Ad-Supported Optimism


When asked about the near future of free music streaming, Robert Kyncl, YouTube’s chief business officer, tells me, “What’s next is more ad revenue coming into it.” For instance, the advertising conglomerate Interpublic Group recently revealed it was shifting $250 million in TV ad spending to YouTube. Kyncl suggests advertisers could increasingly take money off traditional radio, too, and put it on the service’s clips. The record industry’s business model always differed from TV and radio in that fans bought specific songs or albums, but now it’s being tied into that same advertising-based model through free streaming.

“The music industry as a whole hasn’t earned that much from advertising, and now that’s changing,” Kyncl says. The reason industry coffers haven’t previously spilled over with ad revenues is partly a quirk of U.S. copyright law. Unlike in some other nations, radio broadcasters here pay royalties only to the songwriters, not the labels that own the recordings. But on-demand streaming service providers like YouTube and Spotify must pay both types of royalties. So, according to Kyncl, as listening goes from analog to digital, the music industry can look forward to a bigger share of the revenue from a larger market. In other words, labels—and artists who own their own master recordings—have gone from “monetizing only the super fans, by selling them CDs and LPs and tapes, to making money through ads from everybody that enjoys music,” he explains. “And that’s a big deal.”

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