Blood & stones: Squeezing value from music video

Juggernaut Brew only occasionally goes topical, but since I’m posting each day this week, it’s a good time. The much-covered, much-read, much-twittered Mexican Stand Off between music publisher PRS and You Tube can only benefit from The View from The Brew, no?

Perhaps not though - what hasn’t been been debated, analysed, rumoured & forum’d with this one already this week? Besides, it’ll all blow over in a few days and the issue will be resolved –temporarily. And that is the issue – the lack of longer-term viable commercial deals between content producers and digital distribution platforms.

The PRS-You Tube squabble isn’t trivial, it strikes at the very heart of the music industry’s commercial model and means to future sustenance. The debate over the value of music videos on the web is a pre-cursor to the future debate of music itself on the web, what with Spotify’s momentum signalling the true arrival of ad-funded streaming services.

The difference between the two of course (music video and music itself), is that music video has never had much in the way of transparent market value, ever. The term ‘promo’ is such for a reason. The original deal between the labels and MTV was as good as barter – license the content for nothing and broadcast it as a promotional platform for the on-sale of a transactional good – CDs. One business model: going, going, eventually gone.

Meanwhile, the digital revenue model is a work in progress, to be confirmed. To put it into perspective, radio pays roughly 5% of its revenues to the music industry in licensing fees – an amount considered by many on the label-side nowadays, to be too small – 5% isn’t much of a cut after all. But it’s negotiated regularly in absolute terms, informed by the amount of revenues radio makes from advertising rather than tied to it (public radio - the BBC - also strikes its own deal with publishers and labels). It’s not a big share but it is solid, stable revenue flow to the music industry.

Commercial radio is a global market worth roughly $33billion (2007) and falling. Google’s revenues meanwhile for 2007 were $17 billion and rising ($22 billion). There isn’t much doubt about which sector is now leveraging ad-revenues more effectively. While You Tube of course, is only a part of Google, it’s a significant part.

The basic argument the recording industry is taking is that Google and You Tube can afford to pay more than it does currently for what is a critical element of content. Music video may have little transparent value, but it does have considerable collective intrinsic value. Meanwhile You Tube takes the argument that its own commercial model (not that of its rich parent) must be viable in itself. And with ad-revenues currently small, it can’t afford higher rates. Now you will know all this of course. I only iterate it here to make one point – both sides are right – which is why this is a genuinely hard one.

In the straightforward negotiation, the music industry is on trickier ground than You Tube. It’s hard to make any kind of ‘claw back’ argument – that you’re increasing your rates because the world is changing, than it is to stake a claim to nothing more than a valid slice of what the new world has to offer. You can hardly increase prices based on the size of your customer if you offer the same product to other customers. The music video market is a non-exclusive glut of services now including DailyMotion, MTV and smaller players Muzu, Joost etc. Even Music Brigade e-mailed me this week to let me know that its back. Guys, I didn't notice you'd gone!

On the other hand, You Tube’s mission doesn’t square with the world of content creation. You Tube doesn’t want to discriminate between a free-to-produce UGC video and a high-end glossy music video costing £10k per-minute to produce. Offering absolutely every piece of video ever made under the same free-to-all terms basically means the eventual, certain end of high-end glossy. That’s a shame because high-end glossy, professionally produced video is what a lot of people want, but have come to expect to get for free.

Basically, the goals & missions of You Tube and those of music & content producers do not square. The only solution, from an end-product point of view, has to be some form of service tier development. If you the user want your music video for free, fine, get it in its current, down & dirty form and don’t expect to get EVERYTHING. But if you want it higher quality, with extras, tier-up to something better. That something better has to paid for, be it subscription, transactional or sponsorship funded rather than ad-funded.

The producer-distributor partnership must share equitably across both or all tiers, not just one. The onus is on You Tube (and its content partners) to develop a commercial solution that maximises revenues enough to pay its way. Offering everything ever made by anybody or any company will not cut it. Platforms: innovate around your commercial model (Spotify seems to be working hard at this, watch that space). Meanwhile producers: innovate with your content and leverage some exclusivity.

The most puzzling thing to me about this spat is the timing. It comes just as You Tube has announced the development of its 'Vevo' service with Universal. That seems to me like exactly the right way to be going, in the direction of a solution that can work on a slightly more sophisticated level than what we have currently. It shows again how labels and publishers are as separated in the vision of music’s future as either is from You Tube.

Footnote: With these types of fundamental debates, it’s informing to see what music artists are saying. Beth Orton defended her ‘little’ royalty cheques on NME. Find me an artist that doesn’t like a royalty cheque. It’s a living!