Surprise! YouTube Slashed Its Royalty Rate by 50% Last Year

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YouTube and Vevo streams increased 132% last year, but revenue paid to artists only increased 15%.  Make sense?

The argument over whether YouTube is paying labels and artists fairly has been intensifying for some time.  But, that argument is about to reaching a boiling point following recent findings.  

Here’s the bombsell: Midia Research has now concluded that the revenue paid to music labels and artists halved last year relative to the number of streams.  That is, dropped by 50%.  This translated to a potential revenue loss of $755 million for the industry.

The numbers are easy to calculate.  Last year, streams on YouTube and Vevo grew 132%, but revenue to rights holders only increased by 15% within the same time period.  As a result, the streaming platform’s already low per-stream royalty rate dropped from $0.002 per stream in 2014, to just $0.001 in 2015 (according to Midia).

Looked at from another angle: if the per-stream royalty rate had remained constant, music labels and artists would have earned double.

The discovery could provoke a massive reaction from the music industry.  The main issue that artists and labels have expressed is that streaming services like Spotify and Apple Music pay rights owners a per-stream royalty rate regardless of the revenue they earn.  By contrast, YouTube pays a  share of their revenue.   “Labels are not used to being paid based on how profitable the company is,” said Mark Mulligan, analyst at Midia Research.

So what’s going on?  The reason why labels and artists are being paid less — despite a boom in streaming — is reportedly because ad prices dropped last year, which ultimately reduced ad-revenue.

Google Executive: “You Cannot Devalue Music. It’s Impossible.”

The drop represents the latest face-slap from a company increasingly viewed as hostile.  Indeed, responses from YouTube and its owner, Google, have been nothing less than infuriating over the years.  In the heat of a pitched battle over Google’s role in fueling piracy, Google executive Tim Quirk famously told a group of industry executives and artists that devaluing music was ‘impossible,’ while advising that ‘old people should shut up.”  “It’s amazing how often people invoke that word ‘devalue’ as if it means something,” Quirk snubbed.  “It doesn’t.  You know why?  Because you can’t devalue music.  It’s impossible.  Songs are not worth exactly 99 cents and albums are not worth precisely $9.99.”

“When I hear people complain about discount pricing in online stores or fret about on-demand services such as Rhapsody and Spotify, I rebut them with another rule of mine that makes me sound like a hippie but I promise I’m not: music is priceless.”

Quirk has since left Google, for reasons unknown.  But others inside the Google camp have assumed softer rhetoric, while still enraging music companies and artists.  A recent statement by YouTube, for example, claims disproportionately large payments for something that ultimately isn’t really that important to the platform:

”YouTube has paid out over $3 billion to the music industry, despite being a platform that caters to largely light music listeners who spend an average of one hour per month consuming music – far less than an average Spotify or Apple Music user.

Any comparisons of revenue from these platforms are apples and oranges.”

All of which has artists wondering where their piece of that $3 billion lies.  Or, why their royalty statements seemed to experience a distinct, hard-to-miss devaluation last year.

5 Responses

  1. Anonymous

    “YouTube has paid out over $3 billion to the music industry”

    No, it didn’t.

    YouTube — and similar services — paid a total of less than £25m to the industry in 2015.

    Which means it would take Google at least 20 years to pay $3bn.

  2. Anonymous Too

    This problem transcends music, especially for Google’s future revenues. Ad display volumes keep rising. click-through rates keep dropping. Search is a low engagement platform which is steadily losing share to higher engagement platforms like facebook and amazon. All of this dilutes the value of each ad placement and inhibits Google’s efforts to change course (anyone remember the now defunct Google+ that was supposed to be their answer to Facebook?).

  3. BAMstutz

    Why aren’t ASCAP, BMI, and SESAC stepping in and demanding royalties from YouTube?

  4. hjnp

    Hang on, I thought Spotify was on an ad rev split too. 70/30