When YouTube announced recently that it had paid more than $8bn to the music industry in the last year, its music chief Lyor Cohen said that “the twin engine of ads and subscriptions is firing on all cylinders”.
How is that engine purring for YouTube as a whole? Parent company Alphabet’s Q3 financial results can partially answer that. YouTube generated $10.26bn of advertising revenue last quarter, up 15% year-on-year.
Alphabet CEO Sundar Pichai shared another stat during the company’s earnings call with analysts yesterday too. “YouTube Shorts also continues to perform well,” he said. “In the US, Shorts now earn more revenue per watch hour than traditional in-stream on YouTube.”
This isn’t a big surprise. Back in May, YouTube CEO Neal Mohan said that Shorts were equalling long-form vids for revenue per watch-hour in the US, and had overtaken it in some other countries. Now the US has also crossed that tipping point.
This is relevant to music. For some time now, labels have been grumbling about the royalties they get from short video platforms: not just Shorts, but TikTok and Instagram reels too.
Creation and consumption on these services has exploded, and so much of that content is soundtracked by commercial music. Yes, there’s a promotional boost when songs that go viral in short videos get a spike in streams elsewhere. But rightsholders want music’s value to be reflected in bigger direct payouts too.
The challenge has been that short video was still a new and fast-evolving space, with the platforms testing which ad formats would work best, and advertisers gauging when the moment might be right to put more spending its way.
The ads surge for Shorts should be good news for the music industry: more revenue being made means more revenue to share with partners. But it also raises the stakes in the negotiations for the next set of short-video licensing deals, where rightsholders will be even more keen to secure what they see as their fair share.
