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Artist organisations says ‘value gap’ not just about what YouTube pays the labels

By | Published on Wednesday 22 June 2016

International Artist Organisation

The International Artist Organisation – the umbrella body that includes the UK’s Featured Artist Coalition – this morning published a letter it has sent to the European Commission about the ongoing and ever vocal safe harbours debate, in which it lends support to the wider music industry’s campaign on the ‘value gap’, but stresses that the need to equitably share the value of digital music goes beyond what user-upload sites like YouTube pay the labels.

As much previously reported, record labels, music publishers, artists, songwriters, managers and collecting societies in both the US and Europe are now behind a campaign to reform the safe harbours in American and European law. That is to say, the rules that say that companies which provide internet services cannot be held liable when customers use those services to distribute copyright material without licence, providing there is some sort of takedown process in place via which rights owners can stop the unlicensed distribution.

The music industry doesn’t oppose the safe harbours in principle, it just wants limitations put in place on what kinds of internet services qualify. Basically it wants the protection removed from user-upload platforms like YouTube which, the music industry’s lobbyists argue, are services that compete head-on with streaming platforms like Spotify and Apple Music, but which exploit safe harbours to pay much lower royalties. Hence the ‘value gap’.

With copyright law up for review in Europe as part of the Digital Single Market initiative, various trade groups representing the music industry have been lobbying hard on this issue for nearly two years now. And while it’s already on the European Commission’s agenda, 58 MEPs this week put their names to a letter calling on its President, Jean-Claude Juncker, to clarify the status of online services providing access to creative works.

Helen Smith of indie-label repping IMPALA welcomed that letter, telling reporters: “Europe’s parliamentarians recognise the true value of Europe’s cultural and creative sectors, and see that there is a problem when so many works are being accessed on certain platforms while so little money is returning to creators. This is especially true in music. While music is available everywhere and listened to more than ever before, a lot of the value never finds its way back to artists and those investing in creation. The reason is simple: some online services actively distributing music are under-licensed or not licensed at all”.

She added: “This letter from Europe’s parliamentarians underlines the political importance of addressing this issue. Tackling the transfer of value is essential not only for musicians, but for the entire value chain, and of course ultimately for the fans themselves. The Commission has already committed to fixing this problem, which is a source of friction and inefficiency in the licensing market. It is a key priority for the EU’s copyright review and we look forward to continue working together with both the Parliament and the Commission”.

But what does the artist community actually think? Since the US industry ramped up its value gap efforts after the country’s Copyright Office announced a review of America’s safe harbours at the end of last year, a number of high profile artists have spoken out on the issue, very much backing up the record companies and music publishers in calling for a change in the law, so that services like YouTube no longer enjoy the protection. And this week veteran artist manager Irving Azoff rallied over 180 big name acts to sign an open letter calling for US Congress to act.

Though most of those 180+ artists are heritage acts, who insist that they are talking for the musicians of the future who, they fear, won’t be able to make money from their music unless the value gap is addressed. But younger artists – and younger managers – are often sometimes less resolute.

They recognise that YouTube’s per-play royalties are meagre and of course would like more money. And, like the labels, they fear that free-to-access YouTube may be hindering the success of premium streaming services that could drive new growth in the recorded music market.

Though they also know that YouTube is a brilliant fan engagement platform that can help in the building of a decent direct-to-fan and brand partnerships business. And that might actually deliver more value down the line for artists, who feel they are too often cut out of the financial benefits Spotify et al are delivering to the record industry.

Which brings us to the IAO’s entry into the value gap debate. Its position can be summarised as follows: Yes there is a value gap. Yes that is a problem that needs to be resolved. But not in a way that means only the major music rights companies benefit.

“It is difficult to argue against the value gap and the headline figures are stark”, writes IAO and FAC chief Paul Pacifico. “Usage on YouTube is indeed vast and in terms of functionality it is all too close to services which pay up to ten times more. [And] in spite of the unique promotional opportunities given by YouTube as a platform, the proportion of commercial content usage on YouTube is difficult to reconcile against the proportion of revenue that usage delivers back to artists”.

But, he goes on, “it is interesting to observe the labels now making very similar demands from YouTube that artists have been asking of all stakeholders in the digital market. When we have made our demands previously, the majors have consistently stated that care must be taken here not to allow the legislative process to be hijacked as a proxy for commercial negotiations between counterparties”.

“However” he continues, “with digital, we have entered into a world of value-share business models as opposed to the buy-sell world of physical retailing and this requires a level of trust that has changed the dynamic in the market and that needs legislative help to build. If we are sharing the value we collectively generate then neither platforms nor labels should be able to use contractual gymnastics to remove value from the table and deny the stakeholders further down the value chain their fair and legitimate share from the use of their works”.

As for whether or not artists should embrace the wider music industry’s value gap campaign, Pacifico says: “We have recommended to artists across the globe that they support the labels in their quest to review value gap legislation on safe harbours both in Europe and the USA. However, we must be careful to make sure that this review includes the whole value chain and that the results are not just to pass value one link down the chain where it stops with the majors”.

Noting some past lobbying priorities of the majors, he goes on: “Artists have always been told to support our intermediaries when lobbying – that we will be ‘looked after’ if only we play along. We were not looked after in the wake of the copyright term extension campaign and we must make sure that this travesty is not repeated in the current copyright review. Yes we must pull together to ‘grow the cake’ as we are constantly told, but not to address how that cake is being cut at the same time would be to cut the artists’ slice out of the picture”.

You can read the IAO letter in full here. And don’t forget our recap of the music industry’s tortuous relationship with YouTube to date in this CMU Trends report here.