Indie artists such as Adele and Animal Collective could be gone from YouTube “in a matter of days,” Robert Kyncl, YouTube’s head of content and business operations, told the Financial Times.
The Google-owned video service will start blocking content from record labels that have refused to agree to licensing terms for its new music subscription service set to launch later this summer.
The holdouts won’t just be blocked from the new premium service, but from YouTube’s free site too.
“This is the dumbest thing Google could do,” wrote Gizmodo’s Mario Aguilar. “YouTube is amazing precisely because it has been an easy way for content makers to share their latest creations. This is especially true for music … YouTube’s power has always been its extraordinary openness; once Google starts to wall off the service to the creators, the YouTube we all fell in love with will be dead.”
The new premium service (rumored to be called YouTube Music Pass) will allow users to watch videos or listen to music without ads on any device for a monthly fee.
Kyncl told the Times that labels representing 95 percent of the music industry, including Sony, Warner and Universal, have agreed to the new terms governing prices for their content. He did not disclose details of the contracts but said, “We’re paying them fairly and consistently with the industry.”
But many independent labels think it’s a raw deal and are holding out for a better offer. Forbes reported the Worldwide Independent Network, which represents indie labels, said they were offered unfavorable, non-negotiable terms they believe will undercut existing rates from Spotify, Rdio and other music services.
The complaint from independent labels seems to center on how much YouTube is willing to pay labels under the new service terms for streams of music that are free. The labels have been concerned that YouTube is giving more royalty weight to music played in the paid tier, and therefore offering less of a payout for the free plays — but in reality YouTube will be adding more enhancements to the free tier to compete better against the Spotifies of the world. In the end, the vast majority of users will opt for the free tier, meaning that in the end the labels will make less from all paid services.
In a statement, Alison Wenham, CEO of WIN and chairman of the Association of Independent Music said: “Our members are small businesses who rely on a variety of income streams to invest in new talent. They are being told by one of thelargest companies in the world to accept terms that are out of step with the marketplace for streaming. This is not a fair way to do business.”
Among the holdouts is XL Recordings, whose artists include Adele and the xx, and Domino, the label behind the Arctic Monkeys, the Times reported.
In the meantime, Impala, a trade group for independent music companies, asked the European Commission to look at whether YouTube is abusing its dominant position by forcing small record labels to accept unfavorable terms.
A source close to YouTube told Business Insider the deal will not affect regular users that post their own songs and videos on their own channels. The source also said “negotiations are still open” with the holdouts.
One wrinkle in YouTube’s effort to ban the holdouts is its relationship with the music video service, Vevo, which has agreed to YouTube’s new terms. A Vevo spokesperson told TechCrunch that music videos from indie labels distributed by Vevo on YouTube will not be taken down. That means, for example, that an Adele song distributed by Vevo will remain on YouTube, but an Adele video that comes to YouTube through an independent label may be taken down.
Google gave the following statement to Gizmodo:
Our goal is to continue making YouTube an amazing music experience, both as a global platform for fans and artists to connect, and as a revenue source for the music industry. We’re adding subscription-based features for music on YouTube with this in mind — to bring our music partners new revenue streams in addition to the hundreds of millions of dollars YouTube already generates for them each year. We are excited that hundreds of major and independent labels are already partnering with us.