You’re producing a web video with the makings of a viral hit: a great script that features up-and-coming artists and well-known social media influencers. You can’t wait to let it go live on the web and rack up the views. But before you hit upload, make sure you have a plan to handle an often overlooked aspect of content creation: royalties.
It’s clear that the landscape of creative production has changed. Companies are no longer limited to major ad agencies or corporate studios for outsourced creative work. Instead, companies are turning to online content creators—bloggers, video creators, dancers, music artists and more—for a new take on digital marketing and connecting with audiences. While you’re more than ready to collaborate with these influential creatives, your business operations also play a part in building these partnerships. Let’s take a look at how a lean process will help you to tackle business challenges—like paying royalties to a growing influencer community—and build relationships with creative partners.
Costs associated with influencer collaborations
Content creators is a broad term describing anyone who makes digital content. From web videos to blogs and more, creative partners run the gamut of content specialties and niches. Consider YouTube: creators are producing comedy skits, DIY, daily vloggers, gaming streams, pranks, challenges, cooking videos—and that’s just a handful of the diverse content available on the video-only platform. With millions of blogs on the web, it makes sense that blog content is just as diverse. Niche sites range from geography to hobbies and topics to lifestyle and more.
The diverse content specialties demonstrate that every collaboration is its own production, which means a standard royalty rate doesn’t exist. In a Collaborator Academy course, YouTube shared a list of various costs to keep in mind when collaborating with a content partner:
Talent: paying for the on-air talent and whether that contract is exclusive, non-commit or just a talent fee.
Production: the work behind the scenes, such as special effects or on-location fees.
Intellectual property: the rights and terms to use the video for commercial use.
Distribution: placing the content on the websites.
Media amplification: promoting the video collaboration through social channels.
These pricing considerations can also apply to other partnerships with other creators like lifestyle bloggers or songwriters. Understanding the various aspects involved in producing content will help you develop a productive partnership with creative content creators domestic and abroad.
The difference between paying for contract services and royalties
Influencers or content creators have typically been compensation through these pricing models:
Pay-per-post or flat-rate pricing: Creators receive a flat payment per content.
Product compensation: Partners receive free product or service in exchange for promotion on the partner’s platform.
Pay-per-click: Compensation based on the number of clicks from a publisher’s site to the merchant’s website.
Pay-per-acquisition: Payment rate based on a specific action, such as when a new visitor signs up for a merchant’s newsletter or makes a purchase through an affiliate link.
Let’s take a closer look at pay-per-post, also known as flat-rate pricing, and how it compares to paying royalties.
A flat fee is how it sounds: a flat rate for a defined and contracted service. When the contract service is intellectual property, such as a song, the flat fee covers payment for the labor and the rights to use the intellectual property. So let’s say you’re running a kitchen appliance company and you need to create a print catalog of the appliances you’re selling. You pay a flat rate to a freelance photographer for taking photos of the appliances and obtain the rights to use those photos in any way you choose.
Then you decided to increase your marketing reach by collaborating with a famous mom blogger. She creates a video of making her favorite apple pie using your kitchen appliances. Instead of charging a flat rate for producing the video, she wants to get paid through royalties.
Under U.S. copyright law, original works receive “copyright protection the moment it is created and fixed in a tangible form that it is perceptible either directly or with the aid of a machine or device.” In other words, any original work produced by a content creator is automatically copyrighted, which gives the creator the right to license the asset and charge royalties for ongoing use of it. The royalty rate is calculated according to specific terms defined in a licensing agreement; the terms include restrictions on geographic distribution, time period or the number of uses of the licensed asset. A typical calculation for a royalty rate is paying a specific percentage of the sales that generate from the asset.
Streamlining mass royalty payments
Lean operations are the ideal in many industries, but it’s critical for companies that deal with digital creative services. Izo, the parent company of Dance On, is well aware of the challenge. The Los Angeles-based digital media firm partners with thousands of dance groups around the world to produce videos aimed at Millennial and Gen-Z audiences. Izo’s influence network is best known for creating dance music videos to Silentó’s “Watch Me (Whip/Nae Nae),” helping to propel it as the top trending song in 2015.
That’s the heart of its business—collaborating and distributing content—but Izo knew that cumbersome back-end processes would distract the company from its focus.
“For a lot of early-stage digital media entertainment companies, in order for them to become cashflow positive, it behooves them to run very lean,” Izo Chief Finance Officer Dan Steinberg told Tipalti. “Digital media involves much more guerrilla approaches to production. You’re filming a lot more with lower budgets, and ideally employing data-driven approaches to extend the value of content.”
With the help of the Tipalti mass payment platform, Izo improved its royalties payment workflow by automating tasks related to tax identification. Previously, Izo had to request, collect, and validate the tax identification of its growing community of content creators. But after implementing the Tipalti platform, new artists and partners were able to complete digital IRS W-9 and W-8 documents through Tipalti’s onboarding portal. The streamlined workflow reduced the paperwork for partners and Izo management, enabling the company to run a lean finance operation.
“From our partners’ standpoint, the process is smooth and transparent,” Steinberg said. “We don’t hear complaints. That’s the golden indicator that nothing is going wrong, and that’s the payment experience you want.”
Simply put, automation is the key to unlocking the secret behind global creator and royalty payments. A lean finance operation enables Izo to put their business growth efforts where it matters most: growing its influencer network, creating exciting new content, and connecting with new audiences.
Maintaining a global reach
The nature of the worldwide web is, well, worldwide, which makes sense that content creators are located around the globe. So why put geographic limits on creative collaboration and marketing reach? Automation is the key to unlocking the secret behind growing your global creator network while scaling your royalty payment capabilities. A mass payment platform like Tipalti takes on the manual tasks, such as verifying country-specific tax compliance, and keeps you focused on partnering with influencers and other creatives without geographic limitations. So if you want to collaborate with a German-based video creator and you’re in the U.S., you can reach out with confidence because you know that your business operations will support global partners.
Creative partners are the driving force of change, continually serving up new ways to share information or tell stories. Lean business operations using automation enable media producers to focus on where it matters: producing innovative content with the growing community of creatives around the world.
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