YouTube to block indie labels as it launches paid music service

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 platform is governed by its new contractual terms, said Robert Kyncl, YouTube's head of content and business operations.

Record labels representing 90 per cent of the music industry have signed up to the new terms, Mr Kyncl said. The remaining 10 per cent, which are asking European regulators to intervene, will be blocked from the platform.

“While we wish that we had 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 said.

The new paid-for tier will be part of YouTube’s existing apps and websites, which have more than 1bn monthly visitors. For a monthly fee, users will be able to watch videos or listen to music without adverts, on any of their devices, even when not connected to the internet.

YouTube will start Google-wide internal testing of its new 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.

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.

Amazon last week launched a music streaming service as a component within its Prime subscription bundle, while Apple last month acquired Beats Music as part of its $3bn purchase of headphone maker Beats Electronics.

But while the technology companies all want to offer their customers music, they have often struggled to reach agreement with rights holders – particularly the three major 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 has abused a dominant position in the market 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 YouTube’s free tier will become so attractive that it will reduce the number of people willing to pay for subscription services such as Spotify or Deezer.

Mr Kyncl said such concerns were unfounded. YouTube’s “ultimate goal” is to make “features that fans love” and drive as many people as possible to paying 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," said Mr Kyncl.

Financial Times