A Class-Action Lawsuit, Late Creator Payments: Inside Defy Media's Shutdown

Courtesy of Defy
The stars behind Defy-owned Smosh and Clevver have taken control of their YouTube channels.

The creators behind Defy-owned Smosh and Clevver have kept posting videos to the channels even as they await the fate of those brands.

Ten days after Defy Media announced its abrupt closure, the effects of the shutdown are still rippling through the community of YouTube creators who worked closest with the company.

Shocked and confused by the sudden end to the Defy business, many of the YouTubers who were part of its network have posted videos or Twitter threads claiming that Defy still owes them money and that there is no one left at the company to take their calls. Meanwhile, the stars behind Defy-owned Smosh and Clevver have taken control of their YouTube channels and told fans that they plan to continue posting videos while they await the fate of those brands. “It’s surprising,” says one source involved in discussions about what is next for the former network of creators. “We don’t know anything.”

Lionsgate and Viacom-backed Defy said that it was shuttering on Nov. 6, revealing via a statement that it had “ceased operations” due to “market conditions” that “got in the way of us completing our mission.” A spokeswoman said at the time that a small team would remain with the company to search for buyers for brands like Smosh and Clevver.

Defy raised a round of funding as recently as 2016, cutting a deal with Wellington Management Co. for $70 million in backing. At one point the company had sales talks with Viacom, but they never became serious. And as late as mid-October, CEO Matthew Diamond and president Keith Richman had advanced conversations with prospective buyers to either sell the whole company or some of its brands, a knowledgeable source tells The Hollywood Reporter, but those deals fell through. Instead, the company shut down.

The small group of some 50 YouTube creators who were part of Defy’s network learned about the closure through press reports. For many of them, Defy had been a conduit for larger sponsored videos and also helped with the logistics of working with YouTube. In many instances, Defy took a 10 percent cut of that monthly ad revenue, known as AdSense, in exchange for its services. After Defy shut its doors, many creators began to worry that they would not receive checks for their September and October AdSense payments, which for some equates to tens of thousands, if not hundreds of thousands, in lost income.

“It’s a massive hit,” says James Clement, who operates the Mr. Sunday Movies YouTube channel, which has 921,000 subscribers. Clement says that he and his wife, Claire Tonti, have diversified their business in recent years, including building out a podcast network, and won’t be significantly hurt if they never receive those payments, but notes that not all creators are in his position. Chris Stuckmann, who has 1.3 million subscribers on his movie-focused channel, adds that in addition to the monthly AdSense money, he is also waiting on Defy to send him a check for a pair of videos. “That money was supposed to put a dent in my college tuition,” he said. “Now I have to use my savings.”

Earlier this week, former Defy creators learned that the company was not yet in possession of the October AdSense payments and that YouTube plans to pay them directly. But even so, many creators have become frustrated by the lack of response from Defy about what has happened to the rest of the money. Some partner managers who were laid off are still responding to creators’ requests via personal phone numbers and email addresses, say sources, but they have had few answers. A further snag for partners who say that Defy still owes them money is the possibility that the company will file for bankruptcy. 

As they wait for more information, creators have started to point fingers at the bank, Ally, that they believe is now in control of Defy’s finances. Ryland Adams (3.1 million subscribers), for example, tweeted at the bank asking it to “please help get my fellow creators and I our hard earned money back that Defy Media took from us.” Diamond did not respond to multiple requests for comment. A spokeswoman for Ally also did not respond to a THR’s request for an interview.

Complicating matters for creators, immediately following Defy’s shutdown they realized that their channels were still connected to the company’s network, meaning that any revenue they made in the days after the closure could potentially get sent to Defy. YouTube, per several of these creators, was quick in responding to their concerns and has released them from the Defy network.  

As the days drag on and the silence from Defy continues, several creators are now exploring what steps they can take to try to get back the money that they say they are owed. Several, including Stuckmann and Clement, have already posted videos about their experiences with the company — “Let’s talk about some shit,” Stuckmann started his 22-minute video on the topic — and more videos are expected. Some YouTubers are also exploring whether to take legal action.

Defy’s laid off workers have responded more quickly, with one filing a class-action lawsuit in Los Angeles against the company on Nov. 13 that claims Defy didn’t provide the California mandated 60 days of advance notice of the layoffs. Defy did send a Worker Adjustment and Retraining Notification (WARN) letter to around 80 employees on the morning of Nov. 6, notifying them that the company’s primary office in Beverly Hills would shut down by Jan. 2, but then proceeded to lay everyone off and cease operations by the end of the day. Georgina Guinane, a former writer and producer for Clevver who is bringing the case on behalf of her colleagues, is seeking 60 days of wages and benefits. Another lawsuit was filed Nov. 14 in Los Angeles by the co-founders of management firm Generate, a division of Defy. It alleges that Defy executives misrepresented plans to separate Generate into an independent company and withheld financial information that would have prompted the Generate founders, David Rath and Kara Welker, to terminate their relationship with Defy sooner. 

For the creators who worked at Defy-owned brands Smosh and Clevver, it had been unclear whether they would be able to post new videos while the company looked to offload those businesses. Ian Hecox, one of the co-founders of Smosh who sold the company to Defy’s predecessor, posted a note on his Twitter on Nov. 6 telling fans, “We’re already in the process of finding a new home and will update you all as soon as we can.” Meanwhile, Clevver hosts Joslyn Davis and Erin Robinson posted videos to their personal YouTube channels updating fans on their situation.

But after a period of silence on the brands’ main channels, both have returned. Smosh posted a video Nov. 12 in which Hecox announced, “Smosh is homeless” but revealed that he had obtained access to the channels and would continue posting. The video has more than 1.6 million views. On Nov. 16, Davis and Robinson also posted an update on the main ClevverStyle account revealing that they, too, would release new videos. “We don’t really have a plan so it may not be your regularly scheduled programming,” Robinson explained. But, she added, “We are not going anywhere.”

A version of this story appears in the Nov. 19 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.