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What YouTube Could Learn from Record Companies

April 20, 2016

Peter Mensch gave voice to what many in the music business believe as reported by the BBC:

“YouTube, they’re the devil,” [Peter Mensch] told a BBC Radio 4 documentary on the music business. “We don’t get paid at all.”

He said the site’s business model, in which artists make money by placing ads around their music, was unsustainable.

“If someone doesn’t do something about YouTube, we’re screwed,” he said. “It’s over. Someone turn off the lights.”

YouTube’s reaction?  It’s not them, it’s the labels, the “gatekeepers”.  YouTube pays high royalties for music, it’s that it’s not getting to the artists because it’s being siphoned off by “gatekeepers”.  According to YouTube’s Chief Business Officer–the Suit of Suits–Robert Kyncl:

“There are middle-men – whether it’s collection societies, publishers or labels – and what they do is they give advances and they want those recouped. So it’s really hard when there’s no transparency for the artist.”

If you know anything about trying to actually check the calculation of YouTube royalties, you’ll know that it is impossible–not virtually impossible, not difficult, but actually an impossibility–to determine how YouTube arrived at your royalty payments.  That’s because the key determinate of your YouTube royalty is the revenue share and the revenue share is based upon what an advertiser actually pays, which YouTube won’t tell you.

Sir Martin Sorrell, the head of the mega-ad agency WPP, says Google won’t even tell WPP or the advertisers themselves.  According to a recent article in the Financial Times, Sir Martin “warned Google that unless it improves its efforts to weed out ‘fake views’ of online adverts, marketers will shift their focus back towards traditional media such as press and television.” Sir Martin was reacting to a study that alleged that Google “has been charging marketers for YouTube ad views even when the video platform’s fraud-detection systems identify that a ‘viewer’ is a robot rather than a human being” and Sir Martin stated the obvious conclusion that “[c]lients are becoming wary and suspicious.”

All of YouTube’s business deals are subject to strong NDAs and secrecy like everything else Google touches.  Ask any journalist who’s been threatened with a lawsuit by the most litigious company in commercial history if they dared to publish royalty rates.  Next time you’re in a Google office, be careful that you didn’t inadvertently sign an NDA as at least one music industry executive discovered.

It’s not pretty.

Maybe not all the way to Lucifer, but as Keyser Söze said, the Devil’s greatest trick is making us think he doesn’t exist.

It’s pretty obvious that Mr. Kyncl has no idea about the history of Peter Mensch and Cliff Burnstein two of the greatest artist advocates in the history of the music business.  Cliff and Peter are also some of the most aggressive deal makers out there.  This history doesn’t seem to have penetrated the Googleplex.  That’s not surprising because Mr. Kyncl has no history in the music business so why would he know what a fool he’s made of himself.

That’s why Mr. Kyncl points to one of the “YouTube stars”, Lindsay Stirling, who has the misfortune of being used as a human shield by a multinational media corporation:

“The artists who are signed up directly with YouTube are seeing great returns,” [Kyncl] said. “Not everybody – but if you’re generating a lot of viewership, you’re making a lot of money.”

He cited the example of hip-hop violinist Lindsey Stirling, who has 7.8 million subscribers to her YouTube channel, and made $6m from the service last year.

I certainly wish Ms. Sterling well, but I note that unlike other artists, Ms. Stirling is not publishing her YouTube royalty statements.  I wonder if that’s because she’s subject to an NDA?

Knowing what I do about YouTube royalties, I seriously doubt that Ms. Stirling actually made $6 million from YouTube royalties.  That means she made more from YouTube that Psy did on “Gangnam Style”.  (Although Google overstated Psy’s numbers by magnitudes, as well.)  And if she did, she needs to audit YouTube right away.  What’s true of other YouTube stars is that they make that kind of money from brand integrations or tie ins–not from YouTube royalties which is what Peter was reacting to.

So here’s what YouTube can learn from record companies.  No record company discloses to the public the royalties they paid to any of their artists and no record company would ever put their artist in the position of being a lottery winner poster child to promote the label.

Why?  Because managers like Peter Mensch would put their foot so far…well, would give them such a vigorous kick that they could learn to tie shoelaces with what’s left of their molars.

I feel for Ms. Stirling who was probably minding her own business…literally…before she was put into play by a man and a company that clearly know nothing about artist relations.  It’s not her fault.  She’s gotten involved with The Man 2.0, the New Boss.

As she would probably tell you if her confidentiality clause allowed it.

And you know what kind of contract doesn’t have that kind of restriction?  A record deal. And you know what a manager like Peter Mensch would do if any label one of his artists was signed to tried to muzzle his artist?

Can Mr. Kyncl tie a bow with his teeth?

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