Sensing that the ire of musicians , labels executives , publishers , and even fans was shifting from music streaming services to YouTube , the Google-owned service ’ s chief business officer , Robert Kyncl , went on the offensive . He revealed in a December 2016 blog post that “ in the last 12 months , YouTube has paid out over $ 1 billion to the music industry from advertising alone , demonstrating that multiple experiences and models are succeeding alongside each other .”
A billion dollars is an impressive figure , but it doesn ’ t tell the whole story . The International Federation of the Phonographic Industry ( IFPI ), which represents the global recording industry , wasn ’ t impressed . They initially accepted Kyncl ’ s claim and said that when averaged out across its music-listening users , YouTube is paying the music industry $ 1 per user , per year . They then noted Spotify ’ s estimated $ 18 per user , per year average . In its recently-released Global Music Report 2017 , however , the IFPI says $ 553 million was paid to rights holder in 2016 , not $ 1 billion , from all useruploaded video streaming services combined , though it ’ s fair to assume YouTube makes up the vast majority of that . That total is actually less than the music industry ’ s revenue from vinyl sales in 2016 ($ 563.6 million ). They also revised their Spotify comparison to say that Spotify now pays $ 20 per user , per year compared to YouTube ’ s average of less than $ 1 .
“ I hate it that when IFPI responded , and it ’ s an intelligent response , but it plays into the wrong paradigm ,” states Jeff Price , founder of Audiam , the New York-based digital reproduction rights collection agency . ( SOCAN purchased Audiam in July 2016 , which seems to put it in competition with the CMRRA for collecting online reproduction royalties in Canada , but that ’ s for another story .) “ How much you pay out isn ’ t an indicator of anything beyond how much money you paid out . It doesn ’ t mean you ’ re doing it right and it also doesn ’ t mean you ’ re doing it wrong . It ’ s just an abstract number and it has no relevance beyond the PR buzz ,” continues Price . “ The real question should be : Is YouTube paying out the appropriate amount of money based on the value it ’ s extracting from music ? That ’ s the right question , and is a billion dollars the right number ? Well , you ’ re dealing with a company that ’ s owned by Google , which has an over-half-trillion-dollar market cap and a sector of it going through explosive growth and adoption and music seems to be one of the reasons why this is happening . So a billion dollars , which is broken up between all the rights
Music Canada Pres . Graham Henderson holders in all the different countries , is that the right amount ? That ’ s for you to decide .”
Evidently , the music industry has decided it ’ s not . To understand why , you have to understand how YouTube calculates payments , who it ’ s paying , and why – essentially , who is getting what slice of the pie ?
Unfortunately , a lack of transparency due to non-disclosure agreements ( NDAs ) makes this nearly impossible . Canadian Musician reached out to Google Canada for this story and its press officer declined to arrange interviews . They originally agreed to provide background information on the topic but subsequent emails and phone calls went unanswered . Canadian Musician also reached out directly to Andrew Lindsay , Google Canada ’ s manager of music label partnerships for YouTube and Google Play Music , who also declined an interview .
In terms of who is getting what slice of the YouTube pie , a lot is unknown , even compared to Spotify , Apple Music , and other audio streaming services , which are notorious for their lack of transparency . With Spotify , for example , we know it operates according to the “ big pool ” model , where it pays rights holders a percentage of revenue . According to Billboard ’ s sources , Spotify ’ s new long-term deal with Universal Music Group , which will provide a framework for deals with other labels , sees the service pay about half of its revenue to labels . In Canada , on-demand audio streaming services also pay 12.78 per cent of revenue to publishers and songwriters via SOCAN and CSI ( CMRRA-SODRAC ). With YouTube , even these types of broad numbers are unknown .
Audiam Founder & CEO Jeff Price
“ No one knows anything about [ YouTube ’ s contracts with rights holders ] and the people who do are usually under solicitor-client privilege , so they can ’ t say anything anyway . So we don ’ t know anything about them other than to say it seems like the major labels these days aren ’ t happy with them , so there ’ s something afoot ,” says Safwan Javed , who wears many hats as an entertainment lawyer with Taylor Oballa Murray Leyland LLP , a songwriter and drummer for Wide Mouth Mason , VP of the Songwriters Association of Canada , and a SOCAN board member .
As Javed alludes to , the complete lack of transparency makes it hard to fairly judge You- Tube . But who is insisting on such secrecy ? It seems all sides are eager to lay blame on the other guy .
In Canada , SOCAN collects and distributes performing rights royalties from YouTube to its songwriter , composer , and publisher members . Previously , You- Tube ’ s payments to SOCAN were subject to Tariff 22 . D . 2 , which applies to user-generated content services . It stipulated the service pay SO- CAN 1.7 per cent for the years 2007-2010 , and 1.9 per cent for the years 2011-2013 , of the service ’ s relevant revenues . Since then , however , SOCAN and YouTube have reached a privately-negotiated agreement that also covers future YouTube Red subscription revenues , but that agreement is subject to an NDA .
According to Jennifer Brown , SOCAN ’ s VP of licensing , the performing rights organization would love to make public the details of its deal with YouTube . “ We want to make sure that our members know the information and we can pass as much data on to them as possible ,” she says . “ So that would also be in the interest of being able to put the information to our membership so that they can understand their royalties a bit better .”
Likewise , the Canadian Musical Reproduction Rights Agency ( CMRRA ) announced in August 2016 that it had completed a new licensing agreement with YouTube . For its publisher and songwriter clients , the CMRRA is now collecting royalties on YouTube advertising revenue for the existing free platform , and will do so when You- Tube Red launches in Canada and through You- Tube ’ s Electronic Sell Through ( EST ) and Transactional Video-On-Demand ( TVOD ) services . Exactly what rates YouTube is paying the CMRRA is also subject to an NDA .
CMRRA President Caroline Rioux told Canadian Musician they cannot reveal the duration of the agreement with YouTube , the formula ( s ) used for determining payment amounts , or any indication of how the agreement compares to the CMRRA ’ s licensing deals with audio streaming services . All Rioux could say in her written response to our questions is that , “ generally speaking , our licensing agreements with online services include a percentage royalty rate on revenues as well as minimum royalty amounts on a per subscriber and / or per play basis .”
“ It ’ s extremely frustrating to not be able to disclose information that I also agree should be disclosed , but there is an NDA in there ,” says Price at Audiam . “ That being said , there are reference points that exist in the world that tend to show how these services operate . You know , advertising tends to be based on CPMs , so
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