YouTube runs the world's most massive and diverse video bazaar, one that's home to more than 1 million content creators.
But with more and more online distributors getting into the market, some of the company's longest-standing content providers are getting restless, maintaining that the site exploits its pole position as the Internet's No. 1 video destination to extract unfair revenue-sharing terms; that it provides poor marketing; and that it doesn't effectively sell ads against professionally produced content.
Google is that premium content providers -- traditional media companies and pureplay digital studios -- will shun YouTube or increasingly shift toward Internet distributors that furnish more generous splits.
YouTube's critics point out that Apple offers a 70% cut for content sold through iTunes, with Hulu's ad revenue share in the same ballpark. And while the sales paradigms aren't the same -- iTunes content isn't ad-supported, and Hulu offers an array of business models -- smaller players in the ad-supported space, like Yahoo and DailyMotion, are getting noticed. (Yahoo's attempt to scale up by buying DailyMotion was thwarted by the French government.)
"If YouTube was a little more flexible, it could have a ton of TV content," said an exec with a large cable programmer.
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Given YouTube's revenue split, professional content creators and multichannel networks have come to realize they must work with multiple distributors -- and cannot exclusively rely on YouTube for anything but the lowest-cost video-blogger-type material.
"We see YouTube as a great place to incubate content," said George Strompolos, a former YouTube exec who went on to become founder and CEO of Fullscreen, which formed as a YouTube MCN in 2011. "But any media company that thinks that's the be-all-and-end-all is very shortsighted."
Fullscreen last month announced series A funding from Chernin Group, Comcast and ad agency WPP. With the investment, Strompolos plans to adopt a studio-like model to invest in original content for distribution on YouTube and elsewhere.
Machinima, one of the earliest YouTube MCNs specializing in vidgame-related animated content, also is branching out even as it says YouTube remains a key component of its direct-to-consumer strategy. "Machinima's approach to delivering video to our audience is global and multiplatform," chairman/CEO Allen DeBevoise said in a statement, citing as an example the company's launch of an Xbox Live app in April.
Diversify or Die
YouTube itself says it encourages partners to distribute on multiple platforms, positing that healthier media partners will boost content and views on its own service, and for now, in general, it's not budging on the rev-share numbers. The site is pinning future growth on content for younger, Web-savvy auds largely generated by the masses (read: produced for a fraction of Hollywood film or TV budgets).
Over the past two years, YouTube spent some $200 million funding more than 100 original channels to create exclusive content for the site. But now it has reversed course and is lifting exclusivity provisions for those partners.
There's no universal YouTube backlash afoot, despite various objections as to how it does business. Many content creators and multichannel network operators that deal with the site believe that on balance, it's a fantastic venue for turning clicks into cash, with unmatched scale of 1 billion users monthly, and growing. While they say there's room for improvement in how YouTube monetizes and promotes content, media companies of all stripes continue to invest in developing programming for the platform.
"Our success on YouTube has been phenomenal," said AwesomenessTV CEO Brian Robbins. "In a short period of time, we've been able to build an audience and a brand that I don't think we could do on any other platform."
Robbins sold his company, which produces youth-skewing content for YouTube that has generated more than 1 billion views, to DreamWorks Animation in May for a reported $33 million upfront, which could grow to $117 million, depending on how Awesomeness performs.
That said, Robbins and others, including Jim Louderback, CEO of online video network Revision3, now owned by Discovery Communications, emphasize that relying solely on one distribution partner is not a smart decision for any media company's long-term business.
"We've never put all our eggs in the YouTube basket," said Louderback, who's company has its own website and mobile app. "There are great communities for watching video around the Web, and you have to understand the rules of the road."
The loudest -- and most barbed -- gripes about YouTube recently have come from Jason Calacanis, Internet entrepreneur and CEO of Inside.com. His company received funding under YouTube's original channels program and produced nine shows including animated program "Wellcast," workout show "XHIT" and ultimate fighting tie-in "MMA Surge."