YouTube's Biggest Critic on How the Site Could Lose Creators

Why Twitter Could End Up YouTube's Biggest Threat

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Internet entrepreneur Jason Calacanis has torched YouTube multiple times in the past few months for cutting creators a raw deal and capitalizing on its near-monopoly. Recently at the video conference VidCon in Anaheim, he did it to the Google-owned video site's face.

Jason Calacanis
Jason Calacanis

Presenting the conference's closing keynote to a room full of YouTube creators and more than a dozen YouTube employees (a video of the speech is embedded below), Mr. Calacanis reiterated and further explored the frustrations he voiced in a pair of widely circulated blog posts published in June.

The gist? The 45% revenue cut Google typically takes from its top creators' ad revenues, as well as the distance it keeps between those creators and their audience and advertisers, limits people's ability to build a business based solely on their YouTube presence. Others share Mr. Calacanis's thinking, though perhaps not his aggression.

To be fair, the man who is arguably YouTube's biggest critic is also a fan. A beneficiary of the digital video service's funded partners program that shelled out money to people in exchange for creating original series, Mr. Calacanis has praised YouTube's ability to distribute videos to a massive global audience while assuming many of the overhead costs for creators. But he has also boasted of turning down a second round of funding from YouTube.

Advertising Age asked Mr. Calacanis about those objections and how they may open YouTube to better competition from Amazon, Netflix, Twitter and others in an email interview.

Advertising Age: Is it fair to say that a key message in your VidCon keynote is that YouTube risks becoming a farm league for Netflix, Amazon, Yahoo and others to recruit video creators?

Jason Calacanis: YouTube is going to be number one in video for some time to come if they do nothing, however we will see at least three new competitor emerge from the likes of Twitter, Facebook, Microsoft, Apple, Amazon, Netflix and Yahoo.

Each would compete differently. For example Yahoo would give much more promotion from their home page and a better split, while Amazon and Netflix would certainly provide more production support in the form of money up front.

Ad Age: Of the solutions you suggest -- such as reducing YouTube's cut of ad revenues -- which is/are most likely to be implemented?

Mr. Calacanis: In all honesty there is no reason for YouTube to change anything. Most content creators are so scared of not being included in the next "Geek Week" [one of several themed weeks YouTube has organized to show off related channel creators] that they are not being vocal about the split.

For me, it just became clear that this was never going to work unless the split changed. So there is nothing to lose with me going public about. If you're an emerging artist, you probably don't want to lose your invite to the fancy new facilities and the parties.

YouTube will, in all likelihood, do nothing until Facebook, Yahoo, Twitter and Amazon start offering the top stars better deals.

Why should they [do anything] if no one will publicly come forward and say, "This has to change?"

Ad Age: YouTube doesn't give creators access to subscriber emails. Is that to keep them from moving to other distributors like Amazon or Yahoo?

Mr. Calacanis: The person who will win the video space is the one who empowers the creator the most. Right now that is YouTube because they are the only option. If another option comes out and they do just two or three of the things I'm suggesting, a very significant portion -- probably all -- of the top creators will start experimenting on that platform.

There is little downside to posting your videos to, say, a Facebook competitor and YouTube.

Ad Age: What can be done about the low ad rates on YouTube that you cite in your keynote?

Mr. Calacanis: First, they can let the partners sell the advertising with a reasonable 10% commission to YouTube as opposed to 45%. That would make it possible for small channels to hire a salesperson and sell a premium, exclusive and intimate marketing program. Right now you have to give 45% off the top to YouTube even if you sell it! That kills the whole deal right there.

Second, they can let top creators -- say, folks who have over 50,000 subscribers and who have published over 100 videos -- control the frequency of ads. Right now the [cost to advertisers for every thousand ad impressions served] are all $1-2 net to creators, according to sources, largely because you only see a pre-roll advertisement on one of six or seven videos.

Can you imagine if you made "Mad Men" and only showed advertising every sixth episode?

Ad Age: You point to Twitter as the big sleeper in terms of YouTube competitors. Can you elaborate?

Mr. Calacanis: There is no difference between a subscriber on YouTube or a follower on Twitter, and most big celebrities and publishers spend much more time using Twitter. They have much bigger followings there. And advertisers love Twitter and building their follower base there more than YouTube.

So, if Twitter started allowing iJustine or Vsauce to publish videos to Twitter with a revenue share of 70% to the creator and 30% to Twitter, they would get 100% of the top YouTubers to do it.

Adam Bain, [president of global revenue] at Twitter, is a super smart guy, and he's really pushing video already on the platform. It would be three months of developer time to open up the video platform to the world -- plus they have the Vine ad inventory already they could do post-rolls on on.

Ad Age: We have reported that Facebook has approached some YouTube creators about setting up a YouTube-like service. Have you heard anything about that?

Mr. Calacanis: I can't comment on that.

Ad Age: You didn't include Hulu among Amazon, Netflix, Yahoo and others as potential YouTube competitors. Was that intentional?

Mr. Calacanis: Paid content providers like Amazon Prime Instant Video, Hulu and Netflix could all scoop the top 1% of YouTube creators with a simple offer of a $10 CPM. One of them will wake up and say, "Geez, we can get these YouTube stars to bring their audience to Hulu for just a $10,000 advance per video? Let's do it!"

Ad Age: What feedback have you received from YouTube based on your blog posts and keynote? From creators? From advertisers?

Mr. Calacanis: YouTube is not interested in having a dialog on serious issues like this. They would much rather talk about their fancy new green screen and how much traffic Geek Week got for the half-dozen anointed channels.

Creators were all like, "You're saying exactly what we are thinking... Thank you!"

I've had tons of folks from Machinima, Maker and other [companies that manage multiple YouTube channels] say, "Right on, brother!"

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