Billions of people around the world love YouTube. Since the domain was activated nine years ago by a trio of former PayPal execs, the service has revolutionized the way we watch, share, and make videos. Last year over 6 billion hours of video were watched every month.
Now a sleek production platform, YouTube has turned a host of web personalities into bona fide stars. Savvy creators are turning exposure into paydays, cashing checks from the Google-owned company, and benefiting from major branding and promotional opportunities.
But an avalanche of content, fluctuating ad rates, and heavy production costs burden many YouTubers. The pace is not sustainable–and high-level YouTubers will be the first ones to tell you. The hamster wheel system values volume over quality and creators are stuck. Burnout is increasing and the returns are decreasing. YouTube’s choice to keep conditions that favor advertisers over creators is alienating the very talent that’s made the site so popular.
Is this the beginning of the end of the homegrown YouTube star?
In late December, King Russell, better known as the mega-popular Kingsley, announced that 2014 would be his final year on YouTube. Around that time a handful of big creators declared they were also going away. In a blog post Kingsley said he was fed up with big egos and the focus on money, which he said was sucking the “soul out of what YouTube once was.”
In February, Olga Kay’s admission to the New York Times that she produces 20 videos a week caused many to raise an eyebrow at her punishing pace. Kay, a former circus performer, is in bed with YouTube as part of the partners program. She’s monetizing her work and getting a share of ad revenue, but when you look at her numbers, and the fact that YouTube generated an estimated $5.6 billion in gross revenue in 2013, it’s a pittance.
The Siberian-born Kay has more than one million subscribers on half a dozen channels. But she’s never made more than about $130,000 a year. Twenty videos a week translates to more than 1,000 videos a year, at around $125 a pop. On most of Kay’s channels her videos get $2,000 for every million views.
When you factor in YouTube’s cut of 45%, plus production costs for editors, cameras, staff, equipment, sound, lighting, and the time to write, shoot, cut, and post videos, she’s lucky to keep it in the black. Or have time to leave her house.
I spoke to the 31-year-old in Los Angeles, and asked her how she keeps her creative juices flowing and pumps out material–and whether she’s sacrificed her happiness for success.
“If you slow down you might disappear,” she says over a vodka cocktail at a tech meetup in Hollywood. Her production schedule is nonstop. A day for brainstorming ideas, another for writing and blocking scenes, the rest dedicated to getting props, rehearsing, filming, directing, editing, cross-promoting, exporting and uploading, and waiting for videos to be approved by YouTube, for legal and copyright issues.
When she finishes her work for one channel it’s not quitting time. Instead she sits down and plays “video games for four hours to record for my gaming channel. In four hours I can probably record 12 or 16 episodes, which would cover 12 or 16 days of gaming content.”
When I asked her if she has any time left to have fun, Kay smiled and told me her career is her motivation.
“I rarely leave my apartment and if I do it’s always work related,” she says, admitting that the process does take a toll on her. When she breaks from her work “sometimes it stresses me out more because I know I have to come back. If I’m taking time off, and it’s a lot of time off, I have to come back and work twice as hard.”
Kay told me that her costs per impressions (CPMs) are dropping due to over- and undersold ad inventory. She says her main money source is her game channels, which have less subscribers than her main one. The February Times article claims ad rates are shrinking, but representatives at YouTube told me that’s not true. They say partner revenue across YouTube increased by 60% over the past year, with partner revenue from mobile ad sales tripling.
Still, Kay says “at the end of the day I’m making less money than I’m used to,” calling YouTube “over-saturated” with content. “If you have more views, CPMs are less than $3. People who don’t do YouTube for a living have higher numbers with AdSense.”
When I asked YouTube about this, sources there said that’s not systemic–and it could be for hundreds of reasons. The algorithm used to determine ad prices is based on what advertisers are willing to pay, view rates, a creator’s brand, content, demographic appeal, and who can buy advertising. And it’s likely the bump in mobile views, about 40% of all site traffic, is affecting pricing, too.
YouTube isn’t exactly a digital sweatshop, but it’s not an easy place to make a living. But that’s a fact creators are well aware of when they decide to monetize, Kay says.
Kay takes home 10% to 20% of what each video makes, telling me at one point she made as much as 50% of video revenues. But she doesn’t blame the platform.
“It’s up to advertisers–I don’t think YouTube can do any better,” she says.
Almost like a tamed tiger in reverence for her Las Vegas trainer, she calls herself lucky that YouTube doesn’t take more, particularly in regard to sponsorships, which at one point was against the company’s terms of service.
The problem is advertiser demand hasn’t caught up with the number of videos released every day. A constant check is a positive, but it’s almost like a server at a restaurant who relies on tips over their minimum wage. The equivalent of tips would be the merchandise and promotional deals that have become the key to making money through YouTube. Kay’s own brand has evolved into a sock line, a lifestyle website, and even a subscription care package. But when I ask if she’s getting paid enough for her videos, her lips uncurl from her trademark smile and her brow furrows.
“We know what we’re signing up for when we get on YouTube,” she says. “We don’t make as much as we should be making, as much as traditional media is making, but it’s going to get there eventually. We’re the pioneers and we have to suffer through the hard times.”
Kay knows which side her bread is buttered on. The platform has been great for her, exposing her to millions. And it’s allowed her to branch out into consumer sales and products.
“The opportunity is there,” she says. “It’s up to your popularity. If you’re really, really popular you’re making an amazing living.” But for those who aren’t, “a lot of people don’t realize YouTube will take their cut no matter what,” she says before finishing her drink.
Taryn Southern is another successful creator navigating the sometimes choppy waters of YouTube.
“It’s good for your brand, bad for business,” says Southern, who has about 400,000 subscribers on her two channels, which she started almost two years ago. “Churning out content is exhausting–it doesn’t lend itself to being creative. It’s a machine and you have to keep up.”
Southern says she and Kay often talk about their blistering work pace, and tells Kay, “Girl, you’ve got to slow down.”
In order to stay sane, Southern takes periodic breaks to see her boyfriend in New York. And because there aren’t as many creators back east, she says it forces her to stop working and recharge.
When she’s back home in L.A., Southern says she stays busy on projects from 7 a.m. to 8 p.m. Southern’s online influence on YouTube has garnered her endorsement deals, a web series with Glamour magazine, Hot Pockets, and a gig hosting Discovery Channel’s Naked After Dark. Turning your brand into a commodity is a crucial route creators must use to make the YouTube model work. The trick is aligning a personality with a product, which can be challenging.
But Southern says the problem with working on so many things at once is “most of my time is spent on content for other people and brands,” not her own. Yet she says keeping her nose to the grindstone is a sacrifice for the future, and a caveat to being independent from the traditional system.
“This is the time I need to power through it,” she says. “My instinct is to work all the time.”
YouTube is the biggest fish in the sea, but that may be changing. This week, Disney forked over a whopping $500 million for Maker Studios, the platform and content engine home to web stars like 24-year-old Swede PewDiePie. It’s uncertain what Disney’s plans are but it’s likely to farm both Maker’s talent and data analytics.
Other players include World Star Hip Hop, Vevo, Machinima, ZEFR. The list goes on and on. But even with good, viral content, most viewers prefer watching the same material on these companies’ YouTube channels, not their sites. Which insures YouTube’s dominance.
The only real competitor that might scare YouTube is Vine, which has ushered in a whole new generation of primarily younger, shorter-attention-spanned stars and viewers. But the future of that company and audience is still in the making. And even stars on that site are just figuring out how to make money off their success.
Drew Baldwin, the founder of Tubefilter, a site which tracks the industry and produces the web-video-focused Streamy Awards, points out that no matter what platform creators are on, they have to make more money.
“If my business is bringing in $100,000 a year, that’s a very small business,” he says, since YouTubers are getting paid on views and volume, and quality is suffering. “YouTubers are tied to their Google check,” while teens on Vine, Baldwin adds, don’t have as much to lose, and more to gain from brands willing to put money in their hands.
There is hope for sustainability–and his name is Freddie Wong.
Wong is sort of a folk hero amongst YouTubers. He’s done things no one else has, like turn his channel and following into a bona fide production company in RocketJump.
I first met Wong at the YouTube space in Los Angeles in early 2013. He was building a set on location there for Video Game High School, with money he crowdfunded. Since then he’s raised almost $1 million (more money than any other web series ever) for the final season of VGHS. Now he’s funneling his nearly 7 million YouTube subscribers onto pay-to-play distribution platforms like iTunes, Netflix, Xbox Live, and Sony PlayStation 3. This is the model, and this is the wizard.
Right now Wong is in the middle of filming the VGHS, but says when he wraps he will begin reaching out to more traditional investors to help grow RocketJump into a major content creator. He wants to release multiple series a year.
I spoke with Wong on the set of VGHS in Studio City, Calif. Half a dozen trailers lined the driveway up to the house being used for the shoot, and a production staff of 50 all worked like a well-oiled machine. Looking around, the evolution of Wong’s process is like australopithecine to Cro-Magnon. If someone told me this was a Hollywood production, I would have believed it.
Wong looks at YouTube in three distinct categories. User generated viral videos, daily vlogs with thought and effort put into production, and big budget trailers and offerings from major film companies.
“The key distinction for me comes down to money,” he says. “Category one doesn’t cost anything to make. Category two costs some money to make. I would say category three you can’t support on YouTube’s ad infrastructure right now. Category two stuff you’re looking at a brand deal and they come in and do it, or just use AdSense, and that can support you up to a certain point. And there’s a lot of good content in that world. What we’re doing with Video Game High School, and what I want to do and continue doing, is stuff that you can’t just support off AdSense.”
Wong says his team calculated budgets and returns back solely via AdSense. It would have been hundreds of millions of dollars. Catering, air-conditioned trailers, crew—these all cost more than YouTube’s model can support. Wong ended up posting the budget for the series online: season one cost more than $600,000. Season two more than doubled to $1.4 million. Both were crowdfunded, along with contributions from sponsors like Monster Energy Drinks and Dodge.
“It’s way cheaper than television but more than the usual YouTube video,” he says. “Some people can live entirely off of what they make on YouTube, which we were doing for a bit before we were doing longer form stuff. But now in order to facilitate anything bigger than any weekly or bi-weekly short videos, you have to figure out other ways of funding it.”
Wong still gives the show away for free on YouTube, in addition to VOD distribution.
“The challenge for us has always been how can you make it make sense financially,” he says, and keep creative control, which both Kay and Southern told me is an integral next step. All three, and most YouTubers you speak to will tell you the same thing.
“It’s harder to think about larger scale progress which is why I find what Freddie Wong does so impressive,” Southern told me.
Kay, like Southern, says she wants to branch out into more mainstream fare, and both are moving in that direction. Like Wong, they want to do it on their own terms, and keep control.
“I’ll never stop doing what I’m doing,” Kay says. “My goal is to create a bigger production company and turn my channels into a network eventually, and create content where I’m not the face of the channel anymore, but I can still entertain the youth of America.”
Wong is a few steps ahead. He also wants to keep his YouTube presence, but is open to “pretty much anything” that will keep his dream going.
“There is no regular route anymore,” he explains. “What it really comes down to—is there a scenario that makes sense? We’re not just a regular-director for hire. We’re not just some production company in Hollywood. We find ourselves in a situation where we have full creative control over everything. That’s a scenario that a lot of directors try to spend their whole careers to get. We’re fortunate that we already have that ability. And there’s compromises we have to make, because we don’t have as much money to play around with as these other guys. But being able to have ownership of what we’re doing and creative control, that’s why I got into filmmaking. That’s the motivation. I want to make movies.”