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Jason Calacanis Rants On YouTube Partner Pay, MCNs

Jason Calacanis How YouTubers Make Money MCNs Partnery Pay

YouTube Partner Pay: Will You Make Money? 

Jason Calacanis wrote a great article about YouTube Partner pay, producing online video content as a YouTube Partner, and  MCNs (multi-channel networks) as a threat to YouTube's current model. He points out the current, fundamental problem with YouTube: making money as a YouTube partner.

There are currently three ways to make money as a YouTube partner:

  1. YouTube Grant Program - as part of YouTube's grant program, the creator is paid directly by YouTube to produce content.
  2. Adsense Payout - payout is based on a revenue share. For most YouTube partners, the payout works out to be around $1.50 CPM (not the best Cost Per Impression in the world of online video).
  3. Advertisers - custom, branded content sold directly to advertisers and published on your channel.

As a participant in YouTube's grant program, Calacanis realized that YouTube will not pay him indefinitely to produce content. By analyzing his video views and search traffic, Calacanis came to the realization that his video content won't pay out enough (via Adsense) to support production if YouTube isn't paying. Many YouTube partners who were paid by YouTube to produce content have also come to the same realization.

Although Calacanis mentions the three channels he launched as a "HUGE success," at video views between 2-8K each, this is far from a huge success. Top YouTube channels get 500K+ views per video. Through YouTube's partner rev share (approximately $1.50 CPM), he nets out between $3 - $12 per video. Even with a premium CPM, Calacanis would be hard-pressed to generate enough revenue to simply cover production costs. A $1.50 CPM on 10,000 views equates to $15. Additionally, because of the massive inventory on YouTube, the perceived lack of production quality by advertisers, and the Adsense ads YouTube offers, these factors drastically reduce the CPM. Furthermore, YouTube takes their 45% tax. All of this is unlikely to change anytime soon.

The Role of YouTube MCN's (Multi-Channel Networks)

Jason Calacanis believes YouTube plans on dis-intermediating MCNs (multi-channel networks including Machinima, Maker Studios, Fullscreen, and others). This is unlikely. An MCN's job is to help talent produce top shows, build audiences, and community engagement. For the amount of support MCNs provide, they just take a cut of the Adsense dollars their curated channels would normally make (a 20% cut is standard). MCNs provide music libraries, account managers, and other supporting services. Again, it's very unlikely YouTube would desire to take on these services or get involved in day-to-day talent management. Jason Calacanis is strongly off on this point.

In terms of MCNs, siphoning off YouTube's traffic, that's simply not a threat to YouTube's model. Successful YouTube channels (ex. Smosh) do this as part of their business model (they produce ancillary content for a standalone site and make 5X or greater the amount of money per view than on YouTube). It hasn't and won't have any effect on YouTube's traffic and engagement. The primary point of driving audiences away from YouTube is for ancillary content. YouTube is and still remains the primary discovery and publishing vehicle.

YouTube's Audience, Discovery, and Engagement

At a higher level, bigger-picture scheme concerning the challenges of actually ever making a dollar on YouTube, Jason Calacanis is right. YouTube is a phenomenal discovery tool. However, YouTube as an engagement vehicle isn't as good as everyone would believe, and it's engagement tools are still relatively flat to align with Google's bigger social aspiration (ex. no commenting via Twitter, Facebook, Tumblr, etc.). Here's where YouTube could stand to make real improvements, but they have continually changed their engagement for years (they seem to do bi-annual format and redesign's though). This is where YouTube seems to clash with Google's overall social aspirations. If they increase methods to engage on YouTube (Facebook, Twitter commenting, Tumblr replies, etc.), they dis-intermediate Google's platform as the social cure-all.

Outside of YouTube's core demographic (12-24), audience's don't watch content on YouTube. This also ties into the overall engagement picture for YouTube. Yes, you may watch the cat video and the occasional interview, but let's face it, how many check YouTube's home page every day, or regularly consume the content of your YouTube subscriptions? YouTube paid a lot of money in their grant program ($100M+) and it's difficult to think of many resulting successes.

What does this all mean? A lot of participants in the YouTube partner grant program are realizing that it isn't worth the sheer effort to get 50,000 views a month. Others are skeptical about where the grand program leads. YouTube may be paying them to produce content now, but it's difficult to imagine how long this will continue? In Jason Calacanis' case, how long does it make sense to get paid to produce content that gets a mere 5K views/video? In YouTube's case, how long does it make sense to keep pouring money into small channels and small partners (by way of their partner program)?

YouTube has done a great job of publicizing their successes like Smosh, Annoying Orange, and others but there are a lot of people out there producing content with the idea that they'll be the next Jenna Marbles. It does takes her level of success to truly make real, substantial money from YouTube.

UPDATE: See Jason Calacanis' comment below for some more information on his channel's CPMs and traffic. YouTube does offer some of its premium partners higher CPMs though partners are pretty tight lipped about what those are.

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June 11, 2013 By Evan

  • http://www.inside.com Jason

    two quick notes: 1. the views per video are much higher, if you’re just eyeballing the most recent you’ll see lower view counts. The business is very hit driven… and if you look at something like Wellcast you’ll see our three puberty videos are getting 20k combined a week. they have 100k+ views in just a couple of months. Also, the curve of these shows is doubling every 8 weeks or so… so it’s fairly amazing how fast things can grow inside YouTube (if you get a core audience of 100k+ subs). 2. the CPMS you discuss are the off the street numbers. i can’t talk about specifics around ours–but they are higher.

    overall you are correct…. YouTube doesn’t work as a stand alone business except for the top 1% of the top 1%…. but it doesn’t have to be that way. if youtube had better terms and more creator-driven features (like letting us collect emails) we could make the business work on YouTube.

    Youtube has chosen to treat the person uploading a cat video the same as the person who spent $1m producing a show. It’s the absurd stance–which they will not back down from–that has people fleeing in droves. Google.YouTube is keeping up this absurd stance, i think, because it’s historically their DNA and because it keeps their position over creators fixed: take it of leave it.

    guess what, people are leaving it. or, simply using YouTube as a marketing tool… and that’s really sad. YouTube should really think about treating people based on their investment in the platform.

  • Edd

    To say that networks provide for their partners is an exaggeration. The points you speak of are cheap assets that any partner can aquire with minimal investment. MCNs have responsibilities, which none of them really focus on. The 20% standard cut is rarer than you think. The standard is 40-305 of the Google Adsense alone. MCNs are not a smart investment for financiers. Like Amazon did within it’s market, Google-YouTube can one day just pull the plug when the market changes.

    Most MCNs depend on the ignorance of their affiliates and managed partners.

    There have been MCNs that pay out 100% on Google ads, and payout royally over the addition ad revenue that is generated by the selling of inventory by the MCN. Like pre roll campaigns. That’s the deal they should offer. Right now I know of R. Entertainment + Age/Ageofgaming for gaming partners. Those are the MCNs to beat.

  • Evan

    Agreed on the MCN’s. The leaders in the MCN do provide value for the their top channels, but in general the MCN space is confusing. YouTube recently stopped allowing new MCNs for that reason.

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  • Sam Mollaei

    As a YouTube contract lawyer, I help YouTubers leave their Multi-Channel Network (MCN). If you have any questions, feel free to email me sam@mollaeilaw.com

    Read more: http://www.mollaeilaw.com/mcn-contract-lawyer/

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