Media corporations, often called YouTube Networks (or Multi-Channel Networks), once ruled the creator space but their often predatory business model no longer works now that creators have concentrated much more power.
At the beginning of YouTube, there was no way for a creator to make money on the platform without signing with a Multi-Channel-Network (MCN) like Machinima, the first MCN focusing on gaming content. There were only a few options available to them at the time as well, sometimes as few as 1, which meant there was little to no competition over their signing agreements.
On top of this, many YouTubers, like young musicians or sports stars, didn’t know to read the fine print or hire a lawyer to do so and didn’t understand the ramifications of what they were signing.
Of course, these networks knew this so they wrote their contracts to squeeze as much money out of creators as possible. This often included perpetual contracts of as high as 50% of the creator’s revenue that also bound them to the network for “life and beyond.” Many of these contracts transferred ownership of all of their current and sometimes future content to the company as well.
Once a few more networks started to get into the business, competition increased and the contracts signed out of desperation a year or less earlier started to look even worse.
When startup creatives start to reach initial success (especially when they are young), they are all too often manipulated or coerced into signing predatory contracts that take most of the profits of their labor. This isn’t just true in the creator space either.
Many who signed these contracts have no recourse. Even though their industries started to become better and better for their peers, they were stuck with horrible contracts, and a large portion of them were forced to quit.
The Creator Space Isn’t Alone in the World of Predatory Contracts
Music artists are regularly signed under horrible deals to record labels, managers, sponsors, and more, though it seems that it is getting less common over time. One of the most infamous examples of this is one of the most popular boy bands of the 90s and 00s, NSYNC.
The band’s manager, con man Lou Pearlman, signed them under some of the worst contracts in the history of the music business. Pearlman used the bad contracts along with a heavy dose of manipulation to convince the band members that they would get a massive check after 3 years.
When that day came, each member of NSYNC received a $10,000 check for their 3 years of work, a pathetic sum that was much lower than minimum wage even at the time. He told them that they had to pay for the many extravagant gifts and dinners he gave over the past 3 years after (allegedly) manipulating them into believing that he was footing the bill.
Even worse, Pearlman told them that they were actually in debt for over $1 million dollars. Eventually, it was discovered that he stole over $300 million through a gargantuan Ponzi scheme over decades and he was sent to jail where he died.
The group revealed to the public how horribly they were being swindled and manipulated and yet more and more artists signed under predatory contracts.
Lance Bass, one of the members of NSYNC who created a documentary on YouTube about his troubles with Pearlman, explained why this still happened: “They knew they had horrible contracts because we presented that to the world, but they still had to sign it because, what else are you going to do? It’s this or nothing.”
In today’s world, with many more record labels and investors looking for a hit band or artist, this doesn’t happen as much (though it’s far from eradicated).
The same is true in the creator space. Affiliate marketers and businesses in general now better realize the power of creators on platforms like YouTube and Twitch.tv, opening up the possibilities for monetization. This, in turn, forces these companies to compete with better and better deals for the creators, improving the space as a whole.
A New Page For the Creator Space
While there are still examples of creators signing bad contracts, they generally have more power and are much better informed about their options.
One of the most promising examples of turnarounds in the space comes from the creators of the smash-hit YouTube channel Smosh, Anthony Padilla and Ian Hecox. They sold their company which included the YouTube channel and brand in 2011 to Defy Media.
They don’t claim to have been manipulated into a horrible deal or anything of the sort but they were clearly overworked and their relationship became dysfunctional in the next few years so much that they were eventually forced to split. Padilla left the channel and Hecox stayed on to keep it going.
Padilla went on to become an incredibly successful interviewer with his hit show “I spend a day with,” interviewing the likes of furries, Corpse Husband (the faceless YouTuber and musician), school shooting victims, and more.
Eventually, Defy Media collapsed and Smosh was acquired in 2019 by a separate pair of incredibly popular YouTube Creators, Rhett McLaughlin and Link Neal III, who run the Mythical Morning channel.
The pair were successful enough in their channel and its surrounding business dealings to make the acquisition because of the power concentrated in creators since the fall of the network model (along with their own hard work of course).
This year, Padilla and Hecox were finally able to buy Smosh back from McLaughlin and Neal because of their tremendous success in recent years and triumphantly returned with a new sketch on the main Smosh channel.
Padilla and Hecox aren’t the only creators benefitting from the power concentrating in the space. The industry (mostly YouTube and Twitch) pays much better overall, which is great for the community as a whole as it allows their favorite creators to make more and better content.
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