Here's Why YouTube Video Creators Are About to Make a Lot of Money

The video-sharing website is testing out a panoply of new features, including the ability for fans to 'tip' video creators directly through the site.

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By Laura Entis

Opinions expressed by Entrepreneur contributors are their own.

Yesterday, YouTube revealed a range of shiny new features for the site's creators and consumers, including the introduction of higher-quality video, the ability for fans to submit translated subtitles for videos and an app that allows creators to track their videos' metrics in real time.

The most exciting reveal, however, was the company's announcement that it will be entering the crowdfunding arena. Soon viewers will be able to 'tip' YouTube channel creators, an exchange that can happen "at any time, for any reason," the company wrote.

"To put it really simply, any viewer can show any creator their love by tipping them any amount between $1 and $500," YouTube CEO Susan Wojcicki said at VidCon yesterday.

Related: How This Wildly Popular Web Series Made It Big

The move positions YouTube as a possible Kickstarter and Indiegogo competitor, although form-wise, its 'tip' system mirrors the San-Francisco-based crowdfunding platform Patreon, which just received $15 million in series A funding. Unlike both Kickstarter and Indiegogo, which raise money to fund large projects, Patreon calls on backers to commit a small amount of cash each time an artist releases something new (from a song, to an article, to a video short).

While fan funding hasn't officially launched yet (it's currently being tested by a handpicked group of creators), the feature has the potential to drum up quite a bit of money for the very indie musicians whose labels are currently being bullied by YouTube.

Related: 'David After Dentist' Dad Now Wants Christianity to Go Viral

The video-streaming service has allegedly been strong-arming indie record labels as it works to build a paid, advertising-free version of its service to compete with subscription streaming services such as Spotify and Rdio. By threatening to block indie labels' videos until they agree to "unfavorable terms" (including an alleged clause, which stipulates that if the company strikes a lower deal with one label, it can retroactively reduce rates for all other labels) YouTube is essentially doing to musicians what Amazon, in its ongoing battle with Hachette, is doing to authors.

It's unclear if YouTube will take a cut of the 'tips' donated to creators on the site. Currently, both Kickstarter and Patreon take 5 percent of the funds collected on their platforms.

Related: Spinning Viral Stars Into One-Man Empires: The Rise of YouTube's Multi-Channel Networks

Related Book: Ultimate Guide to YouTube for Business

Laura Entis
Laura Entis is a reporter for Fortune.com's Venture section.

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