Why It Is Time To Make YouTube Look Less Like Spotify And More Like Pandora

2014 has been a dramatic year for the music industry and may prove to be one of its most significant. The brief history of digital music is peppered with milestones such as Napster rising its head in 1999, the launch of the iTunes Music Store in 2003, Spotify in 2008. The 2014 legacy looks set to be more nuanced but equally important: it is the year in which streaming started to truly transform the music industry. The significance though lies in how the music industry is responding. With download sales tumbling, royalty rates still being questioned, and Taylor Swift’s hugely publicised windowing, the music industry is taking a long hard look at what role streaming should play. Spotify and Soundcloud will find themselves in the cross hairs, but there is also a case for redefining YouTube’s remit too.

Don’t Throw Out Freemium With the Windowing Bathwater 

Swift’s windowing move centred around free streaming. If Spotify had been willing to treat the free tier as a separate window from its paid tier, the odds are it would have got ‘1989’. Spotify’s argument that weakening the free tier could affect their ability to convert is logical. But ultimately the purpose of the free tier is to persuade people to pay to stream, not to deliver a fantastic free experience. I first made the case for windowing back in 2009 and I remain convinced it will be crucial to long term success.

By playing an all-or-nothing negotiating game freemium services risk being left with the latter. And it would be a tragedy if freemium got thrown out with the windowing bath water. Windowing will quite simply make free tiers more palatable. Windowing can drive huge success. Look at Netflix: with 50 million subscribes gloably Netflix has the traditional broadcast industry running scared yet is far more heavily windowed than Spotify – how many new movies do you find on Netflix?

One Rule For YouTube Another For The Rest

But the core problem is that Spotify does not exist in a vacuum. While Swift windowed Spotify her videos stayed on YouTube and Vevo. Unless YouTube is treated with a similar approach to other free services then any windowing efforts will simply drive more traffic to YouTube rather than drive more sales or subscriptions. 5 years ago a YouTube stream could be seen as driving sales, now a YouTube stream drives another YouTube stream.

Among the Top 10 fastest growing YouTube channels (in terms of views), half are music. More people are streaming more music on YouTube than ever. The reason YouTube remains untouchable has much to do with the fact labels still see it as a promotional vehicle despite the fact it has become a fully fledge consumption platform. Without doubt YouTube plays the discovery role for youth that radio does for older generations. But it is also the end point for youth.

Time For A New Role For YouTube

So what is the solution? Simple. If YouTube is the radio equivalent for youth, make it look and feel more like radio, not like Spotify premium with video. Instead, make YouTube look like Pandora with video. If YouTube is all about promotion then swap out unlimited on demand mobile plays for DMCA compliant stations. Let any user search and discover a new song but once they have discovered it the next few music videos are automatically selected related videos.

I remember Beggars’ Martin Mills quoting music industry veteran Rob Dickens:

‘If you play what I want when I want I’ll accept it is promotion. If it is what you want when you want it is business.’

That is at the core of what makes a streaming service additive versus substitutive. This is why Pandora stands out as a complement to ‘sales’ revenue and why YouTube no longer can. If YouTube’s core value to the music business is still discovery then this approach is how that role can be protected without damaging the ability of subscription services to proposer.

Do Not Conflate Music Key With YouTube

Now of course, YouTube has its own subscription service too in the form of Music Key, which is great: YouTube is a hugely welcome addition to the subscription market. But this does not mean YouTube music videos should be free on demand to all. Only 3% of UK and US consumers say they would pay for Music Key (and consumer surveys typically over report on intent to purchase).   Instead, YouTube’s free on demand music videos should be only available for users that register for Music Key. This would be Music Key’s freemium base, not the entire installed base of YouTube users.

With on demand free music it is all about the conversion path: how many of those consumers that listen for free are likely to pay. With YouTube’s 1 billion users it is a tiny per cent so there is little business rationale for letting them take the Ferrari out for a test drive when they are only ever going to get the bus.

Is 9.99 too expensive for most free music users? Of course it is. Should PAYG options be added in to the mix? Yes, absolutely. But none of those will work unless the music industry takes a consistent and fair approach to freemium.

Turning YouTube into a video enabled Pandora is clearly a controversial proposal and it will have huge opposition. It may even cause some meaningful disruption in the mid term, but unless equally meaningful change is made the music industry will remain locked on course to a future in which subscription services will never be able to realise their full potential.

14 thoughts on “Why It Is Time To Make YouTube Look Less Like Spotify And More Like Pandora

  1. I have wondered about windowing for many years, Rhapsody got it right when they allowed you to listen to the entire album one time for free and then you had to buy the album to have access to it again and that business model has been working since.

    So I’ve said to myself and others, it’s quite simple to resolve the music industry conundrum of losing money.

    If you think about it, many years ago before streaming because widely known. We would hear a song on the radio or see a music video on MTV, VH1 etc, because that song/video was being aired to promoting the forthcoming single or album and drive in stores sales.

    The movie industry uses windowing very well, first a movie goes to the theaters, then it’s on TV and syndication, then DVD.

    So the question is: why haven’t they suits at the record label figured that out and simply mirror the film industry.

    1st: Use Radio to promote and drive sales on the download stores and premium subscriptions for online streaming (music & video) services, 2nd: Make music & videos available to only premium subscribers, 3rd: Release on CD (if viable). 4th: Then repeat…

  2. The Sirius model in my mind is the way.
    Spotify, Pandora and YouTube are like turning on the water tap. You get what you get.

    SIRIUS on the other hand is more engaging, and personal with host/celebrity stimulation and thought provoking . You gotta have that, otherwise it’s just quite simply boring.

    Spotify, Pandora and even YouTube are more like a jukebox which bodes well in a public setting, like a party or bar setting, where the music is more or less in the background.

  3. I agree strongly that greater free tier windowing is necessary, and that Youtube’s current free tier needs to be restricted more… but I hope you understand the challenges of this initial proposal. First, it will pretty much require Youtube users to register and log in to view *any* music videos, because the other options are to track via an easily rejected/deleted cookie or via IP, which could cover a lot of different users. Music videos will then be second class in convenience to other content types on the site, unless you force a login for everything, in which case Youtube becomes less convenient compared to its competitors. Speaking of which, current second-tier video sites like Yahoo, Vimeo, Dailymotion etc. will need to face the same restrictions and be closely monitored to prevent extensive reposting on unofficial channels.

    Assuming you get it set up, I don’t think pushing people into radio after a single play is the smoothest handling. Check out this hot new artist, oops, you’ve just used your free play so my blog embed or Twitter link redirects into a radio station and you can’t see them for several plays. Pretty unpleasant UX. Instead, what about a weekly or monthly lockout from an artist’s channel or newest video after several views? Then users can elect to either launch ad-covered radio for the artist or pay in one form or another, whether that’s a purchase, full subscription, rental, channel subscription, filling surveys, sitting through longer ads, etc. To me it seems easiest to make sales to a new convert who has already built up a little interest in an artist. In addition to pushing various tiers of subscriptions and paygo rentals, I would like to see some consideration of selling individual channel subscriptions in the $2-3 range that would give subscribers a couple of exclusive new covers and/or a livestream every month. I know such channels have not done well on Youtube so far, but the top music artists have far far more traffic than most of them.

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  6. The difficulty with YouTube is that they are the 800 pound gorilla that lives to the letter of the DMCA law vs. being a good partner with the music industry. If you don’t want to be on Spotify, Rhapsody, Beats Music or any other legitimate streaming service you simply have to say no. If you don’t want to be on YouTube, SoundCloud or GrooveShark you have to hire an army to constantly issue take down notices. They make it almost impossible to not be on their service on purpose. Their content ID system (the same system they use to ID content to monetize) is so flawed that almost every 8 year old kid knows how to game it to keep their UGC (a buzz word for pirated work) from being flagged and you have to play manual search whack-a-mole 24/7 to even make a dent. What’s worse is there is a whole generation of YouTube users that think this is normal. Intact they think it’s their right to use your copyright and post it because they are “fans”?!?! Almost every legitimate content company in the world (outside of YouTube) is forced to properly license content or be sued for copyright infringement. Not YouTube or Google as they have hired so many lobbyist that they can squash any attempt at protecting legitimate copyrights. It took many many years of lawsuits to get GrooveShark and SoundCloud to start legitimizing their service but no one is willing to admit what YouTube is doing day in and day out is wrong. YouTube has to become a legitimate music service and comply when a copyright owner says “I don’t wan’t my content on your service” and if you allow it on your service you are liable for the infringement. Can you imagine if Spotify or Rhapsody allowed anyone to put up Garth Brooks catalog and then said, if you tell us it’s there we will pull it down but you have to find it first and as soon as it was taken down it went back up and they said you have to tell us again as this just went up? YouTube is not promotional it’s enabling an entire generation to think that copyrights do not have value and that its actually their “right” to do what ever they want with them. Can you imagine if ABC decided to use a Michael Jackson song in it’s new TV show trailer and pitch-shifted it so it didn’t get flagged on TuneSAT or what ever tracking system they use. Then when it was caught they simply had to pull it down vs. pay fines or even have a cease and desist slapped on them. Let’s wake up music industry and fix the biggest piece of the broken system. YouTube is not your friend it’s more akin to the perverted uncle that we don’t want our kids playing with.

  7. Mark, I do love the idea and sentiment but let’s be honest, since Google bought YouTube the innovation has been pretty low. They’ve added ads and content ID – anything else notable? The design is still as horrible as it’s always been.

    Do you really expect them to do something like this? They’ll do what they’ve always done: try new models on different services that ultimately get no traction and end up failing.

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