Snapchat, the company now known as Snap, is planning to change the way it compensates the publishers that appear on the Discover content section, according to a report from Recode's Peter Kafka.
At the moment, the publishers who appear on Discover — which include BuzzFeed, Cosmopolitan, Vice, and ESPN — enter into an advertising revenue share deal with Snap. Publishers can sell their own ads to appear against the content, or Snap's sales team can sell the ads and split the revenue.
Now, in a model more similar to the way TV distribution deals, Snap will instead pay an upfront license fee, according to the report.
Snap declined to comment on the report when contacted by Business Insider.
For many premium publishers, this will be seen as a positive step. It's a guaranteed windfall of cash and reverts back to a syndication model most content producers have used for decades.
Snap has publicly stated that 100 million of its users visit the Discover section every month, with the top-performing channels averaging view time of between 4 to 6 minutes.
Sources told Business Insider that those top-performing channels average around 10 million monthly users a month — far fewer than the amount of visitors they get to their sites — so an upfront payment may be seen as preferential to a risky advertising revenue share that requires time investment for their sales teams.
Snap Discover content also requires specific skills from publishers to produce. The short-form content and vertical videos are Snap-specific, meaning editorial teams have to create original stories rather than simply transferring existing articles over from their sites. An upfront payment could be viewed as a better insurance policy for this hard work, rather than ad revenue that they may or may not be able to generate — not least after Snap redesigned the section, putting Stories from friends in a priority spot above publisher content.
Dominic Carter, chief commercial officer at News UK, which publishes The Sun — a Snap Discover partner — told Business Insider the change reflects Snap recognizing that professionally created quality journalism is of high value.
But he added that the "Devil is always in the detail."
Carter said: "[The change] is a great opportunity for us to be clear that we are valued by platforms in a way that we historically haven't felt they have. The question is: Is it on good commercial terms?"
However, others may look at this move as Snap enforcing a ceiling on how much they can earn from their content. Some publishers may also want to lock down strict guidelines on the types of advertising and brands that can appear against their Discover content rather than letting Snap have full control.
Carter says that News UK always works to guidelines with distribution partners anyway and said it would be "daft" for Snap to do anything that would undermine its partners' brands.
As far as revenue ceilings are concerned, Carter said "I don't think you're signing up for life. You enter into it open-minded and do the deal that makes sense. No contracts are lifetime contracts, it's down to the detail. [Snap] is one of those platforms you know has a great audience and it's a great opportunity for us today and clearly for them too. At the moment you have to get advertisers used to the platform, with the formats they have got, and once they have it will take off. We know our content is well-viewed on there today, but it'll be interesting to look at it in five years time and then it'll just be a question of reshaping the contract."
The reported shift in strategy comes as Snap prepares to become a public company, with its IPO expected in 2017, according to numerous reports.
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