YouTube has registered more than 50 million paid subscribers for its music service, which is an important milestone for the Google Video website, which has long been criticized by record companies and Hollywood studios for giving away their works for free.
The 50 million figure includes users who pay for YouTube Music, customers who subscribe to YouTube Premium (part of their music subscription), and customers who are still trying out. The company did not disclose how much revenue its subscriptions generated, nor did it disclose the average price paid by users.
In the past ten years, Google has been trying to recharge music, reusing several different products and names, but without much success. But judging from the performance of the current music service launched in June 2018, YouTube has finally found a way to convince many customers to pay for music. According to data from Midia Research, YouTube is the world’s fastest-growing paid music service, currently accounting for about 8% of global subscribers. Spotify is far ahead.
This is encouraging news for investors in Alphabet, the parent company of YouTube. YouTube’s free advertising support business has made it one of the largest media businesses in the world. YouTube reports that advertising sales in the most recent quarter were 7 billion U.S. dollars (approximately 51.16 billion rupees), an increase of 84% year-on-year. The booming subscriptions provide two sources of growth for YouTube, laying the foundation for most of the world’s great media companies.
“The story of dual-engine growth is true,” said Lyor Cohen, YouTube’s global music director. “Some people are going to pay with their eyes, and some are willing to subscribe. They are all very important.”
When YouTube hired Cohen to run its music business five years ago, the hire was met with strong skepticism in the industry.
Cohen grew up on the hip hop stage in the 1980s, worked with bands such as Run-DMC, LL Cool J, and Beastie Boys, and climbed up the team to help manage Warner Music Group, one of the three major record companies. Cohen was efficient but exaggerated Famous for executives, his Rolodex covers almost all meaningful managers and recording artists in the past 40 years.
But YouTube is a fan of the music industry, a technology company owned by a larger technology company, and both are based on the idea that information should be free and easy to access. The company was sued for copyright infringement and was labelled evil by many critics in the entertainment industry.
The music industry blames the Internet for its 15 consecutive years of decline in sales, hoping that people will pay for music. The executives lamented that YouTube could build a huge subscription business if it wanted to. If the company converts only 5% of its 2 billion users, it will have 100 million subscribers. But YouTube always puts its advertising business first.
YouTube has always been an important promotional tool for the music industry, and artists still make music videos to a large extent in order to spread on the site. Under Cohen’s leadership, YouTube has been seeking to strengthen its promotional tools, including a new product for artists to host live premieres of their videos and interact with fans in real time. But Cohen believes that making people famous is not enough. YouTube also needs to make them rich.
Although Cohen took some time to adapt to a culture dominated by engineers, he was supported by YouTube Chief Commercial Officer Robert Kinkel and CEO Susan Wojcicki. “Soon, most or all of my colleagues encouraged me to help change the narrative within Google and YouTube,” Cohen said.
YouTube signed new agreements with all major music copyright owners in late 2017 and early 2018, paving the way for new services in June of that year. According to Kyncl, YouTube Music did not receive much attention in the first 10 months. The company has few resources needed to build a subscription business.
It does not know where to invest in marketing to convert its free users. Should it target rich countries where marketing costs are expensive but people have money, or poorer countries where marketing costs are low but customers won’t pay that much? It does not know how to prevent the person who registered for the service from deliberately or unintentionally abandoning it.
But in the past few years, YouTube has spent a lot of money marketing this service, and has established a team and infrastructure to attract and maintain new customers.
Earlier this year, Cohen boasted that YouTube paid more than US$4 billion (approximately Rs 29,230 crore) to the music industry in the past 12 months. Therefore, after more than ten years, the music industry finally has no negative comments about the company. Five different major music companies issued statements praising YouTube’s growth.
“Music has always been a key part of their platform, so it’s great to see them also become a driving force for subscription streaming,” said Max Lousada, Chief Executive Officer of Recorded Music, Warner Music Group.
YouTube has achieved particular success in emerging markets, which is a challenge for companies such as Apple and Amazon. But because YouTube is already the most popular video service in most countries, the company has a channel to convert customers who are tired of advertising or eager to listen to songs without connecting to the Internet.
“These markets are growing at an amazing speed,” Kyncl said. “I think we did not expect that we would reach 50 million so soon. It is much better than we thought.”
© 2021 Bloomberg