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YouTube’s grand plan
For several months, the media reported that the competition to land NFL Sunday Ticket’s broadcast rights was a three-company race between Amazon, Apple, and Disney. But when YouTube swooped in and won the deal, it seemed like an obvious fit. YouTube TV already aired NFL games through broadcast networks. It was less friction for the NFL, which lost 41% of its Thursday audience with Amazon. YouTube’s existing position helped close that deal.
YouTube’s goal is to do the same in music. It paid out $6 billion to the music industry in a 12-month span and wants to surpass Spotify to become the industry’s largest revenue source. It started a $100 million fund to grow YouTube Shorts and take on TikTok.The platform’s expansiveness helps connect its dots but has some unique challenges too. Let’s explore its current role in music and make a few predictions at the end.
It’s tough to dominate both audio and video
YouTube competes with social media networks, video-on-demand services, digital streaming providers, and more. Big social networks rarely win at everything, but YouTube does a good job in these areas. It knows how to maximize viewers.
But maximizing listeners is a different beast.
Audio is passive. It attracts those who want background music during their commutes and workouts. It attracts busy business leaders who play a song, podcast, or audiobook during their packed schedules. These are people with limited time and deeper pockets. Their consumer behavior is different than users on YouTube, which requires full attention to get the full experience.
Ironically, YouTube’s stickiness may attract users who are less desirable to advertisers. Getting lost in a YouTube rabbit hole implies that the person has the time to get lost in a YouTube rabbit hole! Meanwhile, one of the reasons audio ads, especially podcasting ads, work well is because they reach a relatively wealthier audience that’s listening on a platform where discoverability is more challenging.
YouTube’s answer to this is the audio-only option on its YouTube Music app. The platform operates smoothly like several digital streaming providers, but it’s unclear how many of YouTube Music and Premium’s 80 million combined users pay for which of the two services. And since YouTube Premium is a bundle that includes access to Music, it’s difficult to know how many of those users signed up mainly for an ad-free YouTube experience or for a Spotify alternative.
The bet on Shorts
Short-form video is a growing focus for YouTube, especially as it takes not-so-subtle shots at TikTok. YouTube’s advantage is its ability to funnel users from Shorts to the app’s longer-form content and keep them on the platform. It’s an integrated alternative to the leakier TikTok-to-Spotify artist discovery pipeline where users leave one platform to go to another. But YouTube’s integration has to outweigh the behavior shift from short-form to long-form video.
One of the most successful social media copycat moves was when Instagram launched Stories and surpassed Snapchat Stories. Here’s what I wrote about it:
“Instagram Stories worked well because it solved a problem that influencers had while using the app. Influencers, Instagram’s core users at the time, felt pressure to post perfect images which made them less likely to share. ‘Stories’ let them share temporary photos and videos. Problem solved. And since Instagram had more influencers than Snapchat, it didn’t take long to claim victory.”
YouTube’s core creators likely felt pressure to keep subscribers engaged given the increased competition for its audience’s attention. It’s hard to convince a brand-new user to watch a 45-minute video. Many successful creators already had separate YouTube “clips” channels to create their own top-of-funnel within the algorithms. So Shorts helped solve that need by creating bite-sized content.
TikTok is still the dominant player in the space though. According to MiDIA Research, TikTok is still used by 3x as many users as Shorts, and still trails behind Instagram Reels. Users open up TikTok to mindlessly scroll and be entertained. It’s a passive experience. YouTube is much more active, so Shorts’ direct competition with TikTok may hit a natural ceiling. Trying to take down TikTok may steer YouTube away from the aspects that make it unique.
Predictions for YouTube’s goals in music
The #1 contributor of revenue to the music industry by 2025? I do expect YouTube’s revenue to eventually exceed Spotify’s but it will be because of its artist-generated videos and user-generated videos that include the artist’s music. The platform’s global reach will continue to work in its favor, especially over its audio competitors that are still vying for growth.
As YouTube grows though, there will be more of a magnifying glass on the actual payouts to the artist, especially given the recent comments on the artist-centric model from Universal Music Group CEO, Lucian Grainge. YouTube has also faced criticism in past years for lower streaming payouts. If YouTube eclipses Spotify, then the attention will shift in its direction.
YouTube Music: I doubt that YouTube Music moves the needle much for the company. Even if the combined YouTube Music and Premium subscriber number continue to grow, it’s too vague of a number. It’s similar to determining the specific number of paid subscribers for Apple Music or Amazon Prime Music. Keeping it vague works to their advantage.
YouTube Shorts: The strongest value prop for Shorts is to increase discovery for its creators. It’s another way to keep the sticky YouTube audience engaged.
The weaker value prop though is Short’s ability to overtake TikTok. Even if Shorts could catch up, shifting too far in that direction would take away what’s special about YouTube itself.
Much like TikTok itself, YouTube is a big company (under another big company) that was built to take big swings. Even if many of them fail, the likelihood of one taking off can defend its position. But that position is strongest as the stickiest platform that captures attention, helps creators find their niches, and is still strong after almost twenty years under Google’s umbrella.