@telecomsense: Subsidizing the Platform Giants, Part 1: What If YouTube Paid for Content?

[This is an important post from Jonathan Lee (@telecomsense) that fills in some of the available data on just how much of YouTube is music and infers what that means for royalties.]

YouTube Is Primarily a Music Service

Given recent headlines criticizing YouTube’s algorithms for promoting home movies of pre-teens to pedophiles, violent videos to young children, as well as political extremism/bullying, you might have the idea that a lot of people watch these videos; they don’t. As this fascinating post–describing documents that surfaced in Viacom’s copyright suit against Google–explains, YouTube became popular not because of homemade videos, but because it embraced piracy.

The model of other people’s copyrighted videos driving user traffic remains the secret of YouTube’s success. Social media monitoring firm Pex recently calculated that less than 1% of YouTube’s videos–0.64%–were responsible for over 80% of video views. The majority of these videos are music videos.

Read the post on TelecomSense

@loudmouthjulia: Creators finally know how much money YouTube makes, and they want more of it

[Editor Charlie sez:  Hey Susan, do you like apples?]

Alphabet CFO Ruth Porat told investors during an earnings call on Monday afternoon that YouTube pays out a majority of that advertising revenue to its creators. Although Porat wouldn’t say how much of the $15 billion goes to its content makers, she did specify those payouts belong to YouTube’s “content acquisition” costs, which run around $8.5 billion.

For people trying to make their living on YouTube, many feel like they don’t see nearly enough of that $8.5 billion. Top creators tend to earn the most ad revenue via higher rates — as long as their content is advertiser-friendly — because they generate a large number of views. Other advertising revenue then trickles down to the thousands upon thousands of creators who belong to YouTube’s Partner Program.

Many personalities have said they feel like they have to fight for advertising revenue, turning to subscription services like Patreon and signing brand deals since ad revenue isn’t reliable. Now, in the wake of major changes to YouTube’s advertising policies when it comes to content aimed at children (which may include popular video genres like gaming), advertising revenue looks even more fraught.

YouTube has long enticed creators to work on its platform with advertising revenue, but most creators didn’t know how much YouTube was making. Now they do — and, as one YouTube employee told The Verge, this feels like “a real seminal moment.”

Read the post on The Verge

@realrobcopeland: WSJ Reports Google Reveals YouTube Revenues of $15 billion of Value Gap, CEO Wants More–Where’s Ours?

Very insightful reporting from Rob Copeland at WSJ on Google’s revenue that culls out YouTube’s share of Google’s revenue–and boy are we getting hosed.

Alphabet said YouTube exceeded $15 billion in annual revenue in 2019. That would be on the lower end of projections for the video business, which has been the subject of educated guesses for years, and suggests that YouTube pulls in less than $8 a year from each of its 2 billion users. On a call with analysts, Mr. Pichai said he believes there is “significantly more room” to make money off YouTube’s users.

Read the post on the Wall Street Journal.

Given that YouTube is heavily dependent on music videos, it’s hard to explain how YouTube is dead last in royalty rates:

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And remember, according to BrandWatch, “[a]s of Jan 2020, the 93% of the most-watched videos [on YouTube] were music videos” and according to IFPI’s Music Consumer Insight Report, 47% of time spent by fans listening to on-demand music is on YouTube.  So it’s hard to explain why YouTube royalties are so low–and I would actually say that YouTube royalties are actually negative when you take into account the total cost of dealing with YouTube on DMCA, Content Management System and Content ID.

If you can afford it–remember the A2IM and Future of Music Coalition study that showed the main reason that independent’s don’t pursue their rights is because they can’t afford to.  Not a big leap that they definitely can’t afford to challenge Google.

A2IM FOMC Study Slide

It’s all a little hard to understand.  Even at 1% of YouTube revenue for publishing, comparable to the low public performance royalty at radio (distorted by the radio oligopoly), the songwriters alone should divide up $150,000,000–in a comparable deal.  Artists should be grossing well over that in line with historical ratios.  Given the outsized impact of music on YouTube’s revenue, shouldn’t the total industry-wide royalty payment be vastly more than $150,000,000?  Why do we get hosed so badly on YouTube revenues?  My bet is that it’s not at the negotiator level.  Those are some of the most talented negotiators in the world.

But they’re on a leash and Google knows it.  It’s always seemed to be a situation where eventually someone upstairs calls and says, thanks for the great work on YouTube negotiation–we’ll take it from here.  And you see the result.  Hard to explain any other way.

But it may help to explain why this person is laughing at us.

161102113717-susan-wojcicki-youtube-ceo-1280x720-1

Charlotte Hassan: Surprise! YouTube Slashed Its Royalty Rate by 50% Last Year

All of the downside but none of the upside.  Another reason why we say legacy revenue share deals have to go.

YouTube and Vevo streams increased 132% last year, but revenue paid to artists only increased 15%.  Make sense?

The argument over whether YouTube is paying labels and artists fairly has been intensifying for some time.  But, that argument is about to reaching a boiling point following recent findings.

Here’s the bombsell: Midia Research has now concluded that the revenue paid to music labels and artists halved last year relative to the number of streams.  That is, dropped by 50%.  This translated to a potential revenue loss of $755 million for the industry

The numbers are easy to calculate.  Last year, streams on YouTube and Vevo grew 132%, but revenue to rights holders only increased by 15% within the same time period.  As a result, the streaming platform’s already low per-stream royalty rate dropped from $0.002 per stream in 2014, to just $0.001 in 2015 (according to Midia).

Looked at from another angle: if the per-stream royalty rate had remained constant, music labels and artists would have earned double.

The discovery could provoke a massive reaction from the music industry.  The main issue that artists and labels have expressed is that streaming services like Spotify and Apple Music pay rights owners a per-stream royalty rate regardless of the revenue they earn.  By contrast, YouTube pays a  share of their revenue.   “Labels are not used to being paid based on how profitable the company is,” said Mark Mulligan, analyst at Midia Research.

So what’s going on?  The reason why labels and artists are being paid less — despite a boom in streaming — is reportedly because ad prices dropped last year, which ultimately reduced ad-revenue.

The drop represents the latest face-slap from a company increasingly viewed as hostile.

Read the post on Digital Music News.