The Steven Crowder/Daily Wire Term Sheet: Full Text and Analysis

In a recent livestream, Ryan and I dug into the Steven Crowder vs. The Daily Wire drama. I generally try to only weigh in on topics for which I have something to offer, and I haven’t really watched much content from either side. However, having previously received and signed 7-8-digit term sheets, I suspect most people don’t realize the full impact of the terms offered by The Daily Wire, when considered together. And while I’m not a lawyer, I thought I may have an interesting perspective to add.

What I did not expect, is that the text of the term sheet itself is not available anywhere (as far as I could tell). So we did the hard work of extracting screenshots, one by one, like this:

Viewer hoggl helped finish the job and turn it into text. I thought it would be a waste of all that effort not to publish it here, so here is the contract for everyone to read and comment on. We’ll do a Rumble stream today at our usual time (2pm Pacific), where we’ll try to tease out some more interesting aspects, as well as go through people’s reactions to reading the contract. I think there’s a lot to learn here, no matter your level of expertise.

If you want to see just the text of the contract, scroll down.

Some Quick Observations

I will probably write something longer on what exactly is troubling me about this term sheet, but first, I want to point out some interesting features of this document that others have missed.

It’s Not Really Just a Term Sheet

The reason you read the fine print is to catch things like what is written in section XIV. In the first paragraph, you see text like this:

Until the time that such long-form definitive agreement becomes
fully executed, there is no binding agreement between the Parties
except for those matters in this section XIV.

In other words, section XIV is binding. In addition, here’s what’s at the end of the section:

By signing below, the Parties agree to move forward in good faith to
negotiate Definitive Agreements according to the terms above, and
further agree that until and unless such Definitive Agreements become
fully-executed, this Term Sheet shall be non-binding except for those
matters in Section XIV.

All this put together means that once signed, this term sheet actually does impose contractual obligations, and if—after signing—one party is able to show that the other is not moving forward in good faith, there’s the potential to sue for damages. Someone might say “they would never do that,” but then one has to wonder what this text is doing there in the first place.

The Penalties Really Go Up To 11

Section XIII details how the “fee” (of $12.5m/yr.) is reduced by 25% if an advertiser drops out and cannot be replaced in time, another 25% if any major platform demonetizes Crowder, and an additional up to 60% reduction (20% for YouTube, 20% for Apple Podcasts, 10% for Facebook, and 10% for Spotify) bans Crowder.

An argument that has been made is that the 25% demonetization reduction is additional to the ban reductions. However, if that were true, in the case Spotify demonetizes Crowder—costing him 25%—he would be incentivized to simply get banned and replace that with a 10% reduction instead. It doesn’t make sense for The Daily Wire to do that, so I assume in that case they would withhold 35% of the fee, adding both reductions together. This means that each platform—individually—holds the power to cost Crowder somewhere between $4.37m and $6.24m PER YEAR. In the case of an Alex Jones/Andrew Tait scenario unfolding—where Crowder is kicked out of everywhere—he would quickly reach a theoretical 110% reduction, which I assume (and hope) would mean that Crowder collects $0 from The Daily Wire and isn’t liable to pay them back 10% of the contract per year.

Crowder’s Costs

Crowder has said several times that he employs about 25 people. With very conservative assumptions, if eight are paid an average of $120,000/yr. and 16 are paid an average of $60,000/yr., we’re looking at a salary expense of about $2m/yr. And of course, employees bring additional costs from taxes, to offices, to software licenses, to hiring costs, etc. Conservatively, putting those at 25% brings us to $2.5m/yr. If we add another $1m between general, legal, equipment, and production expenses per year, we’re very conservatively at $3.5m/yr.

What this means is that about 30% (accounting for inflation) of Crowder’s costs are already spoken for. Any fee reduction above 70% means that Crowder is losing money just doing the show.

Well, He Could Always Just Stop Doing It, Right?

Given that the contract provides The Daily Wire with four to six years of exclusive rights to all things Crowder, he would not even be able to start a crowdfunding campaign—never mind get into any form of media—until the contract expired.

The term sheet also includes a $100k/episode fee that Crowder has to pay if he doesn’t deliver exactly 192 episodes a year to The Daily Wire. In addition, each year, he has to pay $1m for each “annual” production he misses, and another $1m if he misses all four quarterly productions. This means that he’s on the hook for about 170% of the fee if he doesn’t produce the content.

In other words, either Crowder continues at 100% the pace he was at—regardless of how much money he is losing—or he has to fire every person on his team and quit show business for up to six years.

No Guts, No Glory, Right?

Some might say that the potential for a downside is justified by the potential for an equally big upside. After all, every entrepreneur has to take some risk, right?

The problem is that despite transferring all the risk to the talent (and then some), The Daily Wire doesn’t share any of the upside. If Crowder becomes twice as successful, the contract stipulates that he gets exactly the same amount. It’s not even adjusted for inflation (though that could become part of the fine print, arguably). As such, the extreme downside protection DW tried to extract doesn’t make much sense.

Now, there’s a school of thought that says that this is simply negotiation, and that if he didn’t like it, he could return the contract and ask for them to try something else. Leaving aside the fact that Crowder appears to have done exactly this, with The Daily Wire refusing, there’s a much deeper issue here. Negotiation is where you learn about the people you will be working with. If their posture is that they will take you for all you have if they are given a chance, this is a sign that you should run.

A 10-20% difference can, perhaps, be negotiated. However, this isn’t that. This is an extreme negotiating pose, at best, that carries a very clear message: even if you somehow get a deal that isn’t terrible here, whenever you’re not looking, we’re going to milk you dry. Every term of the contract will be exploited, because it’s “just business.” It is the absolute worst kind of partner that proposes a deal they know doesn’t work for the other side and needs to be negotiated with to even acknowledge basic logic.

Quite simply, if I was shown a contract like this, regardless the amount, I would run. There is no amount of negotiation that will turn a wolf to a sheep.

My Conclusion: Crowder Had A Point

In this contract, The Daily Wire retains the right to monetize Crowder’s back catalog, merchandising, email list, social media, as well as make pretty much any adaptation of the material for other purposes. Each of these is potentially worth millions over the course of the contract, while Crowder’s fee may be reduced to zero.

There is no other way to describe these fee reductions than as a multiplier over the original punishments inflicted by social media platforms, which are intended not to recoup costs for The Daily Wire, but to punish the content creator. The term sheet, as written, opens up the potential for Crowder to have to pay out of his own pocket to keep his company going over the course of this contract, while The Daily Wire continues to make tens of millions out of the non-advertising revenue streams.

All this, of course, is not really intended to be enforced in reality. I don’t think The Daily Wire is aiming towards a situation where it bankrupts content creators. But then, what is the purpose of these terms? The obvious explanation is that they are there—scary as they are—to fully terrorize the creators into complying with the superset of all “terms of service” the various major platforms impose over time. While The Daily Wire may not want the drama of bankrupting someone like Crowder, it does seem to want instill the fear that the content creator will feel at the prospect of being bankrupted, or at least locked out of the game for up to six years.

Crowder’s claim—that the aggregate result of the terms as proposed would be to reduce the risks The Daily Wire’s content creators are willing to take, staying within the lanes of what Big Tech considers to be acceptable at any given point in time—appears to be correct. If these terms are what are offered to up-and-coming talent who doesn’t have the courage to push back on them, then the movement that DW and Crowder are both part of will likely suffer as a result.

And for someone like me—who doesn’t belong in that movement—the biggest implication is that we will have fewer voices willing to speak out about the topics the establishment is afraid of: exactly the kind of topics that are “discouraged” by YouTube’s terms of service.

The Full Text

This non-binding term sheet (this "Term Sheet") sets forth the
basic deal points of a proposed content production and distribution
agreement between The Daily Wire, LLC, a Texas limited liability
company ("DW"), and Steven Crowder, via his loan-out (collectively
"Crowder'), (collectively with DW, the "Parties") so that if
and when the Parties elect to move forward with a long-form agreement
(the "Definitive Agreement"), they can then move quickly in
preparing a definitive and binding agreement.

I. TERM: 4 Year Initial Term with 2 Year Renewal at DW's
sole discretion (together, the "Term").

II. FEE: $50M for the Initial Term, plus $25M for the
Renewal Term if extended. Paid in monthly installments.

III. PRODUCTION COSTS: Crowder will bear the burden of
production, including all costs associated therewith, on all of the
content contemplated herein, except on the quarterly and annual
content contemplated below. The quality of the production will be as
good as or better than his currently existing content.

IV. REVENUE COLLECTION: DW will have the exclusive right to
realize revenue in connection with all of Crowder's content and brand.

V. CONTENT

a. Daily: Crowder will deliver a 1.5 Hour LOUDER WITH
CROWDER Audio/Video Show, of a quality and kind consistent with the
daily show he currently produces, 4 Days a Week, 192 Original Episodes
per Year (i.e. 4 weeks off), Including All Ad Reads and Promotions as
Requested by DW.

i. These episodes are to be filmed in-studio daily, Monday-Thursday.

ii. At least 1 hour outside the paywall.

iii. At least 30 minutes inside the DW+ paywall.

iv. Crowder may bank/pre-record a limited number of episodes, upon
approval in DW's reasonable discretion. Days without new original
episodes will be scheduled in advance and subject to DW's reasonable
approval.

b. Monthly:

I. 90 Minute All Access Live Member Q&A, and

II. All Ad Reads and Promotions as Requested by DW for the same.

c. Quarterly:

I. One (1) Major DW+ Promo Video & Photo Shoot coordinated by DW
(anticipated to be a full day separate from other content shoots), and

II. One (1) Backstage Episode or Major Live Event and VIP Experience
and Reasonable Promotion of the Same.

d. Annual

I. One (1) Feature-Length Entertainment Special and Reasonable
Promotion of the Same. Entertainment Specials may include (in DW's
discretion in consultation with Crowder) a Stand-up Comedy Special or
four half-hour episodes of the same (DW will produce at a minimum
production budget of $500k), or up to ten episodes of a scripted DW+
series (DW will produce with a minimum production budget of $250K per
episode), and

II. One (1) Feature-Length Political Special and Reasonable Promotion
of the Same. Political Specials may include (in DW's discretion in
consultation with Crowder) a feature documentary or four half-hour
episodes of the same (DW will produce at a minimum production budget
of $1.25M), or up to ten episodes of a Premium Interview Show with
approved guests (DW will produce at a minimum production budget to be
determined).

e. Additional Crowder Content: DW and Crowder may mutually
agree to create additional content not currently contemplated
above. In the event of such agreement (the nature of the content, and
the fact that it is "additional" subject to this paragraph to be
confirmed in writing), Crowder will be paid $15K per shoot day for
such additional content.

VI. BACK CATALOG: Crowder will license his entire back
catalog, including without limitation every past episode of Louder
with Crowder, to DW during the Term.

VII. AD READS AND PROMO READS:

a. DW will have the exclusive right to sell ads on the Crowder
Content, on all platforms, channels, websites, apps, widgets, pages,
and lists owned, branded, or controlled by DW, and on any
Crowder-owned or controlled social channels, email lists, websites,
etc (including the Louder With Crowder website). Remuneration for such
ads is included in the Fee.

b. Crowder will read any ad copy and promo copy as requested by DW,
though Crowder will have the right to disapprove of particular ad
sponsors, other than for DW and affiliated companies, as long as he
does not disapprove of more than 10% of the total sponsors brought to
him by DW.

c. DW will not have the right to sell ads on behalf of companies for
which Crowder himself owns more than 5% equity in a direct competitor
without Crowder's approval.

d. Failure to read all requested ads or promos in any piece of content
will constitute a failure to deliver such content, but will not
prevent DW from releasing and monetizing the content.

VIII. OWNERSHIP: DW will own all of the content
contemplated to be created herein, and will own all DW-created
channels and brands created by DW during the term. To be clear: DW can
exploit those channels, brands, and content in perpetuity at its sole
discretion.

IX. ADAPTATION RIGHTS: DW will have the right to adapt and
monetize anything Crowder says or writes on his podcast, social media,
etc - both DW-owned and Crowder's personal channels, books, or media
hits - for DW articles (free or subscription), marketing and
promotions, social media posts, merch or newsletters with no
additional approval required from Crowder.

X. ADDITIONAL DW RIGHTS

a. Merch Riqhts: DW will maintain the exclusive right to
create and sell Crowder- and Crowder Content-branded merchandise. All
Remuneration for the DW's license and exploitation of these rights is
included in the Fee.

b. Email List: DW will maintain the exclusive right to
manage, grow, and monetize all Crowder email lists during the
Term. All remuneration for the exploitation of these rights is
included in the Fee.

c. Social Media Management: DW will have the exclusive
right to manage, curate, and monetize Crowder's Official Facebook,
YouTube, Apple Podcast, Spotify, SnapChat, Rumble, and other Social
Media Accounts, excluding Crowder's existing personal Twitter and
Instagram Accounts, during the Term. Additionally, DW will have the
perpetual and exclusive right to create, own, manage, curate, and
monetize any and all Social Media Accounts on any Social Media or
similar platform as determined by DW created by DW based on the
Crowder Content or Shows. All Remuneration for the exploitation of
these rights is included in the Fee.

XI. EXCLUSIVITY

a. Total exclusivity, for all kinds of content, in all media,
throughout the Term.

b. Occasional, non-regular guest appearances are not restricted,
provided Crowder uses good-faith efforts to coordinate them with DW.

c. Crowder will not have the right to run any personal subscription or
donation effort of any kind. (e.g., no Patreon, Locals, Fan Club,
etc.).

XII. FEE REDUCTIONS.

a. Daily Content: If Crowder fails for any reason to
deliver 192 episodes of the DAILY show, including any and all ad reads
and DW & Affiliate Companies promo reads approved and deemed
satisfactory by the Company: $100,000 reduction in the Fee per
instance (For clarity, any time Crowder misses a single episode of the
Daily Content without written DW approval, the Fee will be reduced by
$100,000).

b. Monthly and Quarterly Content: If Crowder fails to
deliver MONTHLY content in any month, or any of the QUARTERLY content
in any quarter, including any and all ad reads and DW & Affiliate
Companies promo reads approved and deemed satisfactory by the Company:
$250,000 reduction in the Fee per instance (For clarity, any time
Crowder misses a single example of the MONTHLY and/or QUARTERLY
Content without written DW approval, the Fee will be reduced by
$250,000).

c. Annual Content: If Crowder fails to deliver ANNUAL
content in any year, including any and all ad reads and DW & Affiliate
Companies promo reads approved and deemed satisfactory by the Company:
$1m reduction in the Fee per instance (For clarity, any time Crowder
misses a single example of the ANNUAL Content without written DW
approval, the Fee will be reduced by $1m.

d. Reset. The Fee reduction calendar resets each year.

e. Disability. In the event of temporary disability, or
serious illness that prevents Crowder from performing, the Fee will be
reduced on a pro rata basis, not subject to the Fee reduction schedule
above.

XIII. REDUCTION OF FEE FROM LOST REVENUE FROM BOYCOTTS CONTENT STRIKES OR BANS FROM MAJOR SOCIAL MEDIA PLATFORMS:

a. Ad Drop. If Crowder is boycotted or dropped by more than
50% of his then extant advertising partners (that is, 50% of the
revenue from those partners) and the company is not able to replace
them within 90 days, then the Fee will be reduced by 25% until such
time as that ad revenue has been restored for a period of 90 days.

b. Content Strike. If any of the major platforms (e.g. YouTube, Facebook, Apple Podcasts, Spotify) issues a content strike (other
than a "companywide" content strike) such that the Crowder content
cannot be monetized on such platform, and the company is not able to
resolve the issue within 90 days, then the Fee will be reduced by 25%
from that point forward.

c. Ban. If the Crowder Content can not be released on any
of the major platforms (YouTube, Facebook, Apple Podcasts, Spotify)
because of Crowder or his content being banned from those platforms,
then the Fee will be reduced by:

i. If YouTube, 20%

ii. If Apple Podcast, 20%

iii. If Facebook, 10%

iv. If Spotify, 10%

XIV. THIS DOCUMENT:

a. Definitive Agreement. The parties intend to collaborate
in good faith in an attempt to reach a mutually agreeable definitive
long-form written agreement regarding the subject matter of this Term
Sheet. Until the time that such long-form definitive agreement becomes
fully executed, there is no binding agreement between the Parties
except for those matters in this section XIV.

b. Confidentiality. The Parties agree that the terms of
this Term Sheet and the transaction contemplated herein are
confidential. Except as required by applicable law, rule, or
regulation or any governmental, judicial, regulatory or supervisory
authority having jurisdiction over such party or that party's
affiliates or any of their respective officers, directors, employees,
consultants, contractors, agents, and financial and legal advisors
(collectively, "Representatives"), none of the Parties or their
Representatives, will make, or cause to be made, any disclosure, press
release, or any public announcements relating to this Term Sheet or
the transaction proposed herein, without the prior written consent of
the other parties. The foregoing shall not apply to any information
which is or becomes generally available to the public other than as a
result of a disclosure by the party seeking to disclose. In the event
that a party hereto or any of its Representatives is requested or
required (by oral questions, interrogatories, requests for information
or documents in legal proceedings, subpoena, civil investigative
demand or other similar legal or regulatory process) to disclose this
Term Sheet or the terms hereof to any third party or governmental
authority, that party shall use commercially reasonable efforts to
provide the other parties with advanced written notice (if legally
permitted) of any such request or requirement so that such other party
may, to the extent practicable, seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Term Sheet. This confidentiality provision will terminate four (4)
years from expiration of the Term.

c. Counterparts: This Term Sheet may be signed in
counterparts. Electronic copies of signatures shall be considered
originals for all purposes.

d. Governing Law: The construction, validity and
performance of this Term Sheet, and all disputes or non-contractual
obligations (if any) arising from or connected with this Term Sheet,
shall be governed by the laws of Tennessee with venue being before a
court of competent jurisdiction in Davidson County, Tennessee.

By signing below, the Parties agree to move forward in good faith to
negotiate Definitive Agreements according to the terms above, and
further agree that until and unless such Definitive Agreements become
fully-executed, this Term Sheet shall be non-binding except for those
matters in Section XIV.