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The Nintendo-YouTube partnership discussion
This post was orignally created targeting normal gamers that do not have marketing knowledge. I present both sides of the discussion about Nintendo and Youtube's partnership to claim ownership over the profits of videos that use their Intelectual Property
12 Min Read
Okay, so for a few months there has been an avid discussion about Nintendo and YouTube’s partnership concerning copyright issues, causing many people to rage about it or defend it in heated arguments throughout the internet. For those of you that still didn't hear about it or simply didn't really pay attention to what was happening, here’s the deal in a nutshell:Nintendo and YouTube made a deal, in which YouTube would use its “Content ID” System to scan and identify any videos (not originated by the original company) that included unauthorized audio and/or video content of any Nintendo product and claim all monetary profits from those videos to itself. That means that any profit that usually would go to the uploader through views and advertising, will now go directly to Nintendo, 100% of it.
While for many people that upload their gameplay and alike videos for fun would be unaffected, this has a great impact on those YouTubers that actually used those kind of videos as means of income (we can include many YouTubers here, such as JonTron, Egoraptor, Keyori, Tobuscus, SmoshGames and even cover musicians like Lara De Wit and Taylor Davis).This agreement caused a big uproar to those communities, people bashing Nintendo were everywhere, and any place they were, you could see comments of others actually defending the company’s decision. Unfortunately, almost all of the comments were made based just on the person’s superficial understanding of the pros and cons of the actual deal, arguments like: “Greedy Nintendo is greedy” and “It’s their product not yours, so shut up” can be used as representatives of the whole discussion.In this post, I hope to take a more in-depth approach on both sides of the argument (meaning against and in favor of Nintendo’s decision), using not only my interpretation of the facts but actual data and marketing strategies, and hope that someone actually has the patience to read all of it.
Nintendo’s side:
First we need to look at the core of what is being discussed, what is the main point of this new partnership, I mean, what is the objective? Money. Plain and simple. But does Nintendo actually need money? I mean, it’s Nintendo for god’s sake, they’re filthy rich right?Not exactly. Yes, Nintendo is not only one of the major video gaming companies of the world but THE major company, but statistics just like karma, are a bitch. Let’s take a look at how Nintendo has been faring along the years:
Nintendo’s Market Share: 
Nintendo's Global Market Share
As demonstrated on the chart above, over the last 5 years, Nintendo’s Market Share has dropped from 27.1% in 2008 to 17.1% in 2012. That means that, in five years time, Nintendo actually lost 36.9% of its Market Share, that is A LOT for those of you not accustomed to statistics. If even by it you are still skeptical about the company’s bad situation, let’s look at actual financial data, shall we? According to Nintendo’s annual financial report, their total Net Income, in 2008, was U$2,573,426,000. Yeah, over 2 Billion dollars, there’s no way they can be dissatisfied with a result like that right? Now let’s look at more recent data, on 2011 (sorry, the company has yet to release data about 2012), that same value managed to transform into U$935,200,000. Well, 935 millions seems like a nice number, but wait, wasn't the last value way above it? Yes, in 4 years time the company managed to lose U$1,638,226,000 in Net Income, the equivalent of 63,66% of the “original value”. Now put yourself in Nintendo’s shoes: everything was happy, your company was stable and doing good for decades, and suddenly, you lose more than 1,5 billion dollars, freaking out yet? I know I would.
Okay, calm down, there must be a way to actually get some extra income besides what you’re already doing right? I mean, surely you can’t recover that big of a loss, but you can find something to get a little revenue. So you, while surfing desperately on the internet to try and find new ideas find out that YouTube actually gives you money for views, crazy right? But you have a problem, seems like there are many users that actually upload footage from your products and profit from it, whilst not giving any to you. That’s not acceptable, that’s like people buying a CD from your band and then making people pay to them to listen to your music. I mean, you do want people to listen to your music, but is your music dammit, if they’re gonna pay someone it should be you, you’re the one who worked your ass off to make it, not them, the least they should do is pay a tax or something (and surprise, you just learned copyright in a nutshell).
Okay but, how much would you actually profit from getting those rights? YouTube pays something about U$0.0033 per view, meaning that a video with 100,000 views would earn you something like 330 dollars. I know, it does not seem like a huge amount, but it isn't just one video. Let’s take the YouTube channel TobyGames as an example, that channel alone has a total of 3,679 video game videos, of course not all of them are from Nintendo, but let’s imagine they are. As of this moment, the channel has a total of 1,172,290,500 views, considering what has been previously said about the payment method, only that channel by itself would result in a profit of U$3,868,558.65. That’s almost U$4,000,000 someone is profiting with your products without giving you a dime! And for a company like yours that is totally freaking out over how much you lost on the last few years, it’s totally unacceptable. So what’s the solution? Removing all those videos won’t give you any money, and would only incite the rage of all your customers, we live in an age of sharing content, and cock-blocking your clients would go against all of it. But if you just get a deal and make all that profit actually go to your pockets that could settle it, you wouldn't be preventing people sharing your content and would actually get the profits from your products. And that’s not really unfair, YouTube has an entire section detailing copyright issues and there it clearly states regulations about uploading non-original content and the fair use of those. Now all of that in a nutshell: Nintendo is not actually being anti-ethical, all of the content reclaimed by the company is actually theirs by right, not only by standard copyright laws but by YouTube’s regulations as wells, everyone who uploads those videos was supposed to have read through it and understand the consequences. It is a fairly substantial value overall, and Nintendo is not in a financial situation that allows them to turn a blind eye. Actually every other company has the right to do the same, they just choose not to (yet) by their own reasons. Yes, Sony and Microsoft didn't cock-block your video’s income, but considering the amount of their original content compared to Nintendo’s, for them it is not yet something that huge.
Youtuber’s Side:
Now let’s try and see the “people’s side” shall we? I could just go on and on with the most common arguments (I mean, the ones that actually have some basis, not just “greedy Nintendo is greedy”) that at the moment someone plays their game on their own way, add comments and other stuff, that becomes their own content, their unique way of sharing an experience. But seriously, that’s bullshit, I could say that the moment I play Foo Fighters at my nightclub, with my decorations and space it would make for my own “experience” that I would still get sued and I think most of the people who uses that argument for video games wouldn't say a word to defend my little club. Copyright issues are as true to video games as they are for music.
So, what I could actually say, with sound argumentation and logic that would defend the YouTubers in any way? For that we should take a step further in Marketing analysis, more precisely, into Communication Theory. In 1944 the sociologist Paul Lazarsfeld introduced a theory that media didn't actually passed its message through to every person, that actually after a message was transmitted via any way of mass communication, people called opinion leaders would re-transmit the message to their “followers”. In later years that theory has been adapted and changed to reflect the modern society. Nowadays it is known as the Two-step flow of Communication or the Multistep Flow Model. What we can basically learn from the Multistep flow theory is that people don’t always know something because they saw it on TV or the company’s site, that actually, many people learn about news through other people, the so called opinion leaders.
Let’s make another example ok? Let’s say that Valve announced Half-Life 3, but you still didn't hear about it, so you’re on the internet, you go to YouTube and see that the GameGrumps channel, which you are subscribed to, released a new video, when you go see it it’s a 3 minute video about them freaking out with the announcement. Now you’re freaking out in synch with them. Happy story right? You didn't hear about the news, but you actually learned about it through someone that you consider a personality on that specific subject. Now another example: You've watched the Far Cry 3 trailer, but only the one about the story. Okay, at first it seems like a really cool game, but you don’t know how the gameplay is (let’s assume you didn't play the other 2) and for you that’s a key point (assuming you are one of the majority of players that think that gameplay is actually important). So what? You’re not willing to buy the game to see and risk if it’s worth it, that would be a risky gamble, you've already got let down sometimes doing that. Then you go to YouTube again and watch some Let’s Play videos, after watching it, it’s decided, you are SO going to buy this game.See? Because of a YouTube video not owned by any company, but by a YouTuber, you decided to buy a game that, otherwise, you probably wouldn't. And that is not a forced argument, in ANY product category, people’s decisions are most affected by the opinion of someone they trust, a.k.a opinion leaders. Someone buying a game because of a positive review on YouTube is as true as a woman using a Shampoo because her hairdresser said it would do wonders for her hair or you trying that new restaurant because your best friend said it was awesome. Okay, now you would say: “Yes, they made someone buy a game, that’s U$100 at most, there’s no way it can compare to what Nintendo isn't profiting with the videos”. Yes skeptical imaginary reader, it would be true if it was just that, let’s use a past example shall we?
As has been said before, the YouTube channel TobyGames has 1,172,290,500 views, let’s assume half of those views were aimed at Nintendo’s games videos, we would have 586,145,250 views. Now let’s assume that at least 5% of those that watched the video decided to buy the game. Using a U$50 price as the standard, that would give Nintendo a profit of U$1,465,363,100. Okay, that’s a super optimistic view of the situation, but still a possibility. Even if the actual number were only 1% of what was used in the example, that would be a total of U$14,653,631, still an awesome number if you ask me. I’m not an psychic, I will not pretend that any estimates I use will actually become true, but still, even if the profit the company would make with the deal surpasses by 100% the money they could gain with sales because of the positive media, it would still be worth it. Why, you ask me? Because even if it does not look like it at first, Marketing isn't all about money. Nowadays, one characteristic that most of the companies around the world are seeking to improve is their reputation. Yes, reputation, something that don’t actually gives you money directly, but represents the company’s relationship with their customer. And it is a fact, companies that have a better relationship with their customer’s are the ones that the clients will actually stand for, they are the ones the consumer will prioritize in their purchases, meaning, that in the long run, companies with a better reputation are the ones who will profit more. But this move, this deal with YouTube will hurt Nintendo’s reputation really hard. As explained before, the people that Nintendo’s deal affected more aren't the normal users, but the opinion leaders. Oh wait, hadn't we just agreed (I hope) that the opinion leaders insight on a subject really affects and influence the other consumers opinion? Yes it does. So, the moment Nintendo pissed them off taking away their “pocket money” they didn't just piss them off, they pissed off their followers.
Let alone the YouTuber’s stop making videos about Nintendo contents, many of them actually bashed the company after the decision. Not only Nintendo seriously diminished their chances of User Generated Content (term used to designate original content about a company/brand created by their customers), they actually gave their own reputation a beating. Their reputation, the one thing companies are freaking out trying to learn how to improve, the basis of a relationship between consumers and companies. On 2012 Nintendo was ranked in the list of the best 100 global brands (by Interbrand) as the company in the position number 56, now that they just gave their opinion leaders a well placed kick in the nuts, where do you think that rank will go next?
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