In the last year, YouTube has paid out over $1 billion to the music industry from advertising alone, the company revealed on Tuesday.
Bolstered by music subscription revenue, the music industry is growing again for the first time in over a decade. Last month, analysts at Macquarie even predicted that global recorded music revenues will double over the next 10 years. On Tuesday, YouTube pointed to its $1 billion advertisement pay-out as evidence that “multiple experiences and models are succeeding alongside each other.”
Not everyone in the music industry agrees with that sentiment. In 2016, major labels and other music heavyweights have slammed YouTube over the low rates it pays in royalties.
RIAA boss Cary Sherman has been particularly vocal about it. Here’s what he wrote in a Medium post in March:
“In 2015, fans listened to hundreds of billions of audio and video music streams through on-demand ad-supported digital services like YouTube, but revenues from such services have been meager — far less than other kinds of music services. And the problem is getting worse. Check out the alarming disparity between the growth in the number of ad-supported streams compared to the growth in revenues generated from those streams.”
This is the graphic he’s talking about:
Here’s the basic problem: Label execs are convinced that many people use YouTube as an alternative to services like Spotify and Apple Music, which pay higher rates. But YouTube argues that it’s fundamentally a different type of service.
Streaming music has finally became the biggest part of revenue for the industry this year, so the stakes, and emotions, run high on what model should dominate moving forward. In September, YouTube hired powerhouse music exec Lyor Cohen in an apparent attempt to smooth relations with the music industry at large.
Now YouTube is making the case that the streaming industry needs two pillars: advertising and subscription. And $1 billion is a big chunk of change, especially considering Spotify paid out $1.8 billion to the music industry in 2015.
“In the future, the music business has an opportunity to look a lot like television, where subscriptions and advertising contribute roughly equal amounts of revenue, bolstered by digital and physical sales,” the company said.