Shaylene Flanagan • May 17, 2023

Autonomy of Revenue

The Pros and Cons of Merchandise-Funded Companies

Merchandise-funded companies frequently come in the form of social media influencers or YouTubers. While some with a large following gain brand deals or sponsors, many online creators have turned to merchandise to fund their projects.

There are generally two types of merch that influencers push – merch that is dedicated to their online channel or brand and merch that is independent of that brand. Examples of this are the channel Good Mythical Morning, which sells merch that is branded with the channel name and themes. On the other hand, PewDiePie has a merch brand that is independent of the channel name and has relatively no connection.

This article will explore the advantages and disadvantages of selling merchandise to generate revenue for online projects.

Advantages of Selling Merchandise

Autonomy of Revenue

One of the greatest advantages of selling merch is that creators gain control over their revenue stream. Creators ultimately become their brands, which is why merch sales become crucial to supporting their business. An example of this is the YouTuber, PewDiePie, who has the largest following on YouTube at 111 million subscribers. He also maintains a successful merch line which earns him $6.83 million a year.

In comparison, PewDiePie generates more than $3 million in revenue per year from his YouTube channel, with around $20,000 in revenue per video. With around 150 videos per year, generating income from YouTube is a tremendous amount of work compared to merch development.

Though creating content on YouTube can be profitable, the YouTube Partner Program has significant amounts of red tape that makes it difficult and frustrating to generate a steady stream of revenue. On top of the many admission requirements, YouTube has all the power – meaning they can suspend ad revenue or even suspend your channel if they decide you’ve broken a rule. Likewise, the popularity of videos, which can determine the success of the video and therefore the amount of revenue it generates, is usually determined by YouTubes algorithm, which changes regularly and has let many large creators down in the past.

YouTubers who have made names for themselves on the platform have learned how to protect their independence by relying on merch sales rather than YouTube revenue. By augmenting the traditional way to earn money on YouTube, creators have been able to take control of their brand, values, and ultimately revenue.

Greater Focus on Creating Content

As a creator, finding time to manage content creation while generating a steady revenue stream can be difficult. Depending on the channel type, videos can require anywhere from $1,000 to $20,000 per minute to produce. While some creators have dedicated sponsors or brand deals, others spend a large amount of time seeking out such deals to fund their projects – which ultimately takes time away from creating content.

Selling merch gives the creator a steady stream of revenue which provides them with a better work/life balance and allows them to concentrate on their content. At some point, for creators like PewDiePie, the merch business becomes a form of passive income, where they only need to approve designs and sign papers. This leaves them with a significant amount of time to focus on producing high-quality, entertaining content.

Connecting With Viewers & Creating Community

Selling merch is a great way to create a strong connection between the creator and their most loyal and active subscribers. Introducing a way for the creator to collaborate with their audience fosters a greater sense of community and allows subscribers to embrace the channel's brand. Building a strong sense of community among fans ultimately builds the channel, allows the creator to have more meaningful relationships with subscribers and will eventually sell more merch. Not to mention that those who buy merch are like walking billboards. Even after the purchase, the channel's brand, logo, or other distinctive imagery continues to be spread by those wearing the merch.

Take the Yes Theory channel, for example. They have been able to build a worldwide community centred around Seeking Discomfort. On top of merch, they’ve created many online chat forums, meet-ups around the world and ultimately a lifestyle of following your dreams and doing things that make you feel uncomfortable. By selling merch, the creator has provided a chance to connect with subscribers worldwide and has given fans a way to connect, which only strengthens the community.

Disadvantages of Selling Merchandise

Startup Costs & Associated Risks

The cost of starting a merch line is one of the greatest disadvantages as it requires a significant amount of capital upfront. Paying for things like product design and production, an e-commerce platform, marketing, product storage, and distribution are all factors to be considered when evaluating the feasibility of releasing merch.

Creators must be able to front a large amount for start-up costs with the understanding that it takes time to recover such costs and start turning a profit. This poses risk as it can be unclear how sales will perform, especially for smaller channels. According to Forbes, it can take anywhere from 18 to 24 months for a new business to start turning a profit – though this doesn’t factor into the already established brand identity. For larger, successful channels, recovering these costs wouldn’t take as long as a small channel that doesn’t have as many subscribers. Though potential highly profitable, selling merch is a huge financial risk that should be carefully considered before launching.

Planning & Time Requirements

Starting any kind of business comes with risks and difficulties, especially when maintaining another business. Running a YouTube channel is much different than a full-scale merch business as it requires a massive amount of planning and is extremely time-consuming. That’s why it’s essential to have a detailed business plan that includes a strategy for staffing, marketing, finances, sales, distribution, etc.

Creators should also consider their knowledge of running a business. Creators who’ve had success with their channel for several years may have a better understanding of running a business than those just starting out.

It also takes a tremendous amount of time to get started. From product design to distribution, it can take anywhere from 6 months to a year to get a business off the ground. Clothing lines require even more lead time, at a minimum of 12 months. Without a solid plan, vital activities may be overlooked which could result in major delays.

Large & Dedicated Audience Required

The sale of merchandise depends on the performance, identity, and familiarity of the creator. Normally, large followings are required to make any sum of money on YouTube, let alone from merch. If a YouTuber has 11,000 Subscribers and sells 6 pieces of merch every month then that creator would generate $70 per month. This equates to about 0.5% of subscribers' purchasing merch each month. That profit is low considering how much work goes into launching and maintaining a brand. Therefore, having an already established large following is crucial to successful merch sales.

Generally, the creator’s brand identity is vital to the success of merch sales – which requires content that is well-aligned with the merchandise. A channel that is dedicated to gaming, that is primarily watched by impressionable teenagers, is more likely to have success selling merch compared to a channel geared to teaching financial management. It must make sense based on the channel content whether this revenue stream is going to be viable.

Familiarity and repetition are also extremely important for selling the brand, and eventually the merch. Subscribers are unlikely to buy merch if they don’t frequently see creators posting videos or staying active on social media. Consistently coming up on viewers' feeds repeatedly drives home the brand identity, which eventually pushes the users onto the channel and potentially onto the merch site.

Is Merchandise a Viable Way to Generate Revenue?

This business model can be extremely rewarding to creators and provides them with consistent revenue, control of their brand, and more freedom to deliver quality content. Though having your own business creates autonomy, and a stronger community, the challenges are significant. Considering the time and costs required to start a business, the greatest difficulty to overcome is the audience requirements. Without an established brand identity, and with many dedicated supports, selling merch can be extremely difficult. However, if there’s careful consideration and a large enough fan base, this business model is extremely viable and has proven to give financial freedom to online creators.

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