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YouTube paid out $6bn to the music industry in the 12-month period between July 2021 and June 2022, the company has announced. That’s up from $4bn paid out in the 12 months before that, meaning that YouTube’s music payouts have grown by 50% year-on-year.

The latest figure was announced by YouTube’s head of music Lyor Cohen in a blog post this afternoon, and it covers money paid to artists, songwriters and rightsholders.

Cohen said that more than 30% of the payouts came from user-generated content (UGC) videos on YouTube, claimed by rightsholders using the company’s Content ID tool. That’s the same share as in the previous year.

“Our foot is still planted on the gas pedal,” promised Cohen in the blog post. “We want our twin engine of ads and subscriptions to be the #1 contributor of revenue to the industry by 2025.”

The race to overtake Spotify

This is an existing goal set by Cohen and YouTube, so how is it progressing? The target in sight is Spotify, and since that company revealed its own payout figures in the not-too-distant past, we can find out.

Earlier this year, Spotify said that it paid $7bn to music rightsholders in 2021, up from $5bn in 2020. Those are calendar-year figures, so they’re not a direct comparison to YouTube’s July-to-June stats.

We can say that Spotify is still ahead, but the gap is clearly narrowing. YouTube’s 50% growth in payouts for the year to June 2022 compares to Spotify’s 40% in the calendar year 2021.

Overhauling Spotify by 2025 is certainly a feasible target for YouTube, but there are plenty of uncertainties ahead.

For example, might economic headwinds in the advertising market have a bigger impact on YouTube than on Spotify? Subscriptions were 87.5% of Spotify’s revenues in 2021 and ads only 12.5%, whereas the ratio is unknown for YouTube’s music business.

Then again, with a cost-of-living crisis biting (and expected to get worse) in many parts of the world, there are potential headwinds for subscription-dominated businesses too.

The bigger picture of streaming payouts

Arguably it doesn’t really matter which company is the music industry’s biggest royalties payer. What’s important is the rising tide across all of them, driven by their competition.

40% and 50% increases in annual payouts from two of the biggest, not to mention the not-publicly quantified growth in royalties from Apple Music and Amazon’s music services; from mid-tier and regional DSPs; and from the new wave of licensing deals with social media giants…

This is the bigger picture: one that drove more than $16.9bn of streaming revenues for recorded music globally in 2021 according to the IFPI, up from $13.6bn the year before. Note, that doesn’t include publishing, whereas the YouTube and Spotify figures do.

YouTube’s announcement today was accompanied by warm words in a statement from Universal Music Group’s EVP of digital strategy Michael Nash, who hailed the platform as “a powerhouse of music discovery” and welcomed “an exponential increase in payouts to recording artists, songwriters, labels and the entire music ecosystem”.

Also quoted were BMI president and CEO Mike O’Neill (“We applaud YouTube’s amplified focus on music, which has increased royalties for the creators of that music”) and MMF CEO Annabella Coldrick (“very positive news for artists and songwriters in a time of economic uncertainty and rising touring costs”).

The ‘value gap’ debate continues

Does all this mean that the long-running ‘value gap’ arguments have gone away? Not just yet.

The UK’s recent parliamentary inquiry into streaming economics included another round of accusations that YouTube gains too much leverage in music licensing negotiations from its safe harbours, and complaints that this may also disadvantage rival DSPs who don’t have that protection.

That inquiry’s report in July 2021 came down on the side of rightsholders in that argument, concluding that these dynamics have “suppressed the value of the digital music market both in real and absolute terms even as these services generate multi-billion-dollar advertising revenues”.

The report suggested that the UK’s competition regulator the CMA should investigate further, but when that body published the initial findings from its market study of streaming and the music industry in July 2022, it hedged its bets.

The study found that YouTube “appears to pay a broadly similar amount per stream to rightsholders compared to the ad-funded tiers of other music streaming services”; noted that this may be a lower proportion of its ad revenues than those rivals; but suggested any resulting ‘value gap’ would “need to be substantial for it to have a material impact on the total UK revenues for rightsholders, including artists”.

With today’s announcement, YouTube is aiming to return the focus to the surging growth in its payouts, and the prospect of perhaps becoming the industry’s biggest payer within a few years.

Short videos and consumption-plus-creation

Key to that goal, as Cohen laid out in his blog post today, are the emerging formats around music videos on YouTube, and audio tracks on YouTube Music. Short videos are key to that pitch: he cited the announcement in June that YouTube Shorts are now generating 30bn daily views from 1.5 billion monthly logged-in users.

“In addition to our $100m Shorts Fund, we’re creating long-term monetization solutions for Shorts, and we’ll have more to share on this soon,” promised Cohen.

“As our twin engine continues to hum, we’re seeing profound changes in music. We must accompany this movement to be the best place for every music fan. Fans want to discover, consume, and participate in music across multiple content formats, and only YouTube can deliver that entire experience in one place.”

That’s the pitch, although there’s an interesting wider context here too. In recent times, TikTok has seized some of that zeitgeist around consumption-plus-creation trends, and with music already key to its popularity, may soon spawn its own streaming service.

Meanwhile, Spotify – just as sensitive about TikTok’s threat as YouTube – already has some short-video formats, and is also experimenting with more UGC features. Again, the competition between these big platforms should be healthy for their own evolution and innovation, as well as for the music industry.

Bigger payouts, but to the right people?

One last point. YouTube is paying out more money to the industry, but it can’t ignore the growing rumble about whether some of that money is going to the wrong people.

Witness the recent coverage of an indictment by the US’s Internal Revenue Service (IRS) of a company that allegedly diverted $23m of YouTube recordings and publishing royalties from Latin artists, despite not owning the rights to their music.

Or, indeed, the follow-up investigation this week from Billboard criticising YouTube’s system for claiming publishing rights, and the potential for it to be abused by fraudsters who don’t own any rights in the compositions that they are claiming.

It’s a reminder of the challenges that are also on YouTube’s to-do list for music. As we’ve also seen with scamsters trying to siphon off Spotify royalties, the growth in music streaming payouts will inevitably attract bad actors.

However, none of this is to downplay the importance of today’s announcement. YouTube’s annual payouts to the music industry are up by 50% to $6bn a year.

That’s worth celebrating, as are the efforts within Cohen’s team and beyond for YouTube to work ever more closely with artists, and to build a meaningful YouTube music business driven by subscriptions as well as by advertising.

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