Knowledge Bank

news category created 20 June 2014 written by Dan Cox

YouTube and the independent labels…

“With regards to the recent dispute between YouTube and independent labels and the unfavourable terms which Youtube seeks, without negotiation, to impose upon independent record labels, the Music Producers Guild is deeply concerned about Google’s apparent abuse of its monopoly and associated market power and the adverse affect this will have on the wider industry and funds available for innovative and creative content production in the future.

Independent record producers everywhere, in common with recording artists, rely upon the income from sales and streaming of music files, the production of which they have been responsible, often with little or no credit (itself ironic in this digital age). Attempts by international media conglomerates to throttle negotiation and impose unfavourable and unjust terms upon independent record companies, whom they perceive to be “small fry” and thus “fair game”, should be opposed at every opportunity.” (MPG press release – June ’14)

There have been many articles in the press about this issue – few of them containing facts, and many containing opinions posing as facts. These points remain clear:

• YouTube has negotiated with the major labels, and has offered a lousy deal to the independent labels, but is refusing to negotiate with them.

• All the deals, as with Spotify, are subject to NDA’s, and YouTube is refusing to make any public comment about the issue.

• In the Digital Music News article, entitled “Everyone Calm Down. YouTube Is NOT Going To Remove Music Videos”, the “source very familiar with YouTube Music’s streaming partner agreement” is expressing an opinion, not fact, when it says that “Saying they’re blocking videos from YouTube doesn’t make any logical sense to YouTube as a platform”.

• Robert Kyncl, YouTube’s head of content and business operations, is quoted in an article in the Financial Times as saying that “Record labels representing 95 per cent of the music industry have signed up to the new terms”. This is incorrect, according to Impala, which states that the independent sector accounts for at least 31% of income from record sales. Kynci is using this false (95%) figure to make the independent sector seem like an insignificant blip in the stats, and hence to diminish their significance in the eyes of readers.

• The statement in the FT that “YouTube is about to begin a mass cull of music videos by artists including Adele and the Arctic Monkeys, after a number of independent record labels refused to sign up to the licensing terms for its new subscription service.” might turn out to be true, but anyway…

• The article on the ars technica website says “the [YouTube] source says the correct intepretation of YouTube’s statements are that the site will be blocking music videos from YouTube’s monetization program…”.

However one interprets al this, it is not good for independent labels who refuse to accept Google’s non-negotiable terms.

What we are dealing with here is one of the many effects of the “everything for free” culture, which companies like Google have made popular by giving everyone a free Email account, free videos and music videos (Youtube is now one of the prime sources of music for the current generation, many of which don’t bother buying CDs, downloads or even going on Spotify, as you can get it all instantly and “for free” on Youtube).
But as everyone knows, nothing is free in this world, and we buy our “free” email accounts by giving Google and the like all of our information so they could make billions of dollars in advertising, and we gave them all of our videos, again, so that they can make billions in advertising.
I have heard through the grapevine, that the majors apparently did not even bother asking Youtube for royalties for the videos, they just wanted a big upfront payment of a projected advertising revenue split, about 10% of which they will pay out to their artists (and the rest they will keep).
The independents, who are the ones funding and putting out most of the innovative and interesting new music, are not in a position to do that kind of deal, not that it would be fair anyway. And they do not have the market power to take on a quasi monopoly like Google, so Google is clearly abusing it’s market power hereto the disadvantage of our industry: Less revenue for Independent labels means less budgets for records, which means less money for producers!
The only multinational federation that would be strong enough to take on Google and put it in it’s place with regards to competition law is the European Union, which already delivered one well deserved blow earlier this year.

Believe Digital claims they had fair negotiations with Google, Believe Digital is a major aggregator though, so YouTube can’t afford to mess them around.…

Maybe it’s time to play the advertisers at their own game and charge for product placement in productions. Flash up shots of Coca Cola in your artist’s video and charge for it or include Nike in the lyrics or backing vocals and charge a fee. At worst, it will interfere with other advertising initiatives on YouTube and put some advertiser off, impacting negatively on the revenue potential of Google. This may seem half hearted and a bit David vs the Goliath but it might start something and would be making some noise that would get the attention of the monolith marketing giant conduits of Google and Apple. At best it finances new creative content.

A small note: there are alternatives for youtube, but since a large part of the audience seems to (download and) share videos on this google platform a strong organization is needed to be able to handle royalties. I believe that should not be a problem for google. Strangely enough I do not see strong arguments from google why they have so much difficulty negotiate or deal with the independent labels. Are the independents sufficiently organized?

Good thought Joram, but the problem is that Google’s new music streaming service, in competition with Spotify, Napster etc, is doing deals with the Majors and has gone to the independents and given them both a non-negotiable punitive deal and an ultimatum stating they will remove their uploaded YouTube content if they don’t do the streaming deal. This affects some big independent players and if this is where the industry is going, how will we be able to generate enough income to live let alone find budgets to produce music?