Major Labels

YouTube Music Service Could Cost Artists, Labels $2.3 Billion Per Year In Lost Income

YouTube Music[UPDATED] A new report from Mark Mulligan and media industry analysts MIDiA looks at the massive impact YouTube along with its yet to launch Music Key service will have on the music industry.  YouTube delivers a massive audience of 210 million active music fans, according to the study. But it fails to deliver the commensurate revenue, and that is likely to get much, much worse.

YouTube's Free Tier Will 'Suck The Oxygen' From Spotify, Competitors

MIDIA

YouTube Music key "should prove to be among the most compelling music product offerings in the marketplace, yet YouTube’s net impact on the subscriptions’ sector will still be net negative with its free tier sucking the oxygen from its premium competitors,” says Mulligan.

MIDiA asked 1000 UK YouTube users if they'd pay for an ad free music subscription service from YouTube, and just 7% sent yes. In fact, 25% said they'd never every pay for any music subscription service because the already get all the music they need on YouTube for free.

$2.3 Billion In Net Loss To Artists and Labels Per Year

The report extrapolates that YouTube Music Key will generate $400 million in revenues in its first year. But over the long run it will also be responsible for more than $2.6 billion in lost subscription revenue yearly. That's a negative net impact of $2.3 billion in lost music revenue every year, according to the study.

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8 Comments

  1. I think we should probably wait to see what YouTube Music Key *is* and how people *actually* use it. It’s kind of irresponsible to throw around headlines like this for a service that is still unannounced. Furthermore, consumers are notoriously bad at predicting their own behavior.

  2. By all means David, let’s be fair and wait for the meteor to crash into the planet and then asses the damage.
    I do have to give it you for one of the best lines I’ve read in quite sometime:
    “Furthermore, consumers are notoriously bad at predicting their own behavior”.
    May I quote you, David MacDonald?

  3. According to Google, YouTube paid about $1bn to right holders over the past 8 years.
    But YouTube makes about $3-4 bn/year – and it claims to pay 55% to content owners.
    So what happened to the rest of the money?

  4. The music industry made a lot of money in the past by selling an album with a single hit and a bunch of filler. This worked because there wasn’t much of an alternative if you wanted to listen to that hit. Now technology and competition have given the music consumer an alternative.
    The fault in the math is the assumption that particular industry’s profits can only move in the positive direction. Yes, the music industry has made more money in the past, but that doesn’t mean someone is stealing from them if profits decrease in the future. It’s called competition, it’s what drives innovation.
    How can you blame streaming services for paying labels the exact rates that the labels agreed to?

  5. Kevin, in the past, if people wanted to buy a hit and not get the rest of an album, they could usually buy a single. That really has nothing to do with the issues of streaming and the posting of other people’s work for free on Youtube. (BTW, you can pretty much always buy songs by the track now on MP3 services for nearly all hits making artists.) A lot of this is theft and most artists did not sign agreements to deal with streaming services or give streaming services special deals to pay next to nothing. I also don’t see how you would take this to be supportive of continued work in the area of entertainment production.

  6. Michael, I’m so sorry for your intellectually poor post. Technological progress and innovation make things cheaper in the long run, that’s why your standard of living is multiple times better than that of your grand-parents at the same age.
    Plus, nobody is entitled to a business model. Nobody is forced to make music, post it and automatically make a decent living off of it.
    Nobody will stop making music because the improbable chance of making money with it is even more improbable now.

  7. Actually, a lot of people will stop making music because doing so will be unsustainable. I talk to musicians all the time who are reaching that point right now.

  8. Isn’t that a good thing? Not enough people are listening to their music, so they move on to other things. So there is more space and time for more worthwhile music.
    If you’re a baker and nobody wants your bread, will you move on or keep making bread?

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