[UPDATED] Earlier this week, YouTube shared that it had paid in excess of $1 billion to the music industry in the last 12 months. It's an impressive number; but not nearly big enough, according to global major label trade group the IFPI, who says that even the much maligned Spotify pays 18 times as much.
"Google has today issued more unexplained numbers on what it claims YouTube pays the music industry. The announcement gives little reason to celebrate, however. With 800 million music users worldwide, YouTube is generating revenues of just over US$1 per user for the entire year. This pales in comparison to the revenue generated by other services, ranging from Apple to Deezer to Spotify. For example, in 2015 Spotify alone paid record labels some US$2 billion, equivalent to an estimated US$18 per user.
YouTube, the world's largest on-demand music service, is not paying artists and producers anything like a fair rate for music. This highlights more than ever the need for legislative action to address the "value gap" that is denying music rights holders a fair return for their work.
ANALYSIS: USAGE vs. USERS
The IFPI appears seems to have made it's $18 per user Spotify estimate by dividing the roughly $2 billion that the music streamer will pay the music industry and musicians in 2016 by its slightly more than 100 million active users. How they arrived at the stat that 800 million of YouTube's 1 billion monthly users actively listen to music which led to the "just over US$1 per user for the entire year" claim is less clear.
So while its easy argue that YouTube's music payments are far too low, it is not entirely useful to compare playing a few videos on YouTube to firing up several hour long playlists each day on Spotify.
Music royalty payments are calculated by usage nor users.
UPDATE: Responding to our inquiry on their source and use of data, John Blewett of the IFPI wrote:
The figure is based on our global music consumer research report, produced by Ipsos. It found that 82% of all YouTube users say they use the service for music. YouTube state they have “over a billion users” so the 800m is a conservative estimate. We also quoted the 800m figure in our Global Music Report this year – referencing research conducted by MIDiA.
The comparison is between the revenue returned to rights owners per user from services such as Spotify, on one hand, and from YouTube on the other. This is an illustration of the impact of ‘Value Gap’.