YouTube to block indie labels as it launches paid music service

Labels refuse to play along with Google streaming service

Alex Turner of Arctic Monkeys

YouTube is about to begin a mass cull of music videos by artists including Adele and the Arctic Monkeys, after a number of independent record labels refused to sign up to the licensing terms for its new subscription service.

The Google-owned company will start blocking videos “in a matter of days” to ensure that all content on the new platform is governed by its new contractual terms, said Robert Kyncl, YouTube’s head of content and business operations.

Google’s decision to press ahead without some of the best-known artists shows its determination to enter the fast-growing market for music subscription services. Amazon last week launched its own service as part of its Prime subscription bundle, while Apple last month acquired Beats Music through its $3bn purchase of headphone maker Beats Electronics.

Record labels representing 95 per cent of the music industry have signed up to the new terms, Mr Kyncl said. The remainder, which are asking European regulators to examine whether Google is abusing a dominant market position, will be blocked from the platform.

“While we wish that we had a 100 per cent success rate, we understand that is not likely an achievable goal and therefore it is our responsibility to our users and the industry to launch the enhanced music experience,” Mr Kyncl told the Financial Times.

The new premium YouTube tier will allow users who pay a monthly fee to watch videos or listen to music without adverts on any of their devices, even when they are not connected to the internet.

Music streaming has become a fierce battleground for many of the world’s biggest technology companies, which see music as an important way to lock customers into their ecosystems.

However, while the technology companies all want to offer their customers music, they have often struggled to reach agreement with rights holders – particularly the three big record labels Universal Music Group, Sony Music Entertainment and Warner Music – over how much it should cost.

Mr Kyncl said YouTube was offering all rights holders a good deal, though he did not go into details of the contracts. “We’re paying them fairly and consistently with the industry,” he said.

But many independent labels, which are represented by the rights agency Merlin, disagree. XL Recordings, whose artists include Adele and The xx, and Domino, the label behind the Arctic Monkeys, are understood to be among the indie labels holding out for a better deal.

Impala, a trade body for independent music companies, is appealing to the European Commission for assistance, arguing that YouTube is using its market position to force small record labels into accepting unfavourable terms.

One label boss said the big problem with YouTube’s new licensing agreement was not to do with the paid tier, but rather that it allowed YouTube to make substantial enhancements to its free tier.

His fear is that the free tier will become so attractive that it will reduce the number of people willing to pay for subscription services such as Deezer or Spotify, which charges users $9.99 a month.

Mr Kyncl said such concerns were unfounded. YouTube’s “ultimate goal” was to make “features that fans love” and drive as many people as possible to pay for them, he said.

Since it was acquired by Google in 2006, YouTube has paid out more than $1bn to the music industry through licensing deals that allow rights holders to take a share of its advertising revenues. “That number is going to double soon,” Mr Kyncl said.

YouTube, which has more than 1bn monthly visitors, will start internal testing of its subscription-based offering in the coming days, Mr Kyncl said. This will allow the company to polish the user interface and remove any bugs, before making it available to the public later in the summer.

Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.

More on this topic

Suggestions below based on Google