UPDATED: The Real Gangnam Style: Was Google Off a Couple Magnitudes on Earnings Call?

According to the Washington Post’s Caitlin Dewey in her reporting about Google’s January 22 Q4 earnings call:

Youtube has become one of the biggest forces behind Google’s growth, said Nikesh Arora, Google’s chief business officer.

Viewers watched an average of 4 billion hours of video a month in 2012. Gangnam Style, the most-watched video of all time, earned $8 million in advertising revenue — or roughly 65 cents a play, Quartz calculates.

So let’s see–the “Gangnam Style” official video has as of a few minutes ago gotten 1,238,957,445 views on YouTube.  This doesn’t count all the unofficial monetized versions of the video which also have a bunch.

So let’s see–$8,000,000 divided by 1,238,957,445–even without doing the math, a simple country lawyer like me can see that it’s not possible for the per-view payment to be anything remotely close to $0.65.  (And given that a single track mp3 download on iTunes has a wholesale price of about $0.70–doesn’t that $0.65 number for a YouTube stream ring any alarm bells?)

In fact–based on the Quartz numbers quoted by WaPo, the per play rate is $0.00645.  So just a couple magnitudes off.  But as I think you will see, there are problems with the internal consistency of these calculations.

Billboard was considerably more judicious in its reporting:

Make that twice in a row PSY’s “Gangnam Style” video has been mentioned in a Google earnings call. During Google’s fourth quarter earnings call Tuesday afternoon, Google senior VP and chief business officer Nikesh Arora said, “Outside estimates say… ['Gangnam Style'] has generated over $8 million in all-in advertising deals.”

“Outside estimates”, eh?  “All-in advertising deals”, hmm?  Sounds like they’re talking about YouTube, don’t it?

The previous mention of “Gangnam Style” came in October when Page called it an example of the future. “Just flip a switch and get worldwide distribution, almost without doing any work,” Page said. “That’s how we see the future. YouTube is going to be available everywhere.”

Not that “Gangnam Style” is an outlier or anything.

As @profjeffjarvis once said, in the link economy, journalists are the central bank.  So after about 2 minutes searching we found the original Quartz post misquoted by Ms. Dewey–perhaps that “outside estimate” to which Arora referred (somebody could always have asked him which outside estimate he meant–but that would require waking up from a cozy nap):

Considering that Gangnam style has, as of this writing, racked up 1.23 billion views on YouTube, that means the video is generating on average 0.65 cents every time someone plays the video. The creator of a YouTube video keeps about half of that money, which suggests Psy and his record company have earned about $4 million from YouTube.

Ah.  So Quartz never said anything about $8 million from YouTube….

But of course Quartz was in turn quoting the Associated Press:

A previous analysis by the Associated Press indicated that Psy had earned $7.9 million from Gangnam Style in worldwide revenue, including downloads on iTunes and streaming and sales on services available only in Korea.

And Quartz didn’t use Google’s Mr. Arora’s reference to “all-in advertising deals” either–but maybe Quartz was close enough to qualify as an “outside estimate” for Google logic.

We can’t be sure, but what seems to have happened is that Quartz overstated the YouTube earnings by dividing $7.9 million (the sum of worldwide YouTube and non-YouTube revenue from the AP) by 1.23 billion plays on YouTube which gets you close to their $0.0065 per play rate.  Of course that’s meaningless. By their own math, the all-in to the artist and label (they always seem to leave out the publisher for some reason) was $4 million.  So wouldn’t you derive a YouTube per play rate by dividing the YouTube revenue by the YouTube plays?  Which gets you to $0.00325, roughly half of the $0.0065.  Not surprising, because…4 is roughly half of 7.9….or 8.

Then again, perhaps the $8 million Quartz referred to was 2x their estimate of $4 million in revenue to artist, label and publisher.  But why say that the video is “generating on average 0.65 cents” in a way which implies that’s what the copyright owner gets–2x $4 million/1.23 billion?  But why would you include money YouTube keeps for itself in the calculation of money paid to the artist particularly when that’s how you “see the future” of “no work” distribution?

So, let’s see.  Maybe somebody dropped a couple decimal places, and also missed the “worldwide revenue” part.  The Washington Post seems clearly to have been trying to get the reader to draw the impression that YouTube earned $0.65 per play in “advertising revenue“.  And of course it appears that Quartz may have taken $7.9 million in worldwide revenue including downloads on iTunes, etc.–that is “apples”–and divided those apples by the number of YouTube video views–oranges–to get a number signifying nothing at all.  Which not only was repeated–albeit incorrectly–by the Washington Post.

Ms. Dewey not only screwed up the per play number, but also the revenue source “quoted” by Quartz, and Quartz screwed up the per play rate either by using the wrong numerator or determining a per play rate that is misleading.  Either way–Quartz appeared to refer to “[a] previous analysis by the Associated Press” as the inspiration for their math.

Which is really interesting because this is what the Associated Press “outside estimate” actually said:

With one song, 34-year-old Park Jae-sang – better known as PSY – is set [maybe] to become a millionaire from YouTube ads and iTunes downloads, underlining a shift in how money is being made in the music business. An even bigger dollop of cash will come from TV commercials.

From just those sources [i.e., YouTube ads, iTunes and commercials--not just YouTube as both Quartz said and WaPo implied], PSY and his camp will rake in at least $7.9 million this year, according to an analysis by The Associated Press of publicly available information and industry estimates….Here’s how it works.

YOUTUBE

“Gangnam Style” with its catchy tune and much imitated horse-riding dance is the most-watched video on YouTube ever.

The viral video has clocked more than 880 million YouTube views since its July release, beating Justin Bieber’s “Baby,” which racked up more than 808 million views since February 2010. PSY’s official channel on YouTube, which curates his songs and videos of his concerts, has nearly 1.3 billion views.

TubeMogul, a video ad buying platform, estimates that PSY and his agent YG Entertainment have raked in about $870,000 [not $8 million or $4 million] as their share of the revenue from ads that appear with YouTube videos. The Google Inc.-owned video service keeps approximately half. [Approximately $0.000702 per play--I think, I get confused when I get those e-4 results.]

PSY and YG Entertainment also earn money from views of videos that parody his songs.

So Quartz–supposedly inspired by the AP’s analysis–misstated the AP’s $870,000 estimate of the YouTube revenue to the PSY contingent by a factor of 10 (if $8 million) or 4.5 (if $4 million) and guess who went right along with it.  Why?  To make YouTube sound too good to be true?  There’s a long way between $0.65 and $0.000702.  That makes about as much sense as a Rightsflow royalty statement.  Or $8 million from “all in advertising deals”.

That’s all anyone needed to say if they were relying on the AP’s “analysis”: the PSY crew made $870,000 for (then) 880 million views on YouTube.  The problem is–that sounds like highway robbery.  That sounds far worse that a record company artist payout.  In fact–as David Lowery might say–that sounds like the new boss is way worse than the old boss.  (And the songwriter and publisher are probably making something like $0.0003 per view.)  And given that PSY–all due respect–has an outlier, the average bear on YouTube is not making even hobbyist wages.  Oh…did I say “hobbyists”?

Good going Washington Post fact checkers.

Here’s the real fact to check:  Google knows how much they paid the PSY contingent.  It’s on the IRS Form 1099.  Why would they mention an “outside estimate” that appears to be wildly internally inconsistent? On an earnings call?

But who’s counting?

And Larry Page, like many distributors before him, mistakes the fact that a songwriter wrote a hit, the producer produced the hit, the artist performed the hit, and the artist and his record company worked their tails off to make it a hit.  So aside from busting their humps for years, PSY & Co. might agree with Page’s lunatic comment: “Just flip a switch and get worldwide distribution, almost without doing any work,” Page said. “That’s how we see the future….”

And all that YouTube did was deliver a potential–potential–audience that it has attracted largely as the result of two things–a bunch of artists who can’t say know because YouTube takes their music anyway and then curses them publicly if they pull out, and Google’s monopoly investment.