YouTube strikes new publisher deal but more storm clouds gather

29 November 2011

by Eamonn Forde

Given its sheer reach, YouTube is arguably the biggest music platform in the world. While not officially a music service, it is increasingly where consumers go to listen to music, especially younger ones. Its user-generated content (UGC) approach has been the key cause of its growth as well as a contested part of its relationship with rights holders, as Viacom’s $1 billion [A$1.01bn] lawsuit against it amply illustrates. Now the company is looking to paper over some of these cracks and remunerate copyright holders for music use in a UGC context.

The National Music Publishers' Association in the US reached a deal with YouTube in August and payment processes for independent publishers are about to be implemented. Billboard reports that the video streaming site will pay a $4 million [A$4.04m] advance (which is recoupable) to publishers for UGC videos that use songs they control.

On top of this, if the UGC videos contain a master recording, the publishers will receive a sync royalty rate of 15% of net advertising revenue on the site. Payments will be administered by the Harry Fox Agency and publishers have until January 16 to sign up.
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As YouTube grows, it is finding that it has more fires to fight and this move to placate publishers is clearly designed to make the site look, at least from the outside, that it is putting its house in order. This will be essential as parent company Google looks to lock all its music interests together to create a sprawling ecosystem for digital content to rival Apple and to gain a competitive advantage over Amazon.

Alongside YouTube will sit Android (Google’s mobile operating system) as well as its recently launched Google Music download and cloud storage solution (initially only available in the US). It will also be used to put new wind in the sails of Google+ – the company’s social network that risks becoming as big a white elephant as Apple’s Ping. Within Google+, a new YouTube slider allows users to share and watch videos with friends within the social network. It is a clear attempt to leverage the viral sharing appeal of YouTube videos and use this to driver up user engage with – and dwell time within – the Google+ network.

YouTube is unquestionably a huge business and Barclays Capital is estimating the site will generate $1.6 billion [A$1.61bn] in revenues this year (Google does not break out what YouTube specifically generates, so exact numbers are hard to pin down). It is also a key platform for musicians. Justin Bieber, for example, broke on the site and is now the first artist to pass 2 billion cumulative views on their YouTube channel.

Around it, however, more storms are brewing.

These new deals and developments are all, of course, happening against the backdrop of the SOPA (Stop Online Piracy Act) legislation in the US that could close many of the ‘safe harbor’ exemptions that allowed YouTube, and other UGC-powered sites, to build such traction in the market.

On top of this, Viacom is looking to take YouTube back to court – even though its copyright case against the site collapsed last June. It is now arguing that, by opening its API to allow content to be streamed to mobile devices and tablets, YouTube is negating its safe harbor protection.

TechDirt writes, “Effectively, what Viacom is arguing is that if someone uploads a video to YouTube, they only intend to let people watch it via the web.” It adds that Viacom’s case is “stretching the law to ridiculous levels”.

Even so, with the revived Viacom lawsuit and the uncertainty surrounding what way SOPA could go in the US (and whether or not its knock-on effect puts music video parodies, remixes and mash-ups on the danger list), YouTube is hoping to generate as much good will in the industry as possible. The more it has, the stronger it will be if, in a worst-case scenario for the company, it has to fight against rulings that could completely change and undermine the very business model that has taken it this far.