1. Late last month, an international association of independent record labels made headlines when it went public with complaints against YouTube, which is preparing to launch a long-awaited paid subscription feature for music.
The indies alleged that YouTube, and its owner Google, were attempting to strong-arm them into unfavorable licensing deals. Unless the labels — including name-brand indies like XL Recordings (Adele, Vampire Weekend), Domino (Arctic Monkeys), and Merge (Arcade Fire) — agreed to the terms of the new service, Google was threatening to disable their ability to make money on regular, ad-supported YouTube. That would be a significant blow to the labels, who would lose the world’s most popular destination for streaming music as a potential revenue stream.
2. YouTube’s plans are controversial, but they don’t involve banning any indies outright.
It’s important to note that removing the labels from YouTube’s ad program, or “Partner Program,” isn’t the same as blocking them from YouTube altogether, as some outlets have reported. And a source familiar with YouTube’s operations told BuzzFeed that holdouts from the service, which is currently scheduled to launch in the “coming months,” not days, would still be able to use YouTube’s Content ID to stop unauthorized users from posting their copyrighted content. That source also said among the labels currently participating in the Partner Program, there are now fewer than 100 holdouts.
In a statement, a spokesman for YouTube said: “Our goal is to continue making YouTube an amazing music experience, both as a global platform for fans and artists to connect, and as a revenue source for the music industry. We’re adding subscription-based features for music on YouTube with this in mind — to bring our music partners new revenue streams in addition to the hundreds of millions of dollars YouTube already generates for them each year. We are excited that hundreds of major and independent labels are already partnering with us.”
3. For indies, getting the short end of the stick with streaming is sadly nothing new.
The major labels — Universal Music Group, Sony Music Entertainment, and Warner Music Group — haven’t had any bad things to say about YouTube’s new subscription service. Sources said that’s because they received a better set of terms for licensing their music. Thanks to blockbuster albums from big names like Beyoncé and Justin Timberlake, the majors held the copyrights to about 65% of the music sold in America at last count, according to Nielsen. And because they own distribution companies that deliver independent music to retail stores and digital service providers, they can sometimes claim control of an even greater percentage. When a new music service launches, appeasing the majors is usually seen as the cost of doing business.
On a basic level, that makes indies a disadvantaged minority. In 2008, News Corp. did something similar to what YouTube is doing now with the launch of the now-defunct MySpace Music. MySpace offered equity in the service and special payouts to major labels but not the independents. The indies abstained… and MySpace Music eventually fizzled. But since then, other services have stuck to this approach: Beats predecessor MOG, Samsung’s Milk Music, Sony Music Unlimited, Songl (Australia), iTunes Radio, Amazon Prime Music, and now YouTube — all have reportedly given preferential deals to the majors and offered indies sloppy seconds.
“A lot of times these companies come from the tech sector and they know music is important, but they’re not really interested in digging into the details,” said Charles Caldas, president of Merlin, an international association that lobbies on behalf of thousands of independent labels with new digital services, including YouTube. “Usually they’re selling something else and music just ticks a box for them.”
4. Even though major label artists aren’t necessarily worth more than independent ones.
Majors may dominate music sales, but streaming is a different ballgame. There’s no evidence to suggest that major label artists perform better on average on streaming services than independent ones do. Nielsen doesn’t track streaming counts by label, and the services themselves don’t publicize marketshare data. But Caldas said independents’ share of the total music pie is much larger in streaming than it is in retail and download sales. Last year, Merlin collected $89 million in revenue for indie labels from streaming alone (excluding YouTube), and this year it expects that number to reach $160–$170 million.
“There’s no more retail space where you have to walk past the Katy Perry display to get to the punk rock,” said Caldas. “In terms of access, in terms of the charts, even in terms of the amount of Grammy awards they’re winning, independents are not at the periphery any more.”
5. Thankfully, not all streaming services treat indies badly.
Many of the most successful streaming platforms, including Spotify, Rdio, and Beats Music, have approached independent labels with terms that are equitable with the majors. They argue that artists like The War on Drugs and Danny Brown are just as important to a quality music repertoire as Rihanna and Justin Bieber.
“It seems clear that YouTube is putting the screws to the indies, and from our perspective what they’re doing is wrong,” said Sachin Doshi, vice president of content and distribution at Spotify. “We’re proud of the fact that we treat indies on par with the majors … There’s no substantial difference in the economics of our payouts from one artist or label to another.”
Joseph Armenia, head of music marketing at Rdio, said his company has taken a similar stance.
“We have the same agreements with everyone, whether it’s an indie label with one album or a major label that has 5,000 new releases a week,” said Armenia. “Everyone is treated the same and brought in the door the same way.”
6. And although the playing field isn’t level, there’s reason to be optimistic.
In some ways, the war over streaming revenue mirrors the same battle indies have been waging with majors since time immemorial. Just as the majors used their consolidated power, money, and influence to dominate brick-and-mortar retail and terrestrial radio in generations past, they’re making a concerted effort to tip the streaming scales in their favor. Some streaming services, meanwhile, have taken a myopic view of what will be valuable to their customers over the long run.
So far, the streaming services that have been the most widely adopted and long-lasting are the ones that have treated all copyright owners fairly. And until better data is available on who is streaming what and how often, any service that plays favorites based on an old paradigm is gambling with its own life. For once, the great equalizer here may just be the free market.
“If you look at the services that are really making an impact, they haven’t pushed independents off to the side of the business,” said Caldas. “They’re putting independent artists right next to any other type of artist and letting people listen to and discover them based on the merits. That’s the future.”
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