I don't write this kind of blog posts but today I'm going to make an exception as I have a need to share my frustrations with the world :) in a way it is a review of YouTube Paid channel offer.
I have set up a YouTube paid channel 14 days ago and today I have received my first report with payment details so have the facts which confirmed my assumptions.
YouTube Revenue split is 55% to channel owner and 45% to YouTube. After seeing my first report just now I confirm that is true!
45% is quite a lot and the same split is used for income from ads. I can accept 45% from ads because all the hard work is done by Google and YouTube but 45% for paid channel just to process payments and do accounting is a lot but it gets worse!
45% is over 80%
Revenue Split is very clever way to get more money (you lose more!) and I'm going to show you how I change 45% to 80%.
Let's say I want to get $10 from every subscriber. I could set price at $10 but YouTube would take $4.5 so I would be left with only $5.5. A naive way to sort it out is to add 45% to $10 so charge $14.5. I say naive because that is not correct. 45% out of $14.5 is not $4.5 but $6.5 so you are left with $8 instead of $10!
The correct calculation is $10 / 0.55 = $18.18 which means you need to add 81.8% on top of what you want to get to cover the 45% YouTube revenue split.
Yes the true cost is 81.8%!
Effect? The subscribers will see a hefty price tag which will lead to harder sell so it will hurt your sells, smaller net revenue and effectively it will hurt YouTube as the paid channel is not going to be very attractive to Channel owners as potential subscribers may find prices to be too high.
But that is not all. One of my subscribers is UK based like myself so it turns out the price I set was VAT (TAX) Inclusive so my $10 would be $8.33 + $1.67 VAT if we took 20% UK VAT but my payments come from Google Ireland so subscribers VAT is actually 23% so $8.13 + $1.87 VAT.
This will probably change in January 2015 as EU changes it's rules and "local tax" needs to be applied so I believe from January a UK subscribers price will be 20% VAT inclusive instead of 23%. The accounting complexity is actually one big reason why I have decided to use YouTube instead of developing my own system and handle all the complexities.
Let's recalcuate if UK based client wants to buy a subscription and I want to get $10 out of it then I need to charge $22.36 which is 123.6% extra but this is tax, nothing we can do about it :)
The good thing for me is that most of my clients are US based on as I get paid by Google Ireland there appears to be no tax. I get Tax on the report but it seems it not taken into consideration when the revenue split is applied so practically it looks that there is no tax for customers from USA.
YouTube paid channel is a great idea that also simplies my accounting and reduces administration costs. Extra benefit is that I can set prices for each supported country (34 at this point in time) which is great as my Top 1 country (34%) is India so I can set much smaller fee and make it affordable instead of not making any sells.
Only problem is the 45% Revenue split which is a 81.8% fee on top of your desired price and personally I don't find this fee justifiable so I'm a little bit frustrated by this fact and I can only hope this will change in the near future!
The biggeest issue is that your paid videos disappear from YouTube search so marketing of your YouTube Paid Channel is practicaly non existent and converting to paid means you lose visibility on YouTube, so why do I pay an 81.8% fee if I have to do marketing on my own? Fortunately for me I have a website with good traffic and run free Webinars to get more subscribers but this is hard work and I don't feel there is anything on YouTube that would help in a noticable way.
The report I ran does not show me details of the subscribers which to a certain degree is fine because these are not my customers but that means I cannot give them extras which I want to give to them so I need to think how I can "inject" my website membership into YouTube paid channel so I don't have to worry about accounting.
If you decided to set up YouTube paid channel than please share your opinion and experience in the comments section.
After two months
It's been nearly two months since I've used YouTube paid channel and I got my data. It was a big mistake! I'm glad I've moved all my member videos on my website and used Encrypted Video Straing service to protect it from downloads. I get much more out of my website and I use it with FastSpring payments so I don't have to do account and I'm charges 8.9% or less $30+ payments).