Why Irving Azoff's New Company Has (Some) Leverage Over YouTube

Irving Azoff took to Twitter Wednesday to repeat previously stated contentions that YouTube lacks licenses from Global Music Rights, the performing rights organization created by Azoff's joint venture with Madison Square Garden Entertainment. The legendary artist manager and former executive chairman of Live Nation sent out these tweets in quick succession:

1. "YouTube knows it lacks any license from GMR and refuses to prove the basis for any other rights to perform GMR writers’ songs."

2. "YouTube's knowledge and direct financial involvement makes them serial and willful copyright infringers."

3. "YouTube will get no protection from any claimed legal 'safe harbors.'"

These are big claims that get to the heart of the fast-changing publishing industry. Believing they are underpaid by digital services like Pandora and YouTube, publishers are considering leaving the two big performing rights organizations, ASCAP and BMI, and negotiating directly with services for performance royalties. ASCAP and BMI are bound by decades-old agreements, called consent decrees, with the Department of Justice that requires them to license all comers and which, according to publishers, hurt their ability to negotiate fair royalties. GMR is not bound by the consent decree and thus has a credible threat of withdrawal from digital services.

Last week, as YouTube announced its upcoming Music Key subscription service, Azoff threatened to pull his catalog from YouTube, as reported by The Hollywood Reporter. The matter escalated this week after YouTube didn't pull the videos related to GMR songwriters. A letter from GMR's attorney to YouTube claims each broadcast of a video controlled by GMR constitutes "a willful copyright infringement." According to The Hollywood Reporter, YouTube believes its right to perform GMR works has been secured through prior deals with other performing rights organizations.

The claims made by Azoff and GMR boil down to one question: what constitutes willful copyright infringement?

There are two main questions, as The Hollywood Reporter's Eriq Gardner noted in an article Tuesday about GMR's latest warning to YouTube. First is whether or not YouTube has a right to perform the songs. YouTube is said to have claimed a multi-year license for the public performance of works represented by GMR, possibly from a preexisting deal with another performing rights organization.

Second is the issue of notification. As Judge Stanton wrote in the Viacom v. YouTube decision, the copyright owner, not the service, has the burden of identifying an infringing work. GMR claims to have given proper notification, but according to The Hollywood Reporter, GMR sent a general notification related to all 20,000 works. A source confirmed this to Billboard, saying GMR's notification did not meet the requirements of the DMCA.

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The disagreement between GMR and YouTube is different than Taylor Swift's beef with Spotify. "Spotify and YouTube are not governed by the same rules," says Matt Pincus, founder and chief executive of SONGS Music Publishing. "It's apples and oranges." Subscription services pay music publishers according to a compulsory right under Section 115. Services pay publishers an amount based on the deals they have negotiated with record labels. This amount, established by the Copyright Royalty Board, is about 10.5 percent of service revenue (though it's actually more complicated). Performing rights organizations negotiate their share of that 10.5 percent with publishers. With YouTube, music publishers are able to have open-market negotiations without government intervention.

Under the DMCA, YouTube can enjoy a "safe harbor" that protects it from liability related to the actions of its users. As a result, it isn't punished for providing a service on which infringing behavior occurs. To get safe harbor protection, a service must not have actual knowledge of infringement, cannot benefit financially from the infringement and, when notified, responds "expeditiously" to remove or prevent access to the infringing content, according to the statute. But YouTube can't let infringement continue once it becomes aware of it. Because the receipt of a takedown notice constitutes knowledge of an infringing video, YouTube must remove the video specified in the notice.

So what's the end game here? At the very least, Azoff appears to be pushing hard for better royalties for GMR songwriters. He has a catalog of popular compositions and the ability to negotiate directly with YouTube. Azoff has formed a small performing rights organization with a small number of compositions -- around 20,000 from 42 songwriters -- by popular songwriters. The business is based on a belief -- a common one in the publishing industry -- that songwriters receive too little revenue for the performance of their works. Azoff's bet is GMR can collect more for its hit-heavy songwriters if they withdraw from the larger current performing rights organization. His pitch to songwriters: I'll pay you more than your current performing rights organization.

Playing hardball should put licensees on notice. One executive believes Azoff's small concentration of popular songwriters puts him in a unique position for licensing talks. "TV might be able to work around him. Radio might not be able to."

The outcome could be bigger than higher royalty. Although Azoff told The Hollywood Reporter he's not yet thinking about a lawsuit, one entertainment attorney believes Azoff "could be setting up a massive copyright infringement case against Google." It would take someone like Azoff challenge a company as large and powerful as Google: Azoff is independent and immune from the kind of blowback that can squash threats from a major music company, he tells Billboard. "Because Irving doesn’t care, YouTube has a problem."