Angel Studios CEO on the Audience-First Model Driving Growth

SPEAKER_1 (0:00)

Joining us now is a smaller player in this space, Neal Harmon, the co-founder and CEO of Angel Studios. Neal, thank you for being with us this morning. For our viewers who aren't familiar with Angel Studios, can you just tell us a bit about yourself?

Neal Harmon (0:14)

You bet, Marlee.

First off, my wife and I have been receiving Schwab statements for a long time. It's an honor to be on with you today, Marlee.

Angel is a response to Hollywood getting increasingly out of touch with families like ours. When we founded this company, we were looking for where are the classic films like 12 Angry Men, It's a Wonderful Life, Sound of Music. Where are these films that just are intergenerational, that bind the generations together and make our culture a better place? We weren't seeing those coming out of Hollywood, and so we set out to solve this problem by asking the audience what they want, and so the way that Angel Guild works, and the way that we make money is we have a community of approximately 3 million Angel Guild members, and they get to be part of the green lighting process. They vote on every single release prior to it coming to Angel, and as the CEO of Angel Studios, I can't bring a titled Angel without their permission. So what that means is that Angel has a higher audience satisfaction number on Rotten Tomatoes than Disney, Paramount, A24, Netflix, because we listen to the audience and respond to their needs and give them what they'd like to see.

SPEAKER_1 (1:41)

And Neal, this is a very different model from the other streamers as you welcome this participation, and you are seeing explosive growth. When I was looking at your numbers, you were in Q2 of 25, about 1.3 million. You doubled that by Q2 of 26 Your revenue also higher. It was 111.7 million. That was up more than 27%.

However, you're still reporting an $18.5 million operating loss, and you've got a $23.8 million net loss. As you look at Angel going forward, when does that growth translate into sustainable profitability?

Neal Harmon (2:15)

So what happens, Marlee, in this business is when you have people who have been subscribers like they have on Netflix for many, many years, the retention levels go up, and Angel's very new. So we launched the productized version of the Angel Guild in late 2023

So we're just into this three years, but in those years, we grew from 550,000 members to 2 million members to approximately 3 million members today. And the base upon which we're growing and we're building the business is growing. And in fact, this year, we're operating cashflow positive, we're growing within our means, we're growing very wisely, but we're growing very quickly. And we believe that's because of the way that the audience is responding to Angel's message. And also because there's two other unique things about Angel that are helping us achieve this kind of growth within our own means. Those are number one is that we share the upside with the filmmakers.

We've paid out almost $300 million to our filmmaker partners, and that's growing exponentially alongside of the growth of the Angel Guild. And number two is that we set a north star. So Guild members choose stories that are values driven. There are stories that give you hope, that make you feel like you can make the world a better place, and those are the kinds of stories that society needs right now in a world of uncertainty. So we're very excited that this year our base has grown large enough that we're able to grow within our own operating cash flows.

SPEAKER_1 (3:49)

I'm glad you're highlighting some of the differentiators, because it feels like there's so many streaming services to choose from right now, and you sharing this Guild membership revenue with the intellectual property owners is a big differentiator. How does that deliver a better economics for the filmmakers? Also, Neal, what is preventing one of the larger streamers from simply replicating this?

Neal Harmon (4:14)

The benefit to the producer and to the audience is that they both own the outcome, right? The audience gets to help decide whether or not a project is ready for primetime. And then the filmmaker is, instead of trying to sell Netflix or Prime or Apple, one of their product, and then as soon as it's purchased, that they're out of the equation.

The filmmaker instead, with Angel, is saying, how do I make sure that this title, this streaming series makes audiences very, very happy long into the future? Because I get to share in the upside of all of the dollars that come in to the Angel Guild and all the dollars that Angel makes. And that aligns the audience and the filmmakers together. They're able to have conversations together and able to make one another happier.