The independent music publisher agreement with YouTube first reported in August is finally ready to be implemented, according to the National Music Publishers' Association. Advance payments are expected to follow shortly.
In anticipation of publishers signing on, YouTube will make up to a $4 million recoupable advance payment for music publishing royalties due on user-generated contents containing published songs. Moreover, YouTube will pay user-generated videos that contain master recordings at a synchronization royalty rate of 15% of net advertising revenue, based on a pro-rated basis of the publishers' share of the songs. The mechanical-licensing song-share split will be used as the proxy to calculate payments.
All licensing and payments will be administered by the Harry Fox Agency (HFA). Publishers will have until Jan. 16, 2012 to sign up and be eligible to receive a portion of the advance. They can sign up regardless of whether they are affiliated with HFA. While the licensing agreement begins Aug. 11, it's only in effect when publishers sign up. It runs through Aug. 11, 2014.
The HFA-administered license with YouTube doesn't cover public performance licensing or payments, which presumably means that YouTube has agreements or will negotiate them with performance rights organizations around the globe.
HFA will charge publishers a 7.5% administration fee.
In the digital age, when online piracy is rampant, HFA president/CEO Gary Churgin portrayed the YouTube agreement as groundbreaking.
"At our very core, HFA exists to ensure publishers and songwriters are paid for the use of their work and this unprecedented agreement with YouTube represents a new phase in commerce for our industry," he said in a prepared statement. "HFA's unwavering dedication to technology innovation makes us the perfect service provider for YouTube and we are proud to have been selected to administer the agreement ensuring publishers and songwriters share in the revenue generated by YouTube's far-reaching presence."
Advances will be paid to music publishers based on their market share, calculated by counting all mechanical licensing royalties paid during a certain fix period. Not just those paid by HFA. Publishers not affiliated with HFA must submit evidence of direct licensing income from that period.
YouTube will deliver reports and royalty payments on a monthly basis, 45 days after the end of a period, and HFA will in turn pay publishers and other right holders via its standard practices and procedure. After advances are recouped, any late payments from YouTube will carry a 1.5% monthly penalty.
Payments will be calculated on each video's net advertising revenue, with 15% of net ad payments going to publishers on a prorated basis for videos using master rights recordings; for user-generated videos using cover versions of songs, the rate is 50% of net revenue.
The agreement, which allows for audits and is subject to additional special provisions, can be viewed in detail here. Independent publishers can also opt in at that website.