Why You’ll Never Get Rich on YouTube (In One Easy Diagram)

YouTube: Great for Exposure Bucks!

It’s not that YouTube won’t help to you build an audience (it will).  But it definitely shouldn’t be your long-term focus as an artist (unless you like being broke).  Here’s the data that proves why.

So the music industry keeps talking about something called the ‘value gap‘.  What it refers to is the massive difference between the money that gets paid by YouTube versus other streaming platforms.  Basically, YouTube pays the music industry (and its artists) a fraction of what other streaming platforms like Pandora and Spotify pay, for the same amount of listening.

Music Labels Say YouTube Is Flat-Out Lying About Its $1 Billion Payout

So, ‘fan A’ streaming 10,000 songs on YouTube is worth just a fraction of that exact same user on Pandora.  Which is why the music industry basically hates YouTube.

But how different, exactly?  THIS different.

Here’s the average revenue received by the music industry per user, per year in 2016:

screen-shot-2016-12-14-at-6-22-07-pm

The data comes from MusicWatch, a music industry research group that’s been focusing on monetization issues.

In industry-speak, ‘ARPU’ refers to the amount of money that flows back to the music industry per user, per year.  Here’s the quick look again:

  • YouTube: $2.50

  • Pandora: $8.75

  • Spotify (Premium): $42

  • Apple Music: $42

Boil this down to the artist level, and there’s a reason why your YouTube checks are insultingly low (if you’re getting anything at all).

YouTube’s payouts are uniformly, undeniably, the absolute f–king worst across the entire music industry!

We asked Russ Crupnick, chief researcher at MusicWatch, to break down some of these stats.  Here’s what he told us, based on a top-level payout of $1 billion in revenues (which is what the video giant claims to have paid the industry over the past 12 months).

“Based on numbers presented by the RIAA, our estimate is that about 30 percent of YouTube revenue filters to the US, or roughly $300M. If first half trends hold up, US streaming revenues will be in the neighborhood of $3.5B, meaning YouTube contributes almost nine percent of revenues. With that 120M user base, ARPU (average revenue per user) is about $2.50 per music listener.”

Contrast that with Pandora:

“Through Q3 2016 Pandora reported $522M in content acquisition costs. At that run rate the total 2016 expense will be roughly $700M. With 80M active users, Pandora’s industry ARPU is $8.75, or 3.5 times higher.”

And finally, Spotify Premium and Apple Music.

“For the paid streaming services it will be approximately $42 per user. If you take $120 per year for the sub, times 70% to stakeholders,  that yields $84. We divide by two to get $42 because of account sharing – two users per account. The $42 is a bit high because some people have student or family plans that are discounted, but it’s a fair estimate.”

Any questions?

 

7 Responses

  1. FarePlay

    YouTube is not your friend and it isn’t your marketing partner either. It’s just a software program and servers that store files and finds things for visitors who know what they’re looking for.

    The great thing about YouTube is that you can find almost anything there. The bad news is that the chance that someone would actually stumble onto your video and initiate a tsunami of interest, that would explode into a viral video, making you an overnight celebrity are practically non-existent. Dream on.

    What’s far more likely to happen is that those who are attracted to your music will find it on YouTube, listen to it there and never make it to your website, the one place where you want them the most. The one place where you go out on the first date and find out if there is more to the relationship than a brief encounter. Music today is all about relationship building, sometimes one fan at a time when you’re starting out.

    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 500 fans who are willing to pay you, than 5,000 fans who are willing to play you.

  2. Anonymous

    the best way to make money from music on youtube is to not put music on youtube, but to become a youtube celebrity by making a video that goes viral. but you had to do that by about 2010 or so. i was sitting next to a guy at an event, and his opener to me was “i just make 200K yesterday”. he was a youtuber, got lucky w/an early viral and leapt on making content. (apparently he is not part of an MCN). if he had done his video a year or two earlier (too soon), or a year or two later (too late, too many people) he’d be just another guy. not sure what it all means. anyway, he now has enough subscribers to charge for product placement. he was rude; seemed coked up; was an authority on everything; but hey, he made 200K yesterday.

    Musicians: your only solace is that no one is going to be looking at his dumb youtube vids 20 years from now, but maybe they’ll be listening to your great song…

    • Paul Resnikoff

      Question: what do successful, top-rated YouTube celebrities and channels actually make?

      • 42

        millions. “Felix Kjellberg, a 25 year-old who makes YouTube videos under the alias “PewDiePie,” reached a new high this year when the Swedish newspaper Expresen reported he made $7.4 million in 2014, a little less than double the $4 million the Wall Street Journal estimated he made in 2013.” -Forbes.

        PewDiePie literally made his ‘fame’ by talking while playing video games. that’s it. he’d describe the play, make some jokes, etc.

        by 2015 he’s making 12 million. more about him and others : http://www.forbes.com/sites/maddieberg/2015/10/14/the-worlds-highest-paid-youtube-stars-2015/#1a6aba88542c

  3. 42

    not sure if last post posted. anyway, PewDiePie makes 12 million this year. he talks while playing a video game. top ten make between 2.5 and 10 million. one does makeup tips, some are ‘sketch’ comedy, etc.

  4. Antinet

    Youtube is not a place to sell music. It’s a place to post a video that goes viral. That’s it.