4 months, some after 6.

But just like a real estate transaction, both advertisers and creators need representatives. For advertisers, these are usually referred to as agencies, and for creators, they’re either called agencies or networks. While some advertisers buy directly, and some creators sell directly, the vast majority of advertisers and revenue-earning creators find that their business is best served by working with a representative.

Even after the failure of Kast, I believe that all of its creators migrated to another representative who served essentially the same function as Kast, demonstrating the necessity of the role.

This effectively creates a 4-party revenue waterfall. Even when each party adheres strictly to its contractual payment terms, the time built up throughout the process is often very high.

But unlike a real estate transaction, best practices have not been established for the mechanics of cashflow in the creator industry. 

In 2023, we were accused of systemically paying Creators late, building up balances with creators, and then using those balances as leverage against creators. In transparency, I certainly have regrets when it comes to certain creators, and the extent to which their payable balance had accumulated by March of 2023. 

However, after analyzing Kast’s accounting records, we found that we paid people on average within about 30 days across the board prior to the advertising downturn in the second half of 2022, which is much better than what is typically found in the industry.

So why the perception that Kast had leveraged its creators by running up balances?

Kast’s payment terms were based either on a set number of days (usually 30) from the end of the month in which we were paid by an advertiser, or a set number of days (usually 60-90) from when an ad ran. Our average days to collect our receivables during this period was 67, so both payment terms led to similar payment timing for creators in practice (90-150 days after the ad runs).

Beyond the aspect of the time it takes for a dollar to get all the way from the advertiser to the creator, this also exacerbates the problem of the size of the balance, which is appropriately carried at all times owed by the creator representative to the creator, for both collected and uncollected revenue. 

Inevitably, this balance will be approximately 3 - 5+ months' worth of “debt” to creators in the form of payables. This isn’t debt based on cash already collected – it’s the entire waterfall of revenue working its way through the system. And in any distressed financial situation, that payable balance becomes highly vulnerable. Because if you can’t pay one vendor, then in the name of fairness (and potential bankruptcy scrutiny), you can’t pay any of them.

Say you spend 60 days trying to make ends meet to save your company, unable to meet payment obligations, before giving up, and all of a sudden, your creators have been working for nearly half a year (5 - 6 months), and that entire balance is at risk.

Stretching Payables

Personally, I live with guilt over the way Kast stretched out its payables to certain creators as market conditions worsened and we were unable to make ends meet. Lawsuits - began - to fly across the industry as creator representatives were forced to renegotiate and restructure contracts and debts and pull offers that had made sense for the previous era, but that they now knew would lose money in the changed market conditions.

Stretching payables is common at all levels of the creator revenue waterfall, and is amplified the lower in the waterfall you go. 

To provide protection for both creators and smaller advertising representation firms, a new set of standards is required to protect against a system that can leave creators exposed.

When you decide to purchase real estate, a “closing date” is set. At this moment, the buyer deposits money into escrow – a third-party company designed to facilitate this role. When the transaction is fully consummated, the buyer will deposit the remaining down payment into escrow, which will be disbursed to the seller upon their release of the property deed.

Imagine the potential for bad actors or simply weak links if a real estate transaction were structured like the Creator Economy: the entire amount of the transaction would be at risk the entire time it was passing through the various brokers’ hands, and for no good reason. 

Yet this is what we do in the Creator Economy.

Why do we do this?

The Solution: Protect the “Revenue-Share Creator”

At this point, earlier drafts of this letter included a brief history of Kast – but it was unnecessary to the point herein. If you want that writeup, you can read it here.

For this letter, it suffices to state that creator deal structures have evolved to take many different shapes and sizes. Some are simple pass-through revenue splits, while others require Minimum Guarantees (MGs), production subsidies, producers and/or studio time provided, or other types of guaranteed payments.

Commensurate with the varied deal types, the associated risk distribution between creator and the creator-representative varies, requiring separate classification and different protections.

A distinction should be drawn that has not existed to date, so that certain standard operating procedures can be put in place to protect a category of workers who generate gross profit for a representative while carrying their own operational and funding risk.

My proposed term: The “Revenue-Share Creator.”

Perhaps the term could use some workshopping, but it’s good enough for today.

The Revenue-Share Creator is:

• Represented by a network, agency, or broker - not employed by it.
• Owed a contractual share of gross (not net) receivables generated by the sales of their content.
• Not owed a minimum guarantee, production subsidies, or other upfront cash investments.
• Not adding operational risk to the network/agency beyond the simple obligation to route earned revenue.

Why the distinction matters: 

Today, creators who operate under pure revenue-share models are often treated no differently from creators whose payouts or production costs are fronted by creator networks.

There is likely a reason for this lack of distinction, and it has to do with company valuations. It is too much for a letter that is already way too long, so I’ll save it for later.

A More Protected Path Forward

Here, I will outline some of the structures that could protect the Revenue-Share Creator in the long run. However, I do not pretend to have all the answers, nor do I claim to understand the intricacies of anyone’s business but my own. 

I also do not pretend to know any adjacent creator industry nearly as well as podcasting, but I understand that many similar dynamics are at play, so I hope that the conversation that begins here in podcasting can flow through to other creator industries, and similar protections can emerge.

This is a dialogue, not a prescription.

To that end, I propose the following as a rough sketch:

Potential Certification Standards for Revenue-Share Creator Representatives

Revenue-Share Creators should be able to demand certain protections upfront when signing with their representatives. When things go wrong, it's too late – the structure needs to be put in place from the beginning of a creator / creator representative relationship.

I propose that there should be a checklist that will certify a creator representative. 

This certification will help Revenue-Share Creators select a representative more easily, knowing which ones have chosen to abide by the standards established by the community to ensure that their revenue receives best-in-class protections, given the risk they are undertaking by operating as a Revenue-Share Creator.

To start the conversation, here are some ideas about what could be required for certification:

1. Fund Flow
   1. Funds associated with the creator’s campaigns must be deposited directly into a designated creator trust account, separate from the representatives’ operational accounts.
      1. If funds are sent to the representative’s operating account (such as bulk payments for multiple invoices), they must be routed into the trust account immediately.
   2. Creator trust accounts must be held at a U.S.-domiciled, FDIC-insured institution, properly designated.
2. Timely Payout
   1. Provided funds are cleared from the advertiser, disbursements must originate within an agreed period of time after the creator’s deliverable is confirmed.
      1. Deliverable depends on the contract and may be the ad itself, the impressions delivered, or some mix of the two.
      2. Deliverable verification can occur via advertiser confirmation, third-party platform reporting, or mutual agreement.
      3. Disbursement includes both the creator’s share and the representative’s share – originated simultaneously.
3. Independent Audit
   1. All certified representatives must complete an annual independent audit of their creator trust account operations.
   2. A summary report must be made available to Revenue-Share Creators upon request.

An independent body could be established to conduct audits, issue certifications, and maintain a public-facing list of compliant entities.

In sum, protection of this new category of Revenue-Share Creators requires certain operational practices that have not been in place to date. Because of my own experience and the distressed financial position I have led a company through, I understand the problems and the embedded incentives that lead to these ongoing systemic issues, and I hope to start a conversation that ultimately improves the situation. 

Meaningful change never happens in a vacuum.

Today, I am inviting Creators, advertisers, business leaders, platforms, agencies, lawyers, networks, into a dialogue.

Let’s learn from the mistakes of the past and build something better, stronger, and more resilient together.