YouTube Has All The Leverage In New Label Negotiations

If you’re a record label, or an artist, band or publisher for that matter, the one thorn in your digital side is YouTube. Why? It’s by far the most widely used streaming service for consuming music, yet it pays the least of all the services. However, it’s come to light that YouTube’s licensing agreements with the three major labels have either expired or are about to, which brings new hope that renegotiated terms might mean increased revenue for the industry.

That hope may prove false though, since YouTube continues to hold all the leverage - in fact, it holds virtually all of it.

Until now, the major labels could drive a hard bargain with all other streaming services that not only gained them hefty upfront fees, but also even a piece of the company in some cases. If a music service didn’t like a label’s terms, it still had no choice but to take the deal, otherwise it would be minus the label’s catalog, which could mean a death blow to the service.

Not so with YouTube.

Since so much of the music on the service is illegally uploaded by its users, the company is able to dictate the license agreement terms, since if a label balks and refuses to agree to the deal, its music will still appear on the service.

In fact, Warner Music tried this very tactic a few years ago, but after a year of its songs still appearing on YouTube yet generating zero revenue, the company acquiesced and signed a deal on YouTube’s terms. Getting some money is better than no money at all.

All this is made possible thanks to the 1998 Digital Millennium Copyright Act (DMCA), which protects YouTube and other similar services in that they can’t be held liable as a result of unlicensed content that its users might upload. A record label can ask that the content be taken down, and YouTube will comply, but chances are that content will be re-uploaded immediately and the cycle will continue. Plus the burden of finding any unlicensed versions lies with the labels, all of which spend a great deal of time and resources searching for violations. 

So YouTube is in the drivers seat in these negotiations. Even if the labels don’t like the deal presented, they have no recourse since their music will find its way onto the service, but the labels will get zero money if they pull their catalogs because they don’t like the terms.

Read more on Forbes.

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Why The Grooveshark Ruling Should Scare YouTube

Grooveshark is the music streaming service that everyone uses at least sometimes, but gets no respect, especially from the music industry. In fact, Grooveshark has been laden with lawsuits from the major labels over the last few years over users uploading copyrighted songs illegally, a fact that has weighed the company down significantly.

Despite having a healthy 30 million users a month, the service has been struggling with cashflow thanks to the legal hassles that the suits entailed. Things just got worse for the company when a 5 judge panel of the New York Supreme Court overturned a previous ruling and concluded that any song created before 1972 that was uploaded to the service should have the same "safe harbor" protections offered by the Digital Millennium Copyright Act as a song written after 1972.

What that means is that not only must Grooveshark remove any copyrighted song from that period if given notice of infringement by the controller of the copyright, but that it can also be charged as a party to the infringement as well. This, of course, opens the company up to all sorts of potential lawsuits that can bring an already struggling company to its knees.

While Grooveshark is clearly the focus of this suit and controversy, it also brings the same type of scrutiny to YouTube and all other video sites however, a fact that should be making them extremely nervous about now.

Now the saving grace for YouTube in all this is that so far this is a lawsuit based in New York, where Grooveshark does business, and each state has their own interpretations of the same law, but a precedent has been set.

Google has some mighty deep pockets that can hold their own in just about any legal fight, but you know that this is not a fight that they need or want. Copyright holders might see this as another source of income however, one that they might feel has rightfully eluded them for many years, and move along a new round of legal action based upon the ruling quickly.

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