A report from Digital Music News says that India’s CPMs are at around $5.83. In the US, says the same report, CPMs are around $15.58. According to T-Series’ Kalyan, 60% of the company’s views are from India. As a result, T-Series may not be outearning PewDiePie—who has a more Western-centric audience—the way one might imagine.

When asked what it would take for Indian CPMs to increase, YouTube’s Anand explains that they are dependent on a multitude of factors rather than just location. “One major factor is advertiser appetite for digital advertising, which is still very nascent in India. It’s a reflection of the budgets that Indian advertisers are willing to commit to digital spend at this point,” he said. This doesn’t augur well for T-Series’ earnings.

A report from advertising and marketing company Dentsu Aegis Network pegged the Indian digital advertising market at Rs 8,202 crore ($1.13 billion) in 2017 and expected it to grow at a rate of around 32% annually. By 2020, stated the report, it would be worth around Rs 18,986 crore ($2.62 billion). Meanwhile, the digital ad market in the US presently stands at around $88 billion—roughly Rs 638,000 crore.

Betting on digital

But there is still hope. As more Indians come online, advertisers are bound to pay more attention to digital platforms. “Advertisers have noticed that users are embracing online video like never before, and we’re working together with advertisers, agencies, media planners, and of course, creators, to showcase the value of YouTube,” says Anand. Anand admits that this change will take time. However, he emphasises, all the trend lines are up for YouTube in India.

Companies like T-Series’ rival Shemaroo, which aggregates rights to music, are betting on this change. As with T-Series, Shemaroo has seen a surge in its YouTube views and has created multiple different channels on YouTube. The company is increasingly moving away from traditional media revenues from television and DTH, focusing on growing its digital media business instead. In the September 2018 quarter, its digital media business grew 33.3% YoY to Rs 45.6 crore ($6.2 million). However, over the last three quarters, analysts note that the pace of growth in digital has been slowing. Little wonder then that Shemaroo CEO Hiren Gada indicated in an analyst call that Shemaroo is counting on YouTube to help maintain its pace of growth.

Shemaroo’s management said that its digital media revenues primarily came from three sources —telco partnerships, syndication with video streaming apps like Hotstar and Netflix, and YouTube. According to them, 50% of digital revenues came from telco partnerships and about 15-20% was from the video streaming apps. That leaves us with around 30-35% revenue from YouTube alone. A significant number for the company.

Getting their due

But this isn’t a one-sided relationship. Or, at least, it shouldn’t be. Music as a vertical is far too big for YouTube to ignore. As a result, YouTube is doing what it can to help grow the space. This extends to encouraging YouTube artists to sing covers of popular songs. And it is seeing some amount of reciprocity from music labels who are increasingly aware of the importance of digital. “What’s also very special is that T-series has been tapping into the creativity of independent YouTube creators and leveraging their influence to amplify their releases. They partner with creators to produce song and dance covers, and also sign key YouTube music talents such as Shirley Setia,” said YouTube’s Anand.

However, even as music labels are keen to grow their digital business, they’re not content relying on ad revenue alone. Instead, they’re keen to maximise their earning potential by also going after royalty payments.

As an online platform, YouTube is a strange beast. A senior executive in the music industry explained that with other streaming platforms such as Apple Music, Spotify, Gaana, etc., the deal is pretty straightforward. Royalties are paid based on the number of times a song is played. YouTube, on the other hand, is far more complex. Unlike the other services, YouTube, as a video streaming platform, has user-generated content in terms of videos uploaded and comments. Importantly though, it is considered a broadcaster.