Media Matters #1: YouTube and record labels – Alex Bradley

Alex Bradley begins ‘Media Matters’, a regular slot focusing on the media industry and its impact on our society.

Quick question: How many of you listen to music or watch music videos on YouTube, specifically the channels Vevo or Emimusic? I’d wager it’s the majority of you reading this right now. Of course, it’s become commonplace in the age of the internet. Just like other aspects of television and radio, it was only a matter of time before the music industry migrated to social media, and there is not a video streaming platform for social media more famous than YouTube.

However, this could all be about to change. At the time of writing, YouTube’s deals with the faces of the music industry, Sony, Warner and Universal, have ended, and now these three companies face a choice about whether or not to renew their contracts and, if so, under what terms. Of course you may be thinking to yourself that this isn’t really big news; almost everybody accesses music through YouTube nowadays, so surely it’s a no-brainer for record companies to continue working with YouTube in order to keep reaching as wide an audience as possible. However, as always, things aren’t as simple as that.

According to a writer for the site Digital Music News, YouTube accounts for about 40% of all digital music consumption, but only about 4% of the revenue generated from digital music. That may now sound like a lot to those not well versed in maths or business, but that 40% consumption makes YouTube the biggest single digital music provider on the internet, having almost half of the digital music industry’s consumer base to itself. That 4% revenue, on the other hand, really isn’t a lot and is certainly not proportional to the consumption statistic. In short, YouTube is getting a lot of money from their hosted music videos, whereas the record labels which produce the music aren’t.

So now we have some context, we can address the elephant in the room: how will this influence renewal of music contracts and how does it affect us as music fans? The answers to these questions are intertwined to a degree, but I’ll try and explain it the best I can.

In terms the influence on contract renewals, this is very significant stuff. The situation we are facing has four potential outcomes:

-YouTube won’t increase the revenue that they contribute, leading the record labels to stop supplying content, as well as removing existing music from YouTube.

-Music videos are moved to YouTube RED, YouTube’s premium service which effectively works like a Spotify subscription; Users pay an amount of money each month for unlimited access to a channels YouTube RED videos.

-YouTube just pays more money. Let’s be honest here, it’s not like Google’s strapped for cash, so it’s hardly a game-changing situation.

-Nothing happens. The contracts are renewed with the same terms as before as the record labels grin and pretend that they’re fine with this, lest they anger the almighty Google.

Of course, it’s pretty easy to see what the most likely outcomes are; the record labels won’t dare pull their content for YouTube due to the massive backlash and loss of audience they’ll suffer (sure, there may be a few hipsters among you that do use SoundCloud, but how many of you have even heard of Tidal?); similar to the first outcome, moving music videos to YouTube RED would cause a massive backlash and decrease in views simply because going from priced to free with a product never works the other way round.

This leaves us with the last two outcomes. Google, a company which made over $74 billion in alone last year, just pays out some more to the record labels and both parties are happy to get right back down to making our lives miserable by forcing us to watch more advertisements in order to access our favourite songs. If this doesn’t happen, then life goes on as it did before and nothing changes.

However it seems to me that something will change this time around. Why? Because the record labels make very little revenue from YouTube ($634 million last year) in comparison to the revenue they generate from subscription-based streaming ($2 billion last year). Even the total revenue the music industry generated last year (about $15 billion) pales in comparison to its pre-social media income (a whopping $26.6 billion).

With that, you are now prepared with everything you need to know about the situation of YouTube and music streaming. This has been a pretty long article by blogging standards, but hopefully you’re now a bit more enlightened about how media is affecting us in our day-to-day lives.

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