YouTube has hired its first “Global Head of Music”: Lyor Cohen, a powerhouse music exec who ran Def Jam and Warner Music Group before starting his own label.
Cohen’s big job is going to be smoothing relations between YouTube and the music industry, which have been terrible, particularly in 2016.
Over 2016, major labels and other music heavyweights have continually slammed YouTube over the low rates it pays in royalties.
RIAA boss Cary Sherman has been particularly vocal about it. Here’s what he wrote in a Medium post in March:
“In 2015, fans listened to hundreds of billions of audio and video music streams through on-demand ad-supported digital services like YouTube, but revenues from such services have been meager — far less than other kinds of music services. And the problem is getting worse. Check out the alarming disparity between the growth in the number of ad-supported streams compared to the growth in revenues generated from those streams.”
This is the graphic he’s talking about:
Here’s the basic problem: YouTube wants to be seen as a promotional tool that drives revenue to other forms of music consumption, but label execs are convinced that many people use YouTube as an alternative to services like Spotify and Apple Music, which pay much more. Streaming music has finally became the biggest part of revenue for the industry this year, and YouTube's model isn’t what the labels want.
So why don’t the labels refuse to sign new deals with YouTube? The answer is complicated, and comes back to the Digital Millennium Copyright Act, which gives YouTube a lot of protection against having to pay if its users post copyrighted material.
Here’s Sherman again, on the topic of label negotiations, from an interview with Recode:
“The way the negotiation goes is something like this: ‘Look. This is all we can afford to pay you,’ YouTube says. ‘We hope that you’ll find that reasonable. But that’s the best we can do. And if you don’t want to give us a license, okay. You know that your music is still going to be up on the service anyway. So send us notices, and we’ll take ’em down as fast we can, and we know they’ll keep coming back up. We’ll do what we can. It’s your decision as to whether you want to take our deal, or whether you just want to keep sending us takedown notices.’ That’s not a real negotiation. That’s like saying, ‘That’s a real nice song you got there. Be a shame if anything happened to it.’”
So YouTube has the labels between a rock and a hard place, but even so, an openly hostile relationship with labels isn’t great for YouTube's business. That’s especially true because in the EU, the government seems to be receptive to the music industry’s point of view. The European Commission is planning to reevaluate its own “safe harbor” positions. "Safe Harbor" is the basic concept that gets sites like YouTube off the hook for piracy. Those changes could be horrible for YouTube.
Bottom line: YouTube’s bad relationship with labels could end up hurting its business, and that’s where Cohen comes in.
Cohen joins a budding tradition of tech companies snagging well-connected music veterans to serve as dealmakers with labels and artists. Apple Music has Jimmy Iovine, the cofounder of Interscope Records, and Spotify has Troy Carter, who managed the likes of Lady Gaga and Meghan Trainor.
Here's a bit about Cohen's background.
Cohen first made noise in the music industry when he became Run-DMC’s road manager. While working for Russell Simmons’ management company, Cohen continued to expand both his artist list and influence, and is credited with being a force behind Run-DMC’s huge Adidas endorsement, according to Complex.
Cohen had a knack for savvy business, and became a major force in the hip-hop world, running Def Jam and then Warner Music Group, one of the major labels.
In 2012, Cohen resigned from Warner, and went to start his own venture called 300 entertainment. The idea behind 300 was to be a new type of record label: a boutique venture that could still swing up and compete with the major labels. It signed artists like Fetty Wap and Young Thug. Google has invested $5 million in 300, according to Recode.
Cohen will continue to run 300 until December 5, according to YouTube. And after Cohen leaves, 300 will continue.
But Cohen's new challenge will be bringing the thinking of music industry titans in line with tech companies. "I hope that together we can move towards a more collaborative relationship between the music industry and the technologies that are shaping the future of the business," he wrote in a letter to his new team at YouTube.
Here's the full letter:
It’s an incredible time to be in the music business. Back in 2006, as an executive at Warner Music Group, I worked closely with a fledgling video site to sign its first big record licensing deal. That site was YouTube. Over the next decade, I watched as your work transformed YouTube into an incredibly powerful platform that connects artists with fans all over the world.
Throughout my career in the music industry, I have strived to stay on the forefront of new technologies and cultural movements. And since starting in the industry over thirty years ago, I’ve always sought to be an advocate for artists and do everything possible to shine a light on the great talent I’ve been lucky enough to work with, including Jay Z, Run-DMC, DMX, Public Enemy, Kanye West, The Killers, Bruno Mars, Ed Sheeran, Young Thug, Fetty Wap, and Highly Suspect among others. Bringing attention to the often overlooked, but talented communities has been a huge part of my life’s work and I’ve seen how music can truly bring people together.
Over the last two decades we have seen dramatic shifts, both to the inherent value of music and the literal value that people are willing to pay. Technology and new business models have completely changed the established distribution channels that have long-served the recorded music industry. And while change has been met with understandable resistance, I strongly believe that this transformation provides opportunities that will be larger and more rewarding for both artists and the music industry.
That’s why I am excited to join this incredible team as Global Head of Music. I look forward to working together with all of you on three things. First, helping the music community embrace the technological shifts we’re seeing in music today so we can help take the confusion and distrust out of the equation. Second, building on the great work you all have done to help the music industry and creative community break new songs and artists to YouTube’s audience of over 1 billion fans. From building on the success of the YouTube Music app, to shining a light on emerging artists, I believe our potential to strengthen the industry is massive. And third, I hope that together we can move towards a more collaborative relationship between the music industry and the technologies that are shaping the future of the business.
I’m confident that we can bridge the worlds of technology and music in ways that benefit everyone, instead of the zero-sum mentality that exists today. I’m proud to be a music man, and hope that the perspective I bring from both the creative community and the music business at large will help us, our music partners and artists grow and thrive together."
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