Tuesday, February 15, 2011

Making Money Off Youtube


Why The Arguments That The Huffington Post Must Pay Bloggers Is Misguided: Payment Isn't Just Money

from the you-made-the-choice dept

We didn't mention the whole AOL buying Huffington Post story earlier this week, because there just didn't seem to be that much to say about it. It was an interesting deal, to be sure, and I'll be curious to watch what AOL does with the property, but, beyond that, it seemed like just another content acquisition deal. However, almost immediately after the deal went through, I started seeing some rumblings on Twitter, picking at the scab that has always annoyed a certain group of people about The Huffington Post: that it doesn't pay most of its writers. Sure enough, it didn't take long for this issue to start to spread, with the inevitable summary line of: "Hey, HuffPo became famous because all these people worked for free, and yet, they don't get a cut of the sale."



That story is now snowballing. Dan Gilmor wrote a blog post arguing that it was the "ethical" thing to do to start paying bloggers. Douglas Ruskoff said that he'd no longer blog on the site for free. And, of course, a bunch of cranky HuffPo contributors have created a whole campaign arguing that Arianna Huffington had no right to sell the site, since it was built off of their free labor.



They're all wrong.



Of course, we've been through this before. Five years ago, Nick Carr tried to argue that all the various big Web 2.0 sites like (at the time) Digg, YouTube and MySpace were really digital sharecroppers exploiting labor. As we argued at the time, this was hogwash. People were using those sites because they provided a valuable service. The reason they provided labor was because they got something of value in return -- whether it was attention or hosting or distribution or reputation.



Three years ago, we saw an almost identical controversy after AOL bought Bebo and musician Billy Bragg demanded some of the $850 million AOL paid (in retrospect, a massively bad decision). Bragg argued that Bebo made this money based on all of the "free labor" of musicians who used the site. But that ignored the fact that those musicians got tremendous value in using the Bebo platform to connect with fans and distribute their music... all for free. The folks who got to keep the money were the ones who took the actual risk. The ones who had to cover the expenses to keep the site and the service running, even when it wasn't making enough revenue. They took the risk, they should get the reward. The people who used the site did so of their own free will knowing quite well that the benefit they got from using the service was worth it to them at the time. Along those lines, if Bebo had struggled and faced bankruptcy instead of a massive buyout, would Bragg have felt obligated to give them money to keep it going? Similarly, if HuffPo had been running out of money, and Arianna had gone back and demanded that those who used the platform pay up retroactively, how would these people have reacted?



There are more ways to "get paid" than with money.



The reason that people chose to blog for free at the Huffington Post was because it's a fantastic platform for exposure. It brings traffic like no one else out there, and if you want to present something in a way that's likely to get more attention than on your own blog that no one visits, posting at HuffPo can be quite a good way to go.



And that's the point: the people who chose -- of their own free will -- to post at the Huffington Post for free did so because they clearly got value out of doing so. Otherwise, why would they have done so in the first place? To then say that the only proper thing is to pay them is completely missing the point. It's an attempt to retroactively go back and change the terms of a deal. If you wanted to get paid directly for what you write, fine, don't write for the Huffington Post. It's that simple. Go out and pitch your stories to publishers who pay freelancers. But don't go back and complain afterwards when the folks who actually did take the risk of putting together the site, financing it, organizing it, hiring the staff, buying the servers, paying for the bandwidth, and building it up so that it was such a successful platform, then get paid for their efforts.



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Long California’s digital also-ran, Los Angeles may have its first bona fide new media hit brewing. It’s called Machinima, it did 2.3 billion video views last year, 350 million in December alone, has 45 million uniques, and is still growing.


These numbers slaughter more well known video companies, but if you haven’t heard of Machinima– don’t feel bad. I hadn’t either before a week ago, when I found myself camped out in Redpoint Ventures office and told partner Geoff Yang I wouldn’t leave without a good story tip. Finally he whispered, “Machinima’s December numbers” and I had to ask him to pronounce Machinima a few times, and spell it before I even knew what he was saying. I was impressed we even had a CrunchBase widget for it.


The word is mash-up of “machine” and “cinema” and refers to an underground trend of gamers recording their own videogame play and posting the videos online. It used to be limited to bragging– a hard core gamer showing off his skills. But increasingly, machinima has taken a more creative turn. Players have learned to manipulate story line and character within the video game worlds, with gamers playing characters, and one acting as the camera man. The company was started by Allen DeBevoise and has raised $15 million in two rounds of funding from MK Capital and Redpoint Ventures.


DeBevoise was drawn to the underground movement more from the animation side than the gamer side. He’s been in animation so long, he even worked on the first Tron movie. He was blown away that gamers were able to use these real time game engines to render the imagines in real time– a process that used to be expensive and slow. “Real time rendering was the hold grail in the traditional computer animation business,” he says.


He went to see a gamer who owned the URL in 2004 and bought it from him, although he didn’t focus much on the business until YouTube started to take off in 2007. He tried to raise money back then but the audience was seen as too niche, maybe 5 million people if Machinima was lucky. Clearly everyone underestimated what was brewing here.


There are a lot of fascinating cultural aspects to Machinima that helped make the audience so much bigger than anyone expected. It’s smack in the middle of the expansion of the geek-chic Comicon-culture. It’s never been a better time to be a geek, as seen with the rise of comic themed mega-movies, the explosion of digital movie making innovation in movies like Avatar and Tron that blur the line between actor and animation, everything JJ Abrams and even the mainstream popularity of shows like “The Big Bang Theory.”


While Machinima’s audience is more hardcore than your average Farmville user, platforms like Facebook and the iPad have certainly made the concept of being a “gamer” more mainstream than ever. Already Machinima is doing roughly 70 million views a month through mobile phones, and expects more off-computer as digital living room devices like GoogleTV and Apple TV take off. “Gamification” is even an overused Silicon Valley buzzword these days. And Machinima’s young users have grown up in a world of digital animation, from Pixar as a kid to Halo as a young adult to developing crushes on blue aliens as a 20-something. They’re the natural generation to create a new art form merging the two.


What I love about this company is how well it plays to LA’s endemic strengths, and doesn’t try to do what the Valley does well. Rather than be a tech-centric company, Machinima runs entirely on a YouTube channel. But that doesn’t mean it’s a lean, user-generated-content company. Machinima has 90 employees most of which produce 24 regular shows in house, that augment the ones from community “directors.” Given the creative talent in LA, you could argue this is a company that couldn’t have been built in the Valley. DeBevoise says he regularly meets with agents who see Machinima as a potential digital outlet for creative talent like animators, directors and writers, and since it’s a very new form of filmmaking there aren’t a lot of sacred cows it’s threatening.


DeBevoise isn’t into Machinima being the next, say, Facebook. He wants it to be the next iteration of Rolling Stone magazine or MTV–the touch-point for the pop culture zeitgeist for young people broadly, not just hardcore gamers. It’s a very LA-vision.


In 2010, Machinima’s advertisers were not surprisingly mostly gaming publishers, but given the numbers, this year the company is expanding into non-endemic mainstream consumer goods like Coke and Unilever. Any company with this large of an audience can build a decent ad business, but particularly attractive about Machinima is the idea of unleashing gamers to make their own videos to promote certain brands, DeBevoise says. He expects the company to become profitable this year.


In the cold-war between Silicon Valley and LA, LA may finally have a big winner.


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