Snap cuts off licensing fees for Snapchat Discover publishers

Snap is no longer paying licensing fees to publishers for their Snapchat Discover channels, leaving those publishers instead to live off advertising.

Over the past several months, Snap has been notifying Snapchat Discover publishing partners that it will stop paying an upfront licensing fee for them to produce daily and weekly editions for the media section. Instead, Snap has been reverting the deals back to focus entirely on sharing ad revenue generated from Snapchat Discover, according to three sources with direct knowledge of Snap’s plans. Snap typically does an even split with publishers on ad revenue generated by their channels.

“While we don’t comment on the specifics of our financial deals with our partners, our goal in structuring these deals is to help our partners build long-term, sustainable business models on Snapchat,” said a Snap spokesperson, in a statement.

In late 2016, Snap proposed changing its deal terms with Discover publishing partners where, instead of splitting ad revenue generated from the channels, Snap would pay a flat upfront licensing fee in exchange for keeping all of the ad revenue. It’s unclear how many publishers agreed to these terms — today, Snapchat has more than 90 media partners producing Discover publisher channels or video shows — but the prospects of guaranteed income from the platform excited those that did sign up.

“There were a lot of people who didn’t take the licensing deals, and I think some people who didn’t were bummed because the audience and ad revenue growth slowed down,” said a Snapchat Discover publishing exec. “If you were able get a high enough of a license fee based on Snap’s belief that the platform would keep growing, you were able to shield yourself.”

According to one Discover publishing source, Snap is now more focused on having the same general “template” for the content and advertising deals it signs with media partners, which range from big media giants such as NBCUniversal (a Snap investor) and Viacom to digital publishers like BuzzFeed and Refinery29. While Snap typically offers an even split for ad revenue generated on Discover content created by media partners, the general understanding is that some partners — especially the big media companies on the platform — have received more favorable terms in the past. Snap hopes to change that, the source said.

“What they’ve been telling people is that they don’t want to do too many bespoke deals anymore; they want to templatize everybody,” the source said.

Snap is coming off a down quarter, during which the company missed Wall Street’s audience and revenue estimates. While some of its slow user growth can be attributed to a controversial redesign, Snap’s shift into programmatic has depressed prices for Snap Ads (the vertical video ad unit that runs inside Discover video shows and publisher channels). According to Snap, pricing (excluding Story Ads) was down 65 percent compared to the previous year.

The company has also been on a charm offensive of sorts with publishers as it seeks to curry favor with media companies producing content for its platforms. This has resulted in various revenue-related efforts, including a recent test to run commerce inside various Discover channels and allowing Discover publishers to run branded content as ads within their editions.

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