Rage Against the Machinima

As YouTube becomes increasingly wealthy, its stars and the networks that contract with them battle for money and creative control.

It's tempting to write off each contract dispute as just that — an individual incident. But taken together, these fights constitute a bigger issue, one not unlike those that developed when the film industry was first finding its feet.

Like Maker Studios and Machinima, the film studios of the '30s and '40s didn't just produce content, they distributed it, says Tino Balio, professor emeritus of communication arts at the University of Wisconsin at Madison and an expert on the history of the American film industry.

At the time, studios produced shorter, lower-budget films on a tight schedule because theatrical runs were much shorter — only about a week. Studios churned out one major movie every week, plus a few B films, to meet the demand.

"The studios were run on a factory basis. They had to have total control of their talent in order to assign them to projects, in order to make all of these films to keep their theaters filled," Balio says. "They could not negotiate with talent each time they decided to make a motion picture."

They met this challenge by adopting the "option" contract. A new star might be signed for a fixed term (typically seven years). Each year, the studio had the option to renew the contract — but the actors were unable to break it during its duration.

"It was bondage," Balio says. "It changed over time, but basically, when a performer signed an option contract, he or she was bound to the studio because no other major studio would hire that performer if he or she broke their option contract."

Beginning in the 1950s, though, the industry underwent a transformation. It moved away from producing as many films as possible and toward producing the best films possible.

That change was the result of two things, Balio says: the rise of television and the Paramount antitrust suit. The judgment in that case declared that studios could no longer own the theaters that showed their movies. The result was, in some ways, a transformation similar to the one YouTube is hoping for: a transition from short, low-budget films toward longer, professionally made content.

That was the idea behind YouTube's $100 million investment in 100 original-content channels, which included channels produced by Maker and Machinima, made in October 2011. In November 2012, YouTube doubled down on that bet, reinvesting in the top-performing 30 to 40 percent of those channels.

In November, YouTube also opened a production facility in Howard Hughes' former airplane hangar in Playa Vista, available to "partners" who want to up their game. YouTube's redesign, unveiled in December, also was a step in that direction. It is more about channels, less about individual videos, with the idea that YouTube will become a destination rather than a repository for video content.

David Lisi is an attorney with DLA Piper in Silicon Valley. He has worked on both sides of these contract disputes — on behalf of both talent (YouTube stars) and distributors (their networks).

Part of the problem, he says, is that YouTube networks initially adopted the language and practices of the entertainment industry, but technology is evolving quickly, and the law is struggling to keep up with it.

In the past, the talent needed Hollywood studios or record labels or book publishers in order to get their work distributed. Today, not so much.

And that, Lisi says, leaves a lot of video creators asking, "What do these guys do for me?"

"From the standpoint of people who grew up with the Internet, many of these young artists — and I call them artists because I do think they are in the truest sense of the word: They are doing what they are doing out of a creative impulse — for them, it's like, 'Why do I need a middleman?'"

YouTube, after all, was founded on the idea of cutting out the middleman, of making it possible for a filmmaker to post a film and for anyone with an Internet connection to access that film instantly.

Video makers, Lisi says, can easily reach out to each other, unlike actors or recording artists of the past. "Because these are creatures of the Internet, not only do they broadcast to their audience, they consume each other's content, they are fans of each other, and they communicate," Lisi says.

"What you have are the benefits of a union without the burdens of a union — all of the talent sharing information almost instantaneously," Lisi says. And, "Much like a union, they can threaten group action."

"It's a very interesting power dynamic, and I think that the industry is still trying to work out how to deal with this genie that is newly out of the bottle. [YouTube] provides a lot for a lot of people, but it is a genie, and you don't want to piss it off."

Machinima is in the process of changing its terms of use, its partners say, walking its existing talent from open-ended contracts to contracts with three-year terms. All 6,000-plus partners were asked to agree by Jan. 1, 2013, to updated terms.

No one from the company would confirm whether the change was due to the onslaught of bad publicity.

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