YouTube and Collective Licensing

by on October 16, 2006 · 4 comments

Derek Slater notes an important wrinkle in the recent YouTube news:

Lost in the GooTube shuffle last week was some even bigger news for the scores of YouTube users who already enjoyed lip syncing (and hip shaking) to their favorite songs and posting home videos to the site. Deals worked out with Sony BMG, Universal, and Warner Music suggest that fans will be able to freely remix and share popular sound recordings from those major record labels’ catalogs. When a remix video gets viewed, YouTube will share a cut of the advertising revenue with the rights holder.

It’s a simple concept with potentially profound implications. Artists get paid, while fans can keep on sharing remixed tunes on the site and push the boundaries of user generated media even further. No fans or innovators get sued in the process.

That raises an important question: why can’t P2P users get a similar deal? EFF has long advocated that the music industry blanket license P2P users to let them keep sharing in a way that gets artists paid. The labels could help Internet users get legal by cutting a deal with an intermediary, whether a P2P company, an ISP, or a collective licensing society like ASCAP.

It’s worth noting that Prof. Picker called this development back in June. The deals announced last week appear to use exactly the model professor Picker predicted:

The ASCAP and BMI licenses are typically based on a percentage of revenues of the licensee. The key point there is that it means that we don’t have to invest that much time tracking actual use.

Actually, no time needs to be invested tracking use vis-a-vis the licensee. Some time may be required to know how to divided the revenues among the copyright holders.

I was skeptical of the feasibility of this plan at the time, but YouTube seems to agree with Prof. Picker.

As for why Napster wasn’t able to negotiate a similar agreement, my guess is that Napster cut too close to the core of the music industry’s business. YouTube is an extra revenue source that has little or no cannibalistic effects on its existing businesses. In contrast, if the recording industry had signed a collectively licensing agreement with Napster, the billions of dollars it had invested in its music distribution network would have been rendered obsolete almost overnight. Even if the operating profit margins from a Napsterized music industry would have been higher (because they’d save almost all the costs of manufacturing, shipping, and retailing pieces of plastic), the transition would have been wrenching, involving writing off billions of dollars in now-obsolete assets and laying off the majority of their workforce. Even the most ruthless corporate executive lacks the stomach for that kind of cost cutting unless his hand is forced.

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