YouTube has publicly blamed non-disclosure agreements (NDAs) it signs with major labels for its inability to tell artists exactly how much cash it’s passing their way.
The Google-owned online video giant is currently under fire from a host of top acts.
The likes of Debbie Harry, Katy Perry, Rod Stewart, Deadmau5, Elvis Costello and Steven Tyler are calling on the US Copyright Office to quash safe harbor protections – which enable YouTube to avoid liability for copyright infringement taking place on its platform.
In tandem with this criticism, these artists and their representatives are attacking YouTube over the tiny royalty cheques they’re seeing from the service.
“YouTube is paying out about a sixth of what Spotify and Apple pay artists,” said Nikki Sixx this week, adding: “[YouTube is] hiding behind this safe-harbor loophole. That is allowing them the freedom to not take care of artists.”
Last week, Metallica manager Peter Mensch of Q Prime bluntly laid out his YouTube criticism on a must-listen BBC Radio 4 documentary, in which he said: “YouTube? They’re the devil. If someone doesn’t do something about YouTube, we’re screwed. It’s over. Turn off the lights.”
The second part of the programme has now aired, and it’s another eye-opener.
“We’d be happy to share [artist payout] information… if we could.”
Robert Kyncl, YouTube
During the show, Robert Kyncl, Chief Business Officer at YouTube (pictured) is grilled over YouTube’s payouts to artists and songwriters.
As previously reported, he expresses concerns over music biz “middlemen” – labels, publishers and collection societies – shaving off chunks of money that, in the case of YouTube stars like Lindsey Stirling, go directly to the artist.
Then, the killer line: “It’s just really hard when there’s no transparency for the artist… I can say we’d be very happy to share that information… if we could.”
Spotify, of course, has already shared that information.
Facing a similar barrage of questions over artist compensation, the company launched a website in late 2013, Spotify For Artists, which revealed that it paid out an average blended rate of $0.007 per stream to music rights-holders.
It managed to do so without contravening any non-disclosure agreements with labels.
Will YouTube follow suit? Or does it have something to hide?
When Robert Kyncl is told of Peter Mensch’s “devil” comment – and the veteran manager’s concern for his artists – the YouTube exec cites Stirling, who reportedly made $6m from the Google platform last year.
“The opposing argument is that you should look someone like Lindsey… She makes more money than probably most of these guys combined, through YouTube,” says Kyncl.
“It really depends on how successful you are in terms of driving viewership; what is the flow of the money from us to you.
“Lindsey is set up directly with YouTube, she sees exactly all of her consumption on YouTube – how much money she is making. It’s very clear. In other cases, maybe less so…”
“Metallica owns their entire catalogue, so we see the cheques. We get paid like a record company does.”
Peter Mensch, Q Prime
How successful Metallica is at “driving viewership” is one important point; the band’s official YouTube channel, Metallica TV, has just 1.4m subscribers – Lindsey Stirling has just under 8m.
But in terms of being “set up directly”, Kyncl’s argument – that artists are in the dark over how much cash their label is retaining – doesn’t really apply.
“Metallica owns their entire catalogue and has direct deals with Spotify and iTunes, so we see the cheques,” Mensch tells the BBC. “We get paid like a record company does. It’s very healthy.
“Why does a label get a much larger share [when an act is signed to a record company]? That’s the conundrum we’re wrestling with now.
“If the entire business goes to all streaming, and it certainly looks as it’s headed that way, then I start questioning what the record company’s going to do for me that I can’t do for myself.”
Much of the rest of the show, hosted by broadcaster Matt Everitt, is dedicated to tackling this poser.
Roger Ames, an investor in Black Butter and the former boss of Ticketmaster and Warner Music Group, comments: “Yeah, record companies get a bad wrap and in some cases, they deserve it.
“[But] the record company buys the horse, trains the horse, feeds the horse, runs the horse and then hopefully one day wins a race.
“The record company gets 70% and the artist gets 30%. Maybe that will change over time.”
Other comments from the likes of Glassnote’s Daniel Glass, AIM’s Alison Wenham, the BPI’s Geoff Taylor and the Featured Artists Coalition’s Paul Pacifico chart the course of digital music since the birth of Napster.
Spotify’s Mark Williamson, Head Of Artist Services at the streaming company, offers a staunch defence of the Swedish business’s payouts to artists.
“Spotify doesn’t pay artists directly,” he says. “We go to major labels and independent labels, and at the end of every month we look at how much that particular label has been streamed and we pay them a proportion of all of our revenue. We pay out around 70% of every pound, Euro or dollar that we make.”
“The record company buys the horse, trains the horse, feeds the horse, runs the horse and then hopefully one day wins a race.”
He adds: “The pot that we bring in is continually growing. [Spotify] paid out, in the first five years that we were around, $500m. Then last year alone we paid out over a billion dollars.
“If you go back to year one of Spotify, even the biggest stars in the world were making very little because we as a business made very little.
“Now you’ve got artists on Spotify who we’re paying $15m to $20m a year – that’s just for one artist. And that will continue to get paid on year after year after year.
“So actually the amount of money an artist would earn on a month-to-month basis, if they [maintain] the same amount of popularity, does go up.
“For every artist like that, there is another artist that emails me directly and says: ‘We put our song on Spotify, got added to a playlist, got a few million plays and made $20,000 – we used that money to go into the studio.’
“That artist is completely independent and gets the money directly, whereas another artist might have signed a deal five years ago, taken an advance and never paid it back.”
Rob Wells, Crowdmix exec and former global digital boss at Universal Music Group (pictured inset), says: “Understand, the music industry is very complicated. It’s an old business because it’s founded in copyright. But it’s still a machine for making money.
“All we had to do was find the right solution for that consumer demand; find it, license it and then allow it to flourish and grow.
“I led the team that did the first Spotify deal for Universal Music Group. Subscription wasn’t a new thing – there was already subscription platforms out there. But what we saw on the Spotify platform, the engineering, was a complete focus on what the consumer wanted. Take your eye off what the consumers are doing, you’re dead.”
Wells warns the music business not to do exactly that – at another crucial juncture in its development.
“The music industry is famous for not being able to get out of its own way,” he adds. “There’s so many stakeholders. To launch a new service [ you need] massive thinking, massive expense.
“You then have to sit down and negotiate a deal with all the major labels, the independent sector, the publishing sector, collection societies – on a territory-by-territory basis. Ballache.
“Now you’ve got artists on spotify [to whom] we’re paying $15m – $20m a year – that’s just for one artist.”
Mark Williamson, Spotify
“It’s not over yet, and it could still go wrong.”
That warning is echoed by industry analyst Mark Mulligan from Midia Research, who tells the BBC: “The music industry is collectively holding their breath for when Spotify finally goes public. Because they know the investment community are watching.
“And if Spotify doesn’t have a successful IPO, the music industry does not have a plan B.”
A note of optimism is struck by Kobalt’s Willard Ahdritz, who has long believed that if the music business can monetize billions of consumers with a choice of ad-supported and premium streaming options, it will dramatically grow.
“We have heard quite a lot of doom and gloom in the last 15 years – from Napster and on,” he says.
“Today, I see with this technology and transparency that we can double the music industry within three years.”Music Business Worldwide