Why YouTube’s Global Deal With Universal Publishing Isn’t Simplifying Licensing…

The EU Commission has been complaining for a while about the difficulties of cross-border online licensing in Europe. Their aim is for users to be able to travel from country to country and still be able to access their subscription service, and for services to be available across the continent.

So the news that Universal Music Publishing and the French songwriters’ collection society SACEM have signed a global agreement with YouTube may have looked like a sign that licensing is becoming more streamlined and simple.

Not so fast.

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First of all, the UMP deal only covers its Anglo-American repertoire.  By that, I don’t mean all the music they have that’s sung in English – or even by a British or American artist – it’s only music written by people who are members of the American and British collection societies.  So, although most of my catalogue is published by UMP (I was signed to BMG, which was bought by UMP years ago), and I live in the UK, none of my songs are licensed for YouTube, as I belong to the Swedish collection society STIM, which hasn’t licensed YouTube.

This, in turn, means that none of the songs I’ve written with American and British writers are licensed for YouTube – as, of course, you can’t extract one writer’s contribution from a song. Considering the amount of Swedish writers that write for big American and British artists these days, this would exclude quite a big chunk of videos, as the vast majority of YouTube music is written by a multitude of songwriters, often with different publishers and collection societies representing them.

I would also assume that music fans in Europe, the Middle East, Africa and Asia – where the 127 countries that have been licensed through this deal are located – would demand that YouTube in their countries feature local music.

The reason UMP has been able to make such a broad deal is because they’ve pulled out of the local societies for online licensing, and are instead using a newly created Direct European Administration and Licensing (DEAL) initiative.  This means that while digital music start-ups who wanted to set up shop in a country used to only have to go to the local collection society to license the publishing rights for all the music in the world, now they can’t.

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As the other major publishers have done the same as UMP, but with other organisations, start-ups have to get licenses from even more places than ever before.

Of course, the reason services such as Spotify haven’t launched in 127 countries is not necessarily due to licensing complications. Both Spotify and Omnifone (which handles licensing for quite a few services) have said that they usually wait with launching until they understand the local market.

Then again, YouTube doesn’t have the same issues as Spotify, as it can operate anywhere without music licenses, hiding behind the DMCA (despite it being a US act and not applicable in other countries) take-down scheme.  Even though it isn’t licensed in Sweden, for example, Swedes can still access all the music on it – a license would only mean that rights holders could make a cut of ad revenue.  I guess the only reason it blocked videos in Germany was to posture – and Sweden just isn’t as important to YouTube?

So, in YouTube’s case, I predict that now it has a deal with UMP, one of the biggest publishers in the world, it will put ads on the videos in all the 127 countries, despite not having a license from local songwriters and the other publishers, and the local writers will push for agreeing to a deal, as they don’t want to be left out of getting a slice of the ad revenue, no matter how low the offer is.

But even if YouTube doesn’t put ads on the videos, it would mean UMP would push local collecting societies to license (and there are usually UMP members on their boards), so that they can make money from ads.

Either way, YouTube has scored a win.

They take 30-50% of the ad revenue, and collection societies will be forced to license the streaming service, no matter how substandard the offer.

by  Helienne Lindvall

8 Responses

  1. Visitor

    Youtube gets 30-50% of the ad revenue? That seems pretty fair considering they cover all the expenses.

    Reply
    • Visitor

      Apple and Spotify pay 70% of Gross.

      Apple is complete transparent in that.

      Spotify not so transparent.
      You Tube is neither Transparent or “Open” about what percentage of gross it actually pays to it’s “partners” and rights holders.

      Reply
      • Visitor

        But youtube is a different type of service. It is a video service. Video takes substantially more bandwidth than a song stream or download and it must be redownloaded on every play. The reality is Google wouldn’t make any money if they offered the same payments as Apple or Spotify. They have much higher operating expenses than either one.

        Reply
    • Yves Villeneuve

      My calculations show the major labels make at least 75% from Spotify while the indies make no more than 55%. The average that Spotify pays is 70%. See below.

      Major labels = 75% market share x 70% average wholesale rate = 56.5% of revenues

      Indies = 25% market share x 70% average wholesale rate = 17.5% of revenues

      Total = 70% of revenues

      The major labels believe they are the only game in town therefore request a higher wholesale rate. Fortunately, iTunes does not see it their way.

      Reply
      • Yves Villeneuve

        To clarify, this is what Percent of revenues everyone receives from Spotify:

        Major Labels = 70% + 5% = 75%

        Indies = 70% – [75%/25%]{this is the market share ratio} x 5% = 55%

        The normal wholesale rate is 70%.

        Reply
  2. Visitor

    I don’t see how this is possible for UMP to do deals like this unless they own the rights on the music.

    And if they do, well they have every right to do whatever they want, they because you know, they own the rights on the music.

    Reply
  3. Ravi kumar

    According to me, Youtube has 30-50% ad revenue for their ads program. It is the big strategy for youtube to cover their expenditure.

    Mp3Flight.com Team

    Thank

    Reply

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