by Kevin Erickson, Communications & Outreach Manager

This week, cellist and composer Zoë Keating wrote an eloquent and impassioned blog post wrestling with the question of whether she should participate in YouTube’s new Music Key subscription service under terms she finds objectionable. By any estimation, Zoë is a savvy observer of the industry and a DIY success story. With regard to YouTube, Zoë took issue with several provisions of the contract presented to her, including the requirement that she make her entire back catalog available in the new service. She also raised questions about the company’s negotiation style. The post clearly struck a nerve and has been widely discussed.

Zoë’s post is well worth reading. Here are some additional things you should know to really understand the full picture:

YouTube has multiple overlapping programs.

YouTube’s “Partner Program” allows uploaders of original content to share in advertising revenue generated by views of their videos. This program was opened up to the general population of musicians in 2010.

YouTube’s “Content ID” program, also rolled out to the music world in 2010, allows copyright owners to exercise control over where their works appear in third-party uploads. All new uploads to the site are scanned and matched against a database of identified sound recordings. When a match is found, the copyright owner is notified, and can choose to:

• Mute audio that matches their music
• Block a whole video from being viewed
• Monetize the video by running ads against it
• Track the video’s viewership statistics

Music Key is the name of a recently launched subscription based streaming service, which among other features allows viewers to avoid seeing ads. It also includes a subscription to Google Play All-Access’s library of on-demand audio. (More from Guest blogger Jeff Price about Music Key)

These three programs all generate different kinds of revenue, but the varying mechanisms may not be immediately visible to most viewers using the site. One such mechanism:

Content ID is generally well-regarded.

Different artists, labels, and music fans may have different opinions about YouTube. But in our experience, they’ve been generally fond of Content ID and the flexible tools it provides.

It’s no secret that a large chunk of YouTube’s userbase seems clueless about how copyright works (as evidenced by the frequent invocation of meaningless disclaimers in third-party uploads saying “I do not own this! No copyright intended!) Unauthorized uploads are quite pervasive; YouTube isn’t obligated to monitor these uploads for infringing content, but under the terms of the Digital Millennium Copyright Act (DMCA), the company must swiftly respond to, and have provisions to bar, repeat offenders who consistently infringe.

In practice, Content ID bypasses the DMCA process, giving copyright owners more control. If you’re someone who doesn’t mind having your music in third-party videos all over YouTube, Content ID allows you track where it’s being used and by whom, and even make a little money. If you’re someone who doesn’t want any of your music on YouTube, Content ID offers a welcome alternative to manually policing the site and submitting DMCA takedown requests through YouTube’s webform, a task that would otherwise be highly time consuming.

Content ID has had some critics: independent artists and smaller labels have expressed frustration that the process for getting your work included in the database for matching was less open than it ought to be. Other critics have found the language presented to third-party uploaders to be slanted. But overall, it’s been a good tool for giving musicians the ability to choose, which is why potential new limitations on this system are seen as troubling. And yet:

The terms offered by YouTube aren’t particularly surprising.

That’s because they seem to be essentially the same as the terms offered to independent labels, which spurred outcry from indie trade groups including WIN (World Independent Network) and inspired protests outside Google offices. 

Merlin—a global rights agency representing a consortium of independent labels—eventually struck a deal for participation in Music Key. But while Merlin represents many important indie labels, they certainly don’t represent the entire independent music ecosystem. Whatever terms they reached don’t extend to unaffiliated artists like Zoë. As in any direct deal, some artists are left behind. And what’s more:

A lack of transparency makes everything worse.

We don’t even know what terms Merlin was able to negotiate for its members because of non-disclosure agreements. We also don’t know what special treatment the major labels have been able to extract (typically, they seek equity stakes, large cash advances, front-page promo deals, and non-play related income; whether any of this revenue is shared with artists remains in doubt).

We’ve been talking a whole lot about transparency lately, and we encourage you check out our four part series on the topic. Of course, just because the terms of a deal are transparent doesn’t make them equitable or favorable. But transparency is a baseline necessity for artists’ rights, because without transparency, we can’t know what to fight for—individually or collectively. Generally speaking:

The ways that deals for digital services are negotiated often disadvantages smaller players.

In that past, we’ve raised concerns about direct deals that result in unequal treatment for some artists and rightsholders, whether it’s a digital service or an agreement with AM/FM broadcasters. 

Part of this is because for services, negotiations are typically with rightsholders and not with artists themselves. And biggest fish in the dealmaking pond are the three consolidated corporate record labels, who have amassed incredibly large and valuble catalogs. As a result, they end up playing an outsized role in the functionality of a service and its revenue structures. Indie labels, despite clear public appetite for their catalog, are often treated like an afterthought, presented with non-negotiable contracts under less attractive terms.  And self-released artists may have even less leverage. (For a deep dive on the concept of leverage, check out this presentation from FMC’s Artist Revenue Streams project.)

But while major label demands might explain the pervasive use of NDAs and how services do business, it doesn’t excuse it. The work of artists like Zoë Keating is a huge part of what made YouTube popular and attracted users to the service; her choices about how she wants to participate should be respected. Because:

Not every music business conflict is directly about revenue.

YouTube’s per-play payouts vary based on whether it’s through the partner program or a Content-ID monetization of a third-party upload. But on average, they’re very small; smaller even than on-demand audio services like Spotify, which has seen its own controversies over payouts. Keating’s spreadsheet of her digital revenues from 2013 indicates that she was paid $1,247.92 for 1,943,263 YouTube plays. It’s possible that these payouts could go up if Music Key finds favor with consumers. But as we’ve previously noted, whether growth would result in significant revenue hinges on an artist’s ability to attract and retain fairly large numbers of listeners or viewers. As Zoë speculated in the past, “[On-demand full-catalog services] will be financially valuable to those who make hits and those who aggregate legions of artists. For a single artist like me commercial streaming will never be more than promo.” 

That doesn’t mean that such a service can’t be quite useful for musicians; obviously, many artists with far fewer views than Zoë use YouTube as a means of reaching and learning about new audiences, sharing their work, and nudging viewers toward towards more significant revenue streams such as music sales and live performances. Some artists are making pretty good money from YouTube, but the value proposition isn’t always about financial remuneration. This can help us understand why for Zoë, the complete-catalog requirement is a sticking point:

Exclusivity matters to many artists.

While Zoë Keating is a unique artist, her basic business model is not particularly unusual among self-released performers. To call her an “edge case” suggests unfamiliarity with the diversity of artist approaches today—where offering exclusives and exercising conscious choices about where and how you want to make different works available is an important exercise of leverage. In previous posts, we’ve looked at how exclusives matter to top-tier artists like U2 and “Weird Al” Yankovic. And they can be equally important to indie artists.

Such exclusives can be permanent (as with iTunes live sessions only available through on that platform) or temporary (as with “windowing” where a new release is available only through a preferred retailer for some period of time). Exclusives can be available digitally (e.g. a commentary track to accompany a new album, available only on Spotify), or physical (a bonus disc of remixes available only to customers who pre-ordered the album direct from the label). They can be free to consumers (a video for a new “Weird Al” single viewable only at a specific website) or they can cost money (an album of demos made available to Kickstarter backers). Such strategies are employed by everyone from the biggest stars to the smallest DIY bands selling tour-only cassettes at house concerts.

Among other things, it’s a way for artists to want to nudge consumers toward options that allow for the establishment of an ongoing relationship or to reward a core group of supportive fans. Understandably, on-demand digital services that are focused on complete catalog want to offer everything a consumer could possibly want to listen to. It’s in their best interest to offer exclusives, but it’s also in their best interest to ensure that competing services can’t offer them. So it’s unsurprising that YouTube would seek to contractually limit third-party exclusives. It’s also not surprising that artists would find attempts to limit their own ability to offer exclusives off-putting.

Keep in mind that this isn’t the only digital model out there. Hybrid download/streaming services like drip.fm and Zoë’s preferred merchant Bandcamp aren’t about having everything. The artists and rightsholders decide what they want to make available. Since these services don’t aim for complete catalog, they don’t have to give special treatment to major labels. It’s a very different model, and it won’t necessarily work for every artist and every consumer. But that’s OK, because digital music doesn’t have to be one-size-fits-all. To better serve the full diversity of musicians:

Service providers should consider the needs of a broader range of artists at the product design stage.

Several times now we’ve seen a service model emerge, and some population of artists determines that it doesn’t ideally fit their needs.   But with regard to the YouTube situation:

There’s a lot we still don’t know.

Stuart Dredge at The Guardian did an admirable job of spelling out these issues, and landed on a crucial, unresolved question. If Zoë opts out of the new music service, what level of participation in Content ID will YouTube allow?

YouTube says musicians who don’t agree to its Music Key terms still have “control” over their content in terms of copyright: they can still get videos that use their music without a license removed. What remains unclear is whether they can still use Content ID for that. If not, artists would have to manually find videos using their music, and file individual takedown requests with YouTube to get them removed—a process that could be onerous for independent musicians like Keating. It’s a bigger threat than blocking her channel.

Zoë has since published a partial transcript of her conversation with a YouTube rep, and some things are murky. The YouTube rep indicates that Keating would be able to decouple her “partner” account from her “content owner” account in the Content ID system so her videos would still be available. And the rep also suggests that Content ID will still be able to “track” her content. The monetization option, it’s clear, will be turned off. But what about the decision to mute or block audio? Will Zoë be able to make these choices on a one by one basis, or will she have to apply a blanket on-or-off policy?

So far, YouTube hasn’t responded publicly. When they do, we’ll let you know.

Edit: Late on Thursday, Billboard was able to get a statement from YouTube; the service says that Zoë will in fact be able to host exclusives, and can still allow or block uses of her music with Content ID.  Keating responded that she was “very happy to hear Youtube has changed that language in the contract, and I look forward to seeing it, since mine does not say that.”