Brands' and YouTube's gain is content creators' pain: Impact of YouTube's updated terms of service

YouTube has updated its terms of service with respect to content monetisation through ads policy, which has made creators across the board unhappy.

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It will now show ads on all videos, even if the creators don’t want ads on their channels. On top of it, the platform will not share ad revenue with creators if they don’t fall under YouTube’s Partner Programme.

Prior to this, YouTube could place ads only on the content of creators who were a part of YPP (mostly larger creators). The new policy changes will come into effect from June 1, 2021.

Just to give a background about the YouTube Partner Programme, it requires creators to have accumulated over 4,000 total hours of watch time over the last one year and more than 1,000 subscribers. If a creator is a member of YPP, it makes the person eligible for a share of the ad revenue, but many don’t end up meeting the qualifications.

YouTube wrote, “You grant to YouTube the right to monetise your Content on the Service (and such monetisation may include displaying ads on or within content or charging users a fee for access). This agreement does not entitle you to any payments. Starting June 1, 2021, any payments you may be entitled to receive from YouTube under any other agreement between you and YouTube (including for example payments under the YouTube Partner Programme, Channel memberships or Super Chat) will be treated as royalties. If required by law, Google will withhold taxes from such payments.”

This move will help the platform serve brands better and earn money. Starting June 2021, brands will have a larger set of audience to reach out to once the policy will be implemented.

Large content creators and YPP partners in soup with the updated policy

If one analyses the impact of the YouTube content monetisation policy changes on larger content creators and those who are a part of YPP, at the first look it seems they will not be impacted. But in hindsight, it is drastically going to impact the revenue of larger creators.

Sudish Balan

Sudish Balan, Chief Business Officer, Tonic Worldwide, explained, “This change in policy is not just going to affect creators who are not on the YouTube Partners Programme, but it will also see a dramatic drop in revenue for creators in the YPP programme. Because YouTube will prefer to exhaust their ad inventories on non-partners’ videos and save on commission/royalty that they have to pay out.”

The updated policy leaves smaller content creators helpless

As far as smaller content creators are concerned, there wouldn’t be any monetary impact, but it will get difficult for them to increase their subscriber base without any control over the ads on their channels. Being ad-free gives a competitive advantage to smaller content creators as they climb the long hill to finally be able to monetise their content through ads. But now this power has been taken away from them.

Talking about the impact on smaller content creators and those not a part of YPP, Siddharth Devnani, Co-Founder and Director, SoCheers, explained, “For new or small creators, this is definitely less than ideal. It is adding a layer of friction to build subscribers. Users are likely to be less patient when they see ads on newer channels or less popular ones.”

Balan added, “Non-partner creators will not get paid and won’t have any control over the type of ads that will be run on their content or their duration. This could lead to higher bounce rates. In hindsight, this was inevitable just like any other platform or service. If you are getting it for free, then you are the product.”

Khushboo Sharma Solanki

Irrespective of content creators wanting to monetise their content or not, earlier it was in their hands if they wanted to show ads on their content. Now that power has been taken away. According to Khushboo Sharma Solanki, Founder, Zero Gravity Communications, said whether content creators were monetising content or not, the choice, if they wish to show ads on their channels, have been snatched.

She said, “YouTube is a go-to video content platform for all when we look for a quick recipe, easy makeup, home gardening tips or even movie trailers. There are content creators who have diligent followers and habitually consume content. Many channels chose not to monetise their content and ads didn't appear on their videos. The choice is taken away now. The audience is going to see ads, irrespective of content creators earning from their channels or not.”

Previously, in March, Google has announced that YouTube creators outside the US will be subject to ‘US tax withholding or deductions’ from the monthly earnings they generate from viewers in the US. This tax regime will also come into effect from June 2021.

YouTube has asked creators to provide their tax information in their AdSense account as early as possible. Google posted on its support forum, “If your tax info isn’t provided by May 31, 2021, Google may be required to deduct up to 24% of your total earnings worldwide. If you’re a creator in the US, you may have already submitted your tax info.”

Explaining the reason behind this tax deduction, Google wrote that it has a responsibility under Chapter 3 of the US Internal Revenue Code to collect tax info, withhold taxes and report to the Internal Revenue Service (the US tax authority, also known as the IRS) when a YPP creator on YouTube earns royalty revenue from viewers in the US.

This means business for YouTube

For YouTube, it’s a win-win situation. This change will help them earn more revenue from the brands and also serve them better. In the end, it is natural for any business to think about profits. For YouTube, advertising still makes up for most of their revenue.

Rohit Verma

Rohit Verma, CEO, TorcAI, commented, “The platform has a very good recall in the minds of media planners and marketers, and YouTube has enough advertisers lined up to run campaigns on it. Since YouTube is a closed wall garden, it is looking to expand its inventory size. This seems to only be a step to cater to the growing number of advertisers.”

Siddharth Devnani

Devnani of SoCheers added, “When the new policy goes live, YouTube will be sharing the revenue of only those ads that are shown on channels under YPP, not the others. This means the overall percentage share of all ad revenues for creators reduces. With an already massive year-on-year growth in YouTube ads and with this additional component, the overall revenues are bound to rise significantly.”

The experts also believe that even if the content creators aren’t happy with YouTube’s policy update, they don’t have much of an alternative option. The other available platforms are far behind YouTube when it comes to the vast audience base it has to offer to them.

Devnani said, “YouTube is monetising its might. YouTube provides creators an unmatched viewer base. It has the most used search engine on the internet after google.com. Creators will move out or consider other platforms only if their earnings drop significantly. It is unlikely that a new creator will not use YouTube.”

Verma of TorcAI and Zero Gravity’s Solanki echoed Devnani’s thoughts. They said, “YouTube is a very established platform with almost 75% market share, which makes it the largest video-based platform. YouTube is miles ahead of even their best competitor. Any policy change by such a company will not have any sudden impact. Replacing or moving to another platform isn't going to be that easy or quick considering the scale and spread of YouTube.”

When it comes to competition platforms taking the advantage of creators being upset with the policy changes, Devnani said the other platforms will observe and amend their revenue-sharing arrangements in due course after watching the response to this.

Brands will have more value for money

While content creators across the board are to lose, YouTube’s policy update is in total favour of the brands. It will give brands more inventory and a vast audience base to advertise. Solanki explained that the brands will have more spread and relevance to their ad money. This move for sure is good for brands. 

Denvani said, “YouTube permits brands to showcase their ads on a massive collection of content. This change should increase the collection accessibility to brands significantly. Advertisers targeting niche topics, which do not have creators with a large number of subscribers, would be able to show their ads on relevant content.” 

Verma said it is YouTube’s step to maintain the supply and demand on the platform, which means the cost of advertising on YouTube may remain largely unaffected.

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