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Believe chief enters the indie sector’s YouTube debate

By | Published on Friday 20 June 2014

Believe Digital

The CEO of independent distributor Believe Digital has written to his clients about the new deal his company has negotiated with YouTube, which includes signing up to the Google subsidiary’s new subscription-based audio streaming service.

As previously reported, while much of the indie label community has so far refused to sign up to YouTube’s new licensing terms, and have hit out at the firm’s threat to block the indies from its existing video platform as a result, some of the distributors which represent independent labels and artists are on board. Those include Sony Music-owned The Orchard, Universal Music-linked INgrooves and Believe.

Commenting on those deals, another independent distribution firm which hasn’t signed up to YouTube’s new arrangement, Kudos, wrote in a blog post earlier this week: “You have to wonder, did they strike a deal that was in their artist or distributed label’s best interest, or were there incentives (advances, breakage) which benefited only their bottom line? For our part, we would like to assure our labels that any tangible benefit we receive from any deal concluded with YouTube will be fully distributed”.

But in its memo, published by Music Week, Believe denies it received any kickbacks for signing up to the new YouTube deal, adding that it was never threatened by YouTube during its negotiations over the new terms, and arguing that the deal offered by the Google firm was fair.

Labels distributed by Believe will receive increased royalties for content on the video platform (including user-generated content that syncs music and official videos in Europe). And more importantly, Believe says that it reckons the deal offered on the audio streaming service is in line with market expectations.

Says the distributor: “From a detailed analysis of our current agreements with Deezer, Spotify and Rdio, as well as statements received from those services in the past year, our conclusion is that the rate offered by YouTube on the YouTube subscription service is aligned on current market rates. Minimum guarantees per subscriber per country are also in line with market rates”.

Of course all digital music dealings are shrouded in secrecy, so it’s hard for third parties (including artists and managers) to assess how one deal compares to another. Though for Merlin, the body that represents many of the bigger indies and some distributors in digital negotiations, often the sticking point isn’t just per-play royalties/revenue splits, but whether or not the majors were offered large advances and/or equity arrangements as part of their deal.

Many indies argue that if the majors get such advances and they do not, that gives Sony, Universal and Warner – who already enjoy better access to finance – an unfair advantage, because they have money in their bank account from day one which they can use to outbid indie labels when signing buzzy new artists, to invest in new ventures and to otherwise grow their businesses, while the indies have to wait to receive their digital income over a number of years.

One of the reasons why the bigger indies established Merlin was to ensure that they could enjoy similar benefits in big digital deals, to reduce the majors’ competitive advantage. Advances and equity are usually linked to market share, and when the indies come together through Merlin their share of the market is significant (whatever YouTube claims), making it easier to demand such deals. Which, indeed, Merlin has from other streaming start-ups. And, it seems likely, these points are key in the indies’ talks with YouTube, in addition to any disputes over what royalties the Google firm should pay, for both video and audio content.

Believe concedes that it does not enter into these kind of talks, because – it says – they inevitably cause transparency issues for a distributor and its clients. Though, in his personal note, also published by Music Week, Believe chief Denis Ladegaillerie says that he does sympathise with pan-European indie labels group IMPALA and the World Independents Network on most of the issues they are currently speaking out about, although not specifically on YouTube’s dealings, obviously.

The current dispute, reckons Ladegaillerie, is just one incident in the much bigger and ongoing issue of the indie sectors’ access to finance, and the disparities in the cash-flow opportunities for the majors versus the smaller players. Debate should also be had, he reckons, on how music is valued in the streaming market, and how indie artists can be assured equal access to promotional opportunities.

But, he concludes, “Are [these issues] limited to YouTube? No, my personal view is that these are structuring market issues that must be addressed, in initiatives driven by IMPALA, WIN and other organisations in an institutional framework”.