By Sophie Nevrkla
Despite initiatives from the music industry to drive digital reform, the amount of revenue that YouTube paid to US music labels relative to the number of streams of their content halved last year, according to findings published in the Financial Times.
Although YouTube paid $740 million to music rights holders in 2015 (a 15% increase from 2014), the US music industry lost out on revenue of $755 million in the same year, the new research suggests.
YouTube shares its advertising revenue with record labels and artists, and with streams on YouTube and Vevo at a record high of 751 billion, labels argue that they should be benefiting from this more than they are.
According to Midia Research, this rapid increase in video streaming has been behind the decrease in YouTube’s effective payment rate. According to the research, if the payout rate had remained fixed, US music labels would have earned $755m as well as the $740m they were paid. This would have more than doubled revenues for the US music industry.
This research highlights the difference between YouTube’s approach and the policies of other streaming websites, such as Spotify. Whilst Spotify pays music rights holders a minimum amount per stream irrespective of the revenue they earn, video streaming websites YouTube and Vevo pay as a share of revenue. This share is affected by the global ad market, and as ad inventory prices plummeted last year, YouTube’s boom in streaming was not enough to prop up slowing ad revenue growth. YouTube, then, effectively pays labels on the basis of how profitable it is: 55% of its music video revenues went to content holders last year, whilst Spotify paid 83%.
This research comes as the music industry is in a standoff with YouTube, arguing that the company is manipulating copyright law to pay below market rates for the content. In the US, the 1998 Digital Millennium Copyright Act gives online video services ‘safe harbour’ from prosecution for holding unauthorised content. Musicians like Sir Paul McCartney, Taylor Swift and U2 recently signed an open letter to Congress, urging them to reform this piece of legislation. A similar situation has arisen in the UK: artists including Coldplay, ABBA and Ed Sheeran recently signed a letter of complaint about YouTube’s practices, handing this to the EU president Jean-Claude Juncker in late June. Indeed, the revenue that YouTube pays could, potentially, be very powerful: After all, it is the world’s biggest music streaming platform, with more listeners (and viewers) than Spotify and Apple Music combined.
Via: The Financial Times
