Will YouTube’s Pay-Outs Placate The Music Business?

YouTube has announced that it has paid out $4 billion to the music business over the past year. But is this going to be enough to turn it from the music industry’s occasional bête noire to its permanent golden child?

Only a few years ago, YouTube was the chief target for the music business. It and its parent company Google

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were repeatedly attacked for using safe harbour exemptions to, in the music industry’s eyes, avoid paying considerably more in streaming royalties to rights owners. The industry even had a term for it: they called it “the value gap”. And they hated it. They really hated it.

When he took over as global head of music at YouTube in 2016 – after a long career at record labels, notably Def Jam, Warner Music Group and 300 – Lyor Cohen was keen to kick the conversation about the value gap into the long grass.

He wanted to focus instead on how YouTube was a critical marketing, promotion and (yes) revenue partner for the business – stressing their bright and symbiotic future rather than dwelling on the monetary squabbles of the present.

Cohen’s was a very blunt kind of charm offensive (he has a long-standing reputation for direct talk and rarely holding back) and part of his “recalibration” of the conversation was to publish regular blogs on what YouTube was paying out. Transparency was the watchword.

He also stressed in interviews that the industry had to stop obsessing over the value gap and instead emphasised why he saw it as a critical part of the ecosystem for music. These blogs and interviews landed with maximum impact and music industry bodies quickly prepared statements that queried or lambasted his claims.

Thus the wheel turned again.

Spotify and Apple Music were keen to use this PR war on YouTube to their advantage, positioning themselves as more altruistic players. Although there were other instances in the relatively recent past where pop stars attacked both Spotify and Apple Music for, in their eyes, shortchanging the artists. No one was spotless in this war.

In this latest blog, Cohen and YouTube are keen to trumpet the financial contribution the service makes to the music business. It stresses the $4 billion figure multiple times and adds that only 30% of that number was derived from user-generated content (i.e. videos that users uploaded which include music in some capacity but where the rights owners have claimed the due royalties). While the bulk of income therefore is derived from official videos, it does not separate how much came from its ad-supported business, which pays a lower royalty rate, and how much came from its subscription-based business, which pays a higher royalty rate.

There is also no separating out of how much of the $4 billion goes to record labels/recording artists and how much goes to music publishers/songwriters.

The music business, as always, will have more questions than YouTube has given answers for here.

Cohen’s blog is as effusive as it can possibly be, notably with its talk of “a golden age for the music business” and how YouTube is “continuing to innovate with direct-to-fan products such as ticketing, merch, memberships, paid digital goods, and virtual ticketed events”.

There will be plenty of attention paid to his delivery style: he self-mockingly says his 90-year-old mother is still not sure what he does for a job (a line he has used before); he mentions “my friend Chuck D”; and he says he wants to build a sustainable business for new artists so that “the next Kurt Cobain doesn’t have to become a dentist”.

This, however, is not the real meat.

For a while, YouTube was taking almost all of the flak from the music business. It was just waiting for the wheel to turn and for someone else to become the focus of the industry’s ire.

The wheel, inevitably, did turn – sped up by the pandemic and acts’ inability to tour – and Spotify found itself the new public enemy number one, with the #BrokenRecord campaign in the UK and the Justice At Spotify movement in the US holding the feet of Daniel Ek, the co-founder and CEO of the Swedish streaming company, to the fire.

This latest YouTube blog from Cohen lands in a different world to the one his previous blog was published in. Spotify is the primary anger magnet now.

It also comes after the UK Parliamentary inquiry into the economics of streaming earlier this year. While all of the audio DSPs were pummelled in various ways, YouTube did not dodge the blows completely.

For now, at least, it does not have to face down the wrath of artists and songwriters to the same ferocious extent that Spotify currently has to; but it is surely only a matter of time before that switches.

Ultimately, it does not matter what figures YouTube presented here today: the music business will still say it could (or, rather, it should) be a lot higher.

Thus the breaking wheel turns again.

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