The biggest stars on YouTube make huge incomes ... yet they can't keep the vast majority of it
IconFelix "PewDiePie" Kjellberg.
There was an uproar about a month ago when Fusion reported that YouTube star Felix "PewDiePie" Kjellberg earned $7.4 million from his YouTube channel last year.He even who felt that he was somehow overpaid.
The interesting thing about YouTube revenue, however, is how little of it the stars themselves get to keep. YouTube keeps a 45% cut of any ad revenue gathered by one of your videos. And that's before taxes and your own operating and editing costs.
Statsheep, a site that generates statistical estimates about YouTube channels, estimates that PewDiePie actually earns an ongoing $3.5 million every four months, or $10.5 million per year, based on his recent traffic.
$10.5 million a year! Just for making jokes about video games!
But ... PewDiePie is probably making a lot less than that after YouTube and taxes take their cut. Here's the math:
- PewDiePie total revenue: $10.5 million
- After YouTube's 45% cut: $5.775 million
- After taxes @30% after YouTube's cut: $4.0425 million
- Net income: $4 million, roughly
OK, that's still pretty good.
But most YouTube stars are not PewDiePie.
- Michelle Phan total revenue: $378,000
- After YouTube's 45% cut: $207,900
- After taxes @30% after YouTube's cut: $145,530
- Net income: $145,530
That's a nice amount of take-home pay. But it's not lottery money.
Dozens, possibly hundreds of people, have built up huge audiences on Google's video upload site, and the media is full of stories of their success. Another archetype is Jenna Marbles, who has millions of fans and makes an estimated $350,000 a year from her self-deprecating takes on life as an American female.
But before you buy a videocamera and tell your boss to shove it, consider what it costs to become a YouTube star. Turns out you can be one of the most famous people on the web and still barely get by.
And because Kay isn't a massive star like PewDiePie and Phan, it gives you an idea of what you're reasonably likely to make as a YouTube star with a moderate sized fanbase:
- Kay has earned $100,000 to $300,000 in each of the last three years. She has 1 million subscribers. That number is merely the gross revenue, however.
- She makes 20 videos a week, all of which are filled with ads via Google's automated YouTube partners program.
- Kay likely gets about $7.60 per 1,000 ad views, down from $9.35 in 2012, according to TubeMogul, which buys and sells video ads.
- Ads are only run on a minority of videos shown. Roughly, a video creator will earn $2,000 for every million views. "And then YouTube takes 45 percent," the Times notes. (The IRS will take its cut of the remainder, too.)
- Kay spends $500-$700 a week on editing costs.
In other words, Kay is probably getting by on less than 50% of what her videos make in gross revenue. If she earns $100,000 year, she might be looking at as little as $13,500 annually, after YouTube's cut, taxes and editing costs, according to our back-of the-envelope math:
- Total revenue: $100,000
- Minus YouTube's 45% cut: -$45,000
- Minus taxes @30% of revenue after YouTube's cut ($55,000 - 30%): -$38,500
- Minus editing costs ($500 per week x 50 weeks): -$25,000
- Net income: $13,500
We presume Kay's real numbers are a little more optimistic than that - otherwise why bother? She can write off her expenses against her income, for instance. (The first time we wrote about her, we estimated she might take home $21,000 annually. Either way, it's a modest living.)
Jason Calacanis, a well-known Silicon Valley entrepreneur who was part of YouTube's professional partners program, said that to make 10 videos he would spend $25,000 to $75,000 in costs before a dime was earned in advertising:
We were huge fans of YouTube ... but we are not creating content anymore because it's simply not sustainable. YouTube is an awesome place to build a brand, but it is a horrible place to build a business.