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YouTube [1,974 articles]” href=”https://www.musicbusinessworldwide.com/companies/youtube/”>YouTubeās ātwin enginesā of subscriptions and advertising appear to be firing on all cylinders.
As revealed last week, the platform added +25 millionĀ subscribers over the past year to reach 125 millionĀ paidĀ YouTube Music [299 articles]” href=”https://www.musicbusinessworldwide.com/companies/youtube/youtube-music/”>YouTube MusicĀ and Premium subscribers worldwide, including trials.
YouTubeās subscriber growth story today becomes much clearer when you compare it with that of Spotify [4,188 articles]” href=”https://www.musicbusinessworldwide.com/companies/spotify/”>Spotify, the worldās largest subscription music platform.
SPOTĀ addedĀ +27 millionĀ net paying subscribersĀ in the 12 months to the end of December 2024, reachingĀ 263 million paying users.
At a time when questions are being asked about the velocity of music subscriptionās growth trajectory, YouTube is getting faster, not slower.
When YouTube announced that its subscriber count had hit 100 million a year ago, that figureĀ had grown by +20 millionĀ since November 2022.
No surprise, then, that Universal Music Group [3,980 articles]” href=”https://www.musicbusinessworldwide.com/companies/universal-music-group/”>Universal Music Group Chairman and CEO Sir Lucian Grainge [711 articles]” href=”https://www.musicbusinessworldwide.com/people/sir-lucian-grainge/”>Sir Lucian Grainge cited YouTube MusicĀ on UMGāsĀ Q3 earnings call in October as having ābecome one of the fastest-growing players in subscription.ā
Meanwhile, YouTubeās ad revenues across the entire platform reached $10.47 billion in Q4 alone ā the first time the platformās ad revenue surpassed the $10 billion mark in a single quarter.
The platformās parent company, Alphabet/ Google [974 articles]” href=”https://www.musicbusinessworldwide.com/companies/google/”>Google, doesnāt disclose how much of that ad revenue was driven by music alone, but YouTubeĀ confirmed back in 2021 that music accounted for 25% of watch time on the platform globally.
The global music business will be keen to know how much of that ad revenue is going to music rightsholders. The most recent music industry payout number shared publicly by the platform was in September 2022, when YouTube announcedĀ that it had paid music rightsholders over USD $6 billion in the 12 months to the end of June 2022.
That figure marked aĀ $2 billionĀ increase from theĀ $4 billionĀ contributionĀ to music rightsholders that YouTube said it paid out in the prior-year period (the 12 months to end of June 2021).
It was also double the size of the money that YouTube said it paid to the music industry in the calendar year of 2019Ā ($3 billion).
āThe twin-engine growth story is a real thing. And the bigger the engines, the better it is.ā
YouTube also confirmed in September 2022 that some 30% of the $6 billion-plus it delivered to music rightsholders in the year ending June 2022 came specifically from UGC (user-generated content). This means that, at the time, YouTube was paying music rightsholders somewhere close to $2 billionĀ annually in ad revenue generated from UGC.
With YouTubeās total ad revenue and paid subscriber numbers rising significantly since those figures were disclosed, itās fair to assume that the platformās annual contribution to the music industry has increased too, but that figure isnāt publicly available just yet.
YouTubeās Global Head of Music, Lyor Cohen, tells MBW that heās still bullish about YouTubeās goal of becoming the number one revenue contributorĀ to the music industry globally.
That title is currently held by Spotify, which paid out USD $10 billion to the music industry in 2024 āĀ $1 billion more than it did in 2023.
āWe are not going to stop until we become the number one revenue source, not just the best partner.ā
Lyor Cohen
Cohen says that YouTube is ānot going to stopā until it claims the No.1 spot, however, and cites a fable with an ending most of us know to explain his long-term version for the platform:
āThis is like the turtle and the hare,ā he says. (For British-English readers wondering about the title of this fableā¦ āturtleā replaces ātortoiseā in American-English.)
Adds Cohen: āWe have a long vision. Weāre committed to building products that the fans really care for and where fans are, thatās where youāll find the music industry and the artists. We are not going to stop until we become the number one revenue source, not just the best partner.ā
Discussing YouTubeās latest subscriber milestone with MBW, Cohen says heās āelatedā.
āIām so thrilled, not simply for all the 1,000 people-plus that have contributed to this milestone, but Iām thrilled for the industry,ā he says. āPeople are probably tired of me saying this, but the twin-engine growth story is a real thing. And the bigger the engines, the better it is.
āAll this means is more money for artists and songwriters, artist development, and A&R signings. Iām also thrilled for the consumer and the fans that [use] our music app. Thereās no better music [streaming] product than our music app.ā
Here, Lyor Cohen discusses his ambitions for YouTubeās positioning in the music industry and how building a global music subscription business āis not for the faint-heartedā¦ā
YOu mentioned this being like the competition between the turtle and the hare In terms of becoming the number one contributor of revenue to the music industry. When do you predict that YouTube will win that race?
I canāt predict that. I did say by 2025. Thatās obviously not going to happen. Weāre either number one or number two, depending on the account and what country, but we want to be number one globally. And weāre committed to putting in the work.
Do you know if the subscribers that YouTube is adding are being acquired from other platforms, or these new subscribers who are being added into the music ecosystem who didnāt previously subscribe to a platform?
I think they are new subscribers. And we havenāt even gotten to the switching [from other platforms] challenge yet.
We wanted to build a world-class platform. We wanted to take our time, listen to the industry, listen to the fans, course correct, and iterate. I think weāre slowly feeling very bullish about trying to address switchers, but so far, that has not been our focus.
YouTube is expanding the premium lite service to us users This week. Can you tell me about that funnel from premium lite to full premium user?
Well, thatās ultimately the goal ā to give someone a more introductory opportunity and have them really dig the experience of not paying with their eyeballs, but actually subscribing.
Without naming any services, Do you feel like competitors in the market have an unfair advantage in terms of being able to give music away for free essentially via ad-supported services?
No. And by the way, I donāt look at anybody investing in music as competition. I look at those who are investing in music as comrades in arms to make the world a better place.
When it comes to your question about advertising parts of platforms; we respect all consumers of music and feel like they should be validated.
āThe twin engines should be growing on both sides.ā
We should meet the consumer where they are, and if they want to pay with their eyeballs, we should give them the utmost respect.
We should try to work on making sure that we increase monetization. We are selling premium products, so the advertisers should recognize the fact that this is premium and that our advertising dollars should grow as well.
The twin engines should be growing on both sides.
Tiktok was running a music service in a handful of countries around the world, and they closed it. What does that tell us about the wider streaming market, and how competitive it is to thrive in it?
Let me tell you, building a global music subscription business is not for the faint-hearted. It takes real commitment.
We have the finest engineers, led by John Harding. We have the finest UX people led by Dee Speed [Director of UX]. We have the finest product people led by T. Jay Fowler [Director of Product Management] and Will AldrichĀ [Director, Product Management].
You have to have the finest engineers, product and UX [execs] and the best world-class marketing person. Thatās Jodi Ropert [Vice President, Marketing at YouTube].
You canāt half-ass building a global subscription business. It takes a lot of effort and a lot of capital, and of course, you have to recruit the most talented people on the planet.
Thereās a lot of talk at the moment about launching pricier super fan tiers with different perks. Have you considered doing that at YouTube, or would your partners like to see it happen?
Thereās a lot of energy, focus and discussions around the superfan. Weāre constantly analyzing opportunities with other skews, and our full attention is going to Premium Lite to make sure that it launches in the most elegant and constructive way.
And then weāll start thinking about iteration and different skews, but we have a lot of work around the superfan and thinking through the superfan, etc.
Weāll be incredibly excited to see the progress made with the other platform launching it.
What are your thoughts on the evolution of, and your predictions for, the long-term significance of music videos on YouTube? And How important will music videos be for artists in the future?
Thank you for asking that question, because that is one of our top priorities: visual storytelling. Iām thinking [a lot] about the music video. You know, the living room is the fastest-growing screen [for] YouTube.
Thereās a lot of incredible and positive signs we have about the opportunity of video and storytelling. Thereās a lot of [music] releases per day, and so we think that video storytelling really helps contextualize songs.
Weāre not interested in just breaking songs. We want to break artists, and video storytelling is one critical foundation block.
Itās also been the most costly line item of the music industry. If there is a way through AI that we could help reduce the cost of visual storytelling and improve the quality, I think it would be a real gift that we could give our partners and artists and fans.
Certainly weāre doing a lot of work on discovery and making sure that the Premium music video and storytelling is front and center and weāre very excited about it.
Last year we saw Facebook [584 articles]” href=”https://www.musicbusinessworldwide.com/companies/facebook/”>Facebookās parent company meta decide that they didnāt want to license premium music videos anymore. There is a concern in the market that the high demand for short-form video content is eating into the demand for longer-form, premium music videos. For a platform like YouTube that offers both shorts, but also premium music videos, how do you strike a balance so that the two formats can exist and thrive together in the long term?
I think itās a beautiful question, and one that is very near and dear to us. We want, like I said, to have a much more nutritious user experience, where they may discover new artists and their favorite artists in Shorts, but they go deep with long form.
And itās funny to say that the premium music video is considered long form. I remember when I was digging through [vinyl] crates and flipping through [records], but every once in a while I would touch something and pull it out.
Imagine thatās the Shorts, and the moment I touch it, I actually move you over to what you pulled out, the talking heads, and give you interviews or videos of live performances that make you experience the artist in a deeper and more satisfying way than just a flippant way.
Iām not a big fan of scrolling in isolation. Itās a way to discover, but the nourishment is your ability to discover something but also to go deep, and end up cherishing finding that artist and [sticking] that artistās poster on the wall, and standing in line and going to shows and meeting your community of fans.
When we were speaking about music videos, you mentioned the us of AI to lower the cost of making them. What are you doing in terms of AI and your investment in AI tools on the platform?
Weāre going to introduce Veo 2. Itās already in the Dreamscreen on Shorts, but itās also going to come to the longer form [videos].
Itās an incredibly powerful AI tool that allows you to prompt and create cinematic content.
Would you say that the AI tools available to YouTube in collaboration with Google is a significant competitive advantage for YouTube?
Yeah, it is. And the key is to do it thoughtfully, responsibly, and boldly. Our superpower is the deep partnership we have with the music industry, and we set principles early on.
We also believe and agree that AI is going to help power and contribute to human creativity.Ā We really believe that [AI] is going to make things more creative and more interesting. And youāre right, itās part of our competitive advantage that we get to work with an incredible company like DeepMind.Music Business Worldwide