Indie Labels Say Spotify Is Paying 3X Better Than YouTube

Merlin makes it clear: No, YouTube doesn’t pay out artists equally (but Spotify does).

YouTube has long been considered the bane of the music industry.  Thanks in part to exploiting DMCA safe harbor loopholes, the video platform can pay the bare minimum to major labels and artists.

But the story is a bit different at Spotify.  As it pushes ahead with its IPO plans, Spotify has settled major lawsuits and attempted to pay out more.  Now, Merlin Network, the top independent label organization has confirmed: Spotify pays out much, much more than YouTube.

Last week, at the A2IM annual meeting, Merlin Network unveiled the results of their 2017 member survey. It reads,

Audio streaming growth outstrips video 3-to-1 as distributions to independent labels hit $353m.”

Boosted by a “significant uptake” in audio streaming, the global digital rights agency’s payouts have increased 52% year-on-year.  Revenues paid out have increased more than eightfold.  Along with a new multi-year global license agreement with Spotify, Merlin now has over 20 digital partnerships in place.  Partnerships include digital music services like YouTube Red, SoundCloud, Pandora, Google Play, Deezer, Vevo, and KKBOX.

Underscoring the strength of music streaming in the music industry, the report reads,

Nearly two-thirds (64%) of Merlin members report that audio streaming accounts for the majority of their digital revenues.  This marks a significant leap from 2016, when less than half (46%) said this was the case.

However, while audio streaming services like Spotify provide major revenue for Merlin members, video streaming has significantly underperformed.  The global digital rights agency saw “only negligible growth from video streaming.”  In fact, the agency confirmed that audio streaming has outpaced video streaming services, like YouTube.  The report reads,

“…comparing the 12 months to March 2017 with the year before, revenue growth from audio streaming is outpacing that of video streaming at a rate of more than 3-to-1.”

In addition, 42% of its members said that “YouTube account for less than 5% of their digital revenues.”

Proving the mythical “value gap” which Google and YouTube vehemently deny, Merlin stated,

video streaming services [command] ten times more users than audio streaming services – but [return] less than a tenth of the revenues.”

Artists and major labels have long since complained about YouTube’s unfair value gap.  In a leaked memo to company employees, Warner Music Group CEO Steve Cooper singled out the Google-owned video platform.  Criticizing the company, he wrote,

“[Our] fight to further improve compensation and control for our songwriters and artists continues to be hindered by the leverage that ‘safe harbor’ laws provide YouTube and other user-uploaded services.”

Backing Merlin’s claims, according to Cooper, YouTube fails to provide adequate payment under DMCA safe harbor laws.

“There’s no getting around the fact that, even if YouTube doesn’t have licenses, our music will still be available but not monetized at all.  Under those circumstances, there can be no free-market ‘willing buyer, willing seller’ negotiation.”

In addition, the latest IFPI report shows that user-uploaded video platforms [YouTube] have only paid out $553 million to rightsholders.  The Google-owned video platform commands an audience of over 900 million users.  By contrast, on-demand audio streaming services generated $3.9 billion with just 212 million users.

Despite data showing the contrary, Google has long-denied that the “value gap” exists.  Defending itself from constant music industry attacks, the search giant recently commissioned a study.  The study “proves” that without YouTube, people would instead pirate music.  However, critics inside the music industry weren’t satisfied with the argument.

RIAA CEO Cary Sherman blasted the Google-owned video platform.  While praising Apple and Spotify for paying out artists fairly, he said that YouTube undercut the competition by 85%.  He explained,

Why does this happen?  Because a platform like YouTube wrongly exploits legal loopholes to pay creators at rates well below the true value of music while other digital services  — including many new and small innovators  —  cannot…the payouts differ enormously because of an unfair and out-of-date legal regime.”

So far, Google has yet to further comment on the value gap.  They continue stating that YouTube provides fair contributions to artists.  Unless the music industry takes drastic steps to destroy YouTube, top labels will continue complaining about the “value gap.”

Image by Official Leweb Photos (CC by 2.0)

9 Responses

  1. Anonymous

    Yeah — but YouTube is unfortunately the go-to place for music. Because people want videos.

  2. so

    This is key:

    YouTube (user-uploaded): 900 million users, $553 million
    On-Demand Streaming Services: 212 million users, $3.9 billion

    Would love to see YouTube Red’s subscriber numbers, but my guess is that they are around 1/10th of 1% of the total user base.

    Another easy calculation that gets the point across:
    YouTube: pays 55% of a low blended rate
    On-Demand Streaming: pay ~70% of a high blended rate

    YouTube: Practically no control over your work
    On-Demand Streaming: absolute control over your work (assuming the artist hasn’t given that away already)

    YouTube should have to receive content not directly and demonstrably owned by the uploader from the same source everyone else does: distribution. YouTube does not have to be “destroyed” as the article suggests – it should just be forced to play by the same rules as their peers. It’s not 2007 anymore.

  3. Paul Resnikoff

    The stats are pretty staggering; I’m starting to think that YouTube’s free window ends in the short- or mid-term. Mega-labels like UMG are massive now, they can exert the firepower needed to ‘clean’ YouTube of their content.

    They’re paying. And that means free has a sunset.

    • Wendy

      Isn’t the 3.9 billion total revenue generated? What is the payout to artists (not labels)? are there any stats on the ratio of revenue generated v. artist pay across channels/services?

  4. steve

    yes, but daniel Ek is THREE times uglier than Larry Page.

    • Anonymous

      The google twins are 6 x scarier than anybody.

  5. 21

    Paul, question: has any artists/labels complained of Spotify undercounting plays?

    I’ve done tests, playing Apple Music and Spotify for the same length of time, exact same albums. Looking at my analytics, Spotify always shows significantly less plays (30-50% ot the Apple numbers).

    • pschase

      Yes exactly – notice how it’s always the person at the head of the table waving numbers around. The research needs to be done independently, with full access to the system. We need to test an absolute independent artist’s numbers against the Taylor Drakes of the world. I suspect you would find both platforms wanting in certain areas.