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YouTube: why one significant indie music group HAS signed licensing deal

Tim Ingham
YouTube: why one significant indie music group HAS signed licensing deal

YouTube is famously under fire from a group of leading independent labels for issuing ‘indefensible’ and ‘non-negotiable’ contracts regarding its new subscription service. But fresh evidence tonight shows that other influential indies have enjoyed a much more positive licensing experience with the Google-owned video giant.

A leaked memo sent from leading digital distributor Believe Digital to its clients today, obtained by Music Week, shows that the company signed a deal to license YouTube’s upcoming subscription service back in February - months before recent headline-grabbing disagreements came to light.

Interestingly, Believe says its royalty agreement followed a full six months of progressive, if intense, negotiations with YouTube, in talks dating back to September 2013.

Believe stipulates that it received NO monetary advance from YouTube for the deal, but instead negotiated improved royalty rates for its clients, which applied across both the new subscription service and YouTube’s existing video platform.

Other leading indie digital distributors such as INgrooves and The Orchard are also understood to have signed a licensing deal with YouTube regarding its new subscription service.

A previously reported, YouTube looks set to block content from indie labels such as Beggars Group and Domino later this week, after these and other influential independents - led by trade bodies WIN and IMPALA - refused to sign a licensing deal for its new subscription service.

Despite reaching a deal with YouTube, Believe Digital CEO Denis Ladegaillerie shows solidarity with these indies in the firm's memo, acknowledging that he believes WIN’s battle “address[es] true, important and very legitimate concerns”.

He adds that Believe is a “totally independent company representing independent labels and artists” with “no other agenda than to maximise exposure and revenue for [its clients]”.

The three majors labels are understood to have signed a licensing deal late last year with YouTube for its new service. Some industry sources have suggested that the majors received a more favourable royalty rate from YouTube than that offered to the indies - but that doesn’t tally with Believe’s experience.

“The information we have is that the rate Believe Digital has negotiated with YouTube for the subscription service is strictly identical to the rate negotiated by major labels,” says the company.

According to Believe’s memo:

  • At no point in the negotiation was Believe threatened by YouTube of contract termination.
  • Believe secured a significant increase of the revenue share rate on UGC (user generated content) for its clients’ sound recording - currently the largest source of music revenues from YouTube. It also agreed an increased royalty rate on official music videos in Europe.
  • Both of these new rates came into effect at the time of signature of the contract on February 1 - and have contributed to increasing revenues for Believe clients in the past 5 months.

Crucially, the contract signed by Believe also provided for conditions on the use of music on the new YouTube Subscription service. According to the memo:

  • Believe performed financial analysis and market due diligence to ensure that (i) the conditions proposed by YouTube were in line with market conditions with similar services and that (ii) those conditions were at least aligned to other labels and to the majors.
  • The company says: ‘From a detailed analysis of our current agreements with Deezer, Spotify and Rdio, as well as statements received from those services in the past year, our conclusion is that the rate offered by YouTube on the YouTube Subscription service is aligned on current market rates. Minimum guarantees per subscriber per country are also in line with market rates.’
  • It adds that, as a matter of policy, Believe refuses to enter discussions around advances or other benefits such as equity ownership when reaching a licensing deal, due an inevitable “lack of transparency [for clients]. It states: “Believe’s goal is always to ensure we negotiate the highest possible share of the revenues for the benefits of our labels and artists.”

Believe’s negotiations with YouTube were led directly by its CEO Denis Ladegaillerie. Most of the complex points were negotiated directly with Christophe Muller, the head of YouTube Music.

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Tags: youtube, Labels, Digital

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