Structurally, YouTube is the closest thing we have to a traditional TV model in online video. Virtually everything's available for free, supported by advertising, with revenue being shared by the "network" and the programmers.
But of course, YouTube is nothing like television, and everything like the internet. Slick professional video bumps up against amateur webcam talking heads; it's driven by search and sharing, not passive couch-viewing; and everything operates at titanic scale, giving equal weight to the short head and the long tail. All this has made YouTube vibrant and chaotic, an unprecedented success and an unruly mess. The frontier may mostly be tamed, but it's still rugged and open like the west.
Now, YouTube's short head — the comparatively small number of professional video channel programmers with a large, mainstream audience — wants to make sure it gets fed the way it likes. Maker Studios, Vice Media, Machinima, Big Frame, and other partner studios generating billions of views on YouTube tell AllThingsD's Peter Kafka they aren't making enough money through YouTube revenue-sharing alone.
“Every single person in the entertainment group complained… ‘We’re not making enough money.’”
For these programmers, there are simply too many videos on YouTube, and not enough ad dollars chasing them. This inventory glut is amplified by the fact that Google doesn't have a dedicated team selling ads for YouTube, let alone individual programming channels. (Disclosure: Vox Media's SB Nation was part of YouTube's channels program last year.) Video preroll is sold along with search ads, using the same per-click metrics, optimizing revenue for Google but not for its partners. "There isn’t a single person within YouTube that thinks this is the right way to sell video," a video industry executive tells Kafka. (A YouTube representative declined to comment to The Verge.)
"There isn’t a single person within YouTube that thinks this is the right way to sell video."
This isn't just nitpicking. YouTube partners charge that Google isn't capturing as much ad money as it could, as well as throttling the revenue it shares. YouTube typically takes a 45 percent cut of advertising on its platform, with per-thousand-click rates (or CPMs) varying from partner to partner. $2.50 per 1000 views is standard; some partners get as much as four times that, or $10 per 1000 views. But this is well short of the rate partners can get for hosting videos and selling advertising independently, either on a CPM basis or otherwise. Last fall, video programmers at an event reportedly ganged up on Alex Carloss, the head of entertainment at YouTube, to complain, "we're not making enough money."
Still, Google's video partners are loathe to leave, because YouTube is where the audience is. And that's what stings. As a platform, YouTube is doing great: its technology infrastructure is still the best, it has truly global reach, and it's easily the best-known platform for online video. The ads might stink, but that hasn't seemed to stop or slow visitor traffic. And the better YouTube's video content gets, aided by its premium partners, the more indispensable the platform becomes to everyone. Then it becomes even harder to press Google to change its terms to make them more favorable to premium content partners. After all, there are always more video clips where those came from.