The hard part of an MCN isn't partnering. It's splitting things once it works
Originally written in Chinese. Translated with AI, reviewed by Gary. Read the Chinese original →
Besides fashion and running e-commerce for other brands, I actually have another small business: an MCN.
MCN stands for Multi-Channel Network. It sounds impressive, but at heart it's just the old talent agency.
How did the old talent agencies work?
They ran singing contests, scouted new faces, trained artists, helped them release records, get on shows and land ad deals, and then everyone split the income. Artists in that era came up slowly through TV stations, record labels and concerts.
In the internet age, the same thing got a new name: MCN.
The stage is no longer TV stations and record labels. It's TikTok, YouTube, Facebook, Instagram, live-stream rooms and e-commerce platforms. Artists became KOLs, influencers, hosts and content creators. Instead of releasing records, shooting ads and holding concerts, it's brand partnerships, live selling, making content, building accounts and selling products.
Put simply, the MCN business is giving resources to someone who isn't famous yet but can make content.
They might be great at talking, making videos, live streaming, styling outfits or expressing themselves, but they have no team, no equipment, no brand connections, no product lineup, and no idea how to commercialise. That's where the MCN comes in: it builds them a team, gives them resources, products and traffic, lands brand deals, runs operations, and everyone grows this person together.
Sounds lovely, right?
The trouble starts after they get famous
But this is exactly where the problem lies.
The biggest problem with an MCN has never been how to start working together. It's how to split things once it takes off.
Before someone gets famous, everyone is easy to deal with.
The company says: I'll put in the money. The creator says: I'll put in the work. Everyone thinks the future is bright.
But once the person really does get famous, the problems start.
The creator feels: the audience buys because of me, so why does the company take so much?
The MCN feels: when you started you had nothing. I put in the money, the team and the resources, and took the risk. Why do you want to take it all back now that you're famous?
So who's right and who's wrong?
Actually, neither side is completely wrong.
Because the nature of this business was never one-sided contribution. The capital side contributes, and so does the creator. The company takes the early risk; the creator brings personality and content ability. Without the company's resources, this person might never have taken off; without this person, the company is just an empty shell.
So what's really hard about an MCN isn't just splitting money.
More precisely, it's this: once a person goes from having no value to having value, who owns that value?
What does that value include?
Whose is the account? Whose is the IP? The trademark? The content library? The client relationships? The live-stream room? The brand partnerships? The online store? And if this IP one day becomes a brand, whose is the equity?
If these things aren't made clear at the start, there will definitely be fights later.
Li Ziqi is a classic example.
She was, of course, an extremely successful content IP. She took off very early and became hugely popular. But later, she and the company behind her stopped for a very long time over IP, commercialisation and control. By the time things were slowly sorted out and she came back, a lot of time had passed.
On the surface it looked like a dispute about money. Really, it was about IP and control.
Write the growth path into the equity structure
An MCN can't run on ordinary cooperation agreements alone. Especially if you're seriously incubating an IP, you need an equity structure behind it.
Equity structure is an interesting thing.
Many people think equity is just "who owns how many shares". It isn't. Truly good equity design exists to resolve conflicts that might happen in the future.
Let me give a very simple example.
Say today I come across a creator who's great at content and live streaming and has a lot of potential, but has no resources at all right now.
No team, no equipment, no brand connections, no product lineup, and no idea how to commercialise.
As the MCN, I decide to invest RM1 million in this person.
That RM1 million might cover building a team, renting space, buying equipment, making content, running ads, finding brands, arranging live streams, supplying products, operations, editing, customer service and back office.
In short, I take all the early risk first.
So at the start, the investor naturally needs to be protected. The money is mine, the resources are mine, and the risk is mine first. So the initial split could be 80% investor, 20% creator.
That's not the investor trying to keep the creator down. It's because at the very beginning, the risk sits mainly with the investor.
But this structure can't stay the same forever.
Because if this creator really takes off, they can't just be someone making money for the company forever. If the IP succeeds, the one who's truly irreplaceable is them. The audience loves them, brands want to work with them, and the trust in the live-stream room exists because of them.
So the solution is to write the growth path down clearly from the start.
Stage one: if the project earns back RM1 million in profit, the investor has recovered their capital. At that point the investor's risk has dropped, so equity can shift to 60% investor, 40% creator.
Stage two: if the project earns RM3 million in profit, the investor has not only broken even but earned a very good return. By then the creator's contribution is growing, so equity can shift to 40% investor, 60% creator.
Stage three: if the project really reaches RM10 million in profit, the IP is no longer an ordinary account but a personal brand with real commercial value. By then the investor has made enough and proven the original investment was a success. So equity can shift to 20% investor, 80% creator.
Of course, in practice this can be designed with preference shares, options, vesting or a shareholder agreement. In plain terms: the investor gets priority protection early on, and the creator gets more upside later.
What are the benefits?
First, the investor has a very clear payback and exit mechanism.
They know under what conditions they get their money back, and at what stage they gradually step back to being a minority shareholder.
Second, the creator will put more heart into it.
Because they know this isn't something that belongs to the company forever. If they really make it, most of this IP will eventually come back to them.
Third, the two sides won't wait until there's money to start fighting.
Who gets what at each stage, and how equity changes under which conditions, is all made clear at the start.
That's the real point of an equity structure.
It isn't there to hold either side down. It's there so that each side feels it's fair at every stage.
Early on, the investor takes the risk, so the investor needs protection. Later, the creator creates the value, so the creator needs to be set free.
Without this design at the start, if the project fails, that's fine, you just lose money. The worst case is when the project succeeds and only then does everyone start asking: so whose IP is this, really?
By then, it's too late to talk.
Say the awkward things up front
And different stages call for different approaches.
For a small creator, don't rush into equity. Start with a cooperation agreement and run it for three to six months to see whether this person has discipline, growth and commercial value.
For a creator with potential, you can start setting up a project IP, writing down the account, content, brand partnerships, revenue-sharing rules and exit mechanism.
If the company is putting a lot into a project, you definitely need clearer equity and option mechanisms. The company protects its capital; the creator protects their future. Who achieves what result and gets what rights, all written down up front.
This isn't because you don't trust the other side.
It's exactly the opposite. It's because you want to work together for a long time that you say the awkward things up front.
At heart, an MCN isn't about managing influencers.
What an MCN really does is co-incubate a personal IP.
And if it's co-incubation, you can't wait until the IP succeeds to talk about fairness. The truly mature approach is to design how success will be shared before there's any success.
Because the saddest thing in the content industry isn't someone never making it.
It's someone finally making it, and then, because the rules were never made clear, everyone wasting that IP together.