Online news and politics network Young Turks is a hit.
The YouTube channel has more than 1 million subscribers and recently crossed the 1 billion mark for video views. Monthly advertising revenue reportedly is in the six figures, and that and other revenue streams have allowed the Culver City company to build up a staff of 30.
But Steve Oh, its chief operating officer, thinks the network should be even bigger. And so should many other YouTube stars, for that matter.
The blame for why they aren’t, he said, lies partially with the video website.
“YouTube’s promotion is entirely based on algorithms and search,” Oh said. “They don’t give a crap about your star potential”
To be fair, Oh maintains that he’s a big fan of YouTube. The Google Inc.-owned site invested in TYT Network, Young Turks’ parent company, as one of the recipients of its partner program, which was set up last year to fund original content.
“We trust them inherently,” Oh said.
Yet criticisms of the site – something that was nearly unheard in the earliest days of the push for original content – are cropping up. While overall feelings between channels and YouTube remain positive, there is a growing sense from some fledgling networks that policies might need to evolve to better benefit creators.
Some, like Oh, said YouTube has to flex its promotional muscle – start being less a metrics-obsessed tech company and more a hype-fueled Hollywood studio. Others have complained about the share YouTube takes for ad revenue. The amount varies from deal to deal, but the most commonly discussed split is 55-45 in favor of the networks.
Jason Calacanis, founder of Culver City YouTube network Inside, has been particularly noisy on the latter topic. Last month he posted a note on his personal blog announcing that he had turned down Google’s latest funding offer in the partner program, finding the terms of their relationship to be onerous. YouTube’s share of ad revenue was too big, its sales team too weak and the company too withholding with subscriber information, he wrote.
“If YouTube met us halfway on two or three of those issues, I would have kept working with them, but YouTube has a ‘take it or leave it’ approach to partnerships,” Calacanis later wrote in an email to the Business Journal.
While Calacanis’ post put a point on an issue that had caused grumblings for some time, YouTube defended its promotion and revenue-generation efforts in a statement to the Business Journal.
“YouTube has invested significantly in growing our sales operations, monetizing across devices and building our global infrastructure to allow our partners to focus on what they do best – creating great content,” the statement said.
It noted that “while partner revenue is up 60 percent over last year, we’re working hard to bring more media dollars to our creators.”
Part of the problem might be the difficulty in defining the relationship between YouTube and its partner networks. The site acts at once as the marketer, chief financier and controller of the distribution platform, making it more like a TV network than a traditional tech company.
That has complicated the issue of whether YouTube should exact a smaller share of the revenue. Even some of the bigger site partisans, such as Oh, believe it should follow the iTunes model, where music labels get 70 percent of the sale from a download and Apple Inc. gets the rest
“Apple is supposed to be one of the biggest pain-in-the-butt companies and even they have a more generous deal,” Oh said. “I hope that organically over time, the revenue share moves into the 30s for YouTube.”
Sources close to YouTube said there aren’t any plans to recalculate the split for Google’s ad sales on the videos. They argued the iTunes example isn’t accurate – it’s an apples-to-Apple comparison.
For one thing, the cost of maintaining the infrastructure for a streaming site, which requires a fast, stable website that can handle spikes in traffic, is far different than a paid-for download service.
Robert Kyncl, YouTube’s head of content, told AdWeek that an ad-supported business has “a much different cost structure. The delivery costs are much bigger. When I look at it, cable pays out equal or even smaller.”
There are plenty of executives at YouTube networks that have no complaint about the revenue-share structure as it is. Figured into that cost are plenty of services that YouTube offers that it does not charge networks for – including Google’s ad sales team.
Steven Kydd, a co-founder at Tastemade, a foodcentric network based in Santa Monica, sees these features as the true benefit of the partnership. So much does Tastemade rely on YouTube for promotion and revenue that it has no direct sales team of its own.
“It’s more a question of YouTube’s value than the cost of the revenue share for us,” Kydd said. “We view it as an extraordinary opportunity to launch a business, get a scaled, curated audience and analytics.”
Among the gravest scenarios the aggrieved pose to YouTube is the idea of a mass exodus; that fed-up networks will continue to leave videos on YouTube – it’s free, after all – but will work out lucrative sponsorship deals on other platforms.
That has already played out on a small scale, though without enmity. YouTube star Freddie Wong has been posting videos on Blip.tv. Smosh, the most subscribed-to channel on YouTube, has also hosted content on its site, Smosh.com, for more than five years.
But the reason there hasn’t been greater movement away from YouTube to a competitor is because, right now, there isn’t one.
“I don’t know who’d want to compete with YouTube at this point,” said Sameet Sinha, an analyst at the San Francisco office of B. Riley & Co. “It’s being featured more and more in search results. Google is sending so much traffic to YouTube it’s become a search behemoth in its own right.”
There has been speculation that another powerful Internet company, such as Facebook Inc. or Amazon.com Inc. could play this role. Even Hulu, a video-streaming site currently up for sale by its big media owners, might become a home for more online content creators.
George Strompolos, co-founder of multichannel network Fullscreen, expects there to be an eventual distancing between You Tube and its content creators. His company, which just raised a reported $30 million in a round led by media investor Chernin Group, is exploring the possibility of building its own media player. Chernin has also been one of the parties circling Hulu.
But the move isn’t driven by animus, only the need to diversify revenue streams, he said.
“I don’t think anyone looks at YouTube as the end-all, be-all platform,” Strompolos said. “We’re building a next-generation media company, and most media companies own some distribution, channels and programming.”
Oh also believes in the gradual move to other platforms. Half of the overall revenue for Young Turks already comes from non-YouTube sources; the channel has a deal to produce content for news network Al Jazeera and has a PBS-like donation system in place.
But he sees the logic behind abandoning YouTube entirely as fuzzy.
“I don’t think anyone who has achieved success will ever leave. If they do, it’s a stupid business move,” Oh said. “Some may also look elsewhere where the revenue is stronger and deemphasize YouTube. In that sense, YouTube will be a launching pad for careers.”
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