The last few months I've been on the road in Nashville, Barcelona, Mumbai and Rio, meeting with artists and I've noticed something is brewing. The gates are down and independent artists are dashing into the music world like no other time. It's got many people outside the independent music scene looking over their shoulders.
What's the cause of all this? YouTube.
It's no secret that YouTube is a disruptive factor in the music industry. It provides incredible opportunities for every type of artist to reach fans all over the world with their music, plus enables new and unsigned artists to compete with popular artists and the mainstream music industry on a more level playing field thanks to its technology. Those once-rare viral music videos that plastered headlines a few years ago were signposts for a new way to build music audiences.
Artists are now using YouTube to act like the TV stations, radio programmers, and newsrooms of the past. And YouTube itself is highly engaged in helping creators unlock the potential of its platform. In August, at our third annual DIY Musician Conference, YouTube staffers attended in force, showing creators how to create and promote their music and videos on the platform.
As I traveled, I got a little curious myself about how YouTube might be changing the world of music. So, to explore these international scenes, on long airplane rides, I read Streampunks, the new book by the company's chief business officer Robert Kyncl. It left me energized and intrigued, with a new appreciation for artists around the world who are unlocking YouTube's potential.
YouTube Success Stories
The first time I observed a YouTube success at CD Baby was in 2012 when we got a call from a publisher that owned the composition rights to the song "Somebody That I Used to Know" by the artist Gotye. He called because Gotye's song was number one everywhere in the Western world, except Canada, where a cover of the song had topped the charts instead. That cover was an appropriately licensed version by the band Walk Off the Earth, who released a brilliant video, "5 Peeps, 1 Guitar," that powered its version to number one instead. As of this writing, the group now has 2.8 million subscribers and is approaching 700 million aggregate views on its YouTube channel, in addition to 188K followers on Instagram and 2.9 million Facebook likes. They've used their YouTube channel to continually create quirky, interesting, compelling videos and build their repertoire to include a major label release that includes a gold certified record.
At CD Baby, we're fortunate to work with a number of other artists who have built thriving independent music careers using a similar YouTube-first approach, building a fanbase with a steady release of covers before releasing their own original content. We're also thrilled to see the rapid growth in earnings for independent creators whose music and videos we administer on YouTube. In the past five years these earnings have grown from virtually nothing to nearly 10 percent of the $100 million our artists will earn this year.
The amazingly talented vocalist Peter Hollens whose channel has 1.7 million subscribers and 264 million views has built much of his career on YouTube. He also has 126K Twitter follows. The band Ninja Sex Party appealed to its 1 million YouTube subscribers last year with a physical pre-release of Under the Covers, selling nearly 44,000 CDs and vinyl records and debuting on the Billboard charts at No. 9. And just in case you're tempted to write this off as a fluke, it's worth noting that NSP has just repeated this success a few weeks ago, with their second release, Under the Covers 2. The group used YouTube to pre-sell 25,000 CDs and released in the top 20 on the Billboard charts. This approach to building a fanbase of YouTube subscribers as a bridge to the next level is no longer novel, and it's happening all over the world.
YouTube is unsettling the order of things everywhere in the music industry for a number of reasons. First and foremost, it enables the artist to connect directly with more than 1.5 billion potential fans worldwide. There is no other digital platform that unlocks this large of an audience worldwide (second place might be Apple's iTunes with over 1 billion users, and third is China's Tencent, which has more than 500 million subscribers.)
YouTube also lowers the barriers of investment for art. A well-thought out, highly creative and competently performed video can now compete with the high cost, commercially produced, major label financed videos on a more level playing field. It enables artists to retain both ownership and creative control, leading in my opinion to more diverse creative expression.
The platform also provides incredibly valuable data directly to channel owners and creators with a few clicks. Utilizing YouTube's analytics, creators know who their fans are and where their fans are, which in turn helps them conceive content that resonates with their audience. This enables creators to understand how to better deploy their most scarce resource: their time. It helps them understand things like where to tour and even what kind of content to create. And it does this in near real time. YouTube enables transparency in an industry known for opacity.
YouTube paid out more than a billion dollars to the music industry in 2016. That is triple the amount of ad supported revenue paid out by Spotify, although less than either Apple iTunes or Spotify in aggregate dollars. And YouTube is here to stay as part of the massive Google-Alphabet ecosystem.
The next time you hear an industry pundit decry the low per stream payouts from YouTube, consider who the source is and who is really threatened by access, transparency, diversity of art and competition for fans worldwide. I'm excited to see how both YouTube and other platforms evolve in how they are connecting artists and fans. My hope is that Apple, Spotify and emerging platforms like Tencent also invest in these tools of connection that are clearly helping independent artists level the playing field.
Tracy Maddux is the CEO of CD Baby