Blog Post

German rights holders sue YouTube in escalating royalty fight

German music rights group GEMA has filed a lawsuit against YouTube, (s GOOG) alleging that the video site is misleading users about the details of an ongoing licensing dispute between the two parties. The lawsuit is the latest escalation in that dispute, which has been going on since 2010, and resulted in German YouTube users being unable to view many popular music videos on the site. GEMA is now asking a Munich-based court to issue a cease-and-desist order in order to prevent YouTube from blaming GEMA for this mess.

I know, it’s confusing, but bear with me. Here’s what happened so far: GEMA, which represents recording artists as well as publishers, wants YouTube to pay a fee for each and every video viewed on the site that contains music of one of the artists represented by GEMA (which include every major label artist, as well as most indies). YouTube has rejected that approach, and instead wants to pay a percentage of the ad revenue it makes with those videos.

Negotiations between both parties broke down in 2010, and GEMA asked YouTube to block videos containing music of some 600 artists. YouTube responded by blocking a wide range of videos, telling users that these videos are “unfortunately not available in Germany” because they could contain music for which GEMA hadn’t granted the rights to YouTube.

GEMA officials have long complained that this wasn’t true, suggesting instead that YouTube simply didn’t pay for licenses to these rights. Of course, the licenses that YouTube is offering are based on the rates that YouTube is challenging, so it’s pretty much semantics and fingerpointing.

Except, most users are upset about GEMA, and the group apparently doesn’t want to shoulder all the blame anymore. GEMA’s CEO Harald Heker told local paper Wirtschaftswoche that YouTube’s handling of the blocking is “pure demagogy.”

A YouTube spokesperson sent me the following comment about the lawsuit:

“YouTube believes that rights holders and artists should benefit from their work. We have dozens of collection society deals in place across more than 40 countries because we provide an important source of income for musicians and a platform where new artists can be discovered and promoted. We are open for negotiations to find a solution with GEMA compatible with YouTube’s business model so that we can again provide a source of revenue for musicians and a vibrant platform for music lovers in Germany.”

So there you have it. Each side wants to sound completely reasonable as, all the while, the actual licensing dispute drags out further and further. At this point, it’s pretty unlikely that German YouTube users are going to get access to their music videos any time soon.

Image courtesy of Flickr user  nyghtowl.

17 Responses to “German rights holders sue YouTube in escalating royalty fight”

  1. L Bass

    It has always amazed me that something can easily be obtained from the public airways, via TV, radio, or whatever… can then be sold to me. If I understand the common artist/label split… the label cleans the artist’s clock on the actual product sales. The artist takes the largest profit from the tour and memorabilia sales.
    Question: Has anybody asked the Korean artist that became an overnight sensation due to his “youTube” sensation Oppan Gangnam Style? Reportedly to be raking in excess of 10 million USD on his one hit, I agree YouTube has really ripped him off! How many other potential breakthrough artists will be stifled if the recording studios have their way? Screw Germany’s GEMA, you tube will live with out their patronage. And all of the artists that they are trying to milk higher prices for, can live with less revenue.

  2. Mike Page

    Hmmmm, not to sure about that Ted. Most singers/song writers only earn a portion of their income through royalty’s, and most through TV/Radio appearances and gigs. But if I interpret all this with GEMA correctly, then GEMA earns over 60%, I think that is what I read in a German newspaper the ‘Bild’ a year or so back, of the takings, just to feed and keep going the bloated melon head. A good friend of mine is such a singer/songwriter for the electronic-house scene, and he is not happy with GEMA. If he wants to put HIS music on HIS homepage, then he has to pay GEMA. The copyright laws are made for everyone, they are not just made for one side of the world, so that they can smack the other side as and when they wish. What Ted was talking about was the old trading laws of the 30’s, 40’s and 50’s. You write a tune and publish it through a record company, and then sell it in form of a records from a record shop. This is not the case now, you might want to publish your song to get famous and to have as many gigs as possible. Most of the CD’s, at least in the EU, have a anti-copy thing on them so even if you wanted to put your newly purchased CD onto your usb stick to play in your car, you cant. Under EU copyright laws we are not allowed to even look at this software on the CD. So where does that leave me, Mr normal? Well, all I want to do is to listen to the music that was played in a club I goto, and may I add not even put onto CD. Yes, you have all got it right, I look at youtube, and if I live in Germany I cannot, because of GEMA! I think personally, youtube should pull out of Germany and run the German side of the business from the USA, at least they have more balls than the rest of the world to deal with things like this. I think then Google should sue the GEMA for loss in revenue over the last 4-5 years, that will get things moving, at least. Yes of course youtube should pay for the rights, but 0.375 Cents per click is just stupid, and may I add typical German.

    Mike in Germany

  3. Ted in Atlanta

    I think this all boils down to people started out in an unregulated free-for-all with the last 15 years of technology breaking all the established rights of intellectual property, with a bunch of freeloaders. Either the system must monetize the creators or the creating – and either way the freeloading – will end. Yes MTV and radio played songs, but clearly on-demand repeated plays and streaming have eliminated the eventual PURCHASE part of that old promo equation. The internet “content distributors” are all in the obvious and complete wrong, and when the laws and policing again protect the rights of the creators and not the people “used to getting everything in a free and open social framework, don’t harsh my free, dude!” then we can all go back to business as usual. Pay for what you want, as the creator / seller of what you want demands, or do not obtain what you want. That’s simple.

  4. lets not actually forget the fact, that the music videos are in fact promotion videos.
    and used to be in the old days shown on mtv, to encorage people to then buy the music.
    The record companies, and the bands are hoping people see a video and then go and buy the music. A lot of artists and record companies, have already complained about gema’s stupidly heavy handed approach to the whole business, as its basically loosing them customers in germany.
    You dont / cant hear the music, you obviously then dont buy it

  5. Some good comments here [being in the U.S., such things are unfortunately uncommon here]. It may be helpful to distill this matter down to its simplest priciples. Intellectual property is still “property.” This is not a matter of opinion, but law—and as such, the owner (or his legal representative) is entitled to choose what is done with his property.

    Consequently, YT is not in a position (legally) to unilaterally decide to use others’ property and under what terms. Use absent permission is copyright infringement, it’s as simple as that.

    Theoretically, in a capitalist society the market is supposed to arrive at a fair arrangement for all concerned parties. The problem is that there has been a precedent of “take first, negotiate later.” I think most of us can see the flaw in that approach. Just because you create the technological ability to do something, it doesn’t give you the right.

    To me, this is the flaw with most of these digital companies that build their businesses around others’ property. If your business model can’t survive paying fair market value, then, regrettably, your business is not viable—even if it’s a great idea. [There is obviously more to say, but it’s getting late and, admittedly, I’m becoming lazy…]

  6. Ben Norwood

    I wonder what arrangements YouTube has with other publishers and collection societies around the world? For fairly obvious reasons, they’d be very reluctant to pay any individual society significantly more than the others, as that would set a precedent for increasing the amount they pay all the other societies. Naturally, of course, these agreements are probably considered commercially sensitive by both sides, so there’s no easy way for a society to find out if they’re being offered the same amount as everyone else, or if they’re being paid significantly less.

    As for “posting every other video without verifying the ownership and copyright situation first”, given the sheer volume of videos posted to YouTube, that would be completely unfeasible. What they do have, however, is ContentID – an automated system that aims to match music samples with those held in a database (so enabling flagging even if someone uploads a cover of the track in a different key on a different instrument with a different accompaniment and in a different tempo). It’s up to each society to determine what happens with each match – whether the videos are allowed as is, with artist / track info, with ads, or the infamous “This contains content from X, who have blocked it on copyright grounds” or “This video is not available in your country” messages.

    However, I suppose it’s harder to do this for “official” videos by the label / artist. Of course, this isn’t the first dispute YouTube have had with record labels – IIRC they had a big one a few years ago with WMG…

  7. dreyfus2

    In a free market the owner of a product sets a price, normally reflecting demand. Some people might not consider capitalism the greatest thing ever (which is an acceptable opinion), but Germany, for the time being, is a capitalist country. One with a much stronger federal government and much higher taxes than the US, but a capitalist country nonetheless.

    GEMA is not only collecting and distributing fees from broadcasters, bands covering the works of others, pubs, restaurants etc., they also e.g. maintain the retirement funds for artists, composers etc. which are not otherwise covered by the German federal pension system. This means that they have to carefully steer and impose fees in a manner that will allow these mechanisms to work.

    YouTube / Google simply entitles itself to set the pricing of other people’s wares. This is de facto a dispossession and unheard of in any line of business. Yes, companies like Amazon also set selling prices themselves, but they still pay publishers the amount asked, not the amount they deem appropriate. In some cases this is pretty obvious. E.g. some videos are available for purchase on iTunes (and other services) for 2.99 EUR. So, this is the price of the product (like it or not, your options are buy or don’t). What entitles Google to give it away for free and even capitalize on it?

    If the market at large decides that music is having less value and demonstrates this by e.g. not buying at the asked prices, then GEMA, publishers and artists have to deal with it. But it is not up to Google to put a price tag on their works. If I would sell somebodies car without a mandate and for 10% of the actual value, you would call me a thief. Even if I gave these 10% to the owner. It is not Google creating a business for others. It is others involuntarily providing content for Google. GEMA specified their conditions and Google refused them. But Google decided to take the car anyhow and without paying. They are thieves, plain and simple.

      • dreyfus2

        Well, this is true for the 600 artists GEMA has filed the complaint for. But they are still positing every other video without verifying the ownership and copyright situation first. They force owners to actively opt out of the misuse of their content every single time, instead of doing it right.

      • tetracycloide

        The only entity that could verify ‘the ownership and copyright situation’ is a court. Why? Because there are affirmative defenses to infringement. It’s not a hosting services place to make determinations that are fundamentally between uploaders and rights-holders. You try to characterize the way copyright enforcement has ALWAYS worked, that it’s on rights-holders every time, as if that’s something YouTube does differently. It isn’t. Copyright has always required active enforcement by the rights-holder.

  8. YT, as usual, is playing the PR game well, but unfairly. The YouTube percentage of revenue model sounds great, but sounds like YT is refusing any guaranteed minimums. So that means that if licensor A will pay, say $.01 per play, but YouTube sells an ad at a $1.00 CPM ($.001 per play) it shares $.0005 per play. Usually the 50% is after expenses, so it’s probably less than that (possibly substantially less). then YT doesn’t share search revenue, home page revenue and, usually, even on-page banner advertising. YT doesn’t allow any audits of ad sales – so has total control of how revenue is allocated (so a deal might have, say, $1 million allocated to a home page banner ad, and $20,000 allocated to in-stream advertising, and the musician has to accept that the allocation is fair), how clicks are calculated, commissions, etc. So YT has lots of ways to make money, while the artists, who actually created the works that YT is selling, are being told “trust me” and to accept revenues that are way lower than competing platforms. Maybe no so fair.

  9. I’m getting tired of these copyrights blah blah blah stories… it just comes down to who gets more of the money isn’t it? I don’t have a problem with Google/Youtube’s ad revenue-sharing model. The problem is everyone along the way wants a piece of that pie. IF, you are in Google/Youtube’s shoes, no way you would share 50/50 profit with anyone else when you have to provide the entire infrastructure to deliver that content. Content is important but without the means to reach your audience, what you created gets lost.

    • …and vice versa, without content the means to reach the audience are pointless, which is right at the heart of discussions…and the fact that Google is making fat profits above Wall Street expectations while music companies and publishers are struggling shows that currently the balance is not quite right. It is easy to be profitable when you make money out of content you hardly pay for and distribute through internet infrastructure financially supported by telco companies while you do not pay any tax in the countries where you make your money…

      • tetracycloide

        “and the fact that Google is making fat profits above Wall Street expectations while music companies and publishers are struggling shows that currently the balance is not quite right”

        Why? You can’t just declare this ‘not quite right’ a priori as if the two are inextricably linked and that there’s some fundamental reason why both should be successful.