YouTube announced in a blog post that it was honoured to be a part of one of the engines of growth of the music industry, following IFPI, a global music industry body reporting profits after years of decline in the IFPI Global Music Report for 2016. YouTube based the celebrations on paying out $1 billion to the music industry over the course of a year. YouTube called for support from the music industry in driving revenues from advertisements, with a vision of how ad supported music can look a lot like television.
The IFPI Global Music Report for 2016 notes that in 2015, digital distribution revenue overtook that of physical distribution for the first time. The report notes that major businesses that thrive because of distribution of online music are depriving artists of the fair return to their work (read YouTube). The difference is noted in a graph that compares the revenue earned by subscription based services, against revenue earned by advertising based services, and there is a big gap. 68 million subscribers generate more than three times the revenue for the industry than the 900 million users who consume music on advertising supported platforms.
YouTube claims that the $1 billion dollar payout is a demonstration of a successful model. The IFPI did not agree with the interpretation by Google on how ad supported services are a strong driver for growth in the music industry. The IFPI pointed out that the payout by Google pales in comparison to the amount paid to the music industry by streaming services such as Apple Music, Deezer or Spotify. The IFPI noted that Spotify alone paid out $2 billion to record labels.
The IFPI released a statement in response to the YouTube blog post that said "YouTube, the world's largest on-demand music service, is not paying artists and producers anything like a fair rate for music. This highlights more than ever the need for legislative action to address the "value gap" that is denying music rights holders a fair return for their work."
YouTube has long had an antagonistic relationship with the music industry. The European Commission is trying to address this "value gap" perceived by the music industry with copyright reforms. The reforms would require sites such as YouTube, DailyMotion and Pinterest to pay out a larger share of their revenues to record labels. Earlier this year, YouTube hired former Warner Music Group executive Lyor Cohen in an effort to strengthen its ties to the music industry.