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Is YouTube Red paying off?

While still in early days, the new YouTube SVOD generates more data, complications and levels of complexity for MCNs to deal with - but not necessarily a bigger pay day.
January 11, 2016

Since YouTube Red is still in early days, it’s understandable that the biggest multi-channel network (MCN) players are trying to wrap their heads around how to manage it.

Launching in October with a US$$9.99 monthly subscription fee, YouTube Red’s main draw within the children’s space – along with offering ad-free content – is the ability to save videos to watch offline, a feature that’s become increasingly in demand within the kids on-demand video market.

Much like the early ad-revenue sharing days of a few years ago, one thing the new SVOD has introduced is even more information on payments, says Thomas Kramer, VP of product at Bent Pixels, a software company that helps MCNs manage their data flow from YouTube. Despite the new income stream, more data and levels of complexity are leading to more complications—and not necessarily more money, especially for smaller and international MCNs.

Each MCN receives a monthly revenue report from Google for every video in its network. That’s not every creator, but each individual video.

Considering some creators have dozens of channels, that’s a lot of information to parse.

Red has also introduced a new layer of complexity to that data set. Under the Red banner, creators are paid out based on watch time versus views, Kramer says.

YouTube aggregates all subscribers (of which it has yet to release any numbers), and then takes 45% of the subscription fees off the top. The rest is split between the YouTubers, based on how long subscribers actually watch the content itself.

Additionally, based on existing and legacy contracts with music labels, certain music videos are pulled out of that category and paid on a per-view basis, similar to the payout model on YouTube’s ad-supported site.

What these differences amount to are spreadsheets populated by hundreds of thousands of rows of data, says Kramer. “It can be very difficult for the everyday laptop to process,” he adds.

Companies like Bent Pixels offer software to help clients sort through and make sense of that information, and many of the really large MCNs have dedicated software teams to help create code to do the job.

However, all of that data has put pressure on smaller MCNs that often don’t have the resources to effectively meet these challenges. Meaning many risk being overwhelmed by data.

And with YouTube Red’s limited availability (US only at the moment), it’s also created issues for international MCNs with a majority of their creators living outside of the US and who “make very little because they have comparatively fewer viewers in the United States,” says Kramer.

New mountains of data aside, is YouTube Red paying off for its MCNs? “At this stage,” says Kramer, “it’s not generating a lot of money, but it’s costing a lot to [service] manually – and these [small and international] MCNs are still contractually obligated to pay out their funds to their creators.”

From Stream. 

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