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Analysis: YouTube's Originals, Seven Months After the Newfronts

Optimism, growing pains, public contract disputes: it must be the tech sector

Of course, where there is money, there have been major disputes, as well. Even as hugely popular YouTube producer Maker Studios navigated the production of its own three original channels, the company (particularly its CEO, Danny Zappin) came under scrutiny for its relationship with one of YouTube's star attractions, Ray William Johnson.

Johnson's =3 show has made him the single most-subscribed creator on YouTube; he's also been a part of Maker Studios for years. According to a very public post by Johnson, Maker Studios shut down production on =3 when he refused to sign over half of the IP rights to the show (Johnson has some pretty good material backing up his claim, too, including screenshots of emails demanding what he says the company asked for).

When he refused several times to let IP rights enter the renegotiation, Johnson said Maker ended production, forcing him to produce the show himself from his own apartment. When he joined Maker, however, Johnson signed over his AdSense account (through which all of his ad proceeds are paid) to the company and let them handle the revenue split; despite producing the show on his own, Maker continues to retain the AdSense account. In other words, Maker already controls Johnson's ad business (according to Johnson), and wanted a fifty-fifty split of his entire show.

Maker's only public contribution to the legal discussion has been to say that Johnson is still under contract, and that they continue to pay him under the terms of that contract (presumably whether or not they're contributing to producing the show).

And then there's the added, gossipy angle: Johnson included in his lengthy post on the controversy a story about drinking with Zappin and hearing the Maker CEO admit to a felony conviction; Zappin, in a subsequent email obliquely addressing the troubles with Johnson, told his company and the press that "about 12 years ago, I made a mistake for which I was convicted of a felony drug possession." The only other official line on the feud is a video by another Maker comedian, reported by a cat, presumably because it is catty.

All of this comes at an awkward time for Maker—whether Bewkes thinks YouTube is adorable or not, Time Warner made a $40 million investment in the company last month and the studio has a full three channels in YouTube's premium lineup. The growing pains are obviously part of a larger trend in the industry—Toby Turner of CuteWinFail, appears to have had a falling-out with producer Fishbowl, to name one more example—and one that will likely make YouTube all the more anxious to have experienced negotiators on both sides of the producer/talent table in the future. There's such a thing as a high-profile talent dispute, too, of course, but they tend to be the exception, rather than the rule.

Among the other pro channels, most who spoke to Adweek seemed to feel that they knew what they were getting into, and to be happy with the deal, which consisted of YouTube making an initial investment into each creator's content—an investment which was to be at least partially repaid through a healthy stake in ads, but would simply be a gift if ad revenue couldn't cover the seed money.

YouTube then promised that channels making over and above their initial investment would be able to keep 100 percent of the overage, but it's hard to imagine that being the case under most circumstances. Some of the safer bets received multiple millions of dollars, and even with, say, 60 million views, a $10 blended CPM doesn't get anyone that kind of dough. Still, the numbers range from the moderately successful to the outrageous: 56 of the channels have logged at least 10 million views and the top channel, the raunchy MondoMedia, has 1.3 billion views and counting—an incredible success by anyone's standards.

If anything, producers thought that YouTube paid for too much content too quickly, and even then, only in some cases. "Maybe for our vertical in particular," offered one producer, "it would have perhaps been advantageous for YouTube and for channels like ours to take less money and build the channel." Less cash up front, he said, would have meant lower initial expectations that could be built up over time. "I would have taken a quarter of the money, produced a quarter of the content, and proven that we could get the money back; instead we started off with thirteen episodes."

Ultimately, though, that producer said he was happy to have built a business, whether or not endemic viewership stacked the odds in his favor. "Smosh [one of the biggest pre-existing YouTube producers] will certainly have an easier time getting their initial investment back, though," said another.

YouTube didn't want to go into details, but they did express support. "While we don't comment on partner deal specifics, our goal has always been to help all of our partners succeed," said a spokesman.

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