Is the Music Industry Abandoning YouTube?

If you’ve experienced trouble tracking down music on YouTube recently, you’re not alone. While there hasn’t yet been an exodus of biblical proportions, major labels have been clamping down. Music is slowly getting scarcer. Little more than a slight frustration at present, this subtle withdrawal could foreshadow dramatic changes to come. The golden age of free access to ad-supported music videos may be drawing to a close.

In 2016 many artists have united in a public fight against the content giant. Katy Perry, Pharrell Williams and Billy Joel have all penned open letters denouncing the service for paying too little, while these and many other artists have also called for changes to copyright laws to address the issue. If numerous blog posts, news articles and opinion columns are anything to go by, there’s no shortage of public support.

But the songwriters aren’t alone. Within the broader music industry, the tide may be turning against YouTube. Heavyweight manager Irving Azoff has also penned his own open letter, within which he blasted YouTube for the manner in which they’ve treated artists. “If music matters to YouTube, then why not give musicians the same choice you give yourselves?” He asks.  “Taylor Swift should be able to decide which of her songs are available for free and which are part of a paid subscription service. Or she should be able to opt out of YouTube if you won’t give her this choice.”

In a more recent address to the National Music Publishers’ Association, he passed on a pointed question for his industry audience to put to YouTube executives: “How can you sit there and say we can’t afford a couple of hundred millions of dollars for your industry, when their market cap is worth a half a trillion dollars?”

This sentiment is not unfounded. As Apple Music  executive Jimmy Iovine pointed out during an interview at Vanity Fair’s New Establishment Summit: YouTube accounts for 40% of overall music listening, and just 4% of overall music revenues. YouTube’s 2015 sales statistics also show less than optimal figures. Statistics by the RIAA show that despite the enormity of YouTube’s billion strong user-base it produced less direct income for US artists in 2016 than the $416 million collected from sales of vinyl records. In contrast, streaming service Spotify paid $1.8 billion in global music licencing the same year.

Where did it all go wrong? Step back 11 years. Things were looking grim for the battered music industry. The launch of YouTube in 2005 posed another concern: while the platform was ostensibly premised with promoting users homemade videos, it was also perfectly suited for fans to upload and share their favourite songs. A flood of unlicensed copyright material was quickly uploaded.

The music industry was quick to take notice of the opportunity this problem presented. The heydey of MTV had long since evaporated and television promotion was expensive, but this new user-friendly, embeddable and shareable platform offered a free, legal and much-needed source of vitality. YouTube was quickly seen as the go-to platform for the promotion of artists and engagement of a younger generation of music fans.

It wasn’t long before labels, publishers and indie labels were going into business with YouTube. The deal was struck that YouTube would sell advertising around music videos and split the profits. YouTube was a new way to supplement the falling sales of physical music due to piracy.

While leaks and unauthorised use of material were initially a prime concern, a sophisticated system of content review and removal let copyright owners track use of their material. When a new copy of a video clip, a cover version of a song was uploaded or a sound recording is used as a background, YouTube’s “Content ID” would let the copyright owner know. Owners were allowed the owner to keep the video online and receive advertising revenue, or take it down.

The romance wasn’t to last. Optimism over this newfound advertising revenue as a pillar of the music industry would slowly erode. YouTube income was quickly eclipsed by the rise of Apple’s iTunes the following year, which similarly peaked soon after, thanks to the emergence and increasing momentum of streaming, ensuring that YouTube’s returns have become paltry helpings. In recent interviews, YouTube’s chief business officer, Robert Kyncl, repeatedly cites that his company has paid out $3 billion to the music industry since its inception. Yet this pales in comparison to the growing dominance of streaming. From an industry standpoint, there’s real money to be had in subscription-based streaming services.

This has led to a point of conflict. If users can listen for free on YouTube, it deters people subscribing to streaming services like Spotify. If Spotify is paying out and YouTube’s returns remain modest, YouTube is simply diluting and diminishing music industry profits. Streaming might be paying money, but if the business model is expected match traditional incomes from physical music sales it still needs to grow. More streaming means more profits.

Although they might not readily advertise it, major labels also have a close relationship with streaming companies. In exchange for allowing start-ups to use their music catalogues, majors have acquired partial ownership of most streaming services. An estimated 18% of Spotify shares are held by major labels including Sony, Universal and Warner. This gives the big labels a hefty kickback from overall profits in addition to streaming income. No doubt labels have begun questioning why money is flowing to the Google-owned YouTube, when at least part of that revenue could be lining their own pockets.

In 2016 industry stakeholders have mounted a renewed push for Copyright law reforms in Europe and the US. Initial legal disputes supported the idea that websites like YouTube, which allowed users to upload their own content, would not be responsible for illegally uploaded material. These somewhat ambiguous “safe harbour provisions” are a feature of copyright laws, introduced in the 1990s with intent to protect companies providing internet related services. Lawsuits and criminal liability were real concerns at this time as many new companies worried that the internet could not become widespread if copyright monitoring was too onerous. This is reasonable in the sense that your broadband provider could not be expected to monitor every action of thousands of users. They simply provide access to the internet; surely they shouldn’t be liable for everything you upload.

What the legislators in the 1990s did not anticipate, was the ubiquity or potential of digitisation and the internet. A number of legal disputes across the globe in the 2000s firmly established that it wasn’t just internet service providers that could rely on safe harbour – instead, these laws could also include new media companies like YouTube. So long as these companies provided a system for hearing complaints and removing unlicensed material, they would able to make the material public without checking the ownership of each upload. Companies like YouTube were exempt. Or so it was thought.

Content ID is far from perfect, the owner of a song will never have complete control over the income generated by their intellectual property. Unauthorised uploads are a pervasive issue for music labels. Universal Music claims that following the release of Taylor Swift’s 1989 in 2014, the company said, it has sent 66,000 take-down notices to a number and 114,000 blocks have automatically occurred via YouTube’s Content ID system. Independent artists and labels suffer too, having only limited resources for content monitoring. Furthermore, many cannot readily access the Content ID system at all.

Old wounds have reopened. In his aforementioned address, Irving Azoff was critical of safe harbour laws. “…the digital companies no longer need protection. Companies like YouTube and Soundcloud should have to play by the same rules as their competitors—Apple and Spotify,” he levelled.

YouTube is benefiting at music’s expense. The music industry wants safe harbours to be re-written to exclude YouTube and like platforms, but the increased monitoring responsibility this would impose is immense. The leverage of the reforms would provide the music industry as a huge bargaining chip. With this chip YouTube could be forced to improve Content ID, adopt a more lucrative advertising model or simply share more of their profits with the music industry. The Google-owned YouTube is not without its clout; it is well equipped for a lengthy legal battle and could always threaten to ban non-original music in its entirety.

Having a finger in both the music and video streaming pies may no longer be profitable path forward for the music industry. Inversely those who cannot afford the cost will miss out. At the end of the day paying that monthly Spotify subscription for nearly every piece of commercial music ever released is not a terrible deal.

YouTube will always serve a promotional purpose, but as a comprehensive repository of free music, its days may be numbered. Given the discontent from industry and artists, there are more battles to be fought.

Image Source: Wired