The music industry has often cited piracy as the main reason for the decline in revenues over the past decade, and YouTube may have played a more significant role than previously thought. In a recent report, researchers examined the effect of Warner Music’s 2009 YouTube blackout on the record label’s album sales and found that their top artist's sold more albums during that period.
In the report from CAPRI, researchers from Fairfield University and the University of Colorado looked at the time that Warner removed all their music from YouTube due to a dispute over licensing. The researchers applied the logic that they could use this event to compare the sales of Warner’s artists listed in the Billboard Album 200, to those from labels that still had their videos on YouTube. Would they find any evidence that Warners are losing revenues? The evidence seems to be conclusive – based on Warner Music's YouTube blackout, researchers conclude that YouTube costs the label up to $40 million in revenue per year.
Warner Bros Sold More Albums During YouTube Blackout
The results seemed to contradict the belief of advocates of allowing legal content on YouTube to encourages more album sales. After controlling for several variables, such as music genre and album specific characteristics, they found that Warner’s top artists sold many more albums during the blackout.
“We showed that the removal of content from YouTube had a causal impact on album sales by upwards of on average 10,000 units per week for top albums,” the researchers report. “While a great deal has been said about the potential role of these service in promoting and discovering new artists and music, our results cast some doubt on this widely believed notion, at least with regards to top selling albums'.
“Our findings suggest that sales displacement effect can be real without a promotional effect. That is, the people listening on YouTube appear to be, to some extent people who would know about this album anyway, but may not buy it because of YouTube,” the researchers conclude.
In a recent post Music Labels Make More Money From Mashups Than Official Videos, we reported a significant revenue stream to labels from YouTube. So while this latest research may have revealed a genuine area of loss, the net gain of having fans follow their favorite artists on YouTube is much greater.