The thing to remember here is that we're all in this together.
Creators against the people who are looking to bad-mouth us,
against the people who are looking to take advantage of us,
exploit us;
and the only way they win, is when we don't talk.
So, many of you saw my recent video covering the collapse of the Defy Media MCN
and how the closure of that business
ultimately resulted in 50 independent channel creators having
1.7 million dollars of their earnings just stolen from 'em.
And, mind you, when I say 1.7 million dollars,
that's actually a low ball of what's collectively owed to this group of people but
regardless of the final amount the moral of the story was this:
that that money
- our channels' rightful earnings sent to us by YouTube -
now resides trapped in a bank account
with a big old Defy label slapped onto it.
Ally Bank is now holding on to that money
waiting for it to be parceled out
to all the people that Defy owed debts to.
They're treating it like Defy's money when it's actually ours.
At the end of the video
I asked you for help.
Simply by spreading the message, (you mean like subscribing to Pewdiepie?)
raising awareness of the issues that we found ourselves in,
and you did(we did? okay).
You answered the call in force, which,
first off, thank you so much for making it to the end of that really long video.
But also thank you for signal boosting.
People like Phil DeFranco, Gloria Borger, Treesicle, Gamer from Mars,
Optimist, Venture Addicts - not VentureBeat
, I keep wanting to say VentureBeat, but it's Venture addicts-, Tipster!
All of you did, you shared your own MCN horror stories.
Thank you so much for finally helping to air the dirty laundry of this industry
that's been taking advantage of people for far too long.
And it wasn't just here on YouTube either!
The Verge, Daily Dot, Josh Cohen at Tube Filter,
all of you helped to signal boost our story.
A story that, quite frankly, YouTube's trending tab was a bit too scared to touch
And I cannot thank all of you enough because after months of silence,
Since the day that Defy closed, we finally got a response from someone who's wrapped up in this whole mess.
We got a response from Ally Bank.
But hold off on your party poppers, friends because the response we got was not quite what we were looking for.
Let me share a couple tidbits.
Quote: Ally made a loan to Defy Media that it was unable to pay back after
experiencing excessive losses and the owners refuse to continue to support the company
Defy is being liquidated by a professional hired by heir Board of Directors,
and Ally stands to lose most of its loan.
We are sympathetic to everyone caught up in this mess and unfortunately
Ally is also experiencing a substantial loss as a result
Hmm. So sorry for your loss, Ally. Thoughts and prayers.
This, ladies and gentlemen, is not a response.(ripping noises of paper)
It's a Jedi mind trick. It's a misdirect. It's a tactic called false equivalence.
Basically slight of hand that tries to convince you that two things are equal,
that when you step back and actually look at it, aren't.
Aren't all.
In this case, we have Ally Bank, a company who in 2017 had revenues of nine point eight billion
dollars trying to say that it's a victim of Defy media's closure in the same way that we, Youtubers,
who film in our closets, are victims of Defy Media's closure.
That the money that they stand to lose, is
equivalent to the money that we earned, had sent to us by way of Defy,
and now remains trapped in Defy's bank account.
That money is not the same, Ally.
And I think you know that. But in case you don't, because I understand digital video is a complicated business,
let me explain it to you in the way that we like to do things on this channel,
geeky references and pop-culture analogies.
Let's talk about banks, shall we?
No, don't worry. Don't click off this video
I'm gonna try to make this as interesting as possible, but do you have a bank account?
Have you ever stopped to consider how banks make money?
Honestly, it's something I never gave a second thought to until having to do this video,
and now that I've thought about it, banks actually have a sweet deal in place.
You see, we all deposit our money into a bank for safekeeping and to earn little increments of interest.
But the banks then take our money and loan it out to other people, other businesses,
whatever, and charge higher interest rates.
That is how the bank is making money. And loans are cool.
That's all fine and dandy. It enables people to get houses or expand their businesses, it's very awesome.
Except it's easy to forget two facts.
First off, that what the bank is doing is earning money off of our money
by taking our money and just giving it to other people.
It's kind of a weird concept.
But secondly, that the bank has the ability to choose
who they give a loan to and who they reject the loan application from.
Which means that at some point, Ally Bank chose to make a commercial loan to Defy Media.
Now, how much was that loan for?
Unclear.
How much was paid back before Defy closed?
Not sure.
But none of it matters because at its core a loan is a risk.
It is a gamble.
It is the expectation that whoever the person is loaning the money to will pay back that loan as well as interest.
It is a business risk, an investment.
If I go to Vegas and start putting bets on blackjack, sure,
I'm hoping to get good cards and earn more money
But if I lose,
- WHEN I lose, because I am terrible at anything related to Vegas outside of the buffets -
I have no reason to complain because I knowingly made the bet with the hopes of higher returns
That is the inherent risk with any high return investment.
And it isn't like losing these sorts of bets should come as some big surprise to you, Ally,
because between 2006 and 2015,
over 17% of small business loans ended up going into default.
They didn't end up getting paid back. That was a known risk. That is what you do.
So when you decided to give a loan to Defy Media
you stepped up to the blackjack table and you put your money on 20 and the dealer pulled a 21.
Ya lost.
I'm sorry, it sucks. But it's true. That's the game.
Us creators meanwhile, we're not playing blackjack. Heck, we're not even in the casino.
We're down the street at the ATM, except all of a sudden the ATM suddenly changes locations,
changes names, runs out of bills, then decides not to pay us,
but continues to deduct the money from our accounts.
That $1.7 million dollars that us creators are owed, are our paychecks
and they're not even paychecks from Defy Media.
They're paychecks sent to us, from YouTube, through Defy, to us.
You see why there's a difference here, Ally?
And you see why it might be offensive to us that you're trying to loop your victimhood
Your bad business decisions into us and our losses.
You know when you apply for a loan, the bank's totally like,
"Yeah, no need to show proof of income you're probably fine. Here's all that money you requested."
No, no. Of course, they don't do that.
That would be stupid.
They ask to see your pay stubs,
they asked to see your credit history, your bank accounts,
your firstborn child, your dental history, and that awkward photo of you from when you were in middle school.
They want to make sure in every sense possible that you are the type of person
or the business
who will be able to pay back on their loan, who won't go into default and end up costing them money.
The same thing happens when a bank is deciding to make a commercial loan.
They are allowed to and supposed to go through a process called 'Due Diligence'.
Basically, an investigation into the inner workings of a business to see just how healthy that business really is.
Ally outright hires people to do this job.
To go through all the boring little minutiae of businesses that they're thinking of investing money into -
all the cash flow statements, the valuation, the balance sheets, the year-over-year profit and loss statements.
So even if Ally was impressed with the amount of money that was flowing into Defy's books every month,
they should have also seen through this process of due diligence that it was flowing right back out to us,
and all the other dozens of creators in the network, same time every month.
Month, after month, after month.
Shouldn't be a surprise to anybody.
And if anyone -ANYONE- had the ability to come across the shady dealings that Defy was doing,
it should have been a company with access to their financial records
and who had every right to ask questions if and when the numbers didn't quite add up.
That is a luxury that us creators never had.
In fact, my, for now, anonymous contact who used to work at Defy told me that he was outright told to lie to partners about their financial situation
So again Ally, not quite the same situation we find ourselves in.
On one hand, you have a company who had access to numbers and books and expense reports,
and on the other hand you have us, the creators, whose only contact with the company were people whose jobs depended on outright lying to us
And lastly, Ally, in their response makes it seem like everything from this point forward is out of their hands.
They mentioned this professional who's gonna be hired on by Defy's board of directors to parse out where Defy's remaining money goes to.
But let's talk for a minute about Board of Directors and who actually sits on 'em.
You see, in movies, it's always the CEO who's the hotshot at the top making all the big decisions, hiring and firing people
and you know,
just overall being a greedy son of a gun.
But in real life a Board of Directors has a lot of power,
if not more than the CEO.
In fact, they could just vote to oust
the CEO if they choose to. A Board of Directors works kind of like this:
Say for instance
I find a really good soap company.
And so I go up to the owner of that soap company and I'm like
man, the world really needs to experience your amazing soap.
And then they're gonna take it out to YouTube and they're gonna cut the soap and they're gonna run it over with cars
and gonna put it through hydraulic presses. The world is gonna be so excited about your soap
so I give the owner of the company money in order to expand his business.
But before I do I also say that in order to get my money
I demand a seat on their Board of Directors.
What that allows me to do is be in a position where I can supervise how my investment is being used
so that way when I give them the money the soap owner doesn't just go off and buy a Lambo
and then start flexing on YouTube showing off his new car or something like that.
That is what a Board of Directors does
and traditionally a Board of Directors is comprised of inside directors and outside directors.
Inside directors are people who actually work at the company.
The CEO, the vice-president, the soap founder in the first place.
And then outside directors would be people like me, people with other experiences
or other funding sources who can come in and help guide and shape and grow the business.
And while I am sure that you are super interested in Boards of Directors and my hypothetical YouTube soap business,
here's the reason I bring it all up.
Outside directors also tend to be people who have significant financial investment in the company.
People who have lent that business large sums of money.
Given that Ally apparently made such a substantial loan to Defy, there's a high likelihood that they have at least one seat on that Board of Directors
- the people who are outright choosing the professional who decides how Defy's assets get liquidated and parceled out.
And who do you think that person is gonna prioritize in making whole?
The big company who had a hand in helping them get the job in the first place
or a bunch of nameless, faceless creators?
Let me be clear.
In a perfect world everyone who was wronged by Defy would have the ability to get their money back in totality.
Us creators, the creditors, the employees whose jobs went up in smoke and yes,
even large institutions like you, Ally, deserve fairness and justice.
I'm not saying that you don't, but let's be realistic. It's not gonna happen.
Certain people are gonna have to get prioritized over others, and we've heard that story time and time again.
Big business does shady business dealing and it's the little guy who's left holding the bag.
The bankruptcy gets ignored, the lawsuit gets dropped, the bank gets bailed out, and it's the little guy who loses.
It sucks to have to compare who was more victimized by a corrupt business, but guess what?
That's what the professional hired by Defy's Board of Directors is gonna have to decide.
And so I am here on this couch today to remind him of three things:
One, that the creator income that sits in Defy's bank accounts was never Defy's to begin with,
and that the investment that Ally lost was part of the loan that went bad.
It was a calculated risk on your part.
Two
that Ally had a chance to double check their work, go through a process of due diligence to ensure that Defy was a sound investment,
a luxury and privilege that us creators never had.
And three, that Ally may have more of a hand in deciding the professional who ends up liquidating Defy's assets
and thereby deciding where that money goes.
I get it. You have a right to be angry, Ally.
I am too, you have a right to want your money back.
But don't you for a second say that your situation is the same as ours
and if it does end up being that you get your money back before us creators,
just remember where that money's coming from. Because at this point, you know where it's coming from.
You know that it's coming out of the pockets of small business owners.
You will, in accepting that money,
be clawing back your bad investment losses out of the pockets of people who you supposedly represent.
And if you are comfortable with that, I do hope you consider changing your motto
8,000 allies all looking out for one thing: You.
Just saying.
In the aftermath of the last Defy video, I've gotten tons of requests to cover
all sorts of different topics,
MCN related and otherwise.
Stuff like: Can you still get all the perks of being in an MCN without actually signing into one?
What other shady things were happening behind the scenes at Defy?
Don't worry friends.
I've got videos coming up on all those sorts of different topics, because guess what?
I think it's important to cover them. So strap in ladies and gentlemen, there's more to come...