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YouTube vs PRS Spat – Whoever Wins It Will Be Bad News For Content Owners

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Hot music business topic of the moment – YouTube and its take down of all premium music videos from its service in the UK, has seen accusation’s fly from all angles. TMV analyses the dispute from all perspectives and yet still finds it hard for YouTube to justify its actions.

Let’s go back in time a little to when the standard licensing rate per video stream for music was £0.01 per stream. YouTube was not happy with that rate and managed to get the rate down to £0.0025 per stream and yet is still unhappy and when PRS (http://www.prsformusic.com/Pages/default.aspx) refused to negotiate down any further it Youtube decided to through the toys out of the pram in grand corporate bullying style and now we are at the current situation where it is refusing to let UK users view premium based music video content from its site.

Lets drill down and analyze what these stream rates mean in terms of both what YouTube receives on a cpm based advertising model from advertisers and also what they mean for publishers and artists. Firstly, to my knowledge YouTube receive on average around £4 per thousand impressions from advertisers. At £0.01 per stream that means publishers and artists should receive roughly £10 per thousand streams of their videos. Obviously at that rate YouTube lose around £6 per 1000 music video streams. At the rate of £0.0025 per stream publishers and artist receive roughly £2.50 to divide between themselves, leaving YouTube with £1.50 per thousand streams.

The unknown in all of this is how many advertisements YouTube displays per video play. My guess is at least 5 or 6 banner advertisements on top of the in-video pre-roll advertisements. If this were the case it would mean that YouTube is in actual fact making around £21.00 per 1000 video streams (on banner ads alone) after the publisher and artist-streaming fee has been deducted. Quite a nice profit in anyone’s books! So why are YouTube being unreasonable the music industry no doubt asks?

Well, they recently also started doing advertising revenue share deals with music video content owners (labels as well). The splits in these revenue share deals are not known as we do know that the major labels have been negotiating separately, with Warner taking down all its video content on a global basis as it was unsatisfied with the revenue share split. However, YouTube is no doubt not happy that it is required to pay twice once for the actual video rights holder and another time for the video song owner. But to deny these rights would also be a serious breach of copyright.

One does wonder how YouTube would react if the music business was to not recognize its patents and trademarks which in TMVs view are equivalent to the two music copyrights of recorded music and the actual song. Going further it was reported earlier in an analysis that Pete Waterman (http://musically.com/blog/2009/03/16/pete-waterman-ive-earned-11-from-rickrolling-vid-on-youtube/) has only received around £11 for close to 50 million streams of Rick Ashley’s “Never Gonna Give Up On You” track. If true this equates to £0.000022p per stream.

Going further, according to an anonymous source at the PRS “YouTube pays peanuts, it is in fact actually 0.00001 GBP per UK stream, and only if you get over 10,000 UK visits”. In anyone’s logical view that has to be classed as highway robbery. So essentially, all independent artists are being royally screwed and YouTube is laughing all the way to the bank. Obviously YouTube do require independent music video content to achieve scale, yet is not paying for it.

Moving on though, Ireland based music video specific social network Muzu.tv (http://www.muzu.tv) has managed to pay PRS rates and they are a lot smaller than YouTube in terms of scale and content catalogue. So if Muzu.tv has no problems with the PRS per stream rate how come YouTube does? Well, it comes down to quality of content. YouTube sells the majority of advertisements across its whole platform including UGC based content. In advertisers’ eyes logically UGC content is non controllable and hence has a lesser value to brands. Thus, on YouTube premium music content is included along with UGC content, which in turn obviously devalues the premium music content and leads to lower advertiser rates.

However, although Muzu.tv does also contain a UGC aspect the whole proposition from there side is based around premium music content and I have heard along the grapevine that Muzu.tv is able to attract CPM rates at close to four times the rate YouTube receives. If this is the case then it is clear why they do not have a problem with the PRS per stream rates. It does in fact perhaps point to the need for YouTube to re-assess its business model when it comes to premium music content. If anything, it is TMVs view that YouTube should be leveraging the scale of its premium music content to attain higher advertising rates. If smaller players can do it why not YouTube?

Drilling down further, by selling advertising against premium music content alongside UGC content it is clear that YouTube is in fact devaluing music and in turn its own advertising revenue potential. TMV believes that compromise needs to be made by both sides and it is the duty of YouTube to leverage the value of premium music video content over that of everyday UGC content. Music content makes up roughly 18% of YouTube’s overall traffic and as such is a significant revenue raiser, which could and should be leveraged further by YouTube and perhaps music content rights holders in partnership together.

Blog Tech Radar (http://www.techradar.com/news/internet/youtube-vs-prs-whoever-wins) states the case logically with this comment on the spat: “TV channels, radio stations and concert venues accept licenses as part of the cost of doing business, so why shouldn’t Google? If it were to set up a radio station and demand a lower rate than any other radio station, PRS for Music would quite rightly tell Google to get stuffed.”

On a final note, You Tube’s actions are hurting both its own income as well as that of music content rights holders and most importantly artists. Let’s hope the corporate giant sees some sense and stops its bullying actions. Put yourself in an artist’s shoes £11 for 50 million streams would make anyone feel like they had been robbed. Ad-funded service providers have to be aware that although their models may scale for them if they do not scale well for individual content rights holders than YouTube in fact do not have a viable business model. A key point TMV has been advocating from day one.

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