Canadian Musician - May/June 2017 - Page 39

Sensing that the ire of musicians, labels exec- utives, publishers, and even fans was shifting from music streaming services to YouTube, the Google-owned service’s chief business officer, Robert Kyncl, went on the offensive. He revealed in a December 2016 blog post that “in the last 12 months, YouTube has paid out over $1 billion to the music industry from advertising alone, demon- strating that multiple experiences and models are succeeding alongside each other.” A billion dollars is an impressive figure, but it doesn’t tell the whole story. The International Federation of the Phonographic Industry (IFPI), which represents the global recording industry, wasn’t impressed. They initially accepted Kyncl’s claim and said that when averaged out across its music-listening users, YouTube is paying the music industry $1 per user, per year. They then noted Spotify’s estimated $18 per user, per year average. In its recently-released Global Music Report 2017, however, the IFPI says $553 million was paid to rights holder in 2016, not $1 billion, from all user- uploaded video streaming services combined, though it’s fair to assume YouTube makes up the vast majority of that. That total is actually less than the music industry’s revenue from vinyl sales in 2016 ($563.6 million). They also revised their Spotify comparison to say that Spotify now pays $20 per user, per year compared to YouTube’s average of less than $1. “I hate it that when IFPI responded, and it’s an intelligent response, but it plays into the wrong paradigm,” states Jeff Price, founder of Audiam, the New York-based digital reproduction rights collection agency. (SOCAN purchased Audiam in July 2016, which seems to put it in competition with the CMRRA for collecting online reproduction royalties in Canada, but that’s for another story.) “How much you pay out isn’t an indicator of any- thing beyond how much money you paid out. It doesn’t mean you’re doing it right and it also doesn’t mean you’re doing it wrong. It’s just an abstract number and it has no relevance beyond the PR buzz,” continues Price. “The real question should be: Is YouTube paying out the appropriate amount of money based on the value it’s extract- ing from music? That’s the right question, and is a billion dollars the right number? Well, you’re dealing with a company that’s owned by Google, which has an over-half-trillion-dollar market cap and a sector of it going through explosive growth and adoption and music seems to be one of the reasons why this is happening. So a billion dollars, which is broken up between all the rights Music Canada Pres. Graham Henderson holders in all the dif- ferent countries, is that the right amount? That’s for you to decide.” Evidently, the music industry has decided it’s not. To understand why, you have to under- stand how YouTube calculates payments, who it’s paying, and why – essentially, who is getting what slice of the pie? Unfortunately, a lack of transparency due to non-disclosure agreements (NDAs) makes this nearly impossible. Canadian Musician reached out to Google Canada for this story and its press offi- cer declined to arrange interviews. They originally agreed to provide background information on the topic but subsequent emails and phone calls went unanswered. Canadian Musician also reached out directly to Andrew Lindsay, Google Canada’s manager of music label partnerships for YouTube and Google Play Music, who also declined an interview. In terms of who is getting what slice of the YouTube pie, a lot is unknown, even compared to Spotify, Apple Music, and other audio stream- ing services, which are notorious for their lack of transparency. With Spotify, for example, we know it operates according to the “big pool” model, where it pays rights holders a percentage of rev- enue. According to Billboard’s sources, Spotify’s new long-term deal with Universal Music Group, which will provide a framework for deals with other labels, sees the service pay about half of its revenue to labels. In Canada, on-demand audio streaming services also pay 12.78 per cent of revenue to publishers and songwriters via SOCAN and CSI (CMRRA-SODRAC). With YouTube, even these types of broad numbers are unknown. 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