YouTube wants to fix its awkward relationship with the music industry

For the past few years, the biggest fight in the music industry has been against ad-supported music. Apple attempted to kill Spotify's free tier before it launched Apple Music; the industry has railed against what it perceives as low payments from YouTube for years; and SoundCloud, one of the most popular ad-supported streaming sites in the world, is on the brink of collapse. But the truth is that ad-supported streaming isn't going anywhere. YouTube is too big to fail at this point, and labels have largely come to terms with Spotify’s free tier due to its high conversion rate. Getting to scale, everyone acknowledges, requires bringing in users who might not pay at first.

So how will it coexist in a music industry increasingly dominated by paid streaming services like Spotify and Apple Music? Executives from Warner Music, YouTube, SoundExchange, Pandora, and iHeartMedia sat down for a panel at the New Music Seminar in New York on Wednesday night. The event was moderated by Tom Silverman, the founder and chairman of Tommy Boy Records and the founder of the New Music Seminar. The group discussed why ad revenues aren’t growing as fast as expected, the benefits of ad-supported services, and why the music industry should be more supportive of streaming services.

STREAMING NOW BRINGS IN THE MAJORITY OF REVENUE FOR THE MUSIC INDUSTRY

“It takes time,” Lyor Cohen, YouTube’s head of music said, when Silverman asked why YouTube isn’t monetizing its ads at a higher rate. Last year, ad-supported streaming like YouTube and SoundCloud’s free service brought in $469 million in revenue for the music industry, according to the RIAA. Paid streaming services pulled in $2.47 billion. Cohen pointed toward the slow adoption of hiphop within the music industry in the ‘80s — he was president of Def Jam Records in the late ‘80s — as a correlation to what’s going on now with advertisers and streaming music.

“I remember there was at least seven years of incubation for Russell [ Simmons] , Ri ck [Rubin], and myself at CBS. Rap music was exploding, the supply outpaced the demand, and it was happening all over the city. CBS was a New York-based company, and all they had to do was drive about 60 blocks and realize how many kids were trying to get into a venue, and they would’ve said, ‘Oh my god, this stuff is really incredible and speci al .