What sort of income do you earn from YouTube?
More and more young (they mostly seem to be young!) content producers are finding a growing audience using free-to-view online streaming services such as YouTube. Such services provide a great platform for producers to find a market for their typically niche offering without the difficulty, risk, and costs associated with more traditional distribution channels.
So, you’ve created the content, uploaded it and have found an audience racking up the views, you’ve fought off the trolls, and now you’re in a position to actually start making some money from your loyal viewer base. If you’re killing it, Google (as owners of YouTube) will get in touch to discuss how you can monetise your views and what kind of money you can expect, but don’t wait on that, take a look on their site to register for the partner program to ensure when you’re eligible that you don’t miss out.
Below I’ll go through a few of the different ways you can earn money and some of the things to think about. Before I do that, I have to recommend that you hire a good accountant and a good lawyer. It’s important that both of which have the relevant experience – monetising online success is a very new space and not one that all professional advisers will be savvy to.
Advertising revenue (i.e. pay for views)
Once you hit a certain number of views and/or followers, you should be getting in touch with Google to discuss getting paid a split of the advertising revenues Google is earning off the back of your videos. Once you’re in the big leagues you’ll be offered a contract that will specify how you’ll get paid and the wording of this contract will have important tax consequences so it's important you get the right advice. Different types of income are taxed in different ways - some more favourably than others - so you'll want to get this right from the start.
Digital sales
Many an app has been sold off the back of a loyal online following and there are a few tax issues to be aware of before entering into an agreement with iTunes or the Google Play store. Please note that I’ve said “app” here, but really this could apply to almost any piece of digital content you sell.
Foreign withholding tax. Does the sale constitute a royalty? Normally it will be a royalty meaning it’ll be subject to a rate of withholding tax from the country of sale. These amounts will vary from country to country and can generally be varied downward if there is an appropriate agreement in place between Australia and the country of sale. The withholding is the obligation of the payer (e.g. iTunes) and will affect the cash you receive. It also should be noted that whilst you can use the foreign tax withheld as a tax credit here in Australia, you can only apply it to foreign profits – not Australian profits – which can lead to issues if you’ve made a foreign loss (e.g. you may have undertaken a promotional tour in the US with lots of costs attached).
Sales tax. Australia has the GST, the UK has the VAT, the various states of the United States have their own sales taxes. It’s important to be aware of the possibly nightmarish implications of needing to register, account, and return sales taxes in the various jurisdictions you sell your app in around the world.
Structuring. Are you at the stage where you want to setup in a foreign country because perhaps your app has found a really strong market there? If so you'll need to get some localised advice on what your obligations and options are.
Merchandise
One sales strategy behind any pop culture success is the sale of merchandise – simply select an ordinary object (e.g. pillow case, mug, lanyard, any old tat, really), slap a logo on it and resell it for ten times the original cost. Brilliant.
These are a few of the many issues to consider before jumping head-first into selling merchandise with the view to capitalise on your viewer base:
Outsourcing. You may decide to outsource the entire merchandise function to a third party supplier. They are around and they can handle everything if you want – design, manufacturing, sales, distribution, advertising, etc. Before jumping into bed with a third party you’ll need to do your research and get some credible references. We’ve seen a few cases where individuals have been burnt by less than competent third party merch suppliers.
Warehousing. If you decide to go it yourselves, where will you store your merchandise? Your parent’s garage might suffice to start with, but with any level of success you’ll find yourself outgrowing the garage and needing to find proper warehouse space. Have you budgeted this in? Is it reflected in your sales price?
Stock. As any regular view of Shark Tank can tell you, it is incredibly important not to tie up too much cash in stock! However, it’s also important not carry so little your viewers are unable to buy that hat exactly when they want it. Stock levels are a delicate dance and having a reliable supplier who can supply on demand can help dramatically with this and reduce the need to predict the future.
So, if you find yourself in the fortunate position of being able to make some money off your YouTube channel – or any online venture – please get in touch, we’d love to help ensure all the relevant issues are considered so you can maximise your earnings. We work with many of Australia’s highest ranked YouTube channels and find it an interesting and constantly evolving area to be involved with.