It’s not been the best of years for YouTube, what with all the copyright suits from the likes of Viacom that could cost the company billions. And the momentum of the online video world shifting to the new services like iPlayer and Hulu from ‘old-world’ TV broadcasters. Not to mention the largely unsuccessful efforts to transform YouTube’s video ad business. One could be forgiven for seeing YouTube at risk of becoming yesterday’s game, mired in copyright controversy. At least YouTube still has all that music video right? That’s safe right? Not quite.
Over the weekend Warner Music Group indicated it will pull its music content from YouTube after license negotiations broke down. YouTube’s current deals with all of the majors include per play and revenue share, and an equity stake which was given to each of them immediately prior to the Google deal closing. It seemed like a great deal at the time as the labels benefited from the sale and a key channel was legitimized and formalized. But now the dust has settled WMG feel that they aren’t getting the revenue commensurate with YouTube’s huge global audience.
There may be something in it. YouTube may have sold them short. But I suspect the bigger issue here is that WMG are feeling the impact of YouTube not being able to monetize their video content well enough. They’ve been experimenting hard with different ad tactics this year and they’ve yet to hit the right mix. Also, because of the much more variable quality of content and audience compared to the Hulu’s and ABC.coms they’re not able to generate as high CPMs as those sites do.
There’s no doubt social music isn’t generating enough money for the music industry yet. But one could argue that, acquisition revenue aside, it’s just not generating enough revenue full stop. Social has already become a vital part of the music discovery and consumption value chain. It will eventually become an important revenue generator too. But the record labels have to accept that this will be a comparatively slow process that is intrinsically linked to the broader maturation of social media as business.