YouTube's Content Crackdown an Opportunity for Payments Startup

Video game reviewer Clint Basinger feels squeezed by YouTube policies that reduce his revenue from ads, so the founder of Lazy Game Reviews has begun using the crowdfunding payments provider Patreon to restore his cash flow.

Patreon lets artists accept payments from fans who want to help fund their next project. "It makes more sense than donations," says Basinger. "This way I can engage and interact with people who are supporting me."

Basinger appears in videos where he discusses video games, their design and their history, much like a movie critic discussing a film. He specializes in older PC games, though he also reviews modern releases such as The Sims 3. Like many game reviewers who publish on YouTube, he faces the prospect of lost revenue from a recent surge in copyright claims from third parties such as the providers of the background music used in the games.

"What's happening is music distribution companies are petitioning YouTube for payments for content that the distribution companies considered to be owned by the artists that they represent," says Billy Pidgeon, a research analyst who covers the video game industry and other digital media. 

"This is happening against the wishes of the video game owners who want the publicity that the reviewers give them," he says.

If YouTube places a copyright flag against a review, the third party automatically gets the revenue from any advertising placed before the video, shutting out reviewers such as Basinger, who may stop doing reviews if there's no income available. This occurs even when the video and music clips are properly licensed or are shown within the context of fair use, Basinger says.

The financial hit has been palpable. Basinger typically publishes one video per week, though he'll do more if there's a new game release, and he gets about 1.5 million views per month.  Basinger works with Polaris, an Internet video production company that splits the ad revenue with him.

"I started doing this a few years ago, then it got popular enough to be a full time job," he says. When the flood of content disputes began in December, "I was losing hundreds of dollars per month by videos getting flagged. You can dispute the flagging, but that can take up to 60 days."

Friends referred Basinger to Patreon as a way to augment his income as copyright claims surged. After creating a Patreon account, Basinger published a video informing his fans of the new way to support his channel.

Patreon was founded by Sam Yam, a Silicon Valley developer, and Jack Conte, a member of the band Pomplamoose, which also publishes its content on YouTube. The company launched in May 2013 and uses technology from Stripe to handle payments. Patreon charges content creators 5% per transaction, plus Stripe's fee of 3.9%.

Basinger says he does not plan to charge for access to his videos. Instead, users can pledge a certain amount of money to pay to Basinger each month. For larger donations, Basinger will produce premium content for the donor—though he says he's still working on that aspect.

As of Jan. 24, Basinger had 227 patrons who pledged a total of $1,521 per month. Basinger has set a goal of more than $2,000 per month, at which point he will produce advanced video content that's not possible with his current funding levels, he says. Patreon is an "income buffer" against lost ad revenue, he says.

"This sounds like a valid workaround [for the YouTube copyright policy]," Pidgeon says. "The crowd-funded solution would compensate the reviewer, who is not being compensated by shared ad revenue."

YouTube and Marker Studios—which is listed as legal counsel for Polaris—did not return requests for comment by deadline. YouTube is owned by Google Inc.