Los Angeles Business Journal

YouTube’s Methods Channel Unrest

INTERNET: Content producers question promotion, revenue split. By Tom Dotan Monday, July 8, 2013

“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.”

Better split

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.”

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