YouTube has long been the most popular music service in the world. What has changed is that YouTube is not the Darth Vader of the music industry any more.
For years, some artists and suits at record companies loved the zillions of clicks that music videos got on YouTube, but they complained that the site, owned by Google, did not generate enough money for them or do enough to stop rip-offs.
Those grievances have not gone away entirely, but they have mostly gone quiet. Why? A big reason is that YouTube figured out ways to generate enough cash to make many people in the music world happy – or at least content enough for now.
The question is whether YouTube has achieved a lasting peace or a temporary one. If it persists, YouTube might have achieved something that few internet companies have: a relatively healthy relationship with an established industry that it simultaneously helps and disrupts.
When YouTube was in the music industry’s doghouse, the industry powers regularly trotted out a public relations shorthand, the “value gap”, for what they said was YouTube’s paltry financial contribution to the music industry relative to the popularity of music on the site. They were fond of pointing to figures showing that vinyl records generated more income for the music business than YouTube did.
Mostly, YouTube made musicians, songwriters and record labels money the Google way: It sold advertisements in or adjacent to music-related videos and split the cash with the people and companies behind the songs. The powerbrokers in the industry said it was peanuts.
Fast forward to last week, when YouTube disclosed that it paid music companies, musicians and songwriters more than $US4 billion ($5.2 billiion) in the previous year. That came from advertising money and a cut of YouTube’s surprisingly large subscription business. (YouTube subscriptions include an ad-free version of the site and a Spotify-like service to watch music videos without any ads.)
YouTube’s dollar figure is not far from the $5 billion that the streaming king Spotify pays to music industry participants from a portion of its subscriptions. (A reminder: The industry mostly loves Spotify’s money, but some musicians say they are shortchanged by the payouts.)
Subscriptions will always be a hobby for YouTube, but it has bought peace by raining some of those riches on those behind the music. Record labels and other industry powers “still don’t looooove YouTube”, Lucas Shaw, a Bloomberg News reporter, wrote recently. “But they don’t hate it any more.“