Photographer: Andrew Harrer/Bloomberg

YouTube Makes $1 Billion Case That It’s Good for Music Industry

  • That’s how much ad revenue service generated in past 12 months
  • Work with new artists showcases exposure YouTube can provide

YouTube, defending itself from attacks by record labels and artists, said it passed on more than $1 billion in sales to the music business in the past 12 months.

“YouTube has paid out over $1 billion to the music industry from advertising alone, demonstrating that multiple experiences and models are succeeding alongside each other,” Chief Business Officer Robert Kyncl said in a blog post Tuesday. “In the future, the music business has an opportunity to look a lot like television, where subscriptions and advertising contribute roughly equal amounts of revenue, bolstered by digital and physical sales.”

The streaming service, owned by Alphabet Inc.’s Google, is showcasing its financial contribution and its work with emerging artists to prove it is more friend than foe to the music industry. Music is one of the most popular types of video on the site, which generated $8.5 billion in sales in 2015, according to estimates by UBS.

Like Spotify and Apple, YouTube has also prioritized working with artists earlier in their careers and creative processes.

“My priority from day one has been partnering and collaborating with labels and artists to support the success of their artists on and off our platform,” said Vivien Lewit, a music-industry lawyer who joined YouTube in 2011 and runs a group that manages partnerships with the music business.

The music industry has spent most of the year on the offensive against YouTube, demanding changes to copyright laws and accusing the world’s largest video site of using music to enrich itself while giving little back to the artist. Katy Perry, Billy Joel and Rod Stewart were among more than 100 artists who filed petitions with the U.S. government to reform the Digital Millennium Copyright Act.

Services like YouTube “are unfairly siphoning value away from the music community and its artists and songwriters,” artists including Bruno Mars and Gwen Stefani wrote in a separate letter to European Commission President Jean-Claude Juncker in June.

YouTube executives have steamed in private, arguing record labels have pressured managers and artists into fighting the service at an opportune time. While the labels have long criticized what they see as YouTube’s lax attitude toward piracy, they escalated the confrontation just as negotiations began to heat up over new licensing deals that have yet to be completed.

One way YouTube can push back is to work with up-and-coming artists directly -- a strategy that underscores the service’s usefulness in helping musicians find an audience. The world’s largest online video site has been working with British singer Dua Lipa on a campaign tied to her self-titled debut album, due out early next year. YouTube has funded one of her music videos, promoted her across different websites and collaborated with Fader magazine on a documentary and magazine spread due out later this month.

“The power of these streaming services is increasing, and the role of the label is being redefined,” said Ben Mawson, co-founder of TAP Management, which represents Lipa and other musicians such as Lana Del Rey.

Lipa’s label, Warner Bros. Records, declined to comment. Mawson said the label is a party to the artist’s partnership with YouTube.

The campaign, which has helped boost Dua Lipa’s subscriber base on YouTube to more than 300,000, is the latest in a string of collaborations with artists and record labels. YouTube has also hosted workshops with emerging artists as part of a new program called Foundry, and opened up temporary production facilities in half a dozen cities. 

Mawson was receptive to YouTube’s proposal for a partnership based on his experience with Del Rey, the 31-year-old sultry American vocalist. No major label wanted to sign Del Rey at first, but that all changed when a couple of her videos went viral on YouTube. Her 2012 debut sold 7 million copies worldwide.

“YouTube is the first step,” Mawson said. “Video is how everyone starts; it’s how you define your identity.” 

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