YouTube’s exploding mobile traffic is creating a new source of friction between the world’s No. 1 content distributor and the music industry, numerous sources told The Post.
Universal, Sony and Warner execs believe YouTube’s grip on free ad-supported music videos needs to be loosened — by supporting rival sites like Vessel and Snapchat, sources at each of the labels said.
Separately, the labels are weighing going nuclear — potentially yanking rights to the Web’s most valuable and highly trafficked content.
“They are not serious about monetizing music on behalf of creators and, as a result, music companies are realizing they have to reset the current relationship,” one senior industry source said.
“They are fed up with the lack of monetization,” said another label source. “When you look at how music is monetized from lowest to highest, YouTube is at the bottom.”
While consumers love free ad-supported music, the labels are much less enamored of the format. Each company is struggling to build profits in the face of declining downloads — and is lobbying for a better balance between free and paid services, sources said.
The labels know a radical move like removing all their content is fraught with danger as users may simply, and quickly, post their own videos.
The move to squeeze more ad revenue from their videos picked up steam last week when YouTube parent Google revealed that, in the second quarter, time spent viewing YouTube grew 60 percent — the largest uptick in two years — and that the time spent viewing YouTube on mobile devices more than doubled from a year ago.
Google Chief Business Officer Omid Kordestani told investors, “The number of advertisers running video ads on YouTube is up more than 40 percent [compared to a year ago] and, for our top 100 advertisers, the average spend per advertiser is up over 60 percent year-over-year.”
Morgan Stanley estimates that YouTube revenue in 2015 will rise to $6.6 billion, up 38 percent from 2014.
But the labels are not seeing anywhere near as robust an increase in their piece of the ad revenue take.
They have little idea, for example, how lucrative Psy’s “Gangnam Style” (viewed 2.4 billion times) or Carly Rae Jepsen’s “Run Away With Me” (the No. 3 Vevo video on YouTube this week, with 1.6 million views) are when it comes to ad dollars.
“They control everything: ad policy, the sales channel, monetization,” said one music industry exec. “They are one of the worst partners, and it’s a great source of frustration.”
Industry body RIAA says ad-supported streaming services (both visual and audio) contributed just $295 million in 2014 to the US record industry — with YouTube’s contribution estimated to be about half that number.
Google execs have said that YouTube has paid out billions of dollars to the music industry over the last few years and that partner revenue has increased 50 percent year on year the last three years in a row.
Google has a subscription service, Music Key. Launched last November, it is still in beta.
“[Music Key] is a giant head-fake,” one exec said.
A YouTube spokesperson said the service will launch this year and was in beta “to improve the product” ahead of its debut.