07 02 14

Music Ally’s Midem Recap: The Music Industry’s YouTube Problem


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YouTube-Logo“Google are not music people, and that scares me.” This single quote from Colin Daniels, of Australian independent music firm Inertia, summarised a whole conference worth of anti-Google unrest at this year’s Midem, which spilled over onto YouTube too.

Whenever a YouTube exec appeared in a panel session, they were put on the defensive about the company’s approach to music and creators, often by pointed questions from audience members – and on one occasion, angry heckling.

After the last year of Spotify taking constant flak over streaming’s value to artists, at Midem that company was being praised – “everyone there are music people,” said Daniels before making his Google comment in a session on indie label strategies – while YouTube (and, more surprisingly, Facebook) were being attacked.

Music good, Big Tech evil. We’ve been writing about this clash for years now, but it was more open and more emotional than we remember at any previous Midem. Yet we also found a more positive, if challenging takeaway from this year’s conference: the music industry can shed its victim status and make these Big Tech platforms work better for rightsholders and creators.

‘We are generating tens of millions of dollars every year for the industry…’

YouTube execs appeared rattled enough by the criticism to give out some new revenue stats – something that the company hasn’t historically done. “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” said Google’s VP of YouTube content Tom Pickett in one session.

“We are generating tens of millions of dollars every year for the industry. It’s a flow of revenue that never existed before,” said his colleague Vivien Lewit during another 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.”

Leaving aside quibbles over how “tens of millions of dollars every year” adds up to “over a billion dollars” in the last several years, the more obvious comparison is to streaming audio service Spotify. YouTube, with its one billion monthly users, has paid more than $1bn to music rightsholders over its lifetime (or, more accurately, over its licensed lifetime). Spotify, with 24m active users, has paid out the same amount since 2008.

This may further embolden Spotify and its streaming-audio rivals in their willingness to publicly compare their payouts to YouTube – witness Deezer CEO Axel Dauchez’s comment in one Midem session that Google’s video service is “the most important legal pirate” in the digital music ecosystem.

From other speakers, there were more examples of the warlike metaphors that have come to characterise the music and Big Tech debate. “They occupy territories,” said Emmanuel de Buretel, of Because Music. “Sometimes when you occupy territories and make the deals after, sometimes as a creator you still have frustration.”

“I am concerned with YouTube entering the market because for YouTube everything is about dominance. And dominance is connected to destruction. That’s what I am concerned about, that it’s more about market dominance,” said another indie label boss, Horst Weidenmueller, of !K7. “I am more concerned than happy. I would rather prefer perhaps Google not being in music.”

‘Today we have to accept that everything on the internet will be free for the consumer…’

Actually, there was more constructive criticism – if still barbed – from other quarters, notably from artist and CISAC president Jean Michel Jarre in a Midem session that provided zinger after zinger criticising Big Tech firms, but which also stressed the need for them to be strong partners for the music industry, not pantomime villains to fight.

“These people who created Google, Facebook and all these great tools. They are music lovers, they are film lovers. They love artists. They are somehow closer to music and film and arts than a lot of politicians are,” said Jarre. “These guys were geeks 15 or 20 years ago dreaming about creating something extraordinary, and they did it, without realising the collateral damages they were creating, by exciting this kind of constant greed for free content.”

Jarre suggested that the music industry needs “to sit around these people making billions with our content, and say ‘Guys, you love us, we are not hating you, we need to sit together and find a decent business model‘“ – a view reflected in another keynote speech by WME’s head of music Marc Geiger: “I can tell you Sergey Brin didn’t grow up in the music industry. Neither did Steve Jobs. Neither did Daniel Ek, even… They didn’t come up knowing what we know. We have to educate them.”

It’s a less negative slant on the “not music people” accusation, albeit one that might be seen as patronising by Ek in particular, who has always stressed his love of music, even without a music industry background. Beyond the occasional outburst of self-importance – “we were existing before electricity, and we will exist after internet” – Jarre’s emphasis on partnership and acceptance of the consumer habits driving YouTube’s growth was more positive.

“Today we have to accept that everything on the internet will be free for the consumer. It’s done. And it’s not a bad thing, as long as we create an economy with the actors of the internet,” he said. “We should agree with this, as long as the people making billions from giving this free access are sharing the take with us… We should go straight to the people in charge of YouTube making billions on our back. This has to change.”

‘What has changed is the video isn’t a promotional thing: the video IS the thing…’

This, in a nutshell, is The YouTube Problem. Just not quite in the way Jarre intended. Seeing YouTube purely as a company “making billions on our back” and not sharing the take removes responsibility from the music industry to be doing more to increase its income from the service.

Or, as Jordan Berliant, partner at MCN The Collective Group, put it: “It’s not a place to make money right now, but it’s not primarily because of YouTube or Google in my mind, it’s because the people representing the content primarily don’t understand the marketplace.” Or as former WMG exec (and now boss of new company 300) Lyor Cohen put it: “It’s up to us as a creative community to access and utilise this gigantic and wonderful platform to our benefit.”

Making more money from YouTube by simply demanding more money is one strategy, but making more money from YouTube by using YouTube more effectively is another – and it’s the latter that was just as big a trend at Midem this year, fuelled by the multi-channel networks, by independent labels, by emerging firms like bass-music brand UKF and even by industry bodies like the BPI, with its Transmitter channel.

“The way you manage YouTube has nothing to do with the way you manage a physical release… It’s a total new world, and that’s why it’s exciting,” said Buretel. “What has changed is the video isn’t a promotional thing: the video IS the thing,” said Berliant. “It’s not something to promote something else.”

‘It’s no longer an album cycle, it’s a 12-month content cycle…’

All over this industry, companies are figuring out how to make YouTube a better source of income by adapting to its culture and consumption patterns. “The idea is not just to get them there to watch video, it’s to get them there to watch your first video, and then discover your other videos,” said Dana Shayegan, a colleague of Berliant’s.

“It’s no longer an album cycle, it’s a 12-month content cycle,” noted Brandon Martinez of INDMusic. “Over time, you’ll see growth in terms of views, but also subscribers. People will be coming back because they want to see your content.”  And The Orchard’s Scott Cohen even suggested that the value in YouTube and other technology platforms spewing out big data is, well, the data.

“The opportunity is the data. Maybe the data is more valuable than the music. The data you collect from the usage of that music will be more valuable over time and generate more income than just collecting from the music,” he said.

Not everything is rosy in YouTube’s garden – former YouTube content exec Patrick Walker, who now works for MCN Base79, was candid in his admission that some MCNs are “struggling for financing” and predicted that this year will be “a tough year, a lot of consolidation I think, and some death along the highway”.

But YouTube is working for some MCNs, for some labels and for a lot of artists: better to focus energy in how to make it work better, than on simply complaining that it doesn’t work at all.

“It’s a top-five revenue source now at most of the labels, and it’s going up,” said Tommy Boy founder Tom Silverman. “It’s not perfect, but they’re moving in the right direction. Where we started, we were getting nothing, and every year he revenues are getting better.”

‘Investing in new artists is not a marketing tool: it’s an industry need…’

The theme of proactivity from the music industry wasn’t just about YouTube. We came away from Midem with a sense that Spotify and the other streaming services are rewarding the labels and artists who work hard (and cleverly) at making them work.

Brian Message – yes, Thom Yorke’s manager – talked about the importance of streaming to the marketing efforts for the last Nick Cave album. “We put streaming right at the forefront of everything he did… in order to drive an awareness campaign without him having to do too much promotion. And that worked very well for us,” said Message.

He also called for the whole industry – digital services, rightsholders and artists alike – to redouble their efforts to improve music discovery in streaming. “It has to be something that we all collectively need to focus in on. It needs to be intuitive, and it needs to be creative, and it need to be inspirational,” said Message. “That’s the little bit that’s going to create a lot of value in it for fans and consumers. Otherwise it becomes a really low-margin business.”

Deezer’s Dauchez made discovery part of his Midem pitch for streaming’s sustainability for artists, too. “We have a common responsibility to generate discovery: to force people to try new artists, new songs,” he said. “Investing in new artists is not a marketing tool: it’s an industry need… if 70% of the streams are done in the back catalogue, there will be no new creation.”

Discovery drives scale in streaming – whether on Deezer, Spotify or YouTube – and while all those services can and will do more, it’s already clear that there is plenty that artists and labels can do too. We hope that 2014 will see less ‘Streaming doesn’t work for new artists’ rhetoric and more ‘how can we make streaming work for new artists?’ attitudes.

‘This year to me, files are over…’

In one of the comments that drew catcalls from the Midem audience, YouTube’s Pickett said his company is “all-in on music”. The question of whether music is all-in on YouTube – or more widely on streaming – remains a topic of debate. WME’s head of music, Marc Geiger, challenged the industry to make streaming even more of a priority.

“This year to me, files are over,” he said in a to-the-point keynote speech. “If we don’t say ‘no, don’t buy the file, don’t buy the CD, actually sign up for Spotify’, I think we’re dead… If you still believe it’s about files, I will talk to you in 24 months. You will actually deny to me you ever said it.”

Those might have been comments designed to spark a reaction, but Geiger’s suggestions that there are still plenty of opportunities to make more money from streaming – from $2.99 a month extra for an additional family member to $5.99 for audiophile-quality streams – was a reminder that the business models here are in their early days.

“I see macro-business models that are not on some chalkboard, but actually reality. I certainly believe in streaming as being the future of very healthy business, and so the tide would rise,” said Lyor Cohen. “We definitely are gonna see a few bumps. We’ve all experience bumps. But as subscription grows, and it gets to a mass scale, I think it will be a lovely business. The core of the business will be great.”

‘Our market share is a lot higher on Spotify than it was in physical…’

It was a paradox of Midem that while independent labels provided some of the most pointed criticisms of YouTube, Google and Big Tech in general, they also provided some of the most optimistic comments about how the future is shaping up for recorded music – particularly their own sector of the business.

“The internet is a great filter for bullshit. It’s far harder for crap to spread worldwide. You get found out a lot earlier,” said Inertia’s Daniels. “Our market share is a lot higher on Spotify than it was in physical. The internet and the whole online distribution and sharing of information has really helped level the playing field.”

Labels fell over themselves to praise indie licensing body Merlin, with Buretel calling it “beautiful – it should have been invented 40 years ago” and Goldschmidt hailing its deal with Spotify on behalf of the indies in particular. “I remember a time before Merlin. We’d just get raped in the digital deals. Some people were quite reasonable, most people you couldn’t really get deals with them, or they’d pick you off and the deals would be horrible,” he said.

“The Google negotiation was bloody, and we didn’t get a deal commensurate to our market share, but we got a much better deal than if Merlin hadn’t existed. And the Spotify deal was amazing,” continued Goldschmidt, suggesting that Merlin’s equity stake in that streaming service is worth more than $20m at its current valuation.

‘One of the things I hate about the music industry is we’re always victims…’

It was Goldschmidt who provided the defining quote of Midem, and one that points to a positive future of building a better business on the back of big technology platforms, rather than just demanding they pay the industry its dues.

“They don’t owe us a penny, they have their own business models, sometimes they coincide brilliantly, sometimes they coincide terribly, sometimes it’s somewhere in the middle. There’s issues where the business models challenge us, and sometimes we have to fight legally,” he said.

“One of the things I hate about the music industry is we’re always victims… I’m sick of whingeing and complaining about bad guys and pirates. I think it’s a really exciting time, because with streaming we are starting to connect more.”

Google retains the ability to rub the creative industries up the wrong way – unwittingly or otherwise – although the “not music people” claim is inaccurate: there ARE music people working within Google and YouTube, working hard to figure out the economics of the new music industry like everyone else.

Music Ally will still be facepalming at conference arguments about search rankings, small stream payouts and ridiculous licensing complexities for months (and maybe years) to come, but we’re not going to let the acrimonious anti-YouTube atmosphere at Midem distract us from the big picture.

For every angry conference attendee berating a YouTube exec from a mic, there are more people and companies increasing their knowledge, their audiences and their income from the video service. For every artist slating Spotify in an interview, there’s an independent label providing constructive feedback to help the service and its rivals improve their potential for musicians.

Technology companies might be powerful, and they can be arrogant, thoughtless and/or dissembling. Challenging them is necessary – this applies just as much to issues like privacy and financial ethics as to copyright – but it’s not the whole picture. Their powerful platforms can be the solution to the music industry’s battle for survival, not just its cause.

This feature was first published in Music Ally’s fortnightly Report, part of our premium subscription service that also includes a daily news and analysis bulletin. Click here to sign up for a free trial.

Stuart Dredge
READ MORE: Analysis News
One response
  • Michael says:

    Excellent round-up. Keep up the positive momentum. I have been pointing people from the movie business to articles such as these. Only a few years ago, they were still saying “You can’t replace the movie experience”. I still see them pondering whether they will put their movies online or not (as if they had a choice in the matter). It is only by rolling with the punch that the “content” industries will remain the creators of entertainment with some sort of impact.

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