The Changing Business of Music: New Paradigms for Making Money

Contrary to some widely circulated reports, music is not dead.

In some ways, we earn money the way we always have - we make great music, we build a strong brand and we sell it.  What has changed - is always changing in fact - is the way we sell it.  Sheet music, vinyl records, cassette tapes, CD’s, air play, live performances and appearances, publishing, sync rights, sponsorships, merchandising, digital downloads and now streaming.

Streaming.  Digital music transmitted but not downloaded for the listener.  Streaming, is a like a one time license to listen to a track.  If they want to listen again, they need another license.  The cost to the listener for the license? Advertising.  Not quite free, but close.

Musicians all around the world are making money from ad supported streaming of their music,  right this minute.  And good money too.

Jamaican musicians are making good money from ad supported streaming of this music, right this minute.  And good money too.  On YouTube.  Yes.  YouTube.

There are other streaming services - Pandora, iTunes Radio, Spotify.  But from my perspective, there is none more popular or easier to access for both listeners and musicians as YouTube.  Let’s look at the numbers.

Google pays 55% of revenues to rights owners.  This works out roughly (very roughly according to Rolling Stone) to US$2 per 1,000 views.  According to DigitalSpy.com, Rhianna’s estimated YouTube only earnings last year - US$4.15 million.  And she is not the top earning artiste.  Sky News reports that YouTube has paid out over US$1billion to rights owners.

Local musicians don’t publicly share their revenue information, so I can’t quote figures.  You’ll just have to trust my anecdotal evidence.

Locally, let’s look at some examples:

Channel	Subscribers	Views
HeadConcussionTV	107,909	71,434,229
SpiceOfficialVEVO	69,996	25,277,386
vprecords	172,668	238,975,227

I will admit, it is not a simple as flinging up a crappy music video and collecting coin at the bank.  To make money requires strategic effort.

Before any video is posted, it starts with great music and a strong brand.  The mechanics of brand building are for another forum, so let us assume for now that you have a great brand and a new YouTube channel.

There are some basic areas which require attention to build audience.

1. Artwork must pop, after all YouTube is a visual medium.
2. Playlists must be multiple and relevant, so as to truly engage your audience and benefit from cross promotion.
3. Video descriptions need to be detailed. Those video descriptions can be leveraged to generate actual sales with appropriate links to iTunes, Amazon, Google Play and other such services.
4. Videos need to roll out on a strategic schedule, in tandem with your master plan and to satisfy you subscribers.
5. Videos need to be creative, but you are creators, so that goes without saying, to engage audiences.
6. And, perhaps most importantly, tags and meta data must be included.

A fully optimized YouTube channel generates income primarily from advertising.  Google offers a plethora of options which advertisers love - banner ads, pre-roll ads, demographic targeting ads - each at a different revenue rate.  But the channel can also generate income from sponsorship and branded content.

Global superstars have access to Vevo - a joint partnership between Google, Universal Music Group and Abu Dhabi Media - which manages YouTube music videos.  We have access to other independent agencies which can provide YouTube optimization services and favorable returns.

Favourable returns are important because, the 55% paid over by Youtube has to be split among all rights holders.  That list could include the DJ or singer, the songwriter, the musician, the producer, the record label and the music publisher.  Depending on the deal, the list could include the music video director.  Then the revenues may been to be allocated further to the manager, the attorney and the accountant.

That’s a long list, but do not be daunted.  I have good news.

A fully optimized YouTube video truly exploits ContentID.  Introduced last year, ContentID made it possible to make REAL money without alienating fans or issuing dozens of expensive cease and desist orders.  As Billboard explains it, "Content ID allows rights holders to receive reference files on content they own, metadata describing that content and policies to help them choose what they want YouTube to do with that content -- monetize, track, or block it -- once they find videos that match."

Remember the Harlem Shake?  At it’s peak, there were over 4,000 user-uploaded videos featuring the song totaling over 30 million views.  With ContentID, the Harlem Shake rights owners made money on every single view, regardless of whether the view on their channel or not.  Every fan video, every live video, every video that included the Harlem Shake song posted to YouTube made them money.

Now, musicians can encourage their fans to re-post their videos, add them to playlists, make their own lyric video or even their own lip-sync rendition of their favourite track.  The rise of the dancer video has created a wealth of new revenue opportunities.

Want to make more money?  Compelling Content.  It is not enough for viewers to visit your channel, they need to stay and watch.  Longer views mean more ad revenues which means rights holders make more money.

Want to make even more money?  Sponsored content.  A strong subscriber base and high viewership can attract sponsors interested in product placement, mentions and other exposures.

Want to double down on the money you make?  Ensure that your YouTube roll out plan compliments and capitalizes on your wider marketing plan to build your brand and sell your music.

What is a new paradigm for making money in music today? YouTube.  Tomorrow, perhaps SoundCloud.  But that can be discussed at the next MSBM forum.

Thank you.