Musicians are the losers in the YouTube royalty row

There was much celebration in the music world when Google bought YouTube and promptly tightened up the copyright loopholes that once saw the service being sued almost out of existence.

Nine out of the top 10 most viewed YouTube clips are music videos - and some of these have been watched more than 70 million times. Surely the royalty payments for the artists concerned would be massive since, under Google's new legit regime, all copyrighted material on YouTube had to be paid for.

The musicians are still waiting for their YouTube bonanza - and will continue to wait for some time. And, when the royalty payments do appear, they will be considerably less than expected. That's because the ultimate owners of the music video clips on YouTube are the record labels, which, still a bit befuddled by new technologies, have yet to work out who gets what from the YouTube royalty stream.

Music videos have always been a problem for YouTube. Before the site was bought out by Google, it was constantly facing "cease and desist" legal notices from the major labels, which complained that the site was breaching copyright by allowing fans to put up videos of their favourite bands. When YouTube was sold off, Google did deals with a handful of labels stipulating that record company-owned music videos would be paid for on a royalty basis.

YouTube has been as good as its word by sending royalty payments to the labels. But now the musicians (or rather, their managers) claim that they have yet to receive anything.

The conflict lies in the nature of the contract signed between the acts and the labels. Previously it was easy: the only significant revenue stream was from the sale of physical CDs. But, in the download era, new contracts had to be drawn up specifying a different rate (always lower, one can assume) for digital sales. No one ever really expected YouTube to become so popular, so no one seems to know what is due to whom. And the deal struck between the major labels and YouTube has never been made public.

This isn't the first time managers of music acts have been left out of the loop when it comes to revenues generated for new technologies. The managers say they are still waiting for their cut of the multi- million-dollar settlement that the music industry received from the then-illegal sites Napster and Kazaa.

Royalties from YouTube (even with 70 million-plus viewers) won't amount to that much, but the prevailing view among record companies seems to be that YouTube is a promotional tool, so the more hits video gets should mean more overall sales of the track in question.

There are rumblings among music management associations about strike action over their failure to receive YouTube royalties.

The more belligerent managers see the debacle as emblematic of how the labels deal with acts when it comes to new technology revenue streams. Other managers, well aware of how music sales are still in decline, are just happy that YouTube is offering such a global promotional tool to their acts.

Many in the music industry still blame new technologies for the current perilous state of their business, but unless they work openly with their signed acts to develop new models of distribution and marketing, the industry is merely hastening its own demise.