YouTube and the world’s largest music company, Universal Music Group, announced a new “global, multi-year agreement” on Tuesday morning.
Susan Wojcicki, CEO of YouTube said in a statement: “We’re thrilled to strengthen our partnership with Universal Music Group. This agreement means we can drive more value to the industry, break and support more artists and deliver an incredible music experience to fans around the world.”
UMG chairman Lucian Grainge wrote: “This important step forward provides our recording artists and songwriters improved content flexibility and growing compensation from YouTube’s ad-supported and paid-subscription tiers, while also furthering YouTube’s commitment to manage music rights on its platform. I look forward to collaborating with Susan and her team at YouTube on the important work ahead to advance artists’ interests and sustain the music industry’s recent growth.”
Sources close to the situation tell Variety that YouTube also has reached a deal with Sony Music — as does a report in Bloomberg — although a Sony rep declined requests for comment or confirmation (the company also declined to confirm a widely reported deal with Spotify back in July). This would mean YouTube has locked down deals with all three major labels, which it has been trying to do for many months.
While reps for YouTube and UMG declined to comment further, a source close to the situation says that Grainge’s comments regarding artists and songwriters’ “improved content flexibility and growing compensation from YouTube’s ad-supported and paid-subscription tiers” and “YouTube’s commitment to manage music rights on its platform” reflect a commitment to the platform better policing pirated content and driving consumers to its paid service — which, along with YouTube’s comparatively low royalty rates, have been an enormous point of contention in its relationships with rights holders. While reports earlier this month spoke of YouTube launching a “new” streaming service in March, sources say in practice it will actually be an upgraded version of its YouTube Red service, which launched in the U.S. in 2015.
In May, Warner Music Group announced an extension of its recorded-music and publishing deals with the platform — very reluctantly, according to an internal company document obtained by Variety. A source tells Variety that Universal’s deal is different from Warner’s.
The Warner memo, which is addressed to unnamed staff members from CEO Steve Cooper, reads in part, “I wanted to let you all know that, following months of tough negotiations, we’ve extended our deals with YouTube, separately for music publishing and recorded music. On the publishing side, Warner/Chappell tirelessly championed songwriters’ rights, and equally, our recorded music team was relentless on behalf of our artists and our music. We secured the best possible deals under very difficult circumstances. Our new deals are also shorter than usual, giving us more options in the future.
“Nevertheless, our fight to further improve compensation and control for our songwriters and artists continues to be hindered by the leverage that ‘safe harbor’ laws provide YouTube and other user-uploaded services,” the memo continues. “There’s no getting around the fact that, even if YouTube doesn’t have licenses, our music will still be available but not monetized at all.”
Music companies have long railed against safe harbor laws and YouTube’s comparatively low royalty payments. In an IFPI report released earlier this year, YouTube and other user-upload video streaming services were singled out as a major deterrent to the music industry’s recent growth. Based on the IFPI’s “conservative estimate,” some 900 million people use such services and pay around $553 million to rights holders in revenue. By contrast, the much smaller base of 212 million users of licensed audio subscription services (both paid and ad-supported) such as Spotify and Apple Music paid more than $3.9 million.
In September 2006, Warner became the first major music company to sign a licensing deal with YouTube. (Warner’s chief executive at the time, Lyor Cohen, was named YouTube’s global head of music in September 2016.) Despite that, the company’s relationship with the platform has been contentious, with Warner going so far as to pull its content from the site in 2008, only to return it nine months later, under scarely improved terms, because it was losing so much revenue due to unlicensed content on YouTube.