If there was ever evidence that Facebook wants to take YouTube down, it’s with the report that the company has offered the music industry a boatload of money for music licenses so that its users can use popular music on their videos without legal repercussions. Ever since Facebook video was launched in 2015, the social network has been gunning for YouTube and has become surprisingly competitive in a short time span, but this could be the issue that finally puts some separation between the two.
To be sure, there’s no love lost between the recorded music industry and YouTube. The video service has been intransigent about its 55/45 split (the copyright holder gets 55% of ad revenue), and since the revenue is based on paid adverts, there are many factors that go into a monetized video view (like type of advertiser, time of year, length of view time, etc.) that aren’t necessarily favorable for royalty generation. Average per view revenue has been decreasing every year, while record labels spend greater and greater resources tracking down and attempting to monetize unauthorized user generated content.
Facebook video has been slow off the mark monetizing videos as well, as it still doesn’t have a similar tool to YouTube’s Content ID that tracks down illegally used songs on user videos. The company has taken a big step forward to assuage that problem by offering what has been reported as “hundreds of millions of dollars” to license music from the music industry. The IFPI states that a total of $553 million was generated by user video content in 2016 (there’s a big discrepancy here in that YouTube says that it paid out of $1 billion by itself), so the possibility of a big payout in this area is naturally enticing. It took YouTube some 10 years to grow to that figure and it doesn’t look like it will grow in leaps and bounds anytime soon, so having Facebook in the game has to be exciting music execs everywhere.
That being said, Content ID is the tool that makes YouTube monetization go, giving the copyright holder with the ability to first find illegally used audio content, then providing the means to either have it taken down or monetized. Facebook must have it’s own (and hopefully better) version in order to appease the music powers-that-be, but it has recently taken steps in that direction by acquiring the copyright identification platform Source3, which could provide the underlying technology for its version of the tool.
Still, Facebook at least on the surface appears to be much friendlier to the music business than Youtube, and founder and CEO Mark Zuckerberg has already told investors how important video and music is to the growth of the platform. The company has followed that up with hiring a number of solid executives dedicated to music licensing and has announced that it’s formulating a comprehensive music strategy.
Of great concern to Google (YouTube’s owner) is that YouTube music has seemed to plateau in recent months, as more and more people have found subscribing to a streaming service to be much more convenient for music discovery than having to search for the song they want within the video service. To be sure, YouTube is still a leader in music discovery, which the industry holds as dearly valuable, but it doesn’t seem to be quite the musical juggernaut of a few years ago.
With Facebook at over 2 billion users and still growing, it wouldn’t take much to have music video leadership swing its way. The company has a history of successful operational strategy while Google’s has been spotty at best. The music industry would love to see another big source of licensing revenue and that’s exactly what Facebook is now dangling. YouTube’s trying to talk a good game, but no one is buying it, while Facebook is proving itself with actions and cash. That’s a powerful combination in any negotiation.