In a TechDirt piece published last week, Mike Masnick commented on a recent news story involving “Never Gonna Give You Up” songwriter Pete Waterman. Waterman noted that he had earned only £11 in royalties from YouTube for that song over the course of 154 million broadcasts (views), expressing dismay at royalty rates which he likened to the wages of third-world laborers.
Masnick’s response to this story revolved around the point that the song, which had formerly fallen into obscurity, would have not experienced any surge in popularity were it not for YouTube:
“Yup. No one would be talking about Waterman or his song at all in the absence of YouTube and the rickrolling phenomenon. The only “exploiting” being done is now, by Waterman, because he got totally lucky in that a bunch of internet jokesters happened to pick his song (mainly for how bad it is) to use as part of an internet joke. He deserves to get paid for that? It could have just as easily been any other ridiculous pop hit in the 80s. And, if it had been, then no one would be talking or caring about Waterman at all… Furthermore, it was never YouTube making use of the music, but it was all these people on the internet, adopting the meme. YouTube was just the platform they used for it.”
I believe this is a very flawed argument on Masnick’s part. Yes, this means that a rich person demanding more money can be on the right side of the debate!
The issue here has to do with any business model that revolves around large amounts of user-submitted content and advertising revenue. Websites like YouTube or Last.fm are perfect examples. The traffic, and by extension, revenue, of these businesses rests solely on a breadth and depth of user-submitted content. Without users, these websites would not exist. While the most popular content on both sites might be from major content providers such as major record labels, the “long tail” is very long indeed, accounting for the true popularity and growth factor.
Masnick’s argument is that YouTube facilitated a boost in the popularity of Waterman’s song which had a highly beneficial effect in the form of increased record sales (ie. songwriting royalties from other sources, such as mechanical licenses.) He contends that YouTube really owes Waterman nothing, as a result. OK, if we’re talking about someone who may have sold tens of thousands of records and earned hundreds of thousands of dollars as a result of YouTube publicity, that sounds reasonable… but is it really?
What if YouTube were to grow and diversify to the point where it was hosting, say, a billion videos? Outside of a tiny, tiny fraction of videos (the ‘head’), the VAST majority - let’s say upwards of 99% - of this content (the ‘tail’) would receive comparatively few views. It is that tail that draws attention and traffic to the website, and all of that niche user content is what is generating all the revenue.
Let’s say that this future version of YouTube, which is reflective of the direction of the current YouTube, is taking in $3 billion per year in revenue, $1 billion of which is profit. According to Masnick, this is perfectly fine. Even though a relative handful of people are actually getting any real benefit from the site (in the form of increased record sales or other alternate revenue streams), Masnick apparently has no problem with YouTube profiting from the creations and content of the other millions upon millions of users. What benefit are they getting? This isn’t an issue of single users being exploited, but rather, a mass of users being exploited. The only entity that really benefits here is YouTube itself.
last.fm, having been around longer, is an even stronger example. The entire catalog of OC ReMix, among various other non-profit music organizations and netlabels, is available on last.fm. OC ReMix has, to date, received absolutely no royalties of any kind from last.fm, but last.fm has generated plenty of revenue thanks to sites like OC ReMix, which provide free content. Where is the benefit to OC ReMix here?
I wonder if Masnick also supports the actions of Chinese bootleggers. It’s really the exact same concept. Bootleggers take the content of others and sell it, keeping the profits for themselves. One could very easily argue, with Masnick’s logic, that the bootleggers are doing an excellent job of promoting said content - providing a benefit to the content creators in the form of free promotion. However, a reasonable person would say that the bootleggers are simply profiting from content which they did not create and have no right to sell. Sites like YouTube are not selling anything, but they are nonetheless generating hundreds of millions of dollars in revenue from advertising, so the effect is the same.
All that being said, let me preemptively address a few counter-arguments to what I’ve just written:
These sites aren’t generating any profit. Forcing them to pay more royalties would shut them down.
It’s true that putting a greater royalty burden on anyone will make it harder for them to thrive. Any sort of additional taxes or fees on any business entity would have the same effect, but if I were to change “YouTube” to “investment bank” and change “greater royalty burden” to “greater corporate tax burden”, somehow I think few people would complain. The key is to set rates and rate structures that are reasonable and fair to all parties.
The bureaucracy involved with paying tons of users would be prohibitively expensive.
That’s true, but that doesn’t mean there can’t be some sort of royalty structure that mitigates this problem. For example, content could have some sort of “popularity index”, and royalties could simply be paid out once that index rises above certain milestones. This would be easier to track and calculate than view-by-view monitoring and the milestones could be set up in such a way that YouTube would not have to worry about paying royalties on a private video with 40 views.
Users agree to upload their content, so the bootlegging analogy fails.
This would true IF content creators were always the same as content uploaders, and if you’ve ever been to YouTube you know this is not the case. I have no problem if a content creator just wants publicity and wants to distribute their videos/music as widely as possible, free of a royalty burden. However, YouTube is filled to the brim with users uploading content that they have no rights to. last.fm’s royalty system, in theory, addresses this by enabling users to upload content, but only content creators can claim royalties (and they have to prove that they are in fact the creators).
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Let’s not let our outrage directed towards the very biggest fish in the pond negatively impact everyone else.
Tags: Web 2.0, Youtube
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on Tuesday, April 14th, 2009 at 1:34 pm and is filed under Industry news.
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