At Musonomics, we often talk to more people than we can fit into an episode. As a result, some great wisdom gets left on the cutting room floor. While researching our latest episode, “YouTube’s Big Red Elephant is Loose in the Music Industry’s Room,” we got on the phone with Larry Mills, CEO and founder of We Are The Hits, a company that has devised a way for amateur artists to legally cover hit songs in YouTube videos and then share revenue from those videos with the rights holders of the covered songs — no small feat in today’s convoluted music industry. In this Musonomics Q&A, Mills shares some great insight on YouTube’s dominance, it’s importance to the music industry, and how We Are The Hits has tried to create an environment where everybody wins.
When we talk about streaming, YouTube is the elephant in the room. In many ways, and in probably the most important ways, YouTube is the biggest media streaming service in the world. Why do you think that is? What do you think gives YouTube a leg up on other streaming services like Spotify, Deezer, Tidal, or even Netflix?
There was a statistic I saw the other day that said YouTube is 40% of all streaming and it generates 5% of all the revenue. So I think it’s more than just an elephant — it’s probably more the dinosaur in the room. But I think there’s a couple things. Because the platform offers more than just music, I believe you have the ability to get every customer. In the instances where someone choses to use a service like Pandora or Spotify or any of these others, they’re purely going there for their music experience. They’re not going to stumble upon an audiobook or a podcast, right? When you go to a boutique clothing store, you’re not leaving with a washer and dryer, whereas that can happen at Target or Walmart where you’re shopping basically for everything. YouTube has everyone coming there for everything.
And the one last piece of it is that it’s free. You cannot beat free. The conundrum that I think everyone is under is; how do you monetize things that consumers love so much in the way they are? This is the SoundCloud problem. This is the YouTube challenge. People love these services, but because of this freemium model it’s hard to get someone to pay for something they didn’t before.
In other words, how do you monetize a service that’s extremely popular without jeopardizing the thing that made it extremely popular, especially when one of those things was that fact that it was free?
Exactly. There seems to be this disconnect with advertisers and brands that are all about getting these influencers and musicians on YouTube because they have a tighter, quicker connection with their fans. But the YouTube cover artist singer and his (or her, or their) million followers or subscribers have an unbelievable relationship because it’s done within the world of free.
How do you think YouTube is viewed by labels? Is it an enemy or is it a tool of the trade at this point?
You know, I think there is a general adversarial relationship between any company that seems to be profiting off of the back of music that the music industry doesn’t believe is being compensated correctly for it. But I think ultimately the problem is that the labels and publishers and music industry in general are kind of mad at themselves. They made their bed, to a certain degree and the world has shifted into a different type of business. It’s not ownership — it’s rental.
Ultimately more consumption of music should be better for music. I think the issue is that it got so big so fast that you can’t put the genie back in the bottle. The music video used to be the biggest cost in your marketing budget. Peter Gabriel spent a million dollars to make a music video. Now Lady Gaga makes a million dollars on a music video. So there are positives happening here.
So the relationship between rights holders and YouTube can seem adversarial, but it’s much more nuanced than that. YouTube and the labels are not necessarily completely aligned nor completely misaligned, they feed off of each other and they need each other and they sometimes resent each other for that reason.
100%. But let’s not forget that there were two companies that were up for sale at the same time; YouTube and MySpace. Google bought YouTube and then Fox bought MySpace. The reason Fox, and there’s multiple stories, but one of the reasons why Fox shied away from YouTube was about rights. YouTube is a site of video full of infringement. It was built upside down with no rights foundation, an upside down pyramid; very few rights at the bottom with lots of content at the top. That’s how companies that fail start, Grooveshark, and others that are built upside down.
There was no company other than Google, in my opinion, that could have created a safety net around this thing and they did it and it’s awesome and it’s generating billions of dollars for people.
But what happens now is people see Google share price go to $700 and Sony is talking about selling their publishing company. So I think that there is some animosity against companies that basically have music and pay a low rate, or steal it, and then ultimately go sell their company for $400 million and the principle rides off into the sunset. The guy who’s sitting with the business affairs department at BMG is like “Wait a minute how did that just happen?”
What kind of opportunities does YouTube present for established artists?
I think for the established artist it’s an unbelievable way to connect with your fans. So, it’s not necessarily that YouTube makes Lady Gaga more popular, but the way her fans are able to engage with the music and with her — much like a lot of social media — is groundbreaking. Lyric videos, fan videos, that stuff is awesome. I think it is a way for people to engage with their music in a way that no one ever thought of before.
People putting dance videos, Harlem Shake type stuff, it’s just unbelievable how creative fans can get in how they want to show their fandom — not just buying a ticket and buying a record — they really get to say “I love this song so much that it reminds me of my kid. Hey, here are my kids.”
How is YouTube is useful for an unestablished artist?
I think there’s been a pretty radical change in the last three years. Everybody who thinks they can sing is now an aspiring artist on YouTube. I kind of equate it to thinking of the best singer in my high school. She was the lead in all the all the plays, she was good for my high school — I don’t think for a minute she ever thought that she was gonna be on Broadway. In today’s day and age, the best singer in my high school might’ve had 40,000 subscribers and had a video with 200,000 hits and views. Maybe that changes what she would’ve done, or what she would’ve thought about herself. You can see if you’re popular and see if people like you, and make a few bucks. All of a sudden you’re some 17 year old getting a check from YouTube for $240 or $1,000 and it’s awesome. An entire industry has popped up from it, putting lots of people to work doing cool things, doing what they love, from Davenport, Iowa to Portland, Oregon to the Philippines and everywhere.
The problem is that everybody can do it. So what’s happened is that there is no filter. So what used to be, even just a few years ago, this excellent opportunity for artists — we saw Boyce Avenue and Tyler Ward and Megan Nicole and all these very talented musicians start their careers here — is getting harder and harder because everyone’s doing it.
So I think that for the aspiring musician it’s a blessing and a curse. It’s a blessing because you can do your own thing and just kind of have an outlet. The curse is that now everybody can do it. So just as much as it lifts the hopes of a lot, it can also dash some hopes of people that should be heard.
I wanted to talk a little bit about your company, We Are The Hits. How did the idea come about, and how did you make it work?
I used to work at Sony ATV music publishing, and at the time there were a lot of people in companies that were singing cover songs on YouTube and either monetizing and keeping all the money and not paying rights holders, or unable to make any money on it for the aspiring musician. So we came up with this concept that instead of us licensing others, we’ll clear rights and allow people to participate on the back of the rights that we have. So now independent artists and organizations that aggregate artists can basically offer, if you want to sing cover songs and film it and syndicate, it you can do that legally with a synchronization right through We Are The Hits.
We’re basically a rights aggregator. We take the composition synchronization rights from the music publishers, then people come in and they pick what song they want to cover. They upload their video and it is now a legal piece of content fully cleared which they can syndicate on the internet — most notably on YouTube — but we have deals with Vevo, CBS Interactive, Amazon, and others.
So the publishers get their fair share, the kid who sings it gets his fair share, and we take a little administration fee. We do about 300 million views a month currently on YouTube alone, not to mention other syndication partners. We run cover contests. We work with brands and we pump millions of dollars a year into the hands of songwriters and performers.
It could be argued that this type of venture profits off of other artist’s work. But I think that’s a bit reductive. First, those cover songs were likely going to be uploaded somewhere, regardless. We Are The Hits is not saying “Hey don’t want to write your own songs? Just sing a cover of somebody else’s! We’ll help you make money off the whole ordeal!” That’s a severe oversimplification of the product. In a way, you’re cleaning up those videos that would have been infringements otherwise and in the process, everybody gets a more fair piece of the pie.
This was the hard part, I think, for the publishers and songwriters to understand: these people doing cover songs aren’t looking to rip you off. Singing these songs is not a way for them to profit on the back of your work. I think there’s been a shift, where people make fan videos or clips of favorite Seinfeld episodes, or whatever — it’s a new engagement. And so what we did here was try to put our arms around it, in a sense to say to the rights holder, this is happening and right now you’re not getting paid. These YouTube kids are getting popular and getting half a million views and a million views — you kind of want them to sing your song now. So you don’t want an adversarial relationship.
So at a certain point — and we’ve seen it come true — everybody wins. The songwriter gets paid correctly, on time, for everything, and often at a higher rate. We’ve created a place where publishers are happy, I pay them money. Singers are happy, I pay them money. My wife is happy that I get to pay the rent. So, so that’s kind of how we see it. We don’t see it as someone who is stealing. It’s the exact opposite, we’re stopping them.