×
You will be redirected back to your article in seconds

Why YouTube Should Be Singing a Different Tune About Music Streaming

YouTube has proudly announced that it paid more than $1 billion to the music industry from advertising over the past 12 months. But the growth of paid streaming highlights just how small YouTube’s financial contribution was compared with the size of its audience.

The Intl. Federation of the Phonographic Industry estimated that the music industry generated $15 billion in revenue in 2015, of which roughly half was from digital recorded music and the rest from a combination of physical sales and other sources. I estimate that global revenue will be up by 6% in 2016, based on growth rates at the major labels.

The biggest driver of that growth will be streaming services. Music revenue from streaming will rise from just under $3 billion in 2015 to an estimated $5.5 billion in 2016. But the contribution from ad-based streaming like YouTube will be just $1.3 billion, while the other $4.2 billion will come from paid services, a category dominated by Spotify and Apple Music.

sources: Company Reporting, jackdaw research Analysis

The two companies combined had streaming revenue of just over $2 billion in 2015; the 2016 total likely rose to $4.6 billion, driven by rapid growth in membership. (Gross revenue for Apple and Spotify doesn’t translate directly into industry revenue; arrangements vary, but the services typically pay out 70%-75% of revenue to the labels. That’s why the combined gross revenue for these two companies exceeds the industry’s net revenue from paid streaming, despite the existence of several smaller competitors.)

sources: Company Reporting, jackdaw research Analysis

Spotify has well over 100 million users, of which almost 50 million are paid subscribers. Apple has 20 million paid subscribers (and doesn’t offer an ad-supported service). By my estimates, Spotify will pay out more than $2 billion to the labels in 2016, while Apple’s payout will exceed YouTube’s, at a little over $1 billion — this in only its first full year of operation and with an average of 15 million subscribers, versus YouTube’s 1 billion users.

So YouTube can continue to crow about its billion-dollar contribution to the music industry. But when it’s paying out about a dollar per user per year, compared with the $60-$80 per year that’s coming from the paid streaming services, it’s reasonable to ask whether YouTube is paying enough.

Jan Dawson is the founder and chief analyst at Jackdaw Research, an advisory firm for the consumer technology market.

More Voices

  • Hollywood Has Come Far With Diversity

    An Insider's Look at Hollywood's Diversity Efforts and How Far It Still Needs to Go

    I am a white man working in Hollywood. I grew up in Beverlywood, an all-white, predominantly Jewish, Los Angeles neighborhood sandwiched between 20th Century Fox Studios and MGM, where my elementary school had only one black student. I am compelled to write about diversity in Hollywood because “diversity” — in front of and behind the camera [...]

  • Venice Film Festival A Star is

    How Venice, Toronto and Telluride Festivals Stole Cannes' Luster (Column)

    In all the years I’ve been attending film festivals, I have never seen a lineup that looked as good on paper as Venice’s did this fall, boasting new films by Alfonso Cuarón (“Roma”), Damien Chazelle (“First Man”), Paul Greengrass (“22 July”), Mike Leigh (“Peterloo”) and the Coen brothers (“The Ballad of Buster Scruggs”) in competition, [...]

  • Black Women in Medicine BTS

    Hollywood Needs to Include People With Disabilities on Both Sides of the Camera (Guest Column)

    In five years, nothing has changed. Despite open calls for greater diversity and inclusion, recent research shows that there was little change in the number of characters with disabilities in popular films in 2017. A study conducted by the Annenberg Inclusion Initiative of the University of Southern California’s Annenberg School for Communication and Journalism found that [...]

  • Seven Seconds

    Fighting the Racial Bias at the Core of Hollywood’s Cop Shows (Guest Column)

    If fiction is the lie that tells a deeper truth, the TV crime genre has been, for the most part, the lie that simply tells a lie. As a storyteller (Veena) and an advocate for racial justice (Rashad), we collaborated for the past two-and-a-half years in an attempt to reimagine the roles of cops, victims, [...]

  • Harvey Weinstein Trial

    Column: Documentarian Barry Avrich Ponders Whether Harvey Weinstein Will Be Convicted

    Will Harvey Weinstein go to jail? That’s perhaps the most debated topic in Hollywood. It’s a question that makes me miss my friend Dominick Dunne, the controversial Vanity Fair columnist who would have already succeeded in interview-ing the chambermaids at Harvey’s sex-addiction clinic. Dunne once prophetically told me there would be a massive reckoning in Hollywood. He [...]

  • Janet Mock Pose

    'Pose' Writer Janet Mock on Making History With Trans Storytelling (Guest Column)

    I first met Ryan Murphy on location in Hollywood in July. The set was a nightclub, filled with background actors staged as glistening go-go dancers, shirtless revelers, and twirling drag queens. They were all basking under the glow of a spinning disco ball — a fitting setting for my first Hollywood job interview. I was [...]

More From Our Brands

Access exclusive content