Christian P. Pewitt Blogs: DMCA Helps YouTube Underpay Music Industry Up To $1 Billion A Year, Claims New Study

Thursday, March 30, 2017

DMCA Helps YouTube Underpay Music Industry Up To $1 Billion A Year, Claims New Study

Digital Millennium Copyright Act safe harbor protections and lower than industry standard royalty rates allow YouTube to underpay musicians, songwriters, label and other rights holders between $650 million and $1 billion a year, according to a new analysis.

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Safe harbor provisions of the DMCA allow YouTube to underpay the music industry between $650 million and $1 billion each year, according to "Safe Harbors and the Evolution of Music Retailing," a new study from the Phoenix Center.

The study comes just as the music industry is fighting for higher payments on several fronts. Part of the argument from rightsholders is that YouTube and others that allow users to upload content effectively abuse their DMCA immunity so they can profit from material for which they have no license.

“Music is vital to YouTube’s platform and advertising revenues, accounting for 40% of its views. Yet, YouTube pays the recording industry well-below market rates for this heavy and on-demand use of music by relying on those ‘safe harbor’ provisions,” say study authors T. Randolph Beard, PhD, George S. Ford, PhD, and Michael Stern, PhD.

Citing 2016 IFPI figures, the analysis shows that 68 million paid music subscriptions globally generated $2 billion in revenues for artists and labels, or roughly $0.008 per track play. But YouTube and other free ad-supported streaming services generated $634 million in revenues and paid the recording industry just $0.001 per play.

“More rational royalty policies would significantly and positively affect the recording industry, helping it recover from the devastating consequences of the Digital Age and outdated public policies affecting the industry,” the paper notes.

“Simulating royalty rate changes for YouTube, one of the nation’s largest purveyors of digital music, we estimate, using 2015 data, that a plausible royalty rate increase could produce increased royalty revenues in the U.S. of $650 million to over one billion dollars a year. "

“This is a sizeable effect, and lends credence to the recording industry’s complaints about YouTube’s use of the safe harbor,” the study concludes.

Read the full study here.