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YouTube in shock indie music nuke: We all feel a little less worthy today

Depressing message for small producers

Internet Security Threat Report 2014

Comment Yet another argument has brewed up between independent record companies and a wholesale customer, in this case YouTube. The accusation, that YouTube had given the major labels better terms than they were offering indies, was wearyingly familiar; as was YouTube’s reported response.

That response was an offer of “take it or leave it” terms for a settlement, and to try to pick off labels that were willing, for whatever reason, to leave the collective arguing with YouTube.

Both sides have plenty to justify their position. On YouTube’s side, independently produced music brings vast catalogues, a disordered supply chain, and a lower average value per track. Collectivisation solves some problems – but not all – and relatively few recordings are so compelling that consumers would leave YouTube if they were not available.

The indies can counter that they produce more high quality new recordings than major labels, with much more diversity, that the administration can and will be made much smoother if the incentive is there, and that who is YouTube to say that any individual recording is worth more or less according to the size of the corporate entity that is selling it?

Some compromise will no doubt be found in time. YouTube, however, should be much more circumspect about how it manages its relations with music producers; professional independent producers create disproportionate value in music, and YouTube does not have a credible alternative to their skills and investment if it wishes to avoid a disastrous drift into sub-optimal Gini coefficient content markets.

How YouTube skewed the content funnel model in their favour

A music producer who has not contracted away the rights in their recordings can upload their work to YouTube and accept whatever revenue is offered in the click-through licence. Any business wanting to insert itself as an intermediary needs a mixture of pull and push to attract musicians who would otherwise have no reason to give up a share of their revenue from YouTube – or from anywhere else.

Naturally, YouTube would ensure the balance of risk and reward would be very much weighted to its advantage in a deal offered indiscriminately to anyone who fancied signing up. With so little information available about the eventual value of any recording, no advances against future revenue are likely to be offered, and nor will the music producer be able to argue that each listen or view should have a minimum fee attached.

YouTube is extremely unlikely to wish to pay for many recordings before they are made and would find it very hard to organise production. Rival platforms might not wish to carry its content, meaning a proportion of the market would be inaccessible.

All this is obvious, but it benefits from a restatement in this context. Intermediaries can compete by advancing funds for production, bringing organisational skills (hiring arrangers, session musicians, and studio time), and by offering their access to the whole market, as well as their ability to negotiate better terms than would be offered to random uploaders. They can invest in better supply chain management, and can work cooperatively with YouTube and other platforms to find and focus interest in the music.

A content funnel with many intermediaries competing for the attention of music producers raises standards all round.

Focusing only on the big players makes us all poorer

Systemic discrimination in favour of three global companies sends a depressing message about YouTube’s view of the world of music, musicians, and music industry expertise. If it is motivated by anything other than ignorance, laziness, or spite, such discrimination is a broadcast to policy makers, creative people, and to its audience, that YouTube believes any music not owned by music’s Big Three (Sony, Warner, UMG) is by definition less worthy of attention, and the musicians who made it less worthy of investment.

Like the legendary cigar-chomping music exec of yore, this is YouTube’s way of saying “don’t give up the day job”. The fewer highly rewarded music supplier partners YouTube has, the more such systemic discrimination is multiplied, meaning even less investment in quality and diversity.

In an organisation as smart as YouTube, owned by one of the most capable businesses of the age, there must be people capable of taking a forensic view of the music industry and analysing with the greatest precision where incentives should be created to reward diversity and quality in music on a scale never before seen. It is surely too soon in the development of super-massive platforms like YouTube to decide that any encouragement outside the corporate hegemony is a pointless waste.

We should all hope that those people within YouTube who still have a little hope for the future of music soon find their voice. ®

Paul Sanders is the founder of the state51 Conspiracy, an independent music company, and CI which provides a connected digital media platform to record labels and music distributors. He has been working in digital music since 1991, focused always on bringing innovation and technology into the marketing and delivery of music.

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