How to Make Money on YouTube with your Music (Part One of Three) | Jeff Price | Pyramind

so um yeah I always get asked this name preference it I quick background I launched a company called TuneCore and it became the largest music distribution company in the world distributing more music by more artists than any other entity in the planet they earned over half a billion dollars basically became the size of EMI in three years in regards to digital music sales and a couple years ago launched something called global publishing administration which was the last time I was here where we talked about the six legal copyright you get in how you make additional money as a songwriter July of last year I was thrown out of my own company along with the two other founders so it's now a UH what I'll call a bad cover band without a heart it's really upsetting that being said it's been an interesting journey since I've left there which ties into this which is YouTube which to me is really interesting and along the way if you have any questions please feel free to ask I hate standing still but I think I have because of the lighting right so I won't beep if I just go up and down that's why ah what's interesting is before even get into YouTube your money and how to get it why you've earned it it's interesting to think about how this came about right so traditionally you record music you write a song and you record it and that piece of recorded music has two copyrights in it and one is for the recording of the song so let's go to our store records they hire Whitney Houston to sing a song and when they're done the recording of the song is owned by eros directs that's one of the copyrights the second copyright is owned by the person that wrote the lyrics and the melody to the song and in this case it's actually you guys know who dolly parton Dolly Parton wrote the song I will always love you so aerosol recurred hired Whitney Houston to sing Dolly Parton song and when they're done they have a recording that recording has two copyrights in it one for Aerostar records for the recording I one for Dolly Parton for the lyrics of the melody if you're curious the lyrics the melody are represented by a C with a circle around it and the recording is represented by a P with a circle around it the P stands for phonogram and the C stands for copyright so those are the two pieces of copyright in every piece of recorded me they're joined at the hip but they also kind of work differently and traditionally what we did as a music industry is we would exploit the copyright we'd find ways to make money for the people that own those copyrights often the way we traditionally did it in the music industry would be by selling pre-recorded music you'd walk into a record store you buy a CD or a piece of vinyl you just bought it as a consumer caching and that generates revenue for the people that own the copyright sorry so what we had where consumers were going out and they buy pre-recorded music myself included and we go home and we listen to it after we got it and that was basically it that's what we we would do with it sod from the occasional mixtape to try to get someone to sleep with you so come on sound so that's that's all we would do with copyright is we would exploit it license int manufacture it get people to buy it and then the other way copyright traditionally would be exploited would be we've listened to it on am/fm radio and it would appear on television and that generated some revenue as well primarily for the person that wrote the song the Dolly Parton not for iris no records well consumers change the way they began to get music right I mean we all stopped sort of beginning to buy physical and at one point sort of shifted into buying downloads which was still buying pre-recorded music so the same sort of its concepts that applied you'd make money when the thing was bought and we get split between the person that wrote the song and the person that owned the recording of the song by the way the person that wrote the song I called the lyrics and melody it's also known as the composition that's the industry jargon for it and if you represent the rights to the lyrics and melody exclusively the administrative rights of that it's called publishing that's what music publishing is which is just a word there's nothing about it that's legal you could say bananas it doesn't matter what you call it so people began to shift the way they got music for buying we recorded on vinyl and CD into downloading then what happened is we began to move into streaming and what was interesting about that is we were no longer buying our own music and listening to it we were renting somebody else's music so who here uses Spotify anyone right what you're doing is you're Spotify iffy or advertisers are paying Spotify a fee on your behalf to rent access to their music collection so you're doing is you're borrowing your friends music collection it just happens to be everything in the world and available 24/7 etc but you're renting someone else's music collection and when you stop paying them a fee you no longer have access to that music collection right but what was interesting about that is you had this dynamic shift in the way money was being generated it used to be money was generated when the thing was bought the physical product was purchased it was this one-time transaction you bought it in Walmart Tower Records Virgin Megastore you know amoeba whatever it might be 1698 exchanges over the counter that was it that was the economic transaction it was the whole nine yards and what would happen is the store would take a piece of that and then they would pass the rest of the money back to the distributor who would take a piece of that who would pass it back to the record label who would take a piece of that who would give it back to the artist of favor recouped it would take a piece of that and some portion would get paid to the songwriter the deli part as well for the manufacturer of the CD with streaming you get paid not when you buy it but every time you listen to it and that's what's radically different I mean one of my favorite Beatle songs is paperback writer I did I did the guitar tone and that song is insane I don't know how the [ __ ] they did but every single time I listened to that song now every single time the entity that controls the writes the recording of the song and the entity that controls the writes the lyrics of melody one or two entities or however many get paid every single time think of many times you listen to your favorite song right so the question that's out there in the marketplace for artists well is there going to be enough money for artists on streams will the number of times a song gets listened to end up equaling more or equal then how much the artist used to make when the pre-recorded music got sold it's actually a loaded question because the majority of the world's artists never made a freaking penny off of the sale of pre-recorded music and everyone seems to forget that most artists were never allowed in because you had a in our people and of those artists that were allowed in to major record labels 98% of them failed and of the 2% that succeeded less than a half of a percent ever received a banned royalty ever ever ever so when you hear peep complaining and some industry professionals complaining it's a bit disingenuous because we've never had a world of Nirvana no pun intended where artists were just swimming in cash I mean we had Madonna u2 and you know you kind of run out very soon thereafter right most artists just and make it so we've never had this world of a fabulously wealthy artists never existed anyway so that's the question right will streaming sales offset the recorded music sales and if you can remove a middleman right instead of the artist going to the record label to get into iTunes it sells iTunes pays the record label they pay the artist you've just inserted the middleman and that middleman is taking a piece of the money if you're going directly from here to the artist how does that impact things well this is kind of funny take a full length album back in the old days of Tower Records it was for sale for 16 or 17 98 on the shelf of Walmart right when that album sold how much do you think the band earned it as a band royalty yes but penny right yeah it's off the 1798 does throat throat so sir 10% off a 1790 dollar seventy little high run a dollar $42 seventy so more or less right right so that what would happen is it would sell but the band would be recouping in advance given to them so they would never get the dollar 70 now let's go to iTunes you sell a song for $0.99 Stephen how much you make under $0.99 download on iTunes alright 70 cents you sell two songs you made a dollar 40 that's as much money as you would make on selling 17 $98 list price CD in Walmart and you're not unruhe coop so it flows right back to you you sell two songs and iTunes and 99 cents you make the same amount of money as selling a 1798 list price CD and Walmart without manufacturing and co-op all this other stuff so it's interesting the cost of music got cheaper but the net the artists pocket went up now we're getting over to streaming okay so let's get back to streaming so people are now paying to gain access to other people's music collections and stream it on demand and every time they do that the person that wrote the song and the person owns the recording of the song are supposed to get paid and their fractions of pennies but the really interesting thing on top of that is there's been a radical shift in what people do when they get music when I used to get music I usually did one thing with it I either made the ever mention mixtapes or I would just listen to it now when consumers get music they actually use it right and they use it to put in YouTube videos they use it to put on their blog they use it to file share the use it for scan and match they use it to instant message they actually be create another piece of copyrighted protected property somewhat using this other person's pieces of copyright protected property they use music and they're not supposed to according to the way copyright law works you're not supposed to take my song and my recording and stick it into a video you need a license for that that's the way this industry works you can't do that so we're the Recording Industry Association of America so we're going to sue your ass and stop you from doing it because who the hell are you to do this with our copyrights and that's what that's all about by the way it's stopping other at people or entities from using concrete you can't do that so let's only innate our consumer base and Sue them anyway along the way the United States government said wait a second we got this new thing called the Internet and we don't quite know how this thing's going to pan out and what we don't want to do is stifle it from growing into whatever it's going to become because if we do that it'll never become this thing that could be great so we want to have a way to protect them while simultaneously protect the copyright holders and one of the ways we can do that is by creating something called the Digital Millennium Copyright Act and what we're going to do is put something there called a safe harbor provision so safe harbor is you're a boat on a choppy sea and you can pull into a little harbor and the Seas not choppy right what they the courts decide and what the government decided and passed legislation the law around this is if you're a website like YouTube and lend of a cult and you have a video on YouTube and that video has music in it and there hasn't been a license issued to YouTube from our store records as an example we don't want YouTube to be sued into oblivion so what we're going to do is say YouTube we're going to protect you from having your ass handed to you what we're going to do is put the burden on our store records to go and find their video there copyright being used in your videos on YouTube and when they find it they have to notify you and then you'll have to take it down if they do that you can't be sued it's called the safe harbor provision and this is why YouTube is continuing to grow and has been able to grow and other websites if users this person right here goes to youtube uploads a video YouTube has no idea what's in your video it turns out it's got the Beatles in it right what happens is EMI records finds it on YouTube says YouTube you can't have Beatles in his video YouTube takes it down that makes sense alright that's the safe harbor provision well unfortunately it's a bit of a whack-a-mole game as you can imagine because there's a lot more of us and there are of them and there's just billions and billions of videos going into YouTube but what's most fascinating is that we as consumers as music fans are now using the music so the question is what would happen if we could find a way to monetize the use of that music right now we've been fighting it stop it stop and stop it oh wait a second why don't we find a way to make money off of it so this ties into the YouTube opportunity because YouTube is a number one place on the planet where people go to use music it's also the number one destination site on the planet for people to listen to music you know you've got probably know better than I know people under 30 literally go to YouTube to listen to music more go there than Spotify Rhapsody Deezer simply all the other music digital music services combined I mean YouTube's like up here so there's some stats they have more than a trillion annual views these are now outdated by the way they have over 800 million unique users each month that's actually over 1 billion unique users each month now it's insane it's like what oh what's the population of the planet is 4 billion hours of video are watched each month 25 billion views a month of videos with music in them 25 billion views a month of videos with music in them 52 million people watch the Superbowl 72 hours of video are uploaded every minute 70% of YouTube traffic comes from outside of the United States and as far as how it makes money literally what they do is they put advertisements on their videos set they either put an ad on top of it extra banner or they put an advertisement before it in the middle or at the end of it with a video commercial that's it 2011 they did about 3.6 billion in ad revenue and in 2000 uh actually that should be 2011 up anything over that second stat up 103 percent over 2011 that should be up 103 percent over 2010 2010 they did about 1.5 2011 they did about 3.6 2012 is supposed to do at 7 billion some people have them generating 15 billion dollars in ad revenue off of YouTube over the next six years the point is that as they get more videos they can slap more ads on them and make more money so now I'm going to tell you I hope a semi interesting story on how I discovered YouTube opportunity and sort of got my mind around it so I have this friend his name is Scott and Scott wrote the theme song to the NFL for Fox television right go Scott it was like 17 years ago think he also wrote the theme song for have a Coke and a smile and Snickers and some other stuff so Scott as a songwriter became a member of something called a performing rights organization there's BMI and there's AZ cap as examples and those organizations represent the right of public performance right you get six legal copyrights the minute you make a song tangible the six copyright specific and remember them the right of reproduction right of public performance right of derivatives the right of digital transmission right a public display in the right of derivatives those are your six legal copyrights right so there are two of them sorry one of them is the right of public performance so every time Scott song is performed on television Scott's supposed to be paid it doesn't matter where in the world this happens now how in the world of Scott supposed to monitor global television you can't just like most of us can't so he goes to BMI or ASCAP for SESAC and says I want to hire you to work for me and he grants them the right to the right of public performance and then it's their job to go out and monitor the world to do this right and so they go on in the world and they do this and they come back to him and about I don't know a decade ago they came back and Scott got the royalty statement and thought it might not be accurate like I think I'm getting more play on television than I'm being accounted to for here I should be getting paid more so to prove it he went out and he build a system and it took him a long time to do this and this is my presentation of it he created a giant TiVo or DVR where he literally now records in 14 countries 355 Network broadcast television stations and records what they broadcast 24 hours a day seven days a week every microsecond unto a freaking hard drive all right so he's got all hundreds of thousands of hours of TV programming from around the world the second thing he did is he went any recorded a catalogue of music and he began to license it to put into TV shows and he actually didn't charge a fee for it and he was like he did what's called gratis licenses no upfront fee for either side and the reason he did that is he then went on into this third thing he figured out a way he hired someone to create an algorithm to take his recordings and create a digital fingerprint of these recordings and he put an emphasis on something called dirty audio in other words if we're at a football game and there's 10,000 people cheering this technology had the ability to filter out the people cheering and all this noise and pick up on this tiny little sound of music in the background doesn't have to be in the foreground background music and so he created these this algorithm or hired someone to create this algorithm in any fingerprint in his catalog of music and then he smashed it up against these tens of thousands hundreds of thousands of hours of television looking for uses of his songs on TV and lo and behold he found in eighty percent discrepancy between what was being reported to him versus actual and now we had the proof and he figured and he created this thing because he figured this was happening to everybody not just him and he created a company where people could pay him a monthly fee and they could send him copies of recordings of songs and he would fingerprint them and then lo and behold he control through television and show them real-time they could log in and see the date the time the country the duration the use of all this stuff on television and click a little button and actually play the song so you have verifiable proof that your music was being used right because if you can audit the use of music you can monetize it so he created the system and he called it tune Sat and any of you can go there they even have like a free trial and he'll fingerprint your recordings and come back to you with a report on where your musics being used and how you use that information is up to you although there's certain ways you can do you go back to your p ro and say you under ported to me you should pay me more and then they'll fight with you but ultimately look that's their job to pay you when your music is using TV anyway so that was cool and we were talking about this and he about a year ago expanded this technology for his company and he did the exact same thing where he fingerprinted his own recordings but now he moved on to doing it on the internet and he began to troll the internet looking for uses of his recordings online and he found at five six thousand websites using it everything from like Microsoft comm to use car dealerships to Toyota our finalists Toyota but about 5,000 and he used intelligence to whittle out I'll call the chaff the stuff that didn't matter you don't want to like who cares if a thirteen year old has uploaded something to the blog or something and he found like three to four hundred places that were using it and he caught them with their hand in the cookie jar you can't just take Steven crevasses music and put it on microsoft.com without getting a license from Steven Kravitz it doesn't work like that right your music has value they have to get a license from you so he found these sites about 300-400 that didn't have a license sent out one email to them said thank you very much for using my music here's the link where it's happening uh you don't have a license be privileged to issue you a retroactive license for the use you know in about three four weeks later he got in about a quarter million dollars right and that was on some portion of the people you know they got caught you can't do that and you know then he found ways to automate the system and find more places using it so by the way that's something all of you can use as well and no I'm not an employee of toon sad I just love the technology so he now had a way to find out when people were using his music on television and on the Internet and I said to him wow that's really cool man you got the magic glasses you ever see them the movie they live like 19 six of Roddy Allen Piper in it everything God really bad movie there's actually an episode of South Park where who is Jimmy and the other kid get into a fight and it's it's a frame-by-frame recreation of the spite from this movie of a rowdy Alan Piper's trying to get that so they got to put on these glasses and the reason why is trying to get them put on the glasses and when you put on the glasses you can see who's an alien and see the subliminal messages well to me he tunes that is the magic glasses I look at the world and I see the world I put on their glasses and I see where music is actually being used and if you can see where music is actually being used then you can go and go you need to give me a license I need to give you a license and you need to pay me and I need to administer that money back so I asked him do you also troll through YouTube since you're on the Internet he said yeah what'd you find he's like I don't really care because to me YouTube isn't really a place we can make money it's more about you know notifying them to take down and that's not what this is about I said really you can make money how many videos did you find and we did some research and he found like three thousand videos four thousand videos on YouTube and had his music in it and those I went and I looked at them then and I added up the views and he had like 400 million views on these videos guys ever see Annoying Orange yeah okay so that there was an annoying orange video which had like 120 million views with one of his songs in it and I said you know let me explain to you how YouTube works as far as making money so if you can go to the next slide and we'll get into way YouTube works all right and let me start with a simple explanation three fingers wiggling I take a video of that I own the copyright to my three fingers wiggling video no one else can use it right Harry Potter Warner Brothers can't take my three fingers wiggling and stick it into a Harry Potter movie you need to get a license for me to do that so when you make a video on your iPhone your Android phone or wherever you do it that's a piece of copyright protected material that you own now what you're doing when you go to youtube is you're uploading it to YouTube and you're granting to YouTube the right to let other people watch your video gimel license YouTube has a program called the YouTube Partner Program which is open to everybody where you can become a partner of YouTube and what that means is you're saying to YouTube on those my video that I upload it to you I'm going to grant you the right to make some money on that you can put advertisements on it or before it and when you do we're going to share the revenue that's the YouTube Partner Program so if you create a really exciting three fingers wiggling and you get a lot of views on it you'll make more money than if you make a very boring three fingers wiggling and the way it kind of works is YouTube in Google will sell advertisements into it there's different types of ads and I can get into that if you want and it makes money because the advertiser pays YouTube for the ad or Google for the ad they take 45% and they pass through the other 55% to you that's the simple basic economics of the way YouTube works so when you go to youtube and you sign up you have an account with YouTube that account is called a channel and that's it just called a channel when you upload your video you're uploading it to your channel you can upload one video you can upload two videos you can upload a thousand videos there's a guy named Alan and Alan created it an account on YouTube and he decided he was going to upload videos of people talking about video games World of Warcraft I'm Laura Croft whatever whatever the kids are playing these days um Easter eggs or whatever it might be literally camera like this one and started recording this and over the years he is I don't know how many videos he has up there but his videos in his YouTube channel now get over 1.1 billion views a month it's a lot of views not only does he get over 1.1 billion views a month but because he's on YouTube he has information on all the people that watch it how old they are where they live how long they watch when he loses them etc and if you get to the point where you get enough people watching your videos in your channel on YouTube and you're a partner of YouTube you can approach YouTube and go you know what right now you're selling my inventory I've created it I'm going to use metaphorically I've created a TV show here it is on YouTube and you're selling ads into it I want to sell some of those ads myself so let's get into the money you're three fingers wiggling you upload it you know not many people are going to watch it maybe you're doing 30 cents to $1 per 1000 views as more and more people watch it you get a hundred thousand people a month or watching the videos in your channel two hundred thousand ten that you know pick your number the numbers can go up because you're more popular more popular TV shows more popular channels make more advertising money right if you got a popular video it's like a hit TV show hurts twenty seconds so the ad revenue can move from fifty cents to a dollar per 1000 views called the CPM mm of $2 $3 $4 $7 $8 $9 if you get in a billion views a month you're in the you know like five to 12 dollar range on each one of these videos it can get really high but what you can also do is you can take some percentage of your monthly views and you can package them together and you can go and do your own direct advertising sales I hire people to come work for me they're literally an ad sales team and I get a contract with YouTube and say I want to do some of my own direct ad sales instead of you selling ads into my videos I want to do it and I go and I approach New Line Cinema because they've got the new spider-man movie coming out and I have all these people that watch my reviews of the spider-man video game over here and I know the 13 to 25 year old males that live in the northeastern part of the United States or whatever it might be and I can go to New Line Cinema and I can say you know I've got your demographic I can prove it they're watchin my freakin videos this is who you're trying to reach so I want to charge you 30 40 50 dollars per 1000 views and you know what New Line Cinema's going to pay it because as you're able to give the advertiser their exact access to who they're looking for they're willing to pay more money so you can really drive up your CPMs now that's what a channel is you can do a channel on diapers diaper care Bay these dogs cat you know you can do a vertical and anything you want another example of a channel is called vivo vivo went out and got the rights to three fingers wiggling only their music videos there Britney Spears there smells like teen spirit there Justin Timberlake the radio had their official music videos and they created a channel on YouTube called the VEVO channel and they upload these videos into the VEVO channel and there's advertising that appears in front of it they do some of their own direct ad sales and they get a lot of views somewhere between two to three billion views a month and they're doing my guesstimate of somewhere between two hundred three hundred million dollars a year and ad revenue off of youtube off of music videos MTV this guy Alan he's doing pretty well for himself as well my guesstimation but here's this other cool part of YouTube on the channel side so I'm Alan again and I'm uploading videos to YouTube about video games and I learned that this gentleman right here also has a YouTube account where he's uploading stuff looking at an Atari joystick perfect so he's he's uploading videos on you video games as well to YouTube and I learn about you maybe you've got a hundred thousand views a month ten thousand views a month whatever it might be I call you up and I say hey listen keep control of your account but I have an umbrella that will allow me to link my account with your account in the business side so I'm getting 1.1 billion views you're getting a hundred thousand together we're getting 1.1 one whatever those billion views a month right and oh you have an account too let's add you into my umbrella add your views in and so do you and by adding all of you under my umbrella we increase the monthly views of what's called a network my network is my channel plus all of you under my umbrella each one of you control your own channels you upload your own videos but I get the benefit of adding together u plus u plus u plus u plus u all of you together with mine and guess what when I do direct ad sales I have more ad inventory that I can go and get I can raise the amount of money that you're making I'll give you access to tools to make more videos I'm a big deal with YouTube so if there's any problems I can deal with it I can teach you best practices and that's what's called a multi-channel network MCN not so you might have heard this you might not have but this is what the multi-channel network is and this is right now all the rage out there you've got companies like maker studio um there's a bunch of them big frame I'm forgetting off the top of my head and what they do is they create their own content and then they find other people that are also creating content in those areas and they network them all together and they aggregate all these views and they drive up the ad revenue and then they do direct ad sales and I put that do to sleep and I totally go over there like to elfish and they make this is how they're trying to make money

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