They stole $1.7 million

2018 was the most difficult year of my life. And I'm not talking about the way a YouTuber stub their toe and suddenly say, 'Oh my God! Almost dead!' In fact, I want to say that 2018 was the year full of the highest highs, but also the lowest lows that I have experienced in my, what, 31, 32 years of existence? Highlight: Reaching 10

million

subscribers, something I never thought was possible. Getting a diamond play button when it was first announced was so far from what I thought was possible that finding so many people excited to nerd out and theorize with me is just amazing.

Seven years after doing this crazy YouTube thing. and the channels are stronger now than ever, which says a lot. Oh, by the way, don't worry because the 10

million

subscriber special is coming up, by now you should know that I'm very slow. about doing things. Low point: Our house almost burned down in the California wildfires. And when I say almost burning, I mean literally that across the street from our house there is darkness. You have no idea the mental toll it takes on you to watch the news coverage and see the red line of fire approaching where you live.

It's scary. It's disturbing. It is very traumatic to know that you could wake up and that what you worked so hard to build and buy no longer exists. That safety net is ripped away from you. Highlight, big highpoint, highpoint of the year: it's the birth of our son Oliver, who is literally the coolest potato I've ever met. Stomach table! You have to suck it. There you go, yes! but that comes with the low point of everything that comes with giving birth to a new child. Watching your partner and your wife have to deal with tremendous morning sickness, when you can't do anything to relieve that pain outside, you know, just buy more watermelon because it's the only thing she can eat.

And then when he arrives, he watches as she can't walk for weeks and goes through all that recovery pain. Meanwhile, you're dealing with a baby who cries all the time and you're trying to give her the love she needs. But it's really hard to really know what she wants at any given moment. Mind you, we're still trying to run a business, make sure you have videos in your inbox to feed the YouTube algorithm that way. Our family lives all over the country. So we don't get any help from there and we have no idea what we are doing.

And we're sleeping like two hours for the better part of three months, every day. Its alot! Highlight: Raising two hundred thousand dollars to support mental health research in what I can say is one of the proudest and happiest days I've had in the seven years I've been working at YouTube. But obviously that comes on the heels of what was the worst low of last year: losing my partner, my friend, Ronnie Edwards, to suicide. But I already talked about that in one of these other confessional videos. but there was another absolute low point in 2018, which I have not yet been able to talk about on the channel for legal reasons.

You know when someone says "for legal reasons," it's going to be a serious matter. 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, love, and watch. Altogether, fifty of us were robbed of 1.7 million dollars. of us. 1.7 million dollars,

stole

n, from fifty people. And if that wasn't bad enough, in my case, it was taken by someone I thought I knew. Someone I thought I could trust. Someone who, just a few weeks after giving birth to Oliver, she was on the phone with Stephanie and I and lied right to her face knowing full well that she intended to take our money but oh no !

She will offer us some advice for newborns. And if we have any hope of recouping these profits and ensuring this never happens to another creator again, then I need your help. I need you to listen to this story. Today I tell you the story of DEFY media. Now, some of you may have heard a little of this, for others this may be completely new. So to make sure we're all on the same page, let me back up a bit. DEFY media was what is known as an MCN, or a multi-channel network, and if you watch a decent amount of YouTube, you may have heard that phrase a bit.

Youtubers discussing MCN: "multichannel network", "MCN". You could even name a couple: Fullscreen, Maker, Machinima, PewDiePie's RevelMode was one of them when that existed. And basically all of these are businesses that were built with the intention of helping YouTubers. In the "old days" of YouTube, you actually had to join an MCN to monetize your videos and use things like custom thumbnails. Today, a lot has changed. Where copyright protection is the main goal of MCNs, other than giving you better brand deals or things like that, like if you're a big creator, like potentially a TV deal. Interestingly, my first job was at an MCN.

When game theory was just an interesting conversation topic on my resume. I actually worked at a small MCN called Big Frame. I was hired number seven. We worked in a room in downtown 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 a person who understood numbers, but also what it meant to be a creator, I became the optimization guy. Basically my job was to check with YouTube channels around the network about what the status of their channel was and what

they

could be doing better.

And here you have MatPat, with a solid 30,000 subscribers to his name, but a pretty good knowledge of YouTube, having to consult channels with over a million subscribers, about what

they

're doing wrong. And keep in mind that millions of subscribers back then were a big deal. It's a big deal now, but it was back then. These were some of the top channels on the platform that you probably still know today: DeStorm, Mystery Guitar Man, Corridor Digital, Miranda Sings. In fact, I designed one of the channel's banners for Miranda Sings. I think I can probably upload it here if I can find it through the Wayback Machine and don't worry.

It was intentionally made to look embarrassing. I had this whole conversation with her about why it made sense for her brand and as an MCN employee if one of the YouTubers needed an extra actor in her video. We had just gotten ready. It was a requirement of her job, like this Man "I WON THE LOTTERY!". Mat "That's cool" There he is, ladies and gentlemen, my first major collaboration on YouTube Hmm, that guy is going places, ready to skyrocket up the charts anyway I was one of the first to actually start talking about the algorithm of YouTube and I was definitely the first person to get a lot of these YouTube creators to look at their data.

Some of them followed my recommendations, most of them didn't, honestly. Most of them would just say "I'm ignoring this kid" and while I was doing game theory, on nights and weekends, in the background, I would stay late at the office working in the evenings, writing or editing a video and some of the great YouTubers. I would have walked by and said, "Oh, what are you working on?" And I'd be like, "Oh, I'm working on my channel" and they'd be like, "haha, pretty boy, go find them." It was a little degrading and inspired me to work harder.

This is where DEFY comes in. After about a year of working at Big Frame, I moved on to DEFY, where I become their head of audience development, where they work with channels just like Big Frame did, but they also own many of the larger channels. On platforms like Smosh and Screen Junkies, you can see more cameos there. This is me on the first anniversary of Screen Junkies. *Sarcastically* Oh cute baby MatPat. I was actually there making decisions about what weapons were made on their AWE me channel, where a real-life blacksmith was making real-life fantasy weapons. I'm not going to lie, it was amazing, but my proudest moment was probably my team and I getting Morgan Freeman to read the lyrics to What Does The Fox Say when that song was relevant.

Morgan Freeman: "a ring-a-ding ding a ring a ding ding." Look at it. He is so confused and so angry and so over it. Morgan Freeman You're not watching this, but if you ever do, I'm sorry. Let me tell you, there was a lot of hard work going on there too. But I just wanted to throw out these examples because I thought you'd have fun with them. Anyway, I left DEFY after about a year working there to do YouTube full time because by that point the channel had already gotten big enough. Most people do YouTube full time, like with a couple thousand subscribers, at this point Game Theory had 3 million.

So it was already necessary at that time. But the more time I spent working at these companies and DEFY specifically, the more I began to see the questionable way they ran their business. Let me explain to you how broken this system is. Now, when you sign in to an MCN, YouTube sends your ad revenue check to the MCN, who then takes their cut as payment for the services they provided. to you and then repackages that check and sends you what's left. Now, that doesn't seem like it should be that big of a deal, but if you stop and think about it, there are actually two problems with that.

First of all, they rarely, if ever, do anything that is truly worth the money they are taking from you. It is a sad reality. That doesn't mean that good people don't work in these companies. DEFY's Jeff Olson is a great representative of his creators. Jon Karl is undoubtedly one of the best representatives of his creators. He works very hard for them. It's an honor for me to know you and work with you, friend, but when many of these companies represent hundreds of thousands, tens of thousands of channels, there is no way you can provide services to all of them, especially not services that deserve you to take so much money from them. .

It's just a fact, but second and much more important is the fact that this is the creator's money first and foremost. But YouTube sends it to a service that the creator uses. If that doesn't seem like a big deal, think about it this way: It's like your paycheck before being sent to your house was sent to the water company and then to the electric company and then to McDonald's and every other service. that you planned to use during that month and then it will eventually find its way into your own pocket. Everyone gets their share and then you finally get access to the money you rightfully own.

It's still your money that you earned at your job at the end of the day. But first it passed through the hands of others. And that is the loophole that MCNs began to realize and could exploit to appear bigger. Here they get hundreds, thousands, tens of thousands of YouTube checks for all their different AdSense creators. Sometimes that money amounts to hundreds of thousands of dollars, and all that money. They may keep 10 or 20 percent, but on paper it all looks like company money. DEFY money because it's in a big bank account that aggregates all these things. So why would anyone care about this?

Well, because large amounts of money are attractive to investors, MCNs would make all this money from advertising revenue from checks that don't belong to them and then ultimately go around bragging about how much money they were making in the press in blogs for your clients. big company contacts saying look how rich and successful we are, you don't want to invest your money in us, become part of our business, make it bigger, more successful and then we will all make tons of cash. Hoping deep down to sell out before this whole Ponzi scheme goes down. They were companies that were founded with good intentions, but in the end were based on nothing.

Because when you have a business, whether it started with good intentions or not, that is based on nothing and you can't find a way to make a profit, then you have to sell it to someone who doesn't know any better. Big Frames was sold to another MCN called AwesomenessTV for $15 million. Awesomeness was then sold to DreamWorks, yes, DreamWorks, for $33 million, but the big news was that Maker Studios sold it to Disney to get this half a billion dollars. Oops, sorry, it ended up selling for six hundred and seventy-five million dollars, sorry for badmouthing there. And here's Disney buying something shiny new called Maker Studios.

They open it, they see what's inside all this money, all these views and they discover that there is nothing there, that all this passes to the creators and they keep the bag, they have to dismantle it. They have bought a built business. about nothing This Digiday article actually, "Inside the troubled acquisition of Disney creator studios" has many quotes relevant to our story today "I was excited to be there. I thought it was going to be the next big thing But when you started pushing around it was obvious there wasn't much there," that's from a former executive.

Here is another: "It is theepitome of the colossal failure of the MCM business," said another employee. "Every All Hands meeting started with the number of views we had: ten billion views, eleven billion views, twelve billion views, that was the "It's a success story, but the reason views grew was because the network kept growing. We were adding more and more channels." And that's where Disney was left holding the bag, so when you look at Maker Studios now, under Disney, it looks completely different from what they originally bought, a business built on nothing that was sold to someone who didn't know any better.

So where did DEFY all this go? We are doing practically the same thing: investors give them fifteen million dollars, here thirty million dollars there. In 2016 they raised seventy million dollars. I don't know where that money went so they would go bankrupt in two years. At one point, DEFY even asked us if they could delay our Adsense payment for a month. We didn't know why they asked, but we wanted to be good. partner So we said sure, we found out later and by later I mean recently they kept the money to make their books look better to investors, shady, shady friends.

So, knowing how sneaky some of these MCN companies can be, why did the creators sign on? Do you agree with them in the first place? Well, first, most creators don't know all of this is happening. I mean, I worked at two different MCNs for the better part of three years and I'm only now able to put all these pieces together. Most people, you know, when they partner with the company, they assume that that company will keep the promises they made to them or, worst case scenario, they just don't keep the promises they made to them, but never.

Never steal from them directly because guess what would happen if they thought they were going to take that money unfairly? First of all, they wouldn't do business together. But the even bigger problem here is that we, the creators, largely have no choice. As I said in the past, being part of an MCN was necessary for monetization and thumbnails nowadays. It is necessary for copyright protection. If creators want to have copyright protection for their videos to avoid improper uploads or false claims from movie studios, music labels, whatever, then you have to be part of an MCN Because, according to the system that YouTube has set up, those Companies are the only ones who have the tools they can offer. those protections and when you have channels that cover movies, TV and video games, that type of protection is important.

So here we are, Steph and I, two new parents. Deliriously tired of looking for a new network to join, as we do every year, we spoke on the phone with a boss at DEFY, one of the two best guys in the company and someone I've known since my time working there. , who I've had regular conversations with every year at events like VidCon. We asked the usual series of questions. What are you guys doing? What projects are you working on? Where are you heading in the next few years? And he says things are better than ever. In fact.

Yes, he refers to the 70 million dollars of investment they had and then we talk about the children, he asks about Oliver, we ask about his children. It's a really nice conversation with someone you've considered something of a professional mentor for the better part of six. years. A few weeks later, your company collapses, employees are fired and not just fired, they are fired without notice, without email. Without anything about what's going on. Smosh and other channels belonging to DEFY are left homeless. Smosh: "Smosh is homeless, super homeless... Uhh, yeah" Former Smosh founder Anthony is left penniless.Anthony: "I just have to say everything I feel.

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 it for stock means it has no value unless that company goes public, which it never did". So here I am. Me and 49 other creators were robbed of $1.7 million of our money and you see, that's the point. Yes. It's about money. But what is even more important is a betrayal of trust. I have every reason to believe that when we got that call that day he knew that he was about to rob us, that he was about to take our money to pay off his debts or fill up his offshore bank account or whatever and I'm not exaggerating. when I say the more we learn about this situation, the more layers we peel back and try to find this money, the more complicated it becomes.

It's like a movie, it's very stupid, but someone who I thought had decency, someone who I at least saw as a friend or a good boss, would talk on the phone and take advantage of someone he knew and someone who can. He actively knew that he had just had a son. And these kinds of things change you. They make you more cynical, they make you more angry, they make you more depressed. You walk into every meeting with someone, every collaboration, with someone thinking, how is this person going to ruin me? How are they going to take advantage of me?

You don't feel safe, you spend countless sleepless nights wondering who will be next to catch you. How are they going to rob you next time? It's sad. But the more success we have on YouTube, which the channels have on YouTube, the bigger you get, the more people are willing to scam you. More they seek to exploit you, not work with you or succeed in association with you. you, but just use you and then throw you away. Yeah, it doesn't matter, as long as it's quick and easy money for someone on the other side. I've had to keep silent about this for a long time.

At first I was hoping that I could use my connections with DEFY and everyone I knew that somehow there was a back door to find our money and get paid and then be able to help all the other creators that were involved in this process, but that didn't work, it just led to a lot of deaths. ends DEFY is gone. The guy doesn't respond to my emails or calls, for obvious reasons, and DEFY's remaining money has been seized by a bank called Ally Bank and his job now is to look at the list of everyone DEFY owes money to. and prioritize it in order of importance and then start paying it back until the money runs out, and if you're at the bottom of the list, too bad there's no money for you.

You're just out of luck and you can bet that a bunch of YouTubers won't rank too high on that list. Unless we do something about it, that's why I'm making this video to force you to listen to us, to listen to our story, and to understand that the money that currently exists in the DEFY vaults largely does not belong to Stephanie and me. We have reached out to each and every creator who has been affected to lead the charge to make Ally Bank listen to our story and understand a business that I guarantee you have no idea how it works and to recognize that that money, that 1.7 The millions of dollars they have in the vault do not 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 with livelihoods. And you might be thinking Oh, this is just a big YouTuber problem, but it's not all 50 channels that were affected. Many of them were also smaller creators who are using those ad revenues to barely cover rent. That's why this is so important, whether big or small at any time. Someone gets robbed, every time there are unfair business practices, we have to raise awareness about it.

MCN's dirty secrets have been kept quiet for too long. I want to make sure through this video and this entire debacle that no creator ever gets ruined by one of these companies again. So if you are a creator, this is what you should learn from my story. First, don't accept anything more than a 100 percent pass-through of your ad revenue, which is your money and you deserve to keep it. The MCN has other ways to make money from you, if they don't want to accept. that term then don't accept the deal. It's as simple as waiting until you are bigger and have more bargaining power, we and our channels have never accepted anything less than one hundred percent, take our lead.

Second, explicitly state in your contract that your Adsense will be held in a separate trust account, separate from the rest of the company's money and dedicated exclusively to paying creators. Third Make sure it is expressly written in the contract that if something happens to the company you can leave immediately. We, 50 creators, were lucky that YouTube intervened in our case, but don't assume they will. Make sure you have it in writing, and lastly, make sure there are penalties if they are ever late. payment or not making a payment. I know it seems bad. I'm usually not the kind of person who asks for that kind of thing, it's like I need more sanctions or listening, I'm usually the person who says oh no, it's okay.

Alright. Alright. I'll be fine, but no, you have to protect yourself because no one else will do it for you. So what can you do to help all of us creators affected by the situation? You're already doing it by watching this video, by sharing this video, by talking about 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's important. and nothing can do that better than a couple of big videos, forcing them to listen carefully to ignore a video with millions of views that is generating a lot of social buzz.

It's a fact nowadays, but also if you know a creator on YouTube, if you know someone who is working with an MCN or looking to work with an MCN, share this video with them, especially the last part about the four key points here. The thing to remember here is that we are all in this together. Creators against the people who seek to speak ill of us against the people who seek to take advantage of us. Exploit us and the only way they win is when we don't. t Talk. For now, as far as the DEFY situation is concerned, that's the best we can do, the next big decision will be made in May, so you can expect one or two more updates between now and then on how things are going.

Just be patient with us, and if you want. To help us support this channel, keep watching and listening to our story. It really means a lot to us, to the entire team here, and to all the other creators affected. Hopefully there is a silver lining here and that silver lining is ensuring that no one is treated this way again. So that's my story. Thank you for allowing me to vent. Wish us luck.