Interview: Patrick Walker, YouTube: PRS Rates 'Ridiculous', Would Lose Us Money

imageYouTube would lose money on every music video it serves if it accepted PRS For Music‘s proposed rates, the video site’s EMEA region head of partnerships, Patrick Walker, has told paidContent:UK. Walker’s decision to block thousands of music videos in the UK last night has at least brought the orgs back to the negotiating table – the pair are meeting for talks later today, he said.

In its first arrangement with a royalty society, YouTube in 2007 signed a special deal with PRS in which it agreed to pay a flat, advance fee to carry 10 million pieces of music. But the deal has expired and Walker pulled the tracks last night rather than renew at new rates. After PRS highlighted Google’s $5.7 billion Q408 revenue, Walker told me: “We’ve built a service that we’ve invested millions in … to suggest that, because Google’s a big company, we should just suck it and pay a ridiculous rate is not something that we’re going to stand by.”

“The last deal was the last one at a time when that made sense – we’re open to considering new models, but it has to be one that makes sense for the long-term,” he told me Tuesday. “We’re not suggesting that we should pay rates in accordance with (traffic) that we had two years ago; we want to pay a fair rate – but we can’t lose money with every video streamed and that’s what they’re proposing. We need rates that are reasonable, that are not loss-making from day one and that are clear with respect to the repertoire we are licensing. We need to have some certainty to move forward.”

Though PRS For Music CEO Steve Porter last night said GooTube is offering less this time, Walker put that down to a “misunderstanding” and reiterated: “The rates that they’ve put forward to us are many times more what we paid previously. We’re not suggesting we pay the same amount as in the past; obviously, (our) traffic has changed. What we’re talking about is the rate that applies when a video is streamed; it’s a relative number to the popularity of the content.”

“We’re not trying to make a public dispute of this, this isn’t meant to be a spat over the airwaves. We hope it’s only temporary and we continue to work with the PRS for a solution. It’s not like we stopped negotiations, we only blocked videos while we continue to negotiate.”

Walker added: “There’s also a lack of clarity on the rights that they actually represent – the PRS used to represent a much larger repertoire; now it’s declined to some extent – but we’re not sure exactly what it is and they’ve been unwilling to tell us. We can’t operate under business uncertainty, with rates that we disagreed with. If they’re asking us to pay many, many times more and we’re not even clear what the repertoire is, we have to step back and say ‘hold on, let’s just stop the music for a while’.”

Wider discontent?: Pandora abandoned its UK launch last year, similarly citing excessive PRS fees, and We7 CEO Steve Purdham, in paidContent:UK’s comments today, said PRS’ rates “do not reflect the economical world out there”. Walker drapes YouTube under this same banner: “We’re getting lots of calls of support from the industry. We have to make sure we have rates that are sustainable from a business perspective. It’s not just about us – we’re aligned and in unison with a lot of services that have launched, would like to launch or that have discontinued – it’s hard for new models to emerge when the starting point is a massive loss on a per-stream basis.

“We’re not trying to cheat or to compensate the artist less – but if they’re asking us to pay many, many times more and we’re not even clear what the repertoire is, we have to step back and say ‘hold on, let’s just stop the music for a while and come to an agreement that makes sense for everybody’.”

YouTube is increasingly valuable to the music biz: YouTube plays accounted for 40 percent of all transactions PRS processed in between July and September (14 million out of 35 million), and the society made 40 percent more from such online services between January and July than the previous year.

This licensing revenue is an increasingly important source of income as music sales continue falling – YouTube specifically is so important to PRS that, in August, the society made a point of crediting part of the rise to the video site, whose population of “hairbrush divas”, lip synchers and mash-up makers boost PRS coffers. “We came to an agreement with them that we thought was mutually beneficial, and it has been,” Walker said.

More uncertainty on the horizon: YouTube’s 2007 PRS deal was struck outside of the society’s main, “joint online license“, which commands per-track fees. But that license, too, is due to expire in June and, with mounting criticism, there will be further calls for reform.