YouTube and Patreon Still Aren’t Paying the Rent for Most Creatives
Without major platform overhauls, the creator’s gold rush will come to an end
In 2020, YouTube’s highest earner, according to Forbes, was nine-year-old Ryan Kaji, who made $29.5 million — up from $26 million in 2019. Gaining fame through unboxing and reviewing toys, Kaji surged to the top of YouTube’s charts after publishing a 2015 video in which he reviews more than 100 toys, and he’s remained there ever since. Drawing inspiration from other YouTubers like EvanTubeHD and Hulyan Maya, who also reviewed toys, Kaji and his mother started the channel when he was three years old. To many in his generation, Kaji’s living the dream — in a study of 3,000 children ages eight to 12 conducted by the Harris Poll in 2019, the most popular career aspiration among respondents was YouTuber.
Children aren’t the only ones who dream of making a living with platforms like YouTube. As tech YouTuber Shelby Church writes in OneZero: “Becoming a YouTuber is one of those things that feels within the realm of possibility for just about anyone.” And YouTube isn’t the only platform that appears to offer people a chance to convert their passion into fame and fortune. Aspirational stories abound of streamers making $16,000 on Twitch overnight, a viral TikTok skateboarder making $30,000, and a high schooler making more than $1 million in five weeks on Snapchat. Job losses caused by the pandemic and remote work may have even strengthened the narrative that this is the best time to make money from creative work. Author William Deresiewicz calls this enhanced ability of individuals to get rich from creative work the “techno-utopian narrative” in his book The Death of the Artist.
But there’s also a dark underbelly to this narrative that it’s so easy to make money online. There’s the tragic death of streamer Mocha, who made a meager living streaming on Chinese video-sharing website Bilibili (which has been described as “the nearest thing China has to YouTube”), and actor and comedian Brittany Ashley whose YouTube videos for BuzzFeed were seen by tens of millions in 2015 while she paid most of her bills by waitressing. We could call this side of the coin the “techno-dystopian narrative.”
Without creators, platforms are powerless, but these companies are far from solving the problem of how to more evenly distribute income among creators to achieve a greater number of living wages.
Meanwhile, the platforms supporting these creators are earning and raising millions of dollars. Stir, a platform for creators to manage their businesses, recently raised funds at a $100 million valuation. Clubhouse raised $100 million at a $1 billion valuation, and Cameo is considering doing the same. YouTube reported $19.77 billion in earnings from advertising in 2020. In January, The Information reported that Patreon passed $100 million in annual revenue, and that it’s also considering its own public listing this year. The continued success of these platforms all hinge on the willingness of creators to participate.
Without creators, platforms are powerless, but these companies are far from solving the problem of how to more evenly distribute income among creators to achieve a greater number of living wages. Few creators actually manage to make a living wage through YouTube and Patreon — two of the relatively more mature, robust platforms, both of which are in need of distributing more income to their less popular creators. Without that stabilization of income distribution, the techno-dystopian narrative could prevail, and the creator’s gold rush will come to an end.
The big business of YouTube
While top-earning creators like Kaji may be making millions, YouTube is making billions. Between January 2019 and December 2020, YouTube made nearly $35 billion in 2019 and 2020 in advertising revenue. In a 2021 letter, CEO Susan Wojcicki wrote that YouTube paid out $30 billion in three years to creators; on its press page, YouTube says that there are now 40% more YouTube channels earning six figures per year in 2020 than 2019, and 50% more earning five figures.
But YouTube releases only relative increases in high-earning creators; one reason may be that the number of channels earning five and six figures is fairly small compared to the number of creators producing content. This is not exclusively a YouTube problem: Spotify announced in February that only 7,500 creators out of 8 million got paid $100,000 from the platform in 2020. That’s 0.09% — and that number was up 79% from the year before.
Knowing the odds hasn’t persuaded people from trying to become rock stars or run for president.
In 2018, Offenburg University of Applied Sciences professor Mathias Bärtl said that reaching the top 3.5% of YouTube’s most-viewed channels (more than 1 million views per month) is worth only about $12,000 to $16,000 a year in advertising revenue. (Bärtl’s full study is available here.) Amounts can vary greatly, with several YouTubers earning between $3,400 to $40,000 for a video with a million views. According to economist Ernie Tedeschi in an interview with The Indicator, the effective average minimum wage in the United States is $11.80 per hour. Multiplied by 40 hours a week and 52 weeks a year, a creator in the United States would need to earn $24,544 annually on these platforms to achieve a comparable baseline minimum income; the U.S. federal poverty line, for context, is $12,140 for a single person and $16,460 for a two-person household. If we were to use Bärtl’s numbers, over 96.5% of YouTube creators aren’t making a full-time minimum income from advertising revenue on YouTube.
Knowing the odds hasn’t persuaded people from trying to become rock stars or run for president. While time spent doing labor is the conventional way of calculating value, one of the benefits to online content is that it can continue making money after a creator has released their work. An alternative way to calculate earnings would be considering the lifetime value of an idea: If you’re a content creator on YouTube, you can see each video’s estimated ad revenue and the money you’ve earned per 1,000 video views (known as revenue per mille, or RPM). Bärtl says a conservative estimate of advertising earnings is $1 per 1,000 views. (The industry term is CPM, which stands for cost per mille.) This can fluctuate: According to The Economist, a video sponsored by a brand on YouTube in 2016 for 100,000 subscribers could earn the creator $12,500.
The problem isn’t exclusively about the time it takes to produce content — Gary Vaynerchuk brags about making five posts in three minutes — but the time it takes for creators to qualify for YouTube’s partner program, which involves earning more than 4,000 valid public watch hours in the past 12 months and more than 1,000 subscribers. For YouTuber Cathrin Manning, it took nearly two years to accumulate these results. After monetizing, it can still take time for a video to reach $50 in earnings. Even at that rate, creators would still need to make 491 videos per year to reach $24,544 in earnings of advertising revenue. If a creator considers cash flow, that $50 needs to come in within a short amount of time.
There’s greater income stability in diversity, but the trade-off is less effort focused on getting to the top, where earnings are currently disproportionately high.
There are other, more qualitative factors for creators to consider; namely, YouTube changing its guidelines to the videos that qualify for monetization. A particularly drastic instance took place in 2017, known as “adpocalypse.” When advertisers found out that their commercials were being paired with extremist and hate videos, YouTube took an aggressive stance in moderation — which resulted in creators YouTube deemed not advertiser-friendly losing vast amounts of income. In popular YouTuber Philip DeFranco’s case, that was 80%.
Because YouTube pays creators a portion of its advertising revenues, if advertisers are boycotting the platform or cutting budgets and paying it less, then creators’ income at YouTube will decrease as well. As such, YouTubers diversify their risk with numerous income streams — Cristine Rotenberg, who has millions of subscribers, still keeps her day job. An increasingly prominent stream is Patreon, which has paid out more than $2 billion to over 200,000 creators. Its business model enables creators to reach paying fans directly but provides a different set of challenges when it comes to distributing income.
The Patreon boom
Patreon was one of the rare businesses that grew in the pandemic that wasn’t an existing tech behemoth or retail giant, acquiring more than 30,000 creators in the first three weeks of March 2020. One reason behind its growth during an economic crisis is that Patreon sells financial stability to creators. Unlike the fluctuating algorithm of YouTube, Patreon is a place where a creator can talk to fans, provide exclusive content, and process payments. In 2016, Patreon reported that thousands of people made more than $25,000 per year. In 2018, Patreon acquired Memberful, a membership service that can be integrated into websites and mailing lists.
Using data from 2013–2015, Tobias Regner wrote a paper in the Journal of Cultural Economics noting that only the top 1% of Patreon campaigns made at least $2,500 monthly. More recently, Graphtreon developer Thomas Boruta estimated that 2% of its creators made a living wage in 2018.
Even so, Patreon may not be wrong in its claim that it’s the best place for independent creators to get paid. Predictable income is valuable, and Patreon’s payment structure offers more predictability than platforms like YouTube. But the vast majority of creators on the platform still aren’t making more than $24,544 on the platform alone. In 2016, only 31% of its creators made more than $100 on the platform. According to Patreon, the average time a patron supports a creator page is around three months, and each patron pays an average of $12 per month. By contrast, Patreon itself has become something of a booming business, passing $100 million annualized revenue and earning a valuation of $1.3 billion.
The emerging platforms for creators
Plenty of notable platforms help creators earn money beyond YouTube and Patreon. Creators can sell digital products with Gumroad, host paid 1:1 calls with Superpeer, accept patronage from supporters through services like Buy Me a Coffee and Ko-fi, and communicate directly with audiences through an email service like Mailchimp or text messaging at SuperPhone.
What each of these platforms offers is an alternative to YouTube and Patreon — which means creators rely less on both for income, communication, and data. Other social platforms are also popping up, with better monetization options, which will draw in creators who are dissatisfied with YouTube and Patreon. For example, according to Twitch Tracker, more than 9 million people streamed on Twitch in February 2021, with nearly 3 million people concurrently viewing the site on average. Twitch streamers can monetize through subscriptions (Twitch takes a 50% cut) and paid emoji, as well as ads that pay $3.50 per 1,000 views. Prudent creators already know to diversify their income by building a presence at more of these platforms, similar to how they earn at both Patreon and YouTube. There’s greater income stability in diversity, but the trade-off is less effort focused on getting to the top, where earnings are currently disproportionately high.
With a seemingly endless supply of creators, YouTube and Patreon have survived plenty of departures and are powerful enough to kick even popular creators off their platforms. But if they don’t adjust their monetization strategy, that might not be the case in the future, as the techno-dystopian narrative threatens to unravel the dream they have weaved for this generation of creators.