YouTube stars Rhett and Link think this is their moment

LOS ANGELES — In high school, Rhett McLaughlin and Charles Lincoln Neal III, known as Link, met in a North Carolina cow pasture to swear a blood oath. They sliced their hands with sharp rocks and vowed to do big things in showbiz — even though they had no connections to Hollywood.

“We weren’t trying to emulate any particular comedy filmmaker,” McLaughlin said. “We were just so in the dark about the way the industry worked.”

About three decades later, McLaughlin and Neal — known as simply “Rhett and Link” to their fans — have made good on their promise. The duo hit it big on YouTube in its early days and eventually built an online entertainment studio with videos that rack up more than 700,000 hours of watch time daily.

Now, they’re looking to expand. Their company, Mythical Entertainment, has tapped the Raine Group, a merchant bank, to explore selling a stake in the business, and it has held talks with companies including Spotify, connected TV giant Roku and Candle Media, the company run by former Walt Disney Co. executives Kevin Mayer and Tom Staggs.

A deal would be another sign that the creator economy — a catchall term for the expanding industry of online entertainers — is becoming a more fertile ground for investment. Moonbug — the company behind the wildly popular YouTube kids’ TV franchise CoComelon — agreed to sell to Candle Media last year for $3 billion, more than triple what Candle Media paid to acquire Reese Witherspoon’s Hello Sunshine media business. Reed Duchscher, the manager of YouTube megastar “Mr. Beast,” is starting a business focused on online creators with $100 million in funding from TCG.

For Mythical — which has never taken on outside funding — new investment could mean a chance to acquire other online creator businesses with stars who make shows about technology, cooking, home decor and the outdoors. McLaughlin, 45, and Neal, 44, are pitching potential acquirers on replacing traditional TV content with relatively inexpensive shows produced by creators who can cultivate loyal audiences.

Mythical, which is profitable, is on pace to generate about $40 million in revenue this year, according to two people who would only speak anonymously to discuss the company’s private financial results. That makes Mythical a heavyweight among its peers, but small compared with Netflix, Disney and Comcast’s NBCUniversal.

In some ways, McLaughlin and Neal are unlikely media entrepreneurs. After completing engineering degrees at North Carolina State University, they got technical jobs — McLaughlin as a civil engineer and Neal in industrial engineering.

The pair thought they had a big break in 2007, when they were selected to host “Online Nation,” a CW show that introduced popular web videos to TV audiences. McLaughlin and Neal held a huge party for friends and family to screen the first episode, but the show was canceled after a month. They began shooting a precursor to “Good Mythical Morning,” their flagship show, in an old, disused hair salon in 2011.

More than a decade later, Mythical has emerged from the salon. Its headquarters — complete with a studio kitchen, a workshop and a shuffleboard court — is a nondescript, 20,000-square-foot warehouse in the Los Angeles area that eschews signage to ward off overzealous fans. The studio includes a costume room so co-hosts can change quickly to shoot several episodes daily, with episodes that require eating spread out over the week to lighten the caloric load.

The company serves up a smorgasbord of comedy, confessional podcasts and reality-TV-inspired taste tests, seasoned with earnest humor and fronted by hosts with camera-ready hairdos. (Hair-loss prevention company Keeps was once a sponsor.)

“Good Mythical Morning” has about 18 million YouTube subscribers lured by dare-you-not-to-click titles (“We Tried EVERY Flamin’ Hot snack,” blares one recent video, with a thumbnail of a wide-eyed McLaughlin wreathed in chips.) The opening titles of the show include fantastical elements like dragons, and the fans call themselves “mythical beasts.”

Online video businesses that rely on advertising, as Mythical does, have faced significant challenges in the past. An early crop of companies, called multichannel networks, went under when they couldn’t wring enough profit from ads sold across large groups of YouTube creators. One such network, Defy Media, abruptly shut down in 2018, leaving the creators in its network scrambling to find new homes.

Among those creators was Ian Hecox. He was at a meeting in 2018 to discuss the future of his comedy video channel, Smosh, when he received an email saying that Defy Media was ceasing operations immediately. Soon after, the looting started.

“We had a wardrobe room and a prop room, and people were going, ‘Does anyone want this?’” Hecox recalled.

Brian Flanagan, Mythical’s chief operating officer, says the company’s business model is different from those early YouTube companies. While the bulk of Mythical’s revenue comes from advertising, the company doesn’t sell its own ads as multichannel networks did, relying instead on platforms like YouTube and Snapchat for its sales capabilities. And Mythical is focused on creating and owning shows by video creators rather than simply providing services for them.

There are other challenges to running an online video business centered on two stars. Hank and John Green, creators of the popular Vlogbrothers YouTube franchise, said in interviews that YouTube stars don’t “scale” — meaning the same person can’t be in two places at once.

But there are ways around that problem, Hank Green said, such as introducing new hosts on popular shows and giving them spinoffs once viewers become accustomed to them, as NBC did with Frasier from “Cheers.” John Green said that while creators still share ad revenue for some deals with distributors like YouTube, the financial circumstances have improved over the years.