Hello, winter continues to be alarmingly mild in New York City, but I hope all you readers across the globe are doing well. For any new folks, my name is David Turner currently based in Brooklyn. My day job is as a strategy manager at SoundCloud. I keep meeting people who aren’t aware of my day job, so I figured it may be new info for some, either way, if you enjoy the newsletter please share it with your friends. And if you’re in academia please send any recent papers on music and technology you’d recommend, even more so if one’s own research. Now let’s talk about my favorite music streaming platform…YouTube.
Google is under pressure. The Department of Justice in the United States sued the company claiming it holds a monopoly over digital advertising. Those same revenues declined again in Q4, affirming an end to the pandemic-era bump. Through the Alphabet Workers Union, a few dozen YouTube moderates went on strike against a return to the office work policies in Austin, Texas; this comes on the heels of the company announcing cuts to 12,000 workers. (That announcement also leads to AWU-led protests across offices.) And if that wasn’t enough Microsoft, via its investment into ChatGBP, is performing a full-on public relations assault on the company's core product of search. Ironically, YouTube Music, Google’s fourth or maybe fifth attempt at a proper music streaming platform, may be finding its feet, unfortunately in a business, and in a moment, where the ground is increasingly shaky.
If Google’s seen better days, then let’s quickly review how YouTube got to its current position today. The video-sharing company was founded in 2005, signed deals with the major labels in late 2006, and was days later bought by Google, where labels received $50 million from the minor ownerships they took in YouTube when signing said deals. This outlined the template record labels would use when working with digital startups over the preceding decades, but perhaps more importantly for YouTube, the purchase allowed what was then an unprofitable company to sustain itself. Over the next fifteen years, YouTube would continue to grow in size, the types of content on the platform would change along with the audiences, business decision shifts (personified in its recommendation algorithm), and really affirm its hold on global culture with the rise of smartphones. (Google Trends searches for ”YouTube” peaked in the mid-2010s.) The coronavirus pandemic helped extend the platform’s relevancy as other firms like TikTok and Twitch (also unprofitable) nipped at their heels. Now similar to other tech firms, YouTube is seeing new headwinds (decreased ad spend, fragmented user base, and monetary policy shifts) decelerating its growth again. Still despite all of this YouTube Music shouldn't feel quite so dour.
Last November, YouTube announced it surpassed 80 million subscribers, a thirty million jump from the last time it announced the figure in 2021. However, the proclamation revealed nothing about the listeners fueling the growth. Instead one must rely on stories emerging from South Korea about YouTube’s rise to get any sense of where the company may, or may not, be growing. This is important to understand because, over the last couple of years, Spotify’s found major growth in non-western markets, where advertising and subscription revenues are much lower so the perceived value when everyone is more closely looking at budget lines, makes the expense of the global endeavors a bit more precarious. Even a peak at Google’s own financials would show that “Google Services”, the company’s largest revenue line, saw operating income drop over the last two quarters. So, even if YouTube Music is getting subscriptions from somewhere it's not making a meaningful impact on its public financials.
The less-than-positive numbers emerging from YouTube and Google as a whole cannot be blamed on a lack of effort. The company last year announced an increase in its family subscription plan on the heels of Apple Music’s price increase. Last year, there were reports saying that YouTube owned a larger share of the podcast market than Spotify, and thus by proxy Apple (?). Yet considering the relatively small size of the podcast business and Spotify’s own about-face away from it; it may not be surprising YouTube, despite some leaks, hasn’t tripled down on the medium. The company also developed and pushed out its TikTok competitor (YouTube Shorts) fast enough to have it receiving 50 billion views (whatever that means) and figuring out a way to monetize the content for creators. Much like Instagram Reels there’s a strange gambit happening here, where all the companies are fighting for a still unproven ad market that’s decreasing in value, as TikTok is able to offer cheaper products. It may be worth restating: TikTok reportedly missed its own advertising revenue estimates last year and is bleeding cash; still, Instagram and YouTube remain committed to following one step behind.
Yet, if Google is facing new competition and pressure, YouTube Music’s fit into that equation is much less clear. Much as I said in January, the value of tech firms in music is increasingly just buttressing the advertising spend that traditionally would’ve derived from major labels, radio, and other now long-degraded music industry media. YouTube just announced a four-year livestream deal with Coachella, which would affirm the company is committed at least to serving that function. Yet for musicians, there’s a bit more give and take to be found.
YouTube is a place where you can debut a music video and alert your fans who’ve subscribed to your channel; incorporate additional behind the scene material like KPop labels; you can even do Shorts (?!). There’s also the whole world of visualizers, lyric videos, and crafty label workers figuring out what trend to hop on to spread a song (“10 hours of this song”). Beyond increasing payouts to record labels in the last few years due to servicing full-time creators on its platform, YouTube can point towards a fuller suite of creator tools, compared to Amazon, Spotify, and certainly Apple. That being said, the economics of being a YouTuber are similarly terrible, so these perks are perhaps best “enjoyed” by the marketing and social arms of labels, or their contractor equivalents.
Google sits on $115 billion, so any executive talk of financial strain should be met with skepticism. Still, the tech giant as a public company is facing a number of unforeseen factors compared to even 18 months ago. This places YouTube, and in particular its music offerings even further back on the shelf. The company isn’t looking to abandon music but with the company’s sudden press narrative around its own AI projects, the allure of YouTube might only diminish as a low-margin middling business. (Still better than the real boondoggles of its self-driving car or health initiatives, which reportedly lost a billion dollars last quarter.) YouTube is here for the long haul, for better or worse.
Unheard Labor & Policy
A couple of weeks back, the US senate held a hearing on Ticketmaster after an intense public backlash against the fiasco around Taylor Swift concert sales was used by activists to further pressure an examination of Ticketmaster. The sudden bipartisan rush to condemn Ticketmaster is notable, but more noise needs to be made to really understand what if any consequences the company may face. The Federal Trade Commission lost its lawsuit to block Meta’s purchase of a virtual reality fitness company; meanwhile, the Department of Justice is looking into Google’s monopoly over the digital advertising market. The defeat of the former is disappointing, but the latter shows the US government isn’t pulling back from placing its eye on tech firms, and in fact is teaming up with other western regulators for additional scrutiny.
A Note of Financialization
Deals, deals, deals. Hipgnosis Songs Capital, their Blackstone-backed investment arm, bought the writing, production, and neighboring rights catalog of the British songwriters TMS. Concord Music Publishing nabbed the catalog of the country songwriter Corey Crowder and signed him to a co-publishing deal. Reservoir Media bought the entire catalog, future works, and sync rights for the singer Dion, whose biggest hits arrived in the early 1960s. Primary Wave announced a slightly vague deal with Stevie Van Zandt to manage his recording and publishing catalogs and also get a chunk of his producer royalties. Really just threading that needle over there. Then the last deal perhaps closest to my heart, the rap producer Zaytoven sold his catalog to Ultra International Music Publishing, curious as to the company’s direction given Ultra Records’ past commitment to dance music.
Outside of purchases, Shamrock Capital raised $600,000,000 for a new fund for media purchases but didn’t disclose who funded it or what specific targets it may seek. This is a great time to mention that Shamrock Capital received a “strategic minority investment” from RidgeLake Partners, Ottawa Avenue Private Capital, Apogem Capital, and Bonaccord Capital Partners late last year. Penske Media, the owner of many entertainment trade publications including Billboard and Rolling Stone, bought Dick Clark Productions with help from Eldridge Industries, a rather large player in the American media industry, they bought the Killers catalog and helped with Sony’s purchase of Bruce Springsteen’s works. A deeper dive into Eldridge may be needed one day as they’ve gotten their hands in many entertainment industry pies.
6 Links 2 Read
TikTok Is Testing Whether Users Stick Around With Less Music - Bloomberg (Subscription)
TikTok, like Twitch, continues to signal to the record industry it won’t be browbeaten into unsustainable deals while its core business is seeing industry-wide contraction. The uncertain economic moment is testing the music industry’s traditional digital strategy as TikTok isn’t interested in just forking over cash it doesn’t have to appease a few entertainment executives.
Universal Music in Talks with Big Platforms to Overhaul Streaming Model - The Financial Times (Subscription) / What Will the Future of Streaming Royalties Look Like? Tidal and UMG Want to Find Out - Billboard (Subscription)
UMG announced it was working with Tidal on a new streaming model that’ll allegedly be fairer to artists (i.e. Universal Music Group). Meanwhile, the Financial Times reported on earlier details that showed a fairly wide range of options on the table for what major labels envision as the fix to streaming. Who knew 2023 was going to be such a fun year in the music business?
What Comes Next in the Music Streaming Model Makeover - Midia Research
Tatiana explored differing scenarios for where music streaming may go next prior to some of the reporting above. The piece is still worth a read to just appreciate all of the factors that brought this moment that are years in the making.
There’s an irony in the amount of hand-wringing about “fans” and “community” and the alleged great value in these two groups being closer together, rather than asking what was lost in breaking down that connection. Perhaps those old “gatekeepers” (i.e. magazines, radio, blogs, etc.) provided a much more financial and structural, rather than cultural value for music.
Kieran Press-Reynolds continues to ask the important questions: What is corecore? What does it want? And perhaps most importantly, how should accept our new meme-first digital overlords?
Cassettes Are Making a Comeback, But Can Production Keep Up? - Billboard (Subscription)
A look at the production of contemporary cassettes that don’t try and act like they’ll be the next thing to save the music industry. I say that because the chatter around NFTs the last couple of years completely ignored the decades of cultural and financial investment into previous formats that aren’t simply erased with a new format. Technologists and record label executives are always ready to discard the past for new revenue ventures, but consumers don’t always turn on the same dime.