A multi-channel network is an organization that works with video platforms such as YouTube, to offer assistance in areas such as "product, programming, funding, cross-promotion, partner management, digital rights management, monetization/sales, and/or audience development" in exchange for a percentage of the ad revenue from the channel.
The name Multi-channel Network has only recently begun to be standard, coined by former YouTube employee Jed Simmons (reportedly because of YouTube's distaste for the notion of "networks.") Prior to 2014 many names were used by the different companies, including Online Video Studio, Internet Television Company, ITC, MCN, OVS, YouTube Network or simply Network.
Sub-networks of MCNs are known as SubMCNs, Virtual Networks, Proprietary Networks, Content Distribution Networks, SMCNs, VNs, PNs, or CDNs.
They work by a company setting up an account with YouTube CMS (the system used for ContentID), the company adds anyone who signs a contract with them to their CMS, allowing users (and the CMS account owner) to use monetization, block and track policies. Monetization allows for videos to generate revenue, Block prevents access to videos and Track allows content owners to see the analytics of 'reuploads' and copyright infringing content. Some MCN partners can block videos by country (e.g., if a video is uploaded with a banned or unlicensed logo).
MCNs have been described as a means to "negate the hassle involved when seeking out your own advertising opportunities on the site." Advertisers who work with MCNs can pay for services including overlay adverts, product placement and in show sponsorships, aiming to gain repeated exposure, endorsement by YouTube personalities, and increased audience engagement, especially compared with television advertisements which are often ignored or skipped.
Benefits and drawbacks
The benefits and drawbacks of partnering with a multi-channel network have been discussed by several high profile YouTube creators, including Hank Green, Freddie Wong as well as YouTube itself. The possible benefits can include access to production and editing facilities, higher CPM, access to traditional media projects and celebrities and the option to make money from cover songs of copyrighted music. However, there have been several controversies involving YouTube Networks.
Maker Studios was criticised by Ray William Johnson for the pressure the company put on him into signing a contract which gives Maker a 40% share of his channel's AdSense revenue and 50% of his show's intellectual property rights. Johnson stated that they were using "thuggish tactics" to pressure him into signing the contract, one of which was allegedly leveraging his AdSense account for the intellectual property rights to YourFavoriteMartian. He also claimed that former Maker Studios CEO, Danny Zappin, is a convicted felon, a charge which Zappin later publicly admitted to, having a felony drug conviction about 12 years prior.
Machinima has been criticised for the use of perpetual contracts. Ben Vacas, known to the YouTube community as 'Braindeadly', attracted media attention in January 2013 over contractual issues with Machinima. Under the terms of his contract, Machinima were permitted to place advertisements on Vacas's videos and in return he would receive a percentage of the profits generated. However, the contract also disclosed that it existed "in perpetuity"; meaning Machinima would hold the rights to any content created by Vacas published on his partnered YouTube channel in his lifetime, a detail Vacas failed to read.
Networks like Fullscreen have been criticised for partnering thousands of channels, some of which have so few videos and subscribers that they will not benefit from the partnership for more than a year. The concern is that individual channels will find it hard to get meaningful support from such a network as they have too many people to cope with. Fullscreen claims this is due to YouTube streamlining the process so that more people can be partnered.
Machinima was criticised in early 2013 by high profile YouTuber Athene for "intimidating... multiple partners" to sign a contract that would significantly lower their CPM. Athene called it "one of the worst deals on the internet" and advised his subscribers not to "sign with Machinima" stating that they could get a better arrangement with other networks.
Several MCNs have been purchased by larger corporations. In early 2014 Maker Studios sold to Disney for $500 million, and Big Frame was sold to DreamWorks Animation through AwesomenessTV for $15 million. In June 2013, RTL Group invested $36 million in BroadbandTV Corp.