MCNs Are Happening. They’re Also Evolving (And That’s a Good Thing).

Forbes digital media contributor Tom Ward recently made some observations on the evolution of multi-channel networks or MCNs–“Stop Trying To Make MCNs Happen (It Ain’t Working)”–that got our attention here at Paladin, and we would like to add another perspective to the conversation.

We maintain that MCN isn’t a dirty word, and–to invoke Mark Twain–reports of its demise are greatly exaggerated. While there are market corrections taking place that are improving the business model, that doesn’t mean it has failed.

The Semantics of MCNs

In his op-ed Mr. Ward notes that some are critical of the term MCN because video has been embraced by social platforms outside of YouTube, where a creator profile is dubbed a “channel,” rendering the “multi-channel” aspect antiquated. A popular alternative is to label a social video-focused company as a “multi-platform network” or “MPN.” This is a semantic distinction that can, in fact, be a misnomer. A network, digital studio, or combination of the two that is built around online video creators can certainly exist solely on YouTube or include social platforms like Instagram or Snapchat.

Further, MPN is sometimes used to describe companies that are building their own distribution platforms. While a few, such as Fullscreen, are focused on creating their own subscription video on demand (SVOD) services, most leverage existing platforms from major social media companies. They work with creators and content across multiple distribution channels. Thus, multi-channel still fits just fine.

The Good, The Bad, and the Great of the MCN Model

When YouTube was new, MCNs were conceived as collaboration groups where emerging video influencers could create content together and help promote one another. Each creator contributed a percentage of advertising earnings to support funding of the MCN, which in turn provided talent management infrastructure and production resources. A rising tide lifts all boats.

This model gained momentum quickly, catapulting nascent channels into stardom and producing unheard-of growth in views and engagement. In time the paradigm shifted to provide such benefits at scale, and seemingly overnight MCNs went from small groups of several dozen influencers to VC-funded hot commodities aggregating tens of thousands of channels.

These huge MCNs found that collaboration, production, and creative services are difficult to provide at that scale, and pivoted to providing services in tiers. Entry-level creators could join and benefit from technology to help them create and grow, and larger creators could benefit from white-glove services. But the cracks in the scaled model began to show.

Here are a few:

●      Most MCNs do not have technology in their DNA, and that’s a key component of providing talent with financial transparency and creative tools as well as managing a scaled business.

●      Smaller creators have felt burned after signing multi-year exclusivity contracts with the expectation that they would get hands-on services from their network and interact with their favorite YouTubers.

●      Scaled networks made of small creators also mean smaller revenue share contributions to the MCN’s bottom line, and only a minority of signed creators grow substantially.

Luckily, markets evolve. It is now common for an MCN to derive most of its revenue from a combination of talent agency services, branded content sales, and digital entertainment production and syndication. Cultivating multiple high-margin revenue streams in the influencer economy is the name of the game.

MCNs continue to provide hands-on services to creators, but are focused on making these high-value and scalable. This can mean releasing talent from their network who are inactive or not growing. The total number of influencers in a network is now seen as a vanity metric of little importance, as a few top influencers can often have more reach and engagement than the combined low-viewed masses.

On that note, the recent reduction in the Maker Studios network has given way to naysaying about influencer networks. The fact remains that an MCN can have 100 creators or 50,000. Both are valid, and there is still viability for the scaled model.

Many networks run a successful scaled business on revenue share margins – even if they are small – driven by volume. The key to their success is transparency in the services offered, and being a responsive and well-intentioned operator. The value proposition is assistance with growth and helping a burgeoning creator become a creative professional. It is not uncommon for small creators to outgrow a scaled MCN and move on to another with more high-touch services, and in fact this is a signal that the scaled network has done its job well.

International Expansion is Huge

The global MCN business is robust, demonstrating continued growth in EMEA, APAC, and Latin America as mobile broadband and smartphone usage grow internationally. Often these MCNs are focusing on geographic, language-specific, or content-specific niches to better corner regional audiences and appeal to local brands.

These boom markets are catching up to where some of the first (U.S.-based) MCNs began, before they became investment or acquisition targets for traditional media companies, while taking key learnings from successes and failures of the model in Western markets.

Higher Standards Are Not a Bad Thing

At this stage in the evolution of MCNs, influencers have the right to expect high quality service from any network they sign with. They are increasingly aware of this, and some choose to flex their muscle if they’re not getting enough in return for a revenue share. This forces MCNs to compete on value added. When this happens, both the industry and creators win.

The Influencer Economy Isn’t Going Anywhere

We agree with Tom Ward that the influencer business is changing, but it’s not going anywhere. MCNs continue to provide services that creators are buying, and to offer a reasonable business proposition for online video entrepreneurs. As long as there are viewers, brand advertisers, and creators who interact in the social video space, there will be an ecosystem around it. Don’t count out MCNs playing a key role in the video future.

If you’re looking for tools to help manage and scale your MCN, click to learn more about Paladin’s Network Management Suite.

If you’re looking for tools to help find influencers for brand campaigns and network recruitment, check out our Talent Locator.

If you’d like to track and monetize your IP across YouTube, click for details about our Rights Monitor.


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