MONEY & LIFE

A New Type of Investment: YouTube Vids

By: James Flippin · December 14, 2022 · Reading Time: 4 minutes

Investors Fund Creators

Venture capitalists make their bones off big bets, and their latest is a big one. Investment funds are now targeting the rights to YouTube (GOOGL) content in the hopes that popular creators’ back catalogs will only increase in value over time.

To be fair, there is precedent. Investors have used this same strategy in the past with musicians’ catalogs. Songwriters such as Bob Dylan and Bruce Springsteen have recently cashed in on the rights to their recorded and written music, selling them to music companies eager to lock in evergreen revenue streams. Springsteen netted more than half a billion dollars from the deal.

Now, some YouTube creators are hoping to do the same by selling the rights to their videos.

Cashing In

In most of these emerging cases, investment funds will offer a lump sum of cash in exchange for the future advertising dollars generated by a YouTuber’s back catalog.

YouTube usually pays creators 55% of the advertising revenue from their videos. Many of the most popular YouTube channels are known to make tens of millions of dollars per year through ad revenue, sponsorships, affiliate sales, and other revenue streams.

But despite how lucrative and popular YouTubers can be, the comparison to classic rock stars is not a fair one. For famous musicians, the deals mean a tidy estate for their heirs (and their heirs’ heirs). For YouTubers, accepting investor cash means a tidy lump sum, too. But being largely speculative investments, the creators have little leverage — and selling the future earnings from their channels often comes with fine print.

Profits or Passion?

If a YouTuber accepts a deal for their catalog, they will usually be required to post a certain number of videos per month or they could face legal recourse. For the YouTuber, this can quickly turn their passion into a job — if they don’t perform, they’ll risk losing their channel.

At the end of the day, investors are looking for ways to shore up income, and YouTube videos are one way to do that. For YouTubers, this could be both gift and curse. If you have your own channel, it’s certainly exciting to know it could be worth millions down the road. But should you choose to accept the payday, be sure to keep it mind everything that comes with it.

Or, as the old saying goes: “with great venture capital comes great responsibility.”

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