Music industry leaders have singled out YouTube and parent company Google as companies responsible for the growing "value gap".
Speaking at super session The State Of The Global Industry at the 34th Canadian Music Week in Toronto on May 5, the leaders of recorded music trade organisations IFPI, RIAA (USA), BPI (UK), ARIA (Australia) and Music Canada have also called upon policy-makers to fix in the USA and in Europe the "safe harbours" provisions that helped companies such as Google to build businesses without compensating fairly rights-holders.
In her keynote speech, IFPI CEO Frances Moore signalled that in 2015 sales of recorded music have grown in seven of the Top 10 markets and that every region in the world posted growth. However, she added, "the state of the global music business today is an enormous anomaly. Music consumption is exploding worldwide. But the revenues resulting from that consumption are not being returned fairly to those who create, own and invest in the music. This is the problem known as the value gap."
Moore said the problem came from advertising-supported user upload services which have become the single biggest source to access to recorded music globally. "Services like YouTube have some 900 million users and yet they pay a tiny portion of the revenues earned by music rights holders – only 4% of industry revenues globally in 2015," said Moore.
This "structural flaw in our marketplace" needs to be fixed, said Moore, if the industry wants to enjoy sustainable growth in the years to come. "The value gap is not something our business can fix," she admitted. "It is for policy makers to legislate. It is a legislative issue caused by the misapplication of the so-called liability 'safe harbours' to user upload services. This, quite simply, allows them to negotiate music licences in a way that is grossly unfair and devaluing of music. As a result, they have an unfair advantage over other digital services, as well as depriving artists and labels of fair revenues."
Moore added that policy-makers "are responding. In Europe there will be legislative proposals to address the value gap later this year. A study on the DMCA is under way in the US."
Geoff Taylor, chief executive of the BPI, explained that the number of people streaming music in the UK doubled in 2015, resulting in a 70% increase in payments from services such as Spotify and Apple to record labels. However, he added, the revenues paid to labels related to video streaming flat-lined, which he said created "a disparity that encapsulates the value gap". Despite accounting for billions of streams, Taylor said that YouTube "paid labels less than what they earned from selling vinyls."
While Taylor praised YouTube and Google for their innovation, he considered that they were "using safe harbours like royalty havens, to avoid paying fairly for music when goodness knows they can afford to do so". He invited to Google to "commit publicly that it will pay a fair market rate for music on its YouTube service, undistorted by safe harbour".
Taylor also raised the issue of Google "persisting" to direct fans to illegal sites in search results, even if courts ruled the sites illegal. To address this issue, he invited Google "to commit to take effective, responsible, voluntary action in a code of practise to prevent sites building illegal businesses using our music".
If these steps were not taken, Gaylor said that legislators and regulators "should act now to clarify that safe harbours cannot give platforms power without responsibility and to create a new duty of care that requires them to behave with conscience towards the art that is helping to make some of them richer than entire countries."
Cary Sherman, chairman and CEO of the RIAA, focused too on the issue of safe harbours stating that the "value grab was growing bigger". He also considered that the system of take down notices from the 1998 Digital Millenium Copyright Act was among the "systemic problems" faced by the industry due to "outdated laws". He argued that it was "not possible for an artist to patrol the entire internet," especially if links taken down keep on reappearing within minutes. For Sherman: "If it is taken down it has to stay down."
In addition, said Sherman, "pirates can use safe harbours to rip us in total impunity - Grooveshark is a good example." He added: “DMCA reform has become an international phenomenon. Thousands of artists, dozens of music organisations and managers are speaking out and it’s beginning to make a difference. The fundamental unfairness of our existing laws, the stature of artists and power of music, is breaking through like never before.”
Graham Henderson, president and CEO of Music Canada, estimated that for Canada alone, between 1999 and 2015, some $20 billion had been lost by the local music industry. "We have to ask ourselves how wealth has shifted from those who create content - our artists and their partners - to the large internet companies that build their platforms on that content. Our creative class is worse off today." Henderson called upon policy-makers "to rebalance the framework in such a way that creators are fairly compensated".
Dan Rosen, chief executive, ARIA, concluded: “The local Australian music business has done a great job in embracing new digital platforms, giving fans unprecedented access to the music they love. However, we need to ensure that the policy environment reflects the true value that music provides to digital services and allow money to flow back to the artists and labels to sustain a healthy ecosystem of creativity.”