WHAT: Members of the National Music Publishers’ Assn. filed a lawsuit for copyright infringement against Fullscreen on Aug. 6, alleging that the YouTube multichannel network (MCN) relies heavily on videos featuring independent acts performing unlicensed cover songs. The clips are monetized by selling advertising against them, but Fullscreen doesn’t in turn compensate songwriters or publishers. The NMPA has been discussing with Fullscreen, Maker Studios and other MCNs how to properly license music and pay royalties. As part of those talks, the NMPA has also been insisting on retroactive payments for past infringments. So far, only Universal Music Publishing Group has deals with MCNs, or at least two of them: Fullscreen and Maker. The NMPA has reached a settlement with Maker, but that has yet to be finalized.
WHY: The lawsuit, filed in the U.S. District Court for the Southern District of New York, is a shot across the bow of MCNs, content aggregators on YouTube that create networks and have subscribers. In February, NMPA CEO David Israelite told Billboard that while thousands of MCNs populate YouTube, the NMPA had identified several dozen of the larger ones with whom it would try to negotiate a licensing deal. But the association also said if the MCNs wouldn’t negotiate a deal to pay back royalties, the NMPA was prepared to sue.
WHO: The NMPA is a Washington, D.C.-based trade association that represents thousands of independent publishers. It often takes the lead in negotiating with digital music service providers. According to the NMPA, Fullscreen consists of 15,000 YouTube channels with more than 200 million subscribers that view 250 million videos monthly, generating 2.5 billion-plus unique views. MCNs typically produce many of the music videos, and even when they aren’t involved in the production, they provide distribution, marketing and promotional services to these often infringing videos and share advertising revenue with the videos’ producers and performers.
IF: The NMPA reached an agreement with YouTube regarding user-generated videos in 2011 in a deal that pays publishers 15% of net ad revenue when a master is used in a song; when a cover song is used, publishers get 50%. But unlike the MCNs, YouTube doesn’t monetize music videos unless all rights holders are identified. Therefore, it’s unlikely YouTube specifically profited from such uses of music, although in general it could be argued that those videos helped fueled the site’s growth and thus its overall profitability. Meanwhile, MCNs sell their own advertising, apparently regardless of who owns the music licensing. Typically MCNs split net ad revenue with YouTube 45% to 55%. Sources say the NMPA is pushing to receive 50% of the MCNs’ 45% share, or 22.5% of advertising revenue. While that’s lower than the 50% they receive in properly licensed user-generated videos from YouTube, MCNs supposedly charge higher advertising rates for their videos, so while the percentages may not be the same, the overall dollar amounts could offset the percentage imbalance.