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Indie Music's Rude Internet Awakening

With YouTube offering unfavorable licensing fees for its subscription service, the irony of being strong-armed by a onetime startup is all too real for some small labels.
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You'd think an Internet giant like YouTube would have some sympathy for small music labels. The company was founded in a garage and it wasn't always owned by Google. 

But indies are saying they're vulnerable to strong-arm tactics by companies such as YouTube, whose leverage in the online music space is similar to that wielded by Amazon in book sales.

In a New York Times article published Wednesday, Ben Sisario lays out how YouTube has threatened to block some labels' videos unless they sign new licensing deals. And early versions of the contracts obtained by Billboard showed YouTube will either pay the companies a percentage of revenue from its forthcoming subscription service, or a minimum per subscriber, whichever is greater. The rates for use of music by the label's artists were hardly favorable--"the company payment percentages are lower than the combined 70 percent in revenue that the interactive or premium component of services like Spotify or Rdio pay to labels," according to Billboard--and YouTube's take-it-or-leave-it approach hasn't sat well with indie label executives. 

As streaming has gone mainstream, indies have become accustomed to such slights. Darius Van Arman, co-founder of the Secretly Group, which manages acts such as Dinosaur Jr., told Sisario "the three major recording companies have become proficient at extracting a disproportionate share of copyright-related revenue from the marketplace." 

But the irony of this shouldn't be lost on startups who hope to one day become the next YouTube. It's understandable that YouTube would want to carve out a niche in the streaming space and compete with subscription services like Spotify and Rdio. But its treatment of indies is telling in an age when digital revenues are everything. Could it be that YouTube has forgotten its roots, or has its parent company--itself a startup once upon a time--influenced its business mindset in the worst way possible? 

One can only hope that the entrepreneurs at smaller labels will finally get their due. 

 

Last updated: Jun 25, 2014

JILL KRASNY | Staff Writer

Jill Krasny is a staff writer for Inc. magazine, where she covers the intersection of entertainment and startups. Prior to Inc., she was a writer for MTV and Esquire and an editor at TheStreet. She is a graduate of the University of Southern California with a degree in communication. She lives in New York City.




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