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Guest post by Zach Fuller of Midia
After a quiet period in which music and media assets in general were perceived to be in irreversible decline, the narrative is suddenly changing. The boost in revenue from streaming and the allure of consistent income that comes with the transition to recurring subscription revenue seems to have provided new impetus to the investment landscape around music-focused media.
This is what makes French mass-media conglomerate Vivendi’s move to acquire 60% of Havas Media Group intriguing. While much is being written on what has been termed the ‘new media logic’ of integrating content and distribution at scale, this move by Vivendi becomes clearer when we consider the monetisation framework for music on video services:
· Full stack play: Vivendi already owns other assets that can reinforce its work through Universal. Canal+ can be used for visual artistic promotion, Dailymotion and VEVO for online video, See Tickets for ticketing and Bravado for merchandise. However, until now it has outsourced its promotional and advertising efforts. The Havas deal would bring much of this in-house and enable full integration between these services, perhaps an inevitable development in the music industry’s shift towards a low margin business that demands intricate integration of the distribution process. This employs a similar tactic to Liberty Media and Access Industries, who are also pursuing similar integrations across the music industry value chain.
· Maximising online music video revenue: Why Vivendi would want to further its relationship with an agency such as Havas becomes clearer when we consider the present monetisation framework for music on video services. YouTube revenues pay out as a percentage of ad revenue accrued instead of the pure streaming model where all streams are the same on subscription and freemium tiers, regardless of the revenue generated. Labels now recognise that the model of YouTube as a discovery platform driving download sales is defunct: all discovery is now consumption. Subsequently, in a post-sales world, where monetisation of content on YouTube means adhering to ad market demands of seasonality and understanding how to build an algorithmic advantage, having one of the world’s leading ad agencies in your corner can only serve the industry’s cause in helping to close the perceived value gap of what YouTube is presently paying back to the industry.
MIDiA has spoken extensively over the past few years on the significance of YouTube economics versus pure streaming services. Whilst music subscriptions have experienced strong growth year-on-year, the question of how to best monetise YouTube has remained an issue, as YouTube rights payments pay out as a percentage of revenue, leading to erratic payments based on ad industry dynamics. For example, payments growth slowed from a high of 60% in 2011 to just 11% in 2015, despite total streams growing by 132% to 751 billion, up from 332 billion in 2014.
Deals such as that between Vivendi and Havas therefore make sense financially, but they require a culture shift within record labels accustomed to their work being valued on a per-stream basis rather than by ad-revenue generated on content assets. This may not be greeted with immediate enthusiasm. A conversation over YouTube monetisation MIDiA had with a prominent independent label saw them refer to the possible integration of ad-teams within labels to maximise ad sales over video content as something to be kept separate from the rest of the label’s operations; a case of church and state. However, if Vivendi’s move proves successful in raising Universal’s YouTube revenues, others may be influenced to follow suit.
from hypebot http://ift.tt/2qcAFEX
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