Over the course of the last year, we’ve been fielding increasing requests from people wanting to know about potentially joining a YouTube Network – Maker, Machinima, Revision3, to name a few. These networks can do a lot of things. Among their services are providing you with production support, helping link you as a creator with brands and finding brand deals, and an increased (usually flat rate) CPM. What they ask for in exchange varies – some ask to own your content, others ask to take a percentage of your revenue, and others may ask you to work with their other artists.
Online video “networks” bear striking similarities to the old Hollywood studio system in the 20s (Danny Zappin straight up says that’s basically what Maker is in this Fast Company article). Studios back then strove to do two things – first, to bring together a bunch of creatives and their means of production under one roof and own their content, and second, to control the means of distribution of that content. The same can essentially be said for how online networks are operating today – except that the control of the distribution is very easy for them (the studio system basically got sued trying to do that and that’s why theater chains aren’t owned by Universal Pictures or Paramount)
I consider what I’m about to say as essential advice for anybody who is approached by these networks or is interested in joining these networks. I am writing the following because I’m tired of seeing people get screwed by their contracts, or entering into legally binding relationships without fully understanding the implications of their actions. And most importantly – if we, the creators, band together and act as a unified front, we won’t be bullied by ridiculous contracts and business practices online – practices that have been, even by the standards of the entertainment industry, shockingly predatory.
Simply put, if we all follow the advice below, that means better deals for everybody.
Additionally, if you are not being pursued by a network or have no interest in joining a network, take a gander at this article anyway. We cover a lot of the mentality behind treating online video production as a business, and some of our tips may be helpful in a broader sense.
Before we begin, I strongly recommend you pick up a copy of Fisher and Ury’s Getting to Yes: Negotiating Agreement Without Giving In. It’s an invaluable manual for how to conduct yourself in a negotiation (which is what you’ll be doing with these networks).
Please note, before we continue – the following does not constitute legal advice. It’s for informational purposes only. If you need legal advice, you need an actual lawyer, which I am most certainly not.
In the interest of full disclosure – the FreddieW channel is represented by Collective Digital Studios. We followed all our own advice when we talked about signing on with them, and because of that, we’ve been very happy with our relationship.
1. As a content creator, you have something these networks need. You have the power.
You have content. That content has likely already proven itself to a certain extent – you probably have built some audience, or have some viewership, or you are simply making really good work – and that’s what they need. Their entire business model of these networks relies on people like you to supply them with content, which in turn generates viewership. No views on their channels means no money. No money means no business. Your content represents, simply put, a business opportunity. Therefore, you need to treat your interactions with any network as a business.
They are not your friends. They will not look out for your interests if there’s no direct benefit to them. Anything they say that isn’t backed up in writing is meaningless.
We’ve had networks tell us that our exclusivity to them was something we could “back out of anytime we wanted to” and that they would “let us leave.” The contract says otherwise, and when push comes to shove, what’s on the page is what sticks.
At the same time, they’re not your enemies. There’s no need to be adversarial. They have a business to run and so do you. There is no need to be intimidated – remember:You have something they need.
They’ll help you so long as it helps them, so it’s good to structure your deal in a way that this is possible – you want them to want to help you. This usually means giving them a percentage of the business they bring you. This is win-win for everyone – for you, you’ll get more opportunities than you would have otherwise. You get to be associated with their (probably) more powerful brand. For them, since they only get paid when you get paid, it’s in their best interests to get out there and find work for you. This is a relationship that fully acknowledges that each party is self-interested and provides for that fairly. What percentage is fair? We’ll talk about that in a bit.
Never agree to a relationship where they are passively siphoning off your income if they’re not improving your prospects beyond what you normally have. Always weigh what you’re getting versus what you’re giving away, and make sure it’s fair. Granted, in some cases the benefit might be an immediate CPM bump from what you’re used to. Make sure you calculate exactly what that bump is – do the math. Is what they’re taking proportional to what they’re bringing you?
How do you know what’s fair? There aren’t any hard rules – what’s fair for someone in one situation may be ridiculous for another. Trust your gut.
2. Never sign the first draft of a contract. Lawyer up and change it up.
Here’s how a contract usually works. Party A drafts up what they believe is a fair contract and sends it to Party B. Party B makes changes to that contract and sends it back. Party A makes further changes. They go back and forth until they arrive at a contract that both parties agree on.
The receipt of a contract is the beginning of a negotiation. You have every right in the world to want things changed, and you must communicate those changes by altering the contract and sending it back.
I’ve seen a lot of the contracts they hand people right off the bat and frankly they are absurd. They should not be signed under any circumstances. These companies have legal teams or lawyers on retainer. These lawyers are paid very well to ensure their client gets the best possible deal at all times. Unless you have some background in entertainment law, you are not equipped to fight these guys.
Your first step is to read and re-read the contract until you get a grasp of it. Your next step is to find an entertainment lawyer, pay them their fee, and have them review the contract with you point-by-point to make sure you absolutely understand what’s going on. This lawyer will likely suggest and notate changes, and you should have some changes of your own. You should also have questions ready (many of which probably begin with the phrase “What if I…” or “Would this contract allow me to…”)
If you’re considering joining a network, you’re taking things seriously. Whatever fee you pay that lawyer will be well worth it.
You don’t need to call the network and ask them questions about their contract. They’re under no obligation to warn you of any caveats, and based on our off-the-record conversations with some of these networks, they may straight up lie to your face about what you’re signing. Remember – your lawyer (who you are paying) is the only person you can really trust.
Incidentally, make sure you outline out exactly what you’re looking for with any prospective lawyer and get a sense of how much it’ll cost. Remember – this is pretty basic contract/entertainment law – this isn’t negotiating out the director fees for The Avengers and you don’t need the world’s top lawyers on the case.
I have heard of people afraid to challenge the contract because they fear the network will pass them up and they’ll lose out on an opportunity. Remember Rule #1 – you have what they need.
3. If one network thinks you’re awesome, odds are the other ones do too.
Remember – they all need content, and believe me – there’s not a lot of good, proven content out there. If they think you got what it takes, then the fact is, you got what it takes for every other network as well.
Strong negotiation requires a good “Best Alternative to a Negotiated Agreement” or BATNA (This is outlined in great detail in the book I recommended). The beauty of being a YouTube Partner is that your BATNA is very strong – you can continue making money as a YouTube Partner. The allure of the network might be that you can makemore money, but you’re probably not totally desperate to sign on with them. You can always walk away.
If you don’t like what’s on the table you should willing to walk away and approach another network directly. You may not be able to tell that other network what the first network was offering (if you signed a non-disclosure agreement), but you can say you’re fielding offers from other networks and wanted to see what they could do for you.
In fact, the moment you get approached, get in contact with every other network who will listen, send them your stats and an outline of your channel, and see what they’ll offer you. Let them know you’re being courted by the other networks, and let them sling mud at each other. When the dust clears, pick the best deal.
4. Flat CPMs suck.
From our research, the CPM (cost per thousand impressions) rates these companies offer range anywhere from $2 – $5 or more. These are flat rates for video views. At first that sounds like a great deal, right? It’s a guaranteed amount and it’s probably more than what you’re making normally.
As a quick side note – students of internet history will be interested to know that those CPMs are paltry compared to the tech boom hey-day. Back then, you could be getting $15 CPMs or more for freaking pop-up ads! That was a good time to have a popular website.
Networks take all their creators and lump their stats together. When considered as a whole, those stats are mega-super impressive. Millions or billions of monthly video views. They then take this aggregate amount and use it to sell to advertisers (“Look guys! Look how many people we have!”), who in turn pay them a lot of money to access those views.
For all online advertising, CPMs differ from quarter to quarter. In the early parts of the year it might not be much, but come Q4 (i.e. the holiday season), advertising revenue shoots through the roof. A lot of this has to do with companies advertising for the holidays, as well as departments needing to spend their budgets so they can justify asking for more the following year. If you’ve ever worked on commercials, you’ll know the end of the year is a time when you can book gigs left and right.
It goes without saying that the CPMs the networks can get when selling an aggregate of channels is far more than whatever paltry sum they’re offering you as a flat rate (they’re trying to make a profit, after all). A $2 CPM might seem like a lot, until you realize that they could be selling your content at a CPM of $20 or more.
We even had a network tell us once that their CPMs were so great that their company lost money most of the year on that. Of course, what they didn’t mention is that they make that up in spades come the end of the year.
Instead, what we should all be asking for is a baseline flat CPM, coupled with a percentage of anything they sell above that. If times are slow and they’re breaking even with your content, fine. Getting the base rate is fair. But if they’re getting $20+ CPMs, I don’t think it’s fair that your content receives only a tiny fraction of that amount while the vast majority goes to lining their pockets, do you?
5. This is the internet – Time moves faster.
Looking at a two year contract? Two years is a lifetime on the internet. Two years ago, we had the Old Spice guy ads. Two years ago YouTube looked like this:
Two years ago the “freddiew” channel didn’t even exist. In two years we went from complete unknowns to a top 10 YouTube channel. A lot can happen in two years.
As a starting point you should be looking at a contract term that lasts from six months to a year, depending on the deal. It should go without saying but never take a lifetime contract.
One note: the reason they ask for a long term is so they can reasonably sell you to their advertisers throughout the year. Q4 content gets sold early – it does them no good to say “Hey, we have this guy” and have you potentially drop out before the time comes to execute. That’s fair – whatever you sign should take you through the end of the year at least.
But consider this – if you ask a network, they’re tell you that everyone is happy and everyone loves being part of that network. If they’re so confident that you’ll be in that same boat, you’ll be happy in 6 months, so you’ll just renew right then and there no questions asked.
Yet somehow, six months is not ok. If they’re so confident that you’ll be a part of their network, why do they seem to assume you’ll abandon them the moment your contract is done?
What’s baffling is many networks seem to be hell bent on holding their creators to their contract terms. It does nobody any good to do this – if someone hates working under a network, what do you think the quality of their content will be if they’re forced to continue churning it out for another few months?
6. The entertainment industry has guidelines for percentages. Use them as starting points.
While the whole business of online video and networks is relatively new, the business of “organizations taking a cut from talent” is most certainly not.
In general, in the world of entertainment, agents take 10%-15% and managers take 10%-15%. So why should we treat what we do as any different? These entities often are similar to YouTube networks in that both are looking to find you work, so anything more than that and there better be a very good reason for it. They need to be really bringing something to the table.
What they bring to the table depends strongly on what you actually need. Brandon and I, for example, don’t really need much help in the VFX department, but maybe they’ll offer you things you do need – maybe you could use a team of cameramen, or actors, or writers. Whatever they offer, make sure it’s better than what you could do yourself. Otherwise, you’re just taking a step backward.
Always weigh the cost/benefit of letting a network step in and fill a production need, or simply using money to fill that need yourself. In the end, you don’t want to become so reliant on the network to be providing you with cameras and shooters and locations that, if time comes you’re no longer happy, you’ll be unable to leave them because so much of your business’ infrastructure is tied in with them.
One way to incentivize them to work harder for you might be to have different percentage tiers depending on how much work they bring you. That way, there will be some motivation on their part to bring you additional of work because that’ll allow them to take a bigger cut, which is totally fair. Sales Agents for feature films will sometimes do something like this – their rake might enter into a higher percentage tier after they’ve sold a certain amount.
Remember – there aren’t any rules or any “right” way to do this. If it makes sense, odds are it’ll probably work.
7. Do your research. Interview people under the network.
Any prospective network should have no issues whatsoever putting you in touch with people so you can ask them about their experiences. Find people of similar size to your channel. Take them out to lunch. Ask them how their experience has been. What, if anything, would they change? Get a real sense of the vibe of the place before you throw your chips in – this is very important. You might negotiate a great deal, but if you’re not happy there, it won’t be worth it.
You should have a sense of what you need and what these networks can provide for you. This is very important because your relative influence in this negotiation depends entirely on this factor – if there’s nothing they can offer you, you’re in a very strong position. If you would rely on them for a lot of stuff, you’re in a weaker position, and will have to negotiate accordingly.
Don’t compare yourself to the superstars of the network. Instead, look at the entire range, and see how everyone, as a whole, is doing. Try and get a sense of the bigger picture.
Finally, a special bonus 8th thing reserved for people trying to actively leave their contracts right now or are so unhappy they want to terminate it. Check to see if there’s a termination clause in the contract. If there is, invoke it to the letter. If not, there’s still hope – lawyer up and get their opinion.
After all’s said and done, we think networks can be a major boost for content creators, and can be incredibly beneficial, provided said content creator does the legwork to make sure they understand their deal and that it’s a fair deal to begin with. These networks are not your friends – they’re potential business partners. Never make the mistake of confusing courtship with friendship. They want to bring you in – so make sure you’re doing everything you can to get a fair deal.
That being said, in our experience, the vast majority of people’s experiences with joining networks have been very positive. Just make sure you cover your bases so that if something does go wrong, you’re not screwed.
Good luck! If you have any questions, I’d be happy to answer them below, and I’m sure the rest of the RocketJump community can chime in on their experiences as well.
p.s. Never give up your Facebook or Twitter. That’s your first point of contact with your audience. You should have full approval of everything that goes through those.
Edit: List of Networks
Based on some feedback I’ve gotten, it sounds like it’d be useful to know what’s out there. here’s a list of networks that are out there (I’m playing loose with that definition – some of these are less “Networks” and more “conglomerations of channels” or “record labels.” Some of these are also subsidiaries of other companies on this list.) If there are any I’ve missed, let me know in the comments section below.
ChannelFlip (Must have British accent)