By Jeff Price, the founder of TuneCore and now founder/CEO of Audiam.
First, YouTube video creators are getting angry at record labels, artists, music publishers and YouTube for sending them messages stating they are possibly illegally using music in their videos. This causes the videos to be taken down or stops the video creator from making money from the views.
Then we have record labels, artists and music publishers angry with YouTube for letting copyright infringing videos go up in the first place. In addition, record labels, artists and music publishers are angry that people are using their music without a license to make money. In addition, they want to be paid something for the use.
Then we have this first of its kind YouTube economic eco-system. It generates new money in new ways for video makers, labels, artist and music publishers while trying to work within a framework of copyright laws that never contemplated its existence.
Let's take a step back for a better perspective on this.
To begin, the reason everyone is angry, frustrated or yelling is that the YouTube business model (i.e. sharing ad money with video creators, labels, artists and music publishers) is WORKING. It’s working so well, that a lot of people are making (and have made) a LOT of money. In 2013, analysts put YouTube ad revenue over $5.6 billion dollars. This is up from the projected $3.6 billion made in 2012.
Around half of this YouTube ad money is being shared back with the video creators, artists, labels and music publishers. They want more of it and/or they want to make sure their new YouTube money stream doesn’t stop.
YouTube is right there with them. It wants to incentive and accelerate this eco-system.
And all of this is happening in the midst of music copyright law that never predicted YouTube’s existence.
(Although copyright extends to a lot more than just music (films, books etc) the purpose of this article is lay out the impact and issues in regards to music.)
TWO WAYS TO MAKE MONEY ON YOUTUBE
There are two main ways to make money on YouTube:
- One is from views of your own videos on your own YouTube account—your account is called a “Channel” by YouTube.
- The second is from views of other people’s videos which have music in them—this is called a “Claim.”
These two ways to make money - Channels and Claims – work in different ways
YouTube Channels: how to make money on your own videos in your own YouTube account
Let’s say you make you own video of your three fingers wiggling. As soon as you’re done recording it, you have created a copyright protected movie; no one else can use it without your OK.
As it’s your own fingers and it’s your own video, you control all the copyrights in it.
Say you want to put this video on YouTube. You create an account at YouTube (your YouTube “Channel”), agree to the Terms & Conditions, and upload your video of the three fingers wiggling. By doing this you have now given YouTube a license to reproduce your video and let others watch it on YouTube.
You can also tell YouTube to “monetize” your video with ads (this option appears for everyone in their YouTube account—no middleman needed). When the ads generate money, YouTube pays you about 55% of what the advertiser paid them.
REMEMBER: Anyone can make money on YouTube on their own videos if they control all the copyrights in the video. No middleman is needed.
CLAIMS: How to make money on other peoples’ videos using your music
Now let’s assume a complete stranger made a video with of their three fingers wiggling. And now assume this stranger puts music into their video.
That video now has three copyrights:
- One for the video itself,
- One for the recording of the song,
- One for that person that wrote the lyrics and melody to the song (called “The Composition”).
(For example Sony Records hires Whitney Houston to sing the song I Will Always Love You. The recording of the song is owned by Sony Records. HOWEVER, Dolly Parton wrote the lyrics and melody to the song I Will Always Love You. Dolly Parton owns the lyrics and melody of the song.)
In order for YouTube to legally place an ad on that video, all three copyright holders need to say it’s okay. If YouTube places an ad on the video without the approval of ALL three copyright holders, then YouTube would be making money off of other entities copyrights without a license. This is illegal.
Now here’s the important part, when videos got uploaded to YouTube, YouTube has no idea who does and does not have licenses to the music in the video. It asks the person uploading the video if they have all the rights to everything in the video, but how the hell is the general population of the world supposed to know or understand that to legally say “yes” if their video has music in it they have to have the copyrights to “Reproduction” and “Public Performance” cleared for both the “Master” and the “Composition”.
It’s these copyrights (and four others actually) that allow artists, labels, songwriters and music publishers to make money off their music. Without them, they could not get paid.
So YouTube created a solution to get all three copyrights cleared to allow them to place an ad on the video.
The person or company that controls the music has to enter into a special contract with YouTube called a “Direct Licensing” contract. These contracts are typically only given to larger music companies, not to individual artists or songwriters. These contracts are NOT part of a YouTube channel deal – that is, the deal the everyman agrees to with YouTube to make money on their own videos.
The Direct Licensing contract allows the person or company to send a list to YouTube of all the recordings (“Masters”) or "Compositions" (a.k.a., the lyrics and melodies) they control. YouTube then gives the person or company the power to go into YouTube and find other peoples’ videos that have their recordings or compositions in them and do one of three things:
- Do nothing, leave the video on YouTube as is,
- Tell YouTube to take the other person’s video down
- Tell YouTube to sell ads on the other person’s video and share the ad money back with the person/entity that controls the recording (“Master”) and the person/entity that controls the lyrics and melody ("Composition”).
To help the person or company find other peoples’ videos on YouTube that have their music in them, YouTube asks the person or company to deliver a copy of the recording of the song. YouTube then “fingerprints” the recording of the song and beams that fingerprint against the billions and billions of past, present and future videos on YouTube looking for matches.
When YouTube finds other peoples’ videos that have the person or company’s music in them, they ask the person who made the video if they have a legal right to use the music in their video (for example, the person that made the video contacted the artist and got a license from them to use it).
YouTube asks the video creator if they have the legal rights by sending the video maker a notice that gives them two choices:
“Acknowledge” that you don’t have the rights, or
“Dispute” that you don’t have the rights.
- If the video maker clicks “Acknowledge” (meaning they don’t have the rights to use the music in their video) the video stays up, an ad goes on the video, and the artist gets paid a small percentage of the money
- If the video maker clicks “Dispute,” (meaning they do have the rights to use the music in their video), YouTube tells Audiam and Audiam asks the artist if the video maker has a legal right to use their music. If the artist says “yes they do,” the video still stays up and YouTube does not pay any money directly to the music copyright holder for the use of the music.
Now the problem is in many cases the video creator gets one of these messages and gets understandably pissed off as they do not know the nuances of complicated, antiquated hard to understand copyright law and/or they were making money on their own video and now they make less money (or no money) as that money now flows to the artist, label or music publisher.
They point out that they put time, effort, resources and energy into creating “original content” (videos) and that by not allowing them to make some money on these videos (or just keep them up at YouTube) it stifles creativity and their freedom. In addition, some video creators state that they have the right to use the music in their videos and keep all the money as the music in their videos falls under a frequently misunderstood copyright law called “Fair Use” (you can read the US governments definition of that here http://www.copyright.gov/fls/fl102.html)
Finally, they feel threatened as the have heard of stories of the RIAA suing grandmothers and teenagers that violated copyright law.
On the other hand, artists, labels and music publishers also put time effort, resources and energy into creating “original content” (music). There point is that by not allowing them to make some money on these videos (or have a say over if the videos can stay up on YouTube without their authorization) it stifles their creativity and their freedom.
So is YouTube broken? Absolutely not. It’s working and it’s working pretty well (I can give $5.6 billion reasons why). However, it’s not perfect, nor will it be for some time as the right balance to the global shift of “mash up” culture (i.e. your music copyrights mashed up with my video copyrights) is created.
In the meantime, the rest of the world can work to create its own solutions. It’s why I created Audiam. Audiam gets artists, labels and music publishers paid for the use of their music in YouTube. We work for our customers to find videos using their music without a license, tell YouTube to place ads on those videos and get the customer back their portion of the ad revenue. We don’t take videos down. If the video creators have a license to use the music already, we do nothing.
For Video Creators we created a way for them to search for and download music that has been “pre-cleared” for use in YouTube videos. In addition, the music copyright holder can choose to share their YouTube money back with the video creator.
Now everyone wins, the artist, label, music publisher AND video creator all get paid and YouTube has more videos to put ads on.
Instead of screaming at one another, an intelligent thoughtful dialogue has to take place. For the most part, music copyright holders want their music used in YouTube and video creators want to use it.
If all are willing to share the revenue, all will win. But the first step is to realize if everyone is a villain, no one is.