Why musicians are so angry at the world’s most popular music streaming service
By Todd C. Frankel
Jul 14 2017
With the money from CDs and digital downloads disappearing, the music industry has pinned its hope for the future on online song streaming, which now accounts for the majority of the $7.7 billion U.S. music market.
But the biggest player in this future isn’t one of the names most associated with streaming — Spotify, Amazon, Pandora or Apple. It’s YouTube, the site best known for viral videos, which accounts for 25 percent of all music streamed worldwide, far more than any other site.
Now, YouTube is locked in an increasingly bitter battle with music labels over how much it pays to stream their songs — and at stake is not just the finances of the music industry but also the way that millions of people around the world have grown accustomed to listening to music: free of cost.
Music labels accuse YouTube of using a legal loophole to pay less for songs than traditional music-streaming sites, calling YouTube the biggest threat since song piracy crippled the industry in the early 2000s. The industry has pressed its case to regulators around the world in hopes of forcing a change.
“I do think YouTube is starting to panic a little bit,” said Mitch Glazier, president of the Recording Industry Association of America.
But YouTube is not backing down, stressing the benefits to musicians of promotion on one of the Web’s most popular sites — which allows ordinary users to integrate music into their uploads. YouTube also warns against attacks that could reduce competition among streaming services.
“The industry should be really, really careful because they could close their eyes and wake up with their revenue really concentrated in two, three sources,” said Lyor Cohen, YouTube’s global head of music, referring to Spotify, Apple Music and Amazon Prime Music. (Amazon founder Jeffrey P. Bezos owns The Washington Post.)
The music industry counters they are backed into a corner when negotiating with YouTube — a unit of Google-parent Alphabet — which is mostly shielded by federal law from being responsible for what users post on the site.
“It isn’t a level playing field,” said one executive at a major music label who spoke on the condition of anonymity because he wasn’t authorized to talk, “because ultimately you’re negotiating with a party who is going to have your content no matter what.”
Now, the battle is heating up as the European Union is expected to release new rules later this year for how services such as YouTube handle music, potentially upending some of the copyright protections that undergird the Internet.
Online streaming works like a digital jukebox, with fractions of a penny paid each time a song is played. The money comes from ads and subscriptions.
The E.U. has formally recognized that there is a “value gap” between song royalties and what user-upload services such as YouTube earn from selling ads while playing music. YouTube is by far the largest user-upload site.
How such a law would address the gap is still being decided, but the E.U. has indicated it plans to focus on ensuring copyright holders are “properly remunerated.”
Even the value gap’s existence is disputed.
A recent economic study commissioned by YouTube found no value gap — in fact, the report said YouTube promotes the music industry, and if YouTube stopped playing music, 85 percent of users would flock to services that offered lower or no royalties.