YouTube's row with some independent labels over the terms of the contract for its upcoming music subscription service has taken a new twist, with a version of the contract published in full online.
Music industry site Digital Music News obtained a leaked version of the contract and published all 32 pages, with any legal hesitations not reflected in its headline: F*&K It: Here’s the Entire YouTube Contract for Indies…
The leak was wider and carefully targeted. Music industry site Billboard also obtained a copy of the contract, publishing its analysis – although not the actual document – late last week. The Guardian has also seen a copy of the contract.
Independent labels trade body WIN has accused YouTube of trying to force its members to sign the contract with threats that their videos will be blocked on its free service if they do not. The contract's publication sheds more light on the terms at the heart of this dispute.
The most controversial clause concerns the ability of major labels to influence the rate of royalties paid to independents:
"To the extent that any major label agrees to any rates for the Google Services that are lower than the rates set forth in Exhibits C or D, including with respect to bundling, Google will have the right to reduce Provider’s analogous rates accordingly, following thirty (30) days written notice (via email will be sufficient) to Provider."
Independent labels are worried about this due to the potential for major labels to accept lower royalty rates for streams of songs, in exchange for advances – upfront payments. This clause suggests that indies could then be forced down to the lower per-stream rates without getting the advances.
Another clause provoking debate concerns “Catalogue Commitment and Monetization”:
“It is understood that as of the Effective Date and throughout the Term, Provider’s entire catalogue of Provider Sound Recordings and Provider Music Videos (including Provider Music Videos delivered via a third party) will be available for the Premium and Free Services for use in connection with each type of Relevant Content, (excluding AudioSwap Recordings, which will be at Provider’s option) and set to a default policy of Monetize for both the Premium and Free Services, except as otherwise set forth in this agreement.”
YouTube wants labels to make their entire catalogues available to stream on both its premium and free services – videos and audio recordings alike – while setting them all to have ads shown in and around them. That would be problematic for artists who want to withhold their music from YouTube, as some have done from streaming service Spotify.
One important caveat to consider is that this is just a contract sent to indie labels: it indicates the terms that YouTube wanted them to sign up to, but it is not a reflection of the actual deals signed.
This is another point of heated debate though. WIN claims that the contract sent to labels was non-negotiable, with no option to push back against some of these demands, as there would be in traditional dealmaking.
That in itself shows why the publication of the YouTube contract is unlikely to settle any arguments. Any information about its non-negotiability, as well as the alleged threats to block labels' channels if they didn't sign up – including whether that means remove them from YouTube entirely or simply block them from making money from advertising – was delivered outside the contract itself.
To put it another way: until a smoking-gun email or more first-hand testimony from labels about exactly what they were told by YouTube is published, the arguments over whether the company is bullying labels or not will continue to rage.
For its part, YouTube has claimed that it has labels representing 95% of the recorded music industry signed up to its service, which is about to begin internal testing ahead of a public launch later this year.
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