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Music: Does YouTube help or hurt?

Craven Lovelace
NOTES
Free Press Music Columnist
Craven Lovelace
Staff Photo |

For years now, music industry analysts have debated whether YouTube helps or hurts the record labels. Now, thanks to a recently released study conducted under the aegis of the Center for the Analysis of Property Rights and Innovation, we have some data to help us answer that question.

Researchers R. Scott Hiller and Jin-Hyuk Kim examined the period between January and October of 2009, when Warner Music Group (WMG) removed all of its music from YouTube due to a licensing disagreement. Hiller and Kim looked at album sales during that period and determined that WMG sold as many as 10,000 albums more per week than when the music was available on YouTube. They estimated that, if the numbers were comparable for other labels like Sony and Universal, the music industry was losing up to $130 million to YouTube annually.

Upon reading the researcher’s conclusions, label advocates were, to say the least, feeling vindicated in their long-held belief that YouTube was hurting the industry. But the story is more complicated when you drill down into the findings.



For instance, Hiller and Kim determined that the sales hit was really only affecting currently popular albums. Once you got down past the Top 50, having an album uploaded to YouTube had almost no effect on catalog sales.

Furthermore, after a record label executive made disparaging remarks about YouTube at this year’s Marché International du Disque et de l’Edition Musicale (the annual international music exhibition held in Cannes, France), YouTube’s Vice President of Content, Tom Pickett, revealed that YouTube has paid out more than $1 billion to music rights holders “over the past several years.” Even if that is the sum total that Google has paid since it acquired YouTube in 2006 (and we don’t know that’s the case), it means the company has poured an annual average of more than $125 million into the music industry’s coffers, making its impact on the bottom line close to a wash.



But wait — there’s more. YouTube has also opened up completely new revenue streams for record labels and music publishers; streams that simply didn’t exist before the company was founded in 2005. For instance, the Digital Music Report released last month by the International Federation of the Phonographic Industry showed that labels are now earning more money from advertising affixed to lip-sync videos, fan-created mash-ups and the like than they are from the actual promotional music videos created by the labels themselves. One executive, Francis Keeling of the Universal Music Group, called it “a massive growth area.”

So, to paraphrase the great Louis Jordan, “Is YouTube is or is YouTube ain’t the music industry’s baby?” The answer remains clouded, but one thing seems for sure: All eyes will be locked on YouTube during the next few years to see.

Craven Lovelace is the producer of the Notes Blog & Podcast at http://cravenlovelace.com/notesblog. He also writes about popular culture at the Cravenomena blog: http://cravenlovelace.com/cravenblog. You may find him on Facebook as well.


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