When YouTubers ask for money

0:00The Colin and Samir Show is supported by Microsoft Copilot. This is something I thought I would never say, but can I share with you my favorite prompt? I mean, like when you say something like that, I have to say yes. Were you going to say no? No, but okay. Just let me hear it. So when I'm researching for a guest or I need to know a lot about a subject matter, I say, make me a podcast about. And when you do that, you're going to get a short blurb about that subject. And then in like two minutes, you're going to get a podcast. So check this out. Welcome to Co-Pilot Podcasts. Picture this, a guy working the front desk at a hotel, making lacrosse videos in his spare time, completely unaware that he's about to become one of the most influential voices in the creator economy.

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1:10Try it for your research. Try it for getting variations of your titles, your ideas. It's one of my favorite tools on the internet right now for our creativity. And now back to the show. We've watched many YouTubers over the years ask their audiences to pay for things. Sometimes it goes well and other times it doesn't. Today on the show, we're going to talk about an example where it didn't go well, where the creator's audience got really upset. And it's one of the most talked about examples we've seen from a group of guys with a YouTube channel called Watcher. We'll show you that this is actually part of a larger trend in the creator economy and a problem that we're all facing as creators.

1:48All right, if you make it to the deep end, let us know.

1:56All right, so first let's talk about what happened. Okay, so you've got three creators. Okay. Steven, Ryan, and Shane, formerly of BuzzFeed. Steven with his show Worth It that you and I both loved. Love Worth It. And then Ryan and Shane with Unsolved. So they leave BuzzFeed and together decide to start a YouTube channel and a network called Watcher with the goal of making television-style shows and series. It's been a few years since they've launched it. more recently, they put out a video on their channel titled Goodbye YouTube, where they tell their audience that moving forward, their series will be behind a paywall.

2:32It'll be$5.99 a month or$59.99 for the year for their series. And the reason that they give to their audience is essentially the advertising market is not the same as it used to be. They're struggling to keep up with costs. They have 25 employees, and they believe that putting their content behind And the paywall will be the solution to pay for their operation, but also to make better content. Yeah, I think they cite two specific things. One is relevance on YouTube, and second is relevance to advertisers. Yes. So those were really interesting points that they brought up. Now, this video did not go well.

3:07It did not sit well with their audience almost immediately. There was a lot of backlash about whether it be insensitivity in the way that they talked about price, because they said like$5.99 is something that anyone can pay for. People weren't happy with that. And a lot of people in the comments also said that it was just insensitive to the relationship that they have with their audience. To make this move and not give them an option to watch for free was not representative of the relationship they felt what they had with their favorite creator. Yeah. Now, also there was some complications and nuances around like they do have a Patreon.

3:45and I think there was like some suggestion of like patrons would still have to pay for this alt service as well and so there's a little bit of confusion there but overall the sentiment seemed like it turned really quickly into like these guys are greedy yes and there were a lot they're looking for more money there were a lot of people making videos just straight up titling it like these greedy youtubers right yeah these are guys who just want more money and you know even I mean, in the comments, a lot of their audience were like, look, we didn't ask for high quality production. We didn't ask for television.

4:18We actually liked it back in the old days when it wasn't as highly produced. Essentially, they listen to their audience and they make another video titled An Update where they sort of right the wrongs of what their audience wanted. They apologize for the way they handled it. They apologize for the insensitivity around price. and they say that now everyone will be able to watch their content for free on YouTube, but it's going to be windowed for a week or no windowed for a month behind the paywall. The reason why I was really adamant about us making this episode is because I think this situation represents a broader trend in the creator economy.

4:55And I think it's important to talk about, you know, like, look, I know Steven, we know the watcher guys, like this business model shift is not, hey, how can we make more money from our audience? It's how can we make this work? And I think that's a really, really important distinction and a really important topic to discuss. Yeah. It's how can we keep this running? How can we continue to pay our employees and continue to grow? Yeah. So I know like Moist Critical made a video about this where he kind of like makes a lot of suggestions that it's like crazy that they can't, you know, have their business operate.

5:35And we'll get to that. I want to address that. But first, I think we want to talk about this concept of like, why not only are the watcher guys asking for money, you know, or asking for or creating paywalled content, but why creators as a whole? Like, why is this maybe a trend that we might start seeing more? Yeah. I mean, this has everything to do with the advertising market and advertising in general. It is a volatile industry. It always has been. There are so many reasons why the rates you get from advertisers could change, whether it has to do with the specific companies you work with or the overall macroeconomics of what's happening.

6:11Or it could have to do with what's happening with our specific creator economy industry. And that's what we've realized is that there is something happening with our industry specifically. So we actually did a conversation with our agent, Allie Berman, who's also the head of digital talent at UTA as a part of our 30-day cohort, which funny enough is very meta in this conversation because it's us also creating paywalled content. We'll explain that in a second. But this is an excerpt from our cohort creator startup where we talked to Allie about the current state of the ad market in the creator economy.

6:45I know that the spend in this space is stronger than it ever has been. I think the one challenge in this space right now is that brands just aren't spending the way they used to on long form video. on long form video specifically long form video youtube do you think that spend has shifted to short form or do you think it's just more diluted across a ton of channels it's more diluted across the board yeah um because there are there is more inventory there are more assets there are more platforms to package into a deal yeah whereas you know pre short form boom those dollars were heavily concentrated on what in one place.

7:26It's frustrating for me because I do believe that YouTube is still arguably one of the best places to tell a story. And I want to, I do think it'll boomerang back. I think that economy will come back, especially as TikTok starts to really push into longer form content. But it feels like as a result, creators have been in some ways discouraged to pursue long form because they're like, well, I can just get paid to do a 60 second TikTok. It's a much easier lift. I would argue you get way more bang for your buck as the brand, you know, if you're, you know, really investing meaningfully and appropriately investing in long form video because you've got, you know, dedicated appointment viewing.

8:15Here's the highlights of that. Basically something that we noticed too last year, we were starting to produce short form branded content that was trading at similar rates to our long-form YouTube integrations. And I immediately at the end of last year was like, okay, wait, hold on. This is obvious what's happening in the short term. Ad dollars are growing in the creator economy. It's not that they're not growing. It is a great time to be a creator. But those ad dollars, when let's say someone used to spend$50 ,000 sponsoring a YouTube video, it's to their benefit to sponsor five short form creators for$10 ,000 now because short form is applicable across multiple platforms.

8:57You probably can buy paid media against it. Also the opportunity for one of those videos to drive 10 million views and go crazy viral. I'd rather take that chance. As I see it, I kind of agree with Ali. I think like the impact is not the same as a long form YouTube video, but I do understand and empathize with brands that if you only put your spend in one long form YouTube video and that video doesn't go well, that's a good amount of spend. Now this is a bigger conversation around advertiser interest. And again, something that we go deep on in creator startup is relevancy to advertisers, right?

9:31Because if your value proposition to an advertiser is scale, if it's I can get you in front of a million people and I don't know who those people are and I'm an advertiser who might not care, I just need to get in front of as many people as possible. Let's say I'm a VPN. I'm maybe Squarespace, right? I'm an advertiser who's like, I just need high quantities of eyeballs. Then that's when the trade starts to get easier. If I can buy more eyeballs for cheaper or, you know, a better price somewhere else or the same price, I'm going to go in that direction because I'm just looking for quantity. The X factor here of creators is going to come down to relevancy, hyper relevancy.

10:14So like, I don't think niche creators are having this same problem. You know, I can speak from experience. Like we're very niche and we're not yet having this problem because we have a very specific audience and that allows us to talk to very specific advertisers. But if you're more broad, that's when I think this problem is really emerging. Yeah. When you start making more mass general entertainment content, which is what Watcher does. It's just like really, really good stories and programming across different verticals. It's like food, mysteries. You're now dealing with a more general audience.

10:49Right. And so it becomes more difficult to integrate an advertiser. And in the world of BuzzFeed of the past, right? BuzzFeed from 10 years ago, there were limited places to find high quality content like a worth it. there's just limited places so ad dollars went there now there's a lot of places and so it's it's a very different ad market so the the primary issue uh and hank green tweeted about this the primary issue is not for one to two person creator companies the issue is for the companies that built like watcher to 25 employees during one of the greatest ad markets in youtube history during the pandemic, during 2020 to 2023.

11:34During that time when you hire and build studios and create a company around that premise where 95 % of your revenue is coming from brand deals or the YouTube ad market, that's right now the problem that a lot of these companies are facing. It's not the one to two person creator companies. Like it really is not. I don't want to say that this is a problem that is happening there. Maybe there's some ad volatility happening for some of those people, but they can handle it because their overhead is not so significant. But 25 employees is a significant company. That's not a small company. Yeah, and when more than half, well over more than half of your revenue comes from advertising, and all of a sudden you start to see dramatically lower rates, fewer opportunities come your way, and fewer good opportunities.

12:22So brands that you're not interested in working with, right? Or that aren't a perfect fit, but are the ones who are offering you dollars. You know, you have some integrity and most likely you say no. So you're turning down options when you actually do really need the revenue. And there's actually two terms that we should define here. Again, both come from our cohort creator startup. But one is fill rate, right? And the other is price per integration. So fill rate means if you produce 12 episodes a year, what percentage of those episodes has a sponsor on it? So if six have it, you have a 50 % fill rate.

12:57It's pretty hard to sell out a show unless you have like a title sponsor and like an anchor sponsor that sponsors across all of them. But price per integration is then like, okay, let's say you typically trade at$50 ,000 in integration. So if fill rate is fine, if you're filling 10 out of those 12, but price per integration goes from 50 ,000 to 20 ,000, that's a very different business, right? Yeah. It's a very different business. And like you're saying, you're forced to probably increase the fill rate from six to 10 or 11 or all the way up to 12. And maybe with advertisers that you're a little on the fence on with, but you just have to fill it and you're filling it with 20 ,000 or 30 ,000 rather than 50 ,000, which now that is impacting your PNL significantly.

13:46So that then is creating this like tension of, okay, sometimes we're going to sell at market rates and our fill rate is going to be exactly what we want it to be. But sometimes we're going to sell less. And that now means I can't guarantee anything in my company. Yeah. Companies, well, companies don't like, if you're a CEO of a company, if you're running a company, like, you know, for me, I manage our PNL, right? What I don't like is incredible variance in month-to-month revenue. I don't really want that. Yeah. Right? I want one level of certainty, whether that's through a title sponsor or an anchor sponsor that sponsors out the whole year or through a Patreon or through another revenue stream that's subscription-based, right?

14:32So I understand how they got to this point. Yeah. When I watched the Goodbye YouTube video, the initial video from Watcher, I saw a lot of nuance behind the scenes, or at least I assumed it. When they just say, advertising has changed, or it's about keeping our employees, there is all this nuance to how that can actually happen, what the actual stressors are, whether it is fill rate maybe stays the same, but price per integration goes down. There is so much happening behind the scenes, and all that nuance does not make for a good YouTube video. It is not what your audience expects you to talk about, right?

15:11You're a creative person making creative videos that they enjoy. When you step out of that balance and have to come and ask them to pay for what they normally get for free off of advertising, of course, it's not going to go well. So that's, that's the second point I wanted to make. I, when I was thinking about this, I was like, did they commit any cardinal sins of YouTube? Okay. Did they commit any, any like heinous crimes of YouTube, right? in the court of youtube in the court of youtube the one i think they committed was something that that mkbhd talks about quite a bit cardinal sin of the internet is when you charge for something that was previously free yeah something that you used to get for free now costs money that is a cardinal sin of the internet and i think that's why patreon is so widely accepted right because like you really look at what they're doing it's not like it it's the dramatic difference from patreon on the first announcement was that only the first episode of the series and then everything else was behind a paywall patreon is typically extended content right or like extra content so it's stuff that was never available that now costs money or windowed content audiences are fine with windowed content um but that concept of here's something that was free that now you have to pay for.

16:33And then you doing that in an environment that's, they are like very much relationship based creators, right? And they're funny and they're goofy and that's what their audience likes. Yeah. So they have a tight relationship with their audience. So then that becomes a serious issue when you're asking because that the spirit of transparency, I think, between relationship based creators and their audiences, when there's too much production value or too much distance in a video, you start to immediately, your mind spins into the other narratives of greed and they just want money from us, blah, blah, blah, whatever.

17:11So yeah, I do think that was, them walking that back and going into the windowed model is more representative of what I think the YouTube creator and audience relationship can be in payments. Now, we have had experience with asking audiences for money, not just on our channel. And I'll talk more about right now. But you go back in time. One of the most interesting projects we ever did is we made a movie with Yes Theory that was in a pay what's fair model. And what that was, was, hey, here's, you know, you have to pay at least, I think it was like 10 cents or something, maybe a dollar. I mean, it was 99 cents.

17:48So you have to pay at least a dollar to watch this movie. but you can type in any number into this and you pay whatever you think is fair. And it was a movie that was going to be available behind a paywall, a pay what's fair model for three weeks and then released on YouTube. That was really well received. And I think because it felt like it went into that, that vibe of, you know, the community, the Yes Theory community and whatnot. Yes Theory then, you know, years later released a storytelling course. That was, I think,$400 and received a ton of pushback from the audience around it. And it's a really touchy line of where audiences are okay with it and where they're not.

18:34Windowed content seems to be totally fine. Pay What's Fair seems to be totally fine. Patreon seems to be totally fine. But when you start charging for a video as a product, audiences really push back. And obviously, starting this year, we are in that business. We started an education brand called Creator Startup where we're doing 30-day live education courses. And those are selling at really high rates, right? Like that program is$1 ,800. And that's a serious investment. And we acknowledge that. That is a serious, serious investment. But it's also for a very specific subset of our audience. So the other issue is like you're blasting something out to like hundreds of thousands or millions of people when actually it's only applicable to like 1 % of those people, if not less.

19:24Yeah. And so, you know, of course I'm talking about it right now because it's topical to this episode, but the advice we got and the reason why maybe you haven't heard about it yet on this channel is because the advice we got was don't talk about it to your main YouTube audience because it's not relevant to all of them. Yeah. I mean, we got that advice from Ali Abdaal. Yeah. And it makes a lot of sense. I had a lot of anxiety before we launched this course because we don't often ask our audience to pay for things and then we've never done it. Outside of merch, yeah. And we come out of the gates here with a really high price point.

19:57And especially for a first time that you ask for something. And I did have a lot of anxiety about it, but the launch of it was so smooth because we ended up gathering people who were just interested in this and understood the price point and who were the right buyer for it instead of making a big launch video on our YouTube channel and reaching 100 % of our audience where 98 % are actually not the people who would be interested in. I think that's when you get pushback is when you blast something out to your audience, but it's actually only relevant to a small group. Right? Yeah. I mean, I think it's inevitable that people will be like, will look at any creator who's asking for any amount of money and especially the amount of money that our cohort trades at.

20:44And it's like, you guys are greedy. That's inevitable. But I think you have to find the right subset of your audience that is interested in that. And then make sure that it is content that is only available in that context, right? For those people who want it in that context. Again, I don't think, I think if we, like I would feel the same way if we right now were like the entire Colin and Samir show is behind a paywall. I do think that's a really different thing. But it is inevitable even right now with us talking about it that people feel probably not good about it. It's just like creators asking for money is not a comfortable relationship between audiences and creator.

21:28It breaks this wall, I think, or correct me if I'm wrong, if you're watching this and put it in the comments, but it might break a wall between us and the audience that makes it feel too much like we're running a business. Yeah. Right? That makes me want to talk about Moist Critical's video where he talks about like, I think the exact quote is like, I can't see with all their revenue streams how this couldn't be successful. Yeah, and he brings up AdSense, their advertising deals, merch, touring, and Patreon. And he says that he has an agency that works with creators and gets them brand deals and that he has access to what these rates would be for a channel of their size and that he just can't really see how they wouldn't be able to sustain.

22:14And he brings up the Patreon and notes that they have over 13 ,000 members. But if you look at their Patreon, they actually only have about 5 ,800 that are paying members. And the prices that you can pay range from$5 to$10 to$25. Now, if you take it as$5 is the majority, you're looking at around $350 ,000 a year. If they're paying closer to$10 ,000, that's just under$700 ,000 a year. Yeah. And there's obviously a split with Patreon and some processing fees. So it's going to be a little less than both those numbers. Yeah. And there's no doubt that that is a lot of money. It's a lot of money. But when you have 25 employees, and as they mentioned, a lot of freelancers and people that come in on their shoots, they're making high quality stuff.

22:56that goes quickly. And it's 25 employees in LA. I don't know if that includes the three founders again in LA in their mid thirties running a studio in LA. Like it is, it's no joke. It's, it's an expensive endeavor. Like I would assume that the whole thing costs them like, I don't know, three to$4 million a year, if not more. Yeah. And that includes AdSense, merch, touring. Again, these are like, yeah, who knows? High level, rough estimates of that. And it's possible that maybe they're on track to break even this year or make a little money. But I think the bet on subscription is trying to make things make sense in the future, right?

23:40In the short term and the long term. Like again, for us, our business is largely based around advertising. But as I look to the future, I'd like it to not be 100 % based on advertising. I'd like the options. I never want to be put in a position where we have to say yes to an advertiser. Or where we have a drastic drop in revenue. Or like, again, a lot of us as now creator CEOs, we don't want to lay off our team. We have small teams that operate like families. We don't want to lay off our team. If anything, we want them to make more. And, you know, I think that is the insides that you don't get to see as an audience member of like what is actually happening.

24:21And I think that brings me to another point that I wanted to bring up, which was like, I'm not sure the transition from creator to CEO is a smooth one or one where any of us have the appropriate training. You're watching us go through this in real time. You're watching us figure out how to manage a P &L, how to manage employees, how to manage individuals, how to deal with complex partnerships and contracts and deal structures. Like, and at the same time, we're showing up on camera. Trying to be fun, eating food, laughing. Like I said to Steven when I talked to him on the phone, like Steven from Worth It and Steven, the CEO of Watcher, to me are like two different people, right?

25:03Like it's hard to be both of those people at once. And I think, like, I do think that as creators are going through this process, like audiences, I would just ask audiences to be forgiving because we're solving it. But I do think that there is a bigger issue, which is like we as creators, there is a hyper limited amount of operators in the space. And the operator problem, meaning like, you know, can we hire a CEO or a COO? Theoretically, yes. But when you are the face of your company, finding that person who's willing to do that and that you can trust is incredibly challenging. And I don't think there is like a plethora of those people to pull from and bring into our organizations.

25:55So we become the de facto CEOs, and then that is extremely challenging. Some things never go out of style, like trust, reliability, and driving a Toyota. Take the legendary RAV4 and Grand Highlander, designed for maximum space. Hurry in. Offers end September 30th. Toyota. Let's go places. In too many cities, dangerous illegals walk free as police are forced to stand down. Join ICE and help us catch the worst of the worst with bonuses up to$50 ,000 and generous benefits. Apply now. Join.ice.gov. Yeah, building a YouTube channel that then turns into a media company that has overhead is incredibly difficult on YouTube.

26:39Like the model of YouTube is what Charlie Moist Critical is doing. Yeah, yeah, totally. Sitting, reacting, putting out multiple videos a week. Yeah. Incredibly low production quality. It might be time intensive, but, you know, as his rates or his revenue streams go up, he increases his margin and he makes more money. Yeah, and if they go down, pretty low overhead. Pretty low overhead. Doesn't mean he can't, you know, pay rent properly. YouTube is still, it has changed, but like the essence of it is the tagline that it used to be, which is like broadcast yourself, like fire up a camera in your bedroom and reach millions of people, create a connection.