How Four-Person INDmusic is Monetizing the 'Harlem Shake' Meme for Mad Decent

It's Saturday, Feb. 16, and Brandon Martinez has just seen as many total views during the last nine days for his YouTube-based network INDmusic as he has in the company's 18-month existence. That's all courtesy of Baauer's "Harlem Shake," a song owned by client Mad Decent, which inked a deal with INDmusic a year prior to help the label monetize its YouTube channels at a higher CPM (or cost per thousand viewer rate) than it could have on its own, and with faster response to viral trends.

It's the latter promise that has shed new light on a revenue stream that has been developing for artists during the last several years. As soon as the "Harlem Shake" craze started taking off Feb. 7, INDmusic was able to pull the copyright trigger on any viral videos using the song that it could find using YouTube's Content ID -- an online management tool that allows rights holders to find and claim content they own, get metadata describing how that content is viewed and help them choose what they want YouTube to do with that content (monetize, track or block it).

Martinez, the 29-year-old co-founder/CEO of INDmusic, is scrolling through the day's latest entries -- many of which have already logged more than 100,000 views in just 24 hours -- by searching "Harlem Shake" through a proprietary YouTube feature that allows him to claim each clip that actually features the song. He's taking particular delight in claiming uploads of Azealia Banks' just-released video of her bootlegged "Harlem Shake" cover, the subject of heated debate on Twitter between the rapper and Baauer. Initially uploaded on Vimeo to avoid copyright claims like the one Martinez is about to file, the Banks clip has sure enough been posted on YouTube.

"Wow, they made an official video for this," he says to co-founder Jon Baltz, who's joined Martinez at his apartment along Brooklyn's Columbia Street waterfront. "Thanks for making my job a lot easier."

Within days of their uploading, and often hours, the Web's biggest and most-watched "Harlem" clips -- the University of Georgia's Men's Swim & Dive Team video, the Maker Studios office spoof, the Norwegian army edition -- have been claimed by INDmusic or Content ID's automated system and monetized for Mad Decent through pre-roll, overlay or banner advertising that aired adjacent to the clips, as well as click-to-buy links to iTunes, Amazon MP3, Google Play and eMusic.

The meme quickly became one of the biggest indie-music hits on YouTube, and a real-time case study for INDmusic, a four-person Brooklyn-based startup. In one week alone, more than 3,000 "Harlem Shake" videos were being posted per day, and the song amassed 103 million monetizable YouTube views. That's roughly one-third of the more than 300 million clips on YouTube with "Harlem Shake" in the title posted to date (although many of those are for clips of people talking about the song or older clips referencing the initial '90s dance).

This is where the financial upswing comes in for Baauer and other beneficiaries of future music memes: Of those 103 million video views, YouTube is able to charge an estimated average of $2 for every thousand viewers -- that translates to $206,000. Of that $206,000, INDmusic collects a rolling 10% of the total revenue, with another 45% (or $92,700) going to YouTube, according to preferred partner terms first reported by the Wall Street Journal. Multiple executives familiar with terms for YouTube channel partners tell Billboard that of the remaining 45% ($92,700), 10% ($9,270) goes to the person who uploaded the video and the remainder goes to the master rights owners and publisher, both of whom are Mad Decent in this case. In other words, 103 million views translates to roughly $83,500 in Mad Decent money -- far from the premium CPM dollars that netted PSY an estimated $2 million in YouTube revenue from "Gangnam Style," but a more-than-respectable total for a week's worth of memes.

This is the vision Martinez had for the company when he and Baltz founded it in August 2011 after Martinez left his job in Los Angeles at Abrams Artists Agency as a digital talent agent, a first-of-its-kind role representing YouTube stars and other Web personalities at a major Hollywood agency. It was quickly shared by angel investors Guy Oseary and Allen Debevoise, the latter of whom also founded popular YouTube network Machinima, which has also been reinventing the way user-generated content scales and monetizes on YouTube-albeit for videogames instead of music. The executives have been actively involved in the company from its infancy, from shaping its name and logo to putting the company in touch with important investors and content partners.

"Allen and I both had a love for music," Oseary explained in a January interview with Billboard, "and we both felt there should be a solution and an option for all these indie artists who could make more money as being part of this collective than just doing it on their own. That needs a team and it needs people to bring that together."

The company has also caught the interest of Jeff Price, the ousted co-founder of TuneCore, who thinks the INDmusic model helps reverse the fear in YouTubers expecting to get hit with a Digital Millennium Copyright Act notice over their user-generated music videos.

"Consumers using music on behalf of the copyright holder has just opened a whole new income stream for everyone," Price says. "INDmusic has done it in a way that scales, that never existed before without having to pay anybody any money. This has allowed YouTube to grow without getting sued out of existence. You have this new ecosystem where the fans are the gatekeepers."

Next up: plans to further maximize the potential for Baauer and other artists to monetize their music by improving the ad model on YouTube's mobile and TV-based apps. As of last fall, video views on YouTube's iOS and Android apps are monetized through Google's TrueView video ads (skippable pre-rolls that air as a video begins playing). "This means content creators are paid when viewers choose to watch video ads through our mobile app, in the same way as on PCs," a YouTube representative says. Similar plans are in the works for YouTube's TV apps for early summer, Billboard has learned.

All from a free song. Mad Decent label manager Jasper Goggins credits the giveaway of "Harlem Shake" in May 2012 through its Jeffree's imprint for sparking the initial interest and current phenomenon.

"We wanted the music to live on its own for a [while and] to build a groundswell around the track so that when we took away the free download of the track people were fine to just go buy the track," he says. "The idea was to just get the song out there as far as possible, so this is kind of like a testing ground for what we do." With 291,000 singles sold this week, according to Nielsen SoundScan, the test seems to be working.