Video Monetization, YouTube, and Multi-Channel Networks 101
YouTube Changes Cause Creators to Consider Strategic Partnerships With Multi-Channel Networks (“MCN”) So That They Can Avoid Content ID Problems and Monetize Their Videos Faster.
In 2007 Viacom sued YouTube claiming that YouTube intentionally violated their copyrights in television properties like “South Park” by allowing users to upload full episodes of Viacom’s programs onto the YouTube platform. Seven years later, in March 2014, the 1 billion dollar lawsuit was finally settled (and just in time to avoid the next scheduled court date). The terms of the settlement have not been disclosed.  But, even though YouTube was able to avoid the courtroom this time, the video distribution platform will continue to face legal obstacles as Internet video consumption continues to grow in popularity.
YouTube takes preventative measures; since the 2007 Viacom lawsuit, YouTube has implemented two systems that are “content-owner friendly”: the content ID system and the formation of managed channels.
YouTube’s content ID system, allows content owners to register their content with Youtube and manage the online use of their materials by third parties.
The content ID system works by scanning uploaded YouTube videos for unauthorized third party content. YouTube administers the content ID system, but YouTube does not decide what videos are flagged for copyright violations, the content owner does. Many YouTube users criticize the content ID system for its failure to differentiate between uses that violate a content owner’s copyright and uses that can be defended on fair use grounds. For example, if a Youtube user wanted to critique a television show and incorporate clips from the program into their YouTube video, the content ID system would flag the video, notwithstanding the user’s probable fair use defense. The good news is that Youtube users can appeal copyright claims arising from YouTube’s content ID system. The bad news is that the appeal process can take anywhere between two hours and thirty days. One of the ways YouTube creators can avoid problems arising from YouTube’s content ID system, is to be aware of what they are uploading – Youtube creators should pay attention to any music, artwork, and programs that may be visible in the background of the scene.
Through the creation of managed channels, YouTube diverts responsibility for copyright violations to MCNs.
YouTube creators seeking to monetize their content are categorized as either “managed” or “affiliated.” If the YouTube creator is managed, meaning that the channel is owned or operated by the MCN, then the partnering MCN assumes responsibility for copyright violations that the creator incurs.  To incentivize MCNs to manage their top channels, YouTube sweetened the deal by removing the content ID obstacle for managed channels, and thereby enable managed channels to monetize their videos instantly.
Unlike managed channels, affiliated channels do not get to avoid content claims on their videos. Because the MCN is not on the hook for any potentially infringing content, YouTube will scrutinize their content in order to avoid copyright violations. As a result, affiliated channels face greater obstacles to monetization. This differential treatment by Youtube, of managed channels and affiliated channels, tends to encourage YouTubers to actively pursue partnerships with MCNs.
Monetizing your Video Content via MCN Partnership
Ever since YouTube enabled monetization, more and more YouTube talent have discovered that they can earn a living by creating videos and enabling advertisements. Multi-Channel Networks were developed as a means to help YouTube stars maximize their ability to monetize their videos. MCNs also help YouTube talent acquire the production resources and support that they need to produce and distribute high quality content.  MCNs help channels grow their audience and can help creators develop programming and advertisements that are catered to the channel’s demographic.
Considerations for creators looking to partner with an MCN
For YouTube talent considering a MCN partnership, here are a few terms that you should pay attention to:
1) Length of the Contract Term – How long is the contract term? MCN contracts can range from one year to five years, and often have options to renew the contract. Pay attention to terms regarding contract termination (e.g. how much notice you have to provide the MCN in order to terminate the contract).
2) MCN Support – What sort of support does the network provide to its channels? Does the network have a facility where you can film your videos? Are you looking for assistance with production quality? Does the network offer talent management? Will the network assist with the acquisition of third party permissions? Do they offer you ways to optimize your videos searchability? Lastly, what is the typical support turn around time?
3) Network Strategy – Consider what your particular goals are? If you want to cater to niche markets, then consider niche-specific networks like Machinima for gaming or Tastemade for cooking. If you want to do brand integration, then look for networks that are brand friendly. If you want to work with networks that are exploring new technologies and platforms, then consider networks like Maker Studios. If you want to be a part of a network that does vertical programming (24 hr content-specific and curated programming, that resembles television channels like ESPN and MTV), then a network like BigFrame might be a good fit for you. 
4) Grant of Rights – Is the distribution grant an exclusive license or is it non-exclusive?
5) Revenue Sharing – a 70/30 advertising revenue split is the average, although top talent can often bargain for more (80/20 or 90/10). 
6) Revenue Visibility – Typically, revenue generated from AdSense is sent to the MCN and the MCN pays the talent out. Figure out how you can keep track of revenue that is owed to you.
Most MCNs are especially valuable because of their ability to sell premium advertising for YouTube videos. The MCNs can broker advertising deals that the YouTube talent could not otherwise access.
Monetizing Your Content via Google AdSense
Most of the advertising revenue coming from YouTube is derived from Google AdSense. But Google takes a cut of the revenue generated via the Youtube platform, so MCNs and creators will have to look for alternative ways to generate advertising revenue.  Because they provide YouTube creators and MCNs the distribution platform, Google keeps about 45% of the advertising revenue generated by the YouTube video.
In a partnership with a 70/30 revenue split, this means that the MCN gets a check for the remaining 55% of advertising revenue & then distributes 70% of that check to talent and keeps 30% of the check for themselves.
To mathematically illustrate the above, if you get 100 dollars in advertising revenue, Google (YouTube) takes 45 dollars & the MCN gets a check for 55 dollars. The MCN will distribute $38.50 to the creator and keep $16.50 for itself.
Monetization through Alternative Platforms & Affiliates
Channels are also motivated to partner with MCNs, because MCNs provide creators the ability to take advantage of premium advertising, direct sale advertisements, and content distribution to alternative platforms. MCNs are increasingly driving traffic from YouTube to other sites like Yahoo, AOL, and MSN in order to maximize advertising revenue (by eliminating the need to pay Google out). MCNs are also looking to package shows for Internet consumption on sites like Hulu or Xbox.