How Record Labels Are Learning To Make Money From YouTube

Rather than getting unauthorised versions of videos taken down, labels are monetising them through ad partnerships.


Powered by Guardian.co.ukThis article titled “How record labels are learning to make money from YouTube” was written by Helienne Lindvall, for guardian.co.uk on Friday 4th January 2013 18.11 UTC

Shortly before Christmas the Gangnam Style official video broke a YouTube record by clocking up a billion views. How much Psy will pocket for these views depends, of course, on what his record deal stipulates, but the Guardian can now at least reveal what some of the biggest independent labels make. Recently Martin Mills, founder and chairman of the Beggars Group (home to artists such as Adele, Jack White and The xx), told me that last year 22% of the label group’s digital revenues came from streaming – and that the majority of its artists earn more now from track streams than track downloads.

Though it’s not required to do so, Beggars Group currently pays artists 50% of streaming revenue, as Mills “thinks it’s the right thing to do in this nascent stage of the market”. This is not, by any means, an industry standard. Robbie Williams’s co-manager Tim Clark says that not many labels pay that much: “I believe some record companies are paying some artists that rate – Universal among them.”

Mills says the highest unit revenue for streaming comes from Spotify – a significant multiple of what Beggars makes from YouTube, though the number of streams on the latter is greater.

Anyone who has ever tried to get unauthorised versions and videos of their music off YouTube knows that filing takedown notices is like playing Whac-a-Mole, as new versions pop up almost immediately. But now, with YouTube’s ad partnerships, record labels are discovering a better solution: monetising them.

Martin Goldschmidt, founder and managing director of Cooking Vinyl – whose roster includes the Prodigy, the Enemy and Ron Sexsmith – says the record label can make an average of $5,000 per million views, under certain circumstances. The highest rate being paid is for non-skippable pre-roll ads, but even that rate varies and can be higher, depending on how badly the advertiser wants its ads to be used. Conversely, not all YouTube streams are monetised, as it depends on where the viewer is based. YouTube exists in 120 countries, but is only monetised in 26 of them. Often this is due to local songwriters’ collection societies being dissatisfied with the much lower rate they’re offered.

Some indie labels say about 30% of YouTube ad revenue goes to it and owner Google (though the site told the Dead Kennedys that it takes 45%) and 40% goes to the owner of the recording (usually the record label). The label gets another 20% of the ad revenue if it can claim ownership of the video, that is it’s an “official video” and not a video of someone dancing to the track. And last – and least – the songwriters/publishers get to share the remaining 10% between them.

The 10% figure may seem puzzling to many songwriters. As I have written previously their royalty statements are telling a different story, with a million views resulting in around $40 in royalties.

Not so the record labels. “Our revenue is growing month on month at a fantastic rate,” says Richard Leach, digital distribution manager for Cooking Vinyl. “It’s unhelpful to get hung up on per-stream rates, and it’s better to focus on the aggregate figure, which is really healthy.”

The number of views on YouTube for the label’s acts doubled between February and November 2012. Meanwhile its YouTube revenue more than doubled. “It’s because we’ve learned how to exploit those views better,” Leach explains.

Ads in different territories also pay different rates, and deciding what type of ads go on which video is often decided on a case-by-case basis – and can shift after the video has been posted for a while. Putting a non-skippable pre-roll ad on a video can result in fewer views, but in certain cases that may be worth it, says Leach.

There are also third-party ad sales teams, including Vevo, that specialise in certain areas, such as music, sports or lifestyle. These teams know the demographics better than Google Ads, which has a massive inventory, and so is able to sell at a higher rate. Vevo has no user generated content (UGC), so has a better understanding of the type and quality of that content, enabling it to be more specific about what it is offering to advertisers. With Vevo there is no bargaining to be had, as it charges a flat rate per video.

“We’re anticipating YouTube becoming our most important revenue stream in the future,” Leach concludes.

Now, if the opacity of how the songwriters’ share of ad revenue is calculated – and the issue of how the numbers currently don’t seem to add up – can be resolved we may even see ad partnerships rolled out and videos monetised in the 94 countries where YouTube is accessible but unlicensed.

This resolution may come sooner rather than later. The next Plugged In will take a look at how some songwriters and self-releasing artists have figured out a way of making money from UGC – and not only from their own videos.

• To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000. If you are writing a comment for publication, please mark clearly “for publication”.

• To get the latest media news to your desktop or mobile, follow MediaGuardian on Twitter and Facebook

guardian.co.uk © Guardian News & Media Limited 2010

Published via the Guardian News Feed plugin for WordPress.

Quantcast