Change Is Afoot In Music Video

Music video’s two power players are both in the news for strategic resets. On the one hand YouTube has announced that it is merging its YouTube Music and Google Play Music teams while on the other hand Vevo has announced it is postponing the launch of its subscription service in favour of prioritising global expansion. These are both important developments in their own rights but together form part of a changing narrative for music video.

Music video is streaming music’s killer app. According to MIDiA’s latest consumer survey, 45% of consumers watch music videos on YouTube or Vevo every month, while 25% of consumers use YouTube for music every week (more than any of the streaming audio services). So what YouTube and Vevo do has real impact.

YouTube Is Where Google Is Placing Its Music Bets

YouTube’s merging of teams is not a huge surprise. It always appeared overkill having 2 separate teams, especially considering that Play was performing so poorly in the market (its weekly active users are measured in single digit percentages) and that Google’s music priority has always been, and will always be, YouTube. Although nothing will change immediately in terms of user proposition, the strategic direction of travel is clear: YouTube is where Google will place its music bets. Which places even greater importance on rights holders and Google coming to an understanding around royalty payments. YouTube moving to minimum guaranteed per stream rates is untenable (for Google) as is the Value Gap/Grab (for rights holders). Something has to give.

My long-term bet is still on Google creating a parallel music industry around YouTube, one that is entirely opted out of the traditional music industry’s rights frameworks. But a more immediate concern for Google is contingency planning in the event of Vevo upping sticks and becoming the centre piece of a revamped Facebook video play. A combination of no Vevo and disgruntled rights holders would be a recipe for disaster for YouTube’s music strategy.

Facebook And Vevo May Be Courting 

Vevo jumping ship to Facebook is not as far-fetched as it might have seemed when it was first mooted a few years ago. Facebook is now the world’s 2nd biggest online video property and has finally admitted that it is a media company. Slowing ad revenues in 2017 will see Facebook double down on ancillary revenue streams and content will be a key plank of that strategy. Games is the biggest addressable market and it has already made moves in that direction. Growing video is another. While streaming music is a relatively small market opportunity for Facebook, it has wide appeal. Launching an AYCE streaming service would be an ill-advised (and highly unlikely) option for Facebook, but partnering with Vevo would be a higher margin, lower risk way of getting into music. It would also be the perfect vehicle with which to showcase Facebook’s next generation of video UI, which will include features such as curation, channels, recommendations etc. In short, a lot less like Facebook video and lot more like YouTube.

The Rise Of Music Inspired Video

Interestingly, Vevo’s CEO Erik Huggers has announced that Vevo will be increasing its focus on short form, non-music video, such as artist interviews, mini-documentaries, and animated shorts. This snackable, highly shareable content bears closer resemblance to the sort of video that works well in Facebook’s more social-centric video platform than YouTube’s more viewer-centric environment. Vevo’s non-music video approach is smart. As we explained in our report ‘From Music Video To Music Inspired Video’, if rights holders want their share of overall video time to grow, or at least hold their own, then they need to start exploring creating music related video rather than just music videos.

The core consumption format will still be the music video, but the additional content expands reach and time spent. In a Facebook environment (especially if Instagram was incorporated) this sort of content would spread like wildfire. Add into the mix that Huggers also referenced Vevo’s prioritization of building its direct audience via its own apps (ie not via YouTube) and we might just be starting to see the emerging shape of a planning-for-life-after-YouTube strategy. Even if Vevo decided to stick with YouTube (which remains the most likely outcome), it could use all of these moves as leverage for getting a better deal.

Change is afoot in the music video space and we may just be beginning to see the two key players beginning to put competitive space between each other. But perhaps most tellingly, as both companies up their game, they are also both, in different ways distancing themselves from their subscription plays. Music video is the killer streaming app for many reasons. The fact that it is free is reason number one, and Vevo and YouTube both know it.

Why It’s In Everyone’s Interest to Get Music Videos Back on YouTube in the UK

YouTube have announced that they will block access to music videos for UK viewers due to a dispute over licensing terms with UK collection society PRS for Music (formerly known as the MCPS-PRS Alliance).

This is the almost inevitable result of two long-term strategic courses which have ultimately been on collision path:

  • On the one hand you have PRS becoming increasingly assertive  of its remit and licensing position, right from the level of policing small business performance licenses. PRS sees a digital world in which numerous start ups build their businesses around music but that publisher and performance rights seem to be much further down the agenda than record label rights.
  • On the other hand you have Google still desperately trying to figure out how to make YouTube ‘work’ as a business. More effective innovation in video advertising is needed on the one hand, whilst better relationships with content owners are needed on the other. Ever since Google bought YouTube, numerous content owners have come in for their share of the pie. In many instances unsatisfactory licensing negotiations have seen content owners opting to take legal action against YouTube instead (e.g. Viacom, The English Premier League etc). Others have started playing hard ball by other means (e.g. Warner pulling their music videos). With revenue from advertising needing to grow more strongly, YouTube can only cede so much ground in rights negotiating and also needs to be seen not to be a soft touch. Otherwise all content owners will seek aggressively better terms.

So with both parties set to fiercely fight their corner, a conflict was always a strong possibility. The action does have the air of a PR stunt about it and certainly ensures that dirty laundry is now washed in full public gaze. PRS’s Steve Porter said

This action has been taken without any consultation with PRS for Music and in the middle of negotiations between the two parties

Whilst YouTube’s Patrick Walker said

[PRS was seeking a rise in fees] “many, many factors” higher than the previous agreement.

UK consumers needn’t worry too much. The music videos will be back. Once the grandstanding is over both parties will hit upon a compromise. Music video is too important to YouTube not to reach an agreement, just as YouTube is too important a revenue stream for PRS. Until they do UK music fans have plenty of alternatives, such as Daily Motion and of course file sharing networks. And there’s very strong reason why the labels, PRS and even YouTube don’t want YouTube’s loss to be Bit Torrent’s gain.

EDIT:  One very important additional element I missed off has just been pointed out to me: Google are also arguing that PRS cannot give them an exhaustive list of which artists they represent.  Historically this would have just been because of the many very small artists, often without label deals.  But now, with some major publishers withdrawing their online rights the publisher collection market is becoming highligh fragmented.  This raises the stakes for PRS and may well be an astute negotiating tactic for Google.   If push came to shove PRS would probably sacrifice significantly higher rates in favour quoshing the dispute over catalogue reach.  If they don’t their position as a one stop licensing body will be weakened.