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Who’s Telling the Truth: YouTube or the Music Industry? We’re About to Find Out

YouTube says that Article 13, a controversial clause in a new European law, will destroy its platform. The music industry says this is a smokescreen. Who’s right?

Daddy Yankee and Luis Fonsi in the "Despacito" music video.

Daddy Yankee and Luis Fonsi in the "Despacito" music video.

YouTube

On July 4th this year, Sir Paul McCartney took the fight to YouTube

The Beatle issued an open letter that backed European legal proposals designed to force Alphabet/Google’s video service to pay artists and record labels more money. In a clear broadside aimed at YouTube, McCartney wrote, “Today, some user-upload content platforms refuse to compensate artists and all music creators fairly for their work, while they exploit it for their own profit.”

Two months later, during the promotional frenzy that propelled his latest solo album, Egypt Station, to Number One in the U.S. — his first solo Billboard chart-topper in more than 36 years — McCartney announced a one-off stream of a live show in New York. It attracted more than 4 million views . . . exclusively on, and in partnership with, YouTube.

This, in a nutshell, is the music business’s paradoxical relationship with the world’s biggest streaming service.

On one hand, YouTube brings a ginormous daily audience to music around the world. The site officially attracts more than 1.8 billion logged-in users each month, 85 percent of whom — according by stats cited by the record industry — use it to access music content. That’s a worldwide music audience nearly eight times the size of Spotify’s.

On the other hand, for those working to protect the value of copyright — i.e., what musicians earn from their music’s popularity online — YouTube remains a bête noire. The Recording Industry Association of America, for example, claims that payouts to artists and record labels from YouTube are — on average, per stream — one-seventh the size of what Spotify hands over. The RIAA (Recording Industry Association of America) and others call this alleged disparity the “value gap.”

YouTube has in recent years begun actively challenging these criticisms. Earlier this month, Google released a report claiming that YouTube paid music rights-holders $1.8 billion in the 12 months to end of September in ad money. To continue the Spotify comparison, that’s around half of what the Swedish streaming service currently pays out to artists and their representatives.

That $1.8 billion is also, according to YouTube’s own figures, nearly double (+80 percent) the $1 billion that the Google/Alphabet platform says it paid out to music rights-holders in 2016.

These are impressive, optimism-inspiring numbers. The trouble with them? The record industry says they’re fake news.

The IFPI (International Federation of the Phonographic Industry), which represents the commercial interests of the three major labels (Universal, Sony and Warner), claims that Google’s figures “don’t match our own”According to IFPI data, total revenue returning to artists and labels in 2017 from all video streaming services (of which YouTube is by far the biggest) amounted to $856 million – “less than half of Google’s claim and less than U.S. $1 per user per year.”

So, to recap: YouTube reaches more than a billion music fans each month, and says it’s consequently paying artists and labels more than a billion dollars each year. The recorded-music industry, meanwhile, loves YouTube’s massive audience, but reckons its payment figures are bogus.

Who do you believe? In the next few months, the world is going to learn whether or not YouTube is a truth-teller. If it is, the world might not like what happens next.

Let’s go back to Sir Paul McCartney and his open letter, which covertly accused YouTube of “jeopardizing the music ecosystem.” McCartney was addressing European Parliamentarians, who were due to vote on a crucial new piece of legislation called the European Copyright Directive this summer. Within this directive lay a highly controversial clause: Article 13.

Article 13 will force YouTube to face legal responsibility for any copyright-infringing content uploaded onto its system. Currently, in Europe and the U.S., YouTube has been protected by so-called “safe harbor” provisions — which prevent it from getting sued should one of its users illegally upload, say, Cardi B’s album.  

Yet on September 12th, YouTube got a nasty shock: Despite an intense lobbying campaign from Google, the European Parliament voted in favor of Article 13 and the new European Copyright Directive. The bill is expected to be fully enshrined into EU law before 2018 comes to a close. Just as YouTube and the labels have two different stories on payment figures, so too do they have two different stories on the effect of Article 13.

Music-industry lobbyists claim Article 13 is a great thing: It means that labels can finally have a fair negotiation with YouTube about the rates it pays the music business. But right now, Google is busy telling everybody that the passing of Article 13 will, essentially, break the Internet. And, in a targeted message for record labels, it’s also claiming that it will break the modern music industry.

“While we support the goals of Article 13, the European Parliament’s current proposal will create unintended consequences that will have a profound impact on the livelihoods of hundreds of thousands of people,” said YouTube CEO Susan Wojcicki in an op/ed earlier this month.

She claims that, whenever a music video has more than one copyright owner (for example, three or four different songwriters), YouTube — keen to avoid the legal responsibility Article 13 will dump on its doorstep — may be forced to blacklist it. Wojcicki cites Luis Fonsi and Daddy Yankee’s “Despacito,” which just so happens to be the biggest YouTube video of all time, with 5.7 billion plays.

“[‘Despacito’] contains multiple copyrights, ranging from sound recording to publishing rights,” argues Wojcicki. “Although YouTube has agreements with multiple entities to license and pay for the video, some of the rights-holders remain unknown. That uncertainty means we might have to block videos like this to avoid liability under Article 13.”

Wojcicki’s argument has been amplified by an individual who is very familiar to the music business. Lyor Cohen ran Def Jam, 300 Entertainment and Warner Music Group, among others, during a three-decade career in the record industry, and late in 2016 he was named YouTube’s global head of music.

Cohen has warned record labels that Article 13 may result in remixes and covers of tracks, especially “fan tributes,” being banished from YouTube — content types he calls “powerful promotional tools for the music industry,” but which technically trespass on somebody’s original copyright.

Wojcicki and Cohen have been at pains to remind the music business that huge artists — from Dua Lipa to Ed Sheeran and Justin Bieber — were uploading cover versions on YouTube long before they signed to record companies.

Key figures within the pro-Article 13 music industry set, however, are having none of it. Crispin Hunt is chairman of the British Academy for Songwriters, Composers and Authors (BASCA) and a successful musician — best known as lead singer and chief songwriter of grunge-leaning mid-Nineties Brit-pop group Longpigs.

Hunt, among many others, has lobbied hard to get Article 13 across the finish line in the European Parliament. He accuses Wojcicki and Cohen of spreading misinformation — dismissing the idea that the next “Despacito” would be blocked on YouTube as “a complete joke.”

“Think how much ad money YouTube has made from that one video and its billions of views,” he says. “Are you telling me YouTube won’t be incentivized to work out how to pay a handful of that song’s creators, even if those creators are arguing? That’s just a lame argument not to pay creators fairly — passing responsibility rather than taking it.”

He adds, “Even if Article 13 kills YouTube, which it won’t, then so what? Just like what happened after MySpace, something better and fairer will quickly fill the void.”

Wojcicki and Cohen aren’t completely without music-biz sympathizers. Pascal Nègre is a legend of the French music industry who headed up Universal Music Group in the region for 18 years. Today he is the boss of independent label Six et Sept, in addition to #NP, an artist management company run in conjunction with Live Nation.

Nègre has raised serious concerns about Article 13’s potential impact on how record labels discover talent. He points to Kendji Girac, a French performer whom Nègre first spotted singing covers on YouTube, and who has since sold more than 2.5 million albums. Nègre warns that Article 13 “doesn’t move things forward; it turns back the clock,” adding, “The whole process of . . . the emergence of the next generation of artists could be undermined.”

If you were wondering how, exactly, the passing of Article 13 benefits the income of artists on YouTube, it’s not a dumb question. Long story short: If a record label refuses to license YouTube today, it still can’t stop the platform’s users uploading its tracks onto the service. Article 13 puts the legal onus on YouTube to ensure this doesn’t happen, giving the labels (and therefore their artists) stronger leverage during royalty negotiations.

(YouTube claims that its existing algorithm-driven copyright policing tool, Content ID, captures 99.5 percent of all infringing videos. But that stat gets less reassuring when you consider that more than 400 hours of content are uploaded onto YouTube every minute.)

This situation was neatly described by Steve Cooper, CEO of Warner Music Group, in a leaked memo last year — which emerged shortly after the company had signed a fresh global deal with YouTube. “There’s no getting around the fact that, even if YouTube doesn’t have licenses, our music will still be available but not monetized at all,” he wrote. “Under those circumstances, there can be no free-market ‘willing buyer, willing seller’ negotiation.”

Other high-ups in the music business regularly refer to this scenario as “negotiating with a gun pressed to our heads.”

According to Susan Wojcicki and Lyor Cohen, the “unintended consequences” of Article 13 could instead see the same music-industry power players take that gun, point it downward and shoot themselves in the foot.

The music business, emboldened by its lobbying success in Europe, seems determined to call YouTube’s bluff.

Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis and jobs since 2015. He writes a weekly column for “Rolling Stone.”

In This Article: music business, YouTube

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