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My YouTube Experiment

YouTube is the first place many people go when they’re looking for a specific song. It’s common for fans to upload their favorite tunes along with static images of the artist or album cover art. For years many artists, labels and publishers have looked the other way or even embraced the practice. But all that is starting to change as the very nature of the music industry changes.

Publishers and labels are working to hammer out deals with YouTube that would give them a small royalty. These deals aren’t based on any statutory rates (those set by congress) or any historical precedent (like typical sync licenses). Instead they’re based on the “percentage of ad revenue” model that has emerged as the new standard in the Alice in Wonderland world of on-demand streaming. Two of the “big three” majors, Universal and Sony already have their deals worked out via a partner enterprise called VEVO. But indies are still hard at work on their deals and, by all accounts, finding it tough going. It’s not easy to negotiate with a behemoth like Google, especially if you’re a small company. But at least it’s starting to happen.

Meanwhile, YouTube started offering uploaders the ability to “monetize” their videos as a way to win some points with copyright owners. Anyone who has uploaded a video, including (and this is important) people who don’t own the rights to the material they’ve uploaded, can monetize videos, and in theory share in the advertising revenue that YouTube collects when ads are placed within or over the top of the videos. Of course, copyright owners can request YouTube remove a video containing their property that was uploaded without their consent or knowledge. And YouTube does a pretty good job of getting this done quickly. But the onus is on the copyright owner to first find the content and then fill out the appropriate forms. The process is pretty similar to the DMCA “take down notices” that file-sharing (piracy) websites are supposed to honor, although, unlike most piracy sites YouTube doesn’t go out of its way to hide or obscure the illegal content or make removal an overly onerous process.

Thinking through all of this led me to the following question: Does monetizing videos actually help artists and indie labels?

THE EXPERIMENT

My latest album, The Stars Look Very Different Today, is the first that I self-produced and released on my own label (Sonic Camera Records). I have full control over where and how the album is available (excluding when it’s pirated, of course). As an experiment, I decided to see what would happen if I uploaded the entire album to YouTube as one continuous video and “monetized it” by allowing YouTube to insert ads. YouTube allows uploaders to place ads at the beginning, at the end and at one specific time during a long video, for a total of 3 ads.

Once my video had received 300 views over a few days, I took it down and reviewed the stats.  This is what I found:

The total minutes watched by all viewers was 3,284 minutes, or about 11 minutes per viewer (you can get this kind of info on your Analytics page). That means that each viewer listened to about 2 tunes (each one being about 5 minutes in length on average). Total income from the ads was $2.91. This comes out to .0097 cents per viewer or .0048 cents per streamed tune.

Granted, this was a limited experiment. Results based only on personal experience are anecdotal at best. I understand that the jazz world is quite different than the pop world, where “views” might number in the millions. Ad revenue might fluctuate depending on how many hits the video has. But I think my experiment is fair and representative of what an indie musician might expect.

I’ve monetized several other videos of mine for over the past year or so and all of them have generated similar revenue results. I’d be curious to hear what others find. My guess is the results will be pretty similar to my own.

Interestingly, .0048 cents per stream is eerily close to the average per stream amount artists often see from on-demand sites like Spotify, which in my experience was about .006 cents per stream.

My YouTube figure does not include the publisher fee that should (hopefully) be in the pipeline once deals are hammered about between my publishing administrator and Google. But my informed guess is that those fees won’t amount to much either.

You might ask, “What’s the problem? Isn’t YouTube a great place for artists to gain exposure and develop their fan base?” Yes, I agree that’s true. I, myself occasionally upload videos of my band performing live. It’s a great way to share music with fans and the general public. But when it comes to studio recordings that are currently available commercially, I’m increasingly coming to the conclusion that YouTube is not always a good thing for artists and the future of recorded music. At least, not yet.

One of my concerns, as I’ve mentioned in public panel discussions and interviews over the past few years (listen to my interview on WNYC from 2011), is that on-demand, subscription-based streaming is undermining the recording industry by allowing and encouraging consumers to listen to, but never actually buy music. After all, why would anyone buy a track on iTunes for $.99 when they can stream it for free or nearly free anytime they have Internet access (which is most of the time these days).

There are numerous reports, including this new one from Billboard that show download sales continuing to decline (as CD sales have been doing for more than a decade) even as on-demand streaming increases. This particular article ends with the statement: “The growth of streaming services negatively impacts digital purchases and puts additional pressure on the music business to generate new revenue by growing streaming services.” Can income from streaming services fill the gap? My take is that they can’t, or more likely, won’t. Here’s why.

As artists and music-lovers, we should stop thinking of YouTube, Spotify, Rdio, Deezer, Rhapsody and the rapidly growing list of streaming services as being part of the “music industry.” I think of the recording industry (the creator side of the music industry) as essentially being comprised of record labels, publishers, distributors, and artists. All are interested in the same thing — creating and selling music.

By comparison, companies like YouTube and Spotify aren’t really interested in selling music because they don’t sell music. They’re interested in accumulating user and subscriber data and selling ads. They use music as the draw. Spotify recently received an infusion of $100,000,000 in venture capital from Goldman Sachs. Not bad for a company that has yet to be profitable. Is Goldman Sachs interested in getting into the music selling business? I don’t think so.

So, I’m left with the thought that I don’t want to monetize my videos on YouTube. It doesn’t turn into any real money for me. Meanwhile, it allows YouTube to profit when they insert ads into the experience of listening to music. Furthermore, this model adds to the idea that on-demand streaming is going to save the recording industry. I’m worried it will have the opposite effect.

Some say that we’re just in a transition phase to a new kind of music industry. The key, they argue, is to make music as readily available and ubiquitous as possible so that those tiny fractions of pennies derived from ad revenue and subscription fees will add up for creators. In the words of Spotify founder Daniel Ek, “We believe music should be like water. It should just exist everywhere.” Leaving aside the fact that water is a finite resource (and all too scarce for many millions of people), the analogy is troublesome for another reason. It is based on the idea that if you make things cheap enough and available enough, people will consume more. Think of it as the “Walmartization” of music. The Waltons have certainly done alright with Walmart and consumers seem to like it. I’m not so sure about the people who make most of the stuff they sell or the small companies who can’t compete when they come to town.

It is possible that someday the money will start to trickle down, but clearly we’re not there yet. In the mean time, we artists should become as educated as possible. We should be aware of how things are changing and what’s driving that change. Only then can we start to drive some of this change ourselves.

All well-considered opinions are welcome in the comments section below.

Posted on: February 26, 2014 |

12 Comments

  1. Glenn White says:

    Excellent, well-thought-out statements. I am curious. Your list of what makes up the music industry lists distributors. In a marketplace where an overwhelming majority of sales and other consumtion is purely digital, what exactly is a dristributor? Are you referring to TuneCore or CDBaby’s digital distribution services? Also, your list of entities that make up the music industry doesn’t include retailers, venues, or publicists. Are you including these entities within the ones you listed?

    • ballison says:

      Hi Glenn. Thanks for reading and commenting. To clarify, my definition of a distributor is any company that distributes music for sale. That would include Tunecore, et al.

      As to my list of entities that make up the music industry, you’re correct to point out that it’s limited. In fact, the list is much longer and there are many interlocking kinds of businesses that all rely on each other (including those that you mention and many more). I was attempting to be brief for the sake of clarity by mentioning the key players on the “creation” side.

  2. Mike says:

    Hey Ben, this is Mike from FieldWork Social.
    As I said earlier on Twitter, we partially agree with the results of your experiment. In terms of ads monetization you are completely right: income is very tiny and it’s not worth to publish a studio album on YouTube. Also I think music should NOT be everywhere; music is not water. Instead I believe the artist should have full control on the online places where he/she sells his/her music.

    But imo, the mistake here was to use YouTube as a streaming platform. I strongly believe you can still have benefits from this platform if you use it to add value to your audience and sell an experience. Not only YT, but also Spotify, Deezer, etc..

    I would try different things to offer an exclusive experience to people who use these platforms and then redirect them to the online places where you have full control. For example, here is what I would do with Spotify:

    1) New album art. Just a simple “Spotify Exclusive” tag will do its job.

    2) “Thank you” track.

    Track #1 of your Spotify Exclusive album would be a thank you to your new potential fans. One or all members of your band saying something like, “hey! thanks for checking us out. We know your time is valuable so it’s awesome you’re giving us a shot. If you like what you hear reach out to us via [insert URL]. We’ve got a free MP3 waiting for you there.” On that special URL you’re going to have a simple e-mail signup form to give away said MP3, which will build your fan e-mail list. You’ll also have a link to your Twitter and Facebook pages asking for a Follow and a Like, of course.

    3) Exclusive track(s).

    Demos, acoustic versions, live tracks, etc… Something special to make this a real Spotify Exclusive.

    Now every time someone listens to your band on Spotify they’ll hear a message from you and get something special in return. And, to use a business term, you’ve turned Spotify into a lead generator.

    Just an idea. I’d love to talk more on this. ;)

    Best,
    Mike.

  3. Richard Bains says:

    Hello Mr. Allison,

    Thank you for your comments. They are very well spoken and I believe the point you make is correct! None of the present streaming companies provide one enough of an incentive to put forth all of their music in this one basket. I don’t know of anyone that is able to make a living from the monies received from streaming music on the internet. My question to you is, because streaming seems to be the wave of the future, how does one overcome this systematic erosion of the record industry? Not that the record industry itself is beyond reproach, however, it is, in this case seemingly, the lessor of the two evils. Secondly, what recommendations would you have for up-and-comming independent producer/musicians that wish to have their music listened to and purchased by a broader public?

    RBains

    • ballison says:

      Hi Richard. Thanks for your comments. And please call me Ben! :)

      To clarify one small point, I”m not arguing that musicians should be able to make a living entirely from streaming music. After all, musicians have traditionally had multiple income streams that all add up (publishing royalties, live performances, recordings, licensing, etc). But to your second comment, you’re correct to point out that on-demand streaming seems to be the wave of the future. In addition to broad consensus in the music community that this is the case, there are also plenty of well-researched studies showing that on-demand streaming is growing rapidly and seems likely to one day overtake CD sales and digital downloads (see Billboard article referenced at the end of my post). Some argue that on-demand streaming is just another source of income for artists and therefor should be embraced. My argument is that it is supplanting/replacing more traditional means of music delivery, thereby undervaluing the market.

      As to what can be done, that’s a big question, for which I have no easy answers. Personally, I’ve decided to pull my music from streaming sites like Spotify. Others, like Thom Yorke, Coldplay, Adele & David Byrne have done the same (at least, with the recordings they have control over). But for many many artists there’s not much they can do about their existing catalog because they don’t own their recordings. But what about the future? Will artists become increasingly more independent and control more of their own work? If so, will they choose not to offer it for streaming? I see this as a strong possibility.

      As an aside, I’d like to reaffirm two things. First, we musicians love technology. In fact, we need technology. The very idea of a record business was only made possible by technological advances. But technology is almost always a double edged sword, bringing new opportunities and new challenges. Secondly, artists love and need audiences, A.K.A. “consumers.” Without people to listen to our music, we musicians would have no reason to do what we do. In the midst of these open conversations about music and business I wanted to be clear on these two points.

      The huge question for us all is, how do we embrace advances in technology, make it easy for fans to get music, and ensure the ability of musicians to forge a living? I don’t know. But having conversations like this is the only way to generate ideas and start to build consensus. Whatever solutions we come up with need to strike a careful balance between allowing new technologies to emerge, encouraging people to listen to and buy music, and protecting the rights of artists so they can continue to create.

      As to your second question, again I have no easy answers. For artists, part of the lure of on-demand streaming is the idea that more people will be exposed to your music and become fans, which will eventually lead to more music sales. I’m just not convinced those sales will happen, especially if people can listen to your music anytime, anywhere for next to nothing.

  4. Very good article for musicians by @benallisonmusic on YouTube streaming (via Twitter)

  5. Ryan Roberts says:

    Really nice article by @benallisonmusic I agree we should all be as educated as possible. (via Twitter)

  6. Another great article by @benallisonmusic on YouTube and streaming, a must read for musicians (via Twitter)

  7. Jim Vasques says:

    Hello Ben. I found your article while I was researching youtube and music being uploaded. Well done.
    I think the main problem is that Youtube allowed such a practice in the first place. In their terms of service copyright section they make it so the owner of the copyrighted material is the one that has to find the offender and then has to ask Youtube to take it down. I believe that Youtube’s stated policy is that if you do not own the rights to a product you should not upload it on Youtube. If that is part of the terms and conditions shouldn’t it be their problem to take down unlicensed posts/videos/music? Youtube is trying to walk a fine line by offering a service but not being liable for the content of their service. Because they are part of the Giant Google they believe they can do as they want because they hold the Gold.
    As an owner of an online radio station I pay a licensing fee to broadcast music. That is the same thing terrestrial stations do. As an online radio only station I must comply with the rules and regulation set forth by ASCAP, BMI and the rest. However, on my blog if I write about an artist or an issue a song brings up I can just go to Youtube and upload the song someone has posted onto Youtube and hit the share button and there is a link. There are sometimes several version I can choose from. There have been a few instances where a video could not be shared because the artist was part of Vevo which won’t allow it to be shared.
    Then there is the problem of other sites such as XBox radio where I was able to listen to complete new albums online for free without signing up for a trial. Apparently XBox radio has negotiated some sort of deal with the licensing companies to be able to “broadcast” whole albums where anyone can listen to the music for 30 days before buying a membership.
    Well, I have gone on too long but it is my opinion that the website owners, Youtube and the rest, are the ones in violation not so much the little guy who just wants to “share” music.

  8. Jamie Conrad says:

    Hi Ben — I’m a huge fan of yours (have four CDs and more on order; saw your quartet at the Atlas in DC last year). I haven’t fully thought through these issues, but here are some observations:
    1) I first heard you on a streaming music site called Icebergradio (now Accuradio). Their “New School” channel has exposed me to a ton of great music like yours. I tend to have it playing in the afternoon at work, and pay attention to songs in proportion to how much I like them. Several times I thought “that’s great; who is it?”, and it turned out to be you, so I started buying CDs. I may have read an article about you in JazzTimes, but the fact remains that, absent that “station,” I’d never have become a fan or put any money into your bank account.
    2) I continue to marvel at Spotify and the fact that I can now have access at will to what seems like 1/3 of all recorded music. It’s the best $10 I spend every month. But it has really cut down on my CD purchases. Now, I only buy CDs for two reasons:
    – When the artist is one of my absolute heroes (Ralph Towner, Ben Monder) and I want the CD for the car and the sound quality; or
    – The record company doesn’t participate in Spotify. I always bought a lot of ECM CDs, but I buy proportionately more now, since I can’t stream them on Spotify.
    3) So, based on my experience, I’d say:
    – Keep your stuff on sites like Accuradio that work like radio stations, but
    – Keep it off Spotify. Or, if you can, do like Pat Metheny, whose new Unity Group CD is available on Spotify, but with only 40% of the tunes. You have to buy it (I already had) to hear the rest.

    I’m glad you’re injecting yourself into the public policy arena. If the artists’ voices aren’t heard, only the big businesses’ will be.

    And come back to DC!

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