Behind the Epic Moral Battle Over Article 13: YouTube Money (Column)

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Once upon a time -- 2008 to be exact -- there was a major label CEO who thought YouTube didn't pay enough for music. "We just haven't received enough compensation," he told me in an interview at the time, not long after deciding to pull his label's music from the online service. "They haven't figured out how to monetize it well enough to make our share significant enough."

Although few music companies have gone that far, the complaint wasn't unusual -- then or now. Most music executives believe that YouTube gets extra negotiating leverage from "safe harbor" laws like the Digital Millennium Copyright Act, which allow it to stream user-uploaded material unless rights holders ask for it to be taken down. Although YouTube has deals with most commercially significant labels and publishers, many have complained that this regulatory advantage lets the company get better terms than Spotify and other companies that have to negotiate first and stream later.

What might surprise you is the identity of the executive: Lyor Cohen. He shared his thoughts with me in a Billboard interview eight years before becoming YouTube's Global Head of Music. Earlier this month he wrote an op-ed for Music Business Worldwide about how much YouTube pays rightsholders, and why legislative efforts in Europe to hold the service legally responsible for the content it streams would mean "less money from YouTube, not more."

YouTube and the entire music business have both changed a lot since 2009, and Cohen may have changed his mind accordingly. (He declined to comment for this piece.) But the central dynamic between the two hasn't changed. In May 2017, when the Warner Music Group -- which Cohen left in 2012 -- reached a new deal with YouTube, CEO Steve Cooper wrote in a memo subsequently obtained by Billboard, that, given YouTube's advantage, "there can be no free-market 'willing buyer, willing seller' negotiation." Cohen said this "surprised" him -- which is itself surprising considering that he had the very same feelings when he was on the other side of the table. 

The debate over YouTube hasn't changed much, either: Both sides present the issue, which is really about money, as the moral cause of our time. (We should be so lucky.) This summer, technology companies helped organize and fund a lobbying campaign against Article 13 of the proposed EU Copyright Directive, which would make online platforms legally responsible for the content they stream.  But the European Parliament passed the proposed legislation -- the final version of which is now being negotiated -- and now Google is saying it needs to be changed in a way that will protect the internet, and the music business, from "unintended consequences."

YouTube's most important argument, made in CEO Susan Wojcicki's Financial Times op-ed is that YouTube will have to block all music for which it can't figure out ownership information -- a complicated topic that deserves consideration.

Cohen's arguments, meantime, are aimed at the music business, and most of them are smart and rational, but completely beside the point. For example, he points out that YouTube has paid the music industry €5 billion so far, and €1.5 billion over the last year, from advertising alone, although the IFPI disputes these numbers. But subscription streaming services paid out $5.6 billion last year alone, and the free availability of so much music on YouTube doesn't exactly provide an incentive to join one. (While, as Cohen says, this legislation could decrease rights holder revenue from YouTube, the music industry is betting that it could also increase revenue overall.) Cohen also says that YouTube's subscription service pays the same rates as Spotify's, which makes sense, since both companies negotiate with rights holders on an equal footing. But how do the ad-supported tiers compare? And since Spotify seems to do a far better job of converting free tier users into subscribers, shouldn't YouTube's actually pay more?

Cohen then argues that creators don't know how much the service actually pays, because of "a lack of transparency between the money YouTube pays to labels and the money artists see in their pocket," And he suggests that labels allow the service to disclose its payment structure to artists.  This is a great idea, but why stop there? Why not tell creators how many subscribers YouTube's paid service has, what percentage of YouTube views music accounts for, or even how much value YouTube derives from tracking its users?

Cohen goes on to suggest that "License and Rights Ownership is a Black Box that Creates Disputes And Lawsuits," which gets at a serious problem. The music business urgently certainly needs to improve its data systems, and reasonable efforts to find rights holders shouldn't result in ruinous liability when they fail. But what does this have to do with "the lawsuit against Ed Sheeran alleging his song, 'Thinking Out Loud contained music from Marvin Gaye's 'Let's Get it On.'?"  And while it may be unreasonable to expect YouTube to block with perfect accuracy every piece of music it's not authorized to stream, it's perfectly reasonable to ask whether the service is doing all it can: Look at how much music comes up in a Google search for "Prince bootleg".

Cohen, who has a reputation as a firebrand, seems to be joining YouTube's efforts stake out a reasonable middle ground -- and good for him. But he doesn't say much about a way forward -- he just expresses concern for rights holders and creators who, broadly speaking, support Article 13. If YouTube has specific suggestions to improve this legislation, let's hear them -- some could be important. Otherwise, the company seems to be sowing worry in order to weaken legislation that it already, tried, and failed, to block.