The Economics of Internet Comedy Videos

Funny videos on the internet come from a plethora of sources, from established internet studios to TV networks to independent comedians. But how do comedy production studios fund their internet comedy videos? There’s no simple answer. In fact, one of the first answers I heard was “Our funding comes from everywhere.”

However, as I talked to representatives from CollegeHumor, Funny or Die, Jash, Above Average, UCB Comedy, and Comedy Central, a lot of common themes came forward. Branded content funds more than you think. YouTube revenue funds less than you think. Comedy studios, like everyone else, earn money so they can fund passion projects. Incubating new talent is also a huge part of comedy work, and that adds an extra line to the budget.

So let’s take a closer look at how some of the major comedy production studios fund their internet comedy videos, as well as how a few indie comedy teams gets work done.

How an Internet Comedy Video Production Studio Is Born

“We began pretty small,” Sam Reich, President of Original Content at CollegeHumor, told me, referring to the original videos department of the company. “Then two weeks after I was hired we were bought by IAC. They’re an internet conglomerate, and they bought us back in 2006, and they allowed us to invest more in our video department.”

It’s hard to start an internet comedy video production studio without some kind of support structure. Above Average was incubated by Broadway Video Ventures, a division of Lorne Michaels’ Broadway Video. UCB Comedy is parntered with Above Average as well as the Upright Citizens Brigade theatres and comedy school, and CC Studios is an internal department at Comedy Central. Funny or Die got venture funding from Sequoia Capital before partnering with HBO.

Scratch a major internet comedy studio and you’ll uncover an even larger supporting entity. Even a studio like Jash, which was founded by comedians Sarah Silverman, Michael Cera, Tim and Eric, and Reggie Watts, had additional initial production support from the now-defunct YouTube Original Channel Initiative.

The support behind these production studios allows them to invest in high-quality video and production equipment, as well as the talent required to make internet video look and sound great.

It also allows production studios to use their resources to build new talent. Comedy group The Bilderbergers, for example, paid for the cost of video production out of pocket until they were invited to become an Above Average partner.

“It’s been probably the most positive thing that’s happened to us,” Bilderbergers team member Ben Stadler told me. “Not only is there budgetary help, but they also have lots of production help. They have an editor who can work on our videos, and they have production assistants who can come to the shoots and assist, and they have connections to actors and directors and DPs, so it’s this whole well of support that they provide, which has made making videos incredibly easier than we were doing it on our own.”

Without Broadway Video, there would be no Above Average. Without Above Average, The Bilderbergers might still be making homebrew videos on Final Cut. Meanwhile, CollegeHumor is under the same internet conglomerate umbrella as, OKCupid, and Tinder. Media needs money, and a big supporting entity is one way to get that money flow started.

Branded Content and the Funding of Comedy Studio Production

Once these internet comedy studios launch, they have to make money. Where does the money come from? If you’re thinking it’s those YouTube ads you click past, you’re wrong (and we’ll get to why in a minute). Instead, this revenue often comes from branded content.

“We have three tiers to Jash,” Mickey Meyer, Jash co-founder, told me. “There’s the multi-channel network [on YouTube], there’s TV, where we’re actively selling shows, and there’s branded content.”

What’s branded content? As Meyer puts it: “We work with brands and help them matchmake with different up-and-coming comedians, as well as established comedians, to help them find content that serves both.”

Getting Doug With High, for example, is a Jash production that matches Doug Benson with different cannabis advertisers. Not all branded content is this visible; some comedy production companies also make commercials and other content for brands.

As Todd Bieber, Creative Director at UCB Comedy, said: “Our branded content is a little more invisible. We try to do our best to make awesome, funny videos for brands, but you don’t necessarily see “brought to you by UCB” on those videos. That’s because they’re the brand’s videos.”

These branded projects are often what funds the bulk of what you see coming from comedy production studios. Or, as Reich said: “Branded content has become the core of what we sell.”

In fact, the branded work helps support work that allows comedians to build their careers.

I talked to Allison Kingsley, Vice President of Digital Development at Comedy Central’s CC Studios, and she explained it this way: “We work on original branded content, and that comes from different parts of the business, but on the development side, what we’re doing with CC Studios is working with up-and-coming talent, talent that we love, working to incubate and grow and foster potential new shows or franchises.”

“Icing on the Cake”: YouTube Ad Revenue

Okay, so if branded content provides the bulk of some studios’ funding, what about the money these studios are making from their YouTube videos? Doesn’t all of that ad revenue and YouTube Partner money add up, especially if their videos are watched by hundreds of thousands of people?

Turns out that although studios are making money from YouTube, it’s not what they use to fund their productions.

“I can’t see any production company relying solely on YouTube videos,” Bieber said. “Our YouTube revenue is more like the icing on the cake.”

Jen Danielson, General Manager at Above Average, echoed this thought: “As a YouTube channel, we monetize much of our content with advertisements just as many other channels do, but it is not our sole source of income.”

This is true even for the biggest players on the YouTube stage. “We are the most viewed comedy YouTube channel, and even with our subscriber number and the amount of views that we’re generating, we only make enough money [through YouTube] to fund a small piece of our business.” Reich told me.

Internet comedy video is expensive, especially when comedy studios are aiming towards television-level production quality. Or, as Meyer put it: “Most of the larger YouTube channels are making enough money off of their ads that they can reinvest that money into production, but that’s with very little overhead and with very little production value. My goal for Jash has been to find a sustainability for the company that can also support higher-end production for the comedic partners that we work with. Not throwaway content, but something substantive that you could see on TV or a movie theater.”

Mitch Galbraith, COO and President of Digital at Funny or Die, had a great explanation of how YouTube fits into Funny or Die’s work:

Today, as a creator/publisher, you build a YouTube channel with the goal of building an audience and a brand, and then you try to graduate to traditional media projects or owned-and-operated (O&O) properties with better economics. Funny or Die did it the other way around. We built our O&O properties first which meant carving out an audience, establish a premium brand, and building our own in-house sales team. Part of our model was to partner with mainstream celebrity talent which helped us get over the hump.We’ve also always been ahead of curve when it comes to monetization. For instance, making money from our O&O assets with advertising and an award-winning Branded Entertainment division, but also through a number of other lines of business like TV production (@midnight, Funny or Die’s Billy on the Street, The Spoils of Babylon), original digital production deals, live tours (Funny Or Die’s Oddball Festival), TV commercial production, licensing and more. Out of all that, YouTube contributes a tiny fraction.

How TV Shows and Licensing Deals Add to the Equation

Branded content and YouTube revenue aren’t the only two income streams that feed into internet comedy production. When Mickey Meyer told me that Jash’s funding came from everywhere, he was not hyperbolizing.

CollegeHumor, for example, gets additional funding from ads – not just YouTube pre-roll ads, but also old-school banner ads and other forms of advertising. “Most clients are interested in branded content, but they’re also interested in banner ads around their content or that are supplemental to their content or even drive to their content,” Reich said.

Danielson spoke to a few additional sources of revenue for Above Average: “We also arrange licensing deals with some of our properties as well. In addition, we have several series in varying stages of development for TV, including The Morning After and Waco Valley, which we’re really excited about.”

Building a Talent Incubator

Internet comedy studios are not just in the business of high-end production for comedic partners. They’re also interested in developing and incubating new talent, and using their funds to give both new and established comedic voices the creative freedom to do their best work.

As Meyer explained: “The goal [of Jash] is really to support comedians and find a way to help them monetize their efforts online and to do so in a way that gives them creative autonomy, so they’re not compromising their sensibilities or the comedy they want to make. We give them a budget they can’t get otherwise.”

Jash works with a lot of established comedians, but comedy studios also work hard at developing and incubating new voices. Kingsley spoke to the importance of giving early-career comedians a chance to work within a professional setting: “The people that we develop with might never have worked with a television studio before, or have had this type of opportunity. We can really bring them into the fold and help to foster their voice.”

Galbraith echoed this idea: “In terms of emerging talent, Funny or Die has become a platform for up-and-coming talent to hone their craft and work their way up to bigger and better projects – creatively and economically. We’ve become one of the main ways a talented, funny person can build a career – like a modern day, broader-based SNL.”

I kept hearing the word “incubator,” as I talked to everyone about why it was so important to have enough funding to foster new talent.

“We’re talent first at UCB,” Bieber explained. “That’s our goal. We help people get their stuff made and give them an opportunity to find an audience. It’s hard to do on your own. With us, we have production capabilities, insurance, costumes, props, studios. We’re an incubator, and we’ve been an incubator for a long time.”

Some internet production studios hope to incubate talent so that comedians can find success in larger arenas, such as television or film. Others have a different idea.

“We want to build that bridge so we’re not just a stepping stone; we’re the final stone,” Reich said. “We know we’re good at incubating talent, because talent moves on from CollegeHumor and does extraordinary things. But our vision is for them to move on to our things. We’re trying to set up projects that are meaningful enough for our talent to move on to.”

“The Secret in our Sauce”: The Importance of Partnerships and Community

I asked Meyer if Jash spent a lot of money on advertising and promoting its comedy videos.

“That’s a little bit of the secret in our sauce,” Meyer said. “We’re putting our money into the content, but what’s amazing about the internet is that what we’ve built online as a multi-channel network serves as its own marketing.”

Comedy, Meyer explained, is about community and connection. “What we have at the center of Jash is a community. A community of like-minded comedians and channels that can cross-promote and send audience back and forth.”

This community also includes the audience, who share their favorite comedy videos with their friends and social networks. “Think of how we tell a joke and then tell a friend the joke,” Kingsley said. “Good content will be shared.”

Or, as Danielson put it: “We have a loyal fanbase that follows our work and sometimes they are all we need to make the video really take off and make waves on the web.”

This idea of community, and of working in partnership both with other comedians and with the audience, came up again and again. When comedians work together, when they work with comedians on other YouTube channels, and when they create work that connects with an audience, their work reaches more people. Yes, it means that they save a little money on advertising costs – but more importantly, it means that their comedy is doing what it’s supposed to: bringing people together.

As Meyer said: “People care about content and about connecting with a creator. They care about laughing. They don’t care how much money we spent on it.”

“This Is My Unpaid Internship”: The Indie Story

So now you’ve probably got a good idea of how production studios fund and produce internet comedy video, but what about the indie YouTube channels? What about the people making their own stuff without a big production studio and working hard to get it seen? How do they fund their video production?

Marc Muszcynski is a member of the LA-based comedy group Octavarius. He and I worked together when we were both students at Illinois State University, and I was very interested in talking with him about how Octavarius funded its video projects.

“We’re lucky enough that we have touring shows, and so some of the money from our touring goes towards making the videos,” Muscynzki told me.

Octavarius tries to keep its production costs “as close to free as possible,” and the team doesn’t presume they’ll make any money from their videos.

“The revenue for independent videos without guaranteed distribution is negligible,” Muszcynski explained. “Earning money on internet comedy videos is hard. You have to create something that is incredibly cheap to make but is also easily repeatable, and then you have to repeat it often enough that people don’t forget about it.”

Stadler agreed that when The Bilderbergers started out, they weren’t in the game to make money. They were paying for everything out of pocket and making videos simply because they wanted to make good comedy. Their hard work paid off when they were invited to work with Above Average.

Making YouTube videos through Octavarius has also helped Muszcynski get gigs. He’s written for Honest Trailers, I Made America, and the upcoming season of Roomiez: The Series, among other projects.

“Honestly, it’s basically like you’re building a resume,” Jake Weisman, member of the sketch group WOMEN, told me. “You’re doing what you want and you’re making stuff you like, but you’re also saying hey, this is my resume, this shows that I can write, act, and produce something.” Like Stadler and Muszcynski, Weisman has also gotten additional work off his indie comedy videos, including writing on pilots for sketch shows.

Can indie creators expect to make any money at all? Here’s how Muszcynski explained it: “Online video is generally a way to raise an audience. Sometimes you can monetize that audience, but indie comedy video is rarely profitable on its own, unless you get really lucky.”

“This is my unpaid internship,” Weisman said.

The Future of Internet Comedy

When I asked about the future of internet comedy, nearly everyone said the same thing: it’s going to evolve as technology evolves.

“Technology is always evolving,” Kingsley said. “I think that the comedy content side of it will evolve with that. There probably will be platforms that we can’t see, and comics will adjust to those platforms.”

However, YouTube is likely to maintain its role as a key player.

“I think that, for the time being, anyway, YouTube has put themselves in the position where they’re the default,” Reich said. “If you’re watching video online, there’s such skepticism about any other video player. People will often look at another video player and click out of it before the video even has a chance to load. Because we see the potential for growth in YouTube – not only the potential for growth of our channel, but also potential in the way that YouTube is helping its partners to monetize their content, in other words, improved monetization over time thanks to YouTube’s help – we’ll probably stick with them. Nothing is more gratifying than seeing your content get out there in front of millions of people.”

Bieber echoed this excitement: “What’s crazy is that none of us know [what’s going to happen]. And that’s what’s fun about it. Right now all of the comedy makers are creating something brand new. This is creating a new realm of entertainment and a new way of consuming entertainment that will influence a lot of what’s going to happen next.”

For people who want to be part of the comedy world, the advice is pretty much the same as it’s always been: start making things, start getting your comedy seen, work on getting a job with a comedy studio.

With technology thrown in, and with technology changing all the time, the advice gets more specific: find the medium that works best for your comedic voice. “There’s YouTube, there’s a Tweet, there’s Vine, there are so many ways that we can access content,” Kingsley explained. “For talent, it’s finding the form that best suits their voice and just going for it. Good content, funny content, will find an audience.”

And then, see where the future of internet comedy video goes. Or, as Bieber put it: “I don’t know what it’s going to be, but I know it’s going to change everything.”

Photo via Todd Bieber/UCB Comedy.

Nicole Dieker is a freelance writer, essayist, and occasional nerd musician. She writes the “How A Freelance Writer Makes A Living” column for The Billfold, and her work has also appeared in The Toast, Yearbook Office, Boing Boing, and The Freelancer. Nicole keeps a running weekly log of her freelance income at her Tumblr.

The Economics of Internet Comedy Videos