Is YouTube Completely Changing Network/Creator Relations? (Update)

Matthew Manarino / Oct 30, 2013

From the start, YouTube has been a Wild West when it came to rights management. Creators made money from cover songs, and the labels that owned the originals didn’t make a dime. Things became all the more complicated when multi-channel networks (MCN) came into the equation. Creators were still monetizing cover songs without permission from labels while networks were turning a blind eye to it. They were able to do so because modern fair usage laws are unclear and cover songs often fall into a legal grey zone.

Then everything came to a head when MCN Fullscreen was sued by the National Music Publishers Association. The NMPA accused Fullscreen of exactly the aforementioned issue. The MCN was making truck-loads of cash from creators who were in turn monetizing cover songs. The lawsuit flipped a switch for many networks who ignored or refused to acknowledge the legal murkiness. It also put YouTube into action.

As first reported by AdWeek, YouTube will now force MCNs to place partners into two distinct categories: “managed” partners and “affiliates.” As a managed partner, creators will share legal responsibility with their MCN. For example, if a creator uploads an unsanctioned cover song and Sony Music files a takedown claim, that creator’s network will be slapped with a penalty. If a partner receives too many violations, the MCN will face a series of scaling penalties that could even result in a permanent YouTube ban. Of course, it’s highly unlikely that YouTube would ever actually go through with banning a top-tier MCN like Fullscreen.

Managed partners, in reward for their closer connection to MCNs, will be paid more quickly with instant video monetization sans YouTube’s approval.

Affiliate partners, on the other hand, will be held solely responsible for any violations. They will also experience a more detailed monetization process with YouTube monitoring them more closely. In contrast to managed partners, affiliates will be much less tied to MCNs and have full access to their individual CPM numbers — the amount of money they would be making without a network. It’s rumored that affiliate partners will also have a link built into YouTube that, if clicked, will start the breakup process with their network. The link does not instantly remove the creator from a MCN, but it does move the process along more smoothly.

All of this, the partner tiers and MCN culpability, will ideally spark an opportunity for networks to begin treating creators exponentially better. Prior to the Fullscreen lawsuit, networks seemed content to let creators take the heat for violations as individuals. If that network feigned ignorance, how could they be blamed?

Now, however, YouTube is forcing MCNs to meet partners halfway and establish an actual relationship built on trust from both ends. If an MCN makes someone a managed partner and they screw up, there’s going to be trouble.

On the reverse, many partners are going to get a rude awakening come mid-November (the rumored roll out period for YouTube’s strategy) when their network lists them as an affiliate. It will be an eye-opening experience once networks are actually asked to place partners in tiers. In so many ways, the affiliate tier will tell a partner that your network wants to keep making money off of you, they just don’t want be responsible for you. Think of it like the drug kingpin who will collect from his dealer, but the second that dealer gets thrown in jail, he’s on his own.

It may seem like YouTube’s MCN strategy is simply about monitoring fair usage more closely. However, it could also work as a way to force networks to reevaluate how they approach signing and managing talent. With the link that breaks affiliate partners from networks, partner relationships must be tended to at some higher level.

According to AdWeek sources, MCNs are now concerned about the ecosystem becoming too fluid. Network execs are concerned that YouTube’s new strategy will allow for partners to be pulled away by the allure of their individual CPM.

But is that such a bad thing?

Across the YouTube community, signed creators have been openly vocal about the support networks offer partners with limited audiences. At the start of the MCN revolution, networks raced to sign any creators with decent subscriber numbers. Naturally, this led to claims of smaller partners being ignored and troublesome business practices.

Last year, gaming network Machinima was put on the burner after news surfaced that the MCN was enforcing lifetime contracts on some of its partners. Belgian gamer Bachir Boumaaza (AtheneWins) left the network in 2012 in the wake of the contract scandal, saying in a video, “This is a very hard decision and I’ve been thinking about it. But the only thing that I can do — the only thing that feels right, right now — is to leave Machinima.”

A representative of Boumaaza told the LA Weekly after the departure that, “Over the past six months, we’ve regularly talked to several people from Machinima about complaints we have been hearing from partners about how they felt intimidated by their business and contract practices.” The rep goes on to explain that the talks would inevitable lead to a “PR disaster,” so Boumaaza left.

YouTube’s new MCN strategy could help partners better understand where they fit within a network and pay closer attention to contracts.

Additionally, by offering CPM numbers to affiliate partners, creators can see the dollar difference between splitting revenue with a network who may not even offer you that much assistance.

Several months ago, Maker partner John Basedow spoke about being signed to the MCN at a BigScreen LittleScreen event in NYC. “Maker is good at getting you the direct deposit in your account the day it needs to be,” Basedow said. “But so far they have done nothing in terms of promotion, brand deals, and other things they promised before the contract was signed.”

This sentiment has been echoed by not just Basedow but thousand of creators across the YouTube landscape. If YouTube is offering smaller creators (read: “affiliates”) a chance to to see that they could be making more money without a network, I can see why MCNs would be worried.

Note: A YouTube spokesperson responded with an update.

According to the spokesperson, the collaboration process between MCNs and YouTube has been going on for some time and is completely amicable. They write:

“They’ve [MCNs] been VERY active in the process, giving us feedback. We are also ensuring creators in a network have access to data and analytics so that they can continue to thrive and be successful on YouTube. This is good not just for networks and creators on YouTube now, but for more that join in the future.”

Additionally, the spokesperson felt that mentioning that many MCNs offer CPMs was important:

“many MCNS (not all) actually already allow channels to see their natural CPMS because they know they are showing value and they know they are incomplete picture, not representative of the checks that are cut. For example, it doesn’t show revenue from any brand or partner sold deals made by the MCNs. So like I said – when we discussed this change with the MCNs, the majority saw this change as a non issue.”

In response to portions regarding the affiliate partner link that would start the process of leaving an MCN, the spokesperson commented:

There is no button that allows creators click to leave an MCN against the MCN’s wishes. When an agreement ends between a network and creator, unlinking the channel has been a burdensome process. We’re building an operational workflow that allows an affiliated channel to send the network a request to unlink their channel from the network, which the network may accept or decline.