YouTube Addresses Indie Contract Woes

You may have heard about the recent dust-up between YouTube and independent content producers, but in case you haven’t, here’s a quick rundown.

YouTube drew up a new contract for indie labels that would change the way YouTube paid for content. The contract was aimed at musicians, but the results would have rippled out to music video producers as well. The controversy was over the fact that YouTube wanted to lower payout rates from 70% to 65.5%. At first glance, that doesn’t sound like a lot, but it gets worse. That rate would be flexible, not fixed. Due to the “negative most-favored-nation” clause, if a major label agreed to terms lower than what the indie contract set forth, YouTube would have the right lower the indie rates to match. Also, their ad supported network is not geared towards pay-per-play as it is with other streaming content sites. Only videos that have ads attached get ad revenue, and a label that has an ad on every video may get less plays. To that end, YouTube even threatened to pull advertisements from labels that didn’t agree to the terms. This would have had a huge financial impact on independent labels, as ad revenue from YouTube can reach into the hundreds of millions according to Billboard.

The Europe based Independent Music Companies Association filed a complaint with the European Commission, and the American Association of Independent Music joined in the rally against the new terms claiming the company was taking an anti-competitive stance with the new contract. As of early July 2014, YouTube is entering into re-negotiations with indie labels, so things may calm down soon. However, this episode serves as a good reminder for Indies of all crafts to carefully examine every contract before entering into a deal.

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Thank you,

Edward Panos