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Mind the Value Gap: Will Europe Address the Legal Loophole That Lets YouTube Pay Less For Music? (Column)

Will the EU address the legal loophole that lets YouTube pay less for music?

Two decades ago, Congress decided that Internet platforms shouldn’t have to face legal liability for copyright infringement committed by their users, as long as they followed certain procedures. The idea, which became the 1998 Digital Millennium Copyright Act (DMCA) — and the Electronic Commerce Directive 2000 in the European Union — was to spur online innovation and encourage investment by Internet service providers. At the time, this made perfect sense: Why should a company that transmits or stores data for a user face any liability for the user’s actions? At the time, it was hard to imagine that a service like YouTube, which operates under this “safe harbor,” could compete with one like Apple’s iTunes Store.

When it comes to streaming music, of course, that’s exactly what YouTube does: Google’s video service is the biggest online music service in the world, and it’s free. It also pays rightsholders less than other streaming services, and unlike Spotify it hasn’t been able to establish a track record of converting its free users into paid subscribers that generate more revenue for everyone. The reason is simple: While other services have to license songs before streaming them, YouTube can offer them anyway, since users upload them. YouTube has always responded to takedown requests by rightsholders — as it’s obligated to under the DMCA — and it filters user uploads with reasonable, but far from perfect, effectiveness.

More than two years ago, when Irving Azoff, the major labels and various lobbyists drew attention to this issue, I wrote about what rightsholders call the “value gap,” the difference between the price paid for music by YouTube and by licensed services like Spotify. I wrote then that technology companies wielded so much influence over U.S. politics that the issue could only be addressed by reforming the European Union Copyright Directive. Since rightsholders usually negotiate with online companies on a global basis, what happens in Europe matters worldwide — just ask Microsoft.


Early Wednesday (Sept. 12), the European Parliament will vote on several amended versions of Article 13 of that copyright directive, in order to decide which will go to final negotiations. It’s as close to a moment of truth as the European legislative process offers. The version of Article 13 that gets selected could change later, but only so much.

So far, the proposed version of the directive’s Article 13 has generated an avalanche of online fury about how it would force companies to filter user uploads (as YouTube does), endanger democracy (which seems to be facing larger issues online) and otherwise break the Internet. In July, European Parliament voted to take a closer look at the legislation before it went to final “trilogue” negotiations with the European Commission and the European Council — and the chances the directive would address the value gap looked bleak. Two weeks ago, however, when in-person protests across Europe drew just a few hundred people, that outcome began to seem less certain.

Over the last few days, musicians have staged their own protests — including one outside Google’s office in London — and lobbyists in Europe now say the vote could be very close.

This weekend, Wyclef Jean weighed in with an op-ed for Politico EU that managed to both completely misidentify the problem (he writes that the value gap is the difference between what music earns and what the performer is paid) and claim it doesn’t exist (“the truth here is that there’s no ‘value gap.’”) Jean used to worry about the unauthorized use of his music, he writes, but he’s decided to “set my own rules about how my work is used.” The lesson? “Don’t tear down the building, be the landlord.” This is absurd: The whole reason so many artists and songwriters object to YouTube in the first place is that it makes it impossible for them to set any rules about the use of their work. YouTube’s only landlord is Google — which, as it happens, Jean made an ad for last year.


Jean’s argument — and, to an extent, YouTube’s — ultimately comes down to the idea that “we are collectively better off — both financially and promotionally — because of internet platforms.” Which is both true and completely beside the point. Given the revenue generated by Spotify and Apple Music, it’s hard to find anyone in the music business who isn’t a fan of online platforms. The question is whether those platforms should compete with one another fairly, or whether a particular platform — and, let’s face it, this is mostly about YouTube — should have a legal advantage when it comes to costs. The fact that it does is no longer a matter of serious debate.

Until a few years ago, one could make a case that the unfair advantage that platforms like YouTube receive is simply less important than the various benefits they generate — including for musicians that have been discovered there. That’s more difficult now that YouTube no longer recommends music purely based on user tastes; its global head of music, Lyor Cohen, told Billboard that its plans for the music business involve “help[ing] our partners break their acts.” It’s hard to say that your platform offers great opportunities for unknown musicians when you’re actively steering viewers toward your partners’ acts.

YouTube’s value goes beyond the music business, of course — it has changed politics completely, just for starters. But it’s now clear that the service also has a sinister side. YouTube has raised awareness of Black Lives Matter, but also of far-right conspiracy theories. It has boosted the careers of some incredible musicians, but also that of Alex Jones.


Like any other communications technology, YouTube isn’t inherently good or bad — it shows humanity at both its best and at its worst. Regulating these kinds of platforms in a way that limits their downsides but not their potential could take policymakers a generation. But deciding to make them play by the same rules as other businesses would be a good start. Europe has a chance to begin that process. It’s hard to know when there will be another one.