Now that WMG music video content is back up on YouTube and with a whole new business proposition to boot, TMV thought it important to examine the new deal, the technology behind it and its implications for labels and advertising funded services. As most regular TMV readers are aware my personal view is that most advertising funded digital music businesses have not leveraged the proposition of being associated with giving away music for free to its full potential. Many have been set back by the fact their business models and traffic acquisition have been based around user generated content.
As so aptly put by Muzu.tv Managing Director Mark French on Musically’s blog earlier this year “YouTube’s business model doesn’t stack up”. The problem with advertising funded models based around user generated content is that they have also been associated with allowing “illegal content to be viewed – [and]brands are resistant to pay premium rates” where sites allow unlicensed content to be displayed. And it is right to say this is not the music industries fault, yet it is a common trait amongst most advertising funded models currently in the space.
Getting back to the story though, back in September WMG managed to negotiate a deal where they would be responsible for selling advertisements on their artist channels within YouTube. The deal encompassed sharing revenue generated from ads (CPC and CPM based) that run on the site, clicks and videos.
According to Musically WMG also has the option to monetise user generated videos through content ID technology. The label will now sell advertising around its music videos rather than relying on Google, and the label gets to set its own price and get the majority of revenues.
In TMV’s view this move by WMG is a head start on other major labels in terms of control over advertising revenue. Yet the question of whether WMG or any other label will be good at selling advertising is another question that requires an answer. Yes WMG did a deal with an agency to sell its artists’ YouTube channel advertising. Obviously, they saw outsourcing as the way forward for them.
However, having to pay both Google and a sales agency a percentage of all ads served will cut into the margins associated with the new model. Perhaps it might be a better idea for labels to keep the advertisement sales process in-house by integrating with a media sales department within current label retailer sales departments?
All of the data WMG will have access to from its deal with FreeWheel, where use of its Monetisation Rights Management (MRM) platform will according to Hypebot enable Warner’s “to place, monitor and track ad usage effectiveness” within its own artist sites as well as outside digital media. This data will be key in helping to convince brands to pay more to be associated with WMG artists.
Embracing platforms such as FreeWheel, will in the next year becoming increasingly important for all labels in TMV’s view. Other positives for labels include the fact that links to purchase the relevant artist’s products are also embedded on the WMG artist YouTube channels. According to Mike Jbara, WEA Corp CEO “Our goal is to turn our artist’s digital footprints into reliable revenue streams for them”.
Where does WMG’s deal leave advertising funded services like YouTube and MySpace Music? Firstly, it clearly details content owners’ unhappiness with advertising rates ad-funded services offering music content currently receive. As TechCrunch stated, “it’s a concession YouTube surely wasn’t eager to make. After all, now that Warner has the ability to brand their clips however they want, other content owners will want to do it themselves”.
Only last week according to MediaPost Google revealed it had begun to test “skippable” pre-roll ads for video on YouTube. It does beg the question though; will advertisers be happy with YouTube’s users being able to skip their ads? Kind of defeats the whole purpose of paying money to advertise you would think…
Drilling down further, if brands are not happy to pay decent CPM and CPC rates for content when it is served up on sites that have been associated with illegal content and UGC content, let alone if consumers can skip the ads, what is the future of business models based around UGC content? Surely, it clearly outlines the fact that premium content has been devalued by way of association with UGC content.
This should necessitate a radical re-think in terms of companies established on the back of UGC content and the types of deals premium content owners are willing to undertake. This move does also perhaps suggest labels (especially WMG) expect better CPM rates than have currently been paid for advertising within a page of content owned by them.
Will other labels follow in WMG’s footsteps? TMV certainly hopes so as in our view it provides for so many dynamic positives for premium music content when it comes to advertising funded businesses. It draws a very important line on the extra value premium content has over UGC content. A line that large social media companies are only just now willing to acknowledge. Whilst not being forward thinking until recently in terms of technology, labels have always been good at marketing to artist’s fans. Over the long-term, TMV views content owners being in control of their own advertising sales in respect of advertising funded models is a good thing for artists, labels and brands alike.
You can check out previous TMV posts on the issue of advertising funded business models below: