YouTube Continues To Battle With The Music Industry, Over Revenue Returns

Labels are facing off with Google’s video service provider; YouTube, over low returns on revenues and rights.

The two entities have been warring for a decade now, over how much YouTube should pay music labels for hosting the music videos and songs that helped turn the video site into a monolith. YouTube says it’s paid out $3 billion to the music industry and that’s plenty: the music industry says it’s been paid the same amount by Spotify and it doesn’t even offer music videos and has accounted for far fewer streams. The fight isn’t new, but recently the stakes have been raised.

Musicians and their managers were imbued with a renewed vigor for the battle after the RIAA released a report in March stating Vinyl record sales in 2015 brought in more revenue than YouTube.

Major industry players like Irving Azoff chastised YouTube in op-eds, and artists including Katy Perry, Billy Joel, and Rod Stewart petitioned the US government to amend the Digital Millennium Copyright Act (DMCA). Combine that with the fact that all of the major labels have begun to renegotiate their deals with YouTube, and you have the perfect ingredients for a fight.

The music industry says the DMCA, which was passed in 1998, is outdated and needs to be rewritten. The industry’s biggest complaint about the DMCA is that the take-down process for unlicensed content is too complicated, and even after something is taken down, it can be put back up instantly without consequence, thanks to the Safe Harbor provision that limits the liability of websites hosting stolen content uploaded by users.

Changing the DMCA, and specifically the rules around Safe Harbor, could have a much broader impact than just improving business for musicians on YouTube, however. Some experts warn that smaller companies and individual users would be more vulnerable to lawsuits, takedowns, and arbitrary censorship. “Undermining the reliability of the DMCA safe harbors would be disastrous for the Internet economy. And it isn’t just the large, well-known Internet platforms that would be affected,” said Matthew Schrupers, vice president of law and policy at the Computer & Communications Industry Association.

The music industry argues that the Safe Harbor provision is detrimental to rights holders. If YouTube has countered with a series of data points: 99.5 percent of copyright management on sound recordings posted to YouTube happen through Content ID, meaning, it’s an automated process with a fairly low lift for copyright holders. They only need to upload their songs once for YouTube’s algorithms to analyze. And rather than take down music, YouTube says the major labels have chosen to monetize 95 percent of the content identified by Content ID. But the labels say Content ID doesn’t identify everything, and that’s the problem.

In a filing to the US Copyright Office as part of a review of the DMCA, Universal Music Group raised questions about the efficiency of YouTube’s Content ID system. In a footnote, it noted that “[Universal Music Publishing Group] estimates that Content ID fails to identify upwards of 40% of the use of UMPG’s compositions on YouTube.

Recording Industry Association of America CEO, Cary Sherman, believes the DMCA has been exploited nefariously by companies like Grooveshark, which he called a “pirate” and is currently being exploited in a different way by YouTube. “The DMCA has become a problem because companies that were clearly pirates could hide behind it,” Sherman told ‘The Verge’ in an interview. YouTube is in its own category because it’s a legitimate company, Sherman says, but it’s still able to take advantage of the DMCA to negotiate better deals because the content is going to be up there whether labels like it or not.

“That’s a Hobson’s choice for any company, they either get some revenue, way below market, or they get no revenue and spend all their time and money trying to take down all the tens of thousands of illegal copies that are on YouTube, which is a near impossibility,” says Sherman.

Sherman said a notice and stay down policy — one that didn’t require copyright holders to keep filing notices for the same content over and over — would go a long way to satisfying the music industry’s biggest complaint. “If when an illegal file were taken down it stayed down, so that it didn’t get repopulated immediately afterwards, that would make a big difference. What you took down today you don’t have to take down again tomorrow. That would be a huge improvement over the current situation.

But industry experts like Schrupers are quick to point out that YouTube offers some of the most advanced tools for copyright protection: “It is important to recognize that while complaints about the DMCA often cite YouTube, YouTube is actually one of the few platforms that already offers what complainants ask for.” Content ID can automatically block copyrighted songs from being uploaded on YouTube after a copyright holder provides a reference track, but YouTube says the labels only choose that option for 5 percent of their content on the platform.

Sources within the music industry say it’s not that cut and dry, claiming the labels have no choice but to monetize the content. They say YouTube hasn’t been able to keep their music off the service even when they wanted them to — Warner Music Group pulled its content from YouTube in 2008, and in the nine months that it was not licensing its music to the service, the label estimates it spent $2 million to keep its content off YouTube. “WMG views these efforts as having been largely unsuccessful,” the company wrote in a filing to the US Copyright Office.

As for the why the music industry is up in arms over this issue right now, Schrupers has a familiar theory. “The cognitive dissonance of the music sector complaining about a platform that already offers what they’re demanding can be explained by the fact that these complaints are being raised in the context of the major labels preparing to renegotiate licenses with YouTube.

And Schrupers is right, in a sense. The beef between the music industry and Youtube over DMCA goes back years, and there has been little movement in Congress. We’re hearing more about it now because it provides additional leverage at the negotiating table. The labels want more revenue per stream in their next licensing deals  — and have a legitimate argument when you look at the growth rate of music streaming on YouTube versus the growth of revenue — and YouTube doesn’t want to give it to them. It happened with Pandora, then it was Spotify’s turn, and now we’re back around to YouTube, Sherman said .

Right now, the chances of getting a significant change to the DMCA through Congress are extremely low, and the music industry realizes it. The reality is that Congress has not shown itself to be capable of enacting non-controversial legislation, let alone anything that would be controversial. So we’re very realistic about the fact that this would be a steep hill to climb. But we also feel like it would be irresponsible of us not to inform policymakers that there’s a problem — a very serious problem that needs attention.”

The fear is when the physical and digital sales finally dry up — which could happen sooner than you think — the current economics of music streaming won’t be able to sustain the industry.

“We’re an industry that is already 70 percent digital,” Sherman continued. “We get it, we understand that our future is streaming. That’s where all the indications are, in terms of future revenues. We just want to make sure, therefore, that the laws that undergird a streaming business model economy will support a sustainable music industry in this new world.”

Source: theverge.com