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YouTube paid over $1 billion to the music industry this year

By | Published on Wednesday 7 December 2016


Yesterday was the deadline for interested parties to submit opinions to the UK’s Intellectual Property Office with regard to the draft European Copyright Directive which was published earlier this year. For many in the music industry, the key section of that directive is the one that deals with the bloody safe harbours, ie the bit of law that enables services like YouTube to operate an opt-out rather than opt-in streaming service. The music industry wants safe harbour rules revised so that YouTube et al are no longer covered by them.

In convenient timing, YouTube chose yesterday afternoon to announce that it had paid over a billion dollars to the bloody music industry in the last twelve months. This is in addition to the $3 billion YouTube has long claimed to have paid over to music companies since 2007. Because, see, YouTube is supporting the music community, and ad-funded free streaming is something everyone should embrace. Translation: Shut up with your moaning, music industry.

YouTube’s Chief Business Officer Robert Kyncl wrote yesterday afternoon: “Last year was a bright one for music – after several tough years of declining revenues, the industry started growing again, spurred in a large part by the growth of music streaming subscriptions. This year, the industry has even more reasons to be optimistic. Even as music subscriptions have been growing faster than any other subscription type, advertising is another powerful driver of revenue”.

He went on: “In fact, in the last twelve months, YouTube has paid out over $1 billion to the music industry from advertising alone, demonstrating that multiple experiences and models are succeeding alongside each other. And this is just the beginning. As more advertising dollars shift from TV, radio and print to online services, the music industry will generate even more revenue from ads”.

He concluded: “In the future, the music business has an opportunity to look a lot like television, where subscriptions and advertising contribute roughly equal amounts of revenue, bolstered by digital and physical sales. To achieve this, there is a lot of work that must be done by YouTube and the industry as a whole, but we are excited to see the momentum. At a time when there’s never been more competition for attention, fans can’t get enough good music. It is clear that this creative industry has two strong engines of growth – subscriptions and advertising – and we are honoured to be a part of it”.

Yay momentum! YouTube, of course, remains enemy number one in parts of the music industry, despite everyone recognising it’s a valuable marketing channel, especially for new artists. And many labels and publishers are down on all free streaming services.

The key issue with YouTube is that while it shares ad income with music rights owners, it won’t commit to pay minimum guarantees based on users and usage, unlike the audio streaming services. Therefore what the music industry earns from YouTube is based on ad sales not consumption, income going up as more ads are sold, not more videos streamed.

YouTube gets away with that more preferential deal because the aforementioned safe harbours strengthens its negotiating hand. Hence the music industry wants the safe harbours reformed, to weaken YouTube’s hand at the negotiating table, to get the minimum guarantees.

Though Kyncl is right that – while paid-for streaming is driving most of the growth at the moment – free streams will be a necessary part of the digital music business in the long term, meaning rights owners need to find a way of making ad-funded work, which inevitably means accepting lower per-play income from some mass-market services.

Kyncl, of course, reckons that YouTube can be part of the solution here, just providing the music industry doesn’t fuck everything up by pulling its safe harbour protection. Though labels and publishers probably won’t be convinced by that.

Buy hey, interesting that Kyncl isn’t suggesting subscription-based YouTube Red is the solution, isn’t it? All hail the free streams.