My favorite article from the past few weeks is a Vox article on the Department of Justice antitrust suit against seeking to block the book publisher Penguin Random House (PRH) from merging with rival Simon & Schuster. Its title - “Book publishers just spent 3 weeks in court arguing they have no idea what they’re doing” - reflects the publishers’ defense as “helpless incompetents at the whims of larger companies and an irrational market” against the government’s argument that “the publishers were savvy operators who knew exactly what they were doing with their billion-dollar companies”.
It’s an amusing read that is worth your time, especially if you are interested in the economic concept of monopsony, which is a market with one buyer who can set the price however they like (a monopoly is a market with one seller).
One quote from the trial is helpful for understanding the significance of this week’s YouTube Shorts announcement. The quote is from an internal email from PRH CEO Markus Dohle admits that he “never, never bought into” the argument that a combined PRHS&S would give publishers the leverage they needed to push back against Amazon. Instead, one of the “goals” of the post-merger PRHS&S would be to become an “exceptional partner” to Amazon.
The YouTube Shorts announcement hid a larger story of the music industry adopting the “exceptional partner” logic with YouTube.
YouTube & The Music Industry in 2022
There were actually two music industry-related announcements over the past two weeks. The first was from Lyor Cohen, Global Head of Music at YouTube, announcing “In the 12 months between July 2021 and June 2022, YouTube paid over $6B to the music industry. This is a $2B increase from the $4B contribution we announced in 2021.”
The post added, “Fans want to discover, consume, and participate in music across multiple content formats, and only YouTube can deliver that entire experience in one place.”
On Peter Kafka’s Recode Podcast, YouTube’s Chief Product Officer Neal Mohan shed some additional light on how YouTube Shorts can build “the brand and career of an artist” instead of “an immediate sugar high for a week or two weeks”.
The example he gave was of a 15-second clip of a new song from a new artist or an up-and-coming artist, and with one tap the user can “watch the entire music video of that song”. They can tap on another link and “watch our tracks from the rest of the album, understand that album. You can go even one level deeper and learn more about that artist… you can follow what her musical interests are and go on and on from there.”
Creator Music
The second announcement was Creator Music, a new offering in YouTube Studio where: “Creators can now buy affordable, high-quality music licenses that offer them full monetizing potential—they will keep the same revenue share they’d usually make on videos without any music.
And for creators who don’t want to buy a license up front, they’ll be able to use songs and share revenue with the track’s artist and associated rights holders.
The post added, “We believe Creator Music will mean more amazing creator-artist collabs, more new tunes in viewers' playlists, and more ways for artists to break through—all while continuing to put money in creators' pockets.”
The pitch is that YouTube Shorts is a new ecosystem where musicians and the music industry can thrive. Or, to paraphrase the PRH CEO Markus Dohle, above, it’s the kind of ecosystem that may ultimately force the music industry to become “an exceptional partner” to YouTube.
Kyncl to Warner Music
A third music-related development at YouTube this past week was YouTube’s Chief Business Officer Robert Kyncl announced as the new CEO of Warner Music. There was initially confusion as to why the leader of a video platform would leave for a record label, and in especially in light of this new push. But now it’s clear: Kyncl will give Warner Music a leg up in being “an exceptional partner” to YouTube.
The open question remains as what being an "exceptional partner" means. In the case of the Penguin Random House and Simon & Schuster merger, they argued a merger would make both publishers more efficient and therefore "they would actually be able to offer larger advances than before." Perhaps musicians will benefit from similar dynamics with YouTube.
That's certainly the sales pitch.