Study predicts YouTube’s music service will leave artists at a loss

A report by media and technology analysis company MIDiA has said YouTube’s upcoming streaming service Music Key will fail to drive up revenue for artists and labels.

The company and its analyst Mark Mulligan asked 1000 YouTube users in the UK if they would pay for a YouTube subscription service without ads and including extra content, just 7% said yes. 25% said they would never pay for any subscription service because they get all the music they need for free from YouTube.

“YouTube’s net impact on the subscriptions’ sector will still be net negative with its free tier sucking the oxygen from its premium competitors,” said Mulligan.

The report concludes that if YouTube Music Key would contribute about US$400 million in revenue in one year but would be responsible for more than US$2.6 billion in lost subscription revenue – a net loss of around US$2.3 billion each year.

The report’s findings follows YouTube’s much-publicised run-in with the independent label sector after it handed a licensing contract for the service to indie labels and publishers. The sector reacted to its apparent non-negotiable contract terms, which includes a most-favored-nation clause, by drawing up a Fair Digital Deals Declaration.

The Declaration was spearheaded by the Worldwide Independent Network (WIN) and signed by more than 700 independent labels from 21 countries, including Australian labels like Cooking Vinyl, Future Classic, Head Records, Mushroom Group, Rubber Records, The Orchard and Unified.