YouTube Vs. PRS – Whoever Wins, It Will Probably Be Bad News For Content Owners
Hot music business topic of the moment – YouTube and its removal of all premium music videos from its UK site – has seen accusation’s fly from all angles. TMV analyses the dispute from all perspectives and finds it hard for YouTube to justify its actions.
Let’s go back in time a little to when the standard licensing rate for premium music videos (that is, the videos posted by Artists and Labels, as opposed to the millions(?) of videos uploaded by YouTube users themselves) was £0.01 per stream. YouTube were not happy with that rate and managed to get it down to £0.0025 per stream. And yet it was still unhappy. When PRS refused to negotiate down any further, YouTube (and it’s parent Google) decided to throw its proverbial toys out of the pram and in grand corporate bullying style they arrived at the current stalemate where UK users are being refused access to premium music video content from its website (which reportedly alone accounts for up to 25% of all Search Engine clicks).
Let’s drill down and analyse what these stream rates mean, both in terms of what YouTube receives (on a CPM based advertising model) as well as what they mean for Publishers and Artists. Firstly, to my knowledge, at old rate of £0.01 per stream, YouTube received on average £4 per thousand impressions from Advertisers. On the out-payment side, YouTube was paying Publishers and Artists roughly £10 per thousand streams; hence they were actually losing approximately £6 per 1,000 music video streams! At the newly-established rate of £0.0025 per stream, Publisher and Artist out-payments have dropped to roughly £2.50 per thousand, leaving YouTube with a profit of £1.50 per thousand streams. But is this the complete picture?
The unknown in all of this is how many traditional banner advertisements YouTube displays on a user’s profile page while the videos are playing in the YouTube Player. My guess is at least 6 banner advertisements per user profile page. If this is the case, and if we assume that they get an average of £4 per thousand per banner, it would mean that YouTube is actually making around £24.00 per 1,000 video streams from the banner ads alone. Even after the Artist/Publisher £2.50 has been paid out (using the new model) this still leaves YouTube with a gross profit of £21.50 per thousand video streams. And this does not even count the contribution made by video pre-roll ads. Quite a nice profit in anyone’s books! So why are YouTube being so unreasonable?
Well, YouTube recently started doing advertising revenue-share deals with music video content owners (including the Labels). The splits in these deals are not known as they have all been negotiating individually. It is well known that major label Warner took down all of its video content on a global basis as it was unsatisfied with the new revenue-share deal. No doubt, though, YouTube is particularly unhappy that it is required to ‘pay twice’ for each music video: once to the video rights holder and once to the song Publisher. But to deny these revenue rights would be a serious breach of music copyright. Welcome to the music business.
One does wonder how YouTube would react if the music business were to stop recognising Google’s patent holders and trademarks? To bring home the scale of the current situation, it was reported earlier this month that Pete Waterman has only received around £11 for close to 50 million streams of Rick Astley’s “Never Gonna Give You Up” video. If true, this equates to just £0.000022p per stream.
According to an anonymous writer for whom PRS collects income; “YouTube pays peanuts, it is in fact actually 0.00001 GBP per UK stream, and only if you get over 10,000 UK hits”. In anyone’s logical view that has to be classed as highway robbery. So essentially, all independent artists are being royally screwed and YouTube is laughing all the way to the bank. Obviously YouTube do require independent music video content to achieve scale, yet is not paying for it.
Moving on though, Ireland-based music video specific social network Muzu.tv has managed to pay PRS rates and they are much smaller organisation than Google-owned YouTube both in terms of scale and content catalogue. So if Muzu.tv has no problems with the PRS per-stream rate ,how come YouTube does? Well, it comes down to quality of content. YouTube sells the majority of advertisements across its whole platform including UGC based content. In advertiser’s eyes, UGC content is uncontrollable and therefor has a lesser value to their brands. Thus, on YouTube, premium music content is treated the same as UGC content which in turn devalues the premium music content and leads to lower advertiser rates for music videos.
However, although Muzu.tv does also contain a UGC aspect, the whole proposition from their side is based around premium music content and I have heard on the grapevine that Muzu.tv is able to attract CPM rates at close to four times the rate YouTube receives. If this is the case, then it is clear why they do not have a problem with the PRS per stream rates. It also points to the need for YouTube to re-assess its business model when it comes to premium music content. It is The Music Void’s view that YouTube should be leveraging the scale of its premium music content to attain higher advertising rates. If smaller players can do it, why not YouTube?
By selling advertising against premium music content along side UGC content it is clear that YouTube is in fact devaluing music and in turn its own advertising revenue potential. TMV believes that compromise needs to be made by both sides and it is the duty of YouTube to properly leverage the value of premium music video content over that of everyday UGC content. Music content makes up roughly 18% of YouTube’s overall traffic and as such is a significant revenue raiser which could (and should) be leveraged more intelligently by YouTube in partnership with music content rights holders.
Blog techradar states the case logically with this comment: “TV channels, radio stations and concert venues accept licenses as part of the cost of doing business, so why shouldn’t Google? If it were to set up a radio station and demand a lower rate than any other radio station, PRS for Music would quite rightly tell Google to get stuffed.”
On a final note, YouTube’s actions are hurting both its own income as well as that of music content rights holders and most importantly, artists. Let’s hope the corporate giant sees some sense and stops its bullying actions. Put yourself in an artist’s shoes: £11 for 50 million streams would make anyone feel like they had been robbed. Ad-funded service providers have to be aware that although their models may scale for them, if they do not scale well for individual content rights holders then YouTube do not in fact have a viable business model.
A key point TMV has been advocating from day one.
Other readers also read:
Labels Taking Charge: Monitisation on Video Channels
New PRS Streaming Rates: What Do They Mean For Artists and Streaming Businesses Alike
The Trial: – “Can We Trust The Music Industry?”
Related posts:
Posted by Jakomi Mathews
on Mar 17 2009. Filed under Business Models, Digital, Gadget & Services.
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I run a digital distribution service for independent artists and labels. Our artists get paid a revenue share of YouTube advertising. The money is not fantastic, but the principal is important. This deal is a huge step forward for independent content owners. Rates from streaming services like Spotify and now from YouTube are for the time being low, but everything has to start somewhere and both the YouTube payments and the above article is part of moving things forward. without music YouTube would not be much of a website, and without YouTube artists would be short of a valuable distribution and promotion channel.
[...] YouTube vs PRS Spat – Whoever Wins It Will Be Bad News For Content Owners [...]
Thanks for the review!
Does anyone have any thoughts on how we can educate these models that music has far more value than purely “promotion”? I do believe the music business is going to continue to suffer these business continuing their uneducated and downright wrong assumption’s until they are educated about the true value of music. As with Pandora or Last.fm (unlike Youtube) without the music they have no business…
Good post Jakomi – I agree entirely and concur with much of your analysis. A couple of other points though. The YouTube action is clearly the first of many related actions against the UK tariffs ( which were actually set by the UK’s (c) Tribunal). It did not take long for Pandora and Last FM to jump in with the same complaints. This highlights the main fault in their so-called business model – they assumed rights owners and collection societies would roll over and beg them to use music at zero cost. This is because the US system has allowed source licensing to infiltrate the value chain – in plain terms this means they want to use the music for zero because after all they see all music used as just “promotion”. So they get musicians to sign waivers of fees and refuse to use any music where fees are charged.