Free Streams On Spotify Pay 75% More Than YouTube, Paid Streams Pay 515% More ~ New Best Music News

YouTube is increasingly under fire from labels and other creators upset over the size of its payments to creators. A new study reveals details of this payment gap between YouTube and every other streaming service, free or paid.

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"Advertising supported platforms like YouTube are important to the music eco-system and music rights-holders should be grateful for their consumer reach and investment in label tools like Content ID," says Jason Peterson, GoDigital Chairman. "However there is a gap between what paid music streaming services and free ad-supported services like YouTube (and Facebook) deliver in terms of revenue per stream to music rights-holders."

In August 2017, YouTube Global Head of Music Lyor Cohen publicly stated that YouTube delivered a $3.00 CPM to music rights-holders. But a public survey of the YouTube by GoDigital found that only about 40% of video playbacks have an advertisement served, leaving 60% of video streams are unmonetized. Therefore, the effective CPM (eCPM) in the US based on all video streams is $1.20, not $3.00.

YouTube vs Spotify

In data sampled for August 2017 in the United States, GoDigital found that Spotify had an ad supported eCPM of $2.11 and a paid subscription eCPM (revenue/1000 streams) of $6.19. Therefore Spotify is paying approximately 75% more than YouTube for its advertising supported model and 515% more for paid streaming.
Since the majority of Spotify users are free ad supported users, Spotify had a blended (free and paid) eCPM of $3.01 in the United States in the data sampled - more 2.5X the rate that YouTube pays.

YouTube vs Apple Music

Apple Music has no free tier and thus its eCPM is higher at $6.38 for the service

Advocating For A Fixed Rate CPM

"One way rights-holders can close the gap in value delivered is to charge a fixed CPM (cost per thousand views or streams)," argues Peterson. "This fixed CPM could be fixed and based on each agreed upon business model and territory irrespective of the platform. In the future Apple, Google and Spotify could pay the same on a per stream basis."

"The retailers control their platforms and reap the benefits of their success (such as enterprise value in the stock market). Rights-holders on a rev-share don’t control the platforms or reap the rewards of success yet bear the risk of platform failure," he concludes "The fixed CPM strategy aligns with the risk/reward tradeoff in that it shifts the business execution risk to the platforms and away from rights- holders."

Download the Solutions to the YouTube Value Gap study v4.2.pdf here (62.8K)