Music on YouTube benefits unknown artists - but reduces revenues of the big players

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 (Image: Pixabay CC0)
(Image: Pixabay CC0)

Music hits that are made available for free by users on YouTube are less in demand on platforms such as Spotify or Apple Music. For the broad mass of lesser-known artists, on the other hand, uploading to YouTube by users can help them gain more attention and thus revenue via more lucrative platforms. This is the conclusion of a team of researchers from the Vienna University of Economics and Business Administration, the Universities of Tübingen and Hamburg, and LMU Munich. Their study was published Friday in the journal Marketing Science.

Songs that belong to lesser-known genres or were released a long time ago are also accessed more frequently on streaming services if they were previously uploaded by users to YouTube for free. As YouTube occupies a key position as the world’s largest music streaming service, these findings raise questions for the regulation of the market - this was very controversially discussed when the EU Commission Revised the Directive (Article 17) on Copyright in the Digital Single Market.

It is important that policymakers carefully consider the potential impact of stricter regulation of user-generated content platforms," said Nils Wlömert, professor at the WU Institute for Retailing & Data Science and lead author of the study. "Such regulation could unintentionally increase market concentration by limiting the reach of unknown artists."

However, the results of the study also show that lower demand for hit releases on music streaming services like Spotify has a significant impact on music industry revenues. This is because, although they only account for a small proportion of content, these hits are responsible for a large proportion of sales. "It is therefore important to find a balanced regulation that takes into account both copyrights and the interests of artists and fans," says Dominik Papies from the Department of Marketing at the University of Tübingen.

Private individuals can upload and share music videos at very low cost on user-generated content platforms such as YouTube or TikTok. Since the platforms do not have to be liable for this content either, experts speak of the "safe harbor" principle. Authors do receive a small financial compensation from the platforms. But because of the low compensation, among other things, there are repeated discussions about stricter regulation of these safe harbors, as is currently the case with a legislative initiative in the U.S. Congress.

The study was made possible thanks to a unique circumstance that resembles a controlled experiment - a rarity in the social sciences: For years, YouTube in Germany had prevented the playout of videos uploaded by users. The reason was a legal dispute with German collecting society GEMA. But in October 2016, an agreement was reached. Overnight, hundreds of thousands of titles uploaded by users were available on YouTube. The researchers were now able to evaluate a dataset of 600,000 songs: more than 350,000 tracks were actually available on YouTube during the six-month study period following the settlement with GEMA - but the rest were not. This allowed the researchers to determine whether the sudden presence of some of the songs on YouTube changed their creators’ revenues elsewhere.

Original publication:

Wlömert N, Papies D, Clement M, Spann M 2023. The Interplay of User-Generated Content, Content Industry Revenues, and Platform Regulation: Quasi-Experimental Evidence from YouTube. Marketing Science,­.2022.0080