Vimeo to challenge YouTube with Maker partnership

Vimeo Awards are displayed at the TIFF Awards Brunch during the 2014 Toronto International Film Festival, Sept. 14, 2014.
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It's a digital video partnership designed to shake up YouTube's stranglehold on the biggest video stars, and shift them away from ad-supported platform to an on-demand paid model. IAC's premium video platform, Vimeo, just struck a major deal with YouTube's biggest content network, Maker Studios, which Disney purchased last year.

The companies are collaborating to fund exclusive content for Vimeo on Demand. That means Maker creators will sell content on Vimeo, before they make it available for free—with ads—on YouTube. In addition to the funding, Vimeo will offer its tools as a service to Maker's 55,000 creators to convert them to publishing on Vimeo's platform.

The key: YouTube takes a roughly 45 percent cut of ad revenue, while Vimeo takes a 10 percent cut of video-on-demand fees. And on Vimeo, a creator can set whatever fee he or she likes—say $5 for a rental, $10 to own a video. In contrast, ad fees on YouTube are often in the range of $2 per 1,000 views.

Making money with Vimeo

"For many creators, having an ad revenue stream alone leaves money on the table," said Vimeo CEO Kerry Trainor. "We know that paid video creates new avenues for creators to earn more revenue than they can with ad-based systems alone."

But Trainor stresses that YouTube and Vimeo are hardly mutually exclusive. "We're moving into a world where there will be multiple windows for monetizing online video," Trainor said. "One will be free ad-supported content and the other will be paid. It's about being able to window content in creative ways."

Read More Vimeo draws YouTube stars with promise of money

"What Vimeo is pioneering is the premium, paid, ad-free experience, both for the creator and the viewer," Trainor added. "We think this is a massive market that up until now has not been developed effectively."

It's also worth noting that Maker is one of the content partners for Dish's new Sling TV, $20-a-month service scheduled to launch next week. It's just the latest way Maker's new parent Disney is finding ways to make more money from Maker, and find better margins than its creators earn on YouTube, without sacrificing that behemoth of a platform for reach and exposure.

CORRECTION: This version corrected the spelling of Trainor.