All of YouTube’s Major Label Deals Are Now Expiring…

The YouTube Music Problem

Will the industry fix its ‘YouTube Problem’ in 2016?

YouTube’s contracts with major labels Warner Music Group, Sony Music Entertainment, and Universal Music Group are all about to expire, or already expired, according to reports and sources this morning.  In a report late last night, the Financial Times noted that YouTube is girding for a ‘showdown’ as each of these labels are preparing to radically shift the terms of their low-paying deals.

The deals are ending ‘within months,’ which active negotiations over how to change future compensation.  “Over the coming months, Universal Music Group, Sony Music and Warner Music are each due to negotiate new licensing deals with the Google-owned video platform,” the Times notes.  “None of the three music companies has commented in public, but each appears keen to ‘reset’ its relationship with a service that has, to date, paid them relatively little for their content.”

Separately, Music Business Worldwide has reported that YouTube’s contract with Universal Music Group has already ended, with tense discussions happening on a floating deal.

“[YouTube] are 40% of consumption of music and 4% of the revenue.”

Negotiations could be tricky: on one hand, YouTube is pilloried for generating insultingly-low royalties for labels and artists, but the service also accounts for roughly 40 percent of music consumption.  That’s according to Apple Music executive Jimmy Iovine, who spilled the statistic alongside another bomb:  “Here’s a little statistic,” Iovine told attendees at Vanity Fair’s New Establishment Summit in San Francisco last year.   “[YouTube] are 40% of consumption of music and 4% of the revenue.”

“That’s a problem!… They know that doesn’t work. But do they care? I have no idea.”

YouTube has piggishly argued that ad-supported is working, and monetizing users that will never pay for music.  But that rhetoric is being challenged by Apple Music, whose paid-only service now counts an estimated 15 million subscribers.  Tie in Spotify (30 million) and Tidal (3 million), and streaming services are now reaching a critical mass of premium users.

All of which gives the majors a lot more leverage against YouTube.

9 Responses

  1. Anonymous

    I think this is an opportunity for the labels to dramatically change the streaming industry for the better. They should demand that ad-supported streaming on YouTube goes away forever. If YouTube does it, Spotify and SoundCloud will follow soon after. The way to monetize users that will supposedly “never pay for music” is to make piracy so inconvenient that they will sign up for a subscription to avoid the hassle. And I do believe we now have the means to do that.

    Reply
    • doktor audio

      that is literally the million dollar question: how to replace something as convenient as piracy or adblocking with something even more convenient? what would that thing even be?

      Reply
      • Anonymous

        A virus is not convenient. Piracy-punishment is not convenient.

        YouTube should do what DMN tries to do, but go all the way:

        Block adblockers!

        DMN isn’t big enough to get away with it — very few sites are — but YouTube is. I really, really hate ads, but I couldn’t live without YouTube, so I just wouldn’t have a choice…

        Reply
  2. rikki

    how to change future compensation……….

    maybe learn how to play live and sound better than your studio recording?

    Reply
    • Straw Man

      Way to stay on topic.
      A great live act is just that.
      Has f**k-all to do with this article.

      Reply
    • Anonymous

      “You say.. “Steve.. how can I be a millionaire.. and never pay taxes?” First.. get a million dollars. “

      Reply
  3. EsolEsek

    Google are global thieves, not just of music copyright, but every creative copyright out there. They are also completely pro-government surveillance on every level. Larry Page is an arrogant sociopath. If the government was defending the interests of the people, they would break this monster up. Hopefully, the labels will finally face this beast down.

    Reply
  4. aman

    What this statistic means is that the music industry derives 96% of its income from the other 60% of consumption… This 4% is peanuts not even worth bothering about. Heck it drives sales of the other 60%. Yeah, music videos are cool and all, but I listen to most of my music on Spotify (Premium) anyways. Take the hit, asswipes and consider it a marketing campaign that costs you nothing and makes you some money to cover your prod costs. It’s not like these companies are being asked to pay for YouTube’s server farms, bandwidth, development or other costs.

    Reply

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