Joining a YouTube Network (MCN)? Do You Understand the Contract?

So you're thinking of joining a YouTube Multi-Channel Network (MCN)? Maybe you received an email that made you feel so special. A Network thinks that your Channel has potential and they would love to help you grow subscribers, viewers and (yay) revenue. The other week, I received a call from a client who asked if I can help him get out of a network deal. He had a small channel (under 2,000 subscribers) and was, at first, excited about joining a network. He quickly realized that he got little from the network in exchange for some 30% of his revenue. So he decided to leave the network. Not so fast. He was told that he was locked into the contract. What? locked into a contract, giving away 30% of your revenue and getting nothing in return. I can definitely help you here.

So I thought, I'd take a closer look at these networks. More specifically, I decided to review some of the contacts YouTube MCNs ask you to sign when joining. I'm not here to criticize any network. I'm not going to discuss performance or services. I'm not going to talk about experiences my clients had with different networks. As a lawyer, I'm going to look at the contract only. The kind of work clients ask me to do every day. Over the next few weeks, I'll take a look at different contracts by different networks. Today, I'm going to start by looking at the agreement for Creative Nation, MCN. No particular reason. Creative Nation was just the first network for which I found an agreement.  

To review the actual agreement in question, use the following link: MCN Contract. And ... Just in case you're thinking about joining the Creative Nation network or other MCN, I wanted to give you the same tools that I give any of my clients. Using the following link Negotiating Doc for MCN Contract you can download a negotiating document highlighting my suggested revisions, edits and deletions you should negotiate with Creative Nation or the other MCN. 

So let's start. The first thing I notice when reviewing an agreement is if it was written by a professional. We'll just a quick look at the agreement brings something up. Why is this agreement using "Align Center"? Now this might have been a mistake by the Webmaster and not the person drafting the agreement, but it's pretty strange. Definitely dos not look professional. Once you start reading the first few lines in the agreement, you quickly notice that its not necessarily using proper English. That should raise some red flags. 

But let's get into the meat of the agreement. In the intro to the agreement it says ... "Including any other URLs which may be separate YouTube channels launched by Content Creator during the Term of this Agreement (i.e. feature the same or similar subject matter or content, Content Creator's name, Channel name or trademark or logo) all of which above channels and Urls shall be subject to the terms of this Agreement..." Let's stop here. Ignoring the bad English, what are they saying? That not only your current channel subject is to this Agreement, but also any other similar channel that you open in the future. So by signing this agreement, you're legally obligating any future channel, which might be substantially similar to the terms of this agreement. And how they define substantially similar ... anything with your name, trademark or logo. That's a ridiculous provision. No one should ever sign with a Network that asks to tie future channels to their network. Why? A network is not a manager. A network drives traffic. It does not manage your brand. A network puts more eyeballs on your channel. It does not promote you personally. It does not find you speaking engagements. It does not setup collaborations. It does not open up new opportunities for you. Why in the world would a network be entitled to revenue off of new channels that you develop whether or not their similar to your current one. 

Let's more on. In section 1. Titled "Overview" its states ... "Content Creator desires, in exchange for the payment to Content Creator of the fees payable hereunder, for the Content Creator YouTube Properties to become part of the ... [MCN]". Do you understand what this actually says? A Contract would normally start by saying that in exchange for me giving you one thing, you give me another. But this is not what this contract says. It says that in exchange for the privilege of the Network paying you the fees that you receive from YouTube, you agree to add your channel to their network. What? How is the Network paying you the fees you are earning from YouTube advertising a benefit that you are getting from them? Both actions describe things you are doing. You are paying them a percentage of the revenue and you are linking your channel to their network. Why doesn't it say something like ... In exchange of promoting your channel on our network, or in exchange for driving traffic to your channel, you agree to...? This sentence, at the very beginning of the contract sets the tone for this agreement. What you'll se is that nowhere dos the network actually obligate themselves to do anything for you. But let's not focus on this little thing.

On the last sentence of that same "Overview" Paragraph it says ... "Network shall have the exclusive right (other than YouTube's independent, direct sales efforts, if any) to sell advertising on the Content Creator YouTube Properties and to collect any and all revenue generated from the Content Creator YouTube Properties (i.e., ad sales, Google Ad Sense, video ad sense, premium sponsorships, etc.), all as set forth in greater detail below." Now ... what did you think you were signing up for? How much are you paying the Network for their services? A percentage of revenue from AdSense? Well according to this, the Network has exclusive rights over all advertising, not just AdSense. What does that mean? If you get a sponsorship from a product company , you'll owe the Network a percentage. If a company sends you a product for review and to keep, technically you'll owe them a percentage of the value of that product. If you are paid for a product placement in a video, you'll need to share any revenue you make. That is further clarified in section 5.2.

Next ... let's look at payment terms. Under this contract you get paid within 30 days of the Network's receipt of payment from YouTube. While not outrageous, it makes you wonder. its been possible for many years t automated payments and have them split among users. Why can't the network remit payments to you immediately or at least within a day of receiving it from YouTube.  It's definitely not very difficult. What are they waiting for? Do they want to see if they can claim some of the AdSense money against any revenue they think you're making from product placements and advertisements not paid out directly by YouTube? Makes you wonder.

We might have a clue in the next paragraph. Here it says... "Notwithstanding the foregoing, Network will have no obligation to pay any amounts, and is permitted to deduct or withhold any amounts owed, determined or reasonably suspected by Network in its sole discretion to have resulted from: (i) Action Fraud (as defined in the section titled "Action Fraud" below), including without limitation through any clicks originating from Content Creator's IP addresses or computers under Content Creator's control, solicited by payment of money, false representation or request for end users to click on Ads, or (ii) fraudulent, misleading or false activities or activities that Network and/or YouTube believe to be fraudulent or misleading or violative of either of their respective terms of service, guidelines, rules, or privacy policies. Network reserves the right to withhold or deduct payment, if applicable, pending Network's reasonable investigation of any of the foregoing or any breach of this Agreement by Content Creator."

What does all that mean? It means that the network can withhold any of your AdSense money, at their sole discretion and for as long as they feel like it, if they perceive that you violated the agreement with them. So they can, in fact, withhold any money paid by YouTube if they think (no proof) that you earned any advertising dollars that you did not report or pay to them. Isn't that nice? 

But it doesn't end there. Take a look at the end of section 5.1 where it says ... "Network shall have the right to turn YouTube's ad sales 'off', i.e. not allow YouTube to sell the Content Creator YouTube Properties directly or through Ad Sense." What does that even mean? Why would they need the right to turn off you're advertisements using AdSense? Is that a way they can control you're behavior by threatening to shut down all revenue to your channel? Makes you wonder. 

Now let's look at your ability to terminate the agreement. Under section 8, this agreement is for 2 years but can be terminated with 30 day notice. Ok.  That's actually better than some of the network agreements I've seen. I does say the notice needs to be in wiring but doesn't clarify that email will be acceptable. I would definitely add a sentence to that effect. 

Next let's look at indemnification in section 13. Indemnification just means that a party will cover the losses of the other party in the event it caused those losses. Makes sense. Normally, you would be looking for an indemnification agreement that equally protects both sides. Is this the case here?  "Content Creator hereby agrees to indemnify and hold harmless Network..." So you're indemnifying the network for anything that you may do, but why isn't the network doing the same to you? So if the network drives traffic to your channel in violation of YouTube's policies (like paid traffic), which results in your channel getting blacklisted, you will have no claims against the network for all the losses you've suffered. 

And last ... what if you need to file a lawsuit, where do you go? Under section 15.2, you'll have to go to Ireland. Now that's pretty common. The Network will choose the jurisdiction easiest for them, so you have to consider. If this is a great opportunity with a reliable and above-board company, maybe you should accept a contract in a foreign jurisdiction ... but if you have any doubt, you should not sign an agreement with a foreign company. Find a local company or at least local to you country. 

So that's it. Frankly this is a pretty sketch contract. You have to be really excited to sign this agreement. For me, I would either reject the agreement and look elsewhere or negotiate changes to the different provisions. Don't listen to anyone who says you cant negotiate these agreements. These are not huge companies that have to maintain a single contract. If they refuse to negotiate with you, its only because there are 100 other YouTubers standing behind you who never read the agreement and are willing to sign this ridiculous contract. 

Using this link Negotiating Doc for MCN Contract, you can download a negotiating document wherein I provide you with the provision that need to be struck down for the contract to be acceptable. Feel free to download it for Free and use it if you choose to negotiate with Creative Nation, MCN or other similar network.