Business

The Music Industry vs. Twitch: Licensing Tensions Heat Up As Clips Come Down

Dillon Francis, Zedd
Joe Buglewicz/Invision/AP/Shutterstock

Artists Dillon Francis (left) and Zedd at the Amazon Twitch Prime Crown Cup in Las Vegas in 2019.

Having built a reputation as a popular livestreaming platform for competitive gamers, Twitch is leading up to its biggest face-off yet. But the battle won’t be between any of its users.

The Amazon-owned platform is facing harsh music industry criticism over its lack of music licensing agreements for songs played in users’ videos, and as the pandemic has brought Twitch a surge in popularity -- 17.5 million average daily visitors, with artists like Diplo and Mike Shinoda using it to connect with fans and bring in revenue -- tensions are escalating, too.

Twitch has no licensing deals with Universal Music Group, Sony Music or Warner Music Group -- or any of their respective publishing arms -- although it does have deals with performance rights organizations, including ASCAP and BMI. Right now, users stream music in their videos, and Twitch has no liability for any resulting copyright infringement, as long as it responds to rights holders’ takedown requests, per the 1998 Digital Millennium Copyright Act (DMCA) and its "safe harbor" provision for platforms which host user-uploaded content. On Oct. 20, Twitch responded to a new flurry of takedowns notices from the Recording Industry Association of America (RIAA) by deleting thousands of clips, for the second time since June -- and upsetting hundreds of users.

While processing all DMCA takedown requests keeps Twitch technically compliant with the law, rights holders have long labeled the "safe harbor" an outdated provision which encourages piracy, limits financial remuneration and places an unfair burden on the rights holder to track down and fight copyright violations. The RIAA’s goal isn’t simply to take clips offline -- it’s to bring Twitch to the negotiating table.

"[Twitch] wants to try to get away with paying nothing and reaping the benefits of artists using their service," says RIAA chairman/CEO Mitch Glazier. "They’re not going to."

The RIAA has flooded Twitch with 38,500 takedown notices this year. "Legally, we’re doing everything correctly, and we are about empowering creators," says Twitch vice president and head of music Tracy Chan. In September, the company launched Soundtrack by Twitch, an in-platform service that lets users legally incorporate into their videos more than a million rights-cleared recordings and songs by independent creators. The product relies on "partnerships" with independent music companies like SoundCloud, EMPIRE, Dim Mak and Create Music Group, which are trading access to portions of their catalogs for exposure to Twitch’s enormous user base, according to a source familiar with the matter.

Both technology and music executives have seen this movie before: Platform uses music, platform doesn’t pay for music, platform -- after much back and forth -- licenses music. Think YouTube and TikTok. The idea is for rights holders to reach a deal before they depend on the platform more than the platform depends on them.

For now, Chan continues to push back, arguing that Twitch’s monetization system is creating a new business model that’s more valuable to artists than licensing payouts could ever be. Creating an account on Twitch is free, and streamers who pass a certain threshold of followers and hours streamed can earn "affiliate" or "partner" status to tap into monetization tools like ads and paid subscriptions.

"Ultimately, it's a new option of how you can run your music career," Chan says. "Traditionally, it’s recorded music and live [driving revenue], and this provides an option where you can have a small number of fans, interact with them, make money and really drive your own career."

The company says that the number of musicians on track to earn more than $25,000 in revenue this year grew 735% from January to September. As Chan emphasizes, artists don’t need a huge following to make a living on Twitch, either: The median viewership for creators who are making $50,000 or more per year is just 180 individuals per stream.

Chan, who joined Twitch in April after four years as Spotify’s director of product management, suggests that record labels seeking licensing agreements aren’t trying to protect artists as much as looking to turn a profit for themselves.

"We're creating this new model in which artists are making tons of money in ways that the music industry is not used to. It’s not about the DMCA," he says. "It’s a model that [labels are] not participating in. When you're making record profits, as these record companies are, and artists are seeing pennies on the royalty statements, that tells you everything you need to know."

Having emptied its lengthy takedown notice queue (for now), Twitch resumed its normal DMCA process on Oct. 28, and Chan suggests that the company will continue to operate business-as-usual.

Meanwhile, industry trade groups say the clock for peaceful negotiations is ticking.

"If they're not pursuing this as a partnership and business relationship, then the music community will just have to approach it as someone attempting to use music without permission," says National Music Publishers' Association president and CEO David Israelite. "We would be looking to protect the copyrights of the creators using all available resources under the law."

Been there, done that? Sort of

There’s a reason that this story sounds familiar. The music industry has historically cracked down on infringing online platforms as they grow to a certain scale: Take YouTube, which renewed multi-year licensing deals with Universal Music Group, Warner Music Group and Sony Music Entertainment in 2017; or more recently, TikTok, which struck short-term licensing deals with the three major music groups in March.

A platform must have room to grow before it can become a potential revenue source for the music industry in the first place, which means that often, the industry turns a blind eye to infringing platforms in their infancy. But once those platforms have reached a certain growth tipping point, the music industry swoops in to establish a way to collect its due. At the same time, the platform wants to get as big as possible -- and in turn, gain as much leverage as possible -- before negotiations begin. Usually, after some push-and-pull -- and often, a good deal of public lambasting -- digital platforms and labels come to a deal eventually.

Even so, the circumstances surrounding Twitch are markedly different. Amid the global pandemic, big technology companies like Amazon -- which bought Twitch for $970 million in 2014 -- have arguably never had so little public sympathy, and artists have never needed revenue this badly. Amazon founder and CEO Jeff Bezos, who recently surpassed a mind-boggling net worth of $200 billion, is among the four big tech CEOs who recently testified before Congress on anti-trust issues -- during which, in an August hearing, he admitted that he didn’t know whether or not Twitch licenses music.

The artist-run nonprofit Artist Rights Alliance quickly responded with a letter accusing Bezos of "willful blindness," underlining the music industry’s argument that a company like Amazon should have both the legal know-how and financial resources to make licensing deals happen. "We're not talking about a tiny little start-up here," Glazier says, noting that Amazon Music has music licensing deals with the three major music groups as well as independent digital rights agency Merlin.

While it’s unclear how separately Twitch and Amazon Music operate under the Amazon umbrella, they have collaborated on recent charity-focused virtual concerts like Twitch StreamAid and Willie Nelson’s Luck Reunion, and in September, Amazon Music even began integrating artists’ Twitch livestreams directly into the music streaming platform.

Twitch also differs from other digital platforms hosting user-generated content in that the majority of its content is live, although users can also archive portions of livestreams (both others’ livestreams and their own) in the form of clips.

While there are still disagreements about exactly what licenses are required for livestreams, every livestream requires a public performance license from a collecting society like ASCAP or BMI, and may require a license to use a recording (usually from a label) if pre-recorded music is used. Any video that’s available on-demand also requires a synch license and a mechanical license. A DJ set that involves remixes or samples also requires licenses to sample or interpolate songs.

Finally, there is also the lack of a united front from the music industry against Twitch. Even as their representatives fight for their rights, artists and labels have flocked to Twitch to harness its livestream monetization opportunities amid the pandemic. Festivals like Rolling Loud, Outside Lands have partnered with Twitch to host virtual editions, labels like Mad Decent have set up channels, artists from Kenny Beats to Sofi Tukker host regular livestreams and, in July, Logic became the first musician to sign an exclusive livestreaming contract with Twitch through a seven-figure deal.

"I think it's really, really important to note that we have far more progressive partners than we have detractors" in the music industry, Chan says.

Israelite views things differently.

"I think that actually speaks to what's so sad about the situation," he comments. "Every individual artist needs to make decisions based on what's best for his or her career, and I don't begrudge anyone that. What's sad is that Twitch doesn't seem to want to partner with them to make sure that the entire music ecosystem is treated fairly."

The road ahead

Technically, Twitch could continue to operate under the DMCA. But even then, it must be sure its process is up to snuff. When the company took down users’ clips en masse this month, it chose not to offer users the option to issue counterclaims, as the DMCA mandates. It also did not slap those users with copyright strikes. "If they don't have an effective repeat infringer policy, that's a huge liability issue," says Glazier. "They have to be very careful."

There's also the possibility that parts of the DMCA itself could eventually be updated, as Twitch's copyright woes come against the backdrop of a debate in Congress over the system's efficacy.

In the meantime, Twitch has taken small steps to demonstrate its commitment to upholding current copyright laws. In addition to launching Soundtrack By Twitch, the company recently expanded its partnership with Audible Magic to scan old clips for copyrighted audio and video, and its Music Guidelines explicitly prohibit users from incorporating music into their streams without the proper license.

Eventually, though, the competition from platforms like Instagram Live and Facebook Live -- which do have music licensing agreements allowing users to play hit music in their livestreams -- could pressure Twitch to come to the negotiation table. In September, Facebook struck multi-year licensing pacts with the three major music groups and their respective publishing arms to let livestreamers on its Facebook Gaming platform legally add songs from a vast catalogue of popular music to their videos.

At some point, Israelite thinks, Soundtrack by Twitch alone won't cut it. "The problem that Twitch keeps running into is that the music that is the most coveted and popular is the music that seems not to be licensed," he says. "So it's not a very good choice to give content creators a library of music that doesn't include the music they want to use."

Some sources suggest that the bubbling conflict won't explode until big-name artists create outside pressure by publicly demanding that their music be licensed for Twitch. Logic himself recently tweeted his desire to let "gaming homies...play my music during streams," writing that his label home, Universal Music Group, "won’t let me."

"It's my job to be tough and to keep sending notices, and to threaten lawsuits and do all of that stuff, but I really do hope that we don't end up in just some sort of policy fight or legal fight," Glazier says. "We are in the middle of a pandemic where live streaming services can play a very important role, and Twitch is one of the biggest. The best thing that can happen is that we don't get too invested in the fight."

A version of this article originally appeared in the Nov. 7, 2020 issue of Billboard.