YouTube’s Value Gap is the Record Industry’s Biggest Problem To Fix, and Here’s Why…

If the record industry is serious about growing streaming revenues (and the digital economy in general) it must address the problems with the exploitative practices of Google’s YouTube. We’ve been lucky to be supplied with Content ID data from the same source as our previous data – so we added that into the mix to see where it would rank.

These numbers are just staggering.

If you combine Content ID to the YouTube Subscription numbers you arrive at a whopping 63% of total streaming market share that only contributes  11% of revenue. Ya’ll taking notes here?

yt_istheproblem

 

Look at the combined YouTube revenues of Subscriptions and Content ID together at 11% of revenue. That puts the combined earnings at #3 in market share behind Apple Music. However, Apple Music creates more earnings than the two combined YouTube Revenue streams with less than 4% of the consumption. You’ll also notice that YouTube is the only streaming service with three zeros following the decimal point. That means YouTube is paying hundreds of dollars per million streams while the other leading streamers are paying thousands.

Apple Music generates 12% of revenue with less than 4% of streams. YouTube generates 11% of revenue with 63% of streams. Does that sound like a problem to anyone else?

As of this writing we’re not factoring in the direct channel uploads for artists to YouTube or Vevo, however we just can’t imagine that those numbers are much different in terms of plays versus revenues. We hear from a lot of label folks that they are afraid to give up their annual revenue from YouTube sources, but all we can say is that you’d be gaining more much more than you would be giving up.

We’ve heard of at least one executive who met with resistance when faced with the prospect of potentially walking away from millions of dollars a year in YouTube revenues. But, it’s not walking away from millions, it’s giving up 10’s of millions in true revenue.

Let us not forget, that this devalued revenue will prevent the overall growth of streaming as a format. With streaming revenues (largely from Spotify and Apple Music) now accounting for approximately 40% of overall digital music revenues why should YouTube be able to pay 1/10th of the other major players? Oh, that’s right because of user pirated content uploads…

It’s time for the record business to get serious about cleaning up YouTube.

 

After 16% drop in Per Stream rates, Spotify asks for another 14% Reduction…

We can’t make this up. We’ve stated many times before, as the consumption of streams increase (and those services grow) the per stream rate will drop as revenues level off. This is simply because revenues can not keep up with consumption, and there is no fixed per stream rate.

In our latest look at streaming rates we found that Spotify streaming rates had dropped 16% from 2014 to 2016. Now, Hypebot is reporting that Spotify is asking for another 14% reduction in royalty payments.

Please someone break out a calculator… that would be a 30% reduction in per stream rates in two years! It’s just math. Wow.

Read the full story at Hypebot:

Spotify’s Latest Offer To Labels: A 14% Lower Royalty Rate | Hypebot

Spotify Is Burying Musicians for Their Apple Deals | Bloomberg

New boss, worse than the old boss…

Spotify has been retaliating against musicians who introduce new material exclusively on rival Apple Music by making their songs harder to find, according to people familiar with the strategy. Artists who have given Apple exclusive access to new music have been told they won’t be able to get their tracks on featured playlists once the songs become available on Spotify, said the people, who declined to be identified discussing the steps. Those artists have also found their songs buried in the search rankings of Spotify, the world’s largest music-streaming service, the people said. Spotify said it doesn’t alter search rankings.

READ THE FULL STORY AT BLOOMBERG:
http://www.bloomberg.com/news/articles/2016-08-26/spotify-said-to-retaliate-against-artists-with-apple-exclusives

Songwriter Would Need 288 Million Spins To Equal Average Spotify Employee Salary

Screen Shot 2016-05-26 at 8.12.33 PM

 

Spotify just posted their financials and Paul Resnikoff at Digital Music News was quick to point out that the average Spotify employee salary is $168, 747.

Contrast that to the plight of songwriters.  There would be no music business without the fundamental efforts of songwriters. Yet, there is not a free market in songs.  The federal government sets compensation for songwriters/publishers based on a percentage of revenue.  An abysmal below market rate.  In effect a subsidy for streaming services.   Last I checked this rate was working out to about $0.00058 per spin.    This includes both the public performance (BMI/ASCAP) and the streaming mechanical  (IF they happen to pay it).

Best case scenario, if a songwriter retains all publishing rights to their song then a songwriter would need 288,104,634.15 spins to earn the reported average salary of a Spotify employee.

Any questions?

++++++++++++++++++++++++++++++++++++++++++++++++++++

Related see this post on failure of techies to understand that streaming services are subsidized by government mandates

https://thetrichordist.com/2016/05/27/clueless-spotify-defender-illustrates-tech-ignorance-about-federal-cap-on-songwriter-pay/

 

Windowing Works! 9 of the Top 13 UK Albums NOT on Spotify…

Windowing isn’t just for Adele and Taylor Swift anymore, Music Business Worldwide reports the following:

Four of the Top 5 current UK midweek albums aren’t on Spotify – and are, streaming wise, particularly fragmented.

A quick scan down the rankings, sent to labels today, shows that the same fact applies to five of the Top 6, six of the Top 10 and nine of the Top 13.

We started suggesting that windowing was one of several viable solutions to combat the negatives effects of streaming music ubiquity as early as 2013 when we stated “Why Spotify Is Not Netflix, But Maybe It Should Be“.

We were told we were “out of touch”, “luddites” and we “didn’t understand the new digital economy.” But we persisted on this point with additional writing in 2014, “How To Fix Music Streaming In One Word, Windows“.

Again, many resisted what is just common sense. The record industry always had utilized windows (or windowing as some prefer), but it just looked a little different than the way the film business did it. But it was there, and it always had been there.

In a December 2015 post we got more specific, suggesting that record labels experiment with more disruption and innovation following Taylor Swift and Adele successfully windowing off of Spotify during the initial release window of their latest releases. We wrote, “Three Simple Steps To Fix The Record Business in 2016… Windows, Windows, Windows…“.

In that post we included this:

This is not a philosophical discussion. This is financial reality. Respected stock analyst Robert Tullo who is the Director Of Research at Albert Fried & Company says this:

Longer term IP Radio and Spotify are good annuity revenue streams and great promotional tools. However, we believe the system works better for everyone when artists have the right to distribute their Intellectual property how they see fit.

Ultimately we think windows for content will form around titles that look much like the Movie Windows and that will be great for investors and the industry as soon as all these so called experts get out of the way and spot trading fashionable digital dimes for real growth and earnings.

So here we are in the spring of 2016. As simple math and economic reality effects more artists, managers and labels first hand the truth becomes self evident.

YouTube is the next windowing battle to a restoring a healthy economic ecosystem for artists. You can’t window if you can’t keep your work off of YouTube. That’s not YouTube, that’s YouLose…

Consumer Spending On Digital Music Actually Fell In 2014 (Yes You Read That Right) | Music Industry Blog

The Problem With Streaming, Is The Problem With Streaming… Mark Mulligan Reports.

down

“Though the drop was small – 1% – it was still nonetheless a drop at a period when digital spending should be booming.  In some key markets the consumer spending decline was significantly larger, such as a 3% fall in the UK.”

It’s just math. Better late than never… and here’s another newsflash from the way back machine that folks might want to start looking at again, Music Streaming Math, Can It All Add Up? That was 2013…

“The end goal has changed: Just under a third of free streamers go onto buy the music of artists they discover on these service while 37% simply stream newly discovered artists more. Both use cases will coexist for some time, but with with music purchasing fading phenomenon, the latter will dominate.”

The problem is at the top of the waterfall. This means the downstream economics are not going to get better than what’s going on at the top. This is the truth, no matter what nonsense they come up with over at CALinnovates, it’s the musicians are are right to demand better economics and transparency from the streaming companies.

READ THE FULL BLOG AT MUSIC INDUSTRY BLOG:
https://musicindustryblog.wordpress.com/2015/12/04/consumer-spending-on-digital-music-actually-fell-in-2014-yes-you-read-that-right/

Spotify Hit With $150 Million Class Action Over Unpaid Royalties | Billboard

Vocal artist rights advocate David Lowery brings a massive action against the largest streaming service.

Camper Van Beethoven and Cracker frontman David Lowery, retaining the law firm of Michelman & Robinson, LLP, has filed a class action lawsuit seeking at least $150 million in damages against Spotify, alleging it knowingly, willingly, and unlawfully reproduces and distributes copyrighted compositions without obtaining mechanical licenses.

READ THE FULL STORY AT BILLBOARD:
http://www.billboard.com/articles/business/6828092/spotify-class-action-royalties-david-lowery-cracker-150-million

#irespectmusic

Karma Meets Irony. “Freebooted” YouTuber’s Feel The Sting Of Piracy…

Watch and learn… We can’t make this up. Seriously you have to watch this video.

If we had a nickle for every YouTuber or Tech Journalist that advised musicians that “YouTube” was the SOLUTION TO PIRACY we’d be rich. Really rich. I mean, really, really, really rich. We we’re told YouTube was “promotion” and “exposure” to make money other ways.

We were told how if you just “made stuff people wanted” and “connected with fans” then they would reward you with loyalty and support. Musicians were told they were “whining” about piracy and that they should “adapt and evolve” to the “new way” and just embrace all of this “awesome internet empowered promotion”.

Funny how it is when the shoe is on the other foot. See here’s the thing. All of these YouTuber’s make money from the advertising that runs on their YouTube videos. But when those videos are ripped from YouTube by fans and uploaded to Facebook guess who doesn’t get paid? Yup, you guessed it… the YouTuber’s are getting stiffed and they don’t like it.

Where is Larry Lessig to help these folks out? Remember kids, don’t break the internet! It’s “sharing economy” afterall. You do the work and silicon valley shares the profits.

Soooo… when a musician’s work is pirated on Napster, Grockster, Kazaa, Limewire, The Pirate Bay, oh and YouTube… Musicians should “get over it”. But when a YouTuber’s work, labor and creative output is devalued, or worse monetized by a third party (Facebook) who doesn’t pay them anything, well then, you know, that’s “bad”.

The issue gained national attention this year earning editorials and reports from the likes of Slate, “Facebook’s Piracy Problem” in July. Time followed with a story in August, “This Is Facebook’s Biggest Problem With Video Right Now.” And recently as November AdWeek chimed in, “Facebook’s ‘Freebooting’ Piracy Problem Just Cost Casey Neistat 20 Million Views“.

This quote from the AdWeek story above kind of says it all…

But then they ran into a problem known as “freebooting,” which entails republishing videos on social sites without the consent of the folks who made the clips. In essence, it’s a practice of intellectual-property theft that’s plagued Facebook more than other digital platforms—PR-wise, at least—in recent months thanks to a few whistle-blowers.

They go on…

“I spent roughly a week issuing take downs on Facebook—a convoluted process,” Neistat told Adweek. “I crowdsourced the process of finding the freebooters because there is no way to search Facebook. In all, I took down well over 50 different posts—[which was] not nearly all of them. I simply gave up after a while. I anecdotally kept track of the view counts—over 20 million views on the videos I took down.”

Here’s more to chew on from a post by Hank Green on Medium, “Theft, Lies and Facebook Video“.

According to a recent report from Ogilvy and Tubular Labs, of the 1000 most popular Facebook videos of Q1 2015, 725 were stolen re-uploads. Just these 725 “freebooted” videos were responsible for around 17 BILLION views last quarter. This is not insignificant, it’s the vast majority of Facebook’s high volume traffic. And no wonder, when embedding a YouTube video on your company’s Facebook page is a sure way to see it die a sudden death, we shouldn’t be surprised when they rip it off YouTube and upload it natively.

Facebook’s algorithms encourage this theft.

Hmmmmm… where have we heard this story before? Maybe it was Daily Finance back in 2010, “Viacom vs. YouTube/Google: A Piracy Case in Their Own Words“.

• On July 19, Chen wrote to Hurley and Karim: “Jawed, please stop putting stolen videos on the site. We’re going to have a tough time defending the fact that we’re not liable for the copyrighted material on the site because we didn’t put it up when one of the co-founders is blatantly stealing content from from other sites and trying to get everyone to see it.” Four days later, Karim sent a link to the other founders, and Hurley told him that if they rejected it, they needed to reject all copyrighted material. Karim’s reply: “I say we reject this one but not the others. This one is totally blatant.”

• A July 29 email conversation about competing video sites laid out the importance to YouTube of continuing to use the copyrighted material. “Steal it!” Chen said , and got a reply from Hurley, “hmmm, steal the movies?” Chen’s answer: “we have to keep in mind that we need to attract traffic. how much traffic will we get from personal videos? remember, the only reason our traffic surged was due to a video of this type.”

Yup, Karma meets irony… How very interwebs… Ok, Ok, Ok… Sorry, just one more…

Everyone’s creativity deserves to be protected. All creators should be united against the illegal, infringing and exploitative uses of their work (especially for profit) without consent or compensation.

Three Simple Steps To Fix The Record Business in 2016… Windows, Windows, Windows…

windows

This time last year we correctly predicted the restructuring of at least one major label group when we asked the question, “Who will be the First Fired Label Execs over Spotify Fiasco & Cannibalization?“. It didn’t take long for us to find out, “It’s Just Math : Digital Music Execs Exit, But will the Pivot to Paid Subs Be Enough To Save The Record Biz?” We’re still not sure that even paid subscription streaming actually works in the long term, but we know for sure that unlimited free streaming does not!

What a difference a year makes. What a difference Taylor Swift makes. What a difference Adele makes.

Going into the next year our prediction is that the power of windows can not be overstated as the leading solution to the problems faced by the record industry. Effective windowing has always been a part of the economic life cycle of every album release. The physical singles sales business (ya’ll remember 45 prm records, right?) – well, that was largely a loss leader to boost singles chart positioning that combined retail and radio reports.

In every record store there was the “hit wall” of discounted new releases to encourage higher volume sales. Every store stocked a robust variety of titles across different genres and price points comprised of front line titles, mid-line titles, budget line titles, and at the end there was the cut-out bin. Also, let us not forget the “11 records for a penny” record clubs advertised in magazines.

Those, my friends, are windows. Those who are advocating against windows are probably too young to know better or have been lead around by the nose by some digital snake oil salesman protecting their own interests.

This is not a philosophical discussion. This is financial reality. Respected stock analyst Robert Tullo who is the Director Of Research at Albert Fried & Company says this:

Longer term IP Radio and Spotify are good annuity revenue streams and great promotional tools. However, we believe the system works better for everyone when artists have the right to distribute their Intellectual property how they see fit.

Ultimately we think windows for content will form around titles that look much like the Movie Windows and that will be great for investors and the industry as soon as all these so called experts get out of the way and spot trading fashionable digital dimes for real growth and earnings.

Mr. Tullo is correct. Not only will artist (and rights holders) do better when they have the freedom of choice but so will the partner platforms. This is how it works in the film business. Every month the “virtual inventory” on Netflix is rotated. New titles come in, old titles go out. If you really, really, really want to see something right now, you have to rent it or buy it via a transactional stream or download. The record business will benefit from the same models and strategies. Windowing works. Period.

See here’s the thing… If these new digital platforms are so great for artists, why wouldn’t artists want to participate on them?  The benefits would be self evident? If the product that Spotify, Pandora, YouTube (and others) are offering is so good for artists, why are these companies so afraid of artists and rights holders opting out? Maybe, just maybe these platforms are not offering the type of value that their suppliers find meaningful?

It really speaks volumes when a business model is so bad that one of  the essential features for survival of the company is to deny its suppliers the option to fairly negotiate their participation or have the ability to opt out. In the old neighborhoods that was known as a protection racket, or extortion.

Silicon Valley didn’t invent the freemium, they’re just doing it wrong. Really wrong. Horribly wrong.

Let those who want to give away their work freely do so, but also allow those who would rather opt out the ability to do so. If artists find value in the freemium tier, and they may well as they always have, then let them chose how to best utilize that option. Musicians pioneered the freemium model often using street teams to canvas concerts by giving away cassettes to fans of similar music.

If digital platforms allowed artists to use their technologies creatively, everyone might be pleasantly surprised how much better (and more profitable) things would work out.

Watching Pandora lose $5 billion in value in a year becomes a punch line when they believe they are better suited to dictate to artists how to best communicate with their own fans. It is indeed interesting to see Pandora admit what we’ve been saying for years, unlimited, ad-supported free streaming unsustainable. No Kidding. Here it is from Brian Andrews, CEO of Pandora:

“This gray market is unsustainable. If consumers can legally listen to free on-demand music permanently without converting to paying models, the value of music will continue to spiral downward to the benefit of no one.”

Of course what makes this comment most interesting is that Pandora is entering the crowded field of on demand streaming with it’s purchase of the failed Rdio. Pandora now has to compete with Spotify’s very large free tier of unpaid and entrenched users. Migrating those users to a new on-demand streaming platform will be a challenge (ask Apple and Tidal), and even more so as artists and labels grow tired of subsidizing these horribly flawed business models.

Here’s three uses of freemium streaming most artists (and rights holders) would probably embrace if given the choice.

1: The Hit Single

– Using the freemium platform to launch a single to gain ubiquitous awareness of a new album release. This is what both Taylor Swift and Adele did and the results speak for themselves. More artists would probably embrace releasing one or two songs or singles from an album on freemium tiers. With the artists support this becomes far more valuable than extorting the them into releasing their entire album on a platform they feel devalues their work.

BONUS: What if Adele made an official playlist of her favorite songs, leading with her new single? How much added value does an artist of this caliber bring to a platform when they feel they are being respected and valued? Answer, ALOT.

2: The Focus Track

– Not everyone has a hit single, but most artists have a focus track from their album. Like the hit single, these artists would embrace the opportunity to be discoverable and to build an audience of new fans. Developing artists are the most eager to try new opportunities because the have the most to gain. If digital streaming platforms worked with artists in a meaningful and respectful way, the mutual benefits could be huge for everyone.

3: Rotating Inventory Management

– By adopting a Netflix like inventory management of monthly rotating titles on the freemium (or even paid subscription) tier more artists might feel compelled to be more engaged. Rotating inventory management is a smart way to keep users and fans engaged as old titles rotate out and new ones in. This simple trick restores a great deal of the consumer engagement that is a part of discovery, and promotion.

Of course, the goal of every freemium model is to lead to more paid revenues in higher value products. Working together with artists and rights holders the future of streaming distribution could be very bright. But to get there we need to let go of Stockholm Syndrome. the old neighborhood protection rackets, bullying extortion threats and just plain bad business models.

There is a lot that can be done in the world of streaming. Streaming is not bad, it’s just a technology. Free streaming and subscription streaming both have their place in the ecosystem. What is bad are the exploitative business models, lack of transparency and devaluation of the artists work. These are fixable issues that have nothing to do with technology, just a lack of common and business sense.

Quoted: Pandora CEO says free on-demand music streaming is bad | Silicon Beat

“This gray market is unsustainable. If consumers can legally listen to free on-demand music permanently without converting to paying models, the value of music will continue to spiral downward to the benefit of no one.”

Brian McAndrews, CEO of Pandora, in an op-ed published by Business Insider Tuesday.

Where have we heard this before? Now we wonder how long it may be until they acknowledge that Ad Funded Piracy Is Big Business?

READ THE FULL STORY AT SILICON BEAT:
http://www.siliconbeat.com/2015/12/02/quoted-461/

 


 

 

Streaming Is the Future, Spotify Is Not. Let’s talk Solutions.

 

Why Spotify is not Netflix (But Maybe It Should Be)

 

It’s Just Math : Digital Music Execs Exit, But will the Pivot to Paid Subs Be Enough To Save The Record Biz?