I’ll try to keep this one brief.
The whole thing seems to begin – or rather, the first sign that something was going on – with YouTube beginning to sign contracts, directly with artists. The deals stipulate that YouTube would foot some portion of the bill 1 for music videos, in exchange for which there are (obviously) some business terms, and, in the most eye-catching bit of business, a “non-disparagement” clause. That seems like a crazy thing for a video-streaming service to have a music performer sign, until one pans out a little bit to consider a couple of things.
Shortly after the stories about YouTube’s non-disparagement clauses emerged, some similar stories came out about an unlikely force stepping in to shape the way that streaming services 2 move forward, in the form of the U.S. Government. The most germaine of these is the one that’s the hardest to do much about – The U.S. Copyright Board has agreed to hike its rates 40%, eventually increasing (at increments of 1% per year) a final royalty rate of 15.1 cents on every dollar 3. This is a huge increase, obviously, and creates problems for existing streaming models, but especially for Spotify, which has yet to become profitable, and which is preparing a public offering in which the path to profitability will have to be a part of the plan. It also presents a foreboding picture of the world of streaming services to come shortly.
As it happens, YouTube is planning to release its own music-streaming service sometime this year, and that’s the environment they are preparing to enter into – the one where the royalty rate for songwriters/copyright holders shoots straight up. Another thing that is affecting the way that the streaming giant is going to have to confront the world is a widely-publicized petition, signed by some several dozen artists, to have the DMCA revamped in order to (at least in theory) make it more difficult for user-generated spaces like YouTube to be let off the hook for hosting infringing content.
Under the current enforcement of the DMCA, the organization hosting is not responsible for the infringement provided they respond affirmatively to a “takedown” notice. That is, if I go throw a bunch of copyrighted material up there, and the holders of the copyright to that material write a letter to YouTube saying that I did so, they can remove it and the legal obligation is over. The petition 4 would have YouTube held responsible for this sort of infringement to a greater degree, which would, in theory, spur them to create new and novel ways to prevent people from infringing on the copyright in the first place. 5
Whatever happens with this petition, however, it now will exist in the world with the Music Modernization Act, a bill that would provide for a specific governmental body assigned to keeping track of rightsholders, and the creation of a publicly-available database of the person who holds the copyright to any given song, and would be responsible for issuing blanket mechanical royalties for all streaming services, with the end goal being that all songwriters/rightsholders would be compensated more regularly/generously for their work. Obviously if the case is going to be made that the disbursement of payments for the rights to these songs must be handled by this body, that also gives the petitioners a handy place to address their concerns about the enforcement of infringement upon the same rightsholders.
So what does this have to do with the non-disparagement agreements that YouTube is having people sign? Well, it could be related to a couple of things. It’s unknown, and probably immaterial in any meaningful sense, how much the constant bad PR and the above-mentioned petition had to do with the formation of a new rights group, but it can’t have helped. So in the short term, this could be an attempt to get the poeple that YouTube invests in financially – by supporting their production of a video, say – to keep from complaining about how the money that may or may not come in from that same video is meted out (or not, as it were).
This is, even just on its face, its own problem – nobody makes somebody sign a non-disparagement agreement if they plan on dealing fairly with them. This is pretty obviously, whatever the reason, a way to mitigate the risk factors that come from a new business relationship.
Even in the most non-conspiratorial reading, however, it is still clear that this does represent a new kind of direct relationship for YouTube, one where they are yet another business interacting directly with the performer, rather than mitigated through the label. It’s hard not to imagine, given the secrecy that already clouds such contractual objects generally, that there are some business terms in there that would, perhaps, be worth disparagement eventually. If they aren’t yet, then there’s every opportunity that they might be. After all, what we have here is merely the old record-selling industry model asserting itself again, where a company whose business is not, in fact, in music at all 6
In this case, by developing a relationship with the artists directly, and taking on part of the promotional budget 7, they are also (probably) placing themselves in better bargaining position when the time comes to renegotiate either these terms, or similar terms with labels down the line – if you’re going to muck around in the music industry, it probably helps to have some of the only artists still moving units around as a bargaining chip, and if you can legally prevent them from talking negatively about that relationship, well, more the better.
Obviously nobody not involved with one of the YouTube derals knows exactly what’s in it, and obviously this whole thing has some more shaking-out to do before it’s all said and done, but I’m pretty comfortable betting that the answer has more to do with Google coming out ahead here than any sort of objective idea of “fairness.”
- or perhaps even the whole thing, it’s hard to say, given that there’s not really any information out there about this. ↩
- see previous installments in the “Making a Living Selling Buggy Whips” series for more on this and its portent. ↩
- the revenue model was the streaming industry’s preference, with the advocates for the songwriters and labels advocating a more direct per-stream outlay. ↩
- whose signees include Paul McCartney, Jack White, and Taylor Swfit, thus bringing together “people who will sign any goddamned thing”, “people who are super-weird about how their music is presented,” and “people who are seemingly bottomless wells of greed when it comes to their product”, respectively. ↩
- needless to say, predictions about how well this could possibly work, and by what mechanism this could be accomplished or enforced, are not quite the purview of this piece, or of my prognositgatory ability, although I’ll probably have some stuff to say about it if it actually happens. ↩
- even YouTube, remember, is not actually in the business of content, but of selling ads for that content, which is Alphabet’s content-driven business model generally – obviously they also have physical businesses, including their web architecture/infrastructure businesses that don’t run on ad revenue ↩
- from which music video budgets traditionally have come ↩