YouTube has warned that the music industry’s legal push to force it to pay more for the music it plays in the UK could backfire and have a ‘potentially devastating’ effect on artists’ incomes and songwriters.
Google-owned YouTube has long been accused of exploiting the “value gap” in its business, a reference to how much it makes from online advertising around music videos and how much of that revenue goes to consumers. artists and labels.
The longstanding question has surfaced again in an investigation launched by the Digital, Culture, Media and Sport Select Committee into the streaming economy, which has received repeated testimony that most artists receive a pittance in digital royalties.
Earlier this month, David Joseph, the UK chief executive of Universal Music, home of stars such as Taylor Swift, Lady Gaga and the Beatles, told the committee that 70% of its artists’ music is watched and listened to. on YouTube, but royalties only account for 5% of the company’s revenue. In 2019, UK record labels received just £35m in royalties from YouTube, almost half of the £66m they received in cut vinyl record sales.
European Union laws could require YouTube to grant licenses in the same way as services such as Spotify, which accept fees in advance for using a catalog. Current laws mean that YouTube can host music on its site without needing a license, with the company making less favorable deals with rightsholders for reduced advertising after the music has already been consumed by users. users. The music industry believes that a stronger licensing system would ensure a greater reduction in royalties from advertising.
However, after leaving the EU, the UK said it would not apply the new laws. The DCMS select committee heard from bosses of PPL and PRS – which collect royalties for artists and songwriters when tracks are played on media such as radio stations – who said the UK government had a chance to go even further than Europe to “ensure that more money goes back into the pot of creators”.
In a written submission to the DCMS committee, YouTube said that with more than 500 hours of video content uploaded every minute, the music industry worldwide has benefited from $12bn (£8.7bn) in royalties in January 2020. The company said it’s entirely possible that by 2025, it could well overtake all other sources as “the music industry’s top earner by 2025”, even beating Spotify. .
YouTube said strict legislation could be so difficult to comply with that it could be forced to block music content to avoid breaking the law, which would drive down the royalties artists receive.
“We are concerned that any over-implementation of such legislation could lead to vague and untested requirements that could force online services to excessively block content to mitigate potentially significant legal risks,” YouTube said in a statement. his submission. “Such a broad implementation would also risk undermining revenue from YouTube’s traditional media and music companies and could devastate the many creators, artists and songwriters who have built their businesses on our platform.”
The company uses its own data tools to identify copyrighted music content, but if a comprehensive legal requirement were implemented, it could not be sure that 100% of rightsholders received a reduction, which which exposes YouTube to costly lawsuits.
“In the music industry in particular, data around rights ownership is often unclear,” YouTube said. “Historically, it’s been very difficult for platforms to get all of this data. This lack of data is what could lead to overblocking [if legislation were implemented]. If you multiply those risks with the scale of YouTube… the potential liabilities could be so great that no company, especially startups, could afford such financial risk.
YouTube is estimated to have earned more than $18 billion from advertising last year, and in 2019 analytics firm Pex estimated that music videos accounted for 83% of all videos over 1 billion views on YouTube. the platform. The company also runs a subscription music service, YouTube Music, which costs £9.99 a month in the UK, which has more than 30 million paying users.
The DCMS Committee Inquiry heard testimony from a range of musicians, from Elbow frontman Guy Garvey to Mercury-nominated singer-songwriter Nadine Shah, who highlighted the struggles artists face to make money from the small royalties artists receive from digital music services. Garvey, who told the committee that the next generation of bands are dying out because they can’t continue their careers, also said services such as Spotify and Apple Music don’t charge customers enough. It can take over a million streams for an artist to earn £1,000.
In November, Shah told the committee that despite her success and popularity, she earned so little from streaming royalties that with live music and touring halted due to the pandemic, she struggled to pay her rent.