Thursday, October 16, 2014

YouTube is making itself increasingly indispensable to the music industry


(Reuters/Dado Ruvic)
If there were any lingering doubt about YouTube’s status as the biggest streaming music service on the planet, then this fact should dispel it: The Google-owned site has now paid out more than $1 billion in royalties to record labels (and other copyright owners, such as film studios and broadcast networks) for videos they didn't even upload.


YouTube is able to do this thanks to its controversial Content ID technology, a digital fingerprinting system designed to assuage content owners concerns about piracy. Under this system, which remains contentious among people who use the site to promote themselves (particularly in the video game world) every single video that is uploaded to YouTube is scanned against a database of more than 25 million reference files provided by participating content owners ( the biggest film studios, record labels and broadcast networks).

If copyrighted content is identified (including, for example, mashups and lip synchs of songs) the rights holder has the ability to, among other things, block it, mute it, or monetize it by running ads against it and share a slice of the revenue generated with Google.

Given music videos are estimated to account for nearly 40% of all the views on YouTube, it’s reasonable to assume a large chunk of the $1 billion in payouts have gone to the recording industry. It’s taken a while to get there (Content ID was launched back in 2007), and the money is to be shared (no doubt in varying proportions) among some 5,000 content owners. Also, for comparison, Spotify paid out $500 million in royalties last year alone.

But being paid for the use of your content without actively promoting it is vastly superior to being a victim of piracy. A spokesman for YouTube said the majority of content owners “choose to monetize their claims” when their content is identified, and many have seen significant increases in their revenue as a result”.

Ad-supported streaming music services, of which YouTube is easily the biggest, accounted for about 8% of the recorded music industry in 2013, which was worth $15 billion. And unlike just about everything else in music (with the exception of the vinyl renaissance) they are growing rapidly. Content owners seem to recognize this reality.

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