Two days ago, YouTube announced the launch of its music streaming service. The wise move on Google and YouTube’s part, however, was that this streaming service was simply an addition to YouTube — of licensing deals with major music companies, as well as a slew of features designed to help people listen to all that new music. The move will inevitably make a significant impact on the bottom line of the digital music industry (YouTube was already the world’s most-listened to “music service,” without actually being one) as millions of songs previously unavailable (legally, at least) within the YouTube ecosystem suddenly become so.
Curious about this new elephant in the room, Billboard reached out to some of the industry’s most powerful players and brightest thinkers to guage their reactions.
Daniel Glass (president/founder, Glassnote Records): I’m very excited in a few ways. Our artists and myself and my company are really pushing for higher end quality audio, the fact that you’ll have that option is really good. The Deezer audio thing is great. Pretty into that. Here, with one of the most ubiquitous services in the world, the high-quality audio thing makes me smile. Ability to remove advertising makes me smile. It’s huge. I don’t know if any of us ever predicted that YouTube would be the place you automatically, reflexively went to watch, listen to something. Overall the power of Google — Google Play is getting bigger, there’s a synergy with Google Play. It’s another step in the way of monetization. I look at all of this as extremely positive — YouTube said to us, “We’re listening.” Daniel Ek and Sean Parker learned a lot from their experiences at Napster and now treat us fairly and are supportive and collegial. YouTube did not want that backlash. Bob Pittman, what he’s done for radio, made it so friendly, taking a leadership role, embracing what an artist does. What Sirius XM has done made strides to be friendlier and embrace artists. Very democratic to the YouTubes, iHearts of the world. I think it’s great.
Martin Bandier (chairman/CEO, Sony/ATV Music Publishing): I am in favor of any service that creates [an] opportunity for songwriters and artists to make money. From what I can gather, the audio component of YouTube’s new subscription service in the U.S. is covered by statute, which means that they don’t have to license the music from us and negotiate with us for a rate. They can use the compulsory license, which pays about 10 percent of revenue. The rate we receive is not reflective of the value of what the songwriters do and it should absolutely be higher. YouTube can’t use a compulsory license with the labels. They have to negotiate to use the label’s music in an arms-length negotiation — and more power to the labels, who can negotiate market rates.
Nowadays, 95 percent of hit songs are written by someone other than the artist. Are [they] saying that doesn’t have a value? My stance has nothing to do with not wanting that service in business. But the rates they are paying are a constant source of irritation to songwriters. We get phone calls from them all the time, saying that they have been streamed a million times and get something like $1.30. We respond, you should see the [royalty payment] reports they send us.
They have the free ad-based service, which like all of them are atrocious because they are not being properly monetized. And yet if I am reading this correctly with respect to the pay service, they want subscribers to get a six-month free period. If you already have a free service, why would you let the paying subscribers also get it free. That is ridiculous if you already have two different services.
Mike G (manager, Chris Brown): YouTube has always been the No. 1 site to discover new music and artists. [That] definitely gives Music Key the best opportunity at elevating subscription music services to the next level with a mainstream audience.
Jeff Price (founder-CEO, Audiam): I’m excited as all hell. When you have the number-one destination site on the planet for music sharing and discovery, creating a new infrastructure to allow for even more sharing and discovery among a broader demographic base, it’s very exciting. YouTube is Spotify, if you close your eyes. But with the change that’s coming and the new product they’re launching, will the demographic userbase expand from the 12-25-year-old music consumer to everybody? I love the use of audio-only streams, and will be curious to see if consumer adoption will increase because it adds a level of legitimacy. It’s like MTV plus MTV Radio for 10 bucks a month, vs. 10 bucks a month for Spotify.
Shamal Ranasinghe (co-founder, Topspin Media and Fluence): YouTube Music Key has the potential to change the music industry ecosystem, if it can truly be an additive to the streaming services market. If YouTube can find a way to be more than a traditional music subscription service, by having unique and dynamic features such as injecting a premium subscriber experience across different sites outside the core YouTube platform and supporting different services catering to a growing range of music preferences, there is an opportunity to significantly increase the monetization model by converting casual listeners to paid supporters.
Robb McDaniels (founder/CEO INgrooves): Our take is Youtube is responsible for more than 70 percent of music consumption and less than 3 percent of revenue. Anything they do to rectify this injustice we support. We are hopeful that this service will allow YouTube and all the rights holders to more effectively monetize the music on their platforms.
Mark Mulligan (digital music analyst): This is much more than Twitter Music. It will absolutely offer serious competition for Spotify, as will Apple soon. In fact Spotify might be reflecting that it should have sold / gone public as soon as it hit 10 million paying subs. Suddenly the outlook for streaming looks much more competitive than it did a few weeks ago. But perhaps the biggest impact of YouTube Music Key is that it has enabled YouTube to supercharge its free tier. Suddenly, free users can have entire albums and great new discovery tools. Which is a lot more than you get on Spotify Free. If full albums appear on Soundcloud they get taken down. Has YouTube managed to out maneuver the labels on this one? Distracting them with the bright lights of the premium service and using Spotify’s argument that free has to have the same content as paid? YouTube’s No. 1 objective is ad sales on YouTube free. It has managed to secure a much more compelling value proposition for the free tier. YouTube wouldn’t complain if Music Key was a success, but equally it wouldn’t exactly be disappointed if it was not. It would be able to turn to the majors in 18 months or so and say ‘Hey, we gave it a go but it didn’t work out and in good Google style we’re going to kill it off (but we’ll keep all the additions to the free part thanks).’
Ed Christman, Andrew Hampp, Glenn Peoples, Gail Mitchell and Harley Brown contributed reporting.