Youtube Vs the Internet: The music streaming wars
MIDEM is the music industry’s annual European get together. For four days in January, the brightest and best gather in an off-season Cannes to eat, talk, drink, listen to music, but mostly to give out.
This year, there was quite a bit to give out about. A few short weeks before the event, the US posted its worst week for album sales since records began in 1991. In the week ending January 12, only 4.25m units of either CD or vinyl were sold across the US; 240,000 less than the previous lowest figure, registered in October of last year. It’s got even worse since then. In the last week of August, the figure sank below 4m for the first time.
This isn’t, of course, a US problem. Far from it. Last year, for the first time since the 1980s, there was no million-selling album in the UK. Emily Sande’s Our Version of Events was released in 2012, and went on to become the top selling album of 2013. Yet it still managed only 600,000 sales.
Here in Ireland, the decline has been even more precipitous. Two thirds of the market disappeared in the seven years between 2005 and 2012. In 2005, album and singles sales in Ireland stood at €160m. In 2012, it was €52m.
Technology has facilitated piracy on an epic scale, plundering the industry’s coffers with a tenacity that left it shell-shocked for years. The fight back, when it eventually came, concentrated on using the law to get back what had been lost. While that continues — with more fervour in Ireland that perhaps anywhere else in the world — more recently, the industry has become focused on embracing, or trying to embrace the technology.
And it would have worked, if it hadn’t been for YouTube.
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Midem seemed perfectly poised for a major detente between big tech and the music industry. In earlier years — because pirates don’t tend to show up at Midem — streaming services like Spotify neatly filled the role of villain.
Streaming is the latest way to listen to content. You don’t download the music, you don’t own anything, you just click and listen, streaming the track directly from the internet. You can create playlists, swap them with other listeners, or just listen to albums in the conventional way. There are free services, which intersperse the music with ads, and premium ones which are ad-free and allow you to download music to listen to when you’re out of coverage.
Spotify, a Swedish company that’s barely six years old, is the market-leading streaming service. It’s legal, pays royalties and as such is supported, with some exceptions, by the industry. The problem the industry has had with Spotify, and with other legal streamers, is that they don’t pay enough. If someone listens to your song on the site, you can earn between $.006 and $.0084 (€.0046 to €.0065) per stream. Compare that with the price of a nice shiny CD, and you can see why the industry got its collective knickers in a twist.
Recent years, however, have seen Spotify slowly recast from villain into saviour.
The same month that the US recorded its worst ever week for album sales, the Swedish branch of the International Federation of the Phonographic Industry (IFPI) put out a report which showed that music industry revenue in Sweden actually grew by 5% in 2013. What’s more, last year was the third straight year of revenue growth. Looking back over five years, revenues have grown by 27%.
The Swedes aren’t the only ones enjoying a resurgence in the industry. In Norway, music revenues grew by 10.6% in 2013, this despite the fact that CD sales in both countries continued to decline.
It’s all down to Spotify. The service has flourished in these two countries more than in any other. More figures: In Norway, digital music revenue increased 39.7% last year. Streaming accounted for 84.1% of that.
For an industry that has been in the red for the bones of a decade, these figures are, to say the least of it, pretty damn compelling.
But now, just as things were getting cosy, YouTube came along to spoil the party. The company had a tough time of it at Midem. Each time a YouTube staffer stood up to expound on how the service was a godsend for the industry, a queue formed to offer the case for the prosecution.
The industry is basically leveling the same charges at YouTube as it levelled at Spotify in previous years. You’re using our stuff and you’re just not paying enough for it.
Time and again, YouTube execs rebutted the charge.
In one session, Google’s VP of YouTube content, Tom Pickett, said: “We’ve paid out to the music industry over the last several years over a billion dollars, so there is money being generated in this ad-supported model. We are generating tens of millions of dollars every year for the industry. It’s a flow of revenue that never existed before,” said another YouTube executive, Vivien Lewit during a panel debate. “Video on YouTube is the cornerstone of income of a career for many artists… For them, the remuneration that’s coming through their music videos is really powerful. It’s sustaining.”
But while Spotify is, on the face of it anyway, up front about how much it pays, it’s considerably more difficult to figure out how YouTube compensates the content creators who bring visitors to its site.
When Psy’s Gangnam Style crossed the 1 billion views mark on YouTube, much was made of the royalties he was supposed to earn, but the reality is that all of YouTube’s contracts with its content providers are governed by non-disclosure agreements. For the few artists who have decided to break their agreement and spill the beans, the figures may be compelling, but it’s for all the wrong reasons.
Two years ago, American songwriter Ellen Shipley, co writer of Belinda Carlisle’s ‘Heaven is a Place on Earth’, said that she received $38.49 (€29.71) for the over 2 million hits that the song had picked up in the previous quarter. Other song writers have reported comparable earnings.
As part of its charm offensive over the last two years, Spotify went public with its numbers. It maintains that a small indie band can make $3,300 (€2,547) a month from an album, and that a highly successful band in the same genre can enjoy revenues of $76,000 (€58,657). While segments of the industry dispute these figures, no one argues with the following aggregates: Spotify has just over 24 million active users, and has paid out $1 billion (€772 million) in royalties since it first started out in 2008. Half of that was collected in 2013.
YouTube’s billion dollar payout, by contrast, is off the back of one billion monthly users.
All of this seems to corroborate the evolving view: Spotify = good, YouTube = evil. The rhetoric throughout Midem certainly reflected this convenient binary view.
In a session on indie label strategies, Colin Daniels of Australian Independent music company Inertia said of Spotify: “Everyone there are music people.” And of YouTube: “Google are not music people, and that scares me.”
Alex Dauchez, CEO of Deezer, a French streaming service and therefore a competitor of YouTube, described the video site as ‘the most important legal pirate.’
He wasn’t at Midem, but leftwing troubadour Billy Bragg, a late convert to streaming, had this to say about the evolving debate in an interview he gave to Music Alley in February: “If we’re pissed off at Spotify, we should be marching to YouTube central with flaming pitchforks.”
YouTube’s latest plans are likely to swell the ranks of the burgeoning angry mob even further.
After several months of speculation, YouTube has begun leaking details of its new Spotify-type music streaming service, to be called YouTube Music Key. Tech website Android Police revealed that the new service will replicate all of the established music streaming services. You get streaming, playlists, ad-free listening and the facility to download tracks for later listening. Just like Spotify, you sign up free for a month, then start paying a monthly subscription of — we are told — $9.99 (€7.71). In order to help differentiate itself from its competitors, YouTube will also provide all kinds of aural bling; remixes, festival recordings and live sets.
The sight of such a hulking behemoth wading into the streamed music market has struck terror into the hearts of any number of stakeholders. To recap, YouTube has a billion monthly users, doesn’t like making out big cheques for content providers, and is backed by the all-seeing, all-knowing Google. Moreover, music is huge on YouTube. One study estimates that it comprises 38.4% of all views. Small wonder that the major record labels, rocked by a decade of piracy, and finally coming round to the idea of technology as possible friend, were quick to roll over to make peace with the company. All three major labels — Universal, Sony and Warner — have signed deals to enable their artists to get onto YouTube Music Key.
“We welcome all legal streaming services because we spend our lives battling illegal streaming services,” says chairman of the Irish Recorded Music Association, (IRMA) Willie Kavanagh. “When we get somebody like Google coming on board now with the likes of Spotify and Deezer, it’s fantastic news, it’s great news for the industry.”
For Kavanagh, it’s still all about the pirates. Legal streaming services may promise an end to declining revenues, but for the moment, that remains no more than a promise.
“Illegal downloading is still absolutely enormous,” Kavanagh goes on. “iTunes was our single biggest market on the web last year. If you took the volumes that we did on iTunes last year and you put it into the chart of illegal downloading, it wouldn’t have been in the top ten sites. It’s that bad.”
We don’t yet know what kind of deal the majors did with YouTube, but given the power wielded by the internet giant, you’ve got to believe that it will not be compensating artists as Spotify and Deezer have been.
But not everyone is at the table. The independent music sector is holding out for something better.
Alan Hennessy sits on the board of IRMA, and works with Irish Music Licensing Ltd, an independent record and music publishing company whose clients include The Dubliners, Sharon Shannon and Mary Coughlan.
He’s not as gung-ho about streaming as some of his colleagues in the major labels. “My concern would be that the more niche genres would be sidelined because of the younger age demographics at which streaming services are aimed. Genres like classical or even Irish trad, folk and country are, I think, going to find it tough to really engage with a streaming audience.”
’Discovery’ is another big issue in the industry. How do you lure streamers towards new content and away from continually mining the back catalogues of their favourite artists? In the absence of discovery, not alone do niche genres and artists lose out, but the threat of stagnation hangs over the whole thing.
A report in the Financial Times in June put the independent music sector on a war footing. YouTube’s head of content and business operations, Robert Kyncl told the paper that the company would begin blocking videos of labels that had refused to sign licensing deals for their new music streaming service. While all of the majors have signed, most of the independent music sector, aghast at the low rates it says Google offers, have refused.
“While we wish that we had 100% success rate,” Kyncl told the paper, “we understand that is not likely an achievable goal and therefore it is our responsibility to our users and the industry to launch the enhanced music experience.” He went on to say that 90% of the industry had signed up.
That last assertion is just one of the many that the independent music industry hotly disputes. Merlin, the independent sector’s foremost licensing agency claims that independent music, far from comprising the last 10% of the industry, actually owns a market share of 36.2%.
We’re not talking about small time bands uploading home-recorded tracks from their bedroom — though they’re in the mix too. The threat of being culled from YouTube, hangs over all artists not signed to a major label, including, among others Adele, Jack White and Arctic Monkeys.
WIN — the World Independent Network has become the nexus for much of the disquiet that YouTube has stirred up among indie labels. In June, the network issued a statement saying that YouTube continued to issue content blocking threats to the network’s independent label members who refuse to sign. They said that their member labels described the deal on offer as highly unfavourable by comparison with what’s available from Spotify and Deezer.
Alison Wenham, CEO of WIN is couching her argument in commercial terms. “By not giving their subscribers access to independent music, YouTube is setting itself up for failure...The vast majority of independent labels around the world are disappointed at the lack of respect and understanding shown by YouTube. We once again urge YouTube to come and talk to us.”
There is no evidence, however, of YouTube doing any further talking, but nor, so far, is there any evidence of the expected cull. You can find any amount of Arctic Monkeys and Jack White on the site. Adele’s ‘Someone Like You’ is currently approaching 400 million views. Wonder if she’s making any money out of it?
MUSIC AND THE MODERN MARKETPLACE
Getting paid as a musician has never been easy. The internet, despite revolutionising music distribution, hasn’t made it any easier. Right now, both royalty structures and the ways in which people access music are in a state of flux, making it difficult to figure out the best place to showcase your talents. There are a variety of websites out there which will gratefully host your music and connect you with fans and potential fans. Getting paid, while difficult, is still possible. We look at five of the most popular services.
Just how much Spotify pays its artists is a source of constant debate among songwriters. The site says that the figure currently averages between $.006 and $.0084 per stream, and that some 70% of its total revenue goes out to rights holders.
It also says that a small indie band can make $3,300 a month from a ‘niche’ album, but again, the testimony of artists themselves doesn’t always bear this out.
Canadian born cellist and composer Zoe Keating has put a lot of time into dissecting the revenue streams her music garners at the various sites. She says that she made only $808 from over 200,000 streams on Spotify.
If you have neither label nor distributor, you will need the services of an artist aggregator like Tunecore or CDBaby to enable you to upload tracks. These sites will charge either a annual fee or take a cut of earnings in return. Spotify will also allow you sell merchandise on site, without taking a cut of the income.
One of the most musician-friendly sites out there, Bandcamp is structured so that you can charge any price you like — including nothing — for digital downloads. In addition, artists can offer CDs and merchandise for sale onsite.
The Bandcamp business model is delightfully simple. They take 10% of merchandise sales and 15% of digital downloads. If your digital revenue rises above $5,000, that digital commission drops to 10%.
There’s also a premium service, Bandcamp pro. For $10 a month, you get access to your data via the site’s in-depth analytics package. You can also configure private streaming options and send out discount codes to fans.
According to the site, artists have made $81 million using Bandcamp to date, $2.8 million of that in the last 30 days. It’s also one of the few sites where the album still lives — album sales outnumber track sales at a ratio of 5:1.
Who knows what YouTube pays musicians? The non-disclosure agreements which Google insists artists sign has kept the waters conveniently muddy for the internet giant, but it’s fairly safe to assume that compared to its competitors, YouTube doesn’t pay out very much. According to a piece in The Guardian two years ago, one anonymous songwriter got $80 for 9 million views.
There could be several reasons why the figures that do leak out are invariably low. The site doesn’t have rights agreements in place in every country, so some of the views racked up in the little counter below the screen may not count towards royalties at all. In addition, in other countries, YouTube just pays out a lump sum for royalties, which are then distributed by the rights authority, making the counter meaningless from a revenue point of view.
The only way to generate reasonable revenue from YouTube is to create sufficient content and draw sufficient views to secure a partnership deal, which will then entitle you to a slice of the ad revenue which underpins the site’s business model. Irish YouTubers like the Saccone-Jolys in Cork and Chris O’Neil in Wexford (YouTube channel: OneyNG) are making a comfortable living from YouTube.
Soundcloud isn’t really a vehicle for selling music, more for sharing and discovery. It has three layers of membership: Partner, Pro and Premier. The basic, free package allows you upload up to three hours of material to the site. You can also get access to analytics which show how many times your tracks have been listened to and which ones your fans like.
The Pro level increases your upload limit to six hours (though there’s also a pro unlimited which, as the name suggests, allows you upload countless hours of material). You get more detailed stats, including where your fans are, vital when planning that European tour, and there’s also social media functionality to allow you talk directly to fans.
The premier level allows a degree of monetisation together with a range of other features, but as of now, access is via invitation only. Pro costs €3 a month or €29 a year, while Pro Unlimited is €9 per month or €99 annually.
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