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YouTube paid $4 billion to the music industry last year and is still finding new sources of revenue for artists, says Lyor Cohen

By | Published on Thursday 3 June 2021

Lyor Cohen

YouTube’s Global Head Of Music Lyor Cohen yesterday published a stats brag blog post, declaring that the Google division has paid over $4 billion to the music industry over the last year, and that it signed up more premium subscribers in the first quarter this year than in any previous quarter.

Of course, when record industry veteran Cohen first took on the YouTube role in 2016, blog posts like this were mainly about responding to the latest round of criticism of the Google video platform by the music industry.

But in the last couple of years relations between the music industry and YouTube have generally improved. Indeed, in some quarters that was already happening even when the very public music industry v YouTube war was underway as the safe harbour reforms in the 2019 EU Copyright Directive were being negotiated.

There are various reasons why YouTube’s relationships with the music industry have got a lot better. The launch of the stand-alone YouTube Music streaming service, which works more like Spotify and Apple Music, was one key development, allowing Google to argue that all the free music swimming around the main YouTube platform was now directly helping to upsell the kind of premium subscriptions that have long been a priority for the record industry.

However, a surge in ad sales on the main YouTube platform – and a marked increase in the number of ads being served alongside videos on the service – also helped, fuelling an uplift in revenues the music industry receives from free video streams and user-generated content. Other logistical tools behind the scenes making it easier for labels to link together the various strands of YouTube – the music service, music on the main platform, other artist uploads and so on – all helped too.

Cohen has always been keen to big up the revenue potential of ad-funded free content to a music industry more focused on the premium subscriptions business, while also stressing YouTube’s concurrent commitment to grow its own paid-for music services.

And, despite the positive shift in YouTube’s relationship with the music industry, that’s basically still his key message to the wider music community

“I’ve seen this industry evolve from an audio business, to an audio-visual business, and now – as my friend Chuck D puts it – to a visual-audio business”, he writes in the new blog post. “As a visual-audio platform, our goal is to become the leading revenue generator for the music industry and to help artists around the world build a career making music. We are uniquely positioned to achieve this goal because YouTube monetises the end-to-end music experience globally”.

He then talks up what he calls “our twin-engine growth”. With both ad-supported and subscription tiers, he says, “we give users the choice to pay with their attention or their wallets. YouTube is the world’s largest stage, and advertisers are eager to tap into the deep music engagement that the platform enables. With over two billion users watching music videos monthly, YouTube allows advertisers to reach audiences they can’t find anywhere else. In addition, we added more paid members in quarter one of 2021 than in any other quarter in our history”.

And, while Spotify could also talk up it’s “twin-engine growth” – with both ad-funded and premium tiers – YouTube arguably has “triple-engine growth” because of user-generated content. “Of the more than $4 billion generated for artists, songwriters and rightsholders in the last twelve months, over 30% has come from UGC”, Cohen says. “Fan-powered videos have always flourished on YouTube, helping artists grow their audiences and break songs around the world. We’re THRILLED it’s now also become a meaningful and incremental source of revenue alongside premium music content”.

Though maybe YouTube has “quadruple-engine growth”. Because in the final section of his blog, Cohen talks about how YouTube is “finding new sources of revenue” for the music industry. That’s mainly about direct-to-fan products – which means enabling the upsell of tickets, discs and merchandise, but also channel memberships and digital gifting.

It’s always seemed like the music industry hasn’t fully capitalising on the potential of the online direct-to-fan relationship, though many artists, managers and labels have become more focused on this opportunity during the COVID shutdown, with the online connection to the fanbase becoming ever more important in the absence of live shows.

Meanwhile, the direct-to-fan side of the music business is itself in flux. Whereas in the past D2F was often mainly about selling physical products through an online artist store – or possibly via a fan-funding or pre-order campaign – increasingly it’s about fans paying to access extra and premium online content and experiences.

The fact online influencers beyond music are increasingly moving into that space too is boosting the idea that fans might want to directly support creators through subscriptions, donations or new fangled forms of digital gifting.

Specialist D2F platforms and services like Bandcamp, Patreon and FanCircles all have an important role to play in that domain, of course. But the social media and video-sharing platforms are all busy adding new monetisation tools of this kind too – often linked to their respective livestreaming services – and that includes Facebook, Instagram, TikTok, Twitter, Twitch and – of course – YouTube.

“We’re continuing to innovate with direct-to-fan products such as ticketing, merch, memberships, paid digital goods and virtual ticketed events”, Cohen’s blog adds. “Blackpink’s paid virtual concert sold nearly 280,000 channel memberships across 81 countries and helped the group earn 2.7 million new subscribers to their official artist channel”.

While ongoing growth in premium streaming subscriptions remains very important to the music industry of course, the further expansion of free services and all the various new direct-to-fan monetisation tools will become increasingly key over the next decade in the digital music market.

That trend is put in the spotlight in the latest One Step Ahead report from IMPALA and CMU Insights, which looks at the different ways music content and the fan relationship are being monetised on social media and video-sharing apps, as well as the potential of other digital platforms and business models, including livestreaming, podcasts, NFTs and all the manifestations of direct-to-fan.

The report also considers what artists and labels need to do now to capitalise on these new opportunities, both in terms of how they interact with individual platforms like YouTube, and in terms of the kinds of of content and experiences that might excite the fanbase. And, as music content is accessed and monetised in increasingly diverse ways, how does that impact on the artist/label relationship?

Members of IMPALA and IMPALA-affiliated national trade bodies can access a free copy of the new report – ‘A Diversifying Digital Market: Capitalising On The New Opportunities’ – from the IMPALA website. There will also be a webinar on the report next Thursday, 10 Jun.

Meanwhile, back at YouTube, Cohen concludes: “Building the best music experience for fans and empowering all artists to grow their careers are mission-critical for us. I couldn’t be more excited about the music industry’s future”.

Of course no one platform is the going to single-handedly power an artist’s business – and that’s more true now than ever. But, while there are still plenty of YouTube critics in the music industry, it is also true that the Google business is interesting because the digital music market is diversifying, and YouTube more than any platform cuts across all the different digital revenue streams, both those that are the big bucks generators of today, and those that could be the key money making tools of tomorrow.

You can read Cohen’s blog post here.