Trouble in MCN Land: Jason Calacanis Tears YouTube Wide Open

/ Jun 3, 2013

VIS-CalacanisYT

Over the weekend, Twitter went a-buzz at the hand of serial angel investor and internet entrepreneur Jason Calacanis’ lastest rant against YouTube.

In a blog post titled “I ain’t gonna work on YouTube’s farm no more” Calacanis tears a hole in YouTube’s business model and how it affects publishers and content creators. Essentially, Calacanis discusses how media companies “have no chance of breaking even” because YouTube collects a 45% tax on all ad-related revenue. Combine that with pretty much no marketing support, an in-house sales operation that isn’t even entirely devoted to YouTube (which Calacanis believes is a way for YouTube to control the relationship with advertisers by distancing them from the publishers), and massive individual overhead, the potential for real business revenue on YouTube is nearly impossible. Ultimately, these reasons are why Calacanis claims he turned down YouTube’s funding renewal.

“Since YouTube doesn’t have to create any content, just aggregate it, they don’t need to worry about the individual profitability of any one brand. Things can be dying and soaring and going sideways throughout their ecosystem, but as long as they have a ton of traffic and control the relationships with advertisers, they win,” Calacanis notes.

While the post is certainly a knife to the YouTube jugular, the points Calacanis raises actually signal a tipping point for YouTube and a massive opportunity for the other platforms gaining strength like Blip (which just acquired Ray William Johnson’s production co.), Revision3 (which just acquired Phil DeFranco’s production co. + IP), Yahoo!, Hulu, and even Dailymotion (which was recently close to netting a pretty nice acquisition by Yahoo! if not for the French government).

His points also unearth a significant problem for the “MCN’s” who are building their businesses essentially on, around, in, and on top of YouTube.

“Sure, it can *feel* like you’re making money, but when you look across the landscape of YouTube businesses — and we won’t call anyone out here — it’s very, very clear they are losing millions and millions of dollars a year,” he adds, which makes the deals that Revision3 and Blip have made with top creators like Phil DeFranco and Ray William Johnson all the more important for the future models.

At a dinner series published by PandoDaily, Jason Hirschorn makes an excellent point regarding VC apprehensions about the media businesses that are reliant on YouTube. According to Hirschorn, VCs are telling the MCNs that are looking to raise money that “[they] need to have a fragmentation strategy, [they] need start thinking about maybe not how you’re moving off YouTube but how you’re not dependent on them.”

“In summary, if you are a content company trying to build a ‘YouTube business,’ you are investing in your own demise. You must stop and think, ‘How can I reduce my YouTube footprint to 1/3rd of my mix of revenue and views?’” says Calacanis. “Every time you invest $1 in YouTube, you’re building their power base and leverage over you. How can you invest that $0.66 of that dollar in an asset you control? At least then you might have a fighting chance over Goliath.”

Which is why in the last year or so, top creators like DeFranco and Ray William Johnson have started siphoning their audiences off of YouTube. Big Frame has launched multiple verticals (geeky girl brand, Wonderly, and urban-centric Forefront), starting to migrate their businesses to platforms where they control the ad revenue, the consumer, and the content creators — three categories Calacanis marks as the most important for any business to control as well as the same three categories that YouTube seems to be going after with its business strategy.

There will be a day when some of these MCNs band together and create a worthy competitor to YouTube; we’ve already heard rumors that a coalition of MCN’s is forming to fund and co-produce content.

And who knows, YouTube co-founder Chad Hurley’s new online video project, MixBit could end up being a YouTube competitor, regardless of what he said at SXSW.

YouTube needs to realize it’s no longer at the center of the online video universe. The other premium video sites — the Blips, Hulus, Yahoo!s, and AOLs — have the chance to grab a significant market share in online video if the right acquisitions happen and creators are wising up to the stranglehold YouTube has over them within the current system.

Do you think Calacanis made the right call in turning down YouTube’s $$? Any predictions on who will win the platform race?  Share in the comments below! 

 

 

 

Tags: , ,


Stand Up to Cancer with YouTube Endemol Shine Group

Brits Stand Up To Cancer with Live-Streamed YouTube Campaign

 
How They Made Fight of the Living Dead Experiment 88

How They Made YouTube Red’s ‘Fight of the Living...

 
More people in the US use Smart TVs than last year

Cord-Stackers Get Most Satisfaction from SVOD Experience

 
BizWireTV Launches on Apple TV, iPhone and Android Devices

BizWireTV Streaming News Show Comes to Mobile

 
Industry Tickets Selling Fast!
Click above to lock in your registration for VidCon 2015!
 
Now We're Talking LeBron James Uninterrupted Go90

First Look at Trailer for Go90 series ‘Now We’re...

 
American Gods Amazon Starz

Amazon Captures ‘American Gods’ for Prime Video in ...

 
Digital Domain World Surf League Tahiti

Digital Domain Goes 360 with World Surf League in Tahiti

 
Streamy Awards

Epic Rap Battles and ‘Oscar’s Hotel’ Top...

 
Dose

Dose Hires BuzzFeed and Elite Daily Execs to Build Out Video and...

 
Wong Fu Productions Single by 30 YouTube Red New Form Digital

How Wong Fu Productions Upped Their Game with YouTube...

 
DigitalCabana_Ep4Still

Streaming Businesses Are A Dime A Dozen, Will They Work?

 
DigitalCabana_Ep4Still

Why is Facebook Catching Push-Back from Premium Publishers?

 
SekineRisa_VideoInk_300x250

International MCN’s Are Still Standing —...

 
JW Player

JW Player’s New “JW Showcase” Further Enables...

 
YuYu_VideoInk_300x250

Digital Media Rights Announces Another Streaming Service — YuYu

 
netflix mobile

Majority of Netflix Subscribers to be Outside of U.S. by 2018

 
ComcastWatchable_Exclusives_VideoInk_300x250

Comcast’s Watchable Grabs Exclusive Titles from Cut, Buzzfeed

 
Rupert Grint Wild Target

Rupert Grint to Star in Crackle’s Series Adaptation of...

 
Vaughan Emsley Tongal

Why Vaughan Emsley Left an Old School Ad Giant for...

 
NextVR and FOX Sports to Broadcast Bundesliga Opening Match Live

NextVR Live Streaming Bundesliga German Soccer League Kick-off...

 
Netflix acquires three new indie flicks

Netflix Returning to Canada with ‘Anne of the Green...

 
AOL Alpha VR Virtual Reality

Does the Future of Virtual Reality Sit at Home and Wear a Headset?

 
Udi Jacobi_VideoInk_300x250

Ad Blocking: How Big is the Problem and What Can Publishers Do...

 
Damon Dash Dame Dash Studios Dame Dash TV

Hip Hop Entrepreneur Damon Dash Launches Dame Dash TV OTT Channel

 
Jake Paul

Vine Star Jake Paul to Headline DigiTour’s ‘Team 10...

 
Dr. Havoc's Diary Fullscreen

EXCLUSIVE CLIP: Fullscreen’s “Dr. Havoc’s...

 
Between_Jennette_McCurdy Netflix

Jennette McCurdy Pacts with Canvas Media Studios for Series...

 
John Zhang Indigenous Media

Indigenous Media Hires DanceOn’s John Zhang as EVP of Marketing

 
Jamie Curry WME

WME Signs Kiwi YouTube star Jamie Curry of Jamie’s World

 
Elizabeth Grier Nash and Hayes Awestruck

Nash & Hayes Grier’s Mom Joins Awestruck Network

 
Billy Crudup Stanford Prison Experiment

Billy Crudup joins Naomi Watts in Cast of Netflix’s...

 
Zype

Zype Adds Live Streaming Capabilities for Clients

 
Talking Tom and Friends

‘Talking Tom and Friends’ feat. Colin Hanks Greenlit...

 
eOne Logo

eOne Completes Acquisition of Secret Location Digital Studio

 
Creative Galazy Season Two Amazon

Amazon Announces ‘Creative Galaxy’ Season 2 Premiere Date

 
DigitalCabana_Ep4Still

Digital Cabana: ESPN Goes Over the Top, Investment is Hot, and more!

 
Defy Media

Defy Media Partners with 3 Ball Entertainment on Content Initiative

 
Primr Machinima

Machinima Returns to Gaming Roots with Channel Revamp

 
Curse Twitch

Twitch Acquires Gaming Tech Company Curse

 
Jason Hargrove Izo DanceOn

DanceOn Parent Company Izo Hires Jason Hargrove to Head Original...