Music Publishing & Songwriting

Alright– I promise. This is the last YouTube diatribe at least until the end of the summer. But since the most recent call to arms on this blog, I actually wound up doing a NPR radio interview for a story about the growing influence of YouTube in the music biz. The prospect of being on the firing line prompted me to do a bit more homework about the licensing battles involving YouTube at the moment– and the more I read, the more angry I’ve become. So now, I’m really fired up.

Yes, I know that YouTube provides a very valuable service to unknown and developing artists in helping to expose them to a wider audience. I know that YouTube can be a useful A&R service, helping to draw label and publisher attention to particularly reactive songs or artists. But for active or aspiring songwriters and music publishers, I think it’s worthwhile to understand how YouTube has approached rate negotiations with publishers, record labels, and copyright owners. It certainly presents a pretty clear picture of the level of seriousness they are bringing to the negotiating process and to complying with copyright law. It also makes very clear the actual monetary value they attach to music.

In a nutshell, here’s the situation:

With the record labels, YouTube is currently in negotiations to renew licenses made several years ago. While the labels thus far have fared better than anyone else with YouTube, the actual income generated under these early license agreements is negligible. YouTube income has certainly not done much to break the free-fall in which labels now find themselves, nor has it softened the blow to the artists, most of whom are still wondering when that elusive YouTube income is going to show up on their accounting statement.

But on the publishing side, it’s even uglier. For the performing rights organizations, led by ASCAP, the last three years of negotiation have proven extremely disillusioning. Back in 2005, YouTube agreed to make performance payments, based on an understanding between ASCAP and YouTube that both parties would eventually settle on a reasonable rate. Unfortunately, it’s easier to agree to agree than to actually agree. After years of negotiations, YouTube and ASCAP have failed to reach an agreement upon a reasonable rate, and YouTube has paid nothing to the PROs while that fruitless negotiating was going on. If you want to know why those talks fell apart, here’s one clue:

Just last week, a judge from the US District Court ordered YouTube to pay 1.4 million dollars for the unlicensed use of ASCAP’s material from 2005-2008. Then, the judge ordered YouTube to pay $70,000 a month, beginning in January of 2009. To put that in proper perspective, consider that Imagem Music recently purchased the Rodgers and Hammerstein song catalog for somewhere around $20 million dollars. So while the purchase of one song catalog from one writing team (granted a pretty good one) will set you back $20 million, the judge is granting YouTube unlimited access to HALF OF THE ENTIRE SONG CATALOG IN AMERICA FROM THE LAST 100 YEARS for $1.4 million dollars. Even the judge acknowledged the measly nature of the sum, saying:

“Even considering that the fees paid to ASCAP will represent only about one-half of the total fees that YouTube pays to music performing rights, the contemplated interim fees are clearly reasonable, even conservative, in comparison to those called for in other licenses for the performance of copyrighted content on the Internet,” Judge Connor said.

Well, he got that right. $1.4 million dollars is scraping the bottom of the barrel, given the extent of unauthorized use of copywritten material over the past four years. But get this– YouTube thinks even $1.4 million its too much! How much would it like to pay for access to the entire ASCAP catalog, which includes thousands of classic songs from every era in modern music history? Uh, maybe about $80,000?

Huh? Did someone forget a zero or two on that number? No. YouTube has proposed that they will pay $80,000 to cover the last three years, and then about the same amount annually in 2009 and beyond. That’s a pretty sweet deal. It’s also a pretty revealing one, in case you’re wondering what YouTube and Google think copyrighted music should be valued at. Basically, less than the annual salary of one mid-level executive in their office.

Of course, YouTube and Google claim that since YouTube has proven woefully unsuccessful at actually making any money, they shouldn’t be saddled with the hindrance of having to pay fees for use of the material that is at the core of at least fifty percent of their most popular programming. The flaw here is that YouTube was never actually designed to make any money.

Like many internet businesses, the strategy from its conception seems to have been to create a site that was immensely popular rather than income-generating. Of course, this was done with the knowledge that such a popular destination could then be flipped for a massive financial payout to its creators, despite the fact that there were no actual earnings. Not surprisingly, this is exactly what happened when Google purchased YouTube for $1.65 billion. How convenient for the creators that they didn’t have to share any of that $1.65 billion with the people that created the material upon which their “network” is based. They probably would have sent over a check for 80 grand.

When one considers the financial burden of paying ASCAP royalties upon a company like YouTube, it’s worth remembering that YouTube is basically an entertainment network that creates absolutely nothing of its own. Every minute of its programming is made up of things either donated or stolen. YouTube is a TV station that doesn’t even own a camera. Given that they have virtually no overhead, it doesn’t seem unreasonable that payments for rights to the material they use should cost them at least half of what they actually bring in, maybe more.

During the interview with NPR, I was asked about the promotional service that YouTube provides to the music industry. Surely, the exposure that it offers artists at all different levels has to acknowledged. In fact, in this blog, I’ve suggested on several occasions that the smartest career strategy for a new, unknown artist would be to create one great song, do a truly inventive, provocative, funny, attention-grabbing video and post it on YouTube, then see how the audience reacts. As a means of being “discovered”, there aren’t many better, or more accessible forums.

But for established artists, record labels, and publishers, the “promotional” value of YouTube is starting to look rather dubious. Promotion for what? To help artists sell albums? That’s clearly not working. Check the album sales of the music industry as a whole since 2005. Whatever promotional service YouTube is providing, it’s not very effective.

Suppose you owned a butcher store and a man set up a table in front of your shop, handing out free hamburgers. You might complain— but then he would explain that really he was providing a promotional service for your butcher shop, showing people just how tasty a well-cooked piece of beef could be. What seemed to be direct competition for your shop would prove to be a boon to your business. Great.

But what if your butcher business then proceeded to crash and burn, as your customers took the free hamburgers, ate them for dinner and never came into your store again. How long would you wait until you tried to get rid of the less than helpful “promoter” outside your store?

As I’ve said before, the day of reckoning may have arrived. Warner has taken a bold, if marginally effective step, by pulling product off of YouTube. ASCAP continues to fight the good fight. On the other hand, Universal has immediately abandoned the protection of its writers and artists, and hopped into bed with YouTube, trying to put the rest of the industry at a disadvantage. And here’s another less than encouraging story from the front-lines of the battle:

PRS, the licensing organization for publishers and songwriters in the UK, has been in its own rate dispute with YouTube, running into the same negotiating brick wall that ASCAP, NMPA and others have encountered. In a move that took the industry somewhat by surprise, YouTube recently countered PRS’s tough negotiating stance by pulling off all PRS-licensed, premium music videos supplied by the labels in the UK.

It now appears that PRS has come back to the negotiating table with a new offer. Rather than insisting on the previous royalty rate of .22p per track, they have put forward a new compromise. The new per track price?

0.0085p

Yep. From 22 pence to less than a penny. There’s not much you can buy for less than a penny anymore– here or in London. Apparently, a song is one of them. For songwriters and publishers, what you can see on YouTube tonight is your career slipping away…

Alright– I promise. This is the last YouTube diatribe at least until the end of the summer. But since the most recent call to arms on this blog, I actually wound up doing a NPR radio interview for a story about the growing influence of YouTube in the music biz. The prospect of being on the firing line prompted me to do a bit more homework about the licensing battles involving YouTube at the moment– and the more I read, the more angry I’ve become. So now, I’m really fired up.

Yes, I know that YouTube provides a very valuable service to unknown and developing artists in helping to expose them to a wider audience. I know that YouTube can be a useful A&R service, helping to draw label and publisher attention to particularly reactive songs or artists. But for active or aspiring songwriters and music publishers, I think it’s worthwhile to understand how YouTube has approached rate negotiations with publishers, record labels, and copyright owners. It certainly presents a pretty clear picture of the level of seriousness they are bringing to the negotiating process and to complying with copyright law. It also makes very clear the actual monetary value they attach to music.

In a nutshell, here’s the situation:

With the record labels, YouTube is currently in negotiations to renew licenses made several years ago. While the labels thus far have fared better than anyone else with YouTube, the actual income generated under these early license agreements is negligible. YouTube income has certainly not done much to break the free-fall in which labels now find themselves, nor has it softened the blow to the artists, most of whom are still wondering when that elusive YouTube income is going to show up on their accounting statement.

But on the publishing side, it’s even uglier. For the performing rights organizations, led by ASCAP, the last three years of negotiation have proven extremely disillusioning. Back in 2005, YouTube agreed to make performance payments, based on an understanding between ASCAP and YouTube that both parties would eventually settle on a reasonable rate. Unfortunately, it’s easier to agree to agree than to actually agree. After years of negotiations, YouTube and ASCAP have failed to reach an agreement upon a reasonable rate, and YouTube has paid nothing to the PROs while that fruitless negotiating was going on. If you want to know why those talks fell apart, here’s one clue:

Just last week, a judge from the US District Court ordered YouTube to pay 1.4 million dollars for the unlicensed use of ASCAP’s material from 2005-2008. Then, the judge ordered YouTube to pay $70,000 a month, beginning in January of 2009. To put that in proper perspective, consider that Imagem Music recently purchased the Rodgers and Hammerstein song catalog for somewhere around $20 million dollars. So while the purchase of one song catalog from one writing team (granted a pretty good one) will set you back $20 million, the judge is granting YouTube unlimited access to HALF OF THE ENTIRE SONG CATALOG IN AMERICA FROM THE LAST 100 YEARS for $1.4 million dollars. Even the judge acknowledged the measly nature of the sum, saying:

“Even considering that the fees paid to ASCAP will represent only about one-half of the total fees that YouTube pays to music performing rights, the contemplated interim fees are clearly reasonable, even conservative, in comparison to those called for in other licenses for the performance of copyrighted content on the Internet,” Judge Connor said.

Well, he got that right. $1.4 million dollars is scraping the bottom of the barrel, given the extent of unauthorized use of copywritten material over the past four years. But get this– YouTube thinks even $1.4 million its too much! How much would it like to pay for access to the entire ASCAP catalog, which includes thousands of classic songs from every era in modern music history? Uh, maybe about $80,000?

Huh? Did someone forget a zero or two on that number? No. YouTube has proposed that they will pay $80,000 to cover the last three years, and then about the same amount annually in 2009 and beyond. That’s a pretty sweet deal. It’s also a pretty revealing one, in case you’re wondering what YouTube and Google think copyrighted music should be valued at. Basically, less than the annual salary of one mid-level executive in their office.

Of course, YouTube and Google claim that since YouTube has proven woefully unsuccessful at actually making any money, they shouldn’t be saddled with the hindrance of having to pay fees for use of the material that is at the core of at least fifty percent of their most popular programming. The flaw here is that YouTube was never actually designed to make any money.

Like many internet businesses, the strategy from its conception seems to have been to create a site that was immensely popular rather than income-generating. Of course, this was done with the knowledge that such a popular destination could then be flipped for a massive financial payout to its creators, despite the fact that there were no actual earnings. Not surprisingly, this is exactly what happened when Google purchased YouTube for $1.65 billion. How convenient for the creators that they didn’t have to share any of that $1.65 billion with the people that created the material upon which their “network” is based. They probably would have sent over a check for 80 grand.

When one considers the financial burden of paying ASCAP royalties upon a company like YouTube, it’s worth remembering that YouTube is basically an entertainment network that creates absolutely nothing of its own. Every minute of its programming is made up of things either donated or stolen. YouTube is a TV station that doesn’t even own a camera. Given that they have virtually no overhead, it doesn’t seem unreasonable that payments for rights to the material they use should cost them at least half of what they actually bring in, maybe more.

During the interview with NPR, I was asked about the promotional service that YouTube provides to the music industry. Surely, the exposure that it offers artists at all different levels has to acknowledged. In fact, in this blog, I’ve suggested on several occasions that the smartest career strategy for a new, unknown artist would be to create one great song, do a truly inventive, provocative, funny, attention-grabbing video and post it on YouTube, then see how the audience reacts. As a means of being “discovered”, there aren’t many better, or more accessible forums.

But for established artists, record labels, and publishers, the “promotional” value of YouTube is starting to look rather dubious. Promotion for what? To help artists sell albums? That’s clearly not working. Check the album sales of the music industry as a whole since 2005. Whatever promotional service YouTube is providing, it’s not very effective.

Suppose you owned a butcher store and a man set up a table in front of your shop, handing out free hamburgers. You might complain— but then he would explain that really he was providing a promotional service for your butcher shop, showing people just how tasty a well-cooked piece of beef could be. What seemed to be direct competition for your shop would prove to be a boon to your business. Great.

But what if your butcher business then proceeded to crash and burn, as your customers took the free hamburgers, ate them for dinner and never came into your store again. How long would you wait until you tried to get rid of the less than helpful “promoter” outside your store?

As I’ve said before, the day of reckoning may have arrived. Warner has taken a bold, if marginally effective step, by pulling product off of YouTube. ASCAP continues to fight the good fight. On the other hand, Universal has immediately abandoned the protection of its writers and artists, and hopped into bed with YouTube, trying to put the rest of the industry at a disadvantage. And here’s another less than encouraging story from the front-lines of the battle:

PRS, the licensing organization for publishers and songwriters in the UK, has been in its own rate dispute with YouTube, running into the same negotiating brick wall that ASCAP, NMPA and others have encountered. In a move that took the industry somewhat by surprise, YouTube recently countered PRS’s tough negotiating stance by pulling off all PRS-licensed, premium music videos supplied by the labels in the UK.

It now appears that PRS has come back to the negotiating table with a new offer. Rather than insisting on the previous royalty rate of .22p per track, they have put forward a new compromise. The new per track price?

0.0085p

Yep. From 22 pence to less than a penny. There’s not much you can buy for less than a penny anymore– here or in London. Apparently, a song is one of them. For songwriters and publishers, what you can see on YouTube tonight is your career slipping away…

Never really pictured myself making a call for songwriter solidarity. Not that I have anything against the organized labor movement (I was even a card-carrying Local 802 member for awhile). But as I’ve mentioned many times, songwriting is a pretty lonely task– it doesn’t breed the kind of personality that finds strength in numbers. At the same time, there’s also no escaping that the music industry is one of the most competitive environments on earth– so the idea joining hands with all of the other people trying to get the same cuts, or record deal, or radio play that you are, and singing “We Shall Overcome” seems a bit far-fetched.

However, the time may have come. If you haven’t heard, things are getting increasingly ugly between YouTube and some of the music industry’s primary licensing agencies– culminating in a recent move by YouTube that pulled off all music videos for UK-based users, much to the chagrin of PRS (the English version of ASCAP, BMI & Harry Fox) and many UK music fans. Here in our neck of the woods, it’s gotten so ugly that Warner has pulled off many of their videos, even blocking A&R execs from watching YouTube in their office (now what will they do all day?)

Surprise, surprise: the issue centers on money. After years of negotiation with the music publishers, labels, and songwriter organizations, YouTube continues to fight to lower rates for use of music on the site– even as they have hardly paid up the monies that they owe for the past five years. The tentative deal that have been struck, which is what’s kept music available on the service thus far, have resulted in rates so low that they are almost meaningless (have you ever heard an artist or writer claim they’re really cleaning up on YouTube royalties?)– even as YouTube continues to grow in popularity and overall profitability. Given that a huge percentage of the videos on YouTube use music in one way or another, the music industry would like to see a healthy income from this service and others like it. Is that asking too much?

Apparently so. YouTube is continuing to stall negotiations and press for lower and lower rates. Perhaps they figure if they stall long enough, all the major labels and publishers will be out of business and the industry as a whole will be reduced to a bunch of individual artists desperate for any small opportunity for self-promotion. We might not be far from that point.

Not surprisingly, just as some labels are determined to go to battle, others are ready and eager to cut a deal. While Warner and PRS are taking a confrontational approach, YouTube and Univeral Music have recently announced the formation of Vevo, a “premium” partnership channel that will feature Universal Music artist’s videos and presumably charge higher ad rates, from which the profits can be split between Uni and YouTube.

It’s a nice idea, if in fact the consumer draws any value from a channel that shows videos exclusively from one label. Every marketing survey ever done has indicated that most music fans have little or no idea which label their favorite artist is associated with, and little interest in finding out. The real value in the new venture, at least from YouTube’s point of view, may be in dividing and conquering– pulling one of the industry’s biggest and most powerful players over to their side as a business “partner”, just as the others are getting ready to march off to war. I doubt this is an example of the music industry unity that NARAS, NMPA, and the RIAA were trumpeting in a recent Billboard article.

The problem is, venues like YouTube are the only game left in town. No one sees music videos on MTV. Radio is shrinking like a cheap shirt. Record sales have fallen to the point where last week’s #1 Album sold less than 90,000 units in its first week, the lowest #1 sales total since they started keeping track of these things. For most young consumers, music exists on YouTube, MySpace (like an old legendary club that no one goes to anymore), and iTunes.Of course there are live shows, which are great for established superstars, but pretty limited in their earning power for everyone else. Today’s reality is that the music industry has to make money off sites like YouTube, because it’s the only money there is.

In light of that rather dire situation, I think I have to side with the Warner approach, as opposed to Universal’s “embrace the enemy” tactics. Before our industry disappears entirely, we might want to heed a call to arms. Perhaps its time that the chief segments of the music industry– record labels, artists, songwriters and publishers AROUND THE WORLD– quit acting out of mutual antipathy toward each other and start facing up to our common cause. Maybe it’s time for all the labels to pull their videos off of YouTube. Maybe it’s time for all the publishers to shut down every video that offers a bad karaoke version of a song from their catalogs. Maybe it’s time for music executives to quit watching YouTube (this has become one of the primary spots for quickly finding new music, and I’m as guilty as everyone else), and for artists to start encouraging their fans to do the same.

Unfortunately, the music industry has put itself in a very weak bargaining position– in which the myriad of services like YouTube know that the labels and artists are desperate for the outlet that YouTube provides, and thus unlikely to ever actually treat the service as the blatant copyright infringers that they are (and have always been). It might be worth reminding them that YouTube without music would be a collection of news snippets and people doing funny stunts with their pets. That Susan Boyle video that made the rounds would not have been very interesting without sound.

I’m not normally a militant. But I’m not quite sure how the music industry somehow has managed to find itself on the verge of defeat in a battle that should have been a slam-dunk. There is no question that YouTube has been using music without permission or licenses. There is no question that the right to use music synchronized with visual images requires the negotiation of a sync fee and the issuance of a license. There is very little debate that eliminating all music from YouTube would be extremely damaging to the service. And yet, we find ourselves struggling to negotiate a fair rate. Now, we’re even starting to lose the public relations battle, being branded as greedy profiteers by the very people who have been pirating our music to build their own financial empire.

It might be time for an uprising from the creative community– not complaining, or begging, or negotiating, or tolerating or hoping for better, fairer times in the future. Maybe it’s time for actually making a stand and making some demands of our own, and doing it together.