Adverts on YouTube are still a driver of profit for the digital music industry. YouTube recently announced it had paid out over $1 billion to artists and labels in the past 12 months.
This, even though music subscription services like Spotify and Apple Music are growing rapidly.
Robert Kyncl, YouTube chief business officer, says this demonstrates how multiple experiences and models are succeeding alongside each other.
"Last year was a bright one for music - after several tough years of declining revenue, the industry started growing again, spurred in large part by the growth of music streaming subscriptions," says Kyncl, citing the IFPI Global Music Report 2016.
According to the report, global music revenue increased 3.2% as digital revenue overtook physical for the first time. Digital sales contributed 45% of industry revenue, and streaming revenue is up 45.2%.
In the music subscription business model, listeners pay a monthly fee to access a large database of music; this music is streamed over the Internet and available whenever they want it. Some services allow users to download some music for offline listening when data coverage is not guaranteed.
However, to reach audiences that do not subscribe to one of these services, artists upload music to YouTube and earn money by allowing YouTube to play adverts before the video starts.
Kyncl says this is just the beginning: "As more advertising dollars shift from TV, radio and print to online services, the music industry will generate even more revenue from ads.
"In the future, the music business has an opportunity to look a lot like television, where subscriptions and advertising contribute roughly equal amounts of revenue, bolstered by digital and physical sales. To achieve this, there is a lot of work that must be done by YouTube and the industry as a whole, but we are excited to see the momentum."
Spotify leads the music streaming market, with approximately 40 million paid subscribers (however, it is not officially available in SA), followed by Apple Music, which recently reported 20 million subscribers. Other paid music services include Google Play Music, Deezer, Tidal and Pandora.
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