By Christine Lenzo @KrysiaLenzo 7/11/15 cnbc.com
Taylor Swift has become the poster child for defending the rights of all artists from tech giants like Apple and Spotify, who are looking to give away music through their free streaming services.
The singer-songwriter’s viral post on June 21, “To Apple, Love Taylor,” on her Tumblr page called out the company for its decision not to pay musicians, writers or producers during Apple Music’s three-month trial period. Within hours Apple made a U-turn and announced that it was reversing its policy.
“To go up against the most powerful company in the world takes tremendous courage,” said Jeffrey Rabhan, chair of the Clive Davis Institute of Recorded Music at New York University and a music executive who has been in the industry for more than 20 years. He added, “Her post was written in an articulate and clearly conceived way. I have a lot of respect for her.”
Swift’s disapproval of Apple’s decision is not the first time she openly expressed her feelings about the music-streaming industry. Late last year, Swift also pulled her music from Spotify in an effort to stress the negative ramifications of free streaming on the future of the music business.
But there is one platform in which Swift does not have “Bad Blood”: YouTube. The seven-time Grammy winner has yet to write an open letter on her Tumblr page to Google-owned YouTube about her disapproval of its free service and actually wants listeners to download her music from the video-sharing website.
So why is YouTube receiving seemingly preferential treatment?
The simple answer is, the economics of YouTube make more sense for the 25-year-old and other artists looking to protect their future revenue, because YouTube videos serve a major promotional purpose. On YouTube, Swift is able to monetize her videos in more ways than Spotify and Apple can provide.
“YouTube is still the place to go to discover and consume music.”
-Larry Miller, professor of music business, NYU’s Steinhardt School
“For much of the country, YouTube is still the place to go to discover and consume music. As a promotional platform, it has become as important as, or more important than, terrestrial radio,” said Larry Miller, professor of music business at New York University’s Steinhardt School of Culture, Education, and Human Development.
“I think that the reason why she is not going against YouTube has to do with the perceived marketing and promotional clout of this type of media relative to the perceived marketing and promotional clout of interactive streaming services like Spotify and Apple,” said Miller.
Marketing is a large component of YouTube, because it’s a way for artists to get noticed and earn money. Artists who may be excluded from the radio or top 20 countdowns can post their songs on YouTube to gain greater visibility.
Compared with Spotify, which has over 75 million users, YouTube has more than 1 billion in its user base, which is continuously growing, partly in thanks to Swift. After leaving Spotify, her official videos and user-generated content on YouTube almost doubled from 12.5 million daily views to 24 million views over the course of about a week. In addition, pages that feature Swift’s music have iTunes or Amazon links where users can easily buy a digital download.
Swift can also increase her $200 million net worth by uploading her videos to Vevo, a site hosted by YouTube with the goal of monetizing music videos through ads. Launched in 2009, Vevo is a joint venture with Sony Music Entertainment, Universal Music Group and Abu Dhabi Media that is considered the Hulu for music videos. YouTube invested about $50 million in the video site as part of an effort to keep Vevo’s 140,000 music videos on YouTube.
Typically, musicians like Swift, whose independent label Big Machine is distributed by Universal Music group, have their own Vevo channel on YouTube where their team can upload the latest videos. YouTube does not disclose royalty percentages; however, industry experts estimate videos with ads make approximately $0.50 to $2 for every 1,000 views.
Swift has a successful presence on YouTube. Her latest song, “Bad Blood,” featured on the Taylor Swift Vevo YouTube Channel has over 230,000,000 views since it was posted a month ago and won Vevo’s 24-hour record by obtaining 20.1 million views on the first day of its release.
In 2014 she placed second on Vevo’s top 10 earning channels based on the number of views and subscribers. The No. 1 most profitable channel on YouTube for the same time period was DisneyCollector BR, which streams videos of hands playing with children’s toys.
YouTube provides another economical outlet for Swift through its user-generated content that includes her songs. For example, if Swift’s song “Shake It Off” is incorporated into a funny YouTube skit by a fan, she has the ability to demand its removal from the site. But, prior to asking for that removal, artists can use YouTube’s “Content ID” tool to decide if they want to license their song, thereby supporting fans’ creativity while getting a cut of the royalties.
A new music model
Swift is vehemently against a model that does not charge users to listen, because despite Spotify’s Premium service, the company offers a free level of streaming that she dismisses as a “grand experiment.” Swift stated in an interview with Yahoo that she is not willing to contribute her life’s work to any part of Spotify, because she would be perpetuating the perception that music is free and has no value.
“Spotify has been made out to be the bad guy,” said Rabhan. “It got all of the appropriate licenses to stream music, and over 70 percent of Spotify’s revenue goes to the rights holders. The artists just did not gain as much from these deals.”
Additionally, Spotify claims it has paid more than $2 billion to record labels, and rights holders can make between $.006 to $.0084 per stream. However, the payout model is not as profitable for artists as YouTube, which also allows users to stream music for free.
So while she is fervent in her beliefs about streaming, Taylor gets greater value from keeping her music videos on YouTube.
Miller of NYU’s Steinhardt School agrees. “It would be a stretch to say that YouTube could be her next target.”