YouTube and music industry row about royalties

YouTube and music industry

The MP3 format has officially passed into tech history, after the inventors of the format announced they would no longer support the encoding system. 

The Fraunhofer Institute decided not to renew the intellectual property rights relating to MP3 because there’s a number of new formats which are now better at encoding.

In a statement, the Fraunhofer Institute says: “Although there are more efficient audio codecs with advanced features available today, MP3 is still very popular amongst consumers.

“However, most state-of-the-art media services such as streaming or TV and radio broadcasting use modern ISO-MPEG codecs such as the AAC family or in the future MPEG-H. Those can deliver more features and a higher audio quality at much lower bitrates compared to MP3.”

This doesn’t mean that the YouTube music videos people downloaded through a variety of, let’s say “questionable”, sites as MP3 files are useless. People can still listen to those and they will work fine. So will all other MP3 files, probably.

It’s just that MP3 files will gradually disappear from view, and be replaced by such things as AAC, or MPEG-H.

It remains to be seen whether those same dodgy sites switch to AAC and cost the music industry even more money in lost royalties.

YouTube and the music industry are at loggerheads at the moment about exactly how much the world’s largest video sharing site is costing the music business.

On the one side, Google – the owner of YouTube – claims that it is helping the music business. The company asked RBB Economics to conduct a study into the subject.

Google says that, according to RBB’s findings: “In the absence of YouTube, time spent listening to pirated content would increase by 29 per cent, suggesting that people are going to YouTube instead of pirating music.”

It also adds that as much as “85 per cent of time spent watching YouTube music videos would either shift to similar or lower value platforms, including file sharing and piracy or be lost completely”.

On the face of it, maybe YouTube has a point. Many people may have experienced the feeling of finding obscure, long-forgotten pieces of music that they may not have been able to locate elsewhere – either online or in the real world.

Moreover, before YouTube came along, there was a global kerfuffle caused by such things as Napster and other pier-to-pier file-sharing software through which millions of people were making music available to each other without the need for payment.

Music has always been vulnerable to loss of earnings brought about sharing. Strictly speaking, one is not allowed to share their music files with anyone. But technologies such as MP3 encoding made it possible, whereas in the book world, formats such as ePub make it more difficult – you either give an ebook away or keep it for yourself, you can’t copy the file to give to loads of people.

However, the Recording Industry Association of America doesn’t buy Google’s study, characterising it as “misleading and out of touch”, according to Variety, the entertainment industry publication.

In a statement to Variety, the RIAA says: “The RBB study tries very hard to show that YouTube is really good for artists, even if they don’t know it. But it isn’t for YouTube to tell artists what’s good for them, or how they should promote their music.

“That’s for artists and their business partners to decide.”

It goes on to get slightly more worked up about the issue, saying it finds it “astounding” that the RBB report actually claims that artists benefit from YouTube.

“Do they truly believe that it’s okay for YouTube to pay only miniscule royalties because artists will make more from services like Apple and Spotify?” asks RIAA.

“The RBB study ignores the fundamental issue – that YouTube is failing to pay fair market value for the music they’re using. Music creators want to make their music available on YouTube. They just want to be paid fairly for doing so.”

So, YouTube does officially pay for playing music videos, it’s just that it doesn’t pay very much, according to the RIAA.

And apparently the amount YouTube pays has gone from bad to worse – because of streaming. The complicated-sounding payment system for streaming somehow pays less for more streams.

An article in the Financial Times last year reported that YouTube’s payment rate per stream had halved from $0.002 in 2014 to $0.001 in 2015.

The article was based on a report by Midia Research, which said YouTube had paid $740 million to music rights holders in 2015. Sounds like a lot, but Midia says that the figure is about $755 million less than what it would have been at the $0.002 rate.

The amount YouTube paid to the music industry increased to $1 billion globally in 2016, according to the Guardian, which adds that Spotify paid approximately $2 billion to the music industry globally in 2015.