YouTube pays 15% less to artists …but who’s to blame?

Figures crunched by MIDiA Research show that the amount of YouTube/ Vevo streams jumped 132% over the last year to a staggering 751 billion.

However YouTube’s pay out to artists and record labels in that period only rose 15% to US$740 million (A$974.6 million) – leading record company executives to query the lost revenue of $755 million ($994.4 million).

MIDIA figures, based on data from the IFPI trade body and YouTube announcements, suggest that the world’s largest on-demand music service’s per-stream rates fell from $0.0020 to $0.0010 between 2014 and 2015.

MIDA analyst Mark Mulligan, who wrote the report, told Forbes magazine, “Even if the music industry was able to get some better deal in place with YouTube, music is never going to prosper in this environment. YouTube would probably walk away from the music industry before it would do per stream rates.”

However Mulligan emphasises that it has to be remembered that YouTube does not pay on streaming rates but as a percentage of ad revenue generated by the music industry.

YouTube has more viewers and listeners than Spotify and Apple Music combined. But YouTube only pays out on a share of ad revenue. Spotify and Apple Music, on the other hand, which make additional revenue from subscriptions, pay a minimum per/stream rates irrespective of the revenue they earn. As a result, in 2015 YouTube paid rights-holders 55% of music video revenues. Spotify, which generated far less streams, paid 83%.

YouTube’s pay-outs therefore depend on the ups and downs of the overall volatile global online ad market. According to Juniper Research, it is expected to grow 22% a year from last year’s $160 billion ($210.7 billion) to $285 billion ($375.4 billion) by 2020, fuelled mostly in the Asia Pacific and North America.

In recent times, the market has been down. So YouTube’s ad revenue growth slowed even as streaming boomed. It hardly broke even in 2015.

Mulligan explained to Forbes that the lower payments have come about for a number of reasons. As YouTube expands to emerging markets, advertisers will pay YouTube less for clicks in those markets where consumption is lower.

Payment is paid not on a per-video basis but on a time-watched basis. So a blogger with a 15-minute clip gets more ads than an artist with a four-minute music video.

What the music industry needs to do, Mulligan suggested, is to work in YouTube’s environment by issuing longer videos that can place more ads, and allowing for more Pandora -like continuous play.

However the recorded music industry continues to attack YouTube. “YouTube takes advantage of the dysfunctional DMCA (1998’s Digital Millennium Copyright Act which gives services like YouTube a ‘safe harbour’ from copyright infringement liabilities) to do less about piracy than it could and pay unfairly low royalty rates,” says Cary Sherman, CEO of the Recording Industry Association of America. “It doesn’t have to be like this.”

As reported in TMN, 180 artists and 19 labels including Taylor Swift, Paul McCartney, U2 and Bruce Springsteen wrote an open letter to Congress saying the digital laws were outdated and were not effectively protecting their interests.

In June, UK/European artists including Coldplay, ABBA and Ed Sheeran signed a letter of complaint about YouTube’s practices, handing this to the EU president Jean-Claude Juncker.

Following recent criticism from several artists (Trent Reznor claimed YouTube was “built on the backs of free, stolen content”) the company quickly responded. “The overwhelming majority of labels and publishers have licensing agreements in place with YouTube to leave fan videos up on the platform and earn revenue from them.

“Today the revenue from fan uploaded content accounts for roughly 50% of the music industry’s YouTube revenue. Any assertion that this content is largely unlicensed is false. To date, we have paid out over $3 billion to the music industry –and that number is growing year on year.”

Powerhouse artist manager Irving Azoff is unimpressed with that $3 billion figure. He says the US music industry last year got more money from vinyl record sales.