YouTube’s MusicKey Will Cause $2.3 Billion In Music Industry Losses…

youtubemusickey

MiDIA Consumer Research Study (UK), n=1000.

It’s not the ones that will subscribe to YouTube’s upcoming music subscription service.  It’s the one’s that won’t, and will never pay for streaming as long as YouTube’s free service is available.  “Just 7% consumers say they would pay for a YouTube subscription service without ads and including extra content (little surprise considering Google makes it so easy for consumers to get apps like AdBlock and YouTube rippers),” relayed MiDIA researcher Mark Mulligan.

But 25% say they will never pay for a subscription service because they get all the music they need for free from YouTube.  The net balance is clearly negative.”

“If we discount both rates and apply them to the US and UK population, Music Key would contribute about $400 million dollars in revenue in one year but would be responsible for more than $2.6 billion in lost subscription revenue, meaning its net impact would be around -$2.3 billion.”

Welcome to a world where promotion and product are the same thing.  “YouTube is more important as a promotional platform to labels and artists than ever but the demarcation between discovery and consumption is becoming indistinguishable,” Mulligan continued.  “For most YouTube users, it is the destination not the discovery journey.  It is time for more record label execs to understand that their advert is now actually the product too.”

 

Written while listening to Diplo and M83.  The full report from MiDIA is available here

49 Responses

  1. Anonymous

    Good thing everyone has poisoned the Spotify well. You’re going to be thinking of half a penny per stream as the good ol’ days soon enough.

    Reply
      • FarePlay

        “YouTube has basically done you a favor, they’ve spelled it out in no uncertain terms. They’re basically saying “you need us, we don’t need you”. To them it’s a numbers game, to you its’ your life’s work. And isn’t that what tech has been saying to you for over a decade? First by Google allowing pirate sites to trash your music, until it was worth what they were willing to pay for it.

        You believed you were forging a partnership, when in reality you were being manipulated by the smartest guys in the room. Unfortunately, none of them understand the music business, nor do they have any interest in learning about it. They’ve been selling advertising, not music.

        You’re just the bait, not the catch. You are lost in a vast warehouse called the Internet.

        Yes, the music business is broken and only you, the artist, can fix it. You start by believing what you create has value and you refuse to take a bad deal. Because until you tell them NO, they will continue to abuse you.
        Take it down, take it all down. Because scarcity is the new marketing strategy. You’re better off with a hundred fans who are willing to pay you, than 5,000 fans who are willing to play you.”

        Excerpt From: ‘ Youtube, Take it or Leave it’ by Will Buckley

        Reply
        • Anonymous

          “You are lost in a vast warehouse called the Internet”

          We need to realize that it’s our warehouse — and act accordingly!

          Musicians, authors, journalists, artists, movie makers, bloggers and DMN-commenters 🙂 own the internet.

          Google, Facebook and pirates don’t own a thing.

          Reply
        • Paul Resnikoff
          Paul Resnikoff

          “And isn’t that what tech has been saying to you for over a decade?”

          I understand your point. After all, Spotify et. al, have long argued that they eviscerated piracy, which pays nothing. Isn’t something better than nothing?

          Google, obviously, would have a more difficult time spinning that argument, but there’s a tendency to make ‘tech’ into this giant, homogenous community. Sometimes that makes sense, even with Spotify: after all, Daniel Ek headed uTorrent, a wildly popular BitTorrent tracker, prior to his stint at Spotify.

          Other times, there are wild differences in philosophy and approach. And of course, there are lots of companies and leaders in tech that are declared enemies. Like any large family, ‘tech’ is a complicated one, if it can even be called a family.

          Reply
          • Anonymous

            “there’s a tendency to make ‘tech’ into this giant, homogenous community […] Like any large family, ‘tech’ is a complicated one, if it can even be called a family.”

            Excellent point. Many commenters, myself included, fall in that trap from time to time.

            Perhaps we need a new word for the abusive companies — Google, Spotify, Grooveshark, Pirate Bay — that most of us are referring to when we say ‘Big Tech’.

            The fact is that artists love tech and use it 24/7 for writing, playing, production and distribution.

  2. Anonymous

    That’s why we need to launch a free, non-censored, high-quality, ad-financed, artist-friendly, better-paying YouTube alternative — owned and operated by the industry — and use that service exclusively. All revenues straight back to the artists!

    Exclusive releases have proved to be a huge success for Netflix.

    Now it’s our turn.

    Reply
  3. Anonymous

    Always remember this:

    You will never sell a song again if you sign with YouTube Music Key: Your entire catalogue will be available not only as streaming, but as free download on YouTube — on release day!

    Reply
    • Dave 5000

      Show me the fine print where it literally says that. There is a lot of disinformation going around about what it actually says.

      Reply
      • Anonymous

        “Show me the fine print where it literally says that”

        Sure — from Google’s contract:

        Provider’s entire catalogue of Provider Sound Recordings and Provider Music Videos (including Provider Music Videos delivered via a third party) will be available for the Premium and Free Services […] Provider will provide Google with the same Provider Sound Recordings and Provider Music Videos on the same day as it provides such content to any other similarly situated partners

        As for the download part — here is Google’s description from the leaked YouTube Music Key screen shots:

        Offline playback. Keep listening, even without an Internet connection.

        So yes, your entire catalogue will be available not only as streaming, but as free download on YouTube — on release day!

        Reply
        • steveh

          I still don’t buy your alarmism.

          Surely this off-line downloadage of which you speak is part of the subscription service, so it’s not free.

          As far as I understand it Music Key and regular Youtube are not the same beast. They are separate entities.

          You are conflating the two together.

          Reply
          • FarePlay

            I have a decent vocabulary, but had never used this word ‘Conflate’ and of late it has been used often in DMN.
            I chose the Webster definition and the following is from Webster’s online definition, used for editorial purposes only. http://www.merriam-webster.com/dictionary/conflate

            Definition of CONFLATE
            transitive verb

            a : to bring together : fuse
            b : confuse

            : to combine (as two readings of a text) into a composite whole
            Examples of CONFLATE

          • FarePlay

            “Surely” is not a legal term that I’m familiar with.

          • steveh

            Being needlessly picky about perfectly acceptable modern British English is not FairPlay. Not at all.

            Perhaps you understand better older British English. Do you know what the term “fuck off” means? Is it in Websters?

          • Anonymous

            “fuck off”

            You really have a way with words, steveh.

          • Anonymous

            “this off-line downloadage of which you speak is part of the subscription service”

            Subscribers can download everything for free, so YouTube Music Key is not a streaming service.

            And everybody can sign up for a free month and download your entire catalog for free.

            “As far as I understand it Music Key and regular Youtube are not the same beast. They are separate entities.”

            Google clearly states that: “Provider’s entire catalogue […] will be available for the Premium and Free Services […] on the same day as it provides such content to any other similarly situated partners”

            So your entire catalog will indeed be available — for free — on the original YouTube on release day.

            This means people won’t buy your records anymore, and you’ll have to make a living from what Google pays you.

            Which obviously is impossible:

            YouTube claims to pay 55% to content owners (15% less than iTunes) but that’s far from the truth: YouTube approximately makes $3-4bn/year, but it only paid a total of $1.2bn to content owners during the past 8 years.

  4. Anonymous

    “Google makes it so easy for consumers to get apps like AdBlock”

    Ad-financed sites need to learn about adblock-blockers. It’s not rocket science, ya know…

    Reply
  5. DreamCoast Music

    Not sure why YouTube thought this was going to be a money maker especially with all the free streaming sites available to get music. Who are they expecting to sit in front of their computer for hours watching videos?

    Reply
    • Anonymous

      “Who are they expecting to sit in front of their computer for hours watching videos?”

      All of us — except on phones, of course — and they’re right: Audio-only is over, video is the future.

      But Google’s epic mistake was to create a subscription service. Now they have to cripple the original YouTube that everybody loves in order to attract subscribers to a paid version nobody wants.

      This leaves a huge void.

      So you’re going to see a lot of new, free YouTube alternatives besides old ones like Vimeo and Daily Motion:

      First, you have VIDescape.com — still in beta, but already claims to pay more than YouTube — and soon we’ll see Vessel.com, backed by former Hulu CEO Jason Kilar and no less than Bezos Expeditions.

      And then there is Yahoo: According to Slate last month, the company has been “working on a plan to lure some of YouTube’s most popular stars and networks to show their stuff on the site”.

      Yahoo’s plan “aimed at taking advantage of persistent complaints by both video creators and owners, who think that they don’t make enough money on YouTube“.

      Many assumed that Yahoo would use its own video platform Screen, but Slate now adds that Yahoo will let its artists use Tumblr instead.

      Interesting times.

      But not for Google.

      Reply
  6. D'Man

    I’m wondering if they accounted for the majority of people that watch videos on their mobile phones where Ad’s are not running.

    Maybe we are going to see Advertisements on phones right when it’s launched.

    Reply
  7. JTVDigital

    “$2.6 billion in lost subscription revenue” – probably, but for who? Who benefits from subscription revenues currently? Major labels (mainly). Signed artists usually see little or none from this revenue (at least not directly, they still benefit from their label’s investments in terms of development and marketing though).
    What is bad for the “music industry” (= huge corporations) is not always bad for indie artists and small labels or music companies.
    See how other media sectors survive, with ads (TV, press, radio). Why would it be different when it comes to online music?
    Most people are ok with ads, as long as it’s not too intrusive, because they’re used to it, they see ads in the streets, on TV, when they turn on the radio…etc.
    YouTube has clearly become the place where most people go for listening to music online, so yes it’s not about discovery but consumption.
    Major labels will certainly take another 10 years to really get up-to-date with how to deal with this, just like what they did with that digital music “thing” 🙂

    Reply
    • Anonymous

      You talk about YouTube as if it were the same thing as YouTube Music Key.

      Nothing could be more wrong.

      YouTube is free, open and unrestricted for everybody — artists don’t have to give up their rights, fans don’t have to pay.

      YouTube Music Key is a closed download service hidden behind a pay wall. Artists are forced to upload their entire catalog to YouTube Music Key on release day, windowing/exclusive iTunes releases are no longer allowed, and fans have to pay.

      YouTube was a gift to fans, dancing cats, singing parrots and musicians.

      YouTube Music Key is Google Classic in its most abusive and vicious mode.

      Reply
  8. jose luis

    7% of 1 billion users make 70 million paying users

    what’s the problem so?

    Spotify have 10 millón paying users

    so we have to welcome new Youtube service!

    Reply
    • zorro

      ^^THIS right here. 7% of a billion+ people is what the model needs. HOWEVER, this presumes reasonable churn rates, etc that all come with a subscription model.

      Reply
    • Paul Resnikoff
      Paul Resnikoff

      There it is. I wonder if 7% is a wild exaggeration now that I look at your simple calculation. But, let’s see MusicKey in the wild.

      Maybe it does change the math on paying subscribers. I’d be surprised, but nothing of this magnitude on the paid scale has been launched. YouTube is a really, really, really, really big site.

      Reply
    • Anonymous

      “7% of 1 billion users make 70 million paying users, what’s the problem so? Spotify have 10 millón paying users”

      Here’s the problem:

      Spotify hardly pays anything at all to artists — but YouTube pays far, far less.

      Again: YouTube claims to pay 55% to content owners (15% less than iTunes), but that’s not true — YouTube approximately makes $3-4bn/year, but it only paid a total of $1.2bn to content owners during the past 8 years.

      Reply
      • steveh

        You are basing all your misguided brain-dead diatribes about Youtube Music Key on the totally erroneous assertation that Music Key will be the same as the current regular Youtube.

        If Youtube Music Key is really going to be a subscription service, then it will obviously pay more than regular ad-driven Youtube.

        Can you not see this? Are you insane?

        Reply
        • Anonymous

          “the totally erroneous assertation that Music Key will be the same as the current regular Youtube”

          Again, in Google’s own words: “Provider’s entire catalogue […] will be available for the Premium and Free Services […] on the same day as it provides such content to any other similarly situated partners”

          “it [YouTube Music Key] will obviously pay more than regular ad-driven Youtube”

          We don’t know anything of the sort — it may pay far, far less if users don’t subscribe.

          Reply
          • steveh

            Yes but your idea that millions of people are going to subscribe to Music key for the one month free and download every artist’s complete catalogue is completely ludicrous.

            The sort of have people who would do that have most probably already done it using bit torrent or similar.

            And please explain mathematically how compared to regular ad-driven Youtube the subscription “may pay far, far less if users don’t subscribe.”

            This is sheer hysterical nonsense!

          • Anonymous

            No, you explain how YouTube Music Key will pay artists if users don’t subscribe.

            I’d really like to hear that…

          • steveh

            Obviously if people don’t subscribe it Music Key won’t pay anything, but in that case it would be a neutral and somewhat irrelevant entity in no way justifying the intense alarmism that you are preaching.

          • Anonymous

            Free, legitimate access to Sony/UMG/Warner’s entire catalogs is irrelevant?

            Whoa…

  9. steveh

    I don’t want to sound like a defender of Google/Youtube – far from it – but the mathematical premise of the original post is kinda bogus.

    The “2.6 billion” dollars “lost” by free Youtube is already happening right now – with regular standard free ad-driven Youtube. This “loss” is not a future product of Youtube Music Key.

    And in fact the potential 400 mill dollars to be arned through Music Key is a potential mitigation of the situation as it is now. So it is unfair to say that Music Key “causes” the “2.3 bill” loss…

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      The math is sort of mixed up isn’t it? I suppose the real money-drainer is YouTube, not YouTube MusicKey. Maybe Mark gets a Mulligan on this one.

      Reply
        • Paul Resnikoff
          Paul Resnikoff

          But Mark it seems that you are squarely pegging this onto Key?

          from the report…

          “If we discount both rates and apply them to the US and UK population, Music Key would contribute about $400 million dollars in revenue in one year but would be responsible for more than $2.6 billion in lost subscription revenue, meaning its net impact would be around -$2.3 billion. “

          Reply
  10. There is+something...

    Let’s see… Now 100% of Youtube user pay NOTHING. If tomorrow 7% pay something, it is in fact an increase. And 7% of Youtube users is A LOT of people by the way. So, how is that exactly “a loss” ?

    Reply
  11. JukiTV

    Keep the comments coming man. Very interesting to see all the varying views on YouTube. But an alternative is coming! very soon! JukiTV; a channel by the artists..for the artists! We don’t have all the answers, but we’re listening to you guys!
    F*ck YouTube!

    JukiTV

    Reply
    • LizaDawn

      There really needs to be something run by the Artists, for the Artists instead of a couple of greedy individuals cutting up a market share of pie behind peoples backs and shafting the Artist. Time for change.

      Reply
      • GuitarMan

        While I agree with this there are some (initial) problems in this approach:
        1) Artists rarely have the money to do an internet startup;
        2) Artists rarely have the business sense needed to make this type venture successful without…
        3) Capital from investors which…
        4) Leads to someone other than the Artists running the business because…
        5) The business needs to be profitable in order to stay in business and…
        6) Musician’s don’t necessarily know how to do this so…
        7) The bean counters take over and…
        8) We’ve now arrived at the same place all successful businesses arrive at…
        Profit over moral responsibility to the artists.

        Plus, by experience I know, getting a group of musician’s to form a union goal is definitely like herding cats.

        Reply
  12. Michael

    Here’s a quick thought on the digital streaming issues…

    All the labels, major and indie, de-license their catalogs for streaming; make the music available only by disc/vinyl/tape or paid downloads.

    Since most complain they make no money via the streaming services, stop allowing your music to be streamed. With no label produced music available the streaming services will quickly go out of business; or they’ll try to survive on the unsigned indie’s – kind of retro to before the big labels got involved.

    Reply
  13. GuitarMan

    While I agree with this there are some (initial) problems in this approach:
    1) Artists rarely have the money to do an internet startup;
    2) Artists rarely have the business sense needed to make this type venture successful without…
    3) Capital from investors which…
    4) Leads to someone other than the Artists running the business because…
    5) The business needs to be profitable in order to stay in business and…
    6) Musician’s don’t necessarily know how to do this so…
    7) The bean counters take over and…
    8) We’ve now arrived at the same place all successful businesses arrive at…
    Profit over moral responsibility to the artists.

    Plus, by experience I know, getting a group of musician’s to form a union goal is definitely like herding cats.

    Reply
  14. Dr. Clickenstein

    Additionally, take a look at Analog radio royalty rates versus “any” internet royalty rates. Plus the same problems exist for artists. We need a sell -your-soul-deal from majors, or we exhaust our juice on the internet for penny’s or nothing! You can’t get “in” without the push from majors, and everyone else says pay & bend over! I stress unity in the artist community. Only if we unite can we run ridiculous numbers like on some vevo accts. which are obviously robotic! No one has art worth 800,000,000 views who’s concert tickets are not $250 an up. Billionaires sleep with each other -as long as it keeps us out the big money game. We must unite and them make them pay the right rate by running up some numbers!

    Reply

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