When former WMG CEO Lyor Cohen joined YouTube, the music industry wondered if this often brash insider could change prevailing opinions of the video behemoth: great for promotion, but the royalties paid are far too low. Few opinions have shifted; but in a new open letter, Cohen remains both optimistic and defiant, seemingly blaming musicians and the music industry for the "disconnect between YouTube and the rest of the industry."
[Editor: Quotes highlighted below were added for emphasis.]
Five observations from my time at YouTube
Earlier this year, I was asked by Google (because they know I am pre "Sucker M.C.") to work on a Doodle celebrating the 44th anniversary of the music that changed my life. The birth of hip-hop was a fusion of expression and technical innovation that forever changed our culture and Google wanted to celebrate the moment when it all came together.
I had one condition on participating: that the project be authentic and not some tech company’s interpretation of a cultural revolution. They couldn't agree more and the collaboration led to an amazing interactive experience that used technology and Google’s reach to celebrate the birth of hip-hop. It showed me that Google and YouTube know how to listen to feedback (in this case, mine), and are willing to work hard to get things right.
"there’s still a disconnect between YouTube and the rest of the industry"
I joined Google and YouTube because I saw a great opportunity to bring tech and music together and do right by artists, the industry and fans. Eight months in, I’m more optimistic than ever that YouTube can do that, but the truth is there’s still a disconnect between YouTube and the rest of the industry.
So, how did YouTube get here? What explains the current state of YouTube’s relationship with the industry? I think there are five factors that explain the current situation.
"The team is serious about subscriptions."
1. Late to the party. I get why some in the music industry would be skeptical of their relationship with YouTube. They were late to the subscriptions party and YouTube’s focus for many years was largely just on ads. While they have been at subscriptions for a year, and the numbers are very encouraging, YouTube must prove its credibility when it comes to its ability to shepherd their funnel of users into paid subscriptions.
But since I’ve been here, I’ve been incredibly encouraged by what I’ve seen. The team is serious about subscriptions. And now with YouTube Music and Google Play Music merging, I’m confident they will build an even better subscription service. And with more deals like the one YouTube recently signed with Warner, they’re going to be able to take it global.
"it all depends on whether or not the industry chokes off these new sources of growth"
2. Twin-engine growth. The success of streaming subscriptions is one reason why I’m so optimistic about the future. Subscription revenue is still in its infancy, yet it’s already reaping billions for the music industry. It’s not just some business model on a whiteboard; it’s a real and rapidly growing source of cash for labels and artists today.
"Fans not being exposed to new music is death. "
Some think ads are the death of the music industry. Ads are not death. Death is death. Irrelevance is death. Fans not being exposed to new music is death. My time at YouTube has me convinced that advertising is another powerful source of growth for the industry. YouTube’s ads hustle has already brought over a billion dollars in 12 months to the industry and it’s growing rapidly. Combined with YouTube’s growing subscription service, they’ve now got two engines taking the industry to a more lucrative place than it’s ever been before.
But that all depends on whether or not the industry chokes off these new sources of growth. I’m old enough to remember what the industry was saying about iTunes and Spotify before they started contributing billions to its bottom line. The growth that the industry is seeing today proves that ads and subscription thrive side by side.
3. Let’s talk dead presidents. It is important that labels, publishers and YouTube come together to make transparency a reality, as I strongly believe it will help everyone in the industry move the business forward.
Artists and songwriters need to truly understand what they’re making on different platforms. It’s not enough for YouTube to say that it’s paid over $1 billion to the industry from ads. We (the labels, publishers and YouTube) must shine a light on artist royalties, show them how much they make from ads compared to subscriptions by geography and see how high their revenue is in the U.S. and compared to other services.
"At over $3 per thousand streams in the U.S., YouTube is paying out more than other ad supported services."
For instance, critics complain YouTube isn’t paying enough money for ad-supported streams compared to Spotify or Pandora. I was one of them! Then I got here and looked at the numbers myself. At over $3 per thousand streams in the U.S., YouTube is paying out more than other ad supported services.
Why doesn’t anyone know that? Because YouTube is global and the numbers get diluted by lower contributions in developing markets. But they’re working the ads hustle like crazy so payouts can ramp up quickly all around the world. If they can do that, this industry could double in the next few years.
4. Fortune AND fame. Every day for the last 30 years, I’ve woken up with the same thought: maybe today’s the day I’m going to meet an artist that’s going to change pop culture. I love watching when an artist goes from obscurity to celebrity. That’s my drug.
"YouTube will deliver fortune…
but I think they need to be just as focused on bringing the fame."
Every artist I’ve ever worked with wanted some fame and fortune. YouTube will deliver fortune … but I think they need to be just as focused on bringing the fame. YouTube is already a great force for breaking new artists; in fact, the majority of music watchtime on YouTube is coming from its recommendations, rather than people searching for what they want to listen to. But YouTube needs to find new ways to promote and break artists and their albums so they have a chance to shine on the platform and connect with their fans. This is one of my biggest priorities and you’ll see more coming soon.
"Safe harbor helps open platforms like YouTube, Facebook, Soundcloud and Instagram give a voice to millions of artists"
6. Without safe harbor, we’d all be lost at sea. I’ve spent my professional life fighting for artists to get what they deserve. I’ve worked with the RIAA and the IFPI to fight piracy since back when the main concern was bootlegged tapes. Safe harbor has become an obsession -- with many complaining it’s the cause of all of industry’s woes. I’m not parroting the company line when I say the focus on copyright safe harbors is a distraction. Safe harbor helps open platforms like YouTube, Facebook, Soundcloud and Instagram give a voice to millions of artists around the world, making the industry more competitive and vibrant.
Every artist should be concerned if their music shows up online without credit or payment. But YouTube’s team has built a system in Content ID that helps rightsholders earn money no matter who uploads their music. As of 2016, 99.5 percent of music claims on YouTube are matched automatically by Content ID and are either removed or monetized.
Before Content ID, when a fan shared a song with a friend through a mix tape, it was called piracy. Now it's generated over $2 billion for content owners and goes far beyond what the safe harbor provision requires.
One of the first jobs I ever had in the music business was working as a road manager for Run DMC. Doing that taught me a lesson that has formed the core of what I’ve tried to do my entire career: set things up well so that the artists and fans can come together and make magic happen. I’ve spent my entire life helping artists achieve fame and fortune. I wouldn’t have joined YouTube if I didn’t believe the company was committed to delivering more revenue to artists, labels, publishers and composers -- they just have to set them up well and get out of their way.
With love and respect,
Lyor recently watched “Brothers Gonna Work It Out”