A big row has been brewing between independent labels and YouTube for months now, over the licensing process for YouTube’s upcoming music subscription service.
Last week, it exploded into the open with a press release from indie body WIN, accusing Google’s video service of sending non-negotiable contracts directly to indie labels – despite being locked in negotiations with their collective licensing agency Merlin – and threatening to block all their music on YouTube if they didn’t sign.
This morning, WIN said it would be filing a complaint with the European Commission, before holding a press conference this afternoon in London to set out its grievances against YouTube. WIN chief executive Alison Wenham, IMPALA executive chair Helen Smith, artist Billy Bragg, songwriter/journalist Helienne Lindvall and musician-turned-publisher Mark Chung (of Einstürzende Neubauten and now Freibank Music Publising) were the speakers.
Here’s our blow-by-blow report. And there were plenty of blows – unsurprising given Bragg’s suggestion earlier this year that “if we’re pissed off at Spotify, we should be marching to YouTube Central with flaming pitchforks” and Wenham’s famous slamming of “repugnant” Myspace when it was accused of a similar disdain for independents.
Wenham kicked off: “We understand that YouTube are still, despite our intervention and despite some very trenchant conversations between YouTube and myself, still threatening to block independent content from the YouTube platform if those independent labels do not sign the contract,” she said.
“It is our duty to act… Their principles of freedom on the internet don’t seem to extend to their commercial interests.”
She added that the three major labels have already signed deals with YouTube, as have some aggregators, but maintained that the “true” independent community has held out despite “threats, intimidation and bullying, and a repeated threat to block content“.
Lindvall said that as a songwriter, the situation has reminded her strongly of past spats between YouTube and collecting societies like PRS for Music in the UK, over licensing their works. “They did the same thing,” she said.
“Now they’re even bigger than they were back then, and basically YouTube is the only game in town for music video streaming… They have a stronghold. And now when they are moving into audio streaming market, there is competition: Spotify, Deezer, Beats and a few others… they will undermine those other services with their behaviour.”
This was a running theme of the press conference: the idea that YouTube’s goal is not just to make independent labels sign unfavourable contracts, but also to ultimately undercut and destroy rival streaming music services. Lindvall also questioned the deals that have already been done with major labels.
“We’re hearing that a billion dollars has been paid by YouTube to the major labels. I would clearly believe that to be true, because this is how it usually works when someone comes into the market. I’m wondering how that money is going to get back to the artists that are signed to those labels. If there are upfront payments, what are the terms: is it in return for a lower royalty rate for artists?” she said.
“Our music is being bargained with, and all we can do is see the result in paltry royalty rates. YouTube already pays the lowest royalty rates on my royalty statement, and now they want to drive the audio streaming rate down as well.”
“I feel that now, if YouTube succeeds in what they’re intending to do, we will have almost a complete monopoly in the music streaming scene. For us, if we think royalties are bad now, they’re going to be even worse then… This is an emergency. For us, it’s the future diversity of music. We have nowhere else to turn but government and the EU to try to get them to protect us from YouTube.”
Over to Billy Bragg, who has been criticising YouTube for some time. “I’ve been saying that YouTube has been the elephant in the room to my colleagues who’ve been criticising Spotify for the last year or so, to no avail. YouTube’s latest operations towards independent labels and artists makes Spotify look incredibly generous.”
Bragg also said that YouTube risks spoiling the many positive aspects of the internet for the indie music community.
“The internet gives incredible potential to artists to engage with their own fanbase, but if YouTube is going to come in and act as the gatekeeper… we were promised that the internet would get rid of gatekeepers and it would be down to our ability to connect with an audience… The elephant in the room, YouTube, doesn’t seem to want to play it like that.”
Bragg emphasised the importance of a healthy, competitive streaming audio market. “It’s clear from the figures that buying downloads seems to be falling away… this [streaming] seems to be the way people want to listen to music. This attempt by YouTube and by Apple as well to get into the streaming industry just shows that it is the way things are going,” he said.
“The question is whether either Apple or Google really want to have a streaming service, or whether they just want to destroy the competition by taking out Spotify and Deezer and the other startups.”
He talked about “serious transition issues” for YouTube in moving from a free service to a pay service. “To find something that everyone is used ot getting for nothing, to start charging, that’s some serious transition problems there I think. And particularly if they’re going to only put music from the major labels on. They won’t be able to compete with something with the depth of catalogue of Spotify.”
Bragg criticised major labels, and warned of the dangers of artistic narrowness if “big, corporate, multi-national” companies like Google swing the market in those labels’ favour.
“If we have something like YouTube that is only for major record labels… I want to see a music industry where somebody like Jerry Dammers can walk in off the street, find the right people and six months later be on the cover of a magazine… That ability for someone with a really great idea to come to an independent label and find someone there with the imagination to not only embrace that idea but market it and make it pay. In a major label, you’ve first got to get past the accountant, and they tend not to be willing to take those artistic risks.”
Bragg also suggested that YouTube’s current approach will be harmful for major labels in the long-term. “I do wonder if the major record labels are playing a dangerous game. What is going to happen with the position that YouTube has taken in concert – and I can’t believe the major labels weren’t aware this was going to happen – it has allowed consumers to look behind the curtain of the record industry and see how it works, who is exploiting who,” he said.
“If we all start to pull back that curtain, and consumers can understand how major record labels and how those multi-national corporations like Google and YouTube are acting towards the artists that they love, in the long-term this could be very damaging for the major labels.”
Mark Chung spoke next, as both musician and publisher, suggesting that “what’s really at stake here is the credibility of the competition in the online market” while stressing the need for support from European regulators to prevent YouTube from “squashing competition”.
“To enable all of us to benefit from the wonderful world of level playing fields and free competition, rather than having cartels or even worse monopolies dictating terms to consumers, and also to suppliers. Which is what we see happening here: a corporation with very substantial resources, which has a dominant position in some key markets with unprecedented scale… YouTube is clearly a gatekeeper,” he said.
“We have an actor in the market who not only has that domination or strength in the market, but they are absolutely willing to use their dominant position to force suppliers to accept terms under the threat of removing their content from the service that they cannot afford to be removed from. I cannot really think of a more obvious abuse of a dominant market position than you are seeing here.”
Chung didn’t pull his punches, agreeing with the other speakers that YouTube’s intention may be to destroy the competition in the streaming market, referring back to other arguments about Google’s role in facilitating online piracy. “To have the company that is the biggest profiteer and biggest enabler of piracy worldwide enter that market is very concerning,” he said.
Finally, Helen Smith from IMPALA suggested that the behaviour of major labels in striking deals with YouTube is part of a longer term pattern – IMPALA has been a figurehead in opposition to major label mergers in recent years on the grounds that it would distort the market in their ability to set terms.
She also talked about the importance of indie labels in cultural diversity – a big issue in Europe, if regulators take an interest in the argument between labels and YouTube.
“We’re expecting the Commission to be taking this very seriously, and we’e also going to be asking for emergency measures – the Commission to say while they’re investigating this, for YouTube to not send out any more threats, carry out the threats or enforce the terms for labels that have signed the contracts,” she said.
“The complaint is going in in the next few days, we’ve already had at least 10 emails from the Commission, different departments: competition, IP, small companies, culture, all anting to know more.”
Wenham wrapped up, drawing a comparison between this row between labels and YouTube and the current impasse between Amazon and publisher Hachette in the books market.
“It seems quite inevitable that what we’re witnessing here, if there isn’t an intervention, is the collapse of a marketplace which has multiple choices, into companies being The Market. It’s quite clear with Amazon, and it’s quite clear with YouTube and Google. Once you have The Market, then you can dictate terms,” she said.
“We will not put down this fight. We will continue to campaign for the right thing to be done, and when I was in conversation with YouTube two weeks ago when they realised we were going to speak out, I was told that Larry Page was allergic to press. So I advised them to get some very very strong medicine, and give him my number! Because if he’s allergic to press, he’s going to get a very very serious dose of hives…”
Wenham was asked whether she thinks YouTube would really launch its new service without indie content. “I certainly tihnk there’s now some energy to get the service launched, and it does feel that the independent sector has been a last-minute thought. They have a launch date, and they have to just tie off a few irritating little details before they launch – that’s how it feels to me,” she said.
“If they go to market, they’re going to find that the majority of the paying subscribers… are sophisticated music fans. They go because of this enormous diversity and range. So they’re going to get found out very quickly if they go to market without us.”
Bragg chimed in, suggesting that this deep independent catalogue is vital if YouTube is going to make that transition from free to paid service. “They’ve got to find a way to do that. I don’t know why they’ve opened this hornet’s nest right now, apart from corporate hubris. I dunno. I don’t think they realise what a stupid thing they’ve done.”
Lindvall called for the European Commission to “shed light” on the deals that YouTube has already struck with major labels for its new service. “We’re not allowed as artists to look into what kind of backroom deals have been done, but the competition commission is. But we need someone to shed light.”
Smith was asked whether EC regulators really have the stomach to take on Google over this kind of issue, with the questioner suggesting that politicians are “terrified” of the company.
“That’s what regulators are there for: they’re dealing with these companies all the time: it’s just normal for them, I think,” said Smith. “Europe has, is the only regulator at the moment that has taken any kind of stance on any of these issues, despite massive, massive pressure. I’m pretty confident that they will take a hard line on this. This is an easy question compared with the general questions about how [for example] multi-national organisations are able to organise their business so they don’t pay tax…”
“We are for the first time seeing politicians speak out,” said Chung. “It’s extremely important that we support these people and encourage them. If they don’t see us speak up, no politicians will want to burn their fingers.”
Bragg signed off with one of the quotes likely to be most repeated after today, by saying the row reminds him of the nightmarish vision of the future portrayed in George Orwell’s 1984.
“Rather than a huge boot stamping on a human face forever, it’s a corporation that changes its logo every week,” he said, agreeing with Chung that artists, songwriters and labels must continue to speak up. “It’s about time the music industry found its radicalism again, and set out to change the world.”
And that was that, for now. But this will certainly not be the last we hear of this debate. Already this year, we’ve seen Merlin boss Charles Caldas take a public potshot at YouTube by citing Bragg’s “flaming pitchforks” comment – “I can’t say Billy’s right, but I can say that he’s not wrong” – and repeated, strong criticism from Beggars Group, one of the most respected indie label groups.
“If YouTube launches a subscription service and it eats Spotify and Rdio, you’ll look back at these times as great days. They want to eat all the other music services and our business. That’s their plan,” said head of digital Simon Wheeler at a conference in April.
“Policing the YouTubes of this world for infringing content is a herculean task, one beyond all but the largest of companies. For my community, the independents, it’s a game of whack-a-mole they can only lose,” said chairman Martin Mills in a speech the next month, albeit focused more on YouTube’s use of ‘safe harbour’ legislation rather than the licensing for its upcoming subscription service.
“Youtube says it’s paid out a billion dollars to music rights owners – but so has Spotify, from one thirtieth as many users. That economic discrepancy is because of the unreasonable economic advantage Youtube has over its digital service competitors because of its use of the safe harbour provisions.”
YouTube is a hugely important marketing platform for independent labels, but if anything that’s increasing the fury – and fury really isn’t an exaggeration – among prominent members of the community at the moment. It’s because YouTube has become so essential for marketing that the threat to block labels’ videos has teeth.
Watch this space: we expect more labels and artists to speak out in the days and weeks ahead, emboldened by WIN’s willingness to bring the licensing complaints out into the open.
Music Ally’s next evening conference focuses on ‘Transparency in the Digital Age’ and takes place in London on 17 June. For more details click here.
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