YouTube Threatens to Drop Indie Label Music

YouTube’s dispute with independent music labels has reached new heights as the video purveyor prepares to launch its streaming music service. YouTube’s head of content and business operations, Robert Kyncl, told the Financial Times that artists represented by labels that haven’t signed on to Google’s premium streaming service will begin to see their videos systematically blocked from YouTube.

Last month, the independent music label trade group WIN filed a complaint with the European Union claiming that YouTube and Google had used their massive size to bully independent labels into accepting less lucrative terms than their major corporate rivals. Massive international labels like Sony Music Entertainment and Universal Music Group received generous terms, while smaller labels represented by WIN were allegedly told to take what they were offered or suffer the consequences. The complaint has yet to be resolved before the European Commission, but it seems those consequences are now more clearly defined.

Music labels are already skeptical about digital streaming services. Many artists and labels have voiced complaints about the relatively small reimbursement they receive when their music is streamed on existing services like Spotify. YouTube’s entry into the field has been greeted with mixed emotions. The video giant is known to offer a larger audience as it operates globally while closest competitor Spotify is only in 55 countries. However, YouTube also offers decidedly smaller compensation despite its larger size and massive revenue.

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Music is one of the most viewed content categories on YouTube, generating billions of views per month. Building a streaming service is a strategic way to lock down that music audience which might start viewing on YouTube but move over to more music-oriented services like Spotify or Pandora. In fact, YouTube has been teasing its streaming service for over a year, hinting that it would be a Spotify competitor and a major force in digital music.

It’s still unclear whether such an ambitious goal can be achieved without the cooperation of independent labels which, despite their small size, control a considerable share of the market.  Merlin, the licensing agency that handles most of the WIN affiliated labels, estimates that independent music accounts for roughly 33 percent of the European market. Indie labels also represent some of the industry’s hottest acts. Artists like Adele, Arctic Monkeys and former White Stripes singer Jack White could all disappear from YouTube if the dispute goes unresolved.

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Loss of those video views would certainly be damaging to artists who rely on YouTube for revenue as well as promotion. However, YouTube’s hardline stance would also leave its streaming service crippled right out of the gate if it can’t deliver some of music’s most popular acts. The new service will already be going up against entrenched competitors like Spotify who have had plenty of time to expand their music catalog and build a loyal user base. Neither service is an ideal partner as far as the music industry is concerned, but labels will still have to choose which devil they’d prefer to dance with. In the end, YouTube’s global reach may outshine it’s hardline bargaining tactics.

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