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YouTube’s Biggest Partners: Show Me the Money (Video)

Multi-channel networks are looking elsewhere to grow their businesses beyond YouTube

YouTube’s biggest partners are now publicly questioning whether they will ever make enough money from the online video giant to sustain their businesses.

Tuesday at the Stream conference, executives from multi-channel networks echoed a controversial blog post by entrepreneur Jason Calacanis over the weekend in which he chided YouTube for taking too large a cut of his channel's revenue. The post has been the talk of the online video community since it surfaced — so much so that Electus COO Drew Buckley kicked off his panel by asking those executives for their take.

Barry Blumberg, EVP of Alloy Digital and president of Smosh, YouTube’s single most subscribed channel, was particularly outspoken, questioning whether the core of YouTube's business – short videos — could ever be a huge source of revenue for producers.

“I’m not sure today — like I was a long time ago — that there is a lot of value in the 3-to-5 minute video,” he told the crowd at the Santa Monica conference. “When is that ad market going to tip where it starts to make sense for us to produce this video, which is infinitely less expensive? It’s not getting there.”

Also read: Why Alloy Digital Might Hold the Secret to YouTube 

Blumberg said that YouTube’s relationship with many of the multi-channel networks has deteriorated in spite of higher viewership. He noted that Smosh now generates more than 65 percent of its revenue from sources other than YouTube.

“We are all having our best years in company history in terms of viewership and audience, YouTube is having its best year in its history in viewership an audience and yet their relationships with MCNS are not having their best years,” Blumberg said.

Other panelists expressed a growing dissatisfaction with the money they were making on YouTube. These partners feel that YouTube's business approach enriches YouTube without making them nearly as wealthy.

To that point, YouTube just revealed on Wednesday that the revenue it generated from mobile devices tripled in the last six months when even those that defend YouTube as revolutionary are looking elsewhere to grow their businesses further.

During the panel, Chris Williams, chief development officer at Maker Studios, expressed confidence that ad dollars will eventually follow YouTube eyeballs. "No other platform in the world has the proven ability to make something go viral," Williams said. 

Yet at the very same conference Calacanis broke the news that Maker would soon launch its own online video platform, which TheWrap later confirmed with other sources. Maker declined to comment.

Also read: Maker Studios Will Launch Its Own Video Site to Rival YouTube, Insiders Say

A YouTube spokeswoman said that the company has long advocated diversification as a positive for all businesses. That's one reason YouTube content chief Robert Kyncl introduced Brain Robbins, the co-founder of MCN AwesomenessTV, to Jeffrey Katzenberg, the CEO of DreamWorks Animation. DreamWorks Animation then bought Awesomeness in April.

Many YouTube partners fear being overly reliant on the platform, which remains the largest video portal in the world by a massive margin. Still, it remains unclear whether it will also be a destination for premium content that will entice advertisers to spend at higher rates.

YouTube funded a select group of channels from name talent, hoping to change its perception amongst top filmmakers and media executives. And it recently launched paid subscription channels, offering its creators a chance at a secondary revenue stream.

Yet Machinima’s Aaron DeBevoise, whose company Google is a major investor in, argued YouTube was not really interested in the premium content business.

“If YouTube wanted to be in the premium content [and] monetization space, it can be,” DeBevoise said. But they “clearly don’t think that way," he continued. "They are ultimately serving a lot of ad inventory, which is not the optimal approach for us […] but we have to understand their take on the world."

This uncertainty about earning potential on YouTube leaves the MCNs in a tough position. They still need and want to be on YouTube, but they have to look elsewhere to make substantial money.

In other words, they no longer see YouTube as the second coming of TV – as they once hailed it – but something entirely different.

In the words of Big Frame co-founder Sarah Penna: “They are a great marketing platform.”