If you want to start a music label executive ranting and raving, just mention YouTube. It’s currently public enemy #1 to the music industry thanks to its relative intransigence over royalty payouts that execs and artists alike feel are way too low. That’s a good reason why Youtube may think its brand new hire of music business insider Lyor Cohen as head of global music will help smooth over its difficulties with the labels, but that line of thinking will probably turn out to be somewhat misplaced when the dust settles.
Cohen comes from his own indie label, 300 Entertainment, after years as a senior exec at Universal Music subsidiary Def Jam, then Warner Music. At Warners, he helped oversee that company’s transition to digital distribution, being instrumental in signing licensing agreements with both Spotify and YouTube, so on the surface this looks like a great hire. Get an insider who knows everyone in the business and how the game is played, and YouTube’s trouble may be soon over, or so the thinking probably went.
The problem is that Cohen isn’t exactly a beloved figure in the industry, so he’ll not be welcomed with open arms to any negotiation, especially if he’s there to play hardball and keep the status quo regarding the royalty rate. Right now YouTube pays only 55% of ad revenue for monetized views, while other music distribution services are in the 70% range and even higher. That’s where the music industry wants to be, but YouTube doesn’t feel compelled in the least to acquiesce, and why should they? If a major label withholds a license, its songs will still find their way onto the platform thanks to the many fans uploading their own videos with the songs attached. YouTube is immune from any copyright infringement prosecution thanks to the Safe Harbor provision of the Digital Copyright Millennium Act.
While it’s possible to identify videos with unlicensed music via YouTube’s Content ID system, most labels feel that it doesn’t identify enough of them, leaving millions of possible monetizable videos views unreported. An improvement to the algorithm is something that the industry is also demanding.
Reportedly, all three major label’s license agreements with YouTube are now out of contract and updated versions of these agreements are currently on the table. Presumably, that’s what YouTube wants Lyor Cohen to handle, but unless he brings a substantial royalty increase with him, you can be sure that the company will continue to remain in the cross-hairs of the music industry, even with an insider at the helm.[This article originally appeared on my Forbes blog]