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YouTube hiring Lyor Cohen proves it’s serious about music

The latest news from the front lines in The Streaming Wars: Lyor Cohen, a 30-year veteran of the music business, former head dude at Warner Music Group, and the guy who signed Fetty Wap, has assumed the throne at YouTube’s music division as the company’s first global head of music.

The move exposes YouTube’s aspirations as a player in the music industry — Cohen is the best in the business, and he couldn’t have come cheap. His acquisition comes on the heels of two launches: YouTube Red, a paid, ad-free, streaming subscription, and YouTube Go, an app that the company is billing as “a new YouTube app built from scratch to bring YouTube to the next generation of viewers.”

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In other words, YouTube is betting globally. And if the company plans to license music from countries around the world, it’ll need someone skilled in the language of business and optimistic about our digital future. Cohen is that guy.

Cohen will probably do what his counterparts at Apple Music (Jimmy Iovine) and Spotify (Troy Carter) do now: act as a liaison between YouTube and the big labels. Why the company needs a liaison to the music business is another legacy of Napster’s Original Sin; YouTube needs to reassure labels and executives that it is not, in fact, destroying their business. (Like all good businesspeople, music executives believe that they have never made enough money.)

Labels have the power in negotiations with YouTube. Their artists create the songs and albums people want to listen to, after all, and the Digital Millennium Copyright Act gives labels the ability to sue anyone out of existence. They also have the right to pull the stuff they make from a given service, which can torpedo a website (or app!) that relies on the content to monetize the people who stop by to see it.

Historically the labels’ relationship with YouTube has been fraught, as are most cases of misaligned incentives: YouTube is in the content hosting business, which means it’s fighting for eyeballs; the labels, on the other hand, are in the content business, which means the things they produce must be captivating to an audience and scarce. Because you don’t make money without scarcity. (Just this week, labels sued the website Youtube-mp3.com, a service that converted YouTube streams to downloadable mp3 files, for reportedly $150,000 per copyright violation.)

Cohen’s job, which he’s uniquely qualified to do, is for a heavy hitter. It’s a sign of good faith on YouTube’s part that they hired a veteran industry insider; Cohen is a known quantity, and the labels understand that he understands their business. Their incentives.

On the other side, Cohen’s history with Google and YouTube means that he’s got a smart perspective on content hosting. In 2006, a year after YouTube was founded, he oversaw the first major label music deal with the site. (Google also invests in 300 Entertainment, Cohen’s record label/management company.)

Cohen’s style is to embrace new platforms instead of fighting them. In 2011, the 56-year-old did a deal with Spotify and licensed the company’s use of WMG’s entire artist roster. Before that, in the early years of the new millennium, WMG’s revenue increased exactly when Napster and its clones were wreaking havoc on the music business. Though he’s known to be kind of a dick, in Cohen, YouTube has hired the guy who’s going to shape the future of the music business.