Is YouTube Really Going To Ban Indie Labels If They Don't Sign Its New Music Service?

YouTube is about to begin testing the new service – which will charge people to watch and listen to music without ads, and download songs to their mobile devices – within the next few days, initially within Google. The company's head of content and business operations, Robert Kyncl, told the Financial Times that the service – previously rumoured to be called YouTube Music Pass – will launch more widely later in the year.

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His confirmation that YouTube will block videos from labels that do not sign licensing deals for the new premium tier will be hugely controversial among indie labels, with trade body WIN already filing a complaint to the European Commission about its negotiating strategy. "While we wish that we had 100% success rate, we understand that is not likely an achievable goal and therefore it is our responsibility to our users and the industry to launch the enhanced music experience," said Kyncl, claiming that YouTube has signed up labels representing 90% of the music industry.

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"YouTube isn't going to take ANY videos down, as the article implies. Why would they do that? It makes no sense. YouTube just won't include those artists in whatever new music service they're building. Everybody should stop freaking out. YouTube is not trying to f**k you over," claimed the top-rated comment.

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"Why wouldn't they block you from the service, if you didn't want to be in it?" asked another. "Basically YouTube is saying 'If you don't agree to be on our music service, you won't be on our music service'," explained another. And: "If this is true, then this is incredibly poor journalism from the Guardian. So poor it's magical."

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What are indie labels saying that YouTube is threatening? What has YouTube said in response? And, what are the various anonymous sources in disputes over digital music licensing saying is the real problem here?

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YouTube has been rumoured to be working on its own subscription streaming music service for some time: a direct rival for Spotify, Deezer, Beats Music and others in that field, including parent company Google's own Google Play Music All Access. In November 2013, music industry site Billboard reported that the service would launch by the end of the year, with users paying for unlimited access to streaming music, including the ability to store and play it offline on mobile devices – a standard feature for those rivals.

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Later that month, Android Police spotted references to something called "Music Pass" in YouTube's Android app, while in April 2014 the New York Post suggested that the new service – it also claimed it'll be called Music Pass – will launch later this year, possibly costing $10 for full ad-free access. All rumours, but this month's dispute with independent labels has smoked out some facts direct from the horse's mouth: YouTube exec Robert Kyncl.

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In an interview with the Financial Times this week, he confirmed that a premium YouTube music service is on the way: it will start internal tests in the coming days, before launching later in the year. "The new premium YouTube tier will allow users who pay a monthly fee to watch videos or listen to music without adverts on any of their devices, even when they are not connected to the internet," claimed the article.

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WIN is a global trade body representing independent music labels, and it has been leading the charge against YouTube this month. Here's what its initial press release alleged:

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"WIN has raised major concerns about YouTube’s recent policy of approaching independent labels directly with a template contract and an explicit threat that their content will be blocked on the platform if it is not signed. According to WIN members, the contracts currently on offer to independent labels from YouTube are on highly unfavourable, and non-negotiable terms, and undervalue existing rates in the marketplace from existing music streaming partners such as Spotify, Rdio, Deezer and others."

On 4 June, WIN organised a press conference to ramp up its protests. Its chairman, Alison Wenham, said this at the event: "We understand that YouTube are still, despite our intervention and despite some very trenchant conversations between YouTube and myself, still threatening to block independent content from the YouTube platform if those independent labels do not sign the contract."

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Wenham has also written to Vince Cable MP, the UK's secretary of state for business, innovation and skills, asking for the government's support. The relevant section of that letter: "YouTube is expected to launch a new audio music streaming service to compete with established services such as Spotify, and is attempting to force contract terms upon the independent sector which we understand are significantly inferior to those offered to the international ‘major’ record companies (Sony, Warner and Universal). If independent companies do not sign up to these revised terms, YouTube has summarily threatened to remove (block) their repertoire from the YouTube service."

The accusation from WIN, representing its independent label members, is clear: if labels don't sign up for YouTube's new paid music service at the (non-negotiable) terms, their entire catalogues will be blocked on YouTube – all of YouTube, not just the new premium bit. Note too the "significantly inferior" terms reference in Wenham's letter. At WIN's press conference, songwriter (and Guardian journalist) Helienne Lindvall said that "We’re hearing that a billion dollars has been paid by YouTube to the major labels" in advances for its new service.

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Some of the anger in this dispute is the perception by indie labels that their major rivals have inked lucrative deals with YouTube while leaving them with the crumbs. That billion-dollar figure is hearsay, of course. But note that YouTube said in February that it had paid $1bn out to music rightsholders in royalties so far, and then consider Kyncl's quote in the FT interview: "That number is going to double soon."

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Until Kyncl's interview this week, YouTube's response to questions about WIN's accusations had been a standard parry: to stress its good relationships with labels while not dealing with the specific allegations. In The Guardian's first report on the dispute on 22 May, YouTube provided this official statement: "YouTube provides a global platform for artists to connect with fans and generate revenue for their music. We have successful deals in place with hundreds of independent and major labels around the world, however we don't comment on ongoing negotiations."

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Last night, Google gave the following statement to Gizmodo: "Our goal is to continue making YouTube an amazing music experience, both as a global platform for fans and artists to connect, and as a revenue source for the music industry,” a Google spokesman said. He said the subscription-based service would bring new revenue streams “in addition to the hundreds of millions of dollars YouTube already generates for them each year. We are excited that hundreds of major and independent labels are already partnering with us.”

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But it's the Financial Times interview that gives the clearest indication of what YouTube is actually planning to do, through a mixture of direct quotes and paraphrased information. The piece begins "YouTube is about to begin a mass cull of music videos by artists including Adele and the Arctic Monkeys" before the key paragraph:

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"The Google-owned company will start blocking videos “in a matter of days” to ensure that all content on the new platform is governed by its new contractual terms, said Robert Kyncl, YouTube’s head of content and business operations."

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It's this wording that has provoked some of the arguments over the last 24 hours: you could certainly read that paragraph as saying videos will only be blocked from "the new platform", but indie labels are claiming the threat is to block them from YouTube as a whole – both the new and old (or paid and free) parts of it.

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What are those anonymous sources and industry experts saying, then? Billboard is a good place to start: it's well-connected with US music labels and YouTube alike.

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"Acts like Adele, Arctic Monkeys and Vampire Weekend, who account for up to 10% of all the music for which YouTube typically has rights to feature, are likely to be pulled down as the world’s largest video service has been unable to reach an agreement with the some of the leading independent labels, including the Beggars Group. The crux of the dispute is that YouTube and the labels are unable to agree on royalty terms the subscription service in addition to existing terms with its free service. YouTube executives argue that they cannot offer music on the free service without it also being available on the paid service as this would disappoint its subscribers. The solution? To take down songs that can’t be available on both services."

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That last paragraph is an important one: it's an answer to the sensible question being asked by several commenters on the Reddit thread about this story: why would YouTube pull free videos just because their labels weren't signed up to its premium service?

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The Verge has also followed up, claiming that YouTube is "explicitly threatening to block artists from using the entire YouTube platform — free or paid — if they do not agree to the terms of the new streaming service" before quoting its own source: "A source familiar with the situation has confirmed to The Verge that most of the details in the FT story were accurate. YouTube does not want to launch a paid service and then be forced to show some videos in ad-supported mode, or offer users the ability to take videos offline, but not be able to offer that for big names like Adele or Jack White. It is going to begin blocking artists whose labels have not signed on to its new licensing terms in the countries where those deals apply starting within just a few days, although the paid service is not expected to roll out that soon."

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The BBC has also reported on the story, suggesting that not all independent videos will be blocked on YouTube: "The BBC understands that even if blocks do go ahead, content from artists signed to independent labels will remain available on YouTube via channels such as Vevo. Videos which are exclusively licensed by independent record labels, such as acoustic sets or live performances, may be taken down."

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This muddies the waters significantly. How can Adele, Arctic Monkeys and Vampire Weekend be "pulled down" if they have official Vevo channels?

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For background: Vevo is a separate company to YouTube that runs its own music video site and apps, as well as running channels on YouTube for labels. (Although Google is one of its shareholders along with major labels Universal and Sony)

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"To clarify, music videos from the indie labels and distributed by Vevo on YouTube will not be taken down," a spokesperson for Vevo told TechCrunch.

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Finally, British music trade site Music Week offered a bit more information: "YouTube’s new ad-free subscription music streaming service will launch later this summer. It has been licensed by the three major labels and, Music Week understands, leading independent digital distributors such as INgrooves, The Orchard and Believe Digital."

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Digital distributors are the companies responsible for uploading music and videos from indie labels to services like iTunes, Spotify, Deezer, YouTube and more – then collecting the money from sales and streams to pass back to the labels, after taking a cut. So, indie labels who distribute music through the firms named above – if the report is correct – won't be blocked on YouTube as things stand.

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One: YouTube is indeed threatening to block the videos of indie labels: if they don't sign up to the terms of its new paid music service, their videos will be removed from its free service too. Although Vevo-run channels seem likely to stay up.

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Two: YouTube will block indie labels from monetisation of their videos on its free service. It's possible that YouTube will leave labels' videos up, but block them from making money from ads in and around those videos – as well as from using its Content ID system to make money from ads shown on videos uploaded by YouTube users featuring their music.

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Three: This is all just a big misunderstanding. If indie labels choose not to sign up for YouTube's new paid music service, their videos will be blocked on it, but left alone on the existing free service. The public evidence appears to be stacked against option three, but it should only be a "matter of days" before we find out for sure.

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It's not a blanket ban, however, since clips released through Vevo will remain, as well as fan-uploaded copies of tracks from artists like Radiohead, Adele and The xx. The kicker here, unfortunately, is that labels who won't sign up to the paid tier are also kicked out of YouTube's ad-supported monetization scheme. So while we may still be able to find Lotus Flower on a Radiohead fan's channel, the band itself won't get a single penny.

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Another downside of the ban is that YouTube won't use its copyright algorithms to blacklist infringing content, leaving independent labels to hunt through the site and issue takedown requests on their own.

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