Image Source: Bloomberg
The largest music streaming service in the world, YouTube, revealed that it had paid the music business more than $6 billion in royalties over the course of the previous year, or around $2 billion more than it had previously claimed. Like previous year, Lyor Cohen, the platform’s head of music, makes the announcement in the form of a blog post.
Despite these significant numbers, trade associations for the music business and others have criticized YouTube’s royalties program throughout the years due to its lack of transparency and, in their opinion, inadequate payouts. Recently, a piece in Billboard made a number of specific assertions that YouTube’s rights-management system is “full of flaws” and “ripe for misuse,” which were backed up by claims from a number of unnamed individuals.
There can be no disputing its effect and success, though. According to Cohen’s blog post, only YouTube can provide fans with the whole music discovery, consumption, and participation experience in one location. He cited BlackPink’s most recent single, “Pink Venom,” as an example.
By 2025, YouTube claims it will surpass Spotify as the largest partner in the music rights market, despite the fact that it currently seems as though the two companies are barely keeping up.
YouTube paid music rights holders more than USD $6 billion in the 12 months following the end of June 2022, according to an announcement by Lyor Cohen, the company’s global head of music, today (September 13).
This amount is noteworthy for a variety of reasons, not the least of which is the fact that it represents a $2 billion increase over the $4 billion YouTube claimed to have contributed to music rightsholders in the same period last year (the 12 months to the end of June 2021).
Additionally, it is twice as much as the $3 billion that YouTube claimed to have paid out to the music industry in 2019.
However, when you contrast YouTube’s figures with what is known about Spotify’s corresponding payouts, things start to get pretty interesting.
Earlier this year, Spotify confirmed on its Loud and Clear website that, up from $5 billion in 2020, it paid out more than $7 billion to music rightsholders in 2021.
Consequently, Spotify’s yearly payments to the music business increased by almost $2 billion annually, similar to YouTube’s growth (although Spotify’s growth was for the calendar year, whereas YouTube’s growth was for the 12 months to the end of June 2022).
How can YouTube maintain the rate of its own expansion?
One of Lyor Cohen’s favorite phrases is the “dual engine” by which YouTube produces revenue for music rightsholders, i.e., YouTube’s advertising business and YouTube Music / YouTube Premium subscriptions.
Cohen also stated today that UGC made for about 30% of the USD $6 billion+ that YouTube gave to music rights holders in the year to the end of June (user-generated content).
Or, to put it more simply: YouTube currently pays music rightsholders close to $2 billion annually in ad revenue derived from user-generated content (UGC).
When compared to the money that music labels and publishers are getting from TikTok, Facebook/Meta, and other “developing” social platforms, that should give them pause.