YouTube Reports $1 Billion Paid to Recording Industry Through Advertising This Year

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Lyor Cohen

The video giant issues a cheery update to its friends in the music industry.

After a year of sustained and withering criticism from the recorded music industry -- and one day after Lyor Cohen began as its global head of music -- YouTube has announced a topline stat intended as a strong defense of its business model and its contributions to the global recording industry.

In a blog post this morning YouTube's Chief Business Officer Robert Kyncl writes that "in the last 12 months, YouTube has paid out over $1 billion to the music industry from advertising alone." (Google itself reported ad revenue of $19.8 billion in the third quarter.) In a study released earlier this year, Statista found that 63 percent of Americans had listened to music on the platform at some point. 

By comparison, leading streaming service Spotify paid out €1.63 billion ($1.74 billion) to the recording industry in 2015. (Keep in mind that the company's subscriber count has been snowballing over the past two years, so that number is likely to increase sharply this year -- indeed, it doubled between 2014 and 2015.)

Overall digital revenue to the recording industry in the US in the first half of this year -- from every source, including downloads, streaming, ring tones, you name it -- reached $2.66 billion, 77.5 percent of the industry's total half-year haul. Ad-supported dollars stateside accounted for $195.4 million of that total, up 23.6 percent year-over-year.

It's hard to predict what the recording industry's response will be to the news (Universal Music Group, Warner Music Group, Sony Music and the American Association of Independent Music did not immediately respond to a request for comment), but in an industry defined by its byzantine structure and entrenched stakeholders, everything always remains open to interpretation. Or maybe not so hard -- in a phone call shortly after the initial posting of this article, one recording industry executive told Billboard that they are "struggling to understand" how YouTube "came up with" the $1 billion figure, and referenced a perceived 'value gap' between "how much consumption is going on and how poorly" the company monetizes that consumption.

YouTube also has the shadow of copyright and safe harbor reform -- at least in the European Union -- to worry about. Safe harbor provisions, both in Europe and the U.S., provide a legal shield for internet companies that host uploaded content, and changes to it could fundamentally shift its business model.

YouTube is still looking to secure licensing deals with the three major labels (ahead of any long-term contracts the companies maintain provisional, stop-gap deals). Meanwhile, the company's only meaningful competition in the music video space, Vevo, said recently it hopes to stop "ceding the conversation" around those videos. (That it would unseat YouTube as a source of music listening is... unlikely.)

The revenues that YouTube returns to the recording industry are dependent on the health of the global digital advertising market, which has benefited (slowly) from ad dollars trickling toward digital platforms. The global digital ad spend next year is expected to reach $69.2 billion, according to Zenith, with online video expected to draw $35.4 billion from advertisers by 2019. (Total global ad spend this year is expected to reach $524.5 billion.)

Facebook and Google, YouTube's parent company, together control over 54 percent of the digital advertising market, according to Magna.

This story first appeared on billboard.com

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