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Value of YouTube to the Music Industry - Paper I: Cannibalisation

03 Nov 2017

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The music industry has undergone significant change over the past few years, with declining volumes of music sold through an ownership model (such as downloads) and rapid growth in usage models (such as streaming). 

While many services provide value to the recorded music industry, in the 12 months to December 2016, one video streaming platform, YouTube, paid out over USD 1 billion to the music industry from advertising alone.  YouTube claims that not only does it return money directly to creators, but also that it has a promotional effect on music.  However, some commentators argue that YouTube has a negative impact on the music industry, paying insufficiently for content and cannibalising other services.

RBB Economics has undertaken several empirical analyses to evaluate YouTube’s potential promotional or cannibalisation effects on the music industry in Europe.  It analysed the results from a 1,500 person user survey, as well as data on YouTube views and streams on audio platforms of approximately 5,000 tracks in each of four European countries over a three year period.

In a series of five short notes we set out a summary of our findings:

  • In this first note, we consider the evidence of cannibalisation by YouTube of other
    legitimate music services.
  • In our second note, we consider evidence on the patterns of growth of different
    platforms over time, namely audio streaming and video streaming platforms.
  • We then consider the evidence of a potential promotional effect of YouTube on other
    legitimate music services.
  • In our fourth note we consider the value for consumers arising from YouTube’s music
    video offering.
  • Our fifth note draws these empirical findings together and consider the direct value
    for the music industry.

Publ. May 2017