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Recording Industry Association Responds to Lyor Cohen: ‘Why Is YouTube Paying So Little?’

Barely 24 hours after YouTube’s new head of music, Lyor Cohen, published a cheerful blog post about the company’s work with the music industry, the Recording Industry Association of America’s Cary Sherman responded with a fiery post of his own in which he asks, “Why is YouTube paying so little?”

YouTube has long been a target for the music industry due to what it considers the platform’s low royalty payments despite the vast amount of music hosted on the site. In a report earlier this year, the global trade organization International Federation of the Phonographic Industry (IFPI) singled out YouTube as the single greatest threat to the renewed growth of the music industry, saying, “The value gap, [which is] the growing mismatch between the value that user upload services, such as YouTube, extract from music, and the revenue returned to those who are creating and investing in music.”

The crux of Cohen’s argument lies in this paragraph: “Critics complain YouTube isn’t paying enough money for ad-supported streams compared to Spotify or Pandora. I was one of them! [Cohen was previously head of Warner Music Group, where he battled with YouTube, and Island Def Jam Records.] Then I got here and looked at the numbers myself. At over $3 per thousand streams in the U.S., YouTube is paying out more than other ad supported services. Why doesn’t anyone know that? Because YouTube is global and the numbers get diluted by lower contributions in developing markets. But they’re working the ads hustle like crazy so payouts can ramp up quickly all around the world. If they can do that, this industry could double in the next few years.”

To this, Sherman replies: “About 400 digital services have been licensed around the world, many with ad-supported features. Comparatively, YouTube pays music creators far less than those services on both a per-stream and per-user basis, and nowhere near the $3 per thousand streams in the U.S. that Lyor claims.

Last year’s actual payout per 1,000 streams was closer to half that amount, according to industry data and Nielsen and BuzzAngle estimates, and seven times less than Spotify, which also is both an ad-supported and subscription service.”

While he allows that “Lyor’s heart may be in the right place,” Sherman asserts that “the numbers and YouTube’s actions tell a different story.”

He goes on to dispute many of the other points in Cohen’s blog post, particularly safe harbor, which he addresses thus: “YouTube is the world’s biggest on-demand music service, with more than 1.5 billion logged-in monthly users. But it exploits a ‘safe harbor’ in the law that was never intended for it, to avoid paying music creators fairly. This not only hurts musicians, it also jeopardizes music’s fragile recovery and gives YouTube an unfair competitive advantage that harms the digital marketplace and innovation. Lyor claims the focus on this safe harbor is ‘a distraction,’ but it’s YouTube that seems obsessed with this legal pretext, probably because it’s the safe harbor that enables YouTube to drive down payments to creators, inappropriately. The safe harbor was intended to protect passive Internet platforms with no knowledge of what its users are doing, not active music distributors like YouTube.”

Sherman concludes by addressing the big picture: “So the facts beg the questions: why is YouTube paying so little? Is this how a true partner values music? We don’t think so. It’s long past time that the safe harbors  —  enacted 20 years ago, in the days of dial-up Internet, and before it was ever imagined that users could upload 400 hours of video to YouTube every minute  —  must be clarified to apply to passive and not active intermediaries.”

“To be clear, we believe safe harbors should be preserved (and Google/YouTube claims that we’re trying to eliminate them is nothing but a red herring),” he continues. “But if safe harbors are to drive innovation and fair competition in today’s digital environment, they must be applied as originally intended, not as they are exploited by YouTube for its own competitive advantage.”

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