Independent Labels Back Down YouTube in Rights Fight
Three weeks ago, YouTube and its parent company Google started a dangerous game of brinksmanship with the independent music world. YouTube required that indies adhere to obtrusive demands for rights to use their music as part of YouTube’s upcoming streaming service, or be faced with extinction from the YouTube format entirely, including the current free YouTube site. That’s right, even big stars on independent labels such as Jack White and Adele would vanish. The thought of this sent the independent music world into a tizzy, and despite YouTube claiming their streaming launch and the subsequent eradication of many independent artists on their site was set to transpire “in a matter of days,” it never did.
Amid the blow back YouTube was experiencing from fans, artists, and labels, they are now second guessing their strategy. In this high stakes game of music streaming chicken, the independents won, at least for now, as YouTube and Google executives head back to the drawing board and negotiating table to hammer out how to include everyone in the new service.
According to the Financial Times, YouTube has postponed their controversial plan to block independent music that has not signed deals, and give more time for negotiations. “They’re back-flipping and backtracking,” is the way one member of the independent label community put it, though it’s entirely possible that some labels and artists could still be blocked if consensus is not met in the future.
One of the problems for YouTube was the matter became a legal one. A trade body representing independent labels called Impala filed a formal complaint with European trade regulators, claiming YouTube’s move to block indies was unfair and discriminatory. Europe’s antitrust chief JoaquÃn Almunia made it known on Monday that he could look into the YouTube matter if the company used its dominance of the online video marketplace to abuse independent labels. Many of the independents that could get hosed in the YouTube deal are from Europe, including XL Recordings, home of Adele and the Arctic Monkeys.
The primary sticking points to why some independent labels refuse to sign to YouTube’s rights deals are:
- YouTube is paying out even less than Spotify and Pandora pay, which has already caused much consternation in the music community. Spotify pays out roughly 70% of revenue, while YouTube is looking at 65.5%.
- YouTube only wants to pay content providers when there are ads tied to the song play, instead of each play like exists for Spotify and others. In other words, if you don’t see an ad as part of the YouTube video, there is no payout to the label, publisher, or artist. YouTube argues they don’t want to put ads on every song, because this discourages people from watching and listening.
- A “most favored nation” clause in the proposed agreements puts independent labels at an unfair disadvantage compared to major labels. Long story short, if the major labels agree to lesser percentages for payouts (below the already industry low 65.5%), then independent labels immediately get docked down to the lower percentage as well.
- Some independent labels feel there’s already too many hands in the music streaming game, and YouTube’s entrance into the marketplace will only par down earnings even more because of streaming services’ payout structures.
Some experts surmise that YouTube never had any intention of pulling independent music content off the site, and it was simply a scare tactic to get more independent labels to sign up. In some instances, it may have worked. According to YouTube, it is only about 5% of the music currently on the site that has yet to sign agreements, though others contend it’s more.
The fight to keep independent music on YouTube is not over, but for the moment the crisis has been averted. Meanwhile YouTube and Google remain very antsy to launch their streaming service amidst the rapid boom in the streaming market and the continued abandonment of physical formats and even MP3’s, evidenced in the music sales numbers for the first half of 2014. YouTube has been pushy because they feel like they are rapidly losing market share, and need to enter the streaming game soon.
July 6, 2014 @ 9:16 pm
Are they doing streaming because they’re losing money or are they just being greedy? because i honestly dont see the point in Youtube getting into the streaming business
July 6, 2014 @ 9:38 pm
YouTube is getting into streaming because of peer pressure. There’s no money in streaming music. They are doing it so they can bundle it with other products and offer it on smartphones. There is absolutely positively no consumer need for what YouTube is doing whatsoever, and it will only result in the parsing of the music dollar even more, taking food out of the mouths of starving artists, resulting in the complete devaluation of music as a consumer product, and the creation of music as an American right to receive for free in the most convenient form possible.
I reiterate my prediction that eventually musicians and labels will have to pay consumers to listen to their music.
July 7, 2014 @ 8:01 pm
I’m sure all these non independent artists are glad they already sold their soul and don’t have to worry about getting screwed over. Hopefully people learn the value of music soon and the next generation of artists wont have to deal with any of this.
July 7, 2014 @ 12:38 am
If even mp3 sales are down or becoming obsolete that is kind of scary. Muscians can’t make music for free. Although the evil cynic in mean think well if we kill music at least nobody will be able to afford to make “bad” music. Of course I understand we have all the bad music now because nobody want to pay for music. But maybe that just means thing will get back to being more community based and local in the music world. Streaming makes no money, social media makes no money, pron is free is anyone generating any actual earnings? I mean real cash not made up stock numbers and such that don’t really exist?
July 7, 2014 @ 1:26 am
Social media makes no money?
The folks at Facebook, some of whom I know personally, would be quite surprised to hear about that. Just in the first quarter of 2014, Facebook made $642 million in profits. Advertising money keeps social media companies rich.
July 8, 2014 @ 4:46 pm
Well I must understand HOW because as far as ads go. I NEVER click on an ad. And as far as I know my “friends” claim they click the ads either and I have never bought anything off FB. I guess I am just confused about how it actually works.
As an aside I still argue we the users should be getting some money for all the “content” we create for FB. I mean without us FB would sink. LOL!