They stole $1.7 million

They stole $1.7 million


2018 was the hardest year in my life. And I don’t mean that in the way a YouTuber stubs their toe and suddenly says, ‘Oh my gosh! I almost died!’ I actually mean that 2018 was the year filled with the highest of highs, but also the lowest of lows that I’ve ever experienced in my, what, 31, 32 years of existence? High point: reaching 10 million subscribers, something I never thought was possible. Getting a diamond play button when it was first announced was so far removed from what I thought was in the realm of possibility that to find so many people excited to nerd out and theorize with me is just incredible Seven years into doing this crazy YouTube thing, and the channels are stronger now than they ever have been which is saying a lot Oh and uh, by the way, don’t worry that 10 million subscriber special is coming, you guys should know at this point that I’m just really slow about doing stuff. Low point: our house almost burning down in the California wildfires. And when I say almost burning down, I literally mean across the street from our house is black. You have no idea the mental toll it takes on you to watch news coverage and see the red fire line approaching where you live. It’s scary. It’s unsettling It is so traumatic to know that you might wake up, and what you had worked so hard to build and buy is just gone. That safety net is ripped out from under you. High point, huge high point, highest high point of the year: Is the birth of our son Oliver, who is literally the coolest potato I have ever met. Stomach table! You have to suck it. There you go, yeah! but that comes with the low point of everything that comes wrapped around giving birth to a new child. Watching your partner and your wife have to deal with tremendous morning sickness, when you are powerless to do anything to relieve that pain outside of, you know just get more watermelon because it’s the only thing that she can eat. And then after he arrives, watching as she’s unable to walk for multiple weeks and suffering through all that pain of recovery Meanwhile, you’re dealing with a baby who just cries all the time and you’re trying to give him the love that he needs But it’s really hard to actually know what he wants at any given point in time. Mind you we’re still trying to run a business, make sure that you have videos in your inbox So that way the YouTube algorithm gets fed. Our family lives across the country So we’re not getting any help from there and we are clueless, We have no clue what we’re doing! And we’re getting, like, two hours of sleep for the better part of three months, every single day It is a lot! High point: raising two hundred thousand dollars to support mental health research in what I can say is one of the proudest, happiest days that I’ve ever had in the seven years of doing YouTube But obviously that comes off the heels of what was the lowest of low points last year: Losing my partner, my friend, Ronnie Edwards, to suicide. But I’ve already talked about that in one of these other confessional videos. but there was one other absolute lowest low point of 2018, that I haven’t been able to talk about on the channel yet because of legal reasons You know that when someone says “because of legal reasons,” it’s gonna be some serious business. And worse yet, it wasn’t just a low point for me, But it was also a low point for 50 other creators on this platform that you know, and you love, and you watch, Collectively, us fifty had 1.7 million dollars stolen from us. 1.7 million dollars, stolen, from fifty people. And if that wasn’t bad enough, in my case, It was taken by someone who I thought I knew. Someone who I thought I could trust. Someone who, only weeks after giving birth to Oliver, hopped on the phone with Stephanie and I and lied directly to our faces knowing full well that he intended to take our money, but, oh no! He’s gonna offer us some newborn advice. and if we have any hope of getting these earnings back and making sure that this never happens to another creator ever again then I need your help. I need you to listen to this story. Today I’m telling the story of DEFY media. Now, some of you may have heard a little bit of this, some of you this might be completely new to. So to make sure that we’re all on the same page, let me rewind a bit. DEFY media was what’s known as an MCN, or a multi-channel network and if you watch a decent amount of YouTube You might have heard that phrase tossed around a little bit. Youtubers discussing MCN’s: “multi-channel network,” “MCN.” You might even be able to name a couple: Fullscreen, Maker, Machinima, PewDiePie’s RevelMode was one back when that was a thing. And basically these are all businesses that were built with the intention of helping youtubers. Back in the “olden days” of YouTube, you actually had to join an MCN in order to get your videos monetized and use things like custom thumbnails. Nowadays, It’s changed a lot. Where copyright protection is the primary goal of MCN’s, as well as getting you better brand deals or things, like if you’re a big creator like a TV deal potentially. Funny enough, my first ever job was actually working at an MCN. Back when Game Theory was just this cool talking point on my resume. I actually worked at a small MCN called Big Frame. I was hire number seven. We worked out of one room in central Los Angeles and there weren’t enough desks for me, So I sat on the floor and worked on my laptop, my laptop, my personal laptop, not like a company owned laptop. As the person who understood numbers, but also understood what it meant to be a creator, I became the optimization guy. Basically It was my job to consult the YouTube channels in the network on what their channel health was, and what they could be doing better. And so here you have MatPat, with a solid 30,000 subscribers to his name, But a pretty good understanding of YouTube, having to consult channels with over a million subscribers, on what they’re doing wrong. And mind you million subscribers back then was a huge deal. Like, it’s a big deal now, but it was a huge deal back then. These were some of the top channels on the platform channels that you probably still may know today DeStorm, Mystery Guitar Man, Corridor Digital, Miranda sings. In fact, I designed one of the channel banners for Miranda sings I think I can probably pull it up here if I can find it through wayback machine and don’t worry It was intentionally made to look cringy I had this whole conversation with her about why it made sense for her brand and as an employee of the MCN if one of The YouTubers needed an extra actor in their video. We were just enlisted. It was a requirement of her job, like this Man “I WON THE LOTTERY!”. Mat “That’s great” There it is ladies and gentlemen my first ever major youtube collaboration Mmm, that kid he’s goin’ places, ready to shoot up the charts anyway I was one of the first to really start talking about the YouTube algorithm and I was Definitely the first person to get a lot of these YouTube creators to actually look at their data. Some of them took my recommendations most of them didn’t, honestly. Most were just like “I’m ignoring this kid” and all the while I was doing Game Theory, on nights and weekends in the background I would actually stay late in the office working nights Writing or editing a video and some of the big YouTubers would have walked past and been like “Oh, what are you working on?” And I would be like “Ah I’m working on my channel” and they’d be like “haha cute little kid go get em’ buckaroo” It was kind of demeaning and it inspired me to work harder. Now this is where DEFY comes in. After about a year of working at Big Frame I move on to DEFY where I become their head of audience developments where they work with channels just like Big Frame did but they also own a lot of the biggest channels on the platform like Smosh and Screen Junkies, you can actually see more cameos there This is me in the Screen Junkies One-year-anniversary. *Sarcastically* Oh cute baby MatPat. I was actually there making the decisions on what weapons got made on their AWE me channel where a real-life blacksmith was crafting fantasy weapons in real life. Not gonna lie it was Awesome, but my proudest moment was probably my team and I getting Morgan Freeman to read the lyrics to What Does The Fox Say back when that song was relevant. Morgan Freeman: “a-ring-a-ding ding a Ring a ding ding.” Look at him. He’s so confused and so angry and so over it. Morgan Freeman You’re not watching this, but if you ever do I am sorry for that. Let me just say there was a lot of real hard work there too that was going on But I just wanted to throw out these examples cuz I thought you would get a kick out of em’. Anyway I left DEFY after about a year working there to do YouTube full-time because the channel by that point had gotten to be large enough. Most people hop into doing YouTube full-time like with a couple of thousand subscribers, at this point Game Theory had 3 million So it was long overdue at that point But the more time that I spent working at these companies And DEFY specifically, the more I started to see the questionable way they ran their business Let me explain how broken this system is Now when you’re signed into an MCN YouTube sends your ad revenue check to the MCN who then takes their cut as a payment of whatever services they rendered to you and Then repackages that check and sends whatever’s remaining over to you. Now that doesn’t seem like it should be that big of a deal right, but if you stop and think about it There’s actually two problems with that. First, they rarely if ever do anything to really merit the money that they’re taking from you It’s just a sad fact of the matter. Now that’s not to say that good people don’t work at these companies Jeff Olson at DEFY great representative for his creators. Jon Karl is without question One of the best representatives as his creators ever he works so hard for em’ I am honored to know you and work with you buddy, But when a lot of these companies are representing hundreds thousands tens of thousands of channels There is no way that you can actually give services to all of them especially not services that merit you taking that much money from them. Just a fact, but secondly and far far more importantly is the fact that that is the creator’s money first and foremost But YouTube is sending it to a service that the Creator Uses. If that doesn’t seem like that big of a deal think of it this way it’s like if your paycheck before it got sent to your house was sent to like, the water company and then like the electric company and then McDonald’s and whatever other services that you planned on using for the duration of that month and then it eventually reaching your own pocket Everyone gets their cut and then you finally get access to the money that you rightfully own It’s still your money that you earned at your job at the end of the day But it went through everyone else’s hands first And that’s the loophole that the MCN’s started to realize that they could exploit to make themselves look bigger. Here they are receiving hundreds, thousands, tens of thousands of checks from YouTube for all their different creators adsense, Sometimes that money is in the hundreds of thousands of dollars, and all that money. They’re maybe keeping 10, 20 percent of it, but on paper it all looks like the company’s money. DEFY’s money because it’s sitting in a big bank account that aggregates all this stuff So why would anyone care about this? Well, because big pots of money are attractive to investors You would have MCN’s getting all this ad revenue money from checks that didn’t belong to them and then ultimately go around Bragging about how much money they were earning in the press in Blogs to their big business contacts saying look at how rich and successful We are don’t you want to invest your money in us become a part of our business make it bigger, more Successful and then we all make tons of cash. Hoping deep down inside to sell off before the bottom fell out of this whole ponzi scheme. They were businesses that were founded with good intent, but ultimately built on nothing. Because when you have a business, whether it was started with good intentions or no, that is built on nothing That you can’t figure out a way to get profit out of then you gotta sell it to someone who doesn’t know any better Big Frames sold to another MCN called AwesomenessTV for 15 million dollars Awesomeness then sold to DreamWorks, yeah that DreamWorks, for 33 million dollars, but the big news was Maker Studios selling to Disney for get this five hundred million dollars. Oops, sorry, six hundred seventy five million dollars is what it ended up selling for, sorry for misspeaking there And so here’s Disney just buying the shiny new thing called maker studios. They open it up See what’s inside all this money all these views and they find that there’s nothing there, that all of that Passes through on to the creators and they’re left holding the bag they have to dismantle it They have bought a business built on nothing This article by Digiday actually, “inside Disney’s troubled maker studios acquisition” has a lot of pertinent quotes for our story today “I was excited to be there. I thought it was gonna be the next big thing But when you started to poke around it was obvious there wasn’t much there” that’s from a former executive. Here’s another one “it’s the epitome of the colossal failure of the MCM business” said another employee “Every All Hands meeting was led off with the number of views that we were doing ten billion views, eleven billion views, twelve billion views that was the outward facing success story but the reason the views were growing was because the network kept growing. We were just adding more and more channels”. And there you had Disney left holding the bag which is why when you look at Maker Studios now, under Disney, It looks completely different from the thing that they originally bought, a business built on nothing that was sold to someone who didn’t know any better. So where was DEFY all this? We’re doing largely the same thing investors giving them fifteen million dollars, here thirty million dollars there. In 2016 They got seventy million Dollars. Don’t know where that money went to for them to go bankrupt in two years At one point DEFY even asked us if they could delay paying us our Adsense for a month We didn’t know why they asked but we wanted to be a good partner So we said sure, we found out later and by later I mean recently that they kept the money to make their books look better for the investors, shady shady friends So knowing how skeezy some of these MCN companies can be, why did creators sign up with them in the first place? Well, first most creators don’t know that any of this stuff is happening. I mean I worked at two different MCNs for the better part of three years and I only just now am able to put all these pieces together. Most people, you know When they go into partnership with the company assume that that company is gonna deliver on the promises that were made to them, or at the very worst just not deliver on the promises made to them, but never. Never, outright steal from them because guess what if they thought that that money was gonna be taken unfairly from them They wouldn’t be in business together in the first place. But the even bigger issue here is that largely us creators don’t have a choice Like I said back in the day being a part of an MCN was required for monetization and thumbnails nowadays It’s required for copyright protection If creators want to have copyright protections for their videos to prevent wrongful reuploads or false claims from movie studios Music labels what have you, then you have to be a part of an MCN Because based on the system that YouTube has set up those companies are the only ones with the tools that can offer those protections and when you have channels that cover Movies, TV and video games that sort of protection is important. So here we are Steph and I two new parents Deliriously tired looking for a new network to join like we do every single year we hop on the phone with a head of DEFY one of the top two guys at the company and someone who I’ve known since My time working there who I’ve had somewhat regular conversations with every year in events like VidCon We asked the usual slate of questions. What are you guys doing? What projects are you working on? Where are you headed in the next couple years? And he says things are great better than ever. In fact. Yeah He references that 70 million dollars of investment money that they had and then we talk about kids he asks about Oliver, we asked about his kids It’s a really nice conversation with someone who have considered a professional mentor of sorts for the better part of six years. A few weeks later His company collapses employees are let go and not just let go they are let go with no notice, no email No Nothing about what’s going on. Smosh and other channels that belong to DEFY are left homeless. Smosh: “Smosh is homeless, super homeless… Uhh yeah” Anthony, former founder of Smosh is left penniless.Anthony: “I just have to say everything that I’m feeling I’ve been hiding it publicly, for so long. Ian and I sold Smosh in 2011 to what eventually became DEFY media. So I sold it for $0, selling for stock means that it’s completely valueless Unless that company goes public, which it never did.” and here I am. Me and 49 other creators with 1.7 million dollars of our money stolen from us and you see that’s the thing. Yeah. It’s about money. But even more importantly it’s about betrayal of trust. I have every reason to believe that when we got on that call that day he knew That he was about to steal from us, that he was about to take our money to pay his debts or fill his offshore bank account or whatever and I’m not exaggerating when I say that, the more and more we learn about this situation, the more layers, we peel back and try to find this money the more complicated it gets. It’s like a movie, it’s so stupid, but someone who I thought had decency, someone who I At the very least saw as a friend or as a somewhat okay boss Would get on the phone and take advantage of someone he knew And someone who can actively knew had just had a child. And these sorts of things change you They make you more cynical, they make you more angry, more depressed. You go into every meeting with someone every Collaboration with someone thinking, how is this person gonna screw me over? How are they gonna take advantage of me? You don’t feel safe, you have countless sleepless nights wondering who is gonna get you next. How are they gonna steal from you next? It’s sad. But the more success that we have on YouTube, that the channels have on YouTube, the bigger you get the more people are just willing to cheat you The more they’re looking to exploit you, to not work with you or succeed in partnership with you, But just use you and then throw you away. Yeah, doesn’t matter as long as it’s a quick easy buck for someone on the other end I’ve had to keep quiet about this for a long time At first it was my hope that I could use my connections with DEFY and everyone that I knew there to somehow backdoor our way into finding our money and getting paid out and then from there being able to help out all the other creators who were involved in this process but that hasn’t worked it only has led to a bunch of dead ends DEFY is gone The guy won’t respond to my emails or calls, for obvious reasons, and whatever money DEFY did have left has been repossessed by a bank named Ally Bank and their job is to now look at the list of everyone that DEFY owed money to and Prioritize it in order of importance and then start paying them back Until the money’s gone, and if you’re at the bottom of the list well, too bad no money for you. You’re just out of luck, and you can bet that a group of YouTubers ain’t gonna be too high on that list. Unless we do something about it, which is why I’m making this video to force them to hear us, to hear our story and understand that the money that currently exists in the vaults as DEFY’s largely doesn’t belong to them Stephanie and I have reached out to each and every one of the creators who’ve been affected to lead the charge in making Ally Bank hear our story understand a business that they, I guarantee have no idea how it runs and to recognise that that money, that 1.7 million dollars that they have in the vault doesn’t belong to DEFY and never did. It was taken out of our pockets it was money that was used to pay our employees, to run our businesses, because guess what unlike DEFY we actually care about building sustainable businesses and providing people livelihoods. And you may be thinking to yourself Oh this is just big YouTuber problems, but it’s not all of the 50 channels that were affected A lot of them were also smaller creators people who are using that ad revenue to barely cover their rent. That is why this is so important, large or small any time. Someone gets stolen from, any time there is unfair business practices, We have to raise awareness of it. The dirty secrets of MCN’s have been kept quiet for too long. I want to ensure through this video and through this whole debacle that no creator ever gets screwed over by one of these companies ever again So if you’re a creator here is what you need to take away from my story. First Don’t accept anything other than a hundred percent pass-through of your ad revenue that is your money and you deserve to keep it the MCN has other ways that they can earn money off of you, if They don’t want to accept that term then don’t accept the deal It’s as simple as that wait until you’re bigger and have more negotiating power, us and our channels we have never accepted anything under a hundred percent pass through take our lead. Secondly get it explicitly stated in your contract that your Adsense will be kept in a separate trust account one that’s away from the rest of the businesses money That is solely dedicated to paying out creators. Third Make sure it’s written expressly in the contract that should anything happen to the company You can leave immediately. Us 50 creators were lucky YouTube’s intervened in our case, But don’t take that for granted that they’re gonna do that Make sure you have it in writing, and lastly make sure there are penalties in place Should they ever be late on a payment or miss a payment. I know it seems mean I’m usually not the type of person to ask for those sorts of things are like I need more penalties or listen that I’m usually The person who’s like oh no, it’s okay. It’s okay. It’s fine. I’ll I’ll be okay, but no you have to protect yourself because no one else is gonna do it for you So what can you do to help all us creators who are affected by the situation? You already are by watching this video, by sharing this video, by talking about in this video on other platforms because at the end of the day if Ally Bank is ever going to take us seriously They need to understand our story and why it matters, and nothing can do that better than a couple of large videos Forcing them to listen hard to ignore a multi-million view video that’s getting a lot of social buzz. Just fact of the matter nowadays but also if you know a creator on YouTube if you know someone who’s working with an MCN or is looking to work with an MCN share this video with them especially that last part about the four key points here. The thing to remember here is that we’re all in this together Creators against the people who are looking to bad-mouth us against the people who are looking to take advantage of us Exploit us and the only way they win is when we don’t Talk. For now as it regards the DEFY situation that’s the best we can do the next big decision happens in May, so You can expect one or two more updates between now and then about how things are going Just stay patient with us, And if you want to help support us on this channel, please keep watching keep listening to our story It really means a lot to us to all the team here to all the other creators who are affected. Hopefully there’s a silver lining here and that silver lining is making sure that no one is ever treated this way ever again So that’s my story. Thanks for letting me get this off my chest Wish us luck.

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