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Understanding Revenue Share | How 70/30 can be better than 90/10

Discussion in 'YouTube Networks, Monetization and Partnerships' started by Tarmack, Jul 25, 2013.

  1. barackobeezy
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    Correct, here's an example from Curse (my contract is not confidential)

    [​IMG]

    As you can see, there is no deduction from any third party in the contract.

    I know you're just throwing out examples here, but I encourage you to use different percentages so people don't presume this as Curse vs. Fullscreen.
     
  2. karlsanada10
    Monthly Video Game Giveaway on my channel now!
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    Hi, so the contract states that you'll get 90% of your rev share WITHOUT getting cut by the parent network?
     
  3. barackobeezy
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    Yes.
     
  4. karlsanada10
    Monthly Video Game Giveaway on my channel now!
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    That looks good and all. I might apply to them soon when I reach 1K+ subs.:)
     
  5. scifiriot
    I have a laser, pew pew
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    To take this thread one step further, it's not really at all about the split percentages, it's about the value you gain for what you're giving up.

    You own 100% of your net revenue split before you sign with an MCN or make any agreement to share that revenue with anyone. On the flip side, you also incur 100% of the monetary negative cost, which include not only the cost of the video itself, but the cost of the gear needed to make the video, and any other direct or indirect costs associated with developing, producing, releasing, and promoting your video. Similarly, you are 100% responsible for the time and effort needed to develop, produce, release, and promote your videos. Finally, there's the rights and intellectual property - i.e. the ownership of your content - which you would have 100% ownership of and responsibility for.

    Calculating the value of a deal is a combination of a bunch of factors, including money, time, and ownership. Another thing to keep in mind is that ad rev is only ONE way a video can earn money.

    A (hypothetical) deal that brought a ton of value, including not just higher CPMs but an increased audience, production and creative resources, paid and unpaid marketing support, and licensing and distribution advantages could be worth a lot more than 30% or even 50% of your ad revenue because whatever % your left with after the deal is worth more than what you have before the deal. Hopefully *way* more. It's possible to have a scenario where giving up 90% of your ad rev would theoretically be ok if the 10% you have left is worth way more than what 100% is worth without it.

    One last thing I'll mention is that a few companies (I know we do it and so does the INDMusic MCN) offer variable splits that scale based on how good a job that company is doing for the creator. Our ad rev splits are based on the channel's CPM, not set to a specific hard number like 70/30. Our basic agreement is 3x Avg.CPM. How that works is this: if our channel has an average CPM of $4 (based on our YT/ad sense reports), we take 12% of the ad rev and you keep 88% (3 times 4 is 12). However, if we're doing our jobs well and the channel is earning an $8 CPM instead of $4, our cut is 24% (3 x 8), but the 76% you have left is worth a lot more due to the higher CPM. I think it's a fairer way to split the ad rev that basically puts the responsibility on us to make each ad impression worth as much as possible.

    Any time you're looking at a deal, look past the percentages and CPMs, and figure out what the real *value* they're offering is. Will they help you promote? Provide gear or shooting space? Drive audiences from their other partners to your videos? Provide creative, post production, or legal assistance? Are they looking to own your content, or just license the rights to it? What's the term of the agreement (if you see the word "perpetuity", which is legalese for "forever and ever", be really careful)? Will they help you with revenue streams outside of ad rev, like merchandising or licensing?

    Add all the factors above (and more) together, and that's the value of the contract. IF the value offered is worth more than what you're giving up, it's a deal worth considering. If what they bring you (and sadly a lot of MCNs have low value deals at the moment) isn't worth more in money, time, and exposure than what they're asking for, you should probably decline. But whatever you do, don't ever make your decision based only on what the percentage of the split is. As Tarmack pointed out, 90/10 can sometimes be a much worse deal than you'd first think.
     
  6. UrAveragePerson
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    If he said barista, I would have said caffe barista xD
     
  7. CamsGuruGaming
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    nice understanding :D
     
  8. markkaz
    I Love YTtalk
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    I agree your post as a whole so don't think I'm nit-picking. =)
    I would like to comment/discuss this part.

    I can appreciate a network/organization having incentive-based revenue structures. However, I would not be willing to sign unless there was a cap. It is not unusual for some channels to see $12 CPM. That would mean that you would be receiving 36% based on your math. That is just too large of a share.

    Addendum: I can understand if the network is providing substantial support (writers, editing, studio, etc).
     
    #18 markkaz, Sep 9, 2013
    Last edited: Sep 9, 2013
  9. Sir Jaxxy
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    For a smaller channel that is not high at all. In fact the standard contract for RPM is 60/40. Si in this case they are taking less then RPM and providing more. Anyone know what network this is that they are talking about?
     
  10. scifiriot
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    Just to address this, the cap is minimum 10%, maximum 50%. To hit the 50% cap, we'd have to have a channel wide CPM of almost $17. That said, unlike a MCN, we offer significant support to the producers we work with - studio space and equipment use (if they're in New York), direct consultation on development and branding, paid and unpaid marketing for their shows, and monetization through revenue streams outside of ad rev, including content licensing deals, merchandising, sponsorships, and direct to consumer sales/VoD. We're a young and relatively small company, we don't work with thousands of people at once (right now we work with two outside producers, with four more in line to be added to the channel shortly). Because we work differently than a normal MCN, the splits aren't always directly comparable. We're not there yet, but we're working towards ad rev being only 20-25% of total incoming revenue for us and the producers we work with, so even if we were doing such a great job on ad sales that we were commanding some of the highest CPMs on YouTube and earning that 50% split, the ad rev is only a small portion of the revenue that producer is earning. Ad rev is the easy part, really. Most of our job involves audience development and generating significant revenue outside of ad sense. When we're not making shows, that is. ;)
     
    markkaz likes this.

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