MIDiA Research: The State of the YouTube Economy
As we gear up for our companion Music 4.5 seminars on licensing and the value gap in London and New York, we’re constantly on the lookout for the latest and best research and analysis around the issues that will dominate and guide these discussions. Which is why we were thrilled when last month Mark Mulligan of MIDiA Consulting sent us his report on State Of The YouTube Music Economy. One of the most comprehensive (and impartial) analyses of current YouTube data, the report dissects many of the issues we’ll be tackling at the seminar: how YouTube – like other streaming services – has become a platform for ‘listening’ and not for discovery, the effect of upcoming (and yet-to-be defined) changes to safe harbour legislation in the US and Europe, and how musicians should rethink how they utilise YouTube to promote and sell their material.
(NB: For the rest of this post, direct quotes from the report are in italics.)
YouTube is…by far the most widely used streaming service on the planet, begins the report, arguing that YouTube’s dominance may mean that musicians and rightsholders are best served working with the platform and not against it.
That’s not to say they should become complacent and not demand a better deal. But with YouTube having the upper hand, it argues, artists and rightsholders need to be measured as they renegotiate terms with YouTube as well as the provisions of safe harbour legislation.
The report goes remarkably in depth about listening statistics, revenues versus royalties, and which type of videos (covers vs originals, etc) gets the most streams. In the context of our upcoming seminars, there are three themes from the report that we’d like to highlight:
1. YouTube is needed by the music industry
2. What the revisiting of safe harbor legislation might change, for better and possibly worse
3. Why musicians need to rethink the role of YouTube in their careers and their relationship with it
-YouTube is needed by the music industry
YouTube is simultaneously the most valuable component of the digital music landscape and the most disruptive threat to the sector’s sustainability.
It terms of value, YouTube is more ubiquitous and more accessible than any other streaming service. Yet while musicians and rights holders are right to complain of their ever diminishing returns against YouTube’s staggering revenue, they need YouTube more than it does them.
But not at any price. The ‘value gap’ – what artists and record labels are paid in relation to YouTube’s revenue – needs to be closed. However, the report argues for mindfulness in the negotiation, an underpinned acknowledgement that there needs to more a middle ground more than black-and-white fair share. 54% of consumers watch music videos online and on mobile, more than do any other single activity. Not only is YouTube leading music behaviour, it has a practical monopoly on the activity.
So, what is that middle ground? If rights holders and YouTube are to find some common ground, says the report, the focus should be on increasing the 55% revenue share.
-What the revisiting of safe harbor legislation might change, for better and possibly worse
Artists are publicly lobbying both the US and Europe to revisit the safe harbour laws that protect hosting platforms from copyright infringement. But the report warns against being careful what you wish for: rights holders and creators risk neutering the most important digital consumption platform on the web if their lobbying actions are successful.
The context for this is that native creators on far outstrip even the most popular mainstream artists on in terms of reach, audience and streams. For YouTube, this means music is far less of a money maker than music videos imported from Vevo. Even if – when renegotiating safe harbor –rights owners get a great deal with YouTube, and even if Safe Harbour provisions are revised, music will not only continue to underperform in revenue terms on YouTube, it will continue to lose ground to native YouTubers like SMOSH and Zoella.
The report also warns that should [safe harbour] negotiations go sour, YouTube could end up becoming a much less amenable stakeholder.
The report has uncovered statistics that show piracy on YouTube is not quite the problem it once was, with safe harbour-enabled UGC is just 2% of music video views from unofficial uploads. Content ID, while not perfect, is effective: 98% of copyright management takes place via Content ID, with only 2% resulting in takedown notices and 90% of all claims resulting in monetization.
-Why musicians need to rethink the role of YouTube in their careers and their relationship with it
The perception of YouTube as a platform for music discovery is obsolete. For many users, it is quite simply a place to listen to music.
69% of free streamers use YouTube to listen to music they already know, compared to 52% that use it to find new music. Crucially, 57% say that when they have discovered new music they then simply stream it some more.
There are exceptions, of course – mainly in the form of cover versions. Covers are quickly becoming a starting point in an artist’s career. A cover enables a performer to quickly gain audience before gradually incorporating original compositions.
However, for the bulk of users YouTube is becoming more like radio. So what can artists do to put their number of streams and revenue on par with native creators?
In short: make longer videos.
Music videos are too short to be well optimised for YouTube video ad revenue. The majority of YouTube users are spending a minority of their YouTube viewing time watching music videos, which means that music video is progressively losing share of time spent due to YouTube viewing moving towards longer, sub-mid form videos of 10 to 20 minutes by Vloggers and gamers.
Music companies need to be making longer videos if they want higher per-stream rates.
At the moment, the problem is that music is not optimized for YouTube monetization. YouTube’s ad monetization is a complex, multi-layered system that most music rights holders need to better understand.
The report did leave us with some unanswered questions. For example, is the onus on YouTube to explain how to best monetise videos or is it for the artists to discover for themselves how to adapt? Or is it that the current advertising structure Content ID monetisation needs to be revisited so that shorter form videos generate more revenue? And let’s say negotiations over safe harbour and licensing go south: what would be revenue repercussions for artists and rightsholders?
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Music 4.5’s companion seminars on The Politics of Licensing and The Value Gap will take place on 27 September in London and 2 November in New York. To view the agendas for both events and to buy tickets, please visit the Music 4.5 website.
The full report on The State of the YouTube Economy can be found here.