YouTube’s Head of Music: We’re Not Discussing the Value Gap

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Article 13, the proposed EU legislation that aims to restrict safe harbors for online platforms, was crafted to end the so-called "Value Gap" on YouTube. However, according to YouTube's global head of music, it's something that simply not on the agenda. “I do know, from every single senior executive, that we’re not discussing the value gap,” Lyor Cohen says.

Music piracy was traditionally viewed as an easy to identify problem, one that takes place on illegal sites or via largely uncontrollable peer-to-peer networks. In recent years, however, the lines have been blurred.

Sites like YouTube allow anyone to upload potentially infringing content which is then made available to the public. Under the safe harbor provisions of US and EU law, this remains legal – provided YouTube takes content down when told to do so. It complies constantly but there’s always more to do.

This means that in addition to being one of the greatest legal platforms ever created, YouTube is also a goldmine of unlicensed content, something unacceptable to the music industry.

They argue that the existence of this pirate material devalues the licensed content on the platform. As a result, YouTube maintains a favorable bargaining position with the labels and the best licensing deal in the industry.

The difference between YouTube’s rates and those the industry would actually like is now known as the “Value Gap” and it’s become one of the hottest topics in recent years.

In fact, it is so controversial that new copyright legislation, currently weaving its way through the corridors of power in the EU Parliament, is specifically designed to address it.

If passed, Article 13 will require platforms like YouTube to pre-filter uploads to detect potential infringement. Indeed, the legislation may as well have been named the YouTube Act, since it’s the platform that provoked this entire debate and whole Value Gap dispute.

With that in mind, it’s of interest to consider the words of YouTube’s global head of music Lyor Cohen this week.

In an interview with MusicWeek, Cohen pledges that his company’s new music service, YouTube Music, will not only match the rates the industry achieves from Apple Music and Spotify, but the company’s ad-supported free tier viewers will soon be delivering more cash to the labels too.

“Of course [rights holders are] going to get more money,” he told Music Week.

“The problem with the industry is, they’ve always compared advertising to subscription. I’m hoping that there will now be more sophistication in understanding, but in terms of subscription, we’ll be providing the same sort of economics that the other services do.”

If YouTube lives up to its pledge, a level playing field will not only be welcomed by the music industry but also YouTube competitors such as Spotify, who currently offer a free tier on less favorable terms.

While there’s still plenty of room for YouTube to maneuver, peace breaking out with the labels may be coming a little too late for those deeply concerned about the implications of Article 13.

YouTube’s business model and its reluctance to pay full market rate for music is what started the whole Article 13 movement in the first place and with the Legal Affairs Committee of the Parliament (JURI) adopting the proposals last week, time is running out to have them overturned.

But while the Internet melts down with Doomsday scenarios of aggressive filtering and irreparable damage caused by censorship, YouTube’s global head of music is as cool as can be. It’s like the whole Value Gap thing never happened.

“I do know, from every single senior executive, that we’re not discussing the value gap,” Cohen told MusicWeek.

“We’re discussing how to maximize our funnel and how to grow the business, how to be better partners with them. It’s nice.”

Behind the scenes, however, the labels and their associates are going flat out to ensure that Article 13 passes, whether YouTube decides to “play fair” or not. Their language suggests that force is the best negotiating tactic with the distribution giant.

Yesterday, UK Music CEO Michael Dugher led a delegation to the EU Parliament in support of Article 13. He was joined by deputy Labour leader Tom Watson and representatives from the BPI, PRS, and Music Publishers Association, who urged MEPs to support the changes.

“The UK music industry is totally united on this issue. The contribution of music to the UK economy is nearly £4.5 billion. Music outperforms in every part of the economy bar one – and that’s average earnings, which are less in our sector than in the rest of the economy,” Dugher said.

“It’s time for Google’s YouTube to stop ripping off the creators and investors behind our world-beating music.”

While they might not be discussing it with YouTube, the aggression and passion over the Value Gap have hardly disappeared into the night.

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