How The European Union Copyright Reform Could Change The Music Business For The Worse

While YouTube certainly has received plenty of negative attention from the music industry over the years, due in large part to its failure to pay fair royalties to artists. It has a least been good for promoting music discovery thanks in large part to user generated content, something which Bobby Owsinski says the EU's copyright reform could make harder.

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Guest post by Bobby Owsinski of Music 3.0

As much as artists, managers, labels and publishers rail against YouTube, there’s no denying that it’s been beneficial to the industry in at least two ways. First, it’s the foremost place for new music discovery, and secondly, it provides an additional revenue stream. The major complaint against YouTube has always been about the royalty amount that was being paid, as the music industry has deemed the 55/45 split (the copyright holder gets the larger chunk) as too low while music streaming platforms like Spotify and Apple Music pay in excess of 70%. The passing of the Copyright Directive copyright reform bill by the European Union can have far-reaching effects on both of those factors however, but maybe not in the way that many expect.

While there are many aspects to the new law, at its heart is what’s known as Article 13 that requires platforms based around user-generated content (UGC) like YouTube and Facebook to implement an automatic content recognition system, which then must block any uploaded video that may contain a copyright infringement.

"It’s a simple fact that if there are more videos available using the song, more people are going to hear it."

On the surface this is good news for the music business, as it keeps users from posting an unlicensed song behind something like a wedding video, a homemade lyric video, or any piece of content that a user makes. Most of these are actually innocent and aren’t intended to be monetized by the user.

But here’s the problem. As much as everyone in the music business wants to stop the infringing, a hit song spreads virally with the help of these UGC videos. It’s a simple fact that if there are more videos available using the song, more people are going to hear it.

What’s even worse though is the fact that UGC videos using an artist’s song are actually another way to monetize the content. For instance, if YouTube’s Content ID fingerprinting algorithm spies the unlicensed use of a song on a UGC video, it flags the copyright holder, who then has 3 choices: do nothing, ask YouTube to take the content down, or monetize the video with the majority of the money going to the copyright controller.

That means that instead of getting paid on a single “official” video, you’re getting paid from the views of dozens and maybe even hundreds of videos. Yes, it does take some work on the copyright holder’s side, but what’s the big deal if it’s resulting in more revenue? The new reform will stop these UGC videos in their tracks, so no additional revenue will be generated because the user videos won’t be there.

Opponents of the reform state that it might put an end to user-generated content anyway because it effectively puts an end to what’s known as the “safe harbor” provision in Europe, which basically means that YouTube and similar platforms can’t be held responsible for what its users post. As a result of the new bill that’s no longer the case so these services must now negotiate another round of licenses with the rights holders (labels and publishers) which promise not to be as lenient in their terms as they are currently.

To be clear, this is only for European Union member countries, but the fear for YouTube and other like platforms is that similar legislation will be passed in more areas of the world now that there’s a precedent.

One part of the reform that many content creators will like though is the requirement for an “easy redress” system for content that is mistakenly taken down. Anyone who’s ever been caught up in one of those battles knows what a pain it can be, so any relief in this area is most welcome.

Passing Copyright Directive is being hailed as a major victory for content creators over the tech giants, but it may be a case of “be careful what you wish for.” Sometimes what seems to be a good idea has many unintended consequences.