David Balfour studies the arguments being made by YouTube in the face of increasingly severe pressure from artists and other music industry groups

29 April 2016 - Press release

YouTube has recently been on the receiving end of a pretty sustained attack from many quarters of the music industry. Whilst a great number of labels and distributors have long echoed concerns about YouTube’s business model, a number of high profile artists have also now joined the fray. The language used is also becoming more explosive. Q Prime’s Peter Mensch minced no words when he recently described YouTube as “the devil”.

The upping of the rhetoric against YouTube is no coincidence: with the US Copyright Office currently engaged in a major review of copyright law, both artists and labels are hoping that it will recommend a fundamental review of the safe harbour protections which are essential to YouTube’s business model.

YouTube has come back fighting, as one would expect. YouTube’s Chief Business Officer Robert Kyncl accused labels of a lack of transparency towards artists, even going so far as to imply that NDA’s in labels’ agreements with YouTube were a deliberate label-led transparency killer. He also suggested that artists could do worse than to cut labels out of the equation and sign their deals direct with YouTube, in the name of cutting out unnecessary middlemen.

Next, head of YouTube international music partnerships Christophe Muller penned a column for The Guardian which directly responded to a number of the music industry’s gripes against their platform. He rejected claims of large-scale “unlicensed” music use, pointing towards the company’s market-leading Content ID technology, which has been to a large extent developed in collaboration with record labels. Muller also rejected claims of a “value gap” between licensing payments made by YouTube and subscription-led platforms like Spotify and Apple Music. He attempts to portray YouTube as being more akin to traditional radio models than to those on-demand services. He goes on to suggest that YouTube also contributes far more significantly to the industry’s revenue pool – and at far higher rates – than many radio stations do.

One would expect this column to naturally side with the position of artists and labels. YouTube is however making it pretty easy for us to reject many of their claims. Kyncl’s suggestion that NDA’s originate primarily from major labels seems disingenuous. We know of many other parties within the music industry – PRS seeming like an obvious example – which would prefer never to have been put in a position of signing NDA’s with YouTube. Google is renowned for having demanded NDA’s in music licensing agreements, and for having been leading the charge to do so. To suggest that this was a label-led initiative is absurd.

Muller’s claim that Content ID is both accurate and developed in conjunction with their music industry is certainly true. Development of such a tool was only necessary however due to the mass of copyright violations that existed on the platform in the first place. Whilst labels are certainly happy to have access to Content ID, they would prefer not to have the problem.

Muller’s suggestion that YouTube should be viewed as being akin to terrestrial radio pained us. The argument seems to be based primarily on the fact that YouTube’s main income stream comes from advertising, as it does for many radio stations. Beyond that, we fail to see much common ground. There is one particular point that makes this suggestion seem paper-thin: YouTube is an on-demand platform, radio is not. For this reason alone, YouTube should absolutely be viewed as – for licensing terms in particular – being more like on-demand services such as Spotify or Apple Music.

We do not doubt that YouTube offers access to an enormous audience which would not necessarily choose to pay for music. In that way, this is indeed like radio. We also acknowledge that YouTube has paid and does pay large amounts of revenue to the music industry. Furthermore, the platform’s ability to reach and interact with huge numbers of music fans is undoubted. Many are these realities however are the historical results of the special legal position which YouTube has managed is to place itself within, thanks to the unsatisfactory level of detail within the Digital Millennium Copyright Act.

The fact that many or most of the arguments which YouTube is currently making in defence of its platform’s royalty obligations sound so hollow, only serves to remind us of the overwhelming role which copyrights law has played with regard to both YouTube’s growth and a position in the market. The platform clearly enjoys an unfair advantage over other on-demand streaming services, which operate not just by the letter of the law but also within the spirit of it.