Maybe you missed it. Howard Stern, the self-titled king of all media, recently got into apissing match with digital pundit Jeff Jarvis about the value of the $7 million man—well,$7.4 million, actually—PewDiePie, née Felix Kjellberg, the Swedish YouTuber with an audience of 38 million. Stern and Jarvis were sparring about the worth of podcasters, YouTube and VidCon, the online video conference.
Stern, an innovator in his own right, was steadfast in his case against the online set. Basically, he doesn’t think anyone can make a living on platforms such as YouTube—at least not without migrating an existing audience, which is what Stern did when he moved from terrestrial to satellite radio. Jarvis, on the other hand, sang the praises and potential of YouTubers such as PewDiePie who do really make good money from their videos.
Jarvis—whom I spoke with at VidCon—and Stern represent Arctic/Antarctic opposites. And the truth is, both are right and wrong, because the economics of digital video is complicated.
More than a billion people regularly sign onto YouTube. That’s one in seven, globally, which are numbers that are sure to rise as more of the developing world gets access to the web. Some of the site’s stars, like PewDiePie, have used YouTube as a launching pad to movies, TV and books. But for most YouTube creators who are battling an onslaught of recording schedules, shifting advertising rates and pricey productions, online riches are hard to realize. And then there’s the issue of audience value: are online eyeballs as valuable as those same views on traditional media platforms?
In July, PewDiePie, a college dropout who formerly worked at a hot dog stand, made headlines and ruffled some feathers by revealing that he makes millions from his silly YouTube videos. It wasn’t the first time this revelation was made. “Hilariously, the same story gets recycled every year,” Freddie Wong, another prominent and profitable YouTuber, told me at VidCon. But in this age of ephemeral content, the public is fast to forget.
It is a strange moment online. Thousands of creators are getting six figures and up. YouTube’s CEO Susan Wojcicki claimed as much during her VidCon keynote.
“The number of channels making six figures annually has jumped 50 percent year-on-year,” she proudly declared.
But what she didn’t mention is that to achieve those numbers, performers are forced to pump most of their income back into production—and in doing so, they rarely leave their screens.
Four hundred hours of video are uploaded every minute to YouTube, a flood that’s created a generation of pseudo-celeb shut-ins. They’re household names to youngsters who aren’t yet heads of households. Today 18-to-34-year-olds watch more YouTube than they do cable. To this cohort, YouTube personalities are bona fide stars, more popular than so-called mainstream celebs. But these hardworking content creators are not getting paid like celebs—not exactly.
In 2013 YouTube earned an estimated $5.6 billion in ad revenue. Net profits have outstripped what the site pays out to the folks making the content. And not everyone is even getting paid—some are unable to receive revenue from the site’s partners programbecause they have violated the sometimes cryptic terms of service.
Here’s the real issue: because marketers pay more to place ads on TV than they do on smaller screens, these online stars with huge audiences are less valuable. If the rates were even, someone with nearly 40 million viewers, like a PewDiePie, could be making double digit millions instead of single—a huge disparity.
“We’re lagging in the shift in advertising dollars,” said Jamie Burns, YouTube’s director of content commercialization. His job is to bridge the gap between talent and brands, maximizing revenue. It’s a tough job, one that’s drastically evolved since he first joined the company nine years ago.
Burns says advertisers are beginning to recognize that YouTube has become the go-to venue for consumers—and that fact will shift how marketers spend their money, causing a trickle-down-effect that ultimately benefits performers.
“People are watching on mobile devices instead of TV,” Burns said. “Audiences have moved. They’re behaving differently and ad dollars have to follow. As more brands wake up, we’ll see more dollars shift and a change in those economics.”
Meantime, there’s no shortage of fresh faces hungry to amass scores of fans and turn a hobby into a career. But to achieve that dream, most work an almost endless production regimen.
“I do everything myself, which sucks, because I’d like more free time,” said Toby Turner, a 30-year-old with over 15 million subscribers. Not long ago, Turner was making 30 videos a week, a punishing sacrifice that made him contemplate a career change. “I wanted to step away just to see what was more important.”
Turner scaled back by a third. But many YouTubers fear that less content will make them less recognizable, less able to havetheir videos reach new audiences already inundated with content. Which leads to the question: Is this format sustainable? And with most YouTubers functioning as independent businesses, how much actual profit are they making?
STRAIGHT FROM THE CREATOR’S MOUTH
Last year, Olga Kay, who has about one million subscribers, told me me she produces 20 videos a week and around 1,000 annually. She makes about $125 per video or $2,000 for every million views, which translates to roughly $130,000 a year. When you subtract YouTube’s 45 percent cut, plus costs for cameras, editors, sound and lighting, there’s not much left. And not much time to do anything else.
“They think it all goes back into your pocket,” laughed Anthony Padilla, who along with Ian Hecox, are Smosh, arguably the most recognizable YouTube brand there is.
The childhood friends joined YouTube a decade ago as floppy-haired, lip-synching 17-year-olds. Earlier this month the now-polished pros debuted their first film, a direct-to-consumer offering backed by AwesomenessTV. With over 20 million subscribers, merch, albums and a deep staff, they’re now a mini media empire that strides alongside a small group of elite YouTubers.
Padilla and Hecox told me that the same stigma that PewDiePie experiences, that they’re making money hand over fist without serious sweat equity, is infuriating. They wouldn’t say how much they collect from their videos (the Washington Post claims it’s close to $2 million a year), but they did tell me that their annual production budget is north of six figures.
“It gets up there,” Padilla said. “People will look at how much money you make or try to calculate how much money you make…” Hecox finishes this train of thought before laughing in frustration: “People think that what we do is just press a record button and scream at the camera.” Adds Padilla, “They won’t take into account that we have like 20 people that work full-time for us.” Editors, producers, equipment, props, admin staff, managers, the list goes on and on. “There’s so many different small fees that people don’t really take into account,” says Padilla. “When we see it at the end, even if Smosh makes ‘whatever,’ we see such a small part, it feels wrong that people hold it against us.”
It’s a touchy subject, and performers are quick to defend each other. “We know for a fact PewDiePie works his ass off,” Hecox said.
“Eighty hours a week, nonstop some days,” Padilla said.
YouTube is the industry heavy, but it doesn’t hold all of the cards. It is a tremendous platform to build a brand and a following, but there are emerging revenue streams and players. Among them are subscriber-heavy venues such as Twitch, a live-streaming gaming community; Collab, a multichannel network that helps talent repurpose, seed and monetize videos across platforms; YouNow, a growing live-stream chat service that shares revenue with performers; and TWiT, a profitable ad-supported podcast network.
The key to achieving a real payday, though, is supplementing YouTube’s AdSense check. That means on-demand distribution (like Netflix or Hulu), plus product endorsements, brand work, merch, and ultimately, crossing over into film, TV and books. It can be exhausting, but it’s a pay-your-dues formula that should be recognizable to a guy like Howard Stern.
Freddie Wong took to Netflix and then Hulu to release a scripted series. Other big names such as Taryn Southern and Shira Lazaar have provided sponsored content and collaborations with brands and media companies that includeGlamour, NBC and the Marriott hotel chain. Some multi-channel networks, which are the digital agencies that represent and sometimes produce and edit a YouTuber’s work, such as Maker Studios, are known for helping clients expand into clothes and accessories. United Talent Agency (full disclosure: my sister works there) has provided its digital roster with everything from book deals to investment opportunities. Added up, these ancillary opportunities can make for a healthy income.
“I like the fact that YouTube and new media is setting its own value,” said Peter Shukoff, who along with Lloyd Ahlquist runs Epic Rap Battles of History, one of YouTube’s most popular channels at over 12 million subscribers. Shukoff and Ahlquist make 12 videos a year, which may sound pedestrian compared to a Toby Turner — until you take into account that their videos usually receive 40 to 50 million views each.
Shukoff and Ahlquist spend as much as six to eight weeks per offering. The duo is choosy when it comes to brand integration, working sparingly with sponsors. Their business focuses on funneling traffic towards iTunes downloads and live performances.
“I don’t think we ever got into entertainment to make it rich,” Shukoff said.
“For me, it was freedom,” Ahlquist said, calling himself and Shukoff members of a digital middle-class.
When asked how much they make, Shukoff told me he wasn’t quite sure because it fluctuates monthly. “It gets split up in a lot of different ways. Some of it goes to our touring corporation, some of it goes to us, some to pay for a big crew. On a good month, the revenue is six figures.”
To show how far they’ve come, their first video was shot for only $200.
When pressed, Ahlquist bristled at the question of how much money they make. “It feels like a judgment. What I say is this: I have a family that I can support, I’m able to pay my mortgage, I’m able to live my life. Five years ago, I was making three figures. So, it’s a lot different now. I’m most proud that I’m able to offer people jobs. I wouldn’t be able to stop because Epic Rap Battles doesn’t just make money for me and Pete. It makes money for a crew of 15 people and our studio.”
Shukoff and Ahlquist say revenue isn’t consistent among YouTubers—there is no baseline, no SAG-AFTRA scale. It’s less about audience size than per video views. That’s why someone like the Korean singer-comic Psy could make a killing from “Gangnam Style” and then walk away.
Like the Smosh duo, Shukoff and Ahlquist agree that the key is building a brand—and most of all—a dedicated following. Focusing on the zeros can be distracting.
“If you go into YouTube trying to make money, it’s not going to work,” said Shukoff. “If you go in trying to make great videos, you might make some money out of it. The difference between YouTubers and a lot of the entertainment business is that the people at the top of it [on YouTube] do it because they love doing it, not for the money.”
As platforms such as YouTube move further towards the mainstream, so will transparency and consistency for the way its business runs, as well as the way advertises pay to reach those valuable audiences. When that happens, we won’t be scratching our heads wondering what top YouTubers are worth. They might have their own Forbes list by then.